[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  HEARING TO REVIEW U.S. AGRICULTURE POLICY 
                        IN ADVANCE OF THE 2012 FARM 
                                  BILL 
=======================================================================

                                HEARINGS

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                     APRIL 30, 2010, DES MOINES, IA
                         MAY 1, 2010, NAMPA, ID
                        MAY 3, 2010, FRESNO, CA
                       MAY 4, 2010, CHEYENNE, WY
                        MAY 14, 2010, MORROW, GA
                         MAY 15, 2010, TROY, AL
                       MAY 17, 2010, LUBBOCK, TX
                     MAY 18, 2010, SIOUX FALLS, SD
                    JUNE 28, 2010, FAYETTEVILLE, NC

                               ----------                              

                           Serial No. 111-48

                               ----------                              

                             Part 2 (Final)

                               ----------                              

          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov















 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL



















 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

=======================================================================

                                HEARINGS

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                     APRIL 30, 2010, DES MOINES, IA
                         MAY 1, 2010, NAMPA, ID
                        MAY 3, 2010, FRESNO, CA
                       MAY 4, 2010, CHEYENNE, WY
                        MAY 14, 2010, MORROW, GA
                         MAY 15, 2010, TROY, AL
                       MAY 17, 2010, LUBBOCK, TX
                     MAY 18, 2010, SIOUX FALLS, SD
                    JUNE 28, 2010, FAYETTEVILLE, NC

                               __________

                           Serial No. 111-48

                               __________

                             Part 2 (Final)

                               __________

          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

57-926 PDF                       WASHINGTON : 2010 

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                             APRIL 30-MAY 4

                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin               BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon                GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois       BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER,              CYNTHIA M. LUMMIS, Wyoming
Pennsylvania                         ------
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho
------

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                  (ii)
?

                             MAY 14-MAY 18

                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin               BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon                GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois       BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER,              CYNTHIA M. LUMMIS, Wyoming
Pennsylvania                         ------
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 (iii)
?

                                JUNE 28

                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           DAVID P. ROE, Tennessee
STEVE KAGEN, Wisconsin               BLAINE LUETKEMEYER, Missouri
KURT SCHRADER, Oregon                GLENN THOMPSON, Pennsylvania
DEBORAH L. HALVORSON, Illinois       BILL CASSIDY, Louisiana
KATHLEEN A. DAHLKEMPER,              CYNTHIA M. LUMMIS, Wyoming
Pennsylvania                         THOMAS J. ROONEY, Florida
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                  (iv)
                             C O N T E N T S

                              ----------                              
                                                                   Page

                         Friday, April 30, 2010

King, Hon. Steve, a Representative in Congress from Iowa, opening 
  statement......................................................   289
Latham, Hon. Tom, a Representative in Congress from Iowa.........   290
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................   288
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   287
    Prepared statement...........................................   288

                               Witnesses

Bailey, Varel G., corn, soybean, grass, pork, cattle, and sheep 
  producer, Anita, IA............................................   291
    Prepared statement...........................................   293
.................................................................
Bayliss, Richard D., corn and soybean producer, Ottumwa, IA......   296
    Prepared statement...........................................   299
Lang, Dane M., dairy, corn, and soybean producer, Brooklyn, IA...   301
    Prepared statement...........................................   302
Volz, Nick, corn, soybean, and pork producer, Elkhart, IA........   306
    Prepared statement...........................................   307
Weems, Darrell, cattle, corn, and soybean producer, Earlham, IA..   307
    Prepared statement...........................................   309
Erickson, Warren, dairy processor, Des Moines, IA................   324
    Prepared statement...........................................   326
Schaben, Jr., Jim W., livestock operator, Lamoni, IA.............   328
    Prepared statement...........................................   329
Skow, Bob, crop insurance agent representative, West Des Moines, 
  IA.............................................................   330
    Prepared statement...........................................   332
Stroburg, Jeff, grain and input cooperative operator, Ralston, IA   334
    Prepared statement...........................................   336

                           Submitted Material

Freise, Brian, President, AgPerspective Inc., submitted letter...   353
Kubik, David, President, Iowa State Association of Assessors, 
  submitted letter...............................................   355
Shaw, Monte, Executive Director, Iowa Renewable Fuels 
  Association, submitted letter..................................   355
Vierkandt, Kevin, farmer, Alden, IA, submitted statement.........   357

                         Saturday, May 1, 2010

Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................   369
Minnick, Hon. Walt, a Representative in Congress from Idaho, 
  opening statement..............................................   366
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   365
    Prepared statement...........................................   365
Simpson, Hon. Michael K., a Representative in Congress from Idaho   367

                               Witnesses

Brossy, Fred, organic wheat, bean, potato, and hay producer, 
  Shoshone, ID...................................................   370
    Prepared statement...........................................   372
Brown, Scott W., wheat and barley producer, Soda Springs, ID.....   374
    Prepared statement...........................................   376
Gross, Doug, potato producer, Wilder, ID.........................   379
    Prepared statement...........................................   381
Henggeler, Kelly R., apple, plum, and peach producer and packer, 
  Fruitland, ID..................................................   382
    Prepared statement...........................................   384
Lee, Galen, sugarbeet, mint, asparagus, hay, grain, corn, and 
  cattle producer, New Plymouth, ID..............................   386
    Prepared statement...........................................   388
Kernohan, Brian J., forestry producer, Coeur d'Alene, ID.........   399
    Prepared statement...........................................   401
Bitner, Ron M., winegrape producer and vintner, Caldwell, ID.....   418
    Prepared statement...........................................   419
Lyons, Charles, cattle producer, Mountain Home, ID...............   420
    Prepared statement...........................................   422
Boer, Adrian, dairy producer, Jerome, ID.........................   424
    Prepared statement...........................................   426
Siddoway, Cindy, lamb producer, Terreton, ID.....................   430
    Prepared statement...........................................   431

                           Submitted Material

Evans, Jim, Past Chairman, USA Dry Pea & Lentil Council, 
  submitted statement............................................   445
Freeman, Sid, farmer, Caldwell, ID, submitted letter.............   446

                          Monday, May 3, 2010

Cardoza, Hon. Dennis A., a Representative in Congress from 
  California, opening statement..................................   453
Costa, Hon. Jim, a Representative in Congress from California, 
  opening statement..............................................   452
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................   450
Nunes, Hon. Devin, a Representative in Congress from California..   497
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   449
    Prepared statement...........................................   450

                               Witnesses

Bledsoe, Walter James, dairy producer, Riverdale, CA.............   454
    Prepared statement...........................................   457
Campos, Tony, almond producer, sheller and shipper, Caruthers, CA   462
    Prepared statement...........................................   464
Diener, John E., almond, grape, wheat, alfalfa, sugarbeet, 
  tomato, and spinach producer, Five Points, CA..................   465
    Prepared statement...........................................   467
Kester, Kevin D., cattle and grape producer, Parkfield, CA.......   470
    Prepared statement...........................................   471
    Supplementary material.......................................   538
Reelhorn, Jon, nursery plant producer, wholesaler, and retailer, 
  Fresno, CA.....................................................   473
    Prepared statement...........................................   474
Rehermann, Frank, rice producer, Live Oak, CA....................   480
    Prepared statement...........................................   482
Roberts, David, orange, lemon, and grapefruit producer, Visalia, 
  CA.............................................................   502
    Prepared statement...........................................   504
Strachan, Jamie, vegetable producer and shipper, Salinas, CA.....   506
    Prepared statement...........................................   508
Teixeira, John M., organic tomato, eggplant, bell pepper, melon, 
  and corn producer, Firebaugh, CA...............................   509
    Prepared statement...........................................   512
Van Konynenburg, Paul J., peach, apple, cherry, apricot, almond, 
  and walnut producer, Modesto, CA...............................   514
    Prepared statement...........................................   516
Parnagian, Justin, peach, nectarine, plum, grape, apricot, and 
  citrus producer, packer and shipper, Fresno, CA................   518
    Prepared statement...........................................   519

                           Submitted Material

Bengyel, Alan J., City Manager, City of Orange Cove, California, 
  submitted letter...............................................   531
Boyer, Paul, Community Development Manager, Self-Help 
  Enterprises, submitted statement...............................   531
Lane, Hon. Mike, Council Member, Visalia City Council, State of 
  California; Management Analyst, Self-Help Enterprises, 
  submitted statement............................................   533
            Kriebel, Barry F., President, Sun-Maid Growers of 
                California, submitted letter.....................   534
Marchini, Jeff, President, Merced County Farm Bureau, submitted 
  letter.........................................................   536
Mendes, Anthony R., Chairman of the Board, California Dairies, 
  Inc., submitted letter.........................................   536

                          Tuesday, May 4, 2010

Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................   542
Lummis, Hon. Cynthia M., a Representative in Congress from 
  Wyoming, opening statement.....................................   543
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   541
    Prepared statement...........................................   542

                               Witnesses

Crapser, Bill, Forester, State of Wyoming, Cheyenne, WY..........   544
    Prepared statement...........................................   546
Cables, Rick, Regional Forester, Rocky Mountain Region, U.S. 
  Forest Service, U.S. Department of Agriculture, Golden, CO; 
  accompanied by Phil Cruz, Deputy Forest Supervisor, Medicine 
  Bow-Routt National Forest, U.S. Forest Service, USDA...........   548
    Prepared statement...........................................   550
    Submitted report.............................................   701
Fishering, Nancy M., forest products producer, Montrose, CO......   584
    Prepared statement...........................................   586
Cooksey, Jerry, wheat producer, Roggen, CO.......................   598
    Prepared statement...........................................   600
Driskill, Ogden, cattle and buffalo producer, Devil's Tower, WY..   602
    Prepared statement...........................................   603
Hardesty, Les, dairy producer, Greeley, CO.......................   605
    Prepared statement...........................................   606
Snyder, Jr., John W., sugarbeet producer, Worland, WY............   608
    Prepared statement...........................................   610
Sun, Dennis, cattle producer, Casper, WY.........................   620
    Prepared statement...........................................   621

                           Submitted Material

Coose, Dick, Retired Forest Service Employee, Ketchikan, AK, 
  submitted statement............................................   633
Cundall, Larry, rancher, Platte County, WY, submitted statement..   636
Galey, Ph.D., Frank, Dean, UW College of Agriculture and Natural 
  Resources; and Chair, Consortium for the Advancement of 
  Brucellosis Science, submitted letter..........................   636
Hamilton, Ken, Executive Vice President, Wyoming Farm Bureau 
  Federation, submitted letter...................................   637
Haynes M.D., Taylor H., President, Independent Cattlemen of 
  Wyoming; Board Member and Director Region II R-CALF--USA, 
  submitted letter...............................................   638
Hellyer, Martha N., Hellyer Limited Partnership, Lander, WY, 
  submitted e-mail...............................................   686
Larson, Carl A., sheep rancher, Summit County, UT, submitted 
  statement......................................................   686
LeResche, Robert, Chair, Powder River Basin Resource Council, 
  submitted letter...............................................   687
Merrill, Alan, President, Montana Farmers Union, submitted 
  statement......................................................   688
O'Toole, Patrick, President of the Board, Family Farm Alliance, 
  submitted statement............................................   690
Paxton, Jerry D., Commissioner, Carbon County, WY; Member, Public 
  Lands Committee, Wyoming County Commission, submitted letter...   699

                          Friday, May 14, 2010

Bishop, Jr., Hon. Sanford D., a Representative in Congress from 
  Georgia........................................................   747
Goodlatte, Hon. Bob, a Representative in Congress from Virginia, 
  opening statement..............................................   745
Marshall, Hon. Jim, a Representative in Congress from Georgia, 
  opening statement..............................................   747
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   743
    Prepared statement...........................................   743
Scott, Hon. David, a Representative in Congress from Georgia, 
  opening statement..............................................   744

                               Witnesses

Angle, Ph.D., J. Scott, Dean and Director, College of 
  Agricultural and Environmental Sciences, University of Georgia, 
  Athens, GA.....................................................   749
    Prepared statement...........................................   752
Latimore, Jr., Dr. Mark, Interim Dean, College of Agriculture, 
  Home Economics and Applied Programs, Fort Valley State 
  University, Fort Valley, GA....................................   755
    Prepared statement...........................................   757
McMurray, Gary, Chief, Food Processing Technology Division, 
  Georgia Tech Research Institute, Atlanta, GA...................   769
    Prepared statement...........................................   771
Farris, Robert, Director, Georgia Forestry Commission, Dry 
  Branch, GA.....................................................   773
    Prepared statement...........................................   775
Bell III, William A. ``Andy'', cotton, peanut, corn, and cattle 
  producer, Climax, GA...........................................   790
    Prepared statement...........................................   791
Duval, Vincent ``Zippy'', cattle and poultry producer, Macon, GA.   792
    Prepared statement...........................................   794
Lee, Ronnie, cotton producer, Bronwood, GA.......................   796
    Prepared statement...........................................   797
Minor, Richard ``Dick'', fruit and vegetable producer, 
  Andersonville, GA..............................................   800
    Prepared statement...........................................   801
Morris, Armond, peanut producer, Ocilla, GA......................   806
    Prepared statement...........................................   808
Segler, Hilton R., pecan producer, Albany, GA....................   812
    Prepared statement...........................................   813
Williams, James ``Ricky'', dairy producer, Baxley, GA; 
  accompanied by Sam Stone.......................................   816
    Prepared statement...........................................   816

                         Saturday, May 15, 2010

Bright, Hon. Bobby, a Representative in Congress from Alabama, 
  opening statement..............................................   842
Goodlatte, Hon. Bob, a Representative in Congress from Virginia, 
  opening statement..............................................   844
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   841
    Prepared statement...........................................   842
Rogers, Hon. Mike, a Representative in Congress from Alabama, 
  opening statement..............................................   845

                               Witnesses

Bell, Andrew P., cotton, corn, soybean, cattle, and hay producer, 
  Tallassee, AL..................................................   846
    Prepared statement...........................................   847
Esposito, Edward D., specialty crop, corn, and potato producer, 
  Newville, AL...................................................   859
    Prepared statement...........................................   860
Mencer, Joe, rice, cotton, corn, soybean, and wheat producer, 
  Lake Village, AR...............................................   861
    Prepared statement...........................................   862
Sanders, Carl, peanut, corn, cotton, and cattle producer, 
  Brundidge, AL..................................................   867
    Prepared statement...........................................   869
Waide, David W., corn, soybean, and rice producer, Jackson, MI...   871
    Prepared statement...........................................   873
Dewberry, Lamar, forestry producer, Lineville, AL................   889
    Prepared statement...........................................   891
Gibbs, Doug, beef producer, Ranburne, AL.........................   892
    Prepared statement...........................................   895
Taylor, Ph.D., P.E., Steven, Professor and Head, Biosystems 
  Engineering Department, Auburn University, Auburn, AL..........   897
    Prepared statement...........................................   899
Wiggins, Ricky, cattle, cotton, and peanut producer, Andalusia, 
  AL.............................................................   901
    Prepared statement...........................................   903

                           Submitted Material

Williams, Hal, farmer, Luverne, AL, submitted statement..........   915

                          Monday, May 17, 2010

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................   920
Cuellar, Hon. Henry, a Representative in Congress from Texas, 
  opening statement..............................................   920
Neugebauer, Hon. Randy, a Representative in Congress from Texas, 
  opening statement..............................................   918
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   917
    Prepared statement...........................................   918
        Submitted statement on behalf of Texas Sheep and Goat 
          Producers Association..................................  1023

                               Witnesses

Bouma, Brad, dairy producer, Plainview, TX.......................   921
    Prepared statement...........................................   923
Grissom, Jimmie ``Jimbo'', peanut producer, Seminole, TX.........   933
    Prepared statement...........................................   934
Lackey, John, citrus producer, Weslaco, TX.......................   936
    Prepared statement...........................................   937
Holt, Ronnie, cotton, corn, and sorghum producer and crop 
  insurance agent, Muleshoe, TX..................................   939
    Prepared statement...........................................   940
Parker, Jr., Joe, cattle producer, Byers, TX.....................   945
    Prepared statement...........................................   947
Murden, Dale, sugarcane, citrus, vegetable, soybean, and sorghum 
  producer, Monte Alto, TX.......................................   949
    Prepared statement...........................................   951
Brown, Billy Bob, irrigated and dryland wheat, sorghum, and beef 
  producer, Panhandle, TX........................................   976
    Prepared statement...........................................   977
    Supplemetary material........................................  1030
Heffington, Brad, cotton, corn, and sorghum producer, 
  Littlefield, TX................................................   979
    Prepared statement...........................................   981
Cleavinger, David, wheat, corn, cotton, and grain sorghum 
  producer, Wildorado, TX........................................   985
    Prepared statement...........................................   987
Raun, Jr., Lowell G., rice producer, El Campo, TX................   990
    Prepared statement...........................................   992
Schniers, Doyle, cotton producer, San Angelo, TX.................   997
    Prepared statement...........................................   999
Smith, Dan, sorghum producer, Lockney, TX........................  1000
    Prepared statement...........................................  1002
Vaughan, Dee, corn, soybean, wheat, cotton, and sorghum producer, 
  Dumas, TX......................................................  1004
    Prepared statement...........................................  1007

                           Submitted Material

Darneille, Wallace L., President & CEO, Plains Cotton Cooperative 
  Association, submitted letter..................................  1023
Fish, David, CEO, Breedlove Foods Inc., submitted statement......  1025
King, Hon. Susan L., Representative, State of Texas, submitted 
  statement......................................................  1025
McGarraugh, Scott, President, Texas Wheat Producers Association, 
  submitted statement............................................  1026
Rapier, Joe, Chairman, Lubbock Chamber of Commerce, submitted 
  statement......................................................  1029

                         Tuesday, May 18, 2010

Goodlatte, Hon. Bob, a Representative in Congress from Virginia, 
  opening statement..............................................  1035
Herseth Sandlin, Hon. Stephanie, a Representative in Congress 
  from South Dakota, opening statement...........................  1034
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................  1033
    Prepared statement...........................................  1033

                               Witnesses

Duffy, Gary, corn, soybean, wheat, alfalfa, hog, and beef 
  producer, Oldham, SD...........................................  1036
    Prepared statement...........................................  1039
Gangwish, Rodney K., irrigated corn, and soybean producer, 
  Shelton, NE....................................................  1040
    Prepared statement...........................................  1042
Sombke, Doug, corn, wheat, soybean, and beef producer, Conde, SD.  1044
    Prepared statement...........................................  1045
Masat, Steve, wheat, corn, soybean, hay, and livestock producer, 
  Redfield, SD...................................................  1047
    Prepared statement...........................................  1048
Scott, Kevin, soybean, corn, and hog producer, Valley Springs, SD  1049
    Prepared statement...........................................  1051
Wolle, Matthew J., corn, soybean, and livestock producer, 
  Madelia, MN....................................................  1052
    Prepared statement...........................................  1053
VanderWal, Scott, corn, soybean, small grain, and beef producer, 
  Volga, SD......................................................  1054
    Prepared statement...........................................  1056
Hallberg, David E., biofuels representative, Omaha, NE...........  1076
    Prepared statement...........................................  1077
Weishaar, Scott, biofuels representative, Sioux Falls, SD........  1083
    Prepared statement...........................................  1085
Neiman, Jim D., forest product producer, Hulett, WY..............  1089
    Prepared statement...........................................  1090
Kephart, Ph.D., Kevin D., Vice President for Research, and Dean, 
  Graduate School, South Dakota State University, Brookings, SD..  1103
    Prepared statement...........................................  1104

                           Submitted Material

Kieffer, Paul, farmer, Sturgis, SD, submitted statement..........  1119
Kieffer, Richard W., alfalfa producer, Sturgis, SD, submitted 
  statement......................................................  1120
Kloucek, Hon. Frank J., Senator, State of South Dakota, submitted 
  statement......................................................  1121
Naasz, Kraig R., President & CEO, American Frozen Food Institute, 
  submitted statement............................................  1124
Renelt, Richard, pork and grain producer, South Dakota, submitted 
  statement......................................................  1125
Nestle USA, submitted statement..................................  1126
Trego, Keith, Northern Great Plains Working Group, submitted 
  letter.........................................................  1129

                         Monday, June 28, 2010

Etheridge, Hon. Bob, a Representative in Congress from North 
  Carolina.......................................................  1136
Kissell, Hon. Larry, a Representative in Congress from North 
  Carolina, opening statement....................................  1135
McIntyre, Hon. Mike, a Representative in Congress from North 
  Carolina, opening statement....................................  1133
Thompson, Hon. Glenn, a Representative in Congress from 
  Pennsylvania, opening statement................................  1134

                               Witnesses

Allen, Ronald J., row crop, timber, pork, poultry, and beef 
  producer, Fayetteville, NC.....................................  1139
    Prepared statement...........................................  1140
Burke, W. Steven, biofuels representative, Oxford, NC............  1142
    Prepared statement...........................................  1144
Lee, Frank, corn, cotton, wheat, soybean, and beef cattle 
  producer, Norwood, NC..........................................  1147
    Prepared statement...........................................  1149
McLaurin, Allen, cotton producer, Laurinburg, NC.................  1150
    Prepared statement...........................................  1152
Woodie, Patrick, rural economic development representative, 
  Raleigh, NC; on behalf of Billy Ray Hall.......................  1163
    Prepared statement of Billy Ray Hall, rural economic 
      development representative, Raleigh, NC....................  1165
Jones, Randall, electric cooperative representative, Red Springs, 
  NC.............................................................  1170
    Prepared statement...........................................  1172
Porter, Jr., Thomas ``Tommy'' E., pork, beef, and poultry 
  producer, Concord, NC..........................................  1173
    Prepared statement...........................................  1173
Ward, Dan, peanut producer, Clarkton, NC.........................  1175
    Prepared statement...........................................  1176

                           Submitted Material

Johnson-Langdon, Sue, Executive Director, North Carolina 
  SweetPotato Commission, Inc., submitted statement..............  1191


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                         FRIDAY, APRIL 30, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                     Des Moines, IA
    The Committee met, pursuant to call, at 1:00 p.m., at the 
Iowa State Fair Grounds, Penningroth Sale Center, Des Moines, 
Iowa, Hon. Collin C. Peterson [Chairman of the Committee] 
presiding.
    Members present: Representatives Peterson, Boswell, Herseth 
Sandlin, Costa, Lucas, and King.
    Staff present: Nicole Scott, Pelham Straughn, John Konya, 
Keith Jones, Anne Simmons, Robert L. Larew, Lisa Shelton, and 
Jamie Mitchell.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. Well, thank you, Chairman Boswell for 
inviting us to your city and we appreciate your leadership on 
the Committee. Chairman Boswell is Chairman of our General Farm 
Commodities and Risk Management Subcommittee. He does a great 
job for us and we appreciate his work, we appreciate being here 
in his district.
    This hearing of the Committee on Agriculture to review U.S. 
Agriculture policy in advance of the 2012 Farm Bill will come 
to order. And good afternoon to everybody. I thank you for 
joining us today.
    We're glad to be here, as I said, in Des Moines to hear 
from area farmers and ranchers about the issues facing 
agricultural and rural communities. As we demonstrated in 2008, 
the farm bill is about much more than just farms. We continued 
the safety net that protects farmers and ranchers and provides 
the certainty that they rely on to stay in business. We also 
made historic investments in nutrition, conservation, and 
renewable energy, we began to research rural development, 
fruits and vegetables and organic agriculture.
    While traditional farm programs have a relatively small 
portion of the funding, these programs are essential for the 
continuing success of U.S. agriculture. We have a system of 
independent farmers and ranchers working the land, and without 
the certainty the farm bill programs provide, these farmers 
would not be able to get the financing that they would need to 
put the crops in the ground.
    I want to welcome our witnesses here today and thank them 
for taking the time out of their busy time of year, to talk to 
us today. The farm bill hearings are the first step in the 
process of writing the next farm bill. A bill this large that 
covers so many important issues, takes a lot of time and effort 
to get it right. So, I am committed to the process as I was 
last time that it be open, transparent, and bipartisan. So, for 
all those that are joining us here in the audience today, I 
hope that you will also participate by sharing your thoughts on 
the farm bill with us.
    We have a survey posted on our Committee website, and I 
think we have some cards around that have the web address on 
there and so forth. So, anybody can have a chance to tell the 
Committee about what's working with the farm bill and what 
isn't working, any new ideas that they'd like us to consider 
for the next farm bill, and we are also web-casting this 
hearing. I think that's the first time that that's been done at 
a field hearing. So people around the country that are 
interested will be able to join us today over the Internet and 
follow this hearing.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Nampa to hear 
from area farmers and ranchers about the issues facing agriculture and 
rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. We have a lot of ground to cover, so let's 
get started with the Ranking Member, Mr. Lucas, we'd appreciate 
a statement from you.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman. I want to thank you for 
calling these hearings and being so proactive in preparation 
for the debate that we will have on future farm policy in the 
2012 Farm Bill.
    We have an extremely difficult road ahead of us, but one 
thing I do look forward to is listening to our producers. I get 
to hear from my own producers every time I step in the coffee 
shop or the feed store back home, or conduct my town hall 
meetings across the third district of Oklahoma. I think it's 
vitally important to hear from producers from a broad range of 
places that grow and raise a broad range of products.
    My goal for the next farm bill is simple. I want to give 
producers the tools to help them do what they do best, and that 
is produce the safest, most abundant, most affordable food 
supply in the history of the world. I think it's extremely 
important to hear from them about what is working, what is not 
working, what changes we can make to the farm bill to allow it 
to work in a more efficient fashion.
    The 2008 Farm Bill was another investment in the future of 
rural America, not only did we provide a viable safety net for 
producers, but we also made substantial investments in 
conservation and nutrition programs during a time of need for 
many Americans. A lot of people do not realize, and some even 
forget, we should all remember that 75 percent of the farm bill 
spending goes to nutrition programs.
    In addition to those investments, this Committee led by 
Chairman Peterson accomplished substantial reforms, especially 
in the realm of payment limits. This is a fact that should not 
be forgotten by those who always seem ready to attack our 
programs.
    Last week during a hearing in Washington, I was concerned 
the Administration's priorities seemed to differ so greatly 
from my producers' priorities. There was barely a mention of 
the safety net, conservation program, or any of the programs I 
hear about from my producers. I think it's imperative that 
Congress work together with the Administration to come up with 
a workable solution for the many problems our rural communities 
face, but first this Administration must prove its commitment 
to production ag. I also want to hear today about some 
impediments that you face when you bring your crops to market, 
and see if we can help alleviate some of those impediments.
    I have serious concerns about the effect of an overreaching 
EPA and what it will have on you. It seems every day the EPA is 
coming out with a new regulation that makes it harder for 
producers to make a living. Can we do something about those 
impediments, or at least give you the tools that help mitigate 
some of the adverse effects to these regulations?
    With that said, I look forward to hearing from all of our 
witnesses today and again, thank you, Mr. Chairman, for taking 
this to the country.
    The Chairman. We have--we normally have other Members 
submit their statements for the record, but today since we have 
other distinguished Members from Iowa, we'll recognize them for 
a brief statement. Mr. King is a Member of the Committee. Did 
want to welcome your constituents?

   OPENING STATEMENT OF HON. STEVE KING, A REPRESENTATIVE IN 
                       CONGRESS FROM IOWA

    Mr. King. Thank you, Mr. Chairman.
    I appreciate the opportunity to be recognized, and I thank 
you for bringing this hearing to Iowa. You and Mr. Boswell 
teamed up with my colleague to my left Tom Latham to help bring 
this hearing here to Iowa. And I'm proud to show off who we are 
here in Iowa to the balance of the Committee.
    I'm looking forward to the testimony from all the 
witnesses. I think we've come a long way in the last twenty or 
twenty-five years in agriculture, and I've been able to be part 
of and witness a lot of that, and I'm looking forward to the 
testimony of the witnesses.
    And when I looked out of the plane coming in here, I had to 
look down and it would seem odd not to see a lot of snow from 
the sky, but it was nice to see fresh green grass, so thanks, 
Mr. Chairman, and I will yield back the rest of my time.
    The Chairman. Well, thank you very much, Mr. King, we 
appreciate that.
    We're also joined today, and I have some paperwork I have 
to take care of here, Tom. The gentleman from Iowa, Mr. Latham, 
is not a Member of this Committee, but is joining us today. I 
have consulted with the Ranking Member, and we are pleased to 
welcome him to joining us in this hearing. Mr. Latham is not a 
Member of our Committee, but we work with him on a regular 
basis because of his position on the Appropriations Committee; 
how that interacts with a lot of what we do on the Agriculture 
Committee.
    He's, like I said, a good friend of mine and we work 
together on a lot of things on a bipartisan basis. I think Mr. 
Lucas would say the same.
    Mr. Latham, we appreciate you being here. We would like to 
give you an opportunity to say a few words, and I understand 
you have some other commitments so you may not be able to be 
here the whole time, but we really appreciate you making the 
effort to be with us for a while.

STATEMENT OF HON. TOM LATHAM, A REPRESENTATIVE IN CONGRESS FROM 
                              IOWA

    Mr. Latham. Well, thank you very much, Chairman Peterson, 
it's strange to call you that. Thank you for allowing a lowly 
appropriator to come and join the esteemed authorizing 
committee, and I thank Mr. Lucas for also allowing me to be 
here. I wish he would take that Oklahoma State jacket off, but 
anyway, we are very good friends. Okay. Ken up there is an Okie 
guy.
    Anyway, I really appreciate all the Committee Members being 
here in Iowa. It is important to know, for Mr. Costa from 
California, and for others, to understand what Iowa's about. We 
are very modest people here, generally speaking. I think it's 
somewhat of our northern European ancestry, Lutheran like 
myself, we just don't brag much, but the fact that we're 
blessed with abundance here. We have 25 percent of the Grade A 
farmland in the world. We're number one as far as corn, 
soybeans, pork, and egg production here. We are leaders 
obviously in beef, renewable energy with ethanol, and used to 
make biodiesel. We have a remarkable place here with the 
abundance like no other place in the world.
    The reason I think it's so important to have this type of 
hearing this early is that we're going to have tremendous 
challenges. As Mr. Lucas said, they really shouldn't call it a 
farm bill, they should call it a food bill or a feeding bill 
because that's where almost all the money goes in a farm bill. 
We have a lot of challenges, obviously, with the new farm bill. 
The fact of the matter is the implementation hasn't occurred 
yet on the last farm bill in a lot of different areas, which is 
very frustrating for a lot of folks.
    And there are some people, in the Administration, that want 
to reopen the previous farm bill before it's fully implemented, 
as far as different aspects and payment limitations, things 
like that. We're going to have a lot of challenges with climate 
change, the idea of indirect land use, all of those things, the 
challenges we have today with EPA and how they want to take 
over a lot more control in agriculture. And that's why this is 
a 900 pound gorilla, with the budget deficit and what funds are 
going to be available for us to write into the next farm bill.
    The farm bill before the last one I thought was upside down 
because the whole discussion was on how much money was going to 
be available, and then we found that out and tried to insert 
policy. The last farm bill and the Chairman's--I'm very 
grateful that the way he did it was to put policy in place and 
have the money follow it. That is the way this should be done, 
and that's why this hearing is so important today to start to 
get a grasp on what the real policy things in varied type of 
budgets in the future.
    So with that, thank you very much for the opportunity, and 
I apologize I'm going to have to leave a little bit early, but 
thank you very much, Mr. Chairman.
    The Chairman. I thank the gentleman, for the statement and 
thank you for being with us today.
    So we'd like to welcome our first panel of witnesses. 
You've been very patient coming up with us here, being part of 
the process, I think you all have been through it before: Mr. 
Varel Bailey, corn, soybean, grass, pork, cattle, and sheep 
producer from Anita, Iowa; Mr. Richard Bayliss, corn and 
soybean producer from Ottumwa, Iowa; Mr. Dane Lange, dairy 
farm, and soybean producer from Brooklyn, Iowa; Mr. Nick Volz, 
corn, soybean, and pork producer from Elkhart, Iowa; and Mr. 
Darrell Weems, cattle, corn, and soybean producer from Earlham, 
Iowa.
    Mr. Bailey, welcome to the Committee and your statement 
will be made part of the record, and we're going to try to keep 
the statements to 5 minutes if we can. We don't have a timer 
here, I guess. Oh, we do. Okay. Good.
    I want to announce we had a hearing here, the first hearing 
we had on the farm bill with the Secretary, some of the Members 
figured out something, so they started asking--this is not 
aimed at you guys at all, but they started asking three 
questions at the beginning of their time and then the answers 
took 10 minutes. So we're going to have a new rule that you can 
ask one question at a time, and when the light is yellow you 
can't ask another question. So we'll try to hold everybody to 
the time frame if we can.
    Mr. Lucas, I think we can agree, so that everybody gets a 
chance to say their piece and have time for questions.
    Mr. Bailey, thanks, for being here.

   STATEMENT OF VAREL G. BAILEY, CORN, SOYBEAN, GRASS, PORK, 
             CATTLE, AND SHEEP PRODUCER, ANITA, IA

    Mr. Bailey. Mr. Chairman, thank you very much.
    The Chairman. You have to talk right into the microphone in 
order for it to work. There you go.
    Mr. Bailey. Mr. Chairman, Members of the Committee, first 
of all I want to congratulate you for starting these hearings 
at this time, and part of the reason is that things are 
changing very rapidly out here. Keeping Washington informed as 
to what's really going on out here is continuously a challenge. 
So, again, we appreciate it.
    I ask that my written testimony be included in the record, 
and I'd like to speak just off the record, here on the record, 
but informally.
    First of all, I'd like to say, that the farm bill as you 
folks have mentioned is more than loan rates and food stamps. 
Most of us don't realize that the farm bill is actually a 
contract. It's a contract between agriculture and the rest of 
society. If you go back in history, you'll find that all 
societies, all cultures have a contract, and that is a level of 
trust. It's actually a covenant between the people that produce 
the food, feed, fiber, and fuel for the general public and the 
rest of that culture. If that erodes, if that trust breaks down 
between the farmers, the agriculture, and the rest of the 
culture, governments are overthrown and cultures die.
    Jared Diamond has written a series of books on that, and we 
are lucky here in the United States in that we have a farm 
bill, and it's continuously renewed and that actually 
formalizes that contract between society and agriculture. Now, 
it's really critical because no society in the history of the 
world has ever had the extreme situation of two percent of the 
people supplying 98 percent of the people and exports in excess 
of that. So our challenge here, our job here is really a lot 
greater than what we realize when we look at it from that 
perspective.
    Now in my testimony I mention about six things and many of 
them are not in the farm bill, but I think are very important, 
and I listed land. I listed site-specific research. I listed 
risk mitigation, rural infrastructure, food fads, and nutrition 
and agricultural structure and market fairness.
    In covering land, I listed the issue and said that we have 
a loss of agricultural land. We have a need for technology for 
land reclamation and improvement. We have 30 million acres, 
over 30 million acres in the CRP and other government land 
programs. I'm not sure that we're fully utilizing, from a 
public policy perspective, what we could be doing with that 
land and improving it and--because it appears in the future 
that we'll probably need to bring that land back into 
production with site-specific research. With globalization and 
everything else, every farm is in direct competition with every 
other farm around the world, and the point is that our long-
term survival as a farmer hinges on a steady stream of site-
specific research.
    Agriculture and politics are similar in the fact that we're 
both local and the research done in other places in the world 
don't necessarily always do good for me on my farm.
    I'm not sure that we did the right thing with the National 
Institute of Food and Agriculture because we pulled the 
decision-making from agricultural research to Washington D.C., 
and pulled it away from the land here at universities. And so 
this is an issue that I think we need to take a look at.
    Risk Mitigation: We have an aggressive program with crop 
insurance. We need to continue to review that. The Center for 
Agriculture and Rural Development at Iowa State University has 
done an extensive study on the subsidized crop insurance, and 
we need to take a good hard look at it. I would suggest we pull 
money, some of the subsidy out of that and rework the ACRE 
program and make it more workable.
    Rural infrastructure, and I'll tick off some things that we 
need to take a look at. One is a problem in broadband. We have 
a problem in electricity transmission. The fact that we farmers 
have problems getting our electricity onto the national grid, 
and that's a bureaucratic problem, really not a physical 
problem.
    We have a pending problem of the global positioning system, 
and many of us rely on that system for our planting and 
spraying and other kinds of site identification. A number of 
farmers are now actually buying Russian equipment, so we have a 
backup system because there's a question as how reliable the 
U.S. GPS system is going to remain.
    We've got another problem with the cellular system. If you 
go to Europe and you get a European cell phone, it will work 
anywhere instead of near three towers along the interstate. 
There is only one because they have a completely unified 
cellular system, and we need a universal cellular system here 
in the United States.
    And foods, fads, and nutrition, I mentioned here the fact 
that we have through the food stamp system the world's largest 
nutritional data center. I'm not sure that we're working with 
that data set, especially with the healthcare bill and 
everything. USDA needs to take a look at what we're doing with 
all that information coming off of the scanners and everything 
with the food situation. We have the data there if we simply 
use it.
    An agricultural structure, oligopoly and market forces, I'd 
just simply say that I really encourage this Committee to 
reinforce USDA's effort with the Department of Justice to take 
a good hard look at the changes taking place in agricultural 
structure and those things.
    So thank you very much for your time, and I would answer 
any questions.
    [The prepared statement of Mr. Bailey follows:]

  Prepared Statement of Varel G. Bailey, Corn, Soybean, Grass, Pork, 
                 Cattle, and Sheep Producer, Anita, IA
    Testifying as an individual farmer; farming since 1966.
    Observation: farm bills are like military strategy; they are 
designed for the last war, not the next war.
    When considering the future, I have these areas for 
recommendations:

    Land.

    Site specific research.

    Risk mitigation.

    Rural infrastructure.

    Foods, fads and nutrition.

    Agriculture structure and market fairness.
Land
    Issue: loss of agricultural land; need for technology for land 
reclamation and improvement.

    Land is the basic building block of agriculture. Adequate area, 
quality and ecology of land are vital to the production of food, feed, 
fuel and fiber and are critical to the survival of humanity. The U.S. 
Government has a vital role in insuring that high quality agricultural 
land is not converted to non-agricultural use. Increased emphasis on 
farmland protection, more emphasis on new soil conservation 
technologies and programs and new initiatives on agricultural land 
reclamation around urban areas are needed.
Site Specific Research
    Issue: loss of site specific research capacity while the need 
becomes greater.

    New emphasis on site specific research is needed to insure the 
necessary increases in agricultural production to feed a hungry world. 
Politics and agriculture are similar in that both are ``local.''
    Globalization has changed the goals of agriculture research. 
Instead of the local Land-Grant University working to perfect 
technology and management systems that are unique to their area, they 
and the private sector work for the ``home run'' invention that can be 
sold universally. At the same time Federal funding for Land-Grant 
support for Research Stations has been reduced 35% in the last decade 
and Cooperative Extension support has been reduced 42%. Globalization 
means every place is in direct competition with everywhere else. 
Economic survival is determined by a continuous stream of site-specific 
research. The last farm bill moved away from local research by 
establishing the National Institute of Food and Agriculture. This 
program uses large multi-state grants, with the goals set in Washington 
to develop ubiquitous technology. This may seem useful from a national 
perspective but it is counter to the need for local prioritized 
research. The private sector cannot provide this R&D because typically 
the unique market is too small. For the farmer, the private sector 
``consultant'' cannot be trusted to provide unbiased information since 
many times he is furnished by an input supplier. If this situation 
continues, U.S. agriculture will lose its competitiveness with the rest 
of the world. Creation of a site specific research system is essential 
for the future of American agriculture.
Risk mitigation
    Issue: need for redesign of government subsidized crop insurance 
program.

    Government programs provide an important role in buffering the 
risks from weather disasters, market aberrations and political 
irrationalities. Government must maintain the role as an insurer (for a 
fee) of uncertainty and not be a driver of change. Past government 
programs have enticed production into marginal areas (the corn belt 
almost to Winnipeg) (milk to the desert). This is a result of a 
combination of commodity programs, subsidized insurance programs and 
other supports that in some areas reduce the farm risk to near zero. 
Reconciliation of the programs so they provide adequate mitigation and 
not a guarantee of profit are needed.
    Further revisions of the agreement between RMA and the crop 
insurance companies are needed. Even with the changes pending in the 
negotiation, the program is a rip-off for taxpayers and transfer of 
wealth from productive areas to marginal areas. That money will be 
better spent in other areas.
    One of the areas in need of added support is in the ACRE program. 
This could simplify the program and make it workable for many more 
farmers.
Rural Infrastructure
    Issue: new infrastructure areas need policy development and Federal 
support.

    Typically when we think of infrastructure we think roads, bridges, 
railroads, phone lines, locks-and-dams, USDA offices, and the Rural 
Electric Co-ops. Those are all still vital but for rural America to 
provide for the demands of the rest of the country and the world, we 
are in a new era. World competitive Broadband communications, a 
modernized electric transmission network, a quality Global Position 
System signal, a unified, comprehensive cellular phone system, and a 
modernized USDA computer system are some of the things rural America 
needs.
    Broadband: A dynamic, last-mile, high speed, high capacity 
Broadband is essential for a vibrant future. ``Net neutrality'' is key 
to success. Without net neutrality, the consolidating communications 
industry will become gate keepers, milking profits from past 
investments rather than building for the future. If government fails to 
protect net neutrality it will be endorsing oligopoly or a cartel. We 
went through this with land-lines in the past. We can avoid the problem 
with the correct policy now.
    Electric transmission network: We don't need to start with the 
political battles in crossing state lines and who makes the investment. 
We can start with changing the rules between REC's, their transmission 
line companies and the electric generation companies. Right now it is 
impossible for a farmer to build a wind turbine, generate electricity 
for his local REC in excess of the need of the local substation, and 
then send power back through the transmission line company to another 
substation in the same REC. This is not a technical problem; it is a 
bureaucratic problem. Furthermore, if a group of farmers and local 
investors wish to build a wind turbine farm, they must get in the same 
bureaucratic waiting line as those trying to build coal, natural gas or 
nuclear power plants. Updating the rules for electric generation at the 
local and regional level will greatly increase the creation of 
alternative energy.
    Global Positioning System: GPS has become a necessary service for 
agriculture and rural America. That signal has become the meta-data 
standard for farming, construction, transportation, recreation, 
emergency services and many other industries. For long time users, the 
signal seems to be less accurate and reliable. After the signal was 
unscrambled by the military there was a period of very high precision. 
Now many users are adopting RTK and CORE precision correcting systems 
that correct for the lower quality service, but even these programs may 
fail if the number of satellites drops too low or their signal is 
corroded. USDA does not run this system but agriculture needs to 
register a concern if the GPS system should fail.
    Cellular telephone system: Traveling the Interstate highway in the 
U.S. and then the Autobahns in Europe, there is a significant 
difference in cell phone towers. In the U.S. there are normally three 
or four towers clustered together. In Europe there is only one. A U.S. 
based cell phone will not work in Europe. The reason is Europe has a 
unified cell phone transmission system. The splinted system in the U.S. 
means all the investment is in the high volume areas, leaving major 
rural area with little cell phone service. This is the same story as 
years ago when the land-line telephone system and the electric service 
system was developed. Government must step in when the private sector 
fails in delivering new technology that is essential to the economy and 
society.
    USDA computer system: This is long overdue.
Foods, Fads and Nutrition
    Issue: massive, long term support for nutrition programs need a new 
strategy.

    The majority of the money spent in the farm bill is for food and 
nutrition. The media is constantly full of news of obesity, hunger, 
nutrition driven medical problems, fad diets, and theories about 
eating. I get the opinion that the computer balanced rations I feed my 
cattle, hogs and sheep provide a better level of nutrition than what 
the American public eats each day. This begs a question: with the huge 
level of government funds invested, the electronic Food Stamp recording 
program, the demographic studies ongoing, and the massive research 
effort, why is human nutrition so confusing?
    My fear is that a fringe group with a secondary agenda will attempt 
to use the USDA nutrition program to implement their goals. Without 
sound science based information on which to base public policy, serious 
damage can be caused on human health, and agriculture. The food policy 
system now in place could not stop the damage done by one BSE cow, 
miss-named H1N1 (swine) flu or sick poultry. It is time to allocate 
funds to research what we really eat and find ways for better nutrition 
to create a better life.
Agriculture Structure, Oligopoly and Market Fairness
    Issue: the need for greater effort in the USDA & DOJ investigation.

    Public policy changes in the past decades have radically changed 
agriculture and rural America. Globalization has created a world market 
and world competition. Micro-electronics, communications and the 
Internet have created a world network. A world financial system moves 
unlimited money around the world with a click. An imperfect 
intellectual property system makes many inventions ubiquitous almost 
overnight. Consolidation and vertical integration in the livestock 
industry have collapsed the profit margins in livestock production. The 
patenting of DNA was legalized. New methods of retailing with worldwide 
supply chains have been developed. We currently have an unbalance 
market place. It is unbalanced at the farm level. It is unbalanced at 
the processing level and unbalanced at the retail level. Examples are: 
livestock grower contracts, processor supply ownership, unbalanced 
market information and artificial segmentation to stifle competition. 
Machinery is designed with proprietary software to capture maintenance 
business and trade territories are established to reduce market 
competition. Broad intellectual property patents provide a legal 
platform to shape segments of the industry and actually reduce 
innovation instead of stimulating it. In pharmaceuticals, FDA 
regulations are used as a weapon to stop generic products based on 
inert ingredients present due to the production process. Failure of 
Federal regulations to consider market balance when evaluating business 
consolidation has created an agricultural structure that is very 
fragile and tenuous. Rebalancing of the market is needed.
    Some will say that it is impossible to put the genie back in the 
bottle, but they said that about the ``trust busting'' business 
conditions in 1900.

    The Chairman. Thank you, Mr. Bailey, we appreciate that. 
Mr. Bayliss, welcome to the Committee.

  STATEMENT OF RICHARD D. BAYLISS, CORN AND SOYBEAN PRODUCER, 
                          OTTUMWA, IA

    Mr. Bayliss. First to the Committee I'd like to thank you--
--
    The Chairman. You have to get a little closer, like a rock 
and roll singer.
    Mr. Bayliss. First to the Committee, I'd like to thank you 
for this opportunity to appear before you and share with you my 
thoughts on the farm bill, and its effects on our farming 
operation and those in my area that I am familiar with.
    My name is Richard Bayliss. Our family, my wife and I, our 
two sons and their families, farm about 2,000 acres of row 
crops in Wapello and Keokuk Counties in southeast Iowa. Our 
farms are split just about evenly between corn and soybean 
production each year, and we rotate those crops annually. We 
have a combination of owned, rented, and custom farmed ground.
    Our landlords include people who are elderly, but very 
involved with their farms, and those who do not live near their 
farm, but still take an active role in management decisions.
    I also retired in 2008 after almost forty-two years in the 
Iowa Army National Guard and spent calendar year 2005 in Al 
Anbar Province, Iraq.
    Production agriculture has become a very risky, high input, 
and high-tech industry. We face many challenges daily with 
changing weather, volatile markets, rapidly advancing 
technology, and rising costs of production. While United States 
farmers continue to feed the world, we see many young and 
beginning farmers who want to enter this challenging and very 
rewarding profession. Investing in farmland and machinery, 
maintenance costs on both of these, and insurance to protect 
against loss presents a major obstacle to established farmers. 
For those just beginning, those things can be more than 
daunting, they can stop a young person in his tracks. Some form 
of revenue or price support or protection for them is 
essential. We will not stay and farm forever. We need that 
younger generation to be in the position to take over from us 
as seamlessly and painlessly as possible.
    As for our own operation, we remained with the traditional 
DCP program that was enacted in 2002 and available with the 
2008 farm program. It is an uncomplicated and straightforward 
commodity price support program that is generated by number of 
acres  price = support level. The DCP Program coupled with a 
revenue assurance option from the Multi-Peril Crop Insurance 
provides a reasonable safety net that provides stability in our 
operation.
    The optional revenue-based-program, ACRE, was new in the 
2008 Farm Bill. It may become simpler and easier to use and 
understand as time goes on, but we found it to be very 
difficult to apply to our operation and challenging to 
accurately determine its usefulness. The major issues with ACRE 
in my opinion are: Yield base is set on a statewide basis. 
Variables such as soil types, average yields, and weather 
conditions across the entire state put the southern tiers of 
counties at a significant disadvantage, and, conversely, puts 
other areas of the state at an unfair competitive advantage.
    ACRE is a corn-only program; no provision for rotating 
crops of soybeans, so coverage is drastically reduced for 
anyone who rotates crops, which are a majority of operations. 
If a producer has a significant crop loss in 1 year, the yield 
base is reduced reflecting the loss, which in turn reduces 
coverage for the subsequent year. Two crop failure years back-
to-back and a producer has no coverage at all.
    Annual submission of proven yields, total revenue, and full 
Federal income tax returns is not only difficult to comply 
with, but is invasive and confidentiality can be an issue. This 
requirement is also extremely difficult to explain and justify 
to elderly or distant landlords.
    ACRE payments are discounted below the DCP Program by 20 
percent, which is a significant reduction that's difficult to 
explain to elderly landlords, those who do not live on a farm, 
and even tenants who are affected in some lease arrangements.
    Available funds through the commodity loan program are 
discounted 30 percent when a producer is enrolled in ACRE. If I 
were able to borrow $10,000 using about 5,200 bushels of my 
corn as collateral while enrolled under the DCP Program, I 
could only obtain $7,000 against the same 5,200 bushels if I 
were enrolled in ACRE. ACRE requires a 4 year commitment with 
no opt-out provision. This constraint significantly prevents an 
operation from reacting to changes in life situations, new 
marketing opportunities, et cetera, and can have a very 
negative impact on estate planning.
    These are the reasons that kept our operation and many 
others, to whom I've personally spoken, out of the ACRE Program 
and will continue to do so until modifications can be made so 
that it is more equitable and user friendly. In comparison, DCP 
helps a producer to stay in compliance with the program, 
instead of manufacturing roadblocks to compliance, which is due 
in large part to its simplicity and its straightforward 
language.
    The fixes I would propose for the farm program to help 
young and beginning farmers to be able to gain a foothold in 
this business and provide the next generation of agriculture 
producers would be: Raise the loan price. Raise the loan price 
on corn to a realistic level. The current loan price of $1.90 a 
bushel is no incentive for a producer to seal grain/put corn 
under loan when the loan rate is half of market value. The loan 
program could be a very valuable financial tool if it were 
restructured to reflect a realistic loan price.
    Gaining support for a loan program as opposed to a direct 
payment program should be easier to manage. Design a 
straightforward, streamlined price support program that the 
producer can sell to his lender. It has to be realistic, and it 
has to provide some form of protection, for both the producers 
and the lenders, to encourage the lender to make funds 
available for production.
    It's extremely difficult to convince a lender to provide 
thousands in operating capital with no safety net beneath the 
production he is financing. Crop insurance, revenue assurance 
needs to be available for every producer to support the 
producer/lender relationship.
    I support payment limits as set out in our current farm 
bill. I do not feel that the significant cuts President Obama 
suggested are acceptable in our current financial structure. 
There are many young and beginning farmers who can exceed the 
$250,000 income limit, but have such large debt service needs 
that their income is stretched very thin. Yet they will be 
ineligible for the program. Preventing these younger, newer 
farmers from participating in the farm program can effectively 
cripple them from being able to compete in the marketplace, 
both from a commodity sales standpoint and in the ability to 
purchase real estate on which to expand their operations. I 
believe that there is a certain unfairness associated with the 
proposed cuts.
    I also support the Federal crop revenue assurance program. 
It is the safety net that farmers and small, rural banks and 
other ag lenders must have to stay in business and remain 
viable in these challenging times.
    In my opinion, the new farm bill must evolve from where we 
are now, and not be a complete 180 turn. Please endeavor to 
look 10 or more years into the future with respect to input 
costs, markets, technology, global perspective, and our 
children's children. The program must fit the future, not what 
we are doing this week or this year. They can fit the rural, 
production landscape and the ecological development of larger 
farm operations. Farms will not get smaller. The new farm 
program needs to be flexible enough to allow for the growth and 
evolution of the business of farming. We have to be able to 
help our next generation get started and become quickly viable 
to maintain the level of production that will be necessary to 
continue to feed the population of the world in the coming 
years.
    The best opportunity for production agriculture is to 
operate in a free market system that allows for profitability 
and innovation. However, when the commodity markets are 
significantly affected by issues completely unrelated to 
agriculture and so very out of our control, there needs to be 
some from of safety net in place to help deal with this 
situation.
    I believe that agriculture has many exciting opportunities 
available for success in every community. Mother Nature seems 
to regulate the size of that success in most cases. The 
business of agriculture needs a support base with revenue 
assurance in place to compensate for the things the farmer 
cannot control: Weather and market volatility.
    Again, I would like to thank the Members of this Committee 
for providing this hearing and for allowing me the opportunity 
to share my thoughts and opinions with you. It's very difficult 
for many of us in production agriculture to imagine doing 
anything else in life. Farming in a situation where a farm 
program wasn't necessary for us to economically produce the 
commodities that fuel our world would be ideal. But until we 
reach that point, I hope that we will work towards creating a 
simply-structured and straightforward framework that can help 
the next generation in production agriculture move toward a 
robust free market system. Thank you.
    [The prepared statement of Mr. Bayliss follows:]

 Prepared Statement of Richard D. Bayliss, Corn and Soybean Producer, 
                              Ottumwa, IA
    First, to the Committee, I'd like to thank each of you for this 
opportunity to appear before you and share with you my thoughts on the 
farm bill and its effects on our farming operation and those in my area 
that I am familiar with.
    My name is Richard Bayliss. Our family--my wife and I, our two sons 
and their families--farm about 2,000 acres of row crops in Wapello and 
Keokuk Counties in Southeast Iowa. Our acres are split just about 
evenly between corn and soybeans each year, and we rotate those crops 
annually. We have a combination of owned, rented, and custom farmed 
ground. Our landlords include people who are elderly but very involved 
with their farms, and those who do not live near their farm but take a 
very active role in management decisions. Also, I retired in 2008 after 
almost 42 years in the Iowa Army National Guard and spent calendar year 
2005 in Al Anbar Province, Iraq. While I was deployed, our farm 
operation went along pretty much as normal because each of those 
remaining at home carried the extra load to make it happen.
    Production agriculture has become a very risky, high input, high-
tech industry. We face many challenges daily with changing weather, 
volatile markets, rapidly advancing technology and rising costs of 
production.
    While United States farmers continue to feed the world, we see many 
young and beginning farmers who want to enter this challenging and very 
rewarding profession. Investing in farm land and machinery, maintenance 
costs on both of those, and insurance to protect against loss presents 
a major obstacle to established farmers; for those just beginning, 
those things can be more than daunting . . . they can stop a young 
person in his tracks. Some form of revenue or price support or 
protection for them is essential. We old guys can't farm forever . . . 
we need that younger generation to be in a position to take over from 
us as seamlessly and painlessly as possible.
    As for our own operation, we remained with the traditional DCP 
program that was enacted in 2002 and available with the 2008 farm 
program. It is an uncomplicated and straightforward commodity price 
support program that is generated by ``number of acres  price = 
support level.'' The DCP Program, coupled with Revenue Assurance option 
from Multi-Peril Crop Insurance provides a reasonable safety net that 
provides stability in our operation.
    The optional revenue-based program--ACRE--was new in the 2008 Farm 
Bill. It may become simpler and easier to use and to understand as time 
goes on, but we found it to be very difficult to apply to our operation 
and challenging to accurately determine its usefulness. The major 
issues with ACRE in my opinion are:

    (a) Yield base is set on a statewide basis, not by county. 
        Variables such as soil types, average yields, and weather 
        conditions across the entire state put the southern tiers of 
        counties at a significant disadvantage and conversely puts 
        other areas of the state at an unfair comparative advantage.

    (b) ACRE is a corn-only program; no provision for rotating crops of 
        soybeans, so coverage is drastically reduced for anyone who 
        rotates crops, which is a majority of operations.

    (c) If a producer has a significant crop loss in 1 year, the yield 
        base is reduced reflecting the loss, which in turn reduces 
        coverage for the subsequent year. Two crop failure years back-
        to-back and a producer has no coverage at all.

    (d) Annual submission of proven yields, total revenue, and full 
        Federal income tax returns is not only difficult to comply 
        with, but is invasive and confidentiality can be an issue. This 
        requirement is also extremely difficult to explain and justify 
        to elderly or distant landlords.

    (e) ACRE payments are discounted below the DCP program by 20%, 
        which is a significant reduction that is difficult to explain 
        to elderly landlords, those who do not live on the farm, and 
        even to tenants who are affected in some lease arrangements.

    (f) Available funds through the Commodity Loan program are 
        discounted 30% when a producer is enrolled in ACRE. (If I were 
        able to borrow $10,000 using about 5,200 bushels of my corn as 
        collateral while enrolled under the DCP program, I could only 
        obtain $7,000 against the same 5,200 bushels if I were enrolled 
        in ACRE.)

    (g) ACRE requires a 4 year commitment with no opt-out provision. 
        This constraint significantly prevents an operation from 
        reacting to changes in life situations, new marketing 
        opportunities, etc. and can have a very negative impact on 
        estate planning.

    These are the reasons that kept our operation and many others to 
whom I've personally spoken, out of the ACRE program and will continue 
to do so until potential modifications can be made so that it is more 
equitable and user friendly.
    In comparison, the DCP program helps a producer to stay in 
compliance with the program, instead of manufacturing roadblocks to 
compliance, which is due in large part to its simplicity and its 
straight-forward language.
    The ``fixes'' I would propose for the farm program to help young 
and beginning farmers to be able to gain a foothold in this business 
and provide the next generation of agriculture producers would be:

    (a) Raise the loan price on corn to a realistic level. Current loan 
        price of $1.90/bu is no incentive for a producer to seal grain/
        put corn under loan when the loan rate is half of market value. 
        The loan program could be a very valuable financial tool if it 
        were restructured to reflect a realistic loan price. Gaining 
        support for a loan program as opposed to a direct payment 
        program should be easier to manage.

    (b) Design a straight-forward, streamlined price support program 
        that the producer can sell to his lender. It has to be 
        realistic, and it has to provide some form of protection for 
        both the producer and the lender to encourage the lender to 
        make funds available for production. It's extremely difficult 
        to convince a lender to provide thousands in operating capital 
        with no safety net beneath the production he is financing.

    (c) Crop Insurance/Revenue Assurance needs to be available for 
        every producer to support the producer/lender relationship.

    I support payment limits as set out in the current farm bill. I do 
not feel that the significant cuts that President Obama has suggested 
are acceptable in our current financial structure. There are many young 
and beginning farmers who can exceed the $250,000 income limit but have 
such large debt service needs that their income is stretched very thin. 
Yet they will be ineligible for the program. Preventing these younger 
newer farmers from participating in the farm program can effectively 
cripple them from being able to compete in the marketplace, both from a 
commodity sales standpoint and in the ability to purchase real estate 
on which to expand their operations. I believe that there is a certain 
unfairness associated with the proposed cuts. Every operation has made 
significant financial decisions based on the rules set forth in the 
last farm bill; the rules shouldn't be changed in the middle of the 
game.
    I also support the Federal Crop Revenue Assurance Program. It is 
the safety net that farmers and small, rural banks and other ag lenders 
must have to stay in business and remain viable in these challenging 
times.
    In my opinion the new farm bill must evolve from where we are now, 
not be a complete 180 turn. Please endeavor to look 10 or more years 
into the future with respect to input costs, markets, technology, 
global perspective, and our children's children. The program should fit 
the future, not what we are doing this week or this year. Make it fit 
the rural, production landscape and the ecological development of 
larger farm operations. Farms will not get smaller. We won't be going 
back to 80 or 120 acre operations where corn, soybeans, oats, clover/
hay were rotated each year and hogs and cattle are pastured on the 
fallow ground while chickens peck in the yard. Farm operations will get 
larger. There are fewer farmers on the horizon to produce and manage 
the commodities. Machinery will only get larger and more powerful. And 
more expensive. The new farm program needs to be flexible enough to 
allow for the growth and evolution of the business of farming. We have 
to be able to help our next generation get started and become quickly 
viable to maintain the level of production that will be necessary to 
continue to feed the population of the world in the coming years.
    The best opportunity for production agriculture is to operate in a 
free market system that allows for profitability and innovation. 
However, when the commodity markets are significantly affected by 
issues completely unrelated to agriculture and so very out of our 
control, there needs to be some form of safety net in place to help 
deal with this situation.
    I believe that agriculture has many exciting opportunities 
available for success in every community. Mother Nature seems to 
regulate the size of that success in most cases. The business of 
agriculture needs a support base with revenue assurance in place to 
compensate for the things the farmer cannot control: weather and market 
volatility.
    Again, I would like to thank the Members of the Committee for 
providing this hearing and for allowing me the opportunity to share my 
thoughts and opinions with you. It's very difficult for many of us in 
production agriculture to imagine doing anything else in life. Farming 
in a situation where a farm program wasn't necessary for us to 
economically produce the commodities that fuel our world would be 
ideal. But until we reach that point, I hope that you will work toward 
creating a simply-structured and straight-forward framework that can 
help the next generation in production agriculture move toward a robust 
free market system.

    The Chairman. Thank you. Mr. Lang, welcome to the 
Committee.

 STATEMENT OF DANE M. LANG, DAIRY, CORN, AND SOYBEAN PRODUCER, 
                          BROOKLYN, IA

    Mr. Lang. Mr. Chairman, Congressmen Boswell, distinguished 
Members of the Committee, I would like to thank you for the 
opportunity to testify before you today. My name is Dane Lange, 
and I am a sixth generation farmer from Brooklyn, Iowa. Every 
day I have the opportunity to work alongside three generations 
of my family: My grandfather, my dad, my uncle, and my younger 
brother. We are dairymen, it's not just what we do; it's who we 
are.
    For the past calendar year, dairymen around the country 
have weathered the largest collapse in milk prices. We have 
seen our fair share of distressed milk prices in the past, but 
this collapse was and is different. It has affected every dairy 
farm regardless of size, debt, or economy of scale. If you milk 
cows, you are losing money.
    Strangely enough, if we went back just a few years, we 
would see a strikingly different dairy industry. Milk cow 
numbers in Iowa had stopped a decades-long slide and started 
growing 190,000 head in January of 2005 to 215,000 head just 3 
years later. This resurgence in milk cow numbers coincided with 
growing domestic demand and a booming market. Milk cow numbers 
increased, milk price increased, the price of corn and soybeans 
that we feed our cows increased. The price of fuel that we use 
to operate our equipment increased, and that was all fine 
because the milk check reflected the cost of producing the 
milk.
    Then in 2008 things went south. The recession just didn't 
hit the dairy industry, it hit the world. Milk price tanked, 
exports dropped from $4 billion in 2008, to just over $2 
billion today, and strangely enough the price of milk from the 
store did not change. The price of a bushel of corn or soy 
beans did not change. The seed and fertilizers that we use to 
grow the crops to feed our cows did not change, and while the 
State of Iowa did not raise our taxes in the crisis, our local 
school boards did it for them.
    The days when milk can be produced for $9 or $10 are over 
and they are not coming back. A recent drop in grain prices has 
helped to stabilize the cost for producing milk; somewhere 
between $15 and $17 a hundredweight, which unfortunately means 
that dairy farms are still losing money and Iowa is losing 
dairies.
    I would like to thank the Committee for recognizing the 
crisis dairy farmers are facing, but unfortunately the next 
farm bill won't help any dairymen today. And to be quite 
honest, we aren't worried about the Farm Bill of 2012; we're 
worried about next month.
    Farmers are entrepreneurs who believe the dairy policy 
should be market oriented and consistent with the world wide 
crisis. It is likely that no one in this room believes that 
every producer who wants to should stay in business. That said 
everyone in this room believes that America and the world is a 
safe and reliable source of food.
    With that in mind, I would like Congress to consider the 
following: The Federal Order structure used to compute milk 
price needs to be modified to better respond to current market 
conditions and provide greater transparency to interested 
parties.
    The world no longer cares about cheddar cheese. Government 
policies need to reflect changing world demand and encourage 
domestic production of milk protein concentrates.
    No farm in the country can make milk for $10. Milk payments 
need to reflect today's break-even levels for the producer.
    The California standards for solids/non-fat in fluid milk, 
should be implemented at a national level. This would enhance 
product quality and improve promotion of the product.
    I am lucky. I've also known that if I wanted to farm, our 
family would make the adjustments and sacrifices necessary to 
make that happen. Most young farmers are not so fortunate. It 
is critical that we provide adequate incentives to secure a 
viable future for dairymen and women. Starting a new dairy 
takes tremendous amounts of capital, and if you don't have a 
family to support you, it is not possible. That is why it's 
important to provide incentives and programs for beginning 
farmers to access capital, as well as tax incentives for 
persons willing to lease, sell, or lend assets to beginning 
farmers.
    The United States must hold our trading partners 
accountable to negotiated trade agreements. It's recently been 
announced that China plans to block imports of U.S. dairy 
products unless the U.S. agrees to change an export 
certificate, which has been in place since 2007.
    In closing, dairymen don't want a hand out or bail out. 
What we want is a reliable safety net to catch us when the 
market drops out beneath our feet. Dairymen need tools to deal 
with an increasingly volatile milk market.
    Government policies need to be brought up to date to 
reflect current costs of production. I would encourage Congress 
to look into implementing some type of loss income insurance 
that producers could buy into. Thank you.
    [The prepared statement of Mr. Lang follows:]

Prepared Statement of Dane M. Lang, Dairy, Corn, and Soybean Producer, 
                              Brooklyn, IA
    Good morning, my name is Dane Lang and I am a sixth generation 
dairy farmer along with my father, uncle, brother and also my 
grandfather in Brooklyn, Iowa.
    It is a pleasure to offer testimony today based upon my experience 
as a dairy farmer and a partner in the Lang dairy farm.
    To give you a little background about our farm, in addition to the 
five family members we also have seven employees. The farm includes 
1,300 acres of forage, corn, and soybeans, yet we also purchase much of 
our alfalfa from local farmers and corn gluten from a local ethanol 
facility. We are proud of our farming operation as we have strived to 
remain modern over the past six generations with modern genetics and 
facilities as well as utilize risk management tools to minimize our 
financial risk.
    As you have heard in previous hearings dairy farmers have been 
challenged with one of the worst periods in lack of profitability. 
While we've seen some improvement in recent months--milk prices rose 
above break-even levels in January 2010 after 20 months of historic 
losses--it appears that the volatility of the market continues into the 
near future. Economists are projecting another dip in prices in the 
near future. In the past few weeks, milk futures prices have dropped 
nearly $2 per hundredweight. Forward futures prices for milk are now 
substantially below the prices USDA projected just a few weeks ago at 
the USDA Outlook Conference. In late 2008 and throughout 2009 reduced 
demand for exports, excess milk and dairy product supply, and high feed 
and energy costs created a perfect storm within the dairy industry, 
driving prices so low that the very survival of dairy farmers was--and 
still is--threatened. In the turbulent seas of the dairy market, 
dairymen got their heads above water just long enough to catch a 
breath, but now it seems were headed back under water.
    To give you a perspective of the condition of the dairy industry 
over last few years, fellow dairymen and women have been tested. In 
March 2006 our milk prices took a negative swing taking profitability 
below break-even costs for nearly a year. Difficult decisions were made 
by many dairy farmers in Iowa and across the U.S. in order to remain 
viable. Herds were liquidated; costs were cut to the bone. Fortunately, 
our milk prices bounced back in 2007 which created an opportunity to 
get caught up and make necessary improvements to the farm. But that 
bounce did not last long. By early 2008 prices were falling again and 
this was also about the same time fuel skyrocketed, grain prices 
increased and virtually all other inputs followed suit, and our 
profitability was once again eroded.
    As dairy prices plummeted again--and this time beyond the levels 
seen in 2006--dairy farmers did every cost-cutting measure to stay in 
business. However, the red ink for many was beyond their control. To 
complicate the issue even more, our herd efficiency improved creating a 
7-8% increase in milk/cow over the last 5 years. When you think it 
can't get any worse, it does. Our exports also declined substantially. 
In 2008, the value of U.S. dairy exports were nearly $4 billion, and 
today, U.S. dairy exports are just over $2 billion.
    My father began his career in our dairy operation in 1973 and he 
has said that this past year was the most challenging in his 37 years 
of farming.
    If we step back a few years, the picture for the Iowa dairy 
industry was looking up. Milk cow numbers in Iowa stopped a multi-
decade long slide in 2005 and there was optimism and hope as dairy cow 
numbers in Iowa grew from 190,000 head in January 2005 to more than 
215,000 head by January 2008. This resurgence in milk cow numbers in 
Iowa coincided with the growth of the ethanol industry and the 
availability of new feed sources like dried distillers grains. 
Nationally, the prospects for the dairy industry were looking good in 
2007. Production was increasing, domestic demand was growing and 
exports were booming. But the depth of the downturn experienced in 
2008-2009 and now resuming again is more than dairymen can endure. Iowa 
is losing dairy farms.
    Iowa is an important dairy state. Iowa ranks 7th in the nation in 
the number of dairy herds; 12th in milk cow numbers; 9th in fluid milk 
bottling; 7th in cheese production and 4th in ice cream production. The 
dairy industry provides more than 26,000 jobs with a significant number 
of those jobs adding to the vitality of our rural areas. The dairy 
industry contributes more than $1.5 billion to the Iowa economy. But 
all that is at risk and in peril if the economic conditions facing the 
dairy industry don't improve.
    A weakening in grain prices has helped stabilize the cost of 
production for most dairy producers. The current cost of production for 
many Iowa dairy farms including ours is in the area of about $15-$16 
per hundredweight. While this is helping the dairy side of the 
business, it has taken away from the ability of the rest of the farm to 
help support the dairy enterprise through tough times. Without 
significant declines in crop input prices, Iowa's dairy farms are now 
facing shrinking (or even negative) margins on both the crop and milk 
enterprises. I wish I could be more optimistic, but the milk futures 
market holds out little hope of prices moving back above break-even 
levels in the next year or 2. The reality is that costs have shifted 
higher and that shift appears to be permanent. It is likely that the 
days of producing milk for $9 or $10 per hundredweight are over.
    I appreciate the House Agriculture Committee examining this issue 
as a starting point for the next farm bill debate, and I also recognize 
that dairy policy is largely complex, divisive and regionally charged. 
There has been much discussion regarding what should be done to help 
dairy farmers weather this economic downturn. Some people have joked 
that if there are two dairy farmers in the same room, you'll hear three 
different opinions on national dairy policy.
    While discussing the critical issues of milk price volatility and 
dairy farmer profitability, I would encourage the Congress to consider 
the following:

   The Federal Order structure, formulas and price classes used 
        to compute milk prices must be modified so that they respond 
        better to current market conditions and enhance transparency, 
        as well as taking into account the regional differences in the 
        cost of milk production.

   Changes are needed to ensure the long-term market 
        development of value-added products, and encourage the domestic 
        production of milk protein concentrates (MPCs)--mitigating 
        concerns arising from the importation of these products.

   The development of a price discovery method that utilizes 
        data from more milk production and expands mandatory reporting 
        and auditing of prices and inventories, including penalties for 
        inaccurate reporting. However, while seeking changes to the 
        Federal Order system to reduce price volatility, Congress must 
        also ensure that producer safeguards remain in place. 
        Continuation of a countercyclical program like MILC, should be 
        a key component to any future farm bill discussion.

   The California standards for solids-non-fat in fluid milk 
        should be implemented at a national level. This would enhance 
        product quality and improve promotion of the product.

   Current promotion mechanisms--such as the industry funded 
        ``Got Milk'' campaign--should continue, and be complemented by 
        an expanded national dairy product promotion program.

   It is also critical that we are providing adequate 
        incentives to secure a reliable future of dairymen and women. 
        Starting a new dairy farming operation takes tremendous 
        resources and if an individual does not have a family member or 
        mentor to provide financial and/or assistance with assets, the 
        chances of starting a dairy to support a family is virtually 
        impossible. That is why it is important that adequate basket of 
        incentives and programs should be available for beginning 
        farmers to access capital. There should be tax incentives for 
        persons who sell or lease land, machinery, or other assets to 
        beginning farmers.

    Farmers are entrepreneurs who believe that dairy policy should be 
market oriented and consistent with expanded worldwide trade--global 
demand and exports contributed to the strength seen in 2008 prices. In 
order to see better prices ahead, American dairy farmers and processors 
need to be able to move dairy products around the globe and into the 
expanding array of new markets. We can no longer afford to have dairy 
policy be confined to the dairy farm--agriculture operates within a 
global economy and our dairy farms need to be a part of the effort to 
feed the world.
    Current self-help programs for dairy producers show promise, but 
also have their limitations. The Cooperative Working Together (CWT) 
program is an industry driven (privately-funded) program that culls 
cows when the supply-demand imbalance needs to be corrected. CWT has 
done a tremendous job in reducing the national herd size; however, it 
is limited in resources as it has about 67% of milk production 
participating in the program. The program would be more effective if 
more producers were part of the program. However, I don't believe that 
the dairy industry is at a point to ask for--or even welcome--
government intervention in the CWT program.
    At the same time we have other tools such as forward pricing and 
milk futures. The availability of forward pricing is very dependent on 
the milk processor that purchases your milk. Not all processors offer 
this option. At times it can be very helpful in locking in an adequate 
price for a short-term period of time.
    Additionally some dairymen can use the milk futures market. 
However, milk futures are fixed contract, which can be ``lumpy'' in 
size and the basis has been somewhat variable in recent months. This 
variability makes futures markets inappropriate for some producers. 
While neither of these options are a guarantee to dairy operations they 
can at times offer some relief.
    In closing, dairy farmers are asking for market stabilization. 
Dairymen and women do a fantastic job at providing safe, healthy and 
quality dairy products and we will continue to do so. In return we need 
a market system that sends accurate market signals that tells us to 
reduce supply when it exceeds demand and provides us the opportunity to 
capture profitability when demand rises.
    Thank you again for the opportunity to testify today. I would 
welcome any questions.
                               Attachment
U.S. Milk Prices and Costs of Production, 2006-2009 (f)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Sources: USDA/NASS & USDA/ERS through Jan. 2009. From Feb. 2009 
        NMPF & CME Group futures as of 02/02/09.

    The Chairman. Thank you, Mr. Lang, we appreciate your 
testimony. Mr. Volz.

   STATEMENT OF NICK VOLZ, CORN, SOYBEAN, AND PORK PRODUCER, 
                          ELKHART, IA

    Mr. Volz. It's a pleasure to offer testimony today based 
upon my experience as a grain farmer. Good afternoon, my name 
is Nick Volz, and I am a fifth generation farmer and have been 
farming for thirty-seven years in Elkhart, Iowa, and the 
surrounding areas.
    Where my wife and I live today is a century farm. I am 
currently raising corn and soybeans, and in the past have 
raised specialty corn and parent seed corn. We have also 
produced seed soybeans for nearly twenty years and specialty 
soybeans for DuPont for 5 years. We no longer produce these 
specialty crops because the premiums have declined, so it is 
not worth the extra expense in producing it. In addition, my 
dad gave me 12 sows when I was twelve years old and after 
graduating, I farrowed up to 80 sows and continued this until 
1998.
    My son, Todd, after graduating from Iowa State University, 
started farming in 1996. With limited row crop acreage 
available to him, he found a niche in the production and 
selling of hay. He currently has 300 acres. He has also needed 
to do non-farm businesses to meet his cash flow. These include 
landscaping and snow removal.
    In 2002, my son and I started finishing 3,200 head of 
feeder pigs a year and continued that for 5 years. It was not 
profitable, and we stopped producing pigs in 2007. With the 
high cost of grain and protein, it was no longer feasible. As a 
smaller producer, we were unable to get contracts because of 
size, and were no longer able to market the hogs because it 
would often take 3 to 4 weeks to get a delivery date.
    We have always participated in the farm programs; however, 
we decided not to enroll in the ACRE Program. Reason being, 
with the lack of price protection and smaller DCP payments and 
loan payments, we didn't believe there were any benefits for 
our operations. Instead of decreasing prices in the ACRE 
Program, the support prices should be raised to offset the high 
cost of production.
    We have always believed in soil conservation and have 
installed at least 12,000 feet of designed grass waterways. 
Some of these waterways are close to thirty years old and still 
serve their purpose in conserving the soil. When the 
Conservation Security Program was announced, we thought it 
would fit the program well; however, it was never funded to the 
extent of where the money would have been placed where needed. 
Programs like this are needed to help conserve the soil to 
ensure that lifelong productivity continues. Payment limits are 
important and the money saved should be put into conservation 
programs to help protect our soils.
    We belong to a number of organizations including corn and 
soybean associations, but we're not here to represent these 
organizations. I am honored to participate in this testimony. I 
do believe that all of this is important to enhance the 2012 
Farm Bill and would like to see future meetings like this be 
held during January and February so that our short window of 
opportunities to plant will not be affected.
    Thank you again for the opportunity to present this 
testimony before you today. I would welcome any questions or 
discussion about what I have spoken about today.
    [The prepared statement of Mr. Volz follows:]

  Prepared Statement of Nick Volz, Corn, Soybean, and Pork Producer, 
                              Elkhart, IA
    It is a pleasure to offer testimony today based upon my experiences 
as a grain farmer.
    Good afternoon, my name is Nick Volz and I am a fifth generation 
farmer and have been farming for 37 years in Elkhart, IA and the 
surrounding areas. Where my wife and I live today, is a century farm.
    I am currently raising corn and soybeans, and in the past have 
raised specialty corn and parent seed corn. Also, have produced seed 
soybeans for 20 years and specialty soybeans for DuPont for 5 years. We 
no longer produce specialty crops because the premiums have declined so 
it is not worth the extra expense in producing it.
    In addition, my dad gave me 12 sows when I was 12 years old and 
after graduating, I farrowed up to 80 sows and continued this until 
1998.
    My son, Todd, after graduating from Iowa State University, started 
farming in 1996. With limited row crop acreage available to him, he 
found a niche in the production and selling of hay. He currently has 
300 acres. He has also needed to do non-farm businesses to meet his 
cash flow. These included, landscaping and snow removal.
    In 2002, my son and I started finishing 3,200 head of feeder pigs a 
year and continued that for 5 years. It was not profitable and we 
stopped producing pigs in 2007. With the high cost of grain and 
protein, it was no longer feasible. Also, as a small producer, we were 
unable to get contracts because of size and were no longer be able to 
market the hogs. It would often take 3 to 4 weeks to get a delivery 
date.
    We have always participated in the farm programs. However, we 
decided not too enroll in the ACRE PROGRAM. Reason being, with the lack 
of price protection and smaller DCP payments, we didn't believe there 
were any benefits for our operations. Instead of decreasing prices in 
the ACRE PROGRAM, the support prices should be raised to offset the 
high production costs.
    We have always believed in soil conservation and have installed at 
least 12,000 feet of designed grass waterways. Some of these waterways 
are close to 30 years old and have served their purpose in conserving 
the soil. When the Conservation Security Program was announced, I 
thought we fit the program well, however, it was never funded to the 
extent of where the money would have been placed where needed. Programs 
like this are needed to help conserve the soil to ensure that life long 
productivity continues.
    Payment limits are important and the money saved should be put into 
conservation programs to help enhance and protect our soils.
    We belong to a number of organizations including corn and soybean 
associations, but I am not here to represent these organizations.
    I am honored to participate in this testimony. I do believe that 
all of this is important to enhance the 2012 Farm Bill. And would like 
to see future meeting like this be held during January and February so 
that our short window of opportunities to plant will not effected.
    Thank you again for the opportunity to testify before you today. I 
would welcome any questions or discussions about what I have spoke 
about today.

    The Chairman. Thank you, Mr. Volz, I appreciate it. Mr. 
Weems.

STATEMENT OF DARRELL WEEMS, CATTLE, CORN, AND SOYBEAN PRODUCER, 
                          EARLHAM, IA

    Mr. Weems. I'm here today to discuss the conservation title 
of the farm bill. My name is Darrell Weems. I'm a lifelong 
farmer, conservationist and I represent today, in the capacity 
as Executive Director on a part-time basis, the Conservation 
Districts of Iowa and to represent the soil and water 
conservation districts in the state. For sixty years it's been 
our task to put conservation on the land. We've done that with 
the local conservation districts and the five electric 
commissioners and the 500 strong that are about putting 
conservation on the land.
    I'm going to talk about the strengths we have, and that is 
in the strength in partnerships through the Iowa Department of 
Agriculture and NRCS, Iowa DNR, the State Soil Conservation 
Committee, and other private groups like, Farm Bureau commodity 
groups, we all came together to put conservation on the land 
and to conserve our resources.
    The other strength that we have is conservation districts 
and CDI is directly in the middle. The funding starts at one 
end, the programs and the law and regulations that come down 
and the districts at the other end, we are in the middle to 
deliver those programs and that's what we do. Today we bring 
forth a couple thoughts relative to conservation programs that 
we have.
    We want to talk a little bit about technical assistance. We 
believe technical assistance should be enhanced. We need to 
find and train technicians so that we can design and lay out 
the structures and processes by which we can deliver 
conservation. Our farmers today can put conservation on the 
land. Farmers by nature love to move dirt. They build things. 
They grow things. We need to give them the opportunity with all 
of their equipment, the technology and the size to deliver, and 
I think we can save some money in that process.
    We can put conservation on our own lands if we have enough 
expertise and enough guidance to get it done. We need to be 
smart conservationists and smart with how we spend our money 
and our resources. We must target funds. We must get the most 
bang for our buck. In many cases we'll do this through a total 
watershed approach. Again, we have programs that work. I'll 
save the long title, as it takes too long, but we have CREP, we 
have EQIP, targeted CRP, wetlands, some with contracts to get 
the work done.
    One thing I would caution is we would warn you we do this 
on a voluntary and local basis. That's how it will work best.
    The next thing we want to talk a little bit about is 
conservation compliance findings. We believe that all land and 
production, whether HEL or non-HEL should be required to have a 
conservation plan to be eligible for USDA benefits. You work 
the plan and you get the benefits. We need more teeth in 
enforcement.
    Successes: we have successes in the area of conservation. 
Forty-three percent reduction in soil erosion over the last 
thirty or forty years. In the last twenty years, the Iowa rural 
water survey shows that we have low detections of nitrates and 
herbicides in well water. Several species of wildlife are 
thriving and repopulating in Iowa. One DNR official recently 
said we have the best fishing we've ever seen in Iowa. I 
haven't been able to enjoy that yet this spring, but I hope to. 
We use conservation tillage and wetlands preservation to 
mantain working wetlands to improve water quality and keep our 
roots on the ground. We do a better job using nitrogen and 
phosphorus today.
    We still have problems, you bet we do, we haven't solved. 
We still have too many pesticides leaving the soil, leaving the 
earth and going into our waterways. We have too many producers 
and citizens who just plain don't get it and don't do enough to 
conserve resources. In some cases conservation gains are 
moderated. We have to be careful about that. In some cases we 
are ill-equipped to deal with the biggest rain events. Last 
year and years before that have taught us that. Funds are 
always short and we always have more people who want to do the 
work than we have funds and technology and resources to provide 
them.
    So in the end--and I've got another point I'm going to get 
into in a second--but in the end we must remember we didn't 
inherit this Earth from our parents, we borrow from our 
children. We must always try to polish and adopt the 
conservation, the future depends on it.
    Sometimes when I am riding a tractor, or in this case last 
night riding the lawn mower, it occurred to me that I would go 
off script a little bit. It won't take long here, but there's a 
line in my testimony that I'd like to refer to that I didn't 
highlight enough, but needs attention. It's on the third to 
last paragraph. Sometimes other events and priorities rob us of 
the conservation focus.
    I'm getting older. I've got grand kids. I'm beginning to 
think about things other than making a daily living now, and my 
kids and grand kids are important to me. It occurs to me today 
that other events and priorities are robbing us of the 
conservation focus. We have programs like Medicare or Medicaid, 
the interest on the national debt. When I borrow money, I have 
to pay back the interest. At sometime back in the 1980s the 
highest was 21 percent.
    This country will have to deal with those issues. I think 
what that says in this scenario is that the status quo is not 
going to work anymore. We don't have enough money to do what 
we've always done, or what we want to do, and we asked for some 
of the trouble we got in.
    So off script, I just wanted to mention that we have to use 
our head. We have to think. We've got to deliver and do things 
in ways that we haven't done, probably without the money that 
we've had before. And so I guess it's with this I'd love to 
answer questions and it's with this I conclude and thank the 
Committee for hearing me.
    [The prepared statement of Mr. Weems follows:]

    Prepared Statement of Darrell Weems, Cattle, Corn, and Soybean 
                         Producer, Earlham, IA
    My name is Darrell Weems. I am here today as interim Executive 
Director of CDI and as a lifelong farmer and agriculturist. 
Conservation Districts of Iowa--CDI--is a nonprofit 501(c)(3) 
organization focused on the conservation of soil, water, and other 
natural resources.
    CDI was founded in 1947 to provide a unified voice for the 
individual country-based soil and water conservation districts. Since 
that time, CDI was been working with the 100 soil and water 
conservation districts in Iowa and their 500 elected soil and water 
commissioners and staff to promote sustainable agricultural practices 
for the protection of soil and water resources. Today, work is also 
being done in urban settings, promoting conservation practices for 
homeowners, developers, and communities.
    While each soil and water conservation district maintains its own 
programs, CDI helps districts combine efforts to address regional, 
state, and national issues. CDI teams with public and private partner 
organizations, such as Iowa Department of Agriculture and Land 
Stewardship, Natural Resource Conservation Service, Iowa Department of 
Natural Resources, State Soil Conservation Committee, Pheasants 
Forever, and others, to implement conservation practices on working 
lands.
    CDI and the 100 Soil and Water Districts (SWCD) represent a key 
delivery mechanism for conservation practice. We are the middle 
organization between our partners and land owner/operators. Most 
conservation programming goes through the local SWDC office and its 
body of elected commissioners. We deliver conservation education and 
promotion. We allocate and deliver funds, local, state, and Federal. We 
match people, process, and programs. CDI and SWCDs facilitate the 
placement of conservation practices on working lands.
    To build on the significant conservation provisions of prior farm 
program legislation, especially those of 1985 and 2002, we would offer 
these comments in advance of the 2012 Farm Bill:
Technical Assistance
    Technical assistance must be enhanced. Funding and training for 
technicians should be increased so that we are able to design and lay 
out more conservation practices and structures. Farmers and/or their 
contractors own and operate large, sophisticated, technology-equipped 
machinery capable of placing conservation improvements on their land. 
Farmers, by nature, love to move dirt and build things. We should 
supply them with the technical guidance and planning necessary to do 
conservation work on their farms. In this time of tight funding, we 
believe there is considerable potential to put more conservation on 
working lands with less money.
Effects of Increasing Row Crop Intensity
    Many factors, including but not limited to economic returns, 
technology, energy use, and food needs, have resulted in an increase in 
crop acres and a reduction in pasture/forage acres. Perhaps it is time 
to offer better farm program incentives for pasture/forage/small grain 
production than for row crop productivity. The farm bill should 
encourage protective seeding in sensitive areas.
Be Smart About Conservation and Water Quality
    We must target funds and resources to the most sensitive areas 
first, where we can have the most impact and get the biggest ``bang for 
our buck.'' In many cases that will be with a total watershed approach. 
We must use and enhance programs that work, such as the Conservation 
Reserve Enhancement Program (CREP, run by IDALS), prioritization of 
watersheds, EQIP, targeted CRP, working wetlands, and summer 
construction incentives. It is important to keep water quality 
improvement programs local and voluntary rather than mandated. 
Voluntary incentives work better than regulated directives.
Conservation Compliance Plans
    All land in production, HEL and non-HEL, should be required to have 
a conservation plan to be eligible for USDA benefits. This would 
strongly encourage producers to create and follow that plan.
Successes
    The nation's farmers and private land owners have made significant 
progress in recent years in protecting the nation's soil and water 
resources. From 1982 to 2007, soil erosion in the U.S. has been reduced 
43%, according to the USDA National Resources Inventory Report. The 
Iowa rural well water survey of 1988-1989 and 2006-2008 show lower 
detection of nitrates and herbicides in well water. A recent U.S. 
Geological Service study reports declining levels of eleven herbicides 
and pesticides in Cornbelt waterways in 1996-2006. Several species of 
wildlife are thriving and repopulating in Iowa, and one DNR official 
reports the best fishing ever in Iowa. The use of conservation tillage 
and wetland reversion/construction is up. The use of better ag 
management practices and technology improvements like GPS systems and 
strategic placement have resulted in better use of fertilizer, 
nitrogen, and phosphorous.
But We Have More Work to Do
    We still have too many nutrients and pesticides moving with the 
water and soil. We have too many producers and citizens who do not 
practice conservation methods and best management practices. In some 
cases, conservation gains are moderating. We are ill-equipped to deal 
with the biggest rain events. And funds are always short and we always 
have people who want to do more but are limited by resource 
availability. Sometimes other events and priorities rob us of 
conservation focus. We must guard against that. All groups, government 
and private, must rededicate themselves to working together and 
coordinating their conservation efforts.
    And we must remember, ``We didn't inherit this earth from our 
parents, we borrow it from our children.'' We must always strive to 
polish and adopt the conservation ethic. Our future depends on it.
    On behalf of the Conservation Districts of Iowa and the 100 Iowa 
County Soil and Water Conservation Districts, thank you for the 
opportunity to comment.
            Sincerely,

Darrell Weems,
Interim Executive Director,
Conservation Districts of Iowa.

    The Chairman. Thank you very much.
    I thank all of the panel for your excellent testimony. We 
appreciate it.
    I think that last comment kind of ties into something I 
want to say, and that is that we are not going to have any 
extra money for this farm bill. We'll be lucky to hold on to 
what we got. I saw on some of the testimony people wanting to 
raise loan rates because they are ridiculously low. If we get 
down to loan rates, we're out of business. It isn't going to 
happen. We can't--the money it costs to raise the loan rates, 
it's not realistic.
    So one of the reasons we're starting this hearing process 
early is to see if there's a more efficient and better way to 
provide the risk management tools, safety net, and conservation 
that we all want to do.
    Mr. Bailey, I see that you mentioned in your testimony 
about profit sharing. Do you think that there need to be 
changes? Are you familiar with the SRA negotiation that's going 
on?
    Mr. Bailey. Yes, sir.
    The Chairman. What's your take on it? It has caused quite a 
commotion, with crop insurance companies and crop insurance 
agents coming to my office and telling me the world is coming 
to the end. So what's your take on where that's going?
    Mr. Bailey. Well, first of all, yes, I am familiar with the 
negotiations.
    I'm not exactly up to date with the last minutes.
    The Chairman. They're ongoing.
    Mr. Bailey. Ongoing, yes. Just refer back, I worked for 
Congressman Gansky in southwest Iowa for a number of years, and 
the crop insurance guys were in my office all the time as well.
    Here, in this case, I think we've got to do what's right 
for the taxpayers, as well as what's right for the agricultural 
industry. One of the dilemmas we have is the way the subsidies 
are designed and everything right now, is that they provide an 
incentive to move crop production into marginal areas. And that 
is a dilemma because with that incentive and everything, you 
really increase the potential for disaster problems as well. So 
I don't have any specific numbers to put out or anything like 
that, what I'm saying is that we need to do a lot of analysis 
on it.
    We have some competent people at the university, economists 
and ergonomists and everything, and I'm not sure that we're 
utilizing those people adequately here as we work on this 
problem. We need to give the farmers the risk mitigation and 
everything they need, and at the same time, we need to mantain 
the proper level of investment by the taxpayers.
    The Chairman. Thank you.
    Mr. Bayliss, you talked about, in your testimony at one 
point, here let's see if I can find it, you say the loan 
program can be very valuable tool if restructured to reflect a 
realistic loan price. Then you say gaining support for a loan 
program as opposed to a direct payment program should be 
easier.
    So are you saying that you think the direct payments should 
be moved into the loan program situation, or is that what 
you're saying?
    Mr. Bayliss. Well, what my point was on that there, and you 
just told me that that was not a possibility, but if there was 
a higher loan rate on grain then you would not need so much of 
a support program under it, that would help offset it. You 
could take a look around and use that as operating captial and 
not have the risk involved through your normal lender or 
whatever to help put in the cost of production. So it was just 
a tool I could see where we could utilize a higher loan rate 
and offset the need for a some kind of a support program under 
it.
    The Chairman. You think the revenue program can be fixed?
    Mr. Bayliss. Yes, I do. It's not going to be easy.
    The Chairman. It's partly our fault that it got so 
complicated, and that's a long story. But, we're going to look 
at this and look at county prices instead of statewide prices, 
and try to design it so you can actually take it to the bank, 
so the bank can borrow money on it. I think there's a potential 
here with the revenue program and it's got to be reworked quite 
a bit.
    Mr. Bayliss. I totally agree. It has to make sense to your 
lender. If it's something he's going to buy off on, you're good 
to go, just so it has a support base.
    The Chairman. Mr. Lang, you didn't mention anything about 
the support price program, and are you familiar with the work 
that's going on with the National Milk Producers Federation 
right now in terms of the new policy they're looking at for 
dairy?
    Mr. Lang. Are you referring to the insurance, the income 
insurance? I guess I'm not sure what you're referring to.
    The Chairman. Well, the National Milk Producers Federation 
have been on a 9 month effort to redesign the dairy program and 
some of the elements that you listed are in there. They're also 
talking about some other things like eliminating the dairy 
price support program altogether, getting rid of the $9.90 
price support and going to a what they're calling marginal 
insurance program. They're going more towards crop insurance 
type program.
    Are you familiar with that?
    Mr. Lang. Slightly.
    The Chairman. You don't know enough about it to know if----
    Mr. Lang. No, I know a lot of people in this room know 
about it, but I do not. I'd like to point out that the co-op 
I'm a part of signed up for the Cooperatives Working Together, 
which use a private loan to remove cows from production, and 
that's over.
    It is done. It's not coming back because as milk prices 
fail to improve from that, people thought well I'm tired of 
paying for all the free riders who are also benefiting from 
this. So I would hope that any new policy makes everyone pay so 
that everyone can reap the benefits.
    The Chairman. What's being looked at is to see if there's 
any kind of a system to try to rein in production. It would 
apply to all areas including unregulated areas and California, 
equally. So whatever we end up doing, I'd like to guarantee you 
it will be across the board with everybody.
    Mr. Lang. If the government would like to do something very 
cheap to improve milk prices, I would suggest that the 
California standards for solids, fat, and milk be immediately 
made nationwide. It's a fair basis for our milk, and it will 
immediately remove cows from production.
    The Chairman. I think there's support for that from some 
Members of the Committee, but there is also interest out there 
that's very much opposed to it.
    So anyway, I've run out of time, so I'll yield to Mr. 
Lucas.
    Mr. Lucas. Thank you, Mr. Chairman, and I should admit 
without any hesitation to the crowd here that coming from 
western Oklahoma, I'm a little envious that you get twice as 
much rain as I get at home. You, generally, measure your 
rainfall in feet in this state, which we generally measure ours 
in inches in Oklahoma. Western Oklahoma is a little 
traumatizing for me.
    But with that said, it is a pleasure to be here, and first 
being a farmer from Oklahoma, let me ask the panels to compare 
the price of farmland in your area that trade in public 
auctions or public exchanges where the market reflects supply 
and demand accurately, describe for me what land prices have 
done in this year or in comparison in the last year or so to, 
say, 5 years ago. Up, down, sideways, no sales, up.
    Mr. Bayliss. Up, up, sky high.
    Mr. Lucas. Fascinating, fascinating.
    The Chairman mentioned the budget situation we find 
ourselves in. In 2002 we had $79 billion, $17 billion of it 
went to conservation. In 2008 we had $7 million, and I can say 
this in a bipartisan way. The Chairman was exactly right with a 
$4 trillion deficit projected if you add the last 2 years and 
next 2 years together, we're going to be under incredible 
budget pressure when it comes time to write that 2012 Farm 
Bill.
    So let me ask the group this: In the spirit of that kind of 
situation we may find ourselves in, looking at the conservation 
title, what's the most important thing to you? EQIP CRP, WRP? 
If anyone would dare or be willing to offer a response. What 
does you the most good? What does your community most good?
    Mr. Bailey. One of the things that maybe we ought to take a 
look at is a reverse auction for conservation projects, instead 
of using a flat 75 percent or 50 percent or whatever. Look at 
some of the ways the CRP has bid to try and get the maximum 
impact for the minimum amount of tax dollars that goes into it. 
Don't get me wrong, I don't have all the details worked out, 
but I'm just looking at a different way that you could 
interface with the producer to stimulate as much conservation 
effort as you possibly can.
    Mr. Lucas. Let's add the rest of the crowd in. I'd like to 
touch on that, Mr. Bayliss.
    Mr. Bayliss. I know in some areas the CRP program put more 
money back in the community and stabilized more things in the 
marginal ground areas than what it did in the high production. 
The CRP program was definitely a blessing in some of the areas, 
and especially for some farms and so on. In my area, it's right 
where we farm, it's not a big issue because we don't have CRP 
production, but I know that was a major thing.
    Mr. Lucas. Mr. Lang?
    Mr. Lang. I milk cows. My brother handles all the farming 
aspects, but I know that we feed things we grow to our cows and 
without crop insurance, if we had a disaster, no crop 
insurance, we wouldn't have food for our cows and we couldn't 
afford to buy it.
    Mr. Lucas. But within the conservation program and your 
business with all the people coming at you with water standards 
and environmental standards, are any of those EQIP resources 
potentially useful to help meet your nutrient water issues and 
all of these things? I was getting at in the conservation title 
itself, I'm just asking. There's no right answer.
    Mr. Lang. No.
    Mr. Lucas. Mr. Volz.
    Mr. Volz. I feel the CRP, not so much the wetlands program, 
but the filter strips that protect our creeks and waterways, I 
feel most of these creeks, small rivers water----
    Mr. Lucas. My grandmother's pronunciation, crick to ditch.
    Mr. Volz.--should be there because we put those on a couple 
of farms that we have, and it has stopped a majority of runoff, 
and a 100 year rain from going into the water waste. Now, I 
feel it's very important and it holds the soil back a little 
bit, and it cleans up the water.
    Mr. Lucas. Mr. Weems.
    Mr. Weems. I am a fan, and I think most of the 
conservationists are a fan of the EQIP Program in some of those 
wetlands that approach, working wetlands. That's a concept in 
Iowa that's pretty intriguing, and we'll see how that works 
within the community to clean things up and take--get some 
infiltration there that will help.
    Mr. Lucas. At the risk of stirring up my appropriator 
friend in the front row here in the dam rehab program we have 
an allocation system where the money is targeted to rehab the 
upstream flood control dams based on the greatest need. Yet, 
new construction program is based on earmarks, not on a 
guaranteed thought-out flow. Do you have an opinion about 
moving new upstream flood control dams to a priority system 
instead of a targeted system? He hasn't thrown anything yet 
from the front row.
    Mr. Weems. Does my face look blank? I think it might. I'm a 
big believer that the best place to stop soil erosion nutrient 
loss is, if you go to the source, high, do it right, put the 
right commitment to it. I guess that would be the answer from 
my perspective.
    Mr. Lucas. Thank you.
    The Chairman. I thank the gentleman. The gentleman from 
Iowa, Chairmen Boswell.
    Mr. Boswell. Thank you.
    I go back a few years. We talked about a lot of things back 
in the farm crisis, and one of them we talked about, I'm sure 
we did, was capital intensity to putting a crop out, and they 
close to the vest that the bankers came then, and now cash flow 
is kind of hard to work out. And we've all talked about safety 
net, safety net, safety net.
    So I'd like to address this to all of you. Some have 
mentioned that the ACRE Program did not offer enough. What 
would make a revenue program work better? What would you do to 
change ACRE? All of you, in fact, I'd like for you to all 
address that, if you will. I'll start with you, Mr. Weems.
    Mr. Weems. I'm not a big enough practicing farmer to have 
looked at that. I'm going to pass on that question. It's a 
bigger scope than I'm working with currently in my agricultural 
experience.
    Mr. Boswell. I understand.
    Mr. Volz. Yes, my opinion on the ACRE Program, when they 
decided to decrease the DCP payment by 20 percent and your 
ceiling price by 30, that limited my end of income or 
prosperity, whatever you want to call it, and if they raise 
that up because we need to offset the cost of production. If 
I'm only going to get a $1.20 for my corn, plus if we do run 
into really hard times, if we don't keep our exports up, and we 
get into a situation where we have a 3 billion bushel 
carryover, we're going to be into that $2 corn range, in my 
opinion. When we do that, we've also eliminated another 30 
percent of the LDP on my side, which was a guarantee, so in my 
opinion they should raise that up, just to improve the cash 
flow, I guess.
    Mr. Boswell. Mr. Lang.
    Mr. Lang. Because we feed what we grow to our cows and it 
doesn't run through a combine, we have no idea how much our 
land produces. And to fill out the paperwork for the past 5 
years, we run into this problem as we have no idea. So the--we 
have an actual problem with ACRE because we don't know what 
numbers to put on the paperwork.
    Mr. Boswell. Mr. Bayliss?
    Mr. Bayliss. Yes, that's--all of that is true. The first 
problem we had was is trying to sell the ACRE Program to 
landlords that are not familiar with that.
    They're used to the old DCP Program where you're going to 
get payment right off the bat. Now you're trying to sell them, 
but you're going to take a 20 percent reduction right off the 
bat. Sell this to me, give me something to chew on here, and 
it's like, nope, that's the way it is. Why would I take a 
definite guarantee, established price on my acres and get a 
payment and now you want me to take a 20 percent reduction?
    So it's hard to sell to someone that doesn't understand the 
program all the way through. I don't understand that program 
all the way through, to be honest with you, but that's a first 
thing.
    Mr. Boswell. Do you have a suggestion?
    Mr. Bayliss. What's that?
    Mr. Boswell. Do you have a suggestion of what you'd like to 
see happen?
    Mr. Bayliss. I think that that needs to be minimized 
somehow. It needs to be a payment right off the bat, not a 20 
percent reduction. The second thing is that it needs to be 
based off countywide yield other than statewide yield because 
there are so many variables across our state. You can have a 
good program there, but not be eligible just because of 
difference in yields across the state.
    Mr. Boswell. Thank you. Mr. Bailey?
    Mr. Bailey. I think as a general mechanism, the things that 
we can do with the ACRE Program to bring the triggers as close 
to the farm as possible will improve it. The statewide trigger 
maybe, move that to a crop reporting or even better yet the 
county triggers on it.
    And I know everyone complains that ACRE Program is ultra 
complicated, but you have to remember we have computers now. 
The fact is that farmers can typically really figure out if a 
farm program, as they say, in a New York minute and figure out 
whether it's good for them or not.
    So, basically, try and tailor the ACRE Program as much as 
we can to fit the individual farm would, I think, move forward.
    The dilemma that we really have in changing the ACRE 
Program is the money problem right now, to make it work even 
better to bring it closer as my two colleagues have said, bring 
it closer to comparing with the countercyclical. But I mean, 
throw one in and the negotiations with Brazil on cotton, 
everything means that there's a lot more in play than what we 
think here. We may have to move some other things that make it 
more WTO compliant, and in that event I would look at any 
revenue that we can work on to enhance the ACRE Program long 
term would be a beneficial for farm programs here in the United 
States.
    Mr. Boswell. Well, thank you.
    The Chairman. I just commented that probably the only 
reason it got in the farm bill, is it saved a billion dollars 
at the end of the day, and the truth is we don't know yet what 
it's going to cost. I had one county signed up 80 percent, and 
they're going to get 2\1/2\ times more money out of the ACRE 
Program than they got out of the traditional program.
    I think once people figure out, see these numbers, you 
might see things change, but your suggestions are well taken.
    The gentlelady from South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. I thank our 
witnesses for their testimony.
    Tim Walz is from Minnesota's southern district along with 
the border here with Iowa, Mr. Walz and I worked on the last 
farm bill on the beginning farmers and ranchers provisions. And 
Mr. Bayliss and Mr. Lang, you both mentioned some of the 
challenges we clearly face.
    In South Dakota at the state level they recently put 
together some sort of a linked program, some retiring producers 
with younger producers as it relates to the transition there. 
I'd like to just go over a couple of the things that we did in 
the last farm bill and get your thoughts on what more we need 
to do to help beginning farmers and ranchers.
    We increased the amount of direct farm ownership loans. We 
guaranteed farm ownership loans. We increased direct farm 
ownership loans reserved for down payment, as well as direct 
operating loans for beginning farmers and ranchers. We provided 
$75 million in mandatory funding for technical assistance, 
training, education, outreach.
    Do you know of any beginning farmers in your area that are 
taking advantage of some of what was in the conference report 
in the 2008 Farm Bill? Are they running into some obstacles on 
accessing these programs to gain some credit, to gain the 
capital that you both mentioned is necessary to get them more 
firmly established?
    Mr. Bayliss. I know in our county the programs are 
available, some of the young farmers are using them to get 
going.
    The main point I was making on the young farmers is that 
they're limited on what they can do with operating a sizable 
farming operation. For them to go to a lender to get the input 
costs it's going to take on it, then you don't help, and it's 
not only to get the initial money, but it's also about 
operating year to year on it, machinery and rent, inputs.
    Ms. Herseth Sandlin. Okay.
    Mr. Lang.
    Mr. Lang. I don't know anyone in my county that uses the 
beginning farmer loan or program, but my brother and I looked 
into buying a farm several months ago. We went to the bank and 
had it all worked out with the banker, and we looked into what 
government programs would be helpful to us. It turned out that 
no government program was going to make land that 3 years ago 
was $6,000 an acre, affordable. So we gave up. The programs are 
there and I know about them, but it wasn't going to make a 
difference at all.
    Ms. Herseth Sandlin. They're just not sufficient in light 
of the increase in land prices, primarily. At least for those 
that are looking to eventually own the land rather than the 
cash rents are being paid out in addition to the leased 
equipment.
    Let me ask you, then, a question about a different program 
and see if this is working any better for anyone in your areas. 
Are you familiar with the REAP Program? Jeff Fortenberry and I 
worked on that in the last farm bill. Jeff's from Nebraska. The 
Rural Energy for America Program. Again, the Department just 
recently released rules on some of this, but do any--this is, 
again, to sort of provide a way to work with the local lender 
for rural businesses, farmers and ranchers to pursue energy 
efficiency projects. Any of you thinking of applying for any 
REAP grants?
    Mr. Bayliss. I'm not familiar with that grant.
    Ms. Herseth Sandlin. Okay. Anyone else familiar with the 
program? Oh, that's a disappointment.
    Mr. Volz. We looked at the machinery show this last winter, 
we looked into it and really haven't pursued it any farther. I 
think there's a benefit there, but the cost--we looked--10 
years ago we looked into putting up a windmill, and we ran into 
all sorts of blockages to get it done----
    Ms. Herseth Sandlin. Yes, our certified electric co-op.
    Mr. Volz. Our REC would not hook up to it, and so that kind 
of put a wrench in that machinery and now that--and the cost of 
that, I think at that time, was about $75,000 to put up. Well, 
assuming the same size would be three times that today, so what 
it's done is the profits seem to have gone in.
    What you can help us with is go right to the guys producing 
the windmills, does that make sense?
    Ms. Herseth Sandlin. Yes, it does.
    Any there any other comments on the REAP Program?
    I think my time got started a little bit late, but a quick 
question, Mr. Volz, the Department of Justice and USDA are 
hosting competition workshops, as you know, around the country. 
You described your family's experience in the pork industry. 
Given that poultry and pork are essentially vertically 
integrated now, do you feel that that was one of the reasons 
you had to get out of the business in, what did you say, 2007?
    Mr. Volz. Yes, we quit in 2007, we--well, we really quit my 
operation in 1998 when hogs got down to 10 cents or 12 cents. 
My son got back into farming, and was doing his thing. We 
thought on our place we have the buildings, the buildings are 
paid for, so we thought we'll just buy pigs, so we bought 
feeder pigs. The price was a little on the high side, and then 
the cost of all the input, just went sky high and we ended up 
losing about $75 a head on 3,500 head. So that's kind of why we 
quit because we just got a lot of equipment and we just 
couldn't afford to lose anymore money, like the dairy business, 
just--not a bottomless pit.
    Ms. Herseth Sandlin. Well, I think we'd appreciate any 
supplemental testimony you could provide us as it relates to 
the livestock title in the last farm bill and what more we 
might be doing. I've worked with Mr. Boswell on some provisions 
as it related to fairness of competitive markets. I think some 
of what we're hearing at the workshops will also provide us 
some insights and what more we can do, and additional changes 
we can make, so, again, with that, I appreciate your testimony 
and responses today.
    Mr. Boswell [presiding.] Thank you.
    Before we go to Congressman King, I would like all of us to 
know that we appreciated working with the Iowa State Fair to 
work out the use of these facilities, and if you see some of 
the board members of the Administration, tell them we 
appreciate it. They opened up the restaurant, if you get hungry 
or something, feel free to go out there and patronize them. 
They're here for us. They're normally not open except during 
the fair or occasions going on here.
    At this time I'd like to recognize my colleague from Iowa, 
Congressman King.
    Mr. King. Thank you, Mr. Chairman. I thank the witnesses.
    Mr. Boswell. Can you get your microphone up there, Steve?
    Mr. King. You might be able to hear that. I'd like to first 
make an observation. It's interesting to me at the beginning 
before the testimony began, I was having a discussion with Mr. 
Bailey about how you get your best thinking done from the seat 
of a tractor or a machine. Mr. Weems testified that he does the 
same thing. I imagine that's true for all of you. I think 
that's one of the reasons why we have so many clear thinkers 
out here in this part of the country, we could use more of you 
in Washington.
    But it's also interesting that Mr. Bailey and Mr. Weems 
both talked about site-specific research in your case, and 
watershed-specific approach to conservation in your case, Mr. 
Weems, and I don't think that's a coincidence either. I think 
that some of those things you thought about from the seat of a 
machine. And so I just reflect us sitting here in this setting 
here in this city with a Ph.D. in environmental engineering to 
explain to me that there was a high amount of nitrates in the 
water in the Raccoon River and that it had gone up 60 percent 
in forty years. He had the tests to prove it, and I asked him 
where did you take those tests, and he said right out here in 
the river. And I know they come from the feedlots and the farms 
near the Raccoon River.
    I'll tell you that's not site-specific and to point the 
finger for high nitrates at whomever you decide you might want 
to put the blame on isn't good enough for me. And I have long 
argued that we needed far more site-specific research done, and 
we had the debate in Iowa about credible data. There were many 
that arguably should not let people introduce data that didn't 
have their proper certification to do so. I argued that we 
should plug all that data and results from the spreadsheet, 
you'll know who's cheating and who's not and we'll have a lot 
of data. Well, now we have the Iowa soybean producers working 
in conjunction with others to do some real credible data 
research that is site-specific and watershed-specific. I want 
to ask Mr. Weems if you're familiar with that program and what 
you might have to tell this panel about it.
    Mr. Weems. There are lots of projects in the state 
currently that are site-specific relative to banding watershed, 
people who live in a watershed together using resources, using 
technology, using our experts at hand that know about those 
things.
    We're doing a lot of that and that refers back to my 
comment that we have to go after the worst first, or we have to 
identify the very sensitive areas, the most sensitive areas. We 
have to get the biggest bang for the buck. We have to go and 
take care of those areas first, and I think that happens 
through watershed-specific projects where everybody bands 
together. I think the end product is bigger than the individual 
pieces. The more people you put into it, the bigger the 
project, the bigger good you get out of it.
    Mr. King. Thank you, Mr. Weems.
    I know there's a clock here, so I would like to ask the 
panel if they acknowledge or nod to me I'm going to go through 
a list of some of the programs, and if I leave some out, please 
remind me of what I missed. But has anybody in the last 2 years 
qualified for LDPs, or countercyclicals, or ACRE, or EQIP, or 
CRP, or CSP? How am I doing?
    First one would have been CRP, probably, that's what I saw 
the nod for, and I expect that's the case. That program has 
been going on for more than 2 decades.
    CSP?
    So I've gone through the list. What about direct payments? 
Has anybody on the panel that's an active ag producer not 
qualified for direct payments? Let the record show that 
everybody has qualified--does qualify for direct payments.
    So I set this up for this reason. Now I would ask the 
panel, I'll start with Mr. Bailey, what do the taxpayers get 
for the direct payments? What's the purpose of them, and what 
do the taxpayers get in return?
    Mr. Bailey. Well, the taxpayer gets a payment into the 
contract that I talked about at the beginning between 
agriculture and the rest of society. It is a bottom-line 
payment for participation for being involved in programs, and 
as far as I'm concerned, that is the general parameter of it, 
and I won't go further by evaluating whether that's a good sale 
for the taxpayers or not.
    Mr. King. Mr. Bailey, would that mean also that what it is 
is part of the contract with the consumers, with the broader 
society, but in exchange, would it be specifically the only 
thing that any--likely that any of the people who are ag 
producers that didn't qualify for any other benefits--would 
that be the only thing that is a government incentive to be 
conservation compliant?
    Mr. Bailey. It would be a dominant one, yes.
    Mr. King. Perhaps EQIP or something else of that nature?
    Mr. Bailey. Yes.
    Mr. King. That is the general dominant, and so its 
conservation compliance would be the purpose of direct 
payments.
    Mr. Bailey. One of them, yes, is critical.
    Mr. King. Well, I appreciate that.
    Does anybody have any comment on that particular conclusion 
that we've reached, and if not, rather than open up another 
subject matter, I make the comment that I--I think Mr. Bailey 
also is the only active pork producer.
    Mr. Bailey. Not anymore.
    Mr. King. Not anymore. Mr. Volz is not anymore, so we don't 
have an active pork producer on the panel, nor in the next 
section of witnesses, which I regret that we left that out, 
that's probably partly my fault, unless Mr. Volz had a brief 
comment.
    Mr. Volz. We have facilities out--we rent our facilities 
out to a neighbor that improves his hog flow because we get the 
tail enders so we can clean his building out quicker so he can 
get another turn a year. We end up getting a couple hundred 
head of pigs out of each of his facilities, and then finish 
finishing the rest, I would say, 190 to 240 or 50 or whatever 
they want them at, and we get paid a fee per head that's about 
all we have to do. There are still a few hogs on the place, but 
nothing like it was.
    Mr. King. Thank you, Mr. Volz, I appreciate it.
    I thank all the witnesses.
    Mr. Chairman, I yield back the balance of my time.
    The Chairman [presiding.] I thank the gentleman, the 
gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman, for beginning 
this effort to set the dialogue for the 2012 Farm Bill on this 
first swing. I want to thank Congressman Boswell for hosting us 
here in this beautiful State of Iowa and my Iowa colleagues. I 
hear a lot about Midwest farming and it's always good to come 
out here and be able to see it.
    Let me ask you first with the panel: Do any of you hedge 
your crops with future contracts? How effective of a risk 
management tool is it? I don't know, Mr. Bayliss, or the head 
nodding that's going on over here, Mr. Bailey?
    Mr. Bailey. Well, these are basically complicated marketing 
decisions, and----
    Mr. Costa. I know.
    Mr. Bailey.--the success you have depends on the skill by 
which you can evaluate the market and take those positions.
    Basically, whenever you enter into a futures market or an 
options market, you either triple or quadruple your marketing 
decisions because if you deal only in cash you only have to 
make one decision when you sell it. If you go the futures, you 
have to go into the future to get out of the future and you 
still have to sell the cash. One of the----
    Mr. Costa. What's your rule of thumb?
    Mr. Bailey. My rule of thumb is an evaluation of a general 
marketplace to determine, in my mind, whether there's going to 
be a major swing in prices. If there's going to be a major 
swing in prices in order to protect your cost of production and 
so forth, you probably better go ahead and take the position on 
the futures market. I will not do it 100 percent of the time, 
but that's just my marketing plan and part of the problem I've 
got----
    Mr. Costa. What's your business plan?
    Mr. Bailey. Just the business. Part of my problem is that 
for the first forty some years of farming I was like Mr. Lang 
and I fed every kernel of corn and every silage and every bit 
of hay that I grew, and you didn't worry too much about the 
futures market at that time. So my son and I are still in 
transition of gradually moving towards a cash/grain operation 
and the use of those tools are different than when you were----
    Mr. Costa. But you're saying it's an effective risk 
management tool and a lot of your farmers surrounding you use 
it?
    Mr. Bailey. It can be, yes, with proper marketing skills it 
can be an effective tool.
    Mr. Costa. Mr. Lang, you talked about three generations of 
your family farming. How many dairy cows are you milking?
    Mr. Lang. We milk about 500.
    Mr. Costa. Well, like you my family has been in the dairy 
business for three generations, so I could get a job elsewhere 
if I didn't have this one. I do have some redeemable skills.
    You spoke about the California standards. I'm obviously 
familiar with them since we've been in that place for a long 
time. Would you go into more detail? I tried to get the 
California standards in the last farm bill, unsuccessfully. 
What benefits would there be, to not only producers, but also 
from a nutrition standpoint if these standards were adopted 
nationwide?
    Mr. Lang. When they process milk, the first thing they do 
is take out every part that's good for you.
    Mr. Costa. Right.
    Mr. Lang. And then they put some of it back in.
    Mr. Costa. That's why we always like the raw milk.
    Mr. Lang. When they sell skim milk, it's had all the fat 
removed, and it's also had the protein removed. I believe the 
California standard makes us put protein, they can still sell 
nonfat milk, but the protein that's good for you has been put 
back into the milk.
    It also changes how they pay you for the milk because all 
the important things they take out of the milk, well, they 
don't have to pay you for all of those important things that 
they take out of the milk. So it accurately pays people for the 
quality and components of the milk they produce, and it dropped 
down the price, not pricing, but the somatic cell count 
process. Somatic cell is the indicator of the quality and the 
healthiness of the milk.
    Mr. Costa. Before my time expires, you're saying it's good 
for the consumers?
    Mr. Lang. It's good for the consumers. It's healthy.
    Mr. Costa. And good for the producers because more of that 
product is put back in the milk?
    Mr. Lang. Yes.
    Mr. Costa. You also testified on the boom and bust cycles. 
You know, it started in California, the milk, in 2008 and we're 
trying to--the Chairman mentioned an alternative milk proposal 
with the National Holstein Association that's more market price 
sensitive. I think dairymen have to, at some point in time, 
have to get control of some level of the supply of milk if 
they're going to have any ability to have impact on their 
price. What's your thought?
    Mr. Lang. Well, as milk price drops, it's a tendency of the 
producer to----
    Mr. Costa. If the prices are down, you produce more milk; 
if the prices are up, you produce more milk, that's not a joke 
anymore; it's this boom and bust cycle.
    Mr. Lang. I think if someone was serious about taking care 
of the supply, oversupply, problem we have in the country, we 
make people sell better milk and that immediately removes cows 
from the market. If you have a cow that's not producing healthy 
milk, I can milk her, I can sell her milk, but we shouldn't do 
that. If you want to reduce the supply of milk, improve the 
quality of the milk.
    Mr. Costa. Well, my time has expired, but I want to thank, 
again, all of you, the witnesses here and look forward to 
reading all of your testimony.
    Thank you very much, Mr. Chairman.
    The Chairman. I thank the gentleman. The gentleman from 
Iowa, Mr. Latham. We'll ask him at the beginning of the 
statement to explain to the audience about CHIMPS. I'm just 
kidding.
    Mr. Latham. About what?
    The Chairman. CHIMPS. Changes in mandatory programs, what 
you guys do over in Appropriations. I'm kidding.
    Mr. Latham. We're trying to help you out, Mr. Chairman, 
that's all.
    This maybe is kind of a different kind of question, not 
specifically about the farm bill itself, but family farm 
operations, and I think each and every one of you. What do you 
see today as the biggest threat to, I think generationally, 
maintaining a family operation? And it doesn't have to be 
pertaining to the farm bill, whether it be the death tax maybe 
not being fixed.
    We have some environmentalists today that--the same lawyer 
that brought up the idea of indirect land use is also 
advocating now that the larger the farmers are, the better 
because then the government can better regulate farms. They can 
have more control, you have taxes, EPA. What do you see as the 
biggest threat to your operations, long term, to a family farm 
operation? Start----
    Mr. Bailey. Congressman Latham, short term it's that 
agricultural policy and basically policy of this country is 
going to be hijacked by special interest groups. I won't go any 
further and name any names. I think that we all understand that 
the forces of money behind the special interest groups to try 
and warp and use public policy for their end, is a real hazard.
    The second one right behind it is the structure of 
agriculture. The fact that we've already talked about the 
culture being vertically integrated. You know what happened to 
the pork producers on this panel. We're not very far from the 
beef industry from being vertically integrated, and let's face 
it, with the patenting of DNA, it is now possible to vertically 
integrate the crop industry.
    So to me those are the big hazards to family farms because 
basically when that happens, we become minimum-wage barn 
cleaners and tractor drivers.
    Mr. Latham. Mr. Bayliss.
    Mr. Bayliss. I see one of the challenges is just with the 
high-tech industries going to get to compete in agriculture. 
It's getting the younger farmers the financing because, just 
like it was mentioned, I think we're going to be down basically 
to corn and soybeans in our area unless we want to get into 
putting up huge buildings and closing operations, but just be 
able to financially keep the young farmers going and our 
children going. Looking into the future, we need to have 
something in the farm bill that's going to be structured for 
way out, more than just next week, next month, next year, 
twenty years, thirty years down the road because they're well-
educated, our young kids. They went to college and are well-
educated kids, just keeping up financially to be able to 
operate in that structure, machine costs, cost of production 
that's my big concern to keep the family farms in the family.
    Mr. Latham. Thank you. Mr. Lang.
    Mr. Lang. The largest challenge for dairy farmers today and 
particularly young people who want to farm, particularly dairy, 
is the lack of return on your invested time and labor. I can do 
lots of things that pay a lot better than what I do now, and I 
wouldn't have to work nearly as hard. I do what I do because I 
love my cows, and I don't expect to get rich, and that's a 
sacrifice I make. I like what I do, but I don't make very much 
money doing it.
    Mr. Latham. Thank you. Mr. Volz, do you have----
    Mr. Volz. Well, the biggest one for us is the death tax. 
We're looking at the future, when your day comes, but when that 
happens especially when land is valued in our area $5,000 to 
$10,000 an acre. I would hate to see what we worked hard and 
what my grandparents did, my dad did, and what I'm doing, be 
gone because we can't afford to pay 50 percent in death taxes. 
Like the high cost of machinery inputs. It's everything going 
out of alignment. I don't know how it did it, but, well, 
ethanol started it there wasn't going to be enough corn, I 
guess that's that there.
    Mr. Latham. Mr. Weems, very briefly, if you can.
    Mr. Weems. Something along a little bit different line that 
I worry about is for people outside of agriculture to 
understand us and know us. As we get more efficient, as there 
are fewer and fewer of us, and it's generations two and three 
maybe even four generations from the farm, there are lots of 
people who like to have the impact on what we do or part of the 
impact is is that there isn't. They don't know how to make an 
impact, and that's a challenge for us, just to get the general 
population to understand what we do and why we do what we do, 
and how we have to do it, and that's my concern.
    Mr. Latham. Thank you very much, Mr. Chairman. Thank you, 
panel.
    The Chairman. Thank you, panel, and I thank all the 
witnesses for taking your time today and being with us today 
and providing your testimony and for answering questions. We 
appreciate that.
    I'd like to recognize we have some people here from USDA, 
the Iowa State FSA Director John Whitaker. John stand up. Iowa 
State Rural Development Director Bill Menner. Iowa State 
Conservationist, Richard Sims. So give them a hand; they do a 
great job.
    And I'd also like to recognize our friends from United Food 
and Commercial Workers who are with us today. They are an 
important part of agriculture and process our products, and so 
we appreciate you being with us today.
    And so the panel is dismissed.
    We'll call the next panel up, and Members, I'm going to 
give you a 5 minute break to stretch your legs a little bit.
    [Recess.]
    The Chairman. We'll welcome the second panel to the table, 
and Mr. Warren Erickson who's a dairy processor from Des 
Moines, and Jim Schaben from Dunlap, Iowa. Bob Skow, crop 
insurance representative from West Des Moines, and Jeff 
Stroburg, cooperative operator from Ralston, Iowa.
    So, we welcome all of you to the Committee, and Mr. 
Erickson, you can begin when you're ready.

 STATEMENT OF WARREN ERICKSON, DAIRY PROCESSOR, DES MOINES, IA

    Mr. Erickson. Mr. Chairman, welcome to Iowa.
    The Chairman. Get up close. I have seen it a couple times.
    Mr. Erickson. Thanks for the opportunity to be here today. 
My name is Warren Erickson. As you know, I'm the Chief 
Operating Officer of Anderson Erickson Dairy. We're located 
just down the street here in Des Moines. This year AE is 
celebrating our 80th anniversary as a family owned and operated 
business. And I'm part of the third generation at AE and help 
run the company with my sister and my father.
    AE is one of the few remaining independent dairy processors 
in the country and Congressman Boswell knows our company well, 
and I'd like to thank him on behalf of the entire dairy 
industry for his leadership.
    Today we're at a crossroads regarding U.S. dairy policy. 
For more than a year, this Committee has heard from hundreds, 
if not thousands, of dairy farmers who have been ill-prepared 
to deal with the volatility and tumultuous downturn in 2009 
milk prices. That's coming off a period of record high prices 
in 2007 and 2008. This dairy price volatility has driven some 
out of business, and it creates difficulties for all dairy-
related businesses in their planning processes; however, we 
compete in a food marketplace where others have just as much, 
if not more, volatility with their agricultural commodities.
    What's different for them? Well, to begin with, they don't 
have milk as a primary ingredient, and so they're not subject 
to the vagaries of the USDA's milk price regulations and their 
intervention in the marketplace in the dairy price support 
program. In addition, they have better marketplace financial 
tools to mitigate their risks. As a result, their entire supply 
chain can, and usually does, use those tools to plan their 
business activities despite that greater volatility. And from 
what I can tell after observing some of the proposals from 
dairy industry groups and the hearings this Committee has held 
in the past year, I'm encouraged that the dairy industry seems 
to be agreeing that we need significantly better risk 
management tools.
    But before talking about risk management, I did want to 
spend a moment to talk about the notion that price volatility 
can be controlled by regulating this U.S. milk supply. This 
concept hasn't worked for other agricultural products, and I 
don't think it will work for dairy either.
    In the past decade, the milk supply in Iowa has grown about 
11 percent. Today at AE we use 100 percent Iowa farm milk. 
That's compared to 65 percent just 3 years ago. This growth in 
Iowa milk production has been good for our state. It's created 
investments in jobs that would not have been possible if the 
supply management policies being proposed by some had been in 
place.
    That's not saying it's been easy with the dairy producers 
in Iowa. They've struggled just like everybody else, but the 
point I'm making is the solution to manage price volatility is 
not to have the government manage the milk supply. They tried 
that in Canada and that supply management hasn't worked. Now, 
in Canada, they are stuck in stagnant production, stagnant 
consumption and Canadian dairy investment is moving to the U.S. 
because of some supply concerns. We should encourage growth as 
it leads to increased investments and jobs.
    I want to get back to the discussion of risk management 
because I think that's where the Members of this Committee can 
really be helpful in leading the dairy industry toward new, 
better policies. USDA spent $5.4 billion on crop insurance 
premium subsidies in 2009, but none of that was spent on dairy 
revenue subsidies. Proposals, including one they mentioned 
earlier by the National Milk Producers Federation, that focus 
on margin protection, make a lot of sense to me. This approach 
makes sense because it allows the producers to protect the 
margin between the milk prices and the feed prices and other 
costs. That's the same thing you have to do at AE. We have to 
protect our margin and sale price and our milk price. And this 
fundamental business model should be the same for the farmers.
    As I told this Committee 3 years ago, I'm not a big fan of 
the Federal Milk Marketing Order system. It constrains our 
ability to innovate and price milk according to the highest 
value in the marketplace. I recognize this Committee is not 
likely to throw the whole system out. So I ask that you would 
significantly simplify it and support efforts and discussions 
within the dairy industry on what details of such a 
simplification would look like.
    I feel optimistic about the future for dairy producers and 
processors in Iowa and across the country. I'm proud to help 
supply AE's customers with nutrient rich dairy products. We 
keep all that good stuff in there when we process it. We were a 
little bit set back earlier, but our industry has great 
potential to prosper if our policies and regulations encourage 
rather than discourage creating new and innovative dairy 
products customers are looking for, as well as not limit in any 
way our milk supply to grow and meet market demand both 
domestic and abroad.
    I respectfully ask this Committee to focus on putting in 
place appropriate dairy farm safety nets and encourage great 
use of financial tools to mitigate risks, while getting rid of 
the current dairy policies that aren't working and to simplify 
the Federal milk pricing system. Supply management in all its 
shapes and forms is a threat to the future of AE and to the 
entire U.S. dairy industry. Thanks again for the invitation.
    [The prepared statement of Mr. Erickson follows:]

 Prepared Statement of Warren Erickson, Dairy Processor, Des Moines, IA
    Thank you for the opportunity to be here today. I'm Warren 
Erickson, Chief Operating Officer of Anderson Erickson Dairy Company in 
Des Moines, Iowa. This year AE is celebrating 80 years as a family 
owned and operated business. I am a third generation dairy operator and 
run the company with my sister and father. AE is one of the few 
remaining, large independently-owned dairies in the country. 
Congressman Boswell knows our company well, and I would like to thank 
him for his leadership as our Congressman on behalf of the Iowa dairy 
industry.
    I don't need to tell any of you that today we are at a crossroads 
on U.S. dairy policy. For more than a year, this Committee has heard 
from hundreds, if not thousands of dairy producers who have been ill-
prepared to deal with the tumultuous down turn in 2009 milk prices 
following the period of record high prices in 2007 and 2008. This dairy 
price volatility has driven some out of business. It creates 
difficulties for all dairy related businesses, from input suppliers to 
grocery stores and restaurants, in planning their business activities.
    However, we compete in a food marketplace where others have just as 
much if not more agricultural commodity price volatility. What is 
different for them? To begin with, they do not have milk as their 
primary ingredient and therefore are not subject to the vagaries of 
USDA's milk price regulations and interventions in the marketplace 
under the dairy price support program. In addition, they have much 
better marketplace financial tools to mitigate risk. As a result their 
entire supply chain can, and usually does, use these tools to plan 
their business activities despite greater price volatility than seen in 
the dairy industry in recent years.
    From what I can tell, after observing some of the proposals from 
dairy industry groups and the hearings this Committee has held in the 
past year--I'm encouraged that the dairy industry seems to be agreeing 
that we need significantly better risk management tools. But before I 
talk more about risk management--I want to address the ill conceived 
notion that price volatility can be controlled, or avoided, by 
regulating the U.S. milk supply.
    Can you imagine if today corn or soybean growers came in and asked 
you to write a law that would take us back to acreage set asides in an 
attempt to control production and limit their ability to meet growing 
domestic and export demand? Basically, that is exactly what some dairy 
producers and their organizations are asking for. Corn and soybean 
prices both experience more price volatility than dairy--in fact most 
commodity markets have more volatility than dairy--but these other 
commodity markets have two things the dairy industry does not.
    First of all, government policy for other agricultural commodities 
focuses on providing subsidized insurance programs and direct payments 
as a farm safety net. In addition, there are not government programs 
that dictate prices that must be paid to farmers each month.
    Second, they have market based risk management tools that allow 
them to manage price volatility. These other commodity industries 
understand the very negative market consequences of trying to control 
price volatility through government intervention; that is a key reason 
there are no longer acreage set asides. For these commodities, the last 
thing they would want Congress to do is limit their potential to meet 
growing demand, both domestic and abroad, with a mandatory, government 
run supply management policy.
    In the past decade, the milk supply in Iowa has grown by over 11%. 
Today AE uses 100% Iowa farm milk--compared to just 65% 3 years ago 
when we imported farm milk from other states. This growth in Iowa milk 
production, investment and job creation would not have been possible if 
the supply management policies being proposed by pockets of producers 
in a few states had been in place. That's not to say that it's been 
easy for dairy producers in Iowa--far from it, our dairy farmers both 
large and small have struggled like those everywhere. But the point I'm 
making is that the solution to managing price volatility is not to have 
the government manage the milk supply.
    I get really nervous when I look north to Canada and see what has 
happened to their dairy industry since they implemented supply 
management in the 1970s:

  u Canadian farm milk production is lower today than then; U.S. farm 
        milk production has grown by over 60% during that time.

  u Per capita dairy consumption in Canada has been flat over the past 
        30 years; U.S. per capita dairy consumption has grown by 11% 
        during that period.

  u The total value of Canadian dairy exports is down in recent years; 
        meanwhile, U.S. dairy exports have nearly doubled in recent 
        years--in 2002, U.S. dairy exports accounted for about 5% of 
        U.S. milk production only due to significant use of government 
        export subsidies (DEIP), while dairy exports have accounted for 
        about 10% of U.S. farm milk production since 2007 with very 
        little use of export subsidies.

  u Canadian dairy processors are expanding here in the United States, 
        through acquisitions and new investments because their milk 
        supply at home is constrained.

    Government supply management in the U.S. dairy industry would take 
us in this same direction. If you restrict growth, no matter how 
cleverly designed a policy might be, or the rhetoric behind it, the 
U.S. dairy industry loses--it would lead to job reduction and reduce 
incentives for this industry to reinvest in its infrastructure and 
cultivate new investment to meet growing dairy demand both here and 
abroad.
    Now I want to get back to the discussion of risk management--
because I think that is where Members of this Committee can be most 
helpful in leading the dairy industry towards new and better policies.
    USDA spent $5.4 billion on crop insurance premium subsidies in 
2009, but none of that was spent on dairy revenue insurance premium 
subsidies. The one dairy-oriented program in existence today--the 
Livestock Gross Margin insurance program (or LGM-Dairy) started in late 
2008, but is hardly used by dairy farmers even though it is designed to 
protect against unexpected declines in gross margin (market value of 
milk minus feed costs) on a target quantity of marketed milk. This 
program certainly needs to be more affordable for producers, and USDA 
needs to focus on education and outreach to get more farmers protected. 
There are also other proposals, including one that the National Milk 
Producers Federation is proposing that focuses on margin protection, 
and we think that is an idea that looks promising.
    This type of approach makes sense because it would allow producers 
to protect the margin between milk prices and feed and input costs. At 
AE, we have to protect the margin between what we receive for our 
packaged dairy products and the regulated minimum prices we pay our 
farmers. This fundamental agribusiness model should be the same for 
farmers. When milk prices are high and feed costs are also high, a 
price based farm safety net is completed outdated. There have been 
times when farm milk prices were higher than they are today, but feed 
costs were even higher and farmers still needed help then. There are 
other times when milk prices are lower, but feed costs are also low, 
and farmers may not need as much assistance during those periods. For 
this reason, I believe the concept of a farm safety net program that is 
designed around protecting a farmer's margin between their milk price 
and feed costs should be the central focus of this Committee, and the 
resources currently used for other programs, such as the dairy price 
support program, should be redirected.
    I would also likely to briefly address the Federal Milk Marketing 
Order (FMMO) system and the current mandatory price reporting we have 
in the dairy industry.
    As I told this Committee 3 years ago, I am not a fan of the FMMO 
system. It constrains our ability to innovate and price milk according 
to the highest value it has in the marketplace. But I recognize that 
this Committee is not likely to throw the system out entirely. So I ask 
that you significantly simplify it and support efforts and discussions 
within the dairy industry on what the details of such a simplification 
would look like.
    Recently a number of dairy groups asked USDA to consider requiring 
more frequent price reporting on a greater number of dairy products. 
I'm certainly all for better access to market price information, but 
frankly, over 70% of the milk in the U.S. is priced off monthly 
announcements from USDA, using weekly average mandatory price reports. 
Until the marketplace is allowed to determine milk prices, and that 
would only come through significant changes to the Federal order milk 
price regulations, changing USDA's frequency and volume of price 
reporting requirements would only be window dressing.
    The current weekly reporting is based on each day's sales, and is 
still only used to change Federal order farm milk prices once a month. 
What good would reporting and publishing that data more frequently do 
if the industry cannot use that information to change farm milk and 
other prices more often as desired by both buyers and sellers? The 
current system does not allow for tailoring procurement and sales price 
changes more often than once per month, so what good is having daily 
price information if we can't use it.
    I am also concerned that, rather than simplify the Federal order 
price regulations, others would call for this newly reported data to be 
used to make the price formulas more complex or increase the number of 
classes of milk. More regulation and reporting will not help Iowa dairy 
farmers and Iowa dairy processors like my company stay competitive.
    I feel optimistic about the future for dairy producers and 
processors in Iowa and across the country. I am proud to help supply 
AE's customers with nutrient-rich dairy products. Our industry has 
great potential to prosper if our policies and regulations encourage 
rather than discourage creating new and innovative dairy products 
consumers are looking for, as well as not limit in any way our milk 
supply to grow and meet market demand both domestic and abroad. I 
respectfully ask that this Committee focus on putting in place 
appropriate dairy farm safety net and encourage greater use of 
financial tools to mitigate risk while getting rid of current dairy 
policies that aren't working, and to simplify the Federal order milk 
pricing system. Supply management, in all its shapes and forms, is a 
threat to the future of AE and the entire U.S. dairy industry.
    Thank you again for the invitation to speak today.

    The Chairman. Thank you, Mr. Erickson for your testimony.
    Mr. Schaben, welcome to the Committee.

 STATEMENT OF JIM W. SCHABEN, Jr., LIVESTOCK OPERATOR, LAMONI, 
                               IA

    Mr. Schaben. Chairman Peterson, Congressman Boswell, 
Agriculture Committee Members, staff and guests, I want to 
thank all of the Members of the Agriculture Committee and staff 
for the invitation to give testimony here today and allowing 
each of us the opportunity to express our feelings and 
concerns, apprehensions and enthusiasm about agriculture both 
here and all across the United States.
    My name is Jim Schaben. I reside in Dunlap, Iowa, a town of 
less than a thousand people in western Iowa. Like most towns 
the size of Dunlap in the Midwest, our community is heavily 
dependent on the health and well-being of agriculture.
    I'm a part owner in the Dunlap Livestock Auction, a now 
third-generation family business that was started in 1950 by my 
parents. Most recently we've expanded our business to include a 
livestock auction in eastern Nebraska in the town of West 
Point. Between the two markets, we are currently selling 
between 175,000 and 190,000 cattle annually. Our business is 
made up of all facets of the cattle industry including selling 
finished weight steers and heifers ready for harvest to packers 
across the Midwest, selling locally raised feeder cattle for 
feed yards both large and small in a mostly seven-state region, 
and selling replacement females to help populate the pastures 
in the upper Midwest.
    Having a cattle auction nearly every week, every day of the 
week has its ups and downs, but it does allow me to conduct 
business on a day-to-day basis with some of the best people 
this country has to offer. I'm excited to tell folks that most 
recently my son has joined our business with the hope of being 
able to raise one more generation in the heartland serving 
America's cattle producers.
    Some of the events of the recent past that are a cause of 
concern, I want to address today. In the last 5 years, I have 
watched a huge change in the cow/calf business in the Midwest. 
There's been a flight out of the cow business at paces I've 
never witnessed in my thirty years at the livestock auction. 
Those huge numbers of cow dispersals have been caused by an 
economic disparity when you compare profitability with the cow 
business, with other aspects of agriculture, most notably 
farming. With the recent rally in grain prices and the advances 
in yield technology, we have watched the demand for pasture 
increase from the pressure of crop farmers to the point it is 
either driving the cow men off the land, or turns the pasture 
into grain crops because of the higher dollar acre return.
    I do understand economics and the forces of supply and 
demand, but the field of play has not always been level in the 
livestock industry. In order to keep the livestock producer on 
the land, and ensure that his way of life is kept intact for 
generations to come, something is going to have to change and 
hopefully change quick.
    In the writing of the 2012 Farm Bill, I would ask Members 
and staff to explore a greater length and depth for the 
possibility of furthering the idea of a partnership of sorts 
that could bring cow producers, conservationists, and grain 
farmers to the table allowing a more aggressive set aside 
program that would give more consideration to the cowmen. 
Partial grazing of CRP acres is a great start, but the programs 
need to be enhanced and allow the cowmen more access to those 
acres. Being able to graze the CRP acres for only a few months 
in already a short season poses all sorts of problems. 
Allocating the cost of fencing for short grazing period is just 
not cost effective. What happens with the cows during those 
months you cannot graze the CRP. There are serious extra 
trucking costs, moving costs in bringing animals back and forth 
from the CRPs in the short period of time. These expenses add 
to an already thin profit margin making the decision to 
disperse a cow herd a disappointing realty.
    If marginal farmland could be set aside with the program 
that puts the emphasis on encouraging cow/calf production along 
with conservation, I believe it could be a good situation for 
all involved. We need to encourage participation from young 
cattle producers, landowners or landlords and the Federal 
Government. All the while the primary concern should be a level 
playing field and enhancing economic vitality in the cow 
industry in this country. We've had a good start with the last 
farm bill, but the program needs to be improved. Anything that 
can be done to ensure the survivability of our young 
agricultural producers has proven to yield all kinds of 
positive results in our community both economic and societal. I 
hope you'll keep the economic well-being and survivability of 
the livestock producers as a high priority in the 2012 Farm 
Bill.
    Again, I want to thank all the Members of the Agriculture 
Committee for your time and commitment to this country and all 
of agriculture.
    Thank you.
    [The prepared statement of Mr. Schaben follows:]

Prepared Statement of Jim W. Schaben, Jr., Livestock Operator, Lamoni, 
                                   IA
    I want to thank all the Members of the Agricultural Committee and 
staff for the invitation to give testimony here today and allowing each 
of us the opportunity to express our feelings, concerns, apprehensions 
and enthusiasm about agriculture both here in Iowa and all across the 
United States.
    My name is Jim Schaben and I reside in Dunlap, Iowa, a town of less 
than 1,000 people located in western Iowa. Like most towns the size of 
Dunlap in the Midwest our community is heavily dependent on the health 
and well being of agriculture.
    I am a part owner in the Dunlap Livestock Auction, a now third 
generation family business that was started in 1950 by my parents. Most 
recently we have expanded our business to include a livestock auction 
in Eastern Nebraska in the town of West Point. Between the two markets 
we are currently selling between 175,000 and 190,000 cattle annually. 
Our business is made up of all facets of the cattle industry including 
selling finished weight steers and heifers ready for harvest being sold 
to packers across the Midwest. Selling locally raised feeder cattle 
bound for feed yards both large and small in a mostly seven state 
region and selling replacement females to help populate the pastures in 
the upper Midwest. Having a cattle action nearly every day of the week 
has its ups and downs but it does allow me to conduct business on a day 
to day basis with some of the best people that this country has to 
offer. I am excited to tell folks that most recently my son has joined 
our business with the hope of being able to raise one more generation 
in the heartland serving America's cattle producers.
    It is some of the events of the recent past that are a cause of 
concern that I want to address today. In the last 5 years I have 
watched a huge change in the cow/calf business in the Midwest. There 
has been a flight out of the cow business at a pace that I have never 
witnessed in my 30 years at the livestock auction. Those huge numbers 
of cow dispersals have been caused by a economic disparity when you 
compare profitability of the cow business with other aspects of 
agriculture most notably grain farming. With the recent rally in grain 
prices and the advances in yield due to technology we have watched the 
demand for pasture increase from the pressure of crop farmers to the 
point it is either driving the cow man off the land or he himself turns 
the pasture into grain crops because of the higher dollar per acre 
return. I do understand economics and the forces of supply and demand 
but the field of play has not always been level when the livestock 
industry is involved. In order to keep the livestock producer on the 
land and ensure that his way of life is kept intact for generations to 
come something is going to have to change and change quick.
    In the writing of the 2012 Farm Bill I would ask that Members and 
staff explore at a greater length and depth the possibility of 
furthering the idea of a partnership of sorts that could bring cattle 
producers, conservationists and grain farmers to the table allowing for 
a more aggressive ``set-aside'' program that would give more 
consideration to the cow man. Partial grazing of CRP acres is a great 
start but the program needs to be enhanced and allow the cowman more 
access to those acres. Being able to graze CRP acres for only a few 
months during an already short season poses all sorts of problems. 
Allocating cost of fencing for a short grazing period is not cost 
effective. What happens with the cows during the months that you cannot 
graze the CRP. There are extra trucking costs moving animals back and 
forth from CRP. These expenses add to an already thin profit margin 
making the decision to disperse a cow heard a disappointing reality.
    If marginal farmland could be ``set aside'' with a program that put 
the emphasis on encouraging cow calf production along with conservation 
I believe it could be a good situation for all involved. Encourage 
participation from young cattle producers, land owners and/or landlords 
and the Federal Government. All the while the primary concern should be 
to level the playing field and enhance the economic vitality of the cow 
industry in this country. We've had a good start with the last farm 
bill but the program needs to be improved. Anything that can be done to 
ensure the survivability of our young agricultural producers has proven 
to yield all kinds of positive results in our communities both economic 
and societal.
    I hope you will keep the economic well-being and survivability of 
the livestock producers as a high priority in the 2012 Farm Bill.
    Thank you again to all the Members of the Agriculture Committee for 
your time and commitment to this country and all of agriculture.

    The Chairman. Thank you very much for that testimony. Mr. 
Skow.

  STATEMENT OF BOB SKOW, CROP INSURANCE AGENT REPRESENTATIVE, 
                      WEST DES MOINES, IA

    Mr. Skow. Thank you. I'm here on behalf of the Independent 
Insurance Agents of Iowa who represent the business interests 
of every Iowa independent insurance agency. We represent over 
720 agencies in the state and have about 291 branch offices, so 
we have over a thousand door fronts located in virtually every 
community in this state. We appreciate the opportunity to 
provide our perspective today on what role the independent 
insurance agent plays in the delivery of the Federal Crop 
Insurance Program.
    Independent agents offer all lines of insurance: Property, 
casualty, life, health, employee benefit plan, and retirement 
products. Our agents live in their communities and serve the 
needs of their communities not only offering insurance 
products, but we serve typically as key leaders, for example 
serving as volunteer firefighters, youth leaders, school board 
members, city council members, et cetera.
    The typical agency employs support staff who helps service 
the product in addition to the writing agent. They have 
considerable overhead; computers with downloadable fast 
Internet connections to the companies, office space, 
advertising, auto, payroll, and they have insurance taxes, and 
other expenses, which need to be paid out of their commission 
dollars that they collect for selling insurance.
    From 1938 to 1981, the United States Department of 
Agriculture was solely responsible for delivering the Federal 
crop insurance program. Beginning in 1981 continuing until the 
late 1980s, Congress began a transition period when the Federal 
crop insurance program was delivered by both the USDA, through 
the structure known as master marketers, as well as private 
sector companies, through a structure known as the standard 
reinsurance agreement. In mandating the transition, Congress 
recognized that the sales talents and experience of the private 
sector commissioned agents are essential to fulfilling the goal 
of nationwide, generally accepted all-risk insurance 
protection. As a result, Congress placed the large burden of 
the program delivery on the agents' shoulders and required them 
to provide full service to the client including, but not 
limited to, the sales.
    Crop insurance agents have proven instrumental in achieving 
the program's goal of helping farmers make well-informed risk 
assessments and choices about the coverage that they purchase. 
These agents are knowledgeable about the technicalities of the 
crop insurance program and are skilled at assisting farmers 
with the concerns that directly impact their coverage, such as 
unit structures and yield guarantee weakness. They also have 
the training and experience necessary to encourage 
participation of small, limited resource, and minority 
producers such as required under the SRA.
    Statistics for the 2008 crop year, as reported by the Risk 
Management Agency, show how widely the program is accepted and 
utilized by farmers, and how effectively and efficiently it 
serves their risk management and cash flow needs of American 
farmers. The 2008 crop year, the program provided coverage on 
more than 272 million acres in all 50 states, which is more 
than 80 percent of the insurable acres with liability 
protection exceeding $90 billion. Today an agent does more work 
per policy than ever before. They do all the data entry. They 
keep the yield records per unit, not per policy. The reality is 
that there's more work and expertise required of an agent in 
servicing this product per acre.
    Crop insurance agents are proud to have been a partner in 
the successful transition and expansion of the invaluable 
program to farmers. Unlike property-casualty insurance 
industry, a crop insurance agent's responsibility requires a 
more hands-on approach, which increases the threshold for 
errors and omissions exposure.
    On average with advanced meeting preparation, travel, and 
meeting time, an agent spends 7 hours on a policy during the 
sales window alone. A transaction typically begins when the 
agent quotes the wide variety of different plans of insurance 
available. There can be as many as 247 in some states like 
Iowa, and they go on explaining the production reports and 
supporting record requirements for the farmers. The agent 
explains different date requirements by crop insurance for 
application and actual production history. The agent reports 
the farmer's options and claims.
    The agent, in addition, is responsible for implementing 
procedures for prevention planning, yield adjustment, unit 
division, power of attorney, and I think you probably 
understand there's a lot of work.
    As we move forward, the Federal Crop Insurance Program is 
an indispensable tool. Without crop insurance, many farmers 
would be unable to obtain financing. Crop insurance makes the 
process for farmers to obtain annual operating loans much 
easier and more efficient. In the case of farmers who purchase 
crop insurance, banks require less collateral because they 
consider these farmers to be better protected.
    I would like to thank you all for your leadership during 
this difficult time in agriculture, and I'd like to take this 
opportunity to express our concerns, as Iowans, regarding the 
components of the current 2011 SRA negotiations as outlined in 
the second draft release. I know our Congressmen, and those at 
the table, have all signed a letter expressing some of their 
concerns, and I will go to my conclusion because of the limited 
amount of time. I do suggest that we all take a hard look at 
that and the impact it will have as we move forward.
    We thank the Committee for allowing us to present our 
written testimony at today's hearing. We'd be happy to work 
with the Committee at any time to further explain the vital 
role that crop insurance agents play. Thank you.
    [The prepared statement of Mr. Skow follows:]

 Prepared Statement of Bob Skow, Crop Insurance Agent Representative, 
                          West Des Moines, IA
    The Independent Insurance Agents of Iowa (IIAI) represents the 
business interests of almost every Iowa independent insurance agency. 
We are proud to report 720 member agencies, who serve the citizens of 
Iowa with another 291 branch offices, more than a thousand door fronts 
located in virtual every town in the state, we represent over 8,000 
licensed Iowa agents. We also have 97 companies who give IIAI support 
by being Affiliate members. We appreciate the opportunity to provide 
our perspective today on the important role independent agents play in 
the delivery of the Federal Crop Insurance Program (FCIP). Independent 
agents offer all lines of insurance--property, casualty, life, health, 
employee benefit plans, and retirement products. Our agents live in 
their communities and serve the needs of the communities not only 
offering of insurance products but also typically serve as key leaders, 
for example serving as volunteer firefighters, youth leaders, school 
board and City Council members. The typical agency employs licensed 
support-staff who help in servicing of the products, in addition to the 
writing agent. They have considerable overhead; computers with 
downloadable fast Internet connections to the companies, office space, 
advertising, auto, payroll, insurance (Liability, Workers' 
Compensation, Health) taxes and other expenses which must be paid out 
of the commission they collect from selling insurance products.
Private Delivery of the Federal Crop Insurance Program
    From 1938 until 1981, the United States Department of Agriculture 
(USDA) was solely responsible for delivering the Federal crop insurance 
program. Beginning in 1981 and continuing until the late 1980s, 
Congress began a transition period when the Federal crop insurance 
program was delivered by both the USDA, through a structure known as 
``master marketers,'' as well as private sector companies, through a 
structure known as the ``standard reinsurance agreement'' (SRA).
    In mandating this transition, Congress recognized that ``the sales 
talents and experience of the private sector commissioned agents . . . 
are essential to fulfilling the goal of nationwide, generally accepted 
all-risk insurance protection.'' As a result, Congress placed the 
``large burden of program delivery'' on agents' shoulders and required 
them to provide ``full service to the client'' including, but not 
limited to, sales.
    Crop insurance agents have proved instrumental in achieving the 
program's goal of helping farmers make well-informed risk assessments 
and choices about the coverage that they purchase. These agents are 
knowledgeable about the technicalities of the crop insurance program 
and skilled at assisting farmers with concerns that directly impact 
their coverage, such as unit structures and yield guarantee weaknesses. 
They also have the training and experience necessary to encourage 
participation of small, limited resource and minority producers, as 
required under the SRA.
    Statistics for the 2008 crop year, as reported by the Risk 
Management Agency (RMA), show how widely the program is accepted and 
utilized by farmers and how effectively and efficiently it serves their 
risk management and cash flow needs. For the 2008 crop year, the 
program provided coverage on more than 272 million acres across all 50 
states, which is more than 80 percent of the insurable acreage, with 
liability protection totaling almost $90 billion.
    Today an agent does more work per policy than ever before. They do 
all the data entry, they keep the yield records per unit--not per 
policy. Reality is there is more work and expertise required of an 
agent in servicing this product per acre. Crop insurance agents are 
proud to have been a partner in the successful expansion of this 
invaluable program for farmers.
Agent Workload and Program Complexity
    Unlike the property-casualty insurance industry, a crop agent's 
responsibilities require a much more hands-on approach, which 
invariably increases the threshold for errors and omissions (E&O) 
exposure (Professional liability). On average, with advance meeting 
preparation, travel, and meeting time, an agent spends approximately 7 
hours on a policy during the sales window alone. A transaction 
typically begins with the agent quoting the wide variety of different 
plans of insurance available (as many as 247 in some states) then 
explaining production reporting and supporting record requirements to 
the farmer. The agent explains different date requirements by crop and 
coverage for application, the actual production history (APH), the 
acreage report, and the farmer's options and claims. He completes APH-
related forms for the farmer, calculates preliminary yields, reviews 
production early to determine if there is a revenue loss, reviews the 
APH form for completeness and accuracy, and forwards the signed form 
and any applicable worksheets to the company. The agent must also 
review approved APH from the company to ensure accuracy, explain 
approved APH yields to the farmer, and provide him with a copy.
    Additionally, the agent is responsible for implementing procedures 
for Preventive Planting, Yield Adjustment, Unit Division changes, Power 
of Attorney requirements, or any of the other technical policy 
provisions. All of preceding goes into writing the policy--and does not 
even factor in the consequences of a potential loss, which occurs more 
often than any other line of insurance.
    Compared to the sale of life, farmowners, homeowner's, or auto 
insurance, the sale of crop insurance is indeed extremely complex and 
challenging. Life, auto, farmowners and homeowner's insurance each only 
require one form (application) to fill out and file, and the claims 
made on those products are relatively rare in comparisons to crop 
insurance.
Crop Insurance_an Indispensable Financing Tool
    The Federal Crop Insurance Program is an indispensable financing 
tool. Without crop insurance, many farmers would be unable to obtain 
financing. Crop insurance makes the process of farmers obtaining annual 
operating loans much easier and more efficient. In the case of farmers 
who have purchased crop insurance, banks usually require less 
collateral because they consider these farmers to be better protected. 
Many younger farmers with less collateral would be unable to obtain 
financing without crop insurance.
    Farmers understand more and more that crop insurance is another 
cost of doing business. However, the purchasing cost of crop insurance 
provides certain benefits for the farming operation, including greater 
ability to finance land purchases, enter into land rental contracts, 
and arrange production input purchases. Protection provided by the 
program gives a lender much more confidence in extending credit.
Standard Reinsurance Agreement
    I would like to thank you for your leadership during this difficult 
time in agriculture, and I would like to take this opportunity to 
express our concern, as Iowans, regarding components of the 2011 SRA 
renegotiation as outlined in the second draft released on February 23, 
2010. The current draft, which fundamentally changes the delivery of 
the crop program, concerns us because the proposals would impact Iowa 
disproportionately compared to the rest of the country. As a leader in 
crop insurance participation, the proposal to create reference prices 
for two staple crops in Iowa corn and soybeans would result in price 
cuts close to 30%. In 2009, insurance for these two crops represented 
$735 million out of $744 million (nearly 99 percent) in premiums 
written in Iowa. Additionally, Iowa will not receive the five percent 
delivery adjustment increase proposed for all other states because it 
falls into the State Group 1 category.
    The reinsurance terms for State Group 1 also appear to reduce the 
potential underwriting gain of companies by nearly 30 percent, while 
increasing overall risk on the loss side. Clearly, this type of risk/
reward change will force companies to consider changes to their 
participation in the crop program in Iowa, relative to other parts of 
the country. These proposed changes to the delivery cost system concern 
Iowans because of the disproportionate effect the changes have on our 
state. Our large agriculture economy employs thousands of workers and 
creates thousands of sustainable jobs. The number of agents and 
companies writing in Iowa make this program highly competitive. 
Jeopardizing the solid structure of the FCIP may have far reaching and 
unintended consequences for a state like Iowa whose economy depends so 
heavily on agriculture.
Conclusion
    The IIAI thanks the Committee for allowing us to present this 
written testimony at today's hearing, and we would be happy to work 
with this Committee at any time to further explain the vital role that 
crop insurance agents play in the FCIP.
    As this Committee and Congress begin to consider the 2012 Farm 
Bill, it is imperative that any and all proposals keep in mind the 
strength and security that the FCIP has brought to American farmers, 
and the role that independent insurance agents have had in the success 
of the FCIP. In particular, we ask that the Committee take into account 
the increased efficiency of the private delivery of the FCIP over 
direct government sales, the small business jobs produced in rural 
America through the crop program, and the extraordinary workload crop 
insurance agents face as compared to other property and casualty 
insurance lines. The strength of the FCIP rests upon the partnership 
that exists between the government, insurance providers, agents, and 
farmers. We commend this Committee for continuing to examine ways to 
improve both these partnerships and the program, and we look forward to 
continuing to work with the Committee in this effort.

    The Chairman. Thank you, Mr. Skow, we appreciate your 
testimony.
    Mr. Stroburg, welcome to the Committee.

    STATEMENT OF JEFF STROBURG, GRAIN AND INPUT COOPERATIVE 
                     OPERATOR, RALSTON, IA

    Mr. Stroburg. Thank you, Chairman Peterson, and thank you 
to the Members of the Committee for the opportunity to testify 
today regarding the 2012 Farm Bill. I'm Jeff Stroburg, and I 
serve as President and CEO in West Central Cooperative in 
Ralston. I also serve as Chairman and CEO of Renewable Energy 
Group.
    In the mid 1990s West Central began using soybeans to 
manufacture biodiesel as a way to add value to local producers. 
Since that time, Renewable Energy Group as emerged from West 
Central to become the largest biodiesel manufacturing and 
marketing business in North America.
    The Farm Bills of 2002 and 2008 energy titles have 
increased value for agriculture commodities and co-products by 
promoting biodiesel use. According to the Untied Soybean Board, 
25 cents has been added to every bushel of soybeans as a result 
of the growth of the biodiesel industry.
    In 2009 the Iowa Cattlemen's Association stated that Iowa 
livestock producers earn more than $9 per head as a result of 
the demand for animal-based biodiesel.
    In October of 2009, the National Biodiesel Industry used 
more than 50 million pounds of inedible fats from our partners 
in the livestock slaughter and render industries. REG also been 
purchasing inedible corn oil from the DDG Coke product stream 
for use as biodiesel feed stock. A pound of inedible corn oil 
averages 25 cents per pound. A new value returned to ethanol 
producers and in turn corn growers through the use of inedible 
corn oil and biodiesel.
    These successes from the 2002 and 2008 energy titles lead 
me to Renewable Energy Group's comments and recommendations 
regarding the 2012 Farm Bill. The foundation of my remarks stem 
from the serious economic uncertainty of financial 
institutions. Today, banks are simply not willing to partner 
with commercial-ready bioenergy projects. I'll address three 
areas of the energy title sections 9003, 9005, and 9007, and 
I'll make a recommendation for a new program concept utilizing 
countercyclical payments.
    First, each of the loan guarantee programs in the section 
9003 and the Biorefinery Assistance Program and in section 
9007, Rural Energy for America Program, that was referenced 
earlier, allow for grants, but what was not allowed is a 
package where a loan guarantee and a grant together would form 
the 80 percent government threshold. We recommend packaging 
loan guarantees and grants together at the 80 percent threshold 
regardless of the total project loan. Having a grant package 
with a loan guarantee, a lender reduces his risk of exposure. 
We recommend that USDA is allowed to determine what portion is 
a loan guarantee and what portion is a grant, in order to 
encourage lenders to partner with projects more easily.
    We believe a package of loan guarantees and grants promote 
more banks and lending institutions to step forward, more 
projects to be awarded, and more competition as a result. For 
example, REG currently has two commercial ready biodiesel 
plants in construction on hold. One in New Orleans and on in 
Emporia, Kansas. These facilities are strategically located to 
add value to midwestern agriculture, and to quickly integrate 
biodiesel into the petroleum infrastructure of the southern 
U.S. However, due to a lack of debt financing, these plants are 
more than 18 months overdue. Being able to package loan 
guarantees with grants would entice our lending partners to 
approve the financing and finalize construction, and then of 
course begin manufacturing biodiesel.
    Next under section 9005, the Bioenergy Program for Advanced 
Biofuels we would like to introduce a new concept for your 
consideration. This program is designed to assist the 
industry's transformation to assist the next generation of feed 
stocks and next generation of biorefinery technology. As 
currently written, the incentive payments are based on 
production capacity and actual gallons produced. Our 
recommendation is to create a countercyclical payment or safety 
net directed to biodiesel producers to manage risk during high 
commodity price trends.
    Agricultural co-products and by-products as feedstocks 
account for 85 percent of the cost of the gallon of biodiesel. 
As the cost of soybean oil increases as it did in 2008, up to 
75 cents a pound, soybean farmers receive additional value per 
bushel, which is great for farmers, but it adds to the cost of 
soybean oil feedstocks. In response to soybean oil price 
pressures, the biodiesel industry looks to alternative 
agricultural feedstocks, so in turn animal fats, inedible corn 
oil, and other feedstocks increase in value. As the cost of all 
biodiesel feed stocks increase, agricultural producers are 
rewarded, but biodiesel producer's margins tighten or 
disappear. A countercyclical program for biodiesel producers 
would create a safety net when the cost of feedstock prices 
biodiesel out of the market, and as feedstock prices go down, 
the safety net would recede.
    Our final suggestion for section 9005 is remove the cap of 
150 million gallons. This limitation has a chilling impact on 
future growth. Mr. Chairman, I've heard it said that Congress 
should not decide how big a farm should be. Likewise Congress 
should not decide how big a biodiesel producer should be.
    Thank you for your time this afternoon, and we stand ready 
to work with you regarding these recommendations at your 
convenience.
    [The prepared statement of Mr. Stroburg follows:]

   Prepared Statement of Jeff Stroburg, Grain and Input Cooperative 
                         Operator, Ralston, IA
Comments Regarding Bioenergy Titles of the Farm Bill
    The results of the previous Bioenergy Titles (2002 and 2008) Farm 
Bill have helped transform farm producers and agribusinesses to not 
only feed the world, but feed and fuel the world. The forward thinking 
work this Committee has pioneered has forever changed rural America.
    The U.S. biodiesel industry stands in support with you in achieving 
our national priorities for increasing energy independence, reducing 
greenhouse gas emissions, supporting green collar jobs and advancing 
American agriculture. The 2012 Farm Bill offers tremendous 
opportunities to advance current Bioenergy Title programs and further 
promote biodiesel utilization.
    Here is a brief summary of the tremendous results our industry has 
achieved as a direct result of previous energy titles.

   Biodiesel Promotes National Energy Independence and Reduces 
        Greenhouse Gas Emissions

    Today, the U.S. has the capacity to produce more than 2 billion 
        gallons of biodiesel which can be integrated into existing 
        petroleum industry infrastructure. Our feedstocks are 
        renewable; we use the fat Americans don't want in their burgers 
        and the oil left over from cooking their French fries.

    Biodiesel is today's only commercially-available renewable fuel 
        which qualifies as an advanced biofuel. Biodiesel significantly 
        reduces harmful greenhouse gas emissions as compared to 
        petroleum diesel. With an energy ration of 4.5:1, we intend to 
        continue improving fuel production efficiency while continuing 
        to produce clean burning fuel.

    Becoming an advanced biofuel is not our final goal as an industry; 
        we have already achieved status as an advanced biofuel which 
        can be produced from hundreds of fats and oils. On the horizon, 
        integrated biorefineries will produce high value specialty 
        chemicals and jet fuel from current renewable oils and fats. 
        Biorefineries will continue to displace industrial and consumer 
        petroleum-based products and in turn reducing dependency on 
        foreign oil while supporting American agriculture.

   Biodiesel Supports Green Collar Jobs

    Many of our staff grew up on family farms, surrounded by production 
        agriculture. I concur with Secretary Vilsack's comment that 
        more and more farm families need off-farm income to make ends 
        meet. REG and our partners offer full-time, highly skilled 
        employment in rural areas like Wall Lake, Ralston, Farley and 
        Washington, Iowa. Several of our employees or their spouses are 
        involved in production agriculture today and sought out 
        positions at our biodiesel plants in order to be able to 
        continue their commitment to agriculture. I believe maintaining 
        these green collar positions and creating new jobs in these 
        rural areas is a valuable piece of the USDA's role in biofuels 
        and bioenergy for the next farm bill.

   Biodiesel Advances American Agriculture

    In the 1940s in rural Iowa, West Central cooperative built a 
        soybean crush facility to add value to local farmers' grain, 
        producing soybean meal and its co-product, soybean oil. In the 
        early 1990s, West Central partnered with Iowa State University 
        to determine the feasibility of using excess soybean oil to 
        manufacture biodiesel. This feasibility study was funded in 
        part by the USDA.

    Today, our REG network of commercial scale biodiesel plants utilize 
        a multiple feedstock strategy that currently includes soybean 
        oil, choice white grease, beef tallow, poultry fats, canola 
        oil, corn oil from ethanol production, used cooking oil from 
        restaurants and other virgin fats and oils. These fats and oils 
        are the co-products or by-products of the U.S. agricultural 
        industry.

     Value to soybean producers:

       $0.25 of value added to every bushel of soybeans 
            produced in Iowa, accord-
        ing to the United Soybean Board.

       In 2009, almost 60% of all biodiesel produced in 
            Iowa was produced from
        soybean oil.

       $121.5 million in additional value for 2009 alone 
            for Iowa soybean pro-
        ducers.

     Value to livestock producers:

       In October 2009, the national biodiesel industry 
            used more than 50 million
        pounds of inedible fats.

       $9.00 per head earned by Iowa cattlemen due to value 
            of beef tallow-based
        biodiesel production.

     Value to corn and ethanol producers:

       Inedible corn oil from ethanol production utilized 
            in Iowa biodiesel plants.

       $0.25 per pound of value returned back to ethanol 
            producers and in turn,
        corn growers.
2012 Farm Bill Considerations
    Considering the Energy Title programs currently underway and the 
results that I just outlined; these recommendations are designed to 
build on a few key programs that will ensure that the previous 
investments are indeed--the solid foundation for the next generation of 
bioenergy technologies.
    However, given the serious economic difficulties of the financial 
industry, banks and lending institutions are hesitant to partner with 
commercial-ready bioenergy projects. Financing options should be kept 
open to keep this critical industry moving forward. Therefore, we 
recommend the following adjustments in order to remain within your 
priorities and restore confidence in the marketplace.

   Under section 9003, Biorefinery Assistance

    Currently the USDA proposed rules allow for loan guarantees and 
        grants to be awarded, but right now only loan guarantees are 
        offered. Our recommendation is to package grants and loan 
        guarantees together, more banks and lending institutions would 
        be willing to step forward, more projects would be awarded, and 
        more competition would result. Under this scenario, the total 
        coverage from the government would remain at 80%, but that 
        coverage could be split between a grant and a guarantee at the 
        discretion of the USDA. By combining grants with loan 
        guarantees; more banks would step forward and more projects 
        would compete and commercialization would occur at a faster 
        rate.

   Under section 9005, Bioenergy Program for Advanced Biofuels

    This program has particularly been one of the most helpful to our 
        industry at this time in history. We would encourage you to 
        continue funding these incentive payments. The biodiesel 
        industry has the capacity and is poised to meet the volume 
        requirements of RFS2. However, the goal for the industry is to 
        not only meet the reduced green house gas emissions levels, but 
        to exceed these reduction levels. The incentives in this 
        program will assist the current infrastructure's transformation 
        to the next generation of feedstock and next generation of 
        biorefinery technology that will exceed reduced green house gas 
        emissions levels. If your goal is to transform the biodiesel 
        companies of today to the next generation of biorefinery 
        production of tomorrow, this program will keep the pace moving 
        forward. That said, removing the 150 million gallon cap will 
        help accelerate this progress.

   Under section 9007, the Rural Energy for America Program 
        (REAP)

    A combination of grant and loan guarantees are allowed for REAP, 
        but at only 75% of project costs. A penalty is allotted if a 
        grant and loan guarantee is packaged. Our recommendation is to 
        remove the penalty and the total coverage from the government 
        would remain at 80%, but that coverage could be split between a 
        grant and a guarantee at the discretion of the USDA. This 
        adjustment will encourage more banks and lending institutions 
        to fund more projects and commercialization would occur at a 
        faster rate.

   New consideration for countercyclical payments for biodiesel 
        feedstock risk management

    The Renewable Fuels Standard, created by the Energy Independence 
        and Security Act of 2007, contains the nation's first carve-out 
        for biodiesel utilization. While this program, in combination 
        with the reinstatement of the biodiesel blenders tax credit, 
        are major milestones for our industry, we would like the USDA 
        to consider an additional option for promoting the growth of 
        the biodiesel industry.

    Agricultural co-products and by-products account for more than 85 
        percent of the cost of a gallon of biodiesel. For example, as 
        the cost of soybean oil increases, soybean producers are 
        rewarded and the biodiesel industry looks to alternative ag 
        feedstocks. In turn, animal fats and inedible corn oil increase 
        in value. As the cost for soybean oil and other biodiesel 
        feedstocks increase, soybean producers and other agricultural 
        producers are rewarded, while biodiesel producers margins' 
        tighten significantly.

    Our recommendation is a countercyclical payment directed to 
        biodiesel producers, which would offer a risk management 
        opportunity when soybean, corn and livestock producers receive 
        value from high commodity prices and the biodiesel industry is 
        exposed to squeezed margins. In turn, when soybean, corn and 
        livestock producers are struggling with low commodity values, 
        our current risk management strategies offer sufficient support 
        for our business progress.

    Renewable Energy Group believes our nation's energy security needs 
are more sensitive and costly than ever and will only get more acute in 
the future if investments in biofuel production, with these program 
adjustments, are not put into operation. We stand ready to work with 
you and any of these recommendations at your convenience.
Comments Regarding Impact of the Loss of the Federal Biodiesel Blenders 
        Tax Credit
    Failure to extend the tax credit for biodiesel produced in the U.S. 
would have a substantial negative impact on biodiesel production and 
the consequent economic and environmental benefits made by the 
biodiesel industry.
    The original biodiesel tax credit was passed in 2004 and has been 
extended twice, most recently as part of the Emergency Economic 
Stabilization Act of 2008 (P.L. 110-343), signed into law in October 
2008. Biodiesel produced from both virgin feedstocks (such as soybean 
oil) and non-virgin feedstocks such as yellow grease and animal fats 
qualifies for the $1.00 per gallon excise tax credit. An incentive such 
as the biodiesel tax credit is necessary to offset the higher cost of 
producing biodiesel compared to petroleum diesel.
    The biodiesel blenders' tax credit lapsed on Jan. 1, 2010. 
Currently, demand for biodiesel is extremely limited because our 
customers are no longer taking the risk of purchasing biodiesel without 
the tax credit. Manufacturing plants have idled. This dire situation is 
occurring not only in Iowa, but all over the country.
    According to a December 2009 study by John M. Urbanchuk, Director, 
LECG LLC, ``without the tax credit the price of biodiesel would be 
insufficient to provide a positive return over variable costs and the 
biodiesel industry could be expected to collapse.'' This would have 
several notable adverse economic impacts including:

   a loss of jobs and income.

   increased demand for petroleum diesel and a degradation of 
        energy security.

   lower demand for soybean oil and soybeans for crushing 
        leading to lower soybean prices and a negative impact on farm 
        income.

   stranded investment as biodiesel capacity is idled.

   lost tax revenue for states and local governments.

    The biodiesel industry will spend about $1.3 billion on raw 
materials, goods and services to produce 475 million gallons of 
biodiesel this year. In doing so the biodiesel industry will add $4.1 
billion to GDP this year, increase household income by nearly $1 
billion, and support nearly 23,000 jobs in all sectors of the economy. 
In addition the biodiesel industry will provide $445 million of tax 
revenue to the Federal treasury and $383 million to state and local 
governments.
                          Take-Away Attachment
    Located in the heart of United States agriculture, West Central is 
a leading grain, agronomy, and value-added processing entity. With 
headquarters in Ralston, Iowa, this member-owned cooperative boasts a 
national and international agricultural presence. The policies within 
the 2008 Farm Bill provides a positive, sound foundation for the future 
of our industry and our business.
Comments Regarding the 2012 Farm Bill
    We would recommend consideration of the following:

   Reduced complexity and increased flexibility to plant in 
        response to market demand;

   Maintenance of a farm income safety net that includes 
        consideration of an energy escalator clause that addresses high 
        fuel and fertilizer prices;

   Compliance with WTO agreements;

     Reduce trade-distorting domestic support (amber box) 
            in exchange for a proportionate increase in agricultural 
            market access, elimination of export subsidies and fully 
            funded ``green and blue box'' eligible programs.

     This could be accomplished through working lands 
            conservation programs, risk management, the Market Access 
            Program, enhanced crop insurance, the concept of a revenue 
            based safety net program, or government programs that 
            increase producer profitability that may include direct 
            payments and/or tax credits; and

   Inclusion of a commodity loan program.

    In considering the new farm bill policies, we oppose:

   Mandatory government supply management programs and 
        acreage reduction programs, (excluding Conservation Reserve 
        Program and conservation easements, for marketing loan 
        commodities under the current farm program);

   A farmer-owned reserve or any federally controlled grain 
        reserve with the exception of the existing, capped emergency 
        commodity reserve;

   Income means testing;

   Payment limitations; and

   Targeting of benefits being applied to farm program 
        payment eligibility.

    Regarding the USDA proposed cuts to the Standard Reinsurance 
Agreement (Crop Insurance Program), by almost 30%--

   Iowa would be hit harder by the proposed cuts to than 
        anywhere. Iowa producers buy more crop insurance than most 
        other states, and Iowa has more crop insurance agents than most 
        other states. There were $735 million in premiums written in 
        Iowa last year alone for just two crops--corn and soybeans.

   Let Congress decide how to best handle crop insurance during 
        its farm bill process.

    The Chairman. I thank all of the panelists for their 
testimony, and, Mr. Erickson, I too am encouraged by what is 
going on within the dairy industry.
    I think it is a sea change from anything I've ever seen 
before, but there does seem to be--seems to me if they're going 
to get this together at the end of the day, they're going to 
have to find some kind of way to manage their excess production 
in order for them to come together on something. And one thing 
that's being looked at is, something I proposed 10 years ago, 
is some way to have like an assessment on all producers when 
they over-produce and use that to try to increase to market 
through feeding programs or exports or whatever. I think 
Congressman Costa is working on a bill that I think has some 
elements of that as well. Is that not true, Mr. Costa? Yes.
    I don't know how much has been discussed about what they're 
considering, but are you and your industry completely opposed 
to any kind of--you know, the problem is, the price goes up, 
dairy farmers produce more, the price goes down, they produce 
more. And that's just causing all the volatilities, so there 
has to be some way to try to even this out. I think insurance 
helps, but people are not convinced that's going to be the 
complete answer. So what's your reaction?
    Mr. Erickson. Mr. Chairman, thank you for the question. I 
get nervous when we talk about supply management because----
    The Chairman. I'm not talking about supply management.
    Mr. Erickson. I work on the demand side. Milk is a 
wonderful product, nutrient rich, gives you nine essential 
nutrients, and I think we ought do all we can to espouse the 
benefits of milk. I've been a benefactor of the growing milk 
supply in Iowa, and when you try to freeze something in time--
--
    The Chairman. We're not talking about freezing anything in 
time. I don't think anybody's talking about that.
    Mr. Erickson. Okay. I apologize
    The Chairman. We're talking about some rules to try to 
increase the demand, to try to get things back into balance. I 
would just encourage you guys to work with us so we can get, at 
the end of the day, with something we can all support.
    I think we can do that because we don't disagree, but I 
would say, when I had the Canadian Agriculture Committee people 
in to see me, they were complaining about all kinds of 
different things. We had an hour meeting, but dairy never came 
up, and I said, ``What about our dairy farmers?'' Oh, we don't 
hear a word out of them; they're happy. So, it's a little 
extreme what they're doing and they are driving people to the 
U.S. and so forth. But, it also has maintained a situation for 
dairy guys that are in business, and so there's maybe some 
balance here that we can work on, so we look forward to working 
with you on that.
    The Chairman. Mr. Schaben, one thing we're looking at is 
crop insurance, obviously there is the SRA going on, but there 
has also been a lot of discussion, a lot of GAO reports and a 
lot of work we've been doing on the Committee. One of the 
things we're looking at is seeing if there's someway we can 
develop crop insurance so it covers everything on the farm, not 
just your traditional crops. We've moved in that direction to 
some extent on capital but not to the extent we've done on the 
crops and so forth. Would that be something that people in your 
industry would be--find helpful if we could expand crop 
insurance to make it risk management?
    Mr. Schaben. You're referring to some sort of risk 
management program?
    The Chairman. Yes.
    Mr. Schaben. I think in this day and age anybody in 
agriculture would embrace any sort of risk management tool as 
long as it's especially in the cattle industry, I guess, is 
what I'm going to speak to, but if it was done on a voluntary 
basis.
    The Chairman. Yes.
    Mr. Schaben. But the problem seems to be that we are losing 
a generation of cow/calf producers, the grass roots part of the 
cattle industry, and like all of this agriculture, it's a 
generational thing.
    And when you lose a generation, you don't get them back. 
Once they're gone, it's kind of over with, it's extinguished, 
and that's my concern. I've watched it happen in our area, so I 
think some sort of--any time that there's some sort of a risk 
management program, I think would be pretty inspiring, but I 
think it would limit the problem.
    The Chairman. My time has expired, but I have to say, Mr. 
Skow, we are also looking at simplifying crop insurance 
significantly, so your people won't be spending as much time as 
they are and they won't be--if we're to get more successful, 
there won't be 400 different policies and so forth, so get 
ready to work with us. I don't know how successful we'll be, 
but I think there is some potential here to simplify the 
program. We think we need to get rid of CAT coverage and NAP. 
They have outlived their usefulness. There are just some 
fundamental things we need to look at it, and we look forward 
to working with you as we go forward with the farm bill. We 
don't have all the answers, but we have some of the questions, 
and we're trying to figure out in these areas what the answers 
are.
    Mr. Stroburg, we'll work with your industry. We understand 
the problems. We don't control all of that in our Committee, 
but we'll do what we can from our end, and your people from 
Iowa have been at the forefront of this, as you know, so----
    Mr. Stroburg. Thank you, Mr. Chairman.
    The Chairman. The gentleman from Oklahoma.
    Mr. Lucas. Thank you, Mr. Chairman.
    Mr. Skow, would you expand a little bit more on what the 
effects on the delivery system of crop insurance would be with 
the second draft of the SRA, as proposed, is implemented.
    Mr. Skow. It specifically here in Iowa, we think it would 
be very problematic, the reality of the situation is that there 
would be significant cuts to the delivery system--what I refer 
to the ice stage or the one stage, and I have some reference to 
it in my testimony. I would also refer you to a letter that our 
Congressional delegation wrote to the department on that, and 
we think that there would be price cuts close to 30 percent.
    Mr. Lucas. So quite literally products might be available 
everywhere in Iowa and there might not be any one to deliver 
those products even in the second round implements.
    Mr. Skow. I think the issue is is that there are probably 
some people who deliver crop insurance, both insurance 
companies that service it, as well as insurance agents would be 
forced out of the marketplace. I think that, based on the 
delivery system, some would simply say it's not worth noting 
the recourses any longer, so farmers would have to go further 
to find somebody willing to serve them. I think you would see a 
compression or a contraction of companies willing to offer, and 
I think that has been spoken in a number of documents to RMA.
    Mr. Lucas. Mr. Schaben, you mentioned in your testimony 
about how we need to focus on some kind of a program that would 
emphasize production along with conservation, potential 
conservation. I just note for the record in 2002 when I wasn't 
a part of the Minority political party, as Subcommittee 
Chairman, we tried to create something called GRP; the goal of 
which is to provide perhaps not only a transition for some of 
the CRP acres, which should be rolled over time, but to provide 
a way for those acres to stay in grass, and perhaps not go back 
to the plow or additional acres to come in and enable producers 
to fully utilize the equipment. Unfortunately, from the time we 
write bills we pass them on the floors of the United States 
Congress, persuade Presidents to sign them or override the 
veto, whatever the case might be, and they're implemented and 
things might change.
    That program essentially became a Green Zone Program around 
urban areas. And I'm perfectly supportive of those kinds of 
efforts. The GRP started as a way for real producers to be able 
to access the conservation dollars, utilize every potential 
from soil and water, air, wildlife conservation, so I'm 
frustrated along with you on those issues.
    A similar question to what I asked the earlier panel: 
What's the price of land in your part of the state compared to 
5 years ago, trade publicly, public auctions, whatever?
    Mr. Schaben. Sure, actually, I sell land at auction. We do 
quite a bit of that. We don't--the inherent problem in our part 
in western Iowa in regards--this is a long answer to a short 
question, but in regards to the grassland, we don't have much 
left, it's gone, it's plowed, that's the problem. Now, I will 
tell you that the average price, whether it's a sheep, but if I 
found grassland in our area now that's strictly grassland and 
that means it's timbered, it's probably in the $400, $500, 
$600, $700 range. That is a large part to do with our location, 
which is we're 60 miles from Omaha, when I sell that piece of 
timber land, it doesn't usually go through a farmer. Obviously 
it's not economically feasible. So we lose that cow/calf man. 
He goes to permanent grassing in Oklahoma or Kansas or 
Nebraska. That's part of the problem.
    Mr. Lucas. That truly is a challenge. There's no doubt 
about it.
    Speaking of the farmer and ranchers and the topic that 
we've touched on numerous times today about the death tax it's 
not a section of statute that the Agriculture Committee has 
direct jurisdiction over, nonetheless capital gains rate, 
income tax rate, have very dramatic effect on processors, 
producers, and everyone in between. From your perspective, if 
we don't do something before the end of this year, what will 
the effect be on your people when the death tax goes back to 
the 2001 level, capital gains go back up to 15 to 20, and those 
kind of things, what's the impact? Not just in the pocket book, 
but the decision making.
    Mr. Schaben. I think that's where the impact is. I think it 
causes people that make decisions that probably aren't first 
and foremost the best for their business or their industry. I 
guess that briefly is the answer because as people made some of 
the decisions or try to out-think what the next move may be 
and, of course, in agriculture it obviously causes a big 
problem with taxes.
    Mr. Lucas. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The gentleman from Iowa, Mr. Boswell.
    Mr. Boswell. Thank you, Mr. Chairman.
    I'll just stick with you for a minute, Jim, and I'll move 
on. You're doing pretty well. I'm still concerned about animal 
ID. We went through quite a discussion on this and we didn't 
get too far, and now it's back to the states. You deal with 
livestock every day, and I continue to worry about the rural 
economy and rural market if something would happen that we 
couldn't put the face on it, then what does that do to us? Do 
you have any comments about that.
    Mr. Schaben. I certainly do. As you well know within your 
office and we've met with the Chairman and staff different 
times in Washington about animal ID, and I guess when I speak 
about animal ID, I only speak about it from a cattle 
perspective, not understanding the rest of the industry's to 
that degree. The cattle industry is so inherently different 
than the hog industry, the sheep industry in the way that it 
moves, in the way that it travels, the interstate commerce 
that's involved and the small load lots. I have been convinced. 
I started out thinking that animal ID was wrong. I became a 
believer, and now I'm going back.
    So I've run the gamut, and I've been going to these 
meetings for over twelve or thirteen years, and I think what we 
need to do, Congressman Boswell, I think we need to work on 
enhancing the programs and again speaking about the cattle 
industry, but enhancing the programs that we have out there 
today, and that is through veterinaries ID, through interstate 
commerce, through traceability, through identifying all of the 
females, if they all had an ID tag, that maybe doesn't give us 
24 hour traceability, but it could easily give us 48 or 72 hour 
traceability.
    So I think we need to enhance the programs that are 
currently out there in the Federal programs and state programs, 
and enhance those as it deals with the cattle industry, rather 
than the ID tag.
    Mr. Boswell. Thank you. I will just divert here just a 
moment. Yesterday, this had nothing to do with this meeting, 
Mr. Chairman, but I was with Senator Harkin in the Rose Garden 
when the national teacher of year was awarded to a teacher from 
Johnston, and Senator Harkin said to give you his greetings.
    I see John is here, so I wanted to recognize he's in the 
crowd as well in case someone needs to visit with him. But, I 
appreciate that.
    Mr. Erickson, the who dairy industry has been whacked all 
over the place the last couple years. We know that, and I feel 
like the USDA has been pretty responsive to us to do the 
different things they've done. What, for the most, in those 
conditions was helpful? All of the above?
    Mr. Erickson. We're all a big fan of Secretary Vilsack here 
in Iowa, so I think he's done an admirable job in a tough 
environment. He has put some extra money toward dairy 
producers, which I think is warranted given the current 
situation. I wish he'd take a look at the Federal Milk 
Marketing Order system and give us a break and simply it a 
little bit and maybe we can get to that too.
    Mr. Boswell. Thank you.
    Mr. Stroburg, the concern about the biodiesel industry is 
something that's carried heavy on you, as we talked about it 
quite a bit. How do you think this--is there going to be a 
recovery period when we get the tax extension back in and so 
on? Are you going to be able to find the people out there to do 
what you need to do? Tell us about your situation is in that 
respect.
    Mr. Stroburg. Congressman Boswell, the longer we go without 
a blender's tax credit, the more difficult it's going to be to 
bring workers back that have been laid off. We've laid off 
about 45 percent of our workforce since the blender's tax 
credit has expired. So the longer it goes, the harder it will 
be to attract good people back to these plants, to run the 
plants.
    I think more critical than that is the investment that 
almost 10,000 Iowans have made in biodiesel plants within Iowa. 
And these are all what I would call retail investors, they're 
farmers, they're people that own the local hardware store, they 
run their local dentist, or have other businesses in small 
towns. These are rural jobs that have been created by rural 
investors, and once those investors get wiped out, and their 
equity is eroding daily as we go without a blender's tax 
credit, once those investors are wiped out, there's no coming 
back. Those plants may get sold for pennies on the dollar to 
other companies, and hopefully the jobs will come back, but 
those investors are gone.
    Mr. Boswell. Thank you.
    Mr. Chairman, on that issue, we've talked about it. That's 
something for--we've all, in agriculture, as farmers, 
producers, say we would like to be part of the value-added, and 
this was a chance, and so we share a deep concern. I know you 
do, too. We've talked about it. But, I guess, we did respond on 
our side of the rotunda, we've just got to figure this out. And 
I'm very concerned about this, and I appreciate the fact that 
you are, too. I yield back.
    The Chairman. Well, I'm being told we're going to get this 
resolved by May 31, so we'll keep our fingers crossed. The 
gentleman from Iowa, Mr. King.
    Mr. King. Thank you, Mr. Chairman. Again, I thank the 
witnesses and enjoyed listening to all of the testimony.
    And I came in a little late, Mr. Erickson, but I've read 
your testimony and appreciate that as well and the generation 
impact you had each year.
    It's interesting to me, Mr. Schaben, to hear where you've 
been on livestock ID, back and forth two ways, and hopefully I 
can pick up that conversation another time in more depth. But, 
I do want to ask you more specifically that sometime back, 
coming in actually in the last farm bill, I worked with a 
number of people across the state, and we put together a 
proposal to try and preserve some of this grassland and enhance 
the grazing in Iowa. That was a combination of CRP, CSP, EQIP. 
There's another one, CP29 or something that I forget, grazing, 
water, those things that you have to do in order to manage 
pastures and be able to reach some of the goals of CRP, and 
work in conjunction with conservation groups across the state. 
The answer I got back from our producers was we don't want 
unfair competition; we're in the cow businesses, and we don't 
need our competition subsidized.
    Would you speak to that particular conflict that exists 
within the cattle industry with regard to anything we might do 
to encourage more pasture land?
    Mr. Schaben. Well, I certainly agree that the cattle 
producers is--has been an awful independent animal, to say the 
least, and I guess that's part of their makeup and part of 
their style. But I think--I really truly believe, Congressman 
King, I think the situation is grave enough in this loss of the 
industry in most of the upper Midwest, I would say, that I 
think it needs to be addressed. It's not necessarily a question 
of direct income for those producers as much as it might be for 
the area as a whole because I had some CRP land that came out. 
I'm in the cattle business. I had a cow pasture. I rented it to 
my brother for $200 an acre. It only made good sense. It only 
made good economic sense. That's my point.
    I didn't miss any money by doing what I did. I benefited by 
doing it, but in my area I miss quite a bit because I don't 
have cows anymore. We don't have, basically, don't have the 
feed store in Dunlap anymore, but, those dollars, and I don't 
have the figures. I'm sure that you do or staff does, about the 
turn over in the animal agriculture versus some other types of 
agriculture, and I think that's where we see it more 
indirectly. It isn't so much that we can't find something to do 
with that track of land, because we can, but I think that we 
need to try to promote for the sake of animal agriculture, 
specifically, I should say cattle industry, we need to promote 
that in some fashion.
    Mr. King. Mr. Schaben, let's do this: Let's come back to 
this subject and have those conversations to see if we can put 
together a plan again, at least propose as we go forward to the 
farm bill, 2\1/2\ years, that's a worthy discussion. I'm glad 
you brought it up. Seems to me that if we're going to spend 
money for CRP to take land out of production so that we can do 
a Conservation Reserve Program, well, we should also be able to 
look at how we keep things in grass, which also is a 
Conservation Reserve Program and has some of the same results.
    But I think the important point that I want to make sure 
that gets made here today, and I'm going to turn it over to Mr. 
Stroburg, just a question first and then a follow-up question 
on that. Is anybody in Iowa right now, today, producing 
biodiesel, or are they all mothballed, all 14 or all 15 plants 
that we have in this state?
    Mr. Stroburg. Congressman King, I don't know about all the 
production. I can tell you that the plants that are associated 
with Renewable Energy Group are running at--take all the 
capacity maybe running at 10, 15 percent capacity, so it's 
practically shut down, but there are a few sales still being 
made.
    Mr. King. Then I'd ask you to just to take this where you 
need to go with it, but a couple of things have happened here 
with renewable energy altogether with ethanol and biodiesel. Do 
you find those as first generation renewable fuels; the 
industry was initiated by our friends north of us in Minnesota, 
but we've picked up on that pretty well and developed an 
industry and an infrastructure here. So with the 6 cents 
reduction and formally 51 cents blender's credit for ethanol 
and for the failure to extend the blender's tax credit for 
biodiesel, now we're looking at--it was essentially zero new 
capital coming into the industry. We understand the urgency to 
renew the blender's credit for biodiesel, but can you imagine a 
second generation ethanol say cellulosic, if we can't be 
viable? How would we possibly attract capital if we can't get 
our money back out of what's already invested in ethanol and 
biodiesel?
    Mr. Stroburg. Yes, I think that second generation is very 
much dependent on what we do be right now because most of the 
second generation feed stocks will actually be produced in 
first generation manufacturing plants, whether it's ethanol or 
biodiesel. There may be additions to the front end or the back 
end to accommodate second generation feed stocks, but if we 
kill the industry now, second generation feed stocks will be 
years before they come on.
    Mr. King. Thank you, Mr. Stroburg.
    I thank all the witnesses, and Mr. Chairman, I yield back.
    The Chairman. I thank the gentleman. The gentlelady from 
South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    Well, Mr. Stroburg, I appreciate your thoughts on combining 
the loan guarantee programs and grants and packaging those 
together. We look forward to working with you to see the 
evidence of how the other sections are working to determine 
whether or not that makes sense for us going into the next farm 
bill and making that change. The only thing we have to be 
vigilant about is, in light of the Chairman's initial remarks 
about the money available, is that we wouldn't want that to 
result in less being available to leverage by USDA to help in 
biorefinery assistance or other renewable energy project 
assistance. We just have to be vigilant about how we package 
them together and how far that would go for how many projects. 
I appreciate the insight and the other project that you put on 
the table, a program with countercyclicals to our biorefineries 
in times of high commodity prices.
    And then, Mr. Skow, we'll keep working with you. As you 
know, Mr. Conaway and I led the ``Dear Colleague letter'' in 
January to the Administrator of RMA expressing our concerns. 
Those concerns remain with the second draft. The third draft is 
due any time here in early May, but in light of what's 
happening to many in the northeastern part of South Dakota, the 
concerns are great in terms of the impact, particularly, on the 
importance of the crop insurance program. It is the most 
important part of the safety net right now for many of these 
producers who are facing flooding conditions, as well as in the 
central part of the state.
    But I did want to focus my time and we'll keep working with 
the both of you, and perhaps get a chance after the hearing to 
talk in greater detail. I wanted to focus my questions to you, 
Mr. Schaben, because in the last farm bill the Chairman came to 
South Dakota, to western South Dakota, as did some of my 
colleagues here and others on the Committee, because of the 
concern given that we still have virgin prairie and grasslands 
in South Dakota of the conversion that was going on and what 
that meant for livestock producers and availability of pasture. 
And I just wanted to explore with you maybe a couple of other 
factors that are driving this rapid and disconcerting 
development in the cattle industry, and I think some of the 
independant streak within our producers comes from the nature, 
but also learning lessons from pork and poultry and wanting to 
avoid the same kind of integration and what that means for 
smaller and mid-size operations.
    What is your--from your perspective, what do you think is 
the state of competition in the cattle industry today?
    And the other issue is about crop insurance; should we look 
at modifying a crop insurance program so you give livestock 
producers a risk management tool where you're covering all on-
farm activities including livestock production?
    Mr. Schaben. Well, the--to address the first question, the 
relative health, I guess, is that what you're asking, the 
competition involved in our industry within our industry, the 
competition?
    Ms. Herseth Sandlin. You think there's healthy competition, 
do you see any signs of market manipulation?
    Mr. Schaben. I believe there's healthy competition on my 
level, which is the running of a livestock auction. Ours is 
transparent and open, obviously there's good reason to keep 
some other aspects of the industry under close watch, some of 
those things that maybe are done behind closed doors. Again, my 
segment of the industry, which is livestock auction and it's 
done out in a room like this, everybody is invited in to 
participate, so it's pretty transparent.
    I know the packing industry, there has been some concern 
over time, and, thereby, the livestock administration was 
started. So I don't worry about that as much, and I know I have 
some things in South Dakota that caused a heated debate over 
the last 10 or fifteen years in the packing industry, Herman 
Schumacher being one of them.
    Ms. Herseth Sandlin. Well all know her.
    Mr. Schaben. Everybody knows Herman Schumacher. He's a dear 
friend. But--so I don't worry about it as much. I don't think, 
I don't believe that I worry about it quite as much in my 
facet. In the packing industry it's obviously a cause for 
concern.
    The second question you had dealt with risk management, and 
I firmly believe in any risk management tool that is offered to 
a cattle producer is a good tool in agriculture in general, 
probably is a good tool. I've stated earlier that I don't think 
it's anything that anybody wants in our industry to see as 
mandatory. If it's out there, there have been some programs in 
the past, safety net, other things, and I think that's great if 
it's an option.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    The Chairman. I thank the gentlelady. The gentleman from 
California.
    Mr. Costa. Thank you very, Mr. Chairman.
    Mr. Stroburg, you talked in a lot of detail with regards to 
the biodiesel industry and the impacts. And would I be left 
with the wrong impression that if the Federal support for this 
biodiesel program is no longer available, then it's going to be 
very difficult to sustain at all?
    Mr. Stroburg. I think at this stage in the industry, if we 
do not have the blender's tax credit, the biodiesel industry as 
we know it will go away.
    Mr. Costa. I mean, that's the sense I got from your 
comments. I just wanted to be clear. Mr. Erickson, you talked 
about simplifying the Federal Milk Marketing Order; is that 
correct?
    Mr. Erickson. That is correct.
    Mr. Costa. You think bringing in California, that produces 
23 percent of milk products of the country, would make it 
simpler or more complicated?
    Mr. Erickson. It depends on the implementation. I think it 
has the--it can have the benefit of putting everybody on an 
even playing field, including the whole country. I don't think 
would be a bad thing.
    Mr. Costa. I think I know the answer to this question, but 
what do you think about implementing, as I tried to, 
California's standards?
    Mr. Erickson. Well, I'd let the customer decide. There has 
been some product out there with fortified skim, and it's not 
popular.
    Mr. Costa. Well, it's popular in California, but, I mean, I 
think we're talking about healthy proteins. We're talking about 
trying to ensure that we have healthy diets.
    Let me move on. Did I hear you correctly as I was walking 
back that any efforts to provide some supply side management 
tools for producers would be a disaster?
    Mr. Erickson. I'm not a fan of supply side because I've 
been the benefactor.
    Mr. Costa. Why would it be a disaster?
    Mr. Erickson. I've been the benefactor of the growth of 
dairy in Iowa, where I think that dairy should be responsive to 
the marketplace.
    Mr. Costa. I agree with you, but I'm not talking about 
limiting supply. What we're trying to do is to help dairymen, 
who are the most prolific producers probably anywhere in the 
world, a third generation dairy family--I know how effective we 
are in producing, but having some ability to have some tool to 
determine whether or not they want to grow or stay the size 
they are, and that's different than putting limits on it.
    I mean, I think if--certainly I hear good things about the 
processing work you do, but, I think there's a different level 
of interest if you're a processor than if you're a producer. 
Obviously over-supply of milk has a different impact on 
producing to processors.
    Mr. Erickson. That's correct.
    Mr. Costa. I just want to acknowledge that. I mean----
    Mr. Erickson. That would be true, but to the extent I need 
producers----
    Mr. Costa. That's true.
    Mr. Erickson. Producers need processors. We need to work 
together.
    Mr. Costa. And that's correct. The Chairman said that 
earlier, and I concur with him wholeheartedly and to do that, 
but there are different interests. I think it's important that 
we acknowledge those different interests to producers and 
processors, but you need each other.
    Mr. Erickson. We do desperately need each other.
    Mr. Costa. There you go. We agree on that point.
    You talked about the insurance program that the National 
Milk Producers Federation is proposing and they're measuring. 
I'm concerned about it, and I think you also said something 
about less government influence, but we lost an estimated 
between $11 and $12 billion in equity in the last 2 years in 
the U.S. milk program. Some say it's even higher, maybe $20 
billion.
    How do you insure those kinds of losses? How do you create 
an insurance program that would insure some of the devastation 
that we've had nationwide?
    Mr. Erickson. Well, I think some of the point is is that 
price supports aren't indicative of the cost of production. If 
you have a high price----
    Mr. Costa. I concur.
    Mr. Erickson.--high input costs, they're not aligned. I 
think the point is the current system is somewhat flawed.
    Mr. Costa. No, I think many of us have felt that way for 
years, but I think it's taken $9 per hundredweight milk to 
finally get the industry willing to--as the Chairman and I have 
spoken, there's nothing like $9 per hundredweight to make folks 
wake up and figure out maybe we need to change things.
    Mr. Erickson. Yes, Congressman, and I think----
    Mr. Costa. When you have $15, $16 per hundredweight input 
cost.
    Mr. Erickson. That's where we need to look at margin 
protection as opposed to price supports.
    Mr. Costa. Well, but you didn't answer my question. How 
would you create an insurance program for over $11 or $12 
billion of the losses and maybe higher losses in the last 2 
years?
    Mr. Erickson. I'm not an insurance genius; I'm a small 
processor in Iowa, but I think it's----
    Mr. Costa. You're a very good processor, Mr. Boswell tells 
me.
    Mr. Erickson. I appreciate that.
    Mr. Costa. My other Iowa colleagues tell me.
    Mr. Erickson. I do think it's important to think about how 
to create margin insurance. The implementation, Congressman, 
I'm unsure of, but I think it would be a better approach than 
price support.
    Mr. Costa. I think we need to look at all of that, and 
obviously price supports have limits and certainly curtail more 
production of milk where we have stored powder and cheese, I 
don't think it's good food policy.
    My time has expired.
    Mr. Chairman, I'll look forward to continuing this 
conversation. Once again, thank you very much.
    The Chairman. I thank the gentleman.
    I thank all the witnesses for being with us for your 
excellent testimony and answers to the questions, and if the 
Members have more questions, they can get them to you, you'll 
answer them, like I said.
    So the panel is dismissed.
    I wanted to tell people again that we are very much 
interested in getting comments from anybody that has good 
ideas. I find that sometimes folks that don't necessarily get 
on these panels for what--have some pretty good ideas, and so 
you can go on our website, www.agriculture.house.gov, and log 
on there and tell us what you think about what's going on, if 
you have new ideas, what we should consider, very much would 
appreciate that input. And those of you that have been watching 
on this web-cast, we'd like comments about how that all works 
and what you think about it. More feedback is better.
    I'm going to yield the rest of my time for closing 
statements. Thank you Mr. Boswell, the host of this event.
    Mr. Boswell. Thank you, Mr. Chairman, Ranking Member Lucas, 
both of you, I appreciate you coming to our state, our 
district, sharing in this.
    I want to thank the Iowa State Fair Board and 
Administration for providing this facility, especially wanted 
to thank the witnesses; some of them had to drive a long ways, 
and took you away from business today, and I appreciate that 
very, very much. As we discussed in the full Committee and 
other times when we talk together, we have one thing in mind 
what we want to do; we want to make agriculture as strong as we 
can make it, and do the best we can with the resources we have, 
and so that's what this is all about.
    So thank you for participating, and it's a challenging 
time. We all know that. I'd be singing to the choir, and we 
were talking about the challenging time as a country and as a 
world community, and we know that too. And I appreciate John, 
Bill, and you for coming today to sit in with us, appreciate 
all of that, and I think that we've had a good meeting and look 
forward to proceeding on to the process.
    Mr. Costa. Would the Chairman yield for a moment?
    The Chairman. The gentleman from Iowa? Oh, Mr. Costa.
    Mr. Costa. The gentleman from California.
    The Chairman. Can't see you down there, I'm sorry. I figure 
you'd be out here further so I can see you.
    Mr. Costa. I understand.
    I just wanted to thank, again, Congressman Boswell for 
hosting all of us. Though I do have somewhat of a question. All 
of us who represent ag country around the country have had the 
pleasure to be in auction pavilions in our districts and 
around, and they always can be a lot of fun. I just was 
wondering Leonard, what this meant when you put those of us 
down in the pit, I was a little concerned that the witnesses, 
and those in the lower part of the panel in the pit, you might 
have some ulterior motives. Usually when we're in the pit, 
we're selling someone or selling something or being sold, so 
hopefully we weren't getting sold anything here today, but just 
good information.
    Mr. King. This isn't how we mark up the farm bill, is it, 
Mr. Chairman?
    The Chairman. I thank the gentlemen for their comments and 
for the people watching, this is the first of eight hearings; 
we're doing seven more of these in the next couple weeks, so 
we're going to hear a lot. The gentleman from Oklahoma, Mr. 
Lucas, do you have a closing statement?
    Mr. Lucas. Just simply, Mr. Chairman, that thank you and 
our Iowa friends, Mr. Boswell, Mr. King, and Mr. Latham for 
being such good hosts and cooperative and our witnesses today. 
It's always worth noting that in the nature of Committee 
process, which is critically important to Congress, that the 
House Agriculture Committee is bipartisan, non-partisan 
committees. We may disagree occasionally on particular parts, 
agriculture economic philosophy, we might have slightly 
different perspective on commodity groups, but when we team up 
in that every 5 year process to write a farm bill, we work 
together for the good of the country as a whole. Sometimes we 
work with Administrations, and sometimes we educate 
Administrations, but the bottom line is we're going to try to 
write you a good farm bill.
    Thank you, Mr. Chairman.
    The Chairman. I thank all of the Members for being here 
today. So under the rules of the Committee, the record of 
today's hearing will be left open for 30 calendar days, to 
receive additional materials supplementary, written responses 
to witnesses and any questions posed by a Member. This hearing 
of the Committee on Agriculture is adjourned.
    [Whereupon, at 3:59 p.m. (CDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
      
    Submitted Letter by Brian Freise, President, AgPerspective Inc.
April 29, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture,
Washington, D.C.

    Representative Collin C. Peterson,

    My name is Brian Freise and I am the owner of AgPerspective Inc, a 
risk management and insurance firm in Dixon, Illinois. I have recently 
read that the Administration, as well as the Congressional Agriculture 
Committee, has begun discussion on the 2012 Farm Bill. I am writing 
today to express my opinions on how the 2008 Farm Bill can be improved 
upon in 2012. Specifically, I would like to address the farm safety net 
and the ACRE (Average Crop Revenue Election) program.
    I believe that the ACRE program was designed to improve upon the 
countercyclical program and attempt to make payments more specific to 
where actual farm losses occur. To better understand the program and 
explain it to our client base, I created the spreadsheet enclosed with 
this letter. It walks the client through the program step by step. 
Clients found this spreadsheet to be a tremendous resource when 
deciding whether to enroll in the program or not. I also created a 
PowerPoint presentation to explain all of the other details. I enlisted 
the help of Dr. Carl Zulaf from Ohio State University to help insure my 
details were accurate. As I created these materials, I noticed one 
major flaw in the program.
    This has to do with the requirement for the individual FSA farm 
number to have a revenue loss. I can appreciate why this component was 
added. I suspect it was included so that farmers who have windfall 
revenue cannot collect through the ACRE program on top of their already 
stellar year. However, the practicality of this component is very 
questionable. For example, using the attached spreadsheet, I have 
determined that if the State of Illinois has a $40.47 per acre ACRE 
corn payment, the average producer would need to have a yield in excess 
of 35 bushel over his Farm Benchmark Yield to NOT qualify for the state 
level payment. Obviously, the larger the state level ACRE payment the 
higher the farmer's yield would be to be to not qualify for payment. 
That being said, if ACRE triggers a substantial payment it will be very 
difficult for the farmer not to qualify. Again, I understand why this 
component was added, but it is my opinion that this feature adds far 
more complexity and administration cost than it is worth.
    I believe this feature has much to do with why less than 15% of 
producers across the Midwest enrolled in the program. Very few Farm 
Service Agency (FSA) employees truly understood the program, and in 
many cases farmers were convinced not to sign up because of this lack 
of knowledge, and the paperwork burden of reporting all of their 
yields. The reporting of yields to the FSA is also redundant as many 
producers already report yields to their crop insurance agent. Not only 
does this feature not accomplish the goal of not paying farmers when 
they have windfall years, but it creates an administrative nightmare 
that adds substantial cost to the implementation of the program.
    Farm policy is something that I take a very active interest in and 
feel that I have many excellent ideas to share. I am by no means an 
expert on all levels of farm policy, but I believe I can offer great 
insight into programs that are designed to serve as a safety net for 
row-crop producers. I would welcome the opportunity to discuss the ACRE 
program or other areas of farm policy with you. Thank you for your 
attention to this letter.
            Regards,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Brian Freise,
President, AgPerspective Inc.
                               attachment

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
 Submitted Letter by David Kubik, President, Iowa State Association of 
                               Assessors
June 1, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture,
Washington, D.C.

Re: Farm bill field hearings

    Dear Congressman Peterson:

    County assessors in Iowa have the specialized task of assigning an 
assessed value to each agricultural parcel for property tax purposes. 
We gather as many pieces of information as we can, at the lowest cost, 
to estimate the most accurate productivity value possible.
    One of the pieces of information that would aid us in this process 
is a Geographic Information System (GIS) crop field shape layer that 
was created by each local FSA office, and was reviewed for accuracy by 
each landowner. Unfortunately, the 2008 Farm Bill declared the bulk of 
this GIS layer confidential and will not release it to other 
governmental entities, including county assessor offices. I am unsure 
as to why it was declared confidential as it contains no personal 
information, no ownership information or actual crop production 
information. The FSA office will release a GIS layer with the shape, 
but all details regard crop or non-crop designations have been purged 
from the file, rendering it virtually useless. This information could 
be recreated from aerial photos and inspections, but the cost to 
taxpayers would be substantial.
    The Iowa State Association of Assessors respectfully requests that 
the next farm bill require that the unmodified GIS field layer be 
available to county government officials, thereby saving substantial 
tax dollars and receiving a more accurate layer than could be 
reconstructed locally.
    We realize that this is a relatively insignificant request when 
considering the magnitude of the entire farm bill, but making this 
information available to local government would produce more accurate 
assessments with no added cost to the local taxpayer.
    I thank you for allowing our concerns to be heard and would welcome 
any questions you or other Committee Members may have regarding this 
issue.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
David Kubik,
President,
Iowa State Association of Assessors.
                                 ______
                                 
 Submitted Letter from Monte Shaw, Executive Director, Iowa Renewable 
                           Fuels Association
April 29, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture;

Hon. Leonard Boswell,
Chairman,
Subcommittee on General Farm Commodities and Risk Management, House 
Committee on Agriculture,
Washington, D.C.

    Dear Chairman Peterson and Congressman Boswell:

    As the largest trade association representing Iowa's ethanol and 
biodiesel producers, the Iowa Renewable Fuels Association (IRFA) 
welcomes the House Agriculture Committee to Iowa and thanks both 
Chairman Peterson and Congressman Boswell for their leadership in 
convening this important meeting in the epicenter of renewable fuels 
production.
    Without question, the Energy Title of the 2008 Farm Bill made 
important strides for both Iowa farmers and the Iowa renewable fuels 
industry. IRFA strongly encourages the Committee to include an Energy 
Title in the 2012 Farm Bill in order that the full potential of 
renewable fuels advancements and improvements can be realized. While 
not a comprehensive list, we appreciate the opportunity to highlight a 
few issues that IRFA would like to see addressed in the upcoming bill's 
Energy Title.
    Before addressing specific issues in the farm bill, we would like 
to generally state that IRFA sees significant room for improvement in 
near and medium term programs that can assist with the eventual success 
of cellulosic feedstocks for biofuels production. First, we feel that 
current biorefineries and the residues of traditional crops will play a 
huge role in the future production of cellulosic biofuels. In Iowa, 
these feedstocks and biorefineries will likely be the first commercial 
cellulosic success stories and in all likelihood will dominate the 
foreseeable cellulosic future. We understand there will be an important 
role for dedicated energy crops as well, but crop residue feedstocks 
are expected to be preeminent in the Midwest.
    Current renewable fuels plants have the infrastructure in place 
(rail, storage, admin.) to make them the most attractive places for the 
adoption of cellulosic ethanol production. Congress needs to keep in 
mind that once the cellulose is broken down into simple sugars, the 
``back'' \2/3\ of a cellulosic biorefinery can be the same as a corn 
starch ethanol plant.
    Even as public and private research perfects the cellulosic 
conversion process and determines the proper harvest/storage/
transportation system for the cellulosic feedstocks, one of the most 
significant practical hurdles to overcome is the cautious nature of 
most farmers. Given the challenges of turning a profit in farming, it 
is to be expected that most farmers aren't going to risk their entire 
operation on the equipment and other costs associated with cellulosic 
feedstock collection and storage until the system has been proven both 
to work efficiently and profitably.
    This presents a major challenge for cellulosic biofuel production. 
When a cellulosic biorefinery is built, the area around the plant 
likely had no demand for cellulosic material one year, but then, as the 
plant begins operations, there is a massive demand for cellulosic 
material literally overnight. If that scenario is allowed to play out, 
it is difficult to see a smooth transition. Resulting financial 
pressures on the new cellulosic plants could pose problems. However, 
there is a model that allows for the rapid but phased-in adoption of 
cellulosic residue harvesting by farmers while at the same time 
providing meaningful carbon and energy security benefits to 
biorefineries.
Repowering Assistance Payments to Eligible Biorefineries
    IRFA believes the synergies between existing biorefineries and 
future cellulosic conversion hold the key. As current plants look to 
lower costs and reduce their carbon footprints, there is growing 
interest in ``repowering'' plants with biomass instead of, or in 
addition to, natural gas or coal. Initiatives such as the Repowering 
Assistance Payments to Eligible Biorefineries program have great 
potential because technology does not require that a plant go ``cold 
turkey'' in transitioning to biomass for heat and steam. Several 
promising technologies allow biomass to work into the equation even as 
natural gas and coal are still partially utilized. This key fact would 
allow area farmers to get into the biomass business over time and not 
require hundreds of farmers to take the plunge at once.
    As ``repowering'' spreads to more plants and biomass replaces a 
greater percentage of fossil fuels, harvest/storage/transportation (and 
possibly even on-farm pretreatment) systems can be improved and proven. 
This will lead to more rapid adoption of the processes by additional 
farmers. Later, as cellulosic biofuels production is commercially 
adopted throughout the industry, we will have solved these hurdles 
instead of the hurdles posing yet another uncertainty for the infant 
next generation biofuels industry.
    For these reasons, IRFA supports the continuation of the Repowering 
Assistance Payments to Eligible Biorefineries program in the 2012 Farm 
Bill. In order to be successful, the payments from this program must be 
robust enough to provide necessary incentives for renewable fuels 
producers to move forward with biomass repowering projects. However, 
IRFA believes the rural location and domestic ownership requirements of 
the program are unnecessary and should be eliminated. Regardless of 
whether or not a renewable fuels facility is located in an area that 
meets USDA's definition of ``rural,'' the facility will still be 
creating demand for agricultural products and services by operating on 
feedstocks produced by Iowa farmers. Therefore, an ``urban'' facility's 
participation in the program will positively impact Iowa agriculture 
and rural development nearly as much as the participation of a 
``rural'' facility.
Biomass Crop Assistance Program (BCAP)
    Further, demand created by repowering must be matched with supply. 
In order to attract early adopters of cellulosic harvesting, IRFA 
strongly supports the continuation and enhancement of the Biomass Crop 
Assistance Program (BCAP) in the 2012 Farm Bill.
    IRFA supports the matching payment option for eligible material 
owners delivering to a biomass conversion facility as proposed in the 
Notice of Funds Availability, which would provide cost-share payments 
for collection, harvesting, storage, and transportation costs at a rate 
to match the biomass sale price, up to $45 per dry ton. IRFA also 
supports the continued eligibility of Title I crop residue such as corn 
stover and corn cobs for the matching payment component of the BCAP 
program. Similarly, IRFA encourages Congress to follow the example of 
the proposed rule issued by the USDA Commodity Credit Corporation by 
eliminating the 20 percent payment cap for corn stover, corn cobs, and 
other Title I crop residue. Finally, we believe the payment period 
should be extended beyond the two year limitation to a duration long 
enough to ensure these fragile ventures are able to take firm root. We 
are hopeful that Iowa farmers will be able to utilize this program in 
the near future as demand for cellulosic biomass increases.
Advanced Biofuel Payment Program
    The 2012 Farm Bill must also encourage the continued production of 
advanced renewable fuels. For this reason, IRFA supports the extension 
of the Advanced Biofuel Payment Program, which is crucial to Iowa's 
biodiesel producers. IRFA encourages Congress to once again follow the 
example of USDA's proposed rule by removing the rural location 
requirement for this program (for the same reasons stated above in the 
section covering the Repowering Assistance program).
    We also encourage Congress to adopt an approach that makes program 
payments based on total gallons produced rather than the ``base 
production'' versus ``incremental production'' payment approach 
currently recommended in USDA's proposed rule. As we are still in the 
infant stages of the advanced biofuels industry, it will be just as 
important for this program to help ensure the continued operation of 
existing facilities as it will be to encourage expanded production or 
new facilities.
    Finally, we believe that the domestic ownership requirements 
included in the proposed rule should be eliminated. While we certainly 
agree that locally-owned plants provide additional benefits, even 
foreign-owned plants who participate in this program will have a 
significant positive impact on Iowa agriculture and the rural Iowa 
economy.
    Chairman Peterson and Congressman Boswell, IRFA thanks you once 
again for coming to Iowa to hold this important Committee hearing. We 
certainly appreciate your passionate leadership and your personal 
commitment to issues that affect the renewable fuels industry, and we 
hope we have identified some areas to be addressed in the 2012 Farm 
Bill that are vital in moving the clean energy economy ahead in the 
next decade. We stand ready to work with you going forward. Please do 
not hesitate to ask for any additional information or assistance that 
we can provide from the Iowa Renewable Fuels Association.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Monte Shaw,
Executive Director.
                                 ______
                                 
       Submitted Statement by Kevin Vierkandt, Farmer, Alden, IA
    To whom it may concern:

    Back Ground: The current farm bill has a disaster component that 
provides Supplemental Revenue Coverage or SURE. This program uses 
Federal Crop Insurance as a component to calculate an additional 
payment to producers who meet certain criteria. This program was 
designed to stabilize farmers' incomes in disaster situations.
    Situation: In 2008 many Iowa and other state counties were declared 
US Secretary of Agriculture disaster counties. Depending on the type 
and coverage level of crop insurance a producer purchased for Spring 
Crops in Iowa prior to 3-15-2008, this selection will greatly influence 
the dollar amount of SURE payment a producer will receive. The other 
component is the producer's own production or crop yields. Many 
producers in these counties and other counties experienced low yields 
due to excessive moisture and cool temperatures in 2008.
    The Problem: It appears there are some unintended consequences in 
the 2008 Farm Bill involving the SURE program using Federal Crop 
Insurance as a component in the formula to establish a revenue 
threshold to trigger SURE payments, based on a producer's proven yield 
or county expected yield, and 2008's marketing year price and finally 
the producer's actual yields. In 2008 due to excessive price volatility 
during the 2008 Crop Insurance selling season from around 12-1-2007 to 
3-15-2008 different spring prices were established for various Federal 
Crop Insurance products. Looking only at Corn (however Soybeans are in 
a similar situation) for GRP crop insurance spring price was 
established at $3.75/bu. for MPCI $4.75/bu. and for all revenue based 
products a price of $5.40/bu. In past and subsequent years from 2008 
this level of price variation between insurance products has not 
existed.
    One particular group of producers who purchased 90/100 GRP Federal 
Crop have been adversely affected due the use of the $3.75/bu Spring 
price in establishing their SURE revenue trigger guarantees. Producers 
choose this type of product due to high coverage levels (90%) and were 
aware of the spring price, but knew if there were low yields in their 
county they would be paid at a price of $6.25/bu for every bushel the 
county was short below the guarantee or trigger county yield level. 
This is all due to GRP products having a 150% multiplier which a 
producer may take advantage of if they choose a 100% on their price 
selection. There are many producers in counties in Iowa and other 
states, that selected 90% coverage and 100% price that were paid $6.25 
on every bushel the county was short in 2008 from the established 
trigger yield. A producer who chooses the 90/60 GRP product would have 
received a payment of $3.75/bu. for every bushel the county was below 
its trigger yields.
    Some producers who purchased very inexpensive lower levels (exp. 
75% RA or CRC revenue products or 75% MPCI federal crop are fairing 
much better in SURE payments than a producer who purchase the mush 
higher coverage product GRP 90/100 product. This probably was not 
intended by the 2008 Farm Bill and the knowledge of exactly what the 
rules were to establish how the FSA was going administer and pay 
producers for the 2008 disaster SURE program were not known until the 
spring of 2010. About 2 years after the 2008 crop insurance buying 
decision had been made.
    The Result: Producers who choose MPCI insurance policy such as a 
75% coverage level are being rewarded with higher SURE payments 
resulting in higher overall farm income versus producers who purchased 
GRP 90% Coverage/100% Price selection Federal Crop Insurance and who 
experienced the same disaster conditions.
    Solution: To Perhaps bring the producer who choose 90/100 GRP up to 
spring price of $6.25 equaling what they actually were paid by Federal 
Crop Insurance for the resulting county yield losses below a certain 
county trigger yield.
    Other Solutions: To provide some level of fairness and payment to 
affected producers who had disaster level revenues in their operations 
for 2008. Perhaps the RMA and FSA should consider using a harmonized 
price on all bushel guarantee Federal Crop Insurance products in 2008. 
Perhaps the spring price of $4.75 could be used on GRP policies as is 
being used on MPCI Federal Crop Insurance products.
    By Kevin Vierkandt: For the good of all affected producers who 
purchased GRP Federal Crop Insurance in 2008 and who have been 
negatively impacted by the 2008 Farm Bill's SURE program.
                               attachment

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 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                         SATURDAY, MAY 1, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                         Nampa, ID.
    The Committee met, pursuant to call, at 1:00 p.m., at the 
Northwest Nazarene University, Old Science Lecture Hall, Nampa, 
Idaho, Hon. Collin C. Peterson [Chairman of the Committee] 
presiding.
    Members present: Representatives Peterson, Minnick, Costa, 
Herseth Sandlin, and Lucas.
    Staff present: Nicole Scott, Pelham Straughn, Robert L. 
Larew, John Konya, Keith Jones, Lisa Shelton, and Jamie W. 
Mitchell.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. This hearing of the Committee on Agriculture 
to review the U.S. agricultural policy of the 2012 Farm Bill 
will come to order.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Nampa to hear 
from area farmers and ranchers about the issues facing agriculture and 
rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. First, I want to recognize Mr. Minnick for a 
welcoming and opening remarks.

  OPENING STATEMENT OF HON. WALT MINNICK, A REPRESENTATIVE IN 
                      CONGRESS FROM IDAHO

    Mr. Minnick. Thank you very much, Chairman Peterson.
    I would like to thank you, and Ranking Member Lucas for 
coming here, and joining us in Nampa. And thank you for 
recognizing that Idaho needs to be an important voice as we put 
together our next 5 year farm program.
    It's most appropriate that this Committee choose to have a 
field hearing in Idaho. As I think everyone in this room 
recognizes, Idaho is the number one state in the nation in the 
production of potatoes. I know that's self-evident, because 
really there is no other state in the nation that produces real 
potatoes. We hope to----
    The Chairman. Now wait a minute.
    Mr. Minnick. We're also just a little--I think a little 
less well known, the number three state in the production of 
dairy products. We're number three in barley. We're in the top 
five in beef, number seven in wheat. And in a number of smaller 
specialty crops, particularly, those grown in the lower 
Treasure Valley. We are a leader--or the leader--among the 
leaders in the nation.
    I want to commend the witnesses who have joined us today, 
taking time out of a weekend to offer their testimony. It's 
thoughtful. It's well reasoned. And it's important that we 
listen carefully to it as we put together the next Federal farm 
program.
    What I hear in talking with farmers and agricultural 
interests generally, and I think we will hear again today, is a 
number of recurring themes with respect to Federal farm policy.
    One is, that unintentionally, but to a significant extent, 
Federal farm programs punish efficient producers. And that has 
deleterious consequences, not just for the producers, but for 
the country, and its international competitiveness.
    Existing farm programs, to a significant extent, also favor 
certain geographic areas, and disadvantage others, sometimes 
Idaho, sometimes other places. Existing Federal farm programs 
also tend to discriminate against large producers, particularly 
the commodity programs, and certain specialty producers, such 
as our emerging organic industry. Existing Federal farm 
programs don't fit these emerging industries very well.
    I think you will also hear consistently, I certainly do 
when I talk to farmers anywhere, that compliance with existing 
Federal farm programs is far too paper intensive and 
bureaucratic. And that we need to come up with a farm program, 
which will allow our efficient producers to spend less time 
fighting the government, and more time farming their land.
    Also, it's evident in this era of runaway record budget 
deficits, the farm programs on balance are extremely expensive. 
Some will say, too expensive, and do a relatively poor job of 
protecting the income of various producers during times of 
stress. And here in Idaho, we're talking this year about the 
dairy industry, and more recently about the potato industry, 
both of which are suffering from low prices.
    In addition, we need a couple of things that are beyond the 
scope of the Agriculture Committee, the Department of 
Agriculture, but need to be done on a national level in order 
to make agriculture more successful, more productive.
    One is, we must have immigration reform in this country. 
And it's critically important to a number of the industries 
we're going to hear from today, who simply do not have access 
to the labor that they require to put in, process, and manage 
their production.
    The dairy industry, grape industry, apple industry, and 
various specialties crops, all are suffering, in my belief, 
from the absent skilled workers that would be available under a 
more enlightened immigration program.
    And finally, the United States is an efficient producer. We 
need access to foreign markets. If we have a level playing 
field, we compete very, very well globally with respect to 
almost every agricultural commodity. So, we need help from the 
U.S. Government in opening foreign markets, and on leveling the 
playing field.
    Well, these themes are ones that we in the community are 
sensitive to; we want to hear your views. And as we spend the 
next couple of hours listening to your testimony, I think there 
is nothing that we could be doing this afternoon that is more 
important, not just for agriculture in the country, but for my 
State of Idaho.
    The Chairman. I thank the gentleman.
    And Mr. Minnick is one of the outstanding new Members of 
our Committee. We're pleased to have him on the Committee. He's 
made a lot of great contributions already in this short time. 
And we're pleased to be here in his district.
    And we also have with us, Mr. Simpson, who is not a Member 
of the Committee. And we may have some magic words that I have 
to read about him, since he's here.
    Mr. Simpson is on the Appropriations Committee. And a lot 
of what we do outside the farm bill and in the farm bill is 
authorize programs that need appropriations. And Mike has been 
great to work with us. He and I are good friends. And we work 
together. And he and Walt are good friends, and work together. 
And that's important for Idaho.
    And those of us in agricultural generally tend not to be 
partisan. We try to work on a bipartisan basis. Please take 
some time to make some comments.

 STATEMENT OF THE HON. MICHAEL K. SIMPSON, A REPRESENTATIVE IN 
                      CONGRESS FROM IDAHO

    Mr. Simpson. Thank you, Mr. Chairman. I just want to thank 
you, and Ranking Member Lucas, for being here, and coming to 
Idaho to hold this hearing.
    As you mentioned--this may be the only time you have in 
whatever state you go to, the entire delegation at the hearing. 
You are bookended by Idaho's First District down there, and 
Second District down here. I thank the other Members for coming 
to Idaho, too. The last time I did this was in the year 2000, I 
think it was. We went around the country before we wrote the 
2002 Farm Bill. And then I went to the Appropriations Committee 
later on when we wrote the 2008 Farm Bill.
    I can tell you how important agriculture is to Idaho. When 
I was first elected to the Idaho Legislature, and when we would 
do our revenue projections at the very first of the year, we 
would just have the price of potatoes, the price of wheat, and 
the price of silver. And you knew what your revenue was going 
to be the next year.
    Now, Idaho has changed a lot. And the economies have 
diversified a lot, but agriculture is still the most important 
industry in this state. So I thank you for coming here today, 
and look forward to the testimony. I'm mostly here to learn 
from all the witnesses about what they think needs to be done 
in the rewrite of the next farm bill.
    Thank you, Mr. Chairman.
    The Chairman. And thank you.
    And the gentlemen from Idaho, Mr. Simpson, is not a Member 
of the Committee, but has joined us today. And I've consulted 
with the Ranking Member, and we are pleased to welcome him in 
joining the questioning of the witnesses. Those are the magic 
words.
    We're also web-casting. This is the first time that the 
Committee has web-cast field hearings. And so we have people 
watching us on the Internet around the country. And we have 
cards for those of you that aren't able to testify today. It 
has the address of our website, which is 
www.agriculture.house.gov.
    And so anybody that's watching or in the audience can log 
on to the website, provide your input, suggestions, questions, 
whatever you have in mind. And that will become part of the 
record as well. So we encourage everybody that has ideas to get 
involved, and that's what we're trying to do here.
    So, I welcome everybody to this hearing. And as I said, 
we're glad to be here. We demonstrated in the 2008 Farm Bill, 
that it's much more than just about the farms. We continue the 
safety net that protects farmers and ranchers, and provides 
some certainty that they rely on to stay in business, and to 
manage their risks.
    But we also made historic investments in nutrition, 
conservation, renewable energy research, fruits and vegetable 
products and organic agriculture.
    While traditional farm programs have a relatively small 
proportion of the funding, these programs are essential to the 
continuing success of U.S. agriculture. We have a system of 
independent farmers and ranchers working the land. And without 
the certainty that the farm programs provide, these farmers 
would not be able to get the financing in a lot of cases that 
they need to put the crop in the ground.
    I want to welcome our witnesses. And thank them for taking 
time today out of their busy time of the year to talk to us. 
The farm bill hearings are the first step of the process to 
arriving at that farm bill. A bill this large covers so many 
important issues. It takes a lot of time, and a lot of effort 
to get it right.
    And I'm committed to taking the time, and having a process 
that's open, transparent, and bipartisan, like we did in 
writing the 2008 Farm Bill, and I have no doubt that we will 
accomplish that.
    As I said, for those in the audience, we hope that you will 
participate in the process by going on our website. And we have 
cards available to you today. So we want to welcome input.
    And a lot of times, we get some great ideas from folks that 
don't necessarily get identified, so we appreciate that.
    So we have a lot of ground to cover. Let's get started. I 
recognize the Ranking Member, my good friend and gentleman from 
Oklahoma, Mr. Lucas, who will make an opening statement.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman. I want to thank you for 
calling the hearing, and being so proactive in preparation 
through the debate we're going to have on future farm policy in 
the 2012 Farm Bill.
    I realize we have an extremely difficult road ahead of us. 
One thing I do look forward to is listening to our producers. 
While I get to listen to my folks back home, my producers every 
time I go to the coffee shop, the feed store, when I do my town 
meetings across the Third District of Oklahoma, I think it's 
vitally important to hear from producers from a broad range of 
places, who grow a broad range of products.
    My goal for the next farm bill is quite simple. I want to 
give producers the tools to help them do what they do best, and 
that is produce the safest, most abundant food supply in the 
history of the world.
    I think it will be extremely important to hear from you 
about what's working, and what's not working, and what changes 
we can make to the farm bill to allow you as producers to work 
more efficiently.
    The 2008 Farm Bill was another investment in the future of 
rural America. Not only did we provide a safety net for our 
producers, but we also made substantial investments in 
conservation and nutrition programs, which are very important 
during any time of great need for Americans.
    But I would say this, and we should always remember, a lot 
of people fail to remember that 75 percent of the present farm 
bill spending goes to nutrition programs. That's \3/4\ of every 
dollar to the nutrition programs.
    In addition to those investments, this Committee, led by 
Chairman Peterson, accomplished substantial reforms, especially 
in the realm of payment.
    And this is a fact that should not be forgotten by those 
who seem ready to attack the programs. It is very, very likely 
that 2012 will be the year the Administration's priorities seem 
to differ greatly from what I believe my producers priorities 
are.
    There was very little mention by the Administration, in a 
recent hearing, about safety net conservation programs, and 
many of the things that my producers consider to be so 
important. I believe it is imperative that Congress work 
together with the Administration to come up with workable 
solutions to the many problems our rural communities face.
    But first, this Administration must provide its commitment 
to production ag. I also want to hear from you today about the 
impediments that you face when you bring a crop to market. And 
how we can help alleviate some of those impediments. I have 
serious concerns of the effects of an overreaching EPA, and 
what that's going to do to you in rural America in production 
of agriculture.
    Hopefully, with your guidance and input, this Committee can 
help to reduce some of those impediments.
    The Chairman. All right.
    I thank the gentleman, very much. I would also like to 
recognize that we have the leadership of the USDA of Idaho with 
us today.
    The FSA Director, Mr. Richard Rush. Are you here? There he 
is.
    Mr. Rush. Yes.
    The Chairman. And the Idaho Wildlife Director, Wally 
Hedrick. And the Idaho State Conservation, Mr. Jeffrey Brewen.
    I want to give them a hand at the great job they do.
    [Applause.]
    Mr. Simpson. Mr. Chairman, I would like to recognize the 
Director of the Idaho Department of Agriculture, Celia Gould is 
here today.
    [Applause.]
    The Chairman. Thank you. So we'll call our first panel 
officially to the table. They are lined up and ready to go.
    Mr. Fred Brossy, organic wheat, bean, potato and hay 
producer from Shoshone, Idaho.
    Mr. Scott Brown, wheat and barley producer from Soda 
Springs, Idaho.
    Mr. Doug Gross, potato producer, Wilder, Idaho.
    Mr. Kelly Henggeler?
    Mr. Henggeler. Hang-ler.
    The Chairman. Henggeler, okay, apple, plum, and peach 
producer and packer from Fruitland, Idaho.
    Mr. Galen Lee, sugarbeet, mint, asparagus, hay, grain, corn 
and cattle producer, from New Plymouth, Idaho.
    And Mr. Brian Kernohan, a forester from Coeur d'Alene, 
Idaho.
    So, gentlemen, welcome to the Committee.
    And, Mr. Brossy, you are on. We have a 5 minute rule. I 
think there is a screen there that will tell you that. It will 
go to yellow at 1 minute. And so your full testimony will be 
part of the record. So if you could summarize, and try to stay 
within the 5 minutes, we would appreciate it.
    Mr. Brossy.

STATEMENT OF FRED BROSSY, ORGANIC WHEAT, BEAN, POTATO, AND HAY 
                     PRODUCER, SHOSHONE, ID

    Mr. Brossy. Thank you. My name is Fred Brossy. My wife and 
I farm 300 irrigated acres around the Little Wood River west of 
Shoshone, on the Snake River Plain east of here. We began 
managing our farm in 1983 for an absentee owner. And in 2005, 
thanks in part to the Federal Farm and Ranchland Protection 
Program, through which we placed a conservation easement on the 
farm, we were able to purchase it.
    And I want to put a plug in here for that program, because 
I think it is one of the great farm bill programs that helps 
preserve farmland. And it sure helped us.
    As you mentioned, I am an organic farmer. I've been 
certified for 15 years producing hay, wheat, barley, potatoes, 
dry beans, garden beans, seed, and other vegetable seed crops.
    I really appreciate the invitation to address the Committee 
today. I would like to thank, Chairman Peterson, the Committee 
Members, and staff for the opportunity to do so.
    For those of us in the Intermountain West, farm bill 
programs often appear focused primarily on the Midwest. And we 
are pleased, very pleased that you are here in Idaho to hear 
our concerns.
    And I'm also particularly honored to be, as far as I know, 
the first organic farmer from Idaho to be invited to address 
the Committee. Thank you very much, Congressman Minnick, for 
this opportunity.
    The 2008 Farm Bill was notable in its recognition of 
organic agriculture as a viable contributor to the food 
production in this country. And we appreciate that Congress 
chose to provide financial assistance to organic farmers and 
those transitioning towards organic, as well as funding 
increased enforcement of the USDA organic standards through the 
NOP.
    As well, we are very appreciative of the expanding crop 
insurance protections that recognize organic. And this is 
another plus for the 2008 Farm Bill from our perspective. This 
financial assistance provided a start towards leveling the 
playing field for those of us who choose to farm organically. 
But there is obviously more to do.
    Another important part of the 2008 Farm Bill were the 
research budgets that recognized organic. And we feel this is 
very important for the future of our organic farming methods. 
Particularly because organic is really a systems approach to 
farming. And there is plenty more scientific research that we 
need to be more effective in managing agroecological ecosystems 
without all the outside influence that traditional agriculture 
relies on.
    As far as the 2012 Farm Bill goes, the EQIP program is 
something I participated in. And I would like to recognize the 
organic initiative for the EQIP program. And what I would like 
to suggest for improvements there, is that we would like to see 
more of a systems approach to EQIP. Right now, it's a piecemeal 
approach to addressing specific resource problems. And often in 
an organic system, really what we would like to see, is a 
holistic approach to conservation.
    And that pertains to the CSP, as well, which I also 
participated in last fall. That's been an extremely arduous 
process to get involved in CSP. And yet, I really think it's a 
great program. And I'm hoping that it will be continued in the 
new farm bill.
    Again, it probably needs to be a little bit less tied to 
the heartland, and a little bit more tied to smaller farmers 
with unique crops, other than corn, soybeans, cotton and rice. 
I think there are some funding concerns about a program like 
that, and I have a suggestion for that, as far as funding CSP.
    It's probably a little bit radical. But those of you who 
were on the Committee back in the 1980s probably recall in the 
1985 Farm Bill, that commodity program payments were linked to 
highly erodible lands and wetlands qualifications. So lands 
that didn't meet the criteria for those, were not eligible for 
Federal farm program funds.
    I would suggest that commodity payments be linked to 
conservation stewardship through some modification to the CSP 
program. And I think that would go a long way towards improving 
conservation across our nation, as well as funding commodities 
produced in a more conservation approach. This would really 
link food production to conservation stewardship. And it is an 
appropriate national policy and worthy purpose for a farm bill.
    A couple other concerns that I have about the 2012 Farm 
Bill, is that we need to see more focused on small farm, 
especially crop farmers. We're being faced with the GAP 
regulations. And some of those are going to require 
infrastructure. And I think it would be very helpful if we were 
to have more access to specialty crop grains. Maybe--I'm not 
sure exactly how to do that, but that's another thing that we 
would like to see funded.
    And in summation, I would just like to say, organic 
agriculture provides important benefits to our country besides 
healthy, nutritious food. If it receives a fair share of 
research and development resources and conservation funding, 
organic farming will lead the way towards a much lighter impact 
on the nation's soils, waters, and wildlife from agriculture. 
This is a worthwhile goal for national agricultural policy. And 
we look forward to further cooperation with Congress in this 
direction.
    Thank you very much again for the opportunity to address 
these important issues.
    [The prepared statement of Mr. Brossy follows:]

Prepared Statement of Fred Brossy, Organic Wheat, Bean, Potato, and Hay 
                         Producer, Shoshone, ID
    My name is Fred Brossy. My wife and I farm 300 irrigated acres 
along the Little Wood River just west of Shoshone, which lies on the 
Snake River Plain in South Central Idaho. We began managing our farm in 
1983 for an absentee owner, and in 2005, thanks in part to the Federal 
Farm and Ranchland Protection Program (FRPP), through which we placed a 
conservation easement on the farm; we were able to purchase the 
operation. The farm has been certified organic for fifteen years, and 
produces alfalfa and grass hay, wheat, barley, potatoes, dry beans, 
garden bean seed, and other vegetable seed crops. I have served two 
terms on the Wood River Soil and Water Conservation District Board in 
the past, and am presently Chairman of the Water District 37M Board and 
a member of the Wood River Land Trust Advisory Board.
    I really appreciate the invitation to address the Committee today, 
and would like to thank Chairman Peterson, Committee Members, and staff 
for the opportunity to do so. To those of us in the Intermountain West, 
farm bill programs often appear focused primarily on the midwestern 
region of the country, and we are pleased that you are here today in 
Idaho to listen to our concerns. I am particularly honored to be, as 
far as I know, the first organic farmer from Idaho to be invited to 
address the Committee. Thank you, Congressman Minnick for this 
opportunity.
    The 2008 Farm Bill was notable in its recognition of organic 
agriculture as a viable contributor to food production in this country. 
We appreciate that Congress chose to provide financial assistance to 
organic farmers and those transitioning towards organic, as well as 
funding increased enforcement of USDA Organic Standards through the 
National Organic Program (NOP). This financial assistance provided a 
start toward leveling the playing field for those of us who choose to 
farm organically, but there is more to do. Organic agriculture in this 
country today is not a reversion to past ways of farming, but a melding 
of modern scientific knowledge of ecological systems and contemporary 
agronomy, and as such is continuing to evolve as new information comes 
to light. This approach includes growing, as much as possible, needed 
fertility on-farm, and maintaining and enhancing natural habitat for 
pollinator species as well as beneficial insects to help keep crop 
pests in check. Because agroecological farming systems, unlike those in 
conventional agriculture, do not rely on a multitude of external 
inputs, there is not a great deal of incentive for privately funded 
research for organic agriculture. The 2008 Farm Bill provided USDA 
funds for this, but due to the inherent long-term nature of this work, 
continued and increased levels of funding are needed. Ultimately, out-
comes of research on agroecological farming systems will move all of 
agriculture towards greater sustainability. The organic farming 
community is grateful for the support Congress initiated in 2008, and 
looks forward to further the process with you in drafting the 2012 Farm 
Bill.
2012 Farm Bill
    Having participated in both the Organic EQIP Program and the 
Conservation Security Program (CSP) this past year, I have some 
suggestions that I believe would improve them. To begin with, EQIP is 
designed to focus on resource concerns, i.e., treating symptoms of 
apparent problems with soil, water, air, plants, and animals. However, 
like many similar programs which have preceded it, EQIP ends up being a 
piecemeal approach rather than holistically addressing agroecosystems. 
In the years I served on the local Soil and Water Conservation District 
Board, I came to the conclusion that many NRCS Conservation Practices 
were mechanical attempts to solve biological problems, i.e., soil 
erosion is caused more often by lack of biologically active organic 
matter and living vegetation than tillage. The Organic EQIP Program 
would better serve organic farmers if it were redesigned to enhance 
whole systems instead of focus on specific ``problems'' (this will 
require not only more scientific research, but a change in culture and 
attitude within NRCS). It would also help if it were geared toward 
smaller farmers who may measure their production in square feet rather 
than acres. This particular situation may be exacerbated by the 
variation between states (differences between what they cost-share on 
and how much they pay per practice). Here in Idaho, we are working with 
the State NRCS Office to make Organic EQIP more available to smaller 
acreage farmers, but in the 2012 Farm Bill, we would like to see 
Congress emphasize the value and importance of small-acreage farmers by 
insuring that they receive financial assistance proportionate to that 
provided to larger producers.
    When the CSP was revised in the 2008 Farm Bill, it was advertised 
as rewarding stewardship, as well as recognizing the conservation 
benefits of organic systems. In actual practice, that recognition only 
opened the door to the program, and in order to receive payment, new 
conservation practices had to be applied. In some ways this makes 
sense, but for example, on our farm we already have a Resource 
Conserving Crop Rotation in place that works well, and so are not 
eligible for payment for that practice without making modifications 
that do not really make sense, where another farm would qualify merely 
by adding another crop to an existing two-crop rotation. While this 
rewards increasing diversity on the landscape which is good, it also 
overlooks the conservation benefits of existing systems which was the 
purported intent of the new CSP. Despite its shortcomings, CSP is a 
good program and should be continued with some fine tuning in the 2012 
Farm Bill. It could and should be made more user-friendly for organic 
farmers if Congress is serious about rewarding good conservation 
stewardship. I am aware that funding this type of program is a concern 
given the current deficit situation, and one possible approach would be 
to make eligibility for commodity program payments (DCP) tied to CSP 
qualifiers, similar to the Highly Erodible Lands (HEL) and Wetlands 
limitations in the 1985 Farm Bill. This would really link food 
production to conservation stewardship, an appropriate national policy 
and worthy purpose for a farm bill.
    Smaller organic farmers often do not have the same access to 
capital needed for necessary infrastructure that larger growers do. In 
past farm bills, Congress has funded Specialty Crop Grants which small-
scale growers have been eligible to apply for. As food safety concerns 
continue to grow, and more and more companies require Good Agricultural 
Practices (GAP) from their growers, the need for on-farm facilities 
increases regardless of farm size. USDA Grants and low-interest loans 
are an important source of financing to help smaller producers meet 
this requirement, and should be more accessible and better funded.
    As an organic seed grower, I see a real need for developing plant 
varieties specifically for organic production systems. One way to 
facilitate this is to provide funding support to public plant breeding 
programs, which are fast disappearing in part because their releases 
are public and not patentable, so do not attract private dollars. 
Organic growers do not need and cannot use varieties that contain GMO's 
for herbicide resistance or built-in pesticides. We do need cultivars 
that are bred with broad-based genetic diversity for increased 
resilience in a variety of agroecosystems. This will become even more 
important in the future as all farmers learn to adapt to using less 
fossil fuel. As the seed industry continues to consolidate with fewer 
and ever-larger players, public support for classical breeding programs 
is more important than ever, and should be recognized by Congress with 
policy and financial help.
    Organic agriculture provides important benefits to our country 
besides healthy nutritious food. If it receives a fair share of 
research and development resources and conservation funding, organic 
farming will lead the way toward a much lighter impact on the nation's 
soil, waters and wildlife from agriculture. This is a worthwhile goal 
for national agricultural policy, and we look forward to further 
cooperation with Congress in this direction.
    Thank you again for the opportunity to address these important 
issues.

    The Chairman. Thank you very much for that testimony.
    And, Mr. Brown, welcome to the Committee. Just to remind 
Members and witnesses, apparently you have to get these 
microphones pretty close to make sure that everybody can hear 
you.

 STATEMENT OF SCOTT W. BROWN, WHEAT AND BARLEY PRODUCER, SODA 
                          SPRINGS, ID

    Mr. Brown. Mr. Chairman, Ranking Member Lucas, and Members 
of the Committee, welcome to the great State of Idaho.
    On behalf of the association I represent, thank you for 
allowing me the opportunity to come today and discuss and 
express my views regarding the 2012 Farm Bill and the future of 
U.S. ag policy.
    Idaho has a long and proud history of grain production. 
Idaho's wheat farmers harvest an average of 99 million bushels 
spread all over six classes of wheat. Idaho ranks seventh in 
the top seven states in wheat production.
    Although our state is normally recognized for our famous 
potatoes, Idaho's barley producers are a top supplier to the 
world's brewing industry. Seventy-five percent of our 48 
million bushels of barley is malted by brewers from Mexico to 
Canada and beyond. Currently Idaho ranks second in production 
only to the State of North Dakota in the United States.
    As a fourth generation farmer, my father, my son, my son-
in-law, and I, farm over 8,000 acres of wheat and barley in 
southeastern Idaho.
    Mr. Chairman, and Members of the Committee, as President of 
the Idaho's Grain Producers Association, I will speak briefly 
to specific policy and program areas identified as priorities 
by our growers.
    One concern we have is the farm bill baseline. IGPA is well 
aware and concerned with the real possibility of a severely 
constrained budget baseline within which to develop a new farm 
bill.
    Like you, we believe that innovation, creativity, 
cooperation, and commonsense will overcome this trying 
obstacle. As the picture becomes clear with the baseline 
challenge, we ask that this Committee and your staff work 
closely with those of us on the ground, who will ultimately 
bear the brunt of the funding issue.
    And as far as Federal farm programs go, the Direct and 
Counter-Cyclical Payment program, and the marketing loan 
programs are widely used by our producers.
    And in particular, the direct payment program is very 
popular with Idaho grain farmers. In many cases, the direct 
payment program has meant the difference between producers 
abandoning their farm, or giving producers another chance with 
their bankers to stay in business.
    Direct payments serve as a stimulus program for Idaho's 
many rural families and communities. The direct payment 
translates into farmers purchasing equipment, seed, chemicals, 
parts, and fuel from local suppliers and dealers. Ultimately, 
this means jobs for our rural communities.
    The IGPA is aware that the Direct Payment has a big red 
target painted on it by the global community, and by others who 
are concerned with trade distortion, and waste, fraud, and 
abuse of the Federal taxpayer dollar.
    As the Committee moves forward with crafting new farm bill 
legislation, IGPA asks that careful consideration be given to 
the impact the direct payment has on farmers, their families, 
and their communities. Your decisions could have a profound 
ripple effect on the rural fabric of our country.
    The ACRE and SURE programs, although relatively new, are 
catching on in our state, and show some real promise. While the 
majority of the Idaho grain farmers opted for the traditional 
support program over the ACRE program in 2008, we have heard 
very favorable reports from farmers who did sign up for ACRE.
    We look forward to working with the Committee on more 
revenue options and improvements to the disaster program like 
SURE. We currently have a situation in north central Idaho 
where significant SURE dollars might be--they're within reach, 
but they might be not obtainable due to an administrative 
oversight. Problems like this need to be worked out.
    IGPA also supports the continuation of an improvement to 
Federal crop insurance programs. As a dryland farmer growing 
wheat and barley at an elevation of over 6,000 feet, I can 
attest to how critical and effective the crop insurance program 
is.
    In 2009, 78 percent of all of our wheat acres were insured 
at an estimated value of $400 million; 63 percent of our barley 
acres were insured in 2009.
    We are excited about the new COMBO insurance product, and 
the new insurance for specialty types of barley. Both of these 
will help provide our producers with the diversity in their 
production operations. And they will be able to remain viable.
    Our growers would like to see crop insurance coverage be 
more robust, specifically, crop insurance should be offered at 
higher levels, and they should include indemnities for quality 
loss issues. We ask that the Committee continue its diligence 
for these proceedings, and carefully consider the impact on the 
growers.
    Conservation: IGPA recognizes the popularity and increased 
focus on agriculture conservation practices and programs, since 
the passage of the 2002 Farm Bill. IGPA supports the wide use 
of CRP as the natural resource tool on environmentally 
sensitive lands.
    Although the CSP has proven as a significant addition, it's 
fairly new for Idaho growers. We support the CSP program, and 
producers seem excited to join that program.
    Mr. Chairman, and Members of the Committee, there are many 
more critical areas affecting Idaho's wheat and barley 
producers. Estate tax policy, rail transportation, immigration, 
renewable energy production, and the need to ratify pending 
free trade agreements are among these critical issues.
    We look forward to engaging our Idaho Delegation in the 
future and this Committee on these issues. But today we're 
grateful for the opportunity to gather here to discuss how 
Congress, the Administration, and stakeholders can craft a 
Federal farm policy that is innovative, responsible, and 
sustains a vibrant farm sector to ensure that production 
agriculture can continue to provide a safe, abundant, and 
affordable supply of food for U.S. consumers.
    Thank you.
    [The prepared statement of Mr. Brown follows:]

 Prepared Statement of Scott W. Brown, Wheat and Barley Producer, Soda 
                              Springs, ID
    Mr. Chairman, Rep. Minnick and other Members of the Committee, 
welcome to the great State of Idaho. On behalf of the association I 
represent, thank you for allowing me the opportunity to appear before 
you today to discuss and express my views regarding the 2012 Farm Bill 
and the future of U.S. farm policy.
    The Idaho Grain Producers Association is proudly celebrating fifty-
three years of service advocating for Idaho's wheat and barley 
producers. The IGPA currently represents over 700 farm families across 
the state, with formal grassroots leaders in twenty-five of Idaho's 
forty-four counties.
    Idaho has a long and proud history of grain production which has 
now earned us a second-place and top seven ranking in the production of 
our nation's barley and wheat crops respectively.
    Idaho's wheat producers harvest an average of nearly 99 million 
bushels spread over all six different classes. Although our state is 
globally recognized for our famous potatoes, Idaho barley producers are 
a top supplier to the world's brewing industry. Seventy-five percent of 
our 48 million bushels of barley is malted by brewers from Mexico to 
Canada and beyond. Currently, Idaho barley production is second only to 
North Dakota.
    As a fourth generation producer, I, my father, my son, and other 
family members farm over eight thousand acres of primarily wheat and 
barley in southeastern Idaho. In my spare time I ``moonlight'' as a 
Certified Public Accountant which I believe gives me a unique 
perspective on crop production and the impact of Federal farm policy on 
my farm operation.
    Federal farm policy and its impact on rural American is the focus 
of the Committee's field hearing today. Mr. Chairman and Members of the 
Committee, as President of the Idaho Grain Producers Association I will 
briefly speak to specific policy and program areas identified as 
priorities by our grower-members.
Farm Support Programs
Farm Bill Baseline
    The IGPA is well aware and concerned with the real possibility of a 
severely constrained budget baseline for future Federal farm programs. 
The case could be made that agriculture is a victim of its own success. 
Our country's farm bill policy coupled with our efficient and 
innovative farmers has minimized safety net expenditures thus chipped 
away at the baseline for these programs.
    However, now more than ever, agriculture producers face 
unprecedented challenges both in the volatile global marketplace and in 
the regulatory arena. If it is not a priority that the U.S. sustain a 
domestic agriculture industry that provides a safe, abundant, and cheap 
supply of food, then so be it.
    I submit that American's do enjoy cheap and domestically produced 
food--but the majority of our consumers are disconnected and uneducated 
about how food gets to the store shelf. We in agriculture are partly to 
blame for this situation. If agriculture told their story more 
effectively, we might have more support for Federal farm programs which 
ensure over 300 million American citizens never miss a meal.
Federal Farm Programs
    Thanks to the excellent management, service and expertise of our 
local Farm Service Agency, and others, Idaho's grain producers 
participate widely in Federal farm support programs.
    The Direct and Counter-Cyclical Payment (DCP) program and marketing 
loan programs are widely utilized by our producers. Newer farm programs 
like ACRE and SURE are catching on and showing some real promise in our 
state. However, the majority of producers have taken a cautious 
approach to these new programs. The IGPA supported both programs as 
options in the 2008 Farm Bill, and we have heard positive comments from 
producers who did sign up.
    During the 2008 Farm Bill debate, farm support programs faced 
unprecedented pressure to be reformed, reduced, or completed 
eliminated. The IGPA and its national affiliates were primarily focused 
on, and thanks to the Committee's fantastic efforts, successful in 
maintaining the Direct Payment.
    The DP has been and is very popular with Idaho's grain farmers. In 
many cases, the DP has meant the difference between producers 
abandoning the farm or giving producers another chance with their banks 
to stay in business.
    Aside from its crucial benefit to grain producers, the DP has 
served as a ``stimulus program'' for Idaho's many rural families and 
communities. DP's translate into farmers purchasing equipment, seed, 
chemicals, parts, and fuel from local dealers and suppliers. 
Ultimately, that means jobs which rural areas desperately need to 
exist.
    I farm in Caribou County in southeastern Idaho. There are roughly 
seven, 300 citizens in our county and the vast majority are directly or 
indirectly involved in agriculture. Our county FSA director told me 
that our county receives $3 million annually in Direct Payments. There 
is no doubt in my mind that farm programs are integral to keeping the 
communities in our county from making Idaho's list of ghost towns.
    The IGPA is aware that the Direct Payment has a big red target 
painted on it by the global community and others concerned with trade 
distortion and waste, fraud, and abuse of Federal taxpayer dollars.
    As the Committee moves ahead with crafting new farm bill 
legislation, the IGPA asks that careful consideration be given to the 
Direct Payment program. It is a simple, minimally trade-distorting 
mechanism that has a profound ripple effect on the rural fabric of our 
country.
    We are also aware of the Chairman's efforts to look at revenue 
programs, like ACRE and SURE and others, as an innovative and effective 
approach to farm support. While the majority of Idaho grain farmers 
opted for the traditional support program over ACRE, we have heard very 
favorable reports from farmers who signed up for ACRE.
Program Administration
    The IGPA plans to monitor and receive input from producers on these 
new programs. One common theme our Association continues to sense from 
rank-and-file Idaho farmers is strong frustration with the process and 
requirements of participation in Federal farm programs.
    Farmers tell us they are overwhelmed with the paperwork they must 
sign. They are frustrated with the ever-changing rules and regulations 
associated with the programs they do participate in. In addition, many 
are simply confused by what they perceive as duplicity in several 
program areas.
    We know of several producers who have followed through, and won, 
appeals through the National Appeals Division (NAD) as a result of the 
issues I outlined. While these farm programs are meant to assist 
producers, the process provides a strong disincentive to participate. I 
would urge this Committee to explore these issues to its fullest 
extent.
Crop Insurance
    The Idaho Grain Producers Association supports the continuation and 
improvements of Federal risk management programs including crop 
insurance. We feel fortunate for the fantastic relationship we enjoy 
with our regional Risk Management Agency office based in Spokane, 
Washington. The technical and consultative support we receive from 
these folks is something we greatly appreciate.
    Idaho, with its varied climatic and production-specific regions, 
maintains robust participation in grain crop insurance programs. As a 
dryland grain producer farming 8,500 acres of grain at an elevation of 
6,000 feet above sea level, I can attest to how crucial an effective 
crop insurance program is.
    In 2009, nearly a million acres (or 78 percent) of all wheat-
planted acres were insured at a 74 percent coverage level. Wheat 
insured in 2009 carried an estimated value over $400 million: 63 
percent, or over 335,000 acres, planted to barley were insured in 2009.
    Idaho wheat and barley production is found on dryland and irrigated 
acres. The consistency and quality of irrigated Idaho barley is a big 
reason why the world's biggest brewers have a strong presence in our 
state. Although irrigation helps alleviate some plant stress, crop 
insurance is still vital to production.
    The IGPA and the Idaho Barley Commission have lead a national 
effort to bolster malt barley crop insurance to more accurately reflect 
the higher value and unique quality of the crop. Thanks to the work of 
many, the RMA recently unveiled a new insurance product for specialty 
types of barley. We hope this will diversify and increase Idaho's 
barley production.
    Another significant improvement to the Federal crop insurance 
program is the work being done, called the COMBO project, which 
combines several existing crop insurance programs and streamlines the 
information and paperwork related to the program. The IGPA is excited 
for the roll-out in this program in Crop Year 2011.
    In recent years, Idaho wheat farmers were subject to weather events 
that caused severe quality problems across the state. Upon further 
investigation, we found that crop insurance indemnities for wheat 
quality problems were extremely inadequate. After raising this issue to 
RMA, FSA, and in collaboration with the National Association of Wheat 
Growers, we are close to providing producers with coverage for quality 
losses.
    Looking to the future of crop insurance, we can build on these 
successes. But our first step must not be backwards. The ongoing 
Standard Renegotiation Agreement (SRA) negotiations are a cause for 
concern for our growers.
    We understand and agree with the Administration's desire to find 
budget savings whenever and wherever possible. However, the USDA's 
draft SRA proposal seeking $8 billion in cuts over 10 years to Federal 
crop insurance programs has the IGPA very concerned.
    A reduction of this magnitude could significantly reduce the 
accessibility, competitiveness, and quality of crop insurance and thus 
negatively impact grain producers. Needless to say, the impact to the 
farm bill baseline by such a reduction would be another major hurdle in 
crafting effective and innovative farm policy legislation.
    The IGPA understands that negotiations between insurance providers 
and the RMA are ongoing. We certainly support a mutually agreeable and 
expedient outcome. We ask that the Committee continue its vigilance of 
these proceedings and carefully consider the impact on producers.
Conservation
    Idaho's unique topography has allowed grain farmers to lead in 
direct seeding technology, implementing practices that reduce soil and 
wind erosion, and methods to maintain water quality.
    The IGPA recognizes the popularity and increased focus on 
agriculture conservation practices and programs since the passage of 
the 2002 Farm Bill. Three programs, the Conservation Reserve Program 
(CRP), Conservation Stewardship Program (CSP), and the Environmental 
Quality Incentives Program (EQIP) are the most prominent in the grain 
farming areas of Idaho.
Conservation Reserve Program
    The IGPA supports the wise use of the CRP as natural resource tools 
on environmentally sensitive land. Our growers support the ability to 
employ Best Management Practices on CRP lands to control pests, weeds, 
and soil quality.
    While we recognize the concerns of the environmental community 
regarding emergency use of CRP lands for haying and grazing, we support 
a more reasonable policy to allow early haying and grazing of CRP land 
in a responsible manner.
    A high volume of CRP acres in Idaho will be due for re-enrollment, 
termination, or extension by September 2010. The decisions made and the 
ultimate outcome could significantly change the environment and culture 
of certain areas in Idaho. The IGPA would request that the Committee 
work closely with the USDA-FSA and NRCS and local leaders as this 
deadline approaches.
Conservation Stewardship Program
    The CSP has proven a significant addition to the management 
practices of Idaho's grain farmers. For example, in Idaho's northern 
region grain production occurs on rolling hills in volatile weather 
conditions. Farm land in this region is particularly susceptible to the 
threat of soil and water erosion.
    With the support from the CSP, producers have adopted or continued 
management practices and technologies that mitigate or eliminate 
erosion threats. The evolution since 2002 of the CSP is welcomed by the 
IGPA.
    The change from a watershed-by-watershed approach to a competitive 
application process for the CSP has made the program more accessible to 
all growers and thus more equitable. In addition, the IGPA supports the 
CSP as a voluntary, consistent, and fully funded stand alone program.
    The IGPA continues to hear concerns and complaints from grain 
producers regarding administration of the CSP by the NRCS. Growers have 
experienced delays in timely contract delivery and payment which has 
caused disruption in farm budgeting.
    The IGPA recognizes the NRCS's traditional role as a technical 
provider of conservation practices. We respectfully request that any 
new Federal farm policy consider shifting the administrative functions 
of the CSP to the USDA FSA, which has expertise in this area.
Environmental Quality Incentives Program
    The EQIP program is very popular in Idaho, particularly on 
irrigated ground in southern Idaho. Producers in this region have 
utilized this cost-share program to install irrigation pivots and other 
technologies to conserve water.
    Idaho is home to several endangered species and the program has 
also assisted producers in establishing critical wildlife habitat while 
maintaining their farming operation.
    The IGPA supports the continuation of this program in future 
Federal farm legislation. However, we are concerned about the recent 
activity of the Senate Agriculture Committee to shift $2 billion in 
EQIP funding away from the program to boost child nutrition programs.
    As we understand, there currently exists a backlog of requests for 
EQIP-related projects. Reducing this valuable program by $2 billion 
seems incongruent with the call for more conservation practices in 
production agriculture. We urge the Committee to find alternative areas 
in which to assist the nutritional programs administered by the USDA.
    Mr. Chairman and Members of the Committee, there are many more 
critical areas affecting Idaho's wheat and barley farmers. Estate tax 
policy, rail transportation, renewable energy production, environmental 
regulation and the necessity of ratifying pending Free Trade Agreements 
are among the many items.
    The IGPA looks forward to engaging our Idaho Congressional 
Delegation and the Committee on these issues at the next opportunity. 
Today, we are all here to discuss how Congress, the Administration, and 
stakeholders can craft a Federal farm policy that is innovative, 
efficient, and maintains a vibrant farm sector.
    As one of the nation's top producers of wheat and barley, the IGPA 
is honored to represent 700 farm families before this Committee. We 
look forward to working with you, your staff, and the rest of our Idaho 
Congressional Delegates to ensure that production agriculture can 
continue to provide a safe, abundant, and affordable supply of food for 
U.S. consumers.
    I would be happy to respond to any questions that Members of the 
Committee might have.
    Thank you.

    The Chairman. Thank you, Mr. Brown, for that testimony.
    Mr. Gross, welcome to the Committee.

      STATEMENT OF DOUG GROSS, POTATO PRODUCER, WILDER, ID

    Mr. Gross. Thank you, Mr. Chairman. Thank you for the 
opportunity to provide input on the key issues for the 2012 
Farm Bill from the perspective of a specialty crop producer and 
potato grower. My name is Doug Gross. I grow fresh market and 
processing potatoes, and small grains on a 1,300 acre family 
farm in Wilder, Idaho. I've been actively involved in the 
potato industry for 35 years.
    The 2008 Farm Bill included historic changes in Federal 
farm policy as it relates to specialty crops. For the first 
time, our nation's farm policy included programs that 
acknowledged the need of specialty crop growers. Such a change 
was long overdue, since it is now commonly recognized that 
specialty crops represent nearly 50 percent of the total farm 
gate revenue of all ag products produced in the United States.
    During the consideration of the 2008 Farm Bill, potato 
growers were directly involved in developing the policy options 
that became part of the legislation. As active members of the 
Specialty Crop Alliance, potato growers worked actively to 
support policies that maintain market based decision making for 
specialty crops, and provided Federal support for increasing 
the competitiveness of specialty crop producers.
    Members of the SCFBA support Federal farm policy for 
specialty crops that is not based on any direct income support 
for individual farmers, but that provides support for the 
industry's efforts to manage pests of concern, conduct research 
relevant to growers, expand export markets, and increase the 
consumption of fruits and vegetables. The Federal commitment to 
those goals has made a very positive difference during the 
tenure of the 2008 Farm Bill.
    At this time, I would like to provide the Committee with a 
broad overview of some of my thoughts on key items that are 
being watched most closely by potato growers in the 2008 bill.
    Number one is planting flexibility restrictions. It's clear 
from the price debacle that we're facing today in Idaho, and in 
the nation in potatoes, that small increases in supply can have 
devastating impacts on grower returns.
    It continues to be clear that it is disruptive to markets 
when acres that receive direct or other Federal payments are 
allowed to be planted in non-subsidized crops. The allowance 
made for individual states to plant fruits and vegetables on 
program crop acres, provided ample opportunity for growers to 
meet the demand for processing fruits and vegetables.
    I believe that the potato industry would strongly oppose 
any additional relaxation of the current planting restrictions. 
It simply sends the wrong market signals to the producer.
    Specialty Crop Block Grants: The enhanced funding for the 
Specialty Crop Block Grants has been positively utilized by 
growers at the state level. As a result of the local decision-
making on these grants, it offers state departments of 
agriculture the opportunity to address the needs of local 
growers. While in some states, there are undoubtedly ways to 
improve the operation of the granting process to ensure that 
the funding goes to new, innovative grower requested and 
developed programs. It appears that the block grant program is 
meeting the goals intended by Congress.
    The introduction of exotic pests and disease can have 
devastating effects on grower's ability to produce and sell a 
crop. The funding provided to APHIS in the 2008 Farm Bill to 
take a more comprehensive approach to pest exclusion and 
management provides the opportunity to develop a more effective 
approach to address, quarantine, and eliminate pests.
    The program encourages a more effective partnership between 
APHIS and the state departments of agriculture on pests and 
disease issues. I think the time has come to look at developing 
some type of an insurance program, similar to what exists in 
the livestock industry, to help when federally quarantined 
pests are discovered on the farms.
    Research continues to be the key to both crop production 
and consumer preference related issues. The Specialty Crop 
Research Initiative provides the opportunity for specialty crop 
researchers to access significant multi-year funding for multi-
disciplinary, multi-institutional research projects.
    The potato industry has worked to encourage the multi-state 
collaborations envisioned by this program. Competition for the 
grants is intense. Grower input prior to proposal submission is 
a critical component of identifying the relevant projects.
    Potential exports of specialty crops are impacted by both 
phytosanitary and structural barriers to trade. The current 
farm bill provides funding to address phytosanitary barriers 
through the Technical Assistance for Specialty Crop program.
    The TASC program has a successful track record in providing 
funding for projects to remove phytosanitary barriers to trade. 
The increased funding provided by the 2008 Farm Bill for TASC 
is important. Additional education is necessary to familiarize 
the industry with the type of projects that can be completed 
with the help of the TASC monies.
    The potato industry has successfully used MAP funds to 
develop new markets for fresh and processed potatoes. The 2008 
Farm Bill provided $200 million in funding for MAP. The potato 
industry continues to support this level of funding.
    In short, the 2008 Farm Bill provides a solid foundation 
upon which further progress can be made. We thank the Chairman 
and Committee for past efforts, and look forward to developing 
the 2012 Farm Bill together.
    [The prepared statement of Mr. Gross follows:]

     Prepared Statement of Doug Gross, Potato Producer, Wilder, ID
    Thank you for the opportunity to provide input on the key issues 
for the 2012 Farm Bill from the perspective of a specialty crop 
producer and potato grower. My name is Doug Gross and I grow fresh 
market and processing potatoes and small grains on a 1,300 acre family 
farm near Wilder, Idaho. I have been actively involved in the potato 
industry for more than 35 years.
    The 2008 Farm Bill included historic changes in Federal farm policy 
as it relates to specialty crops. For the first time our nation's farm 
policy included programs that acknowledged the needs of specialty crop 
growers. Such a change was long overdue since it now commonly 
recognized that specialty crops represent nearly 50 percent of the 
total farm gate value of all agricultural products produced in the 
United States.
    During the consideration of the 2008 Farm Bill potato growers were 
directly involved in developing the policy options that became part of 
the legislation. As active members of the Specialty Crop Farm Bill 
Alliance (SCFBA) potato growers worked actively to support policies 
that maintained market based decision making for specialty crops and 
provided Federal support for increasing the competitiveness of 
specialty crop producers.
    Members of the SCFBA support Federal farm policy for specialty 
crops that is not based on any direct income support for individual 
farmers but that provides support for the industry's efforts to exclude 
and manage pests of concern, conduct research relevant to growers, 
expand export markets and increase the consumption of fruits and 
vegetables. The Federal commitment to those goals has made a very 
positive difference during the tenure of the 2008 Farm Bill.
    Currently the SCFBA is reviewing the existing programs relevant to 
specialty crops in the 2008 Farm Bill to document those successes and 
to identify possible avenues for improvement. The potato industry will 
be actively involved in this effort. We look forward to the opportunity 
to provide the results of that work to the House Agriculture Committee 
to assist in their deliberations.
    At this time I would like to provide the Committee with a broad 
overview of my thoughts on a few of the key items that are being 
watched most closely by potato growers in the 2008 Farm Bill:

    Planting Flexibility Restrictions

      It is clearly evident from the price debacle facing potato 
        growers this year that small increases in supply can have 
        devastating impacts on grower returns. It continues to be clear 
        that it is disruptive to markets when acres that receive direct 
        or other Federal payments are allowed to plant non subsidized 
        crops. The allowances made for individual states to plant 
        fruits and vegetables on program crop acres provided ample 
        opportunity for growers to meet the demand for processing 
        fruits and vegetables. I believe that the potato industry would 
        strongly oppose any additional relaxation of the current 
        planting restrictions.

    Specialty Crop Block Grants

      The enhanced funding for the Specialty Crop Block Grants has been 
        positively utilized by growers at the state level. As a result 
        of the local decision making on these grants it offers state 
        departments of agriculture the opportunity to more directly 
        address the needs of local grower groups. While in some states 
        there are undoubtedly ways to improve the operation of the 
        granting process to ensure that funding goes to new, innovative 
        grower requested and developed programs it appears that the 
        block grant program is meeting the goals established by 
        Congress.

    Pest and Disease Management

      The introduction of an exotic pest or disease can have 
        devastating effects on a grower's ability to produce and sell 
        his crop. The funding provided to APHIS in the 2008 Farm Bill 
        to take a more comprehensive approach to pest exclusion and 
        management provides the opportunity to develop a more effective 
        approach to address quarantine and other pests. The program 
        encourages a more effective partnership between APHIS and the 
        state departments of agriculture on pest and disease issues. 
        The time has come to look at developing an insurance program 
        for growers, similar to what exists in the livestock industry, 
        to help when federally quarantined pests are discovered on 
        their farms.

    Specialty Crop Research Initiative

      Research continues to be the key to both crop production and 
        consumer preference related issues. The Specialty Crop Research 
        Initiative (SCRI) provides the opportunity for specialty crop 
        researchers to access significant multiyear funding for 
        multidisciplinary, multi-institutional research projects. The 
        potato industry has worked to encourage the multi-state 
        collaborations envisioned by the program. Competition for the 
        grants is intense. Grower input prior to proposal submission is 
        a critical component of identifying relevant projects.

    Over Coming Phytosanitary Barriers to Trade

      Potential exports of specialty crops are impacted by both 
        phytosanitary and structural barriers to trade. The current 
        farm bill provides funding to address the phytosanitary 
        barriers through the Technical Assistance for Specialty Crop 
        (TASC) program. The TASC program has a successful track record 
        in providing funding for projects to remove phytosanitary 
        barriers to trade. The increased funding provided by the 2008 
        Farm Bill for TASC is important. Additional education is 
        necessary to familiarize the industry with the type of projects 
        that can be completed with this funding.

    Market Access Funding

      The potato industry has successfully used Market Access Program 
        (MAP) Funds to develop new markets for fresh and processed 
        potatoes. The 2008 Farm Bill provides $200 million in funding 
        for MAP. The potato industry continues to support this level of 
        funding for MAP. There are many more positive aspects of the 
        2008 Farm Bill. In short, it provides a solid foundation upon 
        which further progress can be made. We thank the Chairman and 
        Committee for their past efforts and look forward to working 
        together in developing the 2012 Farm Bill.

    The Chairman. Thank you, Mr. Gross, for that testimony.
    Mr. Henggeler, welcome to the Committee.

    STATEMENT OF KELLY R. HENGGELER, APPLE, PLUM, AND PEACH 
               PRODUCER AND PACKER, FRUITLAND, ID

    Mr. Henggeler. Thank you. Good afternoon, Chairman 
Peterson, Ranking Member Lucas, my Congressman Minnick, Idaho 
Congressman Simpson, and distinguished Members of the 
Committee. My name is Kelly Henggeler, and I am a fourth-
generation grower from Fruitland, Idaho.
    Together with my family, I own and manage a fresh fruit 
company in which we store, package, and market apples, plums, 
peaches, and prunes. We also operate approximately 700 acres of 
orchards growing apples, plums, peaches, and cherries.
    Thank you, Chairman Peterson, for holding this hearing, and 
coming to Idaho to hear about what the farm bill means to us. 
As past Chairman of the U.S. Apple Association, and a current 
board member of that organization, I keep in close contact with 
apple industry leaders from coast to coast. I know firsthand 
that the challenges and opportunities facing the Idaho industry 
are not unlike those experienced by growers in the other 35 
apple producing states.
    I want to thank you for your support of specialty crops in 
the 2008 Farm Bill. Specialty crops in Idaho represent 23 out 
of the top 26 commodities in terms of farm gate receipts. 
Nationally specialty crops compose nearly 50 percent of the 
farm gate value of U.S. agriculture, and should remain a 
significant part of the next farm bill.
    Historically, apples and the produce industry have never 
relied upon direct payment programs. Like a majority of these 
growers, I don't believe that would be in the best interest of 
my business for our industry. Instead we strongly advocate for 
programs to help grow demand and consumption of our products, 
and build long-term competitiveness and sustainability for our 
industry.
    Thank you for recognizing this need in the current farm 
bill. And I strongly urge you to continue its important 
specialty crop programs.
    I would like to highlight some specific provisions within 
the current farm bill that are important to me as an apple 
grower and packer.
    The Specialty Crop Block Grant Program focuses on regional 
and local priorities for specialty crop producers. These block 
grants fund important projects, such as improved food safety, 
enhanced market opportunities, and research aimed at specific 
local industry needs.
    One example is the Idaho Preferred Program that was 
established with the initial Specialty Crop Block Grant funds, 
and provides an opportunity for local producers to collaborate 
with retail partners in providing Idaho products in Idaho 
stores.
    Export programs are extremely important for the apple 
industry, with about 25 percent of our crops sold overseas. The 
Market Access Program, referred to as MAP, provides critical 
funding, more than matched by industry contributions, to 
operate programs which promote American apple consumption 
around the world.
    The New Specialty Crop Research Initiative is enabling the 
apple industry across the country to strategically focus on 
critical research needs. One example of this is the development 
of new integrated pests management practices that enhance 
workplace safety and reduce environmental impact.
    Now, more children are enjoying nutritious fruits and 
vegetables, including apples in a snack program being expanded 
to all 50 states. Apples have been an extremely popular item in 
this program, which promotes lifelong healthy eating habits. 
Funding should be maintained and expanded from this program.
    These specialty crop programs are important, because they 
improve our short and long term competitiveness and strengthen 
market opportunities. They can only play the role Congress 
intended if our apples and other specialty crops are reliably 
picked each fall.
    The American Apple Industry faces a chronic labor 
uncertainty as our borders continue to tighten and internal 
immigration enforcement increases. The 2010 apple harvest is 
quickly approaching, and though the crop appears outstanding in 
many areas of the country, most growers are uncertain if they 
will have enough workers to pick it.
    Securing legal and reliable labor is a critical component 
to our future. We lack sufficient legal labor to prune, pick, 
pack, and process our crop. Without it, we could see the 
decline in the outsourcing of the domestic apple industry. 
Despite our best recruitment efforts, it is difficult, if not 
often impossible, to find local workers.
    For these reasons, I strongly encourage you to enact the 
AgJOBS bill to reform the antiquated H-2A guest worker program. 
Without it, I feel there will be fewer and fewer American 
produced apples, and increased imports. Failure to act means 
giving away our industry and our markets to foreign 
competitors.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Henggeler follows:]

   Prepared Statement of Kelly R. Henggeler, Apple, Plum, and Peach 
                   Producer and Packer, Fruitland, ID
    Good afternoon, Chairman Peterson, Ranking Member Lucas, my 
Congressman Minnick and distinguished Members of the Committee. My name 
is Kelly Henggeler, and I am a third-generation fruit packer and fourth 
generation grower in Fruitland, Idaho.
    Together with my family, I own and operate a fresh fruit packing 
operation in which we store, package and market apples, plums, peaches 
and prunes. Henggeler Packing Company, Inc. was started in 1943 and we 
employee over 75 people during the packing season. We also operate 
approximately 700 acres of orchards and employ another 100 people 
during labor intensive times of the year including harvest. Besides 
packaging and marketing our own fruit, we pack for over 20 growers 
located in three adjacent counties.
    Thank you, Chairman Peterson for holding this hearing and coming to 
Idaho to hear about what the farm bill means to us. Rewriting the bill 
in 2012 provides a real opportunity to assess the current needs of ALL 
of American agriculture, and look ahead. As past Chairman of the U.S. 
Apple Association and a current board member of that organization, I 
keep in close contact with apple industry leaders from coast to coast. 
I know firsthand that the challenges and opportunities facing the Idaho 
industry are not unlike those experienced by growers in Michigan, New 
York, California, Washington, New England and Virginia, to name but a 
few examples.
    First, I want to thank you for your support of specialty crops in 
the 2008 Farm Bill. As members of the Specialty Crop Farm Bill 
Alliance, apple growers and packers worked hard in support of programs 
included in the bill which are enhancing the competitiveness and 
efficiency of our industry and the opportunity for a fair return to the 
land. In Idaho, specialty crops represent 23 out of the top 26 
commodities in terms of farm gate receipts. Nationally, specialty crops 
compose nearly 50 percent of the farm gate value of U.S. agriculture 
and should remain a significant part of the next farm bill.
    It's an exciting time to be in the apple business. Demand is 
growing, especially in the export arena. At home, Americans are seeking 
fruits, such as apples, which represent good value, good nutrition, and 
on-the-go convenience in this time of recession. USDA's Dietary 
Guidelines call on Americans to double their servings of fruits and 
vegetables. Unfortunately, obesity is an even bigger problem today 
among Americans than it was when the current farm bill was written. I 
believe apples are part of the solution for a healthier nation.
    A number of exciting new health research studies have found 
possible links between the consumption of apples and apple products 
with a lower risk of breast cancer, heart disease, asthma, Alzheimer's 
disease and other serious health issues. New great-tasting varieties 
and new products, like convenient, bagged fresh-sliced apples, are 
leading the way to expanding consumer demand and apple consumption.
    At the same time, an unsure labor supply, high energy costs, world-
wide competition, serious pressure from insect and plant diseases, and 
ever-increasing regulations present unprecedented challenges for our 
industry.
    Historically, apples and the produce industry have never relied 
upon direct payment programs to support grower income or market prices. 
Like a majority of these growers, I don't believe that would be in the 
best interest of my business or our industry. Instead, we strongly 
advocate programs to help grow demand and consumption of our products, 
and build long-term competitiveness and sustainability for our 
industry. Thank you for recognizing this need in the current farm bill 
and I strongly urge you to continue its important specialty crop 
programs.
    Currently specialty crop producers, including apple growers, are 
reviewing the successes of the 2008 Farm Bill and developing 
recommendations for further improvements. The Specialty Crop Farm Bill 
Alliance will look forward to sharing them with you, as will I, an 
Alliance member.
    I would like to highlight some specific provisions within the 
current farm bill that are important to me as an apple grower and 
packer.
Specialty Crop Block Grants
    The Specialty Crop Block Grant Program focuses on regional and 
local priorities for specialty crop producers. These are being used by 
growers at the state level and are tailored to meet specific local 
needs. While there may be ways to continue to streamline and improve 
the grant process, these block grants fund important projects such as 
improved food safety, enhanced market opportunities and research aimed 
at specific local industry needs. One example is the Idaho Preferred 
Program that was established with the initial specialty crop block 
grant funds and provides an opportunity for local producers to 
collaborate with retail partners in providing Idaho products in Idaho 
stores. Also, through Idaho Preferred, producers provide school 
districts in Idaho with local product that has been incorporated into 
fund raising opportunities. This program has been a huge success with 
significant increases in the purchase of Idaho products and increased 
revenue for schools.
Export Programs
    Exports are extremely important for the apple industry, with about 
25 percent of our crop sold overseas. Important, exports offer 
excellent potential for further growth. Apple growers use two 
programs--the Market Access Program and the Technical Assistance for 
Specialty Crops Program--to help grow exports. MAP provides critical 
funding, more than matched by industry contributions, to operate 
programs which promote American apple consumption around the world. MAP 
funding should be maintained and where possible, expanded. TASC funding 
is also helping our industry reduce foreign phytosanitary barriers to 
apple exports. For example, TASC funding is being used to overcome 
technical barriers to trade in order to increase exports to Mexico and 
Taiwan.
Specialty Crop Research Initiative
    The new Specialty Crop Research Initiative (SCRI) is enabling the 
apple industry across the country to strategically focus on critical 
research needs. Positive results so far will enable apples and other 
specialty growers to produce and process their crops more efficiently 
and sustainably. Specific projects include:

   Developing new Integrated Pest Management practices to 
        enhance workplace safety and reduce environmental impact.

   Applying modern genomics and genetic technologies to create 
        apple cultivars with consumer-preferred traits.

   Adapting engineering and automation technologies to improve 
        the safety, efficiency, and sustainability of apple and peach 
        orchards.

    The SCRI's focus on multidisciplinary, multi-institutional research 
collaboration has led to close work by the tree fruit industry with 
USDA, and notable academic institutions across the country.
    The National Clean Plant Network (NCPN) is another important 
program in the current farm bill. Tree fruit and grape producers, and 
nurseries, rely on the NCPN as the single nationally-certified source 
of plant material free of devastating virus diseases. The nursery 
industry is vital to apple growers since it supplies essential 
rootstocks upon which different varieties are grafted to produce the 
wide range of colors, tastes and textures enjoyed by apple consumers.
    The SCRI and the NCPN are critical tools to help our industry 
strengthen its foundation and assure we improve our genetic and 
technological edge, which is essential to maintaining a competitive 
position in the global marketplace.
Apples in Schools & USDA Purchases
    Now more children are enjoying nutritious fresh fruits and 
vegetables, including apples, in a ``snack'' program being expanded to 
all 50 states. Apples have been an extremely popular item in this 
program which promotes life-long healthy eating habits. Also, at the 
urging of apple growers, USDA has purchased over $18 million worth of 
apples, apple sauce and apple juice this year as part of the increased 
minimum specialty crop purchases by USDA established under the current 
farm bill. Given our sizeable crop last year, these buys provided 
healthy apples to consumers and helped our growers. Funding should be 
maintained for these programs.
Pest and Disease Prevention
    A foreign pest or disease can easily devastate our orchards. The 
farm bill created and funded a new USDA program to combat invasive 
insects and plant diseases. This program provides for a more thorough 
and coordinated approach to management of quarantine pests and disease. 
It is a joint effort between USDA and state departments of agriculture. 
This increased effort to combat a serious problem should be a priority 
to continue and fund in the next farm bill.
A Strong Farm Bill--But Who Will Pick The Crop?
    These specialty crop programs are important because they improve 
our short and long term competitiveness and strengthen market 
opportunities. They can only play the role Congress intended if our 
apples and other specialty crops are reliably picked each fall.
    The American apple industry faces a chronic labor uncertainty as 
our borders continue to tighten and internal immigration enforcement 
increases. The 2010 apple harvest is quickly approaching and though the 
crop appears outstanding in many areas of the country, most growers are 
uncertain if they will have enough workers to pick it.
    Securing legal and reliable labor is critical to our future. We 
lack sufficient legal labor to prune, pick, pack and process our crop. 
Without it, we could see the decline and outsourcing of the domestic 
apple industry. Despite our best recruitment efforts, it is difficult 
(if not often impossible) to find local workers.
    I strongly urge Congress to fix this problem. I can't, but you can. 
I want the opportunity to pass along my farm and packing house to the 
next generation. They are the future. But without solving the labor 
crisis facing labor-intensive agriculture, I am deeply concerned about 
future of my family operation.

    For these reasons, I strongly encourage you to enact the AgJOBS 
bill to reform the antiquated H-2A guest worker program. Without it, I 
fear there will be fewer and fewer American-produced apples and 
increased imports. Failure to act means giving away our industry and 
our markets to foreign competitors.

    Thank you for the opportunity to testify today. I would be pleased 
to answer any questions you may have.

    The Chairman. Thank you, Mr. Henggeler. We appreciate your 
testimony.
    Mr. Lee, welcome to the Committee.

STATEMENT OF GALEN LEE, SUGARBEET, MINT, ASPARAGUS, HAY, GRAIN, 
                 CORN, AND CATTLE PRODUCER, NEW
                          PLYMOUTH, ID

    Mr. Lee. Thank you, Mr. Chairman, Members of the Committee, 
for bringing this important hearing to Idaho. My name is Galen 
Lee, and I appreciate this opportunity to speak on behalf of 
more than 1,100 sugarbeet growers in Idaho, Oregon, and 
Washington regarding the 2012 Farm Bill.
    And I especially want to express my gratitude to 
Congressman Minnick, who stands with a strong voice for Idaho 
agriculture on your Committee. We are proud that he, and 
Congressman Simpson, who is co-chair of the House Sugar Caucus, 
will work to maintain a strong sugar policy in the next farm 
bill. I also want to welcome Congressman Schrader, in whose 
district all the U.S. sugarbeet seed is grown. We look forward 
to working with all of you in the months ahead.
    I farm in New Plymouth, Idaho, which is about 35 miles 
northwest of here. My family and I grow sugarbeets, asparagus, 
peppermint, alfalfa, and corn. We are also dairy farmers and 
have a beef herd. My family has been farming for more than 100 
years, and growing beets since 1970 for Amalgamated Sugar 
Company. I am President of the Nyssa-Nampa Beet Growers 
Association, and a member of the Board of Directors of the 
Snake River Sugar Company.
    Sugarbeets have been grown in Idaho for 107 years. They are 
an important cash crop in irrigated areas along the Snake 
River. In 1996, the 1,134 beet growers of Amalgamated purchased 
the company, and formed the Snake River Sugar Company, a 
grower-owned cooperative of growers in Idaho, Oregon, and 
Washington. Three factories, one in Mini-Cassia, one in Twin 
Falls, and one here in Nampa, typically produce more than 13 
percent of U.S. beet sugar production.
    Our grower-owned cooperative headquartered in Boise is a 
key supplier of sugar in the northwestern United States and 
other critically important markets.
    In Idaho, sugarbeets are a $1 billion industry that 
supports about 7,000 direct and indirect jobs. The loss of this 
industry would shift 180,000 acres of sugarbeets into other 
crops and depress prices, especially for potatoes and onions.
    Ultimately, our future depends on good farm and trade 
policy.
    The United States is the world's fifth-largest sugar 
producer. We are also the world's fifth-largest sugar consumer, 
and the world's second-largest net importer. We are good at 
what we do.
    Our sugar farmers are among the lowest cost producers in 
the world. We are doubly proud of this distinction, because we 
have achieved it while being fair to our workers and 
responsible stewards of the land.
    The U.S. has one of the most open sugar markets, and 
provides guaranteed access to 41 countries, as it is required 
to do under trade laws.
    Trade agreements, such as with the WTO and NAFTA force the 
U.S. to provide duty-free access for 1.4 million short tons of 
sugar each year, whether the country needs the sugar or not.
    In addition, under the NAFTA, Mexico now enjoys unlimited 
access to the U.S. sugar market. The Doha Round of the WTO 
could result in additional market access concessions, and the 
recently launched Trans-Pacific Partnership, or TPP, trade 
negotiations could result in even more concessions.
    These important concessions could reduce U.S. sugar 
producers' access to our own market even further, and reduce 
prices, and make it impossible for many of us to survive.
    Congress, in its wisdom, designed a sugar policy in the 
2008 Farm Bill that is working to the considerable benefit of 
consumers at zero cost to taxpayers; thus giving sugar farmers 
a chance to survive, plus it fully complies with the rules of 
the WTO.
    Under this market balancing approach, the USDA has retained 
its authority to limit domestic sales of the sugar. Producers 
who exceed their allotments must store the excess at their own 
expense, not the government's expense.
    If imports exceed the difference between domestic market 
allotments and consumption, USDA will divert surplus sugar into 
fuel ethanol production and restore balance to the sugar market 
for food. This production has not been needed as yet, and 
government forecasters expect it will not be over the course of 
the farm bill.
    The current farm bill's benefits to American sugar 
consumers and American taxpayers are clear. American food 
manufacturers and consumers can count on reliable supplies of 
sugar is being produced responsibly, is reasonably priced, high 
in quality, and safe to consume.
    U.S. wholesale and retail prices are below the average of 
the rest of the developed world. In real terms, corrected for 
inflation, U.S. wholesale and retail prices have declined 
substantially over the past 3 decades.
    Sugar producers receive no government payments. Sugar is 
the only major commodity program that operates at no cost to 
taxpayers, and government projections through 2020, say it will 
remain at no cost over all these years.
    American sugar farmers are grateful to the Congress for 
crafting a sugar policy that is balancing supply and demand, 
ensures consumers a dependable, high-quality supplies, and is 
improving market prospects for sugar producers. The policy 
achieves all these goals at zero cost to American taxpayers.
    With some prospect of continued market stability, producers 
should be able to reinvest in their operations, further reduce 
their costs of production, and survive. We strongly urge the 
continuation of the successful, no-cost policy in the next farm 
bill.
    Thank you, Mr. Chairman, for holding this important 
hearing, and for all that you and the Committee do for American 
agriculture. We look forward to working with you in the future.
    [The prepared statement of Mr. Lee follows:]

   Prepared Statement of Galen Lee, Sugarbeet, Mint, Asparagus, Hay, 
           Grain, Corn, and Cattle Producer, New Plymouth, ID
    Thank you, Mr. Chairman and Members of the Committee, for bringing 
this important field hearing to Idaho. My name is Galen Lee, and I 
appreciate this opportunity to speak on behalf of more than 1,100 
sugarbeet growers in Idaho, Oregon and Washington regarding the 2012 
Farm Bill.
    I especially want to express my gratitude to Congressman Minnick, 
who stands as a strong voice for Idaho agriculture on your Committee. 
We are proud that he, and Congressman Simpson--who is co-chair of the 
House Sugar Caucus--will work to maintain a strong sugar policy in the 
next farm bill. I also want to welcome Congressman Schrader, in whose 
district all the U.S. sugarbeet seed is grown. We look forward to 
working with you in the months ahead.
    I farm in New Plymouth, Idaho, which is about thirty-five miles 
northwest of here. My family and I grow sugarbeets, asparagus, 
peppermint, alfalfa and corn; we are also dairy farmers and have a beef 
herd. My family has been farming for more than 100 years and growing 
beets since 1970 for the Amalgamated Sugar Company. I am President of 
the Nyssa-Nampa Beet Growers Association and a member of the Board of 
Directors of the Snake River Sugar Company.
    Sugarbeets have been grown in Idaho for 107 years. They are an 
important cash crop in irrigated areas along the Snake River. In 1996, 
the 1,134 beet growers of the Snake River Sugar Company--a grower-owned 
cooperative of growers in Idaho, Oregon and Washington--purchased the 
Amalgamated Sugar Company, now located in Boise. Three factories--in 
Mini-Cassia, Nampa and Twin Falls--typically produce more than 13% of 
U.S. beet sugar production. Our grower-owned cooperative is the key 
supplier of sugar to the northwestern United States and other 
critically-important markets.
    In Idaho, sugarbeets are a $1 billion industry that supports about 
7,000 direct and indirect jobs. The loss of this industry would shift 
180,000 acres of sugarbeets into other crops and depress prices, 
especially for potatoes and onions.
    Ultimately, our future depends on good farm and trade policy.
Food Security
    Sugar is an essential ingredient in our nation's food supply. As an 
all-natural sweetener, bulking agent and preservative, it plays an 
important role in about 70% of processed food products and is called 
for in a multitude of favorite home recipes. Dependence on unreliable 
and unstable foreign suppliers is a threat to our food security, which 
is why a strong, diversified and reliable domestic industry has long 
been recognized as important to the nation.
    U.S. sugar producers are globally competitive, but for decades we 
have been threatened by unfair competition. Roughly 120 countries 
produce sugar and all their governments intervene in their sugar 
markets in some way. Many countries subsidize their producers and dump 
their surpluses on the world market for whatever price it will bring. 
This depressed, so-called ``world price'' has averaged below actual 
global costs of producing sugar for many years. American producers are 
competitive, but cannot be expected to compete against these foreign 
treasuries and unfair predatory trade practices.
Importance, Size, Efficiency
    In addition to the critical role it plays in local economies, sugar 
is a significant job producer and revenue-generator nationally. The 
U.S. sugar producing industry, with sugarbeets and sugarcane grown or 
processed in 18 states, generates over 146,000 jobs and more than $10 
billion per year in economic activity. These jobs range from the cane 
fields of Hawaii and the beet fields of Idaho to the cane sugar 
refineries in New Orleans, New York City, and other cities.
    The United States is the world's fifth-largest sugar producer. We 
are also the fifth-largest sugar consumer and the world's second-
largest net importer. And, we are good at what we do. Our sugar farmers 
are among the lowest cost producers in the world. We are doubly proud 
of this distinction because we have achieved it while being fair to our 
workers and responsible stewards of the land. Farmers in the developing 
world, who dominate the world sugar market, generally operate with 
little or no enforced requirements for worker safety and benefits, or 
for air, water, and soil protection. Our standards, and compliance 
costs, are among the highest in the world.
Restructuring
    Despite our efficiency, we are an industry that has been under 
enormous stress. From 1985 until 2009, we did not receive any increase 
in our price support level. Over this long period of essentially flat 
nominal prices, the real price we received for our sugar dropped 
sharply because of inflation. (Figures 1-2)
    Only the producers who could match the declining real price with 
efficiency gains and lower production costs were able to survive. More 
than half could not. From 1985 to 2009, 54 of America's 102 cane mills, 
beet factories, and cane sugar refineries shut down, with terrible 
consequences for the local families and communities. Just since 1996, 
35 mills, factories, and refineries have closed. (Figures 3-4)
Trade Challenges
    The U.S. is one of the most open sugar markets and one of the 
world's largest sugar importers. The U.S. provides access to its market 
to 41 countries, as it is required to do under trade laws. Virtually 
all are developing countries, and most are highly supportive of U.S. 
sugar policy because it provides an import price at which many can 
recover their costs of production.
    In addition to coping with the problems of rising costs, pests, 
disease, and natural disasters, American sugar farmers have had to deal 
with another threat: trade agreements that have ceded more and more of 
the American sugar market to foreign producers--even if the foreign 
producers are subsidized and inefficient. And more such concessions are 
being contemplated.
    Trade agreements force the U.S. to provide duty-free access for 1.4 
million short tons of sugar each year, whether the country needs the 
sugar or not. This amounts to about 15% of domestic sugar consumption.
    In addition, under the NAFTA, Mexico now enjoys unlimited access to 
the U.S. sugar market. It is difficult to predict how much sugar Mexico 
might send north each year. Key variables include Mexican sugar 
production, government decisions (\1/4\ of the sugar mills are owned 
and operated by the Mexican government), and the pace at which corn 
sweetener, mostly from the U.S., replaces sugar in the massive Mexican 
beverage industry. Mexican sugar exports to the U.S. have varied widely 
in the past, and could in the future--over 1.4 million short tons last 
year, but only about 0.5 million forecast for this year. (Figure 5)
    Furthermore, the U.S. is negotiating a Doha Round of the WTO that 
would result in additional market access concessions. The TPP (Trans-
Pacific Partnership) trade negotiations, recently launched by the Obama 
Administration, could also eventually result in substantial market 
commitments for sugar to the many countries lining the Pacific Rim. 
Such trade concessions threaten to reduce U.S. sugar producers' access 
to our own market even further, and reduce prices as well, making it 
impossible for those of us who are struggling to survive. (Figure 6)
Previous Farm Bill
    In the 2002 Farm Bill, USDA had only two tools to balance U.S. 
sugar supplies with consumer demand.

    1. It could limit foreign supplies to minimum import levels 
        required by the World Trade Organization (WTO) and other trade 
        agreements.

    2. It could limit domestic sugar sales through marketing 
        allotments. Each year, USDA would forecast domestic sugar 
        consumption, subtract required imports, and allow U.S. 
        producers to supply the balance.

     If U.S. production was insufficient to fill demand, USDA 
            could increase imports by expanding the tariff-rate quota 
            (TRQ).

     If U.S. production exceeded the allotment quantity, 
            American producers had to store the excess at their own 
            expense, not the government's.

    This market-balancing system worked reasonably well until 2008, 
although misjudgments in setting the TRQ in 2006 seriously depressed 
the U.S. sugar market. That's when Mexico gained unlimited access to 
our market under the NAFTA, and USDA effectively lost control of the 
market.
The 2008 Farm Bill
    Congress, in its wisdom, designed a sugar policy that is working to 
the considerable benefit of consumers and at zero cost to taxpayers, 
and is giving the remaining American sugar farmers a chance to survive. 
And, it fully complies with the rules of the WTO.
    While retaining the basic-market-balancing tools described above, 
Congress made a number of important improvements in 2008. The farm bill 
minimizes the erosion of American sugar farmers' share of their own 
market by limiting reductions in their marketing allotments to not less 
than 85% of consumption. It's worth noting that in many years, imports 
amount to much more than 15% of the U.S. market.
    If imports exceed the difference between domestic market allotments 
and consumption, USDA will divert surplus sugar into fuel ethanol 
production and restore balance to the sugar market for food. The added 
ethanol production would be consistent with national goals to reduce 
American dependence on foreign oil and improve air quality.
    In addition to the use of ethanol as a market balancing mechanism, 
two other farm bill measures are helping to stabilize the market and 
improve producer prospects:

    1. The first increase in the sugar support price since 1985. The 
        raw cane sugar loan rate rose by \1/4\ cents per pound this 
        year, and will rise the same amount in Fiscal Years 2011 and 
        2012. Refined beet sugar rates will rise by a commensurate 
        amount. In Fiscal Year 2012, the raw cane loan rate will be 
        18.75 cents per pound and the refined beet sugar rate will be 
        24.09 cents.

    2. USDA may not announce a TRQ above the minimum required by trade 
        agreements until halfway through the crop year (April 1), 
        unless there is a supply emergency. By April, much more is 
        known about actual U.S. sugar production and consumption and 
        the volume of imports from Mexico. This will prevent a 
        recurrence of situations such as that in the summer of 2006, 
        when USDA announced an excessive TRQ for the coming year, the 
        market was badly oversupplied, and producer prices languished 
        for almost 2 years.
Consumer Benefits
    American food manufacturers and consumers continue to benefit from 
reliable supplies of sugar that has been produced responsibly and is 
reasonably priced, high in quality, and safe to consume. In real terms, 
corrected for inflation, U.S. wholesale and retail prices have declined 
substantially over the past 3 decades. Food manufactures and consumers 
in the rest of the developed world pay about 10% more for sugar than 
Americans do. Taking per capita income levels into account, sugar is 
more affordable in America than in virtually every other country in the 
world--rich or poor. (Figures 7-12)
Taxpayer Benefits
    Sugar is the only major commodity program that operates at no cost 
to taxpayers, and government projections through 2020 say it will 
remain no cost over all these years. Projections prior to the enactment 
of the 2008 Farm Bill suggested significant costs because of excessive 
imports from Mexico, low prices, and government loan forfeitures. But 
thanks to steady consumption growth, stable domestic production, 
manageable import levels from Mexico, and sound program management by 
USDA, costly surpluses have not occurred. (Figures 13-14)
The 2012 Farm Bill
    The U.S. sugar industry has endured a wrenching restructuring over 
the past 2 decades. American sugar farmers remain are grateful to the 
Congress for crafting a sugar policy that is balancing supply and 
demand, ensures consumers of dependable, high-quality supplies, and is 
improving market prospects for sugar producers. The policy achieves all 
these goals at zero cost to American taxpayers.
    With some prospect of continued market stability, producers should 
be able to re-invest in their operations, further reduce their costs of 
production, and survive. We strongly urge the continuation of this 
successful, no-cost policy in the next farm bill.
    Thank you again, Mr. Chairman, for holding this important hearing 
and for all that you and the Committee do for American agriculture. We 
look forward to working with you in the future.
                                Figures
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    The Chairman. Thank you, Mr. Lee, for that testimony.
    Mr. Kernohan.

   STATEMENT OF BRIAN J. KERNOHAN, FORESTRY PRODUCER, COEUR 
                          d'ALENE, ID

    Mr. Kernohan. Thank you, Chairman Peterson, and Members of 
the Committee, for this opportunity to speak to the group today 
on the review of U.S. ag policy to prepare for the 2012 Farm 
Bill.
    The crop that I'm going to speak about is slightly 
different than that of my colleagues to my right, but 
nonetheless, is extremely important, and through your 
leadership, has made its way into this farm bill, and we hope 
to see that continue.
    My name is Brian Kernohan. I am the Manager of Wildlife and 
Forest Stewardship for Forest Capital Partners, with offices in 
Coeur d'Alene, Saint Maries, and a large area of Idaho.
    Forest Capital Partners really appreciates the Committee's 
track records in supporting the private working forest. And for 
recognizing the values of markets, not only in the farm bill, 
but in other legislation.
    My goal here today is then to encourage the Members of this 
Committee to continue to support a private working forest 
through market-based incentives, and through conservation 
partnerships, public and private, as you begin rewriting the 
farm bill.
    If you will indulge me a moment, I would like to introduce 
you to Forest Capital Partners. Forest Capital is a private 
landowner, a financial manager and a steward of large-scale 
working forests with 2.1 million acres across the United 
States. We own and manage the second largest private forestland 
in Idaho at about 280,000 acres in the northern six counties of 
the state. The other distinction here is that we're at the far 
end of the state from the Treasure Valley here, where most of 
the working forests are in the state. Our lands are managed 
sustainable, and are community based on long-term 
sustainability.
    Our ownership and management of these Idaho working forests 
bolsters the local economy. And I would like to share a few 
statistics to demonstrate the importance of that forest to 
those north six counties, and the small rural communities in 
which we operate.
    We have 22 direct employees, about 40 local contractors, 
including 150 contracting employees. It's very important in 
today's economic environment to demonstrate the landscape, 
generating around $3.2 million in payroll. Contractor payments 
are on the order of $26 million annually.
    And in addition each year, 60 to 100 million board feet of 
timber are coming out of northern Idaho, supplying 20 local 
mills, and paying about a million dollars in state and local 
taxes. So the numbers of those 280,000 acres really expand in 
the economies of Idaho. And as I'll demonstrate, that is 
equally important across the world.
    So there are three points: Private working forests are a 
vital part of America's natural resources infrastructure. It's 
green infrastructure. I think you all know that. Your 
leadership has demonstrated it, and the farm bill supports it.
    The second point, the most effective means of conserving 
these private working forests is markets. It is about 
economics, and including markets in new products, like forest 
fiber.
    Third is public-private investments in helping to meet the 
public's goals and investments coming off of the working 
forest.
    So first, private working forests are a vital part of 
America's natural resources infrastructure. We at Forest 
Capital aspire to create and capture a full range of value from 
our forests.
    Another unique thing about forests, timber may be our 
primary product. But the benefits and products that come off 
those forests vary and are extensive. Not only is it 2x4s, and 
the paper products that the timber produces, but the clean air, 
clean water, wildlife habitat, recreation, and the economic 
basis already described.
    Forests are also offering the solutions to some of the 
nation's most pressing issues. As you, I'm sure are all aware, 
these issues include: domestic renewable energy, a natural 
means of removing carbon from the atmosphere, and addressing 
climate change, and of course, stable jobs.
    The market that we need to incentivize is biomass energy. 
We need such markets that benefit society and the environment. 
Without these markets, these working forests may be forced to 
be converted to non-forest uses, and we lose the values that we 
have described already.
    As this Committee develops the 2012 Farm Bill, we encourage 
you to include an energy title that fully supports the use of 
biomass energy. We encourage you to continue the current energy 
title. It contains a broad definition of biomass to allow these 
markets to operate and to function.
    The 2008 Farm Bill recognized the value of sustainability 
of energy from biomass by including that definition, and it 
allows the infrastructure of our business to take off.
    Finally, public-private investments: While viable markets 
are critical, investments in public-private partnerships are 
also important. In the State of Idaho, we have been working 
with conservation partners, with the support, thank you, of 
Representatives Minnick and Simpson, on securing forest legacy 
funds to protect and conserve a very important migration 
corridor for wildlife in northern Idaho.
    So thank you for that support. And it's through provisions 
like these in the farm bill that allow these public-private 
partnerships to continue.
    So again, Forest Capital appreciates the Committee's 
support for private working forests, while recognizing the 
value of markets. As you look ahead to the 2012 Farm Bill, and 
other legislation and oversight, we look forward to working 
with you to conserve working forests as a forest.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Kernohan follows:]

   Prepared Statement of Brian J. Kernohan, Forestry Producer, Coeur 
                              d'Alene, ID
I. Introduction
    Mr. Chairman, thank you for this opportunity to appear before the 
House Committee on Agriculture today and review U.S. agriculture policy 
as you prepare for the 2012 Farm Bill.
    I am pleased to appear before you today as a private lands manager. 
I am the Manager of Wildlife and Forest Stewardship for Forest Capital 
Partners. Forest Capital Partners owns and manages 2.1 million acres 
across the United States and is the second largest private landowner in 
Idaho, managing 280,000 acres in the northern six counties of Idaho. 
Our lands are managed sustainably and are certified as such by the 
Sustainable Forestry Initiative'. Our primary management 
objectives on our lands are to (1) sustainably enhance forest 
productivity and health while creating environmental benefits and (2) 
provide economic benefits to the company, mills, and community based on 
long-term sustainability.
    While we have 22 direct employees in Idaho earning a total of $3.2 
million per year, we contract with 40 contractors who employ over 150 
people, generating contractor payments of approximately $26 million per 
year. We pay $1 million a year in state and local taxes in Idaho. We 
harvest between 60-100 million board feet of timber each year that 
supplies 20 mills, and we complete site preparation and reforestation 
on approximately 7,500 annually.
II. Working Forests
    At Forest Capital Partners, we aspire to be a leader in creating 
and capturing the full range of values from our forests. We recognize 
that forests provide social and environmental values in addition to 
economic. In fact, much like farms and ranches, private, working 
forests are a vital part of America's natural resources infrastructure. 
In addition to products that improve our quality of life, whether 2x4s 
for homes, household paper products or furniture, they provide clean 
air and water, wildlife habitat, open space, recreation opportunities, 
and an economic base for rural communities. They also offer solutions 
to some of our nation's most pressing issues: domestic, renewable 
energy; a natural means of removing carbon from the atmosphere; and 
stable jobs that support American families.
    These benefits come primarily from America's private forests. The 
United State has 755 million acres of forests--an amount that is 
roughly the same today as it was 100 years ago--57 percent, or 427 
million acres, is owned by over ten million private landowners. 
America's private landowners are managing their land well and are 
consistently growing more than we harvest. Over the past 50 years, 
growing stock in our forests increased 49 percent.\1\
---------------------------------------------------------------------------
    \1\ State of America's Forests. Society of American Foresters. 
2007.
---------------------------------------------------------------------------
    These healthy, productive forests support American families. 
According to a recent study conducted by the National Alliance of 
Forest Owners, private forests in the U.S. support 2.5 million direct, 
indirect, and induced jobs and $87 billion in payroll in the 29 states 
covered by the study. Here in Idaho, private, working forests support 
30,412 jobs, $891 million in payroll, $9 million in state income taxes, 
$2 billion in sales, and $847 million towards Idaho's GDP.\2\
---------------------------------------------------------------------------
    \2\ The Economic Impact of Privately-Owned Forests. Forest2Market 
and the National Alliance of Forest Owners. 2009. Available online at 
www.nafoalliance.org/economic-impact-report/.
---------------------------------------------------------------------------
    The contributions from private, working forests are noticed at the 
national level. A diverse cross-section of interests recognizing the 
value of working forests have come together to support policies to 
promote working forests at the national level. The platform of this 
group, which calls itself the ``Working Forests Coalition,'' state in 
their platform that ``Sustaining and enhancing the value of private 
working forests both to society and to forest owners is of vital 
national importance and essential to meet some of our nation's most 
pressing needs.'' I submit for the record the platform of the group as 
presented to USDA Secretary, Tom Vilsack, and urge to Committee to 
consider the elements of this platform when developing policies 
affecting working landscapes.
III. Markets Conserve Forests
    Central to this coalition's message--and my message today--is that 
the most effective means to conserve private forests is to ensure 
viable markets for forest products exist. Working forests depend on 
strong and dependable existing and new markets for forest-derived 
products and services. Such markets benefit society, the environment 
and forest owners alike, because they put forest owners in an economic 
position that supports continued investment in sound forest management 
over the long term. Without these markets, economic pressures may force 
private forestlands into other more economically competitive uses.
    Markets supporting working forests change and evolve over time. We 
see that here in the Northwest as pulp and paper facilities have 
significantly declined in number. As the marketplace changes it is 
important that we foster new opportunities that will provide the 
markets of tomorrow. America now stands at the cusp of two such markets 
that may play an important role in conserving working forests: 
renewable energy and carbon.
IV. Energy from Renewable Forest Biomass is Beneficial and Sustainable
    As the Committee develops the elements of the next farm bill, we 
urge the inclusion of an energy title that further supports the use of 
biomass energy from forests and croplands to produce new sources of 
renewable energy and derivative bio-based products as an important 
means of both meeting our nation's energy needs and conserving working 
landscapes.
    Renewable energy from wood is domestic, renewable, sustainable, and 
does not increase carbon in the atmosphere. For decades, the forest 
product industry has produced electricity and heat from biomass. In 
fact, the forest products industry produces more energy from biomass 
than all the energy produced from solar, wind, and geothermal sources 
combined. Additionally, technology is being commercialized to produce 
low-carbon liquid transportation fuels and ultra-low-carbon synthetic 
natural gas that can be substituted for higher carbon sources of 
electricity and fuels.
    The 2008 Farm Bill recognized the value and sustainability of 
energy from renewable forest biomass by enacting a broad definition for 
what qualifies are renewable forest biomass for energy. We thank this 
Committee for its strong leadership in supporting this approach in last 
year's debates on the Waxman-Markey legislation. The U.S. Department of 
Agriculture also supports a broad biomass definition and joins this 
Committee as an advocate for this approach in future renewable energy 
legislation. I would like to submit for the record an exchange of 
letters between a large coalition supporting a broad biomass definition 
and Secretary Vilsack from earlier this year. I would like to also 
submit for the record an April 20, 2010 letter from 98 organizations to 
Senators Kerry, Graham, and Lieberman supporting a broad renewable 
biomass definition.
    As Congress debates new renewable energy policy, we urge the 
Committee to continue its leadership in providing new economic 
opportunities for working lands within the parameters of existing 
Federal, state and local laws, programs and partnerships that support 
the sustainable management of working lands. Private forests operate 
within a framework of Federal, state and local forest practices that 
has been tailored over the course of decades to local conditions and 
needs and has been central to helping the United States be a world 
leader in sustainable forest practices. To help increase awareness of 
this framework, I would like to provide the Committee a white paper on 
environmental regulation of private forests in the U.S.
V. Supporting Working Forests can Help Address Concerns about Climate 
        Change
    As the nation continues to wrestle with the issue of climate 
change, we wish to remind the Committee of the important role of 
working forests in addressing concerns about carbon in the atmosphere. 
The trees we grow absorb and store carbon naturally and turn it into a 
variety of public benefits. Currently our forests absorb 15 percent of 
our nation's annual emissions.\3\ Through proper management, increasing 
use of long-term wood products, and using wood for energy, U.S. forests 
can do even more. Work done by the Consortium for Research on Renewable 
Industrial Materials documented how managed forests can produce 
sustained, overall net emissions reductions when carbon is stored in 
wood products like fence posts and kitchen tables and when wood is 
substituted for building products that require significantly more 
energy to produce.\4\
---------------------------------------------------------------------------
    \3\ U.S. Environmental Protection Agency. 2009. Inventory of U.S. 
Greenhouse Gas Emissions and Sinks: 1990-2007.
    \4\ See Bruce Lipke et al., CORRIM: Life-Cycle Environmental 
Performance of Renewable Building Materials, 54 Forest Prod. J. 8 
(2004).
---------------------------------------------------------------------------
    As the U.S. looks for ways to establish a balance approach to 
reducing carbon emissions, domestic, working forests offer a natural, 
sustainable, and economic solution that not only improves our carbon 
footprint, but helps the rest of the environment as well while 
providing jobs and greater security in rural communities.
VI. Private-Public Partnerships can Further Conservation Goals
    President Teddy Roosevelt said, ``Conservation means development as 
much as it does protection.'' He understood that while viable markets 
are the most critical component to conserving private forests, public 
and private investments can help meet public goals to maintain working 
landscapes. These investments can include both direct investments in 
forest management and conservation and investments in the 
infrastructure that supports forest stewardship and market development. 
Market-oriented private-public investments are frequently the most 
effective.
    As Forest Capital Partners seeks to create and capture the full 
range of economic, social, and environmental values from forests, we 
recognize that sustainably managed working forests provide important 
wildlife habitat and support local communities with jobs and revenues 
at the same time. The Forest Legacy program also recognizes this, and 
it is an important source of funding to help conserve the economic, 
social, and environmental values of forests. In fact, we are currently 
working with the Nature Conservancy to utilize Forest Legacy funding to 
conserve an important wildlife migration corridor in North Idaho.
    Forest Legacy, the Healthy Forest Reserve Program, and other 
private-public partnerships to conserve land are an important tool for 
landowners and the public in their conservation efforts. We urge the 
Committee to continue to support and strengthen these and other 
private-public programs to help conserve working forests.
Conclusion
    Forest Capital Partners appreciate the Committee's track record of 
supporting private, working forests, recognizing the conservation value 
of markets, and entrusting the existing framework of Federal, state, 
local, and third-party laws, regulations, and agreements to sustain 
private forestry operations.
    As the Committee looks ahead to the 2012 Farm Bill and other forest 
legislation and oversight, we look forward to working with you on how 
best to conserve working forests as forests.
                              Attachment 1
Keep Working Forests Working
Private Forests, Public Benefits
    Private working forests are a vital part of America's natural 
resources infrastructure, contributing significantly to the quality of 
life enjoyed by all Americans. In addition to open space and 
aesthetics, private working forests provide important consumer 
products, clean water and air, energy, wildlife habitat and recreation 
opportunities, and strengthen rural economies, just to name a few of 
their many public benefits. They are also key to addressing critical 
issues facing our nation today: increasing our use of renewable energy, 
offering solutions to address climate change, maintaining a healthy 
natural environment, and providing a stable source of jobs that support 
American families.
    Because private forests are so fundamental to meeting the pressing 
and future needs of our nation, tapping their potential as part of 
America's critical infrastructure is a necessary component of the 
nation's overall economic, social, and ecological health and 
productivity. All Americans benefit from the fact that eighty percent 
of renewable biomass energy comes from wood, ten percent of U.S. carbon 
dioxide emissions is absorbed by forests, eighty-six percent of 
forestland is available for recreation, fifty-three percent of all 
freshwater in the U.S. originates on forestland, and 689 tree species 
and 1,486 terrestrial animals species live in our forests.ii 
It is through such abundance that America's forests sustainably account 
for more than $200 billion a year in sales of consumer products and 
services, employ more than one million people, and further the nation's 
environmental and ecological goals.i
    The public benefits of working forests are derived from over 755 
million acres of forests in the United States--the fourth largest 
acreage in the world and an amount that has remained relatively stable 
over the past 100 years.ii Private forests account for more 
than 427 million acres, owned by over ten million private 
landowners.ii
    Private forest acreage in the United States has remained relatively 
stable over the past fifty years, and standing timber inventory on 
these forestlands has increased.ii A primary reason for this 
is viable markets for the goods and services private forests provide. 
These markets provide the opportunity for an economic return to private 
forest owners, which translates into long-term investments that promote 
forest retention and expansion and thereby a continuation of 
environmental, economic and social benefits to society.
    But the success of the past does not secure the future. As existing 
markets weaken or disappear, goods, services and uses associated with 
working forests are becoming less competitive with other economic uses 
of private forestland over time. While some conversion from forests to 
other uses is acceptable to accommodate a growing population or to 
optimize land use, it is critical to develop policies and programs that 
help working forests remain competitive with other land uses and 
thereby help sustain the many benefits they provide as part of our 
nation's natural resources infrastructure. This is especially critical 
as we advance our efforts to meet our nation's growing need for 
renewable energy, climate change solutions, a healthier environment, 
and family-waged jobs in rural communities.
    A Call to Action. Sustaining and enhancing the value of private 
working forests both to society and to forest owners is of vital 
national importance and essential to meet some of our nation's most 
pressing needs, including renewable energy, addressing greenhouse gas 
emissions, a healthy environment, and jobs in rural communities. To 
achieve this, the forestry community, consisting of forest owners, 
conservation and wildlife groups, resource professionals, environmental 
organizations and other interests call for the development of an 
actionable national policy platform focusing on three areas:

    I. Strengthen existing and emerging markets for goods and services 
        working forests can provide. Working forests depend on strong 
        and dependable existing and new markets for forest-derived 
        products and services. Such markets benefit society, the 
        environment and forest owners alike, because they put forest 
        owners in an economic position that incentivizes continued 
        investment in sound forest management over the long term. Areas 
        of focus should include:

     Steps to maintain traditional markets that provide 
            sustainably produced consumer goods and services, such as 
            housing materials, recyclable products and recreation.

     Support for emerging and potential markets such as 
            renewable energy and fuels, green building, and wood-based 
            technologies.

     The promotion and development of markets for environmental 
            services, such as climate change mitigation and carbon 
            offsets, enhancement of water quality and quantity; 
            endangered species conservation and other services, 
            including the effective utilization of new authorities 
            provided under the 2008 Farm Bill.

    II. Support and align public and private investments, partnerships 
        and policies to maintain working forest landscapes. Public and 
        private investments are an important means of maintaining key 
        economic, social and environmental benefits of working forests. 
        Investments can include both direct investments in forest 
        management and conservation and investments in the 
        infrastructure that supports forest stewardship and market 
        development. Market-oriented public-private partnerships are 
        frequently among the most effective forms of such investment. 
        Areas of focus should include:

     Developing and improving tax provisions supporting forest 
            conservation that apply to all classes of forest ownership.

     Strengthening investments in public-private conservation 
            partnerships that equitably benefit both forest owners and 
            the environment and that demonstrate results. Such 
            partnerships may include existing programs, such as Forest 
            Legacy and the Healthy Forests Reserve Program, or may 
            require the improvement of existing or the development of 
            new investment or partnership tools.

     Supporting targeted and effective research and development 
            and strengthening the workforce engaged in private forest 
            management.

    III. Align government policies to support the long-term viability 
        of working forests. Over time, Federal, state and local 
        governments have established policies affecting private forests 
        in a variety of contexts and for a variety of purposes. Such 
        policies should both align with one another and support the 
        long-term viability of working forests. A conscious effort to 
        promote and coordinate government policies to help sustain 
        working forests is essential to maintaining the benefits they 
        can provide over the long term. Areas of focus should include:

     Identifying and reforming policies that discourage private 
            forest ownership or investment in private forest 
            stewardship.

     Developing mechanisms to align new and existing policies 
            affecting private forests with the objective of sustaining 
            private working forests over the long term.

    Developing a Plan of Action. The undersigned seek to work with 
Congress, the Administration, and all interested parties who support 
working forests to advance the concepts in this platform and identify 
priority action items that will most effectively sustain and enhance 
the value of private working forests across landscapes over time. This 
approach contemplates utilizing the considerable body of research on 
private forest management that has already been done, developing from 
this information a set of specific recommendations for policy makers to 
consider, and working with policy makers to put in place national 
policies to reaffirm that our private forests are a vital part of our 
nation's natural resources infrastructure for the long term.
References
    i American Forest and Paper Association. ``Our Industry: 
Economic Impact.''
http://afandpa.org/ourindustry.aspx?id=35 (accessed July 15, 2009).
    ii Society of American Foresters. The State of America's 
Forests. 2007.
                              Attachment 2
April 20, 2010
 Hon. John F. Kerry,                  Hon. Joseph I. Lieberman,
U.S. Senate;                         U.S. Senate,
Washington, D.C.;                    Washington, D.C.Hon. Lindsey Graham,
U.S. Senate,
Washington, D.C.;

    Dear Senators:

    As the Senate considers energy and climate change legislation, we 
urge you to fully support the use of biomass for energy as a means to 
help our nation meet its renewable energy and climate change goals. We 
strongly urge you to include a broad renewable biomass definition that 
is consistent across all relevant Federal programs, similar to that of 
the 2008 Farm Bill (plus mill residues and byproducts and excluding 
commonly recycled paper), and to include the appropriate recognition of 
the carbon benefits of biomass energy in any legislation developed for 
Senate deliberations.
    According to the U.S. Department of Agriculture, a broad definition 
for renewable biomass, such as contained in the 2008 Farm Bill (which 
is substantially similar to the Waxman-Markey bill language), is a 
common sense and practical approach that enables biomass participation 
in emerging markets and provides economic options to help preserve 
working farms and forests on the landscape and the many public benefits 
they provide. We strongly support this view and urge that the expert 
opinion of USDA be reflected in national policy. We also urge that 
biomass definitions not impose restrictions that would foreclose market 
opportunities or introduce new Federal regulation of public and private 
lands.
    We also strongly urge that the full carbon benefits of renewable 
energy from biomass be appropriately acknowledged in national policy. 
Unlike fossil fuels, which emit carbon into the atmosphere from 
geologic sources that are not renewable, carbon associated with the 
combustion of biomass is part of a natural cycle that maintains a 
carbon balance by removing carbon emissions from the atmosphere through 
natural processes, like photosynthesis, and stores the carbon in 
plants, trees and soil. This balance is reflected in contemporary and 
widely-accepted science acknowledging that combustion of biomass for 
energy in countries like the United States does not increase 
atmospheric carbon as overall carbon growing stocks remain stable or 
increasing. It is also embedded in the policies and analysis of the 
Environmental Protection Agency, the Energy Information Agency and 
other authoritative and credible government and non-government 
organizations.
    We look forward to engaging on the important task of helping our 
nation increase its capability to produce domestic, renewable sources 
of low carbon biomass energy. We are confident that, by working 
together, we can achieve this goal in a manner that supports the 
contributions of working farms and forests, appropriately recognizes 
the full carbon benefits they provide, and maintains them as a viable 
source of our renewable energy portfolio in the long term.
            Sincerely,

 25x'25;                              Mississippi Forestry Association;
ADAGE;                               Montana Logging Association;
Alabama Agribusiness Council;        N.C. Association of Professional
                                      Loggers, Inc.;
Alabama Forestry Association;        National Alliance of Forest Owners;
American Forest and Paper            National Association of
 Association;                         Conservation Districts;
American Forest Foundation;          National Association of Counties;
American Forest Resource Council;    National Association of Forest
                                      Service Retirees;
American Loggers Council;            National Association of State
                                      Foresters;
Arkansas Forestry Association;       National Association of University
                                      Forest Resources Programs;
Associated California Loggers;       National Association of Wheat
                                      Growers;
Associated Oregon Loggers, Inc.;     National Farmers Union;
Association of Consulting Foresters  National Forest Counties and
 of America;                          Schools Coalition;
Association of Equipment             National Woodland Owners
 Manufacturers;                       Association;
Avista Corporation;                  New York Biomass Energy Alliance;
Biomass Coordinating Council,        North American Bear Foundation;
 American Council on Renewable
 Energy;
Biomass Power Association;           North Carolina Forestry
                                      Association;
Biomass Thermal Energy Council;      Northern Arizona Loggers
                                      Association;
BlueFire Ethanol Fuels, Inc.;        Oregon Forest Industries Council;
Boone & Crockett Club;               Oregon Small Woodlands Association;
California Forestry Association;     Pingree Associates;
Catch-A-Dream Foundation;            Plum Creek;
Ceres, Inc.;                         Port Blakely Tree Farms, LP;
Congressional Sportsmen's            Professional Logging Contractors of
 Foundation;                          Maine;
Coskata;                             Quality Deer Management
                                      Association;
Duke Energy;                         Range Fuels;
Entergy Corporation;                 Rayonier, Inc.;
Environmental Federation of          Reiver Forest Products;
 Oklahoma;
Family Forest Foundation;            Resource Management Service, LLC;
FirstEnergy Corporation;             RMK Timberland Group;
Florida Farm Bureau Federation;      Rocky Mountain Elk Foundation;
Florida Forestry Association;        Shull Timber Corporation;
Forest Landowners Association;       Society of American Foresters;
Forest Landowners Tax Council;       South Carolina Forestry
                                      Association;
Forest Products Industry National    Southeastern Lumber Manufacturers
 Labor Management Committee;          Association;
Forest Resources Association Inc.;   Tennessee Forestry Association;
Frontier Renewable Resources;        Texas Forestry Association;
Georgia Forestry Association;        The Lyme Timber Company;
GMO Renewable Resources;             The Molpus Woodlands Group;
Hancock Timber Resource Group;       The Westervelt Company;
Hardwood Federation;                 Virginia Forest Products
                                      Association;
Idaho Forest Group;                  Virginia Loggers Association;
John Deere;                          Washington Contract Loggers
                                      Association, Inc.;
KL Energy Corporation;               Washington Farm Forestry
                                      Association;
Longview Timber;                     Washington Forest Protection
                                      Association;
Louisiana Forestry Association;      Wells Timberland;
Michigan Association of Timbermen;   Weyerhaeuser Company;
Michigan Forest Products Council;    Wildlife Mississippi;
Minnesota Forest Industries;         Woodlands Carbon Company;
Mississippi Biomass and Renewable    Xcel Energy.
 Energy Council;
                              Attachment 3
January 26, 2010

David P. Tenny,
President and Chief Executive Officer,
National Alliance of Forest Owners,
Washington, D.C.

    Dear Mr. Tenny:

    Thank you for your October 13, 2009, letter on behalf of a range of 
interest groups in which you express support for a broad definition of 
renewable biomass as it relates to energy development.
    There is wide national agreement on the need for more renewable 
energy and biofuels, including cellulosic ethanol and other advanced 
biofuels. As you may know, I have supported the 2008 Farm Bill 
definition of renewable biomass as it is a common sense and practical 
approach that enables market participation while simultaneously 
considering the sustainability of our lands. I believe that this 
definition can and will provide landowners with economic options that 
will help keep forestlands forested.
    I look forward to working with you in the future on this and other 
forest issues. If you would kindly share this response with your 
colleagues, I would be most appreciative.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Hon. Thomas J. Vilsack,
Secretary. 
                                 ______
                                 
October 13, 2009

Hon. Thomas J. Vilsack,
Secretary,
U.S. Department of Agriculture,
Washington, D.C.

    Dear Secretary Vilsack:

    We are writing to thank you for your leadership in advancing a 
sustainable renewable energy policy, responsible land management, and 
rural America through a broad definition for renewable forest biomass 
in energy and climate policy. We particularly appreciate your support 
of a definition similar to that of the 2008 Farm Bill that would 
provide full market participation for biomass from private and public 
forestlands while including biomass from Federal lands that conforms to 
Federal law and forest plans.
    America's private and public forests are uniquely suited to help 
meet our nation's renewable energy and climate needs. Renewable forest 
biomass from these lands could provide a significant portion of the 
energy needed to meet an RES and could make substantial contributions 
to the production of next generation transportation fuels. Sound 
management of our forests to provide biomass energy will also improve 
the overall carbon footprint of domestic energy supplies while 
contributing to the long-term forest health and vitality--improving 
wildlife habitat, protecting water quality and reducing catastrophic 
wildfires that emit millions of tons of carbon dioxide and other 
greenhouse gases each year.
    One of the goals of promoting renewable energy is to reduce our 
dependence on foreign sources of energy and replace them with domestic 
sources of clean, reliable energy. Critical to this objective is an 
inclusive definition of qualifying biomass that maintains a level 
playing field for market access across all feedstock sources and 
encompasses the full range of wood biomass, including trees and other 
plants, forest residuals and byproducts of manufacturing.
    As Congress moves forward on energy and climate change legislation, 
and the Administration participates in COP-15, we look forward to 
working with you to promote a broad definition of renewable forest 
biomass in Federal policy.
            Sincerely,
 25x'25;                              National Association of Counties;
ADAGE;                               National Association of Forest
                                      Service Retirees;
Alabama Forestry Association;        National Association of State
                                      Foresters;
American Forest Foundation;          National Association of University
                                      Forest Resource Programs;
American Forest Resource Council;    National Forest Counties and
                                      Schools Coalition;
American Loggers Council;            National Wild Turkey Federation;
Arkansas Forestry Association;       North Carolina Forestry
                                      Association;
Associated Logging Contractors of    Northern Arizona Loggers
 Idaho;                               Association;
Associated Oregon Loggers;           NorthWestern Energy;
Association of Consulting Foresters  Oregon Forest Industries Council;
 of America;
Avista;                              Oregon Small Woodlands Association;
Biomass Coordinating Council,        Otoka Energy;
 American Council On Renewable
 Energy;
Black Hills Forest Resource          Quality Deer Management
 Association;                         Association;
Boone & Crockett Club;               Reaves Timber;
California Forestry Association;     Rocky Mountain Elk Foundation;
Catch-A-Dream Foundation;            Ruffed Grouse Society;
Colorado Timber Industry             Shull Timber Corporation;
 Association;
Deere & Company;                     Society of American Foresters;
Empire State Forest Products         South Carolina Forestry
 Association;                         Association;
Entergy Corporation;                 Sustainable Solutions Georgia;
Florida Forestry Association;        Tennessee Forestry Association;
Forest Landowners Association;       Texas Forestry Association;
Georgia Forestry Association;        The Biomass Power Association;
Intermountain Forest Association;    Virginia Forest Products
                                      Association;
Louisiana Forestry Association;      Virginia Loggers Association;
Michigan Association of Timbermen;   Washington Contract Loggers
                                      Association;
Michigan Forest Products Council;    Washington Forest Protection
                                      Association;
Mississippi Biomass and Renewable    Washington Friends of Farms &
 Energy Council;                      Forest;
Montana Logging Association;         Woodlands Carbon Company;
National Alliance of Forest Owners;  Xcel Energy.

    The Chairman. Thank you, Mr. Kernohan. And thank you all 
Members of the Committee for testimony.
    I want to focus in on something, you guys kind of brought 
up the direct payment issue in different ways. You brought out 
the issues that have been before us regarding that part of the 
farm safety net. And part of the reason we get into the payment 
limitation debate all the time is because of direct payments.
    Mr. Brown, you testified that your folks are pretty wedded 
to direct payments. What I'm picking up, as I travel around the 
country in my district, is that some of my folks are starting 
to question whether it may be better to try to direct that 
money towards crop insurance, or towards some kind of revenue 
program, or something along those lines.
    But because you are sitting next to people that are in 
organic and specialty crops, one of the things we wrestled with 
last time, over these direct payments, was the ability of 
having enough land available to be able to grow some of those 
specialty crops. And so because of that, we increased the 
planting flexibility of 11 states to try to address that.
    In my state in the southeastern part, I picked up a lot of 
questions from people. We have Seneca Foods that produces a lot 
of canned and frozen vegetables. But we also have a lot of 
organic folks. And we're getting a lot of complaints from them, 
that they cannot get enough land to be made available to them, 
because of the direct payments in the farm programs.
    So we've got people coming at us from all different 
directions on this issue. Mr. Brown, are your folks at least 
willing to enter into discussion to look at the system, and see 
if there is a better way to do this, or a different way to do 
this? Or are you just kind of locked into keeping the structure 
the way it is?
    Mr. Brown. Thank you, Mr. Chairman. No, our folks are very 
willing to look at different alternatives in lieu of the direct 
payment. We surveyed our board of directors, not formally, but 
we surveyed them in our last board meeting. And the majority of 
them expressed that the direct payment was important. But we 
also talked about an increase in crop insurance benefits, and 
things like that, would be equally as important.
    We realize that the direct payment has a big red target on 
it. And I think you challenged the National Association of 
Wheat Growers to think outside the box. And say, what if the 
farm bill didn't exist? What if this was the first farm bill? 
What would it look like?
    The international organizations are currently in the 
process of surveying our members, asking them for creative and 
innovative ideas.
    The Chairman. Do you have any idea how long that process is 
going to go on.
    Mr. Brown. No. We realize that we have a time constraint. 
And we're trying to get that information gathered as quickly as 
we can.
    The Chairman. Mr. Brossy, do you have any problems with 
getting land for organic production here in Idaho, because of 
the land being in a program, so it's not available.
    Mr. Brossy. Thank you, Mr. Chairman. No, I personally don't 
see that. I have a farm that's very contained, and so I'm not 
looking to expand.
    And I'm fortunate to have an adequate land base to do what 
I can manage. I think partly what Mr. Brown is referring to 
really has to do with the nature of grain production in Idaho, 
which is totally different than irrigated ag down here in 
southern Idaho, where we have much more crop choices available.
    And, if you are farming thousands of acres, and literally, 
most of it's grain, or grain, or peas and lentils as a 
rotation, your direct payment is significant. For most of us in 
southern Idaho, who farm smaller acreages, it's really kind of 
a minor part of our whole program. And I actually would put in 
a plug for improving crop insurance.
    I'm actually looking forward to using AGR-Lite at some 
point. You have to actually own your farm for so many years to 
be eligible, and I'm not quite there. But I think for my 
system, that makes more sense, because it----
    The Chairman. We're looking at that. One of the things I 
would like to see is--I don't know if we can get there in this 
next farm bill. But I would like to see us get to a point where 
we could cover all of the crops under crop insurance. That's 
the goal that I have of trying to figure out a system where we 
can cover your whole operation, whatever you are growing. And 
that's where we need to get.
    As to your CSP idea, I have a problem with that. The way I 
see the safety net program--what I think we're trying to do is 
to put a backstop there that your banker is comfortable with, 
for whatever level of production you have. So that you've got 
enough risk management, enough protection that if the weather 
goes bad, or the markets collapse, or whatever, the banker 
knows he's going to get repaid, or you are going to get your 
money back out of your crop.
    So I see that as what we're trying to do. And I'm reluctant 
to turn that system over to somebody who has some other goal, 
other than production. And if they were sensible, in terms of 
some of the conservation stuff, that might be one thing.
    But we've seen that when you set up those kinds of things, 
you sometimes get ideologue. We've seen this in biofuels. Where 
they basically almost shut down the industry, because of all 
these crazy ideas they come up with, which are almost like a 
religion on the international land use and so forth, that make 
it almost impossible to do.
    I'm all for conservation, but I'm not sure we want to mix 
that up with what the purpose of a farm bill is, and that is to 
get people who want to grow a farm the ability to manage their 
risk. That's kind of where I'm coming from. But I've heard it 
from other people, I should say.
    Mr. Brossy. I realize it's a radical notion when you look 
at the traditional farm bill programs. I guess I would just 
offer that if crop insurance was broader based, and more 
effective in more diversified operations, then it would be the 
safety net that you are talking about.
    And again, I think that any public money spent on 
agriculture should be tied to good conservation. Because 
ultimately, we're going to need that to continue to produce 
food for our country into the future. We're going to be less 
dependent on fossil fuels by necessity. We need to be 
innovative, and conservation should be tied to all that. So 
thank you.
    The Chairman. Well, I agree. But, also, it doesn't make 
economic sense for conservation. Some things that are happening 
don't necessarily make much common sense.
    Mr. Lucas. Now, if I could ask the panel first the question 
that I always ask in these kind of discussions. What are land 
prices doing in your state, in your areas, in your communities 
in year 2010 now and 2005; up, down, sideways.
    Mr. Simpson. [Indicating down.]
    Mr. Lucas. Really? It actually did. Because generally when 
the question is asked, and has been asked for a number of 
years, which I think is a reflection of several good farm bills 
in a row, I get an upwards signal.
    So what's driving down your land prices, gentlemen, in the 
areas where yours are going down? Is it the price of your 
commodities you are selling? Is it the uncertainty of the EPA, 
the Federal regulations? Is it difficulty of acquiring credit?
    Whichever one of you brave gentleman would like to step up.
    Mr. Gross. Mr. Lucas, we see the commodity prices dropping, 
and that's the reflection of lower land values, land rents, and 
lower values.
    Mr. Lucas. Well, along with that, let's touch for a moment 
on the topic that the Chairman brought up. And the Chairman and 
I tend to agree on almost everything, but occasionally we have 
a difference of opinion.
    I share his perspective that if we create programs that 
require certain standards to be met that are created by some 
bureaucracy on the East Coast of CSP, or similar programs, you 
run the danger that if the wrong people implement the programs, 
you get the most bizarre requirements. That does concern me.
    One area where the Chairman and I tend to disagree is when 
we're talking about the direct payment programs. Neither the 
Chairman or I voted to join the WTO. But we live in a WTO 
world.
    And in most commodities, we have to contend with our 
friends in China, and in Brazil, and those trade cases they 
bring against us. And having farm programs that give us the 
best ability to defend the resources that we're putting into 
agriculture is critically important. The direct payments are 
the most compliant part of what we're doing right now.
    So I, too, want to ask Mr. Brown about that question. How 
relevant and how important are the direct payments? And have 
they been since 1996, in your operation, the nature of the area 
you are in?
    Mr. Brown. Well, I think as I said, and I'll speak for 
myself, and also on behalf of the board. But the board, when we 
surveyed the board, the majority of them did say that the 
direct payments were important in operation. And in our 
operation, I think the direct payment is equally important.
    But as I told the Chairman, we would be willing to look at 
alternatives if those baseline dollars could be used in other 
ways to benefit producers, and still provide that safety net 
for the production of agriculture.
    Mr. Lucas. Did I see in your background somewhere that you 
are an accountant.
    Mr. Brown. Yes.
    Mr. Lucas. A CPA.
    Mr. Brown. Yes.
    Mr. Lucas. Could you visit with us for a moment, and of 
course, any one else on the panel who would like to comment 
too, what the effect, potentially, of the estate tax changes 
that are coming to us could have on your business? What the 
change this fall in the capital gains records, and income tax 
rates could do to farmers in your part of the country.
    Mr. Brown. Well, estate taxes are a very big concern in our 
area--well, through all areas of the country should be a 
concern. We've got a growing population of farmers. The estate 
tax should be a vehicle to be able to pass on that family farm 
to future generations.
    In a way, that's our retirement plan, our 401(k) plan, if 
you want to call it that. We make our investment in our land. 
Our land payments are made every year. That is our retirement. 
And for all that hard work and years of work that is put in by 
a family farmer, he should be able to pass that farm on to his 
children up to a certain level, without having to have the 
heirs having to sell that farm in order to pay the tax.
    And so it's a concern to us. Our resolution says we're in 
favor of a $5 million exemption at a 35 percent rate. That 
would be our ideal estate tax.
    Mr. Lucas. Last question, Mr. Chairman, and the panel. 
EQIP, how important is it to you in your industries in your 
part of the state? There again, a show of hands up or down. 
Does EQIP matter?
    [Audience showing hands.]
    Mr. Lucas. Enough said. Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Lucas.
    The gentlelady from South Dakota, Ms. Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. And in 
addition to having your complete Idaho Delegation to the House 
represented today, the entire South Dakota Delegation to the 
House is represented here today as well. And it's a pleasure to 
be with all of you. And thank you for your testimony.
    I don't have a question, Mr. Henggeler. I just wanted to 
make you, and the folks that you represent here today, aware of 
a bill that I and Joanne Emerson introduced called the Healthy 
Start. You had mentioned in your testimony, the importance of 
grappling with the obesity epidemic across the country, 
particularly among young children. How it's expanding to all 50 
states. How the SNAP program has created an additional market 
for your producers.
    And the Healthy Start Program has made, for the first time, 
commodity assistance to be available for school breakfast, in 
addition to school lunches. And I think that this is another 
positive development.
    I don't support undermining our farm safety net, and other 
titles in the farm bill to find the resources. But I do think 
that we can find the resources necessary to expand school 
nutrition programs. We know how important the school breakfast 
program is.
    I'm a mother of a 16 month old baby. He's started every 
breakfast since he was 6 months old with apples, or peaches, or 
pears, or plums, and other fruits.
    And I've sat down in some of the school breakfast programs, 
and I like having my bowl of Cocoa Puffs and Frosted Flakes, 
too. But I am disappointed that we don't have fresh fruits 
integrated into the school breakfast programs. I think 
commodity assistance would be very beneficial to them, and 
certainly to apple producers and other fruit producers across 
the country.
    Eastern South Dakota is more like our neighbors in 
Minnesota, Idaho, and the Midwest. Western South Dakota is more 
like our neighbors in Wyoming, Montana, and Idaho, when we look 
at cattle producers, and sheep producers, and forestry.
    And so Mr. Kernohan, I have some questions for you. You 
mentioned the energy title with the Chairman's leadership by 
incorporating the energy title and expanding it in the 2008 
Farm Bill.
    As you know, we have the forest biomass for energy program. 
We have the community wood energy program. We have been 
authorized at $15 million and $5 million respectively and the 
President's 2011 budget, does request the full amounts, 
recognizing the importance of renewable biomass off our 
forests, as one element among many of reducing our dependence 
on foreign oil and other fossil fuels, and supporting rural 
jobs.
    You know, in the Black Hills of South Dakota, we have a lot 
of national forestlands. But we have the state and private 
forestlands, too.
    And so if you could comment, has Forest Capital Partners 
participated at all in the Biomass Crop Assistance Program?
    Mr. Kernohan. We have not directly. We have spent a lot of 
time looking at it, and have not participated directly.
    Ms. Herseth Sandlin. Is there a reason that you haven't? I 
mean, they have recently proposed some rules. Do you anticipate 
that you might participate? And I know that we've got concerns 
about disallowing national payments for wood wastes and mill 
residues, typically used to produce products, such as particle 
board.
    But do you have any thoughts on how that program might be 
useful to you or other private working forestlands?
    Mr. Kernohan. Thank you for the question. Absolutely. The 
program is very useful. And as an attempt in the farm bill to 
look at producing the infrastructure for a new market, I might 
go so far as to say, it's invaluable to private forestland 
owners.
    It's a program that is intended to jump start our market, 
and that's good. And I think the regulations that are going 
through, are hopefully going to lead to a better program so 
that more companies can take advantage of it.
    The importance of this is that forest biomass is a maturing 
market. And where we struggle at Forest Capital is the question 
that you first asked is, have we participated? No. Would we 
like to? Absolutely.
    And where we struggle to put forest biomass to market right 
now is from the woods to the facility. And the intent, as we 
understand it, is intended to take that nearest forest, and 
bring it to market.
    So that aspect of the supply chain is critical to us. We 
own the supply. We're trying to get it to market. So any 
program like BCAP that does that, we hope to see continue and 
to persist.
    We didn't have an opportunity not for lack of want. It was 
just depending on your location, and production of our harvest, 
we just couldn't make it work in terms of the timing for it. 
The moratorium was set as the rules were revised. So that was 
my answer to your first question, Ms. Herseth Sandlin.
    Ms. Herseth Sandlin. I appreciate that. And just one final 
comment. As you know, Mr. Minnick, and I, and other Members of 
our region here in the interior West, have worked at strategies 
to deal with the pine beetle infestations. They are threatening 
not only our private forests, but certainly, the state and 
national forests as well.
    And we hope to get some feedback from the Secretary to 
effectively resource and identify how we can have competence 
and strategy to deal with this emergency.
    Mr. Kernohan. Thank you.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    The gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman, for holding 
these hearings as we come across the country. And I want to 
thank Congressman Minnick, he's doing a great job in 
Washington.
    Unlike my colleagues from Idaho, who comprise the whole 
delegation, and my colleague from South Dakota, I'm \1/53\ of 
the California delegation. And I'm not so sure you would like 
the other portions of the delegation.
    But I represent perhaps one of the richest agricultural 
regions in the entire country. From Fresno to Bakersfield, 
there are over 300 commodities grown, large dairy, and citrus 
interests. And I represent the third generation of family 
farmers. So I'm very aware of the hard work that all of you do 
by farming west of the Fresno area.
    Let me begin by asking panel members, in terms of your own 
operation: What observations do you make with regards to the 
volatility, the market volatility that you've witnessed in the 
last 10 years in your areas, and how have you dealt with that 
volatility?
    Mr. Lee. Well, thank you, Mr. Costa. In the sugar industry, 
the farm bill we're currently working under has been great for 
stabilizing our sugar prices. We feel that the provisions work 
really well. We would hope to have it maintained.
    On my operation, this year sugar has out-subsidized the 
dairy, which has been low for quite some time.
    Mr. Costa. Yes. We have started to melt down the dairy 
industry in California and clear across the country.
    Mr. Lee. Yes, so the sugar has helped with that. It has 
been very beneficial in that area.
    Mr. Costa. Regarding sugarbeets, you mentioned taking over 
the co-op and purchasing the existing three plants. We've seen 
sugarbeet production, as you may know in our area, diminish 
greatly in the last 2 decades. There have been some efforts to 
try to salvage it and use the industry as part of an energy 
source. Are you looking at that here in Idaho?
    Mr. Lee. To use the sugar as an energy source?
    Mr. Costa. Right.
    Mr. Lee. We've looked into some states. Our Nyssa plant 
that was closed in 2005, there were some studies done to look 
at using that for ethanol. The feasibility just wasn't there at 
this point in time. It was something that we could still look 
at. But right now, it's not being studied.
    Mr. Costa. But the problems that we've had, not just in the 
dairy industry, but other sectors, the credit crisis has been 
felt in American agriculture.
    I don't know who of you might like to discuss any first or 
secondhand knowledge of credit availability, and how you've 
dealt with that within your various crops.
    Does anyone want to tackle that? Traditional lenders, Farm 
Credit, what has worked, what hasn't?
    Mr. Brown. Congressman, I know that in our area in 
southeastern Idaho, credit has tightened up significantly. And 
a lot of it is because of industries, like the dairy industry, 
having significant problems. That has scared the Farm Credit 
Services. They are more conservative, I guess, in their 
approach, and require better financial standards now to lend 
money.
    Mr. Costa. Do you prefer Farm Credit or traditional lending 
community banks.
    Mr. Brown. Mostly in my own operation, I've mostly dealt 
with Farm Credit. They have normally been very easy to deal 
with. They understand farm issues, ag issues. So they've been 
the easiest to deal with.
    Mr. Costa. Mr. Henggeler, I was pleased to hear your 
comments with regards to the need to bring immigration reform. 
I have been a proponent of that, along with AgJOBS. My 
preference would be to see comprehensive immigration reform, 
because it's badly needed throughout the country. I think a lot 
of the reactions we've seen today are a result of long overdue 
Federal policy that needs to be changed.
    Having said that, would a 3 year, or a 5 year pilot program 
that implemented AgJOBS, to kind of set the table for 
comprehensive reform, work here in Idaho?
    Mr. Henggeler. I believe it would. We do need some type of 
vehicle where we can secure a legal workforce. It's been a 
concern. I had an opportunity to be present at the introduction 
of the AgJOBS, bill several years ago. It was critical then, 
and it's even more critical now.
    And if there is some type of pilot program where we can 
work through, where all states are equally participating in 
that program, it would be a positive.
    Mr. Costa. Thank you. My time has expired. I did want to 
get to the area of what applications were for the rural 
broadband. I didn't hear any that were discussed that we're 
trying to expand those efforts. I know it's needed in my area, 
and other rural areas. And also the rural development program 
that Secretary Vilsack is attempting to deal with. And rural 
healthcare, but we'll have to save that for another time.
    Thank you very much, Mr. Chairman, for your time.
    The Chairman. The gentleman from Idaho, Mr. Minnick.
    Mr. Minnick. Thank you, Mr. Chairman. I would like to 
assure my colleague from California, Mr. Costa, that if 
everyone from California thought the way you did, we would 
welcome the whole delegation. In fact, we may even want you to 
run for speaker.
    I would like to pursue Congressman Costa's question with 
you, Mr. Henggeler. What changes would we need, as part of a 
comprehensive immigration reform, to the temporary worker 
programs, H1 and H2, to make it work for the apple industry, 
and other users of seasonal labor, in order that you can get 
your crops in, and compete successfully both locally and 
internationally?
    Mr. Henggeler. Thank you, Congressman Minnick. What we 
talked about, what I referred to as the H-2A system. And a lot 
of folks out West do not participate in that program, 
specifically in Idaho.
    But our New York apple growers do. Our northeastern apple 
growers do. And what they have found is that the process is 
just so cumbersome. By the time that you put paperwork in, and 
securing, or trying to procure labor to come, and pick the 
crops because our items are so perishable, what usually happens 
is, and what has happened in the past is, those apple pickers, 
or fruit pickers that show up about a week after the crop 
should have been harvested. Well, in our business, we can't 
allow that to happen. That's when they start maturing past the 
deadline. And we're not giving a quality piece of fruit to the 
consumer at the supermarket level.
    So, you know what we need is some type of better method to 
identify workers that are eligible for the program. A more 
flexible system that allows us to bring workers in and out, and 
where we can track them thoroughly.
    So the paperwork, even at the level of what H-2A is trying 
to do with 150,000 workers, is onerous. But, we're talking 
about maybe over a million-and-a-half workers in agriculture. 
We're going to have to step up our efforts in order to develop 
a system to handle that amount of workers.
    Mr. Minnick. Thank you very much.
    Mr. Kernohan, following up on my colleague's from South 
Dakota's question. How do we provide incentives to your 
industry, other sources of crop residue to incentivize biomass 
energy, without discriminating against the other end-uses of 
the same raw material?
    I'm thinking in your case about discriminating against the 
people who want to use essentially the same wood fiber, or 
analogous wood fiber, for paper, for lumber, for landscape 
materials? How do we create this new set of incentives without 
making the mistakes we did to incentivize corn ethanol, with 
the consequences it had for a whole host of consumers, 
including our local dairy industry.
    Mr. Kernohan. Thank you, Congressman Minnick. That is a 
challenging level for us with the forest biomass. But let me 
offer this as a thought.
    I think first and foremost, we have to create policies that 
actually allow a strong, vibrant infrastructure to be created. 
And why I start there--and that includes full supply chain, and 
openness of definitions of renewable biomass.
    Because I think when you provide incentives at that level, 
that the economics of forest management will sort those 
principal concerns out in terms of valuation of products. So I 
think forest biomass is honestly, the lowest value product. So 
I think we have to allow those markets.
    Mr. Minnick. So temporary subsidies to jump start, but not 
permanent subsidies of money in use.
    Mr. Kernohan. I think temporary subsidies are the right 
place to start. And honestly, I haven't thought through the 
downfalls of the pros and cons of permanent subsidies. But I 
think in our business, we don't have a lot of subsidies. So I 
would proffer that subsidies could start our market, and we'll 
figure it out from there. And usually it will work.
    Mr. Minnick. Thank you. I yield back, Mr. Chairman.
    The Chairman. I thank the gentleman.
    And the gentleman from Idaho, Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman. I appreciate it.
    First, I have to apologize when I said we have the whole 
Idaho Delegation here. And I didn't think about it. But 
whenever you hold a hearing, whenever Stephanie Herseth Sandlin 
holds a hearing in South Dakota, the whole delegation is there.
    Ms. Herseth Sandlin. That's right.
    Mr. Simpson. So I apologize for that. And I also wanted to 
say, that I appreciate the Cocoa Puffs, and the fruits and 
vegetables in the breakfast. I think that's important, too. But 
you can never forget the most important part of that breakfast; 
the hash browns.
    As was mentioned, I sit on the Appropriations Committee. I 
am also the Appropriations representative on the Budget 
Committee. And one of you mentioned that we would probably have 
a baseline that might be substantially lower.
    See, it won't stay up, just because I'm from the 
Appropriations Committee.
    We will probably have a baseline, I would suspect, given 
the budget situation we're facing in Washington, that may be 
substantially lower for the next farm bill, than we have for 
this current farm bill.
    If that is the case, what do you think of further efforts 
to reduce the payment limitations as a means of trying to 
reduce the overall costs of the farm bill?
    Mr. Brown?
    Mr. Brown. Well, I think speaking from IGPA's standpoint, I 
think we're against any further reduction in payment 
limitations.
    Mr. Simpson. What would the impact be on Idaho producers? 
Because it affects different producers in different parts of 
the country differently.
    Mr. Brown. Yes.
    Mr. Simpson. And I understand the largest impacts on 
payment limitations are on large western farms, and those in 
the South, as opposed to those in the Northeast and other 
states.
    Mr. Brown. We have a lot of large family farms in Idaho, 
who currently bump up against those payment limitations. And in 
reality, when you are talking about large farming operations, 
payment limitations, any further reduction, it just, you know--
--
    Mr. Simpson. The other thing that will put, I guess, a 
challenge to, is this question, as you saw between the Chairman 
and Ranking Member, about direct payments, and increasing the 
possibility of crop insurance, or enhancing the crop insurance 
program. And, you mentioned the desire to increase that.
    If the challenge is enhancing the crop insurance program 
versus direct payments, rather than keeping the direct payments 
as they are, and still enhancing the crop insurance, which 
direction do you think you are going to go?
    Mr. Brown. Well, I don't know. We don't have the survey 
back from our membership. But, as I said, the direct payment is 
important. But as an alternative, I think the producers would 
be willing to look at enhancement to the crop insurance 
program.
    Mr. Simpson. You might know, Mr. Chairman, you'll probably 
see a lot more of Mr. Brown in the upcoming year. He's going to 
be the President of the National Barley Growers Association. 
And another Idahoan, Wayne Hurst, is going to be President of 
the National Association of Wheat Growers.
    So we will have those representatives back in Washington 
talking about this very issue when you hear from your 
producers.
    Mr. Gross, you mentioned during your testimony, that they 
have some indemnity program that provides partial compensation 
to livestock and poultry producers when flocks or herds are 
repopulated due to pests or disease.
    No such program exists for specialty crops. In your 
experience, how has this lack of this aspect of the program 
affected the potato industry, or other specialty crops?
    Mr. Gross. I'm in the potato seed business, also. And I've 
seen cases where bacterial ring rot may have been found on 
individual operations, and they've tended not to report it, or 
not look for it at the risk of a lot of other producers. They 
tend to just push it under, since they know it's a death 
sentence for their seed operation.
    So I just think if there was some kind of safety net 
available, they wouldn't lose their entire operation right 
then, that they might be more forthcoming in looking and 
reporting finds.
    Mr. Simpson. Interesting. How has the Specialty Crop 
Research Initiative Grants helped with the specialty crop 
industry and the potato industry?
    Mr. Gross. Well, specialty crop research initiatives have 
allowed us to study some potato viruses in Idaho, and spreading 
methods that we might better control our potato virus 
situation.
    Mr. Simpson. Thank you all for being here today. I 
appreciate it very much.
    The Chairman. I thank the gentleman, and thank you panel 
very much for your testimony. It was very good. Good answers to 
questions. We appreciate your making the effort to be with us 
here today. So this panel is excused.
    And we will call the next panel to the witness table. Mr. 
Ron Bitner, winegrape producer and vintner from Caldwell, 
Idaho; Mr. Charlie Lyons, cattle producer from Mountain Home, 
Idaho; Mr. Adrian Boer, dairy producer from Jerome, Idaho; and 
Ms. Cindy Siddoway, lamb producer from Terreton, Idaho.
    We will take a brief recess.
    [Recess.]
    The Chairman. Mr. Bitner, we will start with you. And 
welcome to Committee.

  STATEMENT OF RON M. BITNER, WINEGRAPE PRODUCER AND VINTNER, 
                          CALDWELL, ID

    Mr. Bitner. Thank you, Mr. Chairman, Congressman Lucas, Ms. 
Sandlin, Mr. Costa, and I notice two gentlemen are missing 
right now, Congressman Simpson. And I want to thank Mr. Walt 
Minnick for inviting me to participate today.
    My name is Ron Bitner. I am a consulting entomologist here 
in Canyon County, Idaho, about 10 miles west of here. I've been 
growing winegrapes since 1980.
    I'm representing the Idaho Grape Growers and Wine Producers 
Commission today. And I'm currently the Chairman of the 
National Wine Grape Growers Association, and I'm also 
representing the National Wine Grape Growers.
    Nestled between the Rocky Mountains and the Snake River, 
the Idaho wine regions are growing steadily. Nurturing the 
grapes with a moderate climate, limited precipitation, and a 
consistent growing season, the Idaho wine regions add 
complexity to our grapes. We need to do everything in our power 
to see that this industry continues to succeed.
    The Idaho wine industry has been steadily growing for the 
last 30 years with remarkable growth in this past decade. With 
11 wineries in 2002, Idaho is now home to over 40, with 1,600 
acres of grapes planted. And nine of these wineries have opened 
in the past year.
    And Idaho, along with a lot of the other states, has seen a 
resurgence in the small wineries, that have done a lot for 
economic development in the small country towns across this 
nation.
    There is an economic impact study, conducted by Boise State 
University and the Idaho Wine Commission, that concluded that 
the Idaho wine industry had a $73 million impact in 2008, and 
created nearly 625 jobs. This growth led to an increase in 
visibility, more tourism, an enhanced reputation, and has 
created tremendous opportunity for expansion.
    The Idaho wine industry is just in its infancy, and is 
expected to see remarkable growth in the next 15 years, and 
just coming into its own. More and more people are buying Idaho 
wine, and this is good news for our economy.
    In order for us to continue to have success, we need to 
determine what I think are three major issues, not only in 
Idaho, but across the nation. Number one is immigration reform; 
enhanced marketing; and continuing to enhance research dollars.
    Concerning farm bill specifics, the Wine Grape Growers of 
America, we just came back from meetings in March. And our 
three top priorities with the farm bill concerned continued 
funding of the National Clean Plant Network to provide us with 
disease free plants.
    The Specialty Crop Block Grant Program has been extremely 
successful across this country for winegrape growers and small 
wineries. And the Specialty Crop Research Initiative has also 
been very successful. We want to see those programs continue.
    One other aspect of the farm bill, and here I have to put 
on my bee hat. I've been a consulting bee entomologist. I've 
worked with non-Apis bees and native bees for 42 years now. And 
I was really encouraged to see in the last farm bill, the 
importance, and the rise and recognition of the importance of 
pollinators to our crops across this nation, not only in 
increased funding, but including those into our reserve 
programs, set aside programs.
    You know, it's the first time that has actually happened. 
And as a bee biologist with 40+ years under my belt, I want to 
see that continue.
    With that, I'll stand for questions later. Thank you.
    [The prepared statement of Mr. Bitner follows:]

 Prepared Statement of Ron M. Bitner, Winegrape Producer and Vintner, 
                              Caldwell, ID
    Nestled between the Rocky Mountains and the Snake River, the Idaho 
wine regions are growing steadily. Nurturing the grapes with a moderate 
climate, limited precipitation, and a consistent growing season, the 
Idaho wine regions add complexity to the grapes. We need to do 
everything in our power to see that this industry continues to succeed.
    The Idaho wine industry has been steadily growing for the last 30 
years with remarkable growth in the past decade. With 11 wineries in 
2002, Idaho is now home to over 40 with 1,600 acres of grapes planted. 
Nine of these wineries have opened in the past year. That's a lot of 
growth in a down economy.
    In order to see the impact the Idaho wine industry is having, the 
IWC worked with BSU to conduct an economic impact study. The results 
were startling. It was concluded the Idaho Wine industry had a $73 
million impact in 2008 and created nearly 625 jobs. This growth led to 
an increase in visibility, more tourism, an enhanced reputation, and 
has created tremendous opportunity for expansion.
    You might be thinking how are the sales and are any Idaho wines 
selling. The answer is good and yes. Idaho wines are at an affordable 
price point between $10-30, encouraging consumers to try new, 
undiscovered wines that are affordable in this economic downturn 
instead of reaching for the $50 and $100 bottles. Media has also been 
paying attention to Idaho, as they are looking at the next big thing 
and that's Idaho. Countless articles have been written.
    So the next question, where are we going? The truth is the industry 
will continue to grow as national wine consumption increases, as well 
as Idaho's grape growing potential. Idaho wines are discovered across 
the country, ranking us 22nd in the nation.
    The Idaho wine industry is just in its infancy and is expected to 
see remarkable growth in the next 15 years. Just coming into its own, 
and receiving a great deal of recognition, winemakers and growers are 
learning as they go and making great wine in the process. More and more 
people are buying Idaho wine and this is good news for our economy.
    In order for us to continue to have success, we need to determine 
what to do about immigration reform, enhancing marketing, and continue 
with research.
    Dealing with immigration is a sore subject for the wine industry. 
The immigrant workers are a crucial part of the industry, without them 
the work in the vineyards would not get done because it is very labor 
intensive. They face cold winters when pruning takes place and hot 
summers when training the vines. Many of these workers are probably 
illegal, but all they have to do is show their Social Security card to 
the vineyard owner and they are good to go. However, under new laws the 
vineyard owner could face hefty fines and possible jail time if it 
turns out any of their employees are illegal. If you halt illegal 
immigration work, you halt the industry in return due to the lack of 
potential work by these men and women in the vineyards.
    Marketing is another area we in Idaho need to focus on. Consumers 
know about California and Washington wine, but the need to learn more 
about Idaho wine is crucial, and the only way we can succeed is to 
spend more money to reach them. We can do this by participating in 
events, giving samples, creating a better website and buying ads on the 
radio, but all these take money. We need to concentrate on Marketing 
for this industry to succeed; otherwise people simply won't know we 
exist.
    This past year we had substantial cuts to the University of Idaho's 
budget, resulting in almost losing the Parma Research Center where 
substantial research is conducted on grapes and wine. Without this 
research center, we would be forced to see data and research out of 
state, which would not be as applicable due to different climates for 
growing. While we got lucky this time, as the center will stay open, we 
do not know for how long, leaving the potential for losing the center 
up to another budget cut in the future. As the industry grows, 
tremendous research is needed to determine what we can grow best, 
looking for new varietals along the way and determining what grows best 
for Idaho.
    Idaho truly has immense potential to be one of the leading wine 
industries in the country, but we need to get a handle on these issues 
before we can get there.

    The Chairman. Thank you, Mr. Bitner. We appreciate it.
    Mr. Lyons, welcome to Committee.

 STATEMENT OF CHARLES LYONS, CATTLE PRODUCER, MOUNTAIN HOME, ID

    Mr. Lyons. Hello, Mr. Chairman, and Members, thank you.
    My name is Charles Lyons. I'm a rancher out of Mountain 
Home, and I also am a representative of the Idaho Cattle 
Association.
    I'm a first generation cattle producer, and I would be 
tickled to give you guys the credit, but I'm married to one. 
But I'm sure in the future, your programs will help me out 
tremendously.
    But when I was dealt this hand, I was a little confused to 
where I would end up. Today I thought I would be hanging out in 
Walt Minnick's office, telling him how wonderful he is, and 
kicking back, and then going and drinking beer, and telling 
each other----
    Mr. Minnick. There is still time.
    Mr. Lyons.--and then going back, and hanging out and 
telling each other how wonderful we are. But I learned a few 
days ago that my job was a little different than what I 
assumed.
    So I hope to show no disrespect in my lack of preparedness 
to deal with you here today. Karen, on our staff, has been 
extremely willing to jump in and try to make me look better. 
She prepared this opening statement for me.
    So I thought I could just read it, and my wife told me, no. 
No. She said listening to you read is like chewing tin foil. I 
recommend you don't do any such thing. So if it would work, I 
would just like to briefly go through them, and deal with some 
of our top issues. And then I would certainly welcome your 
questions.
    The thing that's affecting us most here in the ranching 
industry in Idaho are environmental regulations. They are 
extremely burdensome. It comes from a lot of different sources, 
either judges, or from the Federal Government, or even the 
state, itself.
    And the thing that has been able to help us a quite a 
little bit and accomplish those goals and deal with those 
regulations is EQIP. And from a personal standpoint, our ranch 
has used EQIP, and cost sharing through NRCS. And they have an 
excellent staff in Mountain Home and in the state.
    And we've entered into a 10 year contract. And it went well 
for about 6 years. And like a lot of things, the burdensome 
part of it continued to grow, to where it became easier for me 
to do it myself instead of dealing with the system. And it was 
actually cheaper to do it by myself, even with the cost share 
program.
    So we went ahead and pulled out of the contract after about 
6 years. And I went ahead and finished the work that we planned 
on doing on the 10 year plan.
    And that's certainly kind of the down side. And I know EQIP 
has helped with a lot of guys dealing with the endangered 
species, such as the bruneau snails, putting in pivots. You 
know, things like that. The money wasn't there. So from that 
perspective, it's been extremely helpful.
    Another program that's been helpful for us through NRCS is 
Wildlife Habitat Incentives Program. The guys are doing a good 
job on the ground. They are making things proactive. They are 
actually there helping wildlife. Within the program there are 
incentives for you to continue those practices. And that's 
extremely encouraging. And we hope those monies are available 
to reward people who are doing good on the job, instead of 
paying somebody that's maybe not doing the work.
    Of the issues that pertain to the farm bill, one was 
energy. It was pretty devastating to the cattle industry when 
we started looking into ethanol, and dealing with farm 
subsidies. From my standpoint, it jerked the guts out of the 
feeder industry here in the State of Idaho.
    And I understand the other side. You know, you need to give 
incentives and subsidies to get a young program going, and get 
it off the ground. But it always has repercussions for those 
that were already using that commodity, and relying on our 
bottom line for the price and structure that was there.
    And when that subsidy came, it seemed that the price jumped 
so far out of line, that it pretty much jerked the feet out 
from under us for a couple of years there.
    One of the things that Mr. Lucas asked about was the taxes, 
and the estate tax. I can only give my own perspective. 
Everything that I do is put back into land and cattle. That's 
what I know. I don't deal in the stock market. I don't really 
deal with--I try to stick with what I know.
    So I try to buy land. And the guy always has to buy more 
cows and more horses. And when it comes my time to purchase the 
ranch from my uncle, I don't want his siblings to be left with 
the only option that is to sell, where I can't even touch it. 
You know, you were asking about land values. You know, not to 
be too personal, but our place is probably now worth $4 
million. Which is so far kind of out of the realm of trying to 
ever purchase it for an animal unit.
    But when it comes my time to purchase that--I kind of got 
lost. But I don't have the ability to do it. There is no way I 
can pay the taxes on that. There is no way the family members 
can pay the taxes on that without selling it. So I think that's 
going to be a huge--a huge problem that we're going to need to 
deal with in the future.
    And I'll just kind of leave it at that. What I found 
interesting most was the back-and-forth questions. So I would 
certainly appreciate your guys' questions on anything further.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Lyons follows:]

Prepared Statement of Charles Lyons, Cattle Producer, Mountain Home, ID
    Mr. Chairman, Congressman Minnick, thank you for the opportunity to 
present the Idaho cattle industry's perspective on the upcoming 2012 
Farm Bill. My name is Charles Lyons, and I am a cattle producer from 
Mountain Home, Idaho. I am currently President-Elect of the Idaho 
Cattle Association.
    As cattle producers, our livelihood is tied to many other 
agricultural commodities. We are dependent upon this nation's 
agricultural system and infrastructure to feed, transport, market our 
cattle, and provide beef for America's table; and as such, we are 
interested in seeing this segment remain healthy and viable.
    Unlike other agricultural commodity groups, however, we tend to 
take a different look at portions of U.S. agriculture policy. Ranchers 
are an independent lot who want the opportunity to run their operations 
as they see fit with minimal intrusion from the government. As the 
nation's largest segment of agriculture, the cattle industry is focused 
on continuing to work towards agricultural policy which minimizes 
direct Federal involvement; achieves a reduction in Federal spending; 
preserves the right of individual choice in the management of land, 
water, and other resources; provides an opportunity to compete in 
foreign markets; and does not favor one producer or commodity over 
another.
    The open and free market is powerful, and as beef producers, we 
understand and embrace that fact. The cyclical ups and downs of the 
market can be harsh, but the system works, and we remain steadfastly 
committed to a free, private enterprise, competitive market system. It 
is not in the nation's farmers or ranchers' best interest for the 
government to implement policy that sets prices; underwrites 
inefficient production; or manipulates domestic supply, demand, cost, 
or price.
Conservation and the Environment
    There are portions of Federal agriculture policy that we can work 
on together to truly ensure the future of the cattle business in the 
United States. Conservation and environmental issues are two such 
areas. Some of the cattle industry's biggest challenges and threats 
come from the loss of natural resources and burdensome environmental 
regulations. Ranchers are a partner in conservation. Our livelihood is 
made on the land, so being good stewards of the land not only makes 
good environmental sense, it is fundamental for our industry to remain 
strong. Our industry is threatened every day by urban encroachment, 
natural disasters, and misinterpretation and misapplication of 
environmental laws. We strive to operate as environmentally friendly as 
possible, and it is here where we can see a partnership with the 
government.
    The goal of conservation and environmental programs is to achieve 
the greatest environmental benefit with the resources available. One 
such program that achieves this is the Environmental Quality Incentive 
Program or EQIP. All producers should be afforded equal access to cost 
share dollars under programs such as EQIP. Further, it is important for 
ranchers in the west that EQIP monies are made available for 
conservation work on the Federal lands that are an integral part of 
their operations.
    Second, many producers would like to enroll in various USDA 
conservation programs such as CSP and CRP to reach environmental goals. 
However, to enroll in these programs requires the producer to stop 
productive economic activity on the land enrolled. We believe economic 
activity and conservation can go hand in hand. As such, we support the 
addition of provisions in the next farm bill that will further allow 
managed grazing on land enrolled in CRP. This will have tangible 
benefits on environmental quality, for example, helping to improve 
lands threatened by invasive plant species.
    Further, programs such as the Wildlife Habitat Incentives Program 
can be helpful tools in assisting ranchers as they manage land to the 
mutual benefit of wildlife and livestock. The Endangered Species Act 
has often put a stranglehold on ranchers' ability to put land to 
productive use, often to the detriment of the species in concern. To 
the extent that WHIP and other NRCS programs can be improved to assist 
ranchers in undertaking on-the-ground conservation efforts and 
developing conservation plans, habitat, wildlife, and production 
agriculture will all benefit.
    Additionally, conservation dollars allocated through farm bill 
programs must be distributed only to those involved in production 
agriculture and not be able to be misused by environmental extremist 
groups with the sole intent of locking up land.
    USDA's conservation programs are a great asset to cattle producers. 
We want to see them continued and refined to make them more producer-
friendly and more effective in protecting the environment in a sensible 
way.
    Environmental issues are also a huge challenge for our industry. 
Proposed legislation regarding climate change and cap-and-trade could 
prove devastating to American agriculture and put us at a distinct 
disadvantage in the world's marketplace. Even if the bills move forward 
with an ag exemption, the increase in costs of fuel, electricity, 
fertilizer, feed, and equipment will be more than most livestock 
producers can bear. These, combined with EPA's regulation of greenhouse 
gases, makes us all concerned for our industry. Although these items 
are not addressed directly in the farm bill, we ask that the Members of 
the Committee step in and help ag producers in their fight to have 
effective and sensible environmental regulations.
Trade
    Outside of conservation and environmental issues, there are several 
other issues that have the potential to impact the long-term health of 
the beef industry. One such area is trade. U.S. cattlemen have been and 
continue to be strong believers in international trade. We support 
aggressive negotiating positions to open markets and to remove unfair 
trade barriers to our product. We support government programs such as 
the Market Access Program and the Foreign Market Development Program 
which help expand opportunities for U.S. beef, and we urge sustained 
funding for these long-term market development efforts. We also support 
Congressional and regulatory action to address unfair international 
trade barriers that hinder the exportation of U.S. beef.
Energy
    Research is also needed to identify and develop alternative methods 
of producing energy. Renewable energy is going to become an 
increasingly important part of our country's energy supply and there 
are many ways that cattle producers can contribute and benefit. 
Research and development is needed to find cost-effective methods of 
utilizing manure and animal waste as a fuel supply. When looking at 
ethanol, however, we must be careful not to act in a way that is 
detrimental to the livestock industry. Livestock consume the majority 
of U.S. corn. As ethanol continues to grow, we must make sure it does 
not do so at the detriment of the cattle feeding industry. We must take 
all opportunities to look at ways to balance feed demand, price, and 
the benefit of renewable fuels.
Taxes
    Reducing the tax burden on ranchers has always been a top priority 
for our industry. We continue to support permanent repeal of the Death 
Tax. Regardless of how many or how few are effected, if even one 
rancher has to sell off part of their operation to pay this tax, it is 
unacceptable to us. Cattlemen pay their fair share of taxes, and resent 
the fact that many will be penalized for wanting to pass their 
operations on to future generations. Our priority is to keep families 
in agriculture, and this tax works against that goal. We do not see 
this as a tax cut for the rich. The rich can afford high priced 
attorneys and accountants to protect their money now. Ranchers operate 
in an asset rich but cash poor business environment. Ranchers must 
spend money that would otherwise be reinvested in their businesses to 
hire the resources necessary to protect their assets and pass their 
operations on to their children. At the same time, however, they may 
have several hundred acres of land whose value has been driven up by 
urban sprawl and the unintended consequences of Federal crop supports. 
We also support keeping the Capital Gains Tax at a lower rate and the 
repeal of the Alternative Minimum tax.
Conclusion
    America's cattlemen are proud and independent. We just want the 
opportunity to run our ranches the best we can to provide a high 
quality product to the American consumer, and even more importantly, 
provide for our families and preserve our way of life. We are coming to 
you in an effort to work together to find ways to use the extremely 
limited funds available in the best way possible to conserve our 
resources, build our industry, and provide for individual opportunity 
at success. We ask for nothing more than Federal agriculture policy 
that helps build and improve the business climate for cattlemen. We 
look forward to working with you on the 2012 Farm Bill.

    The Chairman. Thank you, Mr. Lyons, for your testimony.
    Mr. Boer, welcome to the Committee.

      STATEMENT OF ADRIAN BOER, DAIRY PRODUCER, JEROME, ID

    Mr. Boer. Thank you, Chairman Peterson, Representative 
Simpson, and House Agriculture Committee Members. Thank you for 
allowing me to testify today about dairy policy on behalf of 
the Idaho Dairymen's Association.
    My name is Adrian Boer. I'm in partnership with my wife, 
two sons, and daughters-in-law, and most recently grandson and 
granddaughter-in-law. It's truly a family farm operation.
    Collectively on our three dairy operations, we milk 5,000 
cows. I'm active on the Idaho Dairymen's Association, serve on 
the Board of Directors of the Northwest Dairy Association, and 
for NDA, served on the Board of Directors of National Milk 
Producers Federation. For NMPF, I serve on the Strategic 
Planning Task Force, and currently serve on the Production 
Managing Subcommittee.
    The Idaho Dairymen's Association formed in 1944 is an 
organization comprised of all of the dairy producers in Idaho. 
It is funded by a .01 cents/cwt check-off and utilizes its 
funds to promote the interest of the Idaho dairy industry to 
individual citizens, state and national legislators, 
governmental agencies, conservation organizations, community 
groups and agricultural organizations to maximize the 
understanding and appreciation of the Idaho dairy industry.
    Northwest Dairy Association markets 7.5 billion pounds of 
milk annually from 550 dairy producers located in Idaho, 
northern California, Oregon, Utah and Washington under the 
Darigold label. Darigold, which was established in 1918, is an 
integrated milk marketing cooperative with 11 milk processing 
facilities in the Northwest that make and distribute fluid 
milk, butter, cottage cheese, skim milk powder and a variety of 
cultured products.
    Dairy farmers in Idaho and the United States experienced 
their worst year financially in anyone's memory in 2009, and 
the crisis continues today. It is critical to evaluate all of 
the current dairy programs in order to identify solutions that 
need to be implemented in the next farm bill.
    As an end result, it is estimated that a minimum of 50 
percent of the dairy animals in Idaho across all sizes of 
operations are now in special assets with their banks. The 
uncertainty for the dairy operators, their families, and the 
other industries that rely on a healthy, robust dairy industry 
are taking a toll.
    Dairy has developed into one of the largest agriculture 
segments of Idaho's various commodities, with over 36 percent 
of all Idaho agricultural income coming in the form of a milk 
check. Numerous smaller agriculture operations and small allied 
businesses are at stake as our industry in Idaho tries to 
recover.
    Last year National Milk Producers Federation created a 
strategic planning task force to seek consensus across the 
dairy and producing community in creating a solid foundation 
for the future. The goal has been to analyze and develop a 
long-term strategic plan that will have a positive impact on 
the various factors influencing both supply and demand for milk 
and dairy products.
    The current Dairy Product Price Support Program and the 
MILC program are inadequate protections against the dairy 
pricing crisis that we now face. Neither program was designed 
to function in a more globalized market, where not just milk 
prices, but also feed costs, and energy expenses are more 
volatile and trending higher. We have also faced this past year 
destructively low profit margins that occurred when input 
costs, especially feed prices, shot up.
    It is particularly disturbing when our input costs 
increased dramatically, when other government programs, which 
occurred with the implementation of ethanol subsidies, were put 
into place.
    The Idaho Dairy Association is an associate member of the 
National Milk Producers Federation, and will be closely 
monitoring the development and implications of the NMPF 
proposal that we have tagged with the name, Foundation for the 
Future.
    I believe we will be able to strongly endorse, support, and 
lobby for the proposed changes following the guidance 
established by the legislative policies approved by the IDA 
membership.
    My written testimony contains detailed information about 
the NMPF proposal. And I recognize that you have also had other 
testimony at other hearings on our proposal. As a member of the 
NMPF's strategic planning task force, we have spent numerous 
hours in the development of other proposals. I will address any 
questions you may have on the plan at the end of our testimony.
    As I mentioned in my written testimony, there are other 
issues that are very important to me and the dairy industry. 
Comprehensive immigration reform is long overdue. Our dairies 
employ 57 individuals, the majority of whom are of Hispanic 
heritage. Our entire workforce has legal documents.
    Some of our Hispanic employees have been with us over 20 
years. According to a recent study conducted by Boise State 
University, the Idaho dairy industry accounts for over 29,000 
jobs. In Idaho, 8,200 of those are on the dairy. The majority 
of those on the dairy are held by foreign-born laborers. IDA, 
NDA, NMPF strongly support the type of broad immigration reform 
for the agricultural perspective that AgJOBS proposes.
    Dairy farmers share the concerns of all Americans about 
securing our borders and protecting this country. And they are 
not willing to sacrifice its security. However, failing to 
provide for orderly flows of greatly needed workers has the 
potential to create the enormous economic consequences for our 
industry, and do very little to enhance our border protection. 
It is time for Congress to debate about immigration and develop 
solutions to allow our current employees to remain here.
    The Trans-Pacific Partnership Free Trade Agreement also 
raises concerns. Expanded dairy trade with New Zealand offers 
an entirely one-way street since the FTA would open up no 
effective new opportunity for the U.S. dairy industry in New 
Zealand, and even the prospect of increasing access to other 
markets within the TPP is limited. Because of this, producers 
everywhere throughout the U.S., as well as many leading dairy 
processors, are seeking the full exclusion of U.S.-New Zealand 
dairy trade from the TPP.
    I want to thank you for the opportunity to testify on the 
issue of dairy policies here today. Through IDA, NDA and NMPF, 
I am excited about moving forward to working with the Members 
of this Committee on issues of critical importance to the 
state, regional, and national dairy industry.
    Mr. Chairman, I look forward to answering any questions 
from the Committee pertaining to the dairy industry. Thank you.
    [The prepared statement of Mr. Boer follows:]

     Prepared Statement of Adrian Boer, Dairy Producer, Jerome, ID
    Chairman Peterson and House Agriculture Committee Members; thank 
you for allowing me to testify today about dairy policy on behalf of 
Idaho Dairymen's Association.
    My name is Adrian Boer; I'm in partnership with my wife, sons and 
daughter-in-laws on three dairy operations in Jerome Idaho. 
Collectively we milk 5,000 cows. I am active in the Idaho dairymen's 
Association, serve on the Board of Directors of Northwest Dairy 
Association (NDA) and for NDA serve on the Board of Directors of 
National Milk Producers Federation (NMPF). For NMPF I serve on the 
Cooperatives Working Together (CWT) Committee and currently serve on 
the Production Management Subcommittee.
    The Idaho Dairymen's Association (IDA) formed in 1944 and is an 
organization comprised of all of the dairy producers in Idaho. It is 
funded by a $0.01/cwt check-off and utilizes it funds to promote the 
interest of the Idaho dairy industry to individual citizens, state and 
national legislators, governmental agencies, conservation 
organizations, community groups and agricultural organizations to 
maximize the understanding and appreciation of the Idaho dairy 
industry.
    Northwest Dairy Association markets 7.5 billion pounds of milk 
annually from 550 dairy producers located in Idaho, Northern 
California, Oregon, Utah and Washington under the Darigold label. 
Darigold, which established in 1918, is an integrated milk marketing 
cooperative with11 milk processing facilities in the Northwest that 
make and distribute fluid milk, butter, cottage cheese, skim milk 
powder and a variety of cultured products.
    You have heard in other testimony before this Committee, that since 
early in 2009 the national dairy community has been facing an 
unprecedented financial struggle. That is also true in Idaho and the 
Pacific Northwest; in Idaho alone last year it is estimated that over 
$550 million of producer equity was eroded away and currently there is 
no relief in sight to stop the bleeding. We have literally lost 
generations of equity. Financial recovery may likely prove impossible 
for many, it is estimated that over 50% of the dairy cattle in Idaho 
are in `unacceptable terms' with their lenders. Uncertainty hangs over 
their banking relationship. Many producers are unsure if their lenders 
are waiting for the value of dairy cows and the land, their main 
sources of collateral, to recover only to proceed to liquidate them.
    Numerous reasons can be listed for the collapse of the dairy 
industry from a drop in exports, to a huge increase in our input cost, 
to antiquated government programs. Clearly it is time to take a close 
look at addressing our industry's situation and identifying solutions 
as individuals, as dairy organizations, and as a country.
    The purpose of these hearings is to receive input on what the 
content of the next farm bill should be. Representing the West I want 
to make sure we also cover what it should not be. It should not put one 
commodity at risk while enhancing another commodity as was done in the 
government ethanol subsidy programs that dramatically increased our 
input cost and were devastating to Idaho's livestock operations. It 
should not favor one region of the country over another region as was 
demonstrated in the recent appointments to the USDA dairy advisory 
committee, where the west with over 50% of the milk production received 
on four (4) seats on the seventeen (17) member committee. Finally it 
should not discriminate based on operation size, nor should it 
camouflage market signals such as the MILC program currently does by 
encouraging over production at times when the market is indicating a 
reduction in production is needed.
    That is what it should not be, so how would we propose we move 
forward? Through my involvement with the different producer 
organizations, what has become clear is that we need a combination of 
approaches to deal with the current situation. To address the 
underlying problems that caused this crisis and the many industry 
factors that have contributed to its depth and protracted nature, we 
need to focus on solutions that avoid recurrences of this situation in 
the future.
    Towards that end, last year NMPF created a Strategic Planning Task 
Force to seek consensus across the dairy producer community and create 
a solid ``Foundation for the Future.'' This past month I have been 
involved with the IDA District meetings listening to concerns and 
attempting to explain a potential pathway for the industry to unite 
behind so we can move forward. It is extremely important to develop 
workable and realistic solutions that will garner broad support from 
dairy producers nationwide in order to unify behind an approach as this 
Committee begins to consider the next farm bill.
    The current dairy industry financial crises demonstrates that it is 
time to drastically change many aspects of current policy, some of 
which have existed for decades. Our existing dairy policies and 
programs were designed in an earlier time to operate in a relatively 
closed domestic market. However, today's market for U.S. dairy farmers' 
milk is greatly influenced by global demand and supply, as the record 
prices of 2008--followed by huge declines in exports that led to the 
disastrous plunge in 2009 that we are still currently operating under.
    The NMPF proposed Foundation for the Future program is multi-
faceted in principle and needs to be looked at seriously for the future 
farm bill discussions. It seeks to refocus existing farm-level safety 
nets; create a new program to protect farmers against low margins; 
revamp the Federal Order milk pricing system; and establish a way to 
better balance dairy supply and demand. Many of those testifying on 
behalf of NMPF have already presented the following information but as 
a Member of the Committee that was instrumental in the development I 
believe it is important to reiterate them.

    1. Refocusing Current Safety Nets

      Both the Dairy Product Price Support Program and the MILC program 
        are inadequate protections against not just periodic low milk 
        prices, but also destructively low profit margins that occur 
        when input costs, especially feed prices, shoot up. The Price 
        Support Program, in particular, has outlived its usefulness and 
        hinders the ability of U.S. and world markets to adjust to 
        supply-demand signals.
      Discontinuing the Dairy Product Price Support Program (DPPSP) 
        would allow greater flexibility to meet increased global demand 
        and shorten periods of low prices by reducing foreign 
        competition. Additionally, shifting resources from the DPPSP 
        toward a new income protection program would provide farmers a 
        more effective safety net.
      As this Committee may recall, NMPF vigorously defended the 
        importance of the price support program, albeit modified to 
        make improvements in certain respects, in the 2008 Farm Bill 
        process. But at the end of the day, it is clear at this point 
        that the dairy product price support program is not the best 
        use of Federal resources to establish a safety net to help 
        farmers cope with periods of low prices and is not the most 
        effective way of achieving this goal.

     The DPPSP reduces total demand for U.S. dairy products and 
            dampens our ability to export, while encouraging more 
            foreign imports into the U.S.

      The price support program effectively reduces U.S. exports, by 
            diverting some of our milk flow into government warehouses, 
            rather than to commercial buyers in other nations. It 
            creates a dynamic where it's harder for the U.S. to be a 
            consistent supplier of many products, since sometimes we 
            have products to export, and at other times, we just sell 
            to the government.

     The Program acts as a disincentive to product innovation.

      It distorts what we produce, i.e., too much nonfat dry milk, and 
            not enough protein-standardized skim milk powder, as well 
            as specialty milk proteins such as milk protein 
            concentrate, that are in demand both domestically and 
            internationally. Because the price support program is a 
            blunt instrument that will buy only nonfat dry milk--and 
            because that's what some plants have been built to produce, 
            as opposed to other forms of milk powder--it puts the U.S. 
            at a competitive disadvantage to other global dairy 
            vendors.

     DPPSP supports dairy farmers all around the world and 
            disadvantages U.S. dairy farmers.

      Further aggravating measures, the current program helps balance 
            world supplies, by encouraging the periodic global surplus 
            of milk products to be purchased by U.S. taxpayers. Dairy 
            farmers in other countries, particularly the Oceania 
            region, enjoy as much price protection from the DPPSP as 
            our farmers. Without USDA's CCC buying up an occasional 
            surplus of dairy proteins in the form of nonfat dry milk, a 
            temporarily lower world price would affect our 
            competitors--all of whom would be forced to adjust their 
            production downward--and ultimately hasten a global 
            recovery in prices.

     The DPPSP isn't effectively managed to fulfill its 
            objectives.

      Although the DPPSP has a standing offer to purchase butter, 
            cheese and nonfat dry milk, during the past 12 years, only 
            the last of that trio has been sold to the USDA in any 
            significant quantity. In essence, the product that the 
            DPPSP really supports is nonfat dry milk. Even at times 
            when the cheese price has sagged well beneath the price 
            support target, cheese makers choose not to sell to the 
            government for a variety of logistical and marketing-
            related reasons. We have tried to address these problems, 
            but USDA has to date been unwilling to account for the 
            additional costs required to sell to government 
            specifications. Once purchased, powder returning back to 
            the market from government storage also presents 
            challenges, and can dampen the recovery of prices as 
            government stocks are reduced.

     The price levels it seeks to achieve aren't relevant to 
            farmers in 2010.

      Even though the $9.90 per hundredweight milk price target was 
            eliminated in the last farm bill, the individual product 
            price support targets: $1.13/lb. for block cheese, $0.85 
            for powder, and $1.05 for butter--essentially will return 
            Class III and IV prices around $10/cwt. But in an era of 
            higher cost of production, that minimal price isn't 
            acceptable in any way, shape or form. The chart below 
            depicts the U.S. average cost of production and the 
            effective level of support the program provides for the 
            average price dairy farmers receive for milk in the U.S. As 
            is clear from this graph, this effective price support 
            level is far below today's cost of production.

      We believe that with the current funding constraints facing 
            Congress, we are unlikely to see increased support prices. 
            Even if it did, however, we would likely face the same 
            barriers described in the prior point.

      In summary, discontinuing the DPPSP would eventually result in 
        higher milk prices for U.S. dairy farmers. By focusing on 
        indemnifying against poor margins, rather than on a milk price 
        target that is clearly inadequate, we can create a more 
        relevant safety net that allows for quicker price adjustments, 
        reduced imports and greater exports. As a result of our DPPSP, 
        the U.S. has become the world's balancing plant. As time 
        marches on, so, too, must our approach to helping farmers. It 
        is because of this that NMPF is now focused upon a transitional 
        process that shifts the resources previously invested in the 
        dairy product price support program, to a new producer income 
        protection program.

    2. Dairy Producer Income Protection Program. 

      As mentioned above, existing safety net programs (the price 
        support program, and the MILC program) were created in a 
        different era. Neither was designed to function in a more 
        globalized market, where not just milk prices, but also feed 
        costs and energy expenses, are more volatile and trending 
        higher. In the future, the solvency of dairy farms will depend 
        more on margins (the difference between input costs and milk 
        prices) than just the milk price alone. In order to address 
        this dilemma, NMPF is proposing a revolutionary new program 
        called the Dairy Producer Income Projection Program (DPIPP). It 
        will help insure against the type of margin squeeze farmers 
        experienced in 2009, and also at other points in the past when 
        milk prices dropped, feed costs rose--or both conditions 
        occurred in tandem.
      In developing the Dairy Producer Income Protection Program, a few 
        important principles are being followed:

     Losses caused by either low milk prices or high feed costs 
            need to be covered.

     A farmer's cost for basic protection must be kept low or 
            nonexistent.

     The level of protection available should be flexible, and 
            producers should be able to purchase a higher level of 
            protection if they choose.

     The program should be voluntary, national in scope, and 
            open to all dairy farmers, regardless of size.

     The program should not provide incentives to create 
            artificial over-production.

     The program must be easy to access by all producers 
            through a simple application process or through the 
            assistance of their cooperative.

      Essentially, the Dairy Producer Income Protection Program (DPIPP) 
        is intended to be a farm-level safety net program focused on 
        margins, rather than just on prices, in order to create a 
        better tool to deal with global price volatility. DPIPP would 
        offer a combination of a base level of insurance, coupled with 
        voluntary supplemental coverage, will allow farmers of all 
        sizes in all regions to protect themselves from periodic margin 
        squeezes caused both by high input costs and low milk prices.
      As a substitute for the other two safety nets, DPIPP would 
        involve two levels of insurance against negative margins. The 
        first would be a base level of coverage, subsidized by the 
        government that covers a portion (but not 100%) of a farm's 
        historical annual milk production, and protects against a 
        modestly negative margin between milk prices and feed costs. 
        The second level would be optional, and allow a farmer to 
        purchase a greater level of coverage, with a portion of that 
        insurance subsidized by the government.
      Key elements include:

     Defining margin as the difference between the national 
            all-milk price and key feed inputs.

      The all-milk price is the best proxy to define what an average 
            nationwide price is for milk each month. Feed costs are 
            represented by corn, soybean meal, and alfalfa hay, and the 
            cost of those is also tracked monthly by USDA. The 
            difference between the per hundredweight price of milk, and 
            the cost of feeding cows, will establish this program's 
            margin.

     The government will invest to help defray the cost of a 
            basic level of margin insurance for all farmers.

      A significant portion--but not 100%--of a farm's historic 
            production base will be eligible for coverage. Indemnifying 
            against part, but not all, of that farm's milk volume will 
            ensure that the program does not stimulate overproduction. 
            Once the numerical margin target is established, it will be 
            fixed for the life of the farm bill. USDA will calculate 
            actual margins on a monthly basis and make indemnity 
            payments quarterly, as market conditions dictate.

     Producers will have the option of purchasing an additional 
            level of coverage.

      For a fee, farmers who wish to insure a higher level of margin 
            protection will have that option, with the premium 
            partially subsidized by the government. The premium will be 
            calculated by the probability or frequency of payments of 
            the specific level of coverage selected. Producers will 
            have a year after implementation of the farm bill to sign 
            up for additional coverage.

     The DPIPP will be equitable and national.

      This program is designed to have no payment limitations, or 
            production caps, thus ensuring that dairy farms of all 
            sizes will be covered proportionately. The DPIPP will allow 
            for new entrants, i.e., new farming options, but only under 
            strict parameters so the system can't be gamed. The program 
            will be administered by the USDA through the Farm Service 
            Agency (FSA) or the Risk Management Agency (RMA).

    3. Federal Milk Market Order Reform. 

      Since 2004 when Federal Order 135 was voted out both Idaho and 
        Utah became unregulated milk markets not falling under the 
        protection of either State Milk Marketing Orders, like you find 
        in California or Federal Milk Marketing Orders as is found in 
        Oregon and Washington and most of the country. However we 
        support the goal to develop a pricing system that establish a 
        competitive pay price for milk that doesn't depend on the 
        current milk pricing formulas that can distort signals sent 
        both to producers and processors. Revamping Federal Orders, we 
        can encourage the movement of milk to its highest-value uses. 
        The end result should compensate producers fairly, reduces 
        price volatility, and creates a more dynamic dairy industry.

    4. Production Management.

      For the past 7 years, NMPF's Cooperatives Working Together (CWT) 
        program has voluntarily helped to address the supply side of 
        the supply-demand equation that ultimately determines milk 
        prices. We need to both revitalize Cooperatives Working 
        Together, and evaluate other approaches that will address the 
        extremes in price volatility impacting producer profit margins. 
        The IDA's current policy position strongly supports voluntary 
        production management and allows us to support mandated 
        programs as long as a national referendum is part of the 
        process.

    The dairy farmers I have met with this past month at the IDA 
District meetings all recognize that something has to be done, the 
current programs are no longer in the best interest of dairy producers 
or consumers.
    Two other concerns I would like to briefly discuss are Immigration 
Reform and the Trans-Pacific Partnership FTA.
    Now, more than ever, dairy producers urgently need Congress to act 
on agricultural immigration reform. Immigrant labor plays a very 
important role in contributing to the success of America's dairy 
industry. A large percentage of the hired workers on dairy farms in the 
west are foreign born labors. According to a recent study conducted by 
Boise State University, the Idaho dairy industry accounts for over 
29,000 jobs in Idaho 8,200 of those are on the dairy, the majority of 
those on the dairy are held by foreign born labors. IDA, NDA and NMPF 
strongly supports the type of broad immigration reform for the 
agriculture sector that AgJOBS (H.R. 2414) contains and the visa 
program proposed by H.R. 1660, the Dairy and Sheep H-2A Visa 
Enhancement Act.
    Dairy farmers share the concerns of all Americans about securing 
our borders & protecting this country and they are not willing to 
sacrifice its security. However, failing to provide for orderly flows 
of greatly needed workers has the potential to create enormous economic 
consequences for our industry and do very little to enhance our border 
protection. We urge Members of Congress to join as cosponsors of H.R. 
2414 and H.R. 1660 to once and for all address the endemic labor 
shortage in the dairy farming sector and allow for dairy producers to 
work within the agricultural visa system.
    The Trans-Pacific Partnership FTA also raises concerns. Expanded 
dairy trade with New Zealand offers an entirely one-way street since 
the FTA would open up no effective new opportunity for the U.S. dairy 
industry in New Zealand and even the prospect of increasing access to 
other markets within the TPP is limited. Because of this, producers 
everywhere throughout the U.S., as well as many leading dairy 
processors, are seeking the full exclusion of U.S.-New Zealand dairy 
trade from the TPP.
    Thank you for the opportunity to testify on the issue of dairy 
policies here today. Through IDA, NDA and NMPF I am excited about 
moving forward to working with the Members of this Committee on issues 
of critical importance to the state, regional and national dairy 
industry. Mr. Chairmen would you like me to answer any questions from 
the Committee.

    The Chairman. Thank you very much, Mr. Boer, for that 
testimony.
    Ms. Siddoway, welcome to the Committee.

    STATEMENT OF CINDY SIDDOWAY, LAMB PRODUCER, TERRETON, ID

    Ms. Siddoway. Thank you, Mr. Chairman. And I welcome the 
Committee as well.
    My name is Cindy Siddoway, past President of the American 
Sheep Industry Association. And on behalf of our nation's sheep 
industry, and the Idaho Wool Association, I want to welcome you 
to Idaho.
    Our family owns and operates a five generation sheep ranch 
in eastern Idaho with 20,000 head of ewes and lambs. We are 
extremely proud of our rich heritage in Idaho and in the sheep 
ranching industry.
    We currently operate the ranch much the same as our 
forefathers. Our experience on the land has led to some changes 
in our management style. Having lived here for generations, we 
have learned some valuable lessons about managing our ranch to 
survive drought, predators, severe winters, and to benefit 
rangelands, water, and wildlife.
    Sheep ranching plays a vital role in Idaho's rural 
communities, where sheep provide food and fiber, and are a key 
use for grazing and pasture management.
    I appreciate this opportunity to participate in discussions 
on the next farm bill. And I want to thank the Committee for 
the livestock programs included in the current farm bill. I am 
especially pleased with the inclusion of coverages for losses 
of confirmed wolf kills to livestock, included in the Emergency 
Assistance for Livestock Program, or EALP.
    For sheep producers, the 2008 legislation extended the loan 
deficiency program for wool, and increased the base loan rate 
from $1 per pound to $1.15 per pound that was recently 
implemented. However, the loan rates have consistently been 
less than market prices over the years, even though wool prices 
have varied dramatically from the inception of the loan program 
in 2002 to the present.
    A review of the nine wool categories, the loan rate, and 
the formula used at a comparison to other USDA fiber programs, 
may be necessary to deliver a more workable safety net for 
producers.
    The National Sheep Industry Improvement Center is also 
authorized under the current legislation. Their program is 
designed to fund business ventures through grants, with much 
needed capital, to strengthen the sheep industry 
infrastructures. We request the National Sheep Industry 
Improvement Center be continued in the next farm bill.
    With the sixth generation in the Siddoway family now 
learning the business of running a large range herd operation, 
a plan to increase sheep inventory, production, market and 
infrastructure is very important to me and to our industry.
    However, several impediments stand in the way of achieving 
this expansion; first, increased degradation, especially from 
wool. Second, lack of dollars for scientific research and 
possible disease transmissions between domestic sheep and Big 
Horn sheep. Third, grazing allotments being phased out in the 
national forests, even though allotments that were phased back 
years ago due to perceived wildlife or recreational conflicts 
are available, and should be brought back into production and 
multiple use. And fourth, increased problems with the H-2A 
worker program in maintaining an experienced, stable labor 
force.
    I applaud the National American Sheep Industry Association 
for initiating a national plan to stabilize sheep production, 
and rebuild inventory, and to prioritize the most critical 
items needed to increase production.
    The declining inventory of sheep since 2005 is of great 
concern to our industry. And we are working hard to change this 
trend. However, young people today are reluctant to enter an 
industry when the Federal Government implements policies that 
create hardships and negates any possibility of profitability.
    A final issue for the sheep industry, is mandatory price 
reporting. Accurate market information is critical to 
producers, and provides needed transparency in making marketing 
decisions. The sheep industry requests the Committee to 
reauthorize the mandatory price reporting before it expires in 
September.
    Thank you, Mr. Chairman, and Members of the Committee.
    [The prepared statement of Ms. Siddoway follows:]

   Prepared Statement of Cindy Siddoway, Lamb Producer, Terreton, ID
    On behalf of the 82,000 family farms and ranches that produce sheep 
in America, of which 1,200 are right here in Idaho, I am very 
appreciative of this opportunity to discuss our nation's agricultural 
policy with the agriculture leadership of the U.S. House of 
Representatives.
    I am Cindy Siddoway, past President of the American Sheep Industry 
Association (ASI), the national trade organization of the sheep 
industry. My family and I own and manage a five generation sheep ranch 
in eastern Idaho with 20,000 head of ewes and lambs. We are extremely 
proud of our rich heritage in Idaho and in the sheep ranching industry.
    A half a billion dollars in lamb, wool, sheep milk and breed stock 
sales at the ranch level supports an additional $1.3 billion in 
economic activity for a total contribution to the nation's economy of 
$1.8 billion. The industry is a mainstay of many rural communities 
including many in Idaho where sheep are a key use for grazing and 
pasture land.
    Our industry greatly appreciates the opportunity to participate in 
the current farm bill as well as in this and future hearings with the 
Committee as you prepare for the next farm bill.
    Sheep producers were encouraged when the 2008 legislation extended 
the loan deficiency program for wool with an increase in the base loan 
rate from $1.00 per pound to a $1.15 per pound. That loan rate increase 
was implemented January of 2010 and so far there is still only one of 
the nine loan categories being used by producers.
    Total wool payments nationally, since inception of the program in 
2002, range from $6 million to $8 million annually. This is far under 
the original CBO projection of $20 million per year. We believe this is 
primarily due to the fact that participation has been in only one loan 
category--a category that was intended as an opportunity for the 
smallest farms to participate in the program even though their volume 
of wool didn't justify the expense of quality testing.
    The rest of the loan categories are geared to specific grades of 
wool that match the actual trading in the international wool market and 
are determined by yield and grade testing that producers conduct on 
their wool. The loan rates have consistently been less than market 
prices over the years even though wool prices have varied dramatically 
between 2002 and 2010.
    An increase in the base loan rate and a discussion of the loan rate 
formats similar to those currently used by other USDA fiber programs 
may be in order to deliver a ``workable'' safety net for producers.
    The current legislation also authorized a Sheep Industry 
Improvement Center under the U.S. Department of Agriculture. This 
program, to be implemented and administered by the Agricultural 
Marketing Service, is designed to fund business ventures that 
strengthen the sheep business infrastructure from wool warehouses to 
processing equipment to lamb slaughter companies.
    The farm bill provided a million dollars in mandated spending and 
authorized appropriations up to $10 million per year through 2012. We 
anticipate the oversight board will be appointed by the Secretary and 
the program will be operational before the Committee finalizes the new 
farm bill. We believe the Center will provide much needed capital to 
the industry and would request it be continued in the next farm bill.
    A national plan to increase the sheep inventory of the United 
States is being developed in 2010 by lamb and wool companies, sheep 
producers and feeders to address the shortage of sheep production in 
America. We anticipate that portions of the plan may fit the Committee 
on Agriculture's goals in the 2012 Farm Bill.
    The entire sheep industry and the lamb and wool business chains 
from farm to processor have been working to build a plan that 
prioritizes the most critical items needed to increase sheep 
production. Producers and companies alike believe they must find ways 
to replace retiring producers and attract new producers or the 
infrastructure of the industry will be at risk. Fewer companies mean 
less competition and less ability to market to American consumers and 
to export markets. The lack of both lamb and wool volume continues to 
squeeze the ability of businesses to buy and process our annual crops. 
Declining inventory of sheep since 2005 has not been due to any 
collapse in lamb prices at the farm gate nor extreme volatility of lamb 
prices. In fact, lamb prices weathered the recession better than other 
categories of livestock, yet we still lost production.
    We look forward to sharing the plan to stabilize sheep production 
and rebuild the inventory, which is positive for rural economies and 
sheep farms and ranches.
    Of interest to the Committee is a report issued this winter titled 
Nontraditional Lamb Market in the United States: Characteristics and 
Marketing Strategies. www.sheepusa.org. Fully \1/3\ of American lamb 
production is now sold through smaller markets and nontraditional 
markets from direct consumer sales of lambs to farmers markets and to 
small processors serving local communities. The dramatic shift in lamb 
marketing of the last 5 years is changing the sheep industry as it 
strives to serve traditional retail and food service accounts as well 
as the increasing nontraditional markets.
    One issue that has not changed from the sheep industry perspective 
since the 2008 Farm Bill is the international situation. The United 
States has no barriers to lamb meat imports and as such has become the 
market of choice for lamb exporters from around the world. However, we 
have not had new markets opened up to our products, including China.
    Similarly, the European Union continues to provide subsidies to 
sheep producers estimated at $2 billion annually under their whole farm 
payments. Additionally, the European Union maintains strict and 
effective tariff rate quotas on lamb imports. Our industry looks to 
both the Agriculture Committee's role in industry programs in the next 
farm bill and the Committee's role in pushing for aggressive reform of 
Europe's agriculture programs and barriers to assist the domestic sheep 
business.
    We greatly appreciate the opportunity to discuss the sheep industry 
with the Committee and commit our support to the effort of drafting the 
next farm bill

    The Chairman. Thank you very much for that testimony, Ms. 
Siddoway.
    First of all, Mr. Bitner, are you using the cold weather 
variety of grapes out of Minnesota at all in Idaho?
    Mr. Bitner. Fortunately, we don't get that cold here.
    The Chairman. It's kind of cold here today.
    Mr. Bitner. You know, we're high altitude grape growing. 
But most of our grapes are planted on the south-facing slopes 
along the Snake River, so the cold air drifts away from us.
    The Chairman. Mr. Lyons, on the estate tax, the current 
system doesn't allow for a stepped up basis. Are you familiar 
with that at all.
    Mr. Lyons. Yes, I am.
    The Chairman. And for my farmers, the stepped up basis is a 
bigger issue than anything else in terms of the impact that 
it's going to have. You know, we used to have that before we 
got into this whole thing about getting rid of it. And we've 
lost the stepped up basis.
    So how does that affect your situation? My guys are telling 
me that's more important than what the exemption or the rate 
is.
    Mr. Lyons. Okay. Let me clarify that I do actually know 
what the stepped up basis is. It is you are taxed at a certain 
level at more income; is that correct.
    The Chairman. Yes.
    Mr. Lyons. Okay. Not from the Association's standpoint, but 
my own, I was never a big fan of taking what another man built 
no matter if he was worth $30 million or $10, and giving it 
back, and having the Federal Government dole it out as they see 
fit. What I've seen on my own--and it's pretty well proved in 
the third generation, they do that for you.
    So not to me. I'm sorry. That was kind of a snippet.
    But, yes, I was never in favor of that. I just thought what 
a man builds, and pays taxes on to the end, should be his to 
dole out as he sees fit.
    The Chairman. Mr. Boer, I don't know if I have a question 
for you. I just want to commend the work that you guys have 
been doing with NMPF. I think you've really gotten ahead of 
looking at the fact that your system was not working.
    And if you had told me 2 years ago that NMPF would be where 
they are at right now in the industry, I would have told you, 
you are nuts.
    So I want to commend you for the work that you are doing. 
We, as the Committee, have been very much kept abreast of this, 
and we've been meeting on a regular basis, and been updated on 
your work.
    So I guess I would say, keep it up. And we hope that you 
will come to a successful conclusion here in the next few 
months. It sounds like you are moving in that direction.
    Mr. Boer. Yes.
    The Chairman. I guess the only question might be, the 
latest iteration that's happening here with the so-called 
production management part of the equation. Are you involved in 
that part of things at all.
    Mr. Boer. Yes, I am. I'm part of that--what they call the 
``production management committee.'' And we have come upon a 
plan that we think we can bring to the full board, and come to 
a conclusion, and get agreement.
    The Chairman. So that's moving along in a positive manner?
    Mr. Boer. Yes.
    The Chairman. I think I know what that is. I think we were 
briefed on that.
    Mr. Boer. Okay.
    The Chairman. I actually introduced a bill very similar to 
that about 10 years ago. At that time, it didn't get a lot of 
support. But anyway, you guys are doing a good job.
    And I think you are showing the rest of agriculture what 
needs to be done under this circumstance we're in. With the 
budget being the way it is, and all these questions we have, I 
think it's time for us to be looking at how we're doing things.
    Mr. Boer. Agreed.
    The Chairman. We need to make sure we have programs that 
work given where things are in 2010. Thank you.
    And, Ms. Siddoway, I was mostly responsible for raising the 
loan rate in the last farm bill for wool. I guess I'm surprised 
to hear that only one of the parts of it is working.
    Can you explain that to me a little bit better, in a little 
more detail?
    Ms. Siddoway. Yes. The way that the market works, of 
course, Australia is a big player in it. And we are fairly a 
small player in the world market.
    There is such a discrepancy in the price from the coarse 
wool to the fine wool, and it fluctuates a great deal 
throughout the year. So producers, they are finding it's easier 
just to go with the ungraded.
    The Chairman. And that's the $1.15.
    Ms. Siddoway. Well, that's where it stands. Right now, it's 
paying about 29 cents on the loan deficiency payment. But, yes, 
initially when we brought this program forward, the request was 
for $1.20 for the base rate, and it was at $1. And so I 
appreciate your help in raising it. And hopefully, that 
increase will help us a little.
    The Chairman. There are nine different categories.
    Ms. Siddoway. Nine different categories depending on the 
finest of the wool. The extremely fine wool folks that are 18 
and under, which are only probably ten percent of all the wool 
in the U.S., greatly benefit from having that category, because 
that's super fine wool. But, it's not in a lot of production 
areas.
    The Chairman. Right.
    Ms. Siddoway. So the other categories are just not being 
utilized. So we would like to look at it. We would like to sit 
down and look at it.
    The Chairman. We'll take a look at that. And that's one of 
the reasons we're having these field hearings.
    Ms. Siddoway. Thank you very much.
    The Chairman. The gentleman from Oklahoma.
    Mr. Lucas. Thank you, Mr. Chairman.
    Mr. Lyons, your ranching operation, I don't have a lot of 
experience in your neck of the woods; cow/calf stocker, which 
way do you go?
    Mr. Lyons. I'm a cow/calf. We sell our calves----
    Mr. Lucas. When do you calve.
    Mr. Lyons. We calve in the spring. This area is pretty much 
dominant spring calves.
    Mr. Lucas. In the typical ranching operation, how many 
acres to a cow pair do you run.
    Mr. Lyons. Well----
    Mr. Lucas. And I know typical is a difficult thing to do.
    Mr. Lyons. I'll talk about irrigated pasture and a guy who 
has his own place. Most of us are based in the BLM, or Forest 
Service, or state lands. And that, on the average, I believe, 
is around 20 acres.
    Mr. Lucas. It's not that much different from home. 
Impressive. EQIP, you mentioned that after participating in 
long-term contracts, you chose basically to get out of the 
program. I assume that means that you, as indicated in your 
testimony, what was required to get it done, and the way it was 
set up, and what was determined, it just wasn't in your 
schedule, your agenda.
    Mr. Lyons. Yes, to reach the goals it was--I guess I could 
give a simple example. We had a 10,000 gallon water tank we 
were setting in the spring up on the hill, piping the water 
into the tank. The tank was a quarter inch steel. And it was a 
bear to get it up there. And they wanted us to paint it. Well, 
it actually cost me more to paint the tank than it did to put 
in the entire system myself. So I said, no thanks.
    And that's kind of a simple thing. But I imagine somewhere, 
somebody messed with the system, and put up some crappy tank 
somewhere. So from then on, you need to paint the tanks. Well, 
it was just cheaper for me to say, no. I hate to paint. So I 
just--it will be there--it will be there a long time when I'm 
gone.
    Mr. Lucas. Understood.
    On the tax issues, the stepped up basis system, and that's 
an ongoing debate back East about how that should be handled. 
Some folks view it as important that the stepped up basis be 
allowed. So if you ever sold what you inherited, you wouldn't 
be tagged with a huge, huge tax on the gain.
    Others argue, if you are really going to keep the property 
in the family for generation after generation, you are not 
going to sell the stuff; therefore, it doesn't matter.
    From your perspective, it sounds like you are one of those 
more multi-generation looking kind of individuals. Is that a 
fair assessment?
    Mr. Lyons. Yes, it would be a fair assessment. Just looking 
down the road, it's really tough to get into an operation. Here 
in Idaho, your best opportunity is to buy small ground. And 
hopefully, purchase AUMs, which are Federal grazing permits, 
and state grazing permits. That's your best way.
    To touch private property is almost nonexistent. It may be 
due to the fact that lots of things are cyclical. You saw the 
land try to balloon just in the last couple of years, and now 
they are dropping. And they will probably drop to where they 
become more feasible, and more realistic to what actually can 
be produced on the ground.
    Land is not made any more. So there are a lot more people 
with different types of interests willing to purchase land. 
That makes it competitive. As far as paying for it with cows, 
it almost becomes nonexistent.
    So in order to keep it in the family, and that would be my 
passion, is for the family to hold on to it. So that 
opportunity, be it a cousin, a nephew, whatever, that that 
opportunity still be there if they want to work the land.
    Mr. Lucas. Mr. Boer, Ms. Siddoway, does EQIP work for 
either one of you in the present form of the program?
    Mr. Boer. No.
    Mr. Lucas. So you managed all your nutrient issues, you 
handle your watering issues strictly out of your own operating 
budget.
    Mr. Boer. Yes, we do.
    Ms. Siddoway. Our operation has not worked with EQIP. But I 
was Chairman of the state FSA committee. And many farmers and 
ranchers do benefit from it. So I do see some value in it, 
although personally we have never used it.
    Mr. Lucas. Thank you. Thank you, Mr. Chairman.
    The Chairman. Ms. Herseth Sandlin from South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. Thank you to 
our witnesses.
    And, Mr. Lyons, can you talk a little bit about your 
thoughts on the state of competition in your respective 
livestock industry. The Department of Justice and USDA are 
holding competition workshops throughout the country.
    You had mentioned, Ms. Siddoway, the importance of us to be 
authorizing mandatory price reporting, it certainly is 
important for transparency in the market, to ensure competitive 
fair markets.
    Do either of you have thoughts on these workshops, on the 
state of competition within the beef cattle, or sheep, and land 
industries? Anything more that we can do in the farm bill in 
terms of the livestock title as it relates to the fairness of 
the contracts and the transparency issues?
    Ms. Siddoway. I guess I did talk about mandatory price 
reporting. For the sheep industry, we're so much smaller, of 
course, than the cattle industry. There are probably three 
major packers in the U.S., and the transparency in marketing is 
very important to us, as well as the price for the foreign 
product.
    The sheep industry, of course, has no tariff barriers here 
in the U.S., so we are dealing with imports. And that is of 
great concern to us. And knowing what's being paid for on those 
imported products is very important.
    Especially, when the value of our dollar was up. No matter 
how good a manager you were, it was very hard to compete with a 
foreign product, because so much of it was coming here to the 
U.S. Thank you.
    Mr. Lyons. Yes, thank you. If you want to start a fight 
scene within cattlemen, you talk about competition within the 
market. That's been an area that has been pretty contentious 
within the industry. One is leaning more to protectionism; one 
is leaning more to open markets.
    I could talk about one of our biggest problems may be 
within the packing industry. There are less and less packers. 
And it almost seems to be a cyclical thing to me. But, in order 
to be competitive within the market, you have to be so big. You 
have to run some more cattle.
    In order for a smaller plant to exist with the regulations 
that are handed to it, or with the compliances that they need, 
it truly is not profitable. So then your segments of your 
industry keep combining.
    And that's where I see a real problem--increased 
regulation, and increased bureaucracy on the segments in the 
industry. And it seems to make them consolidate.
    An example would be the Holbrook case in California. Be 
that what it may, take that all apart, that plant doesn't exist 
any more. Those people don't work there. That market is not 
available any more. Was it necessary? It was necessary to deal 
with it, maybe the animal cruelty. But I don't know that it was 
necessary to wipe out an entire part that was viable to a lot 
of guys who slaughtered cull cows over that issue.
    That's what it seems like, a lot of small issues turn into 
huge issues; and therefore, consolidate the industry to where 
it becomes a monopoly.
    Ms. Herseth Sandlin. I appreciate both of your responses, 
and how in terms of the consolidation of the packers, either 
regionally or domestically, and the importance of knowing price 
transparency on what's coming in from the foreign animals as 
well.
    I guess that segues into another question about animal ID. 
And whether you are talking about a split opinion for the 
industry, or the potential for additional regulations that can 
cause unintended consequences.
    As you know, USDA's current animal traceability initiative, 
after listening sessions occurring, and now a new 
Administration now puts the responsibilities on the states to 
develop the animal identification traceability systems.
    What are your respective personal opinions, and perhaps 
association positions, on animal ID? Do you support the state 
administered approach? Do you think at some point a Federal 
animal ID traceability issue is needed?
    Ms. Siddoway. In the sheep industry, it's fairly easy to 
traceback to original owners, and to the original ranch. As far 
as traceback to the individual ewe that had that lamb, it's 
very difficult. That would not work in the sheep industry at 
all.
    We can tag, and we do, we put a straight B tag in to show 
the ranch of origin. We also raise elk, and there is ID through 
the State of Idaho on that. And it become very, very 
complicated to keep track of all of those ID numbers.
    So when I look at what we go through on the elk side of our 
ranch, I see it would be very difficult to have that in the 
sheep industry. Although we are complying with our straight B 
tag.
    Ms. Herseth Sandlin. Mr. Lyons.
    Mr. Lyons. Yes, we were happy to see it come back to the 
states. We've always been for volunteer ID. And we've felt from 
the state's perspective, the fascinating thing about the cattle 
industry is it is so diverse as you travel just from here to 
Wyoming, to Nebraska, and what one individual does in one state 
to identify their cattle.
    And lots of states will have some unique opportunities that 
will fit within the whole picture to give you a way to trace 
cattle back without being a huge detriment to the cow/calf 
producer. Because all things roll downhill.
    I mean, you can go down to the meatpacking plant and tell 
them all things need to be identified, and this is what it will 
cost you. But it will come back to the cattle. That's just the 
way it works.
    So from my perspective, I was excited to hear that we would 
be able to have an opportunity to identify through the State of 
Idaho.
    Ms. Herseth Sandlin. Thank you, Mr. Lyons. Thank you, Ms. 
Siddoway.
    The Chairman. The gentleman from California.
    Mr. Costa. Mr. Bitner, I support your industry on a regular 
basis. Have you participated in Market Access Program? I know 
in California we used it, and we're trying to. I mean, it's 
very difficult in exporting our wine products. But what's your 
experience?
    Mr. Bitner. As a small producer, a thousand case producer, 
I haven't. And I depend upon 75 percent of my wines being sold 
at retail from our little tasting room out in the country. Our 
largest producer is St. Chapelle, at 180,000 cases, 
participated in that. But most wineries here in Idaho are in 
the 25,000 cases.
    Mr. Costa. What kind.
    Mr. Bitner. Cabernet, Merlot, Chardonnay.
    Mr. Costa. I will have to try it. Do you have problems with 
the glassy-winged sharp shooter, or some of the other invasive 
pests that we've got in other parts.
    Mr. Bitner. You know, we haven't. And like I said, I'm 
Chairman of the National Grape Growers. So I spend a lot of 
time with California growers encouraging them to come to Idaho, 
because we don't have all the issues you have there. As far as 
the glassy-winged sharp shooter, one of the vectors are 
oranges. So we don't grow a lot of the warm climate things that 
become a vector for it.
    Our soils are different. So we don't have a lot of those 
issues. Our rainfall is 7 inches. So we don't have a lot of 
mildew problems. Water is cheap. Land is cheap.
    Mr. Costa. Good. Good.
    Mr. Lyons, I appreciate your Will Rogers sense of humor 
added to this discussion. You've certainly told us how you feel 
about animal ID. What's the size of your cow/calf operation?
    Mr. Lyons. We're sketchy on repeating that in public. Is 
that rude.
    Mr. Costa. No. Where I was going with this, my cousin has a 
cow/calf operation. And you answered Congressman Lucas' 
question on your per acre per cow. But you have experience with 
BLM, obviously, with the land that you and your uncle have 
isn't sufficient to support your cow/calf operation.
    Your relationship with the BLM is pretty good?
    Mr. Lyons. I enjoy the people I work with day-to-day on the 
ground.
    Mr. Costa. What's your lease arrangement with BLM.
    Mr. Lyons. Well, it works on a 10 year renewal rate. And 
what happens is, is we set provisions within the lease permit. 
It's actually a permit. So what we hope to accomplish, what----
    Mr. Costa. Do you have a fee to pay on that.
    Mr. Lyons. I pay, I believe, this year, $1.37. It 
fluctuates.
    Mr. Costa. Mr. Boer, my time is short, but, both the 
Chairman and I have a lot of interest in dairy. I'm a third-
generation dairy family, but you milk a lot more cows than we 
did.
    The average size of a dairy in Idaho is?
    Mr. Boer. Excuse me. I want to guess about 500 to 700, 
somewhere in that area.
    Mr. Costa. Among the elements of the program you talked 
about with NMPF is the elimination of the Dairy Product Price 
Support Program, and the Milk Income Loss Contract program, 
with new income protection.
    You know that we are aware of, in the last 2 years, we've 
lost $11 to $12 million in equity in the dairy industry. And 
across the country, some say it's higher.
    Is an insurance component going to replace part of that? 
How do you think that's going to be able to cover those kind of 
losses?
    I mean, obviously, we want to narrow the boom and bust 
cycles that are more prevalent today. But I don't know how you 
create an insurance program that is part of your proposal that 
will cover those kind of losses.
    Mr. Boer. It is. I haven't been a part of that committee, 
but what I do know about it is--the proposal is for the initial 
piece. The insurance would cover the catastrophic drop in milk 
prices.
    In fact, what was proposed from some of the graphs that I 
have seen, the only time it would have come into play was in 
2009.
    Mr. Costa. No, I saw that. We had that at our last 
presentation.
    Mr. Boer. Okay.
    Mr. Costa. I'm working on an alternative proposal. But 
being able to control production with a mechanism that will 
allow them to have some control over their price. Because when 
I grew up, the joke was: when dairy prices are down, dairymen 
produce more milk. And when the dairy prices are up, they 
produce more milk. And it doesn't work any more.
    So I applaud all of the--I mean, of course, as the Chairman 
and I noted, $9 per hundredweight. You have $15, $16 per 
hundredweight input cost will make believers out of a lot of 
folks in terms of change in the paradigm.
    I just think that, in terms of bringing the industry 
together, notwithstanding the crisis, that we've got to give 
you as producers, which is my family, and some of my family 
some better control. I mean, so that the industry can grow. But 
those who don't want to grow, aren't punished by 
overproduction. What are your thoughts?
    Mr. Boer. Well, exactly. I would agree totally. When milk 
prices are up, we produce more milk. When prices are down, we 
produce more milk. That's continuing to happen. We have a 
voluntary program right now through National Milk Producers 
Federation.
    Mr. Costa. The herd production.
    Mr. Boer. Yes, the herd production.
    Mr. Costa. Yes, it won't work very well.
    Mr. Boer. It's the only mechanism we have in place right 
now. And it's voluntary. We have about \2/3\ participation. 
That doesn't seem to be palatable any more.
    The plan that we were trying to come together with is a 
margin plan. So that when margins start shrinking, that there 
would be an automatic trigger come into play that we would all 
participate in.
    We would all have to reduce production by a percentage 
that's predetermined, one or two percent, so that no one is 
really affected disproportionately. And when that margin 
expands back to the predetermined margins for 2 consecutive 
months, then the program will be eliminated. So it has 
automatic triggers and automatic retractions of the program. So 
that's the important part of what we say.
    Mr. Costa. My time has expired. But I'll be happy to share 
with you the proposal that we have been working on. I just 
think that there have to be some supply side signals that 
relate to the production.
    Because from my experience, that old Einstein quote, ``One 
definition of insanity is to continue to do things the way you 
always have done, and expect to get different results.''
    Mr. Boer. Yes, sir, agreed.
    The Chairman. I thank the gentleman.
    The gentleman from Idaho, Mr. Minnick.
    Mr. Minnick. Mr. Boer, continuing the discussion of my 
colleague from California about an alternative to the six 
existing Federal milk support programs, dairy programs, which 
cumulatively, if I listen to your testimony, have caused Idaho 
producers, dairymen, very efficient dairymen, to lose about 15 
percent of their entire net worth in this last down cycle.
    I encourage you, and applaud you for wanting to try 
something else. And I'm curious with respect to this new 
proposed income protection insurance program.
    Would this be a program that a participating dairyman would 
pay a part of the premium, or would that be ultimately supplied 
by the taxpayer.
    Mr. Boer. The initial part as proposed would be supported 
by the government. And any additional premium for a higher 
level of return, the producer has that option whether to take 
it or not take it.
    Mr. Minnick. So a maintenance level would be paid for by 
the participating dairyman.
    Mr. Boer. Yes.
    Mr. Minnick. And to extend you wanted a richer program----
    Mr. Boer. Exactly.
    Mr. Minnick.--you had to have more income in order to pay 
your bank to maintain your operation, you would pay for that 
increment in premium.
    Mr. Boer. Yes.
    Mr. Minnick. And would there be an upper limit as to how 
much income you could insure as opposed to what you get in a 
very good year.
    Mr. Boer. I've not been that close to that program yet. 
They have talked about an upper limit. I think it makes some 
sense to have some limit. The thought is the higher it costs, 
the higher you go, the more it is going to cost.
    Mr. Minnick. And there would be production controls to the 
extent that you paid for the richer program, so that you don't 
essentially buy insurance on a program that's going to worsen 
the----
    Mr. Boer. If, in fact, we come to some conclusion and 
agreement on another plan that's been proposed, right.
    Mr. Minnick. According to your modeling, would the cost to 
the taxpayer be more or less for this kind of program, as 
opposed to the composite of the six programs that we currently 
have.
    Mr. Boer. I haven't seen that number either, but I would 
say, much less.
    Mr. Minnick. Well, certainly, I want to applaud you for 
taking this initiative. Because it's clear to me at least, that 
we've got to do something different to protect our most 
efficient producers, which you represent. So thank you for 
doing that.
    Ms. Siddoway, can I ask you a question with respect to the 
funding that's going to the National Sheep Industry Improvement 
Center. And one of the priority projects that some of your 
colleagues have talked to me about is research on Pasteurella.
    And the problem that we may be facing if the Forest Service 
and the biologists decide we have to separate domestic sheep 
from habitat that is incidentally occupied by Big Horn wild 
sheep.
    If we get a decision by the Forest Service that enforces 
separation, what priority would you give to funding for this 
kind of program that might develop a vaccine, or in other 
words, mitigation that would allow your industry to continue in 
these areas that are now threatened?
    Ms. Siddoway. Thank you. I appreciate the opportunity to 
respond to that question. Research dollars are definitely 
needed. Decisions are being based on nonscientific evidence on 
the separation.
    We need the firm scientific evidence to show that there 
perhaps is transmission. We really don't know that yet. The 
policy is being made on the fact that maybe that does happen, 
which is totally unfair to the sheep industry. Plus it gets in 
the way of finding what really is causing the problem.
    Big Horns are dying off whether sheep are there or not. I 
think all this other stuff is getting in the way to getting a 
real answer to how to save the Big Horn Sheep. And the sheep 
industry, the domestic sheep industry would really like to 
pursue finding research dollars, both with the University of 
Idaho, and with Pullman, and the sheep center there at Dubois.
    Mr. Minnick. So I can tell my Chairman, and Ranking 
Members, this is an extremely high priority for our industry?
    Ms. Siddoway. Yes, it's very high. Especially, in light of 
what perhaps will be coming off the Payette National Forest. 
So, yes, it's very high priority.
    Mr. Minnick. I'm told it might cost Idaho sheep industry 
perhaps half of their existing grazing acreage if an adverse 
decision were to come. And that it's not just an Idaho problem. 
It occurs any place in the West, where you have Big Horn sheep 
naturally inhabiting shared habitat.
    Ms. Siddoway. Yes, that's correct. It's a huge issue.
    Mr. Minnick. So it's a problem with a lot of states. It's 
not just the ones we have here. Thank you very much.
    Ms. Siddoway. Thank you.
    Mr. Minnick. I appreciate it.
    The Chairman. Message received.
    The gentleman from Idaho, Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman. And following up on 
what my good friend, Mr. Minnick, was talking about. Those 
decisions are going to come down. We also have decisions 
relative to the experimental station in Dubois, and the Grizzly 
bear habitat and those allotments over there.
    For those Committee Members who might not know, Idaho is 64 
percent Federal land, and add state land, we're getting to 70 
percent that is government owned. So most ranchers, the cattle 
ranchers, and sheep ranchers, and others, use public lands. And 
I suspect all these issues we're talking about in the ag 
program are minor compared to dealing with the Federal 
Government in dealing with allotments, and how you graze, and 
that type of thing.
    What is the potential impact to the cattle industry, to the 
sheep industry, to the sage grouse issues.
    Ms. Siddoway. On the sage grouse issue? Oh, it would be 
tremendous. Less so on our private ground. And if there is a 
conflict with sheep, it's hard to understand why the leks are 
on our private ground where we've raised sheep for 120 years.
    Mr. Simpson. Maybe they don't know the sheep are there.
    Ms. Siddoway. Maybe they don't. And nevertheless, there may 
be some qualities that restrict the sheep being there. It 
really makes no sense. The sheep man and the cattleman are out 
there on the land day in and day out. They are good land 
managers. They understand the land. They live on this land. 
It's been beneficial to us, and we want to be beneficial back 
to the land itself.
    But, yes, the ramifications of the listing of sage grouse 
would be very detrimental.
    Mr. Simpson. Are there other allotments that have been 
taken out of production that could be used if the Payette 
National Forest decision on the Big Horn sheep comes down 
adversely.
    Ms. Siddoway. Yes, there are lands taken out 20, 30 years 
ago as I said on perceived competition with wildlife or 
recreation. Whether it is real or not, a lot of allotments with 
the Grizzly bear habitat were retired. Those should be made 
available if the sheep man is forced to leave allotments.
    It makes it more difficult to convert to a new one, where 
you don't understand it as well. It takes a few years to 
understand each allotment, and know the best way to graze that 
allotment. But they definitely should be made available.
    Mr. Simpson. How are the degradation payments going to the 
loss of the reintroduced wolves into Idaho? I've heard some 
people say, the process is so complicated, it's just not worth 
it.
    Ms. Siddoway. Well, it does get a little complicated. We 
use Wildlife Services, of course. Are you talking about the 
Defender's of Wildlife compensation.
    It's helpful. It won't be there, I don't think, much 
longer. That's why I applaud the inclusion of the wolf 
degradation in the Farm Service Agency EALP program.
    You have to have Wildlife Services verifying. They have to 
be there. On our operation last summer, we had losses out at 
Sand Creek. At the same time, we were having losses in the 
forest, which is 100 miles apart.
    It really puts a strain on Wildlife Services to have enough 
personnel to manage all of the conflicts. And it's going to get 
worse, and worse, and worse. We lost probably 130 head last 
summer alone.
    Mr. Simpson. From wolves.
    Ms. Siddoway. From only wolf kills. And they killed our 
guard dogs right off the bat. We lost five guard dogs. You 
know, we just can't keep up with it. And we're spread, the 
sheep industry, as with cattle, is spread over hundreds and 
hundreds of miles with different herds. So it's hard to be in 
all places at all times.
    Mr. Simpson. Mr. Boer, how were the banks handling your 
loans and lines of credit given this downturn in the dairy 
industry.
    Mr. Boer. I'm familiar with two lending agencies. I'm most 
familiar with two. And one was Wells Fargo Bank. And the other 
one is the Farm Credit Association. I do my banking with the 
Farm Credit System.
    Wells has taken a position, and I think horribly so--as our 
downturn progressed deeper into the situation, they took a 
position that they reevaluated the cows. They demanded more 
equity positions in your inventories. That, in itself, when 
they lowered their inventories' values, they lowered their cow 
values. They actually threw them in a deficit situation into a 
non-compliant state.
    Now, Farm Credit has taken the position that, we want to do 
the same thing, but we're going to do this over about a year-
and-a-half. So we know what's coming down. So we have a year to 
a year-and-a-half to try to get our financial positions back 
into a number that we can live with.
    But that's the two situations I'm familiar with. And it's 
pretty hard on the producers that are banking with the banking 
industry, other than the Farm Credit. It's a cooperative. So I 
think they are cooperatively working together.
    Mr. Simpson. Well, I would hope as you look at ways to 
control the production, because ultimately you have to, it's a 
supply-and-demand issue with milk. And when you do that, don't 
screw up the cattle industry.
    Mr. Boer. We'll try not to. That's never our intent. We're 
part of that, too.
    Mr. Costa. If the gentleman might yield. On the market to 
market and the lending institutions, as you noted, are treating 
them differently. I think they are coming to the conclusion, as 
they are trying to carry this, they don't have enough sellers 
to milk these cows.
    Consequently, and we're handling a little bit differently a 
lot of value to value in just liquidity is gone on your dairy 
herd.
    The Chairman. I thank the gentleman. And thank the panel 
for answering some questions. And we appreciate it, and 
appreciate your time, and being with us today.
    Before we adjourn, I would advise the Ranking Member to 
make any closing remarks if he has any.
    Mr. Lucas. Just to simply note, that clearly there are 
challenges all over the country. As our friends expressed in 
Idaho today, we have our work cut out for us. As long as we 
have a chance to survive, and maybe thrive in the next farm 
bill.
    Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman, and I think that's 
pretty clear. I have no doubt that farmers can rise to the 
challenge, and come up with new ideas.
    I've always told everybody, that no matter what kind of 
program we put together in Washington, the farmers will be way 
ahead of us, because they sit out on the tractor, and they have 
all day to sit there and think about this. And whatever we come 
up with, they will figure it out. They will be way ahead of us.
    Mr. Lucas. Just don't help too much.
    The Chairman. We thank all of you for being here again. 
Anybody that didn't have a chance to testify, we invite you to 
come on to our website www.agricultural.house.gov. That's 
anybody here today or watching on the web-cast.
    We know there are lots of good ideas out there. We're 
looking for those ideas. We're planning to spend the next 
number of months looking at whether there are better ways to do 
things, and better ways to make things work.
    And this hearing has been very helpful in that regard, and 
we'll give Mr. Minnick the last word.
    Mr. Minnick. Thank you, Mr. Chairman. I think I can say on 
behalf of my friend, and colleague, Congressman Simpson, that 
we do work together on ag problems, just as the Committee does. 
We do it in a nonpartisan way based on what's best for our 
state and industry.
    We are both honored to have this group of distinguished 
representatives of agriculture with us today. And we are 
extremely pleased, Mr. Chairman, and Ranking Member Lucas, that 
you would spend this time with us.
    There are big problems. But there are thoughtful people. I 
think if we work together, we can come up with solutions that 
will benefit Idaho, and benefit the country, and each of you as 
important producers.
    So thank you all for being here.
    The Chairman. Thank you gentlemen for your hospitality and 
for the constituency here today.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 30 days to receive additional 
material, and supplementary written responses from the 
witnesses to any question posed by a Member.
    And this hearing of the Committee on Agriculture is 
adjourned.
    [Whereupon, at 3:40 p.m. (MDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
 Submitted Statement by Jim Evans, Past Chairman, USA Dry Pea & Lentil 
                                Council
    The USA Dry Pea & Lentil Council (USADPLC) would like to thank 
Chairman Peterson, Representative Minnick and the House Agriculture 
Committee for holding a farm bill hearing in the State of Idaho. I am 
Jim Evans, Past Chairman of the USA Dry Pea & Lentil Council, a 
national organization representing producers, processors and exporters 
of U.S. grown dry peas, lentils and chickpeas. I am a third generation 
farmer from Genesee, Idaho. Idaho is a long time producer of dry peas 
and lentils. Idaho has also been the largest chickpea (Garbanzo Bean) 
producer in the United States (40,000 acres) over the past 5 years.
Statistics
    Acreage of U.S. pulse crops (dry peas, lentils and chickpeas) has 
increased from under 500,000 acres in the year 2000 to over 1.5 million 
acres in 2010. Last year the U.S. produced a record 1.0 million metric 
tons of dry peas, lentils and chickpeas. Strong demand for these 
legumes around the world has kept prices for these crops above the 10 
year average for the past 4 years despite record production. Prices on 
all pulse crops have dropped 25% in 2010 as a reminder of the volatile 
nature of agriculture and the need for an adequate farm safety net.
Farm Programs
    Pulse crops are grown across the northern tier states in rotation 
with wheat, barley, minor oilseeds, corn and soybeans. Our industry 
fought hard to have pulse crops added as a program crop in 2002 in 
order to compete for acreage with other program crops. Our goal for the 
2012 Farm Bill is the same as it was in 2002. Pulse producers seek to 
be included and treated equally with other farm program commodities in 
the area of farm and conservation program support. Pulse crops do have 
a loan and countercyclical program but no direct payment. Dry peas, 
lentils and chickpeas are eligible for the ACRE program and this 
program should be continued under the 2012 Farm Bill with some 
adjustments. For example, producers should be allowed to use RMA crop 
insurance records to establish their ``plug yield'' on their farm in 
those counties with a wide variation in environmental conditions. For 
example, in Nez Perce County of Idaho, average rainfall ranges from 10 
to 30 inches.
Research
    The 2012 Farm Bill needs to revitalize agricultural research to be 
a leader in providing solutions to the critical health, global food 
security and sustainability challenges facing this country and the 
global community. The United Nations projects that the world's 
population will grow from six billion to nine billion people by the 
year 2050. The competition for arable land and fresh water will become 
our limiting factor and most likely the cause of the wars of the 
future. We need to double the food supply in less than 40 years. To do 
this we need to increase funding to agricultural research programming 
that will provide short and long term solutions to these challenges. 
The USADPLC in cooperation with the U.S. Dry Bean Council has launched 
the Pulse Health Initiative (PHI) to meet these challenges head on. The 
mission of the PHI is to provide solutions to the critical health and 
sustainability challenges facing the citizens of the United States and 
the global community through research on pulse crops. In March of this 
year we gathered together 50 of the best scientific minds in this 
country to map out a strategic plan to achieve the following three 
goals:

    1. To Reduce Obesity and associated diseases (CVD, Diabetes, 
        Cancer) by 50%.

    2. To Reduce Global Hunger and Enhance Food Security by increasing 
        pulse crop productivity.

    3. To Reduce Agriculture's Carbon & Water Foot Print by optimizing 
        pulse crop nitrogen fixation and sustainability attributes.

    Because of their unique nutrition and environmental attributes, 
pulse crops can achieve these goals, but it will take a significant 
investment in research. We ask the House Agriculture Committee to 
include the PHI in the 2012 Farm Bill. If we are to feed this world in 
a sustainable way, we have to increase our research investment in pulse 
crops and all agricultural research.
Federal Crop Insurance Reform
    The 2012 Farm Bill must improve Federal Crop Insurance for those 
crops without a futures market. The USADPLC has been working for over 
10 years to secure a crop revenue policy for dry peas, lentils and 
chickpeas. Ten years. The USADPLC has taken two pilot program ideas to 
the RMA board for consideration. Both times our ideas have made it 
through expert review with positive marks only to be rejected by the 
RMA staff and/or board. Our two pilot programs were rejected primarily 
because our crops do not have a futures market. There are a lot of 
crops without futures markets that do have solid price discovery 
mechanisms. The 2012 Farm Bill must include reform of the Federal Crop 
Insurance Program that will be more responsive to the risk management 
needs of those crops not traded on the Chicago Board of Trade.
    Thank you for listening to these comments. The USA Dry Pea & Lentil 
Council looks forward to working with your Committee on the 2012 Farm 
Bill.

Comments Submitted on behalf of:

USA Dry Pea & Lentil Council.
                                 ______
                                 
         Submitted Letter by Sid Freeman, Farmer, Caldwell, ID

Members,
House Committee on Agriculture,
Washington, D.C.

From: Sid Freeman, member of: Canyon County Farm Bureau Federation; 
Nyssa Nampa Beet Growers Assoc.; Idaho Eastern Oregon Onion Growers 
Assoc.; Potato Growers of Idaho; Idaho Contract Bean Growers Assoc.; 
former FSA County Committeeman for 11 years.

    Members of the Agriculture Committee:

    My name is Sid Freeman. I am third generation Canyon County farmer, 
a sixth generation American farmer. Each generation has basically stood 
on it own, nothing having been passed on to the next, except for the 
blood that has created the desire to sow and reap the land. My wife's 
family has a long history in agriculture as well, she herself is a 
fourth generation Canyon County farm wife. We have two very wonderful, 
hard working, respectful sons, one in college and one in high school. 
With the mix of the blood that runs through their veins, and with the 
type of upbringing that they have shared, undoubtedly one or both of 
them will have the same desires as both of their grandfathers, their 
great grandfathers, and I possess. Unfortunately, with the current 
economic situation in agriculture they may have to turn towards some 
career other than farming in order to make their living.
    I am here before you today, representing the small multi-
generational family farm. Something that is rapidly disappearing right 
before your eyes, and soon will be gone forever. What I say here today 
is my own opinion and does not necessarily represent the opinion of any 
of the many agricultural organizations that I am a member of. My 
intentions here today are not to get to far into the intricacies of the 
farm bill, but rather to emphasize it's importance. The importance of a 
well written, and well balanced farm bill. As time's change, so should 
the substance of our the farm bill. There are a couple of issue's that 
I would like to touch on later, if I have time.
    But for now, how important is the farm bill? That question can only 
be answered by, how important is the industry that it is written for? 
During the 49 years of my life, I have developed a very deep and 
profound understanding of the importance of the role that the 
agricultural industry plays in the development of our country, past, 
present, and hopefully the future. I would like to share it with you 
here today. What I am about to read to you is a joint memorial passed 
by the 2006 Idaho State Legislature. I personally drafted the 
resolution that became House Joint Memorial #12, which I have attached 
a copy of. Please feel free to read it at your pleasure.
    Members of the Agriculture Committee, a strong and viable 
agricultural industry is without a doubt one of the most important 
cornerstones in the foundation of our counties national security. A 
strong and viable agriculture is the only answer to the preservation of 
the family farm unit, and the land that they so carefully steward.
    In my eleven years as a county committeeman for FSA, I saw many 
programs that seemed to work and many that did not seem to work as 
well. I feel that the disaster payments made directly to farmers when 
weather related circumstances interfered with their crop production was 
far better than a multi peril crop insurance policy that most farmers 
could not afford any way. And then if they did carry multi peril crop 
insurance they seemed to get factored out of any kind of a ``just'' 
payment, even though they thought that they would be covered. This has 
happened to me personally on more than one occasion. In my opinion it 
is a huge ripoff not only to farmers but all American tax payers. The 
insurance companies are increasing their profits at the farmers 
expense, and tax payers are being told that this money is going to the 
farmers.
    I believe that the time has come to add specialty crops to the farm 
bill. Lets face it before you can have crops for food, fiber, and fuel, 
you have to have crops for the seed that is used to produce those 
crops. As the population of the world is expected to increase to nine 
billion by 2050, the need and importance for increased seed production 
is going to be extreme. Idaho is a huge seed producing area for the 
world, especially the treasure valley. Many seed companies from all 
over the world come here to have the seed grown that they send around 
the world to produce food. Seed crops are considered a specialty crop 
and are not currently a properly protected by the farm bill.
    My last contention I wish to bring to your attention is the fact 
that we now currently have a situation where there is a reverse 
discrimination written in the farm bill which allows special conditions 
and programs for minority, or socially disadvantaged, people. I believe 
this is absolutely hypocritical, and has no place in the farm bill. 
This countries veteran farmers and their families are without a doubt 
the ones that have the highest degree of probability to succeed in this 
industry. We should not in any way be cutting them short of the 
opportunities afforded by this farm bill or any other farm bill in the 
future. We must get rid of any language of any kind that is 
discriminatory in any way to anyone. Yes we do have a special need for 
new beginning farmers, but it shouldn't matter what color their skin 
is, or what gender they are.
    Agriculture Committee, I thank you very much for your time, and for 
allowing me to speak with you here today. I would gladly try to answer 
any question that you may have.
            Respectfully,

Sid Freeman.
                               attachment
                     Legislature of the State of Idaho
      Fifty-Eighth Legislature        Second Regular Session--2006
                     In the House of Representatives                       House Joint Memorial No. 12                    By Agricultural Affairs Committee                            A Joint Memorial   To the Senate and House of Representatives of the United States in
                                Congress
Assembled, and to the Congressional Delegation Representing the State of
               Idaho in the Congress of the United States.
    We, your Memorialists, the House of Representatives and the Senate 
of the State of Idaho assembled in the Second Regular Session of the 
Fifty-Eighth Idaho Legislature, do hereby respectfully represent that:

    Whereas, since the beginning of time, the ability of man to provide 
food, fiber, and fuel for himself and others has determined his 
independence, freedom, and security; and
    Whereas, when man began to colonize, the strength of each and every 
colony was directly related to his ability to provide a safe and 
reliable source of food, fiber, and fuel for his people; and
    Whereas, when nations began to form, only nations with such ability 
rose to the top and since then many have fallen because they lost such 
ability; and
    Whereas, agriculture is and will continue to be a fundamental and 
vital industry in Idaho, our nation, and the entire world; and
    Whereas, a strong and viable agricultural industry is a very 
important part of our national security and overall well-being; and
    Whereas, the primary source of funding for building schools, 
roadways, fire stations, and providing police protection in our rural 
communities comes from the taxes generated by agriculture and other 
natural resource industries; and
    Whereas, American farmers, ranchers, and food processors are held 
by Federal, state, and local laws to meet the highest standards in the 
world when it comes to environmental protection, worker safety, wage 
rates, and food safety concerns; and
    Whereas, the family farm unit is the foundation of agriculture and 
one of the basic strengths of this nation.
    Now, Therefore, Be It Resolved by the Members of the Second Regular 
Session of the Fifty-Eighth Idaho Legislature, the House of 
Representatives and the Senate concurring therein, that we urge that 
American farmers, ranchers, and food processors be enabled to compete 
freely and trade fairly in foreign markets on a strictly level playing 
field.
    Be It Further Resolved, that because of the importance of the 
standards to which American producers and food processors are held, 
primarily standards concerning food safety, we urge that foreign 
countries wishing to participate in markets that lie within the 
boundaries of the United States be held to the same standards.
    Be It Further Resolved, when determining the economic values of 
international trade agreements, we urge that these standards be 
quantified and considered in such determinations.
    Be It Further Resolved, that we encourage the education of the 
general public as to the importance of the role agriculture plays in 
the development of a society, recognizing that such public education is 
critical in the preservation and strengthening of the family farm unit 
and the overall preservation and strengthening of the agricultural 
industry itself.
    Be It Further Resolved that the Chief Clerk of the House of 
Representatives be, and she is hereby authorized and directed to 
forward a copy of this Memorial to the President of the Senate and the 
Speaker of the House of Representatives of Congress, and the 
Congressional Delegation representing the State of Idaho in the 
Congress of the United States.


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                          MONDAY, MAY 3, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                        Fresno, CA.
    The Committee met, pursuant to call, at 9:00 a.m., in 
Fresno City Hall Council Chambers, 2600 Fresno Street, Fresno, 
California, Hon. Collin C. Peterson [Chairman of the Committee] 
presiding.
    Members present: Representatives Peterson, Cardoza, Costa, 
Minnick, Lucas, and Conway.
    Staff present: Keith Jones, John Konya, Robert L. Larew, 
Lisa Shelton, April Slayton, Nicole Scott, Pelham Straughn, and 
Sangina Wright.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. The hearing of the House Committee on 
Agriculture to review U.S. agriculture policy in advance of the 
2012 Farm Bill will come to order. To begin with, a couple 
things we need to say, the gentleman from California, Mr. 
Nunes, is not a Member of the Committee but has joined us 
today. I have consulted with the Ranking Member and we are 
pleased to welcome him to join us in the questioning of the 
witnesses today.
    Mr. Nunes. Thank you.
    The Chairman. Welcome to the Committee. Also, this is the 
first time that there has ever been web-casting of these field 
hearings. We have the opportunity for anybody that wants, to be 
able to, in addition to the witnesses that are here today, to 
be able to provide ideas and testimony to the Committee through 
our website, which is www.agriculture.house.gov.
    And there are some of these cards around, I believe, that 
have our website on it, and we welcome the people that are with 
us today on the web-cast.
    So good morning, and I thank all you for joining us today 
for the House Agriculture Committee hearing. We are glad to be 
here, in Fresno, and to hear from area farmers and ranchers 
about the issues facing agriculture in rural communities.
    As we demonstrated in the 2008 Farm Bill, this is about 
more than just farms. We continued the safety net that protects 
farmers and ranchers, and provides the certainty that they can 
rely on to stay in business. But we also made historic 
investments in nutrition, conservation, renewable energy, 
research and development, fruits and vegetables, and organic 
agriculture.
    While traditional farm programs have a relatively small 
proportion of funding, these programs are essential to the 
continuing success of U.S. agriculture. We have a system of 
independent farmers and ranchers working the land, and without 
the certainty of these programs, these farmers would not be 
able to get the financing, in a lot of cases, that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking 
time out of their busy schedules to talk to us today.
    These farm bill hearings are the first step in a process of 
writing the next farm bill. A bill this large, and that covers 
so many important issues takes a lot of time and effort to get 
it right, and I am committed to a process, like the last time, 
that is open, transparent and bipartisan.
    For all of those joining us today in the audience, I hope 
that, as I said earlier, you will participate with us by making 
your comments known. A lot of times, we get some really good 
ideas from folks that do not necessarily get to the witness 
table, and we would appreciate that input. So feel free to send 
us your ideas about what you think we should consider for the 
next farm bill.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Des Moines to 
hear from area farmers and ranchers about the issues facing agriculture 
and rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. So we have a lot of ground to cover. I 
welcome everybody to the Committee. I recognize my good friend, 
the Ranking Member from Oklahoma, Mr. Lucas, for an opening 
statement.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman, and I once again want 
to thank you for calling these hearings and being so proactive 
in preparation for the debate that we'll have on the future of 
farm policy and the 2012 Farm Bill. We do have an extremely 
difficult road ahead of us, but one thing I look forward to is 
listening to our producers from across the country.
    While I am fortunate and get to hear my own producers every 
time I go home, whether it's in the coffee shop, the feed 
store, or doing my own town meetings across my district, I 
think it's vitally important to hear from producers with a 
broad range of products that they produce in a broad range of 
places.
    My goal for the next farm bill is simple. I want to give 
producers the tools to help you do what you do best, and that 
is produce the safest, most abundant, most affordable food 
supply in the history of the world.
    I think it's extremely important to hear from you about 
what is working and what is not working, and what changes we 
can make to the farm bill to allow it to work more efficiently 
for you.
    The 2008 Farm Bill was another important investment in the 
future of rural America. Not only did we provide a viable 
safety net for producers, but we also made substantial 
investments in conservation and nutrition programs during a 
time of need for many Americans.
    A lot of people do not realize that 75 percent of farm bill 
spending goes to the nutrition programs. Three-quarters of all 
the money spent in the 2008 Farm Bill goes to nutrition 
programs.
    In addition to those investments, this Committee is led by 
Chairman Peterson, who has accomplished substantial reforms, 
especially in the realm of payment limits. This is a fact that 
should not be forgotten by those who always seem ready to 
attack our programs.
    Last week, during a hearing in Washington, I was concerned 
to hear the Administration's priorities seemed to differ so 
greatly from many of my producers' priorities.
    In that hearing, barely was mentioned the topic of safety 
net, conservation programs, or many of the programs I hear from 
my producers. I think it's imperative that Congress work 
together with the Administration to come up with workable 
solutions to the many problems our rural communities face. But 
first, the Administration needs to prove its commitment to 
production agriculture.
    I also want to hear from you about the impediments that you 
face when bringing a crop to market, and see if we can help 
alleviate some of those impediments.
    I have serious concerns about the effects of an 
overreaching Federal EPA will have upon you. It seems every 
day, the Environmental Protection Agency is coming out with a 
new regulation that makes it harder for producers to make a 
living.
    Can we do something about those impediments, or at least 
give you the tools that can help mitigate some of the adverse 
effects of those regulations. With all of that said, I look 
forward to hearing from our witnesses today, and thank you 
again, Mr. Chairman, for starting this process.
    The Chairman. I thank the gentleman, and now want to 
recognize one of my Subcommittee Chairmen, somebody that you 
know well, from this area of California, Mr. Cardoza, who is 
the Chairman of the Subcommittee on Horticulture and Organic 
Agriculture. We very much appreciate his leadership, as well as 
the gentleman who is hosting this hearing in his district, Mr. 
Costa, another one of my good friends and allies, and somebody 
that I rely on a lot. I would recognize him for an opening 
statement.

   OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN 
                    CONGRESS FROM CALIFORNIA

    Mr. Costa. Thank you very much, Chairman Peterson and 
Ranking Member Lucas. We appreciate Congressman Conaway coming 
all the way from Texas, and Congressman Minnick from Idaho, and 
Congressman Nunes and Congressman Cardoza, who all share a love 
and a passion for our valley.
    This is the third of four hearings on this swing. 
Congressmen Lucas and Peterson, and I, have been in Des Moines 
on Friday, and Saturday we were in Congressman Minnick's 
district in Boise, Idaho, and today we are in Fresno. Tomorrow, 
they will be heading to Cheyenne, Wyoming, really getting a 
snapshot of the diversity of U.S. agriculture and the 
challenges we face with difficult financing, on trying to write 
a new farm bill for 2012.
    So what we are doing is setting the table here. We are 
setting the table, and the testimony that we will have on the 
two panels here that represent the breadth and width of 
diversity of California agriculture is very much, indeed, 
desired by this Committee.
    Both Congressman Cardoza, Mr. Nunes, and I, are always 
trying to explain to our colleagues, in other parts of the 
country, how diverse California agriculture really is with 
almost 400 crops.
    And of course we well know the challenges we have had with 
the water problems that we have had here, the last 3 years.
    I also want to recognize that we have some guests here. The 
California Secretary of Agriculture, A.G. Kawamura, who is here 
with us, Supervisor Phil Larson I saw in the audience, and 
Council Member Sterling. And is there someone else that I have 
left out here in our local elected officials? We are very 
pleased that you are here as well.
    Let me indicate that when we talk to our colleagues around 
the country about California, many of them do not think of 
farming. They think of aerospace, they think of the movie 
industry, they think of high tech.
    But the fact is is that California is the most diverse 
agricultural state in the nation, and the Central Valley is one 
of the, if not the most, productive agricultural region in the 
United States.
    We have over 81,000 farms in California, farms and ranches 
and dairies, that last year, at the farm gate, totaled $36.2 
billion. This state, our state, grows 99 percent of the 
almonds, pistachios, peaches, plums, olives, kiwi, dates, figs, 
artichokes, pomegranates, and walnuts. That is a mouthful, but 
99 percent of the production is here, in California.
    We produce 22 percent of the nation's dairy products, and 
approximately 50 percent of the country's fruits and 
vegetables.
    California represents 11 percent of the entire U.S. 
agricultural production with over 400 commodities, and that is 
why it is so important, Mr. Chairman, and Ranking Member Lucas, 
that you are here, and we appreciate that very much today.
    California agriculture has always been innovative.
    Today, we will have an opportunity to hear from some of 
these innovators, on both panels.
    The 2008 Farm Bill made great strides in recognizing the 
needs and the value of California agriculture. Congressman 
Cardoza and I appreciate that as it relates to specialty crops. 
We want to build on that progress.
    Today we will be listening to how the priorities ought to 
be established for the 2012 Farm Bill. Do we believe that it is 
important to have domestically-grown products, or do we want 
them to be imported from other countries? I think not.
    Do we want to invest in developing new renewable energy 
sources from farm products, like methane digesters or sugarbeet 
conversion, or should we allow Brazil and the European Union to 
lead the way in these areas? I think not.
    Do we want to have ready accessibility to healthy fruits 
and vegetables and dairy products available for our children in 
their school lunch program? We are dealing with the big problem 
of obesity. It is really a conundrum. We grow abundant fruits 
and vegetables, yet we have problems with young people 
suffering from obesity.
    We know here, in Fresno, in the Valley, that food does not 
come from Safeway but it comes from our farms. It comes from 
dedicated farm families, like those that will be testifying 
this morning.
    I am looking forward to hearing the testimony to ensure 
that the next farm bill will help California agriculture, not 
just our specialty crops, but in dealing with invasive species, 
with research, with marketing, promotion, with air quality 
issues, dealing with all the challenges that our farmers, 
ranchers and dairymen face.
    So I want to thank you again, Mr. Chairman, for your 
leadership. I want to thank Congressman Lucas for the 
bipartisan effort that takes place here, we appreciate it very 
much. I would like to defer to my colleague, Congressman 
Cardoza, for any comments he might want to make.

 OPENING STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE 
                  IN CONGRESS FROM CALIFORNIA

    Mr. Cardoza. Thank you for hosting us, Jim. I want to 
especially recognize the Chairman, who has been helpful since I 
have been in Congress. He has helped the Central Valley every 
time we have asked. Ranking Member Lucas, I thank you for 
coming to Fresno. We appreciate it.
    This is a beloved valley, for those of us who live here and 
call it home. In the last farm bill, we did some very important 
things, trying to help the valley become even more productive.
    We were able to secure $1.7 billion in dedicated Federal 
funding for specialty crops. We increased the funding for the 
popular EQIP Program because we have some of the dirtiest air 
in the country and we created a new Clean Air Program.
    We increased funding for pest and disease control, and 
eradication programs. That is critically important to our 
sustainability. The new outbreak, to be announced today, 
underscores the importance of pest eradication and disease 
control.
    And finally, we did quite a bit in the last farm bill to 
fund healthy eating programs. We did this all within the PAYGO 
constraints that we have put in place in Congress to pay for it 
as we went. We were one of the first bills that went through on 
regular order. And, we may have been the only bill that went 
through PAYGO, went through on regular order, went through on a 
bipartisan basis, and successfully signed into law.
    We have to replicate those kind of same strategies in 2012. 
I am going to close with this, Mr. Chairman.
    It is important to note that the first panelist to speak 
today is a dairyman. As Jim said, 21 percent of the dairy 
production for our country, is in California. California 
dairymen are being devastated by the current price and 
regulatory climate. They cannot survive without relief. I will 
be listening very carefully to this testimony.
    Thank you, Mr. Chairman, for being here.
    The Chairman. I thank the gentleman. I thank Mr. Costa and 
Mr. Nunes for welcoming us to this beautiful agriculture area.
    We have the panel seated. Mr. Jamie Bledsoe, a dairy 
producer from Riverdale. Mr. Tony Campos, an almond producer 
from Caruthers. John Diener, who is almond, grape, wheat, 
alfalfa--too many crops to name--from Five Points. Kevin 
Kester, a cattle and grape producer from Parkfield. Jon 
Reelhorn, a nursery plant producer from Fresno, and Frank 
Rehermann, a rice producer from Live Oak.
    Gentlemen, welcome to the Committee. Your full statements 
will made part of the record. Feel free to summarize, in order 
to stay within the Committee's 5 minute rule. We have a lot of 
things to go through this morning, and we have to get on our 
way to Wyoming before it gets too late.
    Mr. Bledsoe, welcome to the Committee. We look forward to 
your testimony.

 STATEMENT OF WALTER JAMES BLEDSOE, DAIRY PRODUCER, RIVERDALE, 
                               CA

    Mr. Bledsoe. Good morning, Mr. Chairman, Ranking Member 
Lucas, and my Congressman, Devin Nunes, and Members of the 
Committee. Thank you for holding this hearing this morning.
    My name is Jamie Bledsoe. I am currently serving as the 
board President of Western United Dairymen and I am on the 
board of directors of my cooperative, California Dairies, 
Incorporated.
    My wife, Elizabeth, and I, and our four children, I would 
consider as a typical California dairy family, and we currently 
milk about 1,200 Holstein cows and feed 2,500 replacement 
heifers and bulls for breeding purposes. And our operation 
supports my family as well as a family of 20 others that live 
off of our business.
    It is important to note, and I think Congressman Costa 
brought up, that the California dairy industry is responsible 
for more than 443,000 jobs in the State of California, and a 
typical farm like mine generates $33 million in economic 
activity and 232 jobs.
    The dairy industry contributed $63 billion in economic 
impact in our state in 2008. It's the number one industry in 
the State of California. The economic situation for California 
dairy farmers this past year was ruinous.
    While things have improved slightly, dairy families are 
still experiencing negative margins. May is at least the 18th 
consecutive month of low milk prices and high input costs. 
Margins are not just low. They do not exist. Milk prices 
lingered at just over half the cost of production for a large 
portion of 2009, and dairy families all over the state are 
losing what took decades and generations to build.
    In fact, my operation lost over $100 a cow in 2009, and my 
equity took a major hit.
    The industry has experienced periods of low prices before. 
However, production costs have been on a steady upward trend, 
up nearly 20 percent in California, just over the past 3 years.
    If you will notice a chart in my written statement, it 
shows negative margins in 5 of the past 9 years. And last 
year's negative margin was over $6 a hundredweight. Dramatic 
increases in feed prices propelled dairy production costs to 
record levels in late 2008 and into 2009. California producers 
typically do not grow all their feed and have to pay additional 
transportation costs to bring feed in for their cattle.
    At the same time, all the costs of doing business in 
California have increased. Costs mount each year as producers 
work to meet new waste discharge requirements. Our Water Board 
estimates new regulations cost an additional $45,000 to $65,000 
per farm, per year. Water for crop irrigation is a major 
concern in California, particularly right here in our Central 
Valley.
    I farm in the Westlands Water District, and as you know, 
limited water supplies affect feed prices and the availability 
of feed. The milk price crash came early to California, because 
our system reacts to market signals more quickly. Price 
reporting in Federal Orders usually results in a 1 or 2 month 
delay. Our board supports pricing that sends more immediate 
market signals, so we support the California Order.
    Prices for some commodities like butter, nonfat dry milk 
are moving upward, but profitability still looks pretty far 
off. The pressure on milk prices from current massive cheese 
inventories, over a billion pounds of cheese we have in 
inventory today, affects farmers everywhere.
    Projections for the rest of the year are optimistic, but 
they depend on demand recovery that outpaces milk production. 
The downward adjustment in milk production has not kicked in, 
nationwide, to any great extent. California farmers reduced 
production, dramatically, in 2009.
    In fact, California milk production has been down, year 
over year, 20 of the last 21 months. Clearly, something 
triggered a major difference in the supply response in 
California versus other parts of the country.
    Looking ahead, the dairy farmer safety net needs to change, 
and first, it must be herd size and region neutral, and must 
not send signals that more production is welcome when farm milk 
prices are low.
    Second, with these new input costs, an economic safety net 
based on milk price will no longer be sufficient. Both 
organizations are looking at programs for the future, that rely 
on income assurance rather than milk price triggers alone.
    On the concept of production management, Western United 
Dairymen has organized and hosted meetings to gather input from 
the industry. Both boards have offered suggestions for 
improvements and shared our comments about the proposals as 
those proposals have been developed.
    Those who have developed those proposals have dairy 
farmers' interests at heart, and, in my opinion, they are the 
reason the production management is part of the current 
mainstream Federal policy discussions.
    We are very familiar with industry controlled production 
management here, in California. Our co-ops have programs in 
place and dairy farmer support for CWT here is as strong as 
anywhere in the country.
    Next, fluid standards, fluid milk standards are 
specifically mentioned in the 2008 Farm Bill. Dairy farmers I 
talk to all around the country are interested. I encourage the 
Committee to add this to the list of things that could help 
both farmers and our consumers.
    And finally, there are some other important issues I would 
like to mention. Immigration reform is a priority for farmers 
everywhere. Both CDI and Western United are long-time 
supporters of ag jobs. I thank the Members of the House 
Agriculture Committee for their support for technology reform. 
The need for reform has farm families like mine stuck in the 
financial planning ``no man's land.'' Both organizations are 
represented here today, and support the largest exemption 
possible, along with the lowest tax rate on the amounts over 
the exemption, and the use of a stepped-up basis.
    EQIP has been especially useful to California dairymen, and 
funding increases in the current farm bill must be maintained. 
State and Federal regulators must work together, better, on 
environmental compliance.
    Producers here lead the way in renewable energy technology 
to help reduce our dependence on foreign oil. But there are 
local dairymen who have shut down their digesters for nearly a 
year because our local air quality regulations cannot be met.
    The production of renewable gas from livestock waste 
deserves Federal incentives, at least equal to those provided 
for ethanol.
    A good start would be the Biogas Production Incentives Act 
to provide a production tax credit for renewable biogas used to 
offset the use of fossil fuels. And on trade, we support the 
ratification of the free trade agreements with Colombia, Panama 
and South Korea, and relaxing restrictions on trade with Cuba.
    Assistance is needed from the House Agriculture Committee 
to ensure that the dairy trade with New Zealand is excluded 
from the negotiations of the Trans-Pacific Partnership 
Agreement.
    The Congress is now in the process of passing a new child 
nutrition bill, and dairy's position, as part of the 
reimbursable meals in Federal feeding programs is a win-win for 
the public and for our farmers.
    California dairy producers appreciate the Committee's 
support for those programs, and with the importance of EQIP to 
environmental compliance by dairy farmers everywhere, the 
Senate proposal to cut funding for EQIP to provide the offset 
for a nutrition bill is a serious concern to us. I support the 
leadership of the House Agriculture Committee to help us find 
an alternative.
    Thank you again, Mr. Chairman, for holding this hearing 
today, and providing me with the opportunity, and dairymen, to 
share the perspective of our California industry, and our 
future direction of the farm bill. I look forward to answering 
any questions that you or the Committee may have.
    [The prepared statement of Mr. Bledsoe follows:]

Prepared Statement of Walter James Bledsoe, Dairy Producer, Riverdale, 
                                   CA
    Good morning Chairman Peterson, Ranking Member Lucas, my 
Congressman, Jim Costa, and Members of the Committee. I want to thank 
you for holding this hearing to examine Federal agriculture policy in 
advance of the next farm bill. My name is Jamie Bledsoe. My family and 
I dairy near Riverdale, California. I currently serve as Board 
President of Western United Dairymen and am on the Board of Directors 
of my cooperative, California Dairies, Inc. I am testifying on behalf 
of both of those organizations today.
    My wife Elizabeth (a third-generation dairy farmer) and I (a first-
generation dairy farmer) raised four children while making a career in 
this industry. Our son, Joshua returned to the farm in June of 2009 
after leaving California Polytechnic University at San Luis Obispo. Our 
three daughters are at various stages of completing degrees at the 
California State Universities at Fresno and Long Beach.
    I have had many experiences in the industry; including managing 
dairy operations, the development of elite dairy cattle genetics, and 
marketing live cattle, semen, and embryos all over the world. But my 
first love is to develop a profitable dairy herd and that endeavor 
began in 2003.
    We started our first herd 7 years ago with 120 cows. Our first 
expansion was to 400 and in 2008 we tripled the size of our herd. Today 
we milk 1,200 Holstein cows on two facilities and feed over 2,500 
replacement heifers and 500 bulls for breeding purposes. In addition, 
we continue to market dairy cattle and genetics locally and abroad. Our 
operations support my family as well as provide food and shelter for 
twenty employees and their families.
    We are also involved in diversified farming. We recently purchased 
640 acres of land in the Westlands water district where we can grow 
nearly 80% of the roughages for our cattle. We also grow 110 acres of 
wine grapes (Semillon and Muscat of Alexandria) and plan to expand into 
other varieties, and into growing pistachios or almonds.
Economic Impact of the California Dairy Industry
    A recent analysis of the dairy industry by J/D/G/ Consulting, Inc., 
on behalf of the California Milk Advisory Board, offers a perspective 
on how vital the dairy industry is to California and its economy. The 
California dairy industry is responsible for more than 443,000 jobs in 
the state. A typical dairy farm in California generated $33.1 million 
in economic activity and 232 jobs in the state. In total, the dairy 
industry contributed $63 billion in economic impact to the state in 
2008, which is more than the wine industry ($59 billion in 2007) and 
the motion picture/television industry ($35 billion in 2008). For those 
concerned about California being a ``drag'' on the nation's economy, 
improving the economic health of the California dairy industry might 
not be a bad place to start.
Current Economic Situation
    The economic situation facing the California dairy industry this 
past year was ruinous. While things have improved slightly, dairy 
families are still experiencing negative margins. In fact, May will 
mark at least the 18th consecutive month of low milk prices and high 
input costs.

    I. An economic snapshot of the California dairy industry.

    A. Ruinous negative operating margins.

   Farm milk prices and feed commodity prices tend to be 
        cyclical in nature. However, producers have never witnessed 
        such dramatically low milk prices combined with skyrocketing 
        production costs as they did for all of 2009. Margins haven't 
        just been low, they simply haven't existed. That is, we have 
        been losing money on every pound of milk produced for over a 
        year.

   The price paid producers for milk lingered at just over half 
        what it cost to produce the milk for a large portion of 2009. A 
        good rule of thumb is that dairy farmers lost $100 per cow per 
        month last year. Dairy families all over the state are losing 
        what took them years and even generations to build.

   The industry has experienced periods of low prices before. 
        However, production costs have been on a steady upward climb--
        up nearly 20% in California in just the last 3 years (2009 
        versus 2006).

   The following chart, compiled with data from the California 
        Department of Food and Agriculture, compares net operating 
        margins from 2001 through 2009 and year-to-date for 2010. While 
        the last really bad year on the dairy farm, 2006, showed 
        margins resulting in an average loss of $3.30 per 
        hundredweight, the negative margins in 2009 were nearly two 
        times larger. While milk prices have increased slightly and 
        milk production costs have eased moderately, negative margins 
        are still being experienced.

------------------------------------------------------------------------
                                         CA Statewide
(per hundredweight)     CA Overbase         Cost of           Margin
                           Price          Production
------------------------------------------------------------------------
            2001             $13.11            $12.24            $0.87
            2002             $10.24            $12.61           ^$2.37
            2003             $10.70            $12.44           ^$1.74
            2004             $13.89            $12.75            $1.14
            2005             $13.17            $13.43           ^$0.26
------------------------------------------------------------------------
            2006             $10.87            $14.17           ^$3.30
------------------------------------------------------------------------
            2007             $17.27            $15.77            $1.50
            2008             $16.03            $18.54           ^$2.51
------------------------------------------------------------------------
            2009             $10.81            $16.86           ^$6.05
------------------------------------------------------------------------
  2010 YTD.........          $12.88            $15.63           ^$2.75
------------------------------------------------------------------------
Source: CDFA.


   These numbers are hardly unique to California. Previous low 
        price cycles have taken their predictable toll on operations 
        that failed to control costs relative to their competing 
        farmers serving the same markets. This cycle, however, is 
        different. These ruinously negative margins are hurting 
        everybody, including the most efficient.

   Productivity gains on U.S. dairy farms over the past several 
        decades are nothing short of astonishing. However, all U.S. 
        producers will be higher-cost producers in the years to come as 
        a result of the additional debt load taken on to survive these 
        negative net operating margins.

    B. Monthly milk price versus input costs 2008-2010 YTD and near-
term projections.

----------------------------------------------------------------------------------------------------------------
                         CA Overbase    CA Statewide Cost   Margin  (OB less  CA Mailbox (plus   Margin (Mailbox
 (per hundredweight)       Price 1       of  Production 2         COP)        marketing costs)      less COP)
----------------------------------------------------------------------------------------------------------------
           Jan-08             $17.44            $17.31              $0.13             $18.50             $1.19
           Feb-08             $16.72            $17.31             ^$0.59             $17.58             $0.27
           Mar-08             $16.01            $17.31             ^$1.30             $16.57            ^$0.74
           Apr-08             $15.86            $18.04             ^$2.18             $16.43            ^$1.61
           May-08             $16.77            $18.04             ^$1.27             $17.34            ^$0.70
           Jun-08             $17.42            $18.04             ^$0.62             $17.90            ^$0.14
           Jul-08             $17.35            $19.21             ^$1.86             $17.75            ^$1.46
           Aug-08             $16.31            $19.21             ^$2.90             $16.81            ^$2.40
           Sep-08             $16.22            $19.21             ^$2.99             $16.85            ^$2.36
           Oct-08             $15.44            $19.58             ^$4.14             $16.30            ^$3.28
           Nov-08             $14.27            $19.58             ^$5.31             $15.22            ^$4.36
           Dec-08             $12.41            $19.58             ^$7.17             $13.35            ^$6.23
----------------------------------------------------------------------------------------------------------------
           Jan-09             $10.40            $18.51             ^$8.11             $11.09            ^$7.42
           Feb-09              $9.58            $18.51             ^$8.93             $10.32            ^$8.19
           Mar-09              $9.84            $18.51             ^$8.67             $10.44            ^$8.07
           Apr-09              $9.87            $17.12             ^$7.25             $10.40            ^$6.72
           May-09              $9.76            $17.12             ^$7.36             $10.22            ^$6.90
           Jun-09              $9.62            $17.12             ^$7.50             $10.15            ^$6.97
           Jul-09              $9.60            $16.17             ^$6.57             $10.12            ^$6.05
           Aug-09             $10.48            $16.17             ^$5.69             $11.03            ^$5.14
           Sep-09             $11.04            $16.17             ^$5.13             $11.72            ^$4.45
           Oct-09             $11.91            $15.63             ^$3.72             $12.82            ^$2.81
           Nov-09             $13.13            $15.63             ^$2.50             $14.30            ^$1.33
           Dec-09             $14.47            $15.63             ^$1.16             $15.85             $0.22
----------------------------------------------------------------------------------------------------------------
           Jan-10             $13.48            $15.63             ^$2.15             $14.64            ^$0.99
           Feb-10             $13.11            $15.63             ^$2.52
           Mar-10             $12.41            $15.63             ^$3.22
           Apr-10             $12.64            $15.63             ^$2.99
           May-10             $12.79            $15.63             ^$2.84
----------------------------------------------------------------------------------------------------------------
1 Actual through Mar 2010 and estimates for Apr. and May 2010 (based on prices through April 26, 2010).
2 Actual through 4th quarter 2009.
Source: CDFA.


   The dramatic increase in feed prices propelled dairy 
        production costs to record levels in late 2008 and into 2009. 
        Though feed costs have come down a bit, we expect this general 
        upward trend to continue as the cost of doing business in 
        California continues to rise. Unfortunately, this will continue 
        to erode California's competitive advantage compared to other 
        regions where dairy farmers grow the majority of their own feed 
        and benefit from a friendly business climate.

   California producers typically do not grow all their feed 
        and have to pay additional transportation costs to haul in feed 
        for their cows. While dairy farmers unwaveringly support the 
        drive for energy independence, those who purchase the bulk of 
        their feed have seen their bottom line impacted by Federal 
        ethanol policy.

   At the same time, all other costs of doing business in 
        California have increased. Additional environmental costs are 
        mounting each year as producers work to meet new waste 
        discharge requirements. These new water quality regulations are 
        projected by the Water Board to cost an additional $45,000 to 
        $65,000 per year per farm.

   Water for crop irrigation is a major concern in California, 
        particularly right here in the Central Valley where I farm. 
        Limited water supplies affect feed prices and availability. If 
        water is not returned to this area, farm jobs related to feed 
        production, jobs in feed processing and distribution, and jobs 
        related to other important economic activity will be forced to 
        relocate elsewhere.

   Feed costs have eased somewhat from the record levels posted 
        in late 2008. However, the decrease in feed costs has not been 
        large enough to restore positive margins. California dairy 
        families felt a glimmer of hope in December 2009 as average 
        milk prices rose above production costs for the first time in 
        nearly 2 years. However, the milk price increase turned out to 
        be a short-term phenomenon instead of a sustained recovery.
California Statewide Cost of Production

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


        Source: CDFA--includes ROI for investment and management.

    C. The crash came earlier to California.

   The California milk pricing system responds more quickly to 
        current market conditions because it corresponds to the Chicago 
        Mercantile Exchange. In contrast, price reporting procedures 
        for the Federal Milk Marketing Orders usually result in a 1 or 
        2 month delay. Our Boards support the continuation of the 
        California Order.

    D. Outlook for the remainder of 2010.

   Some commodity prices are moving upward (butter and nonfat 
        dry milk) but profitability remains a distant prospect for most 
        dairy farmers. California, with a great deal of cheese 
        production (39% of California's pool utilization in March), 
        will continue to suffer from depressed cheese prices until a 
        drawdown in inventories is witnessed. The pressure current 
        massive cheese inventories place on farm milk prices affect 
        farmers everywhere in the country equally. Optimistic 
        projections for the remainder of 2010 weigh heavily on demand 
        recovery that outpaces milk production.

   The downward adjustment in milk production, made necessary 
        by the disappearance of export markets caused by the global 
        financial crisis, has not kicked in nationwide to any great 
        extent. California producers, who felt the impact of lower 
        prices 2 months before the rest of the country along with the 
        sting of extremely high feed costs, reduced production 
        dramatically in 2009. In fact, California milk production has 
        been down year-over-year for 20 out of the last 21 months. 
        Year-over-year milk production trends completely reversed 
        course in California during 2009--annual production was down 
        4.1% from 2008 levels. This compares to a typical year-over-
        year increase of 4%. It is also worth noting, that the U.S. as 
        a whole was down only 0.3% in 2009. Clearly something triggered 
        a major difference in the supply response in California versus 
        other areas of the country.

   Though prices are expected to increase as we move through 
        the second half of 2010, a return to break-even simply will not 
        undo the damage done to dairy farmers over the past 18 months. 
        Economic experts often say farmers lost $100 per cow per month 
        in 2009. Whether you're a 100 cow producer who lost $10,000 per 
        month or a 1,000 cow farmer who lost $100,000 a month, 
        everybody's equity took a major hit. Producers will continue to 
        go out of business as it becomes clear that equity is gone and 
        lenders are reevaluating operating loans with a new set of 
        rules they must live by. Farmers must have access to adequate 
        operating capital to continue to weather this storm.

   Those left standing will have a huge debt load to work 
        through. It may take years of higher prices (and healthy 
        margins) for the industry to recover.
Looking Ahead--The Next Farm Bill
    A. Dairy Farmer Safety Net.

   An effective and fair economic safety net is a must for 
        farmers.

   Dairy farmers face new challenges from higher input costs. 
        Several factors contribute to high grain, forage and energy 
        costs. An economic safety net based on milk price alone will no 
        longer be sufficient.

   Going forward, the new economic safety net must be herd size 
        and region-neutral and must not send signals that more 
        production is welcome when farm milk prices are low.

    B. Production Management.

   The Board of Directors has voted approval of the concept of 
        supply management. Western United has organized and hosted 
        meetings to gather input from the industry. Both Boards have 
        offered suggestions for improvements and shared concerns about 
        proposals as they have been developed.

   The Boards have shared specific concerns about the potential 
        implications mandatory supply management could have for our 
        international trade agreements and the import and export 
        balance in the U.S. dairy market.

   The Board members of both CDI and Western United Dairymen 
        continue to evaluate supply management proposals on an 
        individual basis as they are made available.

    C. Income Assurance.

   Both organizations are in the process of evaluating 
        proposals for risk management programs that recognize that more 
        than milk price triggers alone are needed and that achieve the 
        goals of being region and herd-size neutral.

    D. Fluid Milk Standards.

   There are more than 4 decades of successful history here in 
        California, the nation's largest milk shed and the nation's 
        largest milk market, with nonfat fortification standards for 
        fluid milk. The reason is simple. The product tastes better 
        and, per serving, provides more calcium and protein to 
        consumers.

   I am encouraged that dairy farmers I talk to all around the 
        country are interested in looking at this issue for the next 
        farm bill. I encourage the Members of the House Agriculture 
        Committee to add this issue to the list of things under 
        consideration that could help both farmers and consumers.
Other Issues of Importance to California Dairymen
    A. Immigration Reform.

   Both CDI and Western United Dairymen are long-time 
        supporters of the AgJOBS legislation (H.R. 2414) and thank the 
        Members of the California delegation who are supportive of the 
        effort led by Senator Dianne Feinstein and Congressman Howard 
        Berman.

    B. Estate Tax Reform.

   I thank the Members of the House Agriculture Committee for 
        their support for reform of the estate tax to help provide 
        stability for farm families and to assist with the 
        intergenerational transfer of their businesses. Both 
        organizations I represent here today support the largest 
        exemption possible, along with the lowest tax rate on amounts 
        over the exemption and the return of the ``stepped-up basis.''

   The House has passed legislation to exempt $3.5 million for 
        an individual and $7 million for a couple. The top tax rate 
        would be set at 35% with the stepped-up basis. The Senate is 
        working on a bill that would exempt estates up to $5 million 
        per individual with a 35% tax rates on amounts over that and a 
        return of the stepped-up basis.

   Without action by the Congress, on January 1, 2011 the 
        exemption returns to $1 million. Farm families like mine are 
        stuck in a financial planning ``no-man's land'' right now and I 
        ask that the Members of the House Agriculture Committee 
        continue to work to find a resolution to estate tax reform 
        before the end of the year.

    C. Environmental Regulation.

   Maintaining and strengthening incentives in the Conservation 
        Title of the next farm bill is critical to all of agriculture. 
        The Environmental Quality Incentives Program has been 
        especially useful to California dairymen. Funding increases in 
        the current farm bill must be maintained and monies 
        appropriated annually so that farmers can continue to be the 
        primary stewards of one our nation's most precious resources--
        our farmland. Our Boards especially thank Representatives Baca, 
        Cardoza, Costa, Nunes and Senators Boxer and Feinstein for 
        their exceptional support in shepherding increased EQIP funding 
        through the last farm bill.

   Other states need only look to California for what may be in 
        store for them from state regulators as farmers come under 
        increasing pressure to comply with environmental legislation 
        and regulation. Producers here have led the way in adopting 
        renewable energy technology to help this country decrease its 
        dependence on foreign sources of energy. But in some cases 
        state and/or local regulators have imposed new restrictions 
        that resulted in the forced idling of that technology. There 
        are local dairymen right here, some of them are my neighbors, 
        who have shut down their digesters for more than a year now 
        because of air quality regulations that cannot be met. State 
        and Federal regulators must work together better in order to 
        hasten the march to energy independence.

    D. Climate Change Legislation and Regulation.

   Farmers are significant energy users. Opportunities to 
        increase farm income through carbon capture offer potential 
        economic benefits to producers. Legislation and/or regulation 
        that would push energy costs even higher, given the state of 
        the dairy farm economy described earlier in this testimony, is 
        a cause of great concern for producers.

    E. Renewable Energy Legislation.

   The production of renewable energy from agricultural 
        byproducts and waste deserves at least equal Federal incentives 
        as those provided for ethanol. A good start would be The Biogas 
        Production Incentives Act (H.R. 1158) that would provide a tax 
        credit for the production of renewable biogas that is used to 
        offset the use of a fossil fuel. This legislation would 
        increase the production of renewable biogas on farms and 
        provide an economically beneficial option to farmers when 
        electricity generation engines do not meet local air quality 
        regulations.

   Tax incentives for electricity generation have been useful 
        in the construction of methane digesters on several dairies in 
        California. The production of renewable biogas is an option 
        that deserves equal incentives. The Biogas Production 
        Incentives Act (H.R. 1158) mentioned earlier would provide a 
        tax credit for the production of biogas that is used to offset 
        consumption of a fossil fuel.

    F. Trade.

   Western United supports ratification of Free Trade 
        Agreements with Colombia, Panama and South Korea and relaxing 
        restrictions on U.S. agriculture trade with Cuba.

   Assistance is needed from the House Agriculture Committee to 
        continue working with the United States Trade Representatives' 
        Office to ensure that dairy trade with New Zealand is excluded 
        from negotiations for a Trans-Pacific Partnership Agreement.

    G. Nutrition Policy.

   Dairy's position as part of reimbursable meals in Federal 
        feeding programs is a win-win for the public and for farmers. 
        California dairy producers appreciate the Committee's support 
        for those programs.

   With the importance of EQIP to environmental compliance by 
        dairy farmers everywhere, the Senate proposal to cut funding 
        for EQIP to provide the offset for a nutrition bill is of 
        serious concern. I support the work of the leadership of the 
        House Agriculture Committee to help find an alternative.
Conclusion
    Thank you again, Mr. Chairman, for holding this hearing today and 
providing me with the opportunity to share the perspective of 
California dairy producers on the future direction of Federal farm bill 
policy. I look forward to answering the questions the Members of the 
Committee may have.

    The Chairman. Thank you very much, Mr. Bledsoe. We 
appreciate that testimony. Mr. Campos, welcome to the 
Committee.

STATEMENT OF TONY CAMPOS, ALMOND PRODUCER, SHELLER AND SHIPPER, 
                         CARUTHERS, CA

    Mr. Campos. Good morning, gentlemen. My name is Tony 
Campos. I am an owner and partner in a diversified family 
farming and almond hulling and processing operation based in 
Caruthers, California.
    I would like to thank you for holding a field hearing, 
here, in Fresno, to discuss the upcoming farm bill and 
receiving our input and viewpoints on the various aspects of 
the proposed bill.
    I would like to give you a brief history of my beginning 
here in the valley. I came to this country at the age of 17 on 
a sheepherder's visa, and landed in Wyoming. After a year in 
Wyoming, I made my way to California where I continued my work 
as a sheepherder for the next 3 years.
    I began farming in late 50's with my brother in the San 
Joaquin Valley. Though there are many issues to discuss, I 
would like to focus, the next few minutes, on the Environmental 
Quality Incentive Program, also known as EQIP.
    In the Natural Resources Conservation Service, in the 2008 
Farm Bill, EQIP was given $150 million authorization for air 
quality projects throughout the 50 states over 5 years. The 
projects help growers and ranchers provide significant 
environmental benefits to our communities, and provide growers 
and ranchers with cost-share assistance for participating in 
the program.
    California is currently receiving $37 million over 5 years 
to fund conservation efforts.
    As you may know, California is developing very stringent 
air quality rules. If adopted, those rules will force growers 
and ranchers to accelerate the replacement of their farm and 
processing equipment. We all want to be part of the solution 
when it comes to bettering the air quality we all breathe, but 
we need help in achieving the standards set before us.
    Through EQIP funding in 2009, 340 tractors and pieces of 
processing equipment were purchased, resulting in a reduction 
in emissions of 560 tons NOX, 72 tons reactive 
organic gases, and 18 tons PM10. This funding has 
allowed California growers to take real positive steps toward 
emission reductions and getting some of the most polluting 
equipment out of the fields. This program has been one of the 
most successful at reducing PM10 and 
PM2.5.
    One example of the program's success is the purchase of 
farm tractors, engine replacement, and our goal is that 2010, 
and forward, will lead to us looking at replacing the older 
harvesters and, for example, almond harvesters or walnut 
harvesters, which will reduce PM10. A study was made 
at UC Davis, that a newer harvester will reduce the dust 
emissions by 50 percent.
    Almond harvesters are expensive to purchase. Many growers 
would not be able to do so without EQIP funding. Not only is 
the EQIP program reducing emissions from engines. It is 
reducing the amount of dust as well. This is a situation where 
an older engine is being replaced by a cleaner-burning Tier 3 
engine. But the real advantage is that the newer harvesting 
machine has been built in such a way, that the amount of dust 
created is reduced by 50 percent.
    I respectfully ask that the funding for this program be 
increased to $400 million in the 2012 Farm Bill. There is a 
great demand for the replacement of the older, higher-polluting 
Tier 0 engines in both farm and processing equipment.
    There are many of those Tier 0 engines on farms and ranches 
that have been in operation because growers cannot afford to 
upgrade to a newer, cleaner engine.
    For farming operations with economies of scale, replacing 
Tier 0 tractors can be quit costly. But the burden on smaller 
family farms is far greater, and in some cases makes it almost 
impossible to achieve, if not for assistance programs.
    With all the economic and environmental stresses we have 
faced within agriculture in the last year, an expansion of this 
program would help growers become more efficient in their 
operations and use less fuel, benefiting us all.
    The key to the successful implementation of this program 
has been the Natural Resources Conservation Services, NRCS. For 
the past 20 years, they have earned the trust of the farming 
and ranching community by providing the ability to work and 
understand the Clean Air Act of 1990, and how complicated this 
issue really is.
    Second, they have gained the respect and trust of working 
with local and state agencies. The program should continue to 
be implemented by this agency, because NRCS has developed 
expertise in many issues affecting farmers and ranchers, 
including air quality and water use.
    Because of this expertise, NRCS has facilitated key 
relationships with the major stakeholders, including grower and 
agricultural organizations, and has the buy-in of these groups. 
Many growers are skeptical to work with government agencies, 
but NRCS has been able to overcome that skepticism because 
their program has been successful in achieving emission 
reductions, while helping farmers to get equipment they need.
    I would like to thank you all, once again, for the 
opportunity to testify this morning, and for listening to my 
concerns. Thank you very much.
    [The prepared statement of Mr. Campos follows:]

    Prepared Statement of Tony Campos, Almond Producer, Sheller and 
                         Shipper, Caruthers, CA
    Good afternoon.
    My name is Tony Campos and I am an owner and partner in a 
diversified family farming and almond hulling and processing operation 
based in Caruthers, California. I would like to thank you for holding a 
field hearing here in Fresno to discuss the upcoming farm bill and 
receiving our input and viewpoints on the various aspects of the 
proposed Bill. Though there are many issues to discuss I would like to 
focus the next few minutes on the Environmental Quality Incentive 
Program also known as EQIP.
    In the 2008 Farm Bill EQIP was given a $150 million authorization 
for air quality projects throughout the 50 states over 5 years. These 
projects help growers and ranchers provide significant environmental 
benefits to our communities, and provide growers and ranchers cost-
share assistance for participating in the program. California is 
currently receiving $37 million dollars over 5 years to fund 
conservation efforts.
    As you may know, California is developing very stringent air 
quality rules. If adopted, these rules will force growers and ranchers 
to accelerate the replacement of their farm and processing equipment. 
We all want to be part of the solution when it comes to bettering the 
air quality we all breathe but we need help in achieving the standards 
set before us. Through EQIP funding in 2009, 340 tractors and pieces of 
processing equipment were purchased resulting in a reduction in 
emissions of 560 tons NOX, 72 tons Reactive Organic Gases, 
and 18 tons PM10. This funding has allowed California 
growers to take real, positive steps toward emission reductions and 
getting some of the most polluting equipment out of the fields. This 
program has been one of the most successful at reducing PM10 
and PM2.5.
    One example of the program's success is the purchase of new almond 
harvesting equipment. Almond harvesters are expensive to purchase brand 
new. Many growers would not be able to do so without EQIP funding. Not 
only is the EQIP program reducing emissions from the engine, it is 
reducing the amount of dust as well. This is a situation where an older 
engine is being replaced by a cleaner-burning Tier 3 engine; but the 
real advantage is that the newer harvesting machine has been built in 
such a way that the amount of dust created is reduced by more than 50%.
    I respectfully ask that the funding for this program be increased 
to $400 million in the 2012 Farm Bill. There is great demand for the 
replacement of the older, higher polluting Tier 0 engines in both farm 
and processing equipment. There are many of these Tier 0 engines on 
farms and ranches that have been in operation because growers cannot 
afford to upgrade to a newer, cleaner engine. For farming operations 
with economies of scale, replacing Tier 0 tractors can be quite costly 
but the burden on smaller family farms is far greater and in some cases 
makes it almost impossible to achieve if not for assistance programs. 
With all the economic and environmental stresses we have faced within 
agriculture in the last year, an expansion of this program would help 
growers become more efficient in their operations and use less fuel.
    The key to this successful implementation of this program has been 
the Natural Resources Conservation Service (NRCS). The program should 
continue to be implemented by this agency, because NRCS has developed 
expertise in many issues affecting farmers and ranchers, including air 
quality and water use. Because of this expertise, NRCS has facilitated 
key relationships with the major stakeholders including growers and 
agricultural organizations, and has the buy-in of these groups. Many 
growers are skeptical to work with government agencies, but NRCS has 
been able to overcome that skepticism because their program has been 
successful at achieving emissions reductions, while helping farmers get 
the equipment they need.
    Again, I would like to thank you for the opportunity to testify 
this afternoon and for listening to my concerns.

    The Chairman. Thank you, Mr. Campos. We appreciate your 
testimony, and your being with us.
    Mr. Diener, welcome to the Committee.

  STATEMENT OF JOHN E. DIENER, ALMOND, GRAPE, WHEAT, ALFALFA, 
    SUGARBEET, TOMATO, AND SPINACH PRODUCER, FIVE POINTS, CA

    Mr. Diener. Good morning, Mr. Chairman, Members of 
Congress. Thank you for the opportunity to speak to you today.
    As you know, nobody in the world farms better than American 
farmers. We still continue to feed the world and have some of 
the most innovative, sustainable practices at our disposal. But 
we can do more.
    The 2012 Farm Bill needs to include increased incentives 
for farmers to commit to even more sustainable practices, and 
create more ways to create new income bases for our 
communities, some of these which are dire, in dire straits.
    The 2012 Farm Bill can go beyond being our father's farm 
bill. It can look toward the future, be a greener farm bill and 
add new life to our industry.
    For example, the City of Mendota, and surrounding areas, 
have been hit hard by a number of factors, which has caused it 
to have an unemployment rate of over 40 percent and a serious 
reduction in its tax base.
    The Spreckles Sugar Refinery, which closed in September 
2008, after almost 50 years of operation, was a major employer 
in the community. This closing not only had a significant 
impact in Mendota, it trickled down to surrounding communities 
in the Central Valley. The refinery allowed area farmers to 
grow an important value-added commodity--sugarbeets.
    I have handed out a little schematic of kind of what I'm 
going to talk about here, if you wanted to follow that.
    A group of these same farmers had previously grew this crop 
for sugar, have now banded together to create a co-op to grow 
this same crop for a new market--green energy.
    The ``Beet Energy'' Mendota Advanced Bioenergy Beet 
Cooperative has undertaken the type of project that should be 
an important part of the 2012 Farm Bill; a project that creates 
a technologically advanced, sustainable biorefinery; a project 
that will create jobs and be an important green business for 
this community.
    We have taken a holistic approach to creating and 
addressing multiple resource and environmental issues with a 
long-term view towards sustainability and employment. This 
project integrates a number of processes to create green energy 
through advanced low-carbon ethanol, biomethane, and biomass 
power; use locally grown crops and byproducts; create a tax 
base and employment in a community sorely in need of both.
    The advanced sugarbeet to ethanol facility takes in energy 
beets grown within a 40 mile radius of the plant to produce 
advanced low-carbon ethanol for cars and farm vehicles, use 
byproducts to create soil amendments and biomethane, capture 
CO2, and take almond prunings that can no longer be 
openly burned, from within 50 miles, to make Green-e 
electricity for the grid.
    A water treatment unit will take the City of Mendota's 
wastewater and recycled sugarbeet wastewater and use it for 
biorefinery process water. It will also take in agricultural 
drainage water for treatment. The Mendota biorefinery will be a 
net exporter of irrigation-quality water south of the Delta.
    We are currently partnering with the California State 
University-Fresno, UC Davis, California Department of Water 
Resources, the USDA-NRCS, to create a pilot project for this 
process.
    Undertaking this is expensive, but with the support of 
these types of projects in the 2012 Farm Bill, we can have new 
avenues for funding and setting up facilities to support a 
project that has a significant impact on our communities and 
our nation's energy future.
    The definitions of farm bill programs need to be expanded, 
so they can include a broader depth of energy resources. As our 
industry grows, we cannot be stifled by narrow definitions.
    We are not just corn-based energy resources any longer. We 
now must include the ability to apply our sugarbeet technology.
    There are many other examples of what can be done to take 
farming practices to the next generation, while still being 
cost-effective for our bottom line. On Red Rock Ranch, where I 
farm, we are undertaking a number of innovative solutions to 
make our farming practices greener.
    Water Cleaning Project: We are currently spearheading a 
pilot project that will clean up to 200 gallons of saline water 
per minute, which will take care of the section of land that it 
is associated with and be reclaimed back into full production 
of Class 1 soil.
    We will be using a desalinization process used on ships to 
provide drinking water out in the ocean. We will be able to 
clean out contaminants such as boron, selenium and salt, that 
we will remove, will be converted to marketable chemicals 
commonly used in plastics, glass and building materials. The 
cost to clean the water may be as high as $2,500 per acre-foot, 
but through selling of the byproducts, our clean water will 
only end up around $300 per acre-foot.
    Conservation Tillage: We work with the UC Conservation 
Tillage Workgroup in implementing a minimum tillage program on 
our ranch. It reduces the inputs across our fields. 
Conservation tillage is aimed at reducing tillage operations 
associated with multiple cropping, seedbed preparation, thereby 
reducing tractor and implement passes, reducing fuel and 
maintenance while increasing profit.
    This, combined with the overhead irrigation, not only 
reduces cost, but also reduces energy requirements, as well as 
saves the land nutrients, and the environment.
    Irrigation efficiency: We have recently taken a new look at 
old technology that traditionally has not been well-accepted in 
California--center pivots. We have worked with manufacturers on 
finding solutions to meet our needs here, and they are working. 
We have saved on labor costs, been able to use water that we 
might not be able to use with other irrigation methods and have 
had excellent production.
     We need your help, including funds in the 2012 Farm Bill, 
that will promote the creation of and support of the next 
generation of projects like these, nationally, that create a 
future for communities like Mendota, and help create a 
sustainable green energy source for the United States.
    The future of agriculture can be even greener, and should 
not be narrowly defined by our next farm bill.
    We must embrace the American farmer's ability to be 
innovative and forward thinking, and by including broader 
definitions for programs that include our expanding 
technologies.
    The foundation of our industry will always remain the same. 
We are truly some of the first conservationists. However, we 
continue to be innovative and expand the definition of green 
technology as we grow and adapt our industry to our ever-
changing environments and markets.
    And thank you for your time, and contact me if you have any 
questions.
    [The prepared statement of Mr. Diener follows:]

 Prepared Statement of John E. Diener, Almond, Grape, Wheat, Alfalfa, 
        Sugarbeet, Tomato, and Spinach Producer, Five Points, CA
    Mister Chairman and Members of Congress, thank you for the 
opportunity to speak with you today.
    As you know, nobody in the world farms better than American 
farmers. We still continue to feed the world and have some of the most 
innovative, sustainable practices at our disposal. We can do more. The 
2012 Farm Bill needs to include increased incentives for farmers to 
commit to even more sustainable practices and create more ways to 
create new income bases for our communities, some of which are in dire 
straits. The 2012 Farm Bill can go beyond being our father's farm 
bill--it can look toward the future, be a greener farm bill and add new 
life to our industry.
    For example, the City of Mendota and surrounding areas have been 
hit hard by a number of factors which has caused it to have an 
employment rate of over 40% and a serious reduction in its tax base.
    The Spreckles Sugar Refinery which closed in September 2008 after 
almost 50 years of operation was a major employer in the community. 
This closing not only had a significant impact in Mendota, it trickled 
down to surrounding communities in the Central Valley. The refinery 
allowed area farmers to grow an important value-added commodity, 
sugarbeets.
    A group of these same farmers previously grew this crop for sugar 
have now banded together to create a co-op to grow this same crop for a 
new market--green energy.
    The ``Beet Energy'' Mendota Advanced Bioenergy Beet Cooperative has 
undertaken the type of project that should be an important part of the 
2012 Farm Bill--a project that creates a technologically advanced, 
sustainable biorefinery, a project that will create jobs and be an 
important, green business for this community.
    We have taken a holistic approach to creating and addressing 
multiple resource and environmental issues with a long term view 
towards sustainability and employment. The graphic I have provided to 
you will give you an overview of how this project integrates a number 
of processes to:

   Create green energy through advanced low-carbon ethanol, 
        biomethane and biomass power.

   Use locally grown crops and byproducts.

   Create a tax base and employment in a community sorely in 
        need of both.

    The advanced sugarbeet to ethanol facility takes in energy beets 
grown within a 40 mile radius of the plant to produce advanced low 
carbon ethanol for cars and farm vehicles, use byproducts to create 
soil amendments and biomethane, capture CO2, and take almond 
prunings that can no longer be open burned from within 50 miles to make 
Green-e electricity for the grid.
    A water treatment unit will take City of Mendota waste water and 
recycled sugarbeet waste water and use it for biorefinery process 
water. It will also take in agricultural drainage water for treatment. 
The Mendota biorefinery will be a net exporter of irrigation quality 
water south of the Delta.
    We are currently partnering with California State University, 
Fresno, UC Davis, California Department of Water Resources, and the 
USDA-NRCS (United States Department of Agriculture--Natural Resource 
Conservation District) to create a pilot-project for this process. The 
undertaking is expensive, but with support for these types of projects 
in the 2012 Farm Bill, we can have new avenues for funding and setting 
up facilities to support a project that has a significant impact on our 
communities and our nation's energy future. The definitions of farm 
bill programs need to be expanded so they include a broader depth of 
energy resources--as our industry grows we cannot be stifled by narrow 
definitions. We are not just corn based energy resources any longer. We 
now must include the ability to apply our sugarbeet technology.
    There are many other examples of what can be done to take farming 
practices to the next generation while still being cost-effective for 
our bottom line. On Red Rock Ranch where I farm we are undertaking a 
number of innovative solutions to make our farming practices greener:
    Water Cleaning Project: We are currently spearheading a pilot 
project that will clean up to 200 gallons of saline water per minute. 
We will be using a desalination process used on ships to provide 
drinking water out of the ocean. We will be able to clean out 
contaminants such as boron, selenium and the salt we remove will be 
converted to marketable chemicals commonly used in plastics, glass and 
building materials. The cost to clean the water may be as high as 
$2,500 per acre-foot, but through selling of the by-products, our clean 
water will only end up costing $300 per acre-foot.
    Conservation Tillage: We work with the UC Conservation Tillage 
Workgroup in implementing a minimum tillage program on our ranch. It 
reduces the inputs across our fields. Conservation tillage is aimed at 
reducing tillage operations associated with multiple cropping seedbed 
preparation, thereby reducing tractor and implement passes, reducing 
fuel and maintenance while increasing profit. This, combined with the 
overhead irrigation, not only reduces cost, but also reduces energy 
requirements as well as saves the land nutrients and environment.
    Irrigation Efficiency: We have recently taken a new look at an old 
technology that traditionally has not been well accepted in 
California--center pivots. We have worked with manufacturers on finding 
solutions to meet our needs here and they are working. We have saved on 
labor costs, been able to use water that we might not be able to use 
with other irrigation methods and have had excellent production.
    We need your help including funds in the 2012 Farm Bill that will 
promote creation of and support for next generation projects like these 
nationally that create a future for communities like Mendota and help 
create a sustainable, green energy source for the United States. The 
future of agriculture can be even greener and should not be narrowly 
defined by our next farm bill. We must embrace the American Farmer's 
ability to be innovative and forward thinking by including broader 
definitions for programs that include our expanding technologies. The 
foundation of our industry will always remain the same, we are truly 
some of the first conservationists, however, we continue to be 
innovative and expand the definition of ``green technology'' as we grow 
and adapt our industry to our ever-changing environments and markets.
    Thank you for your time and please contact me if you have any 
questions.
            Cordially,
John E. Diener,
President,
Mendota Advanced Bioenergy Beet Cooperative;
Owner, Red Rock Ranch,
Five Points, CA.
                                 Chart

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you very much, Mr. Diener.
    Mr. Kester, welcome to the Committee.

   STATEMENT OF KEVIN D. KESTER, CATTLE AND GRAPE PRODUCER, 
                         PARKFIELD, CA

    Mr. Kester. Thank you, Chairman Peterson, and Members of 
the Committee, thank you for the opportunity to address you 
today, to share California ranchers' perspective on U.S. 
agricultural policy as preparations begin for the 2012 Farm 
Bill. My name is Kevin Kester. I am a rancher from Parkfield, 
California, and I am First Vice President for the California 
Cattlemen's Association.
    California is home to 34 million acres of rangeland. This 
rangeland provides wildlife habitat; is home to a diversity of 
common and threatened species; produces wholesome, nutritious 
food; and economically supports family businesses, family 
traditions, and many communities. These vast open landscapes 
are under threat to invasive species, conversion to 
development, and other land uses.
    The 2012 Farm Bill must adequately address the economical 
and environmental impacts and challenges facing these 
rangelands. Conservation continues to provide the greatest 
opportunity for partnership with Congress, that will mean the 
most for ranchers and make wise use of Federal dollars to 
address the issues that impact ranchers, as well as the public 
needs for conservation and environmental stewardship. As such, 
conservation should not be sacrificed for other priorities in 
this bill.
    And to this end, California ranchers support further reform 
to the conservation title of the farm bill to make programs 
more attractive and functional for producers on the ground.
    In addition, authorization levels for programs that are 
working need to be increased to meet the needs of ranchers in 
the state. In California alone, demand for conservation funding 
far exceeds the money available.
    For example, more than 6,000 California farmers and 
ranchers applied for EQIP funds, but only 1,700 projects were 
accepted to receive cost-share funding to address pressing 
natural resources issues and improve a producer's economic 
viability.
    Ranchers also recognize the value in targeting funding, and 
in flexibility to address specific species and conservation 
needs. A key example is the recent initiative undertaken by the 
U.S. Fish and Wildlife Service, and the Natural Resources 
Conservation Service, to cooperatively work with ranchers to 
improve habitat, and ultimately help mitigate the need for 
listing of the sage grouse, currently a species of concern 
under the Endangered Species Act. This model of joint efforts 
can help solve problems that affect the viability of, and 
lessen the regulatory burden for, farmers and ranchers.
    The 2012 Farm Bill should more explicitly recognize 
environmental benefits of using managed grazing as a tool to 
meet Federal priorities. Significant peer-reviewed research has 
been conducted, illustrating that a number of threatened and 
endangered species not only coexist with grazing, but benefit 
from managed grazing, making the rancher's grazing efforts a 
value that provides tangible public benefit.
    An overall funding protocol for the next farm bill should 
be based on key criteria that focus efforts to areas of need 
and threat; that recognize state size, agricultural production, 
number of federally-listed species; and other resource 
challenges.
    This need to consider unique situations, such as those that 
exist on California's rangeland, is particularly true when it 
comes to conservation easement programs that must account for 
the potential of conservation and conversion to other land 
uses.
    Funding allocation to states should consider land values 
and the number of acres for these high-quality proposals.
    I would also like to note areas of concern about issues 
that ranchers feel should not be addressed in the farm bill 
process. We support agricultural policy based on private 
enterprise and competitive market systems. We are concerned 
about the inclusion in the farm bill of any language impacting 
market structure or removing options for ranchers to sell 
livestock.
    Additionally, because animal agriculture is based on humane 
care for cattle, horses, and other livestock, it is also 
imperative that the livestock title of the farm bill not become 
a platform for extremist organizations to push their anti-meat 
and anti-agriculture agendas.
    In conclusion, California ranchers believe that in working 
with this Committee, and other interested stakeholders, 
additional significant steps forward are possible. Working for 
program improvements that increase funding to meet priorities, 
and to review how funding is allocated to states, are issues of 
critical importance.
    So, on behalf of California ranchers, thank you for the 
opportunity to provide this testimony, and I would specifically 
like to thank Congressman Costa and Congressman Cardoza for 
recommending and allowing us to give this testimony. We look 
forward to working with each of you on the development of the 
2012 Farm Bill. Thank you.
    [The prepared statement of Mr. Kester follows:]

   Prepared Statement of Kevin D. Kester, Cattle and Grape Producer, 
                             Parkfield, CA
    Chairman Peterson and Members of the Committee, thank you for the 
opportunity to address you today to share the California ranchers' 
perspective on U.S. agricultural policy as preparations begin for the 
2012 Farm Bill. My name is Kevin Kester, and I am a rancher from 
Parkfield, California and First Vice President of the California 
Cattlemen's Association.
    I'd like to welcome all of the Members to California, which--in 
addition to the wide array of crop production you'll hear about from 
other panelists--is home to 34 million acres of rangeland. This 
rangeland, in turn, provides wildlife habitat, is home to a diversity 
of common and threatened species, produces wholesome, nutritious food 
and economically supports family businesses, family traditions and many 
communities. These vast open landscapes are under threat to conversion 
to development and other land uses, invasive species and the whims of 
the weather.
    The 2012 Farm Bill must adequately address the economical and 
environmental challenges facing these rangelands. Conservation 
continues to provide the greatest opportunity for partnership with 
Congress that will mean the most for ranchers and make wise use of 
Federal dollars to address the issues that impact them as well as 
public needs for conservation and environmental stewardship. As such, 
it should not be sacrificed for other priorities in the bill.
    To this end, California ranchers support further reform to the 
Conservation Title of the farm bill to make programs more attractive 
and functional for producers on the ground. In addition, authorization 
levels for programs that are currently working need to be increased to 
meet the needs of ranchers in the state. In California alone, demand 
for conservation funding far exceeds the money available. For example, 
more than 6,000 California farmers and ranchers applied for EQIP funds, 
but only 1,700 projects were accepted to receive cost-share funding to 
address pressing natural resources issues and improve a producer's 
economic viability.
    Ranchers like me also recognize the value in flexibility and 
targeting funding to address specific conservation, species and on-
ranch concerns. A key example is the recent initiative undertaken by 
the U.S. Fish and Wildlife Service and the Natural Resources 
Conservation Service to cooperatively work with ranchers to improve 
habitat, and ultimately help mitigate the need for listing of the Sage 
Grouse, currently a species of concern, under the Endangered Species 
Act. This model of joint efforts by which individual and regional farm 
bill investment can help solve problems that address complex issues 
that may affect the viability of and regulatory burden for a broad 
scope of farmers and ranchers should continue to be considered.
    Along the same lines, the next farm bill should facilitate 
additional coordination between USDA and other Federal agencies, 
including the Department of the Interior. It is important that USDA 
have explicit authority to share technical knowledge with other 
entities regulating working farms and ranches, such as the 
Environmental Protection Agency, to help ranchers navigate regulatory 
hurdles. Additionally, the 2012 Farm Bill needs to ensure landowners 
who improve the natural resources on their land are not later punished 
with additional regulatory oversight because of their proactive 
management practices today.
    Positive changes to a number of conservation programs were made in 
the 2008 Farm Bill--including the Grasslands Reserve Program and 
Agricultural Water Enhancement Program--and, in developing and 
executing programs for the next bill, those program changes and funding 
authorizations need to be retained. Further progress can be made in the 
2012 bill by working toward meeting state and regional priorities by 
providing additional flexibility to work with landowners and other 
partners, including states and NGOs who can be trusted partners in 
advancing Federal priorities.
    The 2012 Farm Bill also should more explicitly recognize the 
economic value provided by ranchers, along with the environmental 
benefits of using managed grazing as a tool to meet Federal priorities. 
Significant peer-reviewed research has been conducted illustrating that 
a number of threatened and endangered species not only coexist with 
grazing, but benefit from managed grazing, making the rancher's grazing 
efforts a value that provides tangible, financial public benefit.
    An overall funding protocol for the next farm bill should be based 
on key criteria that focus efforts to areas of need and threat, that 
recognize state size, agricultural production, number of federally 
listed species and other resource challenges. This need to consider 
unique situations--such as that existing on California's rangeland--is 
particularly true when it comes to conservation easement programs that 
must account for potential for conversion to other land uses, land 
value and number of acres included in high quality acquisition 
proposals during program funding allocation to states.
    California has returned to a normal rainfall pattern this year, 
after 3 or more years of drought in most parts of the state. During the 
past 2 years, many ranchers have been able to take advantage of the 
permanently authorized disaster programs. While development of these 
new programs was slower than any of us would have preferred, it appears 
that this new direction has improved delivery to better meet the future 
needs of ranchers who are highly subject to changes in weather as long 
as the centralized monitoring of drought continues to recognize 
changing conditions in each part of the country.
    I'd also like to note a couple of concerns about issues that 
ranchers feel should not be addressed in the farm bill process. First, 
we support agricultural policy based on a free, private enterprise, 
competitive market system, including a producer's ability to market 
cattle however, whenever, and to whomever and so are concerned about 
inclusion in the farm bill of any language impacting market structure 
or removing options for ranchers to sell livestock. Additionally, 
because animal agriculture is based on humane care for cattle, horses, 
and other livestock, it is also imperative that the Livestock Title of 
the farm bill not become a platform for extremist organizations to push 
their anti-meat/anti-agriculture agendas.
    In conclusion, California ranchers were pleased with a number of 
program changes under the 2008 Farm Bill and believe that in working 
with this Committee and a wide range of interested stakeholders that 
additional significant steps forward are possible. Working for program 
improvements that meet individual and broader resource and regulatory 
concerns for ranchers, the need to increase funding to meet these 
priorities and to again review how funding is allocated to states are 
issues of critical importance.
    On behalf of California ranchers, thank you again for the 
opportunity to provide this testimony. We look forward to working with 
each of you on the development of the 2012 Farm Bill.

    The Chairman. Thank you very much for your testimony.
    Mr. Reelhorn, welcome to the Committee.

STATEMENT OF JON REELHORN, NURSERY PLANT PRODUCER, WHOLESALER, 
                    AND RETAILER, FRESNO, CA

    Mr. Reelhorn. Thank you, Chairman Peterson, and Members of 
the Committee, for a chance to speak today on what the 2008 
Farm Bill has meant, and can mean to the future of the nursery 
and greenhouse industry.
    I am Jon Reelhorn, owner of Belmont Nursery, a grower and 
retail nursery business operating right here, in Fresno. We are 
a family-owned business that supplies trees, shrubs and flowers 
to garden centers, landscape professionals, and homeowners 
throughout northern and central California. My remarks are 
offered on behalf of both the American and California Nursery 
Associations.
    Let me start by thanking the Committee, and Congressmen 
Cardoza and Costa, especially, for crafting a farm bill that, 
for the first time, recognizes our industry in a serious way. 
We think that's justified. After all, specialty crops represent 
about \1/2\ the value of crop production in the U.S., and our 
industry represents about \1/3\ of the value of specialty 
crops, according to the 2007 Census of agriculture, nursery, 
greenhouse and floriculture, annual crop production totaled 
over $16.6 billion at farm gate. Nursery and greenhouse crop 
production now ranks among the top five agricultural 
commodities in 28 states, and among the top 10 in all 50.
    Wholesale production in California represents over 20 
percent of the nation's production of nursery crops and we 
employ over 217,000 people.
    The U.S. nursery industry has developed and thrived without 
the influences of subsidies, price supports, or similar 
programs. Most of us wish to keep it that way. Our priorities 
in the 2008 Farm Bill are focused on critical infrastructure, 
programs to deal with pest and disease threats, and funding 
needed research.
    Because of accelerated global trade and travel, virtually 
every new nursery pest that arrives and establishes in the U.S. 
becomes a production or market access problem for our industry.
    Pests such as emerald ash borer, Asian Longhorned beetle, 
light-brown apple moth, Asian citrus psyllid, and Sudden Oak 
Death, are just a few of the challenges we're struggling with 
across the country. For this reason, we strongly supported 
several pest-focused provisions for the 2008 Farm Bill.
    Section 10201 provided critical funding and protocol to 
identify and mitigate offshore pest threats, and improve pest 
detection and rapid response in the U.S. Specific projects now 
underway for the certification of nursery crops moving in 
interstate and international commerce, and the development of 
best management practices to facilitate clean and safe trade 
are critical to our industry.
    And Section 10202 established the National Clean Plant 
Network. It was created to protect high-value specialty crops, 
such as nuts, apples, peaches and other fruits, from the spread 
of economically harmful plant pests and diseases.
    The program will improve our growers' access to the newest 
and most profitable plant varieties from around the world, 
without the devastating plant diseases that exist elsewhere. 
Tremendous progress has already been made on this program.
    In Section 10203, Congress intended the Secretary of 
Agriculture to be the final word on emergency pest funding 
decisions. In California, we have witnessed, time and again, 
where the experts at fighting pests are overruled by the Office 
of Management and Budget. The result has been delayed funding 
and more pests. We appreciate the Committee's efforts to 
correct this problem.
    We appreciate the recognition, through the Specialty Crops 
Research Initiative in the 2008 Farm Bill, of the need for 
research funding to support the specialty crops industry.
    We are concerned, however, with a required one-to-one 
funding match for these grants. The requirement puts specialty 
crop growers at a disadvantage as these grants are multiyear, 
and most industry-funding sources, like our own research 
endowments, cannot commit funding for multiple years.
    While many provisions in the 2008 Farm Bill are already 
making a positive difference, one threatens us with a serious 
unintended consequence. While the program's goals are worthy, 
the Biomass Crop Assistance Program threatens to divert 
softwood and hardwood bark from established value-added 
markets. Over 70 percent of U.S. nursery crops, and virtually 
100 percent of the greenhouse crops, are grown in containers. 
Bark is the single most important media to fill those 
containers.
    We are looking for alternatives but they may not exist, or 
our research has not delivered those solutions. The threat of 
disruptions from subsides is immediate.
    BCAP subsidies could divert bark availability and increase 
pricing, jeopardizing nursery crop sales.
    As important as the farm bill has become to America's 
specialty crop industries, it is hard to have a serious 
discussion about the future success of specialty crop producers 
without acknowledging ``the elephant in the room''--farm labor. 
We know farm labor is not a traditional farm bill issue. We 
raise it because if Congress does not act to fix it, we will 
see an exodus of specialty crop production in the U.S.
    In conclusion, thank you for this hearing. Thank you for 
hearing the views and needs of the U.S. nursery and greenhouse 
industry. We thank you for your past efforts and ask that you 
work with us to sustain and enhance the specialty crop 
provisions in the 2012 Farm Bill.
    [The prepared statement of Mr. Reelhorn follows:]

Prepared Statement of Jon Reelhorn, Nursery Plant Producer, Wholesaler, 
                        and Retailer, Fresno, CA
    Thank you, Chairman Peterson, Ranking Member Lucas, and Congressmen 
Costa and Cardoza, for this opportunity to present testimony on behalf 
of the U.S. nursery and greenhouse industry on what the 2008 Farm Bill 
has meant to our industry, and the next farm bill cycle. I am Jon 
Reelhorn, owner of Belmont Nursery, a growing and retail nursery 
business operating right here in Fresno. We are a family owned business 
that supplies trees, shrubs and flowers to garden centers, landscape 
professionals and homeowners through out northern and central 
California.
    My remarks today are offered on behalf of the American Nursery & 
Landscape Association (ANLA) and the California Association of 
Nurseries and Garden Centers (CANGC), which I am representing here 
today. The issues I plan to cover are also priorities of the Society of 
American Florists (SAF). ANLA, SAF, and CANGC worked together on the 
2008 Farm Bill's specialty crop provisions. We join in thanking the 
Committee for crafting a farm bill that for the first time recognizes 
our industry in a serious way. We look forward to close collaboration 
with each of you as the 2012 Farm Bill discussion proceeds.
    The nursery and greenhouse industry is a bright spot in U.S. 
specialty crop agriculture. The combined U.S. nursery, floriculture, 
and landscape industry, collectively known as the ``green industry,'' 
has an estimated economic impact of $147.8 billion. The industry 
employs 1.95 million individuals, generates $64.3 billion in labor 
income, and provides $6.9 billion in indirect business taxes. Products 
and services offered by the green industry directly contribute to 
production of apples, citrus, grapes, strawberries, and other food 
crops; to sustaining our environment; and to improving the quality of 
life in rural, suburban and urban communities. Landscape plants provide 
ecosystem service benefits that range from reducing energy needs, to 
fostering carbon sequestration, and improving water quality and storm 
water management.
    U.S. nursery and floriculture crop production represents a major 
component of the nation's specialty crop agriculture. According to the 
USDA's 2007 Census of Agriculture, nursery, greenhouse and floriculture 
annual crop sales totaled over $16.6 billion at farm gate. Nursery and 
greenhouse crop production now ranks among the top five agricultural 
commodities in 28 states, and among the top 10 in all 50 states. The 
sector represents roughly \1/3\ of the value of all specialty crop 
production in the U.S.
    Not surprisingly, California is the number one state for both 
nursery and floral crop production. A recent economic report placed 
production figures at roughly $4 billion and retail sales at over $13 
Billion. Wholesale production in California represents over 20 percent 
of the nation's production of nursery crop. Nurseries and garden 
centers employ over 217,500 Californians.
The Farm Bill and the Nursery Industry
    The U.S. nursery industry has developed and thrived without the 
influence of market-distorting subsidies, price supports, or similar 
programs. Most wish to keep it that way. Consistent with this history 
and philosophy, our priorities in the 2008 Farm Bill focused on 
critical infrastructure and programs to deal with plant pest and 
disease threats, and to fund needed research. Global trade and travel 
have accelerated the pace of new pest introductions. Given the 
diversity of crops that the industry produces, virtually every new 
plant pest that arrives and establishes in the U.S. becomes a 
production or market access problem for the nursery industry. Emerald 
ash borer, Asian Longhorned beetle, and the pathogen responsible for 
``sudden oak death'' are just a few examples with which the industry is 
struggling. The 2008 Farm Bill did several positive things relating to 
the serious threat of plant pests and diseases:

   Section 10201 provided critical funding and direction for 
        innovative initiatives to identify and mitigate offshore 
        threats, and improve pest detection and rapid response in the 
        U.S. So far, USDA's Animal & Plant Health Inspection Service 
        has set priorities based upon six goal areas drawn directly 
        from the language of the farm bill. While this is long-term 
        work, and success at prevention is not always easy to measure, 
        we believe APHIS has done a good job of involving stakeholders 
        in an open and transparent process for identifying and funding 
        the best ideas to accomplish the goals.

    Specific projects under the ``Safeguarding Nursery Production'' 
        goal are setting the stage for a modernized system for the 
        certification of nursery crops moving in interstate and 
        international commerce. Also, the newly established ``National 
        Ornamentals Research Site at Dominican University of 
        California'' is facilitating critically needed research on 
        quarantine pest prevention and containment under real-world 
        conditions.

    Other specific 10201 projects are of critical importance in helping 
        USDA to identify potential threats to U.S. agriculture before 
        they come into our ports, rather than after they have become 
        crises because they were introduced through travel or trade. 
        Strategic research on pest threats which might reach our shores 
        in the next few years is essential to our ability to avoid 
        introduction, or to eradicate pests or diseases quickly if they 
        do arrive here.

   Section 10202 of the farm bill established the National 
        Clean Plant Network (NCPN). The NCPN was created to protect 
        U.S. specialty crops, such as grapes, nuts, apples, peaches and 
        other fruits, from the spread of economically harmful plant 
        pests and diseases. The NCPN will contribute to the global 
        competitiveness of U.S. specialty crop producers by creating 
        high standards for our clean plant programs for these vital 
        crops. The program will improve U.S. growers' access to the 
        newest and most profitable plant varieties from around the 
        world, without the devastating plant diseases that exist 
        elsewhere in the world.

    Effective clean plant programs are essential to preventing 
        catastrophic pest and disease problems and to maintaining U.S. 
        agricultural competitiveness. In California, wine and table 
        grape growers in particular depend on the introduction of 
        foreign selections, and demand for new varieties has exceeded 
        the capacity of existing clean plant programs. When demand for 
        new foreign selections is high but legal channels are 
        insufficient, some growers resort to illegal importation of 
        plant materials. Grapevine mealy bug, a new pest problem that 
        is approaching epidemic status in California, is suspected to 
        have been introduced in illegally imported grapevine planting 
        stock that was smuggled into the U.S. from Australia, most 
        likely due to the impatience of the importer. Plum pox in New 
        York and Pennsylvania is another example of where illegal 
        importation threatened an industry.

    The establishment and maintenance of the National Clean Plant 
        Network was one of our highest farm bill priorities. We are 
        truly impressed with the progress that has been made already on 
        this program.

   In Section 10203, Congress intended the Secretary of 
        Agriculture to be the final word on emergency pest funding 
        decisions. In California, we have witness time and again where 
        the experts at fighting pests are overruled by the Office of 
        Management and Budget. The result has been delayed funding and 
        more pests. We appreciate this Committee's efforts to correct 
        this bureaucratic problem. Early indications suggest that OMB 
        remains the final word and we would ask that you closely 
        monitor this situation.
Specialty Crops Research Initiative
    We appreciate the recognition, through the Specialty Crops Research 
Initiative in the 2008 Farm Bill, of the need for research funding to 
support the Specialty Crops industry. We remain concerned, however, 
with the required 1:1 funding match for these grants. This requirement 
puts specialty crop growers at a disadvantage as these grants are 
multi-year, and most traditional industry funding sources (including 
our own research endowments, the Horticultural Research Institute, and 
the American Floral Endowment) cannot commit funding for multiple 
years. We are also concerned that the match requirement, as 
implemented, is placing USDA-ARS and other Federal partners on a less-
than-competitive playing field because other Federal funds and 
resources cannot be used to meet the matching requirement.
    A longer term concern with the creation of the National Institute 
of Food and Agriculture--NIFA--is that the move toward long term, 
systems competitive funded research reduces funding that could be 
applied to meet immediate or quickly emerging research needs, such as 
those resulting from the introduction of invasive pest species. We feel 
that it is critical for USDA to maintain and increase funding efforts 
for its intramural research agency, USDA-ARS, in a balanced way with 
respect to competitive funds available through NIFA. Increased funding 
is also needed for the formula-funded Smith-Lever and Hatch Act as 
these programs provide for the base research and educational delivery 
infrastructure for Cooperative Extension and State Experiment Station 
programs. If we allow our national research infrastructure to 
deteriorate for lack of funding for traditional pest and disease 
research, we will not easily be able to rebuild it.
Biomass Crop Assistance Program
    While many provisions of the 2008 Farm Bill are already making a 
positive difference, we must alert you to a serious potential 
unintended consequence of one particular program, the Biomass Crop 
Assistance Program, or BCAP. While the program's goals are worthy, the 
potential diversion of certain forestry byproducts--most notably 
softwood and hardwood bark--from established value-added markets could 
devastate nursery producers across the U.S. for these simple reasons: 
most nursery crops are now grown in containers, and the single most 
important component of the growing substrate that fills these 
containers is bark.
    Over 70 percent of the nursery crop and 100 percent of the 
greenhouse crop production in the U.S. is now grown in containers. The 
major ingredients for the growing media used in container production--
``substrates''--are various bark based formulations. Diversion of bark 
supplies for other uses, or a sharp and significant change in their 
market price due to market-distorting subsidies, therefore threatens 
the domestic nursery and greenhouse industry and much of the $16.6 
billion in annual nursery and greenhouse crop sales across the country. 
Market price distortions or diversion of bark resulting from inclusion 
in the BCAP will seriously impact domestic production and could fuel 
loss of market share to imports from Canada and elsewhere.
    It is worth noting that already, over 95% of bark byproducts have 
established markets. Roughly 83% of softwood bark, and 70% of hardwood 
bark, is already used for energy generation. In this respect, BCAP 
subsidies would seem to represent a solution in search of a problem. 
ANLA recently submitted official comments to USDA's Farm Service 
Agency, in which we offered a series of recommendations on how to 
address this concern. While the issue is now in the regulatory realm, 
we are grateful for the opportunity to alert the Committee to the 
potential unintended consequences that will result if bark and other 
wood waste materials with established markets are included in the BCAP.
Agricultural Labor and Immigration Policy
    As important as the farm bill has become to America's specialty 
crop industries, it is difficult to have a serious discussion about the 
future success of specialty crop producers without acknowledging the 
elephant in the room: farm labor. Hired labor is critical to most 
specialty crop producers, and we now face a ``perfect storm'' 
characterized by the following:

   For at least the last 12 years, a significant majority of 
        workers who plant, harvest, and tend specialty crops and 
        livestock lack proper immigration status even though most 
        employers fully comply with the law when hiring;

   The recession has done virtually nothing to change the 
        reality: few Americans seek farm work, most farm workers are 
        foreign-born, and most lack proper immigration status;

   Aggressive worksite enforcement that began near the end of 
        the Bush Administration has accelerated under the Obama 
        Administration. Specialty crop and dairy producers are 
        especially vulnerable. Farmers are one I-9 audit away from 
        disaster.

   The only legal labor safety net, known as H-2A, has long 
        been difficult and unattractive. Producers are now struggling 
        through the third set of rules in 3 years. The program has 
        descended into regulatory chaos.

    We fully recognize that farm labor is not a traditional farm bill 
issue. Nonetheless, we raise it for this simple reason: lack of timely 
and thoughtful resolution of the farm labor crisis will hasten the 
offshoring of our specialty crop and livestock agriculture. As 
production shifts to Canada or Mexico or Chile or China, America will 
lose thousands upon thousands of U.S. jobs upstream and downstream of 
the farmer that exist here now because we are producing here. We 
respectfully urge your leadership and support for enactment of the 
bipartisan and urgently needed reforms of the AgJOBS bill, H.R. 2414, 
whether as part of a comprehensive immigration reform bill, or a 
smaller first step toward fixing our broken immigration system.
Conclusion
    Members of the Committee, thank you for this hearing, and for 
listening to the views and needs of the U.S. nursery industry. The 2008 
Farm Bill for the first time truly recognized the importance of 
specialty crops, including nursery and floriculture. Together, 
specialty crops now represent almost half of the value of total crop 
production in America, and the specialty crop title of the 2008 Farm 
Bill placed emphasis on practical, solutions-oriented programs. We 
recognize that the next farm bill cycle will be exceptionally difficult 
from a budgetary standpoint. We thank you for your work to date, and 
hope you will join together to protect specialty crops' place at the 
table, going forward.
                               Attachment
April 9, 2010

Director of CEPD,
USDA FSA CEPD,
Stop 0513,
1400 Independence Ave., SW,
Washington, D.C. 20250-0513

    Dear Sir or Madam:

    This letter is in response to the proposed rulemaking for the 
Biomass Crop Assistance Program (BCAP)--Docket Folder CCC FRDOC 0001-
0145). These comments are being filed by the American Nursery and 
Landscape Association (ANLA), the national trade association 
representing nursery crop producers, landscape design, build and 
maintenance companies and independent retail garden center businesses. 
This official submission is also fully supported by the Society of 
American Florists (SAF), the national trade association representing 
the entire floriculture industry. SAF membership includes small 
businesses, including growers, wholesalers, retailers, importers and 
related companies that produce and sells cut flowers and foliage, 
foliage plants, potted flowering plants, and bedding plants.
    The combined U.S. nursery, floriculture, and landscape industry, 
collectively known as the ``green industry,'' has an estimated economic 
impact of $147.8 billion according to 2005 survey and analysis, 
Economic Impacts of the Green Industry in the United States. In 
addition, the industry employs 1.95 million individuals, generates 
$64.3 billion in labor income, and provides $6.9 billion in indirect 
business taxes. Products and services offered by the green industry 
directly contribute to the U.S. food supply (e.g., fruit tree planting 
stock), to sustaining our environment, and to improving the quality of 
life in rural, suburban and urban communities. Ecosystem service 
benefits of landscape plants include reducing energy needs, fostering 
carbon sequestration, and improving water quality and storm water 
management.
    U.S. nursery and floriculture crop production represents a major 
component of the nation's specialty crop agriculture and the ``green 
industry.'' According to the USDA's 2007 Census of Agriculture, 
nursery, greenhouse and floriculture annual crop sales totaled over 
$16.6 billion at farm gate. Nursery and greenhouse crop production now 
ranks among the top five agricultural commodities in 28 states, and 
among the top 10 in all 50 states. The sector represents roughly \1/3\ 
of the value of all specialty crop production in the U.S. Nursery and 
floriculture production is the top-ranking agricultural sector in 
several states, ranging from Connecticut, Massachusetts, and Rhode 
Island in the Northeast, to Oregon in the Northwest.
    As an energy intensive ``green industry'', we support the 
President's and USDA's efforts to increase the availability of 
alternative energy sources, such as biomass, to help reduce the U.S. 
dependence on foreign energy sources. Therefore, as a matter of 
principle we do support the biomass energy Section 9001 of the 2008 
Farm Bill. We are very concerned, however, about the BCAP Federal 
subsidy for the redirection of wood and wood waste materials, 
specifically bark, bark based materials and mulch from an existing and 
established, value-added marketplace to the generation of energy. This 
will result in market dislocations, supply shortages and possible 
elimination of these materials for use by all business sectors of the 
green industry, leading to serious unintended economic and 
environmental consequences.
    Specifically, over 75 percent of the nursery crop and 100 percent 
of the greenhouse crop production in the U.S. is now grown in 
containers. The major ingredients for the growing media used in 
container production--``substrates''--are various bark based 
formulations. Diversion of bark supplies for other uses, or a sharp and 
significant change in their market price due to market-distorting 
subsidies, threatens most of the domestic nursery and greenhouse crop 
production industry and will jeopardize most of the $16.6 billion in 
annual nursery and greenhouse crop sales across the country. This will 
result in major economic dislocations in many rural areas of the U.S. 
as nursery and greenhouse crop producers are major employers of both 
seasonal and permanent help in these locations.
    As of result of the current economic recession, the nursery and 
greenhouse industry is already experiencing economic distress. Market 
price distortion or diversion of bark resulting from inclusion in the 
BCAP will seriously impact domestic production and drive loss of market 
share to imports from Canada and elsewhere. Our ANLA members have 
already received notification from their bark suppliers about future 
product shortages and complete unavailability of bark, bark based 
materials and landscape mulch. An industry survey conducted in March 
2010 indicated that 95% of the nursery and greenhouse crop producers do 
not have access to a viable, alternative replacement for bark and bark 
based nursery and greenhouse crop substrates.
    Even before the passage of the Section 9001 of the 2008 Farm Bill, 
the national nursery industry was concerned about the future 
availability of these wood waste materials because of long-term 
structural changes within the forestry industry and the use of bark as 
a fuel source at wood products production facilities. An industry 
study--``Estimation of U.S. Bark Generation and Implications for 
Horticultural Industries'' (2006) indicated that since the 1980's more 
than 95 percent of the U.S. bark supply has been utilized in some way 
as a ``value-added product'' or market. Industrial fuel consumption 
already consumes the largest share for bark, absorbing 83 percent of 
softwood bark and 66 to 71 percent of hardwood bark. Since there is 
already an established, competitive marketplace for use the wood waste 
materials as a fuel source for energy production, it is counter-
productive for this marketplace to be federally subsidized through BCAP 
funding.
    Recognizing the long term impact of current and future bark 
supplies going for energy production, the nursery industry launched a 
collaborative research project involving USDA ARS, land-grant 
universities and industry, to look at the development of alternative, 
sustainable replacements for bark in substrates. This project has been 
underway for 2 years. At the present time, however, there are no viable 
marketplace alternatives available for bark materials to be utilized in 
the production of containerized nursery and greenhouse crops. 
Development of viable alternatives will take time and sustained 
research investment.
    In addition to the very negative economic impact that possible BCAP 
subsidies for bark based wood materials would have on the production of 
nursery and greenhouse crops, other segments of the green industry 
which rely on these materials will suffer. Landscaping firms depend 
upon the availability of bark mulch and mulch based material in the 
establishment and maintenance of plant material in commercial and 
consumer landscapes. Retail garden centers rely on the sales of bark 
mulch and mulch based materials for a large portion of their gross 
consumer sales in the active spring and fall gardening seasons. A March 
2010 industry survey indicated that 60% of the retail garden center 
respondents have been told by their suppliers to expect a price 
increase for future purchases, or warned of unavailability, of wood-
based mulching materials. Organic mulches used in landscape settings 
are environmentally important. These materials contribute to water 
conservation, reduction in use of chemical herbicides, and prevention 
of soil erosion. Their diversion from established use patterns will 
have negative environmental consequences.
    In regard to the application of BCAP subsidies for bark, bark based 
and mulching materials we respectfully request the following action in 
the drafting of the final Rule by the USDA Farm Service Agency.

    1. Remove bark, bark based materials, landscape mulching materials, 
        softwood chips and forest thinnings from the list of biomass 
        materials eligible for BCAP programs.

    2. Clearly define as high-value/established market materials the 
        use of bark, bark based materials and landscape mulch and 
        nursery and greenhouse growing media substrates. In PART 1450, 
        Subpart A, Section 1450.2 add a specific definition of ``Value-
        Added'' and ``Currently Established Markets.'' Include bark, 
        bark based materials landscape mulch and bark based nursery and 
        greenhouse growing media substrates as value-added and 
        established marketplace products--recognizing that there 
        already exists an established, functioning, competitive 
        marketplace for these materials.

    3. Under the definition of ``Renewable Biomass'' in Section 1450.2, 
        we suggest that specifically define the concept/term of 
        ``higher-value products'' to include bark, bark based 
        materials, landscape mulch and nursery and greenhouse growing 
        media substrates.

    4. Conduct an economic impact study. We request that USDA FSA ask 
        that the USDA Office of Chief Economist, in cooperation with 
        the USDA Economic Research Service, conduct a cost-benefit 
        analysis of the marketplace and economic impact BCAP subsidies 
        on the use of ``wood waste'' materials. The Cost Benefit 
        Analysis, conducted by the Office of Management and Budget 
        under Executive Order 12866, as referenced in 7 CFR Part 1450, 
        Biomass Crop Assistance Program: Proposed Rule does not 
        adequately address all the possible negative economic impacts 
        that BCAP funding will have on agricultural industries who rely 
        on ``wood waste'' materials, including bark, bark based 
        materials and mulches as ``value-added'' products for the 
        production of agricultural crops.

    5. Expand the restriction on the use of BCAP funds on federally and 
        other publicly owned lands for ``value-added'' biomass 
        materials and markets to privately owned forestlands.

    6. Focus BCAP on the original intent of incentivizing on-farm 
        production of new, renewable biomass crops and the expansion of 
        and the proper management of privately owned forestlands.

    Both ANLA and SAF stand ready to work with USDA FSA in the rule 
making process so as to effectively craft BCAP policies which will 
assist in the reaching of the biomass and energy production goals as 
outlined in Section 9001. In defense of a $16.6 Billion nursery and 
greenhouse specialty crop agricultural product market however, we must 
continue to register our great concerns for the unintended negative 
impacts that the BCAP Federal subsidy program, as it currently relates 
to wood based materials, has and will have on the availability of bark, 
bark based and mulch materials and nursery and greenhouse crop 
substrates that are a critical input and resource for our industry.
    We appreciate your serious consideration of the issues that we have 
outlined in these proposed Rule comments and look forward to your 
response.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Marc Teffeau,
Director of Research and Regulatory Affairs,
American Nursery and Landscape Association.
References:
    Hall, Charles R., Hodges, Alan W. and Jolm J. Haydu. 2005. Economic 
Impacts of the Green Industry in the United States. Final Report to the 
National Urban and Community Forestry Advisory Committee, U.S. Forest 
Service.
    USDA 2007 Census of Agriculture, http://www.agcensus.usda.gov/
Publications/2007/Full_Report/index.
    Lu, Wenliang, Sibley, Jeff L., Gilliam, Charles H., Bannon, James 
S. and Yaoqi Zhang. 2006. Estimation of U.S. Bark Generation and 
Implications for Horticultural Industries, J. Environ. Hort. 24(1):29-
34, March 2006.

    The Chairman. Thank you very much, Mr. Reelhorn. We 
appreciate it.
    Mr. Rehermann, welcome to the Committee.

   STATEMENT OF FRANK REHERMANN, RICE PRODUCER, LIVE OAK, CA

    Mr. Rehermann. Thank you, Chairman Peterson, Ranking Member 
Lucas, and Members Cardoza and Costa. Thank you for holding 
this hearing to review farm policy in advance of the 2012 Farm 
Bill, and thank you for inviting me to testify.
    My name is Frank Rehermann. I am a rice farmer from Live 
Oak, California, up in the Sacramento Valley. My wife and I 
operate our farm as a family partnership, growing 800 acres of 
rice. I am a hands-on rice grower of average size. Fortunately 
for us, my wife also has a career off the farm in education.
    Rice is planted on about 550,000 acres in the Sacramento 
Valley by some 2,500 growers. Our Mediterranean climate is 
well-suited for the production of medium grain rice. 
Incidentally, we proudly claim to grow all of the sushi rice 
used in the United States.
    Rice farming also creates thousands of jobs in rural 
California communities, and our fields provide unparalleled 
habitat for over 230 species of wildlife.
    In reviewing the 2008 Farm Bill, I would like to begin my 
comments by focusing on the safety net provisions of that bill.
    First, the marketing loan provides a modicum of assurance 
to lenders regarding a grower's ability to service debt. 
However, as a reality, loan values are no longer close to being 
equal to production costs, excluding land costs.
    Second, the countercyclical payment is critical when prices 
fall below a modest target price. This is designed to assure 
that farmers can cover a greater portion of their operating 
costs when prices are low.
    It's worthwhile to note that I have not received a 
countercyclical payment since this bill began, and I submit 
that if prices got so low, that countercyclical payments were 
made, we would be in very, very serious trouble.
    Finally, the direct payment is an important part of the 
safety net. This direct payment, and its predecessors, such as 
the deficiency payment, have provided an important offset to 
the increasing costs of producing rice. In recent years, this 
has been the most important safety net provision for rice 
farmers.
    This consistent program also supports the tremendous 
habitat provided by rice fields.
    Other conservation programs such as CSP and EQIP are mostly 
not beneficial or effective for rice growers. Conservation 
benefits in rice can be clearly linked to the commodity title.
    We ask you to remember that the current farm bill, 
specifically these three elements, are working for growers in 
California and across our nation. Annual farm program spending 
on rice has been reduced from $1.2 billion to just over $400 
million annually.
    The current farm bill also contains the programs Average 
Crop Revenue Election and Supplemental Revenue Assurance. 
However, as of now, these programs do not work well for rice, 
as evidenced by the nearly nonexistent sign-ups for these 
programs.
    Risk management products offered under Federal crop 
insurance have also been of minimal value to rice farmers. We 
are working now to develop products that may be more 
interesting to rice growers and more beneficial. What rice 
growers could greatly benefit from are crop insurance products 
that will help against--protect against rapidly-increasing 
production costs.
    For an example, field fertilizer and other energy-related 
inputs are now increasing at an alarming rate, and constitute a 
major portion of our cost of operation.
    We strongly support and participate in voluntary incentive-
based USDA conservation programs. We are, however, deeply 
disappointed in the practical on-the-ground results of many of 
these programs.
    After enthusiastically participating in the development of 
the Conservation Stewardship Program, we find the new CSP to be 
very confusing. It is unclear, to many of us growers, how we 
can transition from the old program to the new. Screening tools 
are poorly adapted and not easy to understand. As a result, 
fewer and fewer producers are willing to participate.
    In order to work effectively, CSP needs to be demystified 
and transparency needs to be improved. It is important to note 
that we appreciate the diligent efforts of NRCS staff, headed 
up by Mr. Ed Burton, who is with us today. Rice provides an 
unparalleled environmental dividend valued at $1.5 billion. 
Where our fields were once burned each fall, many farmers now 
incorporate straw and reflood, providing a wintering habitat 
for seven million ducks and geese, that over-winter each year 
in the Pacific flyway.
    Biologists tell us that half of the food for these 
waterfowl come from rice fields. What is more, over half the 
managed wetlands rely on water that drains from our fields. So 
critical is the habitat in the Pacific flyway, that experts 
estimate that we would lose more than one million ducks if rice 
acres were cut by half.
    These benefits accrue to everyone in this country as a 
direct result of a viable rice industry. It is the commodity 
title of the farm bill, and its intended safety net provisions, 
that supports this flurry of wings, and the essential habitat 
for so many terrestrial species.
    We have, and I will leave with you, an ad that we have done 
emphasizing the importance of our benefits to waterfowl, and we 
have been joined in this by many conservation organizations.
    Regarding the development of the 2012 Farm Bill, our 
industry is working to analyze all existing safety net policies 
and evaluate their effectiveness.
    We believe some improvements may be appropriate. Let's not 
disrupt the production system that continues to provide our 
country, and millions, around the world, with a safe, abundant, 
affordable supply of food.
    The key principles that are guiding our work in preparation 
of the next farm bill are first, the maintenance of a strong, 
effective safety net; second, recognition that current 
conservation environmental practices on rice farms pay a large 
public dividend; and third, understanding that risk management 
tools such as Federal crop insurance, ACRE and SURE, are not 
currently effective as written, but may be improved.
    In conclusion, I would like thank you again for this 
opportunity to share my views and our initial thoughts on 
developing a 2012 Farm Bill that can help meet the risk 
management needs of producers. We look forward to working with 
you in this regard. I would be happy to respond to any 
questions you may have.
    [The prepared statement of Mr. Rehermann follows:]

   Prepared Statement of Frank Rehermann, Rice Producer, Live Oak, CA
Introduction
    Chairman Peterson, Ranking Member Lucas and Members Cardoza and 
Costa thank you for holding this hearing to review farm policy in 
advance of the 2012 Farm Bill.
    I appreciate the opportunity to offer testimony before the 
Committee on Agriculture concerning rice farmer's views on current farm 
policy and the development of the 2012 Farm Bill.
    My name is Frank Rehermann. I am a rice farmer from Live Oak, 
California. My wife and I operate our farm as a family partnership, 
growing 800 acres of rice in the Sacramento Valley of California. I 
have been farming since 1972.
Rice Industry Overview
    Rice is planted on about 550,000 acres in California primarily in 
the Sacramento Valley. Our Mediterranean climate is ideally suited for 
the production of medium grain rice. In addition to being the largest 
producer of this type of rice in the nation, we also grow all of the 
sushi rice used in the U.S. Rice farming also creates thousands of jobs 
in rural California communities and our fields provide unparalleled 
habitat for 230 species of wildlife. Internationally, about half of our 
crop is exported to Japan, South Korea Taiwan and Turkey.
    California rice is grown by 2,500 family farmers and milled into 
brown or white rice by over 40 marketing organizations. Importantly, 
the number of marketers has more than tripled in the last decade. This 
increased competition benefits farmers, consumers and our customers 
around the world.
    Another 2.5 million acres of rice is produced in the other five 
rice-growing states of Arkansas, Louisiana, Mississippi, Missouri, and 
Texas. The U.S. rice industry is unique in its ability to produce all 
types of rice, from long grain, medium grain, and short grain to 
aromatic varieties. Last year, U.S. farmers produced a rice crop of 
more than $3.1 billion in farm gate value.
    Much of this economic activity occurs in the rural areas of the 
Sacramento Valley in California, the Gulf Coast region of Louisiana and 
Texas, and the Mississippi Delta region, which exported some $2.2 
billion in rice to markets around the world.
    Rice is an important food around the world and at home. The 2005 
Dietary Guidelines and MyPyramid recommendation, published jointly by 
the Departments of Agriculture and Health and Human Services, call for 
five to ten servings of grains daily, with half the servings coming 
from whole grains, such as brown rice, and 45 to 65 percent of calories 
coming from complex carbohydrates, such as rice. Rice is a naturally 
wholesome food with no sodium, no cholesterol, no glutens, and no trans 
or saturated fats.
    Beyond the substantial economic and nutrition benefits of rice is 
the environmental dividend from winter-flooded rice fields. This $1.5 
billion benefit is unparalleled in all of agriculture. We California 
rice farmers have embraced the role that our fields play as critical 
habitat for migratory waterfowl and other wetland-dependant species. 
Where our fields were once burned each fall, farmers now re-flood their 
fields, providing wintering habitat for some seven million ducks and 
geese that overwinter each year in the Pacific Flyway. Biologists tell 
us that half of the food for these waterfowl comes from rice fields. 
What's more, over half of the managed wetlands in the state rely on 
water that drains from our fields for their operations. So critical is 
this habitat to the flyway that experts estimate that we would lose 
more than one million ducks if rice acres were cut in half.
    California ricelands and adjoining wetlands have also been 
designated as Shorebird Habitat of International Significance by the 
Manomet Center for Conservation Sciences. Home to over 300,000 
shorebirds, it is the second largest area designated in North America.
    Clouds of ducks, geese and shorebirds are seen every winter on the 
drive into Sacramento on Interstate 80. The flights of pintail and teal 
that almost stop traffic over the Yolo Bypass at the Vic Fazio Yolo 
Wildlife area are feeding on the ricelands that are purposefully 
incorporated into this Federal wildlife area for the food they provide.
    All told, some 230 species of wildlife utilize California ricelands 
during the year, with 31 listed as species of concern. This same 
success story, with regional differences, is repeated in rice growing 
regions across the Mid-South.
    All of these benefits are essentially free to the people of 
California and across the nation. It is the commodity title of the farm 
bill that supports this flurry of wings and essential habitat for so 
many terrestrial species.
2008 Farm Bill Review
    The Food, Conservation, and Energy Act of 2008 (the Farm Bill) 
provides a strong and effective safety net for California rice farmers 
by maintaining three critical elements.
    First, the marketing loan established in the 1985 Farm Bill 
provides essential access to financing for farmers. The loan program 
also serves as an important tool when world prices are impacted by 
stiff competition from other countries, which underwrite substantial 
government support.
    Second, the countercyclical payment developed for the 2002 Farm 
Bill is an important tool for farmers when prices fall below a very 
modest target price. This ensures that farmers can cover a greater 
portion of their operating costs in a bad year.
    Finally, the direct payment is an important part of the safety net 
both for farmers and for the environment. The direct payment is the 
foundation of the rice farmer's safety net, providing an important 
offset to the cost of production of high value crops such as rice. In 
recent years, this is the only program that has supported rice farmers. 
This predictable year in and year out program supports the tremendous 
habitat provided by rice fields. Other conservation programs such as 
CSP and EQIP are far from perfect and even less predictable. 
Conservation program benefits in rice can be clearly linked to the 
direct payment element of the commodity title.
    We ask that you remember that the current farm bill is working and 
that reforms adopted in 2008 are having a tremendous effect. Annual 
farm program spending on rice has been reduced from $1.2 billion to 
just over $400 million currently. Under the farm bill, farmers receive 
a small but predictable level of ongoing support and have the benefit 
of a greater safety net when market prices fall. This is a system that 
works for farmers and for the country.
    The farm bill also includes the addition of Average Crop Revenue 
Election (ACRE), as an alternative to counter cyclical payments for 
producers agreeing to a reduction in direct payments and nonrecourse 
loan benefits. The bill also added Supplemental Revenue Assurance 
(SURE) as a standing disaster assistance supplement to Federal crop 
insurance.
    Simply put, these programs do not work for rice, as evidenced by 
the nearly non-existent sign-ups for these programs. Structured largely 
for other crops and relying on significant price and production swings, 
these two programs are not attractive to rice farmers who are more 
often impacted by significant increases in production costs.
Crop Insurance
    Risk management products offered under Federal Crop Insurance have 
been of minimal value to rice farmers due to a number of factors. 
Artificially depressed actual production history (APH) guarantees, high 
premium costs for a relatively small insurance guarantee, and the fact 
that rice is unique among most other major crops in its production 
practices are all major flaws.
    For example, since rice is an irrigated crop, drought conditions 
rarely result in significant yield losses as growers are able to pump 
additional irrigation water to maintain moisture levels and, thus, 
relatively stable rice yields. These drought conditions do, however, 
result in additional production costs due to the need to pump 
additional water.
    What rice farmers really need are crop insurance products that will 
help protect against increasing production and input costs, 
particularly for energy and energy-related inputs. For example, fuel, 
fertilizer, and other energy related inputs represent about 70 percent 
of total variable costs on average.
    In this regard, the USA Rice Federation has been working for over a 
year now to develop a new generation of crop insurance products that we 
hope will provide meaningful risk management tools for rice producers 
to protect against sharp upward swings in input costs. Our objective is 
to gain approval from the Risk Management Agency (RMA) of two new 
products that could be available to growers in time for the 2012 crop 
year.
Conservation Policies
    Rice producers are outstanding conservationists and stewards. We 
strongly support and participate in voluntary, incentive-based USDA 
conservation programs. We are however, deeply disappointed in the 
practical, on-the-ground results of many of these programs.
    After enthusiastically participating in the development of the 
Conservation Stewardship Program (CSP), we find the current program 
confusing. It is unclear how farmers get in the program or how they are 
even excluded. Screening tools are poorly adapted and not understood. 
As a result, we hear of fewer and fewer producers willing to 
participate, unlike the broad participation seen in the initial 
program. In order to work effectively, the program needs to be 
demystified and transparency significantly improved.
    The Environmental Quality Incentives Program (EQIP), while an 
effective program for developing infrastructure like tailwater recovery 
systems, is poorly designed for habitat projects. The 50 percent 
matching fund requirement is a major stumbling block as farmers 
conclude that habitat projects can wait. EQIP has far to go before it 
can be a useful tool to provide incentives for wildlife habitat 
improvement.
    The Wetlands Reserve Program (WRP) is also an inadequate tool for 
preserving working landscapes. With 30 year contract requirements, this 
is essentially a land retirement program. While suitable for a small 
number of acres in the state, it is contrary to the evidence that 
clearly demonstrates the significant benefits provided by ricelands in 
production.
    We do appreciate the emphasis Congress has placed on technical 
assistance to producers through the Natural Resources Conservation 
Service (NRCS). We greatly value these significant NRCS services, 
especially at the state level, both from agency officials and NRCS-
certified third-party providers. Conservation programs do not work 
without the support provided by NRCS. We simply ask that you give them 
the tools they need to make conservation programs truly work for rice 
farmers.
    I can assure you that rice farmers care deeply for the environment 
and we take our responsibility to protect and enhance our farms for 
future generations seriously. To replace the current commodity title 
safety net with conservation programs, however, would be disastrous 
given the experience we have had with CSP, EQIP, WRP and others 
programs which are simply not tailored to rice farms.
Environmental Policy Challenges
    Of ongoing concern to rice farmers is the economic impact of 
climate change legislation on the U.S. rice industry.
    One of the key areas of focus in our analysis is the impact on rice 
production costs, as a result of higher costs for major inputs such as 
fuel, electricity, fertilizer, natural gas, and propane. Rice is a high 
yielding crop utilizing nitrogen fertilizer, which, in turn, is made 
using natural gas. Moreover, all rice must be dried before it can be 
stored again using natural gas or propane fuels. Finally, beyond the 
increased costs of field production, U.S. rice must also be milled 
before it can be consumed or utilized in products, an expense which is 
also borne by producers if they are part of a cooperative. All of these 
already significant costs are expected to substantially increase under 
pending climate change legislation, both in the short and long term.
    Increased input costs greatly reduces our competitiveness compared 
to others in the global marketplace such as Vietnam, Thailand, Pakistan 
and India, who will not likely bind their economies to the same level 
of commitments to greenhouse gas emissions reductions.
    Rice farmers are not afraid to address the issues of climate 
change. California rice farmers have been working for 3 years with the 
Environmental Defense Fund to understand methane production in our 
fields. This effort is based on our commitment to understand the data 
surrounding the impacts of rice farming and to provide policy makers 
with the information necessary to evaluate viable practices for offset 
trading. We look forward to contributing solutions for climate change, 
but our research to date has failed to find any practices that are 
economically feasible.
Trade Policy Challenges
    Another key policy focus for our industry is trade. While many 
previously negotiated trade agreements have promised market access 
gains for agriculture, much of what was promised has yet to materialize 
or is continually threatened by artificial sanitary and phytosanitary 
(SPS) and other non-tariff barriers.
    In California, our key export markets are Japan, South Korea, and 
Taiwan, and we are regularly faced with one or more of these markets 
failing to meet their trade commitments.
    In terms of new agreements, rice was completely excluded from the 
free trade agreement negotiated with South Korea, foreclosing new 
markets for U.S. rice producers there. And the Colombian Free Trade 
Agreement (FTA), which would provide significant new market access for 
the Mid-South rice industry, remains stalled.
    One market that has the potential to become a top five export 
market for the Mid-South rice industry almost immediately is Cuba. 
Unfortunately, the U.S. Government continues to maintain restrictions 
on our agricultural exports to this country. Cuba, once the number one 
export market for U.S. rice, is potentially a 400,000 to 600,000 ton 
market, if normal commercial relations are established. In this regard, 
we wish to commend Chairman Peterson and Congressman Moran for your 
leadership in efforts to address this situation with the introduction 
of legislation to further open agricultural trade as well as remove 
travel restrictions to Cuba. We look forward to working with you to see 
this legislation enacted into law.
    I would be remiss if I did not at least touch on the Doha Round 
negotiations of the World Trade Organization (WTO). We are currently 
terribly outgunned by high foreign subsidies and tariffs and, at least 
so far, we have seen nothing in the Doha Round negotiations that would 
change this. In fact, in many ways Doha would make matters worse. 
Enshrining in our trade agreements decisive advantages for our trading 
partners, including such countries as China, India and Brazil, may be 
marketed as trade liberalization in Washington or Geneva but we see it 
as picking winners and losers in the global economy based on politics. 
Given rising future global demand for food, the U.S. should exercise 
great caution in negotiations, so as not to arbitrarily forfeit 
America's domestic production to less efficient competitors.
Budget Challenges
    As we look ahead to the development of the 2012 Farm Bill, we are 
deeply concerned about the deteriorating budget baseline for 
agriculture. Today, less than \1/4\ of 1 percent of the Federal budget 
and less than 17 percent of the USDA budget is dedicated to the farm 
safety net. Yet, the renegotiation of the Standard Reinsurance 
Agreement (SRA) by USDA and the crop insurance companies could result 
in another baseline reduction of nearly $7 billion. Clearly, 
agriculture cannot afford this kind of hemorrhaging in advance of what 
we understand may be a baseline farm bill and the potential of another 
budget reconciliation effort. Of equal concern is the adverse impact 
cuts to crop insurance that producers are told they will have to rely 
on to a greater degree in the future.
    As you know, the farm safety net sustained cuts in 2005 during 
budget reconciliation and in 2008 in the context of the farm bill, even 
as other policies administered by USDA received funding increases, some 
very substantial. The success of farm legislation has always depended 
upon carefully balanced legislation and coalition building. We are 
deeply concerned that singling out the farm safety net for additional 
cuts may upset this fragile balance.
2012 Farm Bill Development
    Our industry is working internally to analyze all the existing 
safety net policies and evaluate their effectiveness in providing a 
measure of protection in the most efficient manner.
    We believe some improvements may be appropriate but must be 
accomplished in a manner that does not cause disruption and upheaval in 
the U.S. agriculture production system that continues to provide our 
country and millions around the world with a safe, abundant, and 
affordable supply of food, fiber and fuel.
    The key principles that are guiding our work in preparation for the 
next farm bill are:

    1. Maintenance of a strong, effective safety net that includes 
        marketing loans, countercyclical program and direct payments.

    2. Recognition that conservation and environmental practices 
        currently undertaken on rice farms pay a large public dividend.

    3. Understanding that risk management tools such as Federal Crop 
        Insurance, ACRE and SURE are not effective for U.S. rice 
        farmers, as currently written.
Conclusion
    In closing, I would like to thank you again for this opportunity to 
share my views on the current state of the rice industry, the diverse 
challenges we face, and our initial thoughts on developing a 2012 Farm 
Bill that can help meet the risk management needs of producers. We look 
forward to working with you in this regard. I would be happy to respond 
to any questions the Committee may have.

    The Chairman. Thank you very much, Mr. Rehermann. I thank 
all the members of the panel for that excellent testimony. We 
will now move to questions. I will recognize Members for 5 
minutes. I recognize the gentleman from California, Mr. 
Cardoza.
    Mr. Cardoza. Thank you, Mr. Chairman. We are on here.
    I am going to ask everyone on the panel a very simple 
question. We have 5 minutes, so we are not going to have much 
time to discuss it. After I ask the question, I am going to go 
to Mr. Bledsoe, and then I will come back to you for your 
answers.
    We did a lot of things in the last farm bill. I would like 
you all to tell me the one thing that is most important to your 
industry, and the thing that you would most like to eliminate, 
or remove from the farm bill, or that is causing you problems 
of impediments.
    Mr. Bledsoe, I want to make a comment first, and then I 
have another question for you, sir.
    In my mind, the dairy farmer safety net is sending the 
wrong market signals, right now, at least in some parts of the 
country. The triggers based on milk prices alone are no longer 
adequate in the new climate of high-input costs that our 
farmers now face.
    Jamie, can you please give me some details of your input 
costs and highlight where and why California has higher inputs 
than the rest of the country?
    Mr. Bledsoe. Yes. Of course, since last spring, we have 
made major cuts. But, if you figure a return on investment into 
your input costs, prior to 2009, we were probably sitting at 
$19 a hundredweight, would be a good average number to use 
today. On my farm, because of the cuts I have made, and if I do 
not figure in return on investment I think I can break even, 
cashflow, at $13.50 a hundredweight. There are quite a few 
other farmers in our state that would probably be closer to a 
$15 and $16 range.
    The biggest factor when determining our input costs is 
feed. It is over 50 percent of our total cost. Corn is the 
biggest component of our feed ration, and even today, when you 
try to look ahead, I feel, as a dairy farmer in California, I 
am competing against the Federal Government for my corn because 
of subsidies for ethanol.
    In the previous Administration they told us that was not 
really the case, but it is very hard to sell that to my 
neighbors.
    And now, when you do try to plan ahead, and look at corn, 
now we are also competing a little bit with the hedge funds, 
with everything coming out of the stock market into the CME, 
into the commodity markets.
    It is very difficult for us, to learn what kind of risk 
management tools to use. Our number one cost here has been 
feed, also water. I mean, we can talk for hours on water. But I 
hope that answered your question.
    Mr. Cardoza. Thank you. There is no question, I think all 
the members of this panel would agree with you, that the 
California water situation requires some significant overhaul. 
The Endangered Species Act is not working for the farmers, for 
the fish, for any of us in the Central Valley, and certainly 
not the California economy.
    Very quickly now, what is a program that is not working, 
for each one of you.
    Mr. Bledsoe. For dairy, MILC is not working. In our 
opinion, it sends a signal to the rest of the country, when 
prices are low, to make more milk.
    Mr. Cardoza. Is that the program that you think is causing 
the greatest distortion in the dairy program and sending the 
wrong signals?
    Mr. Bledsoe. Yes. Right now. This is not a typical year 
because of the economic crash, but today, we have a billion 
pounds of cheese on inventory.
    Mr. Cardoza. Okay. Thank you.
    Sir. Mr. Campos.
    Mr. Campos. Programs that work and programs that don't 
work?
    Mr. Cardoza. That is right.
    Mr. Campos. I believe the EQIP Program, the funding to 
replace the older equipment has really been working, and I say 
that in my testimony.
    Mr. Cardoza. That was great testimony, by the way.
    Mr. Campos. Last year, in the last farm bill there was 
about $150 million for that program. California got roughly 25 
percent of that--$37 million.
    Mr. Cardoza. Right.
    Mr. Campos. That has been working. I believe that 
California with $100 million, we can change the air quality and 
the PM10 reduction tremendously.
    Mr. Cardoza. For the out-of-area Members, we are out of 
attainment in PM2.5 and PM10. The Air 
Quality Board regulates us for those small particulates.
    Mr. Campos. Yes.
    Mr. Cardoza. Thank you, Mr. Campos. Mr. Diener.
    Mr. Diener. Crop insurance--I have never been able to make 
it work in California. I look at it as a Midwest program. We 
are forced to be part of that as part of the particular farm 
program, and we have to participate. That is what I do not care 
about. We can talk about that later. But I do care a lot about 
farmers as the source for the environmental betterment of the 
society. The NRCS is where you are going to start, working with 
the ARS, and the specialty crops area, I think we could 
probably create quite a beneficial habitat within our farms, 
just like the rice growers are doing within that whole system. 
As a long-time participant in the NRCS programs, as well as 
being on the conservation district board, I think that part of 
the farm bill needs to be strengthened and actually enhanced.
    Mr. Cardoza. We have very little time left. We are 
overtime. Mr. Kester.
    Mr. Kester. Really quick, I will start with the negative. 
What I would like to see out of the farm bill from 2008 would 
be country-of-origin labeling, and the negative effects that 
has had on producers.
    And then positively, I would like to see the conservation 
title expanded through NRCS programs, specifically EQIP. That 
program provides three benefits to the producer, the public and 
the environment.
    Mr. Reelhorn. For the nursery industry, funding for pest 
and disease protocol, is huge. We move plants, so we need those 
programs, and the negative consequence is the biomass research 
initiative because of the lack of bark availability.
    Mr. Cardoza. Thank you.
    Mr. Rehermann. Very briefly, the most important is the 
direct payment. The least important are the ACRE and SURE 
Programs.
    Mr. Cardoza. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you. The Ranking Member, Mr. Lucas, 
from Oklahoma, is recognized.
    Mr. Lucas. Thank you, Mr. Chairman. Mr. Campos, I cannot 
help but inquire. You mentioned coming from Wyoming to 
California. Would you be of Basque heritage, perhaps?
    Mr. Campos. Excuse me? Can you ask the question again, 
please.
    Mr. Lucas. You said you came from California by way of 
Wyoming and the herding business. Would you perhaps be of 
Basque heritage?
    Mr. Campos. Yes. I am.
    Mr. Lucas. The reason I ask that--my very best friend in 
college, the best man at my wedding, his mother came from the 
Basque country in the 1940s. So I have spent a little time 
around the American version of your culture. Wonderful people. 
Wonderful people.
    Mr. Campos. Thank you.
    Mr. Lucas. Actually, pretty intense level of intensity.
    [Laughter.]
    Mr. Lucas. Let me mention for just a moment--and that is a 
respectful statement, by the way--the challenges we face on 
this Committee as we write a new farm bill. We had $79 billion 
more in 2002, and when I sat as the Subcommittee Chairman for 
conservation, we spent $17 billion of that on conservation. In 
2008, the world had changed, the budget had changed, we had $7 
billion and leadership mandated that virtually all of that go 
to nutrition spending. That was a mandate from on high, the 
Speaker's Office. Then, in 2012, or what we will most likely 
face, at the very best, if we have what we had before, it will 
be nothing short of a miracle. In the worst-case scenario--and 
we will see how the Chairman's eyes dilate on this--we may have 
fewer resources to write a farm bill with. It is just going to 
be a tough process.
    Fair statement, Mr. Chairman? Now with that said, with 
these tighter resources, and I say this very respectfully to my 
California friends, because many cousins, third cousins and 
fourth cousins of my Oklahoma constituents have relatives in 
your great state. I say that respectfully too.
    I get the questions, across the country, especially on 
things like carve-out of EQIP, which is a critically-important 
program. I will ask it to all of you, and let you step in to 
this, if you care to. How do I explain to my constituents in 
Oklahoma, my colleagues across the country, and also farmers 
and ranchers, that we should be directing more and more 
targeted resources to California, when it appears your biggest 
challenges perhaps are not the EPA but water issues and 
environmental issues mandated on you by state government. How 
do I respond to my constituents who say the Feds should pay for 
the state mandates? Be brave, guys.
    Mr. Kester. Mr. Lucas, I will take a stab at it. My 
response would be that it is not just a California issue, 
because I think every state has some sort of regulatory burdens 
in each state. I would respond that it is a national benefit, 
expand the EQIP Program and target those funds, because it is 
the environment across the U.S. that benefits as well as the 
taxpayers across the U.S., and it is just not a state issue. It 
is a nationwide issue for conservation benefits, and I pick out 
California, even though we are higher in the regulatory 
burdens.
    Mr. Lucas. Yes, sir.
    Mr. Diener. Yes. Mr. Lucas, I would say if you look at the 
food pyramid that has been developed by USDA, we have 50 
percent of that food pyramid grown here. We are all specialty 
crop growers at some level in this state. We comprise probably 
50 percent of the food production for the United States.
    If you are in charge of dividing the pot, the fact is is 
that if you eat, you eat from us. If we do not survive, you do 
not have the needed crop diversity, especially the specialty 
crop component of the food pyramid.
    Everybody that is beating on you about the old farm 
program, the new farm program, are asking you for fresh, local 
food. I can tell you, if you are in Tennessee today, you are 
not eating fresh and local. It is a little underwater.
    The fact is we are shipping produce off our farm today, 
back East, and they have fresh produce every day from our area 
here. If the United States wants to have fresh and local 
produce, they are going to have to get it from California, or 
it is going to be imported from some other country where there 
are no controls.
    The fact of the matter is that we have the cleanest food, 
from California, because we have the strictest rules and 
regulations, all stimulated by the EPA from back in Washington, 
D.C.
    We live under those mandates at the state level as well as 
the Federal level. We have taken them probably, somewhat, to 
another level, but what goes on in California goes elsewhere 
soon. You should help us, because if you do not, you are not 
going to have us.
    Mr. Lucas. I appreciate that. Anyone else? Just bear in 
mind, there is the perception, back East, that whatever the 
standard is, your state government rushes to do it harder, 
higher, greater than anyone else. Your state government has 
shown a more aggressive nature about resource reallocation than 
the folks in the rest of the country, and California has always 
been subject to the green-eyed monster of envy. I will not deny 
that for a moment. Not all of us came here. The rest of us 
stayed in Oklahoma and watched you.
    Nonetheless, that classic argument is if we provide enough 
money for tractors and resources and better equipment, will 
your standards just get higher and higher and higher? I think 
it is a legitimate issue; but I appreciate the points that both 
of you bring back.
    Mr. Bledsoe, you mentioned in your written testimony your 
support for the estate tax bill that has passed in the House, 
41-54%, with its top bracket of 35 percent.
    I think the bill actually has a top bracket maybe of 45 
percent. Let's talk for a moment--and I address this to all of 
you--the question about exemptions on how many dollars of 
property can be moved. Assuming you sort out your water issues, 
assuming you sort our your environmental issues, you do have 
the most productive ag land. Therefore, the most valuable in 
the world. Can you move very much farmland for $3.5 million in 
most of your areas?
    Mr. Campos. About 100 acres.
    Mr. Kester. No. Your point is well-taken. The answer is no: 
$3.5 million does not even come close, even on our rangeland, 
let alone specialty crops with more intensive farming.
    We are always looking for the more generous exemption, 
because we are not going to be in business if onerous estate 
tax laws get continued on, or even revert back to 2001 levels. 
I have been through it. I am a fifth generation rancher, and I 
have three children. I am trying to keep them in the ranch, and 
if these estate tax issues are not solved, our sixth generation 
is not going to be able to stay in business in this state.
    Mr. Lucas. I know that is not an issue that the House 
Agriculture Committee has primary jurisdiction over. That is 
Ways and Means in the House. I know in much of the rest of the 
country, our farmland simply is not as valuable per acre as 
yours is.
    But I do have a sympathy for you in trying to move the work 
of one or two or three generations, keeping it within the 
family--and that is not just farms, that is small business 
too--keeping it within the family.
    So I am sympathetic to that. I wish you well in the 
challenges that you face. I really do. But you have some 
challenges out here. Thank you, Mr. Chairman.
    Mr. Cardoza [presiding.] Thank you, Mr. Lucas. On behalf of 
my folks, would like to say that while California certainly 
does do what you say, and ratchets everything up higher, I do 
not think there is anybody in this room that would argue 
against the fact that they think that the Clean Water Act, the 
Clean Air Act, and the ESA Act cause them significant amounts 
of challenge every single day.
    Mr. Lucas. I think it is well within California's rights to 
set the appropriate standards that they view, but it does have 
economic impacts on the community, and if that affects the 
overall Federal budget, you get those questions from the rest 
of the country.
    Mr. Cardoza. Absolutely. Thank you for your questions.
    Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. Mr. Bledsoe, 
your testimony on challenges affecting the dairy industry was 
very compelling.
    As you know, we are trying to deal with several proposals 
that involve NMPF and National Holstein Association, all with 
an idea to try to develop a mechanism to allow dairymen and 
dairywomen better control over their supply of milk, and, 
therefore, their prices.
    Do you think, at the end of the day, as we deal with this 
meltdown that has taken place in the dairy industry, that that 
has to be a critical part of any change in Federal Order?
    Mr. Bledsoe. As you know, there are a host of proposals to 
now evaluate.
    Mr. Costa. Right. We are working on them.
    Mr. Bledsoe. We are working on them. And a major concern 
now--and I am representing two boards here, that represent a 
lot of dairymen.
    Mr. Costa. I know you are wearing a couple different hats.
    Mr. Bledsoe. Yes. I guess the best answer is that we are a 
large manufacturing state. Our co-op brings in about 17 billion 
pounds of milk a year, and we are going to produce 750 million 
pounds of powder and 350 million pounds of butter.
    Most of that butter, and powder, needs to go out of the 
country.
    As our boards look at those kind of proposals in our state, 
we want to make sure that the impacts on imports and exports 
are not devastating to our industry.
    Mr. Costa. But the current system is devastating right now 
to the industry, and doing nothing is not a solution. Being a 
third generation farm family, a lot of my family is still in 
the dairy business--I just think that producers, at some point, 
have to have some ability to have some impact, nationwide, on 
their own supply. Otherwise, they will never have an ability to 
control the price.
    Mr. Campos, you are an American success story, you and your 
family, and we appreciate all your hard work.
    One of the things that you touched upon, in terms of what 
the industry, the almond industry has done to export those 
almonds around the world, is I think critical.
    In the Farm Bill of 2008, we provided money for the Market 
Access Program. I would like to find out if the almond 
industry, in general, and whether or not in your own specific 
experiences, and marketing in Europe and Asia. What works best 
and whether or not the Market Access Program is helpful?
    Mr. Campos. Yes. The Market Access Program has been very 
helpful. Another issue that we have, in the almond industry, is 
trade. We export to 62 countries, worldwide. I do not know if 
this Committee has any jurisdiction on that, but the trade 
issue is--the duties that these countries put on almonds. They 
never grow any almonds, but they still have high import duties.
    India has 60 percent. China has 40 percent, they reduced to 
ten percent, and when you go in, they add value-added tax, so 
we go back to 40 percent.
    Mr. Costa. This Committee does not have jurisdiction over 
those issues, but we do know how you get leverage. We continue 
to argue with the Ways and Means Committee, and others, that 
fair trade has got to be an essential part of any WTO efforts.
    Mr. Diener, I could go on about a lot of the different 
issues you touched upon. I think that one of the things, having 
been out to your farm, I would like you to touch upon the 
ability to not only be among the most conservation-minded water 
users anywhere in the world, but how we can better deal with 
some of the problems with the brackish waters that you are 
attempting to deal with to reuse water.
    Can you touch upon that, quickly?
    Mr. Diener. As you well know, Mr. Costa--thank you--one of 
the solutions that we have is taking a resource that people 
call a waste product and making a resource out of it.
    I do not care whether it is the Waste Management Board from 
California taking materials out of the landfill or us pulling 
water from our farms.
    The fact is that we have to be resource managers. We have 
to take a negative and make something positive of it. Then the 
question becomes, how do you offset the cost of doing that?
    As we live in a water-short area, the approach that we have 
taken, by working with a lot of good people from government, as 
well as the private sector, is the salt coming out of our 
ground, and make that a positive.
    The salt basically, in this case, is sodium sulfate. Tide 
soap is 60 percent sodium sulfate. The U.S. buys 1.5 billion 
tons of sodium sulfate a year to put in soap so we can wash our 
clothes. They buy that either offshore, or from a mine some 
place. Why are we not making that from the water that comes out 
of our ground and recycling it in a green sense, actually 
taking and making clean water, using minerals that are used in 
everyday life?
     It is just so simple and straightforward. It takes energy. 
It takes time. It is a very simple idea that requires a very 
sophisticated process. I think we will achieve success, because 
we are pretty close to doing that now. Hopefully, by next year 
we will have this project running and be glad to show everyone.
    Mr. Costa. We will bring people out there, and we 
appreciate your innovation. I regret that we did not get an 
opportunity to have a representative of the cotton industry 
testify, an important part of this effort. I see some of them 
here today. I do not know if you are still growing cotton or 
not.
    Mr. Diener. We grew up thinking we were cotton farmers.
    Mr. Costa. I know we need to focus on, and the Chairman and 
I have had that discussion, our issues with Brazil.
    Mr. Kester, you talked about in your testimony, barriers to 
your ability to market cattle. Do you want to be a little more 
expressive on those barriers.
    Mr. Kester. Well, I will start on trade, for example. We 
would like to see the pending trade agreements with South 
Korea, Panama, and Colombia, for example, be put into effect. 
Trade represents somewhere upwards of ten percent of the total 
beef industry dollars generated in the United States. It is a 
huge component, potentially, to keep a lot of us in business. I 
would start there.
    Mr. Costa. I appreciate that. My time has expired, but Mr. 
Reelhorn, I want to thank you for raising the issue of 
immigration reform. Again, it is not the jurisdiction of this 
Committee, but, frankly, we have to, on a national level, have 
immigration reform. Whether it ultimately is in the form of 
AgJOBS or a comprehensive effort. I think we would all like to 
see, at least among production agriculture, immigration reform 
has to happen. I do not know whether we can make it happen this 
year or not.
    Mr. Reelhorn. Thank you for addressing it. It has to be on 
the top of our minds.
    Mr. Costa. My time has expired, so thank you very much, Mr. 
Chairman.
    The Chairman [presiding.] Thank you, Mr. Costa, for hosting 
this. I would like to introduce some guests we have here today, 
who are very important to agriculture.
    From the U.S. Department of Agriculture, the California 
FSA, Director, Mr. Val Dolcini. Why don't you stand up. The 
Rural Development Director for USDA, Dr. Glenda Humiston. And 
the State Conservationist from NRCS, Mr. Ed Burton.
    Thank you all so much, and thank you for what you do for 
USDA and for agriculture. Why don't you give them a hand.
    [Applause.]
    The Chairman. I recognize the gentleman from Texas, Mr. 
Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I appreciate being 
here. I don't get to come to California very often, but I enjoy 
it when I do. I will make a comment about--I don't necessarily 
want responses back--but with respect to California's higher 
and higher standards, and the Federal taxpayer not having any 
real input into how those are set, and why those get set. It is 
almost as if you are asking us to allow you guys to write 
checks the rest of us have to cash.
    We all want to drink clean water, we all want to breathe 
clean air. Mr. Costa, I understand your comments, but by the 
same token, we can't drive public policy based on just what one 
state does, and why they think something is better, 
particularly a state that is in as deep financial trouble as 
California finds itself right now.
    Mr. Bledsoe, I was looking at your chart. I am a CPA, by 
trade. I like those kind of charts. They speak to me. But what 
it says is folks participating in your business for 9 years 
have lost, cumulatively, $12.72 a hundredweight. How do you do 
that?
    Mr. Bledsoe. Equity.
    Mr. Conaway. I understand. There are only 4 years in which 
you have made money, and obviously, cumulatively, you are 
``behind the curve.''
    How do you turn that around? Other than equity, are there 
other things that aren't in your chart, off-farm income things 
that aren't in that chart, that allow you to survive?
    Mr. Bledsoe. Yes. During that period of time the land 
values have increased here, so borrowing base increases. 
Dairymen that I know, around the world, are the most optimistic 
breed of producer in the world, in my opinion. We always think 
it is going to be better the next day or the next year.
    But in California, that question has to be answered with 
equity, and the value, of our laws.
    Mr. Conaway. We are doing that at the Federal level, 
borrowing more money and it won't work at your level. I don't 
think it's going to work at our level either.
    Mr. Bledsoe. That's true about this year. I think we are 
done.
    Mr. Conaway. Okay. Well, our country and you are finding 
yourself kind a like the fellow that fell off the ten story 
building. As he passed the fifth floor, he said, ``So far, so 
good.'' ``So far, so good.'' It gets a snicker every time I say 
that, but it is grave, and you may be about to see what the 
impact of it is.
    The ACRE, SURE programs. First off, a show of hands. How 
many are participating in ACRE?
    Let the record reflect that nobody raised their hand.
    How many are participating in a SURE Program?
    Again, no one. Any thoughts as to why that is the case? 
Anybody on the panel.
    Mr. Rehermann.
    Mr. Rehermann. Yes, sir. My opinion is that the longevity 
requirements of both those programs makes some people 
reluctant. For instance, I rent some land from some elderly 
people who are reluctant to gamble on pricing decisions, and 
reluctant to gamble on programs that go into the future. They 
are far more interested in what is going on now.
    And so therefore, those programs have not been very 
successful in rice country in California.
    Mr. Conaway. Okay. So the direct payment tradeoff with ACRE 
was not attractive?
    Mr. Rehermann. Not attractive. No, not attractive.
    Mr. Conaway. Okay.
    Mr. Rehermann. Now we have enjoyed some pretty good pricing 
over the last couple a years. We may be in a downward cycle in 
that regard, and consequently, interest in those programs may 
improve. But they are not there today.
    Mr. Conaway. Okay. Mr. Reelhorn and Mr. Campos, you both 
asked for new money into your programs. It's probably unfair to 
ask you this, but at least get some sort of a head nod. Mr. 
Campos, you wanted $400 million in new EQIP money. Where would 
you see that coming from? Reduction in spending. Where else? Or 
raise taxes?
    Mr. Campos. Well, the way we see it, this program has been 
very successful in California.
    Mr. Conaway. Oh, I understand. But is there any----
    Mr. Campos. I would hope that you will look at other 
programs that are not as successful, and be able to transfer 
some of that money----
    Mr. Conaway. Okay. So I would go to the budget that says 
money for unsuccessful programs, we would go ahead and start 
reducing that one.
    [Laughter.]
    Mr. Conaway. Mr. Reelhorn, you mentioned the one-to-one 
match on your research dollars. If we reduce that match, would 
you call for just a reduction in total dollars spent, so that 
the Federal share would stay whatever that dollar amount is, 
and that you guys will just put up less money, so there is less 
money going into it, or would you want to keep the same amount, 
total, just have a bigger share for the Federal Government?
    Mr. Reelhorn. Difficult for me to answer.
    Mr. Conaway. Okay. Us too.
    Mr. Reelhorn. I am really good at growing plants.
    Mr. Conaway. Say again.
    Mr. Reelhorn. I am really good at growing plants.
    Mr. Conaway. All right.
    Mr. Reelhorn. But fortunately, I have representatives to 
the government that can make those difficult decisions for us.
    Mr. Conaway. Yes. You mentioned new money for pesticides or 
pest responses.
    Mr. Reelhorn. It's huge. Right. It's huge for us, right.
    Mr. Conaway. Given you could only have one of the two, 
which would you do?
    Mr. Reelhorn. One of the two. I am sorry. Clarify.
    Mr. Conaway. Yes. More money for research, or pest 
response. Which would you----
    Mr. Reelhorn. Oh, they go together.
    Mr. Conaway. I understand that. But you can't have both. 
Which one?
    Mr. Reelhorn. Yes.
    Mr. Conaway. There you go.
    [Laughter]
    Mr. Conaway. You have a great career in politics because 
that is the standard answer. When faced with a challenge, and 
when I have friends on both sides of the challenge, I generally 
stick with my friends.
    [Laughter.]
    Mr. Conaway. All right. What that points out, though, Mr. 
Reelhorn, is that difficult trades are going to have to be 
made. The Ranking Member mentioned it. The Chairman is, in all 
likelihood, probably privy to some information the rest of us 
aren't. We have tough times ahead in the 2012 Farm Bill. We are 
going to have to make these kind of choices. One of the 
criticisms of Congress, because we don't have a balanced budget 
amendment at the Federal level, and we should, we have taken 
the path of least resistance, and that is just borrow the money 
from future generations.
    We have to stop doing that. This city council, very nice 
digs here, but they have to make choices between good programs, 
and it is hard. We need the wisdom of Solomon to make that 
happen and we don't have it. But at our Federal level, we have 
to do a better job of doing that, and we are going to have to 
cross the Rubicon and pick on good programs.
    Mr. Reelhorn. And you understand, we are doing that in our 
businesses too.
    Mr. Conaway. Yes, you are.
    Mr. Reelhorn. Whether to keep the employees hired, or 
whether to buy the new equipment, or what have you, so----
    Mr. Conaway. But whatever it is, you make the tough choice, 
and we have to do that at the Federal level as well.
    Mr. Reelhorn. Absolutely. Absolutely. Yes.
    Mr. Conaway. I appreciate your comments. Mr. Chairman, I 
yield back.
    The Chairman. I thank the gentleman. The gentleman from 
Idaho, Mr. Minnick.
    Mr. Minnick. Thank you, Mr. Chairman.
    As someone who has spent 12 years, before being elected to 
Congress, in the retail nursery industry, and one of only two 
Members of Congress with a nursery industry background, I would 
like to commend the Chairman and my California colleagues for 
inviting Mr. Reelhorn to talk about a very, very important 
segment of the specialty crop agriculture. I was impressed, Mr. 
Reelhorn, with your statistics about you being \1/3\ of the 
entire specialty crop production in California, and I believe 
you quoted a $16 billion impact, nationally.
    Coming from Idaho as I do, where a nursery industry is also 
extremely important, I have heard complaints like yours about 
the BCAP Program, and the impact, unintended impact it is 
having, not just on bark for the nursery industry, but on raw 
material for the paper industry, for the particle board 
industry, and even for taking small trees away from the sawmill 
industry.
    My question to you is this, if you think it is important 
that this country put in place incentives that will move us 
away from our dependence upon fossil fuel energy, how would you 
design an incentive program that nudges the country toward 
green energy, without having the kinds of disadvantages that 
your industry, my industry, has suffered through the BCAP 
approach of basically subsidizing one segment of raw materials, 
provided it ends up in a specific end-use, and therefore 
punishing the other end-users?
    Mr. Reelhorn. Possibly research. Rice hulls are an example. 
We can use different media. But, you can help me on that. I 
don't know the answer to that.
    Mr. Minnick. I would like to, but I need some----
    Mr. Reelhorn. Yes.
    Mr. Minnick. We are about to consider reauthorizing this 
program, and I share the same reservations you do. That is why 
I thought you might have some input.
    Mr. Reelhorn. We are always looking at different media to 
use Obviously, we want to produce a product that is less 
expensive and more competitive. I don't know if this answers 
your question. But it is a difficult one.
    Mr. Minnick. So we take that raw material for you and force 
you to do something different, because it is no longer 
competitive for that end-use?
    Mr. Reelhorn. That is what has happened. Right.
    Mr. Minnick. Let me ask you another question. You mentioned 
AgJOBS and the need for immigration reform. Let's assume we 
can't get AgJOBS through--and I hope that's not the case--but I 
don't see immediate prospects for it. Are there some narrow 
changes we could make to the H1 and H2 Programs, that would 
allow your industry to have access to the labor that you need 
as a year-round producer, to keep the labor talent you need?
    Mr. Reelhorn. Understand, Mr. Minnick, that we, in 
California, don't take advantage of H-2A and H-2B, as much as 
other parts of the country. I understand they are critical.
    Mr. Minnick. It is not just the nursery industry.
    Mr. Reelhorn. Absolutely.
    Mr. Minnick. We have many, many agriculture industries that 
are not operating with, at least knowledgeably, legally, 
because we, in the government, have put you in that position.
    But what one or two things would we have to do that would 
allow you to operate legally?
    Mr. Reelhorn. Well, the AgJOBS legislation. I would hope 
that you support that.
    Mr. Minnick. Yes. I do.
    Mr. Reelhorn. What legislation will allow us to have a 
stable workforce is a tough one. As I said earlier, I am really 
good at growing plants, but I need your support to be able to 
do that.
    Mr. Minnick. Well, continuing to turn a blind eye to the 
problem is not the solution.
    Mr. Reelhorn. It's very difficult. Very difficult.
    Mr. Minnick. Thank you very much, Mr. Reelhorn.
    Let me ask one question to Mr. Bledsoe. Would the 
California dairy industry be better off, if you had no Federal 
income support programs at all, except this new insurance 
program to which you spoke, and simply left the activities of 
the Department of Agriculture to funding such things as crop 
promotion, research, export assistance, conservation 
incentives, but no other direct incentive programs? Would that 
be a solution that would be viable for your industry, which is 
very important to my state as well?
    Mr. Bledsoe. You are speaking about the price support?
    Mr. Minnick. Yes.
    Mr. Bledsoe. Yes. As I mentioned earlier, we are such a 
large manufacturing state, at least in the near term. We are 
not willing to give that up. We need to keep our plant 
capacity, keep our plants alive, and guarantee our producers 
that they have at least a bottom. Not to say that as we look 
ahead, that there may not be some interest in a transition off 
of those programs. But for the moment, we would be done. If 
those disappeared tomorrow, we would be done.
    Mr. Minnick. Thank you, Mr. Chairman. My time has expired.
    The Chairman. I thank the gentleman. I am now pleased to 
recognize the gentleman from California. Although this isn't 
his district, when we went roaming around last night, they 
pointed out that you are pretty close here. So we appreciate 
you being with us.
    I will give you a little bit extra time so you can make an 
opening statement and then ask some questions. We are glad to 
have you with us today.

  STATEMENT OF HON. DEVIN NUNES, A REPRESENTATIVE IN CONGRESS 
                        FROM CALIFORNIA

    Mr. Nunes. Absolutely, Mr. Chairman. Mr. Peterson and Mr. 
Lucas, I want to thank both of you for being out here, taking 
your time to come out here, to bring the Committee out here. I 
think it is important for the committees in the House to get 
out across the country, to see how the real people are living, 
and what is going on in different states, especially as it 
relates to agricultural issues, resource issues and other 
issues. I know this is not easy for those of you who come from 
a long way away.
    I want to thank Mr. Minnick and Mr. Conaway also for coming 
out.
    It is important for you folks, in Washington, to understand 
what is going on, especially out here in California, and I want 
to point out that one of the industries that you don't see here 
today, that perhaps, if we would have held this hearing 10 
years ago or 20 years ago, is the forest and timber industry.
    We used to have a huge forest and timber industry here, in 
California, here in the San Joaquin Valley, and all those empty 
chairs you see there are probably representatives, or 
monuments, to those forest and timber industry employees that 
are no longer here.
    And what you are seeing, Mr. Lucas kind a hinted at in his 
questioning about the state government and the rules and 
regulations that they are putting on agriculture.
    But essentially what you are seeing between the state 
regulations, coupled with, sometimes in combination, sometime 
separately, with the Federal regulations, is you are seeing 
total destruction of California's number one industry, and 
those of you who are from other states, in some cases you are 
benefiting from California. I know like Mr. Conaway, you have 
several of my constituents who now have operations, I don't 
know if they are in your district but I do know that they are 
in your state.
    So, this is part of the bigger problem with our country 
today, is this continued job destruction throughout the United 
States of America. But one thing that is for sure, is that 
there is nowhere worse than the San Joaquin Valley of 
California, and it is partially water-related, partially air 
and air regulations, and other regulations that have been put 
on by the state and the Feds.
    But the bottom line is is that another 10 or 20 years from 
now, there may not be anybody else left in this valley in 
agriculture, except for maybe a few nurseries and other smaller 
industries, because by and large, our water is quickly exiting 
this region.
    There is a story today, for those of you who saw the Fresno 
Bee. I get a kick of how they report on these things now. But 
essentially, we are going to waste away several hundred 
thousand acre feet this year, due to a state law that was used 
in Federal court to recreate a salmon run on the San Joaquin 
River, right here, just a few miles from here.
    And of course in the local paper, it is reported as if this 
is some great water delivery for farmers, when hundreds of 
thousands of acres are gone. When it relates to the pumps being 
off, they are still off. The Obama Administration made some 
meaningful water delivery increases, to get us from five 
percent--I don't know what it will be now, 30 or 40 percent. 
But it is important for the record to note that, number one, 
this could have been done last year and it was not. And number 
two, we have well over a 100 percent of our water supply, and 
we are going to be lucky to get 40 to 50 percent of our water 
supply, which is going to mean there is going to be hundreds of 
thousands of acres of farmland out of production, probably the 
same amount out of production as last year.
    I just want to take this time and opportunity to impress 
upon my colleagues from other states, thank you for coming out 
here to see this. It is very important and I hope that, 
hopefully, if you come back here in 10 years, that we won't 
have what happened to the timber industry in all these other 
industries, like dairy and farming and everything else.
    So with that, one area of jurisdiction that is in the 
Committee that I sit on is the free trade agreements, that I 
think all of you have, or some of you talked about the 
Panamanian, Colombian, South Korean Free Trade Agreements. Is 
everyone here in favor of those agreements? Is there anyone 
that is not in favor of those agreements?
    So let the record show that all six of you are in favor of 
those three trade agreements. Those trade agreements are still 
stalled in the House, and hopefully we can move those quickly, 
because I think trade is really one of the biggest factors for 
marketing our products overseas.
    Well, my time is up, Mr. Chairman. But thank you so much 
for being here, and I want to thank all the panelists, some of 
whom are my constituents. So thank you for being here.
    The Chairman. And I will claim my time. I would note that 
we have a bill in our Committee that is ready for action, that 
would also increase, significantly, trade, and at least in my 
district, and in my part of the world, it's a very important 
issue.
    I will ask those of you on the panel. This is a bill that 
would open up trade with Cuba, and also the travel 
restrictions.
    Do any of you support that agreement? Or any of you oppose 
it? How many support it?
    Mr. Rehermann. I suppose.
    The Chairman. Mr. Rehermann.
    Mr. Rehermann. Rice industry supports it.
    The Chairman. Yes.
    Mr. Rehermann. Yes, sir.
    Mr. Campos. I have been in Cuba on a trade mission, and I 
think for humanitarian reasons, alone, I think we should have 
an open trade.
    The Chairman. All right. Well, we are hoping that we can 
have a successful vote on that in the next couple weeks.
    On the BCAP program, it has come up a couple times, that is 
a program that I designed, or was an idea that I came up with. 
There was never any intention, on my part, to have wood use 
this program. And it was designed to bring new crops in that 
could be the basis for the second generation, third generation 
biofuels.
    During the process, and in the Senate, there was a lot of 
pressure to expand the definition of biomass, and apparently 
they have more lobbyists than we did--the wood industry.
    But one of the things that I did, if we are going to create 
these new crops, I didn't want to grow those crops unless we 
have a place to utilize them, to burn them, or try to figure 
out how to grow these new crops, transport them, so forth and 
so on.
    So we put a requirement in there that they had to have a 
plant, some kind of a facility to utilize this, and they had to 
be within, I don't know, a 40, 50 mile radius to make it 
economic.
    Well, the wood industry ginned up the lobby and they knew 
that they could fit in this definition, and I resisted, but at 
the end of the day, we put it into law. Had the department gone 
through the rulemaking in the regular order, this problem would 
have never happened.
    But what they did is they authorized this before the 
rulemaking because the language was specific enough, 
apparently, for them to justify it.
    Now there is a rule that has been put in place, or is being 
put in place, that will rein this back in. It would cut the 
subsidies, substantially, and we think fix the problem. So we 
are on your side there. This is not something that should have 
happened and is one of the things that we need to fix.
    But as long as I am over here, we are looking at the crop 
insurance system. We have a SRA that is going on right now, and 
some of you have heard me say that I think we need to develop a 
crop insurance system that covers all ag crops, or all of 
agriculture. I think we need a simpler system than we have, and 
I think we could come up with one.
    And one of the ways that I think we get there is by 
eliminating CAT coverage and NAP coverage. Is your industry 
okay with that?
    Mr. Reelhorn. The crop insurance is very difficult for us 
to use because we grow a diverse selection of crops, and so 
it's virtually unusable.
    The Chairman. But you probably have CAT coverage.
    Mr. Reelhorn. Only because it is subsidized so much.
    The Chairman. Pardon me. What?
    Mr. Reelhorn. Only because it is subsidized so much. But we 
will never use it. we will never be able to cash in.
    The Chairman. Well, that is because of the way it is 
designed.
    Mr. Reelhorn. Right.
     The Chairman. And my point is, I mean, we could pick up a 
lot of revenue by eliminating CAT coverage. It actually gives 
us extra money to fix the other parts of the system.
    Mr. Reelhorn. Sure.
    The Chairman. But if we could design a product that would 
fit your needs, and was actuarially sound, and you had to pay 
some part of it, you would be very much interested in that?
    Mr. Reelhorn. We would jump at it. We would jump at it.
    The Chairman. How about the rest of you? That would be 
similar, that where the----
    Mr. Diener. I made the comment, that I don't think your 
farm insurance program works, but----
    The Chairman. Pardon?
    Mr. Diener. I said I made the comment, that I don't think 
your farm insurance program works for California. It is a long, 
involved thing, but we would be interested in being involved in 
coming up with the right kind of program that would fit that, 
for everybody, because we have so many diverse crops here. NAP 
gets so confusing, I mean, you have to be a lawyer to be able 
to figure it all out.
    The Chairman. Yes. The CAT coverage was originally designed 
to give people that weren't utilizing crop insurance, to get 
them to start using the system. It started off at $50 a crop. 
And it worked. We got a lot more people into the insurance 
system, especially in the South, than we had before. But I 
think it has kind of served its usefulness, and that was the 
main purpose of it when we started it.
    And now people are buying it because they have do, because 
in order to get disaster coverage, or whatever you're required. 
I think rice has a similar kind of problem with the insurance 
system, but I think that they could design, we could design 
crop insurance that would work for rice. That is what we need 
to be working on, in my opinion, looking at a way to make these 
coverages effective. It is not going to be free, but it is 
going to be another risk management tool that people would have 
available, and I think we should have it.
    Mr. Rehermann.
    Mr. Rehermann. The rice industry agrees with you, Mr. 
Chairman. We can do something. We can come up with a tool. I 
agree with everything you've said about growers, and now I will 
speak for California, my area. We only enrolled in CAT coverage 
because it has been a prerequisite for receiving a disaster 
payment.
    I have been a bought-up customer of crop insurance for 
several years, and I believe in it. But most growers in 
California believe because we irrigate, that we have a minimal 
risk----
    The Chairman. Well, you have a different risk. You have a 
price risk and you have a cost-of-production risk. You don't 
have a crop loss risk. So it is a different kind of a 
situation. But, there is no reason that we can't design a 
program that fits those needs. One of the things we are looking 
at is so much of our safety net is focused on the price of 
commodities, and one of the things that I am interested in is 
looking at more of a safety net that looks at the cost or 
production and looks at trying to make the crop profitable and 
not necessarily just focus on the price.
    You know, I think it would be a more efficient way for us 
to move ahead with the safety net.
    Mr. Rehermann. And we look forward to working with you in 
that regard.
    Mr. Lucas. Will the gentleman yield for a moment on that 
point.
    The Chairman. I yield to Mr. Lucas.
    Mr. Lucas. Having now worked with you on several farm bills 
and through several farm bills, in general, the main point, 
like CSP, that keeps coming across to me, is the thoughtful way 
that we work through these processes.
    Whatever we do in crop insurance, let's spend a year and a 
half doing it, and let's not surprise anybody.
    The Chairman. Right. Well, and that is one of the reasons--
I will take a little more time here--that is why we are 
starting early. I think, and I have asked all, you guys know, I 
have asked all the commodity groups, all the people, not just 
in the agriculture area, but in conservation and nutrition, 
energy, fruits and vegetables, all the different areas of the 
farm bill, to take a look at what we are doing, analyze the 
money we are spending, and don't just get stuck in this idea 
that, well, we have to have the same thing we have always had.
    Take a look at if we could do this better? Is there a way 
that we could have a more efficient, effective system, maybe 
with less money, in some cases?
    And that is why I wanted to start a year early, so that we 
could have that discussion, and we aren't going to surprise 
anybody. If we waited till next spring, started then, and would 
try to get a bill done in the next few months, nobody would be 
ready.
    And so that what I am saying to all of you, I want you to 
get engaged to work with us, to see if there is a way that we 
can make changes and reforms in this farm program that makes it 
work for agriculture. That is what we all want. We want risk 
management, the safety net for producers, the people that are 
out there feeding this country and feeding the world, and we 
look forward to working with you.
    Thank you very much to this panel. You have been excellent 
in your testimony, in answering the questions, and we 
appreciate you taking your time and making yourselves available 
today. And so you are excused and we will immediately call the 
next panel of witnesses to come forward.
    We have Mr. David Roberts, orange, lemon and grapefruit 
producer from Visalia. Mr. Jamie Strachan, vegetable producer 
and shipper from Salinas. John Teixeira, organic tomato, 
eggplant, bell pepper, melon and corn producer, from Firebaugh. 
Paul Van Konynenburg, peach, apple, cherry, apricot, almond and 
walnut producer from Modesto. And Justin Parnagian, peach, 
nectarine, plum, grape, apricot and citrus producer, packer and 
shipper, from Fresno.
    So welcome to the Committee. We appreciate all of you 
making the time available to the Committee today, and we will 
get started. I think we have just about everybody up here. So 
Mr. Roberts, it looks like you are ready to go.
    Mr. Roberts. I am ready.
    The Chairman. Your testimony, in full, will be made a part 
of the record, so we would encourage you to summarize and try 
to stay as best you can within the 5 minute rule, and we look 
forward to your testimony.

   STATEMENT OF DAVID ROBERTS, ORANGE, LEMON, AND GRAPEFRUIT 
                     PRODUCER, VISALIA, CA

    Mr. Roberts. My name is David Roberts. I am a family citrus 
producer, here, in the San Joaquin Valley, and I am proud to 
welcome you to the number one----
    The Chairman. If you are having to leave, do that, but with 
respect to the witnesses, let's have everybody please be quiet.
    Mr. Roberts. I am proud to welcome you to the number one 
citrus-producing, fresh citrus-producing state in the nation. 
My brother and I have been here since our parents started 
farming, and hope to witness my son and daughter take over the 
ranch operations. I would also like to welcome my son, Percy 
David, probably one of the younger members of the audience here 
today. He can witness some of the contortions the government 
goes through to come to solutions.
    In addition to citrus, we have smaller interests in 
avocados, plums, pistachios, Asian pears, and we run a few 
trucks to harvest our commodities. Our main interest, however, 
is citrus. I have been on various boards, ranging from water 
districts to our local farm bureau, and a cooperative citrus 
packing house. I am completing my term of service as a 
California Citrus Mutual Director, and for the past 2 years, 
have been fortunate to serve as board chair. I am not sure how 
that happened, however, as I was present to defend myself.
    It has clearly opened the doors for me to offer policy 
makers, from a wide variety of areas, my thoughts on edicts and 
decisions that affect my family.
    In the next couple of paragraphs, I wish to highlight 
comments in my written testimony. First, invasive pests and 
diseases are not just an agricultural issue. Today, industry is 
waging a battle against the Asian citrus psyllid and the deadly 
disease it carries, Huanglongbing.
    Fellow growers in Florida are literally dying from that 
incurable disease, and have pulled over 200,000 acres from 
production. That is about \2/3\ of the acres that the 
California citrus industry has.
    Along our coast, we have bark beetles killing pines, we 
have pitch canker in landscape trees, we have foreign fish 
destroying our waterways, and we have a multiple of invasive 
species throughout the country.
    The problem is not the exclusion system. We were at the 
forefront of that battle a few years ago, and I believe USDA, 
APHIS, along with Customs and Border Protection, are doing all 
they can to protect our environment. The system is overloaded, 
and we believe it started back when Congress passed the Plant 
Protection Act of 1999.
    It was then that USDA, and other agencies, acquired a 
flexibility in determining risk. I can tell you, that as a 
farmer, what works on paper, through analysis, and in modeling, 
is not necessarily reality.
    It was believed that you can import disease-free and pest-
free product from pest-infested areas. After a decade, we don't 
believe it is working, and we urge the Committee to consider an 
evaluation of the Plant Protection Act within the context of 
the farm bill.
    Our second immediate concern is an area which we have just 
learned about, and now fully understand--the use and abuse of 
biological opinions and the alleged science that serves as a 
foundation.
    Candidly, the issue is not the science. The issue is what 
question is asked, and then how Fish and Wildlife, or the 
National Marine Fisheries Service frames the science to answer 
the question and achieve a preconceived opinion.
    Their process does not allow stakeholders such as me to 
participate. Their process does not call for notice and 
comment. Their process is conducted in a dark backroom, and 
their process is adversely affecting production throughout the 
West.
    By edict, within the confines of the ESA, they are removing 
crop protection tools and limiting the availability of water. 
They are forcing viable food and fiber land out of production, 
causing unemployment, reduced economic activity, not to mention 
a reduction in healthy food products.
    Your bill needs to mandate that USDA and EPA have a role in 
determining risk and mitigation steps. It is hard for me to say 
that EPA is a partner, but as I visit with them, their 
frustration over the process is only exceeded by mine. These 
agencies must have a role in the ESA biological opinion 
process.
    Last, I wish to implore that you remove the word 
sustainability from your lexicon. That is an attack vehicle 
against family farmers. Quite frankly, I am sick and tired of 
hearing that I need to be more sustainable. I don't need more 
regulation to be sustainable. I don't need ``cap-and-trade.'' I 
know I am a net benefit to the environment because my 75 year 
old trees produce nutritious food and absorb ozone and VOCs 
from the air.
    I don't need some activist to tell me to be more efficient 
with water, since I have been on low-volume irrigation systems 
since before they were born. I don't need government to tell me 
about sustainability, because all on my own, and with the help 
of the university, our ranches have been on IPM programs for 
years.
    Believe me--I know a good bug from a bad bug. This word has 
been adulterated to the point that only this Committee can 
adequately define the word, sustainability.
    Which begs the question: does society and Congress really 
want the family farmer to survive? I always thought my fellow 
panelists, and I, were the ones that provided the needed food 
security for the nation.
    But in the past 2 years, I wonder. According to the 
``enviros,'' all I do is contaminate, waste and poison. Do you 
want costly programs to subsidize the family farmer, or do you 
want me to provide and be part of the most efficient farming 
and food distribution system in the world?
    Thank you. Thank you.
    [The prepared statement of Mr. Roberts follows:]

  Prepared Statement of David Roberts, Orange, Lemon, and Grapefruit 
                         Producer, Visalia, CA
    Good morning, Mr. Chairman and Members of the House Agriculture 
Committee. On behalf of my fellow citrus producers I welcome the 
opportunity to offer our thoughts relative to farm bill deliberations 
as your Committee begins its exercise to develop a policy that benefits 
producers and our nation.
    Again, my name is Dave Roberts and along with my brother we farm 
several hundred acres of citrus in the San Joaquin Valley. We are 
second generation farmers and I hope to turn over a successful 
operation to my son and daughter. I'm not here to talk about farm bill 
titles or the previous farm bill. Frankly I don't have that expertise. 
But I do know how to farm and I do know what government policies are 
affecting me and my colleagues in the citrus industry.
    Our industry is dominated by family farmers. Over 80% of our $3 
billion economic activity is generated by families such as mine. 
Collectively we directly employ 12,000 people and indirectly another 
10,000 look to our industry for their employment. We are the nation's 
number fresh citrus producing state. Depending upon the variety we 
export approximately 30% of our tonnage, primarily to Asian markets.
    My purpose in presenting testimony is to offer my thoughts as to 
how we on the farm are being impacted by government policies and to 
bring them to your attention in the hopes that these subject areas are 
worthy of your consideration as we move forward. Our industry and its 
representatives utilize the TASC program, crop insurance, the Specialty 
Crop Block Grants and some day will hopefully benefit from the 
nutrition language as our nation moves to a better diet.
Invasive Pests & Diseases
    But let's talk about our family farm and my concerns and 
priorities. Invasive pests and diseases are a major priority. I think 
our government needs to revisit the Plant Protection Act and the 
latitude USDA now has relative to import issues and phytosanitary 
subjects. I believe in APHIS, its role and its efforts to protect 
production agriculture. However I simply believe that our entire system 
is overwhelmed with product originating from pest or disease infested 
areas and no matter how hard we work on our border inspection program 
or how accurate we are in analyzing on paper risks the bottom line is 
the industry is inundated with pest and disease.
    Pest Risk Assessments and border inspections allegedly allow the 
importation of product, relatively risk free, into our production 
areas. Yet the reality is something different. More imported product 
and more consumer travel has created more eradication efforts either by 
government or the farmer. The system is not perfect and never will be 
thus are we sentenced to constant and expensive eradication programs 
that diminishes the ability of our nation to provide food and fiber? 
The situation in Florida with Huanglongbing is destroying the viability 
of that once vibrant industry. Customs and Board Protection is not 
necessarily the problem. We have worked with that office and believe 
they are doing as good a job as possible.
    Thus I believe we need to take a step back and determine whether we 
are not asking for the impossible. Bugs, fruit flies and diseases are 
constantly threatening the viability of my operation and fellow 
producers. I believe we have simply overwhelmed our system and throwing 
more money to inspection and eradication will not solve the problem. So 
I support any and all efforts to keep the APHIS and CBP fully funded 
but I ask Congress to reevaluate the impacts and value of the Plant 
Protection Act. Even though this is a farm bill discussion there are 
many examples of impact on urban or non-farm environments as well.
Use & Abuse of Biological Opinions
    Second, I ask this Committee to insert language mandating the 
participation of USDA and landowners in the development of Biological 
Opinions originating from Fish & Wildlife and the National Marine 
Fisheries Service. Somebody needs to balance the table on these non 
scientific opinions. I know that sounds harsh but the manner in which 
they are being used and abused threatens the viability of farming in 
California, the Northwest and I would assume the balance of this 
nation.
    Without adequate input, without transparency and without balanced 
direction; but with a bias, these services are robbing farmers like me 
of our crop protection tools, our water, our land and ultimately our 
ability to farm in an economically viable manner. I have given water 
up. I rely less on pesticides today than I ever have and those that I 
use are much softer in nature. Yet the Services mentioned above fail to 
take into consideration any input I may offer to achieve an objective. 
They have failed to acknowledge the work and input from our state 
government to protect listed species or their habitat. They issue top 
down edicts that are woefully short on science and long on conjecture. 
This Committee, the farm bill and Congress must provide balance to a 
process that is too narrowly directed.
    In 1988 when the ESA was last amended Congress wrote in report 
language: Agriculture is a major part of the U.S. Economy and provides 
nutritional sustenance for our population and exports abroad . . . The 
Conferees, therefore, anticipate that . . . the Federal agencies shall 
implement the Endanger Species Act in a way that protects endangered 
and threatened species while minimizing, where possible, impacts on 
production of agricultural foods and fiber commodities.
    Somewhere that has been lost.
    I laugh when I hear Congress is accused of operating in a smoke 
filled room behind closed doors when in fact that's just what the 
Services do. I just shake my head when I hear activists, members of 
government and the media shout that the family farmer must be protected 
all the while passing or issuing edicts that I can't begin to comply 
with. I clearly understand the need for the ESA but when it comes to 
reducing the very foundation for this nation's food security I have to 
question the fairness.
    Committee Members I submit that science is not the issue, it is the 
manner in which science is directed and whether it is the National 
Academy of Sciences, or even USDA and EPA the questions asked of them 
dictate the scientific answer. We have lost the capability of 
evaluating the whole and deciphering unintended consequences. Add this 
to the bias that exists with two Service Agencies and it is a recipe 
for intrusion, lost farm land and reduced production. Is that direction 
good for this country? It is if you believe reliance on other oil 
producing nations for our energy is good for the country.
Sustainability
    More regulation is not what's needed, more help from government is 
not what's needed and more ``good ideas'' are not needed. I farm in an 
environmentally sensitive and sustainable manner yet that word, 
sustainability, has become an attack vehicle against the family farmer. 
Right now my farming costs are exacerbated to the tune of $400 per acre 
just for regulatory fees and permits. We farm almost 1,000 acres of 
citrus. My industry consists of 300,000 acres. Somebody must connect 
the dots. Input costs do rise but the cost of government inclusion has 
exploded. By the way that amount per acre was quantified by Cal Poly 
San Luis Obispo with a study initiated in 2004 and updated 2 years ago.
    I believe a fair definition of sustainability is necessary within 
the context of the farm bill. It makes no sense for me to use more 
water than necessary; spray when it is not needed, contaminate the soil 
in which I seek to make a living or foul the air to the detriment of my 
family, my neighbors and those around us. I rely upon the Universities, 
the scientific community and I continue to strive towards better 
agricultural practices as they develop. But don't tell me I am not 
farming in a sustainable manner and don't allow others to saddle me 
with their vision of farming when I'm the one working the land with a 
proven track record.
    So Committee Members these are my priorities for a viable and 
profitable future. I do worry about our nation's food security. We are 
the envy of the world with our production and distribution system. But 
nobody is connecting the dots and as I try to incorporate or adapt I am 
forced to become a member of the agribusiness community. Take away my 
water, my crop protection tools; or inundate me with pest and disease 
and then attack me for not farming in a sustainable manner and I will 
leave the ranks of the family farmer. I may survive as an agribusiness 
person but more than likely I will simply sell my operation to those 
who have deeper pockets.
    So this farm bill must tell me whether I am wanted as a valuable 
member of our food security team or I am just a wanted criminal being 
viewed as a negative influence on our environment and nation as a 
provider of food and fiber.

    The Chairman. Thanks very much, Mr. Roberts. We appreciate 
it.
    Mr. Strachan. Strachan.
    The Chairman. Strachan. Okay. I am sorry. Welcome to the 
Committee.

 STATEMENT OF JAMIE STRACHAN, VEGETABLE PRODUCER AND SHIPPER, 
                          SALINAS, CA

    Mr. Strachan. Chairman Peterson, Ranking Member Lucas, and 
Members of the Committee, thank you for inviting me to testify 
here today before the House Agriculture Committee. My name is 
Jamie Strachan. I am President and CEO of Growers Express, a 
specialty vegetable company located in Salinas, California, 
with partner-owned and operated farming operations throughout 
the Salinas Valley, Santa Maria, Oxnard, Huron, Imperial, Yuma, 
and northern Mexico.
    We farm 40 commodities and ship more than 15 million 
cartons of produce annually. Our crops include lettuces, 
celery, spinach, brussel sprouts, artichokes, broccoli, 
cauliflower, and others. My company was mistakenly raided by 
the FDA and FBI following the spinach outbreak in 2006, and our 
farming companies lost millions of dollars as a result of this 
tragic industry event.
    Following that, I was a founding member of the California 
Leafy Greens Advisory Board, the food safety board, and have 
held roles as Treasurer, Vice Chairman, and now Chairman of the 
Board. I run a health insurance trust, spending more than $10 
million, annually, on health benefits for my employees, a 
worker's comp insurance company covering more than 3,500 
employee, and sit on the board of a packaging cooperative.
    We will be one of the first companies in specialty crops to 
meet the Produce Traceability Initiative, milestones four and 
five, for putting labels on cases of produce.
    As you know, specialty crops represent a mere three percent 
of farmland, nationally, while contributing close to half the 
U.S. crop production. The farmland that we have for specialty 
crops is irreplaceable, and despite what others might think, 
there is no other place in the country that can grow specialty 
crops for 9 out of 12 months of the year.
    And this cropland, and these crops, will be critical in 
delivering on the child nutrition objectives and combating the 
national obesity epidemic.
    We use H-2A programs in Yuma and Imperial Valley, along 
with operating two of the largest farming operations South of 
the border, to help us balance our labor issues and cost 
issues.
    We operate 30 crews in the U.S., along with multiple 
distribution centers and packing operations which all require 
immigrant workers.
    The new Arizona law, which requires police to look for 
illegals, could have large negative ramifications on our 
operations in agriculture in Arizona. AgJOBS is the answer, or 
if we need to call it something else, those types of approaches 
are the answer to keep production of specialty crops in the 
U.S.
    This is the single most important requirement for us to 
stay competitive in a global marketplace, and to continue to 
contribute GDP and exports to our economy.
    Without viable labor, we will cease to exist overnight.
    One current ``hot'' issue for my company is in commerce and 
border pathogen testing, that is being performed by FDA and 
USDA. One of my customers recently moved their purchases of our 
produce to Guatemala, because the imports from Guatemala are 
not being subjected to the same border testing and enforcement 
standards that FDA currently requires on my operations coming 
out of northern Mexico.
    The California Leafy Greens Marketing Agreement is 
protecting public health by establishing a culture of food 
safety on the farm. I fully support the efforts being made in 
Washington to implement a similar food safety system on a 
national level that maintains the high bars we have established 
in other states.
    As part of my role in California LGMA, I have been actively 
engaged in the food safety efforts relating to USDA's national 
leafy greens marketing agreement as well as the food safety 
legislation, and FDA's current rulemaking efforts.
    The California and Arizona Leafy Green Advisory Boards 
support the development of these programs.
    Food safety is a multimillion expense for my organization, 
and I feel a lot like it is R&D, due to the lack of valid 
science to support everybody's good ideas. Food safety 
incentives in the form of tax incentives would be a wonderful 
way to help handlers do the right thing and invest the 
necessary dollars in their operations, and assist in 
determining real answers to these food safety concerns.
    The FDA lacks the traceback tools to accurately and 
identify real causes of foodborne illness outbreaks, or isolate 
them through targeted recalls based on real-time supply chain 
information. Until this is addressed in a holistic way, 
innocent parties, including consumers and industry, will 
continue to suffer.
    I recommend that more research, including the type being 
authorized by the farm bill, be devoted to food safety and 
traceability. I encourage Congress, through the farm bill, to 
fund additional food safety-related research, so we, as 
growers, can do an even better job of managing risks on the 
farms.
    Organizations like the Center for Produce Safety, and 
California Leafy Greens Research Board, exist to implement this 
type of research, and additional funding will make great 
strides possible in a fairly short period of time.
    Further, when an outbreak occurs, a whole industry is 
affected, whether companies contributed to the event of not. I 
would suggest that some sort of crop insurance be provided in 
the event of an outbreak, whereby companies that did not 
contribute but were hit with decline in sales, like my company 
in 2006, would receive offsets.
    While FDA is likely to receive broad new regulatory 
authority in the area of on-farm food safety, we believe they 
can best carry out that mandate by working closely with USDA, 
the agency that knows agriculture, has experience on the 
inspection of farms and practices, and has existing regulatory 
oversight on the farm.
    The 2008 Farm Bill provided a significant allocation of 
funding dedicated to the specialty crop industry, and I want to 
thank this Committee, and the agency, for that allocation. Four 
programs that I would like to recognize are the Fresh Fruit and 
Vegetable Snack Program, the Department of Defense Fresh 
Program, the Specialty Crop Block Grant Program, and the 
Specialty Crop Research Initiative.
    I support continued expansion of those programs to support 
healthy eating habits, and combat childhood obesity, increased 
healthcare costs and poor food quality in our schools and 
communities.
    Healthcare reform, in the way this bill is interpreted, 
could impact our current costs of healthcare by a factor of 
four. Currently, we spend about $10 million, so that means 
upwards of $40 million on healthcare is what we may be faced 
with, depending on different interpretations of that bill.
    So, last, in closing, the specialty crop policies and 
programs contained in the 2008 Farm Bill generated broad 
industry support and have helped to enhance the competitiveness 
of our industry, as well as address critical specialty crop 
needs.
    We look forward to working with this Committee when 
Congress begins writing the next farm bill. Thank you for 
allowing me to testify before the Committee today.
    [The prepared statement of Mr. Strachan follows:]

 Prepared Statement of Jamie Strachan, Vegetable Producer and Shipper, 
                              Salinas, CA
    Chairman Peterson, Ranking Member Lucas, and Members of the 
Committee, thank you for inviting me to testify before the House 
Agriculture Committee today. My name is Jamie Strachan, and I am 
President and CEO of Growers Express, LLC. Growers Express was founded 
in 1987 by eight produce growers who all believed in a few simple 
values: Producing our own premium quality products, consistent supply 
and superior service. Our owners have taken three generations of 
knowledge and respect for the land and have developed it into one of 
the nation's largest suppliers of fresh vegetables. Unlike many 
shippers who have grown in size but have actually reduced their own 
operations, the vast majority of our 15 million cartons of produce 
grown and shipped annually are still grown by our own owners. We still 
maintain the values on which our company is based. Headquartered in 
Salinas Valley, California, our total year-round ground base exceeds 
50,000 acres. To offer our 40+ items on a year-round basis, we also 
grow in Arizona, Mexico, Oregon, Michigan and Ohio. Our largest volume 
items-- iceberg lettuce, broccoli, cauliflower, green onions, celery 
and leaf lettuces--are complimented with a full line of bunched items. 
We also offer several value-added packs to round out our line.
    In addition to my role at Growers Express, I also serve as the 
Chairman of the California Leafy Greens Products Handler Marketing 
Agreement (LGMA), which is the most rigorous food safety program for 
produce in the U.S. The CA LGMA is a mechanism for verifying, through 
mandatory government audits, that growers and handlers implement 
accepted Good Agricultural Practices in the growing and harvesting of 
lettuce, spinach and other leafy green products. In other words, the CA 
LGMA is protecting public health by establishing a culture of food 
safety on the farm, and I fully support the efforts being made in 
Washington to implement a similar food safety system on a national 
level.
    The 2008 Farm Bill provided a significant allocation of funding 
dedicated to the specialty crop industry, and I want to thank this 
Committee for that allocation. The 2008 Farm bill provided my company 
and our industry with a set of tools necessary to enhance our 
competitiveness and expand our markets. While we benefit from most of 
the programs contained in the Farm bill, there are four that I would 
like to highlight today:

    1. The Fresh Fruit & Vegetable Snack Program.

    2.The Department of Defense (DOD) Fresh Program.

    3. The Specialty Crop Block Grant Program.

    4. The Specialty Crop Research Initiative.

    I support the continued expansion of programs, such as the Snack 
Program and the DOD Fresh Program, that increase the consumption of 
fresh fruits and vegetables. These programs will develop life-long 
healthy eating habits for millions of children by providing fresh 
fruits and vegetables in our nation's schools. In addition, these 
programs help address the problems our nation faces with increased 
rates of childhood obesity, increased healthcare costs, and poor food 
quality in schools and many communities. The mandatory funding provided 
for the Block Grant Program helps focus on local efforts to enhance 
producers' ability to compete in the marketplace and provide consumers 
with safe, abundant food. The Specialty Crop Research Initiative helps 
to develop and provide the industry with science based tools to address 
the critical needs of the industry.
    Food safety being a number one priority area for my company, 
coupled with the food safety reforms being discussed in Washington, I 
recommend that more research funds be devoted to food safety and 
traceability. While the leafy greens industry and others are doing all 
they can to raise the bar for food safety, there is a real need for 
more research in this area. I would encourage Congress, through the 
farm bill, to fund additional food safety-related research so that we, 
as growers, can do an even better job of managing risks and upgrading 
our practices in order to grow, harvest and ship the safest food 
possible. Organizations like the Center for Produce Safety and the 
California Leafy Greens Research Board exist to implement this type of 
research, and additional funding will make great strides possible in a 
fairly short period of time.
    Last, I applaud the USDA for its cooperation with the Food and Drug 
Administration in recent months on food safety initiatives, and we 
encourage a continuation of this collaboration. While FDA is likely to 
receive broad new regulatory authority in the area of on-farm food 
safety, we believe that they can best carry out that mandate by working 
closely with USDA, the agency that knows agriculture, has experience on 
the inspection of farms and practices, and has an existing regulatory 
oversight role on the farm. In the leafy greens industry, we welcome a 
greater level of Federal scrutiny and oversight of our practices, but 
we believe this can best be achieved in a collaborative manner working 
with both the USDA and the FDA.
Summary
    The Specialty Crop policies and programs contained in the 2008 Farm 
Bill generated broad industry support and have helped enhance the 
competitiveness of our industry as well as address critical specialty 
crop needs. We look forward to working with this Committee when 
Congress begins writing the next farm bill. Thank you for allowing me 
to testify before this Committee today.

    The Chairman. Thank you very much, Mr. Strachan. We 
appreciate it.
    Mr. Teixeira, welcome to the Committee.

         STATEMENT OF JOHN M. TEIXEIRA, ORGANIC TOMATO,
 EGGPLANT, BELL PEPPER, MELON, AND CORN PRODUCER, FIREBAUGH, CA

    Mr. Teixeira. I am from Firebaugh, California, 1 hour 
northwest of Fresno, an agricultural community of 6,000, to the 
San Joaquin River. I produce on Lone Willow Ranch certified 
organic small greens, wheat, alfalfa, hay, tree fruit, herbs, 
greenhouse transplants, heirloom seeds, grow crops, pastured 
chickens, pigs and dairy goats.
    I am also a partner in Teixeira and Sons, with my two 
brothers and father, in a conventional family farm of 5,000 
acres producing, processing tomatoes, fresh market tomatoes, 
cantaloupes, alfalfa, wheat, hay, cotton, livestock, greenhouse 
transplant production, composting 6,000 tons a year. I have 
been farming 40 years and 20 years organic.
    I serve as California Certified Organic Farmers' Fresno-
Madera Chapter Certification Standards Chair, and board member 
of the Organic Farming Research Foundation, and board member of 
SlowFood Madera Chapter, and board member of the Sustainable 
Cotton Project.
    Thank you, Chairman Peterson, and Committee Members, for 
the invitation to speak out on developing the next farm bill. 
We, here in California, appreciate you coming to the Central 
Valley to hear our thoughts on Federal policies for food and 
agriculture.
    The 2008 Farm Bill established a number of new provisions 
concerning organic agriculture. These provisions covered 
research, conservation, crop insurance, and support for the 
USDA Organic Standard and Certification Systems.
    USDA is still in the early phase of implementing some of 
these provisions. Overall the initial results show promise.
    We must nurture these programs, as seedlings, for good 
results in the future. It is like growing a crop, starting out 
with a good seed source, preparing the soil, making a good seed 
bed, and to get a good germination with the right temperature 
and moisture. We want the seed to pop out of the Earth and 
continue to grow strong.
    The farm bill policies for organic agriculture will be the 
same.
    They get off to a good start but need careful attention and 
adjustment, so that we have a good bountiful harvest in years 
to come.
    Congress has recognized that organic farming has multiple 
public benefits, in addition to sustaining high levels of food 
and fiber production.
    These benefits range from conservation of pollinator 
species to the provision of good jobs in production and 
processing. In California, the organic market is a strong 
economic force, and one of the brighter spots in our 
agriculture economy.
    The next farm bill should begin to really leverage these 
benefits and amplify them by getting more coordination between 
agencies and programs. The benefits of organic research and 
organic conservation systems can have positive ``spillovers'' 
for improving the environmental performance of all farming 
systems.
    But the agencies need to approach it that way and have a 
coordinated strategy for this effect. If it receives a fair 
share of research and development resources organic will lead 
the way towards a much lighter impact on the nation's soils, 
waters, and wildlife while providing the productivity that we 
need.
    Research, Education and Extension: Increased funding for 
organic research and education in the 2008 Farm Bill was 
historic. Many projects from the first round of funding look 
promising. The dedicated organic research funds are also 
helping to build baseline capacity in organic systems research.
    But there is still only a relative trickle of science and 
technology for organic systems coming from the agencies and 
universities.
    Research and education for organic systems is still only 
about two percent of USDA's research budget. That is only about 
half of the overall market share that organic products have at 
retail level.
    If you look at the scale of problems that organic systems 
could affect an outsize contribution, such as pollinator 
declines and greenhouse gas emissions, and compare that to the 
relative resources available, you see that the potential 
contribution is being hobbled.
    The overall effort on science and technology for 
sustainable organic systems has to be scaled up. That is still 
a primary limiting factor in the long-term success of existing 
organic farms and for effective transition.
    I am particular concerned about seed breeding. We have a 
critical need for varieties that are adapted to organic systems 
and we need adequate seed supplies for increased organic 
production.
    We need organic plant and animal breeding for increased 
resilience in the face of climate change and reduced water 
supplies. Policy passed by Congress must continue to 
aggressively rebuild our national capacity for developing and 
releasing high-quality public cultivars.
    Organic can use all the advanced tools, except for 
transgenic modification, but the science is moving beyond that 
anyway, and it is not needed.
    Marker-assisted selection, environmental genetic analysis, 
and other tools need to be applied alongside classical breeding 
tools, to produce varieties in the public domain that respond 
best to the ecological fertility and pest management strategies 
that are built into organic systems.
    Economic research and regional marketing infrastructure 
development are crucial to the success of our growing organic 
production sector. Rewards for organic's environmental services 
are important, but we still need to have a basically successful 
economic model in the marketplace.
    Here, again, 2008 made a start, and the results of those 
investments should inform the next stage of scaling up.
    Advanced organic soil management systems can improve 
performance in soil health and biodiversity, water retention 
and drought tolerance, energy conservation, pollinator health, 
and more.
    Extension programs and applied technology development are 
needed to put all these parts together in regionally and site 
specific packages.
    The conservation effects of organic agriculture were 
singled out by Congress in 2008 as an important purpose of 
Organic Research and Extension Initiative. This area of study 
is going to be incredibly important and will deserve continued 
support by Congress.
    Conservation Programs: As directed in the 2008 Farm Bill, 
the USDA Natural Resources Conservation Service has made great 
strides in trying to integrate organic and transitional 
production systems into the EQIP and Conservation Stewardship 
Programs. In some places, this seems to have worked very well.
    In other places, it does not appear to be working so well. 
There is a great need for the NRCS field personnel to be 
trained in the principles and requirements of organic 
production. In some places, there is still a need for NRCS 
personnel to just be open to it at all.
    As the 2010 sign-ups and contracts for the NRCS 
conservation programs are completed and analyzed, we will have 
a better picture of how to improve Congress's goal of 
integrating insurance and transitional growers into the 
programs, and get the resulting conservation benefits that 
organic systems provide.
    I have enjoyed working with our local office, signing up 
for the EQIP Program and the organic high-tunnel project. I 
have passed the word to other growers on the benefits of 
signing up to learn more about conservation practices. NRCS 
needs to be better at outreach and get the word out. They also 
need to be able to be better prepared when organic growers and 
small farmers come into the office.
    Crop insurance, credit and disaster payments: Again, we 
still only have a very incomplete picture of how well the 2008 
organic provisions for crop insurance are working.
    There does seem to be some focused activity, but we don't 
have results to see yet. Likewise, the related data collection 
and analysis, that could help remedy the problems for organic 
growers with farm credit and disaster payments, is not yet 
sufficient. We hope that the efforts started under the 2008 
Farm Bill will yield enough information to shape further 
constructive policy changes in the next round of legislation.
    In conclusion, Mr. Chairman, there is still a ways to go to 
get organic agriculture on an equal footing with the USDA's 
agencies and programs; but we are making great progress. The 
outcomes are good, not only for organic farmers and their 
customers, but for all of agriculture.
    I thank you for listening and ask that I may be able to 
submit revised written remarks for the record.
    [The prepared statement of Mr. Teixeira follows:]

Prepared Statement of John M. Teixeira, Organic Tomato, Eggplant, Bell 
            Pepper, Melon, and Corn Producer, Firebaugh, CA
    My name is John Teixeira. I live at [Redacted] in Firebaugh, 
California. My town is 1 hour northwest of Fresno, an agricultural 
community of 6,000 population, next to the San Joaquin River. I produce 
certified organic small grains, wheat and alfalfa hay, tree fruit, 
herbs, greenhouse transplants, heirloom seeds, row crops, chickens, 
pigs, and dairy goats. I am also a partner with two brothers and father 
in family farm of 5,000 acres producing processing tomatoes, fresh 
market tomatoes, cantaloupes, alfalfa, wheat hay, cotton, livestock, 
greenhouse transplant production and composting 6,000 tons a year. I've 
been farming for 40 years, 20 years organic. I serve as California 
Certified Organic Farmers' Fresno-Madera Chapter Certification 
Standards Chairman, and Board member of the Organic Farming Research 
Foundation. I am also a board member of SlowFood Madera Chapter, and 
board member of the Sustainable Cotton Project.
    Thank you Chairman Peterson and Committee Members for the 
invitation to speak on developing the next farm bill. We here in 
California appreciate you coming to the Central Valley to hear our 
thoughts on Federal policies for food and agriculture.
Building on the 2008 Farm Bill
    The 2008 Farm Bill established a number of new provisions 
concerning organic agriculture. These provisions covered research, 
conservation, crop insurance, and support for the USDA organic 
standards and certification system among other things.
    USDA is still in the early phases of implementing some of these 
provisions. I think we can all draw some general conclusions but the 
Committee will need to sort out some details over the next year in 
order to fine-tune the details. Overall the initial results show 
promise.
    We must nurture these seedlings for good results in the future. 
It's like growing a crop: starting out with a good seed source and 
preparing the soil making a good seed bed to get a good germination 
with the right temperature and moisture. We want the seed to pop out of 
the earth and continue to grow strong. The farm bill policies for 
organic agriculture will be the same: they are getting off to a good 
start but need careful attention and adjustment so that we have a good 
harvest in years to come.
    Congress has recognized that organic farming has multiple public 
benefits in addition to sustaining high levels of food and fiber 
production. These benefits range from conservation of pollinator 
species to the provision of good jobs in production and processing. In 
California the organic market is a strong economic force and one of the 
brighter spots in our agricultural economy. The next farm bill should 
begin to really leverage these benefits and amplify them by getting 
more coordination between agencies and programs. The benefits of 
organic research and organic conservation systems can have positive 
``spillovers'' for improving the environmental performance of all 
farming systems, but the agencies need to approach it that way and have 
a coordinated strategy for this effect. If it receives a fair share of 
research and development resources, organic will lead the way towards a 
much lighter impact on the nation's soil, waters and wildlife while 
providing the productivity that we need.
Research, Education and Extension
    Increased funding for organic research and education in the 2008 
Farm Bill was historic. Many projects from the first round of funding 
look promising. The dedicated organic research funds are also helping 
to build baseline capacity in organic systems research.
    But there is still only a relative trickle of science and 
technology for organic systems coming from the agencies and 
universities. Research and education for organic systems is still only 
about 2% of USDA's research budget. That's only about half of the 
overall market share that organic products have at the retail level. If 
you look at the scale of problems that organic systems could make an 
outsized contribution (such as pollinator declines and greenhouse gas 
emissions), and compare that to the relative resources available, you 
see that the potential contribution is being hobbled.
    The overall effort on science and technology for sustainable 
organic systems has to be scaled up. That is still a primary limiting 
factor in the long-term success of existing organic farms, and for 
effective transition.
    I am particularly concerned about seed breeding. We have a critical 
need for varieties that are adapted to organic systems and we need 
adequate seed supplies for increased organic production. We need 
organic plant (and animal) breeding for increased resilience in the 
face of climate change and reduced water supplies. Policy passed by 
Congress must continue to aggressively rebuild our national capacity 
for developing and releasing high quality public cultivars. Organic can 
use all the advanced tools except for transgenic modification, but the 
science is moving beyond that anyway and it is not needed. Marker-
assisted selection, environmental genetic analysis, and other tools 
need to be applied along side classical breeding tools, to produce 
varieties in the public domain that respond best to the ecological 
fertility and pest management strategies that are built into organic 
systems.
    Economic research and regional marketing infrastructure development 
are crucial to the success of our growing organic production sector. 
Rewards for organic's environmental services are important but we still 
need to have a basically successful economic model in the marketplace. 
Here again, 2008 made a start and the results of those investments 
should inform the next stage of scaling up.
    Advanced organic soil management systems can simultaneously improve 
performance in soil health and biodiversity; water retention and 
drought tolerance, energy conservation, pollinator health, and more. 
Extension programs and applied technology development are needed to put 
all these parts together in regionally- and site-specific packages.
    The conservation effects of organic agriculture were singled by 
Congress in 2008 as an important purpose of the Organic Research and 
Extension Initiative. This area of study is going to be incredibly 
important and will deserve continued special attention by Congress.
Conservation Programs
    As directed in the 2008 Farm Bill, the USDA Natural Resources 
Conservation Service has made great strides in trying to integrate 
organic and transitional production systems into the EQIP and 
Conservation Stewardship programs. In some places this seems to have 
worked very well. In other places it does not appear to be working so 
well. There is a great need for NRCS field personnel to be trained in 
the principles and requirements of organic production. In some places 
there is still a need for NRCS personnel to just be open to it at all. 
As the 2010 sign-ups and contracts for the NRCS conservation programs 
are completed and analyzed, we'll have a better picture of how to 
improve Congress' goal of integrating organic and transitional growers 
into the programs, and get the resulting conservation benefits that 
organic systems provide. I have enjoyed working with our local office 
signing up for EQIP program and the high-tunnel project. I pass the 
word to other growers on the benefits of signing up to learn more about 
conservation practices. NRCS needs to be able to do better outreach and 
Get The Word Out. They also need to be able to be better prepared when 
organic growers and small farmers do come in.
Crop Insurance, Credit and Disaster Payments
    Again, we still have only a very incomplete picture of how well the 
2008 organic provisions for crop insurance are working. There does seem 
to be some focused activity but we don't have results to see yet. 
Likewise, the related data collection and analysis that could help 
remedy the problems for organic growers with farm credit and disaster 
payments, is not yet sufficient. We hope that the efforts started under 
the 2008 bill will yield enough information to shape further 
constructive policy changes in the next round of legislation.
    In conclusion, Mr. Chairman, there is still a ways to go to get 
organic agriculture on an equal footing within USDA's agencies and 
programs but we are making great progress. The outcomes are good not 
only for organic farmers and their customers, but for all of 
agriculture.
    I thank you for listening and ask that I may be able to submit 
revised written remarks for the record.

    The Chairman. Thank you very much, Mr. Teixeira, and we 
will definitely make room for any additional comments you want.
    Mr. Van Konynenburg, welcome to the Committee.

  STATEMENT OF PAUL J. VAN KONYNENBURG, PEACH, APPLE, CHERRY, 
             APRICOT, ALMOND, AND WALNUT PRODUCER,
                          MODESTO, CA

    Mr. Van Konynenburg. Thank you, Mr. Chairman. Chairman 
Peterson, Ranking Member Lucas, Congressmen Cardoza, Costa, 
Minnick, Conaway and Nunes, and other distinguished Members of 
the Committee, thank you for the opportunity to address the 
Committee today in advance of the 2012 Farm Bill.
    My family has been growing fruit and tree, nut tree 
specialty crops in California for over a 100 years. Thank you 
for recognizing the contribution and the importance of 
specialty crops to the overall farm economy.
    Before I get to my comments on the 2012 Farm Bill, there 
are two items of importance that Congress needs to address 
immediately.
    These are the estate tax reform and agricultural labor 
reform. On the estate tax reform, as you are well aware, in 
2009, the estate tax rate was 45 percent with an exemption up 
to $3.5 million. And that tax expired on December 31, 2009. But 
a new rate of 55 percent and a $1 million exemption is 
scheduled to take effect on January 1st, 2011, if there is not 
a significant change.
    As Ranking Member Lucas stated earlier, this estate tax can 
be unusually hard-hitting on farmers who need substantial 
capital assets to generate income.
    USDA's Economic Research Service estimates that the 
proposed 2011 estate tax could see up to ten percent of farm 
estates owing taxes, a marked increase from the 1.5 percent of 
farm estates which owed tax in 2009. An immediate legislative 
solution is required.
    The next item, the agricultural labor reform. Labor-
intensive agriculture, including all fresh market tree fruits, 
from coast to coast, is faced with a long-term labor problem. 
This isn't about wages. Many of these jobs pay well above the 
minimum wage. Most are $12 to $15 an hour. But the work is 
physically demanding and seasonal.
    Growers need a sufficient, sustainable, and legal supply of 
workers to produce, pack and market specialty crops to 
consumers. Without reliable and legal labor, our industry will 
eventually be forced offshore, or outsourced to where labor is 
available. This would greatly impact our food safety and 
reliability.
    At a time when the nation's health community is encouraging 
us to eat more fruits and vegetables, we should do everything 
possible to encourage their production here and discourage 
greater dependence on imports.
    This is a problem Congress can fix by passing agricultural 
labor reform with improvements to the H-2A guest worker program 
and the opportunity to earn legal work status by continued work 
in agriculture. Please approve the AgJOBS bill.
    Now looking forward to the 2012 Farm Bill, please 
considering expanding specific priorities from the 2008 Farm 
Bill.
    First of all, in the USDA Fruit and Vegetables Snack 
Program. This program is important since it develops life-long 
eating habits for children through the consumption of fruits 
and vegetables.
    The current program is particularly effective with school 
districts that have modern and efficient logistics and 
distribution infrastructure. However, the program needs greater 
flexibility in order to assist school districts that are not 
equipped to handle large volumes of fresh produce.
    For these districts, allowing the inclusion of preserved 
items to the program, such as peach snack cups or a box of 
raisins, would allow the district to meet the goals of the 
program.
    Second, the Special Crop Research Initiative, also known as 
SCRI, is helping improve production efficiency, lower costs, 
and enhance taste and quality for our consumers.
    Particularly exciting to our operation has been research 
into engineering and automation technologies to improve the 
safety, efficient, and sustainability of apple and stone fruit 
orchards. Thanks to the SCRI we were able to work with Roger 
Duncan at the UC Extension to test the Darwin String Mechanical 
Fruit Tree Thinner in peaches. We must continue research into 
technology that will reduce labor and enhance the quality of 
specialty crops.
    There are new programs for the 2012 Farm Bill that I would 
like for Congress to consider. The first is expanding the USDA 
Germplasm Repository. We need a global DNA database/
registration system for the purpose of cultivar protection, so 
that plant breeders can adequately defend their intellectual 
property around the world.
    The USDA Germplasm Repository is the right agency and 
program to develop a global repository, that would be the first 
step in strengthening the intellectual property rights of 
American plant breeders around the world.
    Once fully established, a global recognition of cultivar 
protection could be enacted.
    Second, expand the crop insurance guarantees for all 
specialty crops. Currently, crop insurance for specialty crops 
is affordable and workable in some crops and completely 
unaffordable and unworkable in others.
    While there has been significant improvements in cherry and 
apple insurance programs over the past 10 years, crop insurance 
for other crops remain nonviable.
    As the Committee considers changes, please note the unique 
aspects of specialty crop production in California. We 
oftentimes have one operator in partnership with several 
different land-owning entities. Therefore, having income 
guarantees for just the operator doesn't always work.
    Thank you for the opportunity to testify today. I will be 
glad to answer your questions. Thank you very much.
    [The prepared statement of Mr. Van Konynenburg follows:]

 Prepared Statement of Paul J. Van Konynenburg, Peach, Apple, Cherry, 
           Apricot, Almond, and Walnut Producer, Modesto, CA
    Chairman Peterson, Ranking Member Lucas, Congressman Cardoza and 
distinguished Members of the Committee,

    Thank you for the opportunity to address the Committee in advance 
of the 2012 Farm Bill. My family has been growing fruit and nut tree 
Specialty Crops in California for over 100 years. We currently grow 
almonds, apples, cherries, peaches and apricots in Stanislaus County.
    Let me first say to the Committee how much we appreciate the 
Specialty Crop provisions that were included in the 2008 Farm Bill. 
Thank you for recognizing the contribution and importance of Specialty 
Crops to our overall farm economy. Specialty Crops account for nearly 
half of all U.S. cash crop receipts, play a vital role in our economy 
and are important for our health.
    Before I get to my comments on the 2012 Farm Bill, there are two 
items of importance that Congress needs to address immediately: Estate 
Tax Reform and Agriculture Labor Reform.
Estate Tax Reform
   In 2009, the estate tax rate was 45 percent with an 
        exemption of up to $3.5 million. The tax expired on December 
        31, 2009, but a new rate of 55 percent and a $1 million 
        exemption is scheduled to take effect on January 1, 2011. The 
        estate tax can be unusually hard hitting on farmers who need 
        substantial capital assets to generate income. USDA's Economic 
        Research Service (ERS) estimates that proposed 2011 estate tax 
        could result in up to 10% of farm estates owing taxes, a marked 
        increase from the 1.5% of farm estates which owed tax in 2009. 
        An immediate legislative solution is required.
Agricultural Labor Reform
   The farm bill presumes that Specialty Crops will be 
        harvested and available to market. However, labor intensive 
        agriculture, including all fresh market tree fruits, from 
        coast-to-coast is faced with a long term labor problem.

   It's not about wages; many of these jobs pay well above the 
        minimum wage ($12 to $15 per hour national average). But the 
        work is physically demanding and seasonal. It is next to 
        impossible to find American workers who are capable and willing 
        to do the work.

   Growers need a sufficient, sustainable, and legal supply of 
        workers to produce, pack and market specialty crops to 
        consumers.

   Without reliable and legal labor, our industry will 
        eventually be forced offshore--outsourced--to where labor is 
        available.

     This would greatly impact our food safety and 
            reliability.

     At a time when the nation's health community is 
            encouraging us to eat more fruits and vegetables, we should 
            do everything possible to encourage their production here 
            and discourage greater dependence on imports.

   This is a problem Congress can fix by passing agricultural 
        labor reform with improvements to the H-2A guest worker program 
        and the opportunity to earn legal work status by continued work 
        in agriculture. Please approve the AgJOBS bill.

    Looking forward to the 2012 Farm Bill, please consider the 
following:
Overall Recommendations
   Tree fruits and nuts are vital to the good health of the 
        American diet. The next farm bill should support foods which 
        the nation's medical community believes will enhance health and 
        help fight disease.

   Improving the Specialty Crop provisions in the farm bill 
        that addresses nutrition, increases food safety, expands 
        exports, fights invasive pests and disease, and expands 
        research is not just good for farmers, but it is a victory for 
        every American's health.
Expand Specific Priorities from the 2008 Farm Bill
   USDA Fruit & Vegetable ``Snack'' Program: This program is 
        important since it develops life-long healthy eating habits for 
        children through consumption of fruits and vegetables.

     The current program is particularly effective with 
            crops that have long storage life (apples) or a long 
            growing season (table grapes) and with school districts 
            that have modern and efficient logistics and distribution 
            infrastructure.

     However, this program needs greater flexibility in 
            order to assist school districts that are not equipped to 
            handle large volumes of fresh produce. For these districts, 
            allowing the inclusion preserved items--such as peach snack 
            cups or a box of raisins--would allow the districts to meet 
            the goals of the program.

   Specialty Crop Research Initiative (SCRI) is helping improve 
        production efficiency, lower costs, and enhance taste and 
        quality for our customers. The SCRI has supported collaborative 
        projects already impacting specialty crops, including the apple 
        and stone fruit industry. Particularly exciting to our 
        operation has been the research into engineering and automation 
        technologies to improve the safety, efficiency, and 
        sustainability of apple and stone fruit orchards. Thanks to the 
        SCRI, we were able to work with Roger Duncan at UC Extension to 
        test the Darwin String Thinner in peaches. We must continue 
        research into technology that will reduce labor and enhance the 
        quality of Specialty Crops

   Specialty Crop Block Grants: This program provides Federal 
        help to meet crop specific problems with localized solutions. 
        This program is funded by the USDA but operated by state 
        departments of agriculture to focus on regional and local needs 
        for specialty crops such as improving food safety, increasing 
        the consumption of home-grown specialty crops as well as pest 
        and disease research.

   Market Access Program: Let's continue to grow the export 
        market, where much of the world's future population expansion 
        will occur. Exports are a bright growth market for almonds, 
        apples and cherries. We need to enhance critical trade 
        assistance and market promotion tools to expand international 
        markets for apples and other specialty crops.

   Pest and Disease Prevention Programs: Please continue to 
        support the USDA's work with the California Department of 
        Agriculture to implement prevention and mitigation protocols to 
        combat invasive pest and diseases, which cost the economy 
        billions of dollars per year.

   Section 32 Program: We need to be serving more fresh and 
        canned fruits and vegetables to our children. Please recognize 
        their importance and therefore emphasize these items over fried 
        or less healthy processed foods.
New Programs for the 2012 Farm Bill
   Expand the USDA Germplasm Repository. We need a global DNA 
        database/registration system for the purpose of cultivar 
        protection so that plant breeders can adequately defend their 
        Intellectual Property. The USDA Germplasm Repository is the 
        right agency and program to develop a global repository that 
        would be the first step of strengthening the Intellectual 
        Property rights of American plant breeders around the world. 
        Once fully established, a global recognition of cultivar 
        protection could be enacted.

   Expand crop insurance guarantees for all Specialty Crops. 
        Crop insurance in Specialty Crops is affordable and workable in 
        some crops and completely unaffordable and unworkable in other 
        crops. While there have been significant improvements in cherry 
        and apple insurance programs over the past 10 years, crop 
        insurance programs for other crops remain nonviable.

    Thank you for the opportunity to testify today. I'd be glad to 
answer your questions.

    The Chairman. Thank you, Mr. Van Konynenburg.
    Mr. Parnagian, welcome to the Committee.

 STATEMENT OF JUSTIN PARNAGIAN, PEACH, NECTARINE, PLUM, GRAPE, 
  APRICOT, AND CITRUS PRODUCER, PACKER AND SHIPPER, FRESNO, CA

    Mr. Parnagian. Thank you. Good morning, Chairman Peterson, 
as well as Members of the Committee. My name is Justin 
Parnagian and I am an employee, as well as a member of the 
Fowler Packing Company family, which grows, packs and ships 
stone fruit, table grapes and citrus throughout the world.
    My grandparents, Sam and Gladys Parnagian, who were already 
farmers in the area, started Fowler Packing less than a decade 
after World War II. My father, Dennis Parnagian, along with his 
brothers, joined the family business after completing their 
formal education, and helped grow our company, continuously, 
for more than 50 years.
    I am proud to be the latest generation actively growing, 
selling and shipping healthy fruits all around the United 
States and the globe.
    We very much appreciate the House Agriculture Committee, 
and all of you taking the time and making the effort to be here 
in Central California, an area that is, arguably, the most 
productive agricultural region in the world.
    We look forward to the continuing dialogue as it relates to 
the discussion and the formation of the 2012 Farm Bill.
    While it truly does seem such a short time ago, we were 
discussing the 2008 Farm Bill, those of us in production 
agriculture in California very much appreciate your foresight 
in holding these hearings at this early point of the process.
    As a specialty crop producer who grows fresh grapes, tree 
fruit and citrus, I was particularly gratified that the current 
farm bill recognized for the first meaningful time, the 
importance of specialty crops in improving the quality of life 
for all Americans.
    Due to the focus and resources of the current bill, we 
better understand the importance of fruits and vegetables, and 
their role in providing needed nutrition and fighting obesity.
    We applaud the efforts of First Lady Michelle Obama and her 
childhood obesity initiative, appropriately named ``Let's 
Move,'' and the ability of the farm bill to assist in providing 
funding for healthier diets for our youth, as evidenced by the 
expansion of the Fruit and Vegetables Snack Program to all 50 
states.
    However, as we all know the 2008 Farm Bill did not just 
stop at nutrition, but looked to improve the overall 
competitiveness of specialty crops by providing critical trade 
assistance and market promotion tools that help grow 
international markets; expanded research and APHIS initiatives 
to combat invasive pests and diseases; invested in the latest 
research to make the nation's food supply safer, more 
economical, better tasting and nutritious; promoted the 
conservation of our agricultural resources; and expanded the 
funding for state specialty crop competitiveness projects in 
all 50 states.
    We believe we are on the right track with these kinds of 
investments, in that they provide true value for all of our 
citizens. But, realizing the fiscal and budgetary challenges 
our country now faces, we are even more committed to analyzing 
and assuring that all of these programs provide the tangible 
returns that will guide the allocation of resources under the 
next farm bill.
    I can tell you from personal knowledge of the success of 
such programs as EQIP, that help on our conservation and 
environmental efforts. TASC that assists in developing markets 
for California tree fruit in Mexico, working in conjunction 
with the California Grape and Tree Fruit League, and MAP funds 
that help promote our products around the world.
    As we move forward in the 2012 Farm Bill discussion, there 
remains clear benefits to increase consumer education and 
awareness in consuming fruits and vegetables.
    We also need to recognize the importance, from many 
viewpoints, but particularly that of national security, of the 
production of our domestic food supply. We will again require a 
farm bill that will help our competitiveness, strengthen our 
research efforts, enhance our conservation programs, and 
encourage investment and efficiency in all agricultural 
production sectors.
    But in addition, we will also need to address developing 
issues that look to negatively impact the true sustainability 
of California agriculture and its ability to produce that 
domestic food supply.
    These include the lack of sound science connected with 
biological opinions related to the Endangered Species Act, and 
the resulting reductions of water and plant health material 
supplies.
    I would hope the USDA would assist in advocating on behalf 
of agriculture in regard to these issues with the EPA, as well 
as the Department of the Interior, and to work with the NRCS, 
to provide additional and more efficient water supplies.
    If we do not address these concerns properly, the chances 
that we will continue to outsource an increasing percentage of 
our fruits and vegetable from other countries such as China 
will only grow.
    And please make no mistake, they will be eager to take our 
place.
    We look forward to providing specific and detailed 
examples, and working with you through this very important 
process. Thank you very much, again, for taking the time to be 
here today.
    [The prepared statement of Mr. Parnagian follows:]

Prepared Statement of Justin Parnagian, Peach, Nectarine, Plum, Grape, 
      Apricot, and Citrus Producer, Packer and Shipper, Fresno, CA
    Good morning, Chairman Peterson, Ranking Member Lucas, Congressman 
Boswell, Congressman Conaway, Congressman Costa and Congressman 
Cardoza. My name is Justin Parnagian and I am an employee as well as a 
member of the Fowler Packing Company family. My grandparents, Sam and 
Gladys Parnagian, who were already farmers in the area, started Fowler 
Packing Company less than a decade after World War II. My father, 
Dennis Parnagian, along with his brothers, joined the family business 
after completing their formal education and has helped grow our company 
continuously for more than fifty years. I am proud to be part of the 
latest generation actively growing, selling and shipping healthy fruits 
all around the United States and the globe. We very much appreciate the 
House Agriculture Committee and all of you taking the time and making 
the effort to be here in Central California; an area, as you know, that 
is arguably the most productive agricultural region in the world. We 
look forward to the continuing dialogue as it relates to the discussion 
and the formation of the 2012 Farm Bill.
    While it truly does seem such a short time ago we were discussing 
the 2008 Farm Bill, those of us in production agriculture in California 
very much appreciate your foresight in holding these hearings at this 
early point of the process. As a specialty crop producer who grows 
fresh grapes, tree fruit and citrus, I was particularly gratified that 
the current farm bill historically recognized for the first meaningful 
time the importance of specialty crops in improving the quality of life 
for all Americans. Due to the focus and resources of the current bill, 
we better understand the importance of fruits and vegetables and their 
role in providing needed nutrition and fighting obesity. We applaud the 
current efforts of First Lady Michelle Obama and her childhood obesity 
initiative appropriately named ``Let's Move'' and the ability of the 
farm bill to assist in providing funding for healthier diets for our 
youth as evidenced by the expansion of the Fruit and Vegetable Snack 
Program to all 50 states.
    However as well all know, the 2008 Farm Bill did not stop just at 
nutrition but looked to improve the overall competitiveness of 
specialty crops by providing critical trade assistance and market 
promotion tools that help grow international markets; expanded research 
and APHIS initiatives to combat invasive pests and diseases; invested 
in the latest research to make the nation's food supply safer, more 
economical, better tasting and nutritious; promoted the conservation of 
our agricultural resources and expanded the funding for state specialty 
crop competitiveness projects in all 50 states. We believe we are on 
the right track with these kinds of investments in that they provide 
true value for all of our citizens but realizing the fiscal and 
budgetary challenges our country now faces we are even more committed 
to analyzing and assuring that all of these programs provide the 
tangible returns that will guide the allocation of resources under the 
next farm bill. I can tell you from personal knowledge of the success 
of such programs as EQIP that help on our conservation and 
environmental efforts, TASC that assists in developing markets for 
California tree fruit in Mexico working in conjunction with the 
California Grape and Tree Fruit League, and MAP funds that help promote 
our products around the world.
     As we move forward in the 2012 Farm Bill discussion, there remains 
clear benefits to increase consumer education and awareness in 
consuming fruits and vegetables. We also need to recognize the 
importance, from many viewpoints but particularly that of national 
security, of the production of a domestic food supply. We will again 
require a farm bill that will help our competitiveness, strengthen our 
research efforts, enhance our conservation programs and encourage 
investment and efficiency in all agricultural production sectors.
    But in addition we will also need to address developing issues that 
look to negatively impact the true sustainability of California 
agriculture and its ability to produce that domestic food supply. These 
include the lack of sound science connected with biological opinions 
related to the Endangered Species Act and the resulting reductions of 
water and plant health material supplies. I would hope that USDA would 
assist in advocating on behalf of agriculture in regard to these issues 
with the Environmental Protection Agency as well as the Department of 
Interior and to work with NRCS to provide additional and more efficient 
water supplies. If we do not address these concerns properly, the 
chances that we will continue to outsource an increasing percentage of 
our fruits and vegetables from other countries such as China will only 
grow.
    We look forward to providing specific and detailed examples and 
working with you through this very important process. Thank you very 
much again for taking the time to be here today.

    The Chairman. Thank you very much, Mr. Parnagian. I thank 
all of the witnesses for their excellent testimony.
    I would like to recognize Mr. Earl Williams, who I think is 
in the audience, from the California Cotton Growers and Ginners 
Association. We had a hard time getting everybody to fit in 
here, but I just want you to know, you maybe are aware, I met 
with your national people last week, and it is probably 
premature to talk about what we are going to do, given the 
Brazil case and all that.
    But we look forward to working with you to make this all 
work and figure out how to get through this. We appreciate you 
being here today and look forward to working with you as we 
move forward.
    The gentleman from California, Mr. Cardoza.
    Mr. Cardoza. Thank you, Mr. Chairman. I appreciate each of 
you being here today. I asked the previous panelists a single 
question, because I think it speaks about what we need to do 
more of and what we need to do less of.
    My question is, what is working for you in the bill, very 
briefly, and what is not working for you in the bill, and what 
you would like to see eliminated.
    So Mr. Roberts, why don't you begin.
    Mr. Roberts. The Plant Protection Act has allowed more 
invasive pests and diseases to come in our direction. I hope 
you are all aware of Huanglongbing, I am sure you are, but we 
have never fought a battle like that before.
    I think we could ask the Office of Management and Budget, I 
believe, to do an audit of what we were faced with before the 
Act, and what we are faced with now, as far as incursions of 
diseases and pests. I think the system is failing us on the 
risk of what is acceptable to come in. I don't think we can do 
any better job of monitoring our borders than we are currently 
doing.
    We are overwhelmed by the amount of pests and diseases that 
may be headed in our direction.
    Mr. Strachan. I think the thing that we like about the 
recent farm bill is just the Fresh Fruit and Vegetable Snack 
Program. The thing that I don't like about it is that it is not 
in every school, or there is not enough funding for it to be in 
every school.
    I would encourage you to reauthorize it at a higher level, 
so that it can get to everybody.
    Mr. Teixeira. Yes. More funding for organic research has 
started. We need a little bit more.
    Mr. Cardoza. What do you think the adequate level of 
research would be?
    Mr. Teixeira. Well, it's only at two percent, so if you 
could double it, or more, it would be big advantage. I know it 
is a gradual thing and it costs money. It has got to come from 
somewhere. So we have a start, let's nurture it and continue to 
grow it.
    Mr. Cardoza. Have any of the organic practices been able to 
be applied to general crop practices?
    Mr. Teixeira. Yes. I use a lot of organic practices in 
conventional ag, composting for one, cover crops. A tremendous 
amount of my neighbors, in my area, are responding to some of 
these innovative ways. We need more research and a systems 
approach, and it just takes time; but it is making a change.
    Mr. Van Konynenburg. The Specialty Crop Research Initiative 
is working. I would urge its continuance. What is not working 
is the current way we are going about doing crop insurance. For 
specialty crops, especially, our main insurable need is for 
hail, or something like that. Right now, the private hail 
market is working in some areas; it is not in others. And long 
term, this year, given the economic conditions, labor, for our 
area is not going to be an issue this year. But long term, 
labor is going to be an issue.
    Mr. Parnagian. I believe the Trade Assistance Programs are 
working for us and MAP funding, as we ship and promote our 
products throughout the world. That is of extreme benefit to 
us. What is not working is little too early to tell yet, so I 
can't comment on that right now.
    Mr. Cardoza. Mr. Van Konynenburg, I know you I experienced 
huge problems with the hail. Some of your colleagues who grow 
peaches have just been devastated. The current program requires 
you to maintain practices all the way to where you would 
normally pick, in order to show whether the blemish is there or 
not, and if you do that, you only get 50 percent. You just 
continue the losses.
    Mr. Van Konynenburg. It doesn't work.
    Mr. Cardoza. Doesn't work.
    Mr. Van Konynenburg. The current program doesn't recognize 
how much money has gone into the crop. It is a disconnect 
between what is reality.
    Mr. Cardoza [presiding.] Exactly. Thank you for your 
testimony and thank you for being here. Next up, Mr. Lucas.
    Mr. Lucas. Thank you, Mr. Chairman. I guess, first, let me 
put this question to Mr Parnagian, and then anyone else who 
wants to touch on it.
    You testified to the effect the EPA is making the domestic 
market a great place for the Chinese and other countries to 
sell to us.
    Would you expand on that for just a moment.
    Mr. Parnagian. Well, the EPA, you say, is making it easier 
for China? I don't necessarily think that it was the EPA. But I 
think that the restrictions that are required, and I think 
justifiably so, that are required within California, because we 
have to maintain certain levels and standards in our farming 
practices.
    I think China doesn't have those restrictions on their 
growing practices, and a lot of the restrictions require labor 
and added cost to our product. A huge competitive advantage for 
China is the fact that their labor is very cheap, and they 
don't have those types of restrictions, thereby making it easy 
for them to get into our country, to bring product in. They can 
deliver it at a much, much lower price than we can, and 
obviously, what is very attractive to a lot of consumers, is 
price.
    We deal with crops that are--you know, it's very elastic, 
it's a true form of price equals demand sense, and the lower 
price that these Chinese can bring in their products, they can 
overshadow us and they can beat us to market.
    Mr. Lucas. From your marketing experience, and then I'll 
call upon everybody else who might offer an opinion, does it 
make a difference when a product is labeled California or USA, 
or is the consumer typically more focused on the bottom line?
    And I'm not asking for a scientific analysis, just your 
impression.
    Mr. Parnagian. My opinion?
    Mr. Lucas. Your opinion.
    Mr. Parnagian. It depends on the economy. We were seeing a 
resurgence in California grown products, and I would like to 
think that the consumers do pay particular attention to that. I 
can't be certain that that is the case. I think that if they 
see a nice-looking piece of fruit, competitively priced, 
they're going to initially go to that. I mean, that is what my 
gut tells me.
    Mr. Lucas. Anyone else like to touch on either part of that 
question?
    Mr. Van Konynenburg. Yes. We are in favor of food labeling 
for origin, especially I think a lot of the issues is there is 
more--we have earned more good will and trust than some of our 
offshore competitors. And so when someone buys something that 
is made up of fruit concentrate that came out of China versus 
fruit concentrate that came out of the United States, I think 
that makes a big difference. There is traceability.
    Mr. Strachan. As far as fresh fruits and vegetables, 
typically, the best-selling fruit and vegetables are the ones 
on the shelf. There is typically only one to choose from when 
you go into a store. So a lot of times, the decision to buy 
domestic versus international lies with the buyer, the 
purchaser that represents that retail store chain or that food 
service chain.
    We would continue to encourage country-of-origin labeling, 
so that the end consumers ultimately see what decisions those 
retailers and food service companies make in terms of their 
vegetable and fruit selection.
    Mr. Roberts. Actually, on the biological opinions, the 
citrus industry would like the EPA to be more involved in that, 
because those biological opinions are supposed to be science-
based, but they see them as opinion papers. They are being 
directed to come to a preconceived answer that we are doing 
things wrong.
    The Center for Biodiversity is ready to launch suit on the 
use of 400 crop protection tools. Without those crop protection 
tools, I think we are pretty much finished.
    EPA is not given a chance to offer their expertise in that 
system with Marine Fisheries Service. That needs to be more 
open, the biological opinions need to be more open than they 
are now.
    Mr. Lucas. Thank you, Mr. Roberts. Anyone else? I yield 
back my time, Mr. Chairman.
    The Chairman [presiding.] Thank you, Mr. Lucas.
    Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. Mr. Roberts, 
in working with you and your association over the years, 
dealing with trade issues with a number of countries; I am 
wondering if you would care to comment on what we might be able 
to do to make trade more fair. There are limitations to what 
the jurisdiction of this Committee is.
    Do you want to make any quick comment on that.
    Mr. Roberts. We need to make sure that we revisit the 1999 
Plant Protection Act and look at the amount of risk that we are 
subject to on diseases and pests. Our system is being 
overwhelmed.
    Mr. Costa. I think that is a good description. I mean, we 
try to deal with these issues, we push and we push, but I think 
you describe it quite well in terms of being overwhelmed.
    Mr. Roberts. The free trade agreements that were mentioned 
earlier, I don't remember what all countries were involved in 
it, but the Koreans are maintaining a 54 percent tariff against 
citrus. We are not completely happy with that.
    Mr. Costa. Yes. The bottom line is free trade is fine as 
long as it is fair trade, and it has got to be a two-way 
street, and too often that is not the case.
    Mr. Roberts. In California, it costs us, as a citrus 
producer, $400 in state regulatory costs, more than it does a 
producer in Texas.
    And then you add on the Federal costs of doing business in 
the United States versus some of these other countries, and you 
put the two together, and we are quite a burden to be the low-
cost producer.
    Mr. Costa. That is in spite of that fact, some of my other 
colleagues may not know--but we have become the number one 
citrus state in the nation, as a result of all that good work, 
notwithstanding the challenges.
    Mr. Roberts. Yes.
    Mr. Costa. Thank you for your good work. Mr. Strachan, we 
have talked before on the efforts with regards to food safety 
and your testimony went into detail about that. The problems we 
have had with leafy greens over in the Salad Bowl, in Salinas, 
but there are a lot of people that grow a lot of leafy greens 
in the valley, out in my district on the west side.
    I want to commend your efforts in supporting our food 
safety systems with United Fresh, Western Growers, and a whole 
lot of other ag organizations. We got that out of the House, 
thanks to Chairman Peterson's help, and others. Congressman 
Cardoza and I worked very hard on that.
    The bill that is over on the Senate side, they are trying 
to pattern it after our efforts. What concerns might you have 
if there is a chance that we can get a conference committee 
this year and get a national food safety standard out there.
    Mr. Strachan. You know, the committees, the FDA agencies, 
everybody has been really open to trying to learn from the 
experience that we have had. We have been running a food safety 
forum that combines government auditing with industry, and been 
running it for about 3 years now. We have a lot of experience--
--
    Mr. Costa. And the traceback program, as you noted, has 
really been perfected, here in California.
    Mr. Strachan. Yes. And so I think the lessons that we have 
learned are starting to make their way into the bill. They 
were, in many ways, in the House bill, and so I think we are 
really positive about the way the legislation is moving along. 
I don't have any specific feedback. I have read both bills. I 
am fairly familiar with them. I have a few concerns about some 
of the traceback provisions.
    Mr. Costa. Please bring any concerns to our attention. We 
will go from there. Before my time expires, I want to get to 
the other three witnesses.
    Mr. Teixeira, you share the same last name as my father's 
grandmother, so we may be related somewhere back there. What do 
you think is the potential for organic farming in this country? 
You talked about a number of statistics in your testimony. What 
do you think the appropriate role on the Federal side is in 
dealing with both our traditional farmers and the organic 
farmers that are continuing to grow in numbers.
    Mr. Teixeira. Organic agriculture is the fastest-growing 
segment in the United States right now. It is growing very 
fast. A lot of people are in transition. I think there are a 
lot of things to be looked at. We have to address some of the 
concerns in that growing phase. Organic research is a real 
important component. The transition component is very helpful 
for transition growers to start up and get involved, and I 
think that has really made a big difference by having those 
funds. It has really increased the amount of people involved.
    Mr. Costa. Thank you. Two more quick questions, if you 
don't mind, Mr. Chairman.
    Mr. Van Konynenburg, I just want to ditto the importance of 
good estate planning. We would not be able to keep our farm in 
our family had that not happened. I am glad that you noted that 
we, who represent agriculture areas, need to continue to see if 
we can come together on estate taxes, because if are going to 
maintain family farms in America, you have to have this issue 
dealing with the estate tax resolved in a way that makes sense.
    I also want to commend you for your comments as it relates 
to immigration reform. It is long overdue. I think agriculture 
has stepped to the plate in terms of the need to have reform, 
whether it is AgJOBS or comprehensive reform, which we must 
achieve. I don't know whether we are going to be able to put it 
together this year or not.
    Finally, Mr. Parnagian, your family and ours have worked 
together over the years, and we commend you. We made some 
progress on obesity with the farm bill, last time, to get 
healthy fruits and vegetables in the school lunch program, and 
expand those efforts.
    What else should we be doing as we look at the 2012 Farm 
Bill to increase consumption of healthy fruits and vegetables? 
I don't care where they are grown in this country, they are a 
key to dealing with obesity. What are your thoughts on how we 
can do a better job?
    Mr. Parnagian. We have seen that when you're training the 
children and getting them involved at a early age with the 
fruits and vegetables that is a huge incentive. I don't know 
what more you can do.
    We do support what you have done with the school systems. I 
think continuing to educate the children and getting them 
involved, in any way, with soccer programs and whatnot, becomes 
the building blocks of healthy habits.
    Mr. Costa. Thank you very much, Mr. Chairman. My time has 
expired.
    The Chairman. I thank the gentleman. The gentleman from 
Texas, Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I appreciate this 
panel coming here. While we have been sitting here this 
morning, my wife has sent me a picture of her one tomato plant, 
with two tomatoes on it, of which she is spectacularly proud. 
And it gives me just a microscopic sense of what pride you 
bring to the table in providing this country with the safest, 
most abundant, and cheapest food supply in the world. Those of 
you in the tomato-growing business, who are in direct 
competition with my wife, don't lose a lot of sleep about her 
having much of an impact on the tomato market.
    [Laughter.]
    Mr. Conaway. When you talk about the estate tax, you need 
to be for something. And I am for repeal. But that is probably 
not going to be in the cards. If you look back at 2006, the 
House passed a version that was not a bad first step in getting 
rid of it totally, but not a bad compromise.
    It would have provided for a $5 million exemption that is 
indexed for inflation, a step-up in basis, it would have 
provided a tax rate for the first $25 million of taxable estate 
to be at the capital gains rate, and anything beyond $25 
million would be double the capital gains rate.
    And it would have addressed this issue much better than 
what we think might be coming around.
    So as your organizations look at your responses to the 
estate tax and what you want, you might look back at the 2006 
version that passed the House, that we were not able to get 
through the Senate.
    As we talk about immigration and labor, I am hopeful that 
as this thing moves forward, that the voices on both sides can 
be what I refer to--remember when you came in off the 
playground and the teacher would say, all right, boys and 
girls, let's start using our inside voice. Much of this debate 
over the last 3 years has been conducted at the top of our 
lungs.
    We have been screaming at each other, and when you scream 
at somebody, they don't really listen, and when somebody 
screams at me, I don't listen.
    This is important stuff. These are human beings. These are 
people. And it is perfectly okay for America to operate in 
America's best interest. It is in America's best interest to 
protect our borders and secure them. It is in America's best 
interest to know who is in this country. But these are people 
and we need to deal with them accordingly, and I think we can.
    We have to be careful that the folks on the way left and 
the way right don't dominate this conversation, going forward, 
because this is important stuff. I don't know if we will get it 
done this year but we need to get it done.
    The employers, as one of the earlier panel members said, 
you need to be able to comply with these laws, you want to 
comply with these laws, and it is important that we get that 
done right.
    One of the things about the conversation we have not had 
yet, is what will the employer responsibilities be for this 
workforce that we might be provided under the reform?
    So you need to be thinking about that as well, because that 
is going to help those who see the workforce as a threat, to 
understand that that is not really the case.
    I would like to get some comments, because the folks in 
Texas who try to deal with this issue, and bring in people who 
are unfamiliar with how hard labor is in your industry, they 
don't really last more than a half a day, at best, and that the 
only people who will do this work are the folks who have been 
doing it and know how hard it is.
    Can you comment, Mr. Van Konynenburg. Thank you for the 
comment earlier about today is it is not really an issue 
because the unemployment across this country is ten percent. 
And when you hear that number, and then you hear folks talk 
about not being able to find people to go to work, there is a 
disconnect. And so could you talk to us, anybody on the panel 
want to talk just a little bit about that?
    Mr. Van Konynenburg. There is a high unemployment, so labor 
is not going to be, at least for our area, an issue this year.
    But there is a, for whatever reason, a need for a stable 
supply of labor who can pick fruit, thin fruit, prune trees. 
That is what we have to have. Unfortunately, it is seasonal. I 
try to spread it out as best I can get, and situate our 
operation the best I can to keep people working, 9, 10 months 
out of the year, if I can; but it is seasonal and it is always 
going to be seasonal.
    We have to have a long-term solution that recognizes that 
this labor need is going to be with us for fruit and vegetable 
growers. This is the reality, going forward.
    We have people who want to work. Let's put together a 
program that is workable and let's get away from the noise. I 
wholeheartedly agree with you. Right now, we have the volume up 
too loud. We have to have a workable solution that works for 
everybody.
    Mr. Conaway. Mr. Roberts. Thank you, by the way, for 
bringing the easiest to pronounce last name to this panel.
    Mr. Roberts. Several years ago, when labor was tight, I did 
take part in a small pilot H-2A worker program. All I did 
during that period of time was donate my crop to that program. 
I mean, the harvest costs in that program ate every dollar my 
crop was worth, and then some. That program was certainly not a 
viable option for us. It was too burdensome, too costly, there 
was no incentive for the workers to speed up, to learn quick. 
The housing, the transportation. It was way too much for us to 
handle.
    It is not fair of the U.S. Government to make me a criminal 
every day. I mean, I do everything I can to do things right. 
But, I cannot tell you that all my guys are legal. I get forms. 
I turn them in. I photocopy them. I do everything I am supposed 
to do. But I am made to feel like a criminal, on multiple 
levels. It gets rather frustrating.
    We need a good documented guest worker program, I think 
would be the solution. I know that may not be palatable to a 
lot of people, but for food security I would appreciate it.
    Mr. Conaway. I do think we could have a worker program that 
is based on two pretty straightforward issues. One, if you are 
in this country on a legal basis, you can work. If you are 
illegal, you can't work, which means let's make it as easy as 
we can on the employers to comply, and then enforce that 
compliance. And two, if you have a job, fine; if not, you go 
home. Nothing to do with citizenship. It's absolutely 
citizenship-neutral, doesn't help, doesn't hurt. It just 
provides taking the ag arena, those folks who want to come here 
and work, seasonally, to do that, and I think we can make this 
work.
    But we are going to have to ``lower the volume'' in order 
to listen to each other properly, in order to make this thing 
work.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you. I thank the panel for their 
excellent testimony. We appreciate you taking the time to be 
with us today and answering the questions, and it was very 
helpful to the Committee. So you are excused.
    I recognize the Ranking Member for any closing statement he 
might have.
    Mr. Lucas. Thank you, Mr. Chairman. Just to note, briefly, 
that the Committee does place great value on your California 
Members of the Agriculture Committee. I think I can say, not 
only for myself, but on behalf of the Agriculture Committee, 
you have many challenges here but you also have some of the 
most tremendous resources--soil, weather, the climate, all of 
those things. Given a fair fight, you will continue to be the 
productive ``jewel'' you have always been.
    We want to help facilitate that and you will see us work 
through a very tight budget in the coming year, to try and make 
that happen. And I think I can say that in a bipartisan spirit, 
Mr. Chairman.
    The Chairman. That is definitely true. I associate myself 
with your remarks. I would yield my time to Mr. Costa and Mr. 
Cardoza for any brief closing statements they would like to 
make.
    Mr. Costa. Again, I want to thank you, Mr. Chairman, and 
the Ranking Member, for the time and the patience that you have 
taken to come out here. Congressman Cardoza and I, as Members 
of the House Agriculture Committee, enjoy working with U.S. 
agriculture throughout the country. We are obviously very proud 
of our agricultural resiliency and our productiveness, and our 
quality and innovation, here in California. The challenges we 
face here, in some cases, are different, but I think we share 
many of the challenges throughout the country. That is why this 
hearing today is important.
    The hearings we are having around the country are important 
as we reset the table for the 2012 Farm Bill. When you talked 
about being criticized for being premature in these actions, 
let me commend both of you for being at the right place and the 
right time.
    As you noted in our hearing, Friday and Saturday, we didn't 
meet the timeline in the last farm bill, so starting early 
seems prudent given all the challenges and the fiscal 
constraints we are going to have to deal with in Washington.
    So I add these comments to those that both of you have 
made, my colleagues here. We share, in a bipartisan fashion, 
the advocacy of American agriculture. We try every day to 
continue to allow you, our producers, to do what you do best, 
which is produce the finest food and fiber anywhere in the 
world.
    To the witnesses on this panel and the previous panel, we 
say thank you. For those who were not able to testify, we 
regret that. When you have 400 commodity crops in California, 
and you have two panels, it makes it difficult. Know that those 
of you who weren't able to testify, we will take your written 
testimony, your submission, as a part of the evidence.
    There will be further hearings that will take place. I want 
to close by thanking the Fresno City Council, and the mayor, 
for allowing us to use these very nice chambers. To the comment 
from my colleague from Texas, they were built in better fiscal 
times. It was 10 years in the planning, and this building, as 
modern as it looks, was completed, I think over 15 years ago. 
We thank them for allowing us to use the council chambers 
today.
    Mr. Cardoza. I just will say thank you to you all again for 
coming here. I think this was a productive hearing. I think you 
heard our constituents tell you, directly, what doesn't work 
and what we need to work on. Some of the things that we did 
change in the last farm bill are ``hits'' that folks are very 
pleased with. There are a few things that turned out to be 
``dogs'' and we need to work on those. And there are programs 
that simply aren't meeting the needs. Industries like dairy 
that are just devastated.
    The dairymen need to be on the same page, or at least close 
to the same page. We have talked about it, time and time again. 
But Mr. Chairman, I know that with the cooperation that is on 
this Committee, that we can forge something that will work for 
the different parts of the country.
    Thank you for being here. I thank everyone for attending 
and have a great trip home.
    The Chairman. Thank you very much. I thank the gentleman, 
and again, for those that weren't on the panels, you can send 
any kind of testimony, any kind of information, suggestions, to 
the Committee, it will be made part of our hearing record, at 
www.agriculture.house.gov.
    And so with that, under the rules of the Committee, the 
record of today's hearing will remain open for 30 calendar days 
to receive additional material and supplementary written 
responses from the witnesses to any question posed by a Member, 
and this hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 12:03 p.m. (PDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
      
Submitted Letter by Alan J. Bengyel, City Manager, City of Orange Cove, 
                               California
April 27, 2010

USDA Rural Development
Fresno, CA.

RE: Letter of Support for USDA Rural Development Programs

    Dear Sirs:

    The City of Orange Cove is a rural agricultural farm worker 
community located in eastern Fresno County. The City has been actively 
involved with a variety of USDA programs ranging from farm worker 
mortgage assistance, community water and sewer infrastructure funding 
assistance, Intermediary Relending business financing and Rural 
Business Enterprise Grant programs funding. We currently have two USDA 
water system loans outstanding with your agency. The City has benefited 
tremendously from USDA assistance.
    Our needs remain ongoing, and we are currently working with USDA 
Rural Development for two major infrastructure financing projects for 
our community sewer and water systems. We have had ongoing meetings 
with USDA staff to address these issues. We plan to have financing in 
place with USDA, for these projects, within the next 12 months. These 
projects are critical for the ongoing stability and growth of our 
community. As well, we are working with USDA Rural Development staff 
for another round of farm worker mortgage assistance funding for 
another 35 homes in our community.
    We wholeheartedly support USDA Rural Development's mission. We 
encourage ongoing legislative support for USDA's programs. Our 
community has befitted greatly from the professional support of USDA 
agency personnel. These USDA programs items are greatly needed for our 
community, and we support all efforts to maintain USDA Rural 
Development programs in place.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Alan J. Bengyel,
City Manager.
                                 ______
                                 
  Submitted Statement from Paul Boyer, Community Development Manager, 
                         Self-Help Enterprises
    USDA Rural Development is an important resource for small 
disadvantaged communities in our country. Historically many San Joaquin 
Valley communities have benefited from these programs. However, due to 
the current USDA definition of rural and because it is anticipated that 
2010 Census data will eliminate the eligibility of many communities, 
California's share of RD Water and Waste Disposal funding will 
diminish. The following includes excerpts from the recently completed 
(February 2010) ``Jobs, Economic Development, and Sustainable 
Communities'' report prepared by the California USDA State office 
containing the issues raised in 43 Jobs Forums held throughout 
California.
Find a Definition of Rural That Fits California's Needs and Realities
    The USDA definition of ``Rural'' impacts the eligibility of 
communities and individuals to receive financial assistance. Rural 
Development has several different definitions for its programs. The 
definitions are not standardized and often confusing. Different 
programs and services at the state and national level define rural 
area, rural community, and rural city and/or county in a variety of 
ways. Some programs use definitions such as ``communities under 50,000 
that are rural in nature,'' ``areas of less than 2,500 not in Census 
places,'' or ``nonmetro county.''
    All SJ Valley counties now have MSAs and do not have their 
population counted as rural. Yet, those of us that live outside the few 
Valley metro areas definitely live in a rural experience. The growth 
experienced within the San Joaquin Valley communities is often without 
the generally-related economic benefit such as diversified economies, 
developed infrastructure, and access to important services such as 
health care and higher education. When applying for resources, rapidly 
urbanizing rural areas can find themselves ineligible for rural-
targeted programs due to tight population eligibility criteria. 
However, because of the limitations discussed above, these areas are 
often unable to compete when vying for resources against truly urban 
and suburban areas.

    Changes to Federal funding formulas should be made to reward 
counties working to direct growth to cities to protect agricultural 
land and open space.

    California policy encourages ``city-centered'' or ``regional'' 
growth patterns that concentrates population growth, development and 
economic activities in areas that are then considered non-rural under 
current USDA definitions. In California this is even more so now with 
green house gas goals further discouraging sprawl and encouraging 
preservation of agricultural land.

    Standardize and simplify the definition of ``Rural''.

    USDA has several different rural definitions which can be confusing 
and contradictory. Rural Development has separate and distinct rural 
definitions for its Housing, Business, Water & Waste, and Community 
Facilities programs. Simpler and more standardized definitions would 
improve public understanding about USDA programs that are available in 
rural areas.

    Funds should be allocated to states based on the percent of the 
population that lives in eligible communities.

    Fifty percent of the weight in allocating funds nationally under 
the Water and Environmental Program and Communities Facilities Program 
is based on rural population. In the past, population data came from 
the population living in communities the Census determined to be rural 
(less than 2,500 population). However program eligibilities under the 
actual statutes are much higher. Aligning allocations with actual 
numbers of population that is eligible under the statutes would allow 
for a much more equitable allocation of funds throughout the country.

    Utilize Census block group data and Census designated places 
instead of county level data to determine areas of persistent poverty.

    Several Rural Development programs maintain set asides for 
persistent poverty counties. These set-asides supplement regular state 
allocations to provide added resources in areas of persistent poverty. 
USDA's Economic Research Service defines counties as being persistently 
poor if 20 percent or more of their populations were living in poverty 
over the last 30 years (measured by the 1980, 1990, and 2000 decennial 
Censuses). County size varies significantly across the country. Georgia 
has 159 counties with an area of 59,000 square miles. Fifty counties 
are designated persistent poverty. California has 58 counties in 
164,000 square miles and no persistent poverty counties. Many SJ Valley 
cities, Census Designated Places and Census Tract Block Groups 
chronically exceed the 20% poverty level with some over 30%.
    Census income data is collected to the Block Group level and as 
Census Designated Places (CDPs). If persistent poverty were calculated 
on that basis throughout the country there would be a greater 
possibility of eliminating areas of persistent poverty that exist in 
many states.
Regulatory Allocation Factors
    Below are regulatory factors for 3 of USDA's programs: Water and 
Environmental Program (WEP, which includes Water and Waste Disposal), 
Community Facilities (CF), and Business and Industry (B&I). The data 
was updated in 2009 based on data from the Economic Research Service.
    As you can see under Rural Population (Criteria A), California's 
minimal percentage of national rural population is a significant factor 
in the allocation of funds since only communities less than 2,500 are 
counted as rural. Criteria B and C below are calculated using non-
metropolitan population and unemployment data. Typically the use of 
non-metropolitan population and unemployment data significantly 
penalizes the more populous states by eliminating a significant portion 
of the population eligible under the statute from the formula used to 
allocated funds. We see this as an even more significant issue once the 
2010 Census data is received and implemented.
WEP/CF/B&I Allocation Formula
(from USDA regulations 1780 and 1940-L)
    The current criteria used in the basic funding allocation formula 
to states are:

    (A) State's percentage of national rural population will be 50 
        percent.

    (B) State's percentage of national rural population with incomes 
        below the poverty level will be 25 percent.

    (C) State's percentage of national nonmetropolitan unemployment 
        will be 25 percent.

    In California WEP, CF and B&I programs will all lose many eligible 
communities after receipt of the 2010 Census. This is supported from 
the 2008 population estimate for cities which shows 14 California 
cities will no longer be eligible for assistance from WEP; 18 for CF 
and 19 for B&I programs. In addition, a number of CDPs would be 
eliminated, but those estimates have not yet been made.
    Most of these communities are in the SJ Valley and are agricultural 
in nature. Consideration should be made to raising the limits on 
population for these programs. The current cut off for Water and Waste 
Disposal is ``rural and rural areas means any area not in a city, town 
or Census designated place with a population in excess of 10,000 
inhabitants, according to the latest decennial Census of the United 
States.''
Recommendations

   Increase the cap for population for Water Environmental 
        Program from 10,000 to 20,000.

   Change the allocation formula to states for WEP/CF/B&I 
        Programs by:

     Redefining ``Rural'' as less than 20,000 population.

     Counting chronic poverty (>20%) for cities, CDPS and 
            Census Tract Block Groups with less than 20,000 population.

     Counting unemployment for cities, CDPs, and CT Block 
            Groups with less than 20,000 population.

Paul Boyer,
Community Development Manager,
Self-Help Enterprises.
                                 ______
                                 
 Submitted Statement from Hon. Mike Lane, Council Member, Visalia City 
Council, State of California; Management Analyst, Self-Help Enterprises
    I appreciate the opportunity to provide input for development of 
the 2012 Farm Bill. There is nowhere more appropriate for input than 
here in the center of the world's richest agricultural region--the San 
Joaquin Valley.
    Self-Help Enterprises is a regional nonprofit organization which 
for over 45 years has worked closely with USDA Rural Development to 
develop, improve, and preserve housing for low income valley residents 
and especially farmworkers as well as the infrastructure that is 
essential to the communities we call home.
    We utilize Rural Development programs to provide mutual self-help 
housing, housing rehabilitation, multifamily rental housing, and sewer 
and water systems.
    As many of those who speak today know so well, agricultural in 
California is more than farms--it is the communities, the 
infrastructure, and the people who manage the farms, who work the 
farms, and who provide the services that rural communities depend upon. 
Though this might surprise our more urban counterparts, the Valley 
consists of much more than the 99 and I-5 corridor. In fact, the rest 
of the valley is mostly unincorporated, invariably poor, economically 
disadvantaged and typically woefully lacking in infrastructure.
    Unincorporated communities like Planada, Ballico, Delhi, Kettleman 
City, Armona, Lost Hills and cities of under 25,000 population like 
McFarland, Avenal, Huron, Firebaugh, Mendota, Dos Palos, Livingston and 
Patterson are home to 45% of the valley population.
    With the most ``affordable'' housing in the Valley, these 
communities are often plagued by substandard housing, lack of municipal 
resources, and outdated infrastructure.
    In a report commissioned by the Valley congressional delegation, 
the Congressional Research Service stated, ``By a wide range of 
indicators, the San Joaquin Valley is one of the most economically 
depressed regions in the United States.''
    At the same time, we know the Valley as an area of great resources 
and even greater potential.
    So just as this is an appropriate venue to hear input about 
agriculture policies in the farm bill, so too is it an appropriate 
venue to hear about USDA's critical role in community development and 
the importance of USDA's comprehensive role.
    These communities--like so much of rural America--need investment 
beyond what they alone can muster--and it is important that a national 
agriculture policy incorporate the broader investment needs of 
agricultural communities.
    It is against this backdrop that the ``other'' part of USDA, the 
Rural Development mission area works quietly, yet effectively, to 
invest in the communities we call home, and the lives of those who live 
there. And the story of rural development in this valley is one of 
successes. As you know, the RD, mission area encompasses three distinct 
but coordinates efforts--RBS, RUS and RHS.
    USDA Rural Development has been a key resource for Valley 
communities. Perhaps the most significant element of USDA's Rural 
Development role one that is often taken for granted--is the delivery 
system. Throughout the San Joaquin Valley, indeed throughout the 
nation, USDA is connected in to rural communities in a way that is 
unique. Key because it is often the people who make the connection to 
resources, who provide the TA necessary to enable the community to 
access the complex resources available to them. In recent years, 
despite consistent reductions, RD staff have continued to have a major 
impact. But staff reductions cause strains, and it is important to 
maintain the delivery system that exists.
    Of course, when you get right down to it, the other key element of 
USDA's Rural Development role is capital--it takes capital to invest in 
our communities, and the USDA capital and technical assistance programs 
are crucial to past and future success. It is important to realize that 
loan guarantees and shallow resources are not a substitute to direct 
capital investment.
    For example, in one Kern County community SHE worked with USDA to 
provide a water system. Without grant capital from USDA low income 
families would have faced bills of $54 per month house for water on top 
of the existing sewer charge. By comparison, in Visalia we pay about 
$58 per month for water, sewer, trash & street cleaning.
    The programs known among us as 502, 504, 514 & 516, 515, 535, sewer 
and water systems loans and grants, and the Rural Community Development 
Initiative, constitute a direct investment in rural people, in Rural 
Communities, in Rural America. In fact, California leads the nation in 
production and utilization of the 502 program. This key rural 
homeownership program has a very low foreclosure rate.
    An important element of the Rural Development role is the fact that 
RD does not try to go it alone, but works in partnership with other 
Federal, state, local, and private resources.
    Working in partnership, USDA and SHE, counties, cities, and perhaps 
most significantly, the people of those communities, have been 
extraordinarily effective in bringing resources to the local level.
    Whether it is an investment in a community water system, the 
construction of rental farm labor housing in Planada, the opportunity 
for mutual self-help homeownership in Shafter, or a new roof over the 
heads of an elderly couple, the resources of USDA Rural Development 
constitute a direct investment in rural people, in rural communities, 
in rural America. It is a noble mission and an excellent investment.
    The definition of ``rural'' continues to be of concern particularly 
in light of the 2010 Census. Rural counties in California are far 
larger than most counties in the Midwest and East. In fact, several 
counties in the San Joaquin Valley are larger than whole states. 
However, due to the fact that these large counties contain a 
Metropolitan Statistical Area (MSA) they are defined as ``Metro 
Counties'' notwithstanding the fact that outside of the urban area they 
are completely rural counties in nature and heavily agricultural.
                                 ______
                                 
Submitted Letter from Barry F. Kriebel, President, Sun-Maid Growers of 
                               California
May 28, 2010
 Hon. Collin C. Peterson,             Hon. Frank D. Lucas,
Chairman,                            Ranking Minority Member,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.

Re: Sun-Maid Growers of California 2012 Farm Bill Testimony

    Dear Chairman Peterson and Ranking Member Lucas:

    Sun-Maid Growers of California is a vertically integrated 
cooperative owned by approximately 750 farmer-members. As Sun-Maid's 
President and Chief Executive, I am submitting this testimony for the 
2012 Farm Bill on behalf of our growers.
    Maintain the eligibility of dried fruit in all school meal and 
snack programs and in the WIC program--Traditional dried fruit, like 
raisins, dried plums, figs and dates are nutritionally dense, shelf 
stable, have no shrinkage and are always available as an alternative to 
fresh fruit in all governmental meal, snack and feeding programs. 
Traditional fruits contain no added or infused sugars and have 
essentially the same nutritional food values as their fresh 
counterparts, only without the water. Additionally, when compared to 
many processed snack foods offered in schools and, when considering the 
Administration's national goal to reduce childhood obesity, traditional 
dried fruit it is an all natural alternative, contains no fat and has 
no added salt.
    Dried Fruit/Raisin Participation in USDA Programs--Currently, there 
is a prevalent USDA theme for schools to participate in the ``buy 
local'' and ``know your farmer, know your food'' programs. While such 
messages appear harmless in thought, they clearly have nutritional and 
practical limitations. Certain nutrient dense, natural products which 
are only produced in one area of the United States, like traditional 
dried fruits, yet are sought nationally by school nutritionists and 
other Federal feeding programs, can be restricted for purchase. Simply, 
California school districts would be able to access an abundance of 
raisins or other traditional dried fruit, yet other school purchasers 
throughout the country would be able to access fewer dollars for those 
same products. Conversely, sellers of traditional dried fruit would not 
be able to compete on a level playing field by selling to schools 
throughout the nation if those schools are incentivized to ``buy 
local'' products.
    Another element we question under the ``buy local'' and ``know your 
farmer, know your food'' themes is the fact that implementing such 
programs displace existing providers of fruits and vegetables produced 
on now what could be considered ``non-local'' farms. If the Department 
is to provide incentives for schools to ``buy local,'' is it in turn 
going to compensate those farmers whose sales are displaced by such 
actions? There is nothing prohibiting schools from presently buying 
local without a special program. We believe buying local should be 
defined as purchases of fruits and vegetables produced within the 
borders of the United States and its territories. Please consider 
instead the theme, ``Buy Local, Buy American, Buy Healthy!''
    Compliance with the Buy American requirement--State agencies have 
an obligation to ensure that purchases under the Child Nutrition 
Programs and by School Food Authorities adhere to the Buy American 
requirement. While it is clear the language of the requirement states 
``. . . the Department shall require that a school food authority 
purchase, to the maximum extent practicable, domestic commodities or 
products,'' the compliance with the requirement is highly questionable. 
Fresh fruits and vegetables produced in the United States are 
seasonally available to schools. Essentially, when they are not 
available, schools could purchase non-domestic produce for their 
students. This action would seem inconsistent with the intent of the 
Buy American program which is to encourage the consumption of domestic 
products. The program should be modified to require the purchase and 
consumption of fruits and vegetables in all forms which would include 
fresh, dried, canned and frozen.
    We believe the spirit of the Buy American program can be maintained 
and conformity take place by implementing the following compliance 
steps and modifying the requirement as shown below:

   Include a Buy American clause in all procurement documents 
        including product specifications, bid solicitations, requests 
        for proposals, purchase orders, etc.

   Monitor contractor performance.

   Require suppliers to certify the origin of the product sold 
        to schools.

   Examine product packaging for identification of the country 
        of origin.

   Change the language in the Buy American requirement to state 
        ``. . . the Department shall require that a school food 
        authority purchase, to the maximum extent practicable, domestic 
        commodities or products in all forms including fresh, dried, 
        canned and frozen.''

    Thank you for your leadership and this opportunity to submit 
testimony for the 2012 Farm Bill. We look forward to working with you 
through this very important process in support of the United States 
agricultural industry.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Barry F. Kriebel,
President, 
Sun-Maid Growers of California.
                                 ______
                                 
  Submitted Letter from Jeff Marchini, President, Merced County Farm 
                                 Bureau
May 20, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture,
Washington, D.C.

    Chairman Peterson:

    The Merced County Farm Bureau represents one of the most productive 
agricultural counties in California and the United States. We have over 
1,600 members in dairy and ranching industry as well as growers of 
almonds, tomatoes, and sweet potatoes crops. We are encouraged by the 
efforts of Chairman Collin Peterson (D-MN) to bring the full Committee 
to the Central Valley to discuss the 2012 Farm Bill.
    California agricultural producers have typically not been deeply 
involved in farm bill issues, but in recent years the farm bill's focus 
has expanded to include new programs and provisions that benefit many 
of our members. The 2008 bill's historic inclusion of the first-ever 
specialty crop title has proved especially important to our growers of 
fruits, vegetables and nuts. Many producers also take advantage of 
conservation programs, including the popular EQIP, a program that 
recently was threatened for budget cuts. Research, nutrition, and other 
areas of agricultural policy also receive greater attention in the 2008 
bill.
    Looking to 2012, the Merced County Farm Bureau would like to work 
with the Congress to ensure that the farm bill continues to acknowledge 
the importance of promoting conservation programs like EQIP, preserving 
the specialty crops title, and strengthening other programs that ensure 
a safe and abundant domestic food supply. We are eager to share our 
thoughts, comments, and expertise in the crafting of a bill that works 
for our producers. Thank you for taking the opportunity to visit us in 
order to learn more about the challenges we face to farm and ranch in 
California.
            Sincerely,

Jeff Marchini,
President,
Merced County Farm Bureau.
                                 ______
                                 
     Submitted Letter by Anthony R. Mendes, Chairman of the Board, 
                        California Dairies, Inc.
May 3, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture,
Washington, D.C.

    Dear Congressman Peterson:

    On behalf of its producer-members, California Dairies, Inc. (CDI) 
respectfully submits this letter into the hearing record for the farm 
bill field hearings. CDI is a full-service milk processing cooperative 
owned by approximately 465 producer-owners located throughout the State 
of California and collectively producing over 17 billion pounds of milk 
per year, or 42% of the milk produced in California. CDI supplies 40% 
of its milk directly to customers located in California and processes 
the balance in its own processing plants. Our producer-owners have 
invested over $500 million in seven large processing plants, which are 
projected to produce about 350 million pounds of butter and 750 million 
pounds of powdered milk products in 2010.
    We thank the Members of the House Agriculture Committee for calling 
the series of field hearings and allowing members of various 
agricultural sectors the opportunity to present our respective industry 
views that the Committee may find to be valuable during future farm 
bill discussions. I appreciate the occasion to speak to the current 
status of the U.S. dairy industry, current dairy policy considerations 
and our suggestions for the next farm bill.
    The situation that the U.S. dairy industry has faced in the last 18 
month has led to a proliferation of ideas and proposals for new 
policies and programs. Ostensibly, these proposals have been put forth 
as solutions to the incredibly difficult times that dairy producers 
have had to endure. While the goals of the various proposals differ in 
the details, the suggestions are mostly focused on stabilizing milk 
prices or providing a higher floor price for milk. Conceptually, the 
programs are laudable, and most producers could support the idea of 
higher and more stable prices. In fact, CDI's Board of Directors voted 
affirmatively at its April 27th 2010 Board meeting to work with Agri-
Mark Dairy Cooperative (Agri-Mark) and National Milk Producers 
Federation (NMPF) to help them further develop their concepts for 
creating a more stable environment for dairy producers.
    The various proposals being considered, including those from Agri-
Mark and NMPF, are at various stages of review within the dairy 
producer community. As they are being discussed in broader forums, we 
are starting to see modifications to the proposals so that they share 
more common elements. We remain hopeful that the process of convergence 
continues so that a single proposal emerges for dairy producers to 
consider. We recognize that there are still unresolved issues in all of 
the plans, even in their current stages of development. We are also 
cognizant that as the concepts are transformed into enabling language, 
the details provided may ultimately affect how many producers will 
support the programs when they are finalized.
    While we hope that continued discussions among dairy producers will 
result in the general agreement needed to move the programs forward, it 
is clear that the proposals are new enough to the dairy industry and 
complex enough in their administration that they are not likely to be 
implemented very soon. The dairy industry needs stabilizing forces 
sooner rather than later. Therefore, we recommend that consideration be 
given to a program that can provide what the dairy industry needs 
quickly. As such, we favor programs that encourage dairy producers to 
utilize risk management tools, some of which are available today. In 
doing so, dairy producers would be establishing their own guaranteed 
income.
    We offer two potential programs that highlight the use of risk 
management tools. The first program would need to be developed but 
would follow some basic principles that would serve as cornerstones of 
the program:

    1. The risk-management program would be voluntary. All dairy 
        producers nationwide would choose whether or not they 
        participate.

    2. The program would be established as an incentive-based program 
        that rewards those producers who choose to be proactive in 
        establishing their own milk pay price.

    3. Dairy producers who execute a risk management strategy, such as 
        buying a put, would be compensated to offset the cost of 
        initiating that strategy (e.g., premiums and brokerage fees).

    To be mindful of the effort of deficit reduction, we recommend that 
other government dairy subsidy programs (such as the MILC program) be 
restructured or eliminated in order to generate the funding necessary 
to carry out the risk management-based program.
    The second option we would favor is to simply revive the Dairy 
Options Pilot Program (DOPP) that was provided for in the Federal 
Agriculture Improvement and Reform Act of 1996. In January of 1999, 
USDA started the DOPP to introduce milk producers to the futures and 
options approach for managing risks. It was a cost-sharing program that 
allowed dairy farmers to gain hands-on experience with options trading 
for a period of 6 to 8 months. USDA paid 80 percent of the premium (or 
cost) of each option and broker fees up to $30 per option. A similar 
but more expansive program could be implemented to keep within the 
theme of emphasizing risk management. Based on the experiences acquired 
with the DOPP, there may be reason to launch a modified program that 
uses some of the elements of the DOPP but improves on the original 
concept.
    Either of the two programs would be a tremendous step forward in 
helping to stabilize milk prices. We also see that implementation of a 
risk-management program can be pursued while we work to address other 
issues that would enhance returns to all U.S. dairy producers, such as 
establishing and enforcing higher fluid standards throughout the U.S., 
and maximizing the exposure of dairy products in school lunch programs 
and ``WIC'' programs by introducing new products, such as snack-sized 
yogurt products and string cheese.
    Thank you for the opportunity to submit these views.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Anthony R. Mendes,
Chairman of the Board.
                                 ______
                                 
 Supplementary Material Submitted by Kevin D. Kester, Cattle and Grape 
                        Producer, Parkfield, CA
May 28, 2010

Hon. Collin C. Peterson,
Chairman,
House Committee on Agriculture,
Washington, D.C.

    Dear Mr. Chairman:

    I appreciated the opportunity to serve as a panelist at the May 3, 
2010, House Committee on Agriculture field hearing on the 2012 Farm 
Bill in Fresno, California, representing the California Cattlemen's 
Association. I wanted to take this opportunity to share a few 
additional comments in response to a question raised by two Members of 
the Committee at the time.
    During the question and answer period, questions were raised that 
implied that farm bill funds in California were being sought only as a 
means to mitigate the state regulatory burden and that--for that 
reason--our state was already receiving or seeking to receive a 
disproportionate amount of farm bill funding.
    I in no way believe that California is receiving an uneven share of 
funding and would offer the following response in addition to the 
comments I made at the time.
    First, California agriculture's request for farm bill funds is 
primarily targeted at the Conservation Title, which represents a 
relatively small portion of the bill, particularly as compared to 
dollars allocated through other titles. Those conservation funds are 
applied across millions of acres of California farm and ranchland that 
stretch across a vast number of geographic and ecological zones to help 
improve habitat, conserve and manage water, improve air quality and 
stimulate other conservation activities that provide benefits to 
landowners, the environment and the public at large.
    In addition to the conservation challenges faced in California's 
diverse agricultural production, ranchers and farmers in the state also 
encounter higher than average incidence of endangered species habitat 
and proliferation, development pressure and associated land value 
appreciation that make managing a business especially challenging. As 
such, demand for programs to conduct conservation work in the state 
greatly outstrip the availability of dollars and technical assistance 
to conduct projects. As I mentioned in my testimony, each year there 
are hundreds of California farmers and ranchers who propose to address 
important resource concerns and are willing to invest their own money 
to improve environmental resources, but are turned away from EQIP 
because of the lack of funds available in California.
    In light of the significant ecological challenges in the state, 
there is a lot that can be accomplished through government and private 
collaboration. Even still, in many programs California receives equal 
or lesser allocations of funds compared to states with significantly 
lower acreages of farm and ranchland or agricultural productive output. 
California's farm gate revenue is much higher as a percentage of the 
nation's total than is our allocation of Federal conservation funding.
    Beyond the proportionately low allocation of Conservation Title 
funding to California, it even more disheartening that our state 
receives a significantly lower portion of Conservation Technical 
Assistance (CTA) funding than other states. CTA makes it possible for 
NRCS to provide voluntary, non-regulatory technical assistance to help 
people conserve, maintain and improve the long-term sustainability of 
working landscapes. This funding is imperative to put conservation 
program dollars on the ground and to assist the state's land managers 
in improving management decisions. In a state where there is already a 
general shortage of technical assistance, it is imperative that in the 
next farm bill California does not experience a decrease or it will 
further erode Natural Resources Conservation Service's conservation 
capacity.
    Despite the size and scope of production in our state and these 
many challenges, most ranchers and farmers in California receive no 
direct payments as they grow and raise a staggering range of more than 
400 crops and livestock commodities that feed people all around the 
country and the globe. Many of these products are grown only in 
California and therefore made available solely due to the work of 
California farmers and ranchers. These factors speak to the need to 
increase, not decrease, investment in ensuring conservation work can be 
completed.
    Mr. Chairman, as California agriculture remains the economic 
powerhouse of the most populous state in the Union and as our state's 
progressive farmers and ranchers continue to seek more creative ways to 
raise the food and fiber our nation needs in a fashion that continues 
to enhance our natural resources, we look forward to your continued 
support.
    Thank you again for the opportunity to participate in the hearing 
and to share my comments. Please be in contact if I can ever be of 
assistance or feel free to contact Matt Byrne in the CCA office at 
[Redacted].
            Best regards,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Kevin D. Kester,
First Vice President.


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                          TUESDAY, MAY 4, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                      Cheyenne, WY.
    The Committee met, pursuant to call, at 8:00 a.m., at 
Laramie County Community College, Center for Conferences and 
Institutes, 1400 East College, Centennial Room 130, Cheyenne, 
Wyoming, Hon. Collin C. Peterson [Chairman of the Committee] 
presiding.
    Members present: Representatives Peterson, Cardoza, Markey, 
Lucas, Conaway, Fortenberry, Smith, and Lummis.
    Staff present: Keith Jones, John Konya, Robert L. Larew, 
Lisa Shelton, April Slayton, Nicole Scott, Pelham Straughn, and 
Sangina Wright.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. This hearing of the Committee on Agriculture 
to review U.S. agriculture policy in advance of the 2012 Farm 
Bill will come to order.
    Good morning everybody, and thank you for joining us today 
as we have our fourth hearing this weekend. We are glad to be 
here in Cheyenne and hear from the area farmers and ranchers 
about the issues facing agriculture in rural communities.
    As we demonstrated in the 2008 Farm Bill, it's about much 
more than just farms. We continue the safety net that protects 
farmers and ranchers and provides the certainty they rely on to 
stay in business, but we also made historic investments in 
nutrition, conservation, renewable energy, research, rural 
development, fruits and vegetable products and organic 
agriculture.
    While traditional farm programs have a relatively small 
proportion of the funding in the farm bill, these programs are 
essential to the continuing success of U.S. agriculture.
    We have a system of independent farmers and ranchers 
working the land, and without the certainty the farm programs 
provide, many of these farmers would not be able to get the 
financing that they need to put a crop in the ground.
    I want to welcome our witnesses and thank them for taking 
time out of their busy time of the year to talk to us today. 
These farm bill hearings are the first step in the process of 
writing the next farm bill. And a bill that's this large and 
covers so many important issues takes a lot of time, a lot of 
effort to get it right; and I'm committed to a process, as we 
had last time, that is open, transparent and bipartisan.
    For all those joining us today in the audience, I hope that 
you'll participate in the process by sharing your thoughts on 
the farm bill with us. We have a survey posted on our Committee 
website. We have cards available today with that web address so 
that everyone has a chance to tell the Committee about what's 
working and what new ideas we should consider for the next farm 
bill. That address is www.agriculture.house.gov. Anybody that's 
in the audience that's not on the panel is welcome to provide 
that testimony to the Committee, or anybody that is watching on 
the web.
    We are, for the first time in history, broadcasting all of 
these field hearings on the website, and people around the 
country are watching us. So we appreciate everybody being here. 
We have a lot of ground to cover, so let's get started.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Cheyenne to 
hear from area farmers and ranchers about the issues facing agriculture 
and rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. I recognize the Ranking Member, my good 
friend and colleague and working partner, Mr. Lucas, from 
Oklahoma for an opening statement.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman. And let me note ever so 
briefly the nice, little, gentle breeze you have out there 
reminds me of western Oklahoma this morning; so I do feel at 
home. It's a pleasure to be here with you and to be a part of 
this important process of preparing the 2012 Farm Bill.
    I think it would be appropriate, Mr. Chairman, if it's all 
right, I would yield my time to Wyoming's very own outstanding 
Member of the Agriculture Committee, Congresswoman Lummis, for 
her comments at this moment.

 OPENING STATEMENT OF HON. CYNTHIA M. LUMMIS, A REPRESENTATIVE 
                    IN CONGRESS FROM WYOMING

    Mrs. Lummis. Well, I would like to thank the Ranking Member 
and thank the Chairman. On behalf of all the people of the 
State of Wyoming, and particularly our ag community, I want to 
welcome all of you to our state. We're honored and grateful 
that you brought the House Agriculture Committee to Cheyenne, 
and I'm personally grateful to my colleagues on the Committee 
who are here today. I apologize for our brisk breeze. It's 
usually not this bad, but winds around here don't usually calm 
down until around the first of June. We have the most gorgeous 
summers and falls that you can possibly imagine, but we're 
still grappling with winter in May. Thanks for your indulgence 
of our brisk breeze.
    It would be easy to hold an all-day hearing and still not 
cover the wide variety of issues facing agriculture in Wyoming. 
I know several people from around the state have prepared and 
will submit written testimony for the record. Amongst them are 
the Wyoming Wool Growers Association which is seeking the 
Committee's help to adjust the Loan Deficiency Payment Program 
and a strong Federal partnership in dealing with predator 
control; the Wyoming Association of Conservation Districts 
whose on-the-ground conservation efforts result in tangible 
environmental improvements all across our state; and the Rural 
Electric Co-ops who appreciate the Committee's work on the RUS 
program and seeks our assistance in the face of railway rate 
hikes pending as a result of Warren Buffet's recent acquisition 
of Burlington Northern.
    But I'm going to move on now to the main topics of our 
hearing today. The scourge of bark beetle is taking its toll on 
the forests of Wyoming and the West. Over the past decade, 
about 17 million acres in Regions 1, 2 and 4 have been affected 
by bark beetle epidemics. I wish the Committee had time to fly 
over the areas, and I know Representative Markey agrees because 
her area is as affected as ours in the Medicine Bow. The 
magnitude of the problem is really difficult to grasp without 
seeing it. But this hearing and the opportunity to hear 
witnesses who can vouch for the seriousness of this issue is 
truly important, and I'm really grateful that you came today 
for that. For my part, last week I introduced H.R. 5192, the 
Forest Ecosystem Recovery and Protection Act, which takes some 
of the best bipartisan ideas on forest management and adds some 
new strategies to begin the long road to forest recovery.
    Forest health is critical to Wyoming's livelihood and 
economy, but so too is the health of Wyoming's vast ranges, 
open spaces and, particularly, watersheds. In the semi-arid 
climate of this state, the health of the land is synonymous 
with the health of the state. There's an old saying in Wyoming, 
Mr. Chairman, and I think we were exposed to it last night, 
that whisky is for drinking and water is for fighting. That 
gives you an indication of how important water conservation is 
to our farmers and ranchers.
    Farm bill programs like EQIP, the Farm Ranchland Protection 
Program and the Grassland Protection Program are invaluable 
tools, and they're so important to the lasting success of both 
the ag industry and land and water conservation that I look 
forward to the testimony on the second panel about these 
programs.
    Again Mr. Chairman and Mr. Ranking Member, we're so 
grateful that you came. And I hope you can see by this turnout 
this morning, and at the reception for you last night, that 
this means a lot to us, that you chose to come to our state. 
And we are really grateful for the opportunity to have input on 
the next farm bill. And, Mr. Chairman, I yield back.
    The Chairman. I thank the gentlelady.
    And we thank her for her hospitality and the warm reception 
that we've received in Wyoming. I want to assure her I made 
certain on the last farm bill that we got the loan rate for the 
wool raised, and we will continue to work on it. We want to 
keep the sheep industry going in this country, and we know they 
have challenges.
    We welcome the first panel of witnesses. But, before I do 
that, we have some people here that do a great job for us at 
USDA, and I want to recognize them. Gregor Goertz, the head of 
the Wyoming FSA operation; Mr. Derrel Carruth, who is the Rural 
Development Director for USDA; and Xavier Montoya, who is the 
State Conservation Officer; and the State Director, Todd 
Ballard. So thank you for your service. Let's give them a hand. 
They do a great job.
    We welcome the first panel: Mr. Bill Crapser, the Wyoming 
State Forester from Cheyenne; Rick Cables, Regional Forester, 
Region 2, from the U.S. Forest Service; Nancy Fishering, forest 
products producer from Montrose, Colorado. And I guess, Mr. 
Cruz, you're in a support role here.
    Mr. Cruz. Yes, sir.
    The Chairman. So we welcome you to the Committee. A lot of 
people don't realize we have jurisdiction over a lot of the 
forest policy. We sometimes don't pay as much attention to that 
as we should; so we're pleased you're able to join us today and 
look forward to you educating us a little bit about some of the 
issues.
    So welcome to the Committee. Mr. Crapser, you're up. Your 
full testimony will be made part of the record, and we would 
like to keep it to 5 minutes. We've got to get back to 
Washington and vote tonight; so we've got to keep this show on 
the road. So welcome to the Committee.

    STATEMENT OF BILL CRAPSER, FORESTER, STATE OF WYOMING, 
                          CHEYENNE, WY

    Mr. Crapser. Thank you, Mr. Chairman, Members of the 
Committee. Welcome to Wyoming. I also apologize for the wind. 
We are in red flag fire danger in the eastern half of the state 
today because of the wind. My name is Bill Crapser. I'm the 
State Forester, and I appreciate the opportunity to speak to 
you today.
    Wyoming has approximately 11\1/2\ million acres of forest 
within its boundaries. Of these forests, about 9 million acres 
are in Federal ownership and 2\1/2\ million acres are in 
private, tribal or state ownership. The state and private 
forestry program authorized by Congress and administered by the 
U.S. Forest Service, along with the other forestry programs in 
the farm bill, are invaluable tools in helping the state 
provide technical and financial assistance to private 
landowners promoting stewardship and the health of our forests. 
Without these programs, the long-term ecological, financial and 
societal value of these forests would be lost.
    Like all areas of the country, Wyoming faces many 
challenges and threats. We've heard a lot about the bark beetle 
and fire, and they're probably our two largest threats that our 
forests face, but they are just two of the challenges that the 
forests face.
    As a key element of the 2008 Farm Bill, states were 
directed to develop a statewide forest resource assessment and 
strategies to address the issues raised in the assessment. I'm 
proud to say that they're due in July, I believe, to the 
Washington Office of Foresters. I'm proud to say that Wyoming 
has completed this task. I will be giving Mr. Cables our 
assessments and strategies today. I believe we're the first 
state to finish our assessment in the country, and I'm pretty 
proud of my crew for that.
    We don't have time today to review the entire assessment, 
but I would like to hit some of the high points on how we 
developed our assessment and what it does for us. It's an all-
lands approach to forestry. It assesses a snapshot in time of 
the status of all forestlands. We developed it with a wide 
variety of input from agencies, interest groups and 
individuals. The assessment is a geospatial analysis using 14 
key data layers identified by our partners. These include 
everything from development risk to wildfire risk, insect and 
disease, aquatic habitat, community forestry, green 
infrastructure and several other data layers.
    With the help of our partners, we then developed 15 threats 
that face Wyoming's forests. And it's in my written testimony, 
the threats and the strategies. I would just like to hit on a 
couple of the threats. These threats that Wyoming is facing in 
forest health issues is probably unprecedented. Congresswoman 
Lummis alluded to the bark beetle issues. We've never seen 
anything like where we're at with bark beetles across the 
state.
    Threat two is a lack of a viable forest products industry. 
Seven years ago when I became State Forester, there were seven 
large sawmills--fairly large--sawmills operating in the state. 
Today there's one in operation. Congresswoman Lummis used to be 
one of my bosses when she was State Treasurer. And I didn't 
usually tell the landlord how successful I had been in losing 
the industry, but we do have a huge drop in industry.
    Many areas of older forests are being converted to young 
forests just by Mother Nature, by the bark beetle and by the 
amount of mortality in this forest. Threat of wildfire both in 
the urban interface, and outside the urban interface, and in 
watersheds, is on the great increase. Our occurrence of fire 
and our acreage burn have almost quadrupled over the last 10 
years.
    Aspen is a growing focus of concern within the Rocky 
Mountain Region. We're seeing Aspen decline throughout the 
Rocky Mountains and there are lots of different health problems 
with Aspen stands. We have numerous challenges facing any type 
of healthy forest community.
    Water quality and water quantity is an important issue. 
Congresswoman Lummis again said that whisky is for drinking and 
water is for fighting. Water is a big issue in our state and in 
our part of the country.
    Terrestrial habitat is under pressure; and we have 
fragmentation of land ownership. We're seeing a lot of ranches 
and farms that really just can't afford to stay in the farming 
business or ranching business anymore for various reasons. They 
are being pretty much forced to fragment their lands and divide 
up a lot of their lands.
    Access for management is becoming more and more complicated 
with new owners, different ownerships, Federal lands, state 
lands all intermingled, and that continues to be an issue.
    With any type of global climate change, the high deserts 
are always on the front runner of those type of issues. The 
management guidance for private landowners, because of all 
these things, is increasingly important.
    And invasive species, including insects, plants, all types 
of things, is on the increase. As most of you know, in the 
Midwest right now, we have a huge outbreak of Emerald ash 
borer. It's killed most of the ash trees in Indiana, and in 
Michigan. That bug is moving West. Even in a state like ours, 
about 30 percent of the street trees in our communities and 
cities are green ash. So if Emerald ash borer gets in this 
state, we're seeing a huge impact. Nebraska is even in worse 
shape. I think there 47 percent of your street trees in 
Nebraska are affected by the Emerald ash borer.
    What we plan to do with these documents is to help focus 
our efforts and to help the Forest Service focus their efforts 
in areas and in projects that will deliver maximum return on 
investment. We believe that partnership between the state and 
the Federal agencies, both the Forest Service and NRCS, are 
important for all of us to succeed, and the forestry programs 
and the farm bill are important facets of that success. Thank 
you very much.
    [The prepared statement of Mr. Crapser follows:]

    Prepared Statement of Bill Crapser, Forester, State of Wyoming, 
                              Cheyenne, WY
    Good morning and welcome to Wyoming. My name is Bill Crapser, I am 
the State Forester for Wyoming and I appreciate the opportunity to 
testify before you today.
    Wyoming has approximately 11.5 million acres of forests within its 
borders. Of these forests 9 million acres are in Federal ownership, and 
2.5 million acres are private and state lands. The State and Private 
programs authorized by Congress and administered by the U.S. Forest 
Service, along with the forestry programs in the farm bill are 
invaluable tools in helping the state provide technical and financial 
assistance to private land owners promoting the stewardship and health 
of our forests. Without these programs much of the long term value 
(ecological, financial, societal) of these forests would be lost.
    Like all areas of our country the forests of Wyoming face many 
challenges and threats. We have heard and seen a lot about bark beetles 
and fires of late, but these are just two of the challenges we face.
    Under the 2008 Farm Bill states were directed to develop a 
Statewide Forest Resource Assessment along with Strategies to address 
issues raised in the assessment. I am proud to say that Wyoming has 
completed this task, and that our documents are being submitted to the 
U.S. Forest Service this week. We do not have time today to review the 
entire document, but I would like to take this opportunity to hit on a 
few of the high points.
    Our Assessment and Strategies were developed with the help and 
input of wide variety of agencies, interest groups, and individuals. 
The assessment is a geospatial analysis using fourteen key data layers 
identified by our partners including: Development Risk, Forest 
Fragmentation, Wildfire Risk, Insect and Disease, Aquatic Habitats, 
Terrestrial Habitats, Water Quality and Supply, Economic Potential, 
Green Infrastructure, Community Forestry, Agro-Forestry, and land 
Stewardship Potential. These data layers allowed us to identify 
priority landscapes, and to focus on issues and threats that are facing 
our forests.
    With the help of our partners we then developed fifteen threats 
that are facing the forest of Wyoming along with strategies to deal 
with them.
    Threats and Strategies:

   Threat 1: Wyoming is facing forest health issues that are 
        probably unprecedented.

   Threat 2: lack of a viable forest products industry.

   Threat 3: In many areas, older forests are being converted 
        to young forests on a large scale due to bark beetle epidemics.

    1. Increase age class and species diversity.

    2. Use fire as a tool.

    3. Ensure a predictable, dependable supply of forest products.

    4. Develop additional forest products markets.

    5. Retain whitebark and limber pine.

   Threat 4: The threat of fire in the Wildland Urban Interface 
        (WUI) is significant and expanding.

   Threat 5: Wildfires in areas outside of the WUI are also a 
        threat.

    1. Mitigate risk of catastrophic fires in WUI areas.

    2. Increase training and capacity.

    3. Actively manage suitable lands.

    4. Reintroduce prescribed fire.

    5. Utilize natural fires.

    6. Continued cooperation between agencies.

   Threat 6: Wyoming's low elevation riparian forests are in 
        decline.

    1. Increase stream flow rates.

    2. Manage ungulate populations.

    3. Manage upstream forests.

    4. Forest management activities in riparian areas to increase 
        forest health.

    5. Increase the public's understanding.

   Threat 7: Aspen is a growing focus of concern within the 
        Rocky Mountain region.

    1. Increase regeneration of aspen.

    2. Analyze current and potential aspen sites.

    3. Manage ungulate populations.

   Threat 8: There are numerous challenges to maintaining 
        healthy community forests in Wyoming.

    1. Enhance species and age diversity.

    2. Increase local community forestry expertise.

    3. Enhance funding and build capacity.

    4. Measure progress within communities.

    5. Build green infrastructure.

   Threat 9: In an arid state like Wyoming, water quality and 
        quantity will always be important issues.

    1. Compliance with Wyoming's Silviculture BMP's.

    2. Conduct forest management activities.

    3. Emphasize riparian forest restoration.

    4. Reduce runoff from urban areas into watersheds.

    5. Evaluate community tree canopies.

   Threat 10: Terrestrial habitat is under pressure in Wyoming.

    1. Encourage landscape level planning.

    2. Provide management information.

    3. Maintain continuity across ownerships and programs.

    4. Mimic natural disturbance regimes.

   Threat 11: Fragmentation of land ownership is likely to 
        adversely affect natural resource management in Wyoming.

   Threat 12: Access for management is becoming more 
        complicated.

    1. Cross-boundary collaboration.

    2. Manage subdivisions as one land unit.

    3. Landscape-level travel management plans.

    4. Provide incentives to conserve working forestlands.

    5. Keep forestry practices financially viable.

   Threat 13: Management guidance for private lands is 
        increasingly important.

    1. Emphasize stewardship plan development.

    2. Provide information and education to private landowners.

    3. Better inventory on private lands.

    4. Establish/maintain a local contractor base.

    5. Provide financial incentive for management.

    6. Develop and implement Certification programs for landowners.

   Threat 14: Wyoming will be on the leading edge of the 
        impacts of global climate change.

    1. Explore the carbon sequestration potential.

    2. Address forest management under a changing climate.

    3. Adapt water management to accommodate changes.

   Threat 15: Invasive species, both insects and plants, pose a 
        threat to forested lands.

    1. Monitor invasive insects, pathogens, and plants.

    2. Early Detection and Rapid Response (EDRR) guidelines.

    3. Build awareness of invasive species.

    4. Focus efforts on the control and management.

    5. Develop rehabilitation and restoration strategies.

    6. Encourage management techniques that do not promote the spread 
        of invasive species.

    7. Manage forests and rangelands to increase resistance.

    We plan to use these documents to help in focusing our efforts and 
limited funds (both Federal and state) in areas and on projects that 
will deliver the maximum return on our investment.
    We believe that the partnership between the state and the Federal 
agencies, both the U.S. Forest Service and the NRCS are important to 
all of our success, and that the forestry programs in the farm bill are 
important facets of that success.
    Thank You.

    The Chairman. Thank you, Mr. Crapser, for that testimony.
    Ms. Fishering, welcome to the Committee.
    Are we going to have Mr. Cables do the presentation? All 
right. You have a PowerPoint for us.

  STATEMENT OF RICK CABLES, REGIONAL FORESTER, ROCKY MOUNTAIN 
               REGION, U.S. FOREST SERVICE, U.S.
             DEPARTMENT OF AGRICULTURE, GOLDEN, CO;
            ACCOMPANIED BY PHIL CRUZ, DEPUTY FOREST
  SUPERVISOR, MEDICINE BOW-ROUTT NATIONAL FOREST, U.S. FOREST 
                         SERVICE, USDA

    Mr. Cables. Mr. Chairman, Members of the Committee, good 
morning. My name is Rick Cables. I'm the Regional Forester for 
the Rocky Mountain Region of the U.S. Forest Service which 
includes five states including Nebraska, Wyoming and Colorado, 
South Dakota and Kansas.
    I'm going to give an overview this morning on this bark 
beetle situation we have in my region and touch a little bit on 
some of the interior West issues. With me is Phil Cruz, the 
Deputy Supervisor on the Medicine Bow-Routt National Forest, 
and he'll be available for questions.
    This is the State of Wyoming. You're right here in 
Cheyenne. This is the Medicine Bow National Forest, the 
Bridger-Teton Forest, the Shoshone National Forest, Black Hills 
National Forest up here. The red is forests that are 
substantially dead in terms of the mature timber. It's a huge 
amount of acreage. I'm going to focus my discussion right now 
on the Medicine Bow and the national forests in Colorado. But I 
just want to show you the extent of the insect and disease 
damage.
    And again, this is Yellowstone National Park right here. 
I'm going to show you a progression from 1996 to today in terms 
of the bark beetle, and the red will indicate that the forests 
that are--that have a hundred percent mortality. So just watch 
closely: 1998, 1999, 2000, 2002, 2003, 2004. In the last couple 
of years, this thing has exploded: 3.6 million acres of dead 
forests the size of the State of Connecticut. And the 
ramifications in terms of infrastructure threats and human 
health and safety threats are significant, and we're very 
worried about that.
    This just gives you an indication of what's happening now. 
One county commissioner said to me that this issue has gone 
from, ``Oh, my God, the trees are dying'' to ``Oh, my God, the 
trees are falling.'' We have two major threats: Falling trees 
and fire.
    On average over this 3.6 million acres, we're going to see 
100,000 trees a day fall down for 10 years every day unless we 
have a wind event then they will fall earlier.
    Here is just a 50 yard stretch of trail. You can see how 
labor intensive it's going to be to keep the trails open. 
Here's a slide of an aerial view. There are horseback riders 
right here riding on a trail with a bunch of deadfall. That 
threatens them and threatens the infrastructure itself. Here is 
the same view of the horseback riders at ground level right 
here.
    In recreation sites, we've had to remove every tree. Also, 
we have major world-class ski areas in this area: Breckenridge, 
Vail, Steamboat, Keystone; in Wyoming, the Snowy Range. And 
with the substantial portion of the timber that provides 
shelter and wind protection on ski areas being lodgepole pine 
which are dying at these incredible rates, we're removing the 
dead trees as fast as we can, working with the ski areas.
    Power lines and utility corridors are threatened. We have 
over 550 miles of power lines. One tree on a power line, and 
you're out of power. So you can just imagine if you look at 
those corridors how much cutting back adjacent to the 
infrastructure we need to do to protect the power source.
    As for roads, there are 3,700 miles of roads in this 
country. We've treated about 500. We've got 3,200 miles to go. 
And of all the values that are really threatened, this is a 
picture of the watershed. This is the Colorado River Basin; 
this is the Rio Grande Basin; this is the Arkansas River, the 
Platte River. There are 177 counties that depend on water from 
this watershed. The reach of this watershed in this country is 
unparalleled in the West. This is literally the headwaters of 
the West. With our 13 downstream states, agriculture interests 
depending on this water, the condition of the watershed is not 
very good right now given the mortality with the trees and the 
falling trees.
    We have 211,000 acres to be treated adjacent to communities 
to protect from fire. You can see the data here. Miles of 
roads, trails, power lines. Significant infrastructure in this 
area.
    Last year I ordered a national incident management team, 
which is one of the big, elite teams, Type 1 teams that address 
fires just because I wanted to look at this as an incident not 
in individual pieces or by state. That team gave us an initial 
assessment a few weeks ago that we're digesting right now in 
terms of actions to take. Last year Secretary Vilsack allocated 
or dedicated $40 million to be spent on this issue, which we 
really appreciate, but there's so much work to do.
    And there are opportunities related to this incident in 
terms of jobs, sustaining the supply of wood and biomass, and 
the research associated with it. So there's a lot of work to be 
done and a lot of opportunities associated with this. But it's 
a daunting challenge.
    So we'll look forward to your questions, Mr. Chairman. 
Thank you.
    [The prepared statement of Mr. Cables follows:]

 Prepared Statement of Rick Cables, Regional Forester, Rocky Mountain 
Region, U.S. Forest Service, U.S. Department of Agriculture, Golden, CO
    Mr. Chairman, Ranking Member and Members of the Committee, thank 
you for the opportunity to appear here today to discuss the 
implementation of the Food, Conservation and Energy Act of 2008 in 
Wyoming. The National Forests of this state lie in two Forest Service 
Regions: the Medicine Bow, Shoshone, Bighorn, and two ranger districts 
of the Black Hills are in the Rocky Mountain Region, known as Region 2. 
The Bridger-Teton, as well as portions of the Wasatch, Ashley, Caribou 
and Targhee, are in the Intermountain Region, known as Region 4.
    Let me start by acknowledging the hard work of the Members of this 
Committee and your staff. Having worked with my staff over the past 15 
months to implement titles in the bill relevant to the Forest Service, 
I can fully appreciate the months of hard work that went into crafting 
this important piece of legislation. You are all to be commended for 
the strong bipartisan bill that overcame multiple obstacles before 
becoming law.
    I know many of you are very interested in the status of the bark 
beetle outbreak, so before I describe specifics of farm bill 
implementation, let me briefly discuss the existing forest condition in 
Wyoming. In 2009, our annual aerial survey in Wyoming detected 
increased mortality in several species: 1,205,000 acres of lodgepole, 
limber, whitebark and ponderosa pines killed by mountain pine beetle; 
26,000 acres of Engelmann spruce killed by spruce beetles; 3,800 acres 
of Douglas-fir killed by Douglas-fir beetles; and 86,000 acres of 
scattered mortality in subalpine fir caused western balsam bark beetle 
and root disease.
    In the areas where mountain pine beetles have been active for the 
past several years, standing dead trees are starting to fall, posing 
threats to public and employee health and safety. On the Medicine Bow 
National Forest, falling dead trees threaten over 20,000 acres of 
Wildland Urban Interface, 334 miles of trails; 1,396 miles of roads; 
and 41 developed recreation sites (campgrounds, picnic grounds, 
trailheads, and administrative sites).
    In FY 2010, we are prioritizing work in those areas that receive 
the most public use such as roads and developed recreation sites. We 
plan to reduce hazardous fuels on 5,914 acres in the wildland urban 
interface, and we plan to mitigate falling tree hazards on 52 miles of 
roads and 21 miles of trails.
    Now I'll turn my remarks to implementation of the farm bill in 
Wyoming. The 2008 Farm Bill made significant changes to the Cooperative 
Forestry Assistance Act and provided a number of new authorities for 
the National Forest System several of which have been implemented in 
Wyoming.
Market-Related Contract Term Additions (MRCTA) (Sec. 8401)
    The 2008 Farm Bill authorized the Secretary to use market-related 
contract term additions to add up to 4 years to the terms of certain 
timber sale contracts awarded prior to January 1, 2007. Prior to the 
2008 Farm Bill, contracts could only receive a maximum of 3 years of 
MRCTA. The agency revised its regulations on November 4, 2008, to allow 
all contracts, regardless of their award date, to receive up to 4 years 
of MRCTA. In Wyoming, purchasers took advantage of the MRCTA timber 
contract relief on four sales in Region 2, and four sales on the 
Bridger-Teton in Region 4.
Contract Cancellations and Emergency Rate Redeterminations (ERR) (Sec. 
        8401)
    The 2008 Farm Bill also authorized the Secretary to provide 
Emergency Rate Redeterminations and cancellations to certain qualifying 
timber sale contracts awarded between July 1, 2004, and December 31, 
2006. Specifically, the farm bill gave the Secretary discretion to 
cancel certain qualifying contracts that were advertised as of June 18, 
2008, (the farm bill's date of enactment) at rates at least 50 percent 
less than the sum of their original bid rates. Other qualifying 
contracts were eligible to have their rates redetermined to more 
accurately reflect timber markets. In Wyoming, seven timber sale 
purchasers requested rate redeterminations, and six of them had their 
rates reduced. The seventh contract, which was on the Bridger-Teton 
National Forest, was cancelled subsequent to the emergency rate 
redetermination.
Forest Resource Coordinating Committee (Sec. 8005)
    The Forest Resource Coordinating Committee, chaired by the Chief of 
the Forest Service, was established in accordance with the Federal 
Advisory Committee Act to provide advice and assistance in coordinating 
USDA actions that relate to educational, technical and financial 
assistance to private landowners for conservation, management, 
productivity and improvement of forestland. Specifically, for the 
Forest Service, it provides advice on implementation of the Cooperative 
Forestry Program. Nominations are being reviewed and our goal is to 
have the first meeting of the Committee in calendar year 2010.
State Assessments and Strategies (Sec. 8002)
    Each state forestry agency is working on a State Assessment of 
forest conditions state-wide across all ownerships, including an 
assessment of threats to forestland and resources in the state, and on 
developing a Strategy that identifies priorities for the protection, 
conservation, and enhancement of forest resources. This program has 
provided an opportunity for state forestry agencies to collaborate with 
interested parties. In addition, this program captures the essence of 
the all lands landscape scale approach to management of our forests. 
State assessments and strategies are due to the Forest Service by June 
18, 2010, and will be reviewed by the Deputy Chief for State and 
Private Forestry.
    The Wyoming State Forestry Division has solicited input from a wide 
variety of stakeholders on drafts of its Assessment and Strategy, and 
it has worked closely with the Wyoming Forest Supervisors and Regional 
Office staff. The draft Wyoming State Assessment and Strategy 
identifies three primary threats related to bark beetles: unprecedented 
deterioration in forest health due to epidemic bark beetle levels, lack 
of retention of a viable forest products industry as an essential 
forest management tool, and conversion of older forests to young even 
age stands due to beetle epidemics.
Competition in Programs Under Cooperative Forestry Assistance Act of 
        1978 (Sec. 8007)
    Competition in Programs Under Cooperative Forestry Assistance Act 
of 1978 (Sec. 8007): For the past 3 years, approximately 15 percent of 
Cooperative Forestry Assistance funds have been awarded nationally 
through a competitive process to better conserve, protect and enhance 
forest resources. Wyoming received $431,749 through this competitive 
process for the following projects:

   Clear Creek Vegetation Enhancement, $74,500;

   Wyoming Information and Education Program, $56,812;

   Southeastern Wyoming Tree Enhancement, $ 33,000;

   Northern Laramie Range Integrated Forest Management Project 
        $255,075; and

   Forest Landowner Education Project: ``Today's Forest,'' 
        $12,362.
Community Wood Energy Program (Sec. 9013)
    This program provides grants to state and local governments to 
develop community wood energy plans and to acquire or upgrade wood 
energy systems. The President's 2011 budget includes full funding of $5 
million.
    This concludes my prepared statement. I would be pleased to answer 
any questions you may have.
                               Attachment

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you very much. That was a very good 
presentation.
    Ms. Fishering, have you got a PowerPoint for us too?

  STATEMENT OF NANCY M. FISHERING, FOREST PRODUCTS PRODUCER, 
                          MONTROSE, CO

    Ms. Fishering. Good morning, and thank you for letting 
industry be part of this panel. I represent Intermountain 
Resources which is the large, commercial-size sawmill remaining 
in Montrose, Colorado. However, we also own a mothballed 
sawmill in Saratoga, Wyoming, which we've been diligently 
looking at getting that open. But at this point, we're just 
happy to be a survivor.
    Our company has hundreds of employees in the mill, but we 
also support an industry that has to work in the woods. We hire 
the loggers; we hire truck drivers; we get the wood out of the 
woods. This is the kind of equipment we use. It's highly 
mechanized; it's very expensive. We no longer have people with 
chainsaws on the ground. We tend to be in equipment above the 
ground. It's safer.
    This is a piece of equipment working in a bark beetle 
forest. These are the type of saw logs we get. Here is one of 
the sawmills that closed this past year. See that ring? It's 
called blue stain. Some sawmills can use blue stain wood. Some 
need very clear, bright wood. We can use anything in the mill 
that we've got going in Montrose, Colorado. We create premium 
studs from the bark beetle. We've purchased 90 percent of the 
timber sales that were done as a result of the bark beetles, 
and they went to a mill in Montrose, Colorado. So we were 
commuting over 230 miles from the bark beetle heart of the area 
from where the epicenter was in Colorado. But, it's now 
extremely strong in Wyoming, as you saw in the pictures.
    So that's kind of a little history of our little company. 
But what I would like to do is talk about the context that 
we're operating in, and this is the economics that we've been 
dealing with. You watch that progression of the insects. If you 
looked at the height, the height of that map, of this chart, 
the fact that the height of the building boom in 2005 and 2006, 
and now we are in a declining market, dropping in terms of 
prices since, well, 2006. At the bottom of this chart was 2009. 
So at the same time you have this huge increase in need to get 
wood out of the woods, we also had the worst lumber markets. 
The prices went down to 1960's levels. This became an extreme 
challenge for the whole industry, not just in Colorado or 
Wyoming. The entire country was feeling this dynamic.
    At the same time we had issues such as those Rick already 
explained; we have this same bark beetle issue. This is a map 
of the entire West. The bark beetles aren't just attacking 
within this region. It's a whole western United States issue.
    And so what I am here to educate you about is what the 
timber program has done over time. This is a map from 1905. 
It's a history of the industry working with the Forest Service. 
This isn't private because we're so much dominated by public 
lands in the West. And it went to the height in about the mid 
1960s, and it's been declining every since.
    And I think it's the contention as I work with my 
counterparts locally, regionally, nationally that the program 
isn't large enough anymore. And the way that we're spending 
budget dollars, it goes through the USDA to the Forest Service. 
The budget doesn't sustain an industry anymore. And we're down 
here obviously at the lower point at this point in time.
    One of the things industry as a whole has come together 
across the country to say is you need to grow the program. The 
timber management budget has gotten so small, it's hard to 
sustain an industry. I would like to put a series of letters 
into the record that we've sent to the Interior Appropriations. 
I know it's not USDA, but it's Interior Appropriations. But 
we're trying to get a critical mass of people to understand the 
issue, and part of that issue is for $57 million, whether it's 
reprogrammed or new dollars, you could grow the program from a 
2.2 billion board foot program up to a 3 billion board foot 
program which would give the Forest Service across the West the 
money needed to deal with a huge issue like this.
    You saw an increase in pressure in the forest; you see what 
the public health and safety issues are. Believe it or not, 
we've been seeing budget cuts coming to our region in timber 
management dollars. Every year I'm astounded that we get 
another cut.
    This year Mr. Cables was very heroic and went back to D.C., 
and said this is an emergency; it's unacceptable; and we kind 
of brought it to a head this year. But we're getting emergency 
dollars, not timber management dollars.
    We believe strongly in accountability. If you have a 
sawmill, you need saw logs. If you don't have saw logs, you 
can't create 2x4s to pay for the money to go in the woods, get 
the trees, get the downfall out, and get it to a higher-end 
product, which for us would be selling it as 2x4s.
    The other issues that they've got on the forest, is when 
we're finished with a traditional logging job, we'll end up 
with a lot of different biomass on the landscape. What we would 
do traditionally would be burn it, the slash. We have air 
quality issues, huge ones, inversions in Colorado and in 
Wyoming; and you can't burn the amount of biomass that's left 
at the end of this kind of massive event of 3.6 million acres 
of dead trees.
    So the bottom line is we can do additional investments. Our 
business plan, if we were to reopen Saratoga, would include 
burning woody biomass residues, turning it into renewal energy 
by cogeneration and selling onto the grid. We have projects all 
over the State of Colorado specifically, some in Wyoming, to 
take some of this extra biomass for co-fire/co-burning electric 
generation.
    It is private enterprise that has stepped up to the plate 
to purchase most of this timber, and timber sale contracts, and 
it's been very unsettling. Our banks don't particularly like us 
now. We haven't been making money for a year. The economy has 
improved. The markets are coming back up right now, as we 
speak, in the past couple of months. Will they stay up? It's an 
uncertain time.
    So bottom line is we really appreciate some of the things 
you have done in your Committee. We would appreciate any 
letters of support to the Interior Appropriations to say this 
isn't working for the folks that we are responsible for in our 
program, which is forestry. So any assistance you can give us 
on helping to retool how they look at funding through Interior 
Appropriations would be very helpful, we believe.
    BCAP is something that was in a former farm bill, and that 
gives subsidies to get the wood out of the woods to a renewable 
energy type end-certified plant. That's helpful. But, the 
biomass definition, there are 14 different definitions of 
biomass floating around in different pieces of legislation. The 
farm bill is our favorite because it does allow biomass from 
Federal lands. We thought that was huge.
    And that's just a mere summary of what we deal with, but we 
appreciate the chance to give testimony today. Thank you very 
much.
    [The prepared statement of Ms. Fishering follows:]

  Prepared Statement of Nancy M. Fishering, Forest Products Producer, 
                              Montrose, CO
    Good morning, Mr. Chairman, and Subcommittee Members. My name is 
Nancy Fishering and I represent Intermountain Resources, LLC a company 
that has a operating sawmill in Colorado and a closed sawmill in 
Saratoga Wyoming.
    I very much appreciate this opportunity to join this panel to 
relate their testimony to the small business perspective and to the 
families and towns that depend upon public land policy for their 
livelihoods and quality of life. Our company investments are in the 
heart of the vast forest health issues that face our national forests. 
According to a 2009 Forest Service Decision Notice, of the total amount 
of standing dead timber that has been removed from the bark beetle 
affected forests in southern Wyoming and northern Colorado, almost 90% 
was processed by Intermountain Resources and our 150+ loggers and log 
truck drivers. We know that it is important to the local Forest Service 
Ranger Districts and the folks who live in Southern Wyoming that 
Intermountain continue their investment by opening the sawmill in 
Saratoga, Wyoming. Oddly, although Saratoga is centrally located in the 
3.6 million acres of dead lodgepole, a big obstacle to opening the 
Saratoga mill is securing sufficient log supplies.
    Let me explain. The company business plan adopted in fall of 2008 
was to continue to operate the mill in Montrose and to invest capital 
to retrofit and re-open the mill in Saratoga. That decision would 
entail hiring 90 employees in Saratoga and hiring another 150+ loggers 
and truckers to bring logs in from the woods for processing into lumber 
and generating electricity by burning sawmill residues and slash from 
the forest.
    This was a win-win fit for the Forest Service that need additional 
capacity to remove the dead timber from the landscape while benefiting 
the town of Saratoga which would very much like to see new jobs in 
their community.
    Unfortunately, this investment decision was interrupted by the 
horrific financial events following the collapse of the housing markets 
and the crisis on Wall Street. The company focus turned to simply 
surviving the economics of 2009. Due to plummeting lumber demand and 
lumber prices, analysts tracked a significant shrinkage in sawmill 
capacity in the U.S. and Canada. A June 2009 article noted that ``over 
the last 3 years, 127 sawmills representing 8.9 billion board feet of 
production capacity have closed permanently in the U.S. and Canada.'' 
\1\
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    At this time we are happy to be a survivor, but we look at the 
economic aftermath and the issues facing a healthy timber industry 
continue to loom largely in the future. A recent forecast by Western 
Wood Products Association calls for ``modest gains in housing, lumber 
consumption and U.S. production this year after setting modern lows 
during 2009,'' and they conclude that there will be a slow, steady 
recovery for mills like ours.
    We are juxtaposed between a recovering lumber market, and a huge 
demand for our abilities to work in the woods and remove standing dead 
timber that poses risks to public health and safety. Our ability to 
perform depends on overcoming several challenges facing our company and 
our industry.
    Both issues relate to the work that is done by our Members of 
Congress.
    First, in Western states containing significant acres of National 
Forests or Bureau of Land Management forest the log supply is largely 
determined by Forest Service or BLM budgets. We were pleased to see the 
President's 2011 budget recognized the importance of the Forest Service 
with an increase in funding. We are concerned, however, about policies 
embedded within this budget that merged important line items, including 
the primary line item historically tied to timber management. The net 
effect of the creation of a new ``Integrated Resource Restoration'' 
account may be to change the predictability and accountability for 
these funds. If adopted as proposed, the outputs will become `acres 
treated' rather than targets for saw timber. This `acres treated' 
number is difficult to plug in a business plan and take to the bank. 
The only language related to targets in the 2011 budget reduced outputs 
from 2.5 billion board feet nationally to 2.4 billion. The uncertainty 
in hard numbers results in reticent bankers and bonding agents which 
ultimately stymies investment and job creation.
    According to the Forest Service, the Medicine Bow-Routt National 
Forests FY 2010 timber target is less than 25% of their desired targets 
to aggressively respond to the mountain pine beetle epidemic, due 
solely to reductions in funding. Similarly, other National Forests in 
our region will be experiencing similar funding cuts which threaten the 
log supplies for both the mill at Saratoga and the operational mill in 
Colorado. This dilemma results from shifting priorities between 
emergency funding and management funding and poses untenable positions 
for the investors and land managers in the middle.
    We believe that the Forest Service budget would better serve rural 
communities if they would recognize the connection between the timber 
program and jobs. A conservative estimate of jobs created per 1 million 
board feet of timber harvested is 11.4 new direct and indirect jobs. 
Increasing the FY 2011 Forest Products line item by $57 million would 
increase the USFS timber harvest level to 3.0 billion board feet and 
thus create some 6,600 new jobs. This would be a modest, incremental 
budget increase that complements the slow and modest lumber market 
recovery forecasted for 2011.
    In the case of Intermountain, our future will depend on (1) a 
steady increase in lumber prices and lumber consumption, (2) an 
adequate log supply to feed both the mill in Montrose and the mill in 
Saratoga, and (3) access to credit for the final retrofit investment 
and the upfront cash necessary for startup employment costs. The log 
supply and credit needs go hand-in-hand since a primary condition for 
any loan is an assurance that the business plan fits consistently to 
the life of the loan. That means simply that a 10 year loan requires a 
10 year log supply to assure payment on that loan.
    While struggling to survive the difficult small-business economics 
of 2010, we can least afford a cut in Forest Service timber budgets and 
timber outputs. The local national forests can least afford a cut in 
industry capacity since we are the most cost-effective tool for 
addressing the unprecedented forest health challenges. The local 
logging contractors can least afford a year or more delay until a new 
investor arrives to build new infrastructure that may or may not fit 
the needs of our forests and community.
    Several pieces of proposed legislation would assist industry 
dependent on public lands for their economic sustainability.

    (1) H.R. 4398 ``The National Forest Insect and Disease Emergency 
        Act of 2009'' introduced by Congressman Salazar presents a 
        strategy for forests to fund their needs to manage 
        unprecedented challenges presented by events such as the 
        mountain pine beetle epidemic in the Intermountain West.

    (2) We have been working with Congresswoman Lummis on draft 
        legislation to address the supply issue with a pilot 
        stewardship approach combined with a modest, but very helpful 
        attempt to assist in the credit needed by the timber industry 
        partners (loggers and sawmillers) who have challenges accessing 
        capital. We embrace stewardship, and in addition will continue 
        to need timber sale contracts to assure a variety of treatments 
        and volumes to profitably accomplish goals to reduce fuel loads 
        and perform land management.

    (3) Careful attention to the language, funding levels, and timber 
        targets in the 2011 Budget to ensure long-term viability for 
        the traditional infrastructure. A robust industry means a 
        robust capacity to treat the land.

    (4) The 2008 Farm Bill contained the new ``Biomass Crop Assistance 
        Program'' (BCAP) which was designed to encourage biomass 
        production. We are concerned that BCAP disrupts the vital 
        relationship between existing infrastructure and national 
        forest management. Using programs designed to encourage green 
        jobs to create new companies has the unintended consequence of 
        generating new competition against the primary infrastructure 
        our forest managers depend on--for land management, hazardous 
        fuel reduction, removal of beetle-killed timber, and other 
        important forest health restoration goals. At a time when 
        lumber prices are at historic lows and threaten the stability 
        of what little industry remains, these programs could hasten 
        the decline of our most vital management tool.

    (5) A similar issue is the continuing debate about the definition 
        of `renewable biomass'. Who would ever have guessed that such a 
        small seven letter word could create such consternation and 
        policy debate among so many? What we need in Wyoming is a 
        definition that includes the national forests and other Federal 
        lands, subject to NEPA and the direction in the forest plans.

    (6) H.R. 4233, the Healthy Forest Restoration Amendments Act of 
        2009, introduced by Congresswoman Herseth Sandlin, which 
        expands the Federal lands on which hazardous fuel reduction 
        projects can be conducted, and adds protection of 
        infrastructure in rural communities as an additional purpose of 
        the Healthy Forest Restoration Act.

    With careful implementation of projects, we can reduce the 
potential for catastrophic fires, begin the management of the `the next 
forest' to reduce the potential for another cycle of bark beetle 
epidemics a hundred years from now, put local residents to work with 
good jobs, manufacture wood products, and increase the economic 
diversity and vitality of local economies.
    Much of the solution is in the hands of private enterprise. Our 
entrepreneurs and investors assume the risks and challenges of 
operating in an uncertain economy. It is an essential component for our 
Federal partners to maintain an adequate log supply, and to be assured 
by the national leadership that budgets and strategies will be crafted 
to help industry survive in the near term and grow for the long term.
    Thank you for your invitation to share our challenges and needs 
with you. You are a critical partner to our success. I would be happy 
to answer any questions.

    The Chairman. Thank you very much.
    We look forward to working with all of you to try to help 
find solutions. As we move to questions, I would recognize 
somebody who has been at the forefront of some of these issues 
and has worked very hard doing everything she can to bring this 
issue forward. I know that she has talked to me many times, the 
gentlelady from Colorado, Ms. Markey, for questions.
    Ms. Markey. Thank you very much, Mr. Chairman. And thank 
you all for your excellent testimony.
    My first question is to Mr. Cables. You gave a very 
sobering analysis of what's going on in the region: A hundred 
thousand trees falling a day. I mean, that is absolutely 
incredible.
    What kind of an impact do you see this having on tourism in 
our state? Obviously we know it has impacted the ski industry, 
recreation in the summer. It's very dangerous when you're in a 
forest where trees are falling.
    Also, I know you received the $40 million this year from 
USDA from Secretary Vilsack. How is that money being used right 
now? And I know you have done an excellent job in coordinating, 
not only a Federal response, but a state and local response, 
working closely with our state legislators, and with county 
commissioners in the affected areas to have a coordinated 
response. But if you could just give us a little bit of 
background on how that $40 million is being used right now.
    Mr. Cables. Thank you, Mr. Chairman, Representative Markey.
    Quickly your first question on--relating to tourism. This 
event has a very significant potential to affect tourism in a 
negative way. Not only are there threats as I pointed out, we 
have outfitters--folks just wanting to enjoy the forest--who 
have access to the forest. So, in the developed recreation 
sites, we've had to cut the trees out which affects that 
experience. We have ski areas that have infrastructure 
threatened that we're working with. And so the long-term 
potential to affect those industries is significant.
    And one of the things that we're concerned about is, if we 
aren't able to accelerate this work in terms of roadside 
clearing and trail clearing, we may need to think about the 
potential of forest closures. Allowing people into these areas 
with that amount of trees falling--even for our own crews and 
our own firefighters--because of the safety considerations. 
We've had several near misses already where falling trees have 
come very close to hurting people. So, if we get to that stage, 
then that will have an even more dramatic effect potentially on 
tourism.
    The second part of your question on the $40 million: we've 
spent that money on roadside-clearing contracts, on fuels 
treatment next to communities. Believe me, it didn't take very 
long to spend that amount of money in terms of the scale of 
this event. So I think the Medicine Bow Forest let a contract 
for 170 miles. Phil?
    Mr. Cruz. It was for 160 miles.
    Mr. Cables. One hundred and sixty miles. So that sort of 
thing is how we've used the $40 million that we received in 
Fiscal Year 2010.
    Ms. Markey. And so that money is being used now? What 
percentage of the problem do you think you were able to 
address, and what do you see as the long-term forecast in terms 
of how long it's going to take get the situation under control.
    Mr. Cables. Thank you, Representative Markey. Let me just 
give you a sense of the scale. The last contract we received 
for roadside clearing, clearing the trees back like a hundred 
feet either side of the centerline, so when they fell they 
didn't close the road, was in the neighborhood of $40,000 a 
mile. And if you do the math on over 3,000 miles, that gives 
you a sense of over $100 million, if we did every road and we 
had that kind of price in terms of our contract.
    The WUI treatments, the Wildland Urban Interface is what 
WUI stands for. It's the stuff next to communities to protect 
them from fire--has been running in the neighborhood of $2,500 
an acre. And we've got over 200,000 acres identified. If you do 
the math on that and we treated every one of those acres, 
that's a very, very large number too.
    So we really appreciate the $40 million, and it enabled us 
to do that much more than we would have from our initial 
budget, but the scale of this problem is very large. And that's 
why it's so important for industry to be able to operate and 
utilize this material and reduce those costs in terms of the 
amount of appropriated funds we need.
    Ms. Markey. And just one other question for Ms. Fishering 
about the timber management program. You said a $57 million 
increase is needed. What form would that take place? Are you 
also talking about grants or a guaranteed loan program? And 
would a guaranteed loan program, for instance, help jump-start 
the industry to get some private capital investment in.
    Ms. Fishering. Thank you, Representative Markey. Actually 
you're bound into line items when you get into the Federal 
budgets, and we were talking about a timber management forest 
products line item that would be designed to keep us alive. 
When you just put money in emergency or roadside clearing, that 
doesn't always provide the foundation that you need to keep the 
sawmill open before you can add the slash and some of this 
stuff that's less merchantable.
    So it's $57 million to one line item. We said that that 
would increase a board foot, which is a hard target, something 
you can measure and see from 2.2 to 3 billion. We believe if 
you use a modest multiplier, that's 6,600 jobs. It would be 
money to the Forest Service, but it creates that private 
investment that you're speaking of.
    We've been looking at USDA Rural Development. Every single 
one of your agencies have contacted our company to say that 
there is a program that can help open Saratoga. What we find is 
they are not at the table with us and the banks. They are risk 
averse. When you see that falling price to 1960s prices for 
lumber, they're not real excited to back that bond. And until 
you've got that private guarantee from a bank, you can't even 
access private activity bonds or pure revenue bonds, or SBA 
loans. So that's where we're stuck. It's the banks not wanting 
to get involved with an industry that has such a volatile 
pricing stint in the lumber market.
    We know we're going to survive. We are actually upbeat, 
believe it or not. We're like a lot of the commodity programs. 
We know we will get through these years, and we'll make it to 
that profitable point. The banks aren't quite as encouraged as 
we are. So actually right now it takes either grants to jump-
start us, or loans, which are very important. Don't get me 
wrong. We just need enough investors willing to sign on the 
dotted line, giving personal guarantees to be able to be 
eligible for the other tools in the Rural Development toolbox. 
Thank you.
    Ms. Markey. Thank you. Mr. Chairman, I yield back.
    The Chairman. I thank the gentlelady for the good 
questioning. I recognize the gentlelady from Wyoming, Mrs. 
Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman.
    My first question is for our State Forester, Bill Crapser. 
The farm bill requires every state forestry agency to develop a 
forest resource assessment. Wyoming recently completed its 
assessment and ranked the lack of private industry 
infrastructure among its top concerns for the health of 
Wyoming's forests. Do you believe the Forest Service could 
produce a predictable supply under the current laws, 
regulations, appeals and litigation affecting the Forest 
Service?
    Mr. Crapser. Mr. Chairman, Congresswoman Lummis, I do 
believe the Forest Service has shown over the last 5 or 6 years 
that they have kind of stabilized the program, if you will. I 
don't want to put words in my Federal colleagues' mouth, and I 
would have them answer exactly where they think their program 
will go. But I think we've seen some good things, as far as 
forest management. I think the importance of having the 
infrastructure--when Mr. Cables talked about just the vast 
amounts of money it would take to clear the hazard trees along 
the roads. We look at everything that you all deal with every 
day, there's not enough money in the U.S. Treasury to pay for 
the work that needs to be done. So without some type of private 
forestry infrastructure being able to utilize that material, we 
really can't make headway into it.
    Mrs. Lummis. Ms. Fishering, you're the only sawmill in 
Colorado. There's only one in Wyoming that's open, and that's 
up in Black Hills National Forest. Could you explain what 
challenges are presented when you're the only game in town. And 
then could you also talk a little bit about how the Forest 
Service could help facilitate the reopening of the Saratoga 
mill?
    Ms. Fishering. Thank you very much for the question. In my 
view, we face challenges. When I speak to my counterparts 
across the country, I find we have unique challenges when you 
are the only large commercial mills, it's not the only sawmill 
because we have smaller mom and pops. We have sawmills that 
just devote their end-products to Aspen; it's not bark beetle 
trees.
    For us, one of the things that we found out when we went to 
try to get an industrial revenue bond, they said, ``Well, 
what's your supply?'' We purchase 90 percent of the timber 
sales that have been put up a percent in the bark beetle. It 
wasn't enough. It's a 3 year supply. It's a year and a half if 
we have two mills open. That is, a bank that's going to loan 
you maybe a 10 year loan isn't real encouraged when you only 
have a year and a half under contract. And the dilemma is two-
fold. They need urgent removal. You can see we can't wait 10 
years to get to some of these areas and clear the roadside. So 
you're in this dilemma of moving quickly.
    We would appreciate more stewardship contracts. I think you 
might have heard of those. The bank feels much more comfortable 
if we were to have a 10 year stewardship contract, so that we 
can say here is a 10 year supply. Maybe not a hundred percent 
of a 10 year supply, but here is a mechanism that we can take 
to the bank.
    Taking documents to the bank is just key for us. And so 
when we see topsy-turvy changes in Federal policy and 
priorities and where they put the funding, banks don't like 
that at all. It's the certainty question the Chairman mentioned 
for the other commodity groups. We need certainty.
    Long-term contracts would be one key area. We actually 
received some ARRA money in the State of Colorado. They carved 
out an area called industry retention. I found that very unique 
in the country, to see them actually go to the foundation, the 
companies that are doing the processing. Most of those funds 
went to fuel reduction and projects on the ground. But they're 
cutting wood, they're decking it and leaving it because there's 
not enough processing. So you really have to start at the 
bottom if you're going to get that cost effective bang for the 
buck. And none of the money that we saw today, very, very 
little of it, went to industry that needed that foundation.
    So if there's any other stimulus money out there, if they 
choose to spend it, I think that's where it goes. It goes to 
the processing level. You're helping private enterprise. They 
helped the auto industry. We could use help too.
    Mrs. Lummis. Thank you. Another question for the Wyoming 
State Forester. Colorado has been operating a pilot Good 
Neighbor Program that allows state forests to undergo fuels 
reduction and other work on Federal land where state forests 
border national forests. I know that Senator Barrasso, our 
senator, has a bill to grant that authority more broadly, and 
we borrowed from his language in the bill we filed last week.
    Could you tell the Committee how Good Neighbor Authority 
would work in Wyoming, how it could be helpful in this fight? 
And then for anyone: How long can a dead bark beetle-killed 
tree stand dead and still be good lumber?
    Mr. Crapser. Congresswoman Lummis, I'll make a shot at the 
second question first. From talking to Intermountain, from 
other contacts I have in the industry, with today's sawmilling 
technology, you're probably looking at 5 to 9 years, as far as 
merchantability for a stud-type operation. If you're up in the 
Black Hills and Ponderosa Pine like Mr. Neiman's operation, you 
would probably be looking at only 2 or 3 years because of the 
type of products and the things you're trying to make.
    As far as Good Neighbor Authority, we feel that it's been 
very successful in Colorado. We would love to see the Authority 
West-wide. To me where it makes sense is it's not a ploy by 
state foresters to take over the national forests or anything 
of the sort. That works really well, especially in WUI-type 
projects, clearing hazard trees along trails, roads, doing 
defensible space, if we have contractors working on the private 
side of the line on private land or on state land, and the 
Forest Service or the BLM have a project across the boundary, 
it makes no logical sense to me or efficiency sense to do 
totally separate contracts for us to do our little piece, and 
then to have the Forest Service do their piece and bring 
different contractors in.
    So it's more an efficiency bang for our buck type thing 
that I see Good Neighbor Authority really helping us with. We 
do a little bit of it with our similar type projects, not with 
contractors but with our inmate crews now, and utilize them 
across the boundary on the Forest Service or BLM land. I just 
see it as a huge efficiency of utilizing the scarce resources 
to get work done.
    Mrs. Lummis. Thank you, Mr. Chairman. My time has expired, 
and I yield back.
    The Chairman. Thank you. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. In full and fair 
disclosure, I'm from west Texas, and I represent a community 
that's got the name of No Trees. So asking foresters questions 
is maybe a little out of my league. I would like to ask one 
kind of a group question; that is, the state-managed forests in 
Wyoming are reported to be healthier than the federally-managed 
properties. Is there a differential; and, if so, what's causing 
that? Is it something that's just a philosophy differential, or 
are there things at the Federal level that ties your hands, 
that won't allow you to manage them so that they're as healthy 
as their state counterparts? So just between you two guys, hash 
it out.
    Mr. Crapser. Mr. Chairman, Congressman Conaway, we deal 
with different things with state lands. For one thing, 
statewide, our state lands are state trust lands commonly known 
as school sections. We have about 300,000 acres of forested 
land that are state lands statewide. So we're not dealing with 
the vast acreages that the Forest Service is. We also have a 
different mission. Our mission, because we are trust lands, are 
for the beneficiaries of the trust, which are the school kids. 
So our lands have been more intensively managed than Forest 
Service lands. I think right now in the bark beetle area, 
almost 30 percent of the state lands--30 to 35 percent of the 
state lands within the bark beetle area have been harvested 
over the last 20 years. So we have younger stands of Lodgepole 
Pine that are too small to be impacted by the bark beetle.
    So while, as state forester, I would like to say that our 
lands are healthier than the Forest Service, I don't have the 
impediments to management, and have a lot more flexibility in 
addressing the issues.
    Mr. Cruz. Representative Conaway, thank you for the 
question. I think some of the situation is that the Federal 
lands probably have a lot more Lodgepole Pine, and that's the 
species that's most at risk here in the Rocky Mountains.
    Mr. Conaway. But are there things under your rules that you 
would have changed that would allow you to manage it better.
    Mr. Cruz. I believe we do have more complex rules. We have 
probably a lot more interest from groups, individuals, 
communities, folks of all sort in what happens on the Federal 
lands. So our process might be a little bit more intense in 
terms of planning and the implementation afterwards.
    Mr. Cables. In addition, I think Bill Crapser hit one of 
the seminal points is the objectives for the land. State trust 
lands often are managed for return to the state. National 
forests are managed for multiple uses, and they're managed for 
the long-term sustainability of those lands, including things 
like recreation, wildlife habitat. And the management 
objectives vary. So I think that's a significant element.
    And, obviously, we have Federal laws like the National 
Environmental Policy Act that apply to the Federal lands which 
require us to do assessments, analyses and decisions. Those 
decisions are subject to appeal and litigation. So if you look 
at the history of timber management over the last couple of 
decades, or 3 decades really in the West, there have been a lot 
of challenges to some of our management protocols and what 
we're trying to do on the landscape. And obviously that has an 
effect, both in cost and time. So those are things that the 
state lands are not subject to.
    Mr. Conaway. Thank you, Mr. Chairman. I yield back.
    The Chairman. I thank the gentleman. Anybody else.
    Mr. Fortenberry. One quick question.
    The Chairman. The gentleman from Nebraska.
    Mr. Fortenberry. Well, good morning, and thank you all 
again for welcoming us. I'm your neighbor to the east in 
Nebraska. It's interesting. I noticed a road sign on the 
highway out here: Omaha 525 miles. It puts it in perspective 
how big the country is out here. I represent eastern Nebraska. 
Again, it's a pleasure to be with you.
    Two questions: One is, of the nearly 4 million acres that 
have been impacted by the bark beetle, you talked about the 
impact on the watershed of 13 states, and clearly Nebraska is 
one of those states. My own community, Lincoln, draws its water 
from the Platte. We've got other water issues throughout the 
state.
    Define that correlation a little bit better. Talk about how 
the impact on the forest actually is correlated to the 
diminishment or the--just how it correlates to that watershed, 
what are the direct effects, and over what amount of time.
    Mr. Cables. Thank you, Representative Fortenberry. Let me 
talk about it in two ways. One is the immediate threat on the 
water infrastructure, reservoirs and that sort of thing from 
fire. And we experienced this in Wyoming. And memorable to me 
was both 1996 and 2002 fires on the Front Range, the Buffalo 
Creek fire and the Hayman fire both down in Colorado where they 
burned. And then we had subsequent rain events, and the 
sediment filled in reservoirs or substantially filled them in. 
Denver Water has spent over $30 million dredging their storage 
reservoir, from the sediment that came after the fire. So there 
are very real remediation costs associated with post-fire 
activity, and that's a major threat, and someone has to pay 
that bill. So there's that threat.
    Then second, we're doing research right now and looking at 
the relationship of how long does the snow stay on the 
landscape when the trees are all dead. So, when the snow falls, 
the canopy of a green forest intercepts some of the snow, and 
some of it evaporates back into the atmosphere. Some hits the 
forest floor. Then it benefits from the shade of the green 
trees, and it holds the snow longer. And then, particularly 
late in the summer, August and September, where you really need 
to have that water in the streams and downstream, if you don't 
have the shade to hold the snow, the snow melts off quicker.
    And when you put that together with some of the issues 
around climate change and the way the temperatures have changed 
in the past decade or so in this part of the world, what is 
that relationship. And I don't think anyone can say 
quantitatively what it is. But there's a worry that the snow is 
going to melt off sooner and faster, and we're not going to be 
able to capture it with storage and then allow it to come down 
the rivers slowly and, particularly, late in the season.
    So there are two effects. The second one, the relationship 
between green trees and a forest with dead trees, no canopy, 
and no shade. I don't think you can say definitively we have 
the science on that. But I think there is a lot of anecdotal 
evidence that we're going to see the snow melt off faster, 
sooner, and it's not going to be available during some of the 
more critical months late in the summer.
    Mr. Fortenberry. Thank you. Let me turn quickly to the 
issue of defining biomass as appropriate for renewable energy. 
I have a bill in this regard. But what are some of the 
controversies? What is the resistance that perhaps you've seen, 
including what appears to me to be logical, including biomass 
in the broader definition of renewable energy opportunities.
    Ms. Fishering. A lot of it has been controversy over, 
believe it or not, over-cutting. It's like if we include 
Federal lands in our biomass definition, then they're afraid 
that they'll be inappropriate--they're going to come and slice 
off the entire forest. And that, indeed, doesn't happen. We get 
in these arguments all the time in Colorado as we try to 
explain that when we have a timber sale contract, no matter 
what it is, we have to leave a certain amount of debris, tons 
per acre or trees per acre when you're finished. You don't take 
every single tree. So some people have that vision. Maybe not 
in our part of the world, but maybe it's in the eastern United 
States. Because there's a mounted effort nationally against 
allowing biomass to include Federal lands within that 
definition.
    Mr. Fortenberry. Frankly, I think it's helpful to talk 
about how some of this waste is simply burned off. It seems to 
me to be tragic or a real loss, or lack of appropriate 
environmental stewardship if you're simply burning it. There 
would be better, higher uses.
    I think I'm out of time, so thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Fortenberry.
    Mr. Smith?
    Mr. Smith. Thank you, Mr. Chairman.
    I was wondering, Ms. Fishering, if you feel in terms of the 
regulatory framework if you have the flexibility to address the 
heightened challenges given the beetle infestation in the kill 
areas. Do you feel that maybe some regulatory efforts should be 
revisited to allow more flexibility?
    Ms. Fishering. Thank you for the question. We've worked on 
that very diligently because typically a timber sale contract 
can be held up. The operating season gets restricted by elk 
calving, deer fawning, snowmobile season, hunting season. It 
becomes so complicated. And in a traditional timber sale 
environment, that's fine, you can do that. But when it's urgent 
removal, or public health and safety on 3.6 million acres, you 
need to be able to relax some of those regulations that are 
typically part of multiple use of managing public lands.
    We go through huge hurdles, but we're partners trying to 
figure out how we overcome that. In Colorado we've cut through 
a lot of those issues. We're actually closing roads and saying, 
I'm sorry, this road is closing. We're going to be using log 
trucks because we just need to get this area cleared out. So 
we're working on that all the time, and we're looking for 
flexibility.
    But to me, number one, it's going to be budgets because 
they can't put up the next project unless they've got the 
budget to put it up and go through those regulatory hoops. We 
do use the Healthy Forest Restoration Act. That was key. If 
that hadn't passed back in the late 1990s or 2000s--I don't 
know. That was key because they're going through the projects, 
getting it up and out the door quick enough. That to me is 
always going to be key, is the budget. And the other regulatory 
stuff, we're working through that pretty well.
    Mr. Smith. Thank you.
    Mr. Cruz, I know that some reports have uncovered some of 
the controversy relating to, and perhaps questioning, the need 
to reduce hazardous fuels in kill areas. I know that the 
controversy existed even before the beetle issue, and I'm 
guessing it's even compounded now. Could you speak to the 
science about the danger of catastrophic wildfire in these kill 
areas?
    Mr. Cruz. Representative Smith, thank you for the question. 
It's a complex question also. Over time it's evolved our 
relationships with neighbors and subdivisions, communities, et 
cetera, on treating the urban interface. It's taken a lot of 
education; it's taken a lot of sitting down at the table with 
city councils, homeowner associations and individuals to talk 
about fire behavior and the implications of protecting homes in 
the communities, not only on Federal lands but also on their 
own lands. And it's been a long journey. We have seen more and 
more folks understanding and seeing the realities.
    The experience that I've had with wildfire approaching 
infrastructure and homes and things like that is, even in a 
thin forest, it can take as much as a \1/4\ mile to \1/2\ mile 
to take a fire that's flaming through the crowns to drop to the 
ground. And that's kind of a scary reality, especially if one 
is out on the ground trying to protect the community.
    Our ability to treat the vast amount of acreage, we are 
doing the best we can. We do appreciate the amount of support 
that we have. To us, it has become so much about working with 
folks and changing fire behavior. If we can change the fuel 
bed, we can have some influence over suppression or getting 
that fire down to the ground. And so the impacts just aren't 
the same then.
    Another thing is folks have chosen to live in the forest 
environment because it's beautiful. There are a lot of other 
amenities: recreation, beauty, visuals, the solitude. If that 
fire burns right up to their home, a lot of that value is lost. 
So, that is part of the reason why it's very important for us 
to create buffers and to work with communities on their own 
lands. And then its also important to have defensible space for 
firefighters so there is enough time to stop those flames.
    Mr. Smith. Can you speak a little bit, either one of you, 
in terms of the likelihood of catastrophic fire and how we 
might address that? I know it's a big challenge.
    Mr. Cables. Thank you, Representative Smith. Let me take a 
shot at that, and particularly the last aspect of your question 
about science. It is a bit of a puzzlement, and I would like to 
separate advocacy from science. And I think there has been a 
lot of advocacy that some of the fuels work is not beneficial, 
but it just is not upheld by science.
    I refer this to the Committee, and we can provide copies of 
this. This is a Rocky Mountain Research Station General 
Technical Report 229 that was done in July of last year that 
talks about fuel treatments, fire suppression and their 
interactions with fire and its effects. It clearly demonstrates 
that managing the fuels changes fire behavior. When you change 
fire behavior, you're able to put crews in there, or aerial 
retardant on the ground, or have a fighting chance to suppress 
the wildfire. If you don't treat the fuels, we may not even put 
a crew in the country because it's not safe. So breaking up the 
fuels, the continuity of fuels is a critical element in our 
fire suppression strategies.
    [The information referred to is located on p. 701.]
    Mr. Cables. And I would say in this area of the bark beetle 
kill where we're going to have these trees falling, you can 
just imagine one of those photographs of jack-strawed trees, a 
continuous fuel bed for miles of jack-strawed trees. If we 
don't break that fuel up in some way with fuels treatments, 
there's just a continuous fuel bed to carry fire if you get 
wind. And it's even compounded because the fuel is closer to 
the forest floor which means the fire is hotter closer to the 
soil which means you can actually ruin the soil, create what we 
call hydrophobic soils and sterilize the soil. So it's kind of 
a double whammy. So in my mind there's no question that the 
science supports fuels treatment, our own science. And if you 
talk to the practitioners, the firefighters themselves, they 
would vouch for that as well without a question.
    Mr. Smith. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman. You guys have become 
almost as risk averse as the Corps of Engineers trying to get 
anything done because you're so afraid of being sued and so 
forth. The environmentalists that keep you from doing anything, 
they don't feel any culpability? What do they say when this 
stuff that's obvious? How do they keep having this position? 
It's ridiculous. What do they say in these hearings?
    Mr. Cables. Well, let me first say that I think we've 
actually made some progress. And I like to use the term 
``social license.'' I think the Forest Service has more social 
license, in other words, public support, to manage these lands 
than we've had in a long, long time. It's because of what 
people have seen, as Phil talked about. They've seen the 
results of wildfire and insect and disease----
    The Chairman. It's changing?
    Mr. Cables. Yes. And they don't like that. However, there 
is still an element of a certain set of interests that really 
are, as Nancy said, are operating with a fear-based approach 
that somehow we, the agency, will go back to some huge, ugly 
timber program and create all these bad results on the 
landscape. I have never feared this, and I don't think it's a 
legitimate fear, personally.
    The Chairman. Too bad we can't send them the bill.
    Mr. Cables. So we're making progress, I believe, Mr. 
Chairman. But here is the real crux of this for me. This is an 
urgent situation. We do not have time to have a lot of meetings 
and discuss this, at least in the area that I described today. 
The trees are falling now, and we've got infrastructure 
threatened and communities. And people are worried, and it's 
time do things, and we want to expedite this to the maximum 
extent we can to prevent further damage.
    The Chairman. Thank you.
    Ms. Fishering, this biomass situation, I was the one that 
came up with this BCAP Program. It morphed into something that 
I never intended at all. All this money was spent. Why didn't 
you guys get some of it? Because you're not close enough to any 
facility that can utilize this? Some of these areas went wild 
and, but I take it that you didn't use it as much?
    Ms. Fishering. As you know, it's under suspension right now 
because there's such a huge national demand for those dollars. 
And we could have used it for part of it if we were delivering 
it to our pellet mills in Colorado that were eligible for those 
funds, but they closed this year. The markets were hard on all 
of us, and those biomass companies as well. I do believe that's 
a long-term answer. It would be--for example, if we put 
cogeneration at the sawmill in Saratoga, then we could go and 
be certified and be eligible for BCAP funding.
    The Chairman. But you would have to put in cogeneration for 
that to be valid.
    Ms. Fishering. What we have there--and we already have 
thermal because we have to use heat to dry the lumber, and that 
is a biomass boiler.
    The Chairman. But the boilers don't exist now.
    Ms. Fishering. No, it does at Saratoga. But it's in this 
Montrose mill, and that would have taken an investment. We were 
needing $10 million.
    The Chairman. Well, I'm not sure we want to have this, 
creating more investments that may not be sustainable. But, we 
want to work with you to try. When I accepted this biomass 
definition on adding wood, the idea was that it would hopefully 
help the situation out here. It was mostly used on the East 
Coast. That should have never happened. The rulemaking has made 
some of that more sensible, but we want to work with you to try 
to get the definition so we can utilize it here. And not have 
it be utilized places where it's driving up the price of 
particle board or other things that are going on which causes 
other kinds of problems. So we look forward to working with 
you.
    Ms. Fishering. Thank you, Mr. Chairman. We think that 
subsidy to get that biomass off the ground to the facility is a 
good idea.
    The Chairman. I thought that too, but that isn't exactly 
how it worked.
    Well, I want to thank the panelists. It's been very good, 
very educational for the Committee. We appreciate your 
testimony and being with us today and look forward to working 
with you.
    The Chairman. We'll call the next panel to the witness 
table: Jerry Cooksey, wheat producer from Roggen, Colorado; 
Ogden Driskill, cattle and buffalo producer, Devils Tower, 
Wyoming; Les Hardesty, dairy producer, Greeley, Colorado; John 
Snyder, sugarbeet producer from Worland, Wyoming; and Dennis 
Sun, cattle producer from Casper, Wyoming.
    We appreciate you being with us and look forward to your 
testimony.

     STATEMENT OF JERRY COOKSEY, WHEAT PRODUCER, ROGGEN, CO

    Mr. Cooksey. Mr. Chairman, Members of the Committee, good 
morning. My name is Jerry Cooksey, President of the Colorado 
Association of Wheat Growers. Thank you for the opportunity to 
testify on behalf of Colorado wheat producers. Three 
generations of my family work together on a farm and ranch 
business located in northeast Colorado. Weld County where we 
live is consistently ranked in the top eight counties in 
agricultural commodity sales in the country. On our farm we 
produce wheat, corn, sunflowers, pumpkins, hay and have a small 
cow/calf operation.
    Colorado wheat producers have been in a continuous drought 
since 1999 until last year. Production and prices have been 
very volatile. During the last 10 years, Colorado winter wheat 
production has ranged from a low of 36.3 million bushels in 
2002 to a high of 98 million bushels in 2009, with a 10 year 
average production of 63.3 million bushels.
    Statewide average yields have ranged from a low of 22 
bushels per acre in 2002 to a high of 40 bushels per acre in 
2009, with a 10 year average yield of 30 bushels per acre. At 
the same time, Colorado average price for wheat has ranged from 
a low of $2.70 per bushel in 2000 to a high of $6.47 per bushel 
in 2008, with a 10 year average of $4.06 per bushel.
    CAWG has several goals related to farm policy:
    A farm safety net that reflects realities of today's 
production system, protecting us from weather and market 
conditions, volatile weather and market conditions, and 
supports our stewardship and conservation of our agricultural 
land.
    Components of that safety net should be reliable, provide 
meaningful coverage for producers throughout the country, and 
be flexible to respond to the worldwide commodities marketplace 
where we do business.
    Conservation programs provide incentives for farmers to 
maintain existing conservation activities, adopt new 
activities, as well. They should be available nationwide on a 
continuous application basis and be properly funded.
    Agricultural currently constitutes the one segment of our 
nation's trade portfolio that results in a trade surplus. 
Growers support continued funding for market development 
program that enables us to create, maintain and grow 
international markets for U.S. ag products.
    CAWG and the National Association of Wheat Growers 
supported the passage of the 2008 Farm Bill due to the 
inclusion of a number of significant programs to wheat growers 
including direct payments, crop insurance, conservation, 
renewable fuels, market development programs and research. 
During the 2008 Farm Bill, CAWG and NAWG fought to maintain the 
direct payment, as it was the most reliable WTO-compliant 
safety net mechanism for wheat farmers.
    CAWG supports a strong, properly funded crop insurance 
program that provides meaningful coverage for wheat producers 
in all regions growing all types of wheat. Crop revenue 
insurance protects producers from weather-related production 
problems and the volatility of the commodity markets. Higher 
revenue coverage at reduced rates would be very beneficial to 
producers.
    Trade is vital to our marketplace since 50 percent of the 
United States wheat production, and 80 percent of Colorado's 
production, is typically exported. We support a robust trade 
agenda including immediate passage of pending bilateral free 
trade agreement with Colombia as a top priority and an eventual 
Doha deal that provides significant new market access for U.S. 
wheat producers.
    Normalization of trade--U.S. trade--U.S. and Cuba trade 
relationship including the lifting of the travel ban, the full 
funding of both Market Access Program and Foreign Market 
Development.
    We are in support of incentive-based, voluntary, 
cooperative conservation programs that help producers maintain 
and improve the quality of land and water resources. The 
Conservation Stewardship Program is a voluntary program that 
encourages agricultural producers to maintain existing 
conservation activities and adopt new ones such as the resource 
conserving crop rotation. CSP provides support for producers 
and landowners of working land, providing environmental 
benefits for everyone.
    The Conservation Reserve Program takes marginal cropland 
out of production, which is then seeded to grass. This has been 
very beneficial to the environment, preventing water and wind 
erosion. In 2009, Colorado had 11,761,000 acres of cropland 
with 2.4 million acres in CRP. Unfortunately of the 743,000 
acres that expired that year, approximately 335,000 acres were 
offered a 2 or 3 year extension. That's 45 percent. This had a 
negative economic impact in these areas. We encourage you to 
maintain the CRP.
    Wheat growers are continuing to gather experience with the 
new programs such as ACRE, Average Crop Revenue Election, and 
SURE, Supplemental Revenue Assistance.
    Twelve percent of the wheat-based acres nationwide were 
involved in ACRE while there was only one percent enrollment in 
Weld County where I live and farm. This is a very complex 
program. Farmers in eastern Colorado did not see the benefits 
of ACRE and chose the direct payments. There is a concern over 
the timeliness of the program sign-up for SURE. This is a 
program that would benefit a producer that has a loss in the 
one crop they grow, or losses in all the crops grown on a 
particular farm.
    On our operation we had significant hail losses on two of 
the crops, and good production on the other two crops in 2008. 
The result was no SURE payment. A producer that spreads risk by 
diversifying into a number of different crops will see less 
benefits from SURE even when there are heavy crop losses.
    We have concerns with the Standard Reinsurance Agreement, 
SRA, negotiation currently being conducted by the Department of 
Agriculture.
    First, CAWG is concerned that the proposed level of cuts, 
nearly $7 billion to the companies and agents, could 
significantly jeopardize the service here in Colorado and 
Wyoming and other regions in the country.
    Second, we are very concerned that the level of cuts will 
reduce the agriculture spending baseline, making the next farm 
bill even more difficult to write. Given tight budget 
forecasts, I urge the Members here today to work with the 
Administration to ensure that the negotiated agreement does not 
negatively impact the delivery of crop insurance programs in 
these areas, and to ensure that any savings that are achieved 
can be captured to maintain the farm bill baseline.
    Farmers seek a safety net that reflects the realities of 
today's production system, protects agricultural producers from 
volatile weather and market conditions and supports the 
nation's foremost environmentalists: Farmers.
    Thank you.
    [The prepared statement of Mr. Cooksey follows:]

    Prepared Statement of Jerry Cooksey, Wheat Producer, Roggen, CO
    Mr. Chairman and Members of the Committee,

    Good morning. My name is Jerry Cooksey, President of the Colorado 
Association of Wheat Growers (CAWG). Thank you for the opportunity to 
testify on behalf of Colorado wheat producers. Three generations of my 
family farms together on a farm and ranch business located in 
northeastern Colorado. Weld County where we live is consistently ranked 
in the top eight agricultural commodity sales in the country. On our 
farm, we produce wheat, corn, sunflower, pumpkins and have a small cow 
calf operation.
    Colorado wheat producers have been in a continuous drought since 
1999 until last year. Production and prices have been very volatile. 
During the last 10 years, Colorado winter wheat production has ranged 
from a low of 36.3 million bushels in 2002 to a high of 98 million 
bushels in 2009 with 10 year average production of 63.3 million 
bushels. Statewide average yields have ranged from a low of 22 bushels 
per acre in 2002 to a high of 40 bushels per acre in 2009 with a 10 
year average yield of 30 bushel per acre. At the same time the Colorado 
average price for wheat has ranged from a low $2.70 per bushel in 2000 
to a high of $6.47 per bushel in 2008 with a 10 year average of $4.06 
per bushel.
    CAWG has several goals related to farm policy:

   A farm safety net that reflects the realities of today's 
        production system, protecting us from volatile weather and 
        market conditions, and supports our stewardship and 
        conservation of our agricultural land.

   Components of that safety net should be reliable, provide 
        meaningful coverage for producers throughout the country and be 
        flexible to respond to the world-wide commodities marketplace 
        where we do business.

   Conservation programs provide incentives for farmers to 
        maintain existing conservation activities and adopt new 
        activities as well. They should be available nationwide on a 
        continuous application basis and be properly funded.

   Agriculture currently constitutes the one segment of the 
        nation's trade portfolio that results in a trade surplus. 
        Growers support continued funding for market development 
        programs that enable us to create, maintain and grow 
        international markets for U.S. agricultural products.

    CAWG and the National Association of Wheat Growers (NAWG) supported 
passage of the 2008 Farm Bill due to the inclusion of a number of 
significant programs to wheat growers including the direct payment, 
crop insurance, conservation, renewable fuels, market development 
programs and research. During the 2008 Farm Bill debate, CAWG and NAWG 
fought to maintain the direct payment, as it was the most reliable, 
WTO-compliant safety net mechanism for wheat farmers.
    CAWG supports a strong, properly funded crop insurance program that 
provides meaningful coverage for wheat producers in all regions and 
growing all types of wheat. Crop Revenue insurance protects producers 
from weather related production problems and the volatility of the 
commodity markets. Higher revenue coverage at reduced rates would be 
very beneficial to producers.
    We support a robust trade agenda including passage of pending 
bilateral free trade agreements, participation in WTO trade discussions 
and more open trade with Cuba. Trade is vital to our marketplace since 
50 percent of U.S. wheat production and 80 percent of Colorado's 
production is typically exported. We also strongly support continued 
funding for market development programs including the Market Access 
Program and Foreign Market Development Program (FMD).
    We are in support of incentive-based, voluntary, cooperative 
conservation programs that help producers maintain and improve the 
quality of land and water resources. The Conservation Stewardship 
Program (CSP) is a voluntary program that encourages agricultural 
producers to maintain existing conservation activities and adopt new 
ones, such as the adoption of resource conserving crop rotations. CSP 
provides support for producers and landowners of working lands 
providing environmental benefits for everyone.
    The Conservation Reserve Program (CRP) takes marginal crop land out 
of production, which is then seeded to grass. This has been very 
beneficial to the environment, preventing water and wind erosion. In 
2009 Colorado had 11,761,279 acres of cropland with 2,412,238 acres in 
CRP. Unfortunately, of the 743,795 acres that expired that year 
approximately 335,000 (or 45%) of those acres were offered a 2 or 3 
year extension. This has had a negative economic impact in these areas. 
We encourage you to maintain CRP.
    Wheat growers are continuing to gather experience with the new 
programs, such as, Average Crop Revenue Election (ACRE) and 
Supplemental Revenue Assistance (SURE).
    Twelve percent of wheat base acres nationwide were enrolled in 
ACRE, while there was only one percent enrollment in Weld County, where 
I live and farm. This is a very complex program. Farmers in eastern 
Colorado did not see the benefits of ACRE, and chose direct payments.
    There is concern over the timeliness of the program sign-up for 
SURE. This program would benefit a producer that has a loss in the one 
crop they grow or losses in all the crops grown on a particular farm. 
On our operation, we had significant hail losses on two crops and good 
production on the other two crops. The result was no SURE payment. A 
producer that spreads risk by diversifying into a number of different 
crops will see less benefits from SURE even when there are heavy crop 
losses.
    It is very important to maintain the same baseline spending in farm 
bill programs going into the 2012 Farm Bill since producers and rural 
communities depend on it. Farmers seek a safety net that reflects the 
realities of today's production system, protects agriculture producers 
from volatile weather and market conditions, and supports the nation's 
foremost environmentalists--farmers.
    Thank you again for this opportunity to testify. Are there any 
questions?

    The Chairman. Thank you very much, Mr. Cooksey.
    Mr. Driskill, welcome to the Committee.

   STATEMENT OF OGDEN DRISKILL, CATTLE AND BUFFALO PRODUCER, 
                       DEVIL'S TOWER, WY

    Mr. Driskill. Thank you, Chairman Peterson, all the Members 
of the Agriculture Committee. I'm pretty nervous. I don't talk 
so well.
    The Chairman. You don't need to be nervous. We're ordinary 
folks like you are.
    Mr. Driskill. I can't tell you how proud I am, first off, 
to have a pioneer ranching family, Cynthia Lummis, as our 
Representative from Wyoming. It is so neat to have working 
ranchers on the Agriculture Committee. That's been a huge point 
of pride of mine.
    I'm a sixth-generation rancher from Devil's Tower, Wyoming. 
Our family came out of Texas in the 1850s and kind of fled 
people and trailed the cattle north to Cheyenne in 1871, and 
followed buffalo trails up to Crook County where we live, as 
the first settlers.
    I spent a lot of my life watching family ranches getting 
broken up and divided, disappear. Our families use lots of your 
grants and programs. They're phenomenal programs. One thing I 
see out of them is very often they're recurring expenses. They 
come in. You know, I get money from the different programs, and 
they keep coming back year after year after year.
    The last farm bill, you guys enhanced the FRPP program. 
That's really what I'm going to talk about here. That's a 
phenomenal program for working ranches. And it's working, it's 
working well. They're one-time expenses. You guys put the money 
up on them. I happen to be part of an agricultural land trust 
that's part of a big number of ag land trusts that come out and 
work to put in conservation easements that are permanent. When 
you guys spend that money, a lot of times it seems pretty 
pricey up front, but it's a one-time spend. That money is 
forever. I'm here to encourage you to continue to fund FRPP and 
GRP, preferably at an increased pace.
    You know, coming in here yesterday, you can see all through 
the West what's happening to our intact ranchlands. If we don't 
have tools to work with into the next centuries, we don't have 
anything to fund farm programs for because we won't have farms 
left. These ranches that you guys are funding easements on are 
going to be here not 100 years, not 200 years but 500 years 
from now. We don't come back and ask for more money. Once 
you've done the easements and put them on, these ag land trusts 
are entrusted to ranches and farms. They have really done a 
fine job of administering them. The organization has high 
integrity, and they have done just a nice job of it.
    I would encourage you to make the rules really flexible 
when you look at the length of the programs on any of your ag 
programs. The longer the programs go, the more flexibility you 
need to have for these programs to really work well. Envision a 
hundred years ago and looking a hundred years into the future. 
It gets really hard to write in-depth rules that work for the 
long term. So I would encourage you to really look at good 
flexibility, keeping in mind the value of intact ranchlands, 
what they do for the scenic, watershed, wildlife lands. I mean, 
every value is there. And it's intact units; it's not just 
pieces. These are working units that are going to be able to 
work forever.
    Also, through the West, they encompass some of the very 
prime best land that the feds didn't manage to get ahold of. 
When they homesteaded, they got in on the root grounds. These 
are the grounds that are at the highest risk very often. Our 
ranch is similar to that. Cynthia's ranch is one of them. The 
best ranches have the highest threats to them. They're also the 
toughest to protect, often because they're hard to get it done.
    The conservation dollars you guys spend--I don't know. I'm 
rambling a little. I can't follow the script version.
    For every dollar you spend on conservation--the one figure 
that really sticks with me is on private land conservation--you 
get $6 back in public benefits. That $6 is kind of an 
interesting figure because it's a one-time deal. The permanence 
to me is just so important in your programs. We're all 
scrambling for money between the different programs. I would 
encourage you to really look strongly at spending money for 
this all through the United States. I would like to see my 
family ranching for another six generations.
    Good farm programs that ensure permanence are of extreme 
importance. Thank you.
    [The prepared statement of Mr. Driskill follows:]

  Prepared Statement of Ogden Driskill, Cattle and Buffalo Producer, 
                           Devil's Tower, WY
    Chairman Peterson, Ranking Member and Members of the Committee, 
thank you for the opportunity to appear here today to discuss 
conservation and the new farm bill.
     I am a working, 6th generation rancher. Our family began ranching 
in Texas in the 1850s and trailed cattle into Wyoming by 1871. Love for 
the land and livestock has kept our family with a keen sense of the 
values of intact ranchland. I am a member of the WY Stock Growers 
Agricultural Land Trust Board of Directors. I also serve on the Board 
of the Land Trust Alliance, a national trade organization dedicated to 
establishing guidelines for quality conservation as well as ethical 
transactions and organizational oversight. From these perspectives, I 
cannot emphasize strongly enough the importance of voluntary, 
conservation incentives on private lands, particularly those that 
protect our working ranch lands, permanently.
    Thank you for some of the positive changes gained in the 2008 Farm 
Bill which provided:

    a. Generous funding of the Farm and Ranchland Protection Program.

    b. Reauthorization of the Grasslands Reserve Program.

    d. Elimination of the need for the Federal Government to be a co-
        holder of conservation easements but rightfully acknowledges 
        the United States as funder.

    e. Recognition of the importance of land trusts as third party 
        entities that can hold, manage and enforce easements on private 
        working landscapes.

    f. The ability to count a landowner donation of a portion of the 
        conservation value as match.

    Why is the conservation of private ranchland in Wyoming important?

   43% of the land in Wyoming is privately owned. 93% of the 
        private land is in agricultural production. We rank first in 
        the nation for the average size of ranches and farms: the av. 
        size is 3,600 acres with 80% of farms/ranches operating on 
        5,000 acres or more). These lands are the most productive in 
        the state, agriculturally as well as from a broader biological 
        perspective. They encompass much of our riparian lands, often 
        buffer national parks and forests, and tend to be in the 
        transition areas linking mountains and plains. They are highly 
        sought after by developers and trophy landowners.

   Nationally, about 40 million acres of land were newly 
        developed between 1982 and 2007, bringing the national total to 
        about 111 million acres. The American Farmland Trust describes 
        the current rate as 1 acre every 2 minutes.

   Population growth in the Intermountain West has stimulated 
        competition between exurban developers and agricultural 
        producers for the allocation of land and other natural 
        resources.

   The average price of a ranch in Wyoming increased by more 
        than three times on a production-unit basis from 1993-1995 and 
        2002-2004, and the average price for irrigated meadowland in 
        Wyoming nearly doubled.

   8.7 million acres of agricultural land in Wyoming are 
        managed by operators 65 years of age and older. What happens 
        when they retire? These funds can help enable a new generation 
        of producers by providing much needed capital and helping to 
        keep ranches at ag value.

    Why are the Farm and Ranchland Protection Program and Grasslands 
Reserve Program Critical to Conserving Wyoming Ranchlands?

   Wyoming's wide open spaces and working ranchlands define the 
        Cowboy State. There is a culture here which is clearly separate 
        from the more urban areas of our country. The land use patterns 
        of our state preserve this uniquely western culture, and also 
        provide wildlife habitat--particularly winter range, breeding 
        grounds and uninterrupted migration routes. They enable our 
        second-largest industry, tourism, and co-exist with our first--
        the production of energy.

   WY ranchers are hit hard with regulatory programs--this 
        voluntary, incentive program has the potential to do far more 
        good in the long run, at less cost.

   FRPP dollars leverage millions of dollars--from private 
        individuals and foundations as well as state investment. The 
        Trust for Public Land has determined that for every dollar 
        spent on private land conservation, $6 is returned in natural 
        resource benefit, including forage for both livestock and 
        wildlife and other ecosystem services.

    How can we build and improve these programs?

   This year, $6 million will be allocated to WY projects. 
        There is at a minimum, a $50 million backlog according to our 
        state NRCS office--but just submitted projects. Every land 
        trust in this state has even more projects in the pipeline, 
        without any advertising whatsoever. Please keep FRPP and GRP 
        fully funded. Take the long view. The benefit of conservation 
        easements does not produce instant gratification. They are an 
        investment in our future. Keep these important tools in the 
        2012 Farm Bill. They provide the most efficient bang for our 
        buck.

   Private land trusts are community based! And, they provide 
        conservation benefit through the protection of private lands 
        far more efficiently than the Federal Government! Enable 
        private land trusts with the right tools:

     Reduce or eliminate the required cash match with FRPP. 
            Allow third-party easements the same benefit of no cash 
            match required as the Federal Government receives with GRP. 
            Match dollars are difficult to raise and the need 
            exponentially increases each year.

     Consider funding the transactions costs for donated 
            easements.

     These two suggestions would make our Federal 
            investment go many times further.

   Stay clear of using these funds for the benefit single 
        species management. The best thing we can for species like the 
        sage grouse, for example, is to keep large open lands 
        unfragmented, sparsely populated, and available for the 
        production of natural resources.

    What is working the best?

   Private land conservation groups that are geared 
        specifically to working farms and ranches are making huge 
        strides at protecting large critically important lands from 
        development or conversion. They have the trust of the 
        agricultural community as well as the expertise to write, 
        document and enforce easements.

   PORT (Partnership of Rangeland Trusts), consisting of 
        agricultural land trusts in Wyoming, California, Colorado, 
        Montana, Oregon, Nevada, Kansas and our newest Texas has 
        conserved over 1.7 million acres of ranchlands in the last 15 
        years, making it the fastest growing conservation segment in 
        the country today. As of 2008 PORT members held one in six 
        privately held easements in the United States.

   FRPP and are great programs--all they are lacking is slight 
        refinement and increased funding.

    Thank you for the opportunity to be a part in helping agriculture 
remain viable into the next century.

Ogden Driskill.

    The Chairman. Thank you very much. You were right on the 
money. I don't know how you figured out to end right at the 5 
minutes, but you did a good job.
    Mr. Hardesty, welcome to the Committee.

     STATEMENT OF LES HARDESTY, DAIRY PRODUCER, GREELEY, CO

    Mr. Hardesty. Well, thank you, Mr. Chairman, distinguished 
Members of the Committee. I really appreciate the opportunity 
to be here today and testify before you today on the future of 
dairy policy.
    I'm Les Hardesty. My wife and I milk about 650 cows about 
an hour south of here and farm about 300 acres of forage 
grounds. I would like to begin by thanking the Members of the 
Committee for acknowledging the severe distress that dairy 
producers have been weathering, and express my appreciation for 
all of your support over this last year. With your help we 
succeeded in securing action from the USDA and passage of the 
ag appropriations measure which contained $350 million of 
direct support for the dairy industry. On behalf of the nearly 
18,000 Dairy Farmers of America members, I want to thank you.
    Mr. Chairman, as the Committee considers future dairy 
policy, it is important the Committee identifies and develops 
policy that addresses the real concern of our nation's dairymen 
and dairywomen: Price volatility. In the last decade, we have 
seen dramatic volatility in dairy prices. The upward spikes are 
higher, depressed prices have been lower and the time in 
between has been shortened with little allowance for recovery.
    Current Federal dairy policy fails to provide an adequate 
safety net, is inflexible and provides few tools for producers 
to access in times of low prices or extreme volatility. We must 
identify the tools necessary to decrease and mitigate such 
extreme swings if we are to sustain a vibrant, domestic dairy 
industry.
    In May of 2009, Dairy Farmers of America began evaluating 
current dairy policies and considering future options. For 
future policy development, DFA supports proposals which adhere 
to the following five guidelines: Be market oriented to allow 
for growth both domestically and globally; be responsive to 
quick-changing market conditions; have 100 percent financial 
participation by producers; be global in nature to consider the 
impact of imports as well as exports; and finally, be national 
in scope with the ability to implement regionally.
    Following much consideration and with these principles in 
mind, the DFA's board of directors adopted a growth management 
concept called Dairy Growth Management Initiative, DGMI, as I 
will refer to it. DFA's primary goal with DGMI has been to 
identify policy that would reduce price volatility, provide 
additional tools to assist producers in times of low prices, 
including the ability to spur demand and enhance exports.
    DGMI was meant to bring new ideas to the table that could 
be used to build consensus within the industry. DFA, other 
dairy cooperatives and industry organizations like National 
Milk Producers Federation then began working together in an 
effort to build that consensus for future national dairy 
policy, a policy that allows for growth in the industry while 
addressing price volatility. These efforts at collaboration are 
proving to be successful, and I am pleased to see that several 
of our DGMI concepts for addressing volatility are now being 
integrated in the proposal NMPF is presenting.
    NMPF's policy proposal recommends changes to national dairy 
policy in an effort to assist dairy producers in times of low 
prices by four points here: Revamping the Dairy Price Product 
Support Program and the MILC, Milk Income Loss Contract; 
creating a program that sends a direct economic signal to each 
individual producer to manage their own production in a manner 
that allows the producer to remain in business, while 
addressing supply and demand imbalances; creating a new dairy 
producer gross margin insurance program that responds to milk 
price and feed costs; and, finally, reforming Federal Milk 
Marketing Orders.
    DFA is supportive of NMPF's policy direction and is pleased 
to see a focus on policy proposals that address volatility, as 
well as provides numerous other tools. We look forward to 
working towards a unified proposal with NMPF as member 
cooperatives and other organizations interested in the success 
and longevity of the U.S. dairy sector.
    Mr. Chairman, on a personal note, as I conclude and wrap up 
here, while I understand and appreciate the timeline you have 
outlined for farm policy--farm bill policy development, I want 
to stress that the idea of waiting until 2012 to reform dairy 
policy leaves many of us concerned. Two thousand and nine was a 
disaster, 2010, the recovery is expected but is coming much 
slower than we had hoped or thought, and is likely not to be 
enough in 2010.
    Many of my neighbors are wondering if they will make it to 
2011. Keep that in mind as you continue your discussions. Dairy 
leaders are working hard to develop a consensus within the 
industry this year. Dairy producers will be anxious for its 
implementation.
    Again, thank you for allowing me to provide testimony 
before you today. I appreciate all of your efforts and look 
forward to working with you all in the coming weeks. Thank you.
    [The prepared statement of Mr. Hardesty follows:]

    Prepared Statement of Les Hardesty, Dairy Producer, Greeley, CO
    Mr. Chairman, distinguished Members of the Committee, I appreciate 
the opportunity to testify before you today on the future of dairy 
policy. My name is Les Hardesty. My wife and I milk 650 cows and farm 
300 acres of forage crops in Greeley, CO. Besides my duties on the 
farm, I also serve on the Executive Committee of Dairy Farmers of 
America's (DFA) Board of Directors, as well as several other DFA 
committees. I also am Chairman of the National Dairy Board and a member 
of the board of the National Milk Producers Federation (NMPF). In 
addition, I am a member of the U.S. Meat Export Federation, the 
National Cattlemen's Beef Association and the Future Farmers of America 
Agriculture Advisory Council.
    The past eighteen months have been very difficult for dairy 
producers across the nation. The depressed milk prices, brought on by a 
supply/demand imbalance, coupled with high input costs, a collapse of 
our financial structure and an international recession has led to an 
economic situation not witnessed for generations within the dairy 
industry.
    I want to thank Members of the Committee for acknowledging the 
severe distress dairy producers have been weathering and express 
appreciation for all your support over the last year. With your help, 
we succeeded in securing action from the United States Department of 
Agriculture (USDA). We asked them to use the tools available to them to 
bring some relief to dairy producers. Working together, we succeeded in 
securing a temporary increase the Dairy Product Price Support Program 
(DPPSP) which resulted in increased purchase prices for cheese and 
nonfat dry milk (NFDM), while boosting farm level income for dairy 
farmers. Together we succeeded in securing the reactivate of the Dairy 
Export Incentive Program (DEIP) for the 2009-2010 year which resulted 
in the transfer of significant volumes of NFDM, butter, and cheese to 
international customers. Additionally, we reminded USDA of the needs of 
those struggling to afford nutritious food for their families and USDA 
transferred 200 million pounds of NFDM to Food and Nutrition Services 
(FNS) for use in domestic feeding programs. Last, Congress passed an 
appropriations measure which contained $350 million and direct support 
to the dairy industry. On behalf of the nearly 18,000 member-owners of 
DFA, I thank you.
    Mr. Chairman, as you know, extreme volatility in the industry 
during the past 18 months has resulted in drastic swings in the price 
dairy farmers are paid for their milk and their costs of production. 
Recovery has come much slower than expected, and producers are low on 
equity and heavy with debt. While, in general, lenders have been 
patient--waiting for the rebound in prices, the starts and fits we have 
witnessed in price recovery this year has many of them in a state of 
increased concern and with a decreased appetite for lending. The 
situation, for many dairy producers, will surely get worse before it 
gets better because of this additional pressure.
    Mr. Chairman, as the Committee considers future dairy policy, it is 
important the Committee identifies and develops policy that addresses 
the real concern of this nation's dairymen and women--extreme 
volatility. In the last decade, we have seen dramatic volatility in 
dairy prices. The upward spikes have been higher, the depressed prices 
have been lower and the time in between has been shortened with little 
allowance for recovery. Current Federal dairy policy fails to provide 
an adequate safety net, is inflexible and provides few tools for 
producers to access in times of low prices or extreme volatility. We 
must identify the tools necessary to decrease and mitigate such extreme 
swings if we are to sustain a vibrant domestic dairy industry.
    In May of 2009, DFA began evaluating current dairy policy and 
considering future options when the Board of Directors established a 
Price Stabilization Study Committee. The purpose of this Committee was 
to provide guidance in the development of, and support for, a future 
dairy policy that met the following principles:

   Be market oriented to allow for growth both domestically and 
        globally.

   Be responsive to quickly changing market conditions.

   Have 100 percent financial participation by producers.

   Be global in nature to consider the impact of imports and 
        exports.

   Be national in scope with the ability to implement 
        regionally.

    Following much consideration and with these principles in mind, 
DFA's Board of Directors adopted a growth management concept called the 
Dairy Growth Management Initiative (DGMI). DFA's primary goal with DGMI 
has been to identify policy that would reduce price volatility and 
provide additional tools to assist producers in times of low prices, 
including the ability to spur demand and enhance exports. DGMI was 
meant to bring new ideas to the table that could be used to build 
consensus in the industry.
    DFA, other dairy cooperatives and industry organizations like NMPF 
then began working together in an effort to build that consensus for 
future national dairy policy--a policy that allows for growth in the 
industry while addressing price volatility. These efforts at 
collaboration are proving successful, and I am pleased to see that 
several of the DGMI concepts for addressing volatility are now being 
integrated in the proposal NMPF is developing.
    NMPF's policy proposal is being developed by the organization's 
Strategic Planning Task Force, of which DFA is an active participant. 
The proposal recommends changes to national dairy policy in an effort 
to assist dairy producers in times of low prices by:

   Revamping the DPPSP and Milk Income Loss Contract 
        programs.

   Creating a program that sends a direct economic signal 
        to each individual producer to manage production in a manner 
        that allows the producer to remain in business while addressing 
        supply/demand imbalances.

   Creating a new dairy producer income insurance program.

   Reforming Federal Milk Marketing Orders.

    DFA is supportive of NMPF's policy direction and is pleased to see 
a focus on policy proposals that address volatility as well as provides 
other tools. We look forward to working in a collaborative fashion with 
NMPF, its member cooperatives and other organizations interested in the 
success and longevity of the U.S. dairy sector.
    Mr. Chairman, just a personal note as I conclude. While I 
understand and appreciate the timeline you have outlined for farm bill 
policy development, I want to stress that the idea of waiting until 
2012 to reform dairy policy leaves many of us concerned. Two thousand 
and nine was a disaster. The expected recovery of 2010 is slow in 
coming and likely will not be enough. Many of my neighbors are 
wondering if they will make it to 2011. Keep that in mind as you 
continue your discussions. Dairy leaders are working hard to develop 
consensus within the industry yet this year. Dairy producers will be 
anxious for its implementation.
    Again, thank you for allowing me to provide testimony before you 
today. I appreciate all your efforts and look forward to working with 
you in the months to come.

    The Chairman. Thank you, Mr. Hardesty.
    And I want to commend DFA and the other folks, National 
Milk Producers Federation, for the work they have been doing. 
You guys have been ahead of the program here. I was in 
California yesterday talking to some folks. We've got some work 
to do to get those guys in the tent. But we're making good 
progress, and we appreciate you guys and the effort you're 
making. We look forward to working with you.
    Mr. Hardesty. Thank you.
    The Chairman. Mr. Snyder, as the representative of the 
largest sugar-producing district in America, I am pleased to 
see you here today as one our good friends, and also doing a 
great job with the sugar industry. Welcome to the Committee.

STATEMENT OF JOHN W. SNYDER, Jr., SUGARBEET PRODUCER, WORLAND, 
                               WY

    Mr. Snyder. Thank you, Mr. Chairman and Members of the 
Committee, for convening this hearing. On behalf of beet 
growers in the mountain states, I want to express my deep 
appreciation for your leadership and bipartisanship, and the 
successful passage of the 2008 Farm Bill. We look forward to 
working with you on the 2012 Farm Bill. I especially want to 
express my gratitude to Congresswoman Lummis for her excellent 
work and strong voice on the Committee for farming and 
agriculture.
    My name is John Snyder. I'm President of the Washakie Beet 
Growers. My family has farmed in Wyoming for over 70 years. My 
wife and I have been farming for over 20 years and raise 
sugarbeets, malt barley, corn, alfalfa and alfalfa seed. My 
youngest son, Steven, recently graduated from the University of 
Wyoming with a degree in agricultural economics and has bought 
into our farm. I hope the farming legacy will continue with his 
involvement.
    For over a century, the beet sugar industry has played an 
important economic role in the mountain region of Wyoming, 
Colorado, Nebraska and Montana. Today there are two companies 
operating six beet sugar factories in our region. In 2002 the 
growers I represent purchased our factory, the Wyoming Sugar 
Company, which is based in my hometown in Worland. At the same 
time, a thousand producers in Colorado, Montana, Nebraska and 
Montana purchased their company and formed Western Sugar 
Cooperative. Western Sugar is based in Denver and owns and 
operates five factories in the four-state area. Our two 
companies produce 13 percent of the U.S. sugarbeet production 
on 135,800 acres, and support 1,500 full-time factory and 
seasonal jobs.
    Since the 2002 Farm Bill, the entire U.S. sugar industry 
has become a hundred percent grower owned. The sugar provisions 
in that bill, and in the 2008 Farm Bill, have given producers 
confidence in the stability of domestic sugar industry.
    The United States is the fifth-largest sugar producer. 
We're also the fifth-largest sugar consumer and the second 
largest net importer. We're good at what we do. Our sugar 
producers are among the lowest-cost producers in the world. 
We're doubly proud of this distinction because we have achieved 
it by being fair to our workers and responsible stewards of the 
land. The U.S. is one of the most open sugar markets and 
provides guaranteed access for 41 countries as it is required 
to do under trade laws. Trade agreements such as WTO and NAFTA 
force the U.S. to provide duty-free access for 1.4 million 
short tons of sugar each year whether the country needs the 
sugar or not. In addition, under NAFTA, Mexico now enjoys 
unlimited access to the U.S. market. The Doha Round of WTO 
could result in additional market access concessions, and the 
recently launched Trans-Pacific Partnership, or TPP, trade 
negotiations could result in even more concessions. These 
important concessions could reduce U.S. sugar producers' access 
to their own market even further, reduce prices and make it 
impossible for many of us to survive.
    Congress in its wisdom designed a sugar policy in the 2008 
Farm Bill that is working to the considerable benefit of 
consumers at zero cost to taxpayers, and is giving sugar 
farmers a chance to survive, plus it fully complies with the 
rules of WTO. Under this market balancing approach, the USDA 
has retained its authority to limit domestic sales of sugar. 
Producers who exceed their allotments must store the excess at 
their own expense, not the government's. If imports exceed the 
difference between domestic sugar allotments and consumption, 
the USDA will divert surplus sugar to fuel ethanol production 
and restore balance to the sugar market for food. This 
provision has not been needed yet and government forecasters 
expect it not to be over the course of this farm bill.
    The current farm bill's benefits to American sugar 
consumers and American taxpayers are clear. American food 
manufacturers and consumers can count on reliable supplies of 
sugar that has been responsibly produced and is reasonably 
priced, high-end quality and safe to consume. U.S. wholesale 
and retail prices are below the average of the rest of the 
developed world and, in real terms corrected for inflation, 
have declined substantially over the past 3 decades.
    Sugar producers receive no government payments. Sugar is 
the only major commodity program that operates at no cost to 
taxpayers, and government projections through 2020 say it will 
remain no-cost over all of these years.
    American sugar farmers are grateful to Congress for 
crafting the sugar policy that balances supply and demand, 
ensures consumers a dependable, high-quality supply, and is 
improving market prospects for sugar producers. The policy 
achieves all of these goals at zero cost to American taxpayers.
    We strongly urge the continuation of this successful no-
cost policy in the next farm bill. Thank you, Mr. Chairman for 
holding this important meeting and for all of you on the 
Committee for what you do for American agriculture. We look 
forward to working with you in the future. Thank you.
    [The prepared statement of Mr. Snyder follows:]

Prepared Statement of John W. Snyder, Jr., Sugarbeet Producer, Worland, 
                                   WY
    Thank you, Mr. Chairman and Members of the Committee, for convening 
this hearing. On behalf of the beet growers in the mountain states, I 
want to express my deep appreciation for your leadership and 
bipartisanship in the successful passage of the 2008 Farm Bill, and we 
look forward to working with you on the 2012 Farm Bill. I especially 
want to express our gratitude to Congresswoman Lummis for her excellent 
work and strong voice on the Committee on behalf of Wyoming 
agriculture.
    My name is John Snyder, and I am President of the Washakie Beet 
Growers. My family has farmed in Wyoming for the past 70 years. My wife 
and I have been farming for 20 years, and raise sugarbeets, malt 
barley, corn, alfalfa and alfalfa seed. My youngest son, Steven, 
recently graduated from college with a degree in agriculture economics, 
and has bought into our farm. I hope the family farming legacy will 
continue through his involvement.
    For over a century, the beet sugar industry has played an important 
economic role in the mountain region of Wyoming, Colorado, Nebraska and 
Montana. Today, there are two companies operating six beet sugar 
factories in our region. In 2002, the growers I represent purchased our 
factory, The Wyoming Sugar Company, which is based in my home town of 
Worland. At the same time, 1,000 producers in Colorado, Montana, 
Nebraska and Wyoming purchased their company and formed the Western 
Sugar Cooperative. Western Sugar, based in Denver, owns and operates 
five factories in the four-state area.
    Our two companies produce 13% of the U.S. sugarbeet production on 
135,800 acres, and support 1,500 full-time factory and seasonal jobs.
    Since the 2002 Farm Bill, the entire U.S. sugarbeet industry has 
become 100% grower-owned. The sugar provisions in that bill, and in the 
2008 Farm Bill, have given producers confidence in the stability of a 
domestic sugar industry.
Food Security
    Sugar is an essential ingredient in our nation's food supply. As an 
all-natural sweetener, bulking agent and preservative, it plays an 
important role in about 70% of processed food products and is called 
for in a multitude of favorite home recipes. Dependence on unreliable 
and unstable foreign suppliers is a threat to our food security, which 
is why a strong, diversified and reliable domestic industry has long 
been recognized as important to the nation.
    U.S. sugar producers are globally competitive, but for decades we 
have been threatened by unfair competition. Roughly 120 countries 
produce sugar and all their governments intervene in their sugar 
markets in some way. Many countries subsidize their producers and dump 
their surpluses on the world market for whatever price it will bring. 
This depressed, so-called ``world price'' has averaged below actual 
global costs of producing sugar for many years. American producers are 
competitive, but cannot be expected to compete against these foreign 
treasuries and unfair predatory trade practices.
Importance, Size, Efficiency
    In addition to the critical role it plays in local economies, sugar 
is a significant job producer and revenue-generator nationally. The 
U.S. sugar producing industry, with sugarbeets and sugarcane grown or 
processed in 18 states, generates over 146,000 jobs and more than $10 
billion per year in economic activity. These jobs range from the cane 
fields of Hawaii and the beet fields of Wyoming to the cane sugar 
refineries in New Orleans, New York City, and other cities.
    The United States is the world's fifth-largest sugar producer. We 
are also the fifth-largest sugar consumer and the world's second-
largest net importer. And, we are good at what we do. Our sugar farmers 
are among the lowest cost producers in the world. We are doubly proud 
of this distinction because we have achieved it while being fair to our 
workers and responsible stewards of the land. Farmers in the developing 
world, who dominate the world sugar market, generally operate with 
little or no enforced requirements for worker safety and benefits, or 
for air, water, and soil protection. Our standards, and compliance 
costs, are among the highest in the world.
Restructuring
    Despite our efficiency, we are an industry that has been under 
enormous stress. From 1985 until 2009, we did not receive any increase 
in our price support level. Over this long period of essentially flat 
nominal prices, the real price we received for our sugar dropped 
sharply because of inflation. (Figures 1-2)
    Only the producers who could match the declining real price with 
efficiency gains and lower production costs were able to survive. More 
than half could not. From 1985 to 2009, 54 of America's 102 cane mills, 
beet factories, and cane sugar refineries shut down, with terrible 
consequences for the local families and communities. Just since 1996, 
35 mills, factories, and refineries have closed. (Figures 3-4)
Trade Challenges
    The U.S. is one of the most open sugar markets and one of the 
world's largest sugar importers. The U.S. provides access to its market 
to 41 countries, as it is required to do under trade laws. Virtually 
all are developing countries, and most are highly supportive of U.S. 
sugar policy because it provides an import price at which many can 
recover their costs of production.
    In addition to coping with the problems of rising costs, pests, 
disease, and natural disasters, American sugar farmers have had to deal 
with another threat: trade agreements that have ceded more and more of 
the American sugar market to foreign producers--even if the foreign 
producers are subsidized and inefficient. And more such concessions are 
being contemplated.
    Trade agreements force the U.S. to provide duty-free access for 1.4 
million short tons of sugar each year, whether the country needs the 
sugar or not. This amounts to about 15% of domestic sugar consumption.
    In addition, under the NAFTA, Mexico now enjoys unlimited access to 
the U.S. sugar market. It is difficult to predict how much sugar Mexico 
might send north each year. Key variables include Mexican sugar 
production, government decisions (\1/4\ of the sugar mills are owned 
and operated by the Mexican Government), and the pace at which corn 
sweetener, mostly from the U.S., replaces sugar in the massive Mexican 
beverage industry. Mexican sugar exports to the U.S. have varied widely 
in the past, and could in the future--over 1.4 million short tons last 
year, but only about 0.5 million forecast for this year. (Figure 5)
    Furthermore, the U.S. is negotiating a Doha Round of the WTO that 
would result in additional market access concessions. The TPP (Trans-
Pacific Partnership) trade negotiations, recently launched by the Obama 
Administration, could also eventually result in substantial market 
commitments for sugar to the many countries lining the Pacific Rim. 
Such trade concessions threaten to reduce U.S. sugar producers' access 
to our own market even further, and reduce prices as well, making it 
impossible for those of us who are struggling to survive. (Figure 6)
Previous Farm Bill
    In the 2002 Farm Bill, USDA had only two tools to balance U.S. 
sugar supplies with consumer demand.

    1. It could limit foreign supplies to minimum import levels 
        required by the World Trade Organization (WTO) and other trade 
        agreements.

    2. It could limit domestic sugar sales through marketing 
        allotments. Each year, USDA would forecast domestic sugar 
        consumption, subtract required imports, and allow U.S. 
        producers to supply the balance.

     If U.S. production was insufficient to fill demand, USDA 
            could increase imports by expanding the tariff-rate quota 
            (TRQ).

     If U.S. production exceeded the allotment quantity, 
            American producers had to store the excess at their own 
            expense, not the government's.

    This market-balancing system worked reasonably well until 2008, 
although misjudgments in setting the TRQ in 2006 seriously depressed 
the U.S. sugar market. That's when Mexico gained unlimited access to 
our market under the NAFTA, and USDA effectively lost control of the 
market.
The 2008 Farm Bill
    Congress, in its wisdom, designed a sugar policy that is working to 
the considerable benefit of consumers and at zero cost to taxpayers, 
and is giving the remaining American sugar farmers a chance to survive. 
And, it fully complies with the rules of the WTO.
    While retaining the basic-market-balancing tools described above, 
Congress made a number of important improvements in 2008. The farm bill 
minimizes the erosion of American sugar farmers' share of their own 
market by limiting reductions in their marketing allotments to not less 
than 85% of consumption. It's worth noting that in many years, imports 
amount to much more than 15% of the U.S. market.
    If imports exceed the difference between domestic market allotments 
and consumption, USDA will divert surplus sugar into fuel ethanol 
production and restore balance to the sugar market for food. The added 
ethanol production would be consistent with national goals to reduce 
American dependence on foreign oil and improve air quality.
    In addition to the use of ethanol as a market balancing mechanism, 
two other farm bill measures are helping to stabilize the market and 
improve producer prospects:

    1. The first increase in the sugar support price since 1985. The 
        raw cane sugar loan rate rose by \1/4\ cents per pound this 
        year, and will rise the same amount in Fiscal Years 2011 and 
        2012. Refined beet sugar rates will rise by a commensurate 
        amount. In Fiscal Year 2012, the raw cane loan rate will be 
        18.75 cents per pound and the refined beet sugar rate will be 
        24.09 cents.

    2. USDA may not announce a TRQ above the minimum required by trade 
        agreements until halfway through the crop year (April 1), 
        unless there is a supply emergency. By April, much more is 
        known about actual U.S. sugar production and consumption and 
        the volume of imports from Mexico. This will prevent a 
        recurrence of situations such as that in the summer of 2006, 
        when USDA announced an excessive TRQ for the coming year, the 
        market was badly oversupplied, and producer prices languished 
        for almost 2 years.
Consumer Benefits
    American food manufacturers and consumers continue to benefit from 
reliable supplies of sugar that has been produced responsibly and is 
reasonably priced, high in quality, and safe to consume. In real terms, 
corrected for inflation, U.S. wholesale and retail prices have declined 
substantially over the past 3 decades. Food manufactures and consumers 
in the rest of the developed world pay about 10% more for sugar than 
Americans do. Taking per capita income levels into account, sugar is 
more affordable in America than in virtually every other country in the 
world--rich or poor. (Figures 7-12)
Taxpayer Benefits
    Sugar is the only major commodity program that operates at no cost 
to taxpayers, and government projections through 2020 say it will 
remain no cost over all these years. Projections prior to the enactment 
of the 2008 Farm Bill suggested significant costs because of excessive 
imports from Mexico, low prices, and government loan forfeitures.
    But thanks to steady consumption growth, stable domestic 
production, manageable import levels from Mexico, and sound program 
management by USDA, costly surpluses have not occurred. (Figures 13-14)
The 2012 Farm Bill
    The U.S. sugar industry has endured a wrenching restructuring over 
the past 2 decades. American sugar farmers remain are grateful to the 
Congress for crafting a sugar policy that is balancing supply and 
demand, ensures consumers of dependable, high-quality supplies, and is 
improving market prospects for sugar producers. The policy achieves all 
these goals at zero cost to American taxpayers.
    With some prospect of continued market stability, producers should 
be able to re-invest in their operations, further reduce their costs of 
production, and survive. We strongly urge the continuation of this 
successful, no-cost policy in the next farm bill.
    Thank you again, Mr. Chairman, for holding this important hearing 
and for all that you and the Committee do for American agriculture. We 
look forward to working with you in the future.
                                Figures
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    The Chairman. Thank you, Mr. Snyder.
    Mr. Sun, welcome to the Committee.

      STATEMENT OF DENNIS SUN, CATTLE PRODUCER, CASPER, WY

    Mr. Sun. Good morning, Mr. Chairman, Committee Members. My 
name is Dennis Sun. Again, welcome to Wyoming, and thanks for 
the opportunity to speak with you.
    I have ranched in central Wyoming all my life and now 
publish a weekly agricultural newspaper based out of Casper. 
I'm speaking to you this morning about the Natural Resources 
Conservation Service, NRCS, an agency that's been a friend and 
partner to Wyoming for many years. We've been very fortunate in 
Wyoming to have some very dedicated people associated with NRCS 
and conservation. All across the state, NRCS staff and 
administration have always been in the front assisting private 
landowners with their conservation practices by providing both 
technical and financial assistance.
    As most of you realize, here in Wyoming, our private and 
state lands only amount to about 58 percent of the state's 
total landmass. Most of the private lands are in the eastern 
part of the state. And in the western part, most of the private 
lands are along the rivers and the creeks, in the valleys or 
irrigated lands. Water, next to our people, is our most 
valuable resource and something we both manage and conserve. We 
are the headwaters for major rivers leaving all sides of our 
state. That water is vital to other parts of the West and 
America, and we hear about it every day from those states. So 
our water and our soil management in Wyoming is of great 
importance for those of us who live in Wyoming, and also across 
the western region.
    Like all government agencies, NRCS has changed in recent 
years. Some changes are good; some not so good. Our late 
Senator, Craig Thomas, through his work helped create 
conservation programs to use on range lands, programs that 
would work on our ranges intermingled with Federal lands. We 
have utilized these programs very well and hope that they will 
continue as our range lands and their conditions are a very 
important resource to all of us.
    We value the technical assistance we have received from our 
local and state NRCS staff. That technical assistance has 
diminished lately as the local NRCS found themselves tied down 
to their offices with the focus on writing contracts. While 
this does get money out on the ground, it may not be the best 
planned use of those dollars. With the current evaluation for 
both offices and personnel tied to the number of contracts 
signed, there is no incentive for those resource professionals 
to leave the office. As a producer, our one-on-one technical 
assistance spent on the ground with NRCS has really gone down. 
Technical assistance is the most critical element to the 
selection and adoption of conservation practices enhanced by 
participation in farm bill conservation programs.
    Wyoming is a very diverse state. One size doesn't fit all. 
We utilize the Environmental Quality Incentives Program, EQIP, 
as our priority program. One could combine EQIP along with the 
Wildlife Habitat Incentives Program, Forest Land Enhancement 
Program and the Grasslands Reserve Program. With tight dollars 
these days, we need incentives, matching dollars and technical 
assistance to get the job done. We feel the focus should be on 
maintaining and enhancing working lands programs.
    We would also like you to review and support the 
flexibility of the use of the Technical Service Providers or 
third-party vendors to aid in the technical assistance of the 
farm bill programming.
    One could also restructure the easement programs into one 
program. The more one simplifies, provides flexibility and 
combines programs, helps ensure quality decisions are made and 
meaningful resource projects are carried out.
    In summary, one should consolidate working lands programs, 
consolidate easement and rental programs, consolidate 
stewardship/entitlement programs, and clarify all program terms 
and policies and purposes earlier in the application process so 
landowners have a greater knowledge of the program right at the 
start.
    There's also a need to utilize local working groups to keep 
flexibility and decisions with improved communication and 
coordination among local, state and Federal agencies. There has 
been continued diminishment of the local working groups' role 
in identifying priorities, having input on program 
implementation, et cetera. The recent Sage Grouse initiative is 
an example. We do appreciate the additional resources to our 
state to address this issue, but I feel there has not been 
enough input or involvement from local working groups from 
people on the ground.
    Wyoming has a great partnership with NRCS and success in 
utilizing the farm bill conservation programs to maintain and 
enhance the natural resources. We hope that will continue 
through the improved programs and opportunities for on-the-
ground partnerships and discussions.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Sun follows:]

     Prepared Statement of Dennis Sun, Cattle Producer, Casper, WY
    Good morning. My name is Dennis Sun. Again, welcome to Wyoming and 
thanks for the opportunity to speak with you. I have ranched in central 
Wyoming all my life and also publish a weekly agriculture newspaper 
based in Casper, Wyo. and serving all of Wyoming.
    I am speaking to you about the Natural Resources Conservation 
Service (NRCS), an agency that has been a friend and partner to Wyoming 
for many years. We have been very fortunate in Wyoming to have some 
very dedicated people associated with NRCS and conservation. All across 
the state, NRCS staff and Administration have always been in the front, 
assisting private landowners with their conservation practices by 
providing both technical and financial assistance.
    As most of you realize, here in Wyoming our private and state lands 
only amount to about 58 percent of the state's land mass. Most of the 
private lands are in the eastern part of the state. In western Wyoming 
most of the private lands are along the rivers and creeks in the 
valleys or irrigated lands. Water, next to our people, is our most 
valuable resource and something we both manage and conserve. We are the 
headwaters for major rivers leaving all sides of our state. That water 
is vital to other parts of the west and America and we hear about it 
every day from those states. So our water and soil management in 
Wyoming is of great importance to those of us who live in Wyoming and 
across the region.
    Like all government programs, NRCS has changed in recent years. 
Some changes are good, some not so good. Our late Senator Craig Thomas 
through his work helped create conservation programs to use on 
rangelands, programs that would work on our ranges intermingled with 
Federal lands. We have utilized these programs very well and hope that 
they will continue as our rangelands and their condition are a very 
important resource to us.
    We value the technical assistance we have received from our local 
and state NRCS staff. That technical assistance has diminished lately 
as the local NRCS found themselves tied down in their offices with a 
focus on writing contracts. While this does get money out on the 
ground, it may not be the best planned use of those dollars. With the 
current evaluations for both local offices and personnel tied to the 
number of contracts signed, there is no incentive for those resource 
professionals to leave the office. As a producer, our one-on-one 
technical assistance spent on the ground with NRCS has really gone 
down. Technical assistance is the most critical element to the 
selection and adoption of conservation practices enhanced by 
participation in farm bill conservation programs.
    Wyoming is a very diverse state, one size doesn't fit all. We 
utilize the Environmental Quality Incentives Program (EQIP) program as 
our priority program. One could combine EQIP along with the Wildlife 
Habitat Incentives Program, Forest Land Enhancement Program, and the 
Grasslands Reserve Program. With tight dollars these days, we need 
incentives, matching dollars and technical assistance to get the job 
done. We feel the focus should be maintaining and enhancing working 
lands programs.
    We would like you to review and support the flexibility of the use 
of Technical Service Providers (TSP) or third party vendors to aid in 
the technical assistance and farm bill program implementation.
    One could also restructure the easement programs into one program. 
The more one simplifies, provides flexibility and combines programs, 
helps ensure quality decisions are made and meaningful resource 
projects are carried out.
    In summary, one should consolidate working land programs, 
consolidate easement and rental programs, consolidate stewardship/
entitlement programs and clarify all program terms, policies and 
purposes earlier in the application process so landowners have a 
greater knowledge of the program right at the start of the process.
    There is also the need to utilize local working groups to keep 
flexibility in decisions with improved communication and coordination 
among local, state and Federal agencies. There has been a continued 
diminishment of the local working group's role in identifying 
priorities, having input on program implementation, etc. The recent 
Sage Grouse initiative is an example. We do appreciate the additional 
resources to our state to address this issue, but I feel there has not 
been enough input or involvement from local working groups or people on 
the ground.
    Wyoming has a great partnership with NRCS and success in utilizing 
the farm bill conservation programs to maintain and enhance our natural 
resources. We hope that will continue through improved programs and 
opportunities for on-the-ground partnerships and discussions. Thank 
you.

    The Chairman. Thank you, Mr. Sun. We appreciate your 
testimony.
    We appreciate all the panelists for their great testimony 
and being with us today, taking their time.
    The gentlelady from Colorado, Ms. Markey.
    Ms. Markey. Thank you very much, Mr. Chairman. I want to 
address my first question to Mr. Cooksey. Thank you for being 
here. And you mentioned with regard to the ACRE program that 
only one percent of producers in Weld County in our district 
actually participate in that program, and it's 12 percent 
nationwide. So can you tell me why do you think that is? What 
could be done to make that program more appealing to the 
farmers in our area? Is it a matter of just streamlining the 
administrative processes, or are there other substantive 
changes that you think need to be made to the ACRE program?
    Mr. Cooksey. Congresswoman Markey, in Colorado farmers like 
the sure thing of that grant payment, and that's worked well in 
past years. I understand that in ACRE it's taken from a state 
average, and it may be better to localize it to a county 
average if there's a loss on ACRE. So I would look at possibly 
localizing the losses to smaller areas.
    Ms. Markey. And then also you talked a little bit about the 
Conservation Reserve Program. And we have had 45 percent now 
being able to reenroll. Can you talk a little bit about 
Conservation Reserve? How large do you think it should be? What 
should be the focus? Do you think that we should concentrate on 
continuous practices or general sign-up enrollments with CRP?
    Mr. Cooksey. That's a good question. When I traveled around 
the state in January, the Conservation Reserve Program seemed 
to be one of the largest issues in Colorado. And we talked 
about, 45 percent of those acres were renewed. That leaves 55 
percent that are not being renewed. So there are farmers out 
there that have this marginal ground, and they're trying to 
decide whether to take it and put it back into crop production 
or use it for pasture.
    And I think you should look at the existing contracts. The 
problem that we see is, it's kind of dependant on how they were 
signed up initially. But some of the marginal acres are the 
acres that are actually coming out and not being renewed. So I 
would first look at the existing contracts and try to move 
forward with those. And I know that funding is tight, but after 
that point I would look at additional contracts. But it's very 
critical that we maintain conservation in this--in Colorado and 
Wyoming and in neighboring states. So with water and soil 
erosion we need to watch those.
    Ms. Markey. It's an important program. I just have one 
additional question for Mr. Hardesty. Thank you for being here 
today. You had talked about volatility being the biggest 
problem right now in the dairy industry and current policy 
being number one, inflexible and, number two, with too few 
tools available for producers.
    With what's gone on with USDA this year to help dairy 
farmers, can you talk about what programs or policies have 
worked, what hasn't worked; and how do you develop a policy 
that is more flexible for producers, if you can just elaborate 
on that a little bit.
    Mr. Hardesty. Absolutely. Thank you, Congresswoman Markey.
    Two thousand and nine, being such a disaster for the dairy 
farmers, absolutely horrendous, generations of equity were lost 
during 2009, and the recovery is not by any means complete yet. 
So the programs that were implemented in 2009 that were of 
significant importance to dairy farmers across the United 
States included Dairy Export Incentive Program. The reenactment 
of the DEIP program certainly helped us move some of our 
surplus product offshore without displacing our normal exports. 
So that was a tremendous help. The other opportunity that we 
had through the $350 million program that you all helped us 
approve was the $60 million that was spent for food aid and 
feeding the under privileged, if you will. And again, you're 
taking a product off of surplus shelves, putting it into either 
school lunch programs and/or feeding programs that not only 
help agriculture in general, because dairy does have a trickle-
down effect, buying feed from my neighbors here at the table, 
but also a humanitarian effect in providing help for the needy.
    So those were the two programs that I think helped in an 
impactful way in 2009. Going forward, price volatility, the 
extreme highs and the extreme lows, have to be minimized. And 
we as dairy farmers have to work off of a margin. It doesn't 
matter if milk is $16 or $12 if we can manage a margin, a 
profitable margin, in between. So any tools that we can develop 
such as those that are presented by NMPF will be helpful, going 
forward.
    Ms. Markey. Thank you very much. We look forward to 
continuing to work with you to make sure that dairy remains 
strong here in this country. So thank you again for being here.
    Mr. Chairman, I yield back.
    The Chairman. Mrs. Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman.
    First question for Mr. Sun. You mentioned, Dennis, that 
technical assistance as a role of the NRCS has kind of 
diminished. What types of projects are affected when the NRCS 
role is diminished as it applies to the technical assistance 
role?
    Mr. Sun. Thank you, Congresswoman. I think they're all 
affected. Here, in a sense, a lot of the NRCS people now are 
kind of regulated as a salesman sitting in the office. If 
you're selling a car, you have to get out and look at the car 
to sell it. In this case, you've got to get out on that 
person's ranch or farm, because each one is different, and see 
what the goals and objectives of that ranch or farm or that 
piece of land are. It can also bring in that big knowledge of 
having worked with others that this may work here and it may 
not; this has been tried and didn't work; here is a way to save 
you some money. So I think they all fall within that.
    Mrs. Lummis. Could you talk a little bit about how on your 
ranch water conservation projects have been assisted by the 
NRCS.
    Mr. Sun. Congresswoman, thank you. I had one riparian area 
that I wanted to improve. We started with baseline data, and it 
came up to about 800 pounds of forage per acre. I had gotten 
some dollars, through matching funds, and we worked with a lot 
of people, different agencies on it. In the end we put in some 
small stream structures. And in the end we're over 4,000 pounds 
of forage per acre, large enough so that all the elk winter on 
it now.
    Mrs. Lummis. Thank you. My next question is for Ogden 
Driskill about the FRPP. And before I ask the question, for Mr. 
Conaway's benefit, the Driskill Hotel in Austin, Texas, is the 
grand, historic hotel in downtown Austin. And this is the 
Driskill family that founded that fabulous Driskill Hotel and 
then trailed cattle out of Texas, north.
    Mr. Conaway. And they're still responsible for the ghost on 
the sixth or seventh floor.
    Mr. Driskill. Family is there.
    Mrs. Lummis. The Driskill Ranch is right at the base of 
Devil's Tower, which is the nation's first national monument. 
It is drop-dead gorgeous, and this family maintains that ranch 
as open land and open space even though the highest and best 
use for that land is probably high-end housing that would 
fragment that landscape and diminish the experience at Devils 
Tower. And so it is properties like that and the ranchers that 
are managing them that provide a public benefit that the public 
doesn't pay for. And yet the ranchers are scratching out a 
living in many cases on those properties. And the fact that Mr. 
Driskill was one of the founders of our Wyoming Stock Growers 
Agricultural Land Trust is because of his love for that land 
and recognizing what ranchers do to provide benefits to the 
public in terms of open space and the beautiful landscapes we 
have, while not getting compensated for it.
    So the FRPP program does provide opportunities for ranchers 
like that to keep those lands open and not develop them into 
high-end housing, so all Americans can benefit.
    And with that, Mr. Driskill, can you elaborate on how the 
connection between the land owner, a land trust and the Federal 
Government plays out with programs like FRPP?
    Mr. Driskill. I can, and I will do it. It's great fun to 
sit down and look Representatives in the eye and say it's great 
to work with the Federal Government. You know, the last farm 
bill they granted us some new flexibility to deal directly with 
ag land trusts. The ag community really had been hesitant to 
deal directly with the Federal Government. Through some real 
stages, they allowed ag land trusts and other land trusts, but 
specifically ag land in our case, to deal directly with the ag 
community. You know, we've created a great amount of trust.
    In a period of 15 years, there are now seven western ag 
land trusts that hold one in six easement acres on private 
ground in the United States. Absolutely incredible. These 
partnership ranchland trust areas have gone absolutely crazy. 
In short, it needs better funding and a little better 
flexibility. Like I say, it's just been outstanding for me to 
see this three-way partnership emerge and emerge with strength.
    You know, the farm agencies have been great to deal with as 
a whole. There was some frustration early on. We got some 
yardage. We would like to see you guys help us get some more 
flexibility, and also increase the funding long term. These 
ranches are going to be here hundreds of years from now without 
any more expense to the Federal Government. Our organizations 
are happy to administer and help keep these ranches in ag 
forever. Thank you.
    Mrs. Lummis. Thank you, Mr. Chairman. I see that my time 
has expired, but if we get to a second round, I have other 
questions as well. I yield back.
    The Chairman. Mr. Lucas.
    Mr. Lucas. Thank you, Mr. Chairman, and let's run and gun 
on some topics here, my friends.
    Mr. Cooksey, you commented on the direct payment program, 
about how it was nice to have something consistent you could 
count on, that with all the uncertainties of SURE and ACRE and 
CSP and all these other programs that your folks can count on 
direct payments. I would add one other caveat to that, and that 
is, of the WTO issues we deal with, the direct payments are the 
most WTO compliant. In a world where we watch the CRP people be 
taken limb from limb over their program, being WTO compliant is 
critically important. So I appreciate your comments to that 
point.
    To my cattleman friends here, being the father of GRP in 
the 2002 Farm Bill, I must tell you this has been an arduous 
little adventure. This program was created as a combination way 
to allow certain acres of CRP that should just not be 
constantly rolled over and rolled over, to be returned on the 
range side to a practical use. The other half of the original 
concept, in 2002, was to provide ranchers with the ability to 
sign up for a decade, to be able then to use those dollars to 
meet all of those cost share programs to fully develop and 
enhance their property. We slammed into a little thing called 
administrative rules. And while I love the previous President 
of the United States very much, some of his folks at USDA in 
D.C. were a bit frustrating for me as we tried to create the 
rules. And that still is an ongoing process.
    But I am pleased with your comments about your ability to 
work with CRP. But given the chance, there's a lot more good 
and wondrous things that could come out of it if we're able to 
pursue the direction that the program was created.
    Mr. Driskill, talking about the long-term conservation 
needs of easements to preserve ranches in place, that's a one-
time payment basically, correct, and then you commit the land 
for generations to come?
    Mr. Driskill. Yes, sir. To me that was the beauty of it. It 
felt kind of like you said. It was interesting as it worked 
around. But the one-time payment, interestingly enough, 
originally the Federal Government was going to take the cost of 
administering those easements, would have made us keep coming 
back to you for more money to continue to have the 
administration. By you allowing third parties to come in and 
administer those easements, it not only allowed that cost to be 
transferred away, which helps. It also made it as a one-time 
program, which I think it's the only permanent conservation in 
the United States. It will never be housing.
    Mr. Lucas. Would you say typically, Mr. Driskill--and I'm 
speaking typically because there's never such a thing as 
average or overwhelming percentage--typically this one-time 
money by most ranchers have been used for conservation purposes 
or to expand the properties? Typically where do you think those 
funds have gone, because it's just a one-time thing.
    Mr. Driskill. A vast majority of the FRPP has gone to 
working ranches. It's gone to enhance ranch operations, 
sometimes to buy a family out, sometimes to buy others out. It 
doesn't guarantee profitability; it guarantees an operation is 
going to be there in the future.
    Mr. Lucas. Which takes me to my next point. It's important, 
I would believe, that those resources be used wisely because 
the next generation or two or five or ten are going to be 
working under that easement given. And making sure those funds 
are wisely used shows good stewardship, and I don't doubt for a 
moment you're a good steward.
    Let me address both you and Mr. Sun for just a moment. The 
issue--and this is something that we worked diligently on in 
the 1960s and 1970s and finally eradicated in the great State 
of Oklahoma. Talk to me about brucellosis in the greater 
Yellowstone area, the tri-state area.
    Mr. Driskill. You want to start, Dennis, or me.
    Mr. Lucas. You can mention APHIS or anyone else in the 
Federal Government you want to talk about.
    Mr. Sun. Congressman and Members, with brucellosis, it's 
turned into a wildlife problem. It used to be a human health 
problem. It's evolved into a wildlife problem. But, one of the 
problems is that the rules and the laws governing it haven't. 
They've stayed where it was. Somehow we've got to clean up the 
problem with brucellosis. The major factor is, here at the 
University of Wyoming and other universities, we're developing 
a vaccine.
    Now we've got to find out, once we get the vaccine 
developed, what's the delivery system for the wildlife and how 
to get the wildlife to it? Once that happens--we don't know if 
the problem will ever be corrected. But the greater Yellowstone 
area is just waiting to erupt.
    In the livestock business, we have solved the brucellosis 
problem time and time again and always will. But as long as the 
wildlife are there, it's going to be a problem, and it will 
come up again. APHIS says they want Wyoming and the other 
surrounding states to come up with a way to fix it. Having said 
that, they've not moved to help us out. So we're kind of 
sitting here confused. They want to do a split state. We're 
saying that's not right. If you happen to have your ranch in 
that area, you're at a severe disadvantage. But Wyoming can set 
up a surveillance area, and we can manage for it. We're 
optimistic, but kind of guardedly optimistic.
    Mr. Lucas. That's why I asked the question as your fellow 
cattleman from down South.
    Mr. Driskill, any thoughts?
    Mr. Driskill. I think Dennis covered it really well. I feel 
like the issue is so complicated because you're dealing with 
national parks, national forest, state lands, private 
producers, game and fish and wildlife. When you put all those 
together in a room and they're all competing over what goes, it 
leaves it incredibly difficult. Back to Dennis talking about a 
split state. I live in the east, and the brucellosis hasn't 
gotten there. The bad news is it's going to. We're watching 
this spread through the elk. It was confined to the Yellowstone 
area through all my youth. It is no longer. It's moving out of 
the Yellowstone area. We're going to deal with this throughout 
Wyoming and ultimately, like Chronic Wasting Disease. We are 
going to deal with it through a lot of western states, I 
believe, if we don't deal with holding it in that greater 
Yellowstone area. That's going to require decisions that are--
--
    Mr. Lucas. Tough.
    Mr. Driskill.--fairly impossible to do on a producer level. 
It's going to have be dealt with on your level.
    Mr. Lucas. Well, clearly there is wildlife or public good, 
then there is a public obligation to address the problem.
    Mr. Driskill. Thank you.
    The Chairman. Thank you. The gentleman from Texas.
    Mr. Conaway. Thank you, Mr. Chairman. I would like to ask 
Mr. Driskill, Mr. Sun: Animal ID efforts at USDA have modified 
or morphed into a state-based model. What's your thought on 
complying or building a model that will allow traceability at 
the state level, and what's going on within your producer 
groups, as well as the folks at the state.
    Mr. Driskill. I'll take a little bit of the first shot at 
that.
    I applaud whoever the powers were that got it back to a 
state level. State is the place that ought to handle that. I 
hate rules and regulations. We need flexibility rather than 
volumes of rules to deal with it.
    Ag industry recognizes the need for traceability. It's the 
delivery system that does it. On a state level, I believe that 
if it's turned loose with good flexibility, you'll see that a 
good program will be implemented statewide.
    Mr. Sun. Congressman, I agree with Mr. Driskill. At the 
state level, I think we can find some type of process that will 
work. That's where it needs to be.
    Mr. Conaway. Well, are the efforts far enough along at this 
stage here in Wyoming to see a program that most producers can 
buy into and afford.
    Mr. Sun. We're working on it, Congressman.
    Mr. Conaway. Mr. Chairman, I would like to yield the 
balance of my time back to Mrs. Lummis. She had a couple other 
questions.
    Mrs. Lummis. Thank you, Mr. Conaway, thank you, Mr. 
Chairman.
    I have a question about the Clean Water Act for Mr. Snyder. 
As you know, there's a revamped version of Clean Water 
Restoration Act going through Congress now. If the new effort 
to expand the authority of the Federal Government over all U.S. 
waters passes, what would it mean to your growers?
    Mr. Snyder. Congresswoman Lummis, I appreciate your 
question. The good Lord chose a different conveyance of water 
for Wyoming than the Chairman's district, and so irrigation 
obviously is very important to us. We do a lot of things--our 
growers do a lot of things to improve water quality. The EQIP 
program has been very important to that with our irrigation 
districts and our conveyance of irrigation water.
    Water quantity is something very important. Where I live, 
we have annual precipitation of 7 to 9 inches. So it's very 
limited, and so irrigation is very important. Water quantity is 
very important.
    I believe that the water situation should be more of a 
state issue than a Federal issue. I think the state feels that 
way. Those EPA regulations are some of our top five concerns 
for all of our growers throughout the nation, and so we are 
monitoring that very closely.
    But water quantity is very important to the producers of 
this region throughout Colorado, Nebraska, Wyoming, Montana and 
even into Idaho. So it's something we'll keep a very close look 
on. Thank you.
    Mrs. Lummis. Mr. Sun, what are the top three or four 
challenges facing the livestock production industry in Wyoming.
    Mr. Sun. Thank you, Congresswoman. I failed to talk about 
the issues as Mr. Snyder said: The Clean Water Act revision, 
air quality, endangered species; the wolf and the sage grouse 
nowadays are hammering us; the uncertainty of the estate tax 
and then just the challenges of maintaining economically viable 
public land on our ranches. Without those public lands, for 
most of us, while they're not the heart of the ranch, we really 
depend on them.
    Mrs. Lummis. And I might add, I saw a presentation the 
other night, Mr. Chairman, that elk numbers have decreased by 
90 percent in the Lolo Unit in Montana; and moose numbers in 
the Grovant area in Teton County, Wyoming, have decreased over 
90 percent due to wolf deprivation. At those numbers, those 
herds are absolutely unsustainable. And we now have a problem 
of too many wolves and a potential loss, catastrophic loss, of 
our moose population, and certainly in some areas our elk 
population as well.
    Thank you, Mr. Conaway, for yielding me your time, and I 
yield back.
    The Chairman. I thank the gentlelady.
    The gentleman from Nebraska, Mr. Fortenberry.
    Mr. Fortenberry. Thank you. Mr. Chairman, I think we need 
to let the record show or at least be emphasized that this is a 
very historic day. Mr. Driskill was quoted as saying it's been 
great to work with the Federal Government. I'm not sure those 
words have ever been uttered in the history of the farm 
program. I'm, of course, joking. My own family has members who 
are USDA employees, and there are a lot of good civil servants 
and public servants who are trying very hard to be good 
stewards and good partners with the private agriculture 
interests.
    But let me ask this. Let me break out of the framework for 
just a moment. We have a tendency to talk about, in our ag 
hearings, either trying to strengthen or adjust current 
programs or expand exports. I put on my Facebook page this 
morning a statistic that the average age of the farmer in 
Nebraska is now 58 years old, and that keeps ticking upward 
every year. I assume it perhaps is similar in Wyoming. So let's 
talk about that perspective. What are the emerging new 
opportunities in agriculture that are going to attract a 
younger--perhaps younger or entrepreneurs into this most 
important sector that again in Washington may be de-emphasized, 
but it is about 15 percent of the overall economy. It is 
essential not only to the well being of our nation, but we help 
feed the world as well. From your perspective, where are those 
opportunities emerging?
    Whoever would like to take it.
    Mr. Sun. Congressman, I think that ranchers and farmers are 
always optimistic, otherwise we wouldn't be around. I think 
that nowadays we're hearing about what the world population is 
going to be. Somebody has to provide that protein source. 
Farmers and ranchers do provide the safest food in the world, 
and we're happy to do it. I take examples of Congresswoman 
Lummis on her Equal Justice Act revision. If that takes place, 
that would stop some of the legal problems that we faced in the 
West with environmentalists suing the government agencies and 
then making money at it.
    In a sense there's government money put inside a business 
making our life harder. It's those little things that count out 
there. And I think people realize that while it's a business, 
other people characterize it as a way of life. And if you ever 
notice, if somebody's always successful in life, they head to 
Montana, Colorado or Wyoming and buy a ranch. So in essence 
we've got what they want.
    Mr. Fortenberry. Are you saying you first have to make your 
money elsewhere to make it in farming and ranching.
    Mr. Sun. Well, it helps. In Wyoming we're an energy state 
also, and that also helps. But, with the sage grouse and the 
wolf and other things hitting us, I don't mean to sound 
negative, but it's a tough go. But we are optimistic or we 
wouldn't be here and our children wouldn't be with us.
    Mr. Driskill. I've got to agree with Dennis. You know, this 
is a dynamic time for youth in agriculture. For one of the 
first times, I'm getting where I still kind of consider myself 
a kid. I'm one of the ones not so young anymore at this point. 
But for my children, which they're of age now, just coming 
home, I hear that excitement. They see a future in ag. That 
light wasn't so bright a few years ago. It was really a tough 
time we've been through. They've grown up, particularly the 
kids who have grown up in the ag world, understand the 
challenges, a good deal of it. Part of it is public opinion of 
ag has gotten so much better. It's not a dishonorable 
occupation at this point. I think the next decades are going to 
be an absolutely dynamic time for the youth. We're going to see 
a lot more young kids want to come into ag. The profitability 
is going to come back. The population, we're going to have that 
end of it. The realizations of the value of ag to the 
environment, not just in general but all the way around, is 
there. Like I say, I think it's going to be a great time for 
the youth.
    Mr. Snyder. Mr. Chairman and Congressman Fortenberry, with 
a son just recently coming back to our farm, we have three 
generations on our farm now. His 83 year old grandfather is 
still active every day on the farm and, of course, myself and 
my son who is 23. It was very interesting. He had a dire love 
for the farm. Not seeking other opportunities outside of the 
farm, he had several job opportunities because of the work 
ethic that was instilled upon him during his youth and 
different things, but he chose to come back. I think it's 
because a lot of the new technologies, biotechnology, things 
like GPS systems.
    There's a lot of change in agriculture, but it all comes 
back to being able to sustain that farm. Good sugar policy, for 
us, allows us to bring another partner back to that farm. 
Without a good sugar policy, without a good farm bill, it 
wouldn't have been sustainable for us. So I think that's 
important. But they do see opportunity. They have a love for 
the land. And so I think that's there. But we all see it. As 
farmers and ranchers are getting older, we have to feed more 
and more people throughout the world. And so all of this, new 
technologies, are important to all of us. Thank you.
    Mr. Fortenberry. Thank you. Mr. Chairman.
    The Chairman. Thank you, Mr. Fortenberry.
    Mr. Smith, do you have any questions?
    Mr. Smith. Yes. Just real briefly. Mr. Hardesty, could you 
elaborate on the factors in dairy demand, the demand of milk? I 
know you spoke of the variables there, if you could elaborate.
    Mr. Hardesty. Absolutely. I assume you're referring to the 
collapse of prices in 2009 and what happened in that whole 
regime there: 300 million people in the United States, six 
billion people in the world; 95 percent of the population lives 
someplace other than the United States. You all know these 
statistics.
    With a run-up in dairy exports over the last 5 years 
topping out at 10.8 percent of our U.S. production on milk 
solids basis being exported offshore or to some other country 
other than the United States, we had a demand signal within our 
industry to continue to grow production and grow cow numbers 
over that period of time. We peaked at about 9.3 million 
milking dairy cows in the United States at the height of dairy 
exports in the dairy economy. The signals weren't there, and 
many of us even in other businesses didn't realize that the 
economy was going to suffer as severely as it did.
    So the signals were there for us to increase production and 
demand, and so we reached this peak of production when the 
global economy crashed.
    Here locally in the United States, we can achieve about a 
1\1/2\ percent growth per annum in consumption of dairy 
products. So if we want to do any growing other than about 1\1/
2\ percent per year within the dairy industry, we need to 
continue to look offshore for those opportunities.
    I hope that answered your question.
    Mr. Smith. Thank you. I yield back.
    The Chairman. I thank the gentleman. I thank the panel for 
the excellent testimony and answers to the questions. We very 
much appreciate it. I recognize the gentleman from Oklahoma for 
our closing statement.
    Mr. Lucas. Thank you, Mr. Chairman. It has been a 
productive series of four hearings as we now head back East. I 
promise you it's more fun here than it will be when we get 
there this evening.
    The Chairman. I thank the gentleman. We thank the Members 
for being here today. We thank the people from the agriculture 
community and other communities around the area for being with 
us. The Committee has learned a lot on this trip. We have 
another trip scheduled in a couple of weeks to go through the 
South, Texas and so forth. We're on the road to get an early 
start and figure out if what we're doing is the right thing, or 
whether we should be doing something different. This is 
complicated stuff and it takes a long time to get everybody on 
the same page. That's why we're doing this early. I am 
determined to get this bill done before September of 2012 when 
it expires--for the first time in I don't know how many farm 
bills--so you guys that are growing winter wheat can know what 
the program is when you plant. That's our goal. Thank you all 
very much.
    I have to say the magic words here. Under the rules of the 
Committee, the record of today's hearing will remain open for 
30 calendar days to receive additional material and 
supplementary written responses from the witnesses to any 
question posed by a Member on this hearing on the Committee of 
Agriculture. The meeting is adjourned.
    [Whereupon, at 10:21 a.m. (MDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
      
 Submitted Statement from Dick Coose, Retired Forest Service Employee, 
                             Ketchikan, AK
May 2, 2010

Hon. Cynthia M. Lummis,
Member,
Committee on Agriculture,
Washington, D.C.

RE: House Agriculture Committee Hearing Cheyenne, Wyo. May 4, 2010

    Please accept the attached as a comment and possible questions for 
the panel relating to forest health and bark beetle epidemic.
            Thank you,

Dick Coose.

    I have received a copy of your message concerning a hearing panel 
that will discuss forest health and the bark beetle epidemic.
    I would like to provide this comment to Representative Lummis and 
the Committee.
    I am a retired Forest Service employee who worked as a forester on 
the old Encampment and Snake River District (Medicine Bow NF) for 11 
years (1961-1973). I prepared, harvested, and completed the 
silviculture treatment several thousand acres of lodgepole pine. Those 
stands are now 40-50 years old and about 5 inches in diameter.
    I visited the area last fall to view the pine bark beetle disaster 
the Forest Service has allowed to occur. The beetle has likely killed 
every mature lodgepole pine in southern Wyoming and northern Colorado. 
The beetle is also attacking the young stands. I observed this and I 
know the Forest Service also knows it.
    To keep this brief, I believe the Committee deserves answers to at 
least two questions from the Regional Forester Cables.
First
    The Forest Service has issued a Federal Register notice (April 16, 
2010) stating the intent is to prepare a environmental impact statement 
(EIS) concerning the restoration (they should define this term) of the 
beetle killed areas. I have attached a copy of the Federal Register 
notice. Considering the time it normally takes the FS to complete all 
EIS plus the legal aftermath, there will very likely be no trees 
salvaged until at least 2011. Considering that these trees have already 
been dead for several years and are rapidly loosing value, these trees 
need to be harvested starting right now. The Committee should ask the 
FS to justify an EIS now that should have been done years ago and when 
trees are loosing value daily and the lands need treatment now.
    If the Regional Forester Cables insists they have to do a EIS on 
this salvage then they should consider making it an amendment to the 
forest plan (and keep the same time frame) concerning beetle kill 
salvage and eliminate the need for any future EIS's on beetle kill 
salvage sales--restoration--stewardship or what ever they want to call 
it.
    If they ever want these beetle killed stands to regenerate, they 
have two choices; get the cones on the ground by salvaging the trees or 
let it burn.
    This destruction of National Forest lands should never have be 
allowed to happen.
Second
    Considering the beetles are now in the 40 year second growth (about 
5" diameter trees). The Committee should ask what plans the FS have to 
treat these young stands to attempt to prevent more loss. The FS 
clearly knows the beetles are attacking the young growth.
    If I can ever provide more information on this issue please contact 
me.
    I wish Representative Lummis good luck in holding the Forest 
Service officials accountable for gross lack of professional management 
of our National Forests.

Dick Coose.
                               Attachment

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   Submitted Statement from Larry Cundall, Rancher, Platte County, WY
Hon. Cynthia M. Lummis,
Member,
Committee on Agriculture,
Washington, D.C.

    Rep. Loomis,

    Thank you for doing this good work on behalf of Wyoming and the 
Agriculture Community.
    I am a long time rancher in Platte County, Wyoming. A 45 year 
volunteer rural firefighter experiencing ``beetle kill'' forest fires, 
a 20 year FSA County Committee member, RC&D Committee member and user 
of NRCS programs, thank you for discussing these topics.
    I am on the Administrative Council for Western SARE hosted by Utah 
State University. Until very recently I was the only rancher on the 
council in this very large Western states region. As I'm sure you know 
SARE (Sustainable Agriculture Research & Education) is the only USDA 
competitive grants program that requires farmers and ranchers to be 
involved in all of its grants. An idea that I believe keeps this 
program grounded in reality that is not always found in today's 
institutions of higher learning or other grant programs. Grant 
proposals undergo a rigorous and competitive review, and are based on 
merit.
    I am proud to be a part of this little known program that serves a 
wide ranging group of agriculture producers, from organic to production 
agriculture. I have reviewed grants from Guam to Alaska and Wyoming to 
California. For example Farmer/Rancher Grants is one area that shows 
that with relatively few dollars we can help real world people with 
real world problems in an integrated approach that also educates others 
with the same problems. Honey Bees to High Tunnels, Riparian protection 
to Beetle banks, all unique but important to sustainable agriculture.
    Sustaining the economic viability of farmers and ranchers, make the 
most efficient use of nonrenewable and on-ranch resources and where 
appropriate, integrate natural biological cycles and controls. Enhance 
environmental quality and the natural resource base upon which the 
agricultural community depends and Improve the quality of life for 
farmers, ranchers and society as a whole.
    Although these are SARE's guidelines I believe they have always 
been part of agriculture's code so I am proud to be a part of and glad 
to support this great program. I hope to be in Cheyenne May 4th with 
some short handouts to better explain the program and in support of 
SARE and I hope to get a chance to get a minute or two with you and 
some of the other Members hoping to strengthen your support.
            Sincerely,

Larry Cundall.
                                 ______
                                 
     Submitted Letter from Frank Galey, Ph.D., Dean, UW College of
    Agriculture and Natural Resources; and Chair, Consortium for the
                   Advancement of Brucellosis Science
April 29, 2010
 Hon. Collin C. Peterson,             Hon. Frank D. Lucas,
Chairman,                            Ranking Minority Member,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.

Re: The Consortium for the Advancement of Brucellosis Science (CABS)

    Dear Committee Members:

    The last remaining reservoir for Brucella abortus in the United 
States is in the wild bison and elk in the Greater Yellowstone Area 
(GYA). In the last few years, the disease has spilled over from those 
affected wildlife to cattle populations in the states surrounding the 
GYA, thus threatening the ultimate success of the Brucellosis 
Eradication Program nationwide.
    The Consortium for the Advancement of Brucellosis Science, called 
CABS, consists of a science team, with members from around the United 
States (including California, Texas, Louisiana, Virginia, Iowa, 
Wyoming, and Montana), and stakeholder advisory team comprised of 
leaders from the Federal Government as well as from the three states in 
the GYA. This consortium is designed according to the model provided by 
the USDA-NIFA CAP grant programs. The mission of CABS is to evaluate 
current research, identify gaps, secure funding, award research grants 
on a competitive and transparent basis, and conduct outreach for the 
advancement of brucellosis science for domestic and wild animals. 
Research will focus on development of vaccines, and diagnostic tests.
    The goal of the CABS is to work toward successful disease control 
and prevention. In-depth research projects under CABS will be conducted 
at veterinary disease labs in the United States, including the $25 
million University of Wyoming (UW) BSL3 laboratory currently in 
construction. This is a collaborative research effort, with stakeholder 
consensus, and an adaptive research approach with results to be widely 
disseminated to policy makers, scientists, and stakeholders.
    The CABS project has been designed to further the efforts of the 
Laramie Agenda, a major meeting with the leading scientists from around 
the world, which took place in Laramie, Wyoming in 2005. This CABS 
consortium was proposed at that meeting. Development of improved 
vaccines and tests for elk, bison, and cattle was estimated to cost $40 
million or more and take up to 20 years to undertake.
    Approximately $1.8 million per year for the next 5 to 10 years is 
required to initiate the research projects and operations. Brucellosis 
has cost the USA and producers billions of dollars since eradication 
efforts began. Despite the fact that this disease remains a national 
issue for industry and Federal agencies, including USDA-NIFA; Federal 
agencies increasingly view this as only a regional issue and thus are 
reluctant to provide research funding. Therefore, please consider every 
avenue within this current and next farm bill's research provisions to 
support efforts to eradicate brucellosis by leading researchers around 
the country.
    Thank you for considering this issue.
            Sincerely,

Frank Galey, Ph.D.,
Dean, UW College of Agriculture and Natural Resources; and Chair, 
Consortium for the Advancement of Brucellosis Science
                                 ______
                                 
 Submitted Letter from Ken Hamilton, Executive Vice President, Wyoming 
                         Farm Bureau Federation
May 12, 2010

Members,
House Committee on Agriculture,
Washington, D.C.

    Dear Sirs and Madame:

    Recently you held a hearing in Wyoming on the upcoming ``farm 
bill'' reauthorization. As a representative of over 2,600 agricultural 
producers in the state I certainly appreciate the Committee taking the 
time and effort to come to a state which has not been traditionally 
associated with U.S. farm bill issues. When you are talking about 
agriculture in Wyoming you would be talking about livestock production 
generally. According to the 2009 Wyoming Agriculture Statistics 
livestock production account for $748.7 million in cash receipts out of 
a total of $974.2 million cash receipts. Of the $748.7 million in 
livestock cash receipts, $598.5 million was from cattle and calves. 
This type of production means that Wyoming ranks first in the nation in 
the average size of agricultural operation. However, the farming aspect 
of agriculture in Wyoming cannot be overlooked and we certainly have 
many important cash crops raised in the state.
    Perhaps the most utilized USDA program the majority of our members 
avail themselves of would be the Federal insurance programs to mitigate 
against weather related impacts. However, many of the current USDA 
insurance programs are not structured to take into account Wyoming 
conditions.
    You heard testimony in Cheyenne regarding the Natural Resources 
Conservation Service. The programs offered through this agency are also 
utilized by producers in this state. NRCS has been an important partner 
with many of our producers. The focus of programs away from enhancing 
production agriculture and more towards environmental programs is of 
concern to our organization. The U.S. Department of Agriculture should 
focus their efforts on programs which help to produce food for this 
nation and the world.
    You also heard testimony regarding the need to continue funding 
conservation easement programs. While conservation easements have been 
popular the Committee needs to recognize that the current structure is 
at best a crude tool to achieve conservation needs and has several 
significant defects which should be addressed.
    The first is that most conservation easements are written in 
perpetuity. Most citizens recognize that drafting a management plan 
today to meet the needs of landowners 25, 50 or 100 years from now 
would be a challenge. Locking land up in perpetuity is not, in our 
members view, a wise public policy decision. Our organization has had a 
policy against perpetuities for over a decade. In those years we 
continue to have concerns that perpetual conservation easements will 
have a significant impact on future generations. As one of our members 
asked when our policy was debated, ``What would have happened to our 
nation if our founding fathers would have locked up everything outside 
of the original 13 states in perpetuity?''
    Many agricultural producers face the ``Hobson's choice'' of passing 
an agricultural operation on to their heirs with a substantial tax 
liability, or passing their agricultural operation on with a 
conservation easement in perpetuity. Neither is a good choice! We 
realize, the scope of these hearings is to take comments on farm bill 
related issues, but allow us to put a plug in here for the extreme need 
for the larger body to address the ``death tax issue'' to help 
eliminate the ``Hobson's Choice'' dilemma facing many of our producers.
    The average size of a Wyoming agricultural operation is 2,745 acres 
and the average farm value per acre is a little over $550, so the 
average agricultural operation in Wyoming has $1.5 million just in the 
real estate. The 2007 Census of Agriculture for Wyoming shows that over 
half of the principal operators of agriculture are 55 years or older 
and a significant percentage of that number is over 70. So you can see 
how important legislation that can limit the cost of the inheritance 
tax burden on agricultural operations is needed.
    Utilizing conservation easements for this purpose is not good 
public policy. A better policy would be to place a limit on the term of 
the easement which can then be renegotiated by the landowner based on 
conditions that exist in the future.
    The current CRP contracts for farm ground recognize this, but 
ranching operations do not have such options. A term easement would 
still allow for retention of agricultural properties while allowing 
payment for those uncompensated functions that these operations 
perform.
    We also believe that all government programs must be considered in 
the context of increasing budget deficits. Our members have always felt 
that a more proper role for Congress to help out agricultural producers 
is to eliminate those programs which add costs to those goods purchased 
by producers or those rules and regulations which add costs to doing 
business. We have to recognize that costs added to producers come out 
of their bottom line. Too many of those costs result in more producers 
going out of business regardless of how many programs are provided to 
help those same producers.
    The Committee also heard testimony about the critical need for 
additional funding to work on the beetle killed trees. Many of our 
members depend on USFS land for seasonal grazing. With an estimated 
100,000 trees falling each day, several areas may need to have roads 
closed due to danger factors. If our members cannot utilize roads to 
access grazing allotments, they could lose aspects of sustainability of 
private land resources, caused by a reduction in productivity.
    Again, thank you for coming to Wyoming.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Ken Hamilton,
Executive Vice President.

CC:
Board, SGA Chairmen.
                                 ______
                                 
  Submitted Letter from Taylor H. Haynes M.D., President, Independent 
 Cattlemen of Wyoming; Board Member and Director Region II R-CALF--USA
May 14, 2010

Hon. Cynthia M. Lummis,
Member,
Committee on Agriculture,
Washington, D.C.

    Dear Congresswoman,

    Thank you for this forum in our Great State. While the farm bill 
represents a great deal of excellent work, Independent Cattlemen of 
Wyoming and R-CALF--USA will take this opportunity to apprise you of 
the crisis in which the United States domestic cattle producer is 
found.
    The Cattle cycle and the domestic market are broken by monopsony. 
The Multinationals by both owning and packing cattle have unfair and 
devastating control of the cattle market.
    We urge you to work to remedy this situation before we are all 
fully vertically integrated and mostly gone.
    Since the 1990s we have averaged losing 12,000 ranches and cattle 
farms annually. This is devastating to rural America and ultimately the 
country.
    We request and welcome any opportunity to meet with you and your 
staff to discuss the situation in detail and present solutions in equal 
detail. The attached provides some insights.
    Again, many thanks for your excellent service to our Great state 
and our Republic.
            Sincerely,

Taylor H. Haynes M.D.,
President, Independent Cattlemen of Wyoming;
Board Member and Director, Region II, R-CALF--USA.
                              attachment 1
Thirteen Indications that the Cattle Industry is in a Serious State of 
        Crisis
The Entire U.S. Livestock Industry Is in a Severe State of Crisis!

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Today's U.S. Cattle Industry

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No. 1: Disconnect Between Cattle Prices and Beef Prices

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No. 2: Increasing Price Spreads Between Ranch Gate and Wholesale, and 
        Ranch Gate and Retail

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No. 3: Industry Shrinks as Consumption Increases

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No. 4: Domestic Beef Production Lags Behind Domestic Beef Consumption

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Domestic Beef Production v. Total U.S. Beef Production Explained 

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No. 5: Domestic Beef Production Losing Share of Total Available Beef 
        Supply

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No. 6: Cattle Feeders Suffer Long-Run Losses While Beef Prices Steadily 
        Climb to Record Levels 

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No. 7: Packer Margins Rise as Cattle Feeders Suffer Losses

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No. 8: Consumers Paying Record Beef Prices While . . .

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

. . . Cow/Calf Producers Receive Depressed Prices 

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No. 9: Cattle Prices Fell When Exports Peaked

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No. 10: Shrinking Number of States Receiving Above-The-Average Cattle 
        Prices

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
No. 11: The U.S. Cattle Cycle Has Been Disrupted

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Description of Historical Cattle Cycle

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No. 12: Huge Disparity in Regional Weekly Cattle Prices

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No. 13: Tremendous Volume Deficit in Cattle and Beef Trade

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How to Address this Crisis

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                              attachment 2

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                                 ______
                                 
 Submitted E-Mail from Martha N. Hellyer, Hellyer Limited Partnership, 
                               Lander, WY
From: Martha Hellyer
Sent: Tuesday, May 04, 2010 9:56 AM
To: Obermueller, Pete
Subject: Grassland Reserve Program
Follow Up Flag: Follow up
Flag Status: Flagged

RE: Hearing on Grassland Reserve Program

    Dear Pete and Pam,

    Our ranch enrolled 4,000 acres in the Grassland Reserve Program in 
2006. We have a 10 year enrollment. These 4,000 acres are scattered 
across and within our 100,000 acre Federal Grazing Allotment. These 
acres are in wilderness study areas, historical landscapes, and 
critical wildlife habitats. The GRP has been very beneficial to the 
viability and success of our ranch. The GRP has also been very 
beneficial to the viability and success of the Landscape; the ranch and 
the landscape are dependent on each other.
    We would like to note that the long term stability of the land is 
directly related to the long term security of the Federal grazing 
permits.
            Thank you,

Martha Hellyer.
                                 ______
                                 
Submitted Statement from Carl A. Larson, Sheep Rancher, Summit County, 
                                   UT
Statement regarding ``Forest Health and the Bark Beetle Epidemic''
House Agriculture Committee Hearing--Cheyenne, Wyoming--May 4, 2010
    My name is Carl A. Larson. I graduated from the University of 
Wyoming in January 1958 with a major in Range Management. I am a third 
generation sheep rancher in southwestern Wyoming. We summer our sheep 
(4 herds) on the North Slope of the Uinta Mountains in Summit County, 
Utah. My Grandfather began running his sheep in these mountains about 
1900. We have been intimately involved in being good stewards of the 
forest in which we graze our sheep, over all of these years.
    We are now very sad to see the devastation caused by the bark 
beetle infestations over these past few years. We know that these 
beetles come in cycles--and we also know that healthy trees can 
withstand an attack by these bark beetles.
    The Intermountain Forest & Range Experiment Station, Forest 
Service, USDA, in Ogden, Utah published. in 1965, the Research Paper 
INT-23, titled, Timber Management Issues on Utah's North Slope. This 
Research Paper states, ``If the North Slope were to be brought under 
management as a sustained yield unit, the task would be difficult 
because the age distribution is unbalanced and is dominated by 
overmature stands. More than half of the coniferous forest bears stands 
that are mature or overmature . . . The North Slope Forest is in a 
state of rapid attrition. Because more than half of the conifer timber 
is mature or overmature, the North Slope lodgepole pine has been under 
intermittent siege by mountain pine beetles for several decades . . . 
Forty-four percent of the 201,000 acres of mature and overmature timber 
is classified as `high risk'. Until this timber is logged or killed, 
periodic flareups of the mountain pine beetle and other insects must be 
expected.''
    The 1985 Forest plan confirmed the deteriorating condition of the 
forest, by stating, ``Of the Forest's 212,000 acres of lodgepole pine, 
about 98,700 acres is rated as having high to medium susceptibility to 
attack by mountain pine beetle.''
    In the 5 year monitoring report of the 1985 Forest Plan, dated June 
1, 1992, under goal #25 it states, ``Concentrate timber harvesting in 
the moderate to high risk lodgepole pine stands to reduce resource 
losses caused by the mountain pine beetle. Objective: Offer 14.7 
Million boardfeet (MMBF) of sawtimber annually by the end of the first 
decade.''
    The 1985 Forest Plan set the Annual Sale Quantity (ASQ) of timber 
at approximately 16 MMBF, later reduced to 12.5 MMBF due to an error in 
double counting part of the timber resource. The actual timber volume 
offered and sold ranged from 11.5 to 14.0 MMBF in the late 1980's, to 
10.0 MMBF in 1991, 1992 and 1993, down to 1.8 MMBF in 1995, 1.7 MMBF in 
1996 and 4.9 MMBF in 1999. The timber required for the sawmills in 
Uinta County at this time was approximately 12 MMBF. The timber 
supplied to our local mills from Forest Service lands has decreased 
from approximately 90% to 50% for one of our two largest sawmills and 
to 0% for our largest sawmill.
The Reason_The Environmental Movement
    Roadless areas were set out, then expanded. Threatened & endangered 
species were used to stop proposed timber sales. Almost every timber 
sale was appealed by the environmental groups. The destruction of our 
forests and watersheds is blood on their hands.
    We are now faced with the difficult task of removing roadless areas 
designations so we can access the areas of dead trees, in order to 
construct fire breaks, remove the massive fuel load which will 
inevitably contribute to a major wildfire and begin a needed forest 
management plan.
    We Need Your Help in Removing the Roadless Area Designations--
Especially The ``Little West Fork Blacks''--Without this we are facing 
`A hot, fast moving wildfire, resulting in the loss of human lives, 
death of livestock, homes burned to the ground, water quality impaired, 
air quality polluted & our large irrigation and culinary water 
reservoirs filled with silt.
            Thank you.
                                 ______
                                 
   Submitted Letter from Robert LeResche, Chair, Powder River Basin 
                            Resource Council
May 4, 2010

Hon. Colin C. Peterson,
Chairman, 
House Committee on Agriculture
Washington, D.C.;

Hon. Frank D. Lucas,
Ranking Minority Member,
House Committee on Agriculture
Washington, D.C.

    Dear Chairman Peterson and Ranking Member Lucas,

    Thank you all for this opportunity to provide our input on the next 
farm bill. We very much appreciate the Committee traveling to the State 
of Wyoming today.
    Powder River Basin Resource Council is a member-run organization 
based in Wyoming whose mission includes the preservation and enrichment 
of our agricultural heritage and rural lifestyle. PRBRC is a member 
organization of the Western Organization of Resource Councils which has 
a critical presence in Washington, D.C.
    As you deliberate the next farm bill that addresses such a vast 
array of programs for the people and Agricultural producers of these 
United States, we would prioritize our comments today to a specific 
issue that is yet to be fully initiated as requested by Congress in the 
2008 Farm Bill.
    Congress is currently wrestling with issues of regulation in the 
banking and financial industries. So too, must Congress bring fairness 
back to our food industry. For far too long, the meats packing industry 
has been dominated by a handful of corporate processors. There is close 
to a 90% chance that the beef you consume today would have been 
slaughtered and processed by one of the only four biggest controlling 
companies in this industry.
    To bring fairness to all producers, feeders and processors, we urge 
you to continue to use your legislative powers to:

    (1) Prohibit packers from procuring cattle for slaughter through 
        the use of a forward contract, unless the contract contains a 
        firm base price and can be equated to a fixed dollar amount on 
        the day that contract is signed, and that forward contracts are 
        offered or bid in an open, public manner.

    (2) Prohibit packers from owning and feeding cattle, unless the 
        cattle are sold for slaughter in an open and public 
        marketplace.

    In the 2008 Farm Bill, Congress directed the USDA to fully define 
what constitutes an ``undue and unreasonable preference'' in livestock 
markets as contained in the Packers & Stockyards Act of 1921. 
Subsequent rule making is presently being generated within the USDA and 
the public awaits this publication.
    The outcome of this rule making is unknown. We anticipate that the 
fight for fair competition and successful free enterprise agriculture 
among our independent ranchers and farmers, feeders and processors will 
continue for years to come.
    Therefore, as you anticipate the major issues of the 2012 Farm 
Bill, please continue to strive toward open and fair markets for 
livestock producers. The control of our precious wealth of food stuffs 
by a small cartel of industrial giants will no doubt continue due to 
volume of scale and capacity alone. However, the laws and subsequent 
rules passed by Congress can return fairness and openness to these 
markets and provide true competition in agriculture once again.
    Thank you again for the opportunity to provide input to this 
Committee today. We very much appreciate your efforts on these issues 
critical to America. If you would like more information on solutions 
which Congress can enact to return this fairness to the livestock 
industry, please contact us at [Redacted] or go to our website at 
powderriverbasin.org.
            Sincerely,

PRBRC.

CC:

Rep. Boswell;
Rep. Conaway;
Rep. Cardoza;
Rep. Fortenberry;
Rep. Costa;
Rep. Lummis;
Rep. Markey;
Rep. Smith.
                                 ______
                                 
 Submitted Statement by Alan Merrill, President, Montana Farmers Union
    Congressman Peterson and Members of the Committee: Thank you for 
the opportunity to testify today on farm bill possibilities for 
Montana's agricultural producers. My name is Alan Merrill, and I am 
President of the Montana Farmers Union. I want to thank you for holding 
this hearing, and we look forward to working with you as the 
development of the 2012 Farm Bill moves forward.
    As you may know, Montana Farmers Union is an organization whose 
policies originate from the ground up. Our producer members develop our 
policy every year at our convention. I'd like to share some of their 
concerns and goals with you today.
    One of our first policy charges is to work to promote a price 
balance between sales and cost of farm operations. A priority for the 
2012 Farm Bill should be profitability for our country's farmers and 
ranchers: a policy that allows farmers to earn their income from the 
market and assures them a safety net during times of low commodity 
prices and/or rising costs of production.
    We believe that farm policy should provide a meaningful measure of 
price protection, be targeted toward family farmers and ranchers, and 
ensure competition in the marketplace.
    It is our belief that the next Farm Bill should include provisions 
to ensure that farmers, ranchers and rural communities will be a part 
of an economic climate that will permit family-based agriculture to 
flourish.

    1. We believe the primary goal of commodity programs should be to 
        provide economic stability and opportunities for producers. We 
        suggest a farm income safety net that uses countercyclical 
        payments indexed to the cost of production to support family 
        farmers during periods of low commodity prices;

    2. The next farm bill should continue to fine-tune programs 
        designed to assist farmers and ranchers to develop and 
        implement conservation cost-share programs;

    3. A competition title that addresses current anti-trust practices 
        and ensures anti-trust laws will be enforced;

    4. A renewable energy title that makes energy independence a 
        national priority--one that puts farmer, rancher and community 
        ownership of renewable energy first; one that encourages value-
        added projects, including biofuels and farmer and community-
        owned wind energy;

    5. A rural development title that helps farmers, ranchers and rural 
        communities develop economic opportunities for the betterment 
        of rural America; and

    6. The bill needs a strong nutrition title that provides basic food 
        and nutrition needs for all citizens in need and enhances 
        increased development and delivery of community-based food and 
        local agriculture systems.
Fuels from the Farm
    Energy is vital to securing our nation's needs for food and fiber. 
Montana Farmers Union supports a balanced, comprehensive energy policy 
that seeks energy independence for the United States, protects our 
nation's environment and recognizes the special needs of America's 
agricultural sector.
    Renewable energy from farm-generated operations continues to 
provide opportunities in farm country. Montana Farmers Union members 
believe the economic benefits made possible through renewable energy 
projects should remain in our rural communities. Many times in our 
state's history we have seen large corporate investments draw the 
wealth out with little or no reinvestment in the local economy. We urge 
the Committee to ensure that USDA Rural Development and other programs 
that are developed for renewable fuels give a competitive advantage to 
farmer-owned and locally owned efforts.
    Energy, economic development, national security and environmental 
quality are inextricably linked. Home-grown energy solutions offer 
tremendous potential for farmers and ranchers to capture more income; 
for rural communities to prosper, and for the nation to lessen its 
dependence on foreign oil.
Conservation Investments
    Montana Farmers Union policy advocates for conservation funding to 
include soil, water, and energy as responsible economic investment 
avenues now and into the future. Conservation programs should be good 
for the environment, reward stewardship, discourage speculative 
development of fragile land resources, strengthen family fanning and 
enhance rural communities.
Competition
    One thing that has not changed through the years is the 
vulnerability of agriculture producers to anti-competitive conduct.
    Consolidation in rail transportation, for example, has injured 
Montana's ``captive'' grain farmers who are served by one dominant 
railroad. According to the USDA, rail rates for grains and oilseeds 
have increased 73 percent since 2003 and rail rates in 2008 for grains 
and oilseeds were 81 percent higher than rates for all other 
commodities. A recent report by Montana's Attorney General's Office 
found that Montana's captive grain shippers have been charged $19 
million more annually by the single monopoly railroad serving the state 
than grain shippers in more competitive transportation markets.
    Montana Farmers Union's agriculture producers strongly urge that 
all Federal agencies enforce current antitrust laws, and that Congress 
take the necessary steps to review and reform antitrust regulations 
where necessary to prevent abuse of captive shippers.
Trade
    Free trade and fair trade are incongruent terms in today's world. 
Montana Farmers Union believes that our current trade agenda does not 
provide opportunities for farmers to make a profit from the 
marketplace. Trade negotiations must include labor standards, 
environmental standards and address currency manipulation situations.
Nutrition and Local Food Systems
    We do not believe that there should be hungry people when we have 
such a capacity to produce safe, nutritious food. We support strong and 
fully funded nutrition and food programs.
    Specifically, we support current programs being developed within 
USDA that support and promote common-sense solutions for community-
based food systems such as the popular Know Your Farmer; Know Your Food 
initiative, and grant programs for specialty crops, beginning farmers, 
rural cooperative development, value-added ventures, and farmers' 
market nutrition for seniors and women, infants and children.
    We believe in the need to promote local food systems based on 
cooperative business models in order to reverse the trend of the rural 
exodus to urban centers and from food deserts back to food self-
sufficiency.
    At about the same time that USDA announced its pilot Hoop House 
initiative, Montana Farmers Union awarded its own grant for a hoop 
house to a newly formed Agricultural Academy at a public high school 
district in our state. It is programs such as these that help put 
students and parents in touch with knowledge of where some of their 
food comes from and helps forge a link between consumers and the 
farmers and ranchers who grow and raise the food we all enjoy.
    In conclusion, we support a 2012 Farm Bill that will help farmers, 
ranchers and rural Montanans make a profit from the market. The family 
farm is the keystone of a free, progressive society, as well as a 
strong America. Farm policy needs to recognize and build on the 
strength of our nation's agriculture. Every politician, voter, 
taxpayer, environmentalist, and consumer needs to realize independent 
family farmers are by far the best stewards of the land and animals.
    Federal agricultural policy, with strong conservation, food and 
energy components, that prioritizes the interests of independent family 
farmers and ranchers, is vital to the people on the land and to our 
country.
    It is my hope that the committee will keep these proposals in mind 
as it works to prepare future farm policy. We look forward to working 
with you to achieve these goals.
    Mr. Chairman and members of the committee, again I thank you for 
holding this hearing and for the opportunity to testify.

Alan Merrill,
President,
Montana Farmers Union.
                                 ______
                                 
   Submitted Statement from Patrick O'Toole, President of the Board, 
                          Family Farm Alliance
    Good morning, Chairman Peterson and Members of the Committee. My 
name is Patrick O'Toole, and I serve as president of the Family Farm 
Alliance (Alliance).
    The Alliance is a grassroots organization of family farmers, 
ranchers, irrigation districts and allied industries in 16 Western 
states. The Alliance is focused on one mission: To ensure the 
availability of reliable, affordable irrigation water supplies to 
Western farmers and ranchers. We are also committed to the fundamental 
proposition that Western irrigated agriculture must be preserved and 
protected for a host of economic, sociological, environmental and 
national security reasons--many of which are often overlooked in the 
context of other Federal policy decisions.
Introduction
    I am honored to be here today to discuss the farm bill, watershed 
health, conservation and the challenges and opportunities facing 
Western farmers and ranchers who depend upon adequate water supplies 
that irrigate the arid West. The Alliance Board of Directors played an 
active role in the development of the last farm bill. In particular, 
working with a diverse coalition of commodity groups, conservation 
organizations, and urban water users, we developed a framework that 
ultimately became the Agricultural Watershed Enhancement Program 
(AWEP). We will also soon release a report that contains a dozen case 
studies that highlight real-world examples of water conservation, water 
transfers and markets, aging water management infrastructure problems, 
and watershed restoration and enhancement projects. An important 
objective of our final report will be to demonstrate that water 
managers, ranchers and farmers are resourceful and creative individuals 
who should play an active role in resolving the water conflicts of the 
West. This testimony touches on these issues and other matters critical 
to the future of Western farmers and ranchers' ability to provide food, 
fiber and energy to our nation and the world.
Farm Bill Water Conservation Recommendations
    Ranches in the West depend on the availability of both public and 
private land for economically viable operations. The single most 
important factor leading to the loss of wildlife and degraded 
landscapes is fragmentation from development. Ranchers want a stable 
business climate for their operations. Conservation groups want healthy 
and productive landscapes. We are already working with conservation 
groups who share a common interest in supporting working ranches and 
healthy landscapes and will work further with those groups to ensure 
that continued emphasis is placed in the farm bill to support 
incentive-driven conservation programs. Thousands of water and land 
conservation projects have been completed across the Western United 
States, and these efforts should continue. We urge that this Committee 
continue to make farm bill conservation programs a priority and fund 
those programs accordingly.
Concerns with AWEP
    AWEP is a newly-established part of the Environmental Quality 
Incentives Program (EQIP), a program administered by the Natural 
Resources Conservation Service (NRCS). The main difference between 
typical EQIP projects and AWEP projects is that applications for 
project funding are made directly to the U.S. Secretary of Agriculture 
from an organization on behalf of a group of agricultural producers who 
intend to make water improvements in a geographic area.
    The Family Farm Alliance was part of a diverse coalition formed 
during the crafting of the last farm bill that focused exclusively on 
the development of the AWEP concept. Our primary motive for engaging in 
this process was to provide additional funding opportunities--outside 
of the Interior Department--for irrigation districts and other 
agricultural water delivery and management organizations to tackle 
aging infrastructure and water conservation challenges in a more 
coordinated and effective manner. The original concept behind AWEP was 
to focus on cooperative approaches to enhancing water quantity and/or 
quality on a regional scale. This new program--in tandem with multiple 
conservation tools (including farmland management practices, easement 
purchases, and ecosystem restoration assistance)--was intended to 
provide flexibility to cooperative conservation partners to achieve 
improved water quantity and quality goals.
    Some of our members have witnessed firsthand the types of 
challenges that AWEP advocates were trying to address. For example, the 
2002 Farm Bill contained $50 million of EQIP funding to implement water 
conservation measures in the Klamath Basin of northern California and 
southern Oregon. These Federal funds were matched by $12.5 million of 
local money, put up by individual landowners. While the water 
conservation measures undertaken undoubtedly contributed to improved 
water use efficiency on individual farms, the EQIP program was intended 
for on-farm purposes and was not designed to coordinate conservation 
benefits to meet specific regional goals, such as conserving water for 
storage and future use. Irrigation districts and other, larger 
conservation entities, which many times coordinate conservation 
projects to maximize benefits, were not eligible to compete for these 
funds in the last farm bill.
    Our push on AWEP, in part, was intended to address these types of 
challenges. There is a need to fund projects that provide water quality 
or water quantity benefits at a scale that benefits more than just one 
or two producers. In many instances, coordinated regional water 
conservation efforts can lead to improved water quantities and quality 
that can only be physically captured and managed by the water delivery 
organizations to meet overall goals and objectives. We had hoped that 
AWEP would provide substantial grant money to irrigation districts or 
other water agencies, which would be placed in a lead position to work 
with multiple producers to achieve locally-generated objectives. If 
consensus at a regional level can be reached on a common approach, 
there will be a better chance of positive community participation and 
ultimately, a better bang for the Federal buck.
    The original AWEP proposal was solid from a conceptual standpoint, 
but by the time it made it through the legislative and administrative 
process, the program that is now in place is not being implemented in a 
manner consistent with the original vision. Rather than providing funds 
directly to irrigation districts, the districts instead have been put 
in situation where they essentially pass the phone number of the local 
NRCS office on to the individual landowner, and NRCS takes over from 
there. In essence, this AWEP has simply become an expansion of the 
existing EQIP program, which was definitely not the intent when this 
concept was crafted 4 years ago.
Recommendations to Improve AWEP
    There may be opportunities with the new farm bill to further 
improve upon AWEP's initial concept:

    1. Provisions should allow direct payment made to irrigation 
        districts, who can than administer the program, working 
        directly with their landowner member farmers. NRCS should still 
        approve the contracts, but we believe more efficient delivery 
        of funds that results real improvements on the ground will 
        occur if the irrigation districts distribute the funds and work 
        with the landowners. Some of these districts have innovative 
        ideas that would lead to the creation of grower education 
        programs, testing, farm water management classes, and 
        irrigation technology seminars that would have immeasurable 
        long-term conservation benefits. Administrative expenses for 
        such partners should be allowed, but be capped;

    2. Irrigation districts or similar entities should be allowed to be 
        the basis for ``pooling'' arrangements, where the benefits of a 
        project which affects multiple landowners is funded by 
        ``pooling'' their individual AWEP interests into a bigger 
        project;

    3. Direction must be provided to improve how NRCS program 
        administrators deliver timely and accurate information, provide 
        reliable and transparent processes, and set firm deadlines;

    4. Administrative costs associated with any work performed by the 
        NRCS should be capped at a reasonable level;

    5. The role of the Bureau of Reclamation and how that agency 
        coordinates with NRCS in the implementation of this program in 
        Western states must be well thought out, and should compliment 
        the collaborative philosophy (between the Departments of 
        Agriculture and Interior) embedded in the ``Bridging the 
        Headgates'' initiative endorsed by both the Bush and Clinton 
        Administrations; and

    6. The program should provide assurances that the intent is not to 
        reallocate water away from agriculture, but to help stretch 
        limited water supplies for future regional beneficial use. It 
        must also recognize the traditional deference of Federal 
        agencies to state water allocation systems.
Conservation Caveats
    The Alliance supports continued voluntary implementation of 
efficient water management practices included in the farm bill and 
opposes mandatory or enforceable requirements for agricultural water 
use efficiency. Only practices that reduce irrecoverable losses 
actually increase the total useable water supply. Furthermore, water 
saved within a water district or on-farm is used elsewhere within the 
same district or farm. Western agriculture in many areas--including 
California's Central Valley and the Klamath Bain--is already highly 
efficient in its use of water. More efficient water application does 
not necessarily increase useable water supplies, but with changes to 
the AWEP program, coordinated regional water conservation projects can 
lead to stretching limited supplies to satisfy unmet needs in the 
future.
    Conservation is often seen as the solution to water supply issues. 
While conservation is surely a tool that can assist in overcoming water 
supply problems, it cannot be viewed as the single answer to water 
shortages, as discussed further below. And, as was keenly demonstrated 
in California's San Joaquin Valley last year--you cannot conserve water 
if there is no water to conserve.
Importance of Federal Climate Change, Conservation and Infrastructure 
        Assistance
    Water conservation and water transfers are important tools for 
improved management of increasing scarce water resources. However, 
demand-management actions must be balanced with supply enhancement 
measures that provide the proper mix of solutions for the varying 
specific circumstances in the West.
    Supply enhancement should include rehabilitation of existing 
facilities and construction of new infrastructure. Rehabilitation 
measures should focus on maximizing the conservation effort through 
increased delivery efficiencies, construction of re-regulation 
reservoirs on irrigation delivery systems to minimize operational 
waste, and construction of new dams and reservoirs in watersheds with 
inadequate storage capacity to increase beneficial use and provide 
operational flexibility. Additional groundwater supplies should also be 
developed, but in a manner where groundwater use falls within the safe 
yield or recharge parameters of the aquifer. Conjunctive management of 
surface and groundwater supplies should be encouraged. Installation of 
additional stream gauges, water meters, groundwater recharge projects 
to employ during times of high surface flow, groundwater monitoring 
wells and better estimates of consumptive use are of paramount 
importance for the equitable management of available water supplies.
    The Federal Government needs to seriously consider adopting a 
policy of supporting new projects to enhance water supplies while 
encouraging state and local interests to take the lead in the planning 
and implementation of those projects. Local and state interests have 
shown enormous creativity in designing creative water development 
projects. For example, the State of Wyoming has initiated its Dam and 
Reservoir Program, in which proposed new dams with storage capacity of 
2,000 acre feet or more and proposed expansions of existing dams of 
1,000 acre feet or more qualify for state funding. Wyoming water 
managers and policy makers recognize that dams and reservoirs typically 
provide opportunities for many potential uses. While water supply is 
emphasized in the Wyoming program, recreation, environmental 
enhancement, flood control, erosion control and hydropower uses are 
also explored as secondary purposes.
    Many water projects are ready to be developed in the West, as 
demonstrated by studies completed by the Family Farm Alliance and the 
Bureau of Reclamation in 2005. While conservation and recycling 
programs have done a tremendous job of meeting new growth, only a small 
amount of new water storage capacity has been developed in the past 30 
years. Maintaining the status quo simply isn't sustainable in the face 
of continued population growth, diminishing snow pack, increasing water 
consumption to support domestic energy, and emerging environmental 
demands. We must immediately start building the water infrastructure 
needed to cope with a changing climate, meet the needs of a burgeoning 
population, and support a healthy agricultural base in the West.
The Need to Support Local Efforts to Manage Western Watersheds
    There are many opportunities for Federal agencies to improve 
management of the West's biggest ``reservoir''--our watersheds. In most 
Western states, much of the water used derives from snowmelt in 
mountainous areas. I can tell you from personal experience that I have 
serious concerns about how the Federal Government is managing the 
watersheds.
    A July 2008 report released by the National Research Council, one 
of the first major studies on forest and water since a U.S. Forest 
Service project in 1976, underscores the importance of forests to the 
nation's water supplies: Forested lands cover about \1/3\ of the 
nation's land area, and although they have roles in timber production, 
habitat, recreation and wilderness, their most important output may be 
water. Forests provide natural filtration and storage systems that 
process nearly \2/3\ of the water supply in the U.S. Demand for fresh 
water continues to rise, while forest acreage is declining and 
remaining forest lands are threatened by climate change, disease 
epidemics, and fire. Forest vegetation and soils, if healthy and 
intact, can benefit human water supplies by controlling water yield, 
peak flows, low flows, sediment levels, water chemistry and quality.
    One of the biggest threats to forests, and the water that derives 
from them, is the permanent conversion of forested land to residential, 
industrial and commercial uses. The 2008 report found that modern 
forest practices have helped to protect streams and riparian zones, but 
more needs to be learned about the implications of such practices as 
thinning or partial cuts. This understanding can lead to the 
development of ``best management'' practices could help balance timber 
harvest with sustainable water flow and quality.
    We strongly believe that locals should be encouraged and given the 
tools to lead watershed enhancement efforts. The best decisions on 
natural resources issues happen at the state and local level. I live in 
the Little Snake River watershed. Since 1991 numerous agencies, 
organization, and NGO's have recognized my community and the local 
governmental natural resource agency, the Little Snake River 
Conservation District (LSRCD), as leaders in natural resource 
conservation. Numerous articles featuring work conducted by the LSRCD, 
area land owners, and its partners have been featured in popular 
publications like Farm Journal, Beef Today, Bugle Magazine, Wyoming 
Wildlife, and Range Magazine as well as peer reviewed journal 
publication in the Journal of Soil and Water Conservation (2008) and 
the Journal of Rangeland Ecology (2009).
    These efforts have all been locally-led. Conservation of natural 
resources in the Little Snake River Basin integrated with agrarian life 
style and perpetuation of this culture is the highest priority for the 
local community in the Little Snake Basin. In Wyoming, the local 
residents have passed a conservation property tax to carry on this 
work. Since 1990 this tax has generated approximately $8 million in 
local revenues. These funds have leveraged over $40 million in project 
money to implement conservation and development projects in the Little 
Snake River Basin.
    Today the Little Snake River Basin hosts a myriad of wildlife and 
robust natural resources while sustaining compatible agricultural uses 
and natural resource based recreation businesses. This was accomplished 
through local leadership and commitment of the Little Snake River 
Conservation District working collaboratively with over 30 different 
partner organizations and agencies that have assisted in the 
conservation of the Little Snake Basin, in a collaborative locally-led 
process.
    Properly managing federally-owned watersheds and encouraging 
Federal agencies to work with the agricultural community to solve local 
water problems are imperative. Through thoughtful planning, Congress 
can play a truly important role in helping find the solutions that have 
proved so elusive to date.
Climate Change Legislation Considerations
    There is broad scientific consensus that even modest changes in the 
global climate would likely alter precipitation patterns in ways that 
could pose serious threats to water supplies and agricultural 
production worldwide, particularly in arid regions such as the American 
West where a large portion of agricultural production is dependent upon 
irrigation. A significant reduction in the amount of food and fiber 
produced by American farmers would have adverse consequences for our 
economy and national security and for our trading partners abroad.
    In the past year, legislation has been introduced to address 
climate change in a comprehensive and aggressive manner. We had hoped 
that Congress would share our concern that safeguarding the nation's 
ability to feed itself should be one of the principal goals of any 
legislation whose purpose is to marshal a national effort to minimize 
and adapt to the effects of climate change. Unfortunately, while House-
passed climate legislation (H.R. 5424) and legislation introduced by 
Senators Boxer and Kerry (S. 1733) would commit the Federal Government 
to employ ``all practical means'' to protect fish and wildlife from the 
adverse effects of climate change, those proposals include no 
comparable commitment to ensuring the continued vitality of domestic 
agriculture and agriculturally-based rural communities. Legislation (S. 
1933) introduced by Chairman Bingaman takes a more reasonable approach 
to natural resources adaptation, and it specifically incorporates the 
goals and measures of the SECURE Water Act (P.L. 111-11). But it, too, 
places the greatest emphasis on fish and wildlife.
    The Family Farm Alliance supports the goal of conserving natural 
resources with fish and wildlife adaptation planning, research and 
programs. But the lack of comparable attention to adaptation needs of 
domestic agriculture and rural communities calls into question the 
intent and effects of a large-scale effort focused exclusively on 
natural resources.
    If Congress enacts comprehensive climate change legislation, it 
must include additional adaptation programs for irrigated agriculture 
and rural resource-based communities if such efforts are to be given 
the necessary attention and resources. Farms and communities in the 
western United States face the prospect of economic disruption and 
increased competition and conflict over agricultural and water 
resources as a result of climate change. Helping them adapt to and 
withstand the impacts of climate change should be no less a national 
priority than meeting the needs of fish and wildlife and of farmers in 
other nations.
    We refer you to the October 27, 2009 statement the Alliance 
submitted to the Senate Committee on the Environment and Public Works. 
It provides specific observations and recommendations on how Congress 
can provide adaptation programs that benefit Western irrigated 
agriculture and rural communities. We hope this Subcommittee can play a 
role in advancing these recommendations as the Senate considers climate 
change legislation.
Opportunities for Environmentally-Safe Low-Head Hydropower Development
    The U.S. Interior and Energy Departments and the Army Corps of 
Engineers (USACE) have agreed to create a new strategy for promoting 
hydropower development while reducing environmental impacts and 
streamlining regulations. Many Family Farm Alliance members are lining 
up with creative new projects to take advantage of this development. 
Under a new Memorandum of Understanding (MOU), the Obama administration 
will evaluate new hydropower technologies and their potential impact on 
U.S. renewable energy supplies. The MOU directs USACE, the Office of 
Energy Efficiency and Renewable Energy, the Bureau of Reclamation, the 
agencies to formulate a resource assessment of current Federal 
facilities as well as identify ways to upgrade and modernize those 
facilities and install hydropower technologies at new sites. The 
Federal Energy Regulatory Commission (FERC) will also be involved in 
the process.
    The Alliance was invited by Interior Secretary Salazar's office to 
participate in the MOU signing ceremony last March in Washington. 
Alliance President Pat O'Toole and Advisory Committee Member Gary 
Esslinger (NEW MEXICO) told those assembled that many of the farmers 
and ranchers we represent are interested in installing low-head 
hydropower facilities in existing irrigation canal systems. While this 
would seem to be a no-brainer--the actual construction is not that much 
more difficult than installing an irrigation turnout and there are no 
new ``environmental impacts''--alas, that is not the case.
    Under current regulations, anyone who wants to develop hydropower 
less than 5 megawatts (which would apply to virtually every single 
potential location within irrigation canals) can get an exemption from 
FERC licensing requirements. However, the process required to get that 
exemption can cost $100,000 and 18-36 months just to satisfy National 
Environmental Policy Act (NEPA) compliance requirements. The costs and 
time associated with the environmental compliance issues (noticing, 
public meetings, etc.) can make projects that only cost $20,000 in 
materials suddenly become infeasible. Meanwhile, new solar and wind 
projects can move full-steam ahead without these ridiculous licensing 
impediments. We believe the process for installing in-canal low-head 
hydro facilities should be the same.
    The Alliance this year will be working hard to make it easier for 
Western irrigators to develop new low-head hydropower. A preferable fix 
would be a new exemption category for low-head hydro in irrigation 
projects that does not require Federal agency interaction. For more 
complicated projects that still fall under the existing FERC 5 megawatt 
exemption ceiling but exceed this new minimum threshold (whatever that 
may be), the process must be streamlined. We also want the Bureau of 
Reclamation to aggressively work with its water customers to find ways 
to get more low-head projects built into the existing delivery system.
    At this time, we are working with the Obama Administration to find 
administrative solutions to these challenges. However, it may be 
necessary to enlist the support of Congress to expedite the common-
sense solutions we are looking to achieve. We look forward to working 
with your Committee on this matter in the future, if need be.
Other Needs
    Other critical problems remain to be solved, and Congress can help 
address these needs.

    1. Streamline the Regulatory Permitting Process

    Modern, integrated water storage and distribution systems can 
provide tremendous physical and economic flexibility to address climate 
transformation and population growth. However, this flexibility is 
limited by legal, regulatory, or other institutional constraints, which 
can take longer to address than actually constructing the physical 
infrastructure. The often slow and cumbersome Federal regulatory 
process is a major obstacle to realization of projects and actions that 
could enhance Western water supplies.
    The Family Farm Alliance has long worked on finding ways to 
streamline the regulatory process, and worked closely with past 
administrations and Congress towards that end. In the past year, our 
members are becoming increasingly concerned about the number of 
environmental policies that are currently being re-written by this 
Administration. It appears the changes being contemplated could result 
in stricter requirements that would further slow down Federal approvals 
on water projects that are already very time-consuming and challenging. 
We are concerned about the following administrative actions that could 
carry the risk of real potential harm for Western irrigators:

   Economic and Environmental Principles & Guidelines for Water 
        and Related Resources Studies. The White House in December 
        released a draft of new standards for Federal water projects 
        that for the first time put environmental goals on the same 
        plane as economic development concerns. The proposed overhaul 
        of 1983 standards for the Army Corps of Engineers (Corps) 
        directs the agency to fold non-monetary benefits into project 
        assessments by measuring improvements to wildlife habitats and 
        biodiversity. These proposed changes for the Corps and Bureau 
        of Reclamation may have a significant impact on new water 
        project planning and Federal funding in the future.

   National Environmental Policy Act Expansion. It is our 
        understanding that the Administration may soon issue an 
        Executive Order adding climate change to the list of factors 
        Federal agencies must take into account when evaluating 
        projects and policies. Some conservation groups have pushed for 
        the expansion of the 40 year old National Environmental Policy 
        Act (NEPA), which currently requires agencies to consider 
        environmental factors such as land use, biodiversity and air 
        quality. Our members fear that requiring analysis of climate 
        change impacts during the NEPA process, especially at the 
        project-specific level, will slow economic recovery while 
        providing no meaningful environmental benefits.

   ESA Administrative Revisions. The U.S. Fish and Wildlife 
        Service (USFWS) is considering wide-ranging revisions to the 
        1973 Endangered Species Act (ESA), that could provide new 
        definitions for some key provisions, including those addressing 
        critical habitat and consultations between service biologists 
        and other agencies over projects that could impact protected 
        animals and plants. For example, the USFWS earlier this year 
        proposed to revise a 2005 designation of critical habitat for 
        the bull trout, a threatened species protected under the ESA. 
        If finalized, the proposal would increase the amount of stream 
        miles originally designated as bull trout critical habitat in 
        five Western states by 18,851 miles and the amount of lakes and 
        reservoirs designated as critical habitat by 390,208 acres. The 
        problem here is, for many Western water users, the maze of 
        requirements for ESA permits that can restrict activities or 
        delay projects for months or years. We essentially supported 
        the administrative regulatory changes put forward prior to 2009 
        that would have streamlined the consultation process. It now 
        looks like those changes have been reversed, with no apparent 
        request for agency input offered to the regulated community.

   EPA Pesticide Restrictions. EPA is making a precedent-
        setting decision to impose pesticide restrictions that will 
        essentially prohibit their use in large areas of Washington, 
        Oregon, California and Idaho. The most serious deficiency in 
        EPA's announced plan involves expansion of no-use buffer zones 
        to every ditch, drain, canal, and irrigation furrow that might 
        eventually drain from an agricultural field into a salmon 
        habitat. EPA also recently singled out the state of Florida as 
        the first state in the nation on which they are proposing to 
        establish a nutrient standard for all bodies of water. These 
        proposed standards are being imposed on the basis of an 
        EarthJustice lawsuit and will establish nitrogen and phosphorus 
        standards different from the rest of the country. This is 
        another very disturbing development, but consistent with other 
        recent administration actions.

   EPA Reconsideration of the ``Water Transfers Rule''. A 2008 
        U.S. EPA rule allows water transfers from one water body to 
        another without Clean Water Act (CWA) permits. We now 
        understand that EPA is planning on reconsidering the ``Water 
        Transfers Rule'', which states that a mere transfer of water 
        from one meaningfully distinct navigable body of water to 
        another does not require a NPDES permit, even though the water 
        being transferred may add new pollutants to the receiving body 
        of water. The Justice Department in a recent document says EPA 
        may abandon the rule, a move that would subject water transfers 
        throughout the nation to pollution permitting requirements. 
        This could have severe consequences in states like Colorado and 
        California, where huge quantities of water are moved from one 
        basin to another.

    Many of the above administrative changes are drawing praise from 
environmental organizations that have been advocating them for some 
time. The Family Farm Alliance hopes that the Administration will give 
equal consideration to the concerns of agricultural organizations. We 
pledge to work with the Administration, Congress, and other interested 
parties to build a consensus for improving the regulatory processes 
associated with improving water systems.
Family Farm Alliance Water Management Case Study Report
    The Family Farm Alliance is currently compiling in to a report a 
number of case studies that highlight real-world examples of water 
conservation, water transfers and markets, aging infrastructure 
problems, and watershed restoration/enhancement. This document will be 
used in several forums. For example, we would like to describe water 
conservation and management projects that work well (best management 
practices), especially those that have benefited from Federal grant 
programs, and pass the lessons learned from those projects on to the 
Bureau of Reclamation and NRCS. Our report can further be used as a 
template to advocate for the types of conservation activities that 
could be potentially funded under the climate change bills currently 
moving through Congress.
    Another area of focus in our report will include water markets and 
transfers, where we would like to provide examples of successful 
efforts, identify where there are impediments to success, and describe 
where adverse impacts negated such benefits. These studies will help 
form the framework for Alliance policy on water transfers, which will 
be advanced in the agricultural/urban/environmental water sharing 
coalition we are involved with in the Colorado River Basin. We are 
already assembling work for transfer programs undertaken in the Central 
Valley (CALIFORNIA), in the Klamath Basin (CALIFORNIA/OREGON), in 
Southern California, and along the Front Range of the Rocky Mountains 
(COLORADO).
    We will also include examples of aging water infrastructure 
predicaments facing our members. Findings and recommended solutions can 
be used in our ongoing efforts to implement the loan guarantee 
provisions we advocated for in the Rural Water Supply Act and to 
underscore the additional funding needs that are required to address 
key infrastructure issues in the West, such as the St. Mary Facilities 
(MONTANA) and rehabilitation of Minidoka Dam spillway (IDAHO).
    Finally, we will describe the complications facing local water 
users, the creative solutions that can be developed to meet those 
problems and recommendations that ensure continued, locally-driven 
success. We already have developed one case study in Nebraska, where 
irrigation districts have completed project transfers resulting in 
expanded opportunities to partner with new entities to improve 
infrastructure, flood control, and water management. Another case study 
here in Wyoming describes the efforts of a local conservation district 
to take the lead in implementing holistic watershed solutions. That 
case study is included as an appendix to this testimony.
    An important objective of our final report will be to demonstrate 
that water managers, ranchers and farmers are resourceful and creative 
individuals that should play an active role in resolving the water 
conflicts of the West.
    When our report is completed, it will include a dozen individual 
case studies for projects located in virtually very major river basin 
in the Western United States. We look forward to sharing the final 
report with this Committee and other important water policy makers.
Conclusion
    The impacts of climate change, population growth, new power sources 
and our society's emphasis on providing water for ecological purpose 
will significantly challenge all water users in the West--municipal, 
industrial, agricultural, and environmental--in the near future. Being 
prepared requires investment and adaptation in the management of 
Western water supplies. To survive this trial, our efforts need to 
begin today--before crises, before conflict, and before there are 
winners and losers.
    We stand ready to assist you, Chairman Peterson, and the Members of 
this Subcommittee in furthering these efforts that are so important to 
all our communities in the face of such an uncertain and challenging 
future. We must emphasize, however, that we are facing water problems 
right now. As evidenced in California's San Joaquin Valley and the 
Klamath Basin, legislation, water transfers and data collection alone 
will not resolve these problems. The amount of water on the planet 
remains the same. We need policy and water decisions that are based on 
sound science. And we need the infrastructure to conserve, reuse, 
store, treat, manage and convey water to where and when it is needed, 
at the quality and quantity needed, to resolve these problems and avoid 
even more severe consequences that loom on the horizon.
    Thank you for this opportunity to provide input on this matter, 
which is very important to the family farmers and ranchers of our 
membership. Our comments and recommendations are intended to help the 
new farm bill become something that they will embrace.
          appendix a: little snake river conservation district
    A case study highlighting integrated collaborative watershed 
management and the importance of locally-led management efforts.
Backdrop
    In most Western states, much of the water used derives from 
snowmelt in mountainous areas. We are hearing more frequent reports 
from state and local governments and water users who question how the 
Federal Government is managing the watersheds. Forested lands cover 
about \1/3\ of the nation's land area, and although they have roles in 
timber production, habitat, recreation and wilderness, their most 
important output may be water. Forests provide natural filtration and 
storage systems that process nearly \2/3\ of the water supply in the 
U.S. Forest vegetation and soils, if healthy and intact, can benefit 
human water supplies by controlling water yield, peak flows, low flows, 
sediment levels, water chemistry and quality. One of the biggest 
threats to forests, and the water that derives from them, is the 
permanent conversion of forested land to residential, industrial and 
commercial uses.
    Real management is needed in the real ``reservoir'' of the West--
our federally-owned forest lands in upper watershed areas.
Location
    The Little Snake River is a Colorado River Headwaters Basin arising 
on the continental divide with land in both Colorado and Wyoming. It is 
a major tributary to the Yampa and Green Rivers in the Upper Colorado 
Basin.
Geography and Hydrology
    The area is relatively geographically isolated from any large 
metropolitan or urban communities (> 300 miles from Denver or Salt Lake 
City). Population in the basin is less than 1,000 people. There are 
three towns in the basin, Baggs, Dixon, and Savery with populations of 
400, 82, and 26, respectively. There are 20,000 acres of irrigated 
lands adjacent to the main stem of the Little Snake River and its major 
tributaries. Land ownership in the basin is approximately 31% private, 
8% state, and 61% Federal (BLM & USFS).
    Elevations and precipitation in the basin range from 10,000 feet 
and 55 inches of annual precipitation to 6,000 feet and 8 inches of 
annual precipitation. Low elevation landscapes are dominated by desert 
shrub land communities and transition to mixed mountain shrub, aspen, 
and pine/spruce/fir plant communities at the highest elevation.
    Average annual water yield out of the basin is approximately 
449,000 acre-feet (AF) per year. Total consumptive water use in the 
basin is approximately 44,000 AF per year. The largest annual 
consumptive use is for municipal water project via a trans-basin 
diversion (21,000 AF) followed by agriculture (20,000 AF) and 
environmental and miscellaneous uses (3,000 AF). The first water rights 
for irrigation where filed with the Territory of Wyoming in March of 
1875.
Land Use and Habitat Characteristics
    Predominant land uses are range land agriculture, recreation, and--
more recently--fluid mineral development (oil & gas). Historically, the 
basin also supported some timber harvest and hard rock mining for 
copper, gold, and silver. Because of the basin's geographic isolation 
and low population, it has not incurred major deleterious impacts 
associated with human activity until the recently development of fluid 
minerals. Consequently, the area has a fairly intact ecosystem that 
supports the largest population of Colorado Cutthroat Trout, flannel-
mouth suckers, and round-tailed chubs. It also supports some of the 
largest populations of Columbian Sharp-tail and Greater Sage Grouse in 
the U.S. The basin is also home to 8,000 elk, 21,000 mule deer, 22,000 
antelope, 130 species of birds, 15 species of fish, and numerous other 
species of mammals and amphibians.
    In 1844 John C Fremont traversed the Little Snake River Valley and 
noted in his journals ``The country here appeared more variously 
stocked with game than any part of the Rocky mountains we had visited: 
and its abundance is owing to the excellent pasturage and its dangerous 
character as a war ground''. The game (wildlife) that attracted the 
warring Native American tribes to area was a byproduct of the excellent 
pasturage that Fremont spoke of. It is also the reason the area 
attracted early ranchers. The first cattle entered the Little Snake 
Basin in 1871 when Noah Reader brought 2,000 head that where turned out 
at the mouth of Savery Creek. In 1873 George Baggs brought 2,000 head 
into the valley near the vicinity of the town bearing his name. Today 
the area supports around 25,000 head of cattle, 6,000 head of sheep, 
and 2,500 head of horse both domestic and wild.
Organization
    The Little Snake River Conservation District (LSRCD) has a locally 
elected board of supervisors and is staffed by dedicated professionals.
Key Integrated Collaborative Watershed Management Actions
   Muddy Creek and Savery Creek Clean Water Act Section 319 
        Watershed Projects. The LSRCD has received and administered 
        over $1 million from EPA to implement best management practice 
        for livestock grazing.

   Muddy Creek Wetlands. Established the largest wetland 
        project in the State of Wyoming and received over $800,000 in 
        grant funding for this project including $165,000 from Ducks 
        Unlimited.

   Little Snake River Aspen Conservation Joint Venture. Locally 
        lead effort with BLM & USFS, private land owners to restore and 
        enhance 12,000 acres of Aspen forest.

   Little Snake River Watershed Fish Barrier Assessment. 
        Collaborative effort with Trout Unlimited, LSRCD, and local 
        landowners/irrigators.

   Little Snake Watershed Fish Barrier Removal and Aquatic 
        Ecosystem Restoration Project. Joint project with numerous 
        local, state, Federal, and NGO partners. Current expenditure 
        and obligation for this project is $2.5 million.

   Cooperative Conservation Planning Initiative (CCPI). This is 
        a USDA-NRCS farm bill program. The LSRCD is the local sponsor 
        on two different CCPI projects including the Fish Barrier 
        Removal and Hazardous fuels--forest health projects in the 
        Little Snake Basin.

   Battle Collaborative Stewardship Contract. The USFS and the 
        LSRCD agreed to address hazardous fuels on 3,000 acres of the 
        Medicine Bow National Forest due to bark beetle infestation.

   Little Snake River Conservation Planning initiative. This is 
        a joint effort among the LSRCD, NRCS, The Nature Conservancy 
        (TNC), and private land owners. It consists of inventorying and 
        updating conversation plans for 42,000 acres of private lands 
        for consideration under Conservation Easements.
Results
   In 2005 the local community, working with the State of 
        Wyoming, constructed a 23,000 acre foot $30 million water 
        storage project to provide water for municipal, agricultural, 
        fisheries and recreational use.

   As part of the overall watershed project, Clean Water Act 
        Section 319 monies were utilized to implement grazing Best 
        Management Practice to restore and enhance riparian and upland 
        areas. Other funds and partners have assisted with the 
        restoration and enhancement of more than 20 miles of river and 
        stream channels for both cold and warm water fish species. Over 
        800 acres of wetland habitat has been constructed, improved, 
        and enhanced.

   3,500 acres of forest treatment has been completed to reduce 
        hazardous fuels and improve wildlife habitat.

   Thousands of acres have been put under conservation 
        easements in order to perpetuate agricultural use and protect 
        critical wildlife habitat.

   Ten irrigation diversion structures have been modified to 
        allow for fish passage and in 2011 all remaining irrigation 
        diversion structures in the Little Snake basin are scheduled 
        for modification for fish passage.
Recognition
    Since 1991 numerous agencies, organization, and NGO's have 
recognized the Little Snake River community and the local governmental 
natural resource agency, the Little Snake River Conservation District 
(LSRCD), as leaders in natural resource conservation. Following are 
list of acknowledgments and achievements.

   1996 USDI-BLM Rangeland Stewardship Award.

   1996-2000 National Demonstration Project ``Seeking Common 
        Ground--Livestock and Big Game on Western Range Lands''.

   1997 & 2002 EPA volume II & III Section 319 Success Stories.

   2007 National Association of Conservation District South 
        West Region Collaborative Conservation Award.

   2009 Rocky Mountain Elk Foundation Imperial Habitat Partner.

    Numerous articles featuring work conducted by the LSRCD, area land 
owners, and its partners have been featured in popular publications 
like Farm Journal, Beef Today, Bugle Magazine, Wyoming Wildlife, and 
Range Magazine as well as peer reviewed journal publication in the 
Journal of Soil and Water Conservation (2008) and the Journal of 
Rangeland Ecology (2009).
Lessons Learned
    These efforts have all been locally-led. Conservation of natural 
resources in the Little Snake River Basin integrated with agrarian life 
style and perpetuation of this culture is the highest priority for the 
local community in the Little Snake Basin. In Wyoming, the local 
residents have passed a conservation property tax to carry on this 
work. Since 1990 this tax has generated approximately $8 million in 
local revenues. These funds have leveraged over $40 million in project 
money to implement conservation and development projects in the Little 
Snake River Basin.
    Today the Little Snake River Basin hosts a myriad of wildlife, and 
robust natural resources while sustaining compatible agricultural uses 
and natural resource based recreation business. This was accomplished 
through local leadership and commitment of the Little Snake River 
Conservation District working collaboratively with over 30 different 
partner organizations and agencies that have assisted in the 
conservation of the Little Snake Basin, in a collaborative locally-led 
process.
    Properly managing Federal watersheds and encouraging Federal 
agencies to work with the agricultural community to solve local water 
problems is imperative. Through thoughtful planning, the Administration 
can play a truly important role in helping find the solutions that have 
proved so elusive to date.
                                 ______
                                 
Submitted Letter from Jerry D. Paxton, Commissioner, Carbon County, WY; 
       Member, Public Lands Committee, Wyoming County Commission
May 3, 2010

Hon. Cynthia M. Lummis,
Member,
House Committee on Agriculture,
Washington, D.C.

    Representative Lummis and Congressional Agriculture Committee:

    Thank you for the opportunity to comment on the beetle kill problem 
in Wyoming. I am a Carbon County Commissioner and live near the 
Medicine Bow/Routt National Forest in Encampment, Wyoming. As you may 
know the Mountain Pine Beetle has devastated our area. My fellow 
Commissioners and I have been working for more than three years to find 
ways to help mitigate the problem. We have become convinced that 
removing as many dead trees as possible as quickly as possible will 
help speed up the restoration process. It is our belief that we must 
engage or re-engage industry to get this done.
    We have helped the town of Encampment acquire a sawmill within the 
city limits of the town and turned the property into an industrial 
park. We have been working with town official to attract businesses 
that are interested in removing the trees for timber or for woody 
biomass uses. We currently have a log home manufacturer, a small custom 
portable mill and a greenhouse located on the property. It appears that 
we now have someone interested in opening a portion of the mill to 
manufacture dimensional lumber. Our biggest problem is how to dispose 
of the waste materials that will be generated. We realize that there is 
an emerging interest in the woody biomass industry and have been 
vigorously pursuing biomass companies to locate in our industrial park.
    Our efforts have put us in contact with companies that produce a 
variety of products from torrified bio-coal to ethanol. The problem we 
have encountered with the woody biomass industries is a lack of a 
viable market primarily due to the end cost of the products. We feel it 
may be necessary to provide some assistance to these companies to help 
get them started. We are asking that you and your Committee explore 
ways to help these companies become established in Wyoming. The 
economic benefits would certainly help offset the devastating effects 
that loss of the timber industry has had on state. The removal of 
hazard trees and reduction of fuel would help preserve our tourist 
industry, reduce wildfire danger, protect the watershed from further 
damage and protect wildlife habitat. We are also convinced that it 
would help speed the process of restoring forest health.
    Any assistance you could provide would be appreciated. Thank you 
for the opportunity to comment on this very important issue.
            Sincerely,

Jerry D. Paxton,
Carbon County Commissioner;
Wyoming County Commissioners Public Lands Committee Member.
  Submitted Report by Rick Cables, Regional Forester, Rocky Mountain 
         Region, Forest Service, U.S. Department of Agriculture

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                          FRIDAY, MAY 14, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                        Morrow, GA.
    The Committee met, pursuant to call, at 1:40 p.m., in the 
National Archives Southeast Region, 5780 Jonesboro Road, 
Morrow, Georgia, Hon. Collin C. Peterson [Chairman of the 
Committee] presiding.
    Members present: Representatives Peterson, Scott, Marshall, 
Goodlatte, Rogers, Smith, and Thompson.
    Staff present: Aleta Botts, Dean Goeldner, John Konya, 
Clark Ogilvie, Anne Simmons, April Slayton, Kevin Kramp, John 
Mathis, and Jamie Mitchell.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. The hearing of the Committee on Agriculture 
to review U.S. agriculture policy in advance of the 2012 Farm 
Bill will come to order.
    I want to welcome everybody to the hearing today. This is 
our fifth hearing in a series of eight hearings that we have 
been doing for the last couple of weeks. We have a number of 
folks here on the Committee from the area and so instead of me 
taking up the time to do a statement.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Morrow to hear 
from area farmers and ranchers about the issues facing agriculture and 
rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. I am going to yield my time to our host 
today, one of our Subcommittee Chairmen that deals with 
livestock issues and dairy and so forth on the Committee. He 
does an outstanding job for us, and we appreciate him hosting 
the Committee here today, David Scott from this district. We 
are glad to be here with you.

  OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. Scott. I am glad to have you here, Mr. Chairman, and I 
just want to say how appreciative we are to our Chairman, who 
is doing just an excellent job and has a great deal of care and 
concern about our farm bill and our agriculture policies all 
across the states. The Chairman wanted to make sure that he got 
down here to Georgia, to make sure that we opened a discussion 
up to get the input of the people in the agriculture community 
from Georgia, to make sure we are putting together the right 
elements of the farm bill as to how they relate to the 
interests of Georgia. And I want to thank you, Mr. Chairman, 
for making that decision to bring the full Committee down here.
    And so I welcome everyone on the Committee to my district 
here in Morrow, in Clayton County, to our wonderful facilities 
here. I certainly want to thank the Georgia Archives and 
Clayton State University for hosting us. And I want to welcome, 
and we certainly appreciate all of our panelists, some of whom 
have had to travel far to get here. We appreciate you coming 
from south Georgia, west Georgia, east Georgia, all down by the 
coast, to travel up today. And I certainly want to express 
appreciation to all of my colleagues. We have an excellent 
turnout of my colleagues from all across this state and other 
parts of the nation. I just want to say thank you.
    Mr. Chairman, agriculture has always been central to 
Georgia's identity--Vidalia onions, Georgia peaches, peanuts, 
poultry, king cotton, watermelon from a great part of our state 
down in Cordele. Agriculture has always been what Georgia does 
and does very well. Agribusiness is our leading business here 
in Georgia. Our farmers and our ranchers producer over $7 
billion in goods every year, so it is especially important that 
we in Washington make sound policies that allow Georgia 
producers to continue to thrive and have profitable farm 
operations.
    As such, I very much look forward to the perspectives of 
our panelists and the insights that they can provide us into 
the unique challenges and opportunities in Georgia agriculture. 
And of course, Georgia does more than just grow things well. 
Our state and its institutions are at the cutting edge of 
agricultural research and development. We are just down the 
road from the Centers for Disease Control and Prevention, which 
of course is the world's preeminent epidemiology laboratory. 
And we cannot forget the great work of the University of 
Georgia, one of our nation's largest land-grant universities. 
The University of Georgia does yeoman's work in not only 
improving production agriculture, but improving our food safety 
systems as well. As many of you know, we have one of the most 
excellent food safety programs right down the street, the 
University of Georgia's south campus down near Griffin. We do 
surprisingly well, but not to others, those wonderful engineers 
who populate the North Avenue trade school that we 
affectionately call Georgia Tech. And of course, our friends in 
middle Georgia at Fort Valley State are at the forefront of 
research and education.
    But I think most importantly, agriculture is ultimately 
about people, not institutions. And no person is more important 
than the American farmer. So I am especially interested in 
hearing from the producers on our second panel, their 
perspective on the farm bill and how these programs play out 
here in Georgia. It will be invaluable to our efforts to craft 
well functioning agricultural policy.
    So without further delay, Mr. Chairman, I just want to 
thank you again and I welcome everyone, and especially our 
Members that have come from all over the nation to be with us 
today. Thank you very much, Mr. Chairman.
    The Chairman. I thank the gentleman for his hosting the 
Committee here today, we appreciate it.
    And now I am pleased to recognize a former Chairman of the 
Committee and today the Ranking Member, Mr. Goodlatte from 
Virginia, for his opening statement.

 OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN 
                     CONGRESS FROM VIRGINIA

    Mr. Goodlatte. Well, thank you, Mr. Chairman. I want to 
thank you for calling these hearings and being so proactive in 
preparation for the debate we will have on the future of farm 
policy in the 2012 Farm Bill. It seems like we just completed 
the 2008 Farm Bill, seems like it was not long ago I was 
sitting next to you although I was there and you were here----
    [Laughter.]
    Mr. Goodlatte.--in the hearings for that last farm bill. It 
is hard to believe we already need to start the process all 
over again.
    Those who observed the 2008 Farm Bill process will remember 
that it was a very difficult task. Other committees were asked 
to help pay for the spending in the bill. Not only did they 
bring money to the table, but they also brought their non-farm 
priorities to the table.
    The Chairman has already stated that process will not be 
duplicated and that, if necessary, we will write a baseline 
bill. Simply translated, that means we will only have the money 
currently spent on our programs to work with. But even that is 
not a certainty. Writing a baseline bill could be further 
complicated by the fact that we do not have a budget right now. 
The current Congress shows no signs of passing a budget. And 
without a budget, our already difficult task will become much 
harder. Writing that budget is a major challenge. No matter 
which party may be in the majority in the next Congress, it 
will be a difficult thing and it may entail a reduction in that 
baseline.
    With that in mind, the 2008 Farm Bill was an investment in 
the future of rural America. Not only did we provide a viable 
safety net for producers, but we also made substantial 
investments in conservation and nutrition programs during a 
time of need for many Americans.
    It is important to note that 75 percent of farm bill 
spending goes to nutrition programs, leaving less than a 
quarter of the funding for all of the other functions, 
including the traditional farm and conservation programs. I 
fear that trend of shifting money out of farm-focused programs 
will continue. Recently, during a hearing in Washington, I was 
concerned to hear that the Administration's priorities differed 
greatly from my producers' priorities. In a presentation to the 
Committee, there was barely a mention of the safety net, 
conservation program, or many of the programs my farmers 
appreciate.
    I think it is imperative that Congress work together with 
the Administration to come up with workable solutions to the 
main problems our rural communities face. Converting rural 
America into bedroom communities, however, is not what I 
consider a workable solution.
    I have concerns beyond the USDA. I want to learn if you 
share my serious concern about the effect of an over-reaching 
Environmental Protection Agency. It seems every day the EPA is 
coming out with a new regulation that makes it harder for 
farmers and ranchers to make a living. Can we do something 
about those impediments or at least give you the access to 
tools that can help mitigate some of the adverse effects of 
regulations?
    I look forward to listening to the producers today. I look 
forward to hearing your concerns about the way government can 
make it easier for you to make a living at a very high-risk 
enterprise. But I also look forward to hearing from you ways 
that we can save money in our current farm programs. I am very 
concerned about the fact that in this coming year, we are 
projecting spending $3.8 trillion, based on the President's 
budget, and yet expecting only $2.2 trillion in revenues, a 
$1.6 trillion deficit in just 1 year. That endangers our 
economic future for the entire country, but it also poses a 
threat to the ability of this Committee to fund programs for 
agriculture. So areas that you can identify that will help us 
to save money, or to spend the money that we do have in a more 
efficient fashion, are very welcome today.
    I thank you all for coming today and it is a great 
opportunity for us to hear from you.
    The Chairman. I thank the gentleman.
    We are also pleased to have with us two other Members of 
the Georgia Delegation, one of whom is an outstanding Member of 
our Committee, one of whom was an outstanding Member of the 
Committee before he went on to bigger and better things on the 
Appropriations Committee, but he is helping us in agriculture 
over there. I would like to recognize them for a brief opening 
statement. Mr. Marshall, one of our Committee Members, the 
floor is yours.

  OPENING STATEMENT OF HON. JIM MARSHALL, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. Marshall. Well, thank you, Mr. Chairman. I do not have 
any prepared remarks. I would like to thank everybody who is 
here as witnesses, I see a lot of friendly faces, folks I have 
known for the last few years who are very important to 
agriculture in Georgia and in the United States because you are 
advocates. You give us guidance and we are here to get guidance 
from you.
    I would simply observe that this Friday we are in District 
13, so drive safely when you go home.
    [Laughter.]
    The Chairman. I thank the gentleman.
    I need to do this before I introduce Mr. Bishop. The 
gentleman from Georgia, Mr. Bishop, is not a Member of the 
Committee, but has joined us today. I have consulted with the 
Ranking Member and we are pleased to welcome him to join us 
today in the questioning of the witnesses, and also to make a 
brief statement.
    So welcome back to the Committee, Sanford. We have missed 
you but you are doing great work over where you are, so keep it 
up.

 STATEMENT OF HON. SANFORD D. BISHOP, Jr., A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. Bishop. Thank you very much, Mr. Chairman. I want to 
personally welcome you and all the Members of the House 
Agriculture Committee to Georgia.
    Mr. Chairman, it goes without saying that we all owe you 
and Chairman Goodlatte a sincere debt of gratitude for the 
leadership that you have exhibited in guiding all of us in 
shaping our nation's agriculture policy and related issues.
    I want to thank my friend and colleague, David Scott, who 
is Chairman of the Subcommittee of Livestock, Dairy, and 
Poultry, for hosting the hearing here in his district. I would 
also like to thank and welcome each of the panelists for coming 
and for bringing very valuable testimony from your respective 
areas. I might add that many are from the Second Congressional 
District of Georgia, which I am privileged to serve--Dr. Mark 
Latimore of Fort Valley State University; Mr. Andy Bell of 
Climax; Mr. Ronnie Lee of Bronwood, who happens to be the new 
Chairman of the Georgia Farm Service Agency State Committee; 
and Mr. Hilton Segler from my hometown in Albany.
    The rest of the panel may not be from the Second 
Congressional District but they are all great friends, and my 
staff and I often confer with them on various topics pertaining 
to agriculture. So I thank you for what all of you do to make 
agriculture the number one economic engine in the State of 
Georgia.
    As a former Member of this Committee and as a Member of the 
House Agriculture Appropriations Subcommittee, I look forward 
to continuing the relationship that I have had with the 
Committee over the years and with the panelists that are here 
today.
    Mr. Chairman and Members of the Committee, I do not have to 
tell you that our country is facing one of the toughest 
economic periods in the history of our nation, and of course 
agriculture is no exception. The uncertainty of the 
marketplace, the volatility of input prices and devastating 
natural disasters force our producers to face difficult 
decisions every day. I commend this Committee for starting 
early to craft this important 2012 legislation.
    I would also like to add my thanks to you. When I am 
traveling through the Second District, the farmers tell me that 
they are adapting well to the 2008 Farm Bill and the changes 
that were made in that legislation--the safety net, crop 
insurance, other programs always seem to come up in those 
conversations that I have. I fully understand that the budget 
situation is more challenging than it was while putting 
together the 2008 Farm Bill. The budget constraints will likely 
place pressure on the Committee to look at modifications to the 
commodity payment levels and the payment limit structure. 
However, given their importance to Georgia's producers, and 
throughout the southeastern United States, particularly in our 
district, I look forward to working with the Chairman and 
Members of the Committee to assure that these important 
programs are reauthorized and continued in the next farm bill. 
So, if changes are made, that none will be made to jeopardize 
the ability of Georgia farmers and other farmers across the 
nation to be successful and compete favorably in the global 
marketplace.
    I would like to provide you with the reason I think the 
farm bill is important, and it is simple. It is to ensure that 
our agrarian way of life that our country was founded on can 
still be realized in rural America, and that American farmers 
can continue to produce the high quality, safest, most 
economical food and fiber and now fuel in the industrialized 
world.
    I am grateful that all of you panelists have come to share 
your insight--folks who work in agriculture every day, who 
understand first hand the challenges that we face in Georgia 
and the Southeast, folks who live and work in agriculture, 
literally where the rubber meets the road.
    Finally, Mr. Chairman, and Members of the Committee, thank 
you for holding the hearing here and for allowing me to share 
my brief remarks.
    The Chairman. I thank the gentleman and you are very 
welcome to be with us. You have always been--you, Mr. Marshall, 
and Mr. Scott have always been great champions of agriculture 
in Georgia and we look forward to continuing to work with you.
    We will have the panelists come forward, I think you know 
who you are. I am going to introduce you when you get up here. 
While you are moving forward to the table, I want to 
introduce--we have from USDA the State FSA Director Mr. Charles 
Stripling in the audience I think. Stand up. Yes.
    [Applause.]
    The Chairman. The Rural Development State Director Shirley 
Sherrod. Shirley, welcome.
    [Applause.]
    The Chairman. And the State Conservationist, Mr. James 
Tillman.
    [Applause.]
    The Chairman. Welcome, all of you, and you do a great job 
on behalf of USDA and agriculture.
    I also want to announce that for those of you who have 
additional thoughts, we have to limit the testimony or we would 
never have time to get through everything. So those of you that 
haven't had time, we are taking testimony from anybody that 
wants to offer it on our website, which is 
www.agriculture.house.gov. We find a lot of times we get some 
great ideas, great suggestions, great input from folks that 
maybe are not always the ones that are at the table. So we 
encourage people to put forward any information or any ideas 
that they might have as we move into this new process.
    As Sanford said, we want to maintain risk management, the 
safety net, the ability of farmers to continue to do what they 
do. I just think that we can probably do this in a simpler, 
more coordinated way, and maybe if we make those kinds of 
corrections, maybe in a more efficient way. And that's what we 
are trying to do here, but we are of no mind to undermine the 
safety net that we have for our producers.
    So gentlemen, welcome to the first panel. Dr. Scott Angle, 
who is Dean and Director of the College of Agricultural and 
Environmental Sciences at the University of Georgia; Dr. Mark 
Latimore, the Interim Dean of the College of Agriculture, Home 
Economics and Applied Programs, Fort Valley State University, 
Fort Valley, Georgia; Mr. Gary McMurray, Chief, Food Processing 
and Technology Division, Georgia Tech Research Institute in 
Atlanta; and Mr. Robert Farris, Director of the Georgia 
Forestry Commission in Dry Branch, Georgia. Gentlemen, welcome 
to the Committee.
    Your full statements will be made part of the record. We 
urge you to summarize down to as close to 5 minutes as you can 
make it happen.
    Dr. Angle, welcome to the Committee and you are recognized.

STATEMENT OF J. SCOTT ANGLE, Ph.D., DEAN AND DIRECTOR, COLLEGE 
   OF AGRICULTURAL AND ENVIRONMENTAL SCIENCES, UNIVERSITY OF 
                      GEORGIA, ATHENS, GA

    Dr. Angle. Thank you, it is an honor to be able to speak to 
all of you today. I am the Dean of the College of Agricultural 
and Environmental Sciences at the University of Georgia. I am 
also the incoming head of the Board on Agriculture Assembly, 
which is the organization that represents agricultural land-
grant universities around the United States. Our college, along 
with our friends and partners at Fort Valley State University, 
represent the land-grant system in Georgia, where agriculture 
is the largest industry, and is responsible for 16 percent of 
our total economy.
    While the world has plenty of food to eat today, it is 
clear that much more food will be needed in the near future. It 
is predicted by the year 2050 food production will have to 
double. Unfortunately, many areas of the world will be unable 
to respond to this need.
    Asia has poor soils and limited rainfall and will be hard 
pressed to significantly increase food production. Africa 
remains hopeful, yet until political instability is resolved, 
the continent will not be able to feed itself. South and 
Central America, while blessed with good soils and rainfall, 
will not likely cut down rain forests for additional 
production. And Europe, also with good soil and rainfall, will 
likely produce less food in the future due to a variety of 
social policies that are causing the continent to 
agriculturally stagnate.
    This leaves North America as the world's hope for meeting 
the challenge of producing more food and feed. But even here, 
production patterns are changing. As you know, water 
availability in the western U.S. is declining. There will be 
less food produced west of the Rockies 10 years from now than 
today. And in the northern part of the United States, 
temperature and sunlight will limit the amount of new food that 
can be produced.
    U.S. production must increase and the Southeast, in my 
opinion, is where much of this additional production will have 
to happen.
    This is not just an obligation, it is an opportunity. In 
2007, the U.S. imported $79 billion worth of food, feed and 
fiber, while we exported $116 billion of the same. We have the 
opportunity to widen this surplus even further.
    The only way the Southeast can increase food production is 
through science and technology. Yet, science and technology 
development in agriculture are unlike any other industry.
    Agriculture's disparate nature means that no single farmer 
is capable of supporting the needed research and development 
for future improvements. The vast majority, 90 percent, of 
American farms are privately owned. Individually, they do not 
have the means to invest in technology development and 
education; hence, the need for the land-grant system of higher 
education.
    Some crops or commodities, such as specialized fruits and 
vegetables are grown in small quantities and do not generate 
sufficient income to attract outside investment.
    Technologies that have a ``public'' good also see little 
investment from private companies. Reduced pesticide and 
fertilizer use, integrated pest management, water-use 
efficiency, and natural resource conservation are all public 
goods. We need research and outreach programs in each of these 
areas and only local, state and Federal Governments will 
support this investigation.
    The land-grant system was established to fill the void of 
agricultural research, education and extension when no one else 
was able to do that.
    Land-grant universities are crucial in most states. Note 
that I did not say in all states. There are some areas where 
information and research may indeed overlap. Today could be 
that historical juncture when we take a critical look at the 
entire land-grant system. A study to investigate potential 
improvements in our national structure may well be needed and 
productive to set our future course, and ensure our continued 
success. We can no longer afford any duplication within our 
system.
    Keeping the land-grant system positioned to create and 
support necessary agricultural production increases requires a 
reliable, sustainable funding system. As you know, Federal 
funds are provided to the land-grant system through three basic 
routes. The first route is competitive funding primarily 
through the USDA. This is the life blood of agricultural 
research, and to a lesser extent, to extension and teaching. 
The funding level for research has been growing and we hope 
that it will eventually rise to the level where funding success 
rates mirror that of other competitive science programs. Thank 
you for your support of competitive funding for competitive 
research in agriculture.
    Earmarks are the second important source of funding. As 
some of you know, I have been an advocate for Federal earmarks 
to support agriculture research. Federal earmarks remain the 
only process for supporting vital research that falls between 
the cracks of the high-minded studies supported by the National 
Science Foundation, USDA's AFRI, and that of profit-driven 
research that private companies might support. So until the 
scientific system is changed to recognize the importance of 
this highly applied research, Federal earmarks are just about 
the only way for this very important research to be supported. 
More transparency, limited high level peer review, and greater 
accountability may allow a skeptical public to feel greater 
comfort with this process.
    The third source of funding is traditionally referred to as 
formula funds. The formula is a complicated equation that takes 
into account farmer numbers and the number of farms to 
distribute available Federal funds to each state. For more than 
30 years, I have been in the land-grant system, and the drum 
beat against formula funds has been steady. Yet, each year we 
make protecting these funds our highest priority.
    We so strongly support these funds against a background of 
concern for the process, because formula funds provide the 
infrastructure that allows both competitive and earmarked funds 
to be used successfully. Unlike many other disciplines, you 
cannot turn on and off our infrastructure when competitive and 
earmarked funds come and go. Herds of cattle, flocks of 
chickens, or orchards of oranges must be maintained in a system 
of research and training for use by our faculty.
    We are proud of the advancements we have helped agriculture 
reap, environmental improvements we have furthered in the 
industry and hands-on, extension education we have provided 
that contributed to the remarkable success of agriculture in 
the United States. But challenges loom large on the horizon. We 
need help in four major areas that will be discussed in the 
2012 Farm Bill. These are especially important to the Southeast 
where biomass and specialty crops are rapidly growing.
    Specialty crop block grants to states for research and 
marketing: This is a very rapid method to get money to research 
and education system when new and emerging diseases, weeds and 
insects are found.
    Second, Specialty Crop Research Initiative: Many specialty 
crops, as previously noted, are not of sufficient acreage to 
warrant industry funding, nor is the basic research environment 
competitive for these crops. Therefore, specialty crop research 
initiatives again are one of the few sources for funding for 
these relatively small crops.
    Biomass research and development programs: Most of us 
realize that biomass is important to agriculture and our 
society. The exact role agriculture will play in energy 
production has not yet fully been defined and needs additional 
government support before the private sector can fully carry 
this burden.
    And last, the Biomass Crop Assistance Program. Scale up for 
production remains risky obviously in biomass production. The 
USDA assumption of some degree of risk will encourage the 
private sector to enter this segment of agriculture and 
forestry more quickly.
    So to conclude, agriculture has a bright future in most of 
the United States. It is going to change, but the unique 
partnership between local, state and Federal Governments as 
well as the private sector will make sure this industry 
continues to be successful. Strategic security needs for the 
United States, a pressing need for a positive trade balance and 
the humanitarian need to feed the world are coming together in 
a way today that makes agriculture more important than ever.
    Thank you.
    [The prepared statement of Dr. Angle follows:]

Prepared Statement of J. Scott Angle, Ph.D., Dean and Director, College 
  of Agricultural and Environmental Sciences, University of Georgia, 
                               Athens, GA
    Thank you for the opportunity to speak to you today. I am the Dean 
of the College of Agricultural and Environmental Sciences at the 
University of Georgia. I am also the incoming head of the Board on 
Agriculture Assembly which is the organization that represents 
agricultural land-grant systems around the United States. Our college, 
along with our friends and partners at Fort Valley State University, 
represent the land-grant system in Georgia, where agriculture is the 
largest industry and is responsible for 16 percent of the state's 
economy.
    My background is in the area of soil science. I have specifically 
worked on ways to use agriculturally friendly means to clean up 
polluted soil. And, I am a farm owner.
    I am here to talk about my assessment of agriculture of today and 
to discuss what I see as the primary issues facing agriculture both in 
the short term and the long term. Most of what I discuss will relate to 
the southeastern region of our nation.
    While the world has plenty of food today, it is clear that much 
more food will be needed in the near future. It is predicted that we 
need to double world-food production by the year 2050. Unfortunately, 
many areas of the world will be unable to respond to this challenge.
    Asia has poor soils and limited rainfall and will be hard-pressed 
to significantly increase food production. Africa remains hopeful, but 
until political instability is resolved, the continent will never be 
able to feed itself. South and Central America, while blessed with good 
soils and rainfall, will not likely cut down rainforests for enhanced 
production. And Europe, also with good soil and rainfall, will likely 
produce less food in the future due to a variety of social policies 
that are causing the continent to stagnate.
    This leaves North America as the world's hope for meeting the 
challenge of producing more food and feed. But even here, production 
patterns are changing. As you know, water availability in the western 
U.S. is declining. There will be less food produced west of the Rockies 
10 years from now than is produced there today. And in the northern 
part of the U.S., temperature and sunlight will limit the amount of new 
food that will be produced.
    U.S. production must increase and the Southeast will be, in my 
opinion, the primary area where production must and will increase.
    This is not just an obligation; it is an opportunity as well. In 
2007, the U.S. imported $79 billion of food, feed and fiber while we 
exported $116 billion of the same. We have the opportunity to widen 
this surplus even more. As noted, the Southeast is especially well 
positioned for increased production. The Port of Savannah and an 
efficient transportation infrastructure make this is an ideal region 
for growth.
    It is my opinion that past Federal policies have not always focused 
on southeastern agriculture. However, with the need for this region to 
step up production, we must have good policies coming from the new farm 
bill that will allow this region to meet the challenge and obligation 
to produce more food for the rest of the world.
    Federal policy can either promote production in the Southeast, 
allowing this need to be met, or it can limit production, forcing more 
of the world's poor to continue to go hungry.
    The only way that the Southeast can increase food production is 
through science and technology. Yet, science and technology development 
in agriculture are unlike any other industry. Boeing Corporation and 
the Ford Motor Company have in-house research and development 
capabilities as well as training. They have all the needed support for 
future innovation. Agriculture, however, is different.
    Agriculture's disparate nature means that no single farmer is 
capable of supporting the needed research and development for future 
production improvements. The vast majority (90%) of American farms are 
privately owned. Individually, they don't have the means to invest in 
technology development and education; hence, the need for the land-
grant system of higher education.
    Much of the needed research is to find ways to reduce production 
costs with the goal of increasing profitability. While some research is 
generated within the private sector, the private sector has no 
incentive to help reduce inputs which also reduces their profits. 
Further, no private concern will invest in technologies that have 
limited potential for economic return.
    Some crops or commodities, such as specialized fruits and 
vegetables, are grown in small quantities and don't generate sufficient 
income to attract outside investment.
    Technologies that have a ``public good'' also see little investment 
interest from private companies. Reduced pesticide and fertilizer use, 
integrated pest management, water-use efficiency, and natural resource 
conservation are all public goods. We need research and outreach 
programs in each of these areas and only local, state and Federal 
governments will support this important investigation.
    The land-grant system was established to fill this void of 
agricultural research, education and extension. Our Federal, state and 
local partnership has become the envy of the world. Many studies of 
agricultural policy credit much of the success in American agriculture 
to the knowledge provided by the land-grant system.
    Our country has come a long way since the Great Depression when 
nearly four out of every ten Americans were involved in food 
production. Today, as you know, less than two percent of the country's 
population work on the farm. The cost of our food today is much less of 
our total income than it was when 40 percent of our population was 
working on a farm. Many of the improvements that help farmers produce 
abundant, affordable food for exponentially more people came about 
through technology developed at land-grant institutions. The land-grant 
system is poised to continue to increase production efficiency to meet 
the challenges ahead of us.
    Land-grant universities are crucial in most states. Notice that I 
did not say land-grant colleges of agriculture are needed in every 
state. There are some areas where information and research may indeed 
overlap. Today could be that historical juncture when we take a 
critical look at the entire land-grant system. A study to investigate 
potential improvements in our national structure may well be needed and 
productive to set our future course and ensure our continued success.
    Until recently, merging land-grant programs was nearly impossible, 
mainly due to limitations in technology. But, as new and better 
communications methods are developed, we should begin to look at 
program and system integration. Reductions in state support may drive 
this process. The Federal Government should get ahead of the issue now 
to make sure the needs of agriculture are met, duplication is avoided 
and efficient use of available resources is maximized.
    Making needed systemic changes won't be easy. Agricultural 
production is quite complex, especially in the Southeast. For example, 
Georgia produces over 100 major commodities with a value of at least 
$10 million each. And while similar crops are grown in multiple states, 
best management production practices vary from state to state because 
of differences in soil, climate, markets, disease pressure and 
especially water. Information from one state is often not applicable to 
production in another state.
    Keeping the land-grant system positioned to create and support 
necessary agricultural production increases requires a reliable, 
sustainable funding stream. Federal funds are provided to the land-
grant system through three basic routes:
    Competitive funding via the USDA is the life blood of agricultural 
research and to a lesser extent, teaching and extension. The funding 
level for research has been growing and we hope that it will eventually 
rise to the level where funding success rates mirror other competitive 
science programs. Thank you for your support of competitive funding for 
research.
    Earmarks are the second important source of funding. As some of you 
know, I have been an advocate for Federal earmarks to support 
agriculture research. Federal earmarks remain the only process for 
supporting this vital research that falls between the cracks of the 
high-minded studies supported by the National Science Foundation, 
USDA's AFRI and profit-driven research that private companies might 
support. So, until the scientific system is changed to recognize the 
importance of this highly applied research, Federal earmarks are the 
only source to support it. Changes are needed to make the process more 
transparent, but I remain adamant that earmark-supported research is 
vital to the success of our farming community. More transparency, 
limited high level peer review, and greater accountability may allow a 
skeptical public greater comfort with the process.
    The third source of funding is traditionally referred to as formula 
funds. The formula is a complicated equation that takes into account 
farmer numbers and the number of farms to distribute available Federal 
funds to each state. For the more than 30 years I have been in the 
land-grant system, the drum beat against formula funds has been steady 
and each year we make protecting these funds our highest priority.
    We so strongly support these funds against a background of concern 
for the process because formula funds provide the infrastructure that 
allows both competitive and earmarked funds to be used successfully. 
Unlike many other disciplines, you can't turn our infrastructure on and 
off when competitive or earmarked funds become available. Herds of 
cattle, flocks of chickens or orchards of oranges must be maintained in 
a system of research and training farms for our faculty's use.
    When competitive funds are awarded to an institution, research and 
training can be initiated quickly. Most agricultural problems need 
quick answers. New diseases or insects can decimate an industry within 
just a few years if no solution is discovered. The U.S. system of land-
grant research and information transfer makes this immediate response 
to new and emerging problems possible.
    I want to emphasize the importance of Cooperative Extension to the 
system. Without a way to deliver research information to those who need 
the help, why conduct the research? In fact, most other scientific 
disciplines are now discovering that information transfer is a vital 
link to successful research. They are searching for effective 
information delivery mechanisms. In agriculture, we are fortunate to 
have discovered this key to success nearly 100 years ago, and that 
Congress had the foresight to authorize establishing Cooperative 
Extension systems in each state.
    Other countries seeking to improve their agricultural systems 
typically identify extension-type programs as their greatest need. We 
are the envy of the rest of the world.
    At the university level, other colleges and disciplines see 
Cooperative Extension's value and remarkable tradition of success. Many 
are looking for ways to tap into extension's grassroots-education 
capabilities or to reinvent similar information delivery systems.
    We are proud of advancements we have helped U.S. agriculture reap, 
environmental improvements we have furthered in the industry and hands-
on, extension education we have provided that contributed to this 
remarkable success. But, challenges loom large on the horizon. We need 
help in four major areas that will be discussed for the 2012 Farm Bill. 
They are especially important to the Southeast where biomass and 
specialty crops are rapidly increasing.

    1. Specialty crop block grants to states for research and 
        marketing.

      This is a very rapid method to get money to the research and 
            extension system when new and emerging diseases, weeds and 
            insects are found.

    2. Specialty Crop Research Initiative.

      Many specialty crops, as noted previously, are not of sufficient 
            acreage to warrant industry funding, nor is the research 
            basic enough for competitive funding.

    3. Biomass research and development program.

      Most of us realize that biomass is important to agriculture and 
            our security. The exact role agriculture will play in 
            energy production has not been fully defined and needs 
            additional government support before the private sector can 
            carry the burden.

    4. Biomass Crop Assistance Program.

      Scale up for production remains risky. USDA assumption of some 
            degree of risk will encourage the private sector to enter 
            this industry.

    Agriculture has a bright future in most of the United States. It is 
going to change, but the unique partnership between local, state, 
Federal Governments and the private sector will make sure this industry 
continues to be successful. Strategic security needs for the U.S., a 
pressing need for a positive trade balance and the humanitarian need to 
feed the world are coming together in a way that makes agriculture more 
important today than ever.

    The Chairman. I thank the gentleman.
    Dr. Latimore, before you start--at the Committee in 
Washington, we do not normally introduce the Members, I should 
have done that before we got started, because we are not in 
Washington, obviously.
    So I would like to welcome a couple of neighbors here, Mr. 
Rogers from Alabama--who I will do by seniority--a Member of 
the Committee has joined us today, as well as Mr. Bright from 
Alabama, one of our new Members on our side of the aisle. And, 
Mr. Adrian Smith from the western \2/3\ of Nebraska. You have 
what, 65 counties or something.
    Mr. Smith. Sixty eight.
    The Chairman. A big area out there--from Nebraska. And, Mr. 
Glenn Thompson from Pennsylvania, who is also a relatively new 
Member of the Committee. So we appreciate them being with us 
today. And I apologize for not introducing them earlier.
    Dr. Latimore, welcome to the Committee and you are 
recognized.

 STATEMENT OF DR. MARK LATIMORE, Jr., INTERIM DEAN, COLLEGE OF 
                AGRICULTURE, HOME ECONOMICS AND
APPLIED PROGRAMS, FORT VALLEY STATE UNIVERSITY, FORT VALLEY, GA

    Dr. Latimore. Good afternoon. Mr. Chairman and Members of 
the Committee, we just recently had a name change at the 
College of Agriculture to the College of Agriculture, Family 
Sciences and Technology. As Interim Dean----
    The Chairman. Dr. Latimore, we will try to get these 
microphones right. That one works I guess. Okay, that sounds 
good.
    Dr. Latimore. All right. As I said, we just recently had a 
name change to the College of Agriculture, Family Sciences and 
Technology which we are very happy about and we are still 
trying to get used to. To the Committee, especially the Members 
that are not from the State of Georgia, Fort Valley State 
University is an 1890 land-grant university, about 115 miles 
south of here. We have about 3,500 students, there are about 50 
disciplines at the University, 11 in the College of 
Agriculture. We have a Masters program as a graduate program in 
animal science, as well as biotechnology.
    I am testifying this afternoon on behalf of Fort Valley 
State, but also keep in mind the other 1890 land-grant 
universities as well as our colleagues at the 1862s, especially 
when we engage in the National Institute of Food and 
Agriculture Sciences.
    The restructuring of some USDA agencies and the creation of 
the National Institute of Food and Agriculture was clearly a 
key element in the Title VII of the 2008 Farm Bill. So with the 
structural change, this afforded the 1890s opportunities that 
they did not have in the past.
    For example, the 1890 Capacity Building Grants Program was 
expanded to include extension activities in addition to 
research activities and education.
    The Expanded Food and Nutrition Education Program was 
amended to provide at least $100,000 to 1890s and the formula 
for distribution of future funds was changed.
    Authorization of 1890 Cooperative Extension Program was 
changed to index it to the Smith-Lever Program at a higher 
level, and there were a few others as well.
    As we look at the changes that are taking place, we still, 
in the 1890 community and the 1862 community, we still suffer 
in the area of agriculture research from the lack of funding, 
to really conduct a program in order to aid in solving the 
problems that our clients, rural America, is faced with.
    The 1890s have never forgotten the expectation that as a 
historical black land-grant university or institution, they 
must be relevant to the multitude of the beginning, the small 
and medium sized farmer, as well as the limited resource 
producer and entrepreneur. With that in mind, we have to 
provide programs that are going to bring about a wider range of 
skills and ideas for agriculture, improve the quality of life 
for these individuals in rural America. We have a mobile 
technology unit that we have been using for quite some time, 
and it has been instrumental in affording us the opportunity to 
really educate rural America, not only to different programs in 
agriculture, but also to the use of computer technology. So 
that has been very successful for us.
    Services to the country's low-income and limited resource 
families and communities is no less--and may be even more--
important today as it was in the early days of the national 
land-grant system. So these are challenges which we are faced 
with in 2010.
    So when we look at the 1890s, and of course Fort Valley 
State University, we are engaged in an integral part in 
creating opportunities that will build a wholesome living and 
learning through responsible pursuit of their goals and 
aspirations. So stronger partners, this is one of the things 
that we definitely need to engage in, partnerships, increasing 
partnership sizes. What this means is increasing the size of 
the funding amount, not simply including us as eligible to 
compete in a funding pool that has not increased in size. So as 
we continue to increase and try to solve the problems which we 
are faced with, we have to consider the opportunities that are 
there and take advantage of those.
    So when we look at the 1890 land-grant universities and the 
mission which they serve, we have a need to increase funding. 
There is a need to increase the funding in order for any of 
these opportunities to take place.
    Agriculture diversification and marketing strategies are 
some things that we definitely need to enhance. These are: 
increasing the viability and competitiveness of farms through 
sustainable practices; improving the nutrition, diet and health 
of rural Americans; improving their economic viability; after-
school enrichment programs definitely through 4-H and skills in 
science, technology and math; improving the technology 
proficiency for farmers, senior citizens, youth and other rural 
Americans; and providing educational outreach to the community 
regarding affordable housing is also a part that we must 
consider.
    Without additional funding, the 1890 Extension will be 
unable to address the needs that are core to its mission, and 
will also fail to respond to the clients that need their 
assistance. The 1890 Extension funding is authorized at 20 
percent of Smith-Lever, but is currently funded at 14.3 
percent. So when we look at programs, not only through 
extension, but also research, we have a strong small ruminant--
the Georgia Small Ruminant Research Center, bioenergy 
activities as well as other sustainable agricultural practices. 
These are just as important to the small farmers as other 
farmers throughout the country.
    We would like to thank you for the opportunity for sharing 
with you some of our concerns and some of the opportunities 
which we are faced with through the 1890 land-grant system.
    [The prepared statement of Dr. Latimore follows:]

 Prepared Statement of Dr. Mark Latimore, Jr., Interim Dean, College of
  Agriculture, Home Economics and Applied Programs, Fort Valley State 
                      University, Fort Valley, GA
    Mr. Chairman and Members of the Committee, I am Mark Latimore, Jr., 
Interim Dean of the College of Agriculture, Family Sciences and 
Technology at Fort Valley State University, Fort Valley, Georgia. Thank 
you for the opportunity to testify at today's hearing to offer our 
views on the U.S. Department of Agriculture's Research, Education, and 
Extension Programs, especially those that benefit the 1890 Land-Grant 
Universities.
    Fort Valley State University was established in 1895 and was 
designated a land-grant university pursuant to the Second Morrill Act 
(1890). Presently, Fort Valley State University has more than 3,500 
students in over 50 disciplines. Our particular college offers 
undergraduate programs in 11 areas and graduate programs in Animal 
Nutrition, Reproductive Biology, and Animal Products Technology, Plant 
Biotechnology, Animal Biotechnology and Applied Biotechnology.
    While I am testifying today on behalf of Fort Valley State 
University, I should also point out that we are a member of the 
Association of Public and Land-grant Universities (APLU) where we work 
closely with our colleagues at other 1890s and 1862s land-grant 
universities to support the periodic reauthorization of the 
agricultural research, extension, and teaching programs at the National 
Institute of Food and Agriculture (NIFA) and the annual appropriations 
for these programs.
    Restructured of some USDA Agencies and creation of the National 
Institute of Food and Agriculture was clearly the key element of Title 
VII of the 2008 bill. This structural change in the research 
organization at USDA will foster better coordination between the 
department's extramural capacity building programs for 1890 
Institutions (Evans-Allen and 1890 Extension) and their sister programs 
for research and extension at 1862 Institutions (Hatch and Smith-Lever, 
respectively). The new structure will also ensure better coordination 
and integration of USDA's intramural research, conducted by the 
Agricultural Research Service (ARS) and U.S. Forest Service.
    As you know, the 2008 Farm Bill included many provisions 
specifically intended to benefit 1890 Institutions including Fort 
Valley State University:

   The 1890 Capacity Building Grants Program was expanded to 
        include extension activities in addition to research and 
        education.

   The Expanded Food and Nutrition Education Program (EFNEP) 
        was amended to provide at least $100,000 per year for 1890 
        Institutions and the formula for distribution of future funds 
        was changed.

   The 1890 Universities were authorized to participate in the 
        Animal Health and Disease Research Program.

   Authorization for the 1890's Cooperative Extension Program 
        was changed to index it to the Smith-Lever Program at a higher 
        level.

   The Smith-Lever Act was revised to allow the 1890 
        Universities to participate in the Children, Youth and Families 
        Research Program.

   And, the 1890 Universities were made eligible to participate 
        in the McIntire-Stennis Cooperative Forestry Program.

    Working through APLU, the land-grant system has begun a 
comprehensive process to develop recommendations for the next farm bill 
and we expect to have our suggestions fully developed well in advance 
of any Committee action. However, in the absence of specific 
recommendations for new programs or amendments to existing programs, I 
can assure you that the greatest need in agricultural research remains 
funding--regardless of whether such research is conducted at an 1890 
Institution, a state agricultural experiment station, or USDA. Many of 
the opportunities for 1890 Universities provided by the 2008 Farm Bill 
are only beneficial to us if Congress actually increases funding for 
these programs.
    For example, funds provided for the McIntire-Stennis Cooperative 
Forestry Program are allocated to governors--who then divide those 
dollars among institutions of higher learning within their state. 
Adding 1890 Institutions to the list of eligible schools without also 
increasing funding for the program is just a reallocation of already-
too-scarce resources.
    The 1890s have never forgotten the expectation that as Historically 
Black Land-Grant Institutions, they must be relevant to the multitude 
of smaller, limited resource producers and entrepreneurs. When these 
clientele are assisted, as is the 1890 mission, these individuals have 
great potential of (1) bringing a much widened range of skills and 
ideas for agriculture and natural resource practices, (2) improving the 
quality of life of rural Americans through computer literacy training 
via the Mobile Technology Laboratory, (3) of bringing economic activity 
to rural communities, and (4) of supplying a variety of specialized 
market niches. Without this segment of the food and natural resource 
system, the nation would be lacking in the richness of its agricultural 
and renewable natural resource based businesses. Service to the 
country's low-income or limited resource families and communities is no 
less (and may be even more) a land-grant mandate today as in earlier 
days of the National Land-Grant System. The 1890s, and of course Fort 
Valley State University, are integrally involved in creating a society 
where all people have opportunities for wholesome living and learning 
through responsible pursuits of their goals and aspirations. We are 
able and anxious to be stronger partners in establishing a region and a 
world with a safe and plentiful supply of food, fiber, fuel and water 
for all, where natural resources and businesses are managed in ways 
that are sustainable and serve the common good. Increased funding 
allows more inclusiveness of universities like ours to help solve the 
complexities of our times. That means increasing the size of the 
funding amounts, not simply including us as eligible to compete in a 
funding pool that has not increased in size.
    The 1890 Land-Grant Universities have a unique mission of serving 
the beginning, small to medium limited-resource and hard to reach 
clientele. The public outreach effort of these universities is known as 
Cooperative Extension.
    These universities have been enormously successful in addressing 
issues and challenges confronting the limited resource clients, but the 
unmet needs have become more demanding. These clients are confronted 
with severe difficulties during normal conditions, but the economic 
recession has escalated their needs for assistance from the 1890 
Universities.
    These Universities depends primarily on Federal funds allocated 
through NIFA to meet the needs of the clients. These funds are matched 
by the state, but state funding remains stagnant if the Federal funds 
are not increased. It is evident that these universities are faced with 
increasing needs from their clientele, but the level of funding has not 
kept pace.
    Additional funding is needed to develop programs that are critical 
to the clients served by the 1890 Universities. An increase in funding 
will enable Extension to focus on the following:

    1. Agricultural diversification and marketing strategies to reverse 
        the decline of small minority owned farms.

    2. Increasing viability and competitiveness of farms through 
        sustainable practices.

    3. Improving nutrition, diet and health of limited-resource 
        families with emphasis on reducing obesity, utilizing the 
        Mobile Technology Laboratory as planned through Fort Valley 
        State University Cooperative Extension Program Family and 
        Consumer Sciences Program.

    4. Improving the economic viability of rural families, including 
        reducing energy consumption.

    5. After school enrichment programs to enhance 4-H and youth skills 
        in science, technology and math.

    6. Protecting the environment and natural resource management.

    7. Improving technology proficiency for farmers, senior citizens, 
        youths and other rural Americans through our Mobile Information 
        Technology Center.

    8. Landowner Initiative for Forestry Education (LIFE) Program 
        designed to provide education opportunities for landowners in 
        sustaining and/or increasing their land productivity.

    9. Financial Literacy and Consumer Economics

    10. Providing educational outreach to the community regarding 
        affordable housing.

    Without additional funding, the 1890 Extension will be unable to 
address the needs that are core to its mission, and will also fail to 
respond to the clients that need their assistance. 1890 Extension 
funding is authorized at 20% of Smith-Lever, but is currently funded at 
14.3%. In the 2012 Farm Bill, we would like to see an increase in the 
authorization level for 1890 Extension. This will enable the 1890 
universities to continue to receive Extension funding at a level to 
respond to the needs of its clientele.
Research (Evans-Allen and 1890 Capacity Building Funding at Fort Valley 
        State University, ongoing.)
Small Ruminant Research
    The Georgia Small Ruminant Research and Extension Center (GSRREC) 
at Fort Valley State University (FVSU) is the largest facility of its 
kind east of the Mississippi River and is recognized as a national 
leader in goat research. Small ruminant scientists, producers, and 
individuals interested in goat production from all over the world visit 
GSRREC to learn more about our research programs. Current programs 
include increasing muscle mass in native goats by modifying the genome 
(particularly the myostatin gene), embryo transfer technology in goats, 
developing basic roughages and dietary supplements for dairy and meat 
goats, developing a year-round grazing system, genetic-marker assisted 
selection for internal parasite control in sheep, invasive vegetation 
management with sheep and goats, breed characterization and genotype x 
environment interaction studies with meat goats and sheep, improving 
meat goat management methods, improving meat quality in small ruminants 
using pre- and post-slaughter methodologies, developing value-added 
goat meat and dairy products, and food safety.
    The resources and project activities of the 1890 Capacity Building 
grant helped us achieve successful simulation of goat milk to human 
milk with respect to milk fat and protein compositions. The resources 
and project activities of Evans-Allen formula project provided us with 
the opportunity to develop and evaluate the reduced-fat goat milk 
cheeses. Studies on food and nutritional qualities of reduced fat goat 
milk cheeses are almost non-existent. Consumer demand for reduced-fat 
cheeses has been continuously increasing due to the relationship 
between dietary fat consumption and coronary heart diseases, stroke, 
and diabetes. The production and marketing of reduced-fat dairy goat 
products is expected to have great impacts not only on health of 
consumers but also on the economic viability of limited resource dairy 
goat farmers and the industry. Although the reduction of fat in goat 
milk cheeses have some challenges in consumer acceptability of the 
products due to defects in texture, flavor and sensory qualities with 
reference to the full-fat counterparts, the results of the project 
confirmed that reduced-fat goat cheeses can be successfully produced. 
Through these project activities and resource allocations, we have been 
able to produce a Ph.D. student at the Department of Food Science & 
Technology, University of Georgia, Athens, GA, who finished her degree 
in 2007 by undertaking part of this research project as her Ph.D. 
dissertation research and experimentations. In addition, we have been 
able to produce an MS student in Animal Science program at Fort Valley 
State University, who has performed parts of this research project as 
his Master's thesis research. These projects greatly helped us in 
training and producing minority food scientists at FVSU.
    Development of value-added products using goat meat (chevon) and 
quality studies conducted at FVSU, and dissemination of information 
through our outreach activities have increased awareness among 
consumers on the benefits of chevon. Food companies have approached 
FVSU regarding releasing chevon products to national and international 
markets. So far, six graduate students have been trained in chevon 
product technology and food safety.
    FVSU is the lead institution for the Southern Consortium for Small 
Ruminant Parasite Control (SCSRPC), an international research group 
dedicated to finding non-chemical methods of controlling 
gastrointestinal nematodes in sheep and goats. Small ruminant 
parasitology research was initiated at FVSU 14 years ago, and the 
University is now the lead institution for an international consortium 
of Scientists, Extension Educators, Veterinarians, and producers 
developing and testing novel, non-chemical methods of controlling 
gastrointestinal nematodes (GIN) in goats and sheep. The Southern 
Consortium for Small Ruminant Parasite Control (SCSRPC) includes 20 
institutions from ten states in the southern USA, and from Puerto Rico, 
the U.S. Virgin Islands, and South Africa. The Institutions include, 
but not limited to Land-Grant 1890 Universities (Delaware State, 
Langston, Kentucky State, North Carolina A&T State, Virginia State), 
1862 Land-Grant institutions (Auburn, Louisiana State University, North 
Carolina State University, Texas A&M University, The University of 
Georgia, Virginia Tech) and USDA Research Stations (Booneville, AR; 
Brooksville, FL) in the U.S., as well as overseas institutions, 
including The University of Puerto Rico, University of the Virgin 
Islands, and Pretoria University (South Africa).
    All of the research of our Consortium to date has included a strong 
extension component, with emphasis on information dissemination to 
producers and the general public through extension publications, a 
consortium web site (SCSRPC.org), and producer workshops. Including 
producers in our SCSRPC research and outreach planning meetings has 
allowed our work to remain relevant to producer needs. These meetings 
are held twice per year (at least once at FVSU) to foster unity and 
creativity in developing new initiatives and overcoming challenges. 
Following this principle, FVSU and our Consortium members have been 
very successful at attracting funding to support this program, 
published numerous scientific and producer-oriented manuscripts, and 
positively impacted sustainability of small ruminant industries in the 
U.S. and overseas. Parasite research at GSRREC and other institutions 
of the SCSRPC have greatly impacted small ruminant producers in the 
U.S. and overseas by reducing dependence on expensive, ineffective 
anthelmintic drugs. Specific impacts of the Consortium are listed 
below:

    1. Over 16,000 FAMACHA (Parasitologist Fafa Malan, Charts) cards 
        sold for on-farm use at over 300 FAMACHA workshops held 
        throughout the United States, Puerto Rico, and the U.S. Virgin 
        Islands.

    2. Average farmer can save 70-80% of his drug treatment costs for 
        controlling internal parasites using this system (Savings of 
        $200-$400/year for every 100 breeding ewes or does)

    3. Research with Sericea Lespedeza (low-input, warm-season legume 
        high in condensed tannins) to control sheep and goat parasites 
        has created a tremendous surge in interest with U.S. farmers in 
        planting this forage for grazing, or making hay or pellets, 
        particularly for use in organic livestock production systems.

    4. Changed perception of U.S. farmers from the exclusive use of 
        chemical dewormers (anthelmintics) to try to eliminate internal 
        parasites in grazing animals, which has led to a world-wide 
        epidemic in anthelmintic resistance, to using integrated 
        systems, including grazing management and other non-chemical 
        control strategies, to keep parasitic infection rates below an 
        economic threshold (Increasing profits by managing parasite 
        levels rather than trying to eradicate parasites).
Specialty Plant Biotechnology
    The recent sociodemographic changes have created enormous 
opportunities for the American farmers to grow high value specialty 
crop plants. Research activities on specialty plants biotechnology to 
benefit wholesome healthcare and balanced nutrition are geared to 
identify medicinal plants through phytochemical screening, application 
of biotechnology to regenerate plants and enhance their value-added 
characters, and investigations on the biomedical evaluation. We also 
plan to emphasize conservation of these plants for their sustainable 
uses. The introduction of nutraceutical plants for health benefits and 
developing them as premium crops for local growers has been a major 
spotlight. Our fundamental goal is aimed at improving wholesome 
healthcare and balanced nutrition through specialty plants 
biotechnology research.
    In collaboration with Wayne State University, we have been able to 
establish that oral administration of Scutellaria (medicinal plant) 
extract could significantly delay the in vivo growth of gliomas in both 
intracranial and subcutaneous tumor models.
    The in vitro studies also showed significant dose-dependent 
inhibition of F98 (rat malignant glioma cell line) cell proliferation 
by specific inhibitors of PI3K as well as NF-kB, confirming important 
roles for these signaling molecules in glioma survival and 
proliferation.
Bioenergy
    Biofuel Research for lowering dependence on foreign oil is also 
timely. Plants are a rich source of non-edible oil (for biodiesel) and 
selected carbohydrates (for fermenting into ethanol). This research 
aims at screening plants for rapid biomass production, oil yield and 
ways to convert the high sugar reserve trapped as cellulose into 
ethanol. Biofuel Research may lower dependence on foreign oil. Selected 
specialty plants, those with medicinal, nutraceutical and biofuel/
bioenergy values, are being studied for their in vitro plant 
regeneration, genetic enhancement for value-added traits including 
quality and quantity of phytomedicines, healthy nutrients, and 
biofuels. The goals of our biofuel research are to produce biodiesel 
and ethanol for lowering dependence on foreign oil utilizing sweet 
sorghum and native grasses and Paulownia.
    Paulownia elongata is being studied as a fast growing tree to meet 
biomass feedstock requirement for South-Eastern USA. Preliminary 
analysis is encouraging as compositional analysis revealed 50% 
cellulose, 13% hemicelluloses and 21% lignin.
    Power generation companies have visited our experimental research 
farm to see the potential uses of Paulownia in moving toward biomass-
based power generation.
Sustainable Agriculture
    The highlights of our sustainable agriculture research findings are 
as follows:

    Due to the hard pan below the plow layer in the coarse textured 
soils of the Southeast, the best option for conservation tillage in 
this region was strip-till rather than no-till.
    Winter cover crop can substitute up to half the nitrogen fertilizer 
needs of a number of crops.
    Napier grass is among the highest biomass yielding energy feedstock 
in the southern United States yielding more than switchgrass and energy 
cane.
    An organic garden/classroom demonstration (approximately 12 acres) 
is being developed.
Teaching
Classroom/Laboratory to Enhance Teaching and Training
    Forestry. Future Farmers of America (FFA) Forestry Career 
Development Events have been conducted annually since 2008 at the 
Outdoor Forestry Classroom/Laboratory site. One hundred and fifty high 
school students from nine high schools have participated in this 
activity each year. At least twenty high school teachers have attended. 
Foresters employed with USDA, the Georgia Forestry Commission and 
Weyerhaeuser assisted with the Forestry Career Development Event 
activities. Foresters from these agencies interacted with the high 
school students discussing career opportunities with the forestry 
industry.
    Two Summer Forestry Camps have been conducted that were attended by 
80 students and ten teachers.
    Biotechnology. Fort Valley State University (FVSU) received three 
NIFA grants to establish and support an undergraduate degree program in 
Plant Sciences with a major in Biotechnology in 2001 through 2010. 
Since its inception, scholarships have been awarded to more than 50 
deserving students. Four new courses in Biotechnology/Genetic 
Engineering have been introduced into the curriculum.
    Environmental Soil Sciences. An 1890 Capacity Building Grant 
afforded this Program GPS/GIS equipment to include an ATV mounted soil 
probe for sampling.
Extension (1890 Extension Funding Formula)
    Successes in Extension at FVSU range from:

   Collaborative production of sweet sorghum with local 
        industry in the production of ethanol.

   Utilizing the Mobile Technology Transfer Center ( Mobile 
        Laboratory with 25 computer stations) to train small farmers, 
        migrant workers, seniors for medicare programs for seniors, 
        youths and seniors on successful test taking skills, etc.

   One-on-one county extension agents training from proper 
        fertilization of crops to nutritional food consumption.

   Seeking enterprises for farmers to diversify or replace 
        existing enterprises that are no longer profitable.
USDA 1890 Facilities Grant
    Projects funded through USDA Facilities Grants for Fort Valley 
State University include but are not limited to:

   Agricultural Technology Conference Center (a Cooperative 
        Extension training facility), 2007.

   Agricultural Arena and Pavilion, under construction.

   Stallworth Agricultural Research Station, 1983.
From USDA/NIFA Website (for the period 2003-2005)
    Results and Impacts for 1890 Land-Grant Institutions Programs:

   1890 Institution Teaching and Research Capacity Building 
        Grants Program.

   Evans-Allen 1890 Research Formula.

   1890 Extension Formula.

   1890 Facilities Grant Program.
1890 Institution Teaching and Research Capacity Building Grants Program
    The following represents results and impacts for the 1890 
Institution Teaching and Research Capacity Building Grants Program from 
activities that occurred between June 2003 and June 2005. 
Alabama A&M University
    The NIFA funding has enabled Alabama A&M University to incorporate 
advanced technology into the department's degree programs in 
Environmental Science, Soil Science, Forestry, and Plant Science. It 
established a minor (18 course credits) in Remote Sensing, GIS, and GPS 
technology for each degree program in the School of Agricultural and 
Environmental Sciences. The laboratory can accommodate 20 students for 
individual instruction or a maximum of 40 students (two per computer) 
for introductory courses. The GIS laboratory is shared with faculty in 
the Department of Community Planning and Urban Studies to enhance 
courses and degree programs in Urban Planning.
Delaware State University
    A NIFA teaching grant at Delaware State University (DSU) provides 
service-based field experience in resource management at Trap Pond 
State Park (TPSP) in Delaware. The project has linked DSU with the 
Department of Natural Resources and Environmental Control (DNREC) 
headquarters in Dover, DE. In 3 short years, the research program at 
TPSP has become a major field program in the Department of Agriculture 
and Natural Resources, providing an ongoing research area in which 
student projects and masters' theses can be developed and carried out. 
The equipment and field training provided by this project enabled DSU 
undergraduate and graduate students to participate in real-time 
research projects of present-day interest to resource managers in the 
state. This project played a central role in the rewriting of the 
undergraduate curriculum in Environmental Science and the masters' 
curriculum in Natural Resources. All students in the Environmental 
Science and Natural Resource education programs (30 majors as of 2003-
2004) have been exposed to the equipment and newly modified curricula 
and courses. The project is providing valuable man-hours for park 
research and data sets that would otherwise not be obtained. Data from 
the project have been made available to the state for use in park 
management both at TPSP and at other parks in Delaware, and the data 
are being made available to the public on an outreach website.
Fort Valley State University
    Fort Valley State University (FVSU) received two NIFA grants to 
establish an undergraduate degree program in Plant Science with a major 
in Biotechnology in 2001. Since its inception, FVSU has awarded 
scholarships ($2,000/year) to 32 deserving students. Four new courses 
in Biotechnology/Genetic Engineering have been introduced. Twenty-eight 
students participated in the Research Experience for Undergraduate 
Program in Biotechnology during the academic year, working in the 
developed infrastructure facilities to perform cutting-edge research in 
Molecular biology/ biotechnology at Fort Valley State University. In 
addition to receiving hands-on experience in the laboratory, these 
students also participated in enrichment activities such as GRE 
workshops and interacted with distinguished speakers. The invited 
speakers represent regional diversities, Federal labs and industry. 
FVSU has successfully established a partnership with major research 
institutions to provide summer research experiences for undergraduate 
students. Twenty-five (25) students travel to different destinations 
throughout the nation each summer. These students conduct independent 
research work and have made more than 45 scientific award-winning 
presentations at national meetings. Four students graduating with 
biotech training joined the graduate/professional schools for higher 
education in Biotechnology. In addition, these programs allowed FVSU to 
provide resources for more than 15 high school students to participate 
in the Summer Research Apprenticeship Program (SRAP). The funding 
helped the foundation to bring additional funding from other Federal 
agencies such as NSF and EPA totaling over $3 million to strengthen 
technology, teaching, and research programs in Biotechnology under the 
Plant Science Department in the College of Agriculture, Economics, and 
Allied Programs.
North Carolina A&T State University
    With funding from NIFA, North Carolina A&T established a 
centralized research facility integrating the use of state-of-the-art 
survey methodologies with computer and communication technologies. This 
Applied Survey Research Laboratory has the capacity to conduct and 
analyze mail, telephone, Web-based, self-administered, and face-to-face 
surveys, focus groups, and other survey research methodologies. In 
addition, North Carolina A&T's agricultural programs have infused 
instructional technologies throughout the curricula, and distance 
learning has become an alternative, yet very important, mode of 
instruction. Hands-on learning is greatly facilitated by access to 
``smart classrooms'' (interactive whiteboards, multimedia cabinets, and 
software that facilitate teaching and research) and state-of-the-art 
laboratories. Finally, the program has allowed North Carolina A&T to 
establish a graduate program (M.S.) in International Trade.
Southern University and A&M College
    Southern University and A&M College received a NIFA grant to 
enhance teaching and recruitment in Food and Fiber Sciences through 
computer technology. This project has had far-reaching impact in 
improving teaching and equipping students with the necessary skills 
they need for employment. The project provided funds to establish a 
modernized computer aided design laboratory in the Division of Family 
and Consumer Sciences. Computer hardware and software was purchased to 
integrate Computer-Aided-Design and Manufacturing for textiles (CAM/
CAM), Computer-Aided Diet Analysis and menu planning, and use of the 
Internet in the curriculum. Textile students gained hands-on experience 
using high tech textile equipment. The University has recognized this 
project as one of the most innovative on campus. This project has also 
helped bring the University to national prominence. A second NIFA grant 
to conduct textiles research was won by Southern University as a direct 
result of this project. The capacity-building research project merges 
computer-aided-design and textile testing. Another very significant 
impact was a $1.8 million software donation from Lectra Systems, Inc. 
This donation places the Apparel Merchandising program at Southern 
University among a few select institutions worldwide that are using 
industry standard software. In addition, Dr. Grace Namwamba (PI) 
received the NASULGC Excellence in College Teaching for the Southern 
Region in 2003.
Tennessee State University
    The NIFA funding has provided Tennessee State University with the 
ability to respond to stakeholder concerns in the Southeast U.S. 
nursery industry. By establishing a program on integrated disease 
management for powdery mildew, improved flowering dogwood selections 
have been developed that will reduce homeowner dependence on chemical 
pesticides while improving the profitability of the regional nursery 
industry. The capacity-building grant program has facilitated the 
establishment of state-of-the-art equipment and collaborative linkages 
for research in nursery crop disease management.
University of Arkansas_Pine Bluff
    NIFA funding has enhanced research and teaching needs in three 
areas at UAPB: agriculture, fisheries, and human sciences. Support of 
programs for student recruitment and retention, curriculum development, 
faculty and student development, and academic enrichment have greatly 
strengthened and increased enrollment. Capacity-building funds were 
instrumental in curriculum design, resource and equipment acquisition, 
and faculty development for (1) implementing the M.S. degree program in 
aquaculture/fisheries that enrolls 23 students, (2) creating the 
nutrition intervention and research program for the study of 
nutritional needs and food security of families in the Mississippi 
Delta, and (3) developing the only regulatory science degree program in 
the nation. The regulatory science program enrolls 27 students in three 
options: Agriculture, Industrial Health, and Safety and Environmental 
Biology.
University of Maryland_Eastern Shore
    Capacity-building funds have allowed the University of Maryland 
Eastern Shore (UMES) to establish an impressive, collaborative, multi-
state research nutrient management program focused on reducing 
phosphorus loading levels to the Chesapeake Bay and Maryland Coastal 
Bays. This work provides protection for the economic viability of 
watermen and the tourism industry on the Delmarva Peninsula. Another 
NIFA grant is being used by the Department of Human Ecology at the 
University of Maryland Eastern Shore to establish an interactive video 
teleconferencing classroom of courses. The department is partnering 
with Chesapeake Community and the Eastern Shore Community College in 
Virginia to offer courses leading to a bachelor's degree for students 
residing in remote areas on the Eastern Shore who are pursuing a career 
in child development.
Evans-Allen 1890 Research Formula
    The following represents results and impacts for the Evans-Allen 
1890 Research Formula from activities that occurred between June 2003 
and June 2005.
Alabama A&M University
    Alabama A&M University is conducting research to study the various 
forms of phosphorus over time in poultry manure, or litter, amended 
soil, using cutting-edge technology to enhance management of animal 
waste applied to land. Discoveries will aid in the development of 
remediation strategies to reduce phosphorus mobility in soils. 
Fractionation studies are identifying differences in phosphorus levels 
at various soil depths using different treatment methods and advanced 
instrumentation testing.
Alcorn State University
    The profitability of American agriculture is extremely important to 
the nation's vitality, yet rising input costs and low market prices for 
agricultural commodities increasingly jeopardize the industry's 
profitability. Since American producers have little ability to affect 
market prices, it is critical that they have and understand how to use 
new technologies that can optimize their input costs with respect to 
profits. Alcorn State University recently completed a project to 
monitor the growth of sweet potatoes to optimize production using 
remote sensing methods. This research shows that remote sensing, GPS/
GIS, and ground truthing should help identify the most suitable areas 
in the field for high sweet potato yield and areas that are 
problematic. Results from the study will be helpful to small limited-
resource producers, will assist extension in the application of the 
research findings, and will provide researchers with necessary tools 
for additional study.
Delaware State University
    The Claude E. Phillips Herbarium is a resource center for 
researchers at Delaware State University. Researchers have included in 
the herbarium native and cultivated plants from across the globe. Those 
research specimens have been pressed, dried, and mounted on archival 
paper, then housed in a state-of-the-art, climate-controlled 
environment. The holdings are available to researchers, students, and 
the general public.
Florida A&M University
    Development of environmentally sound sustainable practices is 
paramount to the successful growing of hot peppers, an alternative 
niche enterprise identified for small farmers. Florida A&M University 
researchers evaluated the effects of bio-solid waste material on plant 
growth and fruit yield of Scott Bonnett and Caribbean Red hot pepper 
varieties and on quality characteristics of the soil on which the crop 
is grown. Results showed that poultry manure, mushroom compost, and 
earthworm castings produced fruit yield that were numerically, but not 
statistically, different compared to fruit yield from inorganic 
fertilizer treatment, but significantly higher compared to fruit yield 
from control treatment. Fruit yield from cow manure was significantly 
lower than all other treatments except the control.
Fort Valley State University
    Sweet potato potential for human nutrition and future energy needs 
can be realized through the application of biotechnology, but a 
reliable in vitro regeneration would be required for the application of 
recombinant DNA technology. Fort Valley State University completed a 
research project to develop an efficient tissue regeneration system via 
organogenesis and embryogenesis for sweet potato and to transfer genes 
of desirable traits into sweet potato using recombinant DNA technology. 
Establishment of reliable and efficient plant regeneration protocol and 
gene delivery protocol for sweet potato will ensure introduction of the 
designed ``value-added'' genes into this crop through genetic 
engineering.
Kentucky State University
    Kentucky State University researchers developed a program to grow 
freshwater shrimp in farm ponds to further reduce the state's 
dependence on tobacco. Economic analyses indicate net incomes of 
between $2,500 and $4,500 per acre for freshwater shrimp. So far, 18 
farmers have adopted the practice, bringing the total additional income 
derived from shrimp to about $185,250 annually.
Langston University
    Langston University continues its research on goat production. A 
recent study showed that the number of Boer crossbred meat goats has 
been increasing rapidly, although how their growth and harvest traits 
compare with those of Spanish goats and influences of maternal genotype 
has not been thoroughly evaluated. This information would be useful to 
achieve optimal meat goat production systems and yield of goat products 
desired by consumers. Langston University's scientists studied post-
weaning growth and harvest traits of Boer x Spanish, Spanish, and Boer 
x Angora wethers consuming a concentrate-based diet. Research shows 
that live weight gain was greater for Boer crossbreds than for Spanish 
wether goats, with little or no difference between Boer x Spanish and 
Boer x Angora goats. Because of more rapid growth of Boer crossbreds 
than Spanish goats, weights of the carcass and primal cuts were greater 
or tended to be greater for Boer crossbreds.
Lincoln University
    Lincoln University is investigating an indoor water recirculating 
aquaculture system for the production of bluegill sunfish. There is a 
high demand for 5 to 6 inch bluegill for pond stocking. Producing 
suitable sized bluegill for pond stocking, however, requires an 
inordinate amount of time and increased labor costs because variable 
growth requires continual sorting and grading to obtain fish of a 
desirable size. The research is aimed at raising bluegill fingerlings 
over winter in controlled temperature systems that will produce 5 to 6 
inch fingerlings by spring to meet current market demands.
North Carolina A&T State University
    Greensboro waters drain into the Jordan Lake, an essential drinking 
water supply in the Chapel Hill-Raleigh-Durham area. The lake is a 
``nutrient sensitive water,'' since it has a nutrient over-enrichment 
problem. North Carolina A&T State University is in its second year of a 
study to determine sources of nutrients coming into the Jordan Lake so 
best management practices can be implemented to remove nutrients 
draining into the lake. Soil and Water Assessment Tool (SWAT) model 
inputs were collected for the farm. A nearly complete set of SWAT peer-
reviewed literature has been listed on the project's website, providing 
SWAT users a centralized source for information.
Prairie View A&M University
    Goats are an important livestock species in many parts of the world 
and their prevalence in the U.S. is rapidly increasing. Nonetheless, 
knowledge of goat nutrient requirements lags behind that of cattle and 
sheep. To help with this, a database of treatment means observations 
from goat feeding/nutrition studies was constructed and used to develop 
and describe nutrient requirements of goats by scientists at Prairie 
View A&M University. Research will yield more knowledge about accurate 
estimates of nutrient requirements of goats, including composition of 
tissue being accreted or mobilized, changes in maintenance energy 
requirements with advancing maturity and differences among nutritional 
planes, energy costs of activity, and conditions influencing the supply 
of ruminally under grade protein. A clearer understanding of these 
factors is being revealed and will improve feeding programs as well 
increase accuracy of predicting performance by goats.
South Carolina State University
    South Carolina State University purchased a mobile technology 
learning center with NIFA funds. The customized Winnebago, which 
travels across the state, is equipped with a 12-station Internet-ready 
computer lab, a child development classroom, dual generators, a 
satellite, and an instructor workstation. By design, the mobile 
technology center delivers the services that 1890 Extension provides 
such as 4-H and youth development, family life and nutrition, adult 
leadership and community development, small farm assistance, and 
computer literacy classes to citizens. The mobile center also provides 
1890 Extension with the opportunity to take programs to the people and 
enhances efforts to address the digital divide.
Southern University
    Southern University is furthering research into the effects on 
animal performance of grazing cattle and goats together and separately. 
The goal of this project is to assist small and limited-resource 
producers in increasing their production and economic base by 
efficiently using the available natural and farm resources. Results of 
this project are determining the most efficient method of resource use 
by two or more species.
Tennessee State University
    Production efficiency of the doe herd is a major determinant of 
annual income in a commercial meat goat enterprise; however, doe 
performance has received little attention when assessing new meat goat 
breeds in the United States. Most pastures in the Southeast have 
endophyte-infected tall fescue, posing a risk of endophyte-induced 
reductions in animal performance. Tennessee State University has 
undertaken a project to evaluate doe-kid performance for economically 
important reproductive and growth traits as influenced by breed and 
forage type. The study recognizes that understanding genetic diversity 
among breeds for economically important traits and endophyte effects on 
goat performance can aid in enhancing meat goat herd productivity. 
Further results of this study should provide producers with information 
useful for genetic management and breed selection within seedstock and 
commercial meat goat operations.
Tuskegee University
    Land loss phenomena and efforts to recoup it continue to be a 
challenge for African American farmers and other minority communities 
in Alabama and the rural South. Rural communities and the underserved 
families in the Black Belt region have problems accessing government 
programs. Access of programs and policies affecting the underserved in 
the Black Belt region of Alabama are being assessed by Tuskegee 
University. The approach involves multidisciplinary teams within the 
social sciences, as well as among the social sciences, Cooperative 
Extension, and continuing education. Target areas are being assessed in 
terms of economic growth, equity, and quality of life as they apply to 
sustainable rural development. As a result of the study, specific 
policies, strategic directions, and programs will be proposed to 
enhance the potential for sustainable rural development, and a database 
including a ``State of Black Belt'' report will be generated on each of 
the target areas.
University of Arkansas_Pine Bluff
    Insect damage to alternative crops produced by small and limited-
resource farmers has a significant effect on production. University of 
Arkansas--Pine Bluff scientists have conducted studies to evaluate Bt 
sweet corn insect suppression and initiate Bt gene field corn trials, 
work on bionomic and integrated pest management (IPM) methods for 
cowpeas in Arkansas, and evaluate insects on new lines of hot peppers. 
They have also evaluated insect infestation on promising pigeon pea 
lines, designed an IPM system for control, conducted verification 
trials on hot peppers and pigeonpeas, and constructed an economic model 
of production costs. This research has developed a sufficient data base 
needed to develop insect management and control strategy for multicrop 
production by limited-resource farmers.
University of Maryland Eastern Shore
    The University of Maryland Eastern Shore has established a private-
public partnership with Bell Nursery to help the university and its 
constituents enhance economic development opportunities for surrounding 
rural communities. The 2.5 acre hydroponic greenhouse was funded at 
$3.2 million through NIFA, state, county, university and private 
industry funds to engage in floral production that links the University 
of Maryland Eastern Shore with a commercial business. The hydroponic 
greenhouse project sponsored by the University's Rural Development 
Center and Small Farm Institute is demonstrating that, through formal 
alliances, economic development strategies can bring needed resources 
to the Delmarva Peninsula of Maryland.
Virginia State University
    In the United States, the need for healthful food is a driving 
force in the search for nutritious alternative crops. Among the 
alternative vegetable crops, soybean has the distinction of being low 
in saturated fat and active in reducing blood cholesterol level. Direct 
consumption of vegetable soybean is very popular in the Orient; 
however, the cultivars used in Asia are not adapted to U.S. production 
systems. Virginia State University recently completed a study to 
determine the physiological and/or chemical basis of vegetable soybean 
that could serve as reliable indicators in predicting the proper stage 
of harvest; to develop vegetable soybean with large seed size, high 
seed yield, and with desirable agronomic traits and nutritional values; 
and to identify vegetable soybean cultivar ideotypes that fit into 
mechanical harvesting.
West Virginia State University
    Societies worldwide produce large quantities of waste organic 
matter. This material arises from human population growth, industrial 
byproducts, and agricultural sources, such as animal farms. The overall 
goal of the environmental microbiology program at West Virginia State 
University is to understand the fundamental microbial processes that 
produce anaerobic digestion and to apply this knowledge to improve the 
control and performance of anaerobic digesters. The scientists found 
that the organic waste bioconversion process can also transform 
agricultural industrial organic wastes into a valuable agricultural 
commodity (fertilizer) and renewable energy (methane).
1890 Extension Formula
    The following represents results and impacts for the 1890 Extension 
Formula from activities that occurred between June 2003 through June 
2005. 
Delaware State University
    The Delaware State University 's Cooperative Extension staff 
annually participates in Coast Day at the University of Delaware Marine 
Sciences Lab in Lewes, DE. Information is provided to several thousand 
people who attend. Media presentations and demonstrations provide 
information on feeding, diseases, and management for aquacultural 
species, including oysters, crayfish, and smallmouth bass.
Kentucky State University
    Kentucky State University aquaculture researchers and extension 
specialists assist catfish farmers in western Kentucky who have more 
than 400 acres stocked with catfish. A local Aquaculture Cooperative 
operates a processing plant with an average of 30,000 to 40,000 pounds 
of catfish processed each week. These farmers are expected to supply 
more than a million pounds of catfish in 1 year.
North Carolina A&T State University
    North Carolina A&T State University provides educational resources 
to improve farm business management skills so that limited-resource, 
small and part-time farmers can increase their incomes from direct 
marketing. The program is designed so that program participants learn 
through practices, discussions, role play, planning, and 
implementation. It monitors and reports results and uses evaluation for 
constant program improvement.
South Carolina State University
    The Extension Beef Cattle Improvement Project (BCIP) at South 
Carolina State University has provided assistance to 111 small beef 
cattle producers in production, improving bloodline, marketing, 
decision making, and risk and enterprise management. One hundred 
eighteen heifers and 18 bulls have been placed on limited-resource 
farms to date. Ninety-two farmers are enrolled in this initiative. 
Fifty-eight families have been assisted through the animal Pass-on-
Project, with 62 heifers and three bulls being passed on to these 
families. The BCIP participants can effectively compete on the beef 
cattle market. The top 10% of these participants receive premium prices 
for their products. The most important accomplishment is that 
participants have increased their knowledge of quality production 
(breed selection to improve their bloodline) and, as a result, have 
increased their farm income by 40 percent to 50 percent.
1890 Facilities Grant Program
    The following represents results and impacts for the 1890 
Facilities Grant Program from activities that occurred between June 
2003 and June 2005. 
Delaware State University
    The Claude E. Phillips Herbarium is a 3,672 square foot building 
completed in 1999. The Herbarium is the largest at a historically black 
college or university. With approximately 106,000 specimens, it ranks 
87th out of 525 herbaria in the United States and is an active center 
for education and research. It includes native and cultivated plants 
that are pressed, dried, and mounted on archival paper as well as some 
pickled plant specimens. The facility encloses special holding cases in 
a climate-controlled environment. Scientists, gardeners, educators, 
students, physicians, and lawyers regularly consult these holdings for 
identification and education.
North Carolina A&T University
    The Cooperative Extension Program at North Carolina A&T State 
University faced many new challenges as it moved into the new 
millennium. The extension program, as well as the academic and research 
programs, needed to address such challenges as sustainable agriculture 
and its effect on the environment, biotechnology and its applications 
to the food chain, burgeoning information technologies, economic 
revitalization of rural communities, and increased accessibility to 
international markets. Facilities needs had to be addressed to plan for 
meeting these challenges. Coltrane Hall, headquarters for the 
Cooperative Extension program, was constructed in 1951. With funds from 
NIFA, the university developed and executed plans for construction and 
renovation of Coltrane Hall. The first floor was renovated, and a 
second floor added on top of the original first floor, using an open 
space design. Footage for the second floor equaled that of the first 
floor--11,521 square feet. The second level features a building face of 
smoked glass.
Prairie View A&M University
    Before receiving the facilities funds, agricultural research at 
Prairie View A&M University was conducted in facilities built in the 
early 1940s and 1950s that were designed primarily for teaching. The 
E.B. Evans Animal Industries building, a 28,000 square foot facility 
built in the early 1950s, served as the primary Agriculture Teaching 
and Research facility. This facility did not have the size nor proper 
design for research, and an inadequate electrical system, poor 
ventilation, and outdated plumbing could not accommodate state-of-the-
art research equipment. Therefore, faculty/research scientists were 
hampered in their efforts to carry out effective research projects. The 
funds received were used to construct a new state-of-the-art research 
laboratory, along with several auxiliary buildings. The Jesse H. and 
Mary Gibbs Jones Building, completed in 1988, serves as the primary 
research laboratory for research in the food and agricultural sciences, 
as well as headquarters for the Cooperative Agricultural Research 
Center. Auxiliary buildings built with these funds include a poultry 
complex, a swine complex, a feed mill, greenhouse/headhouse complex, 
and state-of-the-art laboratory equipment and furnishings.
Southern University
    Southern University has completed two facilities. The Ashford O. 
Williams Hall is a two-story, 55,160 square foot building consisting of 
more than 45 offices and cubicles to house the research and extension 
faculty, staff, and administrators; telecommunication equipment with 
graphics, television, and distance learning components; and more than 
20 research labs. The Maurice A. Edmond Livestock Arena has more than 
58,943 square feet consisting of a regulation horse ring and swine, 
sheep, and beef cattle stables. These facilities greatly enhance the 
capability to conduct research and extend extension programs.
Tennessee State University
    Facilities funds at Tennessee State University have been used to 
renovate an old dairy barn into a contemporary agricultural research 
and extension complex of 46,220 square feet. The complex provides a 
multi-purpose meeting room, Docu Tech printing area, storage rooms, 
first and second floor conference rooms, and offices. This modern 
facility has enhanced the planning, implementing, and evaluating of 
educational programs, increased technology for extension program 
delivery, and increased programming and program visibility among 
decision makers, stakeholders, and clientele groups. The university's 
educational programs in agriculture and natural resources, community 
resource development, 4-H and youth development, and family and 
consumer sciences have been made more visible, allowing the university 
to serve a larger clientele base.
University of Maryland_Eastern Shore
    The swine facility at the University of Maryland Eastern Shore was 
constructed with NIFA facilities funds. Research conducted there 
involves growth, reproduction, and meat quality. The facility includes 
a 60 sow, total confinement farrow-to-finish unit that includes a 
metabolism room with crates adaptable for swine, sheep, and goats and 
other rooms that can accommodate the individual housing and feeding of 
swine, sheep, or goats as necessary for many experiments. All sows are 
bred using artificial insemination. Pregnant sows are group-housed in a 
large pen serviced by a computerized sow feeding apparatus. The 
facility includes a surgery suite used for hormonal studies to improve 
reproduction efficiency. The facility has had a positive impact on the 
Maryland eastern shore farming community. Research results have been 
generated and disseminated through field days, conferences, workshops, 
extension bulletins, and scientific journals. The construction of this 
facility and its equipment provided the necessary infrastructure to 
engage not only in cutting-edge research, but it provided the resources 
to enhance undergraduate and graduate courses in biotechnology and 
molecular biology. The facility also was an attraction for the support 
from the swine industry and allowed the university to partner with that 
industry and other agricultural constituents in research, teaching, and 
outreach activities.
    Mr. Chairman, from 1970 to 2005 the population of the world 
increased by 2.75 billion people, a 74% increase. In 1950, only eight 
countries had a population of 50 million people. By 2030, the United 
Nations estimates that 33 countries will have populations in excess of 
50 million.
    According to a Farm Foundation Issue Report entitled, ``Agriculture 
Research and Productivity for the Future,'' commodity yields in the 
United States are increasing at a much lower rate in the period after 
1990 than when compared to the period between 1950 and 1989. At the 
same time the farm productivity orientation of public research and 
development in the United States dropped from 68% in 1985 to 57% in 
2006/2007.
    Agriculture represents only 1.8% of the nation's Gross Domestic 
Product, but it accounted for more than 12% of total productivity 
growth in the United States' economy between 1970 and 2004. Our 
competitors are not sitting idly by. Between 1981 and 2000, China's 
share of the world publicly funded agricultural research grew from 4% 
to 9%. In the same time period, the United States' share grew from 18% 
to 19%.
    Today, the National Institutes of Health spends $120 on competitive 
research for every dollar spent by USDA.
    While NIH funding is greatly needed, we believe that funding 
agricultural research, education and extension is as important if not 
more so. After all, we only feed fuel and clothe the world. Isn't an 
investment in research that solves the causes of problems--obesity, 
malnutrition, air and water quality, and carbon emissions to name a 
few--a better investment than research aimed at the addressing the 
result of those problems?
    We appreciate the long support that this Committee has shown for 
agricultural research, extension and higher education at land-grant 
universities and especially the 1890 Institutions. We appreciate the 
opportunity to testify before you today and look forward to working 
with the Committee in the development of the next farm bill.

    The Chairman. Thank you very much, Dr. Latimore, and we 
thank you for the good work you do and the work that the land-
grants do, we appreciate it.
    I guess you have a microphone there, Mr. McMurray.
    Mr. McMurray. I believe so.
    The Chairman. We are technology challenged today. Dr. 
Latimore, maybe you can give us some advice to straighten us 
out here.
    Mr. McMurray, you may proceed.

 STATEMENT OF GARY McMURRAY, CHIEF, FOOD PROCESSING TECHNOLOGY 
                DIVISION, GEORGIA TECH RESEARCH
                     INSTITUTE, ATLANTA, GA

    Mr. McMurray. Thank you. Good afternoon, Mr. Chairman, 
Committees Members, ladies and gentlemen; thank you for the 
opportunity to appear here today. My name is Gary McMurray and 
I am the Division Chief for the Food Processing Technology 
Division at the Georgia Tech Research Institute. I am honored 
to lead a team of 17 professionals, four academic professors 
and 20 students working in the areas of sensing for food 
quality and safety, robotics and automation, worker safety, 
energy, and environmental engineering in support of bringing 
technology to the food processing industry.
    Today, we are recognized nationally and internationally for 
developing new and innovative technology and systems for the 
food industry. In addition, we are partners with the Georgia 
Tech Integrated Food Chain Center for sensing throughout the 
food supply chain. We have been funded for the last 35 years 
through the State of Georgia Agricultural Technology Research 
Program. The program's mission is to conduct basic and applied 
research that improve productivity and efficiency in Georgia's 
agribusiness community. In addition, the State of Georgia has 
funded the Food Industry Program that is focused on the 
commercialization of technology for the broader food industry, 
including red meat, fruit and vegetable and baking industries.
    One of the reasons for the success of our program is in the 
partnership we have in the food processing industry, our 
colleagues at the University of Georgia and the Georgia Poultry 
Federation. With the help and support of the Georgia Poultry 
Federation, we have assembled a world class advisory board that 
consists of top management from the nation's leading poultry 
processing companies.
    The USDA NIFA program is an important new program and food 
safety is a major focus. The manufacturing industry realized 
many years ago that you cannot inspect quality into a product. 
Instead, they have learned to control the process with 
statistical control procedures and effective policies. I 
believe that this approach needs to be applied to the food 
system as a whole. A systems-level approach to the food system 
would focus on identifying the appropriate control points, 
sampling requirements, sensor requirements, policies and 
procedures for the system as a whole, and not attempt to sub-
optimize for individual substances.
    By adopting this approach, the value to the industry and 
the consumer is two-fold. First, there is increased food 
safety. It is important to restore the confidence that the 
public has in the safety of our food. Second, we can reduce the 
spoilage of products throughout the supply chain. While we need 
to address the critical issue of food production, the first 
step should be to drive out the waste in the current system. 
Researchers can partner with farmers to better understand the 
initial state of the product at the farm through the use of the 
appropriate sensing technology and monitor its state throughout 
the food chain. The information can be used with predictive 
models to better enable decisions and increase the economic 
benefit for all participants in the system. I believe that by 
increasing the flow of data throughout the entire food chain, 
spoilage of product can be dramatically decreased.
    The current RFA from NIFA is largely focused on the 
development of fundamental science. This is important work to 
be sure, but it does not address a system as discussed earlier. 
I encourage NIFA to include broader scope projects that allow 
for the development of teams with diverse backgrounds to 
address the system as a whole. I also encourage the USDA to 
focus on technology development that can be used to focus on 
technology development that can be translated into 
commercialized hardware and software systems. Developing 
systems will benefit the farmer, but it will also sustain an 
entire industry of equipment companies, distributors, sales 
people and support staff. This creates real jobs and helps 
build the nation's rural communities.
    GTRI recognizes the important work that USDA NIFA is doing 
and as such has already submitted three letters of intent for 
proposals to this program. We believe that collaboration is 
vital to this work and our proposed team reflects that spirit. 
Our team includes experts at the University of Georgia, as well 
as other universities such as Oklahoma State, Florida A&M 
University, the University of Tennessee and North Carolina A&T 
State University.
    One hindrance to fostering such collaboration between land-
grant and non-land-grant institutions is a cap on university 
overhead rates. Today's major engineering universities drive 
innovation in every economic sector other than agriculture. 
These universities will be deterred from participating in USDA 
opportunities until the overhead issue is revisited. A 
partnership between engineering universities with their systems 
approach and technology focus, and land-grant universities with 
their agriculture expertise would be a powerful team to address 
food safety issues, and would provide a great service to the 
food industry and consumers.
    The entire Georgia Tech community looks forward to working 
with USDA and NIFA to solve the problems that face our food 
industry. We know that these problems are critical to 
maintaining one of the most important industries to our nation 
and world. The challenges are large, but I am confident that 
through a systems approach coupled with integrated, 
multidisciplinary teams, we can begin to solve these problems 
in a cost-effective manner. I look forward to working with 
USDA, the academic community as a whole, and the industry to 
achieve these goals.
    I would be happy to respond to any questions that the 
Members might have at the end. Thank you.
    [The prepared statement of Mr. McMurray follows:]

Prepared Statement of Gary McMurray, Chief, Food Processing Technology 
         Division, Georgia Tech Research Institute, Atlanta, GA
    Good afternoon, Chairman Peterson, Committee Members, ladies, and 
gentlemen, thank you for the opportunity to appear here today to 
discuss the 2012 Farm Bill. My name is Gary McMurray and I am the 
Division Chief for the Food Processing Technology Division at the 
Georgia Tech Research Institute (GTRI). I am honored to lead a team of 
13 full-time research professionals, four academic professors, and 20 
students working in the areas of image processing and sensing (food 
quality and food safety), robotics and automation, energy, and 
environmental engineering in support of the food processing industry.
    We are primarily funded through the State of Georgia's Agricultural 
Technology Research Program (ATRP). The program's mission is to conduct 
basic and applied research focused on the development of new 
technologies that improve productivity and efficiency in the processing 
operations of Georgia's agribusiness community. Particular emphasis is 
placed on the commercialization of these technologies and we work 
closely with our industrial partners to facilitate this. We have 
licensed ten systems/technologies to commercial companies in the past 
15 years. In addition, we have a mandate to educate engineers to 
prepare them for careers in the food industry as well as provide 
technical outreach and assistance to the industry. We also work closely 
with our colleagues at the University of Georgia (UGA) on many 
projects. This team approach allows the application and transfer of 
knowledge from multiple disciplines to deliver the best possible 
solution for each research challenge.
    For more than 35 years, ATRP researchers have developed numerous 
innovations that have improved food, particularly poultry, processing 
operations. Food safety technologies have also been a key focus area of 
the program. ATRP has funded groundbreaking work in the rapid detection 
of pathogens and chemicals. Our biosensor uses an interferometric 
optical measurement system for rapid, on-line quantification of various 
chemicals and pathogens in the food system. The research team, working 
with UGA and under USDA funding, recently demonstrated the system's 
ability to quickly and accurately identify avian influenza in live 
chickens. This system has also led to two commercial licenses.
    One of the reasons for the success of our program has been the 
partnership we have with the food processing industry, our colleagues 
at UGA, and the Georgia Poultry Federation. With the help and support 
of the Georgia Poultry Federation, we have assembled a first-class 
advisory board that consists of top management as well as plant and 
complex managers from some of the nation's leading poultry processing 
companies. This advisory board plays a critical role in identifying the 
industry's technology needs and guiding the technology development 
process.
    In addition to the Agricultural Technology Research Program, the 
State of Georgia has funded the Food Industry Partnership (FIP) program 
that is focused on the commercialization of technology for the broader 
food industry. FIP has funded numerous projects focused on food safety, 
water conservation, automation, and imaging for the red meat, fruit and 
vegetable, peanut, and baking industries. This unique program uses an 
industry-led committee to select projects that have broad industry 
appeal. Each project brings together an academic research team, an end-
user, and a commercial partner to bring the system to market.
    The USDA NIFA program is an important new initiative that should 
generate interest from the research community. Food safety is a major 
focus of the program and it is one that requires a multidisciplinary 
team Our approach to food safety, from a technology development point 
of view, has been to not only consider the specific technologies 
required to achieve it, but also to consider the food chain as a 
system, not just individual parts. The manufacturing industry realized 
many years ago that you cannot inspect quality into a product, but 
instead, you must learn to control the process with adequate 
statistical control procedures and effective control policies. You only 
use inspection to verify that the process is under-control. I believe 
this approach needs to be applied to our food system as well. A 
systems-level approach to the food system (farm to fork) would focus on 
identifying the appropriate control points, sampling requirements, 
sensor requirements, data requirements, policies, and procedures that 
would ensure the safety of the food chain but not impose significant 
costs on the system. Then, the correct handling of the product through 
the system that would ensure that the product arrives safely to the 
consumer is defined and a methodology for controlling that process is 
devised. In addition, the information system to convey that information 
to the appropriate decision makers is equally important. Requiring 100% 
inspection of the product at any point along the food chain is neither 
cost-effective nor necessary as long as the rest of the supply chain is 
not ``in control.''
    By adopting this approach, the value to the industry and the 
consumer is two-fold. First, there is increased food safety. It is 
important to instill public confidence in the safety of the nation's 
food supply. Only through a systems approach can we achieve this. 
Second, we can reduce the waste/spoilage of product throughout the 
supply chain. The need for increased food production has been well 
documented. The population of the world continues to grow and with it, 
the need for more food. While we need to address the critical issue of 
food production, the first step should be to drive out the waste in the 
current system. Researchers can partner with farmers to better 
understand the initial state of the product at the farm (through 
sensors) and monitoring its state through the food chain. The 
information can be used with predictive models (simulating the variety 
of conditions by product as it is transported through the chain) to 
enable better decisions and increase the economic benefit for all 
participants in the system. I believe that by increasing the flow of 
data throughout the entire food chain, spoilage (or waste in the 
system) can be dramatically decreased and at the same time overall food 
safety can be maintained.
    The current RFA from USDA NIFA is focused for the large part on 
very specific issues in food safety. This approach is very appropriate 
for the development of fundamental science, but it does not facilitate 
a systems approach as discussed earlier. I encourage the USDA NIFA to 
craft broader scoped projects that allow for the development of teams 
with diverse backgrounds to address the system as a whole. I also 
encourage the USDA to focus on technology development that can be 
translated into commercialized hardware and software systems. 
Developing systems that can do more for the farmer brings benefit not 
only to the farmer, but it sustains an entire industry of equipment 
companies, distributors, sales people, and support people. This creates 
real jobs and helps build the nation's rural communities.
    The problems facing our agricultural system are complex ones that 
require multidisciplinary team-based solutions. I believe the best 
teams can be formed by joining researchers from both land-grant and 
non-land-grant universities. These teams require skills typically found 
at the land-grant institutions such as microbiology, food science, and 
animal science. However, the non-land-grant institutions are an 
untapped resource that can supplement the research teams and allow them 
to tackle the larger problems. I strongly feel that the non-land-grant 
universities have a tremendous amount of technology and skills that can 
be brought to bear on the problems that face our agricultural system. 
While GTRI is considered one of the preeminent sensors universities in 
the nation for the Department of Defense (DOD), very little of that 
work has translated over to the agricultural community. Within the DOD 
world, sensors for detection of various chemicals are well known and 
commonly deployed. In addition, the DOD has invested heavily in 
multispectral and hyperspectral imaging as a means to collect data and 
identify objects of interest. This technology has many applications to 
the agricultural community. Can these non-land-grant universities 
address these problems alone? No. They still need to partner with the 
land-grant universities because that is where the domain-specific 
knowledge resides. They must partner to accomplish the greater goals of 
USDA.
    GTRI recognizes the important work that USDA NIFA is doing and as 
such we have already submitted three letters of intent for proposals to 
this program. We believe that collaboration is vital to this work and 
our proposed team reflects that spirit. Our team includes experts at 
the University of Georgia as well as other universities such as 
Oklahoma State, the University of Tennessee, and North Carolina A&T 
State University. The multidisciplinary teams include experts in signal 
processing, sensor systems, environmental engineering, and energy 
systems that are working with their counterparts in economics, poultry 
science, microbiology, and food science to work on projects of mutual 
interest.
    One hindrance to fostering such collaborations between land-grant 
and non-land-grants institutions is the cap on university overhead 
rates. Today's major engineering universities drive innovation in every 
economic sector other than agriculture. These universities will be 
deterred from participating in USDA opportunities until the overhead 
issue is revisited. A partnership between engineering universities with 
their systems approach and technology focus and land-grant universities 
with their agriculture expertise would be a powerful team to address 
food safety issues and would provide a great service to the food 
industry and to consumers. They must partner to accomplish the nation's 
food safety goals.
    The entire Georgia Tech community looks forward to working with 
USDA and NIFA to solve the problems that face our food industry. We 
know that these problems are critical to maintaining one of the most 
important industries to our nation and our world. The challenges are 
large, but I am confident that through a systems approach coupled with 
integrated, multidisciplinary teams, we can begin to solve these 
problems in a cost-effective manner that will maintain the public's 
confidence in the safety of our food supply. I look forward to working 
with the USDA, the academic community, and the industry to achieve 
these goals.
    I would be happy to respond to any questions that the Members might 
have.

    The Chairman. Thank you very much, Mr. McMurray.
    Mr. Farris, welcome to the Committee and I think we have 
the microphone working now.

    STATEMENT OF ROBERT FARRIS, DIRECTOR, GEORGIA FORESTRY 
                   COMMISSION, DRY BRANCH, GA

    Mr. Farris.  Thank you and good afternoon. I will go for 
the one that is working here, and now if I can just figure out 
where the reset button is on this little box here.
    Good afternoon. I am Robert Farris, Georgia's State 
Forester. Mr. Chairman, and Members of the Committee, thank you 
for the opportunity to review agricultural policy as you 
prepare for the 2012 Farm Bill.
    Georgia has over 24 million acres of forestland, more 
privately-owned, commercially available forests than any other 
state. In addition to the many environmental and social 
benefits, forestry has a $28 billion impact on our state's 
economy and provides over 128,000 jobs here in Georgia. You 
will find similar statistics throughout the South.
    I say all this to emphasize that our forestlands are a 
strategic national resource. The actions of the Committee on 
the 2012 Farm Bill are of critical importance to Georgia, the 
South and indeed the nation. Allow me to review what we see as 
growing challenges and opportunities to manage Georgia's forest 
resources.
    The 2008 Farm Bill required that state forestry agencies 
prepare comprehensive assessments and strategic plans as a 
condition of receiving Federal funds through the Cooperative 
Forestry Assistance Act. As states engage with many partners to 
implement these plans, numerous factors require consideration 
which may also influence development of the 2012 Farm Bill:
    Numerous strategies require long-term participation and 
expanded investment of cooperative forestry assistance and 
conservation title programs, including forestry measures 
contained in EQIP and Conservation Stewardship Program.
    Flexibility is needed in the program funding process for 
cooperative forestry assistance. Emphasis should be placed on 
provisions that assure dependable levels of funding for Federal 
programs, as well as initiatives identified through the state 
assessments. Expanded flexibility is strongly encouraged for 
state-specific priorities.
    As state assessments are completed, more will be understood 
about the opportunities for climate mitigation and adaptation. 
Certain conservation title programs may need enhancement to 
better address forest adaptation. The Healthy Forest Reserve 
Program may be re-examined to address both climate mitigation 
and adaptation.
    As metrics for carbon storage become more reliable, 
specific incentive payment programs may be appropriate.
    Significantly expanding tree planting should be an 
important consideration in the farm bill.
    Ongoing water wars between Georgia, Alabama and Florida 
clearly demonstrate that water quantity and quality are of 
ever-growing concern. Two out of every three rain drops that 
fall in Georgia land on our forests, which filter the water and 
enhance absorption into our streams. Retaining and properly 
managing our working forests plays a critical role in the 
protection of our water resources.
    The 2012 Farm Bill may provide opportunities to better 
recognize and support the role of our extremely effective 
Forest Water Quality Best Management Practices. We have 
concerns about recent U.S. Corps of Engineers rulings, and we 
also have concerns about recent Congressional proposals to 
change the Clean Water Act and the potential adverse impacts 
that that may have on silvicultural exemptions.
    The 2008 Farm Bill's definition for renewable biomass 
assures reliable and sustainable supplies to manage woody 
biomass as a component of the national renewable energy policy. 
Healthy and dependable forest product markets are absolutely 
essential for encouraging land owner investment in 
reforestation and keeping their working forests working. 
Measures to advance sustainable production of woody biomass are 
appropriate for the 2012 Farm Bill.
    Additionally, the U.S. Forest Service FIA program is 
critical for understanding the current and potential future 
condition of forest resources as they relate to climate, 
renewable energy, landscape level conservation and forest 
health. Potential 2012 Farm Bill considerations may include 
expanded FIA services including remote sensing capabilities to 
support facility level supply and demand and impact 
assessments.
    Some forestry-related programs and authorities established 
in the 2008 Farm Bill remain uncertain, or have not been fully 
implemented. To date, no progress has been made to implement 
provisions of the Emergency Forest Restoration Program, the 
Forest Resource Coordination Committee has not yet been 
established.
    BCAP experienced difficulties as implemented under NOFA. 
It's our view that BCAP can generate increased investment and 
commitment to sustainable forest resource management.
    On behalf of the Georgia Forestry Commission, I thank the 
Committee for your recognition of the strategic importance of 
our nation's forests.
    Thank you.
    [The prepared statement of Mr. Farris follows:]

    Prepared Statement of Robert Farris, Director, Georgia Forestry 
                       Commission, Dry Branch, GA
    Good morning and welcome to Georgia. I am Robert Farris, the State 
Forester for Georgia. Mr. Chairman and Members of the Committee, thank 
you for the opportunity to appear here today to review U.S. Agriculture 
policy as you prepare for the 2012 Farm Bill.
    Georgia has over 24 million acres of forestland, of which 92 
percent is privately owned. Georgia has more privately-owned, 
commercially available forestland than any other state in the nation. 
By any measures you care to use, forestry is important to Georgia. In 
addition to its many environmental and social benefits, forestry has a 
$28 billion economic impact on our state and provides more than 128,000 
jobs for Georgia citizens. You will find similar statistics throughout 
the southern U.S., which is well-known as the ``wood basket of the 
world.''
    I say all of this to emphasize that our forestlands are a strategic 
national resource, and the actions this Committee takes on the 2012 
Farm Bill are of critical importance to Georgia, the South and our 
entire nation. I would like to take this opportunity to review what we 
see as growing challenges and opportunities to manage Georgia's 
forestry resource.
State Assessments and Strategies
    The Forestry Title of the 2008 Farm Bill requires that state 
forestry agencies prepare comprehensive assessments and strategic plans 
as a condition of receiving Federal funds pursuant to the Cooperative 
Forestry Assistance Act. These plans must be completed and submitted to 
the U.S. Forest Service by June 18, 2010. These evaluations have been a 
significant undertaking, involving considerable collaboration with 
resource management agencies, organizations, and the public at large. 
The process has produced important findings and guidance about major 
issues, priorities and strategic guidance for state and Federal 
programs, including regional and national perspectives on forest 
policy. During the next 5 years, as states engage with the Forest 
Service and other partners to implement these plans, many factors will 
require consideration which may also influence development of 2012 Farm 
Bill:

   Numerous strategies will require significant long-term 
        participation and expanded investment of Cooperative Forestry 
        Assistance and Conservation Title programs, including forestry 
        measures contained in the Environmental Quality Incentives 
        Program and Conservation Stewardship Program.

   State plans have helped identify landscape-level initiatives 
        that will require interagency cooperation and multi-program 
        coordination to achieve objectives; depending upon the scope 
        and scale of these projects, the 2012 Farm Bill may facilitate 
        organization and implementation of these types of projects, 
        particularly in cases of multi-state initiatives.

   The current set of Cooperative Forestry Assistance Programs 
        may not be the best configuration of Federal services and 
        policies to efficiently assist states in meeting the challenges 
        identified in the planning process; the 2012 Farm Bill may 
        present opportunities to restructure those programs 
        accordingly.
Budget and Appropriation Processes
    The State Assessment and Strategies process, as well as funding 
challenges experienced by most states, have generated discussion about 
potential improved efficiencies in budget development, appropriations 
and grants administration. More flexibility is likely needed in the 
program funding allocation process for Cooperative Forestry Assistance. 
Emphasis should be placed on provisions that assure dependable levels 
of funding for Federal programs as well as additional opportunities to 
participate in regional and national initiatives which may be 
identified through the State Assessment and Strategies process. 
Moreover, expanded flexibility is encouraged for state-specific 
priorities. Reallocating a portion of funding among Cooperative 
Forestry Assistance programs may more effectively address high priority 
forest resource issues. Such alternatives will require careful 
discussion among the U.S. Forest Service, National Association of State 
Foresters, and House and Senate Agriculture and Appropriation 
Committees. The 2012 Farm Bill may present opportunities to 
institutionalize some of these concepts.
Climate Mitigation and Adaptation
    Congressional legislation to develop policies for the management of 
greenhouse gas emissions remains undefined. However, efforts continue 
to be made to quantify carbon sequestration and resolve climate change 
issues. The 2008 Farm Bill set an important stage for potential program 
development through the current USDA Office of Environmental Markets. 
As State Assessments and Strategies are completed, more will be known 
and understood about opportunities, but several concepts may generate 
additional attention in the 2012 Farm Bill:

   Certain Conservation Title Programs may need enhancement to 
        better address forest adaptation strategies.

   As metrics for carbon storage become more reliable and 
        accountable, specific payment programs may be appropriate in 
        which landowner options to participate in marketplace 
        activities are limited or not preferred.

   Debates about carbon mitigation policies notwithstanding, 
        there is consistent agreement that afforestation and 
        reforestation produce carbon sequestration benefits. 
        Accordingly, initiatives to significantly expand tree planting 
        may be an important consideration in the 2012 Farm Bill.

   A re-examination and revision of the Healthy Forest Reserve 
        Program to address both climate mitigation and adaptation may 
        be suggested.
Water and our Forestlands
    Water issues have often been considered a concern of the western 
United States. However, the recent escalation of the ``Water Wars'' 
between Georgia, Alabama and Florida along with Federal court opinions 
clearly demonstrates that water quantity and quality are of ever-
growing concern here in the South. Two out of every three drops of rain 
that fall in Georgia land on our forests, which filter the water and 
enhance water intake to our streams. The maintenance and proper 
management of our working forests play a large and critical role in the 
quality and quantity of our water.
    The 2012 Farm Bill may provide opportunities to better recognize 
and support the role of our extremely effective Forest Water Quality 
Best Management Practices (BMPs). The recently completed Georgia 
Statewide Water Management Plan recognizes our BMPs as a model program 
that other land use practitioners should emulate. We have concerns 
about recent U.S. Corps of Engineers rulings and Congressional 
proposals to change the Clean Water Act and the potential adverse 
effects on silvicultural exemptions.
Renewable Energy and Woody Biomass
    Debates and discussions continue regarding the best combination of 
Federal and state programs to manage woody biomass as a component of 
national renewable energy policy and a significant contributor to 
achieving energy independence. The 2008 Farm Bill's definition for 
renewable biomass assures reliable and sustainable supplies for meeting 
such objectives. Healthy and dependable forest product markets are 
essential for encouraging landowner investment in the establishment and 
expansion of forest cover, which is otherwise at risk in many areas 
throughout the South. With continued improvements in technology for the 
cost-effective utilization of woody biomass for thermal energy, 
generation of electricity and cellulosic-based fuels, it is more likely 
that forest resources and their associated multiple benefits will be 
enhanced. Our view is that one of best ways to conserve our forests and 
the many economic, environmental and social benefits they provide is to 
ensure that it remains economically viable for private forest 
landowners to keep their working forests working. The most effective 
and efficient way to accomplish this is to ensure that traditional 
forest markets are maintained and emerging markets are developed by 
creating forest policies and incentives that promote forest 
utilization, timber production and wood product research and 
development. The role of the 2012 Farm Bill in this regard is not 
certain, but measures to reaffirm and advance sustainable production of 
woody biomass would seem appropriate. The cooperative efforts between 
Federal and state forestry agencies to implement the Forest Inventory 
Analysis Program and the Forest Stewardship Program are excellent 
examples of measures that reaffirm and advance forest sustainability.
Forest Inventory and Analysis
    The Forest Inventory and Analysis Program (FIA) of the U.S. Forest 
Service is a fundamental database for understanding the current and 
potential future condition of forest resources. The analytical and 
reporting services of FIA are routinely relied upon at multiple levels 
of forest resource assessment. With expanding attention to issues 
associated with climate, renewable energy, landscape level conservation 
and forest health, FIA will increasingly be expected to provide 
meaningful support to state forestry agencies and other forest resource 
managers. Potential 2012 Farm Bill considerations may include the 
following:

   Develop expanded and robust inventory and analysis services 
        including remote sensing capabilities at statistical scales of 
        resolution to support facility level supply/demand and impact 
        assessments.

   Achieve inventory and analysis capabilities to assess 
        ecosystem services, particularly carbon sequestration.

   Develop analytical measures to assist in understanding 
        climate adaptation potential.
Status of 2008 Farm Bill Authorizations
    The status of some forestry-related programs and authorities 
established in the 2008 Farm Bill remains uncertain or has not been 
fully implemented. The Emergency Forest Restoration Program (EFRP) is 
intended to provide direct services and recovery capabilities for 
forestlands impacted by natural disasters. To date, no progress to 
implement provisions of that program has been made. However, we 
understand that following the recent tornado events in Mississippi, 
USDA expressed intentions to expedite administrative procedures 
necessary to implement EFRP. In any event, it would be unfortunate to 
experience future losses, such as potential damages from the upcoming 
2010 hurricane season.
    The Biomass Crop Assistance Program (BCAP) has experienced 
difficulties as it was preliminarily implemented under a Notice of 
Funding Availability. Forestry agencies including the National 
Association of State Foresters have filed extensive comments on the 
proposed rules, which we trust will resolve some of the problems and 
inefficiencies initially encountered. We understand as well that issues 
remain regarding disparities in authorized funding levels and expected 
program needs. In any event, it is our view that BCAP can generate 
increased investment and commitment to sustainable forest resource 
management through the requisite forest stewardship plans and technical 
assistance provisions of that program.
    As part of the Forestry Title, the Forest Resource Coordination 
Committee (FRCC) was established to coordinate nonindustrial private 
forestry activities within USDA. Among its duties is the significant 
task of providing advice on allocation of funds, including those 
subject to competitive application. Thus far, the Committee has not 
been established and discussions about the findings and implications of 
the State Assessment and Strategies process may take place without the 
benefit of FRCC participation. Efforts by the House Agriculture 
Committee to encourage prompt establishment of the Committee would be 
appreciated.
    We are very grateful for the tremendous work you are doing for 
American citizens. On behalf of the Georgia Forest Commission, thank 
you for your recognition of the strategic importance of our nation's 
forests. We appreciate your track record of working hard to do the 
right things to maintain our working forests, for taking time to hear 
from people across the country, appropriately addressing our challenges 
and for enabling legislation that capitalizes on emerging 
opportunities. The ongoing partnership between state and Federal 
agencies, non-government organizations and private industry are 
critical to the successful conservation and utilization of our nation's 
forests.
    Thank you for your time and commitment. I would be happy to address 
any questions.

    The Chairman. Thank you very much, Mr. Farris and thank all 
of the panelists for their fine testimony and being with us 
today.
    Now, we are going to have some questions and my question is 
how are we doing with microphones up here that work? Has 
everybody got one that works so we can pass it around, before 
we get going here? How are we doing? That one doesn't work 
apparently, Dr. Angle; how about that one? I do not know if the 
cord is long enough there.
    All right, well, we will do the best we can here.
    I want to recognize the Chairman of the Livestock 
Subcommittee Mr. Scott, our host here, for the first questions.
    Mr. Scott. Thank you very much.
    First, Dr. Latimore, may I ask you the first question? In 
the 2008 Farm Bill, thanks to Chairman Peterson and several of 
us on the conference committee, we made quite a few significant 
changes to research funding programs, opening a whole new world 
of potential funding sources for 1890 land-grant universities. 
Can you please tell the Committee whether Fort Valley State 
University has been able to access any of those funds yet? And 
if so, what have you been using it for? If not, what has 
prevented you from doing so? And is the story the same for 
other 1890 institutions? And finally, what recommendations for 
further changes would you have for our Committee, as we begin 
the process of reauthorizing these programs for 2012, where we 
can improve your 1890 institutions for getting this funding?
    Dr. Latimore. As noted, there were changes in the 2008 Farm 
Bill. As far as Fort Valley State is concerned, we have not 
enjoyed a lot of the opportunities that were there. And 
frankly, my sister universities are in the same situation.
    The 1890 Capacity Building Grant opportunity, that 
continued to be a success for us.
    Mr. Scott. Would you repeat that success again?
    Dr. Latimore. The 1890 Capacity Building Program. That has 
been a success for us and enhanced our research, our extension 
and definitely our teaching--well, actually our research, 
teaching and now extension opportunities.
    But the move in a lot of the programs, let us say, toward a 
lot of the more competitive programs, competitive 
opportunities, we have scientists at Fort Valley State who are 
engaging those now. The recent proposals that are there, we 
have scientists that are participating in those as well. But we 
are still having challenges really accessing these 
opportunities as a whole.
    I mentioned the 1890 Capacity Building, the facility 
funding. The facility funding has been a plus for us. We have 
been able to utilize that really to enhance our infrastructure. 
For an example, we were able to engage in the development of 
the programming stage for a family development/child 
development center as a result of the facility funding.
    Mr. Scott. Could you tell us in the 1890--in just your 
institution, how much funding have you been able to get through 
the farm bill, the 2008 Farm Bill?
    Dr. Latimore. I really cannot answer that now.
    Mr. Scott. If you could just tell us what recommendations--
did you say that this would be true for all the 1890s--Albany 
State, Savannah State, I think they are all 1890s here--what I 
am trying to get at is we were trying to put that in--whether 
you have been receiving the funds, what the difficulty has been 
where you have not been receiving them, and what 
recommendations you would make to us where we can improve your 
ability to access this money, to help the schools.
    Dr. Latimore. From what we have seen, other than what I 
mentioned, we have challenges, we have challenges seeking those 
funds. What we would like is an opportunity in place right now, 
for example, to visit with the 1890 team so that we can come 
together and put a recommendation together and present those 
recommendations to you.
    Mr. Scott. Okay, fine; thank you very much, I appreciate 
you doing that.
    Dr. Angle, I have had the pleasure of representing your 
fine university's food safety center down in Experiment Station 
down in Griffin, that is part of my district and we had an 
opportunity to tour that program. What challenges remain for 
you in terms of getting us in Congress to improve the program 
for you? Are you accessing the funding? Where can we do better 
for you to help you get more funding down to your institution?
    Dr. Angle. Well, we have done relatively well. On the 
competitive side, the University of Georgia ranks number three 
nationally for land-grant universities only behind the 
University of California-Davis and much to my dismay University 
of Florida.
    [Laughter.]
    Dr. Angle. So we feel reasonably good about our ability to 
compete at the competitive level. I would go back to what Dr. 
Latimore was talking about and I also have mentioned, the 
infrastructure. Unfortunately the State of Georgia is 
significantly reducing its support for land-grant universities, 
as we see happening around so many other states in the country 
right now. So we are being hit from both sides with state and 
potentially Federal reductions impending, as the severity of 
the deficit becomes more obvious over the next couple of years.
    For us in particular, we continue to have some problems 
with infrastructure just like the Fort Valley State University. 
There is no 1862 infrastructure included in the program any 
more, and with state reductions on that side, we are very much 
at a crossroads in our ability to maintain our world-class 
infrastructure going into the future.
    Mr. Scott. Thank you very much.
    Mr. Bishop. Would the gentleman yield?
    Mr. Scott. I would be pleased to yield to my colleague from 
south Georgia.
    Mr. Bishop. I would just like to ask Dr. Latimore and Dr. 
Angle if it would be helpful if we were able, in the farm bill, 
to develop more opportunities for the 1890s and the 1862s to 
work together cooperatively on research. Would that facilitate 
better than having what has traditionally been two systems, if 
we are able to make them work more closely together with the 
1890s and 1862s, so that they can collaborate with the research 
opportunities and therefore share those resources? Do you think 
that that would be helpful?
    Dr. Latimore. Yes, that would be helpful. But keep in mind 
also that not at the level that we are addressing now. We have 
scientists in 1890s and 1862s that are presently collaborating 
on projects and basically it's a relationship there. These are 
scientists that have gone to school, or have interacted over 
the past, and an opportunity presented itself so we have some 
of those opportunities. But it needs to be done at a higher 
level, it needs to be done more than where we are now such that 
like in Georgia, both Fort Valley State University as well as 
the University of Georgia, could share in a lot of 
opportunities.
    Also keep in mind that we have to submit an annual plan and 
that annual plan includes both Fort Valley State as well as the 
University of Georgia. So through that and through the 
opportunities to enhance the collaboration, we see an 
opportunity there where we really can enhance the contact with 
the clients which we need to be serving.
    But to answer your question, yes.
    Mr. Bishop. Thank you.
    The Chairman. Dr. Angle.
    Dr. Angle. Dr. Latimore and I have known each other for a 
long time, we actually shared a lab together many years ago. So 
we have been having these conversations repeatedly over the 
last couple of years. We do have joint planning and joint 
reporting, as I say, which makes sure that no one is--no one or 
no program is falling between the cracks and that has been 
relatively successful. Yet there are various things--more 
integration is possible and certainly needed. And not just 
limited to research, I would include teaching and particularly 
extension in that area where there are some great opportunities 
for us to better integrate our program within the State of 
Georgia, as well as many other states around the country.
    Mr. Bishop. Thank you.
    Mr. Scott. I thank the Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Dr. Angle, I noted with interest your discussion of one of 
the popular topics in Washington these days, earmarks, which 
have been fraught with, shall we say, adverse publicity, given 
the scandals that have tainted a number of Members of Congress, 
including former Members of Congress who are in prison as a 
result of misuse of earmarks.
    We are in the process, on our side of the aisle anyway, to 
try to reform this process. We have proposed a 1 year 
moratorium, we are engaged in trying to encourage the Majority 
to join us in this kind of reform. I know that you talked about 
peer reviewing the requests and so on. Hopefully we will find a 
way to continue to have Congressional Constitutional 
responsibility for appropriations reflected, including 
individual member input into that.
    But the bigger problem we have is the other problem that 
you cited in your comments, and that is that you are being 
squeezed on both the state and the Federal level in terms of 
the funding that is available to you. The state funding will 
probably ebb and flow based on the state challenges in 
balancing their budget each year. The Federal Government does 
not have that challenge, so we face an even greater challenge, 
and that is that there is going to be a dramatic decline in the 
amount of money that is available at the Federal level for 
almost anything that you can think of, not just in the 
agriculture sector.
    I am wondering what you can tell me is being done at your 
institution to--and I will ask Dr. Latimore this as well--to 
achieve greater efficiencies, greater outcomes and alternative 
sources of funding for the kind of important research that you 
do.
    Dr. Angle. At the state level, in our case at the 
University of Georgia, we have had a 22 percent reduction in 
state level funding, which began as $100 million just 2 years 
ago. So it has been a loss of state support since that time. We 
have had to make some very hard decisions, we have lost about 
18 percent of our total employment of both faculty and staff. 
We will shortly be making some very hard decisions about 
closing, permanently closing extension offices. Right now we 
may have one of the top extension and 4-H programs in the 
country. We will have to close--and we have an office in all 
159--we have offices in 158 counties of 159 in the State of 
Georgia. Some of them will be permanently closed, several of 
our research farms will be permanently closed as well.
    Trying to deal with this, we are working with the local 
governments much more carefully and closely than we have in the 
past. In fact, for our local extension offices, we now require 
that they come up with and provide \1/3\ of the funding for 
that office. And I think that is fairly unprecedented around 
the United States.
    We are working closely with private donors to fill in the 
gaps, so they can do that. In fact, we just had a large gift 
last year of $1.4 million from an individual to create the 
first privately funding 4-H--an endowment for the first 
privately funded 4-H agent in the country. So we are moving 
very aggressively into that side of the funding equation. But 
there is no doubt there are some difficult times ahead and very 
difficult choices. We understand both the Federal and state 
governments have funding problems, and as part of state 
government and Federal Government, we have to do our part to 
downsize and what we are calling right size, to make sure that 
we can provide the most important services to the citizens of 
Georgia. But unfortunately, some of those services that may not 
rank near the top, but in my opinion are still important, may 
not be offered in the future.
    Mr. Goodlatte. Thank you. Dr. Latimore.
    Dr. Latimore. When you look at our funding, our funding is 
primarily Federal. We are at the stage where we, as far as the 
state is concerned, this is for research and extension, we have 
a state match, maybe close to one-to-one match and it has been 
a challenge for us. In order to grow our state contribution, 
then we definitely need to grow the Federal contribution.
    In addition, the dollars that we receive from the Federal 
Government for research and extension, as I say, is primarily 
targeted to our teaching component, we engage our scientists in 
proposal writing. We have been very successful over the years 
in getting grants funded through our station, actually through 
research, teaching and extension. Through the teaching area, we 
receive anywhere from $3 to $4 million for scholarships and 
research intern opportunities for students from the National 
Science Foundation. We have just been accepted and receiving 
funds and collaborating with the Department of Education in the 
State of Georgia by utilizing our technology unit, as I 
mentioned earlier, to provide training throughout the state, 
training to migrant workers, training related to Medicare, in 
addition to training targeted at youth.
    So we are collaborating with agencies as well as industry. 
We have industry partners where we are looking at small 
projects, and they are opportunities for us to grow into even 
larger projects. So we have those opportunities available for 
us and we still have challenges with state budget cuts, and we 
are still trying to make those adjustments.
    Mr. Goodlatte. Thank you, Mr. Chairman. My time has 
expired.
    The Chairman. I thank the gentleman.
    Dr. Angle, you had mentioned the formula funds. They are 
based on rural population and farm numbers, right?
    Dr. Angle. Yes, sir, primarily farm numbers.
    The Chairman. Now as I understand it, is this the 
definition that is currently being used in most of USDA, which 
is that if you could sell $1,000 of farm products, you are 
considered a farmer. You do not have to sell it, you just have 
the ability to sell. So if you have a horse and you could have 
sold the horse, you are going to be a farmer. So is that the 
definition that is being used for those formula funds?
    Dr. Angle. That certainly is an area of debate and that 
is--you are correct in my understanding of it.
    The Chairman. You know, I have been harping on this, but I 
just think this is crazy, this definition that we are using. 
And I do not know what the resistance to changing this is. 
Maybe it is the universities, you know.
    But the other day we had USDA talking about that the 
farmers get 89 percent of their income from off the farm, you 
know. But they are using these statistics of the 2.2 million 
farmers, 1.9 million of them are probably not really farmers. 
They are lifestyle farmers, they are retired, whatever. You 
know, we have about 350,000, what I would consider, commercial 
full time farmers.
    Does it make sense to base these formulas on that type of a 
system? Would we not get a really skewed result in terms of--
you know we have to ramp up this production. I agree with you, 
we have to do better on research because we are going to have a 
lot of people to feed. But if we are using skewed statistics, 
we are not going to get there, I do not think. Is this a 
discussion within the university community at all?
    Dr. Angle. Well, it certainly is and it is primarily a 
discussion, not based upon politics, but rather between the 
East and the West and the North and South part of the country 
where farm sizes tend to be different and quite diverse. It is 
true in Georgia at least we have a number of medium size farms. 
We do not have a lot of small farms and we do not have a lot of 
large farms. So we are probably more what most people think of 
as the typical agricultural state. But there are plenty of 
other states where I think what you were describing was exactly 
true.
    I should say in Georgia, the fastest growing segment of our 
farm population are those mid-size farms. The people who do 
make a living off of their farm, generally the husband or wife 
works full time on the farm and the other spouse works off the 
farm. We are not seeing a lot of large growth in either the 
very, very large farms or the very, what you were referring to 
as hobby farms.
    The Chairman. Well, I mean I proposed using a $20,000 
number. Clearly those middle size farms would exceed that.
    Dr. Angle. Yes, sir.
    The Chairman. You know. It just seems to me if you have 
less than $20,000 in sales, it is not much--you know, it is not 
supporting the family. So I just think we have to look at this 
definition because it is skewing things in a lot of different 
areas. I do not know how much resistance I am going to get from 
the land-grant colleges if I try to do that.
    Dr. Latimore, do you use these farm statistics too in terms 
of your funding? Do they use--is that part of the formula?
    Dr. Latimore. Yes, especially when we are submitting grants 
that is targeting the small farmer. As a matter of fact, that 
definition has been a definition that has been debated really 
ever since I have been----
    The Chairman. Do you think it makes sense if you could sell 
$1,000, you are considered a farmer, in this day and age? Maybe 
50 years ago, but, I do not mean to put you on the spot.
    [Laughter.]
    The Chairman. Well, you get my point.
    Mr. Farris, this BCAP situation. I was probably the main 
person in getting that thing put together, and I did not 
envision it being used in the way it is being used at all. My 
vision was that this was going to help us develop new crops 
that we currently are not growing that might have a potential. 
And at the end of the day, we had to accept this biomass 
definition which I thought potentially had problems, and then 
the USDA went ahead and authorized this without a rulemaking.
    In my part of the world, we had a whole bunch of money go 
out to what I would consider not what this was intended to 
support. I guess my question is, in Georgia here, have you had 
that same kind of situation where you had a lot of money going 
to a farm where this is already going on, which is what 
happened in Minnesota and a lot of other places.
    Mr. Farris. I believe we kind of got off in the ditch right 
out of the gate with the program trying to roll it out rapidly.
    The Chairman. Yes. So you agree that we went off in the 
wrong direction?
    Mr. Farris. Yes, sir, I think we got off in the ditch 
quick. And we need to get it out of the ditch. We do believe 
there are great opportunities to promote----
    The Chairman. Yes, I support it, but this is about 
developing a long-term sustainable renewable energy resource. 
It is not about subsidizing something that is currently 
happening.
    Mr. Farris. Yes, sir.
    The Chairman. That is the problem I had with it.
    Mr. Farris. Yes, sir.
    The Chairman. And I think there were some lobbyists that 
worded this in such a way and so forth. As I understand it, the 
new rule is getting this under control.
    Mr. Farris. Yes, sir, the state forestry agencies have 
submitted numerous comments on the new rule.
    The Chairman. Okay. But there were some problems here in 
Georgia with this as well, like we had in Minnesota?
    Mr. Farris. Yes, sir. And I would like to thank the 
Chairman strongly for the position on the broad renewable 
biomass definition. That is tremendous related to forestry here 
in Georgia. Under the renewable fuel standards definition, only 
7 million acres of Georgia forestland qualifies or is 
classified as renewable biomass. With the renewable biomass 
definition that you promoted, 23 million acres of our 24 are 
classified as renewable biomass.
    The Chairman. I appreciate that, but I do not deserve the 
full credit. These three gentlemen and others from this part of 
the world deserve some of the credit too because they worked 
hard on it.
    Mr. Farris. Thank you, Mr. Chairman.
    The Chairman. Thank you all very much.
    The gentleman from Alabama, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    First of all, Dr. Angle, I wholeheartedly agree with your 
comments about earmarks. I have two land-grant institutions in 
my district, Tuskegee and Auburn, who do very important food 
safety research and but for earmarking, it would be difficult 
to get a lot of those monies there. So I appreciate you drawing 
attention to that in your opening remarks.
    You did say something that puzzled me in your opening 
remarks when you talked about changes in temperature and 
sunlight in the Northeast was going to cause decrease in their 
food production. What time line are you looking at? That is the 
first I have heard of that.
    Dr. Angle. No, I am sorry, perhaps I did not explain that 
properly. Sunlight and temperature are limited as you go 
further north in the country and so light and temperature 
become limiting in the ability to grow more food. I was not 
suggesting changes, climate changes.
    Mr. Rogers. Okay, thanks.
    Dr. Angle. That is already maxed out in many areas of the 
country.
    Mr. Rogers. Great.
    Mr. Farris, I want to talk to you about conservation 
programs right now. Are they sufficient, given current timber 
prices to be able to allow the small landowners to have proper 
timber management on their land?
    Mr. Farris. No, sir, they are not with current stumpage 
prices. Forestry is a long term investment, typically running 
30+ years on planting and establishing. And one of the real 
concerns we have looking down the road is we have a wall of 
wood working its way through the system right now with some 
tremendous growth, exceeding harvest. But what we are not 
seeing is reforestation. Reforestation rates have been dropping 
drastically throughout the South.
    Mr. Rogers. To what do you attribute that?
    Mr. Farris. It's directly related to market prices. So one 
of the things that we feel is critical to do is to develop 
strong markets, retaining our traditional market, as well as 
taking advantage and promoting emerging opportunities such as 
the bioenergy markets.
    Mr. Rogers. And that is where I was leading. One of the 
things that caught my attention was Dr. Angle's remark, talking 
about the increased demand on the Southeast for not only food 
but fiber. And, we do hear a lot about the potential for 
cellulosic technology for ethanol. And I get a lot of cross 
current critiques about where that is going and the pressures 
it could put on other customers who usually are depending on 
that basket right now.
    How would you like to see that develop, the policy that 
this Committee would implement, as far as promoting cellulosic 
technology, and what it might mean for the current consumers of 
your products?
    Mr. Farris. I think it is very important to maintain a 
level playing field so that we do support traditional markets 
as newer markets are emerging. And that is a lot easier said 
than done.
    Mr. Rogers. That is why I was hoping you would tell me how 
to do it.
    Mr. Farris. That is one of the real challenges, but the 
fact is in Georgia and across the South, we have the woody 
biomass, the feedstock to develop these markets and expand 
traditional markets.
    Mr. Rogers. Do you think it could be done without hindering 
current consumers of that product, natural resource?
    Mr. Farris. Yes, sir. Certainly here in Georgia, we have 
growth exceeding harvest to the level that we could outfit or 
supply feedstock for close to 20 new businesses, large 
industries taking half a million tons.
    Mr. Rogers. That is the concern. I get a lot of feedback 
from paper companies. Obviously they are concerned about 
promotion of cellulosic technology putting some real pressures, 
price pressures, on them. So I would be interested if anybody 
else had any thought on what they would like to see happen with 
that.
    Dr. Angle. I follow this technology pretty closely and 
there remains some very significant technology hurdles before 
cellulosic ethanol production will become widespread. There are 
some breakthroughs that are needed. We do not know what those 
breakthroughs are yet. We do not know what we do not know at 
this point.
    So while we think that this has tremendous opportunity, 
Georgia likes to call itself the Saudi Arabia of bioenergy, 
there is that needed breakthrough that is not on the immediate 
horizon at least.
    Mr. Rogers. Okay. And let me ask, while I have you, Dr. 
Angle, what do you want this Committee to do to continue to 
improve and grow agricultural research already happening in the 
U.S.? You talked a little bit about funding sources. What would 
be the one thing that you would want us to take away from this 
hearing that we could do to improve that research funding?
    Dr. Angle. We would like to see agricultural research 
treated in the same way that we think every other important 
area of research in the country is, whether it is human health, 
environmental research. Agricultural research, in our opinion, 
ranks right up there with those two and many others. In some 
ways, it lacks the respect of many other research communities, 
and I think by allowing USDA AFRI to grow, we feel like we are 
moving in the right direction.
    Mr. Rogers. Thank you very much. I yield back.
    Mr. Scott [presiding.] The gentleman from Georgia Mr. 
Marshall.
    Mr. Marshall. Thank you, Mr. Chairman. Thank you all for 
being here and my questioning is along the same lines as Mr. 
Rogers.
    We did go back and forth on the definition of renewable 
woody biomass and part of the concern was that if you define it 
one way, it is going to have X effect on the face of Georgia, 
if you define it another way, it is going to have X effect on 
the face of Georgia because the the economic forces that are 
out there are so large. And what we came up with seems to me to 
be fairly reasonable and then we can expand it from there. But 
instead of seeing too little, just opening the state up totally 
seemed too much. That caused a judgment by us that I feel like 
we are not really capable to doing in a very competent way.
    You mentioned that forestry, Mr. Farris, is a 30 year 
investment, and you suggested that what we need to do in the 
upcoming farm bill is figure out different ways that we can 
expand forestry in Georgia. I have a good friend right now who 
probably along with a whole bunch of other folks, but my good 
friend, with Federal help, is clearing 600 acres of land for 
pasture for beef. He is going to expand his beef cattle 
operation, not growing trees. But Federal help was involved in 
that instance in actually diminishing the amount of acres 
devoted to trees.
    Dean Angle in his opening remarks talked about food 
challenges that the world is likely to see as a result of a 
number of different phenomena, and suggested that the Southeast 
can sort of come to the rescue and provide a lot of food that 
the world needs. And I found this kind of interesting that Dean 
Angle, on the one hand, seems to be suggesting that what we 
ought to be doing in the next farm bill is focusing on 
protecting and expanding our ability to grow food here in the 
Southeast anticipating that that is where the market is going 
to be. And then at the other end, Mr. Farris is suggesting we 
need more trees, less acreage devoted to food.
    And so I am wondering, do y'all talk to one another?
    [Laughter.]
    Mr. Marshall. Is there anybody out there who is coming up 
with some sort of plan, here is the acreage available in 
Georgia that could be producing energy, producing wood, 
producing food? Given what is likely to happen over the next 
few decades, the Federal program should be prompting balance 
among those three things. Dean Angle.
    Dr. Angle. One thing I would say is that the balance 
happens at the farm level for the most part. Most farmers in 
this room today probably think about the balance between 
forests versus ag land on almost a daily basis and they make 
economic judgments. I see farms going in both directions right 
now for a variety of different reasons.
    I should say I think within the next couple of months, we 
will have more definitive information. Our Center for 
AgriBusiness at the University of Georgia is working on this 
very type of question now and trying to look at the balance, 
and trying to help you and some of our state leaders with 
better information on making these decisions.
    Mr. Marshall. Mr. Farris.
    Mr. Farris. If I can add as well, we are working on a 
statewide forest assessments strategy under your guidance and 
we will be presenting that to the Secretary this summer.
    But there are a couple of things. The greatest challenge to 
our forests in Georgia is not--there has always been a swap, a 
shift between forestry and agricultural practices, as Dean 
Angle mentioned, driven by markets. Our greatest threat to 
forests in Georgia and across the South is growth and urban 
sprawl, unbridled development and all the associated elements 
that come along with that. Here in Georgia, we lose 106 acres a 
day to impervious surfaces, rooftops and pavement.
    So one of our real challenges is not really whether it is 
in ag crops or forestry, but how do we enhance productivity on 
both of those.
    Mr. Marshall. I am delighted to hear, Dean Angle, that you 
have somebody working on a bigger vision here, it is not just 
food, it is not just roads and houses, it is not just energy 
and it is not just wood, but somebody trying to figure out, 
given what is likely to happen over the next few decades, how 
we ought to--well, what sort of programs we ought to be putting 
together that is going to foster the best mix of those four 
things.
    Dr. Angle. Right. And our study was prompted by an expected 
increase in both the forestry, as well as agricultural sectors 
contributing additional acreage to bioenergy. That was the 
driver that started all of this.
    Mr. Marshall. Thank you, Mr. Chairman.
    Mr. Scott. The gentleman from Nebraska, Mr. Smith.
    Mr. Smith. Thank you.
    Mr. Farris, I know in your remarks, you talked about, I 
think you called it recent Congressional proposals to change 
the Clean Water Act. If you might elaborate on what you were 
talking about. Perhaps might it be the effort to extend Federal 
control to almost all bodies of water or all amounts of water 
wherever they might be?
    Mr. Farris. Yes, sir, actually as far as the definition 
going from navigable waters to waters of the U.S. and what does 
that mean. Does it mean the mud puddle in the road or in the ag 
field out there? And our real concern is silvicultural 
exemptions that currently exist regarding 404 permitting.
    Mr. Smith. I am sorry, would you say that again?
    Mr. Farris. Our real concern is maintaining existing 
silvicultural exemptions related to Clean Water Act, 404 
permitting, requirements to go through the process to get a 
permit before you can do a forestry operation.
    Mr. Smith. Would anyone else wish to comment on that?
    [No response.]
    Mr. Smith. Obviously, my constituents in Nebraska are very 
concerned about the reach of the Federal Government as well 
into mud puddles, if you will.
    Thank you. I yield back.
    Mr. Scott. Mr. Bishop.
    Mr. Bishop. Yes, I will forego my questions of this panel. 
I think I talk with them pretty frequently, I am looking 
forward to the next panel.
    Mr. Scott. All right. The gentleman from Pennsylvania, Mr. 
Thompson.
    Mr. Thompson. Thank you.
    First of all, thanks to each of you gentlemen for your 
expertise and your leadership in your respective areas.
    Mr. McMurray, I have a question. In hearing your testimony 
and reading it, in terms of outcomes with investments, I was 
very pleased to hear about in the past 15 years, you have had 
ten licensed technologies or systems. I think that is 
wonderful. I am a supporter of those types of investments. I 
think when we invest in those, it is important to make sure 
that we are expecting outcomes back and commercialization is 
just a great outcome when you are not just developing the 
technology, so that we are not just perpetuating the same 
research study year after year after year, but we have a final 
outcome.
    I just question to what do you attribute your success, 
having at least ten of those technologies and systems 
commercialized in that period of time?
    Mr. McMurray. Well, first of all, thank you for recognizing 
the contribution. We feel that has been a very important 
contribution that we have made, and we are very proud of that. 
I think a lot of this comes from the collaboration between the 
University along with industry.
    One of the programs that we have that was funded through 
the state allowed us to put together a team of academic 
researchers along with industry which would be the end-user 
along with also the commercial company who is going to 
commercialize the technology for licensing. So you put the 
three of those into a single team working together, it 
significantly increases the odds that you are going to have a 
successful outcome for a commercial product. And that is one of 
the key ways we do this.
    But also, back up even further, back when we do the 
research, we are very focused on developing business plans with 
all of our research. We all understand that as academic 
researchers, we can sit around and write research proposals and 
dream up wonderful great problems to solve. Finding and 
identifying the ones which have economic benefit to the 
community--if we can start off by identifying that, then we are 
off to a good start from the very beginning. We have teams of 
people that we are able to bring together, the various hardware 
and software people along with business people, from a very 
early point in the development, to be able to guarantee that we 
have something that is going to be of value at the end.
    Mr. Thompson. Great. That sounds like a great model.
    Dr. Angle, in your testimony, you talked about the 
importance of increased production efficiency with the 
shrinking numbers--the loss of farms, of agricultural land all 
across this country and yet the continued growth of 
populations. The Secretary of Agriculture in Pennsylvania 
described it pretty cleverly I thought in a hearing recently. 
He talked about having 303 million stomachs in this country and 
seven to ten billion stomachs across the world, so the need for 
increased agricultural production efficiency.
    Are there specific programs and initiatives that you would 
recommend or would like to see either new or continued support 
in the expansion of agriculture efficiency of production?
    Dr. Angle. Well, that has been one of our concerns with the 
USDA funding over the last year, they have started some very 
specific issues primarily related to human health. While we are 
all very supportive of that, as you said, we recognize that we 
have to double food production on a worldwide basis and 
probably more than that within this country, and that is only 
going to happen through enhanced science and technology.
    We want to make sure that the USDA, through their 
approaches, are allowing our farmers to increase production on 
a per-acre basis, because you are correct, we are not making 
any more acres of land in this country. And so we are a little 
concerned as a system about some of the directions that they 
have taken. We support and applaud all the directions they have 
taken, though we do not want to forget that we need to enhance 
production on a per-acre basis.
    Again that does two things. That allows us to produce more 
food for humanitarian needs and for those issues, but it also 
allows farmers to increase their profit per farm to help keep 
them in business. Primary for a farmer not to sell their farm 
for urban development is to allow them to make a reasonable 
living for their family.
    Mr. Thompson. Thank you. Please.
    Dr. Latimore. In addition to that, when we think in terms 
of locally grown, locally produced, the approach was 
sustainable organics. The move that that has taken in this 
country is another step toward solving this problem. Throughout 
the years--and I have had some time in industry prior to my 
academic involvement, we pushed to increase production. We 
tried to increase production because we know the world 
population is increasing, but our land base is not. So we have 
to look at both perspectives here, increasing production as 
well as enhancing it, and also influencing individuals at the 
local level, even like the small farm. But that is an 
opportunity, that is a market that will add food and fiber to 
this system.
    Mr. Thompson. Great. I am out of time. Dr. Latimore, I 
would love to get more information, and maybe we could do that 
by correspondence, on a particular project you referenced in 
your testimony, the mobile technology laboratory, that 
specifically was looking at obesity. I think maybe it is a 
planned or a proposed project that was referenced in your 
testimony. But I look forward to talking more with you about 
that.
    The Chairman. [presiding.] I thank the gentleman and I want 
to thank this panel for your testimony and being with us today 
and answering our questions, we appreciate it.
    If the Members have additional questions, I think they can 
submit them to you and you would be willing to answer them in 
writing I assume.
    Thank you all very much, you are excused and we will call 
the second panel.
    Mr. Andy Bell, cotton, peanut, corn and cattle producer 
from Climax, Georgia; Vincent Duvall, cattle and poultry 
producer from Macon, Georgia; Mr. Ronnie Lee, cotton producer 
from Bronwood, Georgia; Mr. Richard Minor, fruit and vegetable 
producer from Andersonville, Georgia; Mr. Armond Morris, peanut 
producer from Ocilla, Georgia; Mr. Hilton Segler, pecan 
producer from Albany, Georgia; and Mr. Ricky Williams, dairy 
producer from Baxley, Georgia.
    I guess we are going to have to squeeze you guys in there. 
It might be good to hold those microphones up close when you 
are testifying, that seems to work the best way. So we welcome 
all of you to the Committee, we appreciate your making your 
time available to the Committee today. As soon as you all get 
settled, Mr. Bell, welcome to the Committee. Is there a 
microphone there? I think if you just take that end there and 
hold it up close, it will work the best.
    Your full testimony will be made part of the record, so 
feel free to summarize. I think it might work better is you 
hold it up, if that does not bother you too much. You have to 
hold it up close though.

  STATEMENT OF WILLIAM A. ``ANDY'' BELL III, COTTON, PEANUT, 
             CORN, AND CATTLE PRODUCER, CLIMAX, GA

    Mr. Bell. Good afternoon, Chairman Peterson, Members of the 
Committee. I am pleased to be here today and I appreciate the 
invitation to attend and speak to you.
    My name is Andy Bell, I am a fourth generation farmer from 
Decatur County, Georgia. I was raised on a family farm near 
Climax, Georgia. Today, I farm in partnership with my brother. 
We farm both irrigated and non-irrigated land on approximately 
2,000 acres. We have a diversified farming operation that 
includes corn, cotton, peanuts, hay, winter forages, and a beef 
cattle operation. We own land and we also rent land from 
neighbors.
    During my lifetime of farming, I have produced and sold 
many crops. I have sold corn for as high as $6.00 per bushel 
and as low as $1.70 per bushel. I have sold cotton for as high 
as $1.00 per pound and as low as 26 cents per pound. This type 
of price fluctuation can be seen in most all crops and 
livestock during the last 25 years.
    Southern agriculture is unique in that our cost of 
production is higher on certain crops. For example, peanuts and 
cotton have their own set of tillage and harvest equipment. 
This specialized equipment is very expensive to own and 
maintain. A six row peanut picker costs approximately $100,000 
and a six row cotton harvester over $300,000. These implements 
are crop specific and are only used for their designed purpose. 
Grain farmers are then required to have even another set of 
equipment. As you can see, our costs can quickly escalate as we 
produce these various crops.
    I believe several key provisions of the current farm bill 
must remain in place in any new legislation. Farmers need 
downside price protection against extreme low prices. The 
marketing loan program is a must for all program crops. All 
crop production on a farm should remain eligible for the 
marketing loan.
    In some years, a farmer may forward contract his expected 
production. Other times, farmers must place their crop in the 
marketing loan in hopes of waiting for a higher price.
    The Direct and Counter-Cyclical Program, has worked well 
and should remain in the new farm bill. The target price system 
has worked and gives some protection against low prices. The 
DCP program helps deliver this assistance. Market gains and 
loan deficiency payments also provide some relief against low 
prices and should remain in the new farm bill.
    Crop insurance is a must on many farms in the South. We can 
have extreme rainfall, drought, windstorms, hurricanes, or 
early or late freezes all in the same year. However, any crop 
insurance coverage above the 70 to 75 percent level is simply 
not affordable. Crop insurance needs to be improved and must 
remain affordable for it to be a useful tool in today's 
agriculture.
    Finally, some type of workable permanent disaster program 
is needed. The Supplemental Revenue Assistance Program, SURE, 
as it is known, does not work well for southern agriculture. 
Growing multiple crops and diversification on many farms makes 
it almost impossible to qualify for benefits.
    In conclusion, the current farm bill has worked reasonably 
well for southern agriculture. Any changes in the current farm 
bill should create new opportunities as well as preserving the 
proven target price system. Agriculture is the leading industry 
in Georgia and most of the South. We need sound agricultural 
policy to continue producing the best food and fiber in the 
world.
    Mr. Chairman, thank you for holding this hearing in 
Georgia, and thank you for allowing me to be a part of this 
discussion.
    [The prepared statement of Mr. Bell follows:]

  Prepared Statement of William A. ``Andy'' Bell III, Cotton, Peanut, 
                 Corn, and Cattle Producer, Climax, GA
    Good afternoon, Chairman Peterson, Ranking Member Lucas, and 
Members of the Committee. I am pleased to be here today, and I 
appreciate the invitation to attend and speak to you.
    My name is Andy Bell, and I am a fourth generation farmer from 
Decatur County, Georgia. I was raised on a family farm near Climax. 
Georgia. Today I farm in partnership with my brother. We farm both 
irrigated and non-irrigated land on approximately 2,000 acres. We have 
a diversified farming operation that includes corn, cotton, peanuts, 
hay, winter forages, and a beef cattle operation. We own land and we 
also rent land from neighbors.
    During my lifetime of farming, I have produced and sold many crops. 
I have sold corn for as high as $6.00/bushel and as low as $1.70/
bushel; cotton as high as $1.00/pound and as low as $0.26/pound. This 
type of price fluctuation can be seen in most all crops and livestock 
during the last 25 years.
    Southem agriculture is unique in that our cost of production is 
higher on certain crops. For example, peanuts and cotton have their own 
set of tillage and harvest equipment. This specialized equipment is 
very expensive to own and maintain. A six row peanut picker costs 
approximately $100,000 and a six row cotton harvester over $300,000. 
These implements are crop specific and are only used for there designed 
purpose. Grain farmers are then required to have even another set of 
equipment. As you can see, our costs can quickly escalate as we produce 
these various crops.
    I believe several key provisions of the current farm bill must 
remain in place in any new legislation. Farmers need downside price 
protection against extreme low prices. The marketing loan program is a 
must for all program crops. All crop production on a farm should remain 
eligible for the marketing loan.
    In some years, a farmer may forward contract his expected 
production. Other times, farmers may place their crop in the marketing 
loan program in hopes of waiting for a higher price.
    The direct and countercyclical program (DCP) has worked well and 
should remain in the new farm bill. The target price system has worked 
and gives some protection against low prices. The DCP program helps 
deliver this assistance. Market gains and loan deficiency payments also 
provide some relief against low prices and should remain in the new 
farm bill.
    Crop insurance is a must on many farms in the South. We can have 
extreme rainfall, drought, wind storms, hurricanes, or early or late 
freezes, all at in the same year! However, any crop insurance coverage 
above the 70-75 percent level is simply not affordable. Crop revenue 
coverage helps, but it is not available for all crops. Crop insurance 
needs to be improved and must remain affordable for it to be a useful 
tool in today's agriculture.
    Finally, some type of workable permanent disaster program is 
needed. The Supplemental Revenue Assistance Program (SURE) does not 
work for southern agriculture. Growing multiple crops and 
diversification on many farms makes it almost impossible to qualify for 
benefits.
    In conclusion, the current farm bill has worked reasonably well for 
southern agriculture. Any changes to the current farm bill should 
create new opportunities as well as preserving the proven target price 
system. Agriculture is the leading industry in Georgia and in most of 
the South. We need sound agricultural policy to continue producing the 
best food and fiber in the world.
    Mr. Chairman, thank you for holding this hearing in Georgia and for 
allowing me to be a part of the discussion.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
William A. Bell, III (Andy).

    The Chairman. Well, thank you very much, Mr. Bell. You get 
extra points for beating the time limit.
    [Laughter.]
    The Chairman. We are doing good here.
    Mr. Duvall, welcome to the Committee.

   STATEMENT OF VINCENT ``ZIPPY'' DUVALL, CATTLE AND POULTRY 
                      PRODUCER, MACON, GA

    Mr. Duvall. I think in the South with our drawl, we ought 
to have a longer time.
    [Laughter.]
    Mr. Duvall. Thank you, Mr. Chairman, for coming to our 
beautiful state here in Georgia. And every time I see you, you 
are working. I hope that you can enjoy your time here. And 
thank you to the rest of the Committee, especially Congressmen 
Jim Marshall and David Scott and also Congressman Bishop for 
representing us so well.
    I would like to introduce myself. I was listed as Vincent 
Duvall and that was what I was named, but everyone knows me as 
Zippy. I spent 30 years dairying on my family farm before I 
became Farm Bureau President. So I live in Greensboro, Georgia 
and I work in Macon as Farm Bureau President. I have been Farm 
Bureau President for 8 years.
    We sold our 300 cow dairy herd in 2005, they went to west 
Texas and I replaced them with 200 beef cows. And I have four 
broiler houses that we grow for an integrator here in the State 
of Georgia. We are very proud to still be in agriculture, and I 
think it is important for the Farm Bureau President to be still 
actively farming so I can go home and face the paycheck and the 
labor problems that we have there.
    I would tell you that Georgia Farm Bureau is the largest 
general farm organization in the state, and we strive to 
represent all Georgia farmers in whatever they produce. We have 
20 major commodity groups with farmers from all over the state 
represented, giving us advice on policy and how to implement 
them. In Georgia, agriculture creates one out of every seven 
jobs, agriculture and agribusiness. We have 159 counties in our 
state and \2/3\ of those counties still depend on agriculture 
as their economic engine.
    Agriculture is very diverse. We are number one in the 
nation in poultry production. We are the four big P's--poultry, 
peanuts, pine trees and pecans, pe-kahns, whatever you want to 
call them. We call them pecans at home. We are the number two 
state in cotton, with about a million acres in cotton, very 
proud of that. And many, many other crops that are important to 
the economic engine of this state.
    U.S. farm policy is important, and it should be market 
oriented for most production of quality products to meet the 
market demand, to ensure availability of U.S. produced farm 
products at competitive prices, and to provide a safety net for 
farmers with market and weather caused problems.
    The 2008 Farm Bill has worked very well in our state. 
Direct and countercyclical programs work well. Our farmers and 
lending institutions are very familiar with them and feel 
comfortable working within those programs.
    The Supplemental Revenue Assistance Program, SURE, presents 
some challenges here in our state. It is hard for our farmers 
here to qualify because we are very diverse. And you heard Mr. 
Bell over here, who has participated, explain that to you.
    The ACRE program, according to our FSA officials in 
Georgia, no one has entered into the ACRE program or signed up 
in the State of Georgia. There are many questions around it, we 
cannot find anybody that understands it, and it requires a 
commitment for the full term of the farm bill, which concerns a 
lot of us. Farmers in our state tend to stick with what they 
trust, understand and are used to.
    But on the other hand, conservation programs are very 
popular here. Conservation Reserve Program, CRP, is important 
to our family farms here in the State of Georgia. As our 
country moves toward a renewable energy, CRP will fit well with 
our farm families. The EQIP program, Environmental Quality 
Incentives Program, there are more people requesting those 
funds than there are funds. And it is very well thought of in 
our state and will be used.
    The drought is still on our mind even though we have had a 
wet last 10 months in Georgia. Water is plentiful in our state, 
but only if we manage it. We would like to see more cost-
sharing on farm ponds and reservoirs, so that we can continue 
to utilize and manage our water to water our crops and our 
livestock.
    Concentration, consolidation and anti-competitiveness is an 
issue with our inputs on our farms and also with what we sell. 
USDA should have more authority to investigate ag concentration 
regarding companies that buy farmers' products and companies 
that sell inputs to farms. USDA should work more closely with 
the Department of Justice. We do not oppose agricultural 
contracts, but farmers should have more power in negotiating 
with these companies.
    Biomass Crop Assistance Program, BCAP, very little BCAP 
money has been going to our landowners. I heard you explain, 
Mr. Chairman, what your intention was. I will tell you the 
growers and farmers in the State of Georgia, if you presented 
them a program that they can plant and make money on, they will 
commit themselves to it. But we have to make sure that the 
people will stand behind that commitment, because it is going 
to take a huge investment for them to move in that direction. 
We would agree that the BCAP program has not gone in the 
direction it should have. We filed for a Freedom of Information 
Act request of what people have received that money in the last 
3 months, and I was surprised. I could not find a farmer on 
there, a tree farmer, unless of course he had his own logging 
crew. So we share the same concerns that you do. I think it was 
developed for farmers to take advantage of.
    Technology upgrades have been a challenge in our FSA 
offices for a long time. FSA office is a provider of a service, 
and our employees in our FSA offices have had their hands tied 
behind their backs because of the lack of technology. The money 
that is appropriated--no one wants to talk about spending money 
on computers and I understand that. However, technology 
upgrades are badly needed. We need to improve the efficiency 
and the help programs so FSA can be more timely and effective 
for our family farms and for our rural communities.
    In conclusion, I would like to congratulate you, Mr. 
Chairman, on the 2008 Farm Bill. It has worked well in our 
state. I think there is one thing we need to make sure that we 
do. We can take care of farmers daily, but if we do not do 
something to encourage young people that are graduating from 
our ag schools to go back and actually apply themselves on the 
land with livestock or with crops, then we will lose 
agriculture in the future. We have to get our young people to 
return to the land.
    I will tell you and I will sum it up by saying this, you 
are in the Bible Belt and there are a lot of people down here 
praying that God will give you all the wisdom to lead us in the 
right direction. God bless you and God bless agriculture in 
this state and across this country, and God bless America.
    [The prepared statement of Mr. Duvall follows:]

   Prepared Statement of Vincent ``Zippy'' Duval, Cattle and Poultry 
                          Producer, Macon, GA
    Good afternoon, Chairman Peterson, Ranking Member Lucas, and 
Members of the Committee. Thank you for calling this meeting and 
providing Georgia Farm Bureau the opportunity to speak.
    My name is Zippy Duvall, and I am President of the Georgia Farm 
Bureau. I am a lifelong farmer from the Greshamville Community in 
Greene County, Georgia. I was a dairyman for more than 30 years. In 
1986, our farm diversified into poultry, and in 2005, we stopped milk 
production to produce beef cattle and hay. Today, we have a 150 cow 
commercial beef herd and four poultry houses through which we produce 
about a half million chickens annually.
    I want to thank the Georgia Congressmen who serve on this important 
Committee: Congressman Jim Marshall, who lives in Macon, the 
headquarters of Georgia Farm Bureau; and Congressman David Scott, a 
true friend to Farm Bureau, agriculture, and within whose district this 
meeting is being held. We are happy to be in the 13th Congressional 
District, and Congressman Scott, we appreciate your hospitality and the 
work done by your staff to coordinate this hearing.
    Georgia Farm Bureau is a general farm organization, and Georgia has 
a very diverse agriculture. Our state ranks first in peanuts, poultry, 
and forest products, second in cotton, and we produce a wide variety of 
other products in economically significant amounts. As a testament of 
this diversity, Georgia Farm Bureau appoints twenty different standing 
commodity advisory committees to make recommendations on Georgia's 
different farm enterprises.
    Sound farm policy is essential for an economically viable 
agriculture. We believe effective farm policy should be market 
oriented, with a goal of promoting quality products that meet market 
demand. The policy should ensure the availability of competitively 
priced U.S. produced farm products. Because of the vagaries of the 
weather and markets, farm policy should provide for an effective 
financial safety net for farmers without regard to farm size or 
structure.
    We believe the 2008 Farm Bill meets most of these principles and 
has worked well for Georgia farmers. We are grateful to the Agriculture 
Committee for the work done on this legislation.
    Georgia's cotton and peanut farmers fundamentally support the 
current program of direct and countercyclical payments (DCP) provided 
by the 2008 Farm Bill. This program makes sense and it is well 
understood by farmers and rural lenders alike. There is also broad 
support for the marketing loan program for these crops.
    The ``Supplemental Revenue Assistance Program'' (SURE) is being 
adopted slowly by Georgia farmers. Many Georgia counties experienced 
declared disasters in 2008 and 2009, so the yields are at low levels. 
Crop insurance is offered at low rates of reimbursement and many crops 
are only available through the ``Noninsured Assistance Program'' (NAP). 
Finally, payments under the SURE program are not available until a full 
year after the end of the crop year in which the disaster occurred. 
This assistance is not timely enough for a farmer in severe financial 
distress.
    Not a single Georgia farm has signed up for the ACRE program, 
largely because it is not beneficial to cotton and peanut farmers. Many 
crops grown in Georgia had relatively low prices in 2007 and 2008, the 
base price years for calculating ACRE revenue guarantees. Also, once in 
ACRE, farmers are in the program for the duration of the farm bill. 
Given a choice between DCP or ACRE, most farmers will go for the 
program with which they are most familiar and satisfied.
    Adjustments to dairy policy are needed to allow dairymen in the 
Southeast to remain in production to supply the market with locally 
produced fresh milk. We recommend a feasible operation plan be created 
that allows regional differences while encouraging production in 
deficient areas so that southeastern dairy farmers may reduce drastic 
swings in milk prices.
    Good farm policy does not accomplish much if commercial farming 
operations are ineligible for benefits. As an organization, we oppose 
payment limits and means testing to determine farm program eligibility. 
However, we understand the necessity of these reforms in 2008 Farm 
Bill.
    Two conservation programs are particularly successful in Georgia. 
The ``Conservation Reserve Program'' (CRP) is popular with landowners. 
The ``Environmental Quality Incentives Program'' (EQIP) is also a 
popular program, but more funds are needed so that more farmers can 
participate.
    Because of recent droughts, Georgians are particularly concerned 
with water issues. We support Federal funding of producer incentives 
for water conservation, including construction, repair, and maintenance 
of impoundments and farm ponds for livestock and irrigation.
    Consolidation and concentration within U.S. agriculture is having 
adverse economic impacts on farmers. Congress should review existing 
statues, develop legislation where necessary, and strengthen 
enforcement activities to ensure proposed agribusiness mergers and 
vertical integration arrangements do not hamper farmers' access to 
inputs and markets.
    We believe USDA should be empowered to investigate mergers, 
consolidation of farm input suppliers, processors, and retailers for 
anti-competitive activities. USDA should be given authority to review 
and provide recommendations to the Department of Justice on 
agribusiness mergers and acquisitions. Producers impacted by unfair 
marketing practices should be compensated when harmed by monopolistic 
practices.
    We are not opposed to the continued use of production contracts so 
long as producers have meaningful input in the process of negotiating 
contracts. Also, it is important that companies owning critical 
genetics do not obtain too much market power. Either of these scenarios 
creates situations where farmers have few viable options and can be 
subject to economic abuse.
    The 2008 Farm Bill authorized a ``Biomass Crop Assistance Program'' 
(BCAP) to assist agricultural and forest landowners in the utilization 
of unused biomass byproducts. Our state has received substantial 
payments regarding this program, but most farmers and forest landowners 
are unaware of it. We are concerned the program is not working as 
Congress intended.
    Additionally, the BCAP is supposed to promote utilization of 
products without a current use. Bark and other wood residues have value 
and are important inputs in the horticulture industry as potting soil. 
Diversion of these products for energy production should not take place 
under BCAP.
    Computer technology offers the promise of government programs being 
delivered in a more efficient and timely manner. However, many FSA 
staff work with slow, obsolete machines. During the busiest times at 
FSA offices, the office computers are unable to input data due to heavy 
use. We support upgrading computer technology and appropriate software 
to allow FSA to achieve savings by improving administrative efficiency 
at the Federal, state, and local level.
    In summary, Georgia Farm Bureau believes the 2008 Farm Bill is 
working well. We suggest the basic funding structure of the 2008 Farm 
Bill should not be altered significantly. Our organization stands ready 
to work with the Agriculture Committee and Congress to help clarify 
issues as the 2012 Farm Bill debate begins.
    Thank you for the opportunity to offer these comments.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Zippy Duvall, President.

    The Chairman. Thank you very much, Mr. Duvall.
    Mr. Lee, welcome to the Committee.

     STATEMENT OF RONNIE LEE, COTTON PRODUCER, BRONWOOD, GA

    Mr. Lee. Good afternoon, Chairman Peterson, Georgia Members 
of Congress and other guests. I am Ronnie Lee, I am from 
Bronwood, Georgia, cotton, peanuts, grain, cattle farmer. I 
also own a cotton gin, serve on the Board of Directors of 
Southern Cotton Growers and that is who I represent. This 
organization represents every cotton producer in six 
southeastern states--Alabama, Florida, Georgia, North Carolina, 
South Carolina, and Virginia.
    I want to thank you for hosting this hearing and giving us 
an opportunity to testify.
    Cotton is a cornerstone of the rural economy of our region 
and the Cotton Belt. Its scope and economic impact extends well 
beyond the approximately 19,000 farmers that plant between 9 
and 12 million acres of cotton each year in the 17 cotton-
producing states. Taking into account diversified cropping 
patterns, cotton farmers cultivate more than 30 million acres 
of land each year.
    Processors and distributors of cotton fiber and downstream 
manufacturers of cotton apparel and home-furnishings are 
located in virtually every state, with much of this 
infrastructure located right here in Georgia. Beyond the farm 
gate, distribution and processing of cotton includes cotton 
gins, independent merchants and cooperative merchandisers, 
warehouses, cottonseed distributors, textile mills and so 
forth.
    Nationally, farms and businesses directly involved in the 
production, distribution and processing of cotton employ almost 
200,000 workers and produce direct business revenue of more 
than $27 billion. Accounting for the ripple effect of cotton 
through the broader economy, direct and indirect employment 
surpasses 420,000 workers with economic activity well in excess 
of $100 billion.
    In our six-state region--Alabama, Florida, Georgia, North 
Carolina, South Carolina, and Virginia--the cotton industry's 
ripple effect is responsible for over 173,000 jobs and 
generates economic activity surpassing $47 billion annually.
    Southern Cotton Growers maintains that sound farm policy is 
essential for the viability of the cotton industry in this 
region and the United States.
    Effective farm policy should adhere to several principles: 
it should be market-oriented with a goal of promoting quality, 
efficiency and domestic competition; it should allow for full 
production to meet market demand; it should provide for an 
effective financial safety net; it should ensure the 
availability of competitively-priced U.S. cotton to domestic 
and international textile mills; and it should encourage 
maximum participation without regard to farm size or structure.
    We believe the 2008 Farm Bill meets most of these 
principles and has worked well for the cotton industry. We 
commend this Committee for its diligent work on this 
legislation.
    The centerpiece of the upland cotton program and 
traditional commodity programs has been, without question, an 
effective marketing loan program. It provides a safety net for 
producers, but does not harm the competitiveness of U.S. 
commodities, not just cotton. It is a program component that 
makes sense, that works, and serves many critical purposes. 
Because it is well-understood and a fundamental part of 
commodity policy, the marketing loan gives rural banks the 
confidence they need to make critical operating loans 
available. I will say in my own operation, I do not think I 
could get financed without this type safety net.
    We believe that USDA overstepped the intent of Congress in 
key payment eligibility provisions and issued regulations that 
were overly complicated and restrictive. Sound policy 
provisions are of little value if commercial-size farming 
operations are ineligible for benefits. The vast majority of 
these are true family farm operations that have expanded in 
size in an attempt to lower per unit cost of production or gain 
economies of scale. While we oppose any artificial payment 
limitations, we advocate administering the current provisions 
within the intent of Congress, and strongly oppose any further 
restrictions.
    In summary, our industry believes the cotton provisions of 
the 2008 Farm Bill are working well. If policy changes are 
inevitable as part of the 2012 Farm Bill, the cotton industry 
remains ready to work with the Agriculture Committee to explore 
alternative programs that can provide the needed safety net for 
our industry in a manner that is consistent with our 
international trade obligations, and within budget constraints.
    Thank you for giving us the opportunity to be here today, 
and I look forward to answering questions.
    [The prepared statement of Mr. Lee follows:]

    Prepared Statement of Ronnie Lee, Cotton Producer, Bronwood, GA
    Chairman Peterson, Ranking Member Lucas, Georgia Members of 
Congress and other guests, my name is Ronnie Lee. I am cotton, peanut 
and grain producer from Bronwood, Georgia where I also own and operate 
a gin. I also serve on the Board of Directors of Southern Cotton 
Growers. This organization represents every cotton producer in the six 
states that comprise the Southeast Region (AL, FL, GA, NC, SC & VA). 
Thank you for hosting this hearing and for the opportunity to testify 
before you regarding farm policy issues.
    Cotton is a cornerstone of the rural economy of our region and the 
Cotton Belt. Its scope and economic impact extends well beyond the 
approximately 19,000 farmers that plant between 9 and 12 million acres 
of cotton each year in the 17 cotton-producing states. Taking into 
account diversified cropping patterns, cotton farmers cultivate more 
than 30 million acres of land each year.
    Processors and distributors of cotton fiber and downstream 
manufacturers of cotton apparel and home-furnishings are located in 
virtually every state with much of this infrastructure located right 
here in Georgia. Beyond the farm-gate, the distribution and processing 
of cotton includes cotton gins, independent merchants and cooperative 
merchandisers, warehouses, cottonseed distributors and processors, and 
textile mills.
    Nationally, farms and businesses directly involved in the 
production, distribution and processing of cotton employ almost 200 
thousand workers and produce direct business revenue of more than $27 
billion. Accounting for the ripple effect of cotton through the broader 
economy, direct and indirect employment surpasses 420 thousand workers 
with economic activity well in excess of $100 billion.\1\
---------------------------------------------------------------------------
    \1\ Direct employment and revenue based on 2007 Census of 
Agriculture and 2002 Economic Census. Indirect employment and economic 
activity derived from input-output multipliers reported by University 
of Tennessee's Agri-Industry Modeling and Analysis Group.
---------------------------------------------------------------------------
    In the six-state region of Alabama, Florida, Georgia, North 
Carolina, South Carolina and Virginia, the cotton industry's ripple 
effect is responsible for over 173 thousand jobs and generates economic 
activity surpassing $47 billion annually.

                                            Cotton's Economic Impact
----------------------------------------------------------------------------------------------------------------
                                                  Cotton Sector                        Broader Economy
                                     ---------------------------------------------------------------------------
                                                           Direct Revenue                      Economic Activity
                                             Jobs           (Million $)            Jobs           (Million $)
----------------------------------------------------------------------------------------------------------------
                    Southeast (AL, FL, GA, NC,77,733A)          $10,647            173,454            $47,502
                 Mid-South (AR, LA, MO, MS, TN31,434             $6,090             70,143            $27,172
          Southwest (KS, OK, TX)              41,569             $5,715             92,758            $25,497
               West (AZ, CA, NM)              24,028             $2,318             53,616            $10,343
                                     ---------------------------------------------------------------------------
  United States.....................         191,405            $27,622            427,102           $123,241
----------------------------------------------------------------------------------------------------------------

    Southern Cotton Growers maintains that sound farm policy is 
essential for the viability of the cotton industry in this region and 
the United States. Effective farm policy should adhere to several 
principals:

    (1) It should be market-oriented with a goal of promoting quality, 
        efficiency and domestic competition;

    (2) It should allow for full production to meet market demand;

    (3) It should provide for an effective financial safety net;

    (4) It should ensure the availability of competitively-priced U.S. 
        cotton to domestic and international textile mills; and

    (5) It should encourage maximum participation without regard to 
        farm size or structure.

    We believe the 2008 Farm Bill meets most of these principles and 
has worked well for the cotton industry. We commend this Committee for 
its diligent work on this legislation.
    The centerpiece of the upland cotton program and traditional 
commodity programs has been without question, an effective marketing 
loan program. It provides a safety net for producers but does not harm 
the competitiveness of U.S. commodities. It is a program component that 
makes sense, that works, and that serves many critical purposes. 
Because it is well-understood and a fundamental part of commodity 
policy, the marketing loan gives rural banks the confidence they need 
to make critical operating loans available. This foundational program 
has also been the lever to move other important reforms, such as 
standardized bales and bale packaging for cotton, electronic warehouse 
receipts, and heightened standards for storage and elevator facilities 
for cotton and for other commodities.
    With respect to cotton, while the 2008 Farm Bill maintained the 
marketing loan and several other program components from prior law, the 
bill also made many reforms, such as a revision in the calculation of 
cotton premiums and discounts, placing a ceiling on the payment of 
storage credits for cotton under loan, and an economic adjustment 
program for the U.S. textile industry.
    Fundamentally, we continue to support the 2008 Farm Bill's approach 
to the cotton program and all of its components, from the marketing 
loan to direct and countercyclical payments. Each component serves a 
distinct purpose that is beneficial to U.S. farmers.
    The 2012 Farm Bill debate, however, will take place with several 
new and increased points of pressure. Record budget deficits will put 
intense pressure on funding. The WTO Brazil Case puts cotton's 
marketing loan and countercyclical programs under special scrutiny even 
though the cotton program, as revised by the 2008 bill, has never been 
evaluated by a WTO Panel. Ongoing negotiations in the Doha Round of 
trade negotiations could result in a dramatically altered landscape for 
domestic commodity support. If circumstances arise that make it 
impossible to maintain a reasonable safety net using existing delivery 
mechanisms, the cotton industry will look at alternatives.
    As evidenced by recent sign-ups, the ACRE program has not been a 
very attractive alternative for cotton farmers in our region or across 
the Cotton Belt. The support mechanisms within ACRE do not provide an 
adequate safety net for cotton farmers when compared to the traditional 
DCP program. If a revenue-based approach is to find support among 
cotton producers, a more reasonable revenue target would have to be 
established. Mr. Chairman, we are working as an industry to evaluate 
fully our industry's concerns with ACRE in order to develop 
recommendations for effective modifications.
    Even as our industry commits to an in-depth review of the structure 
of the cotton program, I must emphasize our commitment to the 
principles I outlined earlier in my statement. One of those principles 
is that effective farm policy must maximize participation without 
regard to farm size or income. The 2008 Farm Bill contained significant 
changes with respect to payment limitations and payment eligibility. In 
general, the limitations were made more restrictive, and the adjusted 
gross income test was substantially tightened.
    In addition to the legislative changes, we believe that USDA over-
stepped the intent of Congress in key payment eligibility provisions 
and issued regulations that are overly complicated and restrictive. 
Sound farm policy provisions are of little value if commercial-size 
farming operations are ineligible for benefits. The vast majority of 
these are true family farm operations that have expanded in size in an 
attempt to lower per unit cost of production (economy of scale). While 
we oppose any artificial payment limitations, we advocate administering 
the current provisions within the intent of Congress and strongly 
oppose any further restrictions.
    Conservation programs were strengthened in the 2008 Farm Bill. The 
Conservation Stewardship Program and similar conservation programs can 
lead to improved environmental and conservation practices but should 
not serve as the primary delivery mechanism for farm program support. 
The Conservation Stewardship Program has also been hampered by overly 
restrictive payment limitations contrived by USDA regulators--
restrictions that we do not believe are supported by the statute. 
USDA's unilateral decision to exclude commercial-size farming 
operations dramatically limits the environmental and conservation 
benefits that are possible with this program. In an effort to improve 
the effectiveness of these programs, we recommend that all conservation 
payments and other administrative such responsibilities be turned over 
to the Farm Service Agency. In other words, let FSA do the paper work 
which in turn will enable the Natural Resources Conservation Service to 
devote all their efforts towards providing technical assistance. 
Furthermore, lack of consistency between county offices is often an 
issue. For example, a producer who farms in more than one county may or 
may not qualify for a like conservation program or practice and often 
times at varying levels of support.
    We support a permanent natural disaster program as part of the farm 
bill, but our experience so far with the SURE program indicates it 
cannot provide an effective level of natural disaster assistance. We 
recognize the challenge facing Congress to make improvements in this 
program. Without increased baseline spending authority, there will be 
no funds to even continue the program in the next farm bill much less 
make the necessary improvements for it to be an effective disaster 
relief mechanism. However, we do not support reallocating existing 
spending authority from current farm programs to apply to SURE.
    Crop insurance is an essential risk management tool for cotton 
producers in our region. As a matter of fact, over 87% of all cotton 
acres in the Southeast purchase buy-up coverage. Our industry continues 
to examine concepts that improve the various cotton crop insurance 
products. Revenue coverage, enterprise policy rates and group risk 
products are examples of improved products that can provide a menu of 
risk options for growers. One change we do support would be to allow 
separate enterprise units for irrigated and non-irrigated practices in 
the same county. Some growers do not opt for the enterprise unit deal 
(with the additional subsidy) because it throws their irrigated and 
non-irrigated units together. However, we continue to view the current 
insurance products as complements to traditional commodity programs but 
do not consider those programs as a replacement system for delivering 
farm program support.
    While the cotton industry supports a viable biofuels industry, it 
must be recognized that benefits are not equally shared by all 
commodity producers. Renewable fuels mandates and other policies 
regarding biofuels have changed the competitive balance between 
commodities, placing severe pressure on cotton infrastructure in 
certain parts of the Cotton Belt. Mandated demand can result in 
excessive and harmful market distortions. The support given to biofuel 
crops must be taken into consideration when comparing relative levels 
of support across commodities, when evaluating payment limitations and 
before trying to mandate a one-size-fits-all farm program for biofuel 
and non-biofuel commodities.
    In summary, our industry believes the cotton provisions of the 2008 
Farm Bill are working well. If policy changes are inevitable as part of 
the 2012 Farm Bill, the cotton industry remains ready to work with the 
Agriculture Committees to explore alternative programs that can provide 
the needed safety net to our industry in a manner that is consistent 
with our international trade obligations and within budget constraints.
    Thank you for the opportunity to present these comments on behalf 
of Southern Cotton Growers. I will be happy to try and answer any 
questions you might have.

    The Chairman. Very good. Thank you very much, Mr. Lee.
    Mr. Minor, welcome to the Committee.

   STATEMENT OF RICHARD ``DICK'' MINOR, FRUIT AND VEGETABLE 
                  PRODUCER, ANDERSONVILLE, GA

    Mr. Minor. Good afternoon, Chairman Peterson and Members of 
the Committee. We welcome you to Georgia.
    My name is Richard Minor. With my brothers, we own and 
operate a diversified farming operation in southwest Georgia. 
Last year, we grew over 1,700 acres of vegetable crops. In 
addition, we grow cotton, peanuts, field corn, wheat, soybeans 
and turf grass.
    Today, I speak on behalf of the Georgia Fruit and Vegetable 
Growers Association. I want to thank you for this opportunity 
to present this testimony.
    In 2008, this Committee recognized the importance of fruit, 
vegetable and other specialty crop production in the United 
States and dedicated approximately $3 billion in funding for 
the specialty crops pest, disease, nutrition, research and 
conservation priorities. We are most appreciative, and deeply 
grateful, for the leadership that this Committee demonstrated 
in the 2008 Farm Bill.
    I have provided the Committee with detailed written 
testimony, but in my comments today, I wanted to touch briefly 
on a few of the most critical issues.
    First, we strongly support continuation of the specialty 
crop state block grants. The 2008 Farm Bill provided $466 
million in state block grants. We believe state block grants 
provide the centerpiece of the fruit and vegetable component in 
the farm bill. It is at the state level that growers, shippers 
and packers, working together with industry and government, 
have the expertise to identify programs that can help enhance 
the competitiveness of specialty crop producers.
    Block grants have been tremendously beneficial to Georgia's 
specialty crops. With funds from previous block grants, our 
association was able to establish a food safety initiative that 
has grown to train over 350 growers, and certified more than 70 
farm operations.
    The 2008 block grants have provided money for a number of 
innovative programs by our fruit and vegetable organizations. 
These grants have helped expand locally grown marketing 
programs, funded commodity promotional activities for 
watermelon, peach, pecan and others, made available cutting 
edge grower educational programs, and supported multi-
discipline specialty crop field research. Working through our 
state departments of agriculture puts the funds at a grassroots 
level where they can be the most effective.
    Second, we believe there should be increased funding for 
specialty crop research. Georgia fruit and vegetable growers 
are receiving basically the same price for their crops as they 
received in the mid-1990s, while input costs have increased 100 
to 350 percent. The only reason fruit and vegetable growers are 
surviving is due to the increased yield levels and production 
efficiencies, and improved pest management systems developed 
from agricultural research projects.
    The 2008 Farm Bill established Specialty Crop Research 
Initiatives with funding at $230 million, which we very much 
appreciate. However, we must continue to expand and increase 
the funding levels for this type of research.
    Third, nutritional aspects. The 2012 Farm Bill must 
continue and expand the progress initiated in the 2008 Fresh 
Fruit and Vegetable Snack Program, which develops life-long 
healthy eating habits for our children. The Georgia Fruit and 
Vegetable Growers Association supports the National Salad Bar 
Policy recommended by USDA as a strategy to increase children's 
consumption of fruits and vegetables.
    Finally, we believe that a total restructuring of USDA's 
disaster assistance program is needed. To date, there is still 
much confusion at the Farm Service Agency county office level 
about the implementation of the Supplemental Revenue Assistance 
Program. For example, USDA headquarters has not made clear to 
the county offices how to handle several issues related to the 
processing of claims under SURE. Another major concern with the 
SURE program is that benefits will not be available to the 
producer for 12 to 18 months after the crop loss. With the 
significantly large input costs of specialty crop producers, 
this delay may be too late to help a producer struggling to 
stay in business.
    In addition, the MAP program is of little benefit and needs 
to be reformed. Producers are willing to pay for insurance 
products that truly protect income. Today, those products are 
not available for specialty crop producers.
    Finally, we question whether a permanent disaster program 
can react to specific emergencies, as well as disaster 
legislation structured in real time for specific disasters.
    In closing, let me mention that the future of specialty 
crop production in the Southeast is largely dependent on three 
regulatory and workforce issues over which this Committee has 
limited jurisdiction. The EPA--at no time in my memory has EPA 
issued as many guidelines, regulations or policies as they have 
in the last 24 or 36 months.
    Climate change legislation--as Congress considers energy 
independence and climate change, the specialty crop industry is 
very concerned as to the impact this final legislation will 
have on specialty crops.
    Immigration reform--the need for a predictable and legal 
workforce in agriculture remains a critical concern for all 
fruit and vegetable producers.
    Mr. Chairman, thank you for the opportunity to present our 
thoughts and views, and we look forward to working with you to 
craft the 2012 Farm Bill.
    [The prepared statement of Mr. Minor follows:]

   Prepared Statement of Richard ``Dick'' Minor, Fruit and Vegetable 
                      Producer, Andersonville, GA
    Good morning, Chairman Peterson and Members of the Committee. My 
name is Dick Minor. I am President of Minor Produce. With my two 
brothers we own and operate a diversified farming operation in Sumter 
County, Georgia. In 2009, we grew over 1,700 acres of vegetables, 
including cucumbers, snap beans, watermelon, pepper and squash. In 
addition we grow cotton, peanuts, field corn, wheat, soybeans and turf 
grass. We also operate or have ownership in a trucking company, cotton 
gin and warehouse and a custom aerial crop care service. I am here 
today representing over 250 producer members of the Georgia Fruit and 
Vegetable Growers Association.
    The fruit and vegetable industry is a major economic generator for 
the State of Georgia. We are adding jobs and dollars to rural economies 
throughout the state. In Georgia, the 2008 farm gate value of 
vegetables alone was almost $850 million. Combined with Georgia's fruit 
crops, including peaches, blueberries, blackberries and strawberries, 
the farm gate value of fruit and vegetable production in Georgia is 
over $1 billion. But this large product value is not limited just to 
our state. Specialty crop growers produce approximately 50% of the farm 
gate value of total plant agricultural production in the United States.
    As a part of developing the 2008 Farm Bill, this Committee 
recognized the importance of fruit, vegetable and other specialty crop 
production in the United States, providing significant support to our 
sector of the agricultural industry. The 2008 Farm Bill dedicated 
approximately $3 billion in funding for specialty crops, pest and 
disease, nutrition, research and conservation priorities. Of particular 
note is that none of this funding goes to direct payments or subsidies 
from the Federal Government but rather it strongly supported 
infrastructure investments and market expansion opportunities to build 
a stronger specialty crop industry. We are most appreciative and deeply 
grateful to the leadership this Committee demonstrated to insure 
specialty crop programming in the 2008 Farm Bill.
    My comments today are directed at several areas of the 2008 Farm 
Bill from which specialty crop growers in Georgia have received 
benefits which offered those growers competitive advances in their 
production and marketing operations. I will also outline several areas 
which we believe should be addressed in the 2012 Farm Bill.
Specialty Crop State Block Grants
    In 2001, Congress provided approximately $159.4 million in 
mandatory funding for Specialty Crop block grants as part of the 
Agricultural Economic Assistance Act of 2001. The funding was 
distributed by the state departments of agriculture in 2002.
    The Specialty Crop Competitiveness Act of 2004 was aimed at 
building on the success of the 2001 block grants by reauthorizing the 
block grants. Congress provided $7 million in appropriations for the 
specialty crop block grants in FY 2006. The FY07 appropriations bills 
also contained specialty crop block grant funding.
    The 2008 Farm Bill provided $466 million in state block grants to 
enhance producers' ability to compete in the marketplace and provide 
consumers with safe, abundant food. We believe state block grants 
provide the centerpiece of the fruit and vegetable component in the 
farm bill. Each specialty crop and each geographic area have unique 
challenges and attributes which must be addressed individually, the 
block grants are critical in helping to improve the competitiveness of 
our specialty crop producers. It is at the state level that growers, 
shippers and packers working together with industry and government, 
have the expertise to identify programs that can enhance the 
competitiveness of specialty crop producers. Innovative programs 
developed at the state level have included production related research, 
nutritional focus on youth, commodity promotion, food safety and 
inspections, and other items.
    Block grants have been tremendously beneficial to Georgia's 
specialty crops. With funds from the 2001 block grant our association 
was able to establish a food safety initiative that has grown to train 
over 350 growers and certified more than 70 farm operations. As a 
cooperative program between the Georgia Department of Agriculture, 
University of Georgia, the Georgia Crop Improvement Association and our 
association, Georgia GAP provides on farm training, consultation and 
third party audit to our growers.
    Our industry is in a crisis at the moment as it relates to food 
safety concerns. Block grant funds would help states develop more 
aggressive food safety educational programs as we have done in Georgia. 
The produce industry must move forward to establish the proper protocol 
to restore this nation's consumer confidence in fresh produce. Research 
is needed to develop economical traceability solutions, reduce field 
contamination and improve post harvest handling. Block grants can 
address this on the state level where it is desperately needed.
    In addition block grant funding has provided assistance to expand 
the `Georgia Grown' marketing program, locally grown promotions, 
specific commodity (watermelon, peach, pecan, etc.) promotional funds, 
provide grower educational programs and fund intra-structure for a 
multi-discipline specialty crop field research lab.
    We recommend the state block grant program continue and funding be 
expanded in the 2012 Farm Bill.
Increasing Specialty Crop Research
    Researcb provides a foundation for the growth of any industry and 
acts as catalyst for change. Federal investment in specialty crop 
research to assure the economic vitality and long-term viability of the 
specialty crop industry has been limited, despite the fact that 
specialty crops and their research needs are unique and important. 
These crops are typically characterized by high production input costs, 
unique market challenges and the fact that there are a plethora of 
specialty corps produced in numerous growing regions throughout the 
country, each with specific challenges. The USDA/DHHS Dietary 
Guidelines recommends the daily dietary intake of Americans be at least 
52% fruits, vegetables and foods derived from specialty crops. Federal 
investments in agriculture should be allocated to reflect the national 
importance of these products to the American diet.
    The 2008 Farm Bill established the Specialty Crop Research 
Initiative (SCRI) with funding at $230 million. Due to the timing of 
the legislative approval of the farm bill and the SCRI program 
announcement, we compliment the hard work at USDA to ensure 2009 SCRI 
project proposals were accepted, evaluated and awarded. Without this 
extra effort, specialty crop research would have been delayed twelve 
months.
    Specialty crop growers are receiving basically the same price for 
their crop(s) as they received in the mid-1990s, while input costs have 
increased 100% to 350%. The only reason fruit and vegetable growers are 
surviving is increased yield levels, production efficiencies and 
improved pest management systems due to research. Applied research is 
critical to the survival of southeastern fruit and vegetable growers. 
As a member of the Georgia Agricultural Commodity Commission for 
Vegetables, we have committed 75% of our crop assessments will be used 
for research. Georgia growers recognize the value of applied research 
that addresses current production pest management, regulatory, food 
safety and product quality problems.
    GFVGA supports expansion of the SCRI and increased funding.
Food Safety
    As noted earlier in this testimony, since 2001 the Georgia Fruit 
and Vegetable Growers Association has been a leader in providing 
education and consultation to southeastern growers concerning food 
safety. While food safety is the regulatory responsibility of the Food 
and Drug Administration, we encourage USDA to continue its role to 
provide guidance and support to growers in the area of food safety 
which effects product quality and market interruptions.
    Congress and FDA are moving forward with food safety legislation 
and regulations. Most likely before the end of 2010, growers will be 
mandated to conform with certain FDA guidelines in the growing, packing 
and handling of fresh produce. GFVGA has supported this governmental 
oversight for science founded, risk based, commodity specific 
guidelines. The depth of experience and body of knowledge at USDA 
should be utilized and called upon as these guidelines are developed, 
and when product recall investigations occur. FDA and CDC lack of 
experience and knowledge of fresh produce production and supply chain 
led to the tomato/pepper fiasco in 2008.
    Based on our commitment to food safety and regaining consumer 
confidence, GFVGA took a leadership role as a member of the proponent 
group calling for a National Leafy Greens Marketing Agreement. We urge 
USDA to conclude its work on the NLGMA so industry can develop a 
Federal marketing program that establishes national measures to address 
leafy green food safety through the Federal Government oversight.
Nutrition
    The 2008 Farm Bill expanded the Fresh Fruit & Vegetable Snack 
Program to all 50 states. The goal of this nationwide expansion of the 
Snack Program is to develop life-long healthy eating habits for 
millions of children by providing fresh fruits and vegetables in our 
nation's schools. Data, and practical experience in the schools, has 
shown if the fresh products are available, most students will select 
tasty (and healthy) fruits or vegetables over candy or chips.
    Increasing the amount and variety of fruits and vegetables served 
in the School Lunch and Breakfast Programs will improve children's 
health and are critical investments in prevention and health care 
reform. The Institute of Medicine's (IOM) Report School Meals: Building 
Blocks for Healthy Children recommends doubling the amount of fruits 
and vegetables served in school meals and recognizes that serving more 
fruits, vegetables and whole grains will require a higher Federal 
reimbursement rate. As Congress deliberates on the Child Nutrition 
Reauthorization Act, school meal standards must be aligned with the 
2005 Dietary Guidelines; the IOM's Report provides specific 
recommendations to improve the healthfulness of school meals.
    GFVGA supports the following:

    1. A National Salad Bar Policy recommended by USDA to schools as an 
        effective intervention strategy to increase children's fruit 
        and vegetable consumption.

    2. Increased reimbursement rates for school meals, with those 
        increases tied specifically to increased servings of fruits, 
        vegetables and whole grains in order to meet the Dietary 
        Guidelines and IOM recommendation for school meals.

    3. Increased funding for salad bars and cafeteria equipment.

    4. Expansion of USDA commodity purchasing of fresh and fresh-cut 
        fruits and vegetables that children want to eat. Today, less 
        than 3% of USDA fruit and vegetable purchases are for fresh 
        produce, unfortunately perpetuating the practice of schools 
        serving children from a 10 pound can rather than offering fresh 
        foods.

    5. Updated nutrition standards for school meals consistent with the 
        Dietary Guidelines.

    6. Updated nutrition standards for foods and beverages sold outside 
        of school meals.
Restructuring Disaster Assistance and Crop Insurance
    Georgia growers have a concern with the Supplemental Revenue 
Assistance Payments Program (SURE). The establishment of this program, 
as intended, makes ad hoc disaster programs more difficult 
Unfortunately, the SURE program has yet to live up to grower 
expectations. Despite USDA announcing this program opportunity early on 
the website, to date there is still much confusion at the Farm Service 
Agency county office level about implementation of the program. 
Specifically, USDA headquarters has not made clear to the county 
offices how to handle producers farming in multiple counties. In the 
Southeast, our growers may farm in several different counties.
    Another major concern with the SURE program is that benefits will 
not be available to the producer for 12 to 18 months after the crop 
loss. With the significantly large input costs of specialty crop 
producers this delay may be too late to help a producer struggling to 
stay in business. Finally, we question whether a permanent disaster 
program can react to specific emergencies as well as disaster 
legislation structured in real time for a specific disaster.
    Unlike my situation, most fruit and vegetable growers do not 
produce program commodities so the farm structure as established at the 
FSA offices is not such that growers can benefit from some USDA 
programs as traditional program commodities benefit. The current 
payment limit structure punishes specialty crops for the few programs 
they can participate in at USDA. Southeast produce farms have to be 
large to make a profit. Labor, input costs, prices for products, etc., 
are such that small producers have little chance to be full-time 
farmers. In establishing payment limitations for all producers, 
consideration should be given that fruit and vegetable growers do not 
have USDA program history and farm structure established at FSA as do 
many producers that have a long history of participating in farm 
programs.
    With regard to crop insurance, over the years RMA has attempted to 
re-formulate a traditional crop insurance program to be a `one size 
fits all' and force specialty crop coverage into a row crop model. 
However, this does not work due to the high cost of inputs per acre for 
our specialty crop growers. Currently there are very few vegetable 
growers that utilize crop insurance due to the extremely high premium 
costs. There are a few specialty crop insurance programs that appear to 
have satisfactory participation and coverage including pecans, peaches 
and blueberries.
    As banks tighten the credit and the loan requirements become more 
stringent, we believe many growers would consider AGR as a crop 
insurance alternative with proper education about the program. An AGR 
policy offers growers total farm income protection rather than specific 
crop revenue coverage. However, the full AGR program has not been 
offered in Georgia. AGR-Lite was offered during the 2009 crop year and 
received limited sign up due to the revenue limitation on the policy. 
For AGR-Lite the maximum farm income protection is $1 million making 
the `lite' program of little benefit to many Georgia producers. For the 
full AGR program the maximum income protection is $6.5 million.
Farm Policy Challenges for Specialty Crops
    The future of specialty crop production in the Southeast is largely 
dependent on regulatory and workforce related issues. As more and more 
regulations, restrictions and agency generated guidelines are 
developed, the United States consumer will see more and more of its 
fresh produce imported. The international trade agreements, designed to 
open foreign markets to U.S. growers, has also shown imported products 
can easily be transported into our domestic food supply chain. Many 
U.S. growers are looking to non-domestic farm operations as an 
alternative if/when Federal regulations become too onerous to comply.
    Outlined below are regulatory issues which threaten the national 
security of the United States. The late U.S. Senator Paul Coverdell 
from Georgia, was a strong proponent that the strength of American 
agriculture was a national security issue. If the U.S. cannot produce 
enough food to feed our people and our troops, we will not be a nation 
capable of defending itself any longer. American agriculture is not to 
that position yet, but we are losing farms everyday due to these 
challenges.
1. Environmental Regulations
    At no time in my memory has EPA issued as many guidelines, 
regulations or policies that have the potential to threaten our 
livelihood and shutdown our operations. That statement makes it sound 
like we are operating an `unsafe' farm; which might be harmful to our 
families and workers. I can assure you we are not--I will not expose my 
family or my workers to anything that I do not consider safe.
    An example of EPA regulations that are issued but not based on 
sound science was the Soil Fumigant Regulations. In late 2008, EPA 
issued new regulations concerning application and usage of soil 
fumigants. The required buffer zones under these regulations were based 
on vaporization and drift studies conducted in the 1990's. In fact 
these primary studies did not include any measurement of soil 
temperature or moisture content, two key elements in vaporization and 
drift, caused the regulations to be flawed.
    If these regulations had been implemented, one of Georgia's key 
vegetable production counties would have lost over 96% of its vegetable 
crop land. Another key county would have lost 89% of its available land 
due to the buffer zone requirements.
    GFVGA working with the University of Georgia, was able to conduct 
emergency research studies to update the 1990 data and show with proper 
soil moisture and temperature, the required buffer zones could almost 
be eliminated. Once the research was conducted, EPA accepted the new 
results after a careful study of the data.
    Recently EPA is proposing a new registrant labeling policy for key 
chemicals. They are moving from a FIFRA-based standard of ``no 
unreasonable side effects'' to a new policy of ``do not apply this 
product in a manner that results in spray (or dust) drift that could 
cause an adverse effect to people.'' So, what is an adverse effect a 
nose irritation?? How does a grower make that determination as to what 
is an adverse effect. This is essentially a move from a standard based 
on scientific risk assessment to an untenable zero-risk standard. EPA 
is moving from regulations that are based on risk and can work in 
practice, to an environmental regulation that is easily enforced--
`prohibition on use--do not use!'.
    We encourage this Committee and USDA to advocate for production 
agriculture in this regard to ensure EPA issued regulations are based 
on--risk and current science. In addition production agriculture should 
be represented early in the regulatory development process to ensure 
the regulations can actually be implemented. If a proposed regulation 
such as the buffer zones mentioned earlier were implemented, it would 
have eliminated vegetable production in Georgia and many other states.
2. Climate Change Legislation
    As Congress considers energy independence and climate change the 
specialty crop industry is very concerned as to the final legislation. 
Fruit and vegetable growers are heavily dependent on production inputs 
to be affordably priced in order to remain competitive domestically and 
in the global economy.
    As Congress debated legislation earlier this year, the specialty 
crop producers may not be able to receive any of the credits or 
participate in the offset programs. Specialty crops represent 44 
percent of U.S. agriculture's farm gate value but only 3.2% of the 
agricultural farmland. In additional growers have taken steps for 
decades to increase production efficiencies, minimize energy 
consumption and conserve natural resources, all resulting in decreased 
greenhouse gas emissions. Therefore the specialty crop industry's 
ability to compete for `credits' based on new carbon sequestration 
efforts (or GHG-reducing technology) will be difficult.
    We urge this Committee to study and understand the impact of the 
costs associated with any climate change legislation before it is 
signed into law, and have in place strategies to address these costs as 
they will have a significant impact on specialty crop livelihoods.
3. Immigration
    We realize immigration reform is not under the authority of this 
Committee; however, when discussing specialty crops and farm policy' 
the need for a predictable and legal workforce in agriculture remains a 
critical concern for all producers.
    Many of our producers in Georgia are using the H-2A program in 
which they can legally bring in guest workers on a temporary work visa 
issued by the Department of Labor. As a part of this program the grower 
pays for the worker's transportation to and from their home country, 
covers their housing while in the states and provides a guaranteed wage 
rate. The paperwork for the program is very onerous and time consuming.
    Revisions were made to the program in late 2008 which made it much 
easier to accommodate to the point we had an increasing number of 
growers enrolling in the program. Unfortunately in February 2010, the 
current Administration revised the guidelines again and reverted to the 
old regulations, some even as far back as the mid 1990's. The revised 
changes are adding even more time and cost to the program. One grower 
shared with me recently the new regulations will cost him over $1.5 
million
    In addition to the high cost and excessive regulations our H-2A 
employers in Georgia and other southeastern locations have experienced 
a very high incidence of frivolous claims by Legal Services. Many times 
a legal services agency representative will file a `trumped up' charge 
against an H-2A employer and it costs the grower less to pay a fine 
than to defend the charge. This excessive cost to the grower is due to 
the legal services agency continuing to file appeals if the case is 
found in the grower's favor, and the grower having to continue pay 
legal fees or his defense.
    Mr. Chairman, thank you for the opportunity to present our thoughts 
and views today. We look forward to working together to craft a farm 
bill over the next year that will establish a strong farm policy for 
specialty crop producers and all of agriculture. Thank you.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
Richard `Dick' Minor,
President,                           Vice President,
Minor Produce;                       Georgia Fruit and Vegetable Growers
                                      Assn.

    The Chairman. Thank you very much, Mr. Minor.
    Mr. Morris, welcome to the Committee.

    STATEMENT OF ARMOND MORRIS, PEANUT PRODUCER, OCILLA, GA

    Mr. Morris. Thank you, Mr. Chairman. And I would like to 
say thank you to the rest of the Committee for being here in 
Georgia, and we welcome you and invite you to come back again. 
Not only that, but it is great to be here in Representative 
Scott's district. We have a lot of consumers that eat peanut 
butter here. So again, thank you for inviting us to your 
district, Mr. Scott.
    I am Armond Morris, a peanut producer from Irwin County, 
Georgia. I am Chairman of the Georgia Peanut Commission and am 
here today representing the Southern Peanut Farmers Federation. 
The Federation is comprised of Alabama Peanut Producers, the 
Georgia Peanut Commission, the Florida Peanut Producers 
Association, and the Mississippi Peanut Growers Association. 
The Southern Peanut Farmers Federation represents about \3/4\ 
of the peanuts grown in the United States.
    Mr. Chairman and Members of the Committee, our message 
today is that: peanut producers support the marketing loan 
program; and the current program prices are set too low to be a 
true safety net for producers.
    As you are aware, peanut program prices were reduced in the 
2002 Farm Bill when it changed from a supply-management program 
to a marketing loan peanut program. The 2008 Farm Bill 
maintained the same prices as the 2002 Farm Bill.
    Since the 2002 Farm Bill, peanut variable costs for 
National Center for Peanut Competitiveness representative farms 
have increased 52 percent per acre. Yields will need to be over 
400 pounds above the state average this year to break even at 
the current price of peanuts.
    I have attached a copy of a recent review by the National 
Center for Peanut Competitiveness. As you can see, peanut 
growers are not making a profit even with our current prices.
    The number one goal for our producer organization is to 
obtain a legitimate safety net for our growers. The current 
$355 per ton marketing loan is not sufficient.
    The peanut loan repayment rate guidelines were established 
in the 2002 Farm Bill. The loan repayment rate has not 
functioned appropriately.
    It is this last variable the Committee included in the 2008 
Farm Bill and similar language in the 2002 Farm Bill that has 
not been adhered to. In setting the loan repayment rate, USDA 
has not taken into account world market prices.
    We recognize the fiscal and political limitations in 
drafting a successful farm bill. Peanut producers want to 
stress to the Committee that we will work with you to develop 
the best possible program, but the pricing structure in the 
2008 Farm Bill is not sufficient and certainly will not work 
for peanut producers if these same prices hold through the life 
of the 2012 Farm Bill.
    There are additional considerations for any program changes 
in the next farm bill. If a new program is structured to limit 
farm size beyond the payment limit structure imposed by the 
2008 Farm Bill, peanut producers will face more serious 
limitations for profit than we do under the current program 
which lowers prices. We must maintain our separate limit for 
peanuts. The current program will not work without the separate 
payment limit.
    If we depend on farmers' markets, hobby farmers and the 
smallest peanut farms for peanut production, there would not be 
a sufficient supply of peanut butter on the shelves of 
America's grocery stores or in our school lunch program.
    The Conservation Stewardship Program included provisions 
for a crop rotation program. We believe this program will 
enhance the environment and improve crop yields.
    The feeding programs at the USDA are very important to our 
producers. Peanut butter is a long-time participant in the 
school lunch program. Peanut butter also qualifies for the 
breakfast program and after school snack program. Our 
Congressional delegations and industry leaders struggled to get 
the attention of those preparing food assistance for Haiti 
relief. Although our industry provided three million servings 
of peanut butter to the relief effort, we were not successful 
in reaching the decision-makers involved in establishing food 
assistance lists for U.S. and international aid.
    Peanut butter does not qualify for the Fresh Fruit and 
Vegetable Snack Program. We believe all school feeding programs 
should allow for the purchase of peanut butter.
    In closing, production agriculture is part of our national 
security. The Secretary has spoken a great deal about rural 
development, but production agriculture, at the heart of which 
is Federal farm programs, should be at the top of the list of 
roles for USDA. Please help the Department remember the 
importance of production agriculture.
    Thank you for allowing me to address the Committee today 
and the Federation looks forward to working with you.
    [The prepared statement of Mr. Morris follows:]

    Prepared Statement of Armond Morris, Peanut Producer, Ocilla, GA
    Good afternoon, Chairman Peterson, Members of the Committee, my 
name is Armond Morris. I am a peanut producer from Irwin County, 
Georgia. I am Chairman of the Georgia Peanut Commission and am here 
today representing the Southern Peanut Farmers Federation. The 
Federation is comprised of the Alabama Peanut Producers Association, 
the Georgia Peanut Commission, the Florida Peanut Producers Association 
and the Mississippi Peanut Growers Association. The Southern Peanut 
Farmers Federation represents about \3/4\ of the peanuts grown in the 
United States. Peanuts have an economic impact of hundreds of millions 
of dollars in our states and tens of thousands of jobs.
    I have been a peanut producer for over 40 years. I farm 
approximately 2,000 acres of peanuts, cotton, wheat, rye and 
watermelons. I have been active in local, state and national 
agricultural organizations and am a graduate of the Abraham Baldwin 
Agricultural College.

   Peanut producers support the marketing loan program.

   The current program prices are set too low to be a true 
        safety net for producers.

   Farm programs should be developed for farmers--not for 
        absentee baseholders.

    As you are aware, peanut program prices were reduced in the 2002 
Farm Bill when we changed from a supply-management program to a 
marketing loan peanut program. The 2008 Farm Bill maintained the same 
prices as the 2002 Farm Bill. The market prices for this year should 
hold above the marketing loan price but this is no guarantee and 
certainly not a guarantee for the future.
    Since the 2002 Farm Bill, peanut variable costs, for National 
Center for Peanut Competitiveness representative farms, have increased 
52% per acre. In addition to the increased costs associated with 
producing a crop of peanuts, we are competing with other countries like 
Argentina, China and India where the environmental costs, other 
regulations and labor rates are much less than U.S. input costs.
    I have attached a copy of a recent review, by the National Center 
for Peanut Competitiveness, of sample peanut farms across the country 
based on the January 2010 baseline. As you can see, peanut growers are 
not making a profit even with our current prices.
    The number one goal for our producer organization is to obtain a 
legitimate safety net for our growers. We do not believe the current 
$355 per ton marketing loan is sufficient to be a real safety net for 
producers.
    The peanut loan repayment rate guidelines were established in the 
2002 Farm Bill. The loan repayment rate has not functioned 
appropriately since the 2002 Bill. Congress directed the U.S. 
Department of Agriculture to consider the following when determining 
loan repayment rates:

   Minimize potential loan forfeitures;

   Minimize the accumulation of stocks of peanuts by the 
        Federal Government;

   Minimize the cost by the Federal Government in storing 
        peanuts; and

   Allow peanuts produced in the United States to be marketed 
        freely and competitively, both domestically and 
        internationally.

    It is this last variable the Committee included in the 2008 Farm 
Bill and similar language in the 2002 Farm Bill that has not been 
adhered to. In setting the loan repayment rate, USDA has not taken into 
account world market prices. Thus, the USDA posted price set every 
Tuesday afternoon, is too high. We ask the Committee to include 
language in the next farm bill that will assure that the prices our 
competitors in the world marketplace are selling peanuts will be 
considered in establishing the posted price. We have trade agreements 
that were negotiated using the U.S. International Trade Commission 
formula converting shelled peanuts back to farmers' stock. This ITC 
formula should be considered in determining the posted price. USDA uses 
a different formula for the posted price. We can provide the Committee 
more information on this issue. In addition to low prices, this has 
been a serious problem since we left the supply-management program in 
2002.
    We recognize the fiscal and political limitations in drafting a 
successful farm bill. Peanut producers want to stress to the Committee 
that we will work with you to develop the best possible program but the 
pricing structure in the 2008 Farm Bill is not sufficient and certainly 
won't work for peanut producers if these same prices hold through the 
life of the 2012 Farm Bill. If budget variables require the Committee 
to look at alternatives to our current marketing loan program 
structure, the Federation will work with you to develop the best safety 
net possible for our producers. I do want to point out that the ACRE 
program, as included in the 2008 Farm Bill, is not a viable option for 
peanut producers.
    There are additional considerations for any program changes in the 
next farm bill. If a new program is structured to limit farm size 
beyond the payment limit structure imposed by the 2008 Farm Bill, 
peanut producers will face more serious limitations for profit than we 
do under the current program with low prices. Specifically, there are 
only a few buyers for peanuts. These processors are large international 
businesses. There is no way a small farmer can survive with the limited 
safety net, necessary economies of scale in the production of peanuts 
and with our current marketplace. Small businesses typically sell 
directly to consumers but we are at the mercy of others, not directly 
selling to the consumer. We must maintain our separate payment limit 
for peanuts. This was agreed to when producers worked with the House 
and Senate Agriculture Committees in the 2002 Farm Bill establishing a 
marketing loan program for peanuts. The current program will not work 
without the separate payment limit.
    The Federation had grower meetings throughout our four states 
explaining the payment limit reforms in the 2008 Farm Bill. Although 
some might consider me a large farmer, my farm is not owned by a 
multinational corporation. I am not a wealthy man yet many reformers 
would argue that my farm should be outside the bounds of Federal 
payment limitations. This is not a rational argument. If we depended on 
farmers markets, hobby farmers and the smallest peanut farms for peanut 
production, there would not be a sufficient supply of peanut butter on 
the shelves of America's grocery stores or in our school lunch program.
    The Conservation Stewardship Program included provisions for a crop 
rotation program. We believe this program will enhance the environment 
and improve crop yields. The Department was slow to initiate 
regulations but the peanut industry is working with the Natural 
Resources Conservation Service to increase grower sign-ups. We hope the 
Committee will continue the program in the 2012 Farm Bill.
    The feeding programs at the USDA are very important to our 
producers. Peanut butter is a long-time participant in the school lunch 
program. Peanut butter also qualifies for the breakfast program and 
afterschool snack program. There are school systems all across this 
country participating in these Federal feeding programs. The peanut 
industry does not have the resources to reach even a small percentage 
of these nutrition programs illustrating the nutritional value, low 
cost and long shelf life of peanut butter. We need the USDA to partner 
with our industry in outreach programs to school nutritionists. We are 
on the USDA lists but many times this falls short of explaining new 
products for kids, the facts, not rumors regarding peanut allergies and 
other important peanut butter related variables. This also includes our 
need for assistance in working with international relief agencies. Our 
Congressional delegations and industry leaders struggled to get the 
attention of those preparing food assistance for Haiti relief. Although 
our industry provided three million servings of peanut butter to the 
relief effort, we were not successful in reaching decision-makers 
involved in establishing food assistance lists for U.S. and 
international aid. USDA has the experience and resources to help 
facilitate communications between the peanut industry and major relief 
organizations. The peanut butter products available for Ready-to-Use 
Therapeutic Food (RUTF) alone are a sufficient example of how helpful 
our products can be in impoverished parts of the world or countries in 
crisis.
    Peanut butter does not qualify for the Fresh Fruit and Vegetable 
Snack program. We believe that all school feeding programs should allow 
for the purchase of peanut butter. USDA, land-grant universities, the 
Department of Defense and other institutions have long recognized the 
importance of peanut butter as a nutritional resource.
    Finally, the recent legislative activity related to the 
reauthorization of child nutrition programs highlights the need for 
nutrition legislation to be the sole jurisdiction of the Agriculture 
Committee. We appreciate that Members of the House seek appointment to 
your Committee because of their interest in production agriculture, 
conservation and nutrition. We would hope that in the future House 
leaders would consider the House Agriculture Committee as the home for 
all nutrition legislation much like the Senate.
    We are hopeful the Congress will pass the agricultural disaster 
relief legislation similar to the bill approved in the Senate. The 
current SURE program has not been effective for peanut producers. 
Despite the USDA website seeking participation in the SURE program 
earlier in the year, the program was far from ready to go forward. In 
fact, peanut producers were turned away until recently because local 
offices had not been given sufficient instructions to receive 
applications for peanut losses. Even today, local offices are not 
consistent as to how they will handle producers from multiple counties. 
Peanut producing states typically have a large number of counties. It 
is not unusual for peanut producers to farm across a number of county 
lines.
    Peanut producers received no public support or financial assistance 
from the Department during the PCA Salmonella crisis caused by one 
peanut manufacturer, not by peanut producers. Peanut state members 
asked the Secretary to increase peanut butter purchases during the 
crisis to at least the purchase levels we saw in the mid 1990's to no 
avail. Other commodities have received financial assistance and support 
from USDA when prices have dropped or when their commodity has been in 
crisis, dairy and pork being just two examples, not peanuts. We believe 
any relief for the peanut industry will come from Congress whether this 
is with regard to the function of our program or the use of our product 
in government domestic and international feeding programs.
     In closing, production agriculture is part of our national 
security. The Secretary has spoken a great deal about rural development 
but production agriculture, at the heart of which is Federal farm 
programs, should be at the top of the list of roles for USDA. Please 
help the Department remember the importance of production agriculture.
    Thank you for allowing me to address the Committee today and the 
Federation looks forward to working with you.
                               Attachment

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The Chairman. Thank you very much, Mr. Morris, we 
appreciate it.
    Mr. Segler, welcome to the Committee.

   STATEMENT OF HILTON R. SEGLER, PECAN PRODUCER, ALBANY, GA

    Mr. Segler. Mr. Chairman, and Members of the Committee, 
thank you for the opportunity to come and testify today. My 
name is Hilton Segler. I retired after 40 years of growing 
pecans, Mr. Chairman, not pe-kahns, pecans. For the last 4 
years, I have been President of the Georgia Pecan Growers 
Association. I am here today representing all of our pecan 
growers, not only in Georgia but the entire nation.
    Most edible tree nuts are essentially a one state crop with 
almonds and pistachios and walnuts produced in California; 
filberts in Oregon and macadamia nuts in Hawaii. The pecan, on 
the other hand, is a multiple state crop, stretching across 
this country from the Southeast to the Southwest throughout 
some 15 states.
    Pecans are a very healthy nut, containing over 19 vitamins 
and minerals and high in fiber. Pecans are also ranked number 
one in total antioxidant capacity. Antioxidants serve as armor 
for our bodies and pecans are loaded with them.
    My written testimony will cover comments on several 
subjects--the Federal crop insurance, specialty crop block 
grant, Market Access Program, Conservation Stewardship Program 
and the School Lunch and After School Snack Program as well as 
the Breakfast Program.
    I briefly want to touch on two subjects today, the U.S. 
Department of Agriculture's domestic feeding programs and the 
Market Access Program.
    Pecans are a very old commodity in this country, but only 
recently has the industry seen just a glimpse of our future 
both domestically and in the world marketplace. Pecans are 
accepted in our school lunch, our after school snack and the 
breakfast programs. By the USDA's own analysis we are high in 
antioxidants.
    Our industry does not have the organizational 
infrastructure as many of our agricultural friends here today. 
We have one full time staff person in the State of Georgia. No 
other state, to my knowledge, has a full time staff. In our 
meetings since the 2008 Farm Bill with Capitol Hill and the 
USDA, it was evident that decisions about what USDA commodities 
to be purchased by the schools were made at the state and the 
local levels. Despite the fact that pecans rank as a healthy 
food product, as an industry, we do not have the resources to 
educate our school nutrition officials about our product at the 
level necessary to participate in most of the school systems.
    A great service that USDA could perform would be to work 
with the commodities to help educate the school officials about 
new research on healthy, nutritious products for these feeding 
programs, the availability of the product, the storage life and 
other important variables used by school nutrition programs to 
determine the food products that they purchase.
    I do not see this as an expensive new Federal program. You 
have access to land-grant university extension services across 
this country. I ask that you consider as a part of your 
nutrition initiatives in the next farm bill, that you include 
funds for commodity groups to work with land-grants and other 
personnel to educate school nutrition officials about our 
products. This will assure that our kids receive the most 
nutritious products in the marketplace, and commodities that do 
not have the infrastructure to market their products to these 
institutions have the opportunity to do so. In November of 
2009, our Pecan Growers Association did a school snack project 
in three Tift County elementary schools. Each school had 500 to 
550 children. The project was funded by our growers. I have 
enclosed a DVD for your Committee and I encourage you to look 
at it at some time. It is only about 3 minutes long.
    In the 2008 Farm Bill, the Congress included report 
language that excluded tree nuts from the Fresh Fruit and 
Vegetable Snack Program. We are a specialty crop. We do not 
have a farm program. We produce a healthy, nutritious nut. 
There is no reason we should not be included in this program. 
It is my understanding that trail mix was excluded because in 
the ingredients it had dried fruits and tree nuts. Please 
reconsider this policy as you draft the next farm bill and 
include pecans in the School Snack Program.
    Members of the Committee, one of the major reasons the 
pecan market has been so strong in recent years is our export 
market. We have seen tremendous growth in China, over 300 
percent increase and a lot of interest from other countries. As 
mentioned earlier, we do not have the money, nor the staff, to 
open offices or send sales teams to many of these places. This 
year is the first year that we are participating in the Market 
Access Program. It is not a large grant, but it is a start and 
we are very excited about it and the possibilities that it 
brings.
    I cannot tell you how important this is for our industry. 
It is also important for our economy. As our producers grow 
more pecans, we hire more employees for our industry. Our 
growers shop locally. They buy equipment, agricultural 
products, they bank and do other business transactions, all 
locally. Our pecans are shipped out of our port here in 
Savannah. The MAP program is a big part of our future and we 
need you to protect and to grow it.
    Thank you very much for allowing me to speak. And one other 
personal thing that I forgot to put in and I do want to say it. 
This Committee and the Senate Committee, as it refers to the 
2008 Farm Bill, you gentlemen did a lot of good things. You do 
not need to take away from it. There are certain areas you need 
to tweak, but it is a good bill for our growers and we thank 
you a lot.
    [The prepared statement of Mr. Segler follows:]

   Prepared Statement of Hilton R. Segler, Pecan Producer, Albany, GA
    Mr. Chairman and Members of the Committee: Thank you for the 
opportunity to testify today. My name is Hilton Segler. I retired after 
40 years of growing pecans. For the last 4 years I have been President 
of the Georgia Pecan Growers Association. I am here today representing 
all of our pecan growers not only in Georgia but the entire nation.
    Most edible tree nuts are essentially one state crops; Almonds, 
Pistachios, and Walnuts are produced in California; Filberts in Oregon 
and Macadamia nuts in Hawaii. The pecan on the other hand, is a multi-
state crop, stretching across this country from the Southeast to the 
Southwest throughout some 15 states.
    Pecans are a very healthy nut, containing over 19 vitamins and 
minerals and high in fiber. Pecans are also ranked #1 in total 
Antioxidant capacity. Antioxidants serve as armor for our bodies and 
pecans are loaded with them.
    My written testimony will cover comments on several subjects;

    1. Federal Crop Insurance.

    2. Specialty Crop Block Grants.

    3. Market Access Program (MAP).

    4. Conservation Stewardship Program.

    5. School Lunch/Afterschool Snack Program & Breakfast Program.

    I briefly want to touch on two subjects today, the U.S. Department 
of Agriculture's domestic feeding programs and the Market Access 
Program.
    Pecans are a very old commodity in this country but only recently 
has the industry seen just a glimpse of our future both domestically 
and in the world marketplace. Pecans are accepted in the school lunch, 
afterschool snack and breakfast programs. By USDA's own analysis we are 
high in antioxidants.
    Our industry does not have the organizational infrastructure as 
many of our agricultural friends here today. We have one full-time 
staff person in the State of Georgia. No other states, to my knowledge, 
have a full-time staff. In our meetings since the 2008 Farm Bill with 
Capitol Hill and USDA, it was evident that decisions about what USDA 
commodities to be purchased were made at the state and local levels. 
Despite pecans rank as a healthy food product, as an industry, we do 
not have the resources to educate our school nutrition officials about 
our product at the level necessary to participate in most of the school 
systems.
    A great service USDA could perform would be to work with 
commodities to help educate school officials about new research on 
healthy, nutritious products for these feeding programs, availability 
of the product, storage life and other important variables used by 
school nutrition programs to determine what food products they 
purchase.
    I don't see this as an expensive, new Federal program. You have 
access to land-grant university extension services across the country. 
I ask that you consider as part of your nutrition initiatives in the 
next farm bill, which is the largest component of what you do, that you 
include funds for commodity groups to work with land-grants or other 
personnel to educate school nutrition officials about our products. 
This will assure our kids receive the most nutritious products in the 
marketplace and commodities that don't have the infrastructure to 
market their products to these institutions and opportunity to do so. 
In November of 2009 our Pecan Grower Association did a school snack 
project in all three Tift County Elementary Schools. Each school had 
500-550 children. This project was funded with grower money. I have 
attached a DVD of the project for your Committee.
    In the 2008 Farm Bill, the Congress included report language that 
excluded tree nuts from the Fresh Fruit and Vegetable Snack Program. We 
are a specialty crop. We don't have a farm program. We produce a 
healthy, nutritious nut. There is no reason we should not be included 
in this program. It is my understanding that trail mix would be 
excluded because it has dried fruit and tree nuts. Please reconsider 
this policy as you draft the next farm bill and include pecans in the 
School Snack Program.
    One of the major reasons the pecan market has been so strong in 
recent years is exports. We have seen tremendous growth in China, over 
300% increase and much interest from other countries. As mentioned 
earlier, we don't have money or staff to open offices or send sales 
teams to many of these places. This year is the first year we are 
participating in the Market Access Program (MAP). It is not a large 
grant but it's a start. We are very excited.
    I can't tell you how important this is for our industry. It is also 
important for the economy. As our producers grow more pecans, we hire 
more employees for the industry. Our growers shop locally. They buy 
equipment, agricultural products, bank and other business transactions, 
all locally. Our pecans are shipped out of the port in Savannah, 
Georgia. The MAP program is a big part of our future and we need you to 
protect and help it grow.
Federal Crop Insurance
    I chaired the committee that began in 1980, to get Congress to pass 
a bill that would enable the RMA to provide Federal crop insurance to 
our pecan growers. Not until 1998 did RMA allow us to have three pilot 
counties (Dougherty, Lee and Mitchell) in Georgia. In 2003, we were 
able to add seventy-nine additional counties in Georgia and in 2004 
added two additional counties in Alabama (Baldwin & Mobile). Only in 
2005 was a national program approved, twenty-five years after we 
started.
    We must protect this product. The proposed cuts in the delivery 
reimbursement, by the Secretary are excessive and unrealistic. The 
success of the crop insurance program is many years of work and 
investment by both the public and private sectors. What was once a 
small regional program to insure a few crops against weather risks has 
grown into an insurance system that allows farmers to manage both 
weather and price risks. We must maintain a delivery reimbursement that 
creates new products to give farmers flexibility in addressing their 
risk management's needs.
Specialty Crop Block Grants
    It is our hope that the Congress will continue to support the State 
Block Grants that were expanded in the 2008 Farm Bill. Georgia pecan 
producers believe this is one of the most important components to be 
considered in the 2012 Farm Bill. Our producers have operated 
successfully without farm programs, but marketing and agriculture 
research are critical to our success. Declining industry dollars due to 
labor and energy cost and other issues inhibit meeting our research and 
marketing needs for the future. State Block Grants provide additional 
resource opportunities to compete in the domestic and world 
marketplace.
Market Access Program (MAP)
    As you know this program was created in the 1985 Farm Bill. The 
level of funding in the 2008 Farm Bill is $200 million annually and I 
want to encourage the Congress to maintain the funding at that level. 
The Market Access Program (MAP) is designed to create, maintain and 
expand existing markets to generate the greatest benefits for all 
producers.
    Exports are projected to be $100 billion in TY10, up $2 billion 
from last year. Agriculture's trade surplus was $23 billion in FY09 and 
is projected to be about $23 billion in FY10 (Source: USDA). 
Agriculture is one of the few sectors of the American economy to enjoy 
a trade surplus, and without it the overall U.S. trade deficit would be 
even worse.
    Every billion dollars of U.S. Agricultural exports supports 8,000 
American jobs (Source: USDA) without the incentive of the MAP funding 
through this important cost-share program, it is highly unlikely that 
private funds could support the Agriculture export promotion effort.
Conservation Stewardship Program
    The planting of clover and other cool season legumes in our pecan 
groves is a tremendous energy saving. The CSP program that was written 
into the 2008 Farm Bill gives the growers that opportunity. It 
increases the farmer's level of conservation practices, while 
maintaining existing conservation activities. It has come to my 
attention that in the past CSP efforts, landowners would sign-up on 
multiple farms under different FSA designations (i.e., operators, 
owners, producer, etc.).
    To address this matter, the new program indicated that only the 
``operator'' can be the applicant. This is a new rule that applies only 
to the CSP program and does not apply to the EQIP, or other 
conservation program. If we can't work through this eligibility 
question it will affect over half of our farmers.
    Look at the energy saving. We have about 150,000 acres of pecans in 
Georgia and about 125,000 acres are on a good management program. The 
clover would save the pecan grower about 100 pounds of ``N'' nitrogen 
each year. Ammonia Nitrate 33.5% has 670 pounds of ``N'' per ton. Each 
ton will treat 6.7 acres of pecans. On 125,000 acres of pecans that is 
18,656 tons of Ammonia Nitrate or 37,312,000 million pounds of Nitrogen 
that is not dump on the ground. Think of the ``Gas & Oil'' it takes to 
make 37 million pounds of Ammonia Nitrate and this is just in Georgia. 
What a great energy saving to our nation with just a rule change.
School Lunch/Afterschool Snack Program & Breakfast Program
    Our nation has come a long way since 1946 Richard Russell School 
Lunch Program was enacted by Congress. The success of the school 
program persuaded Congress to improve children's diets by adopting The 
Fresh Fruit & Vegetable Program.
    We urge the Congress to include our Pecans, tree nuts, trail mix, 
dried fruits in the school lunch program. In the Dietary Guidelines for 
Americans, we are made aware that ``nuts'' are included.
Key Recommendations for Specific Population Groups:
    Children and Adolescents: Keep total fat intake between 30 to 35 
percent of calories for children 2 to 3 years of age and between 24 to 
35 percent of calories for children and adolescents 4 to 18 years of 
age, with most fat coming from sources of polyunsaturated and 
monounsaturated fatty acids, such as fish, nuts and vegetable oils.
    This Dietary Guidelines for Americans is not a mandatory program 
for our schools, but they are guidelines to help the schools understand 
what is best for children.

    The Chairman. Thank you very much. Pecans, we have them. I 
am going to have one heck of a time getting the rest of the 
people in Minnesota to say pecans.
    [Laughter.]
    The Chairman. That will take a lot of work.
    Mr. Williams, welcome to the Committee.

STATEMENT OF JAMES ``RICKY'' WILLIAMS, DAIRY PRODUCER, BAXLEY, 
                  GA; ACCOMPANIED BY SAM STONE

    Mr. Williams. Mr. Chairman, honorable Members of the 
Committee, and Mr. Bishop, it is really good to be here where 
everybody can understand this proper English. It does not 
happen often for me.
    [Laughter.]
    Mr. Williams. First off, I would like to say that I am 
involved in dairy, milking of cows. I also have a milk hauling 
operation where we transport a lot of milk out of Georgia into 
Florida. But I farm too, and I listened here, I grow peanuts 
and I have cotton, I grow corn. A lot of times we fight amongst 
ourselves. You know, I was sitting here listening and thinking, 
and I can remember it seems like whoever does the best job of 
lobbying is who comes out the best in the farm bill. Well, 
maybe we will learn one day not to fight against ourselves.
    A lot of us commended the 2008 Farm Bill. MILC is good, you 
know, it helped farmers. All of you know that and voted and 
approved $350 million last year to aid the dairy industry. When 
everything was said and done, we actually got 32 cents on 
production for a few months. Well, in south Georgia probably 
our price of milk then was around $18.00, $17.00-$18.00 a 
hundredweight. So 32 cents was minute, it was very little. But 
a starving man would give 50 cents for a pack of crackers and 
you are going to take it, it is good.
    Well, I guess I am going to have to quit there.
    [Due to Mr. Williams' illness, he required assistance.]
    [The prepared statement of Mr. Williams follows:]

Prepared Statement of James ``Ricky'' Williams, Dairy Producer, Baxley, 
                                   GA
    Mr. Chairman, distinguished Members of the Committee, I appreciate 
the opportunity to testify before you today on the future of dairy 
policy. My name is Ricky Williams and I am a sixth-generation farmer, 
currently growing peanuts and corn on 900 cultivated acres. In 1993, my 
father and I began Williams Dairy where we currently milk 600 cows. 
Also, in 2005, I began hauling milk in the Southeast through Williams 
Dairy Trucking, which operates 40 trucks and 50 tankers. Besides my 
duties on the farm, the dairy, and in the trucking company, I also 
serve on the Southeast Area Council of Dairy Farmers of America, Inc. 
(DFA), as a delegate to the American Dairy Association of Georgia, and 
as a board member of the Southeast Dairy Cooperative Association. 
Additionally, I have recently been appointed to the U.S. Department of 
Agriculture's (USDA) Dairy Industry Advisory Committee (DIAC).
    As this is the Committee's eighth farm bill hearing, you have no 
doubt heard from other dairy producers on the state of the dairy 
economy. You are well aware that the past 18 months have been very 
difficult for dairy producers across the nation. The depressed milk 
prices, brought on by a supply/demand imbalance, coupled with high 
input costs, a collapse of our financial structure and an international 
recession has led to an economic situation not witnessed for 
generations within the dairy industry. I know of no one in the dairy 
industry--not even the most efficient and best producers--who has not 
been dramatically impacted. In my role as a milk hauler, I know that 
for many producers in my region of the country, the economic strain has 
been too much to bear and they have left the business. Remember that 
for those of us in rural America, the ``business'' allows us the chance 
to raise our children and watch our grandchildren grow in small towns 
with big skies all across the nation. These children are who this 
nation will rely on to produce food in the future. As USDA Secretary 
Tom Vilsack testified to before this Committee on April 21 ``rural 
America truly serves our [this nation's] backbone.'' He went on to say 
that the welfare of rural America . . . ``is of vital importance to the 
success and well-being of all Americans.'' I could not agree more.
    I want to thank Members of the Committee for acknowledging the 
severe distress dairy producers have been weathering and express 
appreciation for all your support over the last year. As always in 
dairy policy, it takes all of us working together to make a difference 
and make changes. With your help and insistence, the USDA used many 
tools available to them to bring some relief to dairy producers. USDA 
temporarily increased the support price through the Dairy Product Price 
Support Program (DPPSP) which resulted in increased purchase prices for 
cheese and nonfat dry milk (NFDM), while boosting farm-level income for 
dairy farmers. They reactivated the Dairy Export Incentive Program 
(DEIP) for the 2009-2010 year which resulted in the transfer of 
significant volumes of NFDM, butter and cheese to international 
customers. Additionally, USDA acknowledged the needs of those 
struggling to afford nutritious food for their families and transferred 
200 million pounds of NFDM to Food and Nutrition Services for use in 
domestic feeding programs. Last, Congress passed an appropriations 
measure which contained $350 million in direct support to the dairy 
industry. On behalf of the 17,000 member-owners of DFA, I thank you.
    Mr. Chairman, as you know, extreme volatility in the industry 
during the past 18 months has resulted in drastic swings in the price 
dairy farmers are paid for their milk and their costs of production. 
Recovery has come much slower than expected, and producers are low on 
equity and heavy with debt. Many of us in the producer community are 
facing increasing pressure from our lenders, who have, until now, been 
patient in waiting for the upswing in prices. They too have balance 
sheets to be concerned with, and their interest in continued lending to 
many in the dairy sector is starting to wane. Because of these factors, 
the situation for many dairy producers will surely get worse before it 
gets better.
    In my opinion, going forward, it is important that the Committee 
identifies and develops policy that addresses the real concern of this 
nation's dairymen and women--extreme volatility. In the last decade, we 
have seen dramatic volatility in dairy prices and in our costs to 
produce milk. The upward spikes have been higher, the depressed prices 
have been lower, and the time in between has been shortened with little 
allowance for recovery. Current Federal dairy policy fails to provide 
an adequate safety net, is inflexible and provides few tools for 
producers to access in times of low prices or extreme volatility. We 
must identify the tools necessary to decrease and mitigate such extreme 
swings if we are to sustain a vibrant domestic dairy industry.
    I have watched, with great interest, the policy development work 
within my own cooperative. As I mentioned earlier, I am member-owner of 
Dairy Farmers of America. In May of 2009, DFA began evaluating current 
dairy policy and considering future options. The following principles 
were used when developing DFA's policy concept and for the evaluation 
of proposals developed by others. New Federal dairy policy should:

   Be market oriented to allow for growth both domestically and 
        globally.

   Be responsive to quickly changing market conditions.

   Have 100 percent financial participation by producers.

   Be global in nature to consider the impact of imports and 
        exports.

   Be national in scope with the ability to implement 
        regionally.

    Following much consideration and with these principles in mind, 
DFA's Board of Directors adopted a growth management concept called the 
Dairy Growth Management Initiative (DGMI). DFA's primary goal with DGMI 
has been to identify policy that would reduce price volatility and 
provide additional tools to assist producers in times of low prices, 
including the ability to spur demand and enhance exports. As DGMI was 
shared with others to consider, it was used as an invitation for 
discussion in an effort to build consensus in the industry.
    DFA, other dairy cooperatives and industry organizations like NMPF 
then began working together towards consensus for future national dairy 
policy that allows for growth in the industry while addressing price 
volatility. These efforts at collaboration are proving successful, and 
I am pleased to see that several of the DGMI concepts for addressing 
volatility are now being integrated in the proposal NMPF is developing.
    At the inaugural DIAC meeting held April 13-15 in Washington, D.C., 
several organizations presented their ideas for future dairy policy to 
the Committee. NMPF, the International Dairy Foods Association, the 
National Farmers Union and the Milk Producers Council all spoke on 
policy proposals their organizations were developing. All the proposals 
had some merit and several addressed my main concern--the issue of 
extreme volatility.
    The NMPF proposal was of particular interest as they are 
recommending several changes to national dairy policy, including:

   Revamping the DPPSP and Milk Income Loss Contract programs.

   Creating a program that sends a direct economic signal to 
        each individual producer to manage production in a manner that 
        allows the producer to remain in business while addressing 
        supply/demand imbalances.

   Creating a new dairy producer gross margin insurance program 
        that responds to milk price and feed cost.

   Reforming Federal Milk Marketing Orders.

    Producers need several tools in order to meet their needs in an 
ever-changing marketplace. NMPF touched on several of those tools. I 
appreciated their presentation and will be very interested in learning 
more details as it is further developed, as will others on the DIAC.
    I will note that DFA is supportive of NMPF's policy direction and 
they believe that the NMPF process will yield a unified proposal within 
the industry. Only through a unified industry proposal can we secure 
the necessary policy changes that will aid in the success and longevity 
of the U.S. dairy sector for years to come.
    While the focus of this hearing is the development of the next farm 
bill, many of you are undoubtedly wondering about immediate steps that 
could be taken to assist dairy producers. I have personally contacted 
Secretary Vilsack about these actions, which I feel should be 
considered today to not only assist the dairy economy's recovery but 
also address the needs of the increasing numbers of those needing food 
assistance.
    According to many economists, the fundamental reason that dairy 
prices have not recovered more quickly is our burdensome inventory of 
American-style cheese. While Congress authorized and USDA committed $60 
million for cheese purchases last year, it simply was not enough. USDA 
has the tools available to them to move an additional 75 million pounds 
of American-style cheese for feeding and nutrition purposes. Moving 
these inventories would reduce excess supply and provide nutritious 
foods to those who are unable to afford them, a population that has 
been growing under the nation's financial crisis. By taking this 
action, USDA could provide dairy products for both domestic and 
international hunger relief efforts currently underway. This would 
directly benefit hungry families who continue to struggle with 
malnourishment and will provide additional support to America's dairy 
producers.
    I believe USDA should focus on the increased need facing our 
nation's food banks. Mr. Dwain Forester, a DFA member and dairy 
producer from the State of Washington, has developed a milk voucher 
proposal that would provide milk and dairy products for those accessing 
local food banks around the country. Under Mr. Forester's plan, USDA 
would issue vouchers similar to those used in the Women, Infants and 
Children (WIC) program to be distributed through local food banks. The 
use of milk vouchers would enhance the food banks' ability to offer 
additional food and nutrition to their participants without requiring 
any new capital expenditures for refrigeration units or extra personnel 
to handle cases of milk. I believe that a milk voucher program has the 
direct ability to provide needy families with nutritious dairy 
products.
    Additionally, USDA, under current authorities, can provide dairy 
products to those in need. USDA can purchase cheddar cheese and donate 
the cheese to food banks, food pantries and emergency feeding 
organizations across the nation that can accommodate the donation. 
These purchases can be made by:

   Utilizing Section 32 funds to purchase cheese and provide 
        this cheese to the Emergency Food Assistance Program which can 
        then donate to food banks and other eligible entities; and

   Utilizing authorities under Section 5 of the Commodity 
        Credit Corporation Charter Act to support commodity prices and 
        remove and dispose of surpluses by donating cheese to food 
        banks and other eligible entities.

    According to a 2008 report by USDA entitled ``Household Food 
Security in the United States'' my home State of Georgia has a 14.2 
percent household food insecurity rate, ranking fourth worst in the 
country and above the national average of 12.2 percent. With the state 
of the economy, we know more and more families are finding it difficult 
to provide proper nutrition at the dinner table and are accessing food 
banks and similar entities for supplemental nutrition.
    USDA programs such as the McGovern-Dole International Food and 
Child Nutrition Program has successfully channeled dairy products 
globally to those in need. In addition, measures such as the WIC, the 
Temporary Assistance for Needy Families, the American Recovery and 
Reinvestment Act, and the Summer Food Service Program have provided 
nutritious dairy products which can address hunger. Because of the 
success these programs have had in addressing hunger, I have urged USDA 
to expand their use to provide dairy products for humanitarian efforts 
both domestically and internationally. Addressing hunger and issues of 
malnutrition has lasting impacts, especially abroad. I urge the 
Committee to contact USDA regarding these proposed actions as well. As 
before, working together, we can secure positive action from the 
Administration.
    On another issue of note, I employ nearly 15 employees on my farm 
and dairy, besides my family who are involved. Increasingly it is 
becoming more and more difficult for dairy producers to fulfill their 
labor needs. Currently, there exists no good visa program for the dairy 
sector to secure a legal and stable workforce. Several pieces of 
legislation currently pending before Congress address this gap in the 
system. I would ask Committee Members to lend their support to H.R. 
2414, the Agricultural Job Opportunities, Benefits, and Security Act 
(AgJOBS), and H.R. 3744, the Dairy and Sheep H-2A Visa Enhancement Act 
of 2009, introduced by Representatives Howard Berman (CA) and Michael 
Arcuri (NY) respectively. Both bills allow the dairy industry to 
participate in the H-2A program which is currently used for seasonal 
agricultural needs. As you are well aware, the dairy industry 
``harvests'' several times a day. We need quality employees to ensure 
that we can continue to do what we do best--produce quality milk to 
meet consumer demand.
    Another issue that impacts my operation is truck weights on Federal 
highways. The current weight limit for trucks on the Federal highway 
system is 80,000 pounds. Increasing the size and weight limits of 
trucks will make the industry more efficient in its use of energy. As a 
hauler and dairy producer, this efficiency will go a long way to 
improving profitability and sustainability. Please support H.R. 1799, 
the Safe and Efficient Transportation Act of 2009, introduced by 
Representative Michael Michaud (ME). The bill would allow states to 
authorize an increase in their weight limits on interstate highways 
without sacrificing safety.
    There are several other issues which Congress may choose to address 
which will impact the dairy sector--either positively or negatively. I 
appreciate the Committee's effort in ensuring the voice of agriculture 
is heard on climate change and other environmental legislation being 
developed. The dairy sector is currently struggling and the imposition 
of new regulatory requirements right now will surely push more out of 
the industry.
    Thank you for allowing me to provide testimony before you today. I 
appreciate the Committee's work and timeline for farm bill policy 
development. I will note, however, that many dairy producers will not 
be able to hold on until the next farm bill, scheduled to be completed 
in 2012. If the dairy sector is able to achieve consensus sooner, I 
would urge the Committee to consider action.
    Mr. Chairman, I appreciate all the Committee's efforts and look 
forward to working with you in the months to come.

    The Chairman. You are fine. Ricky has been in the hospital, 
he is being a real trooper to even be here, his doctor did not 
want him to be up here. So Ricky, why don't you take a break in 
the back there.
    Ricky is on the Secretary's Dairy Commission that had their 
first meeting a couple of weeks ago. The dairy industry has 
been through a real bad time to say the least. They are working 
hard to try and come up with a new policy that will work for 
the future, and try to get some of these ups and downs out of 
the system. I think you guys all suffer from that, it is maybe 
not quite as bad as the dairy industry.
    I am going to recognize Mr. Bishop. He has some other 
commitments and we again very much appreciate him being with us 
today, joining us. We rely on him. In the farm bill, we have a 
lot of mandatory spending that we control, but a lot of it is 
authorized, and we rely on guys like Mr. Bishop to get the 
money to make those things happen in the end. So we put a lot 
of weight on you, Sanford.
    You are recognized and we appreciate you being here.
    Mr. Bishop. Thank you very much, Mr. Chairman, and I 
appreciate you accommodating me.
    A couple of things I would like to say. I listened to the 
testimony and I want to thank the panelists very much. You came 
from a district close by and we collaborate frequently, and I 
want to thank you for your testimony.
    I want to take this opportunity to thank our Chairman, 
Chairman Peterson, for the yeoman's work that he did in 
protecting agriculture in the climate bill as it passed through 
the House. I heard mention of the EPA and how climate change 
legislation could impact specialty crops. And I want you to 
know that Chairman Peterson fought really long and hard to make 
sure that the version that came out of the House would keep EPA 
off the farm and how that could be controlled by USDA. And I 
think he deserves a great round of applause for that.
    I want to also commend the peanut industry for its help in 
stepping forward with the Haiti relief. That is extremely 
important and it I think deserves a salutation and I certainly 
want to shout out that for you.
    There are two things that I want to really ask this panel 
to talk about that I think are particularly important to 
southeastern agriculture, Georgia agriculture especially. And 
that has to do with the issue of payment limitations. Payment 
limitations, budget crunches, and what we are faced with 
fiscally, has become a real difficult political issue for us, 
particularly those of us who are not from the Southeast and who 
represent agriculture.
    So could you share with the Committee and for the record 
why the southeastern agriculture is so uniquely concerned about 
the additional squeeze that payment limitations are putting, or 
could possibly put, on your ability to produce the agricultural 
products that you produce.
    And the other thing that has to do with specifically 
peanuts, and that is peanut storage and handling. I would like 
for you to comment on that. I think several of you are involved 
in multiple crops. So if you would just comment on that, I 
think it might be helpful for the Committee.
    Mr. Morris. Do you want to start with me?
    The storage and handling is very important for the peanut 
farmer. Of course we appreciate in the 2002 Farm Bill that you 
worked through in minimizing cost to the government, and it is 
important that we have that to where we make peanuts available, 
for not only that, but to continue to have it at a price that 
works for our consumer in the storage and handling.
    So we would like to say thank you for that. And not only 
that, it gives marketing opportunities for the farmer in the 
peanut industry.
    And another thing is separate payment limitations, without 
that, with peanuts and cotton being the crops such as they are, 
it would be very unhandy for the southeastern farmer to be able 
to be under the limitations and particularly the restrictions 
that we are under today, and the reductions that has come 
about. We have been able to work with it this far, and it has 
worked very well in most cases for us as peanut and cotton 
producers in the state. So we kind of fall under, I reckon you 
would say, a little bit different circumstances than most other 
producers throughout the United States in peanuts and cotton in 
southeastern agriculture.
    Mr. Bell. I would like to comment on that also. I am a 
peanut and cotton farmer mainly in Decatur County, which is 
probably, if not the number one ag county in the state, it is 
probably the number two. We are right above the Florida line, 
and we are mostly irrigated crop acres.
    I think the payment limit situation is about right for us. 
I do not think it needs to be any tighter. Like on our farm, we 
grow corn, cotton and peanuts as our three main crops. We have 
a separate planter basically for each crop. Mostly corn is 
grown in 30 inch rows, cotton is grown in 36 inch rows and 
peanuts are grown in twin rows. You have to have a separate 
harvester for each one of these crops. You have to have a corn 
harvester for your corn, you have to have a cotton harvester 
for your cotton, you have to have a peanut harvester for your 
peanuts. And we need the payment limitation, we have to have 
multiple implements to operate our operations. And I do not 
think we need any change in the payment limitations.
    And on the storage and handling situation, I feel that was 
a great asset for us as peanut farmers. I know it would be 
tough to put back in, but I am a peanut producer, like I said, 
in Decatur County and the 2002 Farm Bill made a lot of changes. 
It put peanuts under a marketing loan which enabled me and 
about 50 other growers to go into the peanut shelling business. 
We now operate a peanut sheller in Donalsonville, Georgia. We 
are the largest employer in Seminole County and the largest 
taxpayer in Seminole County. Without those changes to the 
market loan and the storage and handling, that business would 
not be in business today. It has further integrated a lot of 
producers, and there is also now another facility in Tifton 
that shells peanuts. So we are expanding and I think storage 
and handling is good, and I think the payment limits should 
remain as they are.
    Mr. Lee. I operate a farming operation with my three sons, 
they are very much involved every day. Thank the Lord I had 
three sons because if I did not, I would have to come under 
payment limitations. I personally think this is very unfair to 
the row crops and southern agriculture. I mean as far as 
payments limitations that we struggle with. I also have a 
cotton gin. When you start looking at any given year of AGI and 
how convoluted it is, we as growers wind up paying CPAs and 
lawyers and everything to try to figure out how we can farm.
    Today we have to be commercial size to afford equipment. 
Mr. Bell said a cotton picker costs over $300,000. A new cotton 
picker that we are going to have to run are over $500,000. I 
think the current program has to be corrected.
    About 800-850 acres of cotton is about all we can grow and 
get payments and if you do not get the subsidies, we are in the 
red on every acre. It takes about 2,500 acres to justify one of 
those pickers. That is just an analogy that I wanted to throw 
out. And then you take away the separate limitation on peanuts 
that we talked about, we are pretty much dead in the water. It 
is a big issue. Thank you.
    Mr. Bishop. I have one other question and I just want you 
to think about it and help the Committee as we try to look 
forward towards the next farm bill. Tell us how we can deal 
with issues raised by the Brazilian-U.S. cotton dispute as we 
go into this new farm bill.
    Mr. Lee. Well, I realize this is a big issue because it is 
far-reaching.
    First of all, I do not think we know what they want as far 
as correcting the problem, number one. I am glad we did what we 
did to sort of put a temporary mandate on the problem. You 
know, I think we preserved about a billion dollars of U.S. 
exports, but the money that we are giving them cannot repay the 
farmers in the red.
    I do not know if I am answering your question, but I want 
to start with that.
    Mr. Bishop. If you want to take some time and submit 
something for the record, that would be good, but I wanted to 
put the question out there because that is going to be an issue 
that will have to be dealt with as we go into that farm bill. 
And I know it is very, very vitally important to the American 
cotton industry, and we would like to have your input as we try 
to grapple with that.
    The Chairman. Will the gentleman yield?
    Mr. Bishop. Yes, I will.
    The Chairman. I had a meeting with the industry here about 
2 weeks ago, the top folks in the cotton industry, and we 
discussed this. You know, the $147 million deal just kind of 
bought some time. We are in a 60 day window now where there is 
discussion going on with Brazil because we really do not know 
what they want. And maybe at the end of that 60 days, we might 
know. What I have been told, once we get a handle on this and 
we figure out what we have to do, where we have to head, then 
the industry is going to get together. They are going to have 
to try to figure out how we respond to it, and how we come up 
with a program that works for cotton. And hopefully we can get 
all that done in time for the next farm bill.
    So that is kind of the plan that is on the table. But I 
think right now it is kind of premature until we get this next 
round of negotiations done. Am I right about that?
    Mr. Lee. That is correct. And you know, one part of this 
affects all other commodities too.
    The Chairman. Right. That was one of the reasons, Sanford, 
that I started having these hearings early, to start people 
thinking, about, obviously, with the dairy industry, what they 
have been through. They have come to the conclusion they have 
to make some changes in order to try to get something that is 
going to work for them. Cotton is probably going to be forced 
into it whether they like it or not. And it could affect the 
other programs.
    So I have asked all the commodity groups to take a look at 
what we are doing. The bottom line--you know, this came up here 
today about the SURE Program is not working here. You know, we 
have the revenue program, some places it works, some places it 
did not. But we keep adding things on top of what we are doing, 
and I just think we are making this way too complicated. My 
goal is to try to simplify these programs, coordinate them so 
they work together better. You know, I would love to get to the 
day where we would not have to have an ad hoc disaster, where 
we have some kind of a way to make this thing fit together so 
that we have a program that addresses it. Maybe that is pie in 
the sky because every disaster is different.
    But you know, that is where we are trying to get. And we 
want to work with you guys to make sure that we have a program 
that works and we maintain the industry.
    By the way, these cotton pickers are made in my district in 
Vincent, Minnesota. I drove one that sold for over $500,000. It 
was quite a machine, but I do not envy anyone that has to buy 
one.
    Mr. Bishop. I thank you, Mr. Chairman, for allowing me the 
opportunity to share this hearing. I thank you for inviting key 
ag policymakers and people who actually work day to day in 
agriculture from our area and our state. I am sure that this 
information is very valuable and we just appreciate the 
opportunity.
    The Chairman. Thank you, Mr. Bishop.
    The gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman, and welcome to all 
of our producers on this panel.
    I would like to switch the subject and ask if you would 
each comment to me about whether or not you looked at the 
impact that climate change legislation, or EPA regulation, 
might have on your operation and cost of production. And then 
as a second question, whether there are other EPA regulations 
or government regulations that are questionable, in your mind, 
as to the merit that they hold relative to the cost and ability 
of producers in your sector to be able to continue to produce 
good agricultural products competitively.
    We will start with you, Mr. Segler, since I am pleased to 
be in Georgia where a pecan is a pecan.
    Mr. Segler. We are pleased to have you, sir.
    One of the problems that we, as growers, and we in the 
private sector have, when Congress passes a law and it moves 
from the intent of Congress to the Department to exercise it, 
it looks like it come from another country. The intent is just 
mixed up.
    EPA is something that is hard to handle. We certainly, 
growing pecans, we have problems with them as well. We are a 
little bit different than some of the other specialty crops, 
vegetable crops with some of the regulations, but it is a 
problem and there are a lot of people that think the EPA should 
just be abolished.
    [Laughter.]
    Mr. Goodlatte. And how about the climate change 
legislation? Are you for that?
    Mr. Segler. You know, I have seen several versions of that, 
from one extreme to the other. Because of the impact that is 
going to come out, as far as the growers are concerned, I think 
it is going to have to be looked at pretty well. We, as far as 
our industry is concerned, we take a lot of carbon dioxide out 
of the atmosphere, our groves do. The winter clovers that we 
plant, the recycling of everything in the trees into the 
ground, we do a lot of soil building with organic matter. It is 
going to be agriculture that is going to take the carbon 
dioxide out of the atmosphere.
    Now if some program can be initiated so that the good is 
not taken away from what the growers are contributing to, to 
the climate change, then I would certainly look at it from a 
favorable standpoint. But the increased cost--no, sir.
    Mr. Goodlatte. Well, the increased costs come about--the 
basic concept of the cap-and-trade legislation is that we are 
going to increase the cost of traditional sources of energy to 
make new sources of energy more competitive in the marketplace. 
And if you were operating in a vacuum, that might be a great 
thing to do, but the fact of the matter is due to competition 
all over the world, they are not going to do that, and they are 
going to not only grow your lunch, they are going to eat it too 
if you let them do that by raising the cost of oil and natural 
gas and electricity generated by coal. Even nuclear power, 
which is CO2 gas emission free, is not favored in 
the legislation that passed the House of Representatives.
    Mr. Segler. Let me share something with you, you can read 
it in my testimony, pertaining to the Conservation Stewardship 
Program. My understanding--and we worked extremely hard as Mr. 
Marshall and Mr. Scott knows, in trying to get pecans cleared 
to plant a legume, a winter legume, because of the terrific 
cost savings it would have, not only for our growers, but in 
energy itself. When you plant clovers in your pecan grove, it 
will generate about 100 pounds of N per acre. If you look at 
the cost savings there as far as the grower is concerned, it is 
going to contribute to probably about $100 an acre cost saving 
in the amount of nitrogen he has to plant. Now we have 150,000 
acres of pecans in the State of Georgia.
    Mr. Goodlatte. What percentage of them are planting clover 
now?
    Mr. Segler. Probably about ten percent.
    Mr. Goodlatte. Do you think that is growing?
    Mr. Segler. It could grow but about 125,000 acres of it is 
under a good management program. We worked extremely hard to 
get clover planted in the CSP program. One of the provisions 
they have in there when it got to the USDA is that you have to 
be an operator in order to qualify. Well, we have a lot of 
pecan growers that are not classified as an operator at the FSA 
office. They may be a producer, they may be an owner, but 
because of an earlier program, they put some restrictions in 
there because of maybe some abuse, and so it is only classified 
as an operator.
    Mr. Goodlatte. Mr. Segler, I am going to have to cut you 
off because I have used my whole 5 minutes on you and I have 
five other people I would like to hear from on my one question.
    Mr. Segler. Please read my comments.
    Mr. Goodlatte. Will do. Pass that to Mr. Morris.
    Mr. Morris. Yes, sir. Anyway, EPA, EPD, we sometimes look 
at them as maybe being an adversity instead of an advantage to 
us, but they are great because there are conservation practices 
and things that we can implement on our farms to better our 
communities. And not only that, but to better the land for the 
future too.
    Of course, I use conservation tillage, been using it since 
1996. It is very important to me not to have erosion, with soil 
going down in the streams and polluting our natural resources. 
These type things are very important to me as we look at future 
generations and ways that we can improve the quality of life 
for all Americans.
    You know, when we look at carbon credits, we look at 
renewable energy, and in one case we are trying to put the 
carbon credits back on the land and in the other case, we are 
gleaning from it to have renewable energy too. So you know, we 
might have a conflict in how we are trying to accomplish 
something, as far as renewable energy and the way that we are 
accomplishing it.
    But all these things are important. I think as we look into 
the future there are a lot of things that we are going to have 
to develop.
    Another thing that we use on our farm is we use water 
conservation, we use the energy in being able to convert diesel 
fuel to electric, so there are some other things that we in 
agriculture can do. So we have a lot of things to accomplish, 
and I would like to say--I would like to commend y'all in your 
efforts in conservation and also in the energy packages and 
things that has happened. So we very much appreciate that.
    I am sorry to take so much time, but thank you.
    Mr. Goodlatte. Go ahead, Mr. Minor.
    Mr. Minor. Just a couple of quick comments on EPA issues. 
Buffer zones are going to be a big issue. We, in Georgia, just 
fought the buffer zones on fumigants. Now we are going to fight 
the buffer zones on herbicides. It is going to be every 
chemical they register. That takes money, it takes research, it 
takes extension and it is taking away from projects we ought to 
be working on, as opposed to defending ourselves against the 
EPA.
    Mr. Goodlatte. On that point, have you seen any indication 
that there is sound science behind the determinations that they 
are making with regard to what the buffer zone should be?
    Mr. Minor. No, we have not. In fact, we just got a notice 
that in Sumter County, Georgia where I reside, where I grow 
cotton, they have come in and said we cannot use an important 
herbicide to control resistant pigweed because of 10 year old 
water data where they found some contamination of water. So it 
is not even current data that they are using to make these 
determinations.
    The other thing is the lack of any new products coming on. 
You know, EPA has made it so burdensome on the chemical 
companies getting stuff registered, they are not registering as 
many products for specialty crop producers, and that is costing 
us money.
    Mr. Goodlatte. Thank you. Mr. Lee.
    Mr. Lee. I guess I would sum that up by saying I think I am 
a conservationist from the get-go. We are all farmers and we 
just are. I do not think we need EPA to be more restrictive. I 
echo what they are saying.
    Mr. Chairman, I heard some California testimony where they 
are getting paid to upgrade equipment because of emissions.
    The Chairman. Well, we did put something in the farm bill 
to help them with one of those things.
    [Laughter.]
    Mr. Lee. Along those lines, where did the old equipment go? 
Is the old equipment still running somewhere?
    [Laughter.]
    The Chairman. I do not know. I did not get into the 
details. It was one of those things we had to do to get the 
bill passed.
    Mr. Goodlatte. That is an excellent question from the 
panel, Mr. Lee.
    [Laughter.]
    Mr. Lee. As far as the other issue, from what little we 
know now, I am not in favor.
    Mr. Goodlatte. Very good. Mr. Duvall.
    Mr. Duvall. Climate change is a very serious issue all 
around the world, but for us saying we are going to solve all 
the world's problems, it is difficult to think that we can do 
that. We know we need to play our part. But the effects of 
input costs to our farms will be devastating. I grow chickens, 
you make LP gas price go up and it is very expensive when you 
try to keep chickens at 90 when it is 32 outside and the wind 
blowing and it is cold. We just cannot afford the cost increase 
in input costs. And from fuel for dryers that these guys have 
to use to heat chickens and whatever we are doing with fuel 
will be devastating.
    The economists I have heard on American Farm Bureau level 
talked about how the climate change bill would shrink food 
agriculture. And I heard Congressman Marshall's question awhile 
ago are we talking between the tree growers and the food 
producers as to what we ought to be doing to make sure that we 
produce enough food for our people, because we heard the Dean 
talk about the demand for food in the future. Well, if it 
shrinks food agriculture by planting trees and grasses or 
whatever else you would encourage us to do, how are we going to 
feed the world? How would we even feed our own people? And that 
is a national security issue. So we are very much against the 
climate change, plus if there is a carbon trading system set 
up, and the one there is not very successful right now, but if 
it is set up and put into motion, what is going to keep it from 
derailing just like BCAP did? Will farmers end up with that 
money, or will it get on the world market and other countries 
or big companies dominate it?
    So there are huge issues, we have huge concerns, we are not 
in favor of it.
    Mr. Goodlatte. Mr. Bell.
    Mr. Bell. On the environmental issues, I think the farmers 
are the first environmentalists. I mean we drink bottled water, 
but we drink well water mostly. We go out and turn the 
irrigation system on, we drink the water out of that well just 
about every time we turn one on. We are using good practices 
now, and I do not think we need any more regulation.
    On the climate change, I used to be in the hog business 
until the price of hogs forced me out of the hog business. The 
cap-and-trade from what I have seen on that would devastate the 
livestock producer, the hog producer and the cattle producer 
also on limiting how many cattle you could have on acres, the 
emissions and what-not. And I use a lot of propane gas drying 
peanuts and have dried corn with propane, and there is a lot of 
propane used in south Georgia and we do not need to further 
increase any of our cost of our inputs. So I would think most 
farmers in our area are against the climate change.
    Mr. Goodlatte. Thank you. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Georgia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Chairman, I wanted to ask, this has been such a good 
panel, if Mr. Stone maybe could come forward.
    The Chairman. Yes. Ricky was--we should not have even had 
him come here. He had two spinal taps yesterday to try to 
figure out what was going on. We are going to have Sam Stone, 
who we all know very well because Mr. Scott had some questions 
about dairy. So welcome to the Committee, Sam.
    Mr. Scott. And certainly, Sam, we want you to pass our 
regards on to Mr. Williams. We are very appreciative that he 
came, given his condition and the fact that he did come, we all 
wish him the very best.
    Chairman Peterson asked my Subcommittee to really look into 
dairy and we did that, we had six hearings in Washington and we 
have gone around the country, we were up in Pennsylvania. So we 
know the very serious problems that the dairy industry is 
facing. So we certainly wanted to get some input on the record 
here.
    I wanted to ask you if you would care to comment on just 
how you feel we are doing, in terms of the Federal Government, 
in responding to the very pressing concerns facing the dairy 
industry. What are we doing right, what tools do we need to 
continue and as we look forward to this farm bill, how can we 
use the farm bill to really, really give the dairy farmers some 
big help.
    Mr. Stone. Well, thank you, Mr. Chairman.
    Producers, as you know, suffered greatly in 2009 and went 
through record low prices. I would say it has been probably 40 
years since we had that kind of difference between the milk 
price and the input costs. The Department has done some things 
for us. At that time, earlier this year, there was 200 million 
pounds of powder in CCC storage and that was donated to 
nutrition programs, and some of it was donated to McGovern-Dole 
to ship to needy folks overseas. The Congress also approved--in 
my years around, this was pretty unprecedented--$350 million 
for dairy farmers, $60 million of that went to cheese purchases 
and the other $290 million went to direct payments to farmers. 
In looking back, probably more of that should have went to 
cheese purchases. Milk price is based off of the cheese price, 
so that would have been very helpful.
    There is discussion within the industry among quite a 
number of dairy groups including our trade association, 
National Milk Producers Federation, and Dairy Farmers of 
America and several other co-ops and dairy herd associations. 
The gist of that effort is--we have met many times and we 
continue to meet. Our effort is to come to a unified position. 
We realize and we have experienced this in the past, that if we 
all come with differing ideas, nothing happens. So we will 
continue to work on that.
    As far as immediate help, it would be helpful if some more 
cheese purchases were made. Currently the government owns no 
cheese. And the reason for that is price support is very low, 
it equates to $9.90 a hundredweight. That is far below the 
production cost of milk. So cheese purchases would help.
    There has also been discussions with the appropriators 
about the possibility of--we are getting indications from food 
banks that they would be interested in a milk voucher program 
which the WIC program currently has. They are saying they have 
a good demand for that, particularly we are hearing that from 
food banks, the Feeding America folks on the West Coast. They 
could use additional cheese also.
    Mr. Scott. There seems to have been, from our hearings, we 
picked up that there seems to be a need for some sort of supply 
management mechanism in the United States to balance supply and 
demand. Would you care to comment on that and tell us how that 
would look in your mind?
    Mr. Stone. Yes. There are several proposals out there, and 
basically it is an effort to equate the supply with demand. 
What happened recently, we had a great price in 2007 brought 
about by droughts in New Zealand and Australia, and also the 
low value of the dollar. So exports really escalated. The price 
went up correspondingly and U.S. production went up. Then with 
the financial global crisis, the price tumbled rather rapidly 
and so we had an over-supply. So we need a mechanism where we 
can get the volatility out of the dairy price works. Supply 
management would do that. You probably would have to do it on 
maybe a regional basis, rather than nationwide, in that some 
regions are deficit. For example, in the Southeast not enough 
milk is produced in this area to provide milk for all the 
consumers.
    Mr. Scott. Okay, thank you. Real quick, my time has run 
out, but I wanted to really get the dairy point. Thank you, 
Sam, for that.
    There is nothing I like better than a peanut butter and 
jelly sandwich followed by a nice cool glass of milk. That is 
just great. We want to keep both of those things flowing.
    I want to ask you, you made a statement, Mr. Morris, in 
your testimony. You indicated that the peanut variable costs 
have risen 52 percent since 2002. How does that compare with 
other crops that you grow? Just give us some comparison of how 
impactful that is in the peanut industry.
    Mr. Morris. Very much so in the other crops also. The 
reason being is when you look at the 2002 Farm Bill, we were 
buying fuel for less than 75 cents a gallon. Today we are 
somewhere between--around $2.75, from $2.60 to $2.75 per 
gallon. And that is off-road fuel. On-road fuel is around $3.00 
or a little over $3.00 a gallon now. Fertilizer prices were 
like $175.00 per ton, nitrogen was somewhere in the range of 
$160.00 to $175.00. So you can see, today, nitrogen is toward 
$250.00-$300.00 per ton, 32 percent nitrogen that we put on 
corn and cotton. Just yesterday, wholesale, nothing but raw 
material, potash, was $435.00 per ton. And when the fertilizer 
place blends fertilizer, adds a little bit of nitrogen and 
phosphorous to it, then the fertilizer ranges--10-20-30% for 
instance is running about $465.00 to $485.00 per ton. So you 
can see that it is a 100 percent increase in fertilizer cost 
basically.
    Cottonseed, for instance, to give you an example of that, 
back in 2002, we had probably a $200.00 bag of cottonseed. 
Today, BP&L is charging, with the tech fees, $562.00 per bag. 
Peanut seed was 46 cents to 48 cents per pound. Today, it is 
from 75 cents to 82 cents or 83 cents per pound. So that gives 
you examples of what kind of fuel changes and what has happened 
here. And of course the other taxes that we have to pay on 
employees has risen also.
    So that gives you an example of why we are talking about 52 
percent.
    Mr. Scott. All right, thank you.
    Mr. Morris. Like loan prices on peanuts, for instance, are 
too low and cotton prices, corn, all of it is too low. And 
gentlemen, somehow we will not be able to survive. It is not 
that we are looking for profits, we just want to catch up.
    Mr. Scott. Okay, thank you.
    And finally, Mr. Duvall, you really struck a chord with me 
because I agree with you 100 percent. We have a real national 
security problem in the fact of our inability or failure--could 
be failure--to get more of our young people to go into farming. 
And I wanted to just ask, as we approach this farm bill, how 
would you recommend, what are some steps you think we could do 
with the farm bill coming up to help in that area? 
Specifically, I have a bill that we put in, we had a shortage 
of legal people going into public defending work, into that 
side of it, and so we put a bill in that we would write off 
their student loans. Would such a thing as that be enticing, 
not just scholarships but maybe writing off student loans, 
developing internships--you all know your business far better 
than we do or certainly me. What would you suggest we could do 
with this upcoming farm bill to put a greater spotlight on the 
need to get our young people to go into farming?
    Mr. Duvall. Well, when you take the young person, I have 
four children. I happen to have two in Washington. If you see 
another kid that looks kind of like a Duvall, he is probably 
mine. You know, young people look for something that they can 
do for a career, and how stable is it going to be. And for a 
young person to go out there and buy that $500,000 cotton 
picker, buy the $3,000-$4,000 acre land, get into the crop 
insurance program and have to start with--and you explained it 
much better, Mr. Bell, than I did, t-yield instead of the 
yields that we had years to develop. It puts them at a huge 
disadvantage. But the farm bill could very well--if we find the 
right way, we could make it a stable way for young people to be 
able to go back and see that for 10 years I know I am going to 
be able to do this and make a living or try to make a living 
and cover my costs.
    The American people reap the benefits of the farm bill 
because it keeps our food cheap. And that is just a fact. But 
we are almost at a crisis of getting young people to go back to 
the farm. Now the Dean tells me that there are more 
agricultural jobs available than we have students coming out of 
ag school--I think I said that right. But a lot of them are not 
on the dirt, or behind the cows, or in the chicken houses. We 
have to make it more stable for them. We have to make it an 
industry that the American people look up to again, and we have 
to make them understand that it is a national security issue.
    I know Congressman Marshall has heard me be passionate 
about agriculture, but if we just think oil brought us to our 
knees, what would we do if we had to depend on other countries 
to feed us? The work that you do on this Committee is probably 
the most important work that is going to be done in Washington. 
We are talking about feeding our people, our children, our 
army. And without it, we are not a country, we will be 
dependent on somebody else in this world, and we cannot afford 
for that to happen.
    So we are at a crisis, we will be glad to look at some 
areas and try to make some recommendations, but we do have to 
find a way to get these young people back out on the farm.
    Mr. Scott. Thank you, sir. Well stated.
    Mr. Bell. Mr. Scott, can I just respond on that, please?
    What Mr. Duvall was talking about on the crop insurance 
issue, a lot of the younger people going into farming may work 
at the farm supply place and have 30 or 50 or 100 acres he 
rents. So when he goes to get crop insurance on those crops, he 
is severely penalized because he does not have any production 
history. The transitional yields like in our county, irrigated 
corn is like 120 bushels. Well, that is pretty low and the 
banks more than likely are not going to loan him any money on 
that low of a yield. And on cotton, I think it is as low as 600 
pounds. Well, if you take 600 pounds and take 70 percent 
coverage, that is 420 pounds. He is severely handicapped. The 
producer that has been in business that can prove a yield over 
a period of time, his insurance coverage is okay. A young 
farmer, starting out, he is severely handicapped because of the 
yield he is given because he does not have any production 
history to back that up.
    Mr. Duvall. Can I follow up? I talked a little bit about 
concentration and consolidation of companies. You look at that 
cottonseed he just talked about. The cottonseed probably cost 
$130.00, the rest of it is tech fees. We pay twice as much for 
that tech fee in Georgia as they do in Texas. And we have 
questioned the companies about it. It is their pricing scheme, 
but we do not agree with it.
    There are other issues----
    Mr. Scott. Did you say tech fees?
    Mr. Duvall. Technology fees. So you are paying $650.00 for 
a bag of cottonseed and you are paying $500.00 of it for 
technology fees. And we are paying more for it in the State of 
Georgia than anywhere else in the country.
    I have two employees that work for Farm Bureau that are 
here today. One of them is very proud that his son graduated 
from medical school, going to be a doctor. The other one is 
just as proud because his son is fixing to plant his first 
crop. I mean both of those are exciting things, and we need to 
have a farm policy that has that kid wanting to plant that 
first crop. This way he has a chance to make a living in this 
country, and supply food for our people for an extended period 
of time. Because if he makes those initial investments, we have 
to stand behind him.
    The Chairman. Do you mind if I weigh in?
    Mr. Rogers. No, go ahead.
    The Chairman. You know, what you just said is exactly one 
of my main motivations in trying to get people to look at this 
situation.
    We are not going to have any more money for this farm bill. 
We are going to have less money probably. And you are right, we 
have to fix this system, crop insurance so that these young 
people have enough money behind them to go to the bank and get 
this loan. That is the biggest problem there is. And we do not 
have that system.
    So, okay, how are we going to get that? Well, probably the 
only way we are going to get it is if the rest of us give up 
something so these people can have the assistance so they can 
get in. We are going to have to change some of this stuff to do 
this. And it is not going to be easy and people are not going 
to want to do this. But that is one of the reasons I am 
starting early because we need to talk about this. In Minnesota 
the average age is 58, probably that same age here in Georgia. 
So these are things we have to look at because I have all kinds 
of young guys that want to farm. But, if they do not have the 
crop insurance, and enough assistance so that they can 
collateralize that loan, they cannot do it.
    Mr. Duvall. The challenge is that the country is so 
regionalized and a program that is going to work here will not 
work in your part of the country.
    The Chairman. As I said yesterday in a hearing in 
Washington, maybe it is time that we are going to have 
different programs for different areas or different crops. You 
know, we have to think out of the box here. But the bottom line 
is we have to make this work. That is what it boils down to, 
and that is why I am challenging people over the next year, to 
think outside the box and look at the money we are spending. 
Are we spending that the best way, the most efficient way, or 
can we get a better result doing things a little bit different 
and making things more coordinated, more simple? That is where 
I am coming from. I think we all agree on what we are trying to 
accomplish, we just have to figure out how to do it.
    Mr. Duvall. Those government regulations that have to do 
with----
    The Chairman. If we were in charge of EPA, you would not 
have a problem, I guarantee you.
    [Laughter.]
    Mr. Duvall. This business about dairy cows just drives me 
crazy.
    The Chairman. Drives a lot of us crazy too.
    The gentleman from Alabama, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    I want to go right back to what we were just talking about, 
this crop insurance. I am a recovering attorney, so I want you 
to make this simple for me.
    [Laughter.]
    Mr. Rogers. What can we do to fix the crop insurance 
problem for you? Mr. Bell, Mr. Duvall, either one, in a 
nutshell.
    Mr. Bell. On what crop insurance, the new farmer, beginning 
farmer?
    Mr. Rogers. The new farmer.
    Mr. Bell. I do not know. How this came up with me, a young 
guy was working at a farm supply dealer there in town and his 
dad owned a little farm. He started farming it and we were 
talking one day about crop insurance yields. And I told him 
mine was 1,000 pounds or 900 and he said well I had to take 600 
because I did not have any history, he had no history. But 
there has to be a way to get that new producer some history 
better than the t-yield that he is given by crop insurance for 
that county. Now I do not know how you do that, but you have 
to--whether he has to work for a farmer for a year and have 
some experience or what. He is penalized and he cannot get--I 
have history because I came in and I was farming, my dad was 
farming.
    Mr. Rogers. Let us get to you now, what needs to be done to 
make it more practical for you? Let us shift away from the new 
farmer and go to you.
    Mr. Bell. Regular crop insurance? Well, what is happening 
with crop insurance, it is getting more costly every year. The 
cost is just going up and up.
    Mr. Rogers. It has to be modified to make it practical for 
you. What you are telling me is what I hear from my farmers.
    Mr. Bell. Well, what is happening is we have X amount of 
dollars that we can really afford to pay for crop insurance, 
and if you buy revenue coverage, which is what I buy on corn 
and cotton, if the price of cotton is 70 cents, well my premium 
is going to be a lot higher. It may have just gone up from 
$26.00 to $46.00 because you are guaranteed more revenue. Well, 
my premium, like I said, went up from $20,000+ to $40,000+. And 
you know, we cannot handle these big swings in the crop 
insurance cost every year. But I really do not know how to fix 
it, but the escalating cost just keeps going up, keeps going up 
every year. What is happening is we are taking less coverage. 
Say we may have bought 70 percent this year, next year we will 
buy 65 percent, which puts us at more risk really for storm or 
whatever. But it is a complex issue and I do not know how you 
fix it, but it is getting less desirable. But the revenue 
coverages are helping, but they are really expensive. If you go 
to 85 percent coverage, the cost could be as much as $65.00-
$70.00 per acre on a crop that is going to bring back $450.00 
or $500.00, it is just simply not----
    Mr. Rogers. You heard the Chairman say he was looking for 
some creative out-of-the-box solutions because he is right, 
when you were answering he stated this to me before he left, it 
is going to take money. As he already told you, we are going to 
have less money for this farm bill. So we really would like for 
y'all to kind of be thinking about some creative modifications 
that we can make that would make it more practical for you.
    I want to shift now--tell me about how tighter credit 
standards are affecting you, if they are affecting you. Mr. Lee 
talked about equipment cost and Mr. Minor talked about input 
costs, as well as Mr. Morris. Have you seen tighter credit 
standards--I know they are affecting every small business 
person in my district; are they affecting y'all, and how?
    Mr. Lee. Mainly how the banks are being scrutinized, I 
think is just the problems that have been caused by other 
industries.
    Mr. Rogers. Now are you dealing with regular commercial 
banks?
    Mr. Lee. Yes.
    Mr. Rogers. Who do you deal with, commercial banks or farm 
credit?
    Mr. Lee. Commercial bank.
    Mr. Rogers. Okay.
    Mr. Lee. An Alabama bank.
    Mr. Rogers. There you go. I like you already.
    [Laughter.]
    Mr. Lee. I think they, in my situation, look at everything 
a lot harder.
    Mr. Rogers. So they have not changed very much the way they 
are profiling your loans?
    Mr. Lee. Well, I guess I said they are, but I have not had 
the kind of problems that maybe some other industries have. And 
along those lines, let me say this is one time even though we 
have a hard time with cash flow and making ends meet and all 
that, but from that standpoint, I am glad I am in agriculture 
because I have a lot of friends in other businesses that were 
doing really, really well----
    Mr. Rogers. And they are hurting now.
    Mr. Lee.--and some of them are gone.
    Mr. Rogers. Quick comment from anybody else about credit 
standards?
    Mr. Minor. I will just mention a couple of things. We work 
with a Minnesota bank and we are pretty large cotton and peanut 
growers too. The new word that has come up from them, and I 
have heard it from other people too, is working capital. They 
are looking for 15 to 20 percent working capital. And if you 
are a large operation, I mean most people will not have $1 
million laying around. So that has become a big issue.
    They have changed the way they look at these ag loans and I 
think 2010 was probably the toughest year we have ever seen as 
far as getting ag loans.
    Mr. Rogers. What would that percentage have been 5, 10 
years ago?
    Mr. Minor. What percentage? I think it is a new category. I 
think it was there, but I do not think they have been looking 
at it like they are now. They have jumped on a bandwagon and it 
is like ag lenders have gotten spooked in the last year. We 
thought they were going to be spooked in 2009, they did not 
become spooked until 2010. I guess looking at what some of the 
other industries did, it scared them. But I do not know what 
2011 is going to be like, I hope it will be better than 2010, 
but 2010 has been tough.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Lee. Can I make another comment? I do not know about 
everybody, but I think generally a banker will loan, I will 
just say 60, 65 percent of what you think your growth revenue 
would be in a crop, that includes farm payment, going back to 
the farm loan, I mean the market loan. All those things are 
very, very important if you would just remember that, because 
for cotton, when cotton prices were below loan or at loan, my 
banker was still able to use, tell me, in your total cotton 
revenue, you need to use 59 cents, 60 cents. If it were not for 
the market loan and payment subsidies, we could not do it.
    Mr. Rogers. Thank you.
    The Chairman. I thank the gentleman.
    The gentleman from Georgia, Mr. Marshall.
    Mr. Marshall. Thank you, Mr. Chairman.
    I want to thank all of you for coming. I mean this is for 
all of you a pretty busy season and you have come a long way. 
It was not because you were anxious to get to Atlanta for the 
night, and you are going to have a long way to go home.
    And Zippy, I was happy to see you listed as coming from 
Macon now. You corrected that, but for a moment there I was 
hopeful.
    Mr. Duvall. I am part one place and part the other.
    Mr. Marshall. Thank you all for coming as far as you have, 
we appreciate that.
    Mr. Rogers mentioned credit and got a few responses from 
you and I would just say, Mike, you probably experienced the 
same thing. A lot of farmers will talk to me, small business 
folks too, they are all having problems accessing credit. Most 
of them do not have Minnesota banks they can go to, Mr. Minor, 
they are just not as big as you are. And there are an awful lot 
of Georgia banks that are struggling right now that these 
farmers have been depending upon. The regulators are saying do 
not take real estate as collateral, it scares us. So a lot of 
these banks are trying to dump their real estate collateral, 
and that is a pretty important piece of collateral for any 
small business, particularly for farmers. So it is pretty tough 
right now for an awful lot of smaller farmers.
    You know, I was interested in the conversation about 
climate change. I have been reading a fair amount about this, 
but I do not claim any kind of expertise, most of us cannot 
possibly be experts in this area. But it just seems to me that 
more and more people are saying yes, it is occurring. And if 
you are traditionally conservative, as I am, you get to a point 
where I am not the expert here, I guess I am going to have to 
go with what these experts say, that it is occurring. Now the 
question is what should we do about it. You kind of lose your 
credibility to say it is not occurring, that we are against 
climate change. I mean, yes, I would like to return to Eden, 
too. The question is what should we do about it, and there are 
a whole range of proposals out there, some of which are a lot 
more expensive than others. And so I think we need to move to a 
point where we are looking at what is being proposed, what the 
likely risk is and do the dollars and cents make sense. That is 
where we ought to be focusing our argument and discussion right 
now.
    Some of the proposals that are out there, for example, 
might be a $1,000 solution to a $10.00 problem. And that is 
what we need to be focused on, instead of just saying there 
isn't a problem, because it loses its credibility among 
conservatives to say there is just no problem.
    So my question has to do with broadband. Do y'all use it, 
is it important? Think about it from the perspective of some of 
the smaller farmers and more rural communities and tell us what 
we ought to be doing where that is concerned. How do you use it 
in your operations, how do you think others use it and is it 
important to your labor, to the people who work for you, et 
cetera.
    Mr. Bell. We still have dial-up where I am from, but we are 
getting broadband with some SPLOST money that our county has 
kicked in and we are getting it in the near future, but as of 
now it handicaps us without having it. But you know, you can 
get it through the cellphone companies or whatever, but just 
the average person that lives in the county, as I do, he is not 
able to get it right now in a lot of counties.
    Mr. Marshall. How do you think it handicaps you?
    Mr. Bell. Well, I mean it is just so slow. You know, you 
sit down on the computer and it takes you an hour to look up 
something or do something that, if you had high speed, you 
would have access. At this time, it is a time factor.
    Mr. Duvall. Congressman Marshall, we just talked about 
young people. My children sit in my living room with a 
cellphone, laptop, TV going and Facebooking at the same time. 
You ask a child coming out of college now to go back to an area 
of Georgia that does not have broadband, he will be severely 
handicapped. He will not be able to compete on the world 
market.
    Mr. Lee. I am lucky where I am, I am in a very small 
community, but we have DSL and we are in good shape. I go 10 
miles up the road, Mr. Marshall, toward Americus in our county, 
Sumter County, I do not have Internet.
    Mr. Marshall. Are you saying Mr. Minor is in the dark ages?
    [Laughter.]
    Mr. Lee. The point I am trying to make is just a few miles 
down the road, you do not have service and that is what you are 
saying with broadband. With a lot of technology controls and 
even security systems, I would like to put a security system on 
that farm when I do not have anybody there, to watch what is 
going on. I cannot do it.
    Mr. Minor. In Americus where I reside, we do have high 
speed, but out in the country you get in areas where you do not 
have it. And it is a vital part of our business, we are using 
it for e-mail, we are using it for communication, we are 
shipping payroll over it, we are getting information over it. 
You cannot prepare for this hearing without it. So yes, it is 
very important. And like Zippy said, young people are not going 
to live without it.
    Mr. Morris. In our community, we do pretty well, but we 
have a lot of areas in south Georgia, rural south Georgia, and 
of course the smaller counties down there that we do not have 
it and it inconveniences the rest of us there. And not only 
that, in our part of the state down there, we have a lot of 
areas that we do not have good cellphone coverage either. So we 
are lacking in communications and I realize that is a challenge 
to get that completed, but we would appreciate any efforts that 
could be done in that area.
    Mr. Marshall. I guess when we get to Hilton here, he is 
going to ask what broadband and cellphones are.
    [Laughter.]
    Mr. Segler. Mr. Marshall, I was going to ask who you could 
send to operate the darn thing. Wives and children do it. We 
have pecans grown commercially from Augusta to Macon to 
Columbus south all the way across to Montgomery and down. The 
larger cities have access, the rurals do not. We grow pecans 
everywhere they farm, so it would be a tremendous help I am 
sure.
    Mr. Marshall. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Nebraska, Mr. Smith.
    Mr. Smith. Thank you all for being here.
    On the cap-and-trade, climate change and various efforts 
underway, I heard a little bit earlier perhaps about the fact 
that agriculture does reduce carbon in the atmosphere. There 
really is not a reasonable provision in the cap-and-trade bill 
to reimburse for capturing that carbon. Is that the general 
consensus in the cap-and-trade bill to your knowledge? So if 
there were compensation in there so you could recoup the higher 
energy costs, higher input costs across the board that would 
effectively right any increase in food costs for consumers in 
addition to higher energy costs for consumers, is that an 
acceptable situation?
    Mr. Lee.
    Mr. Lee. That got complicated then. I do not think it 
would. I think the bottom line is everybody is going to pay the 
price, and we are going to be the first ones to pay the price I 
think.
    Mr. Smith. Do you feel the impact of climate change in your 
production?
    Mr. Lee. At this time, I do not think I do.
    Mr. Smith. Anyone else?
    [No response.]
    Mr. Smith. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Pennsylvania.
    Mr. Thompson. Thank you, Mr. Chairman.
    Mr. Segler, you talked about the MAP program, the Market 
Access Program, a little bit there, pointing out some really 
great outcomes in terms of both the increase in the amount of 
trade, and the trade surplus that agriculture has and we need 
to grow that.
    There are three trade agreements lingering in Washington. 
One with Colombia, one with South Korea, and one with Panama. I 
just wanted to see would those help or hurt? Is this another 
opportunity to expand that trade surplus?
    Mr. Segler. No question about it. That part of the 
Caribbean and South America, any time you get increases in 
trade closer to us, it opens a lot of doors. We have sent 
groups to Cuba for a number of years, I think that is an 
excellent opportunity for Georgia, and I think it is an 
excellent opportunity for the Southeast. It is also a safety 
net for the United States to have a different relationship 
there. So any time we can open up trade agreements, it 
certainly helps us.
    Mr. Thompson. Great. Well, I certainly agree. That is 
something we can do immediately, and that helps us get access 
to more of those seven to ten billion stomachs out there.
    Mr. Minor, you talked in your testimony about the EPA zero 
tolerance spray regulation. Is that realistic, that compliance? 
What is the impact, what do you see as the impact of that on 
your industry?
    Mr. Minor. I think what you are talking about is the EPA's 
buffer zone restrictions?
    Mr. Thompson. The overspray.
    Mr. Minor. What I was talking about is where EPA has come 
in and said there has to be a certain amount of buffer zones 
between residential structures, between roads, between 
churches. As people have moved out to the country more and 
more, we have smaller and smaller fields with people living 
around. If we had looked at the impact it would have had on 
methyl bromine use, one of our largest vegetable counties would 
have had very little area that could have actually been 
planted. And as we now look at application of herbicides and 
pesticides where they are looking at new buffer restrictions, 
you are going to take a lot of farmland out around any house, 
any road, any public areas, like schools. It is going to make a 
major impact on where we can and cannot farm.
    Mr. Thompson. Thank you.
    Mr. Lee, in your testimony, you complained--you noted about 
USDA's unilateral decision to exclude commercial size farming 
operations, and I just wanted to see if you would elaborate a 
little bit on your concern about USDA's attack on production 
agriculture.
    Mr. Lee. I guess what I was saying, I do not know exactly 
what I said, but commercial size--I think the farm bill should 
allow commercial size farming operations. If you tell me I 
cannot be a certain size, I cannot be large enough to afford 
the equipment and be viable, it does not work. I really think 
that is unfair as far as--you have to be in the economies of 
scale, or you cannot farm today. It is a problem with young 
farmers coming back to the farm. It is hard for them to come 
back and start off with 200 acres. First of all they cannot 
make a living. I would say today in our area, that most farms 
that are under 1,000 acres or under 500 or 600 acres, that 
number is probably low, they either inherited land or either 
their wife has a real good job or something. They are not 
living off of that farming operation. I think we have to 
realize that. And it goes back to what the Chairman said, what 
is a farm, what is the size of a farm. I think young fellows 
can understand that. I have a family farm, myself, three grown 
sons, a nephew. And it is a family farm, but if somebody looks 
at our acres and we are farming between 6,000 and 7,000 acres, 
if somebody wants to tell me that is too big, I do not know how 
to get smaller.
    I do not know whether I answered your question, but that is 
the way I see it.
    Mr. Thompson. I appreciate that.
    Mr. Duvall, legislation has been proposed to ban or to 
limit antibiotics with production livestock, and I just wanted 
to get a real quick thought from you, what do you see the 
impact of that is in terms of meeting the food needs and also 
on profitability?
    Mr. Duvall. Sure. You know, the antibiotics we use today, I 
mean they are very important to our production. You do not want 
to treat an animal after they are sick. You want to be a little 
bit preventive. And then when they are sick, you want to have 
the antibiotics to be able to treat them with. The American 
people want us to be kind to our animals, but we cannot be kind 
to our animals if we do not have the tools to do it with. You 
know, the worse thing in the world is to have a sick animal and 
not be able to help it. I think it would be devastating to 
animal production all over this country, it would be 
devastating to integrators that have contracts with us to not 
be able to take care of their flocks or their herds of hogs. We 
need to relook at that and make sure that the tools are 
available to farmers and companies to be able to not only treat 
animals after they are sick, but to have preventive treatment.
    There is no sound science to say that that is changing our 
immunities to antibiotics in humans. We cannot find the sound 
science.
    Mr. Thompson. Thank you all.
    Mr. Morris.
    Mr. Morris. We have a study there in my testimony that 
would show the competitiveness, peanut competitiveness for 
peanuts and showing profitability of farmland. I think there 
are like 20 studies or thereabout that were done by Dr. Stanley 
Fletcher from the University of Georgia, and he can help to 
shed some light on what it would take to be profitable and 
whether there is profit. But most all those farms are in the 
red except one or two. I think maybe there is one that is in 
the green, and maybe the rest of them may be in the yellow, but 
that would help you to have an understanding of the studies 
that have been done. Those studies are from Texas all the way 
through Virginia on those different farms. So that would help 
to shed some light and help to have some information about 
profitability in farming.
    Mr. Thompson. Thank you, sir.
    Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    You know, we have a lot of expertise on the Agriculture 
Committee, but I will guarantee you one thing, we have no idea 
what the right size farm is or how big it should be, we have no 
idea. And I am for any kind of farm that makes economic sense. 
If you can make it on 100 acres, God bless you. Whatever it 
takes to make it work, I am for it. And we should not be 
monkeying around trying to decide how big a farm should be, in 
my opinion.
    One other thing: What I intend to do this year is to 
reauthorize the mandatory price reporting system. Mr. Morris, I 
was wondering if--you know, there has been interest in getting 
crop insurance for peanuts, but one of the things that is a 
challenge apparently is we need a better ability to get pricing 
information than we currently have. Is the peanut industry 
ready to be part of mandatory price reporting structure, so 
that we can get that information to help develop a crop 
insurance system? Do you know the answer to that?
    Mr. Morris. No, sir, I do not really know the answer to 
that because a lot of the prices in the shelled goods----
    The Chairman. Use a microphone.
    Mr. Morris. So far as the shelled goods and the peanuts 
that are ready for the manufacturing or usage to get into the 
food chain, is controlled primarily by the shellers. But also 
we have talked to the shellers about it, and the shellers say 
we can give price updates each week on the market. Another 
thing too is we are not using the world market price at all on 
peanuts. So there are some ways that we think we can implement 
good information for the USDA.
    The Chairman. Okay. I guess the question is are you willing 
to work with us this summer to see if there is a way to do 
this?
    Mr. Morris. Very much so, very much so.
    The Chairman. We would like to help you develop a workable 
crop insurance system.
    Mr. Morris. Thank you. I think it is going to take the 
House or the Agriculture Committees of the House and Senate to 
implement some kind of program that would really work for the 
peanut farmer.
    The Chairman. Right.
    Mr. Morris. The way it has been, turning it over to USDA is 
just not working for us.
    The Chairman. No, I understand. So we will be in contact 
and we will have to get to work on that.
    At one time the industry was against doing this, 5 years 
ago, but apparently there has been a little bit of change.
    Mr. Morris. There needs to be some kind of change, a 
mechanism that will work.
    The Chairman. Okay. All right, thank you all very much. I 
want to thank the witnesses, you guys have done a great job 
with your testimony and answering questions.
    We are going to have some time now. We will probably not 
start marking the bill up until this time next year, so we have 
a year to try to figure out some of this stuff. We look forward 
to working with you over that period of time. We have a good 
farm bill that we passed in 2008, but I think we can do better. 
And that is what we are trying to come up with.
    Thank y'all very much.
    Mr. Goodlatte, do you have a closing statement?
    Mr. Goodlatte. Mr. Chairman, thank you very much for 
bringing this Committee to Georgia, and I want to thank 
everyone here. Not just the panelists but everyone in the room, 
and again we encourage them to participate in the farm bill 
feedback program. I guess we have some cards to give people?
    The Chairman. The cards are available over on the side over 
here and our website--you can read it to them.
    Mr. Goodlatte. www.agriculture.house.gov. And we welcome 
hearing from you on both sides of the aisle, and we will look 
forward to working together to write a new farm bill.
    Thanks for coming today.
    The Chairman. I thank the gentleman.
    The farm bill will be bipartisan, we will guarantee that.
    Mr. Scott, any final word?
    Mr. Scott. Thank you, Mr. Chairman, and especially I want 
to certainly thank our Chairman, and thank all of the panelists 
for coming, I thank my colleagues for coming. It has been 
wonderful and God bless everybody.
    The Chairman. I thank the gentleman. And I have to read 
these magic words.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 30 calendar days for receipt of 
additional material, supplementary written responses from the 
witnesses, and any questions posed by a Member.
    This hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 5:06 p.m. (EDT), the Committee was 
adjourned.]


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                         SATURDAY, MAY 15, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                          Troy, AL.
    The Committee met, pursuant to call, at 1:20 p.m., in the 
Pike County Cattlemen's Association, Cattlemen's Park, U.S. 
Highway 231, Troy, Alabama; Hon. Collin C. Peterson [Chairman 
of the Committee] presiding.
    Members present: Representatives Peterson, Bright, 
Goodlatte, Rogers, Smith, and Thompson.
    Staff present: Aleta Botts, Dean Goeldner, John Konya, 
Clark Ogilvie, Anne Simmons, April Slayton, Kevin Kramp, Josh 
Mathis, and Jamie Mitchell.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. The Committee will come to order. This 
hearing of the Committee on Agriculture to review U.S. 
agriculture policy in advance of the 2012 Farm Bill will come 
to order.
    I would first like to introduce the Members of the 
Committee. We have with us the former Chairman of the Committee 
serving as Ranking Member today, Mr. Bob Goodlatte, from 
Virginia. On my right, of course, he probably needs no 
introduction, your Congressman, one of my favorite new 
Congressmen that has come to Washington, Mr. Bobby Bright from 
this district in Alabama. Mr. Mike Rogers, who is also from 
Alabama a little bit north of here, has been on the Committee 
for a while. Mr. Adrian Smith from Nebraska, western Nebraska, 
he has a huge district out there, I think his district is 
probably bigger than the State of Alabama. And Mr. Glenn 
Thompson from Pennsylvania, he represents the northern part of 
Pennsylvania right south of New York.
    We also have some USDA people that do a great job for us, 
with us today. The Arkansas FSA State Director Linda Newkirk, 
if you would stand up and be recognized. Is Linda here?
    [No response.]
    The Chairman. Maybe she is not here. Rural Development 
State Director Ronnie Davis and the NRCS State Conservationist 
Dr. William Puckett. Give them a big hand, they do a great job 
for us.
    [Applause.]
    The Chairman. We also have been web-casting these hearings, 
so people can watch them on the web, on our website. And for 
those that are not able to testify today, we will take your 
testimony over the Internet and these cards I believe are over 
here someplace, www.agriculture.house.gov. We encourage, even 
if you did not get a chance to testify, we encourage you to 
make your views known, or any ideas that you may have, to the 
Committee on that website and that will become part of the 
record. We find a lot of times we get some really great ideas 
from folks that maybe do not normally get a chance to testify. 
So we encourage you to do that.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Troy to hear 
from area farmers and ranchers about the issues facing agriculture and 
rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. With that, I am going to yield my time for 
opening statement to your Congressman, who as I said is one of 
my favorites. He is my kind of guy, he talks straight, he is a 
little better than I am. I also talk pretty straight, the only 
thing is I do not always keep my mouth shut when I should and 
he is better at that than I am. But I am pleased to recognize 
Bobby Bright for an opening statement and welcoming us to his 
district.

  OPENING STATEMENT OF HON. BOBBY BRIGHT, A REPRESENTATIVE IN 
                     CONGRESS FROM ALABAMA

    Mr. Bright. Thank you, Mr. Chairman. I appreciate that very 
much.
    Let me thank everybody for being here. This is wonderful. I 
do not know how much you know about these Congressional field 
hearings, but it is so important for you to realize that we 
have had now a series of meetings of these field hearings 
throughout the country. This is the second series, five of 
eight. So to be able to have the Chairman and the Ranking 
Member, Mr. Goodlatte, here today to hear you, to ask questions 
and to hear you answer those questions. Having them here to 
speak with you and spend some time with you is so key, and so 
important to what we are doing in the agriculture industry, in 
the fuel business and the forestry business and conservation 
area. So for us to have this here in the heart, here in Troy, 
of the District 2 is so key and so important.
    And I want to thank our Chairman. You know, he can say that 
all day long about me being like him, because over the last 15-
16 months that I have been in Congress I have watched this man, 
this Chairman, perform and handle issues pertaining to you as 
farmers and people interested in the agriculture industry. He 
has your interests at heart, as I do and as every Member who is 
on this panel here. So I am thanking him and the Ranking Member 
for allowing us to have this very important meeting here in 
District two, here in southeast Alabama, here in Troy.
    I am confident that listening to the growers and producers 
in the South will help improve the next farm bill, in order to 
make it work even better for a larger cross section of this 
country.
    It is no secret that the farm bill affects the various 
regions of our country in very different ways. For that reason, 
I believe it is vitally important that southern farmers have 
substantial input into the next farm bill. While certain 
programs may work well for farmers in the West or Midwest, 
those same programs may not be as effective in the South and 
vice versa.
    I often hear complaints from farmers in my district on two 
very important issues. The first is the crop insurance. In the 
Southeast, anything beyond catastrophic crop insurance does not 
make economic sense for our farmers here locally. This is 
unacceptable in an area where extreme drought, heavy rains and 
flood, hurricanes and early freezes can all occur in the same 
year. We must find a way to make crop insurance work for all 
farmers, or at least make it responsive to the specific needs 
of the given region.
    The other issue is peanut pricing. We need more 
transparency and more simplification, as far as that is 
concerned, for our peanut producers out there. The formula for 
the weekly peanut price calculation is complicated and often 
referred to as the black box, leaving guess work as the only 
method farmers can use to plan for the future. This formula 
must be simplified and the process made more transparent.
    I hope to work with my colleagues who are sitting here with 
us today, and also the other Members of our Agriculture 
Committee, in finding a resolution to these two particular 
problems in the next farm bill.
    As many of you know, there is more cotton, peanuts and 
poultry grown in Alabama's Second Congressional District than 
almost any other district in the country. It is crucial for 
improvements to be made where needed in the next farm bill, so 
that these growers can continue to operate.
    With that in mind, I want to thank all of the witnesses for 
agreeing to come today and testify before the panel. And I want 
to encourage you to be open, honest and pretty decisive on what 
you think we need to hear, and how we can resolve some of the 
issues that you are being confronted with every day. So that is 
why it is so key for you to be here, and for us to hear your 
testimony.
    I also at this point in time want to acknowledge someone 
that is really no stranger to us here in Alabama, and it is my 
colleague Mike Rogers, Congressman Mike Rogers. He is on the 
panel today, he was with us yesterday in Georgia, and will be 
traveling on with this panel to Lubbock, Texas tomorrow. But I 
will say this he, like me, is dedicated to the farming 
industry, to the farmers out there, and it has been a sheer 
pleasure and honor for me to serve with him as my colleague 
from Alabama on the Agriculture Committee. So Mike, thank you 
for being here today too, and I look forward to working with 
you in the future.
    Mr. Chairman, I know we have a lot of material to cover 
today, but once again, I want to welcome you and welcome the 
Ranking Member and my colleagues here today. I want to thank 
you from the bottom of my heart for taking the southeastern 
district, District two of Alabama to heart in being here and 
showing my constituents that you care about them, and that you 
care about the agriculture issues that they are struggling with 
every day.
    So with that, I will yield back to the Chairman for you to 
proceed with the hearing.
    The Chairman. Thank you very much, Mr. Bright. We are very 
pleased to be here and look forward to the testimony.
    I recognize the Ranking Member, Mr. Goodlatte, from 
Virginia.

 OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN 
                     CONGRESS FROM VIRGINIA

    Mr. Goodlatte. Well, thank you very much, Mr. Chairman. And 
I want to again thank you for calling this series of hearings, 
and being so proactive in preparation for the debate that we 
will have on the future of farm policy in the 2012 Farm Bill.
    It is hard to believe that it has been 4 years since this 
Committee was in Auburn, Alabama when I was Chairman, holding a 
similar hearing, preparing for the 2008 Farm Bill. It is also 
hard to believe that we need to start this process over again 
already.
    I am very pleased to be here with Congressman Mike Rogers. 
In fact the last time I was in Montgomery, Alabama was when 
Mike was running for Congress his first time. He has been a 
tremendous and valuable ally and a great spokesperson for 
Alabama agriculture, and has done great work for you on the 
Committee. And we are also pleased to be in Congressman Bobby 
Bright's district and pleased to have him on the Committee as 
well. Alabama has a long history of having a lot of good, 
distinguished Members from this state serving on the Committee, 
looking after the interests not only of Alabama farmers, but of 
the Americans who depend upon you for the safest, most 
affordable, most abundant food supply in the world.
    And Mr. Chairman, we on this side of the aisle are just 
delighted to be here with four of us to two Democrats. This is 
a very bipartisan Committee in the Congress, I would say the 
most bipartisan. I enjoyed working very closely with the 
Chairman when we wrote the last farm bill, but I also must say 
that I like this ratio and we look forward to seeing more of 
that in years to come.
    [Laughter.]
    Mr. Goodlatte. The one other thing I want to mention today 
is that unlike the last farm bill where we were able to secure 
money from some other--jurisdictions of other committees that 
helped us in writing that farm bill. We found in that process 
that not only did they come to the table with their money, but 
they also came to the table with their lists of how they wanted 
that money spent. And in fact wanted to influence other aspects 
of agricultural policy. I know the Chairman has been very 
forthright in saying that he is not going to let that happen 
again. And I strongly support that.
    The other element of this is that with an enormous national 
debt that we have, and deficits running at unprecedented 
levels--just to give you one idea, for next year, the President 
has submitted a budget to the Congress, that budget provides 
for spending $3.8 trillion with just $2.2 trillion in revenues, 
or a $1.6 trillion deficit for just 1 year, spending about 70 
percent more than we are actually going to take in in revenue. 
That is completely unsustainable and it is going to mean a lot 
of very tough decisions, a lot of belt tightening, and that is 
going to include the sector of our budget that relates to 
agricultural programs. So I will be interested in hearing from 
our witnesses today, not only on ways that they can make the 
farm bill--which I think many will tell you they like--but ways 
to make it operate more efficiently, ways to eliminate portions 
of it that they may not think are necessary. It is very, very 
important that we have that in mind as we move ahead here for 
this coming farm bill.
    And it is also important that we recognize that more than 
75 percent of the money that is in the farm bill does not go to 
help farmers or rural America. It goes to pay for nutrition 
programs, which are obviously important programs, but your 
ideas on how we can make those programs operate effectively and 
how we can eliminate the anomaly that we have in this country 
of spending far more than $40 billion a year on various 
nutrition programs, and, yet, having a problem in this country 
with obesity, is also an issue that we are going to have to 
confront as Members of the Agriculture Committee, to again 
squeeze efficiencies out of the limited resources that we are 
going to have available.
    So Mr. Chairman, thank you very much for conducting these 
hearings and I will yield back to you.
    The Chairman. I thank the gentleman for his statement.
    I also recognize, since we are in Alabama, Mr. Rogers, for 
a statement as well, in recognition of his great work that he 
does on the Committee and being in his state.

  OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN 
                     CONGRESS FROM ALABAMA

    Mr. Rogers. Thank you, Mr. Chairman. And we are going to 
have y'all saying y'all by the time you leave Alabama tomorrow. 
It is God's country and I am glad to be here in the Second 
District. I am very proud to work with Bobby, he does a good 
job for y'all, looks out for you. And I appreciate all the 
panelists taking the time to be here today. I know that it is a 
Saturday and you could be doing a lot of other things, but it 
really does help us do our job more effectively and hopefully 
productively to have your input. So thanks for being here.
    And thanks, Mr. Chairman, for bringing the hearing.
    The Chairman. I thank the gentleman and thank the panelists 
for being with us.
    We have Mr. Andy Bell, cotton, corn, soybean, cattle, and 
hay producer from Tallahassee, Alabama.
    Mr. Bright. Tallassee.
    The Chairman. Tallassee, I am sorry, I did not read that 
right. Bobby is going to keep me straight here. You probably 
cannot understand what I am saying with my accent.
    Mr. Ed Esposito, specialty crop, corn and potato producer 
from Newville, Alabama. Mr. Joe Mencer, a rice, cotton, corn 
soybean and wheat producer from Lake Village, Arkansas. Mr. 
Carl Sanders, peanut, corn, cotton and cattle producer from 
Brundidge, Alabama. And Mr. David Waide, corn, soybean and rice 
producer from Jackson, Mississippi.
    So, we welcome all of you to the panel, we appreciate you 
taking the time to be with us and Mr. Bell, you are recognized. 
Your statements will be made part of the record in their 
entirety and we encourage you to summarize. We have a 5 minute 
rule, try to stay within that within reason, but we will not be 
too tough on you if you go a little over. So welcome to the 
Committee, Mr. Bell.

STATEMENT OF ANDREW P. BELL, COTTON, CORN, SOYBEAN CATTLE, AND 
                  HAY PRODUCER, TALLASSEE, AL

    Mr. Bell. Thank you, Mr. Chairman, Members of the 
Committee, on behalf of the rest----
    The Chairman. I think you need to get the microphones 
pretty close because of the acoustics here. People will have an 
easier time understanding.
    Mr. Bell. Mr. Chairman, Members of the Committee, on behalf 
of the rest of the agricultural producers here in central and 
southeast Alabama, we thank you for the opportunity to speak 
with you today regarding some future directions of farm policy. 
I would also like to acknowledge Congressman Bright, and the 
rest of his staff, for their attention and hard work for 
production agriculture.
    I would like to begin by saying that those of us in 
production agriculture are very appreciative of the tools that 
you provided us with in the 2008 Farm Bill.
    However, market conditions have changed since that bill was 
drafted, and I would like to share some of the difficulties 
that I, and many of my colleagues, have faced over the last 
several years. I am hopeful that those aspects could be 
addressed. Many of those we feel have become dated and would 
hope to be considered for revision in the next farm bill.
    In my immediate area, four major crops that are grown are 
cotton, corn, soybeans and cattle. All four crops have the same 
problem, and it is finding a way to grow them at a profit. 
Cotton probably deserves the most consideration, it is best 
suited for the environment that we are producing in.
    Since 2003, we have had a 72 percent net increase in the 
cost of production. Fuel is by far the leader at a 330 percent 
increase. To make matters even worse, from 2003 to the 2009 
crop, the cotton crop sold for 13 percent less.
    For the last 7 years, 5 of those years have been weather-
related failures. And when I say failure, I mean a lack of 
profit. In 2003, we were devastated with a flood, 2006 through 
2008 were drought years, 2009 our immediate area had 35 inches 
above normal rainfall. Typically on a longer span of history, 
about 20 percent of the time, we have a failure rate due to 
weather.
    With such a drastic decrease in cotton prices coupled with 
the production costs that have skyrocketed, life has become a 
lot tougher for the cotton producer and also our levels of risk 
are at historic levels.
    Target prices set the value of the commodity, and our 
current cost of production with cotton is about 87 cents a 
pound. The target value is around 71 cents. Dealing with these 
weather-related failures, 80 percent of the time, we have to 
have a five percent profit over 4 years to deal with that 5th 
year that is destined for a weather failure. And that is with 
no inflation factored into that.
    In 2009, we had a cotton crop that was 69 percent of a 
normal crop based on our historic production. At the completion 
of that year, we summarized the last 6 years. We have 
historically just had catastrophic insurance coverage--we 
summarized what it would have been with CRC coverage, crop 
revenue coverage, and over that span of time, we would have 
paid in $22,000 more in premiums than the claims for the 
insurance. So we felt like from an insurance standpoint we had 
no safety net. Dealing with these factors over the last 6 
years, we have created several points of interest that need to 
be addressed.
    The greatest need for today's farmer is to address the 
difference between cost of production and level of income. 
Dealing with a 72 percent increase in the production costs, 
cotton would need to be $1.22 a pound today to represent the 
same relationship that we were experiencing in 2003.
    Second, production agriculture needs a workable safety net 
that can be implemented in a timely manner in dealing 
effectively with this weather variable. As I mentioned earlier, 
we have a weather failure about 20 percent of the time.
    Third, government payments seem to have an adverse effect 
in many cases. The payments, a lot of times, do not ever make 
it to the production entity, or they in effect create higher 
input costs. So it is a very difficult situation to address.
    Fourth, Alabama would also benefit if we could receive a 
larger portion of natural resource funding than it has 
historically received in the past. If this state was developed 
in relation to our neighboring states dealing with natural 
resources, that too could be viewed as a safety net for a 
farmer having the capacity to irrigate on a drought year and so 
forth.
    Since 1976, agricultural trade has maintained a trade 
surplus 98 percent of the time and that pretty well speaks for 
itself. We feel like we are an industry that is needed.
    I hope and pray that we are able to address these issues 
and save this part of our economy.
    Thank you for your time today.
    [The prepared statement of Mr. Bell follows:]

 Prepared Statement of Andrew P. Bell, Cotton, Corn, Soybean, Cattle, 
                    and Hay Producer, Tallassee, AL
    Mr. Chairman, and Members of the Committee, on behalf of the rest 
of agricultural producers in central and southeastern Alabama, thank 
you for this opportunity to speak with you briefly regarding the future 
direction of farm policy. I would also like to acknowledge and say 
thank you to Congressman Bright and his staff for their hard work and 
attention to production agriculture.
    I would like to begin by saying that those of us in the production 
agriculture community are very appreciative of the tools that we were 
provided with in the 2008 Farm Bill.
    However, market conditions have changed since this bill was 
drafted, and I would like to share some of the difficulties that I and 
many of my colleagues have been faced with over the last several years. 
I am hopeful that aspects that have become dated might be considered 
for revision in the next farm bill.
    In my immediate production area the four major crops are cotton, 
corn, soybeans, and cattle. All four crops have a common problem: 
finding a way to grow them at a profit. Cotton probably deserves the 
most consideration because it is best suited for our environment and we 
consume approximately 19.8 million bales of finished goods in the U.S. 
However, we only consume 3.5 million bales with our domestic mills. 
This represents a great deal of value enhancement and jobs that have 
been taken from the U.S. market and distributed overseas.
    Since 2003 we have had a 72% net increase in the cost of cotton 
production. Fuel is by far the leader with a 330% individual input cost 
increase. To make matters worse the 2009 cotton crop sold for 13% less 
than the 2003 crop.
    For the last seven crop years (2003-2009) we have had five weather 
related crop failures. 2003--flood. 2006-2008 droughts, 2009--35" above 
normal rainfall. Failure is defined by lack of profit.
    Based on a longer span of history, we typically experience a 20% (1 
out of 5 years) failure rate due to weather.
    With such a drastic decrease in cotton prices coupled with 
skyrocketing production costs and unreliable weather conditions, life 
has become much harder for the average cotton producer. The risks 
facing production agriculture are at historic levels.
    Target prices set the value of the commodity and with the current 
cost of production cotton costs 87 cents/lb. at a target value of 
.7125 cents/lb. at 83.3% of base acres. It will also require a yield at 
the upper end of our yield history to accomplish a profit. Furthermore 
it will take a 5% profit over 4 years just to overcome a 20% weather 
failure (common loss for 2009) in the fifth year of our historic 
weather cycle for this area. That is with no inflation.
    In 2009 we harvested a cotton crop that was 69% of a normal crop 
based on our historic production. At this point we did an analysis of 
the last 6 years to determine whether we would have been better off 
purchasing CRC insurance coverage as opposed to catastrophic coverage. 
We then determined that at a 75% coverage level Enterprise units we 
would have paid $22,000 more in premiums per year than insurance would 
have paid in claims. Under the Optional units we would have paid 
$471,000 more in premiums per year than insurance would have paid in 
claims. So, from my vantage point there is no safety net with the CRC 
coverage. Also, the input suppliers want to be paid immediately rather 
than some future point in time as with other disaster assistance 
programs.
    This environment creates several points of interest that need to be 
addressed.
    The greatest need for today's farmer lies in addressing the 
relationship between cost and income. The input suppliers seem to have 
no restraints in setting the value of their product. The value of the 
commodities are established by the target price which had no inflation 
factor tied to the value creating an environment where there is no 
reasonable way to produce a yield large enough to compensate for a 72% 
increase in production cost. Cotton would need to be $1.22/lb to 
maintain the same expense/income relationship from 2003. We ask that 
you please consider this when you establish the target prices and also 
consider some tool to keep the value in step with inflation. With no 
expectation for profit, the industry will certainly disappear.
    Second, production agriculture needs a workable safety net that can 
be implemented in a timely manner and be effective in dealing with the 
weather variable. As I mentioned earlier we have weather failures 
approximately 20% of the time. The financial risk is so great that one 
bad year can effectively collapse the business. Farming is a continual 
process in that we are working on the current crop as well as future 
crops at the same time. This environment creates a Day by Day Scenario 
which does not work in farming because it requires a great deal of 
forward planning and the timing of operations is critical when dealing 
with the weather.
    Third, government payments seem to have an adverse effect in some 
cases. The payments either do not make it to the actual entity that is 
incurring the risk to produce the crop, or they cause more expense 
(higher land rents, higher input costs, etc.). If production 
agriculture was offered realistic target values tied to inflation and 
produced a certain percentage of their historic base depending on what 
the USDA deemed to be strategically important for this country, then 
the portion that is not needed could be eliminated. If the population 
is to double by 2050 then this will be needed. But in general 
production agriculture can not continue to survive in this environment. 
The electrical and water utilities are not expected to provide their 
products under these types of circumstances and a safe and abundant 
food and fiber supply is as important to survival as is electricity.
    Fourth, if Alabama received a larger proportion of natural 
resources funding than it has historically then it too could develop 
its natural resources to the level of its neighboring states. It would 
also provide a tremendous risk management tool (irrigation hedging a 
drought, etc.). I should also mention that Alabama has yet to recognize 
an opportunity in the production of alternative energy sources as well. 
With fuel costs increasing 330% over the last 6 years Alabama farmers 
would benefit greatly from this.
    Since January 1976 agricultural trade has maintained a trade 
surplus 98% of the time.
    That speaks for itself.
    I hope and pray that we are able to save this vital sector in our 
economy because production agriculture cannot survive under the current 
circumstances.
    Thank you for your time today.
                              Attachment 1

                                                     Cotton
                                                   Budget 2010
----------------------------------------------------------------------------------------------------------------
                                             Yield                      Price                     Total
----------------------------------------------------------------------------------------------------------------
Revenues:
  Lint Sales 1050................      943,950                              0.75                70,7962.5
  LDP............................            0                              0                         0
  Direct, Counter Cyc............      864,750                              0.0675               58,370.625
                                  ------------------------------------------------------------------------------
    Total........................                                                               76,6333.13
----------------------------------------------------------------------------------------------------------------
Expenses:                               $/acre                           Acre                     Total
----------------------------------------------------------------------------------------------------------------
                            Lime            12.5                          899                    11,237.5
                  Fertilizer                78                            899                    70,122
                    Nitrogen                31                            899                    27,869
                        Seed                20                            899                    17,980
              Technology Fee                65                            899                    58,435
                  Herbicides                61                            899                    54,839
                   In Furrow                15                            899                    13,485
                Insecticides                18                            899                    16,182
           Growth Regulators                 1.5                          899                     1,348.5
                       Boron                 2.02                         899                     1,815.98
                  Defoliants                17                            899                    15,283
                        BWEP                 3.5                          609                     3,146.5
                     Ginning                53                            899                    47,647
                     Freight                23                            899                    20,677
                 Consultants                 0.5                          899                       449.5
        Equipment (Variable)                89.27252503                   899                    80,256
                            Labor           89.70717464                   899                    80,646.75
               Payroll Taxes                 6.86259886                   899                     6,169.4764
                        Fuel                59.20                         899                    62,154.821
                    Supplies                 2.224694105                  899                     2,000
                       Water                 0.75                         899                       674.25
                    Overhead               154.0114565                    899                   138,456.3
                    Interest                46.63465501                   899                    41,924.555
                            Land Rent       60                            899                    53,940
                            Land Rent Adj P^16.25                         899                   ^14,608.75
         Irrigation Supplies                10.66963293                   899                     9,592
                                  ------------------------------------------------------------------------------
  Total Operating Expenses.......          904.192737                                           821,722.38
                                  ==============================================================================
  Excess (Deficit) Revenue Over                                                                 ^55,389.26
   Expenses
----------------------------------------------------------------------------------------------------------------


                                                     Cotton
                                                   Budget 2003
----------------------------------------------------------------------------------------------------------------
                                             Yield                     Price                      Total
----------------------------------------------------------------------------------------------------------------
Revenues:
  Lint Sales.....................   1,433,100                                 0.65              931,515
  Seed Sales.....................       1,003.17                             85                  85,269.45
                                  ------------------------------------------------------------------------------
    Total........................                                                             1,016,784.5
----------------------------------------------------------------------------------------------------------------
Expenses:                              $/Acre                              Acre                   Total
----------------------------------------------------------------------------------------------------------------
                            Lime            5.6                           1,686                   9,441.6
                  Fertilizer               26                             1,686                  43,836
                    Nitrogen               20                             1,686                  33,720
                        Seed               11.75                          1,686                  19,810.5
              Technology Fee               10.31                          1,686                  17,382.66
                  Herbicides               39.66                          1,686                  66,866.76
                   In Furrow               14.26                          1,686                  24,042.36
                Insecticides               11.08                          1,686                  18,680.88
           Growth Regulators                9.27                          1,686                  15,629.22
                       Boron                2.02                          1,686                   3,405.72
                  Defoliants               11.03                          1,686                  18,596.58
                        BWEP                5                             1,686                   8,430
                     Ginning               74                             1,686                 124,764
                     Freight               11.16                          1,686                  18,815.76
                 Consultants                4                             1,686                   6,744
        Equipment (Variable)               43.79233534                    1,686                  73,833.877
                            Labor          53.64213128                    1,686                  90,440.633
               Payroll Taxes                4.103623043                   1,686                   6,918.7085
                        Fuel               17.77833728                    1,686                  29,974.277
                    Supplies                1.779359431                   1,686                   3,000
                       Water                0.75                          1,686                   1,264.5
                    Overhead              105.0834958                     1,686                 177,170.77
                    Interest               13.98229249                    1,686                  23,574.145
                            Land Rent      30                             1,686                  50,580
                                  ------------------------------------------------------------------------------
  Total Operating Expenses.......         526.0515746                                           886,922.95
                                  ==============================================================================
  Excess (Deficit) Revenue Over                                                                 129,861.5
   Expenses
----------------------------------------------------------------------------------------------------------------

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                              Attachment 6
Monthly Economic Outlook: National Cotton Council
http://www.cotton.org/econ/reports/outlook.cfm
Accessed 5/4/2010
          * * * * *
    U.S. Cotton Acreage_USDA's March Prospective Planning report 
indicates U.S. producers to plant 10.51 million acres of cotton in 
2010/11, up 14.8% from the previous year. Upland area is projected to 
be 10.32 million acres, up 14.5% from 2009/10 while ELS area is 
projected at 190,000 acres, a 34.1% increase. The NCC's planting 
intention survey, released in early February, indicated U.S. farmers 
intend to plant 9.92 million acres of upland cotton and 176,000 acres 
of ELS cotton.
    Projected upland area in the Southeast of 2.39 million acres 
represents an increase of 26.4% from the previous year. In the Mid-
South, projected plantings of 1.73 million acres represent an increase 
of 6.3%. The largest acreage increase is expected to be seen in the 
Southwest in Texas where producers intend to plant 600,000 more acres 
of upland cotton than planted in 2009/10. Out West, producers intend to 
plant 320,000 acres of upland cotton, up 29.8% from last year.
    U.S. Cotton Production_In it's April report, USDA estimates that 
the U.S. produced a crop of 19.2 million bales in the 2007 crop year. 
For 2008, the USDA forecast U.S. production at 12.8 million bales. A 
slight drop is projected for the 2009 crop with production falling 
670,000 bales to 12.2 million bales. USDA released 2010-2011 
projections during last month's Agricultural Outlook Forum. U.S. 
production is estimated to be 16.00 million bales for 2010-2011.
    U.S. Cotton Supply_In USDA's April report, USDA estimates 
production at 19.2 million and beginning stocks of 9.5 million for the 
2007 crop year. Combined with imports this gives total supplies of 28.7 
million bales for the 2007/08 marketing year.
    For the 2008 crop year, combining projected production with 
expected beginning stocks of 10.0 million bales results in a total U.S. 
supply of 22.9 million bales. This is down more than 5.8 million bales 
from the 2007 level.
    By adding beginning stocks of 6.3 million bales to the roughly 12.1 
million bale crop, USDA believes total U.S. supply will drop roughly 
4.4 million bales to 18.5 million bales in 2009.
    For the 2010 crop year, combining projected production of 16.7 
million bales with expected beginning stocks of 3.1 million bales 
results in a total U.S. supply of 19.8 million bales. This is up 1.3 
million bales from the 2009 level.
    U.S. Cotton Demand_Moving along, we'll focus on U.S. cotton demand.
    U.S. Retail Fiber Consumption_Net domestic consumption is a measure 
of the U.S. retail market's size. It measures both cotton spun in the 
U.S. (mill use) and cotton consumed through textile imports. Total 
fiber consumption in 2009 was 43.0 million bale equivalents. Cotton's 
share of net domestic consumption decreased 1.0% this past year to 
43.0%, which translates to 18.6 million bales. As for 2010, NCC 
projects net domestic consumption of all fibers to increase to 45.9 
million bales. With a projected share of 43.1%, cotton's net domestic 
consumption is projected to be 19.8 million bales. *
---------------------------------------------------------------------------
    * Emphasis added.

    Cotton's Share of Consumption_While it is important that the retail 
market continue to grow, cotton must also be concerned with its share 
of the market and the competition from manmade fibers. During the past 
few years, cotton's share of the U.S. retail market had generally been 
on the rise. In 2002, cotton's share reached just over 43%. The higher 
prices of 2003 were met with some shifting from cotton to other fibers. 
As a result, cotton's share of the retail market dipped. However, in 
2006 cotton's share of the retail market climbed back up to 43.1%. For 
2007, cotton's share of the retail markets remained roughly unchanged 
at 43.1%. For 2008, cotton's share of the retail markets reached the 
44.0% mark. In 2009, cotton's share has fallen back to just over 43%.
    U.S. Retail Cotton Consumption (Historical)_Imported goods make up 
the largest portion of U.S. net domestic consumption. However, for the 
second time since 2001, imported cotton textiles declined from 20.5 
million bale equivalents in 2008 to an estimated 18.4 million in 2009.
    U.S. Cotton Textile Imports_Increasing imports over the past 
several years have devastated the U.S. textile and apparel industries. 
While cotton textile imports did not increase in calendar 2009, they 
still made up almost 99% of U.S. net domestic consumption of cotton. 
Imports of cotton goods in 2009 are estimated to have diminished by 
over 10.0% to 18.4 million bale equivalents. In calendar 2010, NCC 
projects cotton textile imports to increase to 19.5 million bales.
    U.S. Cotton Content_For imports, it is important to consider that a 
significant portion of imported goods contain U.S. cotton. Since much 
of what the U.S. exports to the NAFTA (North American Free Trade 
Agreement) and the CBI (Caribbean Basin Initiative) countries is in the 
form of fabric and piece goods that come back in the form of finished 
goods, the trade gap is not as wide as implied by gross imports and 
exports. NCC analysts estimate that 26.8% of all cotton goods imported 
in 2009 contained U.S. cotton. This is a 1.2% decrease over the 
previous year. In bale equivalents, these imported cotton goods 
contained over 4.9 million bales of U.S. cotton. This is due, in large 
part, to our trading partners in NAFTA and the CBI.
    Cotton Textile Trade With Mexico_Imports from Mexico in 2009 are 
estimated at 1.3 million bales, down approximately 13.7% from the 
previous year. This marks the ninth straight year in which imports from 
Mexico have declined.
    Cotton Textile Trade With CBI_Imported cotton goods from CBI for 
the year are estimated at 2.3 million bale equivalents, down 21.9% from 
the previous year.
    Cotton Textile Imports From China (Historical)_For the fifth 
consecutive year, China was the largest supplier of cotton textile 
imports into the U.S. Also, China was one of the few countries who 
showed an increase in their cotton product imports into the U.S. in 
2009 compared to 2008. Total cotton product imports from China 
increased slightly to an estimated 5.8 million bale equivalents in 
2009, up 7.3% from 2008 and up 600.9% from 2001 when China entered the 
WTO. China's share of imported cotton goods in the U.S. market 
accelerated from 11.3% in 2004, 21.2% in 2005, 25.6% in 2006, 30.2% in 
2007, and 29.5% in 2008 to 31.3% in 2009.
    Calendar Mill Use_Mill use of cotton declined for the twelfth 
consecutive year in calendar 2009 and is 3.3 million bales, 24.4% below 
the amount consumed in 2008. For calendar 2010, NCC forecasts domestic 
mill use of cotton at 3.5 million bales.
    Crop Year Mill Use_USDA's latest estimate for mill use in the 2008 
crop year is 3.6 million bales. Current estimates are 3.5 million bales 
for the 2009 crop year. Mill use is projected to fall to 3.4 million 
bales in 2010. *
---------------------------------------------------------------------------
    * Emphasis added.

    U.S. Cotton Production & Use_Pulling the U.S. balance sheet 
together for 2007, we see that exports improve and mill use remains 
under pressure. Looking ahead to the next marketing year, USDA expects 
exports to weaken while both U.S. production and mill use continue to 
fall. For 2009, USDA expects exports, mill use and production to 
continue to fall. U.S. production is estimated to be 16.00 million 
bales for 2010-2011. Mill use is set at 3.40 million bales while 
exports are reported to increase slightly to 12.60 million bales.
    World Market_Exports of U.S. cotton will be dependent on conditions 
in the world market.
    China Cotton Supply & Use_For 2008, USDA estimates that Chinese 
mill use will be 44.00 million bales.
    In 2007, production approached 37.0 million bales. For 2008, USDA 
forecasts production will be roughly 36.7 million bales. These 
projections imply a good size differential between production and mill 
use, leading to imports of 7.0 million bales.
    Looking forward for China, production is expected to drop to 31.5 
million
bales . . .

    The Chairman. Thank you very much for that excellent 
testimony, Mr. Bell.
    Mr. Esposito, welcome to the Committee, you are recognized.

  STATEMENT OF EDWARD D. ESPOSITO, SPECIALTY CROP, CORN, AND 
                 POTATO PRODUCER, NEWVILLE, AL

    Mr. Esposito. Mr. Chairman, Members of the Committee, 
first, let me start by saying what both an honor and a 
privilege it is to be here today. I have a small vegetable 
operation, fruits and vegetables, in the Echo community near 
Newville.
    For more than a century, economists have predicted the 
demise of the small family farm. We have been labeled 
backwards, inefficient and unproductive compared to large-
scale, mechanized, corporate-type operations. I believe this 
view needs to be challenged.
    Small farmers make better stewards of the land through 
diverse cropping systems, landscapes and biological 
organization. We responsibly manage our natural resources of 
soil, water and wildlife. Sixty percent of all U.S. farms of 
180 acres or less produce significant environmental benefits 
for society.
    Most consumers have had little connection to agriculture 
and food production. Through farmers markets, community-
supported agriculture and direct marketing strategies of small 
farmers, consumers are beginning to connect with the people who 
grow their food, and with the food itself as a product of a 
farmer's cooperation with nature.
    Small farms of less than 30 acres can have a greater than 
ten times the dollar output than larger farms through the 
production of specialty items such as vegetables and cut 
flowers.
    I would like to laud the USDA Commission on small farms for 
their call to change that policy that favored large corporate 
farms, a policy that I believe negatively affects rural 
communities and the environment.
    I am thankful that programs such as the small scale farmer 
and rancher and beginning farmer are now made available through 
the USDA-NRCS. I believe programs such as these will be of 
great assistance to small farmers in America, and that they are 
long overdue.
    Thank you once again. Brief and to the point.
    [The prepared statement of Mr. Esposito follows:]

  Prepared Statement of Edward D. Esposito, Specialty Crop, Corn, and 
                     Potato Producer, Newville, AL
    First let me start by saying that it is both an honor and a 
privilege to be here today. My name is Edward Esposito of Esposito 
Farms in Echo, Alabama.
    For more than a century economists have predicted the demise of the 
small family farm. We have been labeled as backwards, inefficient and 
unproductive in comparison to large scale mechanized corporate 
agriculture. This view needs to be challenged.
    Small farmers make better stewards of the land through diverse 
cropping systems, landscapes and biological organization. We 
responsibly manage our natural resources of soil, water and wildlife: 
60% of all U.S. farms of 180 acres or less produces significant 
environmental benefits for society.
    Most consumers have had little connection to agriculture and food 
production. Through farmers markets, community supported agriculture 
and direct marketing strategies of small farmers, consumers are 
beginning to connect with the people growing their food and with the 
food itself as a product of a farmers cooperation with nature.
    Small farms of less than 30 acres or less can have greater than ten 
times greater dollar output than larger farms through the production of 
specialty items such as vegetables and flowers.
    I would like to laud the USDA commission on small farms for their 
call to change policy that had favored large corporate style farms. 
Policy that I believe negatively affects rural communities and the 
environment. I am thankful that programs such as the small scale farmer 
and rancher and beginning farmer and now made available through the 
USDA-NRCS. I believe programs such as these will be of great assistance 
to small farmers in America and that they are long overdue.
    Thank you once again for the invitation to speak here today.

    The Chairman. Thank you very much. You get extra points for 
that, Mr. Esposito.
    Mr. Mencer, welcome to the Committee.

STATEMENT OF JOE MENCER, RICE, COTTON, CORN, SOYBEAN, AND WHEAT 
                   PRODUCER, LAKE VILLAGE, AR

    Mr. Mencer. Thank you, Mr. Chairman. We appreciate the 
opportunity to be here, and we appreciate the rest of the 
Committee Members being here today and allowing us the 
opportunity to bring the points of the rice industry to you 
today.
    Frankly, the only part of the farm program that really 
works for rice right now is the direct payment. That is the 
only true part of the program that gives us any safety net 
right now. The countercyclical programs, the loan rates are all 
so low that, frankly, if we had to depend on that for our 
survival, we would be out of business. They just are not in 
sync with the cost of production nowadays. So, we want to try 
to maintain these direct payments if we can, in some form at 
the level they are now, because we know there is little chance, 
if any, of getting the loan rates raised.
    If we could get the target price raised some it would help, 
but I do not think they could justify in the budget bringing 
them up to the levels it would take for us to survive.
    Two programs that are out there that were in the last farm 
bill that rice really cannot participate in, they have no 
benefit to us, are the SURE Program and the ACRE Program. In 
the Mid-South, in Arkansas, especially in cotton, for the last 
2 years, we have had devastating weather during the harvest 
season. We pick around 60 percent of a normal crop. We try to 
buy insurance at an affordable level and, frankly, without high 
insurance, SURE does not work. We cannot afford the insurance 
level we need for SURE to trigger. So most farmers are not 
collecting anything under SURE.
    This next week there are still sales going on in the cotton 
area in south Arkansas of farmers going out of business because 
they could not pay out and they are not qualified to collect on 
SURE. So that program just really does not work in the Mid-
South and there is little value in it for rice at all. We do 
not think we would ever trigger in rice because we normally do 
not have a yield reduction. Our biggest problem with rice is 
the cost of inputs. If it is a drought, we put more water, but, 
that is at an added cost.
    And also if we have downed rice issues, when a storm comes 
through, blows rice on the ground, it can increase 2\1/2\ times 
your normal harvest expense. So the yield is not where we face 
our biggest problem, it is in the cost of getting the crop out 
of the field and producing that crop, because of large amounts 
of energy that it takes.
    Another problem with the SURE program is it is based on 
whole farm revenue, and many of our farms are diversified, in 
that we grow four or five crops. Your early crops come out, you 
do pretty good on those and the margins that you make on those 
offset the huge losses you have in your cotton and your later 
harvested crops. So that is another problem with SURE.
    Where we see there may be some benefit for rice and some 
other Mid-South crops is in crop insurance. Currently, through 
a task force that the Rice Federation has formed, we are trying 
to come up with some new crop insurance programs or policies 
that y'all could take a look at in the next coming months, and 
see if those could be worked into this bill in some way.
    One of them is a crop margin protection to where data would 
be collected on the cost of these inputs and if there is a 
drastic move in energy or fertilizer throughout the year, then 
there may be an indemnity triggered. We see that would be more 
of a benefit for us to try to secure a safety net, rather than 
trying to count on SURE or the ACRE program for us.
    Those are two of our main deals, we need to be sure and try 
to protect the direct payment and build on crop insurance as a 
better safety net for us.
    And once again, I want to thank you for allowing us to come 
here today to represent the rice industry. And in the future, 
if there are any questions, I am sure that we would be more 
than happy to try to help you work through something that would 
be good for the Mid-South, or for rice in particular.
    [The prepared statement of Mr. Mencer follows:]

  Prepared Statement of Joe Mencer, Rice, Cotton, Corn, Soybean, and 
                    Wheat Producer, Lake Village, AR
Introduction
    Chairman Peterson, Ranking Member Lucas, and Members of the 
Committee, thank you for holding this hearing to review farm policy in 
advance of the 2012 Farm Bill.
    We appreciate the opportunity to offer testimony before the 
Committee on Agriculture concerning the view of rice farmers relative 
to current farm policy and the development of the 2012 Farm Bill.
    My name is Joe Mencer. I am a rice, cotton, corn and soybean farmer 
from Lake Village, Arkansas and have been farming for 30 years. My 
family farms 6,300 acres in the southeastern corner of the state on 
land that has been in my family since 1936. I serve on the Arkansas 
Rice Producers' Group board and the USA Rice Producers' Group board and 
also chair its Crop Insurance Task Force.
U.S. Rice Industry Overview
    The U.S. rice industry is a multibillion dollar industry that 
provides jobs and income for not only producers and processors of rice, 
but for all involved in the value chain. Much of this economic activity 
occurs in the rural areas of the Sacramento Valley in California, the 
Gulf Coast region of Louisiana and Texas, and the Mississippi Delta 
region where 3 million acres of rice, on average, are produced 
annually.
    Arkansas is the largest rice producing state in the U.S., growing 
about 1.5 million acres on average, or about \1/2\ of the total U.S. 
crop. Rice is also produced on another 1.7 million acres in the other 
five rice growing states, including California, Louisiana, Mississippi, 
Missouri, and Texas.
    The U.S. rice industry is unique in its ability to produce all 
types of rice, from long grain, medium grain, and short grain, to 
aromatic and specialty varieties. Last year, U.S. farmers produced a 
rice crop of nearly $3.1 billion as measured in farm gate value.
    Today, about 85 percent of all the rice that is consumed in the 
U.S. is produced here at home. And, despite significant trade barriers 
to exports, the U.S. remains the largest non-Asian exporter of rice and 
the third largest exporter worldwide.
    On average, between 40 to 50 percent of the annual rice crop is 
exported as either rough or milled rice. The top U.S. export markets 
for rice include Japan, Mexico, Canada, Haiti, and most of Central 
America. In 2009 we exported $2.2 billion in rice to markets around the 
world.
    Americans consume 25 pounds of rice per year. Of the rice produced 
by our farmers that remains in the domestic market, 53% is bound for 
direct human food use, 16% is dedicated to processed foods, 15% is used 
to produce beer, 14% is for pet food, and the balance is used for 
industrial purposes.
    The 2005 Dietary Guidelines and MyPyramid recommendation, published 
jointly by the Departments of Agriculture and Health and Human 
Services, call for five to ten servings of grains daily, with half the 
servings coming from whole grains, such as brown rice, and 45 to 65 
percent of calories coming from complex carbohydrates, such as rice. 
Rice is a wholesome source of nutrition, with no sodium, no 
cholesterol, no glutens, and no trans or saturated fats.
    Beyond the substantial economic and nutrition benefits of rice is 
the environmental dividend from winter-flooded rice fields that provide 
critical habitat for migratory waterfowl and other wetland-dependant 
species. In point of fact, all of the major rice-production areas in 
the U.S. host important waterfowl activity during winter months.
    Rice-growing areas provide surrogate habitats for hundreds of 
wildlife species that rely on wetland conditions for species survival, 
some of which would be threatened but for the wetland environments 
provided by flooded rice fields.
    Without rice farming, wetland habitats in the U.S. would be vastly 
reduced. A loss of this magnitude would have a disastrous effect on 
waterfowl, shore birds, and a host of other wetland-dependant species. 
In the Delta region of Arkansas, Mississippi, Missouri, and northeast 
Louisiana, at least 70 wildlife species rely on our rice fields for 
habitat.
2008 Farm Bill Review
    The Food, Conservation, and Energy Act of 2008 (the Farm Bill) 
continued the traditional mix of safety net features consisting of the 
non-recourse marketing loan and loan deficiency payment program and the 
direct and counter cyclical payment program.
    The farm bill also includes the addition of Average Crop Revenue 
Election (ACRE) as an alternative to counter cyclical payments for 
producers who agree to a reduction in direct payments and marketing 
loan benefits. The bill also added Supplemental Revenue Assurance 
(SURE) as a standing disaster assistance supplement to Federal crop 
insurance.
    The 2008 Farm Bill made very substantial changes to the payment 
eligibility provisions of the safety net, establishing an adjusted 
gross income (AGI) means test and, albeit unintended by Congress, 
resulting in the very significant tightening of ``actively engaged'' 
requirements for eligibility.
    USDA is still in the process of implementing many of the provisions 
of the 2008 Farm Bill, and the final payment eligibility rules were 
only announced in January of this year. As a consequence, we are still 
adjusting to the many changes contained in the current farm bill, even 
as we begin the process of developing policy recommendations for the 
2012 Farm Bill.
    Regarding ACRE and SURE, frankly, neither policy has proved much 
value to the rice farmer in any of the major growing regions. 
Specifically, in the first year of ACRE sign-up, only eight rice farms 
representing less than 900 acres were enrolled in the program 
nationwide. And SURE has provided little, if any, assistance to rice 
producers, including those producers in the Mid-South who last year 
suffered significant monetary losses due to heavy rains and flooding 
occurring prior to and during harvest.
    Regarding the traditional mix of safety net features, the 
nonrecourse marketing loan and loan deficiency payment program and 
countercyclical payment program have not yet provided payments to rice 
farmers under the 2008 Farm Bill because of the new price paradigm 
which has, as a practical matter, greatly limited the protections 
afforded to producers under these two features.
    In fact, if the protections provided were ever to trigger for rice 
farmers, the protections would help stem some of the economic losses 
but, frankly, not enough to keep most rice farms in business even 
through 1 year of severely low market prices.
    As such, whatever its imperfections, the Direct Payment alone has 
assisted rice producers in meeting the ongoing and serious price and 
production perils of farming today.
    For rice producers, as for most other producers, the existing 
safety net protection levels have simply not kept pace with the 
significant increases in production costs. It is for this reason that 
rice farmers believe strengthening the safety net would be helpful in 
ensuring that producers have the ability to adequately manage their 
risks and access needed credit.
    Another area that we believe needs attention is the Farm Service 
Agency (FSA) direct and guaranteed loan programs. These programs have 
proved invaluable over the years in ensuring producers have access to 
necessary production financing in times of financial stress due to crop 
losses. We urge the Committee to work with your colleagues on the 
Appropriations Committee to ensure adequate funding for these programs 
and with USDA to ensure the program is administered in a streamlined 
manner for both producers and their lenders.
    In sum, despite what one may read in the newspaper or hear on the 
radio or television about Uncle Sam lavishly spending money on the farm 
safety net, rice farmers are certainly not seeing any windfalls and, I 
would respectfully submit, neither are our brethren who produce other 
crops. The public perception about government largess in farm policy, 
so carefully and diligently created and nurtured by critics, is quite 
divorced from reality on the ground. Spending on the rice safety net in 
the farm bill has declined from $1.2 billion to about $400 million 
annually, which is largely made up of only the direct payments.
Crop Insurance
    Even risk management products offered under Federal Crop Insurance 
have been of minimal value to rice farmers to date due to a number of 
factors, including artificially depressed actual production history 
(APH) guarantees, which I understand is also a problem for many other 
producers; high premium costs for a relatively small insurance 
guarantee; and the fact that the risks associated with rice production 
are unique from the risks of producing many other major crops.
    For instance, since rice is a flood-irrigated crop, drought 
conditions rarely result in significant yield losses as growers simply 
pump additional irrigation water to maintain moisture levels to achieve 
relatively stable yields. However, drought conditions do result in very 
substantial production cost increases connected to the pumping of 
additional water.
    As such, what rice farmers need from Federal crop insurance are 
products that will help protect against increased production and input 
costs, particularly for energy and energy-related inputs. For example, 
fuel, fertilizer, and other energy related inputs represent about 70 
percent of total variable costs.
    In this vein, the USA Rice Federation has been working for over a 
year now to develop a new generation of crop insurance products that we 
hope will provide meaningful risk management tools for rice producers 
in protecting against sharp, upward spikes in input costs. Our 
objective is to gain approval from the Risk Management Agency (RMA) of 
at least two new products that could be available to growers in time 
for the 2012 crop year. Without these products in place, rice producers 
enter the 2012 Farm Bill debate at a serious disadvantage, having just 
one safety net feature to which they have effective access. We believe 
that there is the authority within the current Federal crop insurance 
statute to greatly expand access to higher quality coverage and we hope 
that USDA will aggressively use that authority given the constraints 
Congress faces in pursuing this end.
    One of the products is a concept called Crop Margin Coverage (CMC) 
that would provide three levels of protection: yield coverage, price 
coverage, and margin coverage. The new component, margin coverage, is 
intended to provide some degree of protection against rising production 
costs, focused on the major inputs of fuel and fertilizer. We are 
seeing significant interest for such a product from rice producers and 
are hopeful that RMA will work with us to gain approval for full 
development of this concept.
    The second product we are working on is a ``downed rice'' 
endorsement for existing policies. This would be an add on to existing 
insurance policies and is intended to help offset some of the 
additional harvest costs that rice producers experience due to rain and 
flooding at or near harvest. In such situations, harvest costs can 
increase two to three times of normal and the existing crop insurance 
products and SURE provide no protection for this peril.
    Concerning crop insurance as it exists today, we should note that 
the enterprise unit discount provision contained in the 2008 Farm Bill 
did help remove at least some obstacles to better coverage, making Crop 
Revenue Coverage (CRC) policies more affordable and effective for some 
rice farmers. Thanks to this provision, we saw an increase in 
participation in the 2009 crop year and we anticipate additional 
participation again this year. We thank you for including this 
provision in the 2008 Farm Bill and we hope that this pilot program can 
be universally expanded and made permanent.
Conservation Policies
    Rice producers are excellent conservation stewards and, as such, we 
strongly support and participate in voluntary, incentive-based USDA 
conservation programs.
    Rice producers contribute to beneficial conservation efforts 
through a number of initiatives including the Environmental Quality 
Incentives Program (EQIP), the Conservation Security Program (CSP), and 
the Wetlands Reserve Program (WRP), among others. Through our 
participation, rice producers are maintaining and enhancing the natural 
resources of not just our family farms, but that of our communities, 
states, and our nation as well.
    Rice producers support administration of conservation programs 
primarily at the local level. We appreciate the emphasis Congress has 
placed on technical assistance to producers and we value these services 
from NRCS officials and NRCS-certified third-party providers.
    In regard to the current farm bill, we believe that release of 
final conservation program rules is extremely important, as is their 
consistent implementation and application nationwide. In particular, 
with the strong interest in the 2008 Farm Bill's expanded national-
level Conservation Stewardship Program (CSP) and in the absence of a 
final CSP rule to date, we are hopeful that the Administration will 
quickly complete and release the CSP final rule.
    When the 2002 Farm Bill's Conservation Security Program was being 
implemented, rice producers played a proactive role in working with 
NRCS. More recently, in 2009, the USA Rice Federation filed CSP 
comments with NRCS, including some concerns about provisions in the 
interim final rule. Of specific concern to rice farmers are provisions 
that would administratively impose a payment limit of $40,000 per year 
and a $200,000 contract limit despite the fact that the farm bill does 
not impose either.
    Also, of specific concern are restrictions on the number of 
individuals who may apply or contract for CSP. Earlier this year, only 
one entity per contract was allowed, regardless of whether an operation 
was signed up at the Farm Service Agency (FSA) as a multi-entity 
operation. Moreover, only those listed on the FSA's documents as farm 
operators were eligible to apply and, if deemed eligible, enter into a 
CSP contract. Finally, the rule states that, to be eligible, a CSP 
applicant must have documented control of the land for the proposed 
contract term unless an exception is made by NRCS. However, a CSP 
applicant may not have a 5 year lease on every acre he or she farms. 
Landowner-tenant relationships include many types of arrangements. 
Requiring a 5 year or longer lease is unrealistic in most 
circumstances, both from the perspective of the landowner and the 
tenant.
    In short, rice farmers take very seriously our responsibility to 
care for our land and our natural resources. They are our economic 
lifeblood and an integral part of the legacy that we will leave behind 
to our children and grandchildren. As has been said many times, farmers 
often find themselves cash poor but relatively land rich. As such, we 
have an economic as well as an altruistic motivation to properly care 
for our land.
    But there is also very substantial benefit accruing to the general 
public as a result of the conservation efforts we undertake on the 
farm, including cleaner air and water, wildlife and wildlife habitat, 
reduced soil erosion, and wetlands protection. Accordingly, we believe 
these highly successful, voluntary conservation cost-share efforts are 
properly a shared responsibility.
    Finally, given the fiscal constraints expected in the context of 
the 2012 Farm Bill, I would be remiss not to mention that conservation 
funding is an essential part of any successful farm policy, but it 
should not come at the expense of the farm safety net. A farmer and 
rancher must still be profitable in order to properly care for his or 
her land. The safety net doesn't translate into profitability but it 
does take out some of the deep economic valleys producers would 
otherwise face.
Environmental Policy Challenges
    Unlike conservation efforts under the farm bill, Federal and state 
environmental regulations, which are growing in number, frequently 
appear to put more focus on the means of achieving a desired outcome 
than the outcome itself, thus creating unnecessary inefficiencies and 
added costs to conservation.
    Policy makers should consider working to avoid these less efficient 
regulatory frameworks where effective cost-share conservation efforts 
are proven more effective, while making the cost-share dollars 
available to assist in meeting Federal and state regulatory regimes 
when they are nevertheless imposed on producers.
    Of serious and ongoing concern to rice producers is the economic 
impact of climate change legislation on the U.S. rice industry and 
American agriculture in general. From our vantage point, the cost of 
pending legislation heavily outweighs any potential benefits.
    One of the key areas of focus in our analysis of pending 
legislation is the impact on rice production costs as a result of 
higher costs for major inputs such as fuel, electricity, fertilizer, 
natural gas, and propane. As noted earlier, rice is a flood-irrigated 
crop, requiring energy to pump either ground or surface water. In 
addition, rice is a high yielding crop, utilizing nitrogen fertilizer 
which, in turn, is made using natural gas. Rice must also be dried 
before it can be stored. And, finally, beyond the increased costs of 
field production, rice must be milled before it can be consumed or 
utilized in products, an expense which is also borne by producers if 
they are part of a cooperative. All of these already significant costs 
are expected to substantially increase under pending climate change 
legislation, both in the short and long term, and this does not even 
take into account increased transportation and other costs expected to 
rise as a result.
    We fear that these increased input costs will make us less 
competitive vis-a-vis our major global competitors, such as Vietnam, 
Thailand, Pakistan, and India, whose producers already benefit from 
heavy government protections and which will not likely bind their 
economies to the same level of commitments to reduce greenhouse gas 
emissions, if they will bind themselves to any at all.
    In sum, we are confronted with no economic upside under pending 
climate change legislation but plenty of economic downside. For 
instance, an analysis by the Agricultural and Food Policy Center at 
Texas A&M University estimates that due to the increase in input costs 
for rice and the likelihood of no opportunity to meaningfully 
participate in an offset program, at least at this time, all fourteen 
(14) representative rice farms analyzed would experience lower average 
annual net cash farm income. Moreover, the American Farm Bureau 
Federation estimates that the increase in rice production costs per 
acre could reach as high as $153.00.
    Beyond climate change legislation, our industry is also facing 
numerous additional rules and regulations from the Environmental 
Protection Agency (EPA), including new spray drift guidance, potential 
National Pollutant Discharge Elimination System (NPDES) permits for the 
application of pesticides, Endangered Species Act (ESA) and pesticide 
re-registrations concerns, and additional air quality regulations at 
both the farm and processing stages. Clean Water Act legislation 
currently pending in Congress is also troubling because of the legal 
uncertainty that it would create on the farm. Food Safety and Chemical 
Security legislation also needlessly create anxiety for producers by 
failing to address basic concerns over fairness, including, in the case 
of Food Safety, the failure to provide for a simple indemnification 
program for producers in the case of an FDA-error.
Trade Policy Challenges
    Another key policy focus for our industry is trade since we are 
greatly dependent on export channels to market nearly half of our 
annual production. While many previously negotiated trade agreements 
have promised market access gains for agriculture, much of what was 
promised has yet to materialize or is continually threatened by 
artificial sanitary, phytosanitary (SPS) and other non-tariff barriers.
    In terms of new agreements, rice was completely excluded from the 
free trade agreement negotiated with South Korea, foreclosing any new 
markets for U.S. rice producers in that country. And, the Colombian 
Free Trade Agreement (FTA), which would provide significant new market 
access for the Mid-South rice industry, is stalled.
    Moreover, one market that has the potential to become a top five 
export market almost immediately is Cuba. Unfortunately, the U.S. 
Government maintains restrictions on our agricultural exports to this 
country. Cuba was once the number one export market for U.S. rice prior 
to the embargo and we believe it is potentially a 400,000 to 600,000 
ton market if normal commercial relations are established. In this 
regard we wish to commend Chairman Peterson and Congressman Moran for 
your leadership in introducing legislation to open agricultural trade 
as well as remove travel restrictions to Cuba. We look forward to 
working with you to see this legislation enacted into law.
    I would be remiss if I did not at least touch on the Doha Round 
negotiations of the World Trade Organization (WTO). It suffices to say 
that we are greatly outgunned by high foreign subsidies and tariffs 
and, at least so far, we have seen nothing in the Doha Round 
negotiations that would change any of this. In fact, instead, in many 
ways Doha would make matters worse. Yet, enshrining in our trade 
agreements decisive advantages for our trading partners, including such 
countries as China, India, and Brazil, may be marketed as trade 
liberalization or free trade in Washington or Geneva but we in the 
countryside see it for what it really is: picking winners and losers in 
the global economy based on politics.
    Given rising future global demand for food, the U.S. should 
exercise caution in negotiations so as not to arbitrarily forfeit 
America's domestic production to less efficient competitors.
    It is also in light of our highly protected and subsidized 
competition and the importance of trade to our industry that we believe 
it is critical that the U.S. maintain adequate funding and resources 
for our export promotion and market development activities, 
particularly the Market Access Program, Foreign Market Development 
program, and the General Sales Manager (GSM) 102 export credit 
guarantee programs.
Budget Challenges
    As we look ahead to the development of the 2012 Farm Bill, we are 
deeply concerned about the deteriorating budget baseline for 
agriculture.
    As you know, today, less than \1/4\ of 1 percent of the Federal 
budget and less than 17% percent of the USDA budget is dedicated to the 
farm safety net.
    Yet, the re-negotiation of the Standard Reinsurance Agreement (SRA) 
by USDA and the crop insurance companies could result in another 
baseline reduction of nearly $7 billion. Clearly, agriculture cannot 
afford this kind of hemorrhaging in advance of what we understand may 
be a baseline farm bill and at least the potential of another budget 
reconciliation effort. Of equal concern is the adverse impact of such 
cuts on a safety net component that producers are told by lawmakers and 
lenders alike that they will have to rely on more and more.
    As you know, the farm safety net sustained cuts in 2005 during 
budget reconciliation and, again, in 2008 in the context of the farm 
bill even as other policies administered by USDA received funding 
increases, some very substantial. The success of farm legislation has 
always depended upon carefully balanced legislation and coalition-
building. We are deeply concerned that singling out the farm safety net 
for additional cuts may upset this fragile balance.
2012 Farm Bill Development
    The rice industry is working internally to analyze all the existing 
safety net policies and to evaluate their effectiveness in providing a 
measure of protection in the most efficient manner.
    We believe that a strengthening of the farm safety net is 
important. But we also believe that any improvements should be 
accomplished in a manner that does not cause disruption and upheaval in 
the U.S. agriculture production system which continues to provide our 
country and millions around the world with a safe, abundant, and 
affordable supply of food, fiber, and fuel.
    With regard to a whole farm revenue concept, we have serious 
concerns about how such a program would perform for rice producers, 
especially if it has some of the same components as the existing SURE 
program, which is not working for our industry. In general, whole farm 
approaches don't work well for rice farmers, particularly those that 
are diversified with several crops.
    At this time, we would like to share with you the key principles 
that are guiding our work in analyzing the current farm bill policies.

    1. The farm safety net should be strengthened for rice producers by 
        the 2012 Farm Bill.

    2. The Direct Payment Program, or any variant, should confer a 
        stronger safety net for rice producers.

    3. The Marketing Assistance Loan/Loan Deficiency Payment Program 
        should be extended with at least current loan rate levels as a 
        base level safety net for producers and lenders.

    4. The Countercyclical Payment Program, or any variant, should 
        better reflect current market conditions for rice.

    5. ACRE, or any variant, needs to effectively serve all eligible 
        commodities.

    6. SURE, or any variant, needs to effectively serve all eligible 
        commodities and regions.

    7. Crop insurance needs to effectively serve all eligible 
        commodities and regions.

    8. The 2012 Farm Bill should create long-term certainty regarding 
        payment limitations, adjusted gross income requirements, and 
        other eligibility criteria.

    9. There should be no further reduction in pay limits or adjusted 
        gross income requirements or further restrictions on 
        eligibility relative to the current mix of safety net 
        components or the equivalents under any variant.

    10. There should be no further reduction in funding levels for the 
        farm safety net nor any reduction in that safety net funding 
        specific to rice producers.
Conclusion
    In closing, we would like to thank you once again for this 
opportunity to share our views on the current state of the rice 
industry, the diverse challenges we face, and our initial thoughts on 
the development of a 2012 Farm Bill that can help meet the needs of 
producers.
    We look forward to working with you in this regard and I would be 
happy to respond to any questions the Committee may have.

    The Chairman. Thank you very much, Mr. Mencer.
    Mr. Sanders, welcome to the Committee.

  STATEMENT OF CARL SANDERS, PEANUT, CORN, COTTON, AND CATTLE 
                    PRODUCER, BRUNDIDGE, AL

    Mr. Sanders. Good afternoon, Chairman Peterson, Members of 
the Committee. My name is Carl Sanders, I am a peanut producer 
from Coffee County, Alabama, which is the county just south of 
here. I am President of the Alabama Peanut Producers 
Association and am here today representing our organization. My 
comments will also be in support of the Southern Peanut Farmers 
Federation that appeared before you yesterday. The Southern 
Peanut Farmers Federation represents about \3/4\ of the peanuts 
grown in the United States.
    I have been a peanut producer for over 30 years, I farm 
approximately 1,000 acres of peanuts, cotton, corn and cattle.
    Mr. Chairman and Members of the Committee, our message 
today is straight forward: peanut producers support the concept 
of a marketing loan program; the current program does not serve 
as an adequate safety net for producers; farm programs should 
be developed for farmers who assume the risk--not for absentee 
baseholders; and in an effort to address the fiscal challenges 
before us, we must not compromise the stability and security of 
production agriculture in this country.
    Since the 2002 Farm Bill, peanut variable costs have 
increased 52 percent. In addition to increased production 
costs, we are competing with other countries like Argentina, 
China and India where environmental costs, regulations, and 
labor rates are much less than ours.
    The primary goal for our producer organization is to obtain 
a legitimate safety net for our growers. We do not believe the 
current $355 per ton marketing loan is sufficient to be a real 
safety net for producers.
    The peanut loan repayment rate guidelines were established 
in the 2002 Farm Bill. The loan repayment rate has not 
functioned appropriately since the 2002 Farm Bill. Congress 
directed the USDA to consider the following when determining 
loan repayment rates: Minimize potential loan forfeitures; 
minimize the accumulation of stocks; minimize the cost to the 
government; and allow peanuts produced in the United States to 
be marketed freely and competitively, both domestically and 
internationally.
    It is this last variable that has not been adhered to. In 
setting the loan repayment rate, USDA has not taken into 
account the world market prices. As a result, in years of high 
production, USDA's pricing generates an excessive carryover 
that weakens the contract offering for the growers the next 
year. We ask the Committee to include language in the next farm 
bill that will assure that the prices in the world marketplace 
will be considered in establishing the posted price.
    We recognize the fiscal and political limitations in 
drafting a successful farm bill. Peanut producers want to 
stress to the Committee that we will work with you to develop 
the best possible program, but the pricing structure of the 
2008 Farm Bill is not sufficient.
    There are additional considerations for any program change 
in the next farm bill. Making payments limits more restrictive 
than the 2008 Farm Bill will create even more problems for 
producers. We must maintain our separate payment limits for 
peanuts.
    The feeding programs at USDA are very important to our 
producers. We need USDA to partner with our industry in 
outreach programs to school nutritionists. This also includes 
our need for assistance in working with international relief 
agencies. USDA has the experience and resources to help 
facilitate communications between the peanut industry and major 
relief organizations.
    Peanut producers received no public support or financial 
assistance from the Department during the PCA Salmonella crisis 
caused by one irresponsible peanut manufacturer. Peanut state 
members asked the Secretary to increase peanut butter purchases 
during the crisis to at least the purchase levels we saw in the 
mid-1990s, to no avail.
    In addition to a fair and supportive national farm policy, 
maintaining public research in agriculture should be a 
priority. Research by the land-grant universities and USDA 
Agricultural Research Service has contributed greatly to 
keeping the peanut industry competitive.
    In closing, I want to say that as producers we look at the 
Committee as a partner in serving and protecting agriculture. 
Thank you for allowing me to address you today and the Alabama 
Peanut Producers and the Federation will be glad to work with 
you any way we can.
    Thank you.
    [The prepared statement of Mr. Sanders follows:]

 Prepared Statement of Carl Sanders, Peanut, Corn, Cotton, and Cattle 
                        Producer, Brundidge, AL
    Good afternoon, Chairman Peterson, Members of the Committee, my 
name is Carl Sanders. I am a peanut producer from Coffee County, 
Alabama. I am President of the Alabama Peanut Producers Association and 
am here today representing our organization. My comments will also be 
in support of the Southern Peanut Farmers Federation that we are a 
member of which appeared before you yesterday. The Southern Peanut 
Farmers Federation represents about \3/4\ of the peanuts grown in the 
United States. Peanuts have an economic impact of hundreds of millions 
of dollars in our states and tens of thousands of jobs.
    I have been a peanut producer for over 30 years. I farm 
approximately 1,000 acres of peanuts, cotton, corn and cattle. I have 
been active in local, state and national agricultural organizations and 
am a graduate of the Auburn University.
    Mr. Chairman and Members of the Committee, our message today is 
straight forward.

   Peanut producers support the concept of a marketing loan 
        program.

   The current program does not serve as an adequate safety net 
        for producers.

   Farm Programs should be developed for farmers who assume the 
        risk--not for absentee baseholders.

   In an effort to address the fiscal challenges before us, we 
        must not compromise the stability and security of production 
        agriculture in this country.

    As you are aware, peanut program prices were reduced in the 2002 
Farm Bill when we changed from a supply-management program to a 
marketing loan peanut program. The 2008 Farm Bill maintained the same 
prices as the 2002 Farm Bill. The market prices for this year should 
hold above the marketing loan price but this is no guarantee and 
certainly not a guarantee for the future.
    Since the 2002 Farm Bill, peanut variable costs, for National 
Center for Peanut Competitiveness representative farms, have increased 
52% per acre. In addition to the increased production costs, we are 
competing with other countries like Argentina, China and India where 
the environmental costs, regulations and labor rates are much less than 
U.S. input costs.
    Peanuts not only compete for land with other commodities, but also 
with other Federal subsidies for those commodities. For example, if 
corn has a competitive loan rate coupled with its ethanol subsidy, many 
peanut acres convert to corn as we saw 2 years ago in the Southeast. 
The 2008 Farm Bill peanut safety net does not support competition with 
other commodities.
    The primary goal for our producer organization is to obtain a 
legitimate safety net for our growers. We do not believe the current 
$355 per ton marketing loan is sufficient to be a real safety net for 
producers.
    The peanut loan repayment rate guidelines were established in the 
2002 Farm Bill. The loan repayment rate has not functioned 
appropriately since the 2002 Bill. Congress directed the U.S. 
Department of Agriculture to consider the following when determining 
loan repayment rates:

   Minimize potential loan forfeitures;

   Minimize the accumulation of stocks of peanuts by the 
        Federal Government;

   Minimize the cost by the Federal Government in storing 
        peanuts; and

   Allow peanuts produced in the United States to be marketed 
        freely and competitively, both domestically and 
        internationally.

    It is this last variable the Committee included in the 2008 Farm 
Bill and similar language in the 2002 Farm Bill that has not been 
adhered to. In setting the loan repayment rate, USDA has not taken into 
account world market prices. Thus, the USDA posted price set every 
Tuesday afternoon, is too high. As a result, in years of high 
production, USDA's pricing generates an excessive carryover into the 
next year that weakens the contract offerings to growers. We ask the 
Committee to include language in the next farm bill that will assure 
that the prices that the world marketplace will be considered in 
establishing the posted price.
    We recognize the fiscal and political limitations in drafting a 
successful farm bill. Peanut producers want to stress to the Committee 
that we will work with you to develop the best possible program but the 
pricing structure in the 2008 Farm Bill is not sufficient and certainly 
won't work for peanut producers if these same prices hold through the 
life of the 2012 Farm Bill. If budget variables require the Committee 
to look at alternatives to our current marketing loan program 
structure, the Federation will work with you to develop the best safety 
net possible for our producers. I do want to point out that the ACRE 
program, as included in the 2008 Farm Bill, is not a viable option for 
peanut producers.
    There are additional considerations for any program changes in the 
next farm bill. Making payment limits more restrictive than imposed by 
the 2008 Farm Bill will create even more problems for many peanut 
producers who may be impacted. We must maintain our separate payment 
limit for peanuts. This was agreed to when producers worked with the 
House and Senate Agriculture Committees in the 2002 Farm Bill 
establishing a marketing loan program for peanuts. The current program 
will not work without the separate payment limit.
    The feeding programs at the USDA are very important to our 
producers. Peanut butter is a long-time participant in the school lunch 
program. Peanut butter also qualifies for the breakfast program and 
afterschool snack program. There are school systems all across this 
country participating in these Federal feeding programs. The peanut 
industry does not have the resources to reach even a small percentage 
of these nutrition programs illustrating the nutritional value, low 
cost and long shelf life of peanut butter. We need the USDA to partner 
with our industry in outreach programs to school nutritionists. We are 
on the USDA lists but many times this falls short of explaining new 
products for kids, the facts, not rumors regarding peanut allergies and 
other important peanut butter related variables. This also includes our 
need for assistance in working with international relief agencies. Our 
Congressional delegations and industry leaders struggled to get the 
attention of those preparing food assistance for Haiti relief. Although 
our industry provided over 3.5 million serving in peanut butter to the 
relief effort, we were not successful in reaching decision-makers 
involved in establishing food assistance lists for U.S. and 
international aid. USDA has the experience and resources to help 
facilitate communications between the peanut industry and major relief 
organizations. The peanut butter products available for Ready-to-Use 
Therapeutic Food (RUTF) alone are a sufficient example of how helpful 
our products can be in impoverished parts of the world or countries in 
crisis.
    Peanut butter does not qualify for the Fresh Fruit and Vegetable 
Snack program. We believe that all school feeding programs should allow 
for the purchase of peanut butter. USDA, land-grant universities, the 
Department of Defense and other institutions have long recognized the 
importance of peanut butter as a nutritional resource.
    Finally, the recent legislative activity related to the 
reauthorization of child nutrition programs highlights the need for 
nutrition legislation to be the sole jurisdiction of the Agriculture 
Committee. We appreciate that Members of the House seek appointment to 
your Committee because of their interest in production agriculture, 
conservation and nutrition. We would hope that in the future House 
leaders would consider the House Agriculture Committee as the home for 
all nutrition legislation much like the Senate.
    We are hopeful the Congress will pass the agricultural disaster 
relief legislation similar to the bill approved in the Senate. The 
current SURE program has not been effective for peanut producers. 
Despite the USDA website seeking participation in the SURE program, the 
program was far from ready to go forward. In fact, peanut producers 
were turned away until recently because local offices had not been 
given sufficient instructions to receive applications for peanut 
losses. Even today, local offices are not consistent as to how they 
will handle producers from multiple counties. Peanut producing states 
typically have a large number of counties. It is not unusual for peanut 
producers to farm across a number of county lines.
    Peanut producers received no public support or financial assistance 
from the Department during the PCA Salmonella crisis caused by one 
irresponsible peanut manufacturer, not by peanut producers. Peanut 
state members asked the Secretary to increase peanut butter purchases 
during the crisis to at least the purchase levels we saw in the mid 
1990's to no avail. Other commodities have received financial 
assistance and support from USDA when prices have dropped or when their 
commodity has been in crisis, dairy and pork being just two examples, 
not peanuts. We believe any relief for the peanut industry will come 
from Congress whether this is with regard to the function of our 
program or the use of our product in government domestic and 
international feeding programs.
    In addition to a fair and supportive national farm policy, 
maintaining public research in agriculture should be a priority. 
Research by the land-grant universities and USDA's Agricultural 
Research Service has contributed greatly to keeping the peanut industry 
competitive. By maintaining new research in the public domain, the cost 
is less to the producer than if it was privately held. Furthermore, 
much of the research that has benefited our industry would not have 
been done without these public facilities. Protecting these funds from 
cuts has become an annual event. We hope you will protect our 
agricultural research and the role it play in keeping farmer 
competitive.
    In closing, I want to say that as producers we look at the 
Committee as a partner in serving and protecting agriculture. In recent 
years, we cannot say that about the USDA with any conviction. We hope 
that as you address the upcoming farm bill, that safeguards will be 
included to be assured that the implementation of the legislation will 
follow the intent of Congress. Please help the Department remember the 
importance of production agriculture and the industry it was created to 
serve.
    Thank you for allowing me to address the Committee today and the 
Federation looks forward to working with you.

    The Chairman. Thank you very much, Mr. Sanders, appreciate 
that.
    Mr. Waide, welcome to the Committee.

STATEMENT OF DAVID W. WAIDE, CORN, SOYBEAN, AND RICE PRODUCER, 
                          JACKSON, MI

    Mr. Waide. Thank you, Mr. Chairman. I certainly appreciate 
the opportunity to be here and to testify before the Committee. 
I have been in office during the past writings of the previous 
three farm bills, and I appreciate also being able to 
participate in this at the beginning of the 4th.
    My remarks today are primarily going to be directed toward 
the Federal Crop Insurance Program. I do agree with most 
everything that has been said by the other panelists on this 
distinguished panel today, and I do appreciate the fact that 
they have taken the time also to come.
    Let me just comment so that you will realize my position on 
this. I am not a crop insurance purchaser, I do not use CAT and 
I do not buy the buy-up coverages that RMA offers. The 
diversity of my farming operation offers me a spread of risk. 
In my bio I believe it says I am a rice producer, I am not, I 
am a cattle producer and corn and soybean producer. Because of 
the diversity I have, I do not participate in the RMA products.
    I do realize though that they are essential to protect the 
huge investment that agriculture has. And I would relate some 
numbers here as I did in my written testimony. I know it is 
true in Mississippi, and it is true generally throughout the 
Mid-South, the high percentage of CAT coverage exists in the 
Mid-South. I think if you look at the Mississippi numbers, we 
have about 94.5 percent of actually insured acres in 
Mississippi, 35 percent of those acres are just insured by CAT 
coverage only. And I would suggest to you that many of those 
acres that are insured by buy-up coverage are insured by buy-up 
coverage at the request of the individual financing the 
production of that crop, not at the farmer's desire.
    In Iowa, I think you will find that the numbers in corn 
include 88 percent and only two percent of those acres are 
insured by CAT coverage. The same is true for soybeans, the 
percentages are a little bit different, 27 percent are covered 
by CAT in Mississippi compared to only two percent in Iowa.
    There is a huge difference in the risk management product 
that can be purchased in Mississippi, and that is the reason 
you see that CAT coverage is used so widely in Mississippi.
    The problem with the crop insurance that exists in 
Mississippi deals with how the determination of crop insurance 
products are priced in Mississippi. The actual production 
history is the best way to determine what a farmer can insure 
his crops for, but so often because of the diversity we have in 
Mississippi, we have to use t-yields, which are the 
transitional yields within a county. And often, producers have 
to insure their crop less than their actual capability of 
producing. I hope that our new farm bill and the risk 
management products offered will certainly take into account 
the fact that we are not able to purchase the adequate risk 
management products in the Mid-South that are needed for the 
huge investment that we have in crops. Hopefully that can be 
addressed in some more testimony dealing primarily with risk 
management products.
    The APH determines the grower's premium on the crops that 
are grown. If the APH is used over 4 to 10 years, if he has 
that production, certainly he can get real good yield of what 
he needs for his protection. And I hope that we will look at 
how we continue offering insurance products in the future, so 
that we can take advantage of the technology that has been 
offered for southern crops.
    We have a couple of other issues that are important in crop 
losses this past year. One of the ways that they determined 
what a grower is going to get for his adjustment was a quality 
loss. We had different companies requiring different methods of 
adjusting that quality adjustment. Some required them to 
harvest the crop and to at least try to sell it to a salvage 
dealer. In many cases, that salvage dealer was more than 200 
miles from their farm and it was not economical, it simply 
added a lot of cost to a farmer to get his crop to a salvage 
dealer. And I hope that we will be able to get a uniform method 
of getting the quality adjustment, if we can just simply get 
the destruction in the field if the crop is not worth 
salvaging. Hopefully that will be part of the next farm bill 
that will include a uniform way of getting salvage values.
    The other thing that I would like to mention, and I will be 
quick in my closing. We have a lot of crops that are not 
insurable except under NAP. That is just very minimum coverage, 
it very seldom covers the expense, it does not allow the farmer 
to have the opportunity to protect his risk and we have 
numerous crops that are just under NAPs. Sweet potatoes, one of 
the best economic crops in my state, cannot get but somewhere 
in the $300 to $400 range of protection for crop coverages, and 
it costs about $2,500 an acre to grow those crops. So I hope 
that we will consider peanuts, sweet potatoes and certainly rye 
grass. It is big in Mississippi as a stocker grazer forage and 
I hope that we will consider expanding the crop insurance 
program to growers that do not have the ability to get anything 
but NAP coverage.
    Thank y'all and I sincerely appreciate the opportunity to 
be here.
    [The prepared statement of Mr. Waide follows:]

Prepared Statement of David W. Waide, Corn, Soybean, and Rice Producer, 
                              Jackson, MI
    Members of the House Agriculture Committee, thank you for the 
opportunity to appear this morning before the Committee to discuss the 
2012 Farm Bill. I am David Waide, President of the Mississippi Farm 
Bureau' Federation (MFBF). Farm Bureau is the largest 
general farm organization in the country, with members who produce 
everything from catfish to peanuts. Today, my testimony will primarily 
focus on some of the shortcomings of the Federal Crop Insurance 
programs in Mississippi and the Southeast region. Recently, I have 
heard much discussion out of Washington, pushing for downsizing the 
direct payment program in favor of expansion of the crop insurance 
programs. I am adamantly opposed to that idea, and I firmly believe the 
direct payment program serves as a consumer subsidy to food products 
and only contributes to the abundance of our food supply in this 
country.
    One of MFBF's priorities is to improve the cost effectiveness of 
the risk management tools available to producers across agriculture. 
Unfortunately, we believe the current crop insurance products available 
in the Southeast region do not provide adequate risk protection.
    Fortunately, the diversity of my farming operation enables me to 
offset my risk without participation in the Federal crop insurance 
programs. Such diversity is uncommon in Mississippi, and many MFBF 
members cannot feasibly distribute risk in an effective manner. 
Therefore, they choose to participate in the Federal programs. However, 
a comparatively high portion of Mississippi producers only buy 
catastrophic coverage (CAT), which is virtually fully subsidized, only 
requiring the payment of administrative fees. In Mississippi, 94.5% of 
corn acres are insured; of those, 35% are only insured by CAT coverage, 
In Iowa, 88% of corn acres are insured; of those, just 2% are insured 
by CAT only. Similarly, for soybeans, of the insured acres in 
Mississippi, 27% are CAT-only insured compared to 2% in Iowa. I 
understand that the intricacies of the various crop insurance programs 
are complex and producer education may be an issue, but obviously a 
significant amount of Mississippi producers do not find the Actual 
Production History (APH) and Crop Revenue Coverage (CRC) insurance 
products competitive when compared to the participation rates in the 
Midwest region.
    Additionally, we encourage continued producer education of risk 
management alternatives, efforts to refine existing risk management 
tools, and the development of new crop insurance and other risk 
management products. We believe all producers should have access to 
crop insurance programs and policies. In the following, I will briefly 
address a few of the issues that have been communicated to me by 
producers in Mississippi.
I. Inequitable Yield Calculations
    The farmer's actual production history (APH) determines the 
grower's premium rate as well as the grower's yield guarantee. Farmers 
document their APH in a simple average of 4-10 years of historical 
yields for the insured unit. Farmers who lack 4 years of yield records 
can still get crop insurance by using a Transitional or T-Yield, which 
is based on the county's 10 year average.
    Today, due to significant technological advances, producers in the 
Southeast have been able to improve yields drastically over what was 
possible just 10 years ago. These technological advancements are not 
quantified in the 4-10 averages used to calculate APH. Producers in 
Mississippi and other southeastern states have the ability to plant a 
much greater diversity of crops than producers in the Midwest. This 
diversification confers some inherent advantages in terms of risk 
management; however, it also presents some challenges related to the 
crop insurance program. For example, with a relatively large number of 
crops available for rotation on a given farm it may take several more 
years to establish a complete APH for any particular crop. Moreover, a 
producer wanting to plant a new crop on a particular farm will lack any 
yield history for determining APH. Producers who lack a 4 year APH can 
only buy crop insurance based on the t-yield guarantee. T-yields are 
not calculated considering the technological advances that have 
substantially increased yields in the South in recent years. Therefore, 
many of our producers are forced to buy insurance based on yield 
guarantees well below their reasonable production expectations and 
sometimes below their break-even yield, depending upon the yield 
guarantee they can afford.
    Even when a producer has a long track record of good production, 
one or two failure/disaster years will drop his APH to levels that have 
little relation to his typical production level. Each year of crop 
failure reduces the producer's APH, eroding the safety net provided by 
crop insurance, and limiting the amount of insurance he can buy. The 
bottom line is this--a producer's 75% yield guarantee purchased using 
the APH or t-yield formulas will only cover 60% or less of his true 
expected yield.
II. Perceived Lack of Uniformity in Loss of Quality Adjustments
    Many Mississippi crops are subject to Special Provision of 
Insurance (SPOI) quality adjustments. Quality adjustment is a process 
that reduces the quantity of mature production when it meets certain 
requirements provided in the crop provisions. This adjusted production 
to count is used for indemnity anti actual production history purposes. 
Discount factors and additional procedures for quality adjustment are 
listed in the specific special provisions statements for each county/
crop, and are governed by the Loss Adjustment Manual (LAM) published 
through the Risk Management Agency (RMA).
    While RMA sets the standards in LAM, the individual Approved 
Insurance Providers (AIPs) actually enforce the LAM standards for 
quality loss. Most of the complaints I have encountered stem from the 
procedures for obtaining ``zero market value production'' which 
entitles the producer to maximum payment under the terms of their 
insurance. Upon filing a potential ``zero market value production'' 
claim, the AIP does an on-site inspection and makes a determination 
whether the crop is salvageable. If the AIP thinks the crop is 
salvageable, the farmer must harvest the crop and make attempts to sell 
the product on the salvage market. If the ALP does not think the crop 
is salvageable, the farmer must simply destroy the crop to receive his 
maximum payout.
    Substantial costs and labor are required to harvest a crop, and 
even more so for a damaged crop. Consider this scenario. Farmer A's AIP 
decides his crop is salvageable, so if he wants to receive maximum 
payout, he must harvest and ``make every reasonable effort'' to sell 
the crop. Farmer A's neighbor, Farmer B, has very similar crop damage, 
and his AIP determines his crop is not salvageable, and tells Farmer B 
to destroy the crop to collect maximum payout.
    In the above real scenario, Farmer B received his maximum payout 
without the added labor, fuel, and equipment wear and tear costs which 
were endured by Farmer A. It further reasons that Farmer A is 
frustrated and angry because he worked 24 days in January harvesting a 
worthless crop because his AIP determined it might be salvageable.
    We urge RMA to remove the mandatory harvest requirements from 
Federal Crop Insurance claim provisions, and adjust crops at or below 
harvest cost to be considered a zero level of production. Additionally, 
we believe tremendous strides could be made by simplifying application, 
reporting and claim procedures by promoting flexibility in the process 
and communication between agents, adjusters, FSA, and others.
III. A Lack of Cost Effective Insurance Products are Available for Many 
        Commodities
    We believe crop insurance should be available to provide producers 
of all crops options for various insurance products that accurately 
reflect individual risk considerations when making crop insurance 
purchasing decisions.
NAP Program
    When insurance coverage products are not available in a county 
under a Federal Crop Insurance policy, the producer's only option is to 
enroll in the Noninsured Crop Disaster Assistance Program (NAP). 
Administered by the Farm Service Agency (FSA), this program can provide 
financial assistance to producers when natural disasters occur.
    In Mississippi, many of our farmers produce crops that are 
otherwise uninsurable without NAP. No insurance products are offered 
for sweet potatoes, watermelons, tomatoes, sweet corn, rye grass, and 
many others, all of which significantly contribute to the wonderful 
agricultural diversity in Mississippi. It is estimated that 75% of 
sweet potato acres in Mississippi are insured by NAP alone. The program 
protects against yield losses and prevented planting due to 
catastrophic events such as excessive rain, floods, etc. The cost of 
NAP insurance is low, but so is the liability protection it offers. A 
farmer collects nothing unless his expected yield (based on APH) drops 
below 50% or he is prevented from planting more than 35% of the insured 
acreage. So a farmer may lose 49% percent of his expected yield, and he 
will not receive any indemnity. Farming is a business, and any business 
that loses 49% of their yearly revenues would be in dire financial 
straits without an infusion of capital. NAP simply is unable to provide 
enough coverage to meet our producers' needs. Coverage of 50% may not 
he substantial enough for producers in cases of complete loss. Imagine 
any manufacturer losing 50% of their product, while maintaining the 
same overhead and fixed costs as though they produced at 100%. How long 
would they be able to conduct business in your community?
    In summation, we hope FSA will completely review the NAP program 
elements including the applicable dates, guarantees, premium payments, 
and prices related to the program, in order to better serve the needs 
of Mississippi farmers.
SURE Program
    The largest of the new farm disaster programs from the 2008 Farm 
Bill, the Supplemental Revenue Assistance Payments Program (SURE), was 
designed to compensate eligible producers for a portion of crop losses 
that are not eligible for an indemnity payment under the crop insurance 
program (i.e., the policy deductible), through a revenue approach. To 
be eligible for payment, a producer must be in or contiguous to a 
county that has been declared a disaster area by the Secretary of 
Agriculture, or have an overall 50% farm loss. The producer also must 
at least have CAT coverage for insurable crops or NAP for uninsurable 
crops
    Many Mississippi producers have expressed concern that payments for 
crop losses under SURE cannot be determined until after the marketing 
year ends, since a portion of the disaster payment formula is based on 
the average market year prices. For example, SURE payments from the 
2008 crop cycle finally made their way to our farmers in early 2010. 
Waiting over a year for disaster payments after such massive losses of 
revenue is assuring bankruptcy to many in the farming community.
    The SURE program, as designed and implemented, is largely a 
supplement to crop insurance coverage. The linkages between SURE and 
crop insurance are such that SURE does little to address perceived 
deficiencies in the crop insurance program and may actually magnify 
them by providing further incentives for buy-up coverage in areas where 
buy-up coverage is already being purchased. If enhancing crop insurance 
is the goal, it should be more efficient and more effective to work 
directly on the crop insurance program itself.
IV. Conclusion
    In the United States, we have the safest, most affordable, and most 
abundant food supply in the world. The Southeast region produces food 
in a diversity and variety that is unmatched by other parts of the 
country. Farming, like any other business, is compounded by financial 
risk. Unlike other businesses, the majority of the risk in farming is 
blind once the crop has been planted, fully exposing the farmer to 
Mother Nature's wrath, with his only defense being effective risk 
management. In the past few years, this government has doled out 
numerous bailouts and incentive plans to big business in an effort keep 
the struggling economy afloat. Many of our farmers are going bankrupt, 
but they do not want a handout or a bailout. They do need a little help 
in the form of risk management products that can help keep their 
operations viable through a bad crop cycle. They help feed your family; 
let's help them feed their own.
    Thank you again for the opportunity to speak this morning, and I am 
happy to answer any questions you might have.

    The Chairman. Thank you very much, Mr. Waide and thank all 
of the panelists for their testimony.
    I was going to go to Mr. Bright, but I think I am going to 
start off here.
    I agree with you that we need to fix this crop insurance 
thing. And I think we can. I am glad the rice growers are 
finally focusing on this and trying to develop it. We want to 
work with you to make that happen, because in the long term, 
this is going to be hugely important. At the end of the day, 
that might be all that they are left with, at some point. So I 
agree with that.
    But as we get there, we just keep adding stuff on top of 
what we have been doing. You know, this last time, we added the 
revenue coverage and then we added SURE, which does not work 
for you guys. And one of my concerns is that we are making this 
overly complicated, and we are not coordinating these programs 
so they work together.
    And I understand the importance of direct payments to you 
guys because nothing else works. So that is something you can 
depend on. Now even though you might not need it one year, you 
want to hang onto that because the next year, you might need 
it. So I understand all that. But if we are going to develop 
these products, we are going to have to look at rearranging 
what we are doing in order to have the money to be able to do 
this. I have asked all of the different representatives and 
leaders in your industries to work with us to look at this.
    I think there is a way that we can rearrange these 
programs, give you the same kind of certainty you have with the 
direct payments, the current system, but give you a better 
safety net that works. But it is probably not going to look 
exactly like it does today. I know it makes people nervous, but 
that is what we are going to have to look at, in my opinion.
    So on to the questions. We pick up quite a bit of money if 
we eliminate CAT coverage and NAP coverage. And I personally 
think we should do that, because they are really not doing you 
any good. Most people are buying these things because they have 
to, because in order to get a disaster payment or whatever. It 
was originally started to get people used to using crop 
insurance, and I think it accomplished that. It got a lot of 
people into the system and a lot of people started using it and 
it served its purpose.
    But if you eliminate it and go to an actuarial situation 
with CAT and NAP--we would still make those policies available, 
you would just have to pay the actuarial value of them--we 
would pick up quite a bit of money in that process. We could 
then use that money to try to enhance these other crop 
insurance products to get at the problem that you guys have 
raised.
    The other thing that saves money is that the more you can 
insure the whole operation, the cheaper it is. And if you had a 
whole farm type of policy, it is considerably less than if you 
are insuring it crop by crop. So there is some potential there, 
and there are concerns and problems with it, but I think we 
need to look at that as a way to try to expand this and make it 
work over the whole farm.
    You know, part of what I run into in my district with the 
problem is the mentality of people that have been using the 
program, where they do not like the idea that they are going to 
use one crop's profits to offset the losses in another crop. 
Because they look at everything, I am going to buy crop 
insurance based on whether it is going to pay out for me, or 
whether I am going to make money off of it.
    You know, if we shift to more of a revenue type of thing 
with crop insurance, we have to start thinking differently in 
terms of insuring your whole operation at a higher level, but 
you may not get paid all the time. When you do not need it, you 
may not get a payment. But that takes a big shift of thinking, 
probably more in my area than yours because we have used it 
more.
    So, that is one of the reasons I am doing these hearings 
early, is to try to get this process jump started and get 
people to start thinking about this now. We are going to have 
about a year to work on this stuff, and we want to work with 
you guys to try to bring some simplification and coordination 
to this system, and see if we can use the money more 
efficiently and give you a better safety net.
    Do any of you oppose getting rid of CAT coverage and NAP 
coverage and make it actuarial?
    [No response.]
    The Chairman. That would be okay?
    Mr. Esposito, I have been a big promoter of local foods. I 
have had a conference in my district for the last 5 years 
promoting local foods. I think it is a good thing because there 
is a market and the people that get into it can make money, and 
that is great and I am all for it.
    But I do not like this idea of pitting one against the 
other. I do not think it is right and I do not think it is 
necessary. You know, we need production agriculture and we need 
as much of it as we can get. And we are going to have a heck of 
a time feeding not only this country but the rest of the world, 
going forward.
    So I am for all kinds of farms. You know, if you can make a 
living on 30 acres, God bless you. And people can do that. If 
it takes 5,000 acres, I am for that. If it takes 20,000 acres, 
I am for that. Whatever makes sense economically and works for 
the producer, I am for it.
    We are not going to get into the business of deciding how 
big a farm should be, because that is way beyond our expertise. 
So I would just hope that we do not get into any kind of 
conflict between organic, local, and commercial agriculture 
because there is no reason for it. There are plenty of markets. 
You agree with that I guess, you are shaking your head.
    Mr. Esposito. Mr. Chairman, I do agree with that.
    The Chairman. Pardon?
    Mr. Esposito. I do agree with you.
    The Chairman. Because we have had some kind of conflicts 
that have developed--it is not necessary, it is not right. 
There is a great market there for the people that want to get 
into that. In my area, a lot of young people are getting into 
farming, people moving out of Minneapolis that you would have 
never thought, getting into agriculture, a family has never 
been in agriculture, doing a great job. And that is good, we 
need more young people. You have something similar going around 
here in that regard?
    Mr. Esposito. Yes, sir, I do. And the point was made 
basically on how small producers are being treated as opposed 
to larger agriculture.
    The Chairman. I understand. We made a step in that 
direction.
    Mr. Esposito. A good step.
    The Chairman. I had a lot to do with that.
    Mr. Esposito. I am the first one to realize that 3 acres is 
not going to feed the nation, nor is it going to feed the 
world.
    The Chairman. Right.
    Mr. Esposito. And organic production, although I favor it, 
will not feed the world.
    The Chairman. Right. So we recognized local foods, organic 
foods in the last farm bill for the first time. We will do 
better hopefully this next time, but I have to say there are a 
bunch of folks that are in your business that also do not want 
us to overdo. If you get too many people getting into this, you 
are going to collapse the market, potentially, in certain 
areas. I think that could be a danger if you get--if we started 
subsidizing it, you could collapse the whole thing. And so we 
have to be careful how much we push it.
    I have gone over my time.
    The gentleman from Virginia.
    Mr. Goodlatte. Well, thank you, Mr. Chairman, and I share 
those sentiments.
    I would like to ask the panel--I have been calling for you 
to find ways for us to save money. I want to suggest that the 
government can help you on your bottom line as well, and that 
is to just ask you what kind of ideas you have about ways we 
can help your production costs and, in particular, what 
government regulations might be impacting you in that regard. 
We need to have a clean environment, we need to have safe work 
places. But it seems to me that we have, in many instances, 
gone way overboard in terms of not only what we regulate but 
how we go about doing that. We are allowing bureaucracies to 
micromanage your farms and to figure out the best way to do 
something when they have no clue of the best way to accomplish 
a particular goal.
    Mr. Bell, you testified that there has been a 72 percent 
increase in production costs. What is the biggest factor in 
that increase in cost of production?
    Mr. Bell. Fuel and fertilizer.
    Mr. Goodlatte. Fuel and fertilizer, both which are produced 
as a result of natural resources that we have in this country, 
but we do not fully exploit.
    I would like to ask each member of the panel if they have 
any thoughts on government regulations and, in particular, the 
cap-and-trade legislation that passed the House of 
Representatives last year, has not yet been taken up in the 
Senate. This concerns me in terms of a policy which I see as 
moving toward increasing the cost of our traditional sources of 
energy to make newer sources more competitive, but at risk of 
driving a lot of people in farming, manufacturing, 
transportation, even service industries, out of business. Our 
competitors around the world are not going to follow suit, 
certainly not in China and India and many other developing 
countries, which are proving to be some of our biggest 
competitors. They are not adopting a policy that essentially 
penalizes the use of coal and oil and natural gas and even 
nuclear power, which the cap-and-trade legislation does not 
advantage even though it is the largest source of electricity 
generation that has no CO2 gas emissions.
    We will start with you, Mr. Bell, and work our way across.
    Mr. Bell. Well, as I said earlier, the increases, fuel, 
fertilizer makes up a large portion of it. But over the last 10 
years, farmers have been provided with new technology but they 
have not been able, from a financial standpoint, to capture 
much from that technology. It has changed our production 
process, but from a bottom line standpoint, we have not 
recognized anything from that.
    Mr. Goodlatte. Do you favor the cap-and-trade legislation 
that Congress is working on?
    Mr. Bell. In some ways yes, some ways no.
    Mr. Goodlatte. You want to elaborate?
    Mr. Bell. I would rather pass that to someone else.
    [Laughter.]
    Mr. Goodlatte. We will give it to Mr. Esposito.
    Mr. Esposito. Well, sir, as small as I am, I do not have 
much of a carbon footprint. Most of my stuff is hand labor and 
I try to keep my weeds down, so I am not really spraying too 
much.
    I am not well versed on the cap-and-trade, but what I have 
heard about it is it could force prices of fuel use, energy 
use, up based on an allotted amount. But other than that, I 
really do not know much about it.
    Mr. Goodlatte. Thank you. Mr. Mencer.
    Mr. Mencer. Yes, sir, we oppose cap-and-trade the way it is 
currently proposed. Some analysis that has been done shows that 
it could affect us a $70 to $150 an acre increase in cost of 
production for a rice operation, with little to no opportunity 
to capture any benefit in the form of payments in cap-and-
trade. Every analysis that has been run shows that--we had one 
done by the Agriculture Food and Policy Center at Texas A&M and 
it showed that every rice farm realized a loss of income if 
cap-and-trade was enacted.
    Mr. Goodlatte. Thank you. Mr. Sanders.
    Mr. Sanders. From what I understand of cap-and-trade, it is 
going to really affect coal-fired electrical production which 
most of ours in the Southeast is. And it is going to really 
hurt us. Therefore it is going to run up the cost of my 
electricity on my farm. We just switched from diesel fuel to 
electric because we were trying to bring down cost. And now we 
are fixing to run up the cost of my electricity. And when we 
use the natural gas for electricity production, that is going 
to run up the price of my fertilizer drastically. So it does 
not look good on the farm.
    Mr. Goodlatte. Thank you. Mr. Waide.
    Mr. Waide. I am opposed to cap-and-trade. I do not think 
there is anything good that is going to come from it for 
agriculture. I am not sure that it will benefit this country in 
the long run in any way. I think that we are the premier 
producer of all farm commodities, and we certainly cannot 
remain if we get in a non-competitive area with our 
counterparts in other countries that are going to be allowed to 
produce without that.
    I think the one thing we have to remember--and I do 
appreciate Mr. Mencer's comment on the increased cost of rice 
production as it relates to the energy, as a result of some of 
the cap-and-trade provisions. We need to be mindful of the fact 
that farmers are price takers. We have never been able to 
establish a price regardless of what our production costs are. 
We have to be at the market's risk at all times. Weather, 
certainly even celebrities can cause us to take a tremendous 
drop in our farm gate values, by just some comment they make. 
And this cap-and-trade issue is going to be real because we are 
going to be taxed for that energy cost that we have to bear. It 
is not optional with us if we produce the crop. And the thing 
in my opinion that makes us so respected throughout the world 
is the envy the other parts of the world have for our food 
sources and the production methods we have. And I certainly do 
not believe we need to sacrifice that in any way for something 
that has not been proven to be science-based.
    Mr. Goodlatte. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Alabama, Mr. Bright.
    Mr. Bright. Yes, sir, thank you, Mr. Chairman.
    Let me thank the panelists for your testimony today, and I 
have very limited time so I will try to get in as many 
questions as I can. If you will pay attention to my questions, 
I am probably going to take one and maybe ask a comment from 
each one of you.
    You know, everybody in this room and you particularly as 
your testimony today indicates, you are very concerned about 
our economy. We have just been through and are still going 
through one of the worst recessions we have had in our country 
since I have been living in my short 39 years that I have been 
here. It has been real serious and I hope I do not ever have to 
go through another one, particularly from this side of the 
table as an elected official because a lot of people are 
affected, a lot of people are concerned about it today.
    I travel, not just in my district, but statewide, and in 
other parts of our country, and people are very concerned about 
the economy and availability of credit available to small 
businesses. And I assume--and I maybe should never assume and I 
try to teach my staff never to assume--but it affects you too 
as producers in the agricultural industry. Would you each one 
take an opportunity and let us know what effect, if any, 
whether it is positive or negative, the credit crunch or the 
lack of credit that has been the subject of our economy over 
the last number of months, couple of years. Has it affected you 
and if it has affected you, how has it affected you? Mr. Bell, 
I will start with you since you were the first to testify.
    Mr. Bell. As of this point, we have not been affected by 
available credit.
    Mr. Bright. Lack of available credit.
    Mr. Bell. Yes.
    Mr. Bright. Okay.
    Mr. Bell. But if we continue to produce a crop at a loss, 
it is just a matter of time.
    Mr. Bright. Okay. Mr. Esposito.
    Mr. Esposito. I have not pursued any credit. I do not want 
it, I tend to go as I can, I do not want to be in debt.
    Mr. Bright. Mr. Mencer.
    Mr. Mencer. We have not been affected by it. As long as you 
can show a cash flow, we have availability for plenty of 
credit.
    Mr. Bright. You are fortunate, thank you. Mr. Sanders.
    Mr. Sanders. Yes, I personally have not been affected by 
the lack of credit, but it runs up the cost of everything else 
when other people are having problems.
    Mr. Bright. Yes. Mr. Waide, have you got a comment?
    Mr. Waide. Yes, sir, I would. Personally I have not been 
affected but I would tell you this, I have had more phone calls 
because of the farm credit crisis that exists out there in the 
last 30 to 40 days, because farmers are trying to get 
production loans and the cash flow is a big issue.
    Mr. Bright. Any suggestions as to what we can do as a panel 
of Congressmen to help in that area?
    Mr. Waide. Well, I guess the concern that everybody has is 
some of the things that we are dealing with with SURE. The fact 
that those marketing loans, some of the SURE program benefits 
are tied to market loans and that is a year down the road. Any 
way we could speed up the projection of what that may be and 
offer any amount of income to a farmer at the end of that bad 
year would be a big help.
    Mr. Bright. Okay.
    Mr. Waide. And I could also address that in other ways 
dealing with crop insurance, timely settlements for claims and 
that sort of thing.
    Mr. Bright. Okay. I have a short time left and in my time I 
want to recognize--Mr. Chairman, if you would allow me to do a 
point of order. I am not sure you recognized another very 
important person in the USDA arena, the FSA Director for the 
State of Alabama, Daniel Robinson. Daniel, would you stand up 
and let everybody see you? Because this man right here will 
help you out there if you have an issue in the FSA area, and I 
wanted to make sure he got his face before everybody here.
    Specifically Mr. Bell, in regard to crop insurance: I told 
you earlier that I am very concerned about that in our region, 
in our state. You mentioned in your testimony that you 
conducted a study on the economic feasibility of revenue 
coverage versus catastrophic coverage and in your study, you 
concluded that revenue coverage would have cost you 
significantly more in premiums than it would have paid out in 
claims. Surely this is not the case for farmers across the 
country, but I hear this all the time throughout the district. 
Could you explain why revenue coverage is too expensive for 
farmers like you? And use the microphone so we can hear you.
    Mr. Bell. I think the problem has to do with the cost of 
production versus the value that is set for the crop. Cotton, 
for instance, is set at 77 cents. You know, today's cost is 
about $900 an acre to produce an acre of cotton. A 1,000 pound 
crop at 77 cents, 75 percent coverage, you are insuring about 
\1/2\ of the cost of production. So there again, it goes back 
to the cost of production. And 77 cents may be a dated number 
in today's environment.
    Mr. Bright. My time has run out but just one last thing. 
Has any one of the panelists, are y'all familiar with the BCAP 
biomass program today? And if you are, do you have an opinion 
as to whether or not--what we need to do to that to tweak it to 
make it work so we can get into the second phase of it?
    Mr. Waide, are you familiar with it?
    Mr. Waide. I am familiar with it, but mainly because the 
funding has been cut. The members in Mississippi that were 
getting BCAP funding to harvest timber to make it economically 
feasible on some of the acreage that they were harvesting, has 
just dried up the market altogether.
    I think it was a good program, it certainly enhanced the 
economic value, and I think it was doing something else in the 
use of bioenergy. It was creating a demand there for some 
products, some wood fiber products that had not existed. I hope 
we can get something that makes it work in the future.
    Mr. Bright. Mr. Sanders, do you have anything in addition 
to that?
    Mr. Sanders. No, sir, I am not familiar with that at all.
    Mr. Bright. All right, good.
    Mr. Chairman, my time has expired, I will yield back.
    The Chairman. I thank the gentleman.
    The gentleman from Alabama, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Bell, I know you started off talking about your concern 
about crop insurance. What is the one take-away that you want 
us to leave from here hearing from you about what you want 
done, specifically about crop insurance that would make it a 
more viable program for you?
    Mr. Bell. We just need a realistic target value set to the 
crop. And it needs to be kept in step with the cost of 
production.
    Mr. Rogers. And how would you like to see that realistic 
value arrived at?
    Mr. Bell. I have never written farm policy before, so I do 
not have a good answer for you.
    Mr. Rogers. Mr. Mencer, you mentioned that you and some of 
your fellow rice farmers have gotten together and come up with 
some alternative structures for crop insurance that you hope to 
present to us in a few months. Is that--did I understand you 
correctly?
    Mr. Mencer. We are in the process of getting a concept 
approved by RMA and get it submitted.
    Mr. Rogers. Have y'all hired a consultant, is that how you 
are doing it?
    Mr. Mencer. Yes.
    Mr. Rogers. Oh, good, excellent. Are you following the 
model of another area of the country?
    Mr. Mencer. We are working with the spring wheat.
    Mr. Rogers. Have they been able to resolve their concerns 
with crop insurance?
    Mr. Mencer. They are closer and we are trying to team up 
with them and present the two crops together.
    Mr. Rogers. Are you aware of anything that the cotton 
industry, cotton sector, is doing on this to try to--I heard 
the Chairman talk yesterday about how folks in Minnesota had 
done what Mr. Mencer is doing and kind of fixed their problem. 
They had to hire a consultant, but they got a structure put 
together that works for them. And now it is no longer a 
problem. So are you aware of anything folks in your sector are 
doing to try to deal with the crop insurance problem other than 
talking to us?
    Mr. Bell. No.
    Mr. Rogers. Okay. What about the ACRE--yes, sir, Mr. Waide.
    Mr. Waide. Could I respond to that?
    Mr. Rogers. Certainly, yes.
    Mr. Waide. Just so you will know, we have appointed a risk 
management committee in Mississippi and we are going to work 
with all the commodities including the minor commodities that 
are not currently protected, and offer a suggestion on what 
would make this a true insurance product. We do not want a 
social program out of it, we want protection for the at-risk 
part of what a farmer invests in his production costs. That is 
what we are looking for. And I think we will have some ideas 
from the group that is going to be working on it that will be 
very beneficial in writing, updating the risk management 
products.
    Mr. Rogers. Excellent, I look forward to hearing that. This 
is the most common complaint I have from farmers throughout the 
Third Congressional District, is what Mr. Bell is saying, we 
have to come up with something that works, is practical.
    Yesterday in Atlanta at our hearing, there was a cotton 
farmer who made the point that there was not a single farmer in 
the State of Georgia that was participating in the ACRE 
program. Is that the case here?
    Mr. Waide. Is that for me?
    Mr. Rogers. Yes, sir.
    Mr. Waide. As far as I know, there are none participating 
in Mississippi. And I have been in touch with the state FSA 
Director. His statement to me was it simply does not work in 
Mississippi.
    Mr. Mencer. In rice, I think last year there was only nine 
farms nationwide that signed up for ACRE.
    Mr. Rogers. Is that right? What about peanuts?
    Mr. Sanders. The economists that I have heard refer to it 
say it does not work for peanuts.
    Mr. Rogers. And the SURE program, I heard y'all talk about 
the SURE program a little while ago. How would you characterize 
its effectiveness, any of you?
    Mr. Mencer. Failure.
    Mr. Rogers. I'm sorry?
    Mr. Mencer. It was a failure for rice and a failure for 
cotton in the Mid-South last 2 years.
    Mr. Rogers. Mr. Waide.
    Mr. Waide. The diversity we have in Mississippi, it is 
unusual for a producer to miss or have a loss in every entity 
that they have. And unless you are farming a single commodity, 
it is just not going to work in our state.
    Mr. Rogers. I was very interested in your response to Mr. 
Bright's question about credit pressures. Every other small 
business person I am talking to in my district, except folks in 
the grocery store business, are just really struggling with 
access to credit. We have a farm credit fellow in the audience, 
I should ask to have him put up here so he could talk to us 
about it. But it is not affecting you from a production 
standpoint, I understand your answers to that. Do you see the 
tightening credit standards affecting the stream after it 
leaves the farm, some of your customers? Or is this not in any 
way affecting you in the foreseeable future, not just from a 
production standpoint but downstream?
    Mr. Waide. My opinion is that it is going to have a long 
term effect and one of the greatest fears I have, because I 
farmed in the 1980s when we had 19-20 percent interest rates, 
and that is the greatest fear I have. And when it gets to 19-20 
percent, farmers are shut down. We cannot pay that kind of 
interest on production loans.
    Mr. Rogers. Thank you, Mr. Chairman. My time is up.
    Mr. Bright [presiding.] We have an empty seat. One of the 
benefits of being part of the Majority and the only other 
Democratic in the house is to take over when the Chairman steps 
away. So I am going to exercise my privilege and my authority 
as the temporary Chairman to call on the next Congressman, my 
colleague from Nebraska, Adrian Smith.
    Mr. Smith. Thank you. It is great to be here all the way 
from Nebraska here in Mr. Rogers' neighborhood I guess.
    Mr. Bright. Okay.
    Mr. Smith. Neighborhood.
    Mr. Bright. Oh, neighborhood, not district. You see what I 
have to put up with.
    [Laughter.]
    Mr. Smith. No, America is a great country with a diverse 
everything. Here we are today with agriculture and so I am 
grateful that we have some opinions on the panel.
    Mr. Esposito, if you would not mind elaborating a little 
bit. I am intrigued by your production. You do not need credit 
and that is great. But can you tell me more about your actual 
production?
    Mr. Esposito. What would you like to know?
    Mr. Smith. What do you grow? You have obviously found a 
niche market, how many acres?
    Mr. Esposito. I am doing approximately seven now condensed. 
But keep in mind, gentlemen, I know you are talking to these 
folks over here that do several acres, I do not sit there and 
do bushels to the acre or tons. I think of dollars per square 
foot. Keep that in mind. I have a quarter acre of broccoli now, 
if I get 75 cents a stick, that is 42,520 sticks, so you do the 
math, if I get rid of it. So that is what I am talking about, 
condensed acre planting and such. So right now, I am doing your 
common late spring greens--broccoli, cabbage, collards, 
turnips, and mustard and so forth and so on, new potatoes; 
followed by your common summer stuff--squash and tomatoes.
    My market tends to be in my local community. I do not do 
too much wholesale or anything like that. My goal personally--I 
am retired military, I really do not need to be doing this, but 
my goal is to provide a nutritious product for folks right 
there in the neighborhood. I donate--I am working with the 
Wiregrass Food Bank, the House of Relief for Battered Women and 
I even donate to the county jail so old Wally does not have to 
spend too much money on the incarcerated, it can go more to 
where he needs it.
    I like touching bases with young'uns. I have a customer 
that comes over and when the broccoli is in, he wants to hold 
it in the back seat. Well, by the time they get halfway home, 
they have to come back because he has eaten it. He is not 
eating candy, he is eating broccoli. I got that same young'un 
growing his own broccoli. So what is he doing now? He is not 
doing this, he is not playing with a joystick in front of the 
TV, he is tending, he is out in the fresh air growing broccoli. 
That is the kind of difference I intend to make in my 
community.
    I would not mind making a little cash too.
    [Laughter.]
    Mr. Rogers. A comprehensive wellness program. I commend you 
for that. Thank you very much.
    Mr. Bell, you suggested that perhaps there are some good 
points. I kind of heard you say that there might be some good 
points to cap-and-trade. Would you elaborate on those? Unless I 
misheard.
    Mr. Bell. I really do not agree with cap-and-trade.
    Mr. Rogers. Okay.
    Mr. Bell. From an energy standpoint and the costs that are 
going to be increasing and what we will be associated with.
    Mr. Rogers. Okay. Well, I think that probably concludes my 
questions, but again I appreciate the opportunity to be here 
and for everyone participating, and you all are invited to 
Nebraska any time.
    Mr. Bright. The chair will now recognize the gentleman from 
Pennsylvania, Mr. Glenn Thompson.
    Mr. Thompson. Thank you, Congressman, and thank you to the 
panel for your testimony today. As we embark on preparing for 
this next farm bill, this is so important to get this kind of 
input.
    I want to start with Mr. Esposito, but I will expand to the 
rest of the panel as well, but I want to start with the smaller 
farms in particular and then we will go to larger ones. It 
really is about legacy, it is about every time--well, I think 
every year the amount of farmland that is turned over into 
strip malls and pavement and that we lose, that we take out of 
active production, is significant. As we lose those, it is 
difficult to get back.
    And so in terms of loss of farms and specifically family 
farms, what are the challenges to keeping farms in the family 
from generation to generation, and therefore keeping it in 
production providing us with quality affordable food supply? 
Mr. Esposito, we will start with you.
    Mr. Esposito. Well, sir, I am not a heritage farmer, I put 
my farming desires on hold to serve my country for a number of 
years. I would say the number one problem I think with keeping 
a farm in production is making a living off of it. I mean most 
farmers that I know around where I am, they have another job.
    Mr. Thompson. Profitability.
    Mr. Esposito. Yes. I mean how are you going to sustain it 
and make a living off of it. What I am understanding is that 
back years ago, I do not know how long ago, but a farmer 
received 33 cents or 34 cents or so on every agricultural 
dollar and what are we getting now, 11 cents? We cannot live 
like that.
    Mr. Thompson. And the smaller farms, I am assuming, my 
experience is that most--when we are talking 30 acres or less, 
small amount of acreage, a lot of those farmers have other jobs 
off the farm as well because of that profitability issue.
    Mr. Esposito. Yes. I mean some of them do not. If you are 
lucky enough to find a niche market, something high dollar you 
can get rid of, I mean, you can live off it. I think the 
biggest concern about holding onto farmland is why should I be 
struggling to do this when someone is going to give me X amount 
of dollars an acre like they did down in south Florida. Went 
for $25,000 an acre to $50,000 an acre and 5 acre plots for 
$1.5 million. Who can farm on something like that?
    Mr. Thompson. Right. How about other gentlemen, other 
concerns, barriers for keeping the farms in the family--estate 
tax or any issues that you can identify. Mr. Bell.
    Mr. Bell. Profitability would take care of all these 
problems.
    Mr. Thompson. Profitability would take care of all the 
problems.
    Mr. Bell. Absolutely.
    Mr. Mencer. That is the way I see it too, is profitability. 
These younger generations are not going to come in and work for 
the small margins that we are currently existing on. We have 
seen our margins grow smaller and smaller every year, and I 
just do not see how we can encourage a guy out of college to 
come back there when he sees he can go somewhere else to make a 
better living with a lot less stress and probably half the 
hours that we put in in a day's time out there.
    Mr. Sanders. I would have to agree with Mr. Mencer, that 
profitability and if we get some profitability out there, we 
will have young people and we will have sustainability on the 
farm. I always like the carrot approach better than the stick 
approach.
    Mr. Thompson. Okay.
    Mr. Waide. I agree with all of them. If we fix the 
profitability issue, we will be able to continue domestic 
production of food and fiber.
    Mr. Thompson. Okay, thank you, gentlemen.
    Mr. Bell, you noted that government subsidies seems to have 
an adverse effect in some cases. I wonder if you could expand a 
little bit on that comment, where do you see adverse effects 
from subsidies.
    Mr. Bell. A lot of times the payments are tied to the 
landowner versus the actual production entity and the funds 
never reach the actual cost of production. If there is, for 
example, an additional payment that is sent out, in effect that 
may just increase your land rent for that parcel of property 
versus enabling the production entity to cover additional 
costs.
    Mr. Thompson. Mr. Mencer, you testified to a new crop 
insurance called Crop Margin Coverage. What would that margin 
coverage cover?
    Mr. Mencer. Basically it would take two of our largest cost 
inputs there, which are energy and fertilizer, and we would 
establish a base price there at the beginning of the growing 
season. Then if there is drastic increases in those two costs 
during the growing season, as we saw a couple of years ago 
where we saw fertilizer more than doubled in just a matter of a 
few months and fuel went up $1.50 a gallon in just a few weeks. 
Rice is such a big user of fuel and fertilizer that if we could 
hedge our bets on that, if we saw that same increase again, 
then we would trigger an indemnity payment back to the grower. 
So you are setting your baseline up on the front end there and 
protecting against that.
    Mr. Thompson. Now is that obtained through a supplement to 
another policy or is that a whole separate policy?
    Mr. Mencer. We hope to attach that to a CRC policy.
    Mr. Thompson. Okay.
    Mr. Mencer. And we are also looking into another separate 
issue--we are saying separate right now, we really do not know 
where it is going--is a downed rice issue so that if we have a 
storm that blows the rice down, it doubles your harvest 
expense, then you may trigger an indemnity payment there, 
similar to what hail insurance is right now, is how we want to 
take the approach with that.
    Mr. Thompson. Thank you, sir.
    Thank you, Mr. Chairman.
    The Chairman [presiding.] I thank the gentleman. We are not 
going to do another round because we do not have time, but Mr. 
Goodlatte has been kind enough to let me--I need an answer to a 
couple of things.
    One, on the disaster program that is being considered, the 
Senate has put this language in, I assume you are aware of 
that, and they are only going to have to have a five percent 
loss in order to qualify. Did that come out of you guys or 
where did that come from?
    Mr. Mencer. That came from Farm Bureau I think. It was not 
even--I think it was zero is what we had to show up front. If 
you drew a payment you got a payment, is the way the first 
version of it came out.
    The Chairman. I am very concerned about the precedent we 
are setting here. If you only have a five percent reduction in 
income and you are going to trigger another payment, I mean the 
precedent we are setting, I just----
    Mr. Mencer. It does not look good.
    The Chairman. No.
    Mr. Mencer. And the way I have looked at it, I know that 
rice and a lot of other crops will not qualify, but in the Mid-
South if you grew a stalk of cotton, you would qualify last 
year.
    The Chairman. Yes, and I am sympathetic and I think they 
need some help, and we are trying to work through this. It just 
seems like this is a little overkill.
    Mr. Mencer. Just another comment about that. In the Mid-
South in cotton, guys are still being put out of business this 
week because the bankers were counting on disaster assistance 
coming in a timely manner, they did not get it, and somebody 
has to farm the land.
    The Chairman. I understand. You know, part of the 
discussion we have had, if we are going to come up with some 
new system, we have to make it work so that we do not have 
these ad hoc disasters. We cannot keep doing this. We have said 
over and over again we are never going to have another one and 
then we always do. So that is going to be part of the solution.
    And the last thing, on the direct payments, the comment has 
come up a couple of times about how it drives up the price of 
land and so forth. I think you mentioned it, Mr. Bell, am I 
correct, that you think direct payments just raise the rent 
sometimes.
    Mr. Bell. Right.
    The Chairman. You know, and they are tied to the base, I 
guess some people updated in 2002 and so forth. I am more 
interested in supporting production than I am landowners, you 
know. What is your position on that?
    Mr. Bell. If we were able to have a realistic target value 
and had some mechanism to keep it in step with inflation and 
designate to the farms that are actually still in production, 
tell them what percent of their base that they can produce at 
that level, at least we would have a percentage of the farm 
that we know would work.
    The Chairman. What do the rest of you think about it?
    Mr. Mencer. Well, the biggest deal about direct payments is 
you can go to the bank and you know you have this coming every 
year.
    The Chairman. Right.
    Mr. Mencer. And if we had a higher target price, we could 
rely on that because it would trigger countercyclical in those 
low years, and we would not need the direct payment.
    Mr. Sanders. If base was tied to the producer instead of to 
the land, I think that would accomplish part of your goal.
    The Chairman. And you would be for that?
    Mr. Sanders. Yes, sir.
    The Chairman. Mr. Waide.
    Mr. Waide. I would agree with that. I think it needs to go 
to the person actually producing the commodity, that is what I 
think the program was designed for in the beginning, and then 
it got away from that and went to the land. But I think it 
needs to be tied to the producer.
    Mr. Mencer. That would affect our payment limits if it is 
tied to the producer at the current level.
    The Chairman. Well, I am not in favor of payment limits and 
I think that if we could rejigger what we are doing here, we 
might be able to eliminate this whole payment limit discussion, 
which we should because it is not what the issue is about. You 
know, we are off on a tangent with these payment limits.
    Mr. Mencer. If you go to a insurance-based program, which 
is written on private paper, EWG and all them will not know 
what is going on.
    The Chairman. Right, that would be a good thing. But that 
is part of what I am trying to look at, is there some other way 
to do this. It would all be predicated on it having to be 
enough to cover your cost of production and get you up to where 
you need to be before we will ever be able to even consider 
changing anything. But it just seems like the way we are doing 
it is kind of inefficient, the way we are--you know, it works, 
but it is not really getting where it needs to get, from what I 
can tell.
    I will just say one last thing, that the last go-round when 
we--folks, especially in the South, that were involved in this 
from lobbyists and other people, were so focused on maintaining 
a payment limit that they could live with and maintaining 
direct payments, that we never got into any other discussion. 
So the whole thing just focused on that and that is part of why 
the SURE program ended up the way it was. You were fighting to 
keep these other programs and you were not at the table on the 
SURE stuff. And frankly I was not there that much.
    So we need to work on this and the message to you folks is 
we want to work with you and we want to try to make this stuff 
work down here in the Mid-South and the Southeast, so that it 
works like it does for us. I have 98 percent crop insurance in 
my district and it is a different situation up there, and we 
need to get you guys into that kind of a program down here.
    I want to thank the panel very much. You guys have done a 
great job in bringing things forward in a clear manner, and it 
has been very helpful to the Committee. We appreciate your time 
you have taken out of your Saturday to be with us.
    The panel is dismissed and we will call the next panel to 
the table and the Members can take a very short break while we 
are rearranging things here, but we do not want to wait too 
long.
    Mr. Lamar Dewberry who is a forestry producer from 
Lineville, Alabama; Mr. Doug Gibbs, a beef producer from 
Ranburne, Alabama; Dr. Steven Taylor, Professor and Head of the 
Department of Biosystems Engineering at Auburn University; and 
Mr. Ricky Wiggins, cattle, cotton and peanuts producer from 
Andalusia, Alabama.
    So I guess we are going to take a couple minute break here 
while we get this organized.
    [Recess.]
    The Chairman. If you need to continue your conversations, 
we would ask you to do it outside. There is barrel racing going 
on over here, there is an extra horse if anybody wants to enter 
the competition. They offered it to me but I think I probably 
am going to decline.
    Anyway, we welcome the panel to the table and--what 
happened to your sign there? You did not get one? Mr. Dewberry, 
right?
    Mr. Dewberry. That is correct.
    The Chairman. You are a forestry producer. Welcome to the 
Committee and you are recognized. You need to get that 
microphone kind of close, it works better that way.

 STATEMENT OF LAMAR DEWBERRY, FORESTRY PRODUCER, LINEVILLE, AL

    Mr. Dewberry. Good afternoon, gentlemen. My name is Lamar 
Dewberry from Lineville, Alabama. My wife and I are private 
forest landowners in Clay County, Alabama and I manage our 
forestland. I want to thank the Committee Chairman, Congressman 
Peterson and Congressman Mike Rogers for making it possible for 
me to testify before this important Committee.
    My work as an agriculture education teacher made it 
possible for my wife and I to own Dewberry Lands today. I hope 
I can pass this property on to my son and daughter some day. 
And with that being said, we need to do everything possible to 
protect family farms today.
    We are seeing aging generation of farmers and private 
forest owners, of which many of these farms will fall to 
development. I think we should do as much as we can to keep 
this property in the hands of private individuals.
    The management objectives on our property are timber and 
wildlife. These two objectives go hand-in-hand and it is said 
that these are the twin crops of modern forest management. 
Alabama is 70 percent forestland and Clay County, where I live, 
is over 82 percent forestland. Of this forestland, the majority 
is owned by private individual landowners just like myself.
    This past year only one EQIP contract was approved for 
forest management practices in our county. I do not know why, 
but possibly part of the problem may be the work committee that 
sets the resource concerns is weighted heavily in another 
commodity area. I do know for Clay County, forestry and 
wildlife are ranked as second as a resource concern and have 
been since 2007. To me, it was better when forestry was funded 
as a special project, Forest Health Initiative, to get funds to 
protect forestland which make up the majority of Alabama.
    A continuation of cost share funding for forest management 
practices needs to happen. Too much forestland is harvested and 
is never reforested. As we see a turnover in ownership, it 
becomes so important that we have technical expertise on the 
ground to assist these new and beginning farmers and 
landowners. An example is in EQIP and WHIP, the establishment 
of a longleaf pine ecosystem. Much of this ecosystem has been 
lost in the last 200 years, and we are now trying to 
reestablish this forest type. Most of the private forest owners 
in the Piedmont region of Alabama are not familiar with the 
longleaf pine ecosystem and the use of prescribed fire as a 
management tool. Education is important and this comes from 
technicians on the ground working directly with landowners.
    The 2008 Farm Bill requires each state forester to develop 
and submit to the Secretary of Agriculture a statewide 
assessment of forest conditions. The key elements of the study 
were to identify threats to our natural resources, develop 
strategies to address these threats and apply resources to 
implement these strategies. Alabama has completed our 
assessment and we know what these threats are. The problem is 
we do not have the resources to apply to the problems.
    Here in Alabama, our state forestry agency, the Alabama 
Forestry Commission, has seen a steady decline in all funding 
sources, especially in USDA-U.S. Forest Service cooperative 
state and private program funding. For example, the overall 
President's 2011 proposed Forest Service budget for Cooperative 
State and Private is almost 13 percent less than the 2010 
enacted budget. The Alabama Forestry Commission is looking at a 
$2 million reduction in cooperative state and private funding 
beginning in 2011. That loss, coupled with a substantial 
reduction in timber severance taxes due to the slowdown in the 
housing market, has left the Commission with a $5 million 
shortfall. The Commission is currently looking at laying off 
106 employees, or \1/3\ of its workforce this year. This is 
where the technical assistance comes from in implementing these 
cost share practices provided in the 2008 Farm Bill.
    Program delivery by resource professionals at the state and 
county level must be a key component of any farm bill. The 2012 
Farm Bill should include a line item for cooperative state and 
private forestry funding as a mechanism for delivering and 
implementing forestry practices that provide a sustainable 
resource for our rural communities.
    As a local producer of wood, there is a need for more 
markets to sell the wood. In our county, unemployment is over 
15 percent. Many of these are loggers, truck drivers and 
workers in the wood industry. We have really taken a hit from 
the problems in the housing market. Those still in business in 
Clay County are hauling pine pulpwood up to 90 miles one way to 
sell it. There is only one market for pine saw logs left in our 
area and this wood is hauled 70 miles one way. Fuel cost makes 
it impossible for the landowner to get much for their product. 
In 2008, I had a pine stand thinned to improve the stand and I 
had to give the wood away to get it cut. The stand was 12 years 
old and I grew it, paid taxes on it and got nothing for the 
product, but the cut improved the quality of the stand. The 
wood was chipped on site and hauled for fuel at an OSB, 
oriented strand board, mill. Since then, the plant has closed 
and two markets taking wood have been lost, fuel wood and wood 
for OSB. I know there are many factors that go into this 
problem, and I do not have an answer for this dilemma.
    In the 2008 Farm Bill, I was glad to see forestry added to 
the Conservation Stewardship Program. This will encourage 
forest landowners to continue doing a good job in protecting 
the soil and water and wildlife on their property and 
encourages them to do more. Each year, we have 5th graders from 
the local schools come out to our property for ``Classroom in 
the Forest''. They are exposed to how a southern forest is 
managed to protect water, soil and wildlife. They learn about 
something besides a rainforest. It is a fun day for all 
involved.
    Nothing is more pleasing than walking through a beautiful, 
well-managed forest. The water is clearer, the air is fresher, 
the soil is more stable and wildlife is more abundant.
    Thank you, Chairman Peterson, and Agriculture Committee 
Members for coming to Alabama and allowing me to share these 
thoughts with you and for your concerns for conservation, the 
wise use of our natural resources.
    [The prepared statement of Mr. Dewberry follows:]

 Prepared Statement of Lamar Dewberry, Forestry Producer, Lineville, AL
    Good afternoon gentlemen. My name is Lamar Dewberry from Lineville, 
Alabama. My wife and I are private forest landowners in Clay County, 
Alabama and I manage our forestland. I want to thank Committee Chairman 
Peterson and Congressman Mike Rogers for making it possible for me to 
testify before this important Committee.
    My work as an agriculture education teacher made it possible for my 
wife and I to own Dewberry Lands today. When we married we owned no 
property but have been blessed to be able to purchase forestland and 
now we own and manage 800 acres. I hope I can pass this property on to 
my son and daughter someday and with that being said, we need to do 
everything possible to protect family farms today. We see an aging 
generation of farmers and private forest owners of which many of these 
farms will fall to development. I think we need to keep as much of this 
property as we can in the hands of private individuals and keep these 
farms working, no matter what kind of farm it is.
    The management objectives for our property are timber and wildlife. 
These two objectives go hand-in-hand and it is said that these are the 
twin crops of modern forest management. Alabama is about 70 percent 
forestland and Clay County where I live is over 82 percent forestland. 
Of this forestland the majority is owned by private individual 
landowners just like me.
    This past year only one EQIP contract was approved for forest 
management practices. I don't know why but possibly part of the problem 
may be the work committee that sets the resources concerns is weighted 
heavily in another commodity area. I do know for Clay County forestry 
and wildlife are ranked second as a resource concern and has been since 
2007. To me it was better when forestry was funded as a special 
project, ``Forest Health Initiative'', to get funds to protect 
forestland which makes up the majority of Alabama.
    A continuation of cost share funding for forest management 
practices needs to happen. Too much forestland is harvested and is 
never reforested. This land becomes unproductive, the aesthetics are 
slow to return, it quickly becomes unattractive for wildlife habitat, 
recreational purposes are lost and often soil will erode in these 
areas. As we see a turnover in ownership it becomes so important we 
have technical expertise on the ground to assist new and beginning 
farmers. An example is in EQIP and WHIP the establishment of longleaf 
pine ecosystems. Much of this ecosystem has been lost in the last 200 
years and we are now trying to reestablish this forest type. Most of 
the private forest owners in the Piedmont Region of Alabama are not 
familiar with the longleaf pine ecosystem and the use of prescribed 
fire as a management tool. Education is important and this comes from 
the technicians on the ground working directly with landowners.
    The 2008 Farm Bill requires each State Forester to develop and 
submit to the Secretary of Agriculture a ``state-wide assessment of 
forest conditions.'' The key elements of the study were to identify 
threats to our natural resources, develop strategies to address the 
threats and apply resources to implement the strategies. Alabama has 
completed our assessment and we know what the threats are. The problem 
is we don't have resources to apply to the problems.
    Here in Alabama our state forestry agency, the Alabama Forestry 
Commission, has seen a steady decline in all funding sources especially 
in USDA-U.S. Forest Service Cooperative State and Private program 
funding. For example, the overall President's 2011 proposed Forest 
Service budget for Cooperative State and Private is almost 13% less 
than the 2010 enacted budget. The Alabama Forestry commission is 
looking at a $2 million reduction in Cooperative State and Private 
funding beginning in 2011. That loss coupled with a substantial 
reduction in timber severance taxes due to the slowdown in the housing 
market has left the Commission with a $5 million shortfall. The 
Commission is currently looking at laying off 106 employees or \1/3\ of 
its workforce this year. This is where the technical assistance comes 
from in implementing these cost-share practices provided in the 2008 
Farm Bill.
    In Clay County out of the last 6+ years we have only had a county 
forester in the county for 2.5 years. Our NRCS office closed in Clay 
County and combined with Randolph County and the office is in Randolph 
County.
    Program delivery by resource professionals at the state and county 
level must be a key component of any farm bill. The 2012 Farm Bill 
should include a line item for cooperative State and Private Forestry 
funding as a mechanism for delivering and implementing forestry 
practices that provide a sustainable resource for our rural 
communities.
    As a local producer of wood there is a need for more markets to 
sell wood. In our county unemployment is over 15%, many of these are 
loggers, truck drivers and workers in the wood industry. We have really 
taken a hit from the problems in the housing markets. Those still in 
the business in Clay County are hauling pine pulpwood up to 90 miles 
one way to sell it. There is only one market for pine saw logs left in 
our area and this wood is hauled 70 miles one way. Fuel cost makes it 
impossible for the landowner to get much for their product. In 2008, I 
had a pine stand thinned to improve the stand and I had to give the 
wood away to get it cut. The stand was 12 years old and I grew it, paid 
taxes on it and got nothing for the product but the cut improved the 
quality of the stand. The wood was chipped on site and hauled to a 
plant for fuel making Oriented Strand Board (OSB). Since then the plant 
has closed and two markets taking wood has been lost; fuel wood and 
wood for OSB. I know there are many factors that go into this problem 
and I don't have an answer for the dilemma.
    In the 2008 Farm Bill I was glad to see forestry added to the 
Conservation Stewardship Program. This will encourage forest landowners 
to continue doing a good job in protecting the soil, water, and 
wildlife on their property and it encourages them to do more. Each year 
we have 5th graders from the local schools come out to our property and 
have ``Classroom in the Forest.'' They are exposed to how a southern 
forest is managed to protect the water, soil, air and wildlife. They 
learn about something besides a rainforest. It is a fun day for all 
involved!
    Nothing is more pleasing than walking through a beautiful, well 
managed forest. The water is clearer, the air is fresher, the soil is 
more stable and wildlife is more abundant. Thank you, Chairman Peterson 
and Agriculture Committee Members for coming to Alabama and allowing me 
to share these thoughts with you and for your concerns for 
conservation, the wise use of our natural resources.

    The Chairman. Thank you very much, Mr. Dewberry, we 
appreciate that.
    Mr. Gibbs, welcome to the Committee.

      STATEMENT OF DOUG GIBBS, BEEF PRODUCER, RANBURNE, AL

    Mr. Gibbs. Chairman Peterson, and Members of the House 
Agriculture Committee, I guess you can see I am a little out of 
my element by my uniform and lack of cap, but I am here not 
only representing myself but the Alabama Cattlemen's 
Association. And not just that, but I am the third of four 
generations that are living and working on our family farm over 
in northeast Alabama, right on the Georgia-Alabama state line.
    My family's role in the beef industry is we are a 500 head 
momma cow, Simmental, SimAngus and Angus herd that sells seed 
stock, breeding stock.
    Like you, I am passionate about my country and our 
agricultural way of life. But I want to tell you, however, I am 
very deeply concerned about both. Survival of the family farm 
is essential to the wellbeing of our great country. Our lives 
are dedicated not only to producing a product that consumers 
around the globe can enjoy, but also to helping fellow 
cattlemen use their animals that they purchase from my family 
to be more profitable in their enterprises.
    Also like you, I understand that decisions made in 
Washington, D.C., have the potential to impact agriculture 
producers just like me all across the country. Today, my 67 
year old dad and my 15 year old son, with my mother driving the 
truck are in the hayfield. My 91 year old grandpa is in his 
truck sitting there wishing with all his heart that he could do 
more to help. You know, the purpose I left them today is to 
come here and speak out on behalf of all the working cattlemen 
in Alabama and the rest of this country as well.
    To be able to say something in 5 minutes, to demonstrate to 
you how important it is to prepare the farm bill as wisely as 
possible, is an almost impossible task. With all the challenges 
facing the family farm already, from the impact of what other 
countries are doing to our fuel and fertilizer prices, to the 
impact of foreign trade on our beef production demand, to the 
very questionable benefit of ethanol production, to the death 
tax, the last thing we need is for our government to produce a 
bill that does not keep the absolute best interests of the 
people that feed this country as its top priority. I want you 
to just think about it, what would happen if the younger 
generation or just 25 percent of the farmers decided there is 
no future in agriculture and just hang it up and just leave? I 
do not know about you, but it scares me to death. Please 
consider the following points and opinions as you start the 
deliberation for the crafting of the 2012 Farm Bill:
    Number one is crop management tools, risk management tools. 
Crop insurance programs are vital to protect the stability of 
America's farming and ranching families. In a business where 
our bottom line can literally turn red overnight due to 
environmental factors beyond our control, these programs are 
extremely important and deserve your attention. I want you to 
think back to our late President Teddy Roosevelt as he stood 
surveying the death and devastation after a most cruel North 
Dakota winter. He threw up his hands and he went back East and 
went into politics. This is a decision that is just too 
horrible to contemplate for most farming families. Neither 
farmer/rancher, nor this country can take too much quitting.
    Number two is the conservation programs. Incentive-based 
programs meant to preserve and protect wildlife and delicate 
ecosystems have been embraced by landowners like myself for 
years. CRP, WHIP, EQIP and other programs like them absolutely 
define a mutually beneficial relationship between land managers 
and agency officials. But at the same time, some of these 
programs can approach the point of systematic abuse when monies 
are paid to those who choose simply to neglect a piece of 
property in the name of conservation rather than actively 
manage it. In these instances, those enrolled acres should be 
taken out of enrollment under the premise that active 
management of land to produce a viable commodity, in addition 
to protecting wildlife, is actually a much better use of the 
resource.
    Number three is non-farm programs. Now I am positive I am 
not the only one here expressing concern over the number of 
times our Administration has mentioned non-farm programs in 
relation to our next farm bill. I thoroughly understand and am 
aware that 70 percent of the farm bill funds are used on 
programs for non-productive agriculture. But I still am very 
wary over the talk of dedicating farm bill funds to address 
issues like high speed Internet access and graduation rates in 
rural America. Please, let us just keep our focus during the 
farm bill dialogue on protecting our farming and ranching 
families first.
    Number four, conventional growers versus small scale and 
sustainable. While I think it is terrific that there is a 
vegetable garden now growing on the grounds of the White House 
lawn, I think the fact that it is being maintained as an 
organic venture and promoted solely as such does a disservice 
to those of us in mainstream America. Farms like mine should 
not be discriminated against in the court of opinion and 
certainly not within the confines of the 2012 Farm Bill. You 
know, the scale of my operation is what makes me efficient and, 
hopefully, makes me profitable. We have already established 
that there are fewer and fewer family farms. We already know 
that the business climate is getting more and more challenging. 
Do you think we are going to be able to feed this country and 
even the world by going backwards with our production methods? 
Please, let us not let buzz words like natural and organic and 
the like be used to vilify traditional commodity producers like 
us. And by the way, I bet you you could go to the grocery store 
and ask ten different people what these two words mean and get 
ten different answers. This past Sunday morning on the Atlanta 
news, they were interviewing customers who were shocked and 
surprised that they were paying ridiculous prices for foods 
produced with little or no USDA oversight. The products I 
produce are every bit as safe and wholesome as those generated 
from an operation relying on opinion-driven marketing.
    Finally, wildlife versus ag products. Like our past 
President Teddy Roosevelt, I do not think you can find a bigger 
sportsman than I am. And In fact, the farmers and ranchers are 
the original stewards of the land. But just as my earlier 
comment on the abuse of some conservation programs highlighted 
the worth and benefit of land being used to generate actual ag 
products, so too is it a legitimate argument to scrutinize 
wildlife programs with the same attention. While I do not begin 
to argue that wildlife protection programs are not important, I 
do maintain that ecosystems as well as local rural economies 
can all benefit from a multi-tiered benefit of the two working 
together.
    You know, it is uncanny the timing of this question my son 
asked me last Saturday afternoon as we was rotating heifers 
from one pasture to the other. He said, ``Daddy, what would 
happen to the land if it was not for the farmer and the rancher 
taking care of it?'' Well, I thought to myself, how many in 
this country do you think are ready to go back to being hunter/
gatherers in either a grown up jungle or a concrete city or a 
subdivision? Please, let us consider all the positives derived 
from year-round ag production when considering wildlife related 
land use programs as well.
    In closing, thank you guys so much for giving me this 
opportunity to speak. My Congressman Mike Rogers, I am a 
constituent of his and a fellow Alabamian with Mr. Bright and I 
would like to thank the Pike County Cattlemen's Association for 
letting us use this building today. You know, this is a group 
of dedicated volunteers that have been a good example to show 
us that you can come together as like minded people and benefit 
the ag industry in your own community.
    Thanks again. I as well as the rest of the 11,000 members 
of the Alabama Cattlemen's Association are here to help in any 
way we can. Thanks.
    [The prepared statement of Mr. Gibbs follows:]

     Prepared Statement of Doug Gibbs, Beef Producer, Ranburne, AL
    Chairman Peterson, and Members of the House Agriculture Committee, 
I'm delivering this statement to you today not only as a cattleman and 
member of the Alabama Cattlemen's Association; but also as the third of 
four generations currently living and working on our family farm 
located in the eastern edge of Cleburne County near the Alabama-Georgia 
state line. My family's role in the beef cattle industry involves 
hosting an annual production sale where we market 250 bulls and heifers 
from our herd of 500 Simmental, SimAngus, and Angus cows, as breeding 
stock. The remaining offspring are sold private treaty off the farm, or 
sent to Kansas where we contract them to be fed and harvested.
    Like you, I am passionate about my country and our agricultural way 
of life. I am however deeply concerned about both. Survival of the 
family farm is essential to the well being of our great country. Our 
lives are dedicated not only to producing a product that consumers 
around the globe can enjoy, but also to helping fellow cattlemen use 
the animals they purchase from my family to be more profitable with 
their own farms and ranches, as well as help them market their own 
product as wisely as possible.
    Like you, I understand that the decisions made concerning ag policy 
in Washington, D.C. have the potential to impact agriculture producers 
just like me all across our country. Today my 67 year old father and 15 
year old son are in the hayfield, with my 91 year old grandpa sitting 
in his truck wishing with all his heart that he could be more help, and 
I've left my family farm to be with you here for the purpose of 
speaking out on behalf of the hard working cattlemen in Alabama, as 
well as the rest of this great nation.
    To be able to say something in 5 minutes to demonstrate to you how 
important it is to prepare this farm bill as wisely as possible is an 
almost impossible task. With all the challenges facing the family farm 
already, from the impact of what other countries are doing to our fuel 
and fertilizer prices, to the impact of foreign trade on beef demand, 
to the very questionable benefit of ethanol production, to the death 
tax, the last thing we need is for our government to produce a bill 
that does not keep the absolute best interest of the people that feed 
this country as the top priority. Just think about it, what would 
happen if the younger generation, or just 25% of farmers and ranchers 
decide that there is no future in agriculture, and give it up. This 
scares me to death. Please consider the following points and these 
opinions as you begin the process of deliberations for crafting the 
2012 Farm Bill:
    Risk Management Tools--Crop insurance programs are vital for 
protecting the stability of America's farming and ranching families. In 
a business where our bottom line can literally turn red overnight due 
to environmental factors beyond our control, these programs are 
extremely important and deserve your attention. Think back to our late 
President Teddy Roosevelt, who after surveying the death and 
devastation of a most cruel North Dakota winter, hung it up and moved 
back East to pursue politics. For the overwhelming majority of family 
farmers, this is a decision just too horrible to contemplate. Neither 
the farmer/rancher, or our country can take too much quitting.
    Conservation Programs--Incentive-based programming meant to 
preserve and protect wildlife and delicate ecosystems have been 
embraced by landowners like my family. CRP, WHIP, EQIP, and other 
programs like them can absolutely define a mutually beneficial 
relationship between land managers and agency officials. At the same 
time, some of these programs can approach the point of systemic abuse 
when monies are paid to those who choose to simply neglect a piece of 
property in the name of conservation rather than actively manage it. In 
these instances, those enrolled acres should be taken out of enrollment 
under the premise that active management of land to produce a viable 
commodity in addition to protecting wildlife is actually a better use 
of that resource.
    Non-farm Programs--I am positive that I'm not alone in expressing 
concern over the number of times our Administration has mentioned 
nonfarm programs in relation to our next farm bill. While I'm aware 
that more than 70% of farm bill funds are used on programs other than 
production agriculture, I still am wary over the talk of dedicating 
farm bill funds to address issues like high-speed Internet and 
graduation rates in rural America. Please, let's keep our focus during 
the farm bill dialogue on protecting our farming and ranching families 
first.
    Conventional Growers versus Small Scale & Sustainable--While I 
think it's terrific that a vegetable garden is now growing on the 
grounds of the White House lawn, I think the fact that it's being 
maintained as an ``organic'' venture and promoted solely as such does a 
disservice to those of us in mainstream agriculture. Farms like mine 
shouldn't be discriminated against in the court of public opinion and 
certainly not within the confines of the 2012 Farm Bill. The scale of 
my operation is what allows me to be both profitable and efficient. We 
have already established that there are fewer and fewer family farms, 
and the business climate is getting more and more challenging, do you 
think we will be able to feed this country and world by going backwards 
with our production methods? Please, don't let buzz words like 
``natural'', ``organic'', and the like be used to vilify traditional 
commodity producers like me. And by the way, you could probably ask ten 
different consumers how natural or organic foods are produced and get 
ten different answers. For example, news reports this past Sunday 
morning, documented the surprise of families who were paying ridiculous 
prices for foods produced with little or no USDA oversight. The 
products I produce are every bit as safe and wholesome as those 
generated from an operation relying on opinion-driven marketing.
    Wildlife versus Ag Products--Like our past President Teddy 
Roosevelt who I mentioned earlier, I don't know how you could be much 
more of a sportsman than I am. And in fact, the farmers and ranchers 
are the original stewards of the land. But just as my earlier comment 
on the abuse of some conservation programs highlighted the worth and 
benefit of land being used to generate actual ag products, so too is it 
a legitimate argument to scrutinize wildlife programs with the same 
attention. While I don't begin to argue that wildlife protection 
programs aren't important, I do maintain that programs focused on 
protecting the actual production of farm crops can have multi-tiered 
benefits for ecosystems as well as local rural economies. It is uncanny 
the timing of the question my son asked me while we were rotating 
heifers to new pasture this past Saturday afternoon. He asked, ``Daddy 
what would the land look like if it were not for the farmers and 
ranchers to see after and maintain it?'' I thought to myself, how many 
in this country do you think are ready to go back to being hunter-
gatherers in a grown up jungle, concrete city, or subdivision? Please, 
consider all the positives derived from year-round ag production when 
considering wildlife related land use programs.
    In closing, I'd like to thank the House Agriculture Committee for 
this opportunity to speak on the 2012 Farm Bill. As a constituent of 
Congressman Mike Rogers and a fellow Alabamian with Congressman Bobby 
Bright, I'm proud of their service as Members of the House Agriculture 
Committee. I'm also proud to be able to deliver my comments in this 
outstanding venue which is owned and operated by the Pike County 
Cattlemen's Association. This group of dedicated volunteers is an 
example of what good can come of a conjoined effort of like minded 
people who want to benefit the agriculture industry in their community.
    Thank you again for allowing me to speak today. I, as well as the 
rest of the 11,000 members of the Alabama Cattlemen's Association, look 
forward to working with you in the future.

    The Chairman. Thank you very much, Mr. Gibbs; and thank you 
for your passion for agriculture, we appreciate that.
    Dr. Taylor, welcome to the Committee.

 STATEMENT OF STEVEN TAYLOR, Ph.D., P.E., PROFESSOR AND HEAD, 
 BIOSYSTEMS ENGINEERING DEPARTMENT, AUBURN UNIVERSITY, AUBURN, 
                               AL

    Dr. Taylor. Thank you, Mr. Chairman. My comments today 
cover three primary messages. There are significant 
opportunities for developing a new bio-economy in the southern 
U.S. There are numerous policy needs related to bioenergy in 
the farm bill, and the creation of a successful biorefining 
industry is only possible through significant and sustained 
funding of R&D conducted primarily through our land-grant 
university programs in education, research and extension.
    I am here representing Auburn University and its Center for 
Bioenergy and Bioproducts. As such, I speak for a diverse group 
of educators and scientists working hard on developing our 
nation's bioeconomy.
    We feel strongly that a sustainable biofuels industry is 
within our grasp and that it has the potential to strengthen 
our local communities, and to revitalize our agricultural and 
forest economic sectors. This industry must be based on a 
balanced portfolio of regionally appropriate feedstocks and 
biofuel conversion technology.
    Here in Alabama, like most southern states, we are blessed 
with over 22 million acres of highly productive forestland. In 
addition, there is great potential to produce dedicated 
agricultural energy crops, and to take advantage of other waste 
and residues from agricultural forests, commercial and 
municipal sources. Just for one example, each year in Alabama, 
there are approximately 15 million tons of biomass that is 
available from logging residues and currently unmerchantable 
small-diameter trees. These 15 million tons alone have the 
potential to produce nearly 1.5 billion gallons of liquid fuels 
per year.
    While this is significant, our vision of the size of the 
southern bioeconomy should not be constrained by the current 
production levels. History tells us that Alabama farmers and 
forestland owners will respond to market conditions and ramp up 
production to meet demand. New varieties of genetically 
improved trees and agricultural crops, as well as highly 
advanced production and harvesting systems, are either already 
available or under development to help meet the demands of the 
biorefining industry in a sustainable manner. Auburn University 
extension professionals and researchers have a long successful 
history of working with Alabama producers to implement new 
technologies such as: precision agriculture, precision forestry 
techniques, or high productivity harvesting and transportation 
systems for our southern forests.
    In a similar fashion, we believe it is critical to support 
the development of a balanced portfolio of biofuel conversion 
technologies--both ethanol production systems, as well as those 
that make other fuels like butanol or synthetic gasoline. To 
build on our intellectual wealth, Auburn University, with the 
support of Congress and the State of Alabama, has invested 
significant resources into research and education on bioenergy 
and bioproducts. Our researchers are currently developing new 
methods to process the variety of types and forms of biomass 
into a set of relatively uniform commodity products such as 
cellulose, hemicellulose and lignin that can be shipped and 
traded on global markets for more efficient production of 
liquid fuels and value-added coproducts. Our programs also 
emphasize thermochemical conversion processes like biomass 
gasification and gas-to-liquids technologies that result in 
synthetic diesel fuel, gasoline and aviation fuel.
    Beyond our new fluidized bed gasification reactor that is 
coming on line this summer, we operate a unique mobile biomass 
gasification and power generation laboratory. This one-of-a-
kind traveling laboratory allows us to take our research right 
to the source of the bioenergy feedstock and study its 
potential for use in generating renewable electrical power. It 
has traveled over 15,000 miles, even to our nation's capital, 
has been seen by literally thousands of people who have learned 
that generating renewable electrical power from biomass is a 
reality.
    Many of these programs have been made possible through the 
support of Alabama Congressman Mike Rogers and Congressman 
Bobby Bright.
    In preparation for the 2012 Farm Bill, I would like to 
highlight two areas of need in the context of bioenergy policy.
    First, we encourage Members of the House and Senate both to 
continue to work together to coordinate the various definitions 
of renewable biomass, such as those found in the renewable fuel 
standard, the 2008 Farm Bill and the recently passed Waxman-
Markey Bill and the proposed Senate legislation. As you know, 
some of these definitions have had the potential to prevent 
many of our farmers and forest landowners from participating in 
the new bioeconomy, and some of them have had the potential to 
add even further regulation to what are already well-managed 
and sustainable farming or forestry systems.
    A second area of need is with the Biomass Crop Assistance 
Program or BCAP. It is very critical to fully study the impacts 
of such programs before implementation, and then to provide 
consistent and uninterrupted funding which allows those 
programs to have the desired effect of establishing a new 
bioeconomy. We encourage consideration of programs that provide 
cost share funds to help landowners plant biomass crops, as 
well as provide mechanisms to reduce risk for those producers 
through such things as biomass crop insurance program, much 
like crop insurance programs that are provided for agronomic 
crop systems that we have already discussed today.
    Continued investment in new scientific discoveries and 
innovative practices in our agricultural, forest and food 
sectors is critical to the future success of our nation's 
economy, and the wellbeing of communities across America.
    As you know, the support that Congress provides today for 
these education, research and extension programs comes in two 
primary forms--competitive funds and formula funds provided to 
each state. The newly established Agriculture and Food Research 
Initiative, or AFRI, is a highly competitive program that 
provides funding for education, research and extension 
activities in high priority national areas of need. The formula 
funds such as Hatch, Smith-Lever, McIntire-Stennis and Evans-
Allen provide a base level of support for research and 
extension programs delivered by the land-grant universities. 
This formula funding, which is matched with additional dollars 
from each state, fills a critical role by allowing researchers 
and extension professionals to focus on local issues that are 
typically not funded by the competitive programs like AFRI.
    While both these funding mechanisms address the issues of 
global food security, nutrition and health, bioenergy, and 
environmental concerns, unfortunately this support is at a 
level that is not adequate to properly address such major 
challenges in comparison to other Federal programs. For every 
dollar spent on agricultural research the National Institutes 
of Health spends $120. Overall, agriculture, forestry and food 
sciences receive only about one percent of the Federal R&D 
funds. The growth of AFRI is critical, but it is equally 
critical to continue to provide sustainable funding to the 
traditional formula funding programs. These programs fill an 
important role by providing a base level of support that helps 
states maintain a scientific core devoted to solving locally or 
regionally specific problems in our agricultural and forest 
sectors. These programs are even more important today when 
state budgets are being reduced considerably.
    As farmers, forest landowners, scientists or policymakers, 
we are all focused on leaving a legacy for our children and 
grandchildren. At Auburn University, we hope that part of our 
legacy for America will be a secure, sustainable energy supply; 
a healthy population; and a culture of caring for our 
environment.
    Thank you again, Mr. Chairman, for allowing Auburn 
University to join you today.
    [The prepared statement of Dr. Taylor follows:]

 Prepared Statement of Steven Taylor, Ph.D., P.E., Professor and Head, 
    Biosystems Engineering Department, Auburn University, Auburn, AL
    Thank you Mr. Chairman and good afternoon.
    In my comments today I would like to deliver three primary 
messages: (1) there are significant opportunities for developing a new 
bioeconomy in the southern U.S.; (2) there are major policy needs 
related to bioenergy in the farm bill; and (3) the creation of a 
successful biorefining industry will only be possible through 
significant and sustained funding of R&D conducted primarily through 
our land-grant university programs in education, research, and 
extension.
    I'm here representing Auburn University and, more specifically its 
Center for Bioenergy and Bioproducts. As such, I speak for a diverse 
group of educators, scientists, and researchers working hard on 
developing our nation's bioeconomy. Our scientists are world leaders in 
technologies for producing and harvesting forest and agricultural 
biomass. We have nationally recognized experts in the conversion of 
biomass into liquid fuels, electrical power, and other valuable co-
products. Further, our faculty ranks include researchers who study the 
impacts of the bioeconomy on the social and economic fabric of our 
communities.
    We feel strongly that a sustainable biofuels industry is within our 
grasp and that it has the potential to strengthen our local communities 
and to revitalize our agricultural and forest economic sectors. This 
industry must be based on a balanced portfolio of regionally-
appropriate biomass feedstocks and biofuel conversion technologies. We 
recognize the significant strides that the corn-based ethanol and soy-
based biodiesel industries have made for the acceptance of biofuels. 
However, it is clear that to achieve U.S. energy security goals, we 
need additional biomass feedstocks and biofuel products. Like many 
others, we believe that various forms of lignocellulosic biomass hold 
great promise for expanding the biofuels industry and should therefore 
be emphasized in our national R&D funding priorities.
    Here in Alabama, like most other southern states, we are blessed 
with over 22 million acres of highly productive forestland. In 
addition, there is great potential to produce dedicated agricultural 
energy crops and to take advantage of other wastes and residues from 
agricultural, forest, commercial, and municipal sources. For example, 
each year in Alabama, there are approximately 14.6 million dry tons of 
biomass available from logging residues and currently unmerchantable 
small-diameter trees. These 14.6 million tons have the potential to 
produce nearly 1.5 billion gallons of liquid fuels per year.
    Our vision of the magnitude of a southern bioeconomy should not be 
constrained by current production levels. History demonstrates that 
Alabama farmers and forest landowners will respond to market conditions 
and ramp up production to meet demand. New varieties of genetically 
improved trees and agricultural crops as well as highly advanced 
production and harvesting systems are either already available or under 
development to help meet the demands of a biorefining industry in a 
sustainable manner. Auburn University researchers and extension 
professionals have a long, successful history of working with Alabama 
agricultural and forestry producers to implement new technologies such 
as precision agriculture and forestry techniques that can result in 
increased crop yields with more efficient and precise placement of 
fertilizers and herbicides. Our researchers were recently awarded one 
of two grants nationwide to work collaboratively with Alabama forest 
biomass producers to demonstrate high-productivity biomass harvesting 
and transportation systems for pine plantations that hold the potential 
to deliver biomass at cost levels needed by developing biorefineries.
    In a similar fashion, we believe that it is critical to fund the 
development of a balanced portfolio of biofuel conversion 
technologies--both ethanol production systems as well as those that 
make other fuels like butanol or synthetic gasoline. To build on our 
intellectual wealth, Auburn University has invested significant 
resources into research and education on bioenergy and bioproducts. Our 
researchers are currently developing new methods to process the variety 
of types and forms of biomass into a set of relatively uniform 
commodity products such as cellulose, hemicellulose, and lignin that 
can be shipped and traded on global markets for more efficient 
production of liquid fuels or value-added co-products. Current biomass 
handling and conversion systems, which are challenged by the infinite 
varieties and forms of biomass, can be made more efficient by 
transforming these various biomass types into a more uniform and 
consistent set of universal chemical feedstocks. Our programs also 
emphasize thermochemical conversion processes like biomass gasification 
and gas-to-liquids technologies which result in synthetic gasoline, 
diesel fuel, and aviation fuel from biomass, as well as from biomass 
and coal mixtures. Many of these programs have been made possible 
through the support of Alabama Congressman Bobby Bright and Congressman 
Mike Rogers.
    As we develop the U.S. bioeconomy, it is imperative that we fully 
understand its social, environmental, economic, and policy issues. In 
preparation for the 2012 Farm Bill, I would like to highlight two areas 
of need in the context of bioenergy policy. First, we encourage Members 
of the House and Senate to continue to work together to coordinate the 
various definitions of renewable biomass, such as those in the 
Renewable Fuel Standard, the 2008 Farm Bill, and the proposed 
legislation for a Renewable Electricity Standard. Some of these 
definitions of biomass have the potential to prevent many of our 
farmers and forest landowners from participating in the new bioeconomy 
or they have the potential to highly regulate well-managed and 
sustainable farming or forestry systems. All of us should have the same 
goals of encouraging farmers and landowners to sustainably produce 
feedstocks that can be used for clean, renewable fuels and electrical 
power without having to create any unneeded administrative or 
regulatory processes.
    Our second area of need is with the Biomass Crop Assistance Program 
(BCAP), which was established in the 2008 Farm Bill and has the 
potential to help stimulate the growth of a biomass production 
industry. It is critical to fully study the impacts of such programs 
before implementation and then to provide consistent, uninterrupted 
funding which will allow the program to have the desired effect of 
establishing the new bioeconomy. As BCAP is carried out under the 
current or future farm bill, we encourage consideration of programs 
beyond those that offer payments for biomass harvesting. It is equally 
important to have systems that provide cost-share funds to help 
landowners plant biomass crops as well as provide mechanisms to reduce 
risk for producers through biomass crop insurance programs--much like 
crop insurance programs are provided for agronomic crop producers 
today. Also, for BCAP to work most effectively, it must provide 
financial incentives for all major groups in the bioenergy supply 
chain: the farmer or landowner, the producer of the biomass, and the 
bioenergy production facility.
    Supporting the sectors of our nation that produce renewable fuel, 
fiber, and food is a vital responsibility for Congress. Continued 
investment in new scientific discoveries and innovative practices in 
our agricultural, forest, and food systems is critical to the future 
success of our nation's economy, and the well being of communities 
across America. Today we face a daunting list of challenges that 
include: producing an adequate and affordable supply of healthy food 
for an ever-growing global population; addressing the problem of an 
overweight or obese American population; providing clean and renewable 
sources of energy and biobased products from our abundant natural 
resources; as well as responding to climate change and increasing 
demands on resource sustainability.
    As you know, the support that Congress provides today for these 
education, research, and extension programs comes in two primary forms: 
competitive funds and formula funds provided to each state. The 2008 
Farm Bill established the National Institute of Food and Agriculture 
(NIFA) as well as the new Agriculture and Food Research Initiative 
(AFRI), which is USDA's primary competitive grants program. AFRI is a 
highly competitive program that provides funding for education, 
research, and extension activities in high-priority national areas of 
need. The formula funds, such as Hatch, Smith-Lever, McIntire-Stennis, 
and Evans-Allen provide a base level of support for research and 
extension programs delivered by the land-grant universities. This 
funding, which is matched with additional dollars from each state, 
fills a critical role by allowing researchers and extension 
professionals to focus on local issues that are typically not funded by 
the competitive programs like AFRI.
    While both of these funding mechanisms address the issues of global 
food security, nutrition and health, bioenergy, and climate change 
outlined previously, unfortunately this support is at a level that is 
not adequate to properly address such major challenges. For every $120 
spent by the National Institutes of Health on research, we invest only 
$1 for competitive funding in agricultural research. AFRI was one of 
the few Federal science programs to receive no investment in the recent 
recovery act funding. Fewer than 22% of the qualified research 
proposals are funded in AFRI. Overall, agriculture, forestry, and food 
sciences receive only about one percent of the total Federal research 
and development funds.
    It is imperative that Congress continues to support the growth of 
AFRI through significant increases in funding. This includes insuring 
that funds are provided at the full authorized level now, as well as 
providing significant increases in the 2012 Farm Bill. Currently, our 
faculty at Auburn University, like many across the nation, are 
submitting proposals to the AFRI programs. In some cases, these are 
large regional efforts that employ systems approaches to problem 
solving and involve partnerships with multiple academic institutions 
and industry partners. In other cases, these are smaller individual 
grants focused on specific research needs. It is important to maintain 
a healthy balance in funding devoted to large regional funding 
opportunities and those that allow smaller research or extension teams 
to make new discoveries or deliver focused extension programs to a 
targeted audience. Also, it is important to have a funding base large 
enough to support long-term programs focused on a wide variety of 
problem areas so that our ranks of qualified scientists and educators 
remain strong. In addition to increasing the support of AFRI, it is 
equally critical to continue to provide sustainable funding to the 
traditional formula funding programs. These programs fill an important 
role by providing a base level of support that helps states maintain a 
scientific cadre devoted to solving locally or regionally specific 
problems in our agricultural and forest sectors. These programs are 
even more important today when state budgets are being reduced 
considerably.
    As farmers, forest landowners, scientists, or policy makers, we are 
all focused on leaving a legacy for our children and grandchildren. At 
Auburn University, we hope that part of our legacy for America will be 
a secure, sustainable energy supply; a healthy population; and a 
culture of caring for our environment.
    Thank you again, Mr. Chairman for allowing Auburn University to 
join you today.

    The Chairman. Thank you, Dr. Taylor, we are pleased to have 
you.
    Mr. Wiggins, welcome to the Committee.

    STATEMENT OF RICKY WIGGINS, CATTLE, COTTON, AND PEANUT 
                    PRODUCER, ANDALUSIA, AL

    Mr. Wiggins. Chairman Peterson, and Members of the 
Committee, thank you for scheduling these hearings to get input 
from those of us directly impacted by farm legislation.
    My name is Ricky Wiggins and I am a partner in a family 
farming operation along with my son, Russell, and my father, 
Gene. We currently work about 2,500 acres of row crops and 
pasture in Covington and Escambia Counties, located in south 
Alabama. We have been at the same location since 1952, and have 
a history of growing corn, wheat, soybeans, watermelons, 
tomatoes, grain sorghum and hogs. But we currently grow 
peanuts, cotton and cattle.
    My wife, Sharon, and I have four children and ten 
grandchildren. Our concern today is whether or not they will 
have the same opportunity to pursue the American dream in the 
future. Overwhelming national debt, deficit and uncontrolled 
spending casts a dark shadow over their futures. As a farmer, I 
stand ready to work to pass a fiscally responsible 2012 Farm 
Bill. However, I am not prepared to sit back and watch 
agriculture take disproportionate cuts while runaway spending 
is allowed to continue in other parts of the budget.
    Farmers understand that this next farm bill will not be 
written in a vacuum. We know that tough choices will have to be 
made. Effective farm policy maximizes scarce resources by 
triggering programs when prices and conditions warrant, and by 
giving farmers the flexibility to respond to changes in supply 
and demand. Good farm policy is not only important to us who 
live on the farms, but also to every American who enjoys an 
affordable, reliable and safe food supply.
    These are trying times for southern agriculture. Several 
years of prolonged drought along with several devastating 
hurricanes have taken a toll on many in the Southeast. Couple 
these weather events with increased regulation, higher 
production costs and prices for cotton and peanuts that are at 
or below levels we saw 2 decades ago, and you can see that 
southern agriculture is hurting.
    The current three-part safety net of marketing loans, 
direct payments and countercyclical payments has worked fairly 
well for southern farmers or southeastern farmers. We do have 
some issues with USDA regulations on eligibility and see the 
need for Congress to be more specific on intent. Policy should 
encourage maximum participation without regard to farm size or 
structure.
    With more costly environmental regulation on the horizon, 
now is not the time to be shifting funds out of the commodity 
title and into other causes. Providing for the continued 
stability of American farms is the best way to strengthen rural 
communities, conserve natural resources and ensure a safe and 
affordable food supply.
    We also understand the issues with the WTO and that America 
tries to set the example of adhering to compliance, but that 
usually puts us at a disadvantage in the world of trade. It is 
frustrating to have trade agreements be negotiated that will 
truly help us and Congress chooses not to take them up.
    In summary, we think that the current farm bill works well. 
If policy changes are inevitable as part of the 2012 Farm Bill, 
we remain ready to work with your Committee to explore 
alternative programs that can provide the needed safety net to 
our industry in a manner that is consistent with our 
international trade obligations and within our budget 
constraints.
    Thank you for listening to me today.
    [The prepared statement of Mr. Wiggins follows:]

    Prepared Statement of Ricky Wiggins, Cattle, Cotton, and Peanut 
                        Producer, Andalusia, AL
    Chairman Peterson, and Members of the Committee:

    Thank you for scheduling these hearings to get input from those of 
us directly impacted by farm legislation.
    My name is Ricky Wiggins and I am a partner in a family farming 
operation along with my son, Russell, and father, Gene. We currently 
work about 2,500 acres of row crops and pasture in Covington and 
Escambia Counties, located in south Alabama. We've been at the same 
location since 1952 and have a history of growing corn, wheat, 
soybeans, watermelons, tomatoes, grain sorghum and hogs. We currently 
grow peanuts, cotton and cattle.
    My wife, Sharon, and I have four children and ten grandchildren. 
Our concern today is whether or not they will have the same opportunity 
to pursue the American dream in the future. Overwhelming national debt, 
deficit and uncontrolled spending cast a dark shadow over their 
futures. As a farmer, I stand ready to work to pass a fiscally-
responsible 2012 Farm Bill. However, I'm not prepared to sit back and 
watch agriculture take disproportionate cuts while runaway spending is 
allowed to continue in other parts of our budget.
    Farmers understand that this next farm bill will not be written in 
a vacuum. We know that tough choices will have to be made. Effective 
farm policy maximizes scarce resources by triggering programs when 
prices and conditions warrant and by giving farmers the flexibility to 
respond to changes in supply and demand. Good farm policy is not only 
important to us who live on farms, but also for every American that 
enjoys an affordable, reliable and safe food supply.
    These are trying times for southern agriculture. Several years of 
prolonged drought along with several devastating hurricanes have taken 
a toll on many in the Southeast. Couple these weather events with 
increased regulation, higher production cost and prices for cotton and 
peanuts that are at or below levels we saw 2 decades ago, and you can 
see that Southern agriculture is hurting.
    The current three-part safety net of marketing loans, direct 
payments and countercyclical payments has worked fairly well for 
Southeastern farmers. We do have some issues with USDA regulations on 
eligibility and see the need for Congress to be more specific on 
intent. Policy should encourage maximum participation without regard to 
farm size or structure.
    With more costly environmental regulation on the horizon, now is 
not the time to be shifting funds out of the commodity title and into 
other causes. Providing for the continued stability of American farms 
is the best way to strengthen rural communities, conserve natural 
resources and ensure a safe and affordable food supply.
    We also understand the issues with the WTO and that America tries 
to set the example of adhering to compliance, but that usually puts us 
at a disadvantage in the world of trade. It is frustrating to have 
trade agreements be negotiated that will truly help us and Congress 
chooses not to take them up.
    In summary, we think that the current bill works well. If policy 
changes are inevitable as part of the 2012 Farm Bill, we remain ready 
to work with your Committee to explore alternative programs that can 
provide the needed safety net to our industry in a manner that is 
consistent with our international trade obligations and within our 
budget constraints.
    Thank you for listening to me today.

    The Chairman. Thank you very much, Mr. Wiggins, and I thank 
all of the panelists for taking the time to be with us today. 
We will now move to questions.
    I am going to recognize the gentleman from Virginia first, 
Mr. Goodlatte.
    Mr. Goodlatte. Thanks, Mr. Chairman. I will go through 
these questions as quick as I can and start with you, Mr. 
Dewberry.
    I am pleased to see that you are engaged in forestry. A big 
portion of the land in my district is forested land, and we 
have many of the same frustrations that you described. Are most 
land owners that you deal with aware that they are eligible for 
conservation programs?
    Mr. Dewberry. The majority I would say are not.
    Mr. Goodlatte. And are you aware of any outreach efforts on 
the part of the Natural Resources Conservation Service to 
forest landowners to inform them of their eligibility for these 
programs?
    Mr. Dewberry. I do not know of any.
    Mr. Goodlatte. You talked about several conservation 
programs in your testimony. Based on your experience, do you 
believe the USDA currently has the technical expertise to 
assist forest landowners when they consider enrolling in 
programs such as EQIP?
    Mr. Dewberry. In some areas, but in some areas they are 
not. For example, the USDA district conservationist is not 
trained, I do not think, in forestry issues in most cases, and 
right now, in Alabama, we have three wildlife biologists that 
are paid from the Natural Resources Department, Conservation 
and Natural Resources in Alabama, and they are used in like the 
WHIP program. It would be good if the USDA had more technical 
assistance in forestry and maybe wildlife biologists on staff.
    Mr. Goodlatte. Thank you. Mr. Gibbs, I appreciate your 
enthusiasm. You testified of the need for risk management 
tools. Are there insurance policies available for cattlemen?
    Mr. Gibbs. Yes, sir.
    Mr. Goodlatte. Do you utilize them?
    Mr. Gibbs. We currently participate.
    Mr. Goodlatte. Do you think most cattlemen in this area do?
    Mr. Gibbs. For the most part, the beef industry is a 
standalone type. We take care of ourself, it is not highly 
subsidized and it has just started and yes, sir, we are going 
through an education process helping each other learn.
    Mr. Goodlatte. So you think it has good prospects?
    Mr. Gibbs. It had better if they are going to survive.
    Mr. Goodlatte. Okay. And do you use the futures market to 
mitigate your risk?
    Mr. Gibbs. Sometimes, yes, sir. We send our cull cattle to 
Kansas to be fed out and harvested; so yes, sir, we do.
    Mr. Goodlatte. And you think a lot of Alabama cattlemen do?
    Mr. Gibbs. People that feed and retain ownership are doing 
it, but with today's markets and all, it is so speculative, it 
is pretty--if you can find anybody that understands it, I am 
wanting to hire them.
    [Laughter.]
    Mr. Goodlatte. Okay. I am not that person.
    Dr. Taylor, the goal of the energy title in the 2008 Farm 
Bill was to assist the development of second generation 
biofuels and their feed stocks. Do you believe this goal is 
being achieved?
    Dr. Taylor. Yes, I think so. There are quite a few 
developing industries around the country, some with interests 
here in Alabama, some around the Southeast that are building 
the conversion plants to produce those second generation fuels. 
Sure, it is within our grasp. Depending on what part of the 
farm bill you are referring to, different parts of it are 
developing slowly. The research title is helping significantly. 
I think we just need more funds to broaden that base of 
research.
    Mr. Goodlatte. You have heard me describe earlier the 
desperate situation we are in. Increased funding for these 
programs is highly unlikely. So if you needed to have some 
funding allocated into this area, what would you cut out 
elsewhere? What research dollars for agriculture that you think 
is a lower priority that would be better justified if it were 
put into the programs you just described?
    Dr. Taylor. I do not know that I have a good answer for 
you. You know, the statistics I mentioned, for every dollar we 
spend, NIH spends $120. I think we are so far behind that we 
cannot afford to cut anything really. The AFRI program this 
year is targeted on very specific areas and that is laudable, 
but the problem with that is you have to maintain a consistent 
base of funding across the board to keep those programs 
underway. You cannot just flip a switch and turn off a certain 
program this year and bring it back next year. So I do not have 
a good answer for you. I do not think we can shut anybody off 
at this point.
    Mr. Goodlatte. The energy title of the 2008 Farm Bill 
provides nearly a billion dollars to assist in the advancement 
of next generation biofuels. However, those programs did not 
carry a baseline and we will be challenged to find new money to 
continue these programs. What priorities should we have in 
drafting the next energy title to our bill? This is a different 
way of asking you the same question.
    Dr. Taylor. Yes. Continue to fund, encourage that sort of 
regional approach where there is regionally appropriate feed 
stocks, do not necessarily put all your eggs in one particular 
basket. Be willing to realize that in certain regions there are 
going to be variations in the feed stock as well as the 
conversion technology that goes with them.
    Mr. Goodlatte. Do you offer much hope to Mr. Dewberry?
    Dr. Taylor. Yes, I think so, I think so. We are certainly 
at Auburn working very hard on that. The BCAP program has the 
potential to help him. I guess I can mention I am a forestland 
owner, my family owns farmland and forestland in Alabama as 
well as Kentucky. We have the same issues that he has. Stumpage 
prices are probably at an all time low here in the South if you 
look in real dollars. So programs like BCAP are potentially 
very important to help encourage that industry.
    Mr. Goodlatte. Thank you very much.
    Thank you, Mr. Chairman. And I apologize for having to slip 
out, but I have a long way to go.
    The Chairman. No problem. I thank the gentleman.
    I recognize the gentleman from Alabama, Mr. Bright.
    Mr. Bright [presiding.] Good, thank you, Mr. Chairman.
    Mr. Dewberry, are you enrolled in the Wildlife Habitat 
Incentives Program?
    Mr. Dewberry. I am.
    Mr. Bright. Are you accomplishing anything with resources 
from that particular program?
    Mr. Dewberry. Yes.
    Mr. Bright. If you would, elaborate a little bit.
    Mr. Dewberry. Okay.
    Mr. Bright. And before you do that, Mr. Dewberry, let me 
recognize--Mr. Chairman, I am going to take a point of order 
again and recognize somebody very key to the community, the 
longstanding mayor of Troy, Alabama, Mr. Jimmy Lunsford. Mr. 
Mayor, would you wave your hand back here? He helped make our 
meeting here possible today, he and Mr. Johnson, and I wanted 
to thank him and recognize him publicly. And thank you for also 
attending the hearing today, Mr. Mayor.
    Go ahead and continue, Mr. Dewberry.
    Mr. Dewberry. We are enrolled, part of our property is 
enrolled in the WHIP program. It was actually enrolled under 
the 2002 Farm Bill, but we planted 55 acres of longleaf pine 
and every 3 years we do a controlled burn. It is habitat 
establishment for the longleaf pine and that is the program we 
are enrolled in.
    Mr. Bright. The 2008 Farm Bill opened the Conservation 
Stewardship Program for the first time to forest owners. What 
do you think this program is accomplishing on forestlands like 
yours?
    Mr. Dewberry. It is a new program and we have enrolled part 
of our property in that program. If the program works like it 
is supposed to work, I think it is great as far as an incentive 
to encourage landowners to continue managing their property the 
way it needs to be managed. And also it has an incentive there 
in doing other management practices that you are not doing. You 
look for things you can do to make your property better. And I 
think that is a positive thing in the Conservation Stewardship 
Program, and I was glad to see forestry included in that 
program.
    Mr. Bright. Thank you very much.
    Mr. Gibbs, let me commend you for your enthusiastic 
testimony today. Your testimony kind of brings home to people 
like me, I am the son of a sharecropper, and so I really know 
what it means to a family and what the farm delivers to people 
who live and work--and work awfully hard and sweat awfully 
hard--to make sure those farms are protected out there.
    And Mr. Wiggins, thank you also for your family farm and 
your input and for your dedication to making sure the family 
farms are out there and continue in existence.
    It is hard pretty much to deny that livestock and poultry 
have both become more vertically integrated. So along those 
lines, Mr. Gibbs, what do you see as the impacts of increasing 
vertical integration in the livestock and poultry industries, 
if you have an opinion there?
    Mr. Gibbs. Well, the pork and the poultry are very 
vertically integrated, and there have been some kind of efforts 
to make livestock somewhat, but they have been good ideas that 
have gone bad thus far, such as when you start talking about 
packers owning cattle and the risk that involves. You know, the 
average beef producer is probably like less than 40 head of 
cattle. It is going to be a good bit harder to vertically 
integrate with it that spread out.
    Mr. Bright. Good.
    Dr. Taylor, thank you for your testimony today. You are 
part of a great university, not to mention the fact that my 
connection to the university is as an alumnus, but it probably 
is the greatest university in the State of Alabama, not to 
mention the nation as a whole. But there may be some opposition 
to that before the end of the day. But I had to say it since 
you were here.
    Through April 2, 2010, USDA has approved 4,605 agreements 
for the delivery of more than 4.18 million tons of biomass and 
paid eligible biomass owners over $165 million in matching 
payments under BCAP's first phase. I understand there are some 
problems with the BCAP first phase. Can you elaborate on that a 
little bit? And also go a little bit further into why we cannot 
get those issues resolved and get on to the second phase of 
BCAP so that we--as I understand, the second phase could 
possibly have a real economic effect on people in District two 
if we go ahead and move forward and try to implement that 
phase.
    Dr. Taylor. I will try, and I am not the BCAP expert.
    Mr. Bright. You take as much time as you need because this 
is very key, very important and will help create jobs in my 
district. And if your time runs out you take whatever time you 
need to answer because I am Chairman right now.
    [Laughter.]
    Dr. Taylor. Certainly the idea behind BCAP was to encourage 
the development of a biomass production sector. And so there 
were payments that were offered as cost share to the facility 
that purchased biomass as well as the producers of biomass. 
Maybe one of the issues--it was rolled out fairly quickly. In 
fact, it was implemented really before even--I think the public 
comment period was still underway when they implemented it. So, 
it was one of those things that you always want to think it 
through fairly thoroughly before you implement it if possible. 
I think everybody's heart is in the right place to encourage 
that industry, and I know of specific individuals--Mr. Dewberry 
and I were talking--who were right on the edge financially and 
those payments that have been offered the last few months have 
really helped them kind of make it through some very trying 
economic times. I guess the overall idea is fine. I think we 
just need to refine how it is implemented. One of the things 
that Mr. Dewberry and I discussed, for that to work effectively 
really we need three people involved. Right now the facility 
and the producer are the two that have been getting payments, 
but the landowner is kind of left out of that.
    Mr. Bright. We need to get the landowners and producers----
    Dr. Taylor. So all three--the landowner, the producer as 
well as the facility that purchases it--all three of them have 
to benefit from that for that to be a successful program.
    Mr. Bright. How do we go about doing that? Any suggestions?
    Dr. Taylor. I am not sure I have the right suggestion for 
you, but I think the thing to do now is step back and think 
those policies through to make sure that those cost share 
payments are maybe spread to all three, that all three have a 
chance to provide input on what works for them.
    Mr. Bright. Okay.
    Dr. Taylor. Does that answer your question or do you want 
to talk some more about it?
    Mr. Bright. We may need to do that I guess because my time 
has run and I am going to go ahead and pass it over to my 
colleague from Alabama, Mike Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Dr. Taylor, talk more about the technology that you spend 
so much time focusing on. Yesterday when we had our hearing in 
Atlanta, we had a fellow there who was in the timber industry, 
and I asked him about his concerns over pressures that new 
technologies that would use biomass for fuel might put on their 
markets. And one of your colleagues from that school over there 
they call Georgia, who emphasized that the cellulosic ethanol 
technology still had many hurdles to being commercially viable.
    I remember in 2004 and 2005 hearing we were a year away 
from having those technical obstacles behind us. Where are we, 
in your view, on being able to have some commercially viable 
biomass energy sources?
    Dr. Taylor. From a liquid fuel standpoint?
    Mr. Rogers. Yes.
    Dr. Taylor. From a liquid standpoint, we are closer 
definitely. There are commercial plants that have come on line 
in Tennessee. It would not be a full scale plant, but DuPont 
Danisco Cellulosic Ethanol is a joint venture and they have 
built a plant south of Knoxville that is taking corn cobs right 
now and producing ethanol. Their next step will be to take 
switchgrass and produce ethanol. Obviously there is a company 
in Georgia that has been building a large plant, a 
gasification, gas-to-liquids plant, that would eventually 
produce ethanol. I think their first step is to produce 
methanol, is what is planned.
    Mr. Rogers. Are they planning on using trees?
    Dr. Taylor. That one would be a forest biomass plant.
    Mr. Rogers. Do they have the technology or is this 
something they are hoping will come along?
    Dr. Taylor. The technology is there. We know how to do 
these and you have seen our labs at Auburn. We can do it on a 
small scale. The challenge is still scaling it up economically 
to make the economics work out at scale.
    Mr. Rogers. So you think the company in Georgia has the 
technology, they just have not let the rest of the world in on 
it for competitive reasons.
    Dr. Taylor. Yes, but I do not think there is anything that 
unusual about their particular technology. It is gasification, 
gas-to-liquids technology that a lot of us are working on. So 
in their case, that is--you know, there is nothing particularly 
unusual about what they are doing. There are other people that 
have that capability.
    Mr. Rogers. But you do not see in the near future these 
technologies putting price pressures on timberland--timber 
products?
    Dr. Taylor. I would not say in the next 6 months, no, I 
would not say that. You know, it is still going to be--we are 
still a little ways out before those industries will come on 
line enough that they do put pressure on us.
    Renewable power production has the potential to put 
pressure on the market sooner. You know, most of our electric 
utilities have already tested forest biomass in their coal-
fired plants. I would not say they are ready to go, but they 
have done their homework, they know what they would need to do 
to begin producing electricity with forest biomass. So that one 
probably has the potential to put pressure on us earlier.
    And then the other bioenergy industries, the pellet 
industry today across the South, that is primarily an export 
market that is providing pellets for the European market, but 
that continues to grow and will continue to place upward 
pressure on the market.
    Mr. Rogers. Excellent.
    First let me say I love being back in Alabama, mainly when 
I hear y'all talk, it gives me a warm, comfortable feeling. You 
might imagine I hear a lot of accents in Washington and it is 
nice to be home.
    Mr. Dewberry, when you look at conservation programs, what 
would you like to see this Committee, as their single take-
away, leave here trying to incorporate into the farm bill that 
would help you from a conservation standpoint in the farm bill?
    Mr. Dewberry. In the 2008 compared to 2012, most of the 
conservation programs that are in there for forest management, 
I think I would like to see them in there. If there is anything 
I think that could change that would probably help the 
landowner and also the technical side, I know of cases where 
landowners have three management plans. One to take care of 
EQIP, one for WHIP and then they have one stewardship plan on 
that property.
    If a stewardship plan could suffice for EQIP and WHIP in 
the management plan, if these areas of management are 
addressed, I think it would help all concerned, the paperwork 
side for the technical people on the ground, and also for the 
landowner. Also it would free up time for that technical person 
because they would not be spending time rewriting a plan that 
was pretty much already there. So if there was some way that a 
management plan for EQIP and WHIP could be substituted, the 
substitute could become the stewardship plan that was already 
on that property, written by a certified forester, I think that 
would help all concerned. Right now, a plan has to be written 
for the EQIP program and one for WHIP and the landowner may 
already have a plan on his property.
    Mr. Rogers. Excellent, thank you. My time has expired, I 
yield back.
    Mr. Bright. The gentleman from Nebraska.
    Mr. Smith. Thank you and thank you to the panel for your 
participation and sharing your expertise.
    Mr. Gibbs, have you weighed in on any of the food safety 
legislation in Washington? The new efforts basically 
determining that the status quo is unsafe and coming up with 
new procedures, not only ensuring standards but telling 
producers how to achieve that standard. Have you weighed in on 
any of that?
    Mr. Gibbs. Every day. We live it every day and we are the 
safest food supply in the world. I mean it is obvious, it is 
evident. If you go tour any IBP processing facility, it is like 
a hospital. They work two shifts on and one shift cleaning. I 
mean we are doing our vaccinations and we are BQA certified, be 
quality assurance certified. Everything we do--now we are 
stressing humane issues. I mean we are producing the safest 
food supply the world has to offer.
    Mr. Smith. On the humane issues, if you could elaborate.
    Mr. Gibbs. We make a conscious effort now to be absolutely 
humane in everything we do. Have you heard of or seen the HBO 
deal with Temple Grandin as far as correct handling facilities 
so that you have no corners, so that the cattle flow. I mean 
our cattle is our greatest asset. So if they are not--I mean 
they get fed before I do always--always.
    Mr. Smith. Right. It is interesting, the humane issues, 
whether it is the so-called food safety issues, obviously to 
maintain competitive position in the marketplace, you know the 
importance of food safety. So I appreciate the efforts that the 
industry does.
    Mr. Gibbs. You know, the one thing I can say, I am a simple 
type person but it sometimes appears that we are worried about 
taking care of everybody but us. I mean does it not say 
something like government by the people, for the people? And I 
mean that means us American citizens, us American business 
people. We are competing against food products that do not have 
anything like the requirements we do. That is pretty tough.
    Mr. Smith. Did you say food requirements or energy 
requirements or both?
    Mr. Gibbs. Food safety. Do not get me on energy. Is ethanol 
economically viable?
    Mr. Smith. It is in Nebraska.
    [Laughter.]
    Mr. Gibbs. I think, does it not take like 7 gallons of 
fossil fuel to produce 1 gallon of ethanol and then if you put 
ten percent into fuel, you get 20 percent less fuel mileage?
    Mr. Smith. I represent a huge livestock district along with 
a huge ethanol district and so it does give me an amount of 
objectivity.
    Mr. Gibbs. I apologize.
    Mr. Smith. But I hear what you are saying, and I think that 
regardless, when we look at our industry today, whether it is 
energy, whether it is food safety, whether it is food supply, 
quantity, quality, you name it; it is truly inspiring how far 
we have come. And that is why I do not think that, as the 
Chairman said earlier, we want to pit small against large, 
large against small, medium. Who knows what the optimal size is 
other than what consumers will support. And so, when I look at 
the energy issue, I am inspired as well. I mean we have been 
growing record yields of corn in Nebraska with record low 
amounts of moisture. Thanks to the research and development of 
our university and the biotechnology across the country and 
around the world, we can feed the world. So I think that we 
have come a long way, thanks to producers though being 
willing--the willingness of the producers to try a better way, 
sometimes when it might be a little risky. They are willing to 
engage in that because hopefully there is some reward down the 
road that the government will not take it away, and discourage 
that risk the next time.
    So as we do move forward though, I would be curious, Mr. 
Dewberry, where does most of your product end up these days?
    Mr. Dewberry. Are you talking about from where it comes 
from the farm? The pulp is going into the pulp and paper 
industry and if it is saw timber, it is going into the lumber 
industry. You know as well as I do what that means.
    Mr. Smith. Do you track that very much or are you able to--
because one thing that really concerns me about cap-and-trade 
and just increasing the cost of doing business and increasing 
the cost of shipping--you know, we do not have a lot of wood 
pulp in Nebraska.
    Mr. Dewberry. Right.
    Mr. Smith. You know what I am saying? And so we depend on 
regions other than ours, even though we have a need for wood 
pulp, whether it is paper, whether it is lumber.
    Mr. Dewberry. Right.
    Mr. Smith. How far do you track that out geographically?
    Mr. Dewberry. Most of it is sold locally and where it goes 
from there, I am sure all over the United States. A lot of it 
will be shipped out of Mobile Bay, part of it will go down 
there and go out Mobile Bay. So it is worldwide.
    Mr. Smith. Is that largely by rail?
    Mr. Dewberry. Is that what?
    Mr. Smith. By rail, shipped by rail?
    Mr. Dewberry. Most of it is trucked or either by the river, 
some of it shipped by the river.
    Mr. Smith. Thank you, Mr. Chairman.
    The Chairman [presiding.] I thank the gentleman.
    The gentleman from Pennsylvania.
    Mr. Thompson. Thank you, Mr. Chairman.
    Obviously the point of this is to look forward to the 2012 
Farm Bill, but the starting point obviously has to be where we 
come from with the last effort in 2008. So I would like to 
throw out to all of you gentlemen--are there any provisions of 
the 2008 Farm Bill that have not been implemented yet that you 
would really encourage that be moved ahead with?
    Mr. Dewberry. I cannot answer that.
    Mr. Thompson. Nothing you are aware of. Mr. Gibbs?
    Mr. Gibbs. No.
    Mr. Thompson. Dr. Taylor.
    Dr. Taylor. Under BCAP, to go back to the earlier question, 
one of the provisions in BCAP now is to provide cost share 
funds to establish biomass crops or bioenergy crops, and to my 
knowledge that has not been implemented yet. So that is one. It 
is in the language, it just needs to be implemented. You cannot 
harvest things without reforestation or without establishing 
those new crops. So that is going to be a pretty critical issue 
to make sure that happens.
    Mr. Thompson. Mr. Wiggins, any that you are aware of?
    Mr. Wiggins. Not that I am aware of, no.
    Mr. Thompson. Okay. Exports, obviously very important 
market for us, seven billion individuals around the world that 
are potential markets for our agriculture products. And I 
wanted to get an opinion, we have three pending trade 
agreements--South Korea, Panama, Colombia--any thoughts--you 
know, those are kind of lingering right now. If we get those 
implemented would that be a positive impact? Do you see any 
downside to them?
    Mr. Dewberry. I myself, I cannot see any downside. Any time 
we can sell a product and sell it to other countries, I think 
is a positive thing. And if we can make it where we can do 
that, I think the more markets the better.
    Mr. Thompson. Great. Mr. Gibbs, any thoughts?
    Mr. Gibbs. Absolutely, we want money flowing this way.
    Mr. Thompson. There you go.
    Dr. Taylor.
    Dr. Taylor. I do not have anything to offer.
    Mr. Wiggins. Yes, sir, I am in favor of implementing the 
agreements that have already been negotiated and I just do not 
understand why we are not doing that. Maybe y'all can tell us 
why.
    Mr. Thompson. No. I have only been there 16 months, I have 
not figured out why we have not yet.
    Mr. Gibbs, I share your concern with this Administration's 
focus on things other than production agriculture. It seems 
like there has been overall just a really hyping of organic, 
which is good, it has its place, it is an important niche and I 
would never detract from that. But to just focus on that one 
area of agriculture, that one sector, I think to the harm of 
all parts of agriculture, I have a significant concern about 
that and in the focus on things other than production 
agriculture in the context of developing this next farm bill. 
While things like graduation rates in rural America obviously 
are extremely important, they are not the base focus of our 
commodity programs, nor should they be.
    I am concerned that this Administration is trying to turn 
our farming communities into bedroom communities, which we find 
more and more. In your current dealings with the Department, 
have you already seen ways this Administration is trying to 
move away from production agriculture?
    Mr. Gibbs. I have to turn the news off a lot of times to 
function during the day because of all the fears that surround 
us. We are getting--we are on the Georgia-Alabama state line 
just south of Interstate 20 and we are getting swallowed by 
Atlanta. We are raising cattle on family land that has been in 
the family for over 100 years and it is too expensive--if it 
was not for us having them signed up on the conservation 
program, we could not even pay the taxes on it, our business 
would not survive.
    You know, we have to just simplify things a little bit. I 
mean if we want a high speed Internet access bill, let us name 
it a high speed Internet access bill, not a farm bill. I mean, 
we just pile so much stuff in there that we miss what we are 
really trying to work on. That is just me.
    Mr. Thompson. Not just you, I agree, Mr. Gibbs. I have come 
to the conclusion there is only one reason for a bill that is 
more than about 1,000 pages, and that is to hide stuff.
    Mr. Chairman, I yield back.
    The Chairman. Well, that may be true, but we do not hide 
anything in the farm bill. We have a very open process, 
everybody knew what we were doing, there were no earmarks in 
the House bill, there will not be any earmarks this time. It is 
unfortunate it takes a lot of language, but you know, all of 
this energy stuff that we did was all brand new and it took a 
lot of language. We did not get it all right, got a lot of it 
right. Some other people screwed up some of this stuff, the 
BCAP thing. That was my idea, the idea was to grow new 
products, figure out how to do it. And it got off on a tangent 
for a number of different reasons and they are getting it 
straightened out. I think they are going to get the rules out 
to establish new crops and that stuff pretty quick.
    Since trade came up, some of you maybe cannot answer this 
or be interested, but one of the things, we used to have a big 
market in Cuba--rice and a number of other products--that we 
have basically eliminated ourselves, the past Administration 
put restrictions on. I have a bill to open up trade with Cuba 
that we are hopefully going to bring up in the Committee in 
another 3 or 4 weeks. Are you in favor of that, opening up 
Cuba?
    Mr. Dewberry. From what I know, I am.
    The Chairman. Mr. Gibbs.
    Mr. Gibbs. I mean it would be kind of going against what we 
have always stood for if we do that.
    The Chairman. What is that?
    Mr. Gibbs. Human rights. We feed everybody. I mean yes, we 
are giving them assistance and all anyway, are we not?
    The Chairman. So----
    Mr. Gibbs. Humanitarian efforts.
    The Chairman. I do not know that we are doing anything.
    Mr. Gibbs. Well, we do everything everywhere else.
    The Chairman. But you know, this policy has been going on 
for 50 some years and it has not worked too well. Some of us 
think it might be time to change.
    So you are not on board with that. Your national 
organization I believe is.
    Mr. Gibbs. I will study that out, I just spoke out of turn.
    The Chairman. No, that is fine. I understand that reaction 
because a lot of people have that reaction. But we had that 
situation with Vietnam. Vietnam has become a Communist country, 
we opened it up, it has been a huge success the way we have 
changed the economy, Vietnam is turning into a market-based 
economy because we opened it up. And I think that will happen 
in Cuba.
    Mr. Gibbs. But how long has that been? I mean that was my 
uncle in 1968. If we would have gone in there and won, we would 
not have had to wait 40 years for it to start opening up.
    The Chairman. Well, I do not disagree with that, but you 
and I cannot change that. And we are both too young to have 
been involved in 1968 anyway.
    [Laughter.]
    The Chairman. Mr. Wiggins, do you have any opinion about 
it?
    Mr. Wiggins. I totally agree with you, Mr. Chairman.
    The Chairman. Thank you.
    I got distracted, I have been working on some other things 
here. I just want to thank the panel for your being with us 
today and for your great testimony and answers to the 
questions, taking your Saturday afternoon. The Committee very 
much appreciates it and I think we will excuse the panel.
    I will recognize our host, Mr. Bright, for any closing 
comments that he might have.
    Mr. Bright. Very briefly, Mr. Chairman. Let me once again 
stress to you our appreciation for you bringing this U.S. 
Congress field hearing to Troy, Alabama.
    And I will make somewhat of an apology and correction. We 
are sitting here in the home of Troy University and here I was 
talking about Auburn University being the number one university 
in the state. I would have to kind of back pedal a little bit 
and recognize that Troy and Troy University is also a great 
university, second only to Auburn University.
    Let me thank everyone who came, observed, and who have 
participated, the panelists, thank you so very much. This is so 
key. Agriculture is, in my opinion--and each person can speak 
for themselves--it is so key to the strength of our sovereignty 
as a nation as a whole. It is right there with the military 
community. In order to be able to keep a strong country, we 
have to do two things. Number one, we have to make sure our 
military is strong, the strongest in the world; but we also 
have to make sure that our food chain is protected and it 
remains strong. It gives me great pleasure from our district to 
serve on the Agriculture Committee and serve with great 
gentlemen and other ag interested Congressmen that we have here 
on this riser today. I have seen them in action and they are 
truly concerned about our agriculture industry and they want to 
protect it.
    So thank you for being here. Thank you, Mr. Chairman again 
and I thank my colleague from Alabama, Mr. Mike Rogers, it has 
been an honor to serve with him, and he is also protecting the 
farmers and ag industry in our state and our nation.
    So thank y'all very much and it is great to be in God's 
country. I will say that I flew down yesterday, this old 
country boy from Dale County, Alabama flew down on a United 
States of America jet from Washington, D.C. with these guys in 
a red, white and blue airplane. I thought I was in hog heaven 
until we landed in Atlanta, Georgia and I got out and the heat 
and the humidity hit me in the face I said, ``Man, this feels 
like home,'' and somebody said, ``Well, you are in Georgia.'' I 
said, ``Oh, gosh, we are not in God's country yet, but we are 
close to it.''
    But anyway, thank you very much for coming and 
participating. This group today--by the way, I was in Georgia 
yesterday, you were bigger and better than they were in 
Georgia. So thank you for your interest and your participation.
    Mr. Chairman, I yield back.
    The Chairman. I thank the gentleman and thank him for his 
hospitality. We have enjoyed it and it has been a very 
productive hearing.
    Mr. Dewberry, I was going to say I grew up in Clay County, 
Minnesota. A little different probably than Clay County, 
Alabama.
    One of the gentlemen I talked to was telling me that this 
facility here, it is a beautiful facility, was built with all 
volunteer people and they maintain it. They only pay one person 
to clean a little bit and everything else is done, people in 
the community come in and do whatever has to be done and built 
this thing. And so that is a tremendous thing for a community 
to come together and do that.
    [Applause.]
    The Chairman. So with that, under the rules of the 
Committee, the record of today's hearing will remain open for 
30 calendar days to receive additional material and 
supplementary written responses from the witnesses to any 
question that is posed by a Member.
    This hearing of the Committee on Agriculture is adjourned.
    [Whereupon at 4:00 p.m. (CDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
        Submitted Statement by Hal Williams, Farmer, Luverne, AL

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                          MONDAY, MAY 17, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                       Lubbock, TX.
    The Committee met, pursuant to call, at 9:00 a.m., at the 
Texas Tech Museum, Corner of 4th and Indiana, Lubbock, Texas, 
Hon. Collin C. Peterson, [Chairman of the Committee] presiding.
    Members present: Representatives Peterson, Cuellar, 
Childers, Rogers, Neugebauer, Conaway, Smith, and Thompson.
    Staff present: Aleta Botts, Dean Goeldner, John Konya, 
Clark Ogilvie, Anne Simmons, April Slayton, Kevin Kramp, Josh 
Mathis, and Sangina Wright.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. The hearing of the Committee on Agriculture 
to review the U.S. agriculture policy in advance of the 2012 
Farm Bill will come to order. And we welcome everybody to the 
hearing, especially our witnesses.
    We've had so many people who wanted to testify, and we 
weren't able to get everybody in there, and we apologize for 
that. So I have a statement for the record from The Texas 
Cattle Feeders Association. Without objection, I would like 
their full testimony to be made a part of the record today. 
Hearing no objection, that's so ordered.
    We also have testimony from the sheep industry, who also we 
couldn't fit in, and I would also like, without objection, to 
have their thoughts be made a part of the official record. And 
without objection, it's so ordered.
    [The document referred to is located on p. 1023.]
    We pick up lots of good information from folks that don't 
get an opportunity to testify, and so we have--we are web-
casting this hearing. So people are watching it on the web.
    In addition, we have these cards that are someplace, I 
guess, outside, where you can--anybody can offer testimony to 
the Committee through our website, www.agriculture.house.gov. 
And we encourage that. Sometimes we pick up some real good 
ideas and some real good information from people that we may 
have missed having the opportunity to hear testify. So we 
encourage people to do that.
    We have with us today some people that are very important 
to us with the USDA operation. The FSA State Director, Mr. Juan 
Garcia, he had to be at a funeral today. So he isn't able to be 
with us, we understand, on that, but Jerry Don Glover, who is 
the Chair of the State Committee in Texas--where is Jerry? Will 
you stand up and be recognized? We appreciate your service and 
the work that you do.
    The Rural Development State Director, Francisco Valetin, 
Jr., thank you for being with us, and the NRCS Conservationist, 
Don Gohart--Gohmert--excuse me--we appreciate you being with 
us. Let's give them a hand. They do a great job.
    [Applause.]
    The Chairman. And I will forego my opening statement, other 
than to say, we've got a tough job ahead of us. We've got--
We're getting started early, so we can start having a 
discussion about how to make all of this work.
    And we're not going to have any extra money. I think 
everybody has heard me say that a million times. We may not 
even have as much money as we have now. So it's going to be a 
challenge to make this stuff work for production agriculture, 
but we're convinced that we can do it, and we want to work with 
you to make that happen.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Lubbock to 
hear from area farmers and ranchers about the issues facing agriculture 
and rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. So I will recognize, first of all, the host 
of the hearing here today, Mr. Randy Neugebauer, one of our 
Subcommittee Ranking Members, to welcome us and make any 
statements he would like to make.
    Mr. Neugebauer.

OPENING STATEMENT OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN 
                      CONGRESS FROM TEXAS

    Mr. Neugebauer. Thank you, Mr. Chairman, and I appreciate 
you bringing this hearing here. This is very important, 
obviously, not only to my Congressional district, but it's 
important to the country to have good agriculture policy.
    I've already had an opportunity to look at a lot of the 
testimony, and I think we're going to have some--a great, great 
hearing today. I appreciate my other colleagues coming, and, 
obviously, Mr. Cuellar and Mr. Conaway from Texas, also, being 
here. And so we are looking forward to that.
    At this time, do you want to recognize the Chancellor, or 
do you want me to?
    The Chairman. The what?
    Mr. Neugebauer. Chancellor Hance.
    The Chairman. Yes, that would be fine.
    Mr. Neugebauer. At this time, I would like to recognize our 
host, being on campus today, the Chancellor of Texas Tech 
University, the Honorable Kent Hance, who is a former Member of 
this Committee, by the way. So Chancellor?
    Mr. Hance. Thank you very much. And I will tell you this: 
We are excited that you're here. To have eight sitting Members 
of Congress in our community is an honor, and on behalf of 
everyone in west Texas, the State of Texas, I appreciate what 
you do.
    I'll tell you it's a--everybody can second-guess a Member 
of Congress, and I was kind of--I don't miss that, and, in 
fact, until this last year, I didn't realize that everybody was 
second-guessing the Chancellor. And so that happens sometimes, 
too. You just kind of roll with the flow.
    I do--I mentioned last night that I believe at Subsection 
8, Part a, that it says that if there's any former Member of 
the Committee who is in higher education, the Committee is 
obligated to grant them whatever they request. I just want to 
tell you that $100 million for Texas Tech for research is 
certainly high on my list.
    And I appreciate that rule. Somebody asked me if I have a 
copy of it, and I don't. I think that all of those copies have 
been burned.
    But we appreciate you being here. You had a good night at 
the Overton, saw our football stadium that is being added on 
to. We've sold the suites and everything for the September 5th 
game. I was over there looking at the stadium last week with 
the construction company people, and it was apparent to me that 
we had sold seats.
    And I said, ``I've got my doubts that it will be ready.''
    And they said, ``When's the game?''
    And I said, ``September 5th.''
    And the old boy said, ``Is it a day or night game?'' So 
right there you know it's a day game, in case any of you are 
wondering about that.
    The other thing that--once, when we were having hearings 
and I was a Member of the Committee, we had hearings in 
Greenwood, Mississippi, and that one of the witnesses had 
changed his name, and his name was ``none of the above.''
    And my only question was: ``You're not going to move to 
Lubbock, are you?'' I don't want him running against me.
    So you've let all--everybody has an opportunity to have an 
input, and that's the great thing about this Congress. And, Mr. 
Chairman, I've known you for a long time, and you operate the 
Committee on a bipartisan basis, and that is so important. I 
wish everybody else in Congress did the same.
    But we're honored that you're here, and we look forward to 
having you back any time, and I just--I thank you for all you 
do. People don't realize how hard of a schedule a Member of 
Congress has, but the people close to the work and the people 
here, they know that, whether they agree or disagree with you. 
I always have the utmost respect for every Member of Congress 
and the Executive offices with them.
    Thank you for honoring us by your presence. Thank you.
    The Chairman. Thank you.
    [Applause.]
    The Chairman. Thank you for making this facility available 
and for your hospitality. We appreciate it very much.
    And I recognize the gentleman from Texas, Mr. Cuellar, for 
a brief statement.

 OPENING STATEMENT OF HON. HENRY CUELLAR, A REPRESENTATIVE IN 
                      CONGRESS FROM TEXAS

    Mr. Cuellar. Thank you, Mr. Chairman, and we also want to 
thank you for your bipartisan approach to this Committee. And, 
of course, the Ranking Members and Mr. Neugebauer and Mr. 
Conaway, also, the rest of the Members, all the way down to 
Mississippi that are here with us, we want to thank you.
    Kent, the Chancellor, and everybody working together, it's 
always a pleasure being down here. I used to chair the budget 
for higher ed. So we used to do a lot of the tuition and 
revenue bonds to get the buildings built here. So it's always a 
pleasure. And, hopefully, we'll work with the grants and make 
sure it's a Tier One university, like it should be here, down 
over here.
    I want to thank all of y'all for being here. It's always a 
pleasure working with our Chairman, and, of course, I know that 
some of the Texas Cattle Feeders Association and other folks 
couldn't be part of this. You know, there is a--we couldn't get 
everybody in, but we want to certainly make sure your testimony 
becomes a part of the record.
    For the folks who are not from Texas, we certainly want to 
welcome you here to Texas. As you know, Texas is the second 
largest producer in agriculture, and it is the largest for 
livestock and cotton. As you know, those two commodities are so 
important to our nation.
    So, Mr. Chairman, as you said, I know next time we work on 
the farm bill, it's going to be tough. The money is not going 
to be there in the way it used to be, but I think all of us 
working together, developing a consensus, it will work, and I 
know that under your leadership, we will be able to do that.
    So, again, it's always a pleasure being here in Lubbock and 
west Texas, and God bless you. Thank you.
    The Chairman. I thank the gentleman.
    Mr. Conaway, if you would like to--since we are close to 
your home territory, if you want to say a couple of words.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. Thank you, Mr. Chairman. In the interest of 
hearing from our witnesses, I will simply say: Thank you for 
the right to be here. Thanks, Texas Tech. And let's hear from 
our witnesses.
    The Chairman. You get extra points for that.
    Mr. Conaway. I know. Thank you.
    The Chairman. All right. We welcome our first panel to the 
witness stand, if I can find my piece of paper here, which I 
can't. There we go.
    Brad Bouma, dairy producer from Plainview, Texas; Jimbo 
Grissom, peanut producer from Seminole, Texas; John Lackey, 
citrus producer from Weslaco, Texas; Ronnie Holt, cotton, corn, 
sorghum producer, crop insurance agent from Muleshoe, Texas. 
I've run into three or four people. It must be a big town.
    Mr. Holt. Very big.
    The Chairman. Joe Parker, Jr., cattle producer from Byers, 
Texas; and Dale Murden, sugarcane, citrus, vegetables, soybean, 
and sorghum producer from Monte Alto, Texas.
    So, gentlemen, welcome to the panel and to the Committee.
    And, Mr. Bouma, you're recognized. Your statements will be 
made a part of the record in fully complete context, and we 
would like to ask you to try to summarize within the 5 minute 
rule if you can. We've got a lot of people to try to get in 
before we head out of here. So the floor is yours. Welcome to 
the Committee.

     STATEMENT OF BRAD BOUMA, DAIRY PRODUCER, PLAINVIEW, TX

    Mr. Bouma. Thank you, Mr. Chairman and Members, for being 
here in Lubbock, Texas.
    The Chairman. I think you might need to get the microphone 
a little closer.
    Mr. Bouma. I have to get it a little closer? Is that 
better?
    The Chairman. Sure.
    Mr. Bouma. I'm Brad Bouma, and I represent Select Milk 
Producers and the Greater Southwest Agency, which markets all 
the raw fluid milk in the States of New Mexico and Texas, the 
best part of Texas, and parts of Oklahoma and Kansas. I 
represent dairy farmers all through the Southwest.
    The 2012 Farm Bill is going to be a critical juncture at 
the crossroads of the dairy industry, and we firmly believe 
that we need to take a different approach. We should not go 
back and try to continue to fix 30, 40, 50 year old farm/dairy 
program problems. We should take a new light and a new look at 
dairies from a sustainability and an innovative point of view.
    The products that we make in this country are no longer 
fitting within the world market in which we operate. The 
products that we produce, we produce to some great means to 
sell to the CCC and store in this country and balance the world 
market.
    So we firmly believe that through sustainability, which not 
only includes our environmental side, but a sustainable 
operation is one that works well within this community, one 
that also operates profitably within the world to come.
    We feel there are very many opportunities in the dairy 
industry as we look at our environmental side. We're here 
working with two different large co-ops that have been formed 
to work on biomass projects and issues. We operate some of 
those in our Indiana operations, as well, today and generate 
electricity from biomass and feel the potential to do so is 
tremendous.
    We are one of the few industries that can actually take 
methane gas and convert it to electricity or to CNG and into 
natural gas potentially. And we can solve two problems. We can 
create renewable energy at the same time that we're reducing 
the carbon footprint of agriculture throughout our region.
    The balance of renewables, which we support, and wind and 
solar are all excellent, but they do one thing. They create 
renewable energy. We have the potential to create renewable 
energy and shrink the footprint all at the same time.
    We understand that some of those issues are not necessarily 
in the jurisdiction of your Committee. They lie in Ways and 
Means and Energy, in places, but support from the USDA, as we 
work with the Secretary with the MOU, that we have entered into 
with the Secretary, which is an agreement to attempt to shrink 
the carbon footprint of the dairy industry 25 percent in the 
next 10 years, is really, really desirous of the support of 
your Committee.
    We need to be able to have similar access to grant funding, 
to tax credits and to numerous different options as we--that 
are similarly used in wind and solar, as we try to develop our 
biomass industry in west Texas, New Mexico, and also across the 
United States.
    As an industry, we look at the dekatherms of energy that we 
need in ethanol and biofuel, biodiesel. We, as an industry, 
along with our cattle feeding counterparts, pay a premium or a 
higher premium today for corn and soybeans, as these industries 
develop, and we're all for that.
    We're not here to blast at them or stockpile diesel, but we 
would just like to be put on the same playing field when it 
comes to tax credits, availability to grants, access to USDA 
funds, as we try to develop a biomass industry within the dairy 
business.
    We also want to talk about innovation. Innovation is very 
important. We need to look at new products. We, at Select Milk 
Producers, have developed some products that are innovative. 
They reconstitute milk, use 100 percent whole milk, and are 
making recovery drinks. There's actually some in the cooler out 
in the hallway, and at the break, please help yourself to one.
    We need to get away from making dried milk powder in this 
country from the CCC, and re-tool our industry or balance our 
industry in making skim milk powder, which is what the world 
market wants.
    We, in this country, have an antiquated dairy program, and 
they make products that the world no longer desires, or never 
has desired. We need to balance this industry, because we 
always have to have a little bit too much milk in this country 
in order to have enough milk in this country.
    And as we balance the milk in this country, we need to be 
able to do it with products that potentially can be moved 
offshore. We think the support program is antiquated, and we 
need to create transparency in pricing. We need to create 
transparency in reporting, so that all milk sold is reported, 
and every load of cattle that is slaughtered in this country is 
reported. We need to make sure to realign the price discovery 
mechanisms.
    We are not necessarily proponents of supply management. We 
think supply management is the opposite of innovation and 
sustainability. And we need your help and your assistance as we 
look to re-tool our programs and our industry to compete, not 
only effectively and cleanly here in the U.S., but across the 
world. Thank you very much.
    [The prepared statement of Mr. Bouma follows:]

    Prepared Statement of Brad Bouma, Dairy Producer, Plainview, TX
Introduction
    Mr. Chairman, on behalf of Select Milk Producers, Inc. and 
Continental Dairy Products, Inc., I welcome you to Lubbock, Texas. 
Thank you for giving us this opportunity to discuss with you the 
opportunities for the dairy industry in the upcoming 2012 Farm Bill.
    My name is Brad Bouma. I and my wife Barb live in Plainview, Texas, 
just a few miles from here, where we operate an integrated dairy farm. 
With the addition of our sons Brandon and Brent to the management team, 
we represent five generations of dairy farming that began in The 
Netherlands. I also partner in a dairy farm in NW Indiana and am the 
operating partner in a commercial dairy-heifer feedlot in Hale Center, 
Texas.
    I serve as President of Select Milk Producers, Inc., my marketing 
cooperative and as a member of the Board of Directors of Greater 
Southwest Agency. I am a member of Continental Dairy Products which 
markets my Indiana farm milk. I also serve on the Board of Directors of 
First National Bank, El Paso.
    Select Milk is a milk marketing cooperative owned by only dairy 
farmers who have dairies in New Mexico, Texas, Oklahoma, and Kansas. 
Continental Dairy Products, Inc. is a milk marketing cooperative whose 
members operate dairy farms in the states of Michigan, Ohio, and 
Indiana. The milk of Continental's members supplies customers in the 
Mideast, Appalachian, and Southeast marketing orders. Due to its high 
quality feed, abundant fresh water, good dairying climate, and 
proximity to the major markets of the United States, that region of the 
country along with the Upper Midwest are poised for further growth.
    Though using different legal entities to maximize tax, estate 
planning, and other business goals, all of Select and Continental 
member dairies are owned and operated by families just like my family.
    The Greater Southwest Agency is a cooperative of four 
cooperatives--Dairy Farmers of America, Lone Star Milk Producers, Zia 
Milk Producers, and Select. The annual deliveries by members of GSA 
would qualify it, if a state, as the third largest milk producing state 
after California and Wisconsin.
    As I am sure you have noticed, the dairy farms in the Southwest are 
on the average larger than farms elsewhere. But such sized farms can be 
found in increasing numbers in other states such as Michigan, 
Wisconsin, Minnesota, Indiana, Illinois, and Ohio. The size of the 
farm, however, will not define who and who are not the successful 
dairies of the future. The current depression in dairy farming has 
adversely affected all farms whether they milk 35 or 3,500 cows. Future 
policies must not be defined as for the ``small'' or the ``large'' but 
for all. Dairy policy must be for all milk produced not a minority of 
the milk produced. Rather we must focus on what it takes to compete in 
today's world market. Expansion of foreign markets for our milk and 
milk products will benefit all dairy farmers regardless of region or 
size.
    To meet the world market, dairy farmers in the USA can and must 
produce the highest quality milk possible. We have been the World's 
leader in high quality, affordable food stuffs and we must enhance this 
position. The size of the dairy farm does not change that. We must be 
innovators in milk and milk products that can supply milk's nutrition 
in more ways than traditional dairy products. That is not a size or 
regional issue. We must remove the regulatory and pricing systems that 
penalize innovation, quality, and growth of our markets. Size is not 
part of this equation.
    The farm bill is due to be passed by 2012 with it taking effect 
late that year and, traditionally, in place for 5 years or late 2017. 
All of that is well into the future and the industry will see 
significant changes in the next 2 years and clearly in 7. As a 
consequence all discussions of dairy policy must be focused on what the 
dairy industry will be when the programs begin and what we want the 
dairy industry to be like when it ends. Creating, or modifying older 
programs designed for prior times, is not only irrelevant to future 
policy, but will hurt.
    In the past we, like most everyone in the industry, discussed dairy 
policy in terms of milk pricing, Federal orders, and similar programs. 
Though the underlying concept of profit for dairy farmers remains 
relevant, those policy choices no longer are the only issues defining 
the future American dairy industry.
    We are part of the world. The reduction in dairy exports from the 
highs of 2008 to 2009 is often identified as a cause of the drop in 
milk prices at the farm. Despite that drop, exports of dairy products 
in terms of pounds for 2009 were the third highest in history. Exports 
will continue to grow. Just as the role of exports grew from 2007 when 
the present farm bill was passed, they will be higher in 2012 and even 
higher in 2017. Prior to 2007, the American dairy farmer was almost 
entirely in a domestic market and had little impact from the dairy 
markets of the world. It is no longer a decision of whether or not to 
be part of the world. American dairy farming and the world are now 
fully engaged. The question is whether we will adapt and expand to 
benefit from this great market opportunity, or retreat into a fortress 
mentality and disintegrate into a smaller, poorer sector in 
agriculture.
    We are a part of this new market. The farm bill can assist us in 
benefiting from this growing opportunity. To prepare for the growth of 
the dairy exports, three major policy issues must be addressed--
sustainability, product innovation, price intervention programs, and 
quality. The primary one of these is sustainability.
Dairy Farm Sustainability
    To maintain profitability in the domestic market and be able to 
compete in the world market, dairy farms must be sustainable. The term 
``sustainable'' is one of those words that is often misused and 
misunderstood. It is not ``climate change.'' We desire to produce and 
deliver to consumers the greatest and most wholesome food in a way that 
benefits our animals, protects our environment, and makes us a profit. 
American farmers have always been first and foremost a steward of their 
land and animals, always desiring to pass on something better to the 
next generation. This motivation is now heightened because our 
customers care about these same things, competition among those who use 
our products is being used to the advantage of those products that are 
sustainable, retailers market the benefits of sustainability, and food 
service providers tout the value of sustainable sources of their 
ingredients. All of that means more and more markets for our products 
and more markets means more profit.
    The Dairy Innovation Center, a collaboration of dairy producers and 
processors has provided the following guideline regarding 
sustainability.
    The dairy industry is committed to:

   Recognizing and appreciating all members in the value chain 
        from farm to table.

   Working collaboratively with all stakeholders, consistent 
        with the vision.

   Taking responsibility for our environmental impacts and 
        celebrating our positive contributions to the planet.

   Ensuring economic fairness across the value chain.

   Preserving and enhancing the health and wellness of all 
        people.

   Utilizing both sound science and a transparent process to 
        foster continuous improvement.

    Key to these principles is that sustainable dairy farming is 
ultimately profitable dairy farming. Unless programs and processes 
yield economic benefits to the dairy farmers who practice them, the 
program is not sustainable. Profitability is important not only to the 
dairy farmers but to the employees on the farm. A typical dairy farm 
has one employee for every 100 cows. A 3,000 cow dairy would have 30 
employees. These are direct employees, and several times that number of 
jobs are created in the local economy to support the farms' many 
activities.
    Sustainable dairy farming results in dairy farmers implementing 
technologies that capture the waste produced on the farm and turn it 
into a valuable product--energy--as well as finding other ways to 
include renewable energy production into existing systems. This adds to 
the profitability of the farm as well as reducing the environmental 
impact of the waste. These technologies include systems that capture 
methane gas and use it to power generators creating electricity and 
heat for the farm or nearby communities, converting methane to CNG to 
power farm machinery and transportation of milk, and implementing wind 
and solar power options in fields and on top of structures that house 
the cows. Good old American ingenuity will create the most sustainable 
and competitive dairy industry in the world if we put our ag dollars to 
work in the right areas.
    Dairy producers have entered into a Memorandum of Understanding 
with USDA to reduce the carbon footprint of dairy farming by 25%. 
Select and Continental members have committed to implement sustainable 
practices that will simultaneously reduce the carbon footprint of the 
dairy farm, substantially reduce the environmental risks of modern 
dairy farming, and produce a source of energy 24 hours a day 7 days a 
week 365 days a year.
    We are committed to making dairy farming sustainable. Members of 
our cooperative have invested heavily in and currently are operating 
numerous methane digesters powering electric generators for use on our 
farms in Indiana; they are studying a solar alternative in Texas; and 
are moving ahead in a project to clean and compress the methane gas 
generated on the farm into compressed natural gas (CNG) that will power 
our truck fleets. It is estimated that this project, in the 
investigative stage, could produce as much as 10 mW of electricity all 
day and year round.
    Our members with other dairy farmers in the Pecos Valley region of 
New Mexico have formed a manure handling cooperative. The goal of the 
Pecos Valley Biogas Cooperative is the collection of manure from its 
members' farms and converting by gasification or other processes that 
manure into usable energy. For them the process is essential. Unless 
they are able to do this, their continued operation in that region is 
at risk. This is because the required investment to comply with new 
environmental demands exceeds the value of their farms. At the same 
time, the milk they produce is essential to the overall supply of milk 
in this region. Without it the Southwest would be short of milk.
    Continental members in Indiana have formed the Cow Power Bio-Energy 
Cooperative, Inc. to facilitate the advancement of its members in 
sustainability. These two manure cooperatives are the first of their 
kind and identify how dairy farmers of all size can use organizational 
tools already available to benefit from programs to convert to 
sustainability.
    Among the projects being considered in northwest Indiana is a pilot 
operation to convert animal waste at the farm into useable gases and 
environmentally safe land nutrients. This project now, in development 
stage, will convert farm waste to methane gas. This methane gas will be 
cleaned and condensed. The resulting compressed natural gas (CNG) will 
power approximately 47 specially built trucks to move the milk from 
those farms to the market. At the back end, the remaining material will 
provide nutrients for the forage crops used to feed the cows. CNG 
represents a clean replacement of diesel and gasoline powered vehicles. 
The nutrients replace chemicals and other fertilizers that would be 
produced from fossil fuel sources.
    The benefits to the environment are obvious. For farmers, 
sustainability can reduce the cost avoidance of environmental 
management at the farm and receive the income from the sale of the 
energy and nutrient by-products. Making this sustainable is essential 
to the long term viability of dairy farming in the United States and 
places dairy farmers in a position to compete worldwide.
    Sustainable dairy farming assists us as we move to the use of less 
fossil fuel. No other source of renewable energy can provide as many 
benefits as converting animal waste to energy. Its source is solely 
renewable, the energy is continuous and thus can reduce the demand of 
fossil fuel burning plants, and it results in a cleaner environment. It 
brings jobs from the production of the generation systems and equipment 
and the dairy, source of energy, contributes to even more jobs.
    As much as we want to make our farms more sustainable, in the end 
they must be profitable. The easy part of converting waste to methane 
has been accomplished. In some places we have produced electricity and 
gas. But to truly bring these experimental technologies to full scale 
commercial use on our dairies, we must overcome a number of economic, 
regulatory, and other obstacles.
    While everyone wants sustainable practices from the consumer to the 
citizen, no one wants to pay for it. This conversion of waste to energy 
is not free. There are costs--capital costs for the equipment and costs 
to maintain the facilities. Further there are numerous limitations on 
the income. The value of the gas is restricted by a combination of 
government policies, tax policies, utility regulations, and 
competition. The wholesale price of electricity is much less than the 
cost to produce renewable energy. While the dairy can use some of the 
electricity on the farm, generation from manure produces more energy 
than a farm can use itself. The excess has to be sold. The result is 
the difference between what it costs to produce the energy and what it 
brings in the market, or ``the gap.'' Unless and until this gap can be 
closed, waste-to-energy programs are unprofitable at the farm and, by 
definition, non-sustainable.
    The obstacles to full adoption of such technology come from many 
sources. Different types of electricity suppliers (rural cooperatives, 
municipal utilities, and proprietary utilities) respond with different 
incentives. Higher renewable energy credits or other incentives that 
are offered by one type of utility may be unavailable to another. 
Regulations prohibit in one way, or another, the ability of farms 
located mostly in cooperative areas to take advantage of those 
opportunities provided by other utility suppliers. State borders 
provide additional barriers. Connecting a consumer who is willing to 
pay a higher price for renewable energy with a producer such as a dairy 
farm is generally impossible today under regulations as they now exist.
    Current tax and other incentives treat methane digested from animal 
waste unequally. On a million Btu (MMBtu) or dekatherm (DTH) basis 
other renewable biofuels do not represent the same cost benefits and 
often consume resources that would be better used for other purposes:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Figure 1. Biofuels Effective Tax Incentives ($MMBtu) as 
        prepared by the Gas Technology Institute.

    This table of comparison is based upon the conversion of biogas 
into electricity. Biogas which is used as renewable natural gas, its 
most efficient and cost effective approach, receives no production tax 
credit and without production tax credit is ineligible for the 
investment tax credits or alternative grants.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Figure 2. Comparison of Tax Incentives for various renewable 
        biofuels.

    Through combination of harvesting energy from the farm and use of 
the remaining nutrients as fertilizer, we can create a ``sustainability 
model'' that is world class. The size of the dairy farm has no effect 
on the above opportunities if we as a nation put in place the proper 
incentives and regulations.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Figure 3. 30% ITC Grant Impact.
---------------------------------------------------------------------------
    \1\ General Electric.
    \2\ General Electric.
    \3\ http://www.epa.gov/agstar/pdf/digester_cost_fs.pdf.

    At this time of budget constraints and efforts to make sure public 
monies are properly spent, the 30% ITC tax grant would be more 
effectively spent on biogas versus wind, by 3 cents more per kWh (20%). 
The major reason for this in spite of almost doubling the cost for wind 
is the higher generator output time for biogas than wind. The net 
capacity differs from ``nameplate capacity'' which is the rated 
capacity of the plant. The net capacity is the ratio of the actual 
output of a power plant over a period of time such as a year and what 
it would have produced if it had operated at the full nameplate 
capacity for the entire time. The periods of time winds do not blow or 
the sun does not shine significantly reduce the capacity factor of 
those types of plants. For example, a 1.0 mW biogas plant will in the 
end deliver 0.9 mW of power. A wind turbine rated the same will deliver 
0.37 mW.
    The net capacity is important because it determines just how 
effective an alternative energy source can prove to be. Due to their 
inconsistent delivery of energy, solar and wind plants must be backed 
up with those of higher capacity and have the ability to turn on and 
turn off as needed. The term ``net capacity'' as we are using it 
differs from another common use of ``capacity factor'' which considers 
the amount of energy available compared to that used. In the case of 
wind and solar, this number is rated at 100% because by definition the 
energy created is what is consumed. Other energy conversions yield less 
energy than in the raw fuel. For example a gas engine not only provides 
power but some of the energy is converted to heat that is unable to be 
used. While the capacity of wind and solar have no wasted energy, net 
capacity is significantly reduced because the source of energy is not 
always available.
    We do not mean to suggest that there should be no development in 
these other areas of renewable energy, but it is economically mistaken 
to ignore or underrate the value of manure powered electricity. In fact 
such electricity can make the use of wind energy much more efficient 
because electricity generated from manure provided methane is 
dischargeable and while off line, the gas or the manure or both can be 
stored for use when needed. Electricity from our farms teamed with the 
wind turbines of west Texas and the solar arrays can provide large 
amounts of renewable energy all the time.
    By far one of the best uses of tax incentives and other programs to 
increase the amount of alternative energy produced would be for dairy 
farms--an investment that would provide clean energy, reduce the carbon 
footprint of the production and delivery of an important food, and make 
dairy farming sustainable. But it is not available.
    We realize that some of the legislation that addresses these issues 
is under the jurisdiction of other Committees such as Energy and Ways 
and Means. At the same time in the upcoming farm bill we request that 
you continue to support the use of animal waste as a renewable energy 
source. In doing so, we request several things:
    First, there should be parity between a dekatherm of energy 
regardless of how one produces it. Let the efficiencies and market 
forces of the production of those sources dictate the long-term 
winners. For example, CNG from animal waste to methane should have the 
same MMBtu credit as that produced by biodiesel or ethanol.
    Second, in issuing competitive grants and other incentives, the 
Secretary should be required to consider these factors:

   The net capacity of the energy source being considered.

   A multiplier for those processes that also prove to mitigate 
        or eliminate environmental emissions in the production of food 
        such as the conversion of animal waste into energy.

   The inequity of tax and other incentives that improperly 
        favor one alternative energy source over another.
Innovation
    To further increase demand, Select has invested millions of dollars 
over the last decade to develop innovative products which would 
increase sales of dairy products, not cannibalize other milk sales. 
Through patented technology, Select has developed the means to create 
``designer milks.'' High quality milk fresh from the farm goes through 
several filtration processes separating the fat from the protein from 
the sugars from the calcium and other solids from the water. These then 
are recombined in different ratios to provide a different profile of 
milk. The double sugar, lactose, is converted to two simple sugars, 
glucose and galactose. These sugars are sweeter than lactose and thus 
the carbohydrates in the drinks can be reduced while maintaining the 
same sweetness of milk.
    For 6 years HEB has been marketing one such milk here in Texas. 
This milk is produced by Select Milk and bottled by HEB at its plants 
in Texas. This designer milk, called ``Mootopia,'' has more protein and 
more calcium (all fresh from cow's milk) but with fewer carbohydrates. 
This lactose free milk still tastes the same sweetness as regular milk.
    We have also recently introduced another designer milk called 
Athletes Honey Milk'. This product delivers more milk 
protein with natural honey added. The result is a restorative drink 
with natural carbohydrates and proteins to aid individuals after 
biking, running, rowing, or other physical activities. The product has 
been produced in five flavors in single serve bottles and is now being 
stocked in Wal-Mart stores in selected cities in Texas, Indiana, 
Illinois and Wisconsin. We expect to roll it out in additional outlets. 
Negotiations are underway to export the product to China.
    Samples of these have been made available to the Committee today. 
With our food scientist and team of dairy innovators we continue to 
look for other ways to provide quality food products for consumers 
using milk.
Milk Labeling
    One of the biggest hurdles to marketing innovative milk has been 
the labeling enforcement by FDA for use of the term ``milk.'' FDA 
regulations define ``milk'' in Federal standards of identity as the 
``Milk is the lacteal secretion, practically free from colostrum, 
obtained by the complete milking of one or more healthy cows.'' \4\ The 
standards of identity go on to define various milk beverages and 
products, all of which require as an ingredient ``milk.''
---------------------------------------------------------------------------
    \4\ 21 CFR  131.110 (April 2009).
---------------------------------------------------------------------------
    Despite very clear standards of identity established by FDA, FDA 
has refused to enforce them. Dairy farmers and processors have spent 
literally billions of dollars promoting the nutritious value of milk. 
Promoters of competitive drinks that have no milk and in fact advertise 
themselves as alternatives to milk have been openly using the word 
``milk'' to describe their products. In the process they are able to 
capitalize on the marketing of dairy farmers for milk. These include 
``soy milk'' and ``almond milk.''
    More flagrant has been the use of the name ``Muscle Milk'' to 
describe a product that at most contains among its dozens of chemicals 
some caseinates or whey proteins in minute amounts. These products are 
now appearing in dairy cases in packaging similar to real milk.
    The standards of identity exist to protect consumers from the 
dangers associated with mislabeling of foods. Allowing products which 
are not ``milk'' to use that name as part of their food name or label 
threatens the integrity of this vital food safety program. None of 
these products could be used as substitutes for milk in recipes or even 
deliver the same kind of nutrients as milk.
    FDA has done nothing to stop this misappropriation of a distinct 
food name. Some state milk regulatory programs, such as New Mexico, 
have asked them to stop, but without the FDA doing its job, the 
continued theft of the good name of milk will continue.
    We recognize that this Committee does not have direct authority 
over the FDA, but it does have authority over the milk promotion 
programs and milk pricing and regulation. The failure of the FDA to do 
its job threatens those. We urge the Committee as a Committee and its 
members to demand an accounting from FDA for this error.
    While these products have been given a pass on the standards of 
identity, Select has undergone close scrutiny and obstacles to use 
``milk'' in the products we have produced for you to sample. All of 
these products use milk from cows and, except for flavorings, only milk 
from the cows. In other words, dairy farmers producing innovative 
products that only use their milk have to strictly comply with labeling 
requirements while products made by non dairy farmers can make up names 
for their non dairy products using the word ``milk'' get a free pass. 
This inequity must end.
    In this way, the failure of FDA to enforce regulations against 
flagrant violators but challenge legitimate users of only milk is one 
of the many obstacles we face to innovation of new milk products.
Higher Enforceable Standards of Milk Quality Should Be Established
    American dairy farmers produce the highest quality, safest, and 
most wholesome food in the world. Despite that, its standards for 
products and for quality are inconsistent with international markets.
    The current standard for somatic cell count (SCC) under the 
Pasteurized Milk Ordinance (PMO) is an example. SCC is a critical 
measurement in the quality of milk. It is the count of white blood 
cells found in the milk. As pathogenic bacteria increase or decrease in 
the cow, the SCC responds similarly. More and more dairymen are able to 
bring their average counts for their entire herd below 100,000 and it 
is widely agreed that 400,000 should be the outside limit. Under 
current rules a farmer retains Grade A status and thus can share with 
the extra value of bottled milk in Class I if that farm does not have 
more than two tests out of five over 750,000 SCC. A few states, such as 
Indiana, permit limit on SCC for milk used for manufacturing to be 
1,000,000 SCC. In the world, however, EU and other countries have a 
standard of 400,000. To efficiently supply the market, we must have 
quality that meets these standards for our domestic and export markets.
    Improving somatic cell counts has other benefits. Lower counts 
bring better animals and more efficiency. Cows with lower counts are 
healthier animals and produce more milk. Milk with lower SCC produces 
higher cheese yields.
    The challenge is that the standards for SCC are part of the 
Pasteurized Milk Ordinance (PMO). The PMO is promulgated by the 
National Conference on Interstate Milk Shipments. NCIMS includes 
representatives from local and state milk inspection agencies, producer 
groups, milk transporters, academia, and FDA. Every 2 years this 
conference considers questions regarding milk safety. Since its first 
use in 1924 it has met the challenge of making milk safe. The ordinance 
it adopts at these conferences are adopted throughout the nation 
providing a uniform milk safety and sanitation code. This allows milk 
to flow from one region to another without concerns that the milk does 
not meet local standards.
    While this program is very successful, it presents a challenge in 
that the standards for quality are now surpassing the standards for 
safe milk. Repeated efforts at the conference to lower the limits on 
SCC have failed. We do not propose direct interference by Congress into 
this valuable administrative process but efforts to force the FDA to 
take a leadership role in this area at the NCIMS would be helpful.
    Another area of quality that needs to be addressed is temperature. 
Current PMO regulations require that milk that is harvested at over 
100 from the cow be chilled and stored at no higher than 50 F or less 
within 4 hours of the the beginning the first milking and no more than 
45 F within 2 hours after the milking has ended. In cases where more 
than two milkings are put into the tank, the temperature cannot exceed 
50 F. Higher milk temperatures result in degradation of the milk. For 
that reason, all of Select and Continental farms immediately cool the 
milk at harvest to less than 40 F before putting it in the tank. More 
importantly, we all have time and temperature charts that show the 
temperature of milk in the tank at all times.
    Most farms, however, have the temperature tested only at the time 
the hauler picks it up. If it tests at that time at less than 45 F the 
milk is accepted and there is no way to know how long that milk was at 
that temperature. There is a cost associated with putting time and 
temperature charts on all bulk tanks. The cost is prohibitive for many 
farmers, particularly the smaller ones. Expecting them to make this 
investment would be unfair. As a result this cost barrier has hampered 
a universal adoption of the practice even though it would benefit the 
entire industry including the producers.
    Providing grants to producers to install the equipment would cost 
less than $100 million and would be a one-time investment in the 
program. The result would be even higher quality milk and value to all 
dairy farmers.
    Another example is the use of nonfat dried milk (NFDM) as the 
mainstay of our powder industry. Essentially NFDM is skim milk that is 
dried. The protein content varies depending upon the protein in the 
milk. International markets want skim milk powder (SMP) which is very 
similar to NFDM but the protein has been standardized. The standards of 
identity for dairy products permit the use of NFDM in those products, 
but not SMP even though the use of the latter would make for a better 
product.
What should Congress do specifically with dairy policy?
    As discussions center on ``what can Congress do?'' we must realize 
that in the end, very little. We need to recognize that the law of 
economics will always win and legislation cannot avoid the consequences 
of violating its rules. After nearly 3 decades of milk diversion 
programs, whole herd buyouts, the milk assessment with refund, MILC, 
price supports, and the industry-funded CWT program, we still find 
ourselves with low-priced milk. In terms of the purchasing power of the 
dollar, milk is worth less today than it was in the early 1980s. Over 
time, the laws of supply and demand will always win as markets seek 
efficient pricing. This is true in free markets and controlled markets. 
Free markets adjust relatively quickly in finding price equilibrium. 
History shows that markets which have been controlled, by government 
for example, eventually self-destruct generally because prices were set 
too high or low and over-supply or shortages accordingly ensue. And 
markets, such as dairy in the United States, which are subject to 
regulation, are not immune from this economic force. With that as our 
underlying policy we have several proposals.
Drop Price Support
    The Dairy Product Support Price Program should end. Its role in 
providing a safety net for producers has passed. For cheese purchases, 
it fails to address commercial cheese making of the 21st Century in a 
way that will attract cheese when prices fall. On more than one 
occasion, cheese prices fell and remained below the support price.
    In the area of NFDM, the price support program is impairing the 
ability of the industry to provide the dairy ingredients wanted 
domestically and internationally. Because of the safety net built for 
powder plant operators with price support and end product pricing, the 
industry has failed to fully adapt to meet the growing demands for skim 
milk powder, caseins, milk proteins, and other products dried milk.
    Finally, and most important, the price support program has become 
the world price support program. American taxpayers are not only 
supporting domestic producers of powder, but foreign ones. While dairy 
farmers in America suffer from low prices, American taxpayers keep the 
international price of powder high for our competitors. That must end.
Risk Management
    The current crisis has shown the need for better price risk 
management by dairy farmers. Those dairymen who weather this storm the 
best will be, for the most part, those who had the foresight to manage 
their price risk before the markets failed. Though such practices did 
not ``lock in a profit'' in every case, each of them certainly were 
able to fix their losses to a level which could be weathered. As the 
industry moves forward the need for and use of the price risk 
management tools will increase.
    Many of the tools of risk management come from the industry. The 
various contracts available on the Chicago Mercantile Exchange are 
examples of how the private sector is addressing the needs for risk 
management within the industry.
    Congress should coordinate any programs so as to leverage the 
private sector rather than interfere with it. Proposals for livestock 
gross margin programs, for example, using existing markets to tailor 
specific margin risk opportunities for producers. We would support such 
programs so long as there is no limit based upon size.
Changes to Federal Order Program
    The fundamental part of the FMMO program is minimum pricing. Since 
the late 1990's USDA has relied in part or in whole on product formulas 
for pricing milk. These end product-to-rice formulas prices use 
surveyed commodity product prices, make allowances, and yields to 
determine the milk value. There is a general consensus that such 
formula pricing is a mistake.
    In any event, this end product pricing must end and end soon. The 
four classes of milk need to be replaced with a much simpler one-price 
discovery system with two classes of milk--bottled and everything else. 
The system would allow plants and producers negotiate competitive 
prices for milk used in manufacturing. These prices would be surveyed 
and used to establish minimum prices for Class I. Plants in combination 
with their producer suppliers would be free to price and market dairy 
products to the world.
    We are working with NMPF and IDFA and others to develop a 
competitive pricing series that lets the marketplace tells us the value 
of milk. This will bring an end to the product formulas and the 
contentious hearings that they bring.
    These changes will not require legislation but can be handled under 
current authority in the Agricultural Marketing Agreement Act and the 
Federal Milk Marketing Order program.
Price Reporting
    Greater price transparency of dairy products will enhance the use 
of existing risk management tools. The Secretary should be required, 
with necessary funding, to daily report the selling of milk, cream, and 
dairy products in the same way that beef producers can see the pricing 
of meat products.
Animal Welfare and Identification
    NMPF with its FARM program is providing a research based program to 
assure the proper handling of animals in a humane and proper way. Such 
programs can best be handled by the industry as this program shows.
    Animal ID is important. The degree of traceability from farm to the 
store must be transparent to assure our customers that we provide the 
safest food available. We support animal ID.
Supply Management
    We in the United States are sitting on the cusp of a tremendous 
opportunity to grow our dairies to supply the world. We should not be 
shutting it down by implementing supply management programs.
    We oppose any supply management program for dairy. Such programs of 
production base and controls have not worked anywhere else in the 
world. Europe's base plan is in shambles and on farm prices are the 
lowest in decades, with farmers protesting all over the Continent. 
Canada's system keeps production volumes matched with domestic usage. 
This only works if you have in place tight tariff controls on imports. 
If we attempt to shrink U.S. milk production to equal domestic 
consumption, imports of MPC, caseinates, and milk fat will pour into 
our country further eroding our own internal market. We will not only 
lose our place in the world market, we'll lose more and more of our 
market at home as well.
    The ``promise'' of these programs is that by managing supply, dairy 
farmers will always be profitable or, at least, not experience what 
they have now. Supply management has been in Europe for decades and 
they have the same low prices we do. Canada's system exists because 
they can balance off of the United States while protected by 
extraordinarily high tariff rates on imported dairy products.
    Each of the programs propose different means to compute base, 
determine the amount to be reduced, how much is charged for ``over 
production'' and the like. In the end all of them transfer wealth from 
the vigilant and efficient to the inefficient and less vigilant. They 
trap the industry into the past rather than let it fly into the future.
    The underlying principle of all of the ``supply management'' 
programs is that by some means the government imposed tax or other 
penalty will short the market which in turn will result in higher 
prices. We urge the Committee to run away from any proposal that 
imposes milk taxes, causes artificial inflation of food costs, and 
holds back the industry from fully developing.
    The reason expressed for such proposals is to reduce volatility. 
But, at the same time, we have experienced no volatility since the 
beginning of 2009 while we received too low of prices. The two go 
together. You cannot have viable milk prices without some volatility. 
All commodities share that.
    The goal of the supply management programs is to eliminate growth 
in milk production. But production growth comes from being more 
efficient, producing higher quality milk, treating cattle better, 
adopting innovative ideas, and strategic relocation of farms to more 
economically meet changing demand. Supply management programs penalize 
those efforts by taxing, and in some proposals completely taking, all 
of the gains from efficiency, quality, animal welfare, and innovation.
    We must not forget that the milk market is different from any other 
market in the world. Unlike corn, its raw product is perishable. Unlike 
perishable vegetables which are subject to annual planting decisions, 
its raw product cannot be ``turned on or off'' at the individual 
producer level except by program liquidation. Unlike a domestic oil 
well, its raw product cannot be immediately sourced overseas under 
efficient market arbitrage. Unlike gold, its raw product is a solid 
staple in the diet of over half of the world's population. The fact 
that the milk market is very unique from other markets implies that it 
is even more important to understand and respond to milk's supply and 
demand laws. It goes hand-in-hand, then, that the normal process of 
supply and demand seeking equilibrium pricing should not be 
manipulated.
    In support of their proposals, some of the proponents have been 
showing the results of ``models'' and how they show that if adopted the 
proposal would provide profitability all the time to dairy farmers. 
There is a misuse of these models. The models used by FAPRI, USDA and 
academia all incorporate as many as 500 different variables, the change 
to any one of which would cause change in the result. By ignoring the 
hundreds and hundreds of other variables, proponents of supply 
management focus on only one of them. The only way a supply management 
program can work is to isolate us from the world both in terms of 
imports and exports. It is difficult enough to estimate domestic 
demand; it is impossible to do so for world demand. Besides dozens of 
different economies, the ever changing value of the dollar, 
international events and politics, and different weather conditions all 
pose multiple factors to the equation. Matching supply and demand to 
domestic market eliminates opportunities in world markets.
    The biggest weakness of economic models is they ignore the power of 
the human spirit. Not a single economic model for dairy would predict 
that after twelve months of the lowest milk prices and negative margins 
that milk supply in the U.S. would remain unchanged. If $6 and more 
discounts on milk price cannot stop milk production, what can the 
proposals being touted do?
    The law of unintended, but clearly predictable, consequences, will 
play out if supply management is instituted. By decoupling milk prices 
from market reality, the gaps between dairy prices and the ingredients 
from imported products or the use of substitute ingredients will over 
time further reduce the demand for milk. By decoupling the milk prices 
from the rest of market activity, producers will be exposed to higher 
risk of unprofitability because prices will not respond to costs of 
production. Technology for increasing production will stagnate. The 
value of more milk per cow will decrease.
    For example, the institution of supply management will reduce the 
value of heifers. Limiting farm production means fewer cattle, less 
cattle means less value. Reduced value of cattle will reduce credit 
lines, balance sheets, and producer income regardless of size. The 
excess heifers unwanted in U.S. will be exported to develop and grow 
competing milk supplies elsewhere in the world. Smaller, retiring farms 
will be especially hit. Their animals will be worth less than with a 
dynamic market and opportunities to sell will be reduced.
    In the long run, we can't isolate ourselves from market realities. 
Our current treaties and sanitary rules will not keep out foreign dairy 
products. We have the most efficient dairy industry in the world and 
can compete effectively to supply the world with high quality protein, 
but we have to maintain efficiency and be aggressive competitors. A 
supply management program would reduce efficiency and competitiveness.
Conclusion
    Consider long term reform for the dairy industry that is done in a 
thoughtful and methodical manner. Decisions should not be made in 
``crisis mode.'' It will be better to do nothing now and allow the 
market to find equilibrium while working toward the goal of 
transforming the U.S. dairy industry into a consistent global supplier 
of high quality dairy products.
    In summary, we propose:

   Do not adopt any supply management programs.

   Put sustainability of dairy farming at the forefront of 
        policy changes. The Congress can provide assistance through 
        added availability of credit, focusing of grants to dairy and 
        livestock waste to energy programs, regulatory reform to remove 
        obstacles to integration of biogas into our national energy 
        supply, and issue cost effective tax credits for investment and 
        production.

   Eliminate the price support program. It is a burden to the 
        U.S. dairy farmer and taxpayer. The U.S. price support programs 
        should not continue to be the balancer of burdensome global 
        milk supply.

   Replace end product pricing with competitive pricing for 
        milk.

   Institute a mandatory price reporting (analogous to 
        mandatory price reporting in U.S. cattle trade.) We need 
        greater transparency and price discovery in pricing of milk and 
        milk products. Surveys of what all plants are paying for milk, 
        inventories of dairy products, prices received for milk 
        products. This information helps us understand what the dairy 
        economy is doing.

   We need to maintain the integrity of the markets and those 
        who participate in them.

   We can talk about other insurance or safety net options so 
        long as those options do not hamper the sale and movement of 
        milk and milk products domestically and in world markets.

   We must overhaul our pricing and safety net systems to allow 
        our industry to compete on the world stage.

   We must let market forces work. Less, not more, government 
        involvement is needed to make the dairy industry the best in 
        the world.

    Thank you, Mr. Chairman, for this opportunity. We remain willing, 
able, and even eager to assist you, the Committee, and the staff with 
information, ideas, and insight as you address dairy in the upcoming 
farm bill.

    The Chairman. Thank you, Mr. Bouma. You're right on the 
mark. Good job.
    Mr. Grissom, welcome to the Committee.

    STATEMENT OF JIMMIE ``JIMBO'' GRISSOM, PEANUT PRODUCER, 
                          SEMINOLE, TX

    Mr. Grissom. Thank you, Mr. Chairman, and Members of the 
Committee. I would like to welcome you to Lubbock on behalf of 
the peanut growers of west Texas.
    My name is Jimbo Grissom. I'm a peanut farmer from 
Seminole, Texas, President of the Western Peanut Growers.
    We are in our third year of operation under the 2008 Farm 
Bill. This has been a particularly difficult time for west 
Texas peanut growers. During this time, farmers across the 
country have been dealing with skyrocketing input costs. From 
2002 to 2008, fuel prices rose over 200 percent, and while they 
only dropped 34 percent in 2009, they appear to be on the rise 
again for this year.
    The picture is the same for all of our basic input costs. 
Producers of some commodities have seen significant increases 
in their market value. This, perhaps, has allowed them the 
ability to offset the rise in their production costs and make 
profits. That has not been the case for peanuts in west Texas 
due to the various weather conditions, production, and 
marketing problems.
    This is to say current policy is a good base, but it's not 
perfect for all commodities, nor all regions. We believe that 
three basic elements of the current commodity program are 
critical and should be maintained.
    The marketing loan remains the foundation for our 
producers. It is the only element of security that applies to 
our entire harvested crop, because it provides the absolute 
floor for which the value of our total crop cannot fall below. 
The loan is essential for marketing and lending.
    The direct payments represent the only guaranteed income in 
farming. It is absolute security for our lenders, and it is WTO 
compliant. For land with base acres, the countercyclical 
payment is basically a guarantee of a higher minimum price. All 
three of these components, when combined, provide a needed 
minimum safety net for our growers as well as our lenders.
    However, Mr. Chairman, there is a needed component missing 
from peanuts. Multi-peril insurance is the only semi-viable 
risk management tool available for our commodity. One problem 
associated with multi-peril insurance is the pricing mechanism. 
The problem in the policy is that it does not relate to our 
costs, or reflect the actual price situation.
    We believe that a good CRC insurance policy, similar to the 
policies which are available for other commodities, would be a 
more viable risk management tool. We are currently working with 
RMA to develop a viable CRC policy for peanuts.
    We need and seek protection for both price and yield risks. 
We stand ready to support any reasonable price reporting 
requirements necessary to make that happen.
    Regarding payment limitations, we urge the Committee to 
avoid further changes in eligibility standards. Constantly 
changing the limitations makes it very difficult for full-time 
farmers to make a profit. Major changes which were made in the 
2008 Farm Bill have been implemented. Now farmers just need 
stability in this area for the next several years.
    In conclusion, we wish the current program elements were 
stronger and provided more financial support, but at least they 
provide a reliable basis upon which the lender can work with 
the farmer, even in bad times.
    Mr. Chairman, this history, the history of the new program, 
including our recent venture away from the traditional quota 
system, is a full example of unexpected and often unfortunate 
consequences. Due to this history and the fragile financial 
condition of west Texas peanut producers, it is hard for us to 
support doing away with a farm program that we understand.
    We sincerely appreciate the efforts of you and this 
Committee for exploring ways to build a better safety net for 
farmers. It is needed, especially in the region for peanuts.
    In closing, if we are not successful in getting a 
satisfactory CRC insurance policy program through the current 
proceedings with RMA, we will be asking you for legislation to 
help in this effort.
    Thank you for coming to Lubbock, and thank you for the 
opportunity to testify today.
    [The prepared statement of Mr. Grissom follows:]

   Prepared Statement of Jimmie ``Jimbo'' Grissom, Peanut Producer, 
                              Seminole, TX
    Thank you, Mr. Chairman. My name is Jimbo Grissom. I am a peanut 
farmer from Seminole, Texas and President of the Western Peanut Growers 
Association. I would like to welcome you and the Members of the 
Committee to Lubbock on behalf of the peanut growers of west Texas. We 
appreciate your willingness to come and hear first-hand from Texas 
producers our views of the farm programs and their importance to 
production agriculture in the Southwest.
    Mr. Chairman, we appreciate the leadership you demonstrated in 
getting the 2008 Farm Bill enacted into law. We want to commend you, 
Mr. Chairman, and the Agriculture Committee for getting an early start 
on consideration of the 2012 Farm Bill. In this time of budgetary 
pressure, we know that crafting the next commodity program legislation 
will be a great challenge for you, and we want to offer our support as 
the Committee works on putting a new bill together.
The State of Our Peanut Farm Economy
    We are now in our third year of operating under the 2008 Farm Bill, 
and this has been a particularly difficult period for peanut growers in 
west Texas. Like commodity producers across the country, we have been 
coping with volatile and rising input costs. From 2002 to 2008, fuel 
prices rose over 200%, and while they dropped by 34% in 2009, those 
costs are on the rise again this year. The picture is the same for all 
of our basic crop inputs. Fertilizer prices rose over 80% in 2008 
alone. In that same time-frame pesticides costs rose by almost \1/3\. 
While input prices have risen and fallen over the last 5 years, the 
trend-line shows overall steep increases in the cost of growing a crop.
    Producers of some other field crops have seen significant increases 
in the market value of their commodities, allowing them to partially 
or, in some cases, fully offset the rise in production costs. That has 
not been the case with peanuts in west Texas. The 2007 crop year's 
shortage of peanuts created an attractive contract offer price of $500 
per ton for 2008 crop peanuts. In our production area the crop was 
subjected to drought, hail, high winds and a pre-harvest freeze that 
reduced yields from 20 to 40 percent. These weather losses combined 
with soaring input costs in 2008 turned what might have been a 
profitable year into losses as high as $200 per acre.
    The relatively good contract prices in 2008 led producers 
nationwide to increase production, resulting in excess production and 
lower contract prices for 2009. Despite some easing in input cost 
increases, we had a second very poor year for income. In west Texas, 
peanut farmers have dramatically reduced planted acres, and there has 
been some increase in contract offer prices. But input costs are on the 
rise again, and it looks to be another disappointing income year.
    These repeated income shortfalls and production cost increases are 
taking their toll on our producers. One young farmer I know well was 
told this year by his banker that he simply couldn't get financing for 
another year. He now has a job in town and is cash leasing his farm to 
meet the land payment. Most of the older farmers, like me, are using 
the equity on their farms to secure operating loans. More and more of 
our producers are turning to USDA loan guarantees as they use up the 
last avenues to borrow the money to farm another year. Mr. Chairman, 
our west Texas peanut producers are under so much continuing economic 
pressure from the last several years of poor income and high costs that 
all our attention is focused on making it through another year. 
However, the Committee has asked for our thoughts on Federal 
agriculture policy in preparation for the 2012 Farm Bill.
The Peanut Program
    Our first comment is in favor of the preservation of the marketing 
loan. The commodity loan remains the foundation of all program 
structure for our producers. It is the only program element that 
applies to all of our harvest; it is essential for the marketing of our 
crop; and it provides the absolute floor below which the value of the 
crop cannot fall.
    Our next concern is to protect the direct payment, which represents 
guaranteed income regardless of the price or size of the crop. It is a 
dependable security for our lenders, and it is the only part of our 
program that can be reliably protected from World Trade Organization 
sanctions. Since many Texas peanut producers are also cotton producers, 
we fully appreciate the importance of that fact.
    Finally, the countercyclical payment is a valuable tool to provide 
at least part of our crop with a somewhat higher price floor. This was 
helpful in 2009 when we suffered a fairly steep price drop, although 
its utility is mitigated by fixed yield and acre determinations and the 
effect of stricter payment limitation requirements.
    When all three of these components are combined they make a 
valuable tool to set a much needed ``floor'' price for our commodity 
and our lenders.
Workable Crop Insurance Program for Peanut Growers
    Crop insurance has been a growing factor in managing the risks of 
farming in west Texas. Lenders and farmers agree that insurance risk 
management tools are a necessity to cope with the variable nature of 
the weather in this region. Multiperil insurance is the only semi-
viable tool available for peanuts. One problem associated with 
multiperil insurance is the pricing mechanism. Unless farmers' contract 
their peanuts by the acreage reporting date, the mechanism used to set 
the coverage price is many times unrealistically low. This results in a 
policy that does not relate to our costs or reflect the actual price 
situation.
    We believe a good crop revenue coverage (CRC) policy for peanuts 
would be a more viable option for a risk management tool. We urgently 
need USDA's Risk Management Agency's assistance to develop an 
affordable and viable CRC policy for peanuts that would protect farmers 
against price as well as yield risks. We stand ready to support any 
reasonable price reporting requirements necessary to make that happen.
Payment Limitations
    On the subject of payment limitations, we urge the Committee to 
avoid further changes in eligibility standards. We are still trying to 
adjust to the significant changes in this area from the 2008 Farm Bill. 
Constantly moving the markers on eligibility makes it very difficult 
for full-time farmers, who are under pressure to grow their operations 
to make a decent living as costs drive down the per acre profit 
possibilities. Major changes have been made, and now farmers need 
stability for at least the next several years.
Conclusions
    As you can see, Mr. Chairman, the distressed economic condition of 
our west Texas growers causes much of our analysis to be viewed through 
the lens of our lenders. The banking and financial world is 
experiencing major instability of its own, and lenders are seeking the 
means to limit their risks in extending credit. Without their credit, 
many of our peanut producers are simply out of business. We wish the 
current program elements were stronger and provided more financial 
support, but at least they provide an understood and reliable basis 
upon which a lender can work with a farmer, even in bad times.
    Mr. Chairman, the financial condition of west Texas peanut 
producers is too fragile and perilous for us to advocate abandoning 
that which is known. The history of new programs, including our own 
venture away from our traditional program in 2002, is full of examples 
of unexpected and often unfortunate consequences.
    We applaud the efforts of the Chairman to explore new options for 
building a better safety net for farmers. If we are not successful in 
getting a satisfactory revenue insurance program though the 
administrative proceedings of the RMA, we will seek legislation that 
makes a good revenue program a reality for peanut producers.
    Thank you for the opportunity to testify today and thank you for 
coming to Lubbock. I will be happy to answer the Committee's questions 
at the appropriate time.

    The Chairman. Thank you, Mr. Grissom. We appreciate that.
    Mr. Lackey, welcome to the Committee.

     STATEMENT OF JOHN LACKEY, CITRUS PRODUCER, WESLACO, TX

    Mr. Lackey. Good morning. Thank you, Mr. Chairman and the 
Members of the Committee.
    My name is John Lackey. I'm a citrus grower and a third 
generation farmer in Texas. Representing Texas Citrus Mutual 
and the citrus industry, we admit that 2008 was a milestone for 
the specialty crop. You know, being a citrus grower in the 
middle of all the citrus, you don't feel like that there's 
certainly anything special that you do, right, but vegetables 
and fruit are considered specialty crops.
    And we got a little bit better platform in 2008 than we've 
had in the past, and we look forward to a better platform in 
2012 with the financials in mind. But we have several areas 
that are of main concern. One is pests and disease, which we 
are always dealing with.
    I assume you may be aware of a very serious disease that 
has hit Florida. We've noticed citrus greening. That has a 
longer name, Huanglongbing, or something like that. It's a 
virus from--it was started by the citrus--an agent of citrus it 
was very serious. There are about over a hundred thousand acres 
of Florida citrus that has been taken out in the last few 
years.
    It really is to the point where we are not sure, if we 
don't find an answer to it, that the citrus industry will even 
survive this. So that is a very serious issue.
    We continue to push nutrition education, and we know that 
our nation has a problem with obesity, and we know that we have 
the proper diet that will help that, and that's more fruits and 
vegetables. So we continue to support and push for that 
nutrition education across the country.
    Food safety is a big issue, and more and more of the 
retailers and the buyers are demanding more thorough 
inspections, and food safety continues to be a huge issue.
    The next thing, of course, is crop insurance, and every 
specialty crop and main commodity talks about crop insurance, 
and that's a huge issue. But, for the citrus, without that crop 
insurance, I think that the acreage would continue to slide. 
And so we don't very often have a claim on that.
    But, in 2008, we had Hurricane Dolly that came through. A 
lot of growers are still waiting on the tree assistance program 
to kick in. We understand this month that some of that money is 
starting to flow finally, but the length of time it took for 
that to go through is something that needs to be addressed.
    Some of the farmers have not only not replanted, but 
haven't even taken out the dead trees that were killed by the 
flooding from Hurricane Dolly, simply because the money is not 
there.
    And immigration is another issue that continues to come up 
before us. Citrus is very labor-intensive. We think that 
somehow we have to have some sort of a worker program. We need 
the labor in the fields to harvest the fruit, and so we 
continue to look for support in that area.
    And these things are all similar probably across most of 
the specialty crops, whether it's the citrus or the vegetables, 
across the state and across the country. And these are your 
main issues. I appreciate your time this morning.
    [The prepared statement of Mr. Lackey follows:]

    Prepared Statement of John Lackey, Citrus Producer, Weslaco, TX
    I am John Lackey, a citrus grower and member of the board of 
directors of Texas Citrus Mutual. My family and I have been involved in 
the Texas produce industry for over 77 years.
    As Members of this Committee know, specialty crops were 
historically not a big part of the farm bill until the 2008 
legislation. Our industry welcomed the changes in the latest farm bill. 
For many years the farm bill was able to garner enough support for 
passage through the collective efforts of commodity interests along 
with environmental interests and the food stamp program. For the 2008 
Farm Bill new allies in the specialty crops, including a broad base of 
nutrition interests, became an important part of the farm bill 
legislative process. Nutrition, obesity and other specialty crop 
interests touch the everyday lives of all Americans. My comments today 
will focus on the importance of specialty crops in relation to the 2012 
Farm Bill and some citrus specific issues. I will also comment on a 
couple of issues that are not farm bill issues in a strict sense but 
they are important to the Texas produce industry.
    The 2008 Farm Bill was a major milestone for the produce industry. 
Fruit, vegetable and tree nut production accounts for $34 billion in 
farmgate value, or 30% of farm cash receipts for crops. If nursery and 
greenhouse production are added, the percentage of crop farmgate value 
represented by specialty crops increases to 44%. One hundred and twenty 
specialty crop groups were part of the Specialty Crop Farm Bill 
Alliance. We want to thank Congress for including a number of our 
priorities in the 2008 Farm Bill including important provisions for 
nutrition, trade assistance, research, conservation and pest and 
disease prevention.
    The focus today is on gathering input for the 2012 Farm Bill but I 
would also like to share my concerns about length of time it took to 
implement the Tree Assistance Program in the 2008 Farm Bill. Texas 
Citrus Mutual was finally notified on May 7 that applications for TAP 
will begin. I did not personally sustain any serious damage in my 
citrus grove from Hurricane Dolly in 2008 but some of my fellow growers 
have been waiting a very long time for the Tree Assistance Program to 
be implemented. We are glad this program in the 2008 Farm Bill is 
finally going to be available.
    Our Specialty Crop Farm Bill Alliance will once again be active in 
providing input to the 2012 Farm Bill. The Alliance has not formulated 
our specific recommendations so my comments will reflect the priorities 
of Texas Citrus Mutual and not necessarily the overall Alliance.
    The Plant Pest and disease title is very important to the citrus 
industry. The U.S. citrus industry is fighting the biggest disease 
battle we have ever faced in Huanglongbing or citrus greening. Florida 
has already lost over 100,000 acres to this disease and unless research 
develops new tools to fight this disease there is real concern as to 
whether the industry in that state will survive. Texas has the vector 
for the disease, the Asian Citrus Psyllid, but so far Texas does not 
have the disease. Section 10201 was made part of the farm bill to 
develop a more proactive pest and disease prevention effort by taking 
steps to prevent such diseases entering the U.S. and then to quickly 
respond once the disease was found in the U.S. Diseases like citrus 
greening are a biosecurity threat as well as a huge threat to citrus 
growers. I would be stating the obvious to say that Congress, USDA and 
all of us have a long way to go to achieve the objectives of pest and 
disease prevention. The U.S. citrus industry has already invested some 
$30 million of its own money in a desperate effort to find a solution 
to this menace. The clock is ticking and if we do not find a solution 
soon the very existence of the U.S. citrus industry is at stake. It is 
hard to image a world without Florida orange juice, California oranges 
or Texas grapefruit but it could happen.
    Our industry is a big advocate and fan of the nutrition programs in 
the farm bill. Nutrition is an area where the interests of the produce 
industry and the public interest are closely aligned. It is certainly 
in the public interest to fight obesity and we still have a long way to 
go in this area. There is a lot of disagreement about how to solve some 
of our healthcare issues but there is no argument that eating more 
fruits and vegetables is good for you. The Fruit and Vegetable Snack 
Program is increasingly popular in Texas and we certainly want to see 
that program continued. Congress is in the process, considering 
reauthorization, of the Child Nutrition Act and while that is not part 
of the farm bill this is an important piece of legislation for the 
health of our children.
    We all know that with the budget deficit situation that all 
government programs are going to be scrutinized more than ever. In the 
last farm bill, the Specialty Crop Block Grant Program was shifted from 
being subject to annual appropriations to mandatory funding. It is 
important to our industry to keep funding for this program as one of 
the components funded as a mandatory program. This program is currently 
funded at $55 million. The money is allocated to state departments of 
agriculture. For the Texas fruit and vegetable industry this is one of 
the most important programs in the farm bill. I would like to share the 
impact about one of the projects funded under this program here in 
Texas.
    We all know how absolutely critical food safety is to the produce 
industry and American consumers. We will never be as successful in 
increasing the consumption of fruits and vegetables as we need to be if 
consumers do not have confidence in the safety of fruits and 
vegetables. The project I am speaking of was awarded to Texas AgriLife 
Extension for hands on help for producers to be trained in relation to 
food safety audits. Through 2009, 87 food safety standard operating 
procedure manuals were developed. Participants included vegetable 
packing houses, a food bank farm, fruit producers, vegetable producers 
and several greenhouse operations. A new curriculum is also about ready 
to be launched with these funds. This is an ongoing program because the 
Texas Commissioner of Agriculture has placed a high priority on food 
safety. However, without these funds, the state would not have had the 
funds to conduct this program. We urge you to continue mandatory 
funding for the Specialty Crop Block Grant Program.
    Crop insurance seems to be in the cross hairs as a program that 
this Administration wants to cut. I will not make specific comments 
about the current negotiations on the Stand Reinsurance Agreement. The 
Obama Administration has indicated one of the reasons for proposed cuts 
is that companies and agents are making too much money on the program. 
I cannot speak for other parts of the country but in the Rio Grande 
Valley I simply do not see any evidence of the kind of excesses that we 
have heard about in other parts of the country. For one thing Texas is 
a relatively high risk state for crop insurance companies so there is 
not as much money to be made on the underwriting gains as in other 
parts of the country. We urge you not to destroy the effectiveness of 
the crop insurance program. For citrus, it is really the only safety 
net we have since we do not receive any direct payments.
    The new immigration law in Arizona has sparked heated debate about 
national immigration reform. We understand the need for comprehensive 
immigration reform and support but we do not see any way that Congress 
is going to pass a comprehensive bill this year. We urge you and other 
Members concerned about the future of American agriculture to support 
AgJOBS as an important step in addressing an important part of this 
issue. Why does Texas Citrus Mutual support AgJOBS? Very simply the 
reason is this. An immigration bill is not going to pass Congress, 
particularly the Senate, unless it has bipartisan support. AgJOBS has 
that bipartisan support and it is the only sector of the economy that 
can say that. AgJOBS is not a perfect bill but it is a major 
improvement over the current situation. Texas is not a big user of the 
H-2A program but we need a guest worker program in place to meet our 
future needs or we will continue to see Texas based operations move to 
Mexico and we will see our domestic produce industry continue to shrink 
partly because we cannot get domestic workers to take jobs in packing 
houses and in the fields. Our members are saying that the labor 
situation in the Texas produce industry is not as bad as it was a few 
years ago but this current situation will not last and we need a 
workable path to meet our needs in the future, or the produce 
businesses will look elsewhere for their opportunities. With the push 
for locally grown and less food miles, Texas has an opportunity to slow 
the decline in the production of fruits and vegetables but we need a 
dependable supply of labor in order to take advantage of this 
opportunity.
    Thank you for the opportunity to submit this testimony. I will be 
happy to answer your questions at the appropriate time.

    The Chairman. Thank you very much, Mr. Lackey. We 
appreciate that.
    Mr. Holt, welcome to the Committee.

          STATEMENT OF RONNIE HOLT, COTTON, CORN, AND
    SORGHUM PRODUCER AND CROP INSURANCE AGENT, MULESHOE, TX

    Mr. Holt. Thank you. Mr. Chairman and Members of the 
Committee, thank you for this opportunity.
    My name is Ronnie Holt. I have lived and farmed in and 
around Muleshoe since 1965, and I have been a crop insurance 
agent for 32 years. It is in this capacity that I chair the 
Crop Insurance Professionals Association, known as CIPA.
    I want to emphasize four points today. My first point is 
simply to state the importance of the crop insurance. Most 
farmers and their lenders will tell you that it's vital to 
their operation, and you are not likely to get credit without 
it. Beyond that, crop insurance is WTO complaint. Taxpayers 
understand it. Farmers can tailor it to their specific needs. 
And it's a contract, so the farmers can depend on it.
    My second point relates to the Federal budget. We all know 
that the Agriculture baseline is under budget pressure. 
However, the USDA has the unique authority to approve new and 
better crop insurance products under the 508(a) process. The 
USDA should use that authority and any other means to get every 
producer up to the 85 percent level. The USDA has the tools and 
has the means to get it--the producers up to 85. And the 
House--Congress should encourage that those tools be used.
    There are a host of suggestions and ways to improve crop 
insurance in my written testimony. I will mention two.
    First, the USDA should improve farmers' APH, which has not 
kept up with technology. Today, a 75 percent policy may only 
cover 50 percent of what the farmer really expects to produce. 
The USDA's index should index these yields to keep up with the 
technology.
    Second, we ought to bring the rates down. Advanced 
varieties dominate planted acreage across the United States, 
and the reduced risk is only recognized by offering discounts 
to farmers based on the seed they plant or purchase.
    Why not reduce the premiums across the board? The farmer 
and the government would save money on premiums, and the 
government would also save on A&O and underwriting gains. This 
is not a zero sum gain, where some increase while others 
decrease. I am suggesting rates should generally come down.
    My third point concerns what I would hope crop insurance 
and commodities title will not become. There are some 
professors pitching a group-like program like ACRE and a whole 
farm revenue approach like SURE. These approaches do not work 
in this part of the country, and I suspect other places. 
Farmers cannot depend on them, and bankers won't lend credit on 
them.
    ACRE is basically government-sanctioned gambling. It 
provides zero protection on the individual farms. SURE may work 
on a monoculture producer, but it does not work on a 
diversified farm. It is a whole house insurance where the 
adjuster says, ``You won't get an indemnity for your kitchen 
fire, because you've made improvements to your living room. So 
gain cancels out loss.''
    On page five of my testimony, I offered the Committee some 
ways to fix SURE if that is the goal. ACRE and SURE are 
examples of what is wrong with cookie cutter approaches to a 
safety net. While it may work for some, it doesn't work for 
all.
    Finally, I hope the Committee urges USDA to cease further 
SRA renegotiations. Farmers are worried about walking into the 
next farm bill with $6.9 billion less than the budget. 
Reasonable people that have looked at the proposed state cuts 
to A&O say, ``Wow, there is no way that can't have an impact on 
the delivery.''
    Look at the second paragraph on page seven of my testimony 
for an example of what USDA is proposing. Hard to claim that 
that cut is not going to affect delivery and a lot of jobs.
    In contrast to this SRA process, I would go back to my 
first and second points and say, again, we ought to be looking 
at ways to strengthen crop insurance for all producers.
    In closing, please know I appreciate the Committee's 
support of the American farmer and for a good farm policy. I 
will be happy to answer any questions you may have.
    [The prepared statement of Mr. Holt follows:]

 Prepared Statement of Ronnie Holt, Cotton, Corn, and Sorghum Producer 
                 and Crop Insurance Agent, Muleshoe, TX
    Mr. Chairman, Congressman Lucas, and Members of the Committee, 
thank you for this opportunity to testify before you today.
    I am testifying not only as a cotton, corn, and grain sorghum 
farmer from Muleshoe, Texas but also as a crop insurance agent of 32 
years.
    Currently, I serve as the Chairman of the Crop Insurance 
Professionals Association, or CIPA. CIPA is comprised of veteran crop 
insurance agents from across the country, from South Carolina to 
California, from Texas to Minnesota.
    For CIPA agents, selling crop insurance is not just a business. It 
is a way to serve farmers who also happen to be our friends and our 
neighbors and whose success is important to the whole community.
    I understand that the focus of this hearing is to assess where we 
are with respect to farm policy--what is working and what is not--in 
hopes that this will light the path forward for the development and 
passage of a good farm bill in 2012.
    I will defer to the other producers who are testifying before you 
today on what the details of the farm bill's commodity title might look 
like. As a farmer, I have great faith in their leadership. As I said 
earlier, they are friends and neighbors who I know care deeply about 
the future of Texas agriculture and the communities that depend on it.
    Instead, I want to focus on the role that Federal crop insurance 
plays in the farm safety net today and the role I believe that it could 
and should play in the future.
    On the 8th of April, a Washington Post story ran concerning a 
couple of candidates for Congress who happen to be farmers. They were 
put in the position of having to defend their participation in the farm 
bill. At the end of that story, one candidate made a statement that I 
think is very true for our times: he said ``I make more off of crop 
insurance in a bad year than a subsidy will ever pay. But we have to 
keep a level playing field globally.''
    I would interpret this statement as saying, Federal crop insurance 
is a lot more important to my operation than the commodity title today, 
and given the challenges of doing business and a playing field that is 
tilted against us in many ways, both the farm bill and crop insurance 
are justified. Giving further witness to the importance of Federal crop 
insurance to producers around the country are the numbers reflecting 
its growth--nearly $9 billion in indemnities paid to farm families in 
2008 and the more than $5 billion paid in 2009. Last year alone, crop 
insurance had policies in force covering $80 billion in liability--up 
from $50 billion in 2006.
    But, if the testimonial of a farmer-turned-politician and these 
impressive statistics do not persuade a person on the importance of 
Federal crop insurance to the American farmer, then there is one other 
tell-tale sign: the fact that critics of U.S. farm policy have turned 
their guns on crop insurance. To me, that is a strong endorsement of 
the program.
    I can understand why opponents of U.S. farm policy--the likes of 
the EWG--do not like Federal crop insurance. They do not like it 
because it is easy for taxpayers to appreciate why farmers need 
insurance. They do not like it because they cannot demagogue pay 
limits, or shamelessly advertise a farmer's indemnity on their 
websites. They do not like it because crop insurance is narrowly 
tailored to producer risks and WTO-legal. And they also do not like it 
because Congress rightly made crop insurance a permanent law, 
recognizing that farmers need that stability and peace of mind.
    However, in my mind, and I think in the minds of most farmers, 
these are all compelling reasons why Congress should not just keep a 
strong Federal crop insurance in place, but why Congress should 
encourage USDA to aggressively build upon it.
    As agents, CIPA strongly supports efforts to improve and expand the 
access to quality coverage for producers under Federal Crop Insurance 
and to build upon its accelerated record of success since passage of 
the Agricultural Risk Protection Act of 2000, commonly known as ARPA. 
To this end, we are persuaded that Congress ought to encourage the 
Federal Crop Insurance Corporation to set an ambitious goal of ensuring 
that, within 5 years, all U.S. producers have the same opportunity to 
buy affordable access to quality coverage as enjoyed by producers who 
are today best served under Federal Crop Insurance.
    There is no reason why every farmer in this room and every farmer 
in this country should not be able to buy an 85% revenue policy that is 
tailored to the risks unique to the crops they grow. There is no legal 
impediment. There is no shortage of ideas on how to achieve this. All 
that is lacking right now is the will to make it happen. I would submit 
to the Members of this Committee that if there was the will to make it 
happen and the ball was moving in that direction, there would be far 
less anxiety in this room and around the country concerning what the 
2012 Farm Bill might look like.
    Toward this end, what are some of the goals that Congress should 
encourage USDA to set out to achieve?
    Well, we know that improvements to Actual Production History, or 
APH, is needed. Producers that have seen rapid technological advances 
and producers in areas that have experienced multiple year losses need 
to be able to insure more of the crop they expect to make in any given 
year rather than be bogged down by an artificially depressed yield for 
that farm that only exists in some government computer.
    Existing APH requirements that often rely on outdated or 
artificially low yields have left many farmers with what we call a 
``double-deductible.'' A double deductible is the difference between 
what the producer reasonably expects to yield and his or her APH plus 
the additional minimum 15% deductible required under a policy.
    I know that this problem has been around for a long time. But, it 
is not beyond repair. A CIPA Committee has been working with Professor 
Art Barnaby of Kansas State on potential solutions to this issue that 
are both legal and practical. Again, all that is lacking is the will to 
make it happen. As CIPA agents, we firmly believe that producers ought 
to be able to insure 85% of what they can reasonably expect to produce 
based on actuarially reliable data.
    In addition to the APH issue, improvements to the rating of certain 
crops or practices should be pursued. For instance, advanced varieties 
now dominate planted acreage in the United States. That being the case, 
would not lowering rates generally for these crops be a lot more 
efficient way of recognizing lower risk than the current piecemeal 
approach of approving endorsements, a process that seems to be more 
about seed companies competing for advantage than about helping the 
farmer.
    The benefit to reducing rates is that you are not just making 
policies more affordable to producers, allowing them to buy higher 
coverage, but you are also reducing company earnings, A&O, commissions 
to the agent, and the share of premium costs that the government pays 
and you are doing so in a way that does not injure crop insurance. 
Would this not make more sense as a way to reduce costs than what we 
are currently seeing in the SRA process? Importantly, I am not 
suggesting that any rerating be a zero sum game where rates of some 
producers go down while rates for others go up. I think there is an 
argument to be made that generally rates are just too high and should 
come down.
    As I noted earlier, improvements to policies for crops that are 
relatively underserved must be a priority, whether in the context of 
improved access to higher coverage levels, greater access to revenue 
products, or through new policies that better address the unique nature 
of the perils faced by these crops. To be clear, when I speak of 
underserved, I am not necessarily talking about some exotic new crop 
produced in a garden plot in suburban Boston. I'm speaking of any crop 
where the vast majority of producers are locked into CAT or some other 
buy-up coverage that is well below the benchmark set by corn and 
soybeans. There is a success story in the case of corn and beans that 
ought to be replicated for all crops.
    In the past 10 years, there has been a significant increase in the 
quality of coverage for producers of many crops, most notably corn and 
beans and, to a lesser extent but still meaningfully, for wheat and 
even cotton. In the next 5 years, the goal of the Federal Crop 
Insurance Corporation should be to ensure a similar increase for crops 
that are still underserved.
    Expansion of policies that are working should also be a goal. The 
Pasture Rangeland and Forage policy, for example, has shown tremendous 
promise for livestock producers. But it is being withheld from certain 
areas due to obstacles that are not imposed by Congress.
    Development of new products to support the growth of advanced fuels 
under the new RFS2 regulation just released should also be a priority. 
The EPA projects over 11 billion gallons of biodiesel from corn stover 
and switchgrass will help meet the 36 billion gallon mandate for 
renewable fuels by 2022. If Washington is serious about advanced 
biofuels, then it needs to move forward in providing risk management 
tools to farmers who are willing to produce the necessary feedstock.
    Use of crop and yield monitoring technology to better assess crops 
and more narrowly tailor coverages should also be pursued. The west 
Texas area presents a great example. No doubt flying in you saw the 
vast circles (center-pivot irrigation systems) that have become the 
predominant technology for growers to irrigate their crops evenly and 
efficiently. What you may not know is that under current RMA 
guidelines, the irrigated circles and the dryland corners have to 
either be averaged and insured together, or in any case insured at the 
same level. But with the prospect of modern yield monitors combined 
with GPS systems, we could and should be able to tailor the crop 
insurance policies by practice and distinguish the yields accordingly--
and that will mean more relevant and more valuable insurance for 
growers and their lenders who want to hedge the unique risks on 
different parts of a farm.
    Finally, the streamlining of compliance mechanisms so that 
integrity is ensured without placing undue burdens on the delivery 
system or producers is important. There are lots of examples out there 
where the private and public sector machinery of crop insurance gets 
bogged down in costly and cumbersome processes focused more on the 
means of protecting program integrity than protecting program integrity 
itself. The $100,000 loss threshold for automatic review and the 3 
years of data required in the case of a review are good examples. 
Everybody has noticed the new price paradigm for crops except those 
involved in writing these rules that only add time and cost to delivery 
and a delay in indemnities to farmers.
    Having said what we believe the role of crop insurance is, can, and 
should be, I also want to say a few words about what we think it should 
not be. There is a big push from the environmental crowd and from some 
college professors to thrust farmers into whole farm revenue policies 
and group risk policies, or maybe a combination of the two. These sorts 
of approaches may work fine in some academic white paper, but they do 
not work on the farm. I would offer ACRE, SURE, and AGR as exhibits A, 
B, and C.
    Regarding ACRE, it might be that some of us here in the Bible Belt 
just have a problem with gambling, especially with taxpayer money, but 
the whole concept seems wrong to me. Farmers I talk to liken ACRE to 
buying a lottery ticket and then crossing your fingers that Washington 
calls the right numbers. You could lose your shirt and receive nothing 
from ACRE, or you could have a good crop and prices and still receive a 
government payment. There is not a lot of participation in ACRE in 
these parts because our farmers cannot afford to gamble like that. But, 
where there is participation, there are both big winners and big losers 
in the wager, depending on what you grow and the state you farm in. 
There is talk about ``fixing'' ACRE so the wager is made at the county 
or national level rather than the state level. In my view, speaking to 
the county level scenario anyway, having had experience with GRIP 
policies, it is still not ideal. There is no safety in numbers when you 
are trying to get an operating loan or when you have a loss on your 
farm. There's just you. The only merit I see in this county-based 
revenue concept is the legislation that Congressman Neugebauer has 
introduced which essentially allows producers to buy this kind of 
coverage--basically GRP or GRIP--as a wrap-around policy on top of 
coverage that is individualized to your farm. This kind of coverage 
could help producers in the event of a widespread weather event.
    The second example is the whole farm revenue disaster program 
called SURE. From all we have seen (the FSA is just now working losses 
from 2008), SURE has not worked very well for farmers except those 
engaged in monoculture. In this area, that tends to be landlords who 
may have an old family interest in 160 acres, but not the 2000 acre 
dryland/irrigated corn, sorghum, cotton, black-eyed pea farmer/stockman 
who has diversified his risks and actually has a lot of skin in the 
game. It is ironic that the academic community would want to advance a 
whole farm revenue concept when that concept actually encourages 
monoculture. Unlike ACRE, however, I do think that SURE can be fixed to 
address some of its more serious problems. But, the fixes ultimately 
involve making a whole farm revenue program less of a whole farm 
revenue program. And, that is my point: whole farm revenue catches on 
in Washington because it does not cost much, but it does not catch on 
out in the countryside because you get exactly what you pay for.
    Apart from the discussion about whole farm revenue concepts, let me 
offer a few suggestions on how SURE could be made to work better for 
producers if lawmakers opt to extend it:

    (1) Base the SURE program guarantee calculation on the higher of 
        the crop insurance price election or the target price for the 
        commodity. This would address a major problem that has been 
        unique to cotton and which virtually precludes cotton farmers 
        from getting any assistance under SURE.

    (2) Strike the counting of 15% of direct payments received from the 
        calculation of farm revenue. The inclusion of this provision 
        disproportionately affects rice producers.

    (3) Change the definition of ``eligible producer on a farm'' when 
        assessing losses on a farm-by-farm basis as has been done in 
        past ad hoc disaster programs. This fix would address the 
        single biggest problem with SURE which is this: by the time you 
        aggregate everything on a ``whole farm basis,'' the likelihood 
        of receiving any assistance is very small. If you think this 
        sounds expensive, bear in mind that the maximum per unit you 
        could possibly get under ad hoc assistance was considerably 
        more than the maximum you would get under SURE--about 30% 
        versus 10%--though the likelihood of getting something under a 
        unit-by-unit SURE would be greater.

    (4) Direct USDA to provide producers more timely payments by 
        either: (1) using an estimated national average market price 
        instead of waiting till the end of the marketing year; or (2) 
        direct the USDA to use the crop insurance price election for 
        determining revenue instead of a national average market price. 
        This would certainly simplify the program but also change it to 
        address yield losses (like historical disaster programs) 
        without inviting the anomalies caused by bringing season 
        average prices into the equation. For example, I know an agent 
        in South Carolina dealing with peach farmers who suffered 85% 
        losses but who received nothing under SURE due primarily to 
        this problem. That is not right.

    Finally, regarding the third real-life example, AGR, I know that 
some defense has been offered to explain why so few want to buy this 
kind of coverage. But, the simple truth is that farmers have voted with 
their feet. The thing does not pencil out.
    Two final thoughts I would offer to the Committee on the subject of 
what crop insurance should not look like.
    First, recognize that regions are different, crops are different, 
practices are different. As such, it would be a very serious mistake to 
try to shoehorn all farmers, regions, and practices into one cookie-
cutter policy. It will not work. We have seen this in the case of ACRE 
and SURE which clearly do not work for all regions and crops. We have 
seen this in the case of rice and specialty crops where policies for 
corn and beans just do not work. In fact, I am hard-pressed to think of 
where that has not been the case.
    Second, earlier in my remarks, I went into a whole host of reasons 
why Federal crop insurance should continue to be delivered by the 
private sector and written on private paper. I know that one would not 
expect to hear anything different from an agent who earns part of his 
living selling crop insurance. But I can tell you that I hold this 
sentiment as strongly as a producer as I do an agent and I believe the 
vast majority of producers in this room would share this view. Anybody 
who has waited on an ad hoc disaster or SURE payment; anybody who has 
had their farm payments posted on a scurrilous website; anyone who has 
faced arbitrary limits on benefits or constantly changing eligibility 
rules; anybody who has fought and lost a case in the WTO, despite all 
the facts and evidence; and anybody who has had to go out and put in a 
crop with no earthly idea what the devil the farm bill will look like 
that will govern that crop--anybody who has faced any or all of these 
circumstances appreciates a private insurance policy. Maybe the only 
person who appreciates it more than the farmer is his lender.
    Are there problems in Federal crop insurance that need fixing? Yes, 
there are and I have listed just a few. Are the problems frustrating 
for producers and agents? Give me or any farmer in this room an 
audience after this hearing and we will be glad to bend your ear on the 
subject. But, in the end analysis, when all is said and done, none of 
us would want to--and very few of us could--continue farming without 
it.

    My bottom line for you is this: we have a good foundation. Much of 
the serious progress we have made has been made in just the last 
decade. Do not quit now. Certainly do not turn back. Let us keep moving 
forward.

    Of course, you can hardly talk about Federal crop insurance these 
days without bringing up the Standard Reinsurance Agreement, or the 
SRA.
    I know that there is a great deal of talk about the negotiations 
going smoothly and that an agreement is nearly at hand. I am here to 
tell you that that is not the case. A very black and white picture has 
been painted in this process that would describe the conflict this way: 
on one side there are those who want cut to company profits and agent 
commissions and on the other are those who would fight any cuts tooth 
and nail. That is a misrepresentation.
    I do not know of a crop insurance company or an agent who did not 
enter into this SRA renegotiation expecting and accepting cuts. But 
nobody in the private sector expected USDA to propose between $6.9 
billion and $8.4 billion in cuts when Congress made clear in 2008 that 
it thought $2 billion in additional cuts was too much.
    We went into the discussion believing that there were a couple of 
reasonable objectives to be met. First, the Congress directed USDA to 
evaluate the risk sharing involved in crop insurance to make for sure 
that companies were bearing enough of the risk. Second, USDA was to 
examine and recommend to Congress some different ways of calculating 
A&O to avoid peaks and valleys, such as the peak we saw in 2008. What 
we got was something very different.
    On the A&O side, we saw a usurpation of Congressional authority by 
USDA in its attempt to establish a whole new methodology for 
calculating A&O. Worse, the new methodology USDA came up with would 
succeed in eliminating the peaks in A&O by creating a permanent valley, 
using artificially low and fixed crop reference prices as the ceiling 
for calculating A&O while providing for no floor. In some cases, the 
reference price would be as low as 31% below the projected prices for 
the crop as forecast by USDA and CBO over the next 10 years.
    In theory, the new A&O calculations are being pushed to avoid 
another year like 2008, even though A&O has already dropped by 21% in 
2009 and are expected to drop again in 2010, both as a natural 
consequence of lower crop prices and, thus, lower premiums.
    So, the situation of 2008 is already correcting itself. Still, 
despite our concern that USDA is exceeding its authority under the law 
and certainly going too far in trying to correct a 1 year anomaly, as 
agents we offered what we thought was a very logical solution to the 
problem: an A&O reference price band based on a rolling average, taking 
out the highs and lows. Whether that fair, common sense solution gains 
any traction still remains to be seen.
    But there is little uncertainty about the impact of the A&O 
proposal currently on the table. A state-by-state glimpse at what 
happens to A&O speaks volumes. In Minnesota, for example, in 2008 you 
had $175 million in A&O. That dropped down to $112 million in 2009 due 
largely to price election declines, volatility factors and the 12% (2.3 
point) cut from the farm bill. In 2010, A&O is down again, this time to 
$101 million, because of the volatility factors and price moderation. 
For 2011, our best industry analysts believe that A&O number would be 
reduced again under USDA's plan to $72 million. Now, unlike Texas, 
Minnesota is a profitable place for companies to do business and, 
therefore, it is a higher commission state. So, assume for the moment 
that all the A&O in Minnesota is paid out in agent commissions. With 
the 80% commission cap being proposed on top of the proposed capped on 
A&O, the $72 million statewide A&O would translate into a maximum of 
$57 million that could be paid in commissions in the state--less than 
\1/3\ of the compensation that was paid to those businesses 3 years 
ago, and roughly half of what was paid last year. You don't have to be 
in the crop insurance business to know what happens when your income 
stream is cut in half.
    The same thing would happen throughout the country. A plain look at 
the numbers reveals that this is not just a smoothing out of A&O to 
avoid what occurred in 2008, as has been argued. The numbers uncover 
the obvious: you cannot cut A&O to such an extent and not expect it to 
have an impact on private sector delivery, on the service to the 
farmer, including adjustments. And you cannot cut A&O to such an extent 
and expect that it will not have an impact on jobs in rural 
communities. I do not know whether this fact is a consideration in this 
process but this SRA is going to cost people their jobs.
    One of the things that has troubled me so much about this SRA 
renegotiation is that it has taken on the look and feel of how U.S. 
farm policy has been debated in recent years. The discussion has really 
degenerated.
    For instance, on facts, USDA points to the increased cost of 
delivery per policy to justify such deep cuts, citing increased A&O 
costs while the number of policies has slightly declined, while 
ignoring the nearly doubling of sales, as measured by premium, over the 
same period of time. There is an expression here in west Texas that 
coming close to the truth is coming close, but it is still not the 
truth. With respect, this handling of facts is something I expect to 
see from the EWG and that ilk but not from the United States Department 
of Agriculture.
    Remarks made by USDA officials to the House Agriculture 
Appropriations Subcommittee this year and last year are just as 
troubling. In defending cuts in premium support to farmers last year, 
one USDA official stated, ``When crop insurance was first issued, it 
was . . . something that had to be marketed. It was something that had 
to be incented. It was something . . . where producers had to be 
encouraged to participate. Today, that is not the case. Many banks are 
now making it a condition of loans.'' I agree that lenders usually 
require crop insurance. But I do not believe this requirement somehow 
eliminates the need to help make premiums affordable to farmers.
    This year, in defense of cuts to private sector delivery, a USDA 
official stated, ``And the reality is that most bankers today require 
crop insurance as a condition of loans, so it's not all that difficult 
to sell this product.'' Unfortunately, simply mandating something does 
not make it easy.
    To most of us in the countryside, the magnitude of the cuts 
proposed to crop insurance and the rough policy used to squeeze out 
those savings suggest that the motivating factor behind the whole 
exercise is more about robbing Peter to pay Paul, about using crop 
insurance dollars to pay for something else. The media reports I have 
read speculate that the something else is nutrition. If that is the 
case, then it is misguided and unfortunate. The SRA, at least as it 
stands, threatens serious injury to Federal crop insurance, to the 
farmers crop insurance serves, and to the men and women who work hard 
every day to deliver a product that farmers need and their lenders 
require. It represents a serious setback for the agriculture budget, 
for crop insurance, the farmer, and jobs in rural communities. It is a 
setback that I hope never materializes.
    In closing, let me say that CIPA stands proudly with our farmers 
and ranchers who put food on our tables, cloths on our backs, and fuel 
in our pumps. They deserve a strong safety net. But Congress need not 
wait for the 2012 Farm Bill to further the cause. We can begin here and 
now by strengthening Federal crop insurance for all our nation's 
producers.
    I would be happy to answer any questions this panel may have.

    The Chairman. Thank you very much, Mr. Holt.
    Mr. Parker, welcome to the Committee.

    STATEMENT OF JOE PARKER, Jr., CATTLE PRODUCER, BYERS, TX

    Mr. Parker. Thank you for the opportunity to present the 
Texas cattle industry's perspective on the 2012 Farm Bill.
    My name is Joe Parker. I'm from Byers, Texas, and I'm a 
cattle producer in this area. I also serve as First Vice 
President of the Texas and Southwestern Cattle Raisers 
Association, TSCRA. TSCRA supports the farm bill that will 
enhance the individual's right of free choice in land use, soil 
conservation, water conservation, energy use, and development, 
in utilizing working lands conservation methods that are based 
on sound science and economics. State laws and individual 
rights should be pre-eminent in the use of water and other 
natural resources.
    To accomplish our priorities, we strongly support 
eliminating overlap and/or redundancy in current programs and 
improving efficiency of existing programs. And we also support 
the technical assistance ranchers receive on the ground from 
the Natural Resources Conservation Service.
    Federal agricultural policies should be based on free, 
private enterprise and a competitive market system. We support 
a rancher's ability to market cattle however, whenever, and to 
whomever.
    Federal agricultural policies should not be changed to 
guarantee a profit, restrict the operation of the competitive 
marketplace, or dictate who can or cannot own cattle.
    Private enterprise alternatives in marketing and risk 
management should be developed and encouraged as the preferred 
alternative to government programs.
    While the long-term goal of Federal agricultural policy 
should be to promote a free market enterprise and maintain a 
viable agricultural industry and economy in the United States, 
it is essential to recognize that U.S. ranchers compete in a 
global marketplace.
    In this global market, U.S. ranchers face competition from 
foreign producers who benefit from an incredibly complex mix of 
subsidies, tariffs, and state trading enterprises, as well as a 
broad range of other devices, to deny market access to U.S. 
goods. In addition, many of these ranchers are not held to the 
same standards of regulatory compliance as U.S. ranchers and, 
thus, enjoy a significant cost advantage.
    And any government programs which would have a substantial 
negative effect on cattlemen need to be opposed and prevented.
    It's not in the best interests of U.S. ranchers for 
government to set prices, underwrite inefficient production, or 
manipulate domestic supply, demand, cost and/or price.
    TSCRA will strongly oppose direct cash payments to any 
segment of the livestock industry for the purpose of offsetting 
loan market prices.
    Ninety-six percent of the world's consumers reside outside 
of the U.S. borders, and we recognize that the growth and 
profitability of the U.S. cattle and beef industry is closely 
tied to our ability to market our products to those consumers. 
We support international trade policies that aggressively 
pursue expanded market access for U.S. beef, enforce trade 
agreements that are based on internationally recognized 
standards and guidelines, and hold our trading partners 
accountable for their international trade commitments.
    We support the modification of market promotion programs to 
meet current and future marketing trends and opportunities in 
worldwide beef trade.
    Ranchers recognize the value and need for growth of 
conventional and renewable energy. However, many of these 
expanded and new energy sources impact the market, land, water, 
and profitability of ranchers. Ranchers would like the ability 
to monitor and evaluate any energy source that impacts the 
cattle industry, or is based on agricultural commodities, 
waste, or by-products to determine their effects on the 
industry.
    Energy policies should be supported by market demand, and 
not Federal subsidies. In addition, the cattle industry will 
continue to oppose putting food and fuel in competition with 
each other.
    Animal agriculture is based on the humane care for cattle, 
horses, and other livestock. The farm bill should not be a 
platform for extremist organizations to push their anti-meat or 
anti-agricultural agendas.
    As the U.S. imports and exports more agricultural 
commodities, the Animal and Plant Health Inspection Service 
should be more robust in its activities to protect U.S. 
producers.
    Thank you very much for the time that you have spent, and 
we appreciate working together for a comprehensive farm bill. 
Please contact us if we can assist you in any way. Thank you.
    [The prepared statement of Mr. Parker follows:]

   Prepared Statement of Joe Parker, Jr., Cattle Producer, Byers, TX
    Chairman Peterson, Ranking Member Lucas, and Members of the 
Committee:

    Thank you for the opportunity to present the Texas cattle 
industry's perspective on the 2012 Farm Bill. My name is Joe Parker, 
Jr. and I am a beef cattle producer from Byers, Texas. I also serve as 
First Vice President of the Texas and Southwestern Cattle Raisers 
Association (TSCRA).
    TSCRA is the largest and oldest livestock association in Texas. 
With more than 15,000 beef cattle producers, ranching families and 
businesses that manage approximately four million head of cattle on 
51.5 million acres of range and pasture land, TSCRA members have a 
vested stake in the outcome of this legislation.
    Texas ranchers are dependent upon this nation's agricultural system 
and infrastructure to raise, feed, transport, and market our cattle in 
order to provide safe and affordable beef for America's table; and as 
such, we are interested in seeing the cattle industry remain healthy 
and viable. It is not in ranchers' best interest for the government to 
implement policy that sets prices; underwrites inefficient production; 
or manipulates domestic supply, demand, cost, or price.
Natural Resource and Conservation Policy
    TSCRA supports a farm bill that will enhance the individual's right 
of free choice in land use, soil conservation, water conservation, 
energy use, and development utilizing working lands conservation 
methods that are based on sound science and economics. State laws and 
individual rights should be preeminent in the use of water and other 
natural resources.
    To accomplish our priorities we strongly support eliminating 
overlap and/or redundancy in current programs and improving efficiency 
of existing programs. We also support the technical assistance ranchers 
receive on the ground from Natural Resources Conservation Service 
(NRCS).
Marketing Policy
    Federal agricultural policy should be based on a free, private 
enterprise, competitive market system. We support a rancher's ability 
to market cattle however, whenever, and to whomever.
    Federal agricultural policy should not be changed to guarantee a 
profit, restrict the operation of the competitive marketplace, or 
dictate who can or cannot own cattle.
    Private enterprise alternatives in marketing and risk management 
should be developed and encouraged as the preferred alternative to 
government programs.
Commodity Programs Policy
    While the long term goal of Federal agricultural policy should be 
to promote a free market and enterprise and maintain a viable 
agricultural industry and economy in the United States, it is essential 
to recognize that U.S. ranchers compete in a global marketplace. In 
this global market, U.S. ranchers face competition from foreign 
producers who benefit from an incredibly complex mix of subsidies, 
tariffs, and state trading enterprises, as well as a broad range of 
other devices to deny market access to U.S. goods. In addition, many of 
these ranchers are not held to the same standards of regulatory 
compliance as U.S. ranchers and, thus, enjoy a significant cost 
advantage.
    Any government programs which would have a substantial negative 
effect on cattlemen need to be opposed and prevented.
    Any commodity program must include thorough consideration of the 
impact of subsidies and guarantees for given commodities on other 
commodity sectors and on domestic and foreign markets before the 
program is adopted. Recognizing the high degree of government 
intervention in agriculture and the potential economic disruption of an 
immediate end to commodity programs, TSCRA will support a transition or 
phase-out period for programs that may be eliminated.
    It is not in the best interest of U.S. ranchers for government to 
set prices, underwrite inefficient production, or manipulate domestic 
supply, demand, cost and/or price.
    TSCRA will strongly oppose direct cash payments to any segment of 
the livestock industry for the purpose of offsetting low market prices.
Nutrition Programs
    USDA should maintain the role of establishing the human nutrition 
policy for the Federal Government and providing proper human nutrition, 
food security, research, and education for America.
Credit Programs
    Federal agricultural policy should encourage the availability of 
capital to ranchers at competitive rates in order to maintain a healthy 
business environment. This will result in the continued viability of 
U.S. ranching operations.
Trade Policy
    Ninety-six percent of the world's consumers reside outside U.S. 
borders. We recognize that the growth and profitability of the U.S. 
cattle and beef industry is closely tied to our ability to market our 
products to those consumers. We support international trade policies 
that aggressively pursue expanded market access for U.S. beef, enforce 
trade agreements that are based on internationally recognized standards 
and guidelines, and hold our trading partners accountable for their 
international trade commitments.
    We support the modification of market promotion programs to meet 
current and future marketing trends and opportunities in worldwide beef 
trade.
Research Funding
    Research on animal diseases and pests, economics, production 
practices, nutrition, food safety, environmental impacts, and the 
impact of environmentally sensitive lands and species on agricultural 
operations is a critical component in advancing animal agriculture. 
Increased investment in this type of research is vital to the security 
and viability of our agricultural industry and food supply.
Energy Policy
    Ranchers recognize the value and need for growth of conventional 
and renewable energy. However, many of these expanded and new energy 
sources impact the market, land, water, and profitability of ranchers. 
Ranchers would like the ability to monitor and evaluate any energy 
source that impacts the cattle industry and/or is based on agricultural 
commodities, waste, and/or byproducts to determine their effects on the 
industry. Energy policies should be supported by market demand, not 
Federal subsidies. In addition, the cattle industry will continue to 
oppose putting food and fuel in competition with each other.
Animal Activism
    Animal agriculture is based on the humane care for cattle, horses, 
and other livestock. The farm bill should not be a platform for 
extremist organizations to push their anti-meat and/or anti-agriculture 
agendas.
Animal Health
    As the U.S. imports and exports more agricultural commodities, the 
Animal and Plant Health Inspection Service (APHIS) should be more 
robust in its activities to protect U.S. agricultural producers from 
foreign animal diseases and pests. All APHIS activities and 
responsibilities should remain under USDA oversight and not other 
Federal agencies.
    We appreciate the opportunity to work together on a comprehensive 
farm bill and appreciate your work on these issues. Please contact us 
if we can assist you.
            Sincerely,

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Joe Parker, Jr.
First Vice President.

    The Chairman. Thank you. Thank you very much, Mr. Parker. 
We appreciate that.
    Mr. Murden, welcome to the Committee.

          STATEMENT OF DALE MURDEN, SUGARCANE, CITRUS,
    VEGETABLE, SOYBEAN, AND SORGHUM PRODUCER, MONTE ALTO, TX

    Mr. Murden. Thank you, Mr. Chairman, Members of the 
Committee.
    On behalf of the 126 sugarcane farmers of the Rio Grande 
Valley Sugar Growers, I want to express my deep appreciation 
for your leadership and bipartisanship in the successful 
passage of the 2008 Farm Bill. We look forward to working with 
you guys on the 2012 Farm Bill as well.
    My name is Dale Murden, and I currently grow sugarcane, 
citrus, grains, cotton, vegetables, and soybeans near my 
hometown of Monte Alto, Texas. In addition to being Chairman of 
the Board for the Rio Grande Valley Sugar Mill, I'm Past 
Chairman of the National Sorghum Producers and a current member 
of the Board of Directors of the Texas Farm Bureau, Texas 
Citrus Producers Board, and the Texas Grain Sorghum 
Association.
    RGV Sugar Growers is a member-owned cooperative comprised 
of growers in a three-county area. Together, our members 
produce more than 1.5 million tons of sugarcane each year, 
yielding nearly 160,000 tons of raw sugar and 60,000 tons of 
molasses. RGV Sugar Growers is one of the top ten producers of 
raw sugar in the United States.
    RGV Sugar Growers employs up to 500 workers in a normal 
producing year, which culminates with a harvesting period from 
October to April. Annual payroll of our cooperative exceeds $12 
million, with an annual operating budget of more $32 million.
    The sugar provisions in the 2008 Farm Bill have given our 
producers confidence in the stability of a domestic sugar 
industry. Today, I will commend the sugar program's 
effectiveness, but I also want to point out a few areas of 
concerns before we do that.
    In January, we had a hard freeze in south Texas, and that 
proved that the Federal crop insurance program and the new 
permanent disaster program don't adequately cover our style of 
farming in the Valley.
    I liked Mr. Holt's testimony. Affordable crop insurance at 
higher levels of coverage isn't available for cane and many of 
the fruits and vegetables grown in south Texas. The SURE 
program won't cover losses to one crop if overall on-farm 
revenues from the other crops grown on that farm are unaffected 
by a natural disaster.
    The Biomass Crop Assistance Program, BCAP, created in the 
2008 Farm Bill, and whose intention was to help biomass 
producers offset specific costs, did not make payments on our 
cane applications; yet approved $170 million in funds to other 
biomass producers.
    However, I do want to focus on one program that is working 
and explain why, because our future ultimately depends on good 
farm and trade policy.
    The United States is the world's fifth-largest sugar 
producer. We're also the fifth largest sugar consumer and the 
world's second largest net importer. The U.S. is one of the 
most open sugar markets in the world and provides guaranteed 
access to 41 countries, as it is required to do under trade 
laws.
    Our sugar farmers are among the lowest cost producers in 
the world. We are doubly proud of this distinction because we 
have achieved it while being fair to our workers and 
responsible stewards of the land.
    U.S. sugar producers are globally competitive, but for 
decades we have been threatened by unfair competition. Roughly, 
120 countries produce sugar and all their governments intervene 
in their sugar markets in some way. Many countries subsidize 
their producers and dump their surpluses on the world market 
for whatever price it will bring.
    This depressed, so-called world price has averaged below 
actual costs of producing sugar for many years. American 
producers are competitive, but cannot be expected to compete 
against each of these foreign treasuries and unfair predatory 
trade practices.
    Trade agreements such as the WTO and NAFTA force the United 
States to provide duty-free access for 1.4 million short tons 
of sugar each year, whether the country needs the sugar or not.
    Congress, in its wisdom, designed a sugar policy in the 
2008 Farm Bill that is working to the considerable benefit of 
consumers, and at zero cost to the taxpayers, and is giving 
sugar farmers a chance to survive, plus it fully complies with 
the rules of the WTO.
    Under this market-balancing approach, the USDA has retained 
its authority to limit domestic sales of sugar. Producers who 
exceed their allotment must store the excess at their own cost, 
not the government's.
    If imports exceed the difference between the domestic 
market allotments and consumption, the USDA will divert surplus 
sugar into fuel ethanol production and restore the balance to 
the sugar market for food. This provision has not yet been 
needed, and the government forecasters expect it will not be, 
over the course of this farm bill.
    The current farm bill benefits the American sugar consumer 
and the American taxpayer, it's clear. American food 
manufacturers and consumers can count on reliable supplies of 
sugar, and it has been produced responsibly and is reasonably 
priced, high in quality, and safe to consume.
    U.S. wholesale and retail prices are below the average of 
the rest of the world, and in real terms, corrected for 
inflation, have declined substantially over the past 3 decades. 
Sugar producers receive no government payments. Sugar is the 
only major commodity program that operates at no cost to the 
taxpayers, and government projections through 2020 say it will 
remain at no cost over all of these years.
    American sugar farmers are grateful to the Congress for 
crafting a sugar policy that balances supply and demand, 
ensures consumers dependable, high-quality supplies, and is 
improving market prospects for sugar producers. The policy 
achieves all of these goals at zero cost to the American 
taxpayers.
    We would strongly urge the continuation of this successful 
policy in the next farm bill. Thank you again, Mr. Chairman, 
for holding this important hearing, and for all that you and 
the Committee do for American agriculture. We look forward to 
working with y'all in the future.
    [The prepared statement of Mr. Murden follows:]

   Prepared Statement of Dale Murden, Sugarcane, Citrus, Vegetable, 
             Soybean, and Sorghum Producer, Monte Alto, TX
    Thank you, Mr. Chairman and Members of the Committee, for convening 
this hearing. On behalf of the 126 sugarcane farmers of Rio Grande 
Valley Sugar Growers (RGVGS), Inc., I want to express my deep 
appreciation for your leadership and bipartisanship in the successful 
passage of the 2008 Farm Bill. We look forward to working with you on 
the 2012 Farm Bill as well.
    My name is Dale Murden, and I currently grow sugarcane, citrus, 
grains, vegetables and soybeans near my hometown of Monte Alto, Texas. 
In addition to being Chairman of the Board for the Rio Grande Valley 
Sugar Mill, I am also a member of the Hidalgo County Farm Bureau, Delta 
Lake Irrigation District, Texas Citrus Producers Board and the Hidalgo 
County AgriLife Program Committee. I was recently Chairman of the 
National Sorghum Producers and a trade advisory team member to the U.S. 
Grains Council.
    Rio Grande Valley Sugar Growers, Inc. is a member-owned cooperative 
comprised of growers in a three-county area. Together, our members 
produce more than 1.5 million tons of sugarcane each year, yielding 
nearly 160,000 tons of raw sugar and 60,000 tons of molasses. RGVSG is 
one of the top ten producers of raw sugar in the United States.
    Rio Grande employs up to 500 workers in a normal producing year, 
which culminates with a harvesting period from October to April. Annual 
payroll of our cooperative exceeds $12 million, with an annual 
operating budget of more than $32 million.
    In Texas, where more than 8,000 jobs rely on a strong U.S. 
sweetener industry, RGVSG alone accounts for up to 11 percent of the 
total gross revenues produced by Valley agriculture every year. Member 
growers utilize over 40,000 acres of rich South Texas farmland in the 
cultivation of sugarcane crops.
    The sugar provisions in the 2008 Farm Bill have given our producers 
confidence in the stability of a domestic sugar industry. Today, I will 
commend the sugar program's effectiveness but I also want to point out 
areas where we have some problems.
    In January, a bad freeze in south Texas proved that the Federal 
crop insurance program and the new permanent disaster program don't 
adequately cover our style of farming in the Valley. Affordable crop 
insurance at higher levels of coverage isn't available for cane and 
many of the fruits and vegetables grown in south Texas. Also, the SURE 
program won't cover losses to one crop if overall on farm revenues from 
the other crops grown on that farm are unaffected by a natural 
disaster.
    Finally, the Biomass Crop Assistance Program (BCAP), created in the 
2008 Farm Bill and whose intention was to help biomass producers offset 
specific costs, did not make payments on our cane applications yet 
approved $170 million in funds to other biomass producers.
    However, I do want to focus on one program that is working and 
explain why because our future ultimately depends on good farm and 
trade policy.
Food Security
    Sugar is an essential ingredient in our nation's food supply. As an 
all-natural sweetener, bulking agent and preservative, it plays an 
important role in about 70% of processed food products and is called 
for in a multitude of favorite home recipes. Dependence on unreliable 
and unstable foreign suppliers is a threat to our food security, which 
is why a strong, diversified and reliable domestic industry has long 
been recognized as important to the nation.
    U.S. sugar producers are globally competitive, but for decades we 
have been threatened by unfair competition. Roughly 120 countries 
produce sugar and all their governments intervene in their sugar 
markets in some way. Many countries subsidize their producers and dump 
their surpluses on the world market for whatever price it will bring. 
This depressed, so-called ``world price'' has averaged below actual 
global costs of producing sugar for many years. American producers are 
competitive, but cannot be expected to compete against these foreign 
treasuries and unfair predatory trade practices.
Importance, Size, Efficiency
    In addition to the critical role it plays in local economies, sugar 
is a significant job producer and revenue-generator nationally. The 
U.S. sugar producing industry, with sugarbeets and sugarcane grown or 
processed in 18 states, generates over 146,000 jobs and more than $10 
billion per year in economic activity. These jobs range from the cane 
fields of Hawaii and the beet fields of Wyoming to the cane sugar 
refineries in New Orleans, New York City, and other cities.
    The United States is the world's fifth-largest sugar producer. We 
are also the fifth-largest sugar consumer and the world's second-
largest net importer. And, we are good at what we do. Our sugar farmers 
are among the lowest cost producers in the world. We are doubly proud 
of this distinction because we have achieved it while being fair to our 
workers and responsible stewards of the land. Farmers in the developing 
world, who dominate the world sugar market, generally operate with 
little or no enforced requirements for worker safety and benefits, or 
for air, water, and soil protection. Our standards, and compliance 
costs, are among the highest in the world.
Restructuring
    Despite our efficiency, we are an industry that has been under 
enormous stress. From 1985 until 2009, we did not receive any increase 
in our price support level. Over this long period of essentially flat 
nominal prices, the real price we received for our sugar dropped 
sharply because of inflation. (Figures 1-2)
    Only the producers who could match the declining real price with 
efficiency gains and lower production costs were able to survive. More 
than half could not. From 1985 to 2009, 54 of America's 102 cane mills, 
beet factories, and cane sugar refineries shut down, with terrible 
consequences for the local families and communities. Just since 1996, 
35 mills, factories, and refineries have closed. (Figures 3-4)
Trade Challenges
    The U.S. is one of the most open sugar markets and one of the 
world's largest sugar importers. The U.S. provides access to its market 
to 41 countries, as it is required to do under trade laws. Virtually 
all are developing countries, and most are highly supportive of U.S. 
sugar policy because it provides an import price at which many can 
recover their costs of production.
    In addition to coping with the problems of rising costs, pests, 
disease, and natural disasters, American sugar farmers have had to deal 
with another threat: trade agreements that have ceded more and more of 
the American sugar market to foreign producers--even if the foreign 
producers are subsidized and inefficient. And more such concessions are 
being contemplated.
    Trade agreements force the U.S. to provide duty-free access for 1.4 
million short tons of sugar each year, whether the country needs the 
sugar or not. This amounts to about 15% of domestic sugar consumption.
    In addition, under the NAFTA, Mexico now enjoys unlimited access to 
the U.S. sugar market. It is difficult to predict how much sugar Mexico 
might send north each year. Key variables include Mexican sugar 
production, government decisions (\1/4\ of the sugar mills are owned 
and operated by the Mexican Government), and the pace at which corn 
sweetener, mostly from the U.S., replaces sugar in the massive Mexican 
beverage industry. Mexican sugar exports to the U.S. have varied widely 
in the past, and could in the future--over 1.4 million short tons last 
year, but only about 0.5 million forecast for this year. (Figure 5)
    Furthermore, the U.S. is negotiating a Doha Round of the WTO that 
would result in additional market access concessions. The TPP (Trans-
Pacific Partnership) trade negotiations, recently launched by the Obama 
Administration, could also eventually result in substantial market 
commitments for sugar to the many countries lining the Pacific Rim. 
Such trade concessions threaten to reduce U.S. sugar producers' access 
to our own market even further, and reduce prices as well, making it 
impossible for those of us who are struggling to survive. (Figure 6)
Previous Farm Bill
    In the 2002 Farm Bill, USDA had only two tools to balance U.S. 
sugar supplies with consumer demand.

    1. It could limit foreign supplies to minimum import levels 
        required by the World Trade Organization (WTO) and other trade 
        agreements.

    2. It could limit domestic sugar sales through marketing 
        allotments. Each year, USDA would forecast domestic sugar 
        consumption, subtract required imports, and allow U.S. 
        producers to supply the balance.

     If U.S. production was insufficient to fill demand, USDA 
            could increase imports by expanding the tariff-rate quota 
            (TRQ).

     If U.S. production exceeded the allotment quantity, 
            American producers had to store the excess at their own 
            expense, not the government's.

    This market-balancing system worked reasonably well until 2008, 
although misjudgments in setting the TRQ in 2006 seriously depressed 
the U.S. sugar market. That's when Mexico gained unlimited access to 
our market under the NAFTA, and USDA effectively lost control of the 
market.
The 2008 Farm Bill
    Congress, in its wisdom, designed a sugar policy that is working to 
the considerable benefit of consumers and at zero cost to taxpayers, 
and is giving the remaining American sugar farmers a chance to survive. 
And, it fully complies with the rules of the WTO.
    While retaining the basic-market-balancing tools described above, 
Congress made a number of important improvements in 2008. The Farm Bill 
minimizes the erosion of American sugar farmers' share of their own 
market by limiting reductions in their marketing allotments to not less 
than 85% of consumption. It's worth noting that in many years, imports 
amount to much more than 15% of the U.S. market.
    If imports exceed the difference between domestic market allotments 
and consumption, USDA will divert surplus sugar into fuel ethanol 
production and restore balance to the sugar market for food. The added 
ethanol production would be consistent with national goals to reduce 
American dependence on foreign oil and improve air quality.
    In addition to the use of ethanol as a market balancing mechanism, 
two other farm bill measures are helping to stabilize the market and 
improve producer prospects:

    1. The first increase in the sugar support price since 1985. The 
        raw cane sugar loan rate rose by \1/4\ cents per pound this 
        year, and will rise the same amount in Fiscal Years 2011 and 
        2012. Refined beet sugar rates will rise by a commensurate 
        amount. In Fiscal Year 2012, the raw cane loan rate will be 
        18.75 cents per pound and the refined beet sugar rate will be 
        24.09 cents.

    2. USDA may not announce a TRQ above the minimum required by trade 
        agreements until halfway through the crop year (April 1), 
        unless there is a supply emergency. By April, much more is 
        known about actual U.S. sugar production and consumption and 
        the volume of imports from Mexico. This will prevent a 
        recurrence of situations such as that in the summer of 2006, 
        when USDA announced an excessive TRQ for the coming year, the 
        market was badly oversupplied, and producer prices languished 
        for almost 2 years.
Consumer Benefits
    American food manufacturers and consumers continue to benefit from 
reliable supplies of sugar that has been produced responsibly and is 
reasonably priced, high in quality, and safe to consume. In real terms, 
corrected for inflation, U.S. wholesale and retail prices have declined 
substantially over the past 3 decades. Food manufactures and consumers 
in the rest of the developed world pay about 10% more for sugar than 
Americans do. Taking per capita income levels into account, sugar is 
more affordable in America than in virtually every other country in the 
world--rich or poor. (Figures 7-12)
Taxpayer Benefits
    Sugar is the only major commodity program that operates at no cost 
to taxpayers, and government projections through 2020 say it will 
remain no cost over all these years. Projections prior to the enactment 
of the 2008 Farm Bill suggested significant costs because of excessive 
imports from Mexico, low prices, and government loan forfeitures. But 
thanks to steady consumption growth, stable domestic production, 
manageable import levels from Mexico, and sound program management by 
USDA, costly surpluses have not occurred. (Figures 13-14)
The 2012 Farm Bill
    The U.S. sugar industry has endured a wrenching restructuring over 
the past 2 decades. American sugar farmers remain are grateful to the 
Congress for crafting a sugar policy that is balancing supply and 
demand, ensures consumers of dependable, high-quality supplies, and is 
improving market prospects for sugar producers. The policy achieves all 
these goals at zero cost to American taxpayers.
    With some prospect of continued market stability, producers should 
be able to re-invest in their operations, further reduce their costs of 
production, and survive. We strongly urge the continuation of this 
successful, no-cost policy in the next farm bill.
    Thank you again, Mr. Chairman and Members of the Committee, for 
holding this important hearing and for all that the Committee does for 
American agriculture. I look forward to working with you in the future.
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    The Chairman. Thank you very much, Mr. Murden and I thank 
all of the panelists for that excellent testimony.
    I will first recognize our host, Mr. Neugebauer, for any 
questions.
    Mr. Neugebauer. Thank you, Mr. Chairman. And before we get 
started, I'd just like unanimous consent to enter testimony 
from Hon. Susan King, State Representative, and, also, David 
Fisher, CEO, Breedlove Foods, and the Lubbock Chamber of 
Commerce.
    The Chairman. Without objection, it is so ordered.
    Mr. Neugebauer. Well, I want to thank our panelists again. 
I want to say, too, I've had a chance to read all of your 
testimony. I really think that we could go here for days, 
because many of you brought up some very important issues and 
brought a lot of detail to that.
    I am going to focus--and I know my colleagues all have 
areas of interest, but, obviously, one of the areas that I have 
a lot of interest in is the crop insurance piece. As I was 
looking through your testimony last night, one of the things 
that was consistent--there was two or three things, and one of 
those is that there is a need for a better crop insurance 
program.
    The other was that the SURE and ACRE program are not the 
answer that a lot of folks thought that was going to be when we 
did the 2008 Farm Bill. And so, obviously, when we look at the 
2012 Farm Bill, those two areas will have to be something we 
will address.
    I want to go back to the crop insurance, and one of the 
things that we hear constantly is particularly that--one is 
that crop insurance--to carry it at the higher levels. As Mr. 
Holt said, get everybody up to at least a level where there is 
some sufficient coverage with the high input cost, but, also, 
the shallow losses, this is a real problem. In many cases, 
there is no coverage because they don't meet, for example, the 
deductible.
    And what happens, in my district, particularly, and with 
agriculture all across the country, is that we have folks now 
that are farming 4,000 and 5,000 and 6,000 acres, because 
that's what they've had to do to get their farm levels to be 
competitive. When you start amortizing shallow losses over 
4,000, 5,000, 6,000 acres, it turns into real money, even here 
in Texas.
    One of the things that has been brought up in the concept--
and there are a lot of ideas out there, and we want to look at 
all of those, but, incorporating into a crop insurance program 
that has price and yield protection in the policy, to having 
both of those. And some have said that possibly if you could 
incorporate that into the crop insurance, that you could look 
at some of the other areas of the safety net and shuffle that 
basket a little bit.
    I would like to hear from the panel as to--if you are going 
to have changes in the crop insurance program, certainly what 
would be some of those, and with the present yield, what would 
be something that you would like to see in there? We'll start 
with Mr. Bouma.
    Mr. Bouma. Well, actually, the dairy industry doesn't 
participate in the crop insurance program, but is working 
towards a similar type program as the ultimate safety net if we 
can set our antiquated support system aside. So, yes, some type 
of safety net that we can take the dollars that have been used 
in support in the past and create a safety net that producers 
can buy into, we feel that's definitely a part of the answer to 
the new dairy policy.
    Mr. Neugebauer. Thank you. Mr. Grissom.
    Mr. Grissom. On behalf of the peanut industry, there are 
very few times that the crop insurance is even needed in 
peanuts, but when you do need it, you really need it. You have 
a lot of money tied up in an acre, an acre of peanuts, because 
the cross production is so high, so, like I say, the price and 
the yields.
    I know some of the issue maybe for the peanuts has been 
coming up with a price, and we are getting closer to that every 
day, whether it be through a shell good price or whatever, but 
it would be something that, sure enough, would help us, some 
kind of safety net, which, really, we don't have right now in 
peanuts.
    Mr. Lackey. From the point of view of citrus, there are 
really two insurance policies; one for the tree and one for the 
fruit. And the tree insurance is very rarely used, the 1983 and 
1989 freezes, and then, in 2008, for some flooding, and that's 
really about it, that I know of, for trees.
    Occasionally, there will be a little hailstorm that will 
get some fruit, where there will be a claim, but, again, 
really, the freeze is the only major claims. Typically, what a 
lot of guys are carrying is just the catastrophe insurance, and 
it usually doesn't measure up to that unless you get a hard 
freeze, and the last time was 1989.
    And so I haven't seen, really, like Mr. Holt was 
commenting, a balance in the premiums matching up with the 
claims. I mean, there is a--you would think, after this many 
years of not really having any claims, the premiums would go 
way down, and there's bound to be a pot of money somewhere 
after all of those years. So that's important, I guess.
    Mr. Neugebauer. Thank you. Mr. Holt.
    Mr. Holt. I think that as far as the price is concerned on 
certain commodities, we have the CRC, but, still, when you are 
not able to cover the higher levels, then you are short on 
price.
    And one thing that would improve on a lot of the 
commodities is, as I indicated, the technology, bringing your 
APHs up higher, and then that will also bring up your 
protection on price.
    And, also, one of what you had mentioned earlier, and had 
introduced a bill of being able to double-stack, and it still 
is a legit way to go about that, and particularly on disasters.
    Mr. Neugebauer. Thank you.
    Mr. Parker. As you know, livestock, in most cases, is not 
affected, but in related cases, there is quite a bit of farming 
that goes with cattle raising.
    Last year, on April the 7th, there was a freeze in the 
north Texas area that completely destroyed the biggest part of 
the wheat there. And to insure wheat on yield and price would 
be very helpful, because the inputs of the fertilizer and the 
fuel are so tremendous that the cash and capital outlay is so 
burdensome that it would be very helpful.
    Mr. Murden. In regards to sugarcane this year, what really 
remains to be seen is: We are still working claims, but we have 
to share that data for it with you once we do.
    I would like to point out, too, that one size doesn't fit 
all, even in commodities. And, Mr. Neugebauer, you are aware of 
this. You and I are 13 miles apart--or 13 hours apart from one 
end of the state to the other, and the cost of production and 
yields and everything are so dramatic that I think we need to 
be very careful that we don't couch cotton, per se, into one 
area.
    But I'll definitely share my sugarcane data with you, once 
we get through working the claims from the freeze.
    Mr. Neugebauer. I look forward to that. Thank you.
    The Chairman. I thank the gentleman. This summer the 
Committee has to re-authorize the mandatory price reporting 
law.
    And I have, I guess, a question with dairy and peanuts. As 
I understand it, the dairy industry is interested in expanding 
the different products that are covered by mandatory price 
reporting; is that correct, Mr. Bouma?
    Mr. Bouma. Yes, sir. We would look at taking the original 
price support program and scrapping that, if you will, and then 
expanding the coverage to products that we can make--that we 
can market, rather.
    The Chairman. All right. Have you done any work--has the 
industry done any work, so they would be ready this summer, in 
terms of what additional products they want covered under the 
mandatory price reporting end?
    Mr. Bouma. Yes, sir. IDFA and National Milk Producers 
Federation both have been working hand in hand on that, and I'm 
sure we will be ready to roll that out this summer.
    The Chairman. Okay. And, one of the issues that we keep 
running into is this price issue in terms of doing a crop 
insurance program for peanuts. Some people have suggested the 
mandatory price reporting law might be a way to help with that.
    Do you think that's the case, Mr. Grissom?
    Mr. Grissom. I think it would be. Of course, as far as the 
peanut growers, we would have to be in support of any way that 
it would--whatever it would take to be able to come up with a 
price support system, or a way to come up with a price for 
peanuts. That has been an issue, like I touched on a while ago, 
as far as crop insurance for peanuts, and we are getting closer 
to that nearly every day.
    The Chairman. Well, when we were in Alabama and Georgia, 
the message I got from the peanut growers over there was that 
they didn't think that that would necessarily do them any good. 
They thought the current NASS system worked. I get a different 
message out here, I think.
    Mr. Grissom. Well, of course, we have been working with the 
Southeast on this issue as far as the peanut growers there, 
too. As a matter of fact, I think they had a meeting just a 
couple of days ago on this crop insurance and things that they 
were all for, trying to get some type of CRC crop insurance.
    The Chairman. Right. Yes, they are. The question is: How do 
we develop the pricing?
    Mr. Grissom. Well, I think there may have been one or two 
ways to come up with it.
    One of the ways that they've come up to shell--a shell good 
price on peanuts is bought and sold nearly every day, and that 
would be a way to come up and convert that into farmer stock 
peanuts. So that's one way to do it, and that's the way that 
it's being looked at right now.
    The Chairman. We recognize the ACRE program and the SURE 
program have a lot of problems.
    Mr. Grissom. Yes, sir.
    The Chairman. And, we keep trying to develop a way to avoid 
these disaster programs. Now we have another disaster program, 
pending in the Senate, where they're going to give an extra 
direct payment if you only have a five percent loss, which 
seems to me it would be a little hard to explain to people. If 
you only have a five percent loss, why would you need to get a 
payment?
    What is your position on that provision that's in the 
Senate bill?
    Mr. Grissom. Me?
    The Chairman. Well, I guess I would like any of you that 
would dare to venture into that quagmire.
    Mr. Murden. I'd take it. I'll take it.
    The Chairman. Well, I know you would take it, but my 
concern is: We have never done anything like this before. We 
have never paid a disaster payment for that small of a loss.
    And I'm worried about the precedent we're setting and the 
potential of bad publicity we're going to get out of something 
like that.
    So I guess I understand you would take it, but I'm not 
sure--you know, I'm just wondering what you thought about the 
policy.
    Mr. Lackey. Well, I'll just say from a vegetable--
particularly, looking back, as we have also been producers of 
onions and other things, we have always thought that the 
insurance is a double-edged sword; that you need it when you 
need it.
    But it also encourages--in something like that, I think 
that it would really encourage people that aren't necessarily 
growers to get into it, just to play the insurance game, and 
that's certainly a concern.
    There has been some abuse across the country of that, and I 
think we have to be careful about how we construct these 
insurance programs. If it's done wrong, it certainly can 
encourage abuse, and then it hurts the markets. Then we have 
people in the game that just kill a good market, just because 
they're playing the insurance game.
    Mr. Holt. Legally, I think we all have to be careful how we 
address that, because we don't want our producers to think that 
we're against them getting any money, but I think I see your 
point in that.
    Again, this is the reason I feel that we need to work to 
find a way that it's permanent, and it is not a political game, 
as you might say.
    The Chairman. Yes. And, one of the problems that I think is 
that we keep stacking these programs on top of each other. You 
know, now we've got the ACRE program, and then we have the SURE 
program, and these things are not coordinated the way they need 
to be with crop insurance. They are too damn complicated, you 
know.
    We need to simplify the system, and that's part of what I'm 
trying to do here with this, starting these hearings early, is 
to try to figure out a way to coordinate this stuff better and 
simplify it, to make it work better. You know, crop insurance 
will be a big part of this. And, we'll see what happens with 
this SRA and where we end up with that.
    One other question I had was on the CAT coverage and NAP 
coverage. If we eliminate those and go to an actuarial product 
there, we pick up quite a bit of money. I personally think that 
CAT and NAP have served their usefulness, and that we ought to 
move away from them. And I would like to know what you guys 
think about that.
    Mr. Holt. Let me just say: As far as CAT is concerned, I 
would agree with you on many products, but then, on a lot of 
products, that's the only thing that is available to them, 
because we have not provided them with adequate insurance.
    The Chairman. I understand, but what I'm talking about is 
making them pay the actuarial value of that policy instead of 
paying $300.
    Mr. Holt. Right.
    The Chairman. Do you think that makes sense?
    Mr. Holt. Well, yes, sir. Again, I think that it would make 
sense if we give them a valued product.
    The Chairman. Well,----
    Mr. Holt. And I think that before it becomes a valued 
product--and because, as the CAT is concerned, I mean, that is 
catastrophic, and so you have a big loss. And I just--it's a 
Catch 22 answer, because you can't say, ``Yes, they can charge 
full loan for CAT,'' and yet it not be a good coverage. I think 
we've got to look at the coverage.
    And could I just regress just a minute by saying--what you 
were saying like a while ago, that we've got so many double-
stacking, and we've got so many problems, I think that we have 
never sat down as an industry, as a commissioned study from the 
committee, and to work it together. Every time we get one 
solved, then another one comes up.
    And, of course, in some of the organizations I'm in, we 
work--we're working with rice right now, trying to get there. 
And so we continue to try to work with these, but we need the 
support and all of it gathered in.
    And I would like to see, possibly, you commission a study, 
and do it soon, where we can have some reactions to it and get 
some cost studies on it and try to work together.
    The Chairman. Well, that's exactly what we're trying to do, 
and we have asked for some people to make some proposals that 
we're going to, hopefully, be able to roll out here in another 
month or so, where we can start doing exactly that.
    Our Committee can work with the industry and try to figure 
out some way to simplify this and make it work better, and 
hopefully make it more efficient, make the money go a little 
further. That's what we're trying to do this next year. So we 
look forward to working with all of you on that.
    Mr. Holt. Amen.
    The Chairman. The gentleman from Alabama, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman, and thank you all for 
your participation. It's very helpful.
    In our hearings in Georgia and Alabama, the dominant 
concern was crop insurance and the problems that you all deal 
with every day, but yesterday, here in Texas, I had one of the 
folks talk about some out-of-the-box thinking with crop 
insurance. I'm interested if you would agree with this line of 
thought.
    And that is, if you could get a crop insurance product with 
a premium that was comfortable, that had a much higher rate of 
payment, would you be willing to give up direct payments and 
countercyclical payments in exchange for that product? Don't 
all of you jump up at once.
    Mr. Grissom. I guess I will be first. I don't mind.
    One of the things, as far as peanuts go, is our direct 
payment, which the countercyclical payment is not a large issue 
right this minute, because our price of peanuts and the cost of 
production and everything has gotten so high. But the direct 
payment is something that we can go to the bank with, even 
though it's not a large amount, but it's something that we can 
go and we can say, ``Well, you know that we know we are going 
to get this.'' So it would be very hard for us to pass that up.
    Mr. Rogers. And that's the concern that I had, and I think 
Mr. Holt made the point: Without crop insurance, you're going 
to have a hard time getting the bank to work with you. So that 
is why I am wondering which of the--if you had, really, like an 
80 percent rate of payment at a good premium, would that be 
better to go to the bank with than direct payments or 
countercyclical payments? And I guess your silence is saying 
``no.''
    Mr. Murden. I think we ought to run that by the bankers, 
and this is where I'm going to leave my sugar hat on, because I 
don't get a direct payment anyway.
    Mr. Rogers. Okay. Mr. Holt, since you're in the business of 
selling crop insurance----
    Mr. Holt. Yes. Well, I also farm, and I understand. But I 
think that, again, once you put the blueprint out and see what 
it covers and the advantages of it, and I think that the 
lenders would be interested in--because of some of the added 
requirements that they have had in trying to secure these loans 
and so forth.
    And I've had--since I have known I was going to testify, I 
have had three bankers call me and ask to be sure and stress 
that they need to be able to secure loans and so forth. And so 
I think that after you would sum it up and look and see what 
you were able to buy by eliminating it, I think it would be a 
favorable move for most.
    Mr. Rogers. Well, that's something that I hope, as we're 
fashioning this farm bill, that we do start comparing the 
practicalities of it, too. And it may be something that we 
decide to offer as an option.
    Well, in speaking of financing, have y'all found that the 
tightened credit standards are, in any way, affecting your 
ability to get the money for your operations? Mr. Murden?
    Mr. Murden. Definitely.
    Mr. Rogers. Mr. Bouma?
    Mr. Bouma. Without a doubt, in the dairy industry, with the 
prices in the last 18 months, credit has definitely tightened 
up across the industry. You know, cow values are 60 percent of 
what they were 2 years ago.
    So the balance sheet and asset base have developed 
accordingly, and credit is definitely tougher to come by.
    Mr. Rogers. Mr. Grissom?
    Mr. Grissom. Yes. It has become quite a bit harder to get 
operating money for our 2010 crop just because of either 
carryover from the 2008 and 2009 crop. You have a carryover, 
which I would venture to say, in the peanut industry, probably 
had 90 to 95 percent of the people had carryover.
    So, when you carry that over for 2 years straight in a row, 
your lenders are really going to look at you. Then they go 
looking at the assets that you have when you just have peanut 
equipment, and ``What is the value of that peanut equipment, 
and we know you need to utilize it, but what is the true value 
of that?'' So it makes your asset ratio go kind of haywire.
    Mr. Parker. One comment I would like to make is: The fixed 
cost of interest and the fixed cost of taxes are going to put 
more pressure on insurance needs, especially for the younger 
operator.
    And as far as the banking and finance goes, that is 
something that is a consideration.
    Mr. Rogers. Before my time is up, Mr. Grissom, I wanted to 
ask you: My Alabama peanut producers--we were down there 
Saturday--were talking and expressing their concerns about the 
USDA not taking the world market price into consideration in 
calculating low end payments. Is that a concern that you share?
    Mr. Grissom. Yes, it is a concern. It needs to be taken 
abroad, is the way I would see it, as far as maintaining and 
getting a price for peanuts.
    Mr. Rogers. Good. Thank you, Mr. Chairman.
    The Chairman. Thank you. The gentleman from Mississippi, 
Mr. Childers.
    Mr. Childers. Thank you, Mr. Chairman, and I wanted to say 
first, before I asked my questions: When I got here yesterday, 
I felt right at home. The first fellow I met was named Billy 
Bob Brown, and Billy Bob Brown could live next door to me in 
Mississippi.
    And, second, when I met your Chancellor, I finally met 
somebody who talked as southern as I do. So I am glad to be in 
a room full of people who understand me, the way I talk.
    I wanted to follow up on something that the Chairman was 
talking about earlier on the percentage of loss. I think the 
silence kind of said it all on that five percent. I would be 
curious to know: What is the acceptable level of loss, 
percentage of loss, before there should be disaster assistance?
    And on the subject of disaster, I think everyone would 
agree here. We have never really got to the point that we had 
an acceptable--well, that we had a good program for all 
different losses.
    I would be curious to know: What could we do in this 2012 
Farm Bill that would help each one of your industries? And be 
reasonable; be reasonable with your answers, I mean, because 
you know that the Chairman has already said, ``We're not going 
to have as much money as we've had in the past.''
    Mr. Murden. You know, Mr. Childers, down in my neck of the 
woods, along the Mexico border, with us a lot, that five 
percent is ridiculous. But, honestly, for me, in the last 4 
years, it has been all or nothing.
    Starting with Hurricane Dolly, I lost all of my cotton, and 
then I had two consecutive droughts where 75+ percent of the 
crops were lost. And now I have had a hard freeze on citrus. 
So, yes, for me, it's just kind of an all-or-nothing deal. It's 
a sad deal. It's the weather. You know, you can't control the 
weather.
    Mr. Parker. I think a range--a considered range would be 
somewhere around the 10 to 20 percent. I think that's what most 
national programs are.
    And, again, I will repeat that fuel pressure, fertilizer 
pressure, taxes pressure, and I'm afraid one of these days 
interest pressures are going to be so hard that--where I 
couldn't survive any longer. And I hope I'm saying that right; 
that a 15 to 20 percent equity position and then the rest of it 
is loss that would need to be covered.
    Mr. Holt. I think that that percent--the set percent loss 
is difficult to arrive at when you look at individuals. I'm 
particularly talking about some of the lenders that I have 
talked to, because you take a young farmer, just getting 
started, he might be that five percent.
    And so that's the beauty about having flexible buy-ups and 
so forth and being able to determine what you can afford. And 
so I think that you need to put a scale on it all the way up, 
and if that's--if you need that for your banker to determine 
that, yes, it has to be reasonable in price. And that is, 
again, an advantage for trying to go to one level of your 
operating cost.
    And then, when you have a disaster, if the county has a 
disaster or some measure within your area has a disaster, then 
the second part can kick in. But, you would have to pay--
because if you think about last year, $80 billion of what was 
taken out in liability.
    And that's the reason it's important to have partnerships, 
like the companies, to get that re-insurance, because there is 
no way that you could put that kind of liability on your books 
and meet your budget.
    Mr. Rogers. Mr. Bouma.
    Mr. Bouma. Well, I would just defer to the dairy industry, 
because we are not involved in the crop insurance programs 
directly. Five percent does seem to be somewhat tight, from 
what we look at. We would defer to the folks that grow crops 
for us, that we purchase the crops from, that are affected by 
such things.
    But in five generations of dairy, out in the western United 
States, we have never been eligible for disaster payments, and 
that's fine. And we would just as soon to let y'all kind of 
stay out of that side of our business as well. So thank you.
    Mr. Grissom. When you go to looking at the margin of profit 
that there is in peanuts, the five percent, to me, doesn't seem 
like a very--I guess it's drastic, because your cost of 
production, when you go to looking at your cost of production 
versus what you get out of the peanut crop, there is very 
little room for mistake, very little room.
    It's just like Mr. Holt was talking about a while ago, 
about the young producers. The young producers in our area, 
south of here, are getting to be very, very few. Some of those 
guys that, like you say, cannot absorb that five percent loss. 
They don't have the assets to support anything less than that. 
And some of the older producers are just using up equity right 
now.
    The Chairman. All right. I thank the gentleman. The 
gentlemen from Texas, Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I want to change the 
subject just a little bit, and if there's any time left at the 
end, I want Mr. Holt to talk about the SRA negotiations that 
are going on.
    But in some of the rest of the testimony, you talked about 
needing labor or workers. How many of you participate in the H-
2A programs? Is it flexible enough to be able to work? So it 
could be expanded, the H-2A. So a number of people could be in 
the program. Would that work? Be straight-forward.
    Mr. Murden. Chances are.
    Mr. Conaway. You need to speak a little louder.
    Mr. Murden. Chances are. We still have some problems, 
paperwork--with the paperwork.
    Mr. Conaway. Okay. Are both of your operations close to the 
border; is that why it works there?
    Mr. Murden. Mine is on the border.
    Mr. Conaway. I understand, Mr. Murden. I don't know where 
Byers, Texas, is, Mr. Parker.
    Mr. Parker. Well, I mean, our Texas and Southwestern Cattle 
Raisers Association has a lot of members close to the border, 
and it's very important for them.
    Mr. Conaway. What about producers further inland; would 
that----
    Mr. Parker. Well, not so much, but it's still important 
statewide. We are around the Wichita Falls area, and we still 
have some of that need, especially with fruit and vegetable 
people and some of the ranching, also.
    Mr. Conaway. Okay. Any comments on the EPA issues, spray 
drift regulations, permitting or excessive permits required, or 
what do you see with at least control being a problem; just 
anybody's thoughts? Jim?
    Mr. Grissom. Nothing other than just keep good records. 
That would be the only thing that I would know. There is 
nothing as far as anything happening in the peanut world, or 
from my understanding, in the cotton world, but, it's----
    Mr. Conaway. So you're okay with what the EPA is doing 
right now----
    Mr. Grissom. Yes.
    Mr. Conaway.--in what they have planned?
    Mr. Grissom. I don't know if there's anything, unless 
there's something that I don't know, but you never know.
    Mr. Conaway. Mr. Bouma.
    Mr. Bouma. The EPA is in the process of considering 
creative rules as far as with the Clean Air Act with the dairy 
and cattle-raising industries across the country.
    And Ms. Murkowski from Alaska has a letter out currently 
that we are signed on to, as well as most other bovine 
operators, trying to keep the regulation of the Clean Air Act 
and things outside of the agency's hands, and in the hands of 
good solid science, so that we can move forward on this. So 
it's very concerning with some of the things that are happening 
there.
    Mr. Conaway. Okay. Mr. Holt, do you want to give us some 
thoughts about the SRA? The earlier negotiations assumed a $2 
billion cut in the A&O under the SRA. The USDA is talking $6 to 
$8 billion.
    What impact does that have if the USDA winds up with those 
higher numbers?
    Mr. Holt. Well, I think it would be very difficult, if not 
impossible, with those kinds of numbers. We've got to realize: 
We're a partnership in this, and you've got to have room for 
companies to make a profit and----
    Mr. Conaway. Well, excuse me. If the USDA would roll out 
these percentage of profits that the insurance companies have 
experienced over the last 10 or 15 years and are saying those 
are excessive, does the A&O come directly out of those profits, 
or does it come out of the insurance agents' pockets? Where is 
that impact?
    Mr. Holt. The A&O is separate to the underwriting gains, 
and so forth, of the other companies. The A&O comes off of the 
price and so forth that is set every year, and it is separate.
    An A&O is to pay for the loss adjusting and an agent. And 
that is one of, really, the things that is difficult, is that 
they cut all the A&O down, so small, and it's not going to 
leave--we're going to suffer from an adjusting standpoint.
    Mr. Conaway. So the adjusters and the agents participate in 
the underwriting gains that are being reflected?
    Mr. Holt. No, we do not participate.
    Mr. Conaway. Well, help me understand.
    Mr. Holt. The A&O----
    Mr. Conaway. These are apples and oranges that we are 
talking about. The USDA will roll out a chart that shows pretty 
dramatic profits for the insurance companies, and yet they are 
using those charts to get in to support their rationale for 
cutting the A&O.
    Mr. Holt. Of course, well, the A&O is--underwriting gains 
is separate. I mean, there are two different--there are two 
differences.
    But the thing about it is: You are talking about the 
profits from the companies. You know, I'm not here to support 
and say that they're not making too much or--you understand how 
insurance works. So they have to make some.
    Mr. Conaway. Good year versus bad year?
    Mr. Holt. Good year versus bad year, but if it is that 
high, that is what I had mentioned earlier. Well, why don't we 
take that and pile that back in, to lower the rates. If it's 
too high, then take the money out of it and--because the 
producer is the one that helps create that over--that gain by 
their premiums.
    So, obviously, if it's consistent, then it ought to come 
back and lower the premiums and so forth. And then, when you do 
that, well, then, you can buy higher levels of coverage and so 
forth.
    Mr. Conaway. All right. Thank you, Mr. Chairman.
    Mr. Cuellar. The Chairman now recognizes the gentleman from 
Nebraska, Mr. Smith, for 5 minutes.
    Mr. Smith of Nebraska. Thank you, Mr. Chairman, and thank 
you to our witnesses for sharing your expertise.
    Mr. Parker, legislation, as you know, has been introduced 
that would really limit the use of antibiotics in food animal 
production. A little bit of that has been touched on. The FDA 
testified in favor of the legislation, and apparently without 
consulting USDA and getting perhaps closer insight on the 
issue.
    But how would this legislation impact your operation or the 
industry?
    Mr. Parker. Well, the cattle-raising industry is very 
dependent on a good veterinarian guided antibiotic program for 
raising cattle. That also goes to the next level for growing 
stocker cattle with a veterinarian approved program for health 
reasons.
    And then it's very important in the next level above the 
stocker cattle program, which is the cattle feeding program, to 
maintain health. And the industry is paying a premium for these 
cattle that have good health. And the reason that this has 
improved is because of the good antibiotic program.
    We feel like that our ability to choose and select 
veterinarian prescribed antibiotics would very much hurt the 
performance, and would also hurt the prices of our products 
since it is a very big concern for the whole industry.
    Mr. Smith of Nebraska. Okay. Anyone else wish to comment on 
that?
    Mr. Bouma. Well, the dairy industry uses very little--low 
level antibiotics on a consistent basis. As Mr. Parker alluded 
to, veterinarian prescribed antibiotics at therapeutic levels, 
on cattle that we have to deal with, are critical to the 
industry and critical to their health, as we go along.
    And we would much rather see the antibiotic issue not being 
dealt with by an agency, but to be dealt with by sound science 
through sound veterinarian practices.
    Mr. Smith of Nebraska. And, again, as y'all know, there are 
other food safety bills introduced, and some passed the House. 
Would any of you wish to weigh in on that piece of legislation 
and its impact to the industry?
    Mr. Parker. Well, I'd agree that sound science is the most 
important aspect in the cattle industry, as well as the dairy 
industry. We invest millions of dollars each year for that 
sound science.
    And the one way that we do that is with our national check-
off programs. This is producer-funded, and we feel like that 
it's very effective and very important.
    Mr. Smith of Nebraska. Okay.
    Mr. Bouma. National Milk Producers Federation is in the 
process of putting together what we call a farm program, which 
hopefully will roll out a nationwide program, which will have 
industry standards as far as animal care, antibiotic issues, 
vaccination issues, and treatment, as we go. We feel that is 
much better done on the farm with that science versus being 
legislated.
    Also, the dairy industry stands ready to, and has adopted, 
animal ID to the greatest extent, in probably the high 90th 
percentile, and we are accountable for our product on a daily 
basis. We are completely transparent in where our product is 
produced and how it's handled. So we support them in the 
initiative as well.
    Mr. Smith of Nebraska. Okay. Thank you. Thank you, Mr. 
Chairman.
    Mr. Cuellar. At this time, the Chairman recognizes the 
gentleman from Pennsylvania, Mr. Thompson, for 5 minutes.
    Mr. Thompson. Thank you, Mr. Chairman, and thank you, 
gentlemen, for your leadership and your testimony today.
    Mr. Bouma, I wanted to come back to some of the comments 
you had in your testimony. Specifically, you talked about the 
importance of innovation, in terms of expanding markets for 
dairy as one of the initiatives, and I certainly would agree 
wholeheartedly with you.
    I wanted to ask: What would you say is the most important 
action within--that we could take to increase that innovation, 
to stimulate it?
    Mr. Bouma. As far as the larger scale of how we balance it, 
but in order to have enough milk in this country, we're always 
going to have a little bit too much milk. That's the only way. 
To balance a domestic market within a four or five percentile 
basis is virtually impossible.
    The true cost of the dairy balancing program is in the 
nonfat dry milk powder and in products the CCC purchased, 
butter and cheese, which it has not purchased any in this 
downturn. And the problem is that we create a product and make 
a product, per standard, a day, that does not market in the 
world.
    We are the world's last resort for a buyer. They cleaned 
out the EEU. They cleaned out New Zealand, because they told us 
to make a standardized skim milk powder, which is 32 percent 
protein, which is what the world desires. We wind up sitting 
here in the U.S. putting up our nonfat dry milk powder and 
storing it in the CCC, and the taxpayer and the industry both 
pay the balance to the entire world's market.
    And we firmly feel--this is the first time in my lifetime 
that there's a milk producer's federation alliance, ISDA and 
NMPF. The processors and producers are in concert in looking at 
truly getting rid of the support program, as we know it today. 
They are working through the process of trying to create 
products that we can market around the world and balance our 
products around the world, instead of balancing the world's 
products here in the U.S.
    Mr. Thompson. You had also made comments in your testimony 
about--there's a Senate bill. You've talked about supply 
management approaches, and I know there's a bill in the Senate 
side for that, that has been introduced.
    What do you see as a--you didn't speak very favorably of 
it. I wanted to know what do you see as the negative 
consequences from that type of a policy approach from the dairy 
industry?
    Mr. Bouma. It's two or three-fold. One is: They have never 
worked anywhere. Europe has one; Canada has one. And if we 
create a supply management program here, we will, more than 
likely, eventually, elevate dairy prices.
    But within our trade agreements around the world, we will 
increase the imports of dairy products into this country from 
New Zealand and from the EEU, that produce it, and then we will 
actually lose a portion of our domestic product as we go.
    Canada's system works, because Canada has tariffs that 
don't allow our product into Canada nor anyone else's. So, 
thereby, they can regulate their domestic supply. If we work to 
try to regulate our domestic supply, we're going to open 
ourselves up to losing even more and more of our producers in 
the marketplace.
    Further, the world market continues to grow. March was the 
largest export month in our history. Again, the market is 
returning. The Third World markets are going to continue to buy 
more and more dairy products as they continue to improve, and 
their economy has improved.
    And, today, with New Zealand pretty well tapped out and the 
EEU full, the United States is going to be able to access those 
markets. If we can construct our domestic marketplace through 
the supply management program, our ability to access world 
markets to balance ourselves, like I was saying, in a 
profitable manner, will just be unencumbered.
    Mr. Thompson. Thank you. Mr. Parker, the last farm bill 
contained language that you said made final technical changes 
to the mandatory country of origin labor law, which was 
advocated because of its intended benefits for nationwide 
livestock producers. We have had a year of implementation, to 
kind of reflect now on how that has--what has--the outcome of 
that has been.
    Do you believe that law has done anything to improve the 
profitability of cattle producers?
    Mr. Parker. Our industry has been very disappointed with 
that law, and we feel that it has not done anything to produce 
the industry results. We don't feel like that it has helped our 
price situation, and it has been a big burden with our 
relationship with Mexico.
    Mexico is the largest importer of our product, and they are 
having trouble exporting their product to us, and it has caused 
a big problem for them, and it also has caused a big problem 
for Canada, and we are not able to trade in a free way. 
Restrictions have caused problems to those two countries and to 
our industry, also. And we feel like it has been very 
ineffective, and we wish it would go away.
    Mr. Thompson. Okay. Thank you. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman. The gentleman from 
Texas, Mr. Cuellar.
    Mr. Cuellar. Thank you, Mr. Chairman. Mr. Parker, I have 
questions, two quick questions.
    One is fever ticks. I know that has been a big issue in 
south Texas. And regardless of the work we have been doing, it 
has been expanded, and we have been adding more funding.
    If you can just quickly address that for other Members that 
might not be familiar with the fever tick issue from other 
parts of the country, number one.
    And number two is: What can we do to modify our export 
promotion so that we can export more? The more we can export--
and it doesn't matter, cattle, whatever--the better it is for 
us. So do you have any quick recommendations?
    But, first, if you don't mind, start off with the fever 
tick issue.
    Mr. Parker. Okay. One late occurrence is with the border 
security problem and fever ticks. We are faced with a situation 
where the personnel are in danger on the border. The fever tick 
buffer is changing because of the border security, and then 
border security is a huge factor in the fight against fever 
ticks.
    The history of fever ticks has affected states way beyond 
the State of Texas, and I hope that you will remember that 
fever ticks can be a problem for all of the South and the 
Southeast if we let it get out of control.
    And the border security, to help us keep it in control, is 
so crucial. So I hope my direct answer provides money for the 
fever tick fight in border security.
    Mr. Cuellar. And the export situation?
    Mr. Parker. On the export situation for the beef industry, 
we would appreciate very much if the USDA would be proactive in 
helping with international markets, especially the market of 
Japan.
    And we would appreciate very much that the restrictions 
that go on with the beef business specifically be fought 
harder. And that would be my direct suggestion and request 
there.
    Mr. Cuellar. Thank you. Mr. Chairman, I will yield back the 
balance of the time so we can move to the second panel.
    The Chairman. All right. Thank you. I thank the gentleman.
    I would just say that, in my opinion, the Administration 
has been as proactive as they could possibly be on Japan and 
Korea, and Russia with poultry. You know, these are tough 
problems.
    To some extent, the previous Administration caused 
problems, because they had kind of an all-or-nothing approach, 
and we had opportunities to fix a lot of this, and then we 
didn't do it. So, at least, now we are moving ahead and getting 
what we can and opening things up. So we are making some 
progress.
    But it's very frustrating, we understand that. But I 
think--and I may have some problems with some of the things 
that the Administration has been doing, but on that, I think 
they have been pretty proactive, and they have been pushing 
about as hard as I think you can.
    I want to thank the panel for their testimony and for their 
answers to the questions, and for being here with us today, and 
taking your time. It has been very helpful to the Committee, 
and we appreciate you being with us. So you are excused, and we 
will get the next panel up at the table.
    I think we've got a lot of people here, and why don't we 
take about a 5 minute break. Give the Members a chance to 
stretch their legs a little bit, and let the next panel get 
seated, and we will get back going here in about 5 minutes.
    [Recess.]
    The Chairman. We would welcome the next panel: Mr. Billy 
Bob Brown, irrigated and dryland wheat, sorghum, and beef 
producer. If you would take it out in the hall. You need to 
stop talking. We need to have some order here.
    Mr. Billy Bob Brown from Panhandle, Texas; Brad Heffington, 
cotton, corn, and sorghum producer from Littlefield, Texas; 
Scott McGarraugh--am I close?
    Mr. Cleavinger. You've got it wrong. It's David Cleavinger. 
We have switched.
    The Chairman. Okay. I've got the wrong sheet of paper. I'm 
sorry. I didn't look at your--I apologize.
    Mr. L.G. Raun, rice producer from El Campo, Texas; Mr. 
Doyle Schniers, cotton producer from San Angelo, Texas; Dan 
Smith, sorghum producer from Lockney, Texas; and Dee Vaughan, 
corn, soybean, wheat, cotton, and sorghum producer from Dumas, 
Texas.
    So, Mr. Brown, welcome to the Committee. Your full 
statement will be made a part of the record. Try to stay under 
5 minutes, and the floor is yours.

  STATEMENT OF BILLY BOB BROWN, IRRIGATED AND DRYLAND WHEAT, 
                  SORGHUM, AND BEEF PRODUCER,
                         PANHANDLE, TX

    Mr. Brown. Mr. Chairman and Members of the Committee, I'm 
here today to represent Texas Farm Bureau.
    The Chairman. Hold that microphone a little closer.
    Mr. Brown. Now, does this work? Okay. Again, Mr. Chairman 
and Members of the Committee, I'm here today representing Texas 
Farm Bureau. I am a grain and cattle farmer from Panhandle, 
Texas, and currently serve on the board of directors for that 
organization.
    We appreciate your willingness to meet us here in Lubbock. 
Mr. Cuellar, Mr. Neugebauer, and Mr. Conaway, it's good to see 
you here. Mr. Childers, it's good to visit with someone that 
doesn't have an accent. I appreciate that, along with Mr. 
Rogers from Alabama. I enjoyed our visit.
    But, as you know, Texas agriculture is the number two 
economic engine in our state, and it generates more than $100 
billion annually. Furthermore, Texas is the number two 
agriculture producing state in the nation. We are number one in 
cotton and beef and number two in grain sorghum.
    Texas Farm Bureau supports the safety net established in 
the 2002 Farm Bill and maintained in the 2008 legislation. The 
circumstances that occurred in 2008 record high commodity 
prices for a short time, also resulted in high input costs. 
These high input costs have remained, even though the prices of 
the commodities have dropped. Market projections for most 
commodity prices are at levels close to or below the cost of 
production, making the current farm program questionable in 
maintaining the safety net.
    Risk management, specifically crop insurance, is critical 
to the Texas producers generally and especially to those in 
this region of the state. Because of the differences in weather 
and terrain, Texas is very reliant upon the crop insurance 
program.
    In year 2009, when the state experienced major drought 
losses, the Texas loss was 133 percent, compared to 56 percent 
to the U.S. Over a 20 year average, Texas has a loss ratio of 
126 percent, while the U.S. experienced an 85 percent loss 
ratio. These numbers emphasize the fact that any proposed 
changes in crop insurance must recognize the challenges that 
producers face in Texas each year.
    We understand the Risk Management Agency is now considering 
restricting availability of crop insurance in drought prone 
areas. This would be a disastrous change for Texas agriculture, 
because much of the dryland production in this state would be 
considered drought prone.
    For good reasons, the ACRE program has not been well 
received. The provisions have been too complicated, and the 
benefits are--reduction in benefits are really too great for 
most Texas producers. The ACRE program would be better received 
in Texas if the loss trigger was determined at the farm level.
    We support the continuation of a permanent disaster program 
in the next farm bill, but due to the delays in implementation 
and the inability to determine crop revenues until the end of 
the marketing year, it's still too early to determine how 
effective the SURE program will be. Many of the producers are 
just beginning to receive payments, while still others are 
waiting for theirs. We urge the Committee to continue to 
evaluate this program.
    The Livestock Risk Protection program, designed to provide 
price protection, has proven to be cost prohibitive for most 
producers.
    We recognize that any changes in the 2012 Farm Bill will 
require compliance with the WTO. Agriculture trade and 
commodity exports are critical to our industry. Texas exports 
more than $6 billion of agricultural products each year.
    We encourage the Committee, then, to support the Market 
Access Program, the Foreign Markets Development program, and we 
encourage the Members of the Committee to maintain these 
programs under current levels.
    Mr. Chairman, as we look forward to the next farm bill, we 
must remind ourselves of the attempt of the original farm 
bills. America should not be dependent on other countries to 
produce and export food to the U.S. The American farmer and 
rancher has proven that the U.S. can feed much of the world, 
but an effective and efficient Federal foreign policy must be 
established for our producers to continue to be successful.
    I appreciate this opportunity, and we will look forward to 
the questions.
    [The prepared statement of Mr. Brown follows:]

  Prepared Statement of Billy Bob Brown, Irrigated and Dryland Wheat, 
               Sorghum, and Beef Producer, Panhandle, TX
    Mr. Chairman and Members of the Committee, I am here today 
representing the Texas Farm Bureau. I am a grain and cattle producer 
from Panhandle, Texas, and currently serve on the Board of Directors 
for that organization.
    Mr. Chairman, we appreciate your willingness to have a hearing in 
Lubbock, and are particularly glad to have our Texas Delegation 
Members, Mr. Cuellar, Mr. Neugebauer, and Mr. Conaway with us today. As 
those Members are aware, agriculture is king in this part of our state, 
and the farm bill has been and is critical to this area and the rest of 
Texas' future. Texas agriculture is the #2 economic engine in our 
state, and generates more than $100 billion annually in economic 
activity. Furthermore, Texas is the number two agriculture producing 
state in the nation. We are the number one producing state in cotton 
and beef and the number two producer of grain sorghum. Hay and forage 
production is also critical to our livestock industry. Our state is 
also diversified in that we produce sugar, vegetables, and ornamentals 
on a large scale.
    The Texas Farm Bureau supports the ``safety net'' established in 
the 2002 Farm Bill and maintained in the 2008 legislation. The 
provisions of the 2002 legislation have been very effective, primarily 
because farm commodity prices have improved over the period. The 
circumstances that occurred in 2008, record high commodity prices for a 
short period of time, also resulted in cost increases for farm inputs 
that have still not returned to the pre-2008 levels and are unlikely to 
decrease in the foreseeable future.
    We recognize the 2008 Farm Bill was the best we could get given the 
budget limitations at that time. Unfortunately, the budget outlook for 
2012 presents even more challenges than in 2008. While our organization 
supports continuing the direct payments program, counter cyclical 
program, marketing loan program, and permanent disaster assistance; we 
recognize that conditions are changing and have changed since 2008. 
Market projections are for most commodity prices to be at levels close 
to or below the cost of production, making the current farm program 
questionable in maintaining the ``safety net.''
    Risk Management, specifically crop insurance, is critical to Texas 
producers generally and especially those in this region of the state. 
Because of the vagaries of weather and terrain, Texas is very reliant 
upon the crop insurance program. In crop year 2009, when the state 
experienced major drought losses, the Texas loss ratio was 133% 
compared to the 56% for the U.S. Over a 20 year average, Texas has a 
loss ratio of 126% while the U.S. experienced an 85% loss ratio. These 
numbers emphasize the fact that any proposed changes in crop insurance 
must recognize the challenges that producers face in Texas each year.
    We understand the Risk Management Agency is now considering 
restricting the availability of crop insurance in ``drought prone'' 
areas. Unpredictable weather conditions are the major reason for 
purchasing crop insurance in dryland production. This would be a 
disastrous change for Texas agriculture because much of the dryland 
production in the state could be considered ``drought prone.''
    For good reasons, the ACRE program has not been well received in 
Texas. Program provisions are simply too complicated, and the reduction 
in program benefits are too great for many Texas producers to 
participate. The inability to opt out of the program in later years 
after enrollment has also been criticized in our state. The ACRE 
program would be better received in Texas if the ``loss trigger'' was 
determined at the farm level. Again, we are cognizant of the 
limitations the Committee faced in developing this program.
    We support the continuation of a permanent disaster program in the 
next farm bill. Due to delays in implementation and the inability to 
determine crop revenues until the end of the marketing year, it's still 
too early to determine the effectiveness of the SURE program. Many 
producers are just beginning to receive payments while others are still 
awaiting theirs. We urge the Committee to continue to evaluate this 
program to make it more effective.
    We support the current conservation programs. However, these 
programs are designed to provide an environmental component, and in our 
view, cannot replace the need for a commodity safety net for producers. 
Conservation spending for the 2002 Farm Bill was increased 60% and has 
been maintained at that level. We strongly believe the established 
balance between commodity and conservation programs should not be 
altered.
    From the livestock perspective, the Pasture, Rangeland and Forage 
(PRF) program has been very helpful to livestock and forage producers 
in recent years. This program provides risk protection for forage or 
pasture production. We would strongly suggest that this program be 
expanded to cover all states (currently it is available only in a 
limited number of counties in Texas on a pilot basis). Some 
complications have developed due to the limitation on measurements of 
rainfall in certain areas, but overall we believe the program has been 
a success and offers much promise. The livestock risk protection (LRP) 
program, designed to provide price protection, has proven to be cost 
prohibitive for most producers.
    We recognize that any changes in the 2012 Farm Bill will require 
compliance with the WTO obligations of the United States. Agriculture 
trade and commodity exports in particular are critical to the future of 
our industry. Texas is a leading state in agricultural exports. We are 
the largest exporter of cotton and cottonseed, and currently rank 
number two in feeds and number three in animal fats, hides, and live 
animals and meats. Texas annually exports more than $6 billion of 
agricultural products. We encourage the Committee to give careful 
consideration to trade matters that might result in increased exports 
of farm commodities, and specifically support the Market Access Program 
(MAP) and the Foreign Market Development (FMD) programs. We encourage 
the Members of the Committee to fight to maintain these programs at 
their current funding levels.
    Mr. Chairman, as we look toward the next farm bill, we must remind 
ourselves of the original intent of farm programs. American producers 
were provided certain protections and financial support to ensure that 
their fellow citizens have a safe and plentiful food supply. Our people 
should not be dependent on other countries to produce and export food 
to the U.S. That premise is still important today. The American Farmer 
and rancher has proven that the U.S. can feed much of the world, but an 
effective and efficient Federal farm policy must be established for our 
producers to continue to be successful. I appreciate the opportunity to 
appear before the Committee today, and will respond to any questions.

    The Chairman. Well, thank you very much, Mr. Brown. We 
appreciate you being with us.
    Mr. Heffington, welcome to the Committee.

    STATEMENT OF BRAD HEFFINGTON, COTTON, CORN, AND SORGHUM 
                   PRODUCER, LITTLEFIELD, TX

    Mr. Heffington. Thank you, Mr. Chairman. I would like to 
welcome you and your fellow Congressmen here to Lubbock, Texas, 
and to the great State of Texas. We appreciate you coming to 
the world's largest cotton patch to take testimony from our 
industry.
    As I say, my name is Brad Heffington, and I farm 
approximately 6,000 acres of cotton and corn and grain sorghum 
in Lamb County, which is 40 miles west of here. My comments 
today are being provided on behalf of the membership of Plains 
Cotton Growers and the 19,000 cotton producers across the 
United States. I'm proud to say that this region produces up to 
30 percent of the cotton lint and seed production produced in 
the United States.
    The take-home message that I have for you today is that 
sound farm policy is essential to protect the viability of the 
cotton industry and the commercial agriculture in every part of 
the U.S. Specifically, cotton producers believe that the 
effective farm policy should adhere to a few clearly prescribed 
principles.
    It should be market-oriented with a goal of promoting 
quality, efficiency, and domestic competition. It should allow 
for full production to meet market demand. It should provide 
for an effective financial safety net, which is the goal of the 
farm bill. It should ensure the availability of competitively-
produced and priced U.S. cotton to domestic and international 
textile mills, as we have lost all of our great customers in 
the domestic textile industry. And it should encourage maximum 
participation without regard to farm size or business 
structure.
    The 2008 Farm Bill meets most of these principles and 
continues to work well with the cotton industry. Each 
component, the marketing loan, the direct and countercyclical 
programs, serve a distinct purpose that is beneficial to U.S. 
farmers.
    The centerpiece of the upland cotton program continues to 
be an effective marketing loan program. It is a program 
component that makes sense, that works, and that serves many 
critical purposes.
    When it comes to alternative delivery mechanisms, we have 
yet to see any alternatives that can perform as well as the 
current bill. At the current time, we do not support any 
changes in the delivery mechanisms unless circumstances develop 
that make changes inevitable.
    Currently, we have discussed concepts such as shifting 
delivery of farm support payments, conservation, crop 
insurance, or any of the like for insurance purposes, in our 
view, simply are either inappropriate or do not work well for 
cotton and most of southern agriculture.
    One key improvement to the 2008 Farm Bill was the 
investment Congress made to strengthen USDA conservation 
programs. Programs like the EQIP program and the WHIP program 
work well to address locally identified soil, water, and 
wildlife conservation issues.
    Another program that is of particular importance to this 
area is the Conservation Reserve Program. Recent budget 
cutbacks have us on the verge of releasing millions of acres of 
highly erodible land from the CRP that will most likely go back 
into crop production. The 2012 Farm Bill needs to provide a 
clear direction for the CRP program and reiterate the 
importance of keeping these fragile, erodible lands of the 
Great Plains under permanent cover.
    My last comment regarding conservation is directed at the 
Conservation Stewardship Program, CSP program. It has been 
hampered by overly restrictive payment limitations contrived by 
USDA regulators, restrictions that we can't--we do not believe 
are supported by the statute. If the CSP cannot be improved to 
a point where it can deliver meaningful benefits to commercial-
sized farming and ranching operations, we believe that these 
funds would be better used to expand successful USDA 
conservation programs such as CRP and EQIP.
    We know that the 2012 Farm Bill debate will occur in a much 
different environment. Record budget deficits will put intense 
pressure on funding, and it is important to note that we cannot 
maintain a reasonable safety net using currently existing 
delivery mechanisms. Plains Cotton Growers and the U.S. cotton 
industry will work with you to develop alternatives that 
provide an equally effective safety net.
    An effective farm policy must maximize participation 
without regard to farm size or income. The 2008 Farm Bill had 
significant changes to payment limitations and payment 
eligibility. Unfortunately, in addition to the authorized 
legislative changes, we believe that the USDA over-stepped 
Congressional intent when implementing several key payment 
provisions.
    Looking ahead, we continue to fundamentally oppose payment 
limitations and imposition of further restrictions. Given their 
existence, we advocate the administration of these provisions 
be strictly within the intent of Congress. Sound national farm 
policy is of little value if commercial-sized family farm 
operations are unreasonably made ineligible for benefits.
    We support inclusion of a permanent natural disaster 
program as a part of the farm bill. So far, unfortunately, the 
SURE program was unable to provide an effective level of 
assistance without significant modification. While we do 
support the continuation and improvement of SURE, we do not 
support reallocating limited, existing spending authority from 
the current farm programs to fix its shortcomings.
    Finally, crop insurance is an important and essential risk 
management tool for our producers. Our producers invest in a 
crop insurance group that is substantial, and our industry 
continues to work closely with the USDA Risk Management Agency 
to examine new concepts and seek improvements in current crop 
insurance products.
    Revenue coverage, enterprise policy rates, and group risk 
plans are some examples of innovative products that can offer 
more options at affordable rates. Crop insurance is an 
important complement to the current commodity programs.
    Recognizing the vital importance of crop insurance to the 
cotton farmer, we strongly oppose the deep cuts proposed in the 
second draft of the SRA, as well as many of the policies 
underneath these cuts, because we are concerned about the 
adverse impact on delivery of those policies to our producers. 
Now is the time for the Administration to be using its 
authority to expand access to qualify for coverage rather than 
severely weaken delivery.
    In summary, our industry believes that the 2008 Farm Bill 
is working. If the budget or other pressures make the 2012 
policy changes inevitable, the cotton industry remains ready to 
work with the Agriculture Committee to explore alternatives 
that provide the safety net producers need in a manner 
consistent with our international trade obligations and within 
the budget constraints.
    I would like to respond or answer any questions you have 
for me.
    [The prepared statement of Mr. Heffington follows:]

   Prepared Statement of Brad Heffington, Cotton, Corn, and Sorghum 
                       Producer, Littlefield, TX
    Good morning, my name is Brad Heffington and I operate a family 
farm of approximately 6,000 acres in Lamb County, Texas. In addition to 
cotton, which is my primary crop, I also produce both corn and grain 
sorghum depending on growing conditions and circumstances. I welcome 
you and the Members of the Committee that are present to Lubbock. My 
comments today are being provided on behalf of the membership of Plains 
Cotton Growers, Inc. PCG is the certified cotton producer organization 
representing the 41 county cotton production region surrounding 
Lubbock, Texas. I am proud to say that our region produces, on average, 
\2/3\ of the cotton grown in Texas and up to 30 percent of the cotton 
lint and seed produced in the United States. As we speak, farmers on 
the Texas High Plains are at work, planting an estimated 3.5 million 
acres to cotton, roughly 30 percent of all 2010 U.S. cotton acres.
    Cotton is the cornerstone of my operation and of the rural economy 
in our region. In fact, its scope and economic impact extends well 
beyond the approximately 19,000 farmers who plant between 9 and 12 
million acres of cotton each year in the 17 cotton-producing states. 
Taking into account diversified cropping patterns, cotton farmers 
cultivate more than 30 million acres of land each year.
    Beyond the farm-gate, the distribution and processing of cotton 
includes cotton gins, independent merchants and cooperative 
merchandisers, warehouses, cottonseed distributors and processors, and 
textile mills. Processors and distributors of cotton fiber and 
downstream manufacturers of cotton apparel and home-furnishings are 
also located in virtually every state.
    Nationally, farms and businesses directly involved in the 
production, distribution and processing of cotton employ almost 200 
thousand workers and produce direct business revenue of more than $27 
billion. Accounting for the ripple effect of cotton through the broader 
economy, direct and indirect employment surpasses 420 thousand workers 
with economic activity well in excess of $100 billion. In the three-
state region of Texas, Oklahoma and Kansas, the cotton industry's 
ripple effect is responsible for almost 93 thousand jobs and economic 
activity surpassing $25 billion annually.
Safety Net Principles
    The take home message I have for you today is that sound farm 
policy is essential to protect the viability of the cotton industry and 
commercial agriculture in every part of the U.S. In regard to cotton, 
we believe that effective farm policy should adhere to a few clearly 
prescribed principles:

    (1) It should be market-oriented with a goal of promoting quality, 
        efficiency and domestic competition;

    (2) It should allow for full production to meet market demand;

    (3) It should provide for an effective financial safety net;

    (4) It should ensure the availability of competitively-priced U.S. 
        cotton to domestic and international textile mills; and

    (5) It should encourage maximum participation without regard to 
        farm size or business structure.

    The 2008 Farm Bill meets most of these principles and continues to 
work well for the cotton industry. Each component--loan, direct and 
countercyclical programs--serve a distinct purpose that is beneficial 
to U.S. farmers. We commend this Committee for its diligent work on 
this legislation and look forward to working with you to carry its 
basic principles forward in 2012.
Safety Net Provisions That Work
    My next comments are made with respect to the current program and 
its retention of the marketing loan and several other program 
components from prior law. First, it is important to note that the 
cotton industry worked closely with the Committee to institute many 
reforms in the 2008 bill such as: the revision in the calculation of 
cotton premiums and discounts used in the cotton loan schedule, placing 
a ceiling on the payment of storage credits for cotton under loan, the 
development of an economic adjustment program for the U.S. textile 
industry; and, the reduction in the target price for cotton which 
incidentally resulted in savings used to implement several of the 
reforms previously mentioned.
    Fundamentally, we continue to support the 2008 Farm Bill's approach 
to the cotton program and all of its components, from the marketing 
loan to direct and countercyclical payments. The centerpiece of the 
upland cotton program and traditional commodity programs continues to 
be an effective marketing loan program. It provides a safety net for 
producers but does not harm the basic competitiveness of U.S. 
commodities in the international marketplace. It is a program component 
that makes sense, that works, and that serves many critical purposes. 
Because it is well understood and a fundamental part of commodity 
policy, the marketing loan is the foundation that provides rural banks 
the confidence they need to make farm operating loans available.
    Grower participation in the marketing loan program has also helped 
the cotton industry adopt many important reforms that make U.S. cotton 
a predictable and reliable product domestically and worldwide. Among 
these reforms is adoption of: standardized bale sizing and bale 
packaging for cotton; electronic warehouse receipts; and heightened 
standards for storage and elevator facilities for cotton and for other 
commodities.
Budget Challenge
    We know that the 2012 Farm Bill debate will take place in an 
environment much different than any we have ever experienced before. 
Record budget deficits will put intense pressure on funding. The WTO 
Brazil Case puts cotton's marketing loan and countercyclical programs 
under special scrutiny even though the cotton program, as revised by 
the 2008 bill, has never been evaluated by a WTO Panel. Ongoing 
negotiations in the Doha Round of trade negotiations could also result 
in a dramatically altered landscape for domestic commodity support. It 
is important to note that if circumstances arise which make it 
impossible to maintain a reasonable safety net using existing delivery 
mechanisms, Plains Cotton Growers and the U.S. cotton industry will 
work with you to evaluate alternatives that can provide an equally 
effective safety net.
    Creating an entirely new program that maintains the broad 
applicability, reliable delivery and predictable nature of our current 
safety net would be no easy task given the predicted budget 
environment. An example of how daunting this would be is evident in the 
experience recorded by the ACRE program, which was influenced by less 
severe budget pressure. From available data on the ACRE program it is 
clear that in its current form the program is not an attractive 
alternative for cotton farmers and many other crop producers across the 
nation. For cotton the support mechanisms within ACRE, many of which 
were constrained by budget pressures far less severe than what we face 
in the future, simply do not provide an adequate safety net for cotton 
farmers when compared to the marketing loan and current DCP programs. 
If ACRE's revenue-based approach were to find support among cotton 
producers it is clear that a more reasonable revenue target will have 
to be established. ACRE's shortfalls are not just a cotton problem. 
Nationwide, producers of other commodities have demonstrated their 
concerns about the ACRE program in sign-up figures that have been far 
below expectations.
    Mr. Chairman, as an industry cotton is working to evaluate fully 
our concerns with ACRE so that a constructive dialogue on its future 
can be held at the appropriate time. Unfortunately, ACRE's experience 
thus far is clear evidence that a different safety net structure, 
revenue-based or otherwise, will have to demonstrate clear superiority 
over the current combination of programs before it could be considered 
a viable alternative for cotton and other commodities.
    Even though we are committed to an in-depth review of the current 
structure of the cotton program, I must also strongly emphasize that 
our review, and any recommendations that come from it, will be 
conducted within the context of our commitment to the principles I 
outlined earlier in my statement.
Pay Limits and Program Eligibility
    One of those principles is that effective farm policy must maximize 
participation without regard to farm size or income. The 2008 Farm Bill 
contained significant changes with respect to payment limitations and 
payment eligibility. In general, the limitations were made more 
restrictive, and the adjusted gross income test was substantially 
tightened. Unfortunately, in addition to the legislative changes 
authorized by Congress, we believe that USDA over-stepped Congressional 
intent when implementing several key payment eligibility provisions by 
issuing regulations that are overly complicated and made changes to 
program eligibility provisions that were not specifically directed by 
the 2008 Farm Bill.
    Also, while I am on the subject of pay limits, I would like to 
would like to address the issue of corporations, as a business 
structure, being statutorily limited in the amount of program benefits 
that can flow through it, regardless of the number of stockholders that 
would qualify under actively engaged rules in another business 
structure such as a joint venture or general partnership. Under the new 
direct attribution rule, there is no reason that corporations should be 
treated any differently than other business structures. By limiting 
corporations, comprised of eligible program participants, Congress has 
unfairly penalized operations that utilize a corporate business 
structure for legitimate business or estate planning purposes. By 
unnecessarily limiting a corporation to a single pay limit, Congress's 
decision detrimentally impacts the ability of many family farming 
operations to utilize a business structure to quickly and easily bring 
family members or new farmers into a farming operation through a direct 
ownership interest. We believe that the corporate structure, in 
addition to providing important legal protections, can provide an 
orderly transition of the farm operation from one generation to the 
next. We believe this situation also prevents the direct attribution 
rule from working as intended to ensure that every qualified farm 
program participant receives no more, and equally important, no less 
than they are eligible to receive under the law.
    Looking ahead, we continue to fundamentally oppose payment 
limitations and imposition of further restrictions. Given their 
existence, we advocate the administration of these provisions strictly 
within the intent of Congress. Sound national farm policy is of little 
value if commercial-size family farm operations are unreasonably made 
ineligible for benefits.
Conservation
    One key improvement in the 2008 Farm Bill was the investment 
Congress made to strengthen USDA Conservation programs. USDA 
conservation programs can lead to improved environmental and 
conservation practices but should not serve as the primary delivery 
mechanism for farm program support. Many current USDA conservation 
programs are working well in our area. The Environmental Quality 
Incentives Program (EQIP) and the Wildlife Habitat Incentives Program 
(WHIP) are prime examples of programs that are working by targeting 
financial resources to locally identified soil, water and wildlife 
conservation priorities. We believe that Congress can assure the 
continued effectiveness of programs like EQIP by providing the maximum 
funding to states where it can be used to deal with conservation issues 
on working farms and ranches.
    Another program that is of particular importance to this area is 
the Conservation Reserve Program (CRP). There is probably not another 
program that has done more to improve the quality of life in this area 
or protect our precious soil resources like the CRP. Recent budget 
cutbacks have us on the verge of releasing millions of acres of highly 
erodible land from the CRP that will most likely go back into crop 
production. This area, like much of the Great Plains, was the center of 
the Dust Bowl days of the 1930's. The CRP program has prevented a 
return of that situation even though the region has suffered several 
multi-year droughts that could have instigated similar situations. The 
2012 Farm Bill needs to provide a clear direction for the CRP and 
reiterate the importance of keeping these fragile, erosive lands of the 
Great Plains under permanent cover.
    My last comment regarding conservation is directed at the 
Conservation Stewardship Program (CSP). The CSP has been hampered by 
overly restrictive payment limitations contrived by USDA regulators--
restrictions that we do not believe are supported by the statute. From 
a producer perspective the CSP is overly burdensome administratively in 
relation to the benefits that can be earned and has not been 
implemented in a fair manner. In fact, USDA's unilateral decision to 
exclude commercial-size farming operations dramatically limits the 
environmental and conservation improvements that are possible with this 
program. If the CSP can not be improved to a point that it can deliver 
meaningful benefits to commercial-size farming and ranching operations, 
we believe that these funds would be better used to enhance successful 
USDA conservation programs such as the CRP and EQIP that are promoting 
real environmental benefits for both producers and taxpayers.
Permanent Disaster Assistance Programs
    We support inclusion of a permanent natural disaster program as 
part of the farm bill. Unfortunately, our experience thus far with the 
SURE program indicates that it cannot provide an effective level of 
assistance without significant modification. We recognize the 
challenges facing the Committee in regard to making improvements in 
SURE. First and foremost, without increased baseline spending 
authority, there will be no funds to continue any of the permanent 
disaster assistance programs in the next farm bill, much less make the 
necessary improvements for SURE to be a reliable and effective disaster 
relief mechanism. While we do support continuation and improvement of 
SURE, we do not support reallocating limited, existing spending 
authority from current farm programs to fix its shortcomings.
Crop Insurance
    Crop insurance is an essential risk management tool for cotton 
producers in our region. Our industry continues to work closely with 
the USDA Risk Management Agency to examine new concepts and seek 
improvements in current cotton crop insurance products. One example of 
how High Plains cotton producers have led in this regard is the soon to 
be implemented Cottonseed Pilot Endorsement (CPE) coverage. PCG, with 
the support of other regional producer groups worked to develop the 
cottonseed insurance concept and secured final approval from the 
Federal Crop Insurance Corporation Board of Directors for the new 
product last July. The CPE will provide cotton producers that purchase 
`buy-up' plans of insurance the ability to purchase an additional 
coverage endorsement insuring the currently uninsurable value of the 
cottonseed they produce.
    The recent removal of the Group Risk Income Protection (GRIP) 
coverage option for cotton is an unfortunate, but reversible, 
situation. While we understand the basic premise that the Risk 
Management Agency used to make their decision--i.e., the perceived 
unreliability of USDA NASS county production statistics--the GRIP 
product, like other group risk-based products that rely on NASS county 
yield data, was designed specifically around this source of data with 
full knowledge of the limitations of this data product. NASS 
information is derived from a combination of producer survey data and 
information reported by gins and other sources. Even though the GRIP 
product was designed around NASS data, we believe that current problems 
could be addressed through mandatory yield reporting and the use of 
actual yield data in place of NASS information or in concert with NASS 
data to better reflect actual production in a county. Current farm 
programs do not require yield reporting, primarily because these yields 
are no longer used to actively update program payment yields. As 
producers we reported yields to FSA for many, many years and doing so 
again could be a practical way to get the GRIP product back into the 
cotton producers risk management arsenal.
    Crop insurance is an important and necessary risk management tool 
for producers. On the High Plains participation rates are high and 
cotton producers recognize the need to invest in their own protection. 
That investment is substantial, even with the premium assistance that 
is currently available. Revenue coverage, enterprise policy rates and 
group risk products are examples of improved products that can offer a 
wide array of risk options for growers at affordable levels and we 
encourage the Committee to seek opportunities to build upon these 
concepts.
    Recognizing the vital importance of crop insurance to the cotton 
farmer, we strongly oppose the deep cuts proposed in the second draft 
SRA as well as many of the policies underneath these cuts because we 
are concerned about their adverse impact on delivery and on the 
agriculture budget baseline. Now is the time for the Administration to 
be using its authorities to expand access to quality coverage rather 
than severely weaken delivery. Crop insurance is an important 
complement to current commodity programs but is not a suitable 
replacement system for delivering basic farm program support.
Biofuels and Cotton
    While the cotton industry supports a viable biofuels industry, it 
must be recognized that all commodity producers are not sharing the 
benefits equally. Renewable fuels mandates and other policies regarding 
biofuels have changed the competitive balance between commodities. This 
is placing severe pressure on cotton infrastructure (gins, warehouses, 
etc.) in certain parts of the Cotton Belt. Mandated demand can result 
in excessive and harmful market distortions. In regard to the 2012 Farm 
Bill the support given to biofuel crops must be taken into 
consideration when comparing relative levels of support across 
commodities, when evaluating payment limitations and before trying to 
mandate a one-size-fits-all farm program for biofuel and non-biofuel 
commodities.
    In summary, our industry believes the cotton provisions of the 2008 
Farm Bill are working well. If budget or other pressure make policy 
changes inevitable as part of the 2012 Farm Bill, the cotton industry 
remains ready to work with the Agriculture Committees to explore 
alternatives that provide the safety net producers need in a manner 
that is consistent with our international trade obligations and within 
budget constraints.
    Thank you for the opportunity and I would be pleased to respond to 
your questions at the appropriate time.

    The Chairman. Thank you very much, Mr. Heffington. I 
appreciate your testimony.
    And, Mr. Cleavinger, again, I apologize. I had the right 
sheet. I just picked up the wrong one.
    Mr. Cleavinger. That's fine.
    The Chairman. So we will give you an extra minute, because 
we screwed that up.

 STATEMENT OF DAVID CLEAVINGER, WHEAT, CORN, COTTON, AND GRAIN 
                SORGHUM PRODUCER, WILDORADO, TX

    Mr. Cleavinger. That would work. Thank you, Mr. Chairman. 
Mr. Neugebauer, Mr. Conaway, Mr. Cuellar, we welcome each of 
the other Members to Texas, the great Lone Star State.
    I am here today representing Texas Wheat Producers 
Association. My name is Dave Cleavinger, and I farm in Deaf 
Smith County, the second largest ag producing county in the 
state. And my family has been involved in ag policy for many 
years.
    The first hearing I ever attended was in 1976. My father 
represented the sugarbeet industry. And since that time, we 
have lost that industry in Texas, due to a large part of what 
decisions that--some of the decisions that this Committee made. 
And we need to be sure that the decisions we make will not 
affect wheat production in the years to come.
    My son is here with me today, and 35 years from now, I hope 
he can say, ``I have the opportunity to grow wheat.''
    And I have equipment in my equipment yard today that is 
virtually worthless because we lost that crop. Back then, they 
said, ``We can buy sugar from other countries cheaper, and the 
consumer will benefit.'' And we were paying 25 cents for a Coke 
and 10 cents for a bar of candy. Now look what it's done, and I 
wonder who benefited. So let's make sure that we have sound 
policies as we go forward.
    Mr. Chairman, you have been quoted from other hearings as 
saying, ``Wheat growers were for direct payments, and you were 
opposed to that.'' And as the former President of the National 
Association of Wheat Growers, I assure you that we are open to 
any kind of new programs that provide a safety net for 
producers.
    But I have been involved in hearings since 1996, 
personally, and the same arguments that were held back then 
still hold true today; that you look at these revenue-based 
programs, and wheat growers were one of the first ones to look 
at those in the last farm bill and run the numbers. But every 
time you go back and look at that, you must go to counting 
triggers for those programs to be effective.
    Because of the budget, we go back to the state triggers, 
and in Texas, where we have large diversity in farms, large 
diversity in dryland, irrigated, that's why those programs 
don't work. They work in the Midwest, where those states are 
smaller, and you have production that is a little bit more 
stable, but because of the statewide triggers, that is the 
problem in these revenue-based programs.
    The buzz words last year, in the last farm program, was the 
revenue-based programs, and we just want to assure you that we 
would love to work with you on that, but we just have to 
understand how they work and the triggers that go down.
    Wheat growers were active in bringing a disaster component 
program to the last farm bill. Senator Baucus, for the Montana 
wheat growers, brought forth the SURE program. And that may 
work in other states, but in Texas, the SURE program has been 
very difficult, again, going back to the large state that we 
have, the diversity in agriculture, dryland, irrigated.
    And I personally am waiting now for a 2008 payment from 
SURE, because the seed milo and the seed corn production tables 
have not been released from the USDA in Washington, D.C.
    I talked to my local FSA county office last week, and they 
are very frustrated with the program, because it has been 
changed four different times since it has been introduced. They 
have virtually stopped payments, because they're going back to 
2008 on production, and they're wanting--after they have issued 
the payments. So they don't know what to do. And so I'm waiting 
for my payment while all of that is being figured out.
    And having the--these payments are done on the average 
cost, the average price for the year, and so we are having to 
wait a year in order to get those payments for these programs. 
Having to wait a year for the payments when a disaster strikes 
is really not acceptable.
    A guy can go out there and lose his crop, and he has either 
got debt at the bank, and he can't wait a year, or he will be 
out of business before he ever gets that income.
    A lot has been talked about today about crop insurance. We 
think that crop insurance is one of the most effective programs 
we have. It's timely. It gets payments to producers when it's 
needed. It's good public perception. The public gets it, and 
they understand how it works, and it's saleable.
    The problem we have goes back to the APH problem, the 
average production history. In Texas, we have--had droughts, 
and even though you wouldn't know it right now, with the rain 
we have had this year and the snow we have had this year, we 
have a great crop coming on, but we have been through several 
years of drought.
    And those years have lowered our APHs to a point where we 
have some dryland wheat producers that can only insure 3 to 4 
bushels per acre, and it's not effective. We've got to go back 
and look at those APH numbers to make this crop insurance 
effective for our producers.
    And, also, on the premium side, year before last, when 
wheat prices went so high, I virtually was paying $20 to $25 
per acre for a 70 percent guarantee that didn't cover my costs. 
So that whole structure of the crop insurance, that is part of 
the problem. And then you go back and look at costs.
    I want to talk about trade real quickly. The Columbia Free 
Trade Agreement is very important. We export 50 percent of the 
crop in the U.S., 65 percent of the Texas crop is exported. And 
so all three trade agreements are important.
    H.R. 4645 is extremely important to us, and we have a lot 
of money that can be made in Texas for that, and we expect full 
support from this Committee for the Cuban Free Trade Agreement.
    Thank you for your time. I look forward to working with you 
in the coming months, and we will look to craft this new farm 
bill.
    [The prepared statement of Mr. Cleavinger follows:]

Prepared Statement of David Cleavinger, Wheat, Corn, Cotton, and Grain 
                    Sorghum Producer, Wildorado, TX
    Mr. Chairman, Rep. Neugebauer, Rep. Conaway, Rep. Cuellar, and 
other Members of the Committee, welcome to the great Lone Star State of 
Texas. On behalf of the Texas Wheat Producers Association (TWPA), I 
would like to first thank you for allowing me the opportunity to appear 
before you today to discuss the priorities of wheat growers regarding 
the 2012 Farm Bill and the future of U.S. farm policy.
    The Texas Wheat Producers Association was founded in 1950 with the 
sole purpose of providing a strong unified voice for Texas wheat 
producers. The TWPA currently represents over 500 farm families across 
the state and we continue to grow on an annual basis.
    Texas has a long history of production agriculture, and while we 
are not the largest wheat production state in the U.S., we are arguably 
the most diversified in terms of production, weather, geography and 
exports. Texas wheat producers harvest nearly 99 million bushels of 
wheat per year on average, the majority of which is comprised of hard 
red winter wheat. Although Texas is largely recognized for its beef, 
cotton and corn production, sixty percent of our 99 million bushels of 
wheat are exported annually through the Gulf Coast.
    As a lifelong farmer and rancher in Deaf Smith County, my operation 
consists primarily of wheat, but also includes corn, cotton, and grain 
sorghum, along with stocker and grower cattle.
    Federal farm policy and its impacts on American farmers and 
consumers is the focus of the Committee's field hearing today. Mr. 
Chairman and Members of the Committee, I hope to leave you here today 
with a better understanding of where Texas wheat growers are in regard 
to policy and farm programs.
Farm Support Programs
Budget Baseline
    The TWPA is well aware and very concerned with the possibility of a 
severely constrained budget baseline for future Federal farm programs. 
U.S. farm policies, along with efficient and innovative farmers, have 
helped to minimize safety net expenditures which have chipped away at 
the baseline for these programs. As I am sure you are well aware, the 
Congressional Budget Office (CBO) projected commodity program spending 
for the current farm bill will be less than \1/4\ of 1 percent of the 
Federal budget. For each American that is about 25 cents out of every 
$100 dollars paid in taxes. U.S. farm policy as a whole costs Americans 
just 3 cents per meal or 9 cents a day (Farm Policy Facts). These costs 
are minimal in comparison to other countries' annual income 
expenditures on food alone. I would attest that the farm safety net 
must continue to be robust and the farm bill budget baseline must be 
maintained and preserved in order for consumers to continue to enjoy a 
safe, abundant and affordable food supply as they do today.
Farm Programs
    Texas farmers widely participate in Federal farm support programs 
and view them as vital to ensuring the continuance of the agriculture 
industry in light of its inherent risk and increasing volatility. The 
Direct and Counter-cyclical Payment (DCP) program and marketing loan 
programs are widely utilized by Texas producers. In the instance of 
wheat growers, we have served as a cost saving measure within the 
marketing loan program due to the fact we use the least amount within 
our industry.
    During the 2008 Farm Bill process, farm programs faced pressure to 
be reformed, reduced or eliminated. The TWPA along with other commodity 
groups focused very heavily on maintaining the Direct Payment and with 
help from the House Agriculture Committee we were successful in doing 
so. While the TWPA is open to looking at possible new ways of 
maintaining a safety net for producers, we still see the net benefit 
the agricultural industry receives from direct payments.
    Direct Payments have been very essential in ensuring the vital 
support farmers need to continually meet the demands of the 
agricultural industry. Over the years, Direct Payments have allowed 
producers to continue to purchase needed equipment, seed, chemicals, 
parts, and fuel from dealers and suppliers. In looking at a farm 
forward reaction, due to farmers being able to utilize direct payments 
in the aforementioned way, small business owners, coops, tractor supply 
stores, and many others are able to stay in business and lead to 
creation of jobs and opportunities in rural communities.
    The TWPA is well aware that Direct Payments are constantly under 
scrutiny and attack, but let me remind the Committee that the 
reliability of this program cannot be overlooked in meeting the needs 
of producers that are unable to utilize other Federal safety net 
programs. As Congress looks toward crafting new farm bill legislation, 
the TWPA asks that careful consideration be given to the Direct Payment 
program.
    In addition, Texas wheat producers continue to gather knowledge and 
experience with newer farm programs like ACRE and SURE. According to 
the FSA, 930 farms were enrolled in ACRE in 2009. Of those 930 farms 
897 carried wheat acreage. However, we believe this degree of 
enrollment was largely influenced by the extenuating wheat cropping 
conditions in 2009 and the extended deadline to elect and enroll in the 
program.
    Despite the current enrollment levels, the program is still very 
complex and confusing to producers. It is our recommendation that as 
the ACRE program goes forward the complexity and paperwork involved 
with the program be reduced and that payments be made to producers in a 
more timely manner. There is also concern over the timeliness of both 
the program sign-up for SURE and the delivery of payments to eligible 
producers. However, we do recognize the SURE program as an improvement 
in terms of predictability over an ad hoc disaster program.
    As seems to be a recurring theme in any farm policy discussion, 
farmers in Texas and all across the country say they are inundated with 
the amount of paperwork they complete when signing up for farm 
programs. There is also frustration with the inconsistency in rules and 
regulations associated with the programs. In addition, as the process 
of signing up for farm programs is moving more toward an online 
process, the lack of education on how to utilize this system and the 
stiff penalties associated with unintended mistakes are making 
producers more hesitant to move in that same direction. These programs 
are meant to assist producers; however, the cumbersome process provides 
strong disincentives to participate. I would urge this Committee to 
explore these issues and try to address them.
    Last, the TWPA opposes farm program payment limitations. With 
regards to the Adjusted Gross Income (AGI) eligibility tests for 
producers to receive payments, farmers today--whether on a small or 
large operation--can easily accrue expenditures that far outweigh their 
gross income. The cost of fuel and fertilizer can be extremely 
volatile, and the cost of equipment today can seem outlandish to 
someone unfamiliar with the capital-intensive nature of modern farming. 
Likewise, we may see significant increases in seed costs in the near 
future as there continues to be progress in developing commercially 
viable biotech wheat products. In light of this, it is the 
recommendation of the TWPA that we maintain the current level of AGI of 
non-farm income at $500,000 and on farm income at $750,000 instead of 
looking toward a 25 percent cut as has been proposed by the 
Administration.
Crop Insurance
    The Texas Wheat Producers Association supports maintaining a strong 
crop insurance program as an important risk management tool for 
farmers. Federal premium cost sharing encourages participation and is 
critical to a successful program.
    According to the Risk Management Agency (RMA), in 2009 nearly 6.4 
million acres--or 76 percent of the state's total wheat acres--were 
covered by one of the various available forms of Federal crop 
insurance. Texas grain production is very diversified in large part due 
to climatic weather conditions and also by soil types that vary across 
the state. Because of this diversification and the inevitability to 
predict and control acts of Mother Nature, be it drought, hail storm, 
tornado, or even a freeze, Texas' participation in the Federal crop 
insurance program is very high.
    Because of the high enrollment rates among Texas producers, and the 
need to have a viable, reliable program, the TWPA has always encouraged 
RMA to require crop insurance companies to interpret and apply crop 
insurance rules and regulations in a uniform and timely manner.
    That being said, as we look toward the future, the ongoing Standard 
Reinsurance Agreement (SRA) negotiations are a cause for concern for 
our growers. We understand and agree with the Administration's desire 
to find budget savings. However, the USDA's draft SRA proposal seeking 
$6.9 billion in cuts over 10 years to Federal crop insurance programs 
could severely affect the scope of the program. A reduction of this 
magnitude could significantly reduce the accessibility, 
competitiveness, and quality of crop insurance and thus have a negative 
impact on the agriculture industry.
    The TWPA understands that negotiations between insurance providers 
and the RMA are ongoing. We certainly support a mutually agreeable and 
expedient outcome, so long as it does not hinder the competitiveness 
and the quality of crop insurance coverage to producers. In addition, 
we believe any savings achieved through these negotiations should be 
captured in a way to maintain the agriculture budget baseline.
Conservation
    Texas and U.S. farmers have consistently worked to be good stewards 
of the land with which we have been so richly blessed. Texas producers 
have worked at implementing practices that reduce erosion and maintain 
water quality and water management. The conservation program that our 
growers have expressed the most interest in is the Conservation Reserve 
Program (CRP).
Conservation Reserve Program
    The TWPA is very supportive of the use of CRP as a natural resource 
tool to better preserve soil quality and reduce soil erosion. We also 
recognize the erodibility index of eight as a guideline for 
establishing CRP eligibility, but we encourage flexibility to enroll 
land that does not meet the erodibility index of eight when 
environmental or economic benefits justify. We also encourage more 
priority designation and more access to wind and water points in areas 
where applicable.
    In the Panhandle and Northern High Plains Region of Texas where I 
live, roughly 507,000 CRP acres will be due for re-enrollment, 
termination, or extension by October 2010. In 2009, 680,000 acres were 
expired and in 2008, 78,000 acres expired. The TWPA would encourage the 
Committee to work closely with the USDA-FSA and NRCS with regards to 
the potential impacts of producer decisions as the October deadline 
approaches and future CRP acres expire.
Trade
    Last, I would like to leave you with some thoughts to consider 
about trade. The TWPA is very supportive of a robust trade agenda 
including passage of the current pending free trade agreements and more 
open trade with Cuba. Trade is essential to our market especially since 
the U.S. typically exports 50% of the U.S. wheat production and 60% of 
Texas's wheat crop. Given the large carryover stocks that are currently 
in play and looking at the current wheat crop conditions nationwide, 
having viable international markets for our wheat is vital. It is more 
important now than ever to maintain and grow our markets: if we fail to 
do this, our competitors will capitalize on the opportunity.
    The U.S.-Colombia FTA is a prime example. Where the U.S. once 
boasted maintaining roughly 85 percent of the Colombian market, 
estimates now show that our share could fall as low as 30 percent if 
Canada, one of our leading competitors, approves a free trade agreement 
before the U.S.. That in itself is simply unacceptable, especially when 
we continue to hear on a regular basis from our foreign buyers that the 
U.S. has the highest quality and most readily abundant supply of wheat 
but we cannot export it because of a lack of competitive trading 
conditions.
    Cuba proves another example of the potential for Congressional 
action to significantly benefit the Texas economy. According to a study 
conducted by the Center for North American Studies which was supported 
by Texas AgriLife Research, implementing a bill like H.R. 4645, the 
Travel Restriction Reform and Export Enhancement Act of 2010, would 
increase Texas agricultural exports to Cuba by $18.4 million annually. 
This would nearly double agricultural exports from Texas to Cuba 
compared to 2009.
    Mr. Chairman and Members of the Committee, there are many other 
critical areas of interest affecting Texas wheat farmers, including 
estate tax policy, research funding, rail transportation, and 
environmental regulation. The TWPA looks forward to engaging further in 
these discussions with the Texas Congressional Delegation and the House 
Agriculture Committee as these issues continue to unravel.
    In closing, when looking at constructing the 2012 Farm Bill, Texas 
wheat growers are seeking a robust safety net that reflects the 
realities of today's production system, that helps them manage against 
the risk of volatile weather and market conditions, and supports their 
stewardship efforts on our nation's soil.
    Again, the Texas Wheat Producers Association is privileged and 
honored to represent over 500 family farming operations before this 
Committee today. We look forward to working with you, your staff, and 
the rest of Congress to ensure that production agriculture can and will 
continue to provide a safe, abundant and affordable food supply for the 
U.S. and for the world.
    If Members of the Committee have any questions I would be more than 
happy to respond to them.
    Thank you.

    The Chairman. Thank you very much, Mr. Cleavinger. We 
appreciate that.
    And, Mr. Raun, welcome to the Committee.

 STATEMENT OF LOWELL G. RAUN, Jr., RICE PRODUCER, EL CAMPO, TX

    Mr. Raun. Thank you, Mr. Chairman, and Members of the 
Committee.
    My name is L.G. Raun. I am from El Campo, Texas. I am a 
rice producer. El Campo is 70 miles southwest of Houston, about 
40 miles off the Coast, and in the center of the Texas rice 
industry.
    I chair the Texas Rice Producers Legislative Group. I am a 
director of the Southwest Council of Agribusiness. And my wife 
and partner of 35 years, Linda, serves as Vice Chairman of the 
USA Rice Producers Group, and she is a director to the USA Rice 
Federation.
    My grandpa, George Raun, moved down from Nebraska in 1913, 
and after all of his hogs died of cholera, he began growing 
rice in 1915. And that was our beginning there, three 
generations, 95 years later. Besides my wife and I, I have my 
brother and a cousin that all farm in rice in the El Campo 
area.
    Congressman Conaway, the other day, you mentioned something 
about how you love what you do each and every day as a 
Congressman. You get up excited about the challenges and 
opportunities you face each and every day. And that meant a lot 
to me, because I feel that same way about farming. Actually, I 
love what I do.
    And except for maybe getting up this morning, I enjoy every 
day of farming. But, seriously, if you don't enjoy what you do 
in life, you're not going to do a good job of it. Obviously, 
all of you men up here enjoy what you're doing, and I thank you 
very much for your service to this Committee and your 
leadership for our country.
    The U.S. rice industry is over 300 years old, beginning in 
the Colonial Carolinas. We grow rice on three million--over 
three million acres, currently, in six different states. It's 
grown substantially. It provides better wildlife habitat than 
any other major crop grown.
    In Texas, we have 185,000 acres of rice this year. That is 
grown in 20 different counties. The Rice Belt of Texas 
stretches from the Beaumont area of Texas all the way down to 
the Victoria area and about three counties up from the Coast.
    The U.S. rice industry exports about 50 percent of what we 
grow. We are at the corners of the past and pending trade 
agreements, both in Panama and Columbia. Cuba was our largest 
rice export market prior to Castro. And today its potential is 
600,000 tons of market for the rice industry.
    Thank you Mr. Chairman, and, also, Congressman Moran for 
your Cuba bill. That will be a positive step, we feel, in 
future trade relations with Cuba, a great benefit, we think, 
for Texas. I'm not so sure, though, about the WTO negotiations.
    Trade agreements that phase in market access over a very 
long and questionable period of time, yet cut our farm bill 
safety net immediately, are not what I consider or call fair 
trade. It doesn't make a lot of sense. It doesn't allow cash 
flow on the farm level. It doesn't allow cash flow at the bank.
    On the 2008 Farm Bill from a farm--rice farmer's 
perspective, the nonrecourse marketing loan provisions, they 
have not been in play in recent years for rice, but certainly 
that is because our prices have been a little bit higher. But 
certainly when--in years that we have low prices, it's a 
program that helps move stocks. It provides at least some floor 
for prices for farmers and for lenders, both.
    ACRE, SURE, and crop insurance currently do not work for 
us. The countercyclical payments provide a level of support, 
but target prices are below production cost, and payments are 
based on antiquated yields and base acres, not the planted 
acres that you actually have.
    Direct payment is the only component in the 2008 Farm Bill 
that has provided support for the rice industry. Yields are 
fixed there, also, at very low levels, and, again, payments are 
based on the base acres, not on the actual planted acres.
    I wanted to mention: The decoupling of direct payments on 
the 1996 Farm Bill hurt a lot of tenants that are farmers who 
farm 75 percent of the rice in Texas. Landlords have idled land 
for the guaranteed direct payment and said goodbye to their 
tenant farmers.
    Ongoing reduction and reductions that we have witnessed in 
pay limits and program eligibility requirements, such as the 
AGI means test, has made it difficult to perform at an 
economical size. The AGI means test doesn't affect a lot of 
farmers, but it does affect many of our landowners that we 
share-crop rent with.
    Those landowners are not hurt if they will actually convert 
their share lease, then, to a cash lease and receive at least 
the same dollar amount of revenue that they were generating 
before. So the burden of these restrictions, therefore, falls 
on the active tenant farmer who the proponents of these changes 
think they are helping.
    So, looking forward, I'm not optimistic that the whole farm 
revenue program will work for rice, but one indication would be 
the low level participation in crop insurance, ACRE and SURE 
programs for rice farmers.
    Our risk in growing rice is to make sure that the prices 
are received in our production cost. And although a revenue 
program would have price as a variable, obviously, the cost 
variable is usually not covered in these programs. At this 
point, the rice farmers would be nervous about giving up direct 
payments for something we don't know will work.
    That being said, we are willing and we will explore and 
analyze any options to improve the farm bill safety net. In 
conclusion, rice farmers appreciate the opportunity to be a 
part of this process, and we are proud of what we do.
    And although we feel that we are under constant ridicule, 
we believe that there's something honorable about helping feed 
the world. Also, I think there's something honorable about 
being a Congressman, and I want to thank each and every one of 
you for what you do.
    [The prepared statement of Mr. Raun follows:]

 Prepared Statement of Lowell G. Raun, Jr., Rice Producer, El Campo, TX
Introduction
    Chairman Peterson, Ranking Member Lucas, and Members of the 
Committee, thank you for holding this hearing to review farm policy in 
advance of the 2012 Farm Bill.
    We appreciate the opportunity to offer testimony before the 
Committee on Agriculture concerning the view of rice farmers relative 
to current farm policy and the development of the 2012 Farm Bill.
    My name is L.G. Raun. I am a rice farmer from El Campo, Texas. My 
wife, Linda, and I grow 850 acres of rice in Wharton County. We have 
been farming since 1976. I serve as Chairman of the Texas Rice 
Producers Legislative Group and a board member of Southwest Council of 
Agribusiness. My wife Linda serves as vice Chairman of the USA Rice 
Producers' Group and on the board of the USA Rice Federation.
U.S. Rice Industry Overview
    The U.S. rice industry is a multibillion dollar industry that 
provides jobs and income for not only producers and processors of rice, 
but for all involved in the value chain. Much of this economic activity 
occurs in the rural areas of the Sacramento Valley in California, the 
Gulf Coast region of Louisiana and Texas, and the Mississippi Delta 
region where about 3.2 million acres of rice are produced annually.
    Rice is planted on about 185,000 acres in Texas, in addition to 
another 3.0 million acres in the other five rice growing states, 
including Arkansas, California, Louisiana, Mississippi, and Missouri.
    The U.S. rice industry is unique in its ability to produce all 
types of rice, from long grain, medium grain, and short grain, to 
aromatic and specialty varieties. Last year, U.S. farmers produced a 
rice crop of nearly $3.1 billion as measured in farm gate value.
    Today, about 85 percent of all the rice that is consumed in the 
U.S. is produced here at home. And, despite significant trade barriers 
to exports, the U.S. remains the largest non-Asian exporter of rice and 
the third largest exporter worldwide.
    On average, between 40 to 50 percent of the annual rice crop is 
exported as either rough or milled rice. The top U.S. export markets 
for rice include Japan, Mexico, Canada, Haiti, and most of Central 
America. In 2009 we exported $2.2 billion in rice to markets around the 
world.
    Americans consume 25 pounds of rice per year. Of the rice produced 
by our farmers that remains in the domestic market, 53% is bound for 
direct human food use, 16% is dedicated to processed foods, 15% is used 
to produce beer, 14% is for pet food, and the balance is used for 
industrial purposes.
    The 2005 Dietary Guidelines and MyPyramid recommendation, published 
jointly by the Departments of Agriculture and Health and Human 
Services, call for five to ten servings of grains daily, with half the 
servings coming from whole grains, such as brown rice, and 45 to 65 
percent of calories coming from complex carbohydrates, such as rice. 
Rice is a wholesome source of nutrition, with no sodium, no 
cholesterol, no glutens, and no trans or saturated fats.
    Beyond the substantial economic and nutrition benefits of rice is 
the environmental dividend from winter-flooded rice fields that provide 
critical habitat for migratory waterfowl and other wetland-dependant 
species. Rice fields are typically flooded for at least 5 months a 
year, during which time they become temporal wetlands with enormous 
significance to bird populations wintering and breeding in the rice-
producing states of Texas, Arkansas, California, Louisiana, 
Mississippi, and Missouri.
    Rice production areas in Texas correspond with the bird migration 
corridor known as the Central Flyway, providing important habitat to 
hundreds of bird species that rely on these artificial wetlands during 
their migratory journey. According to the Texas Ornithological Society, 
Texas is home to nearly 650 different bird species, more than half of 
which can be found in the Texas Rice Belt.
    Taking rice acreage out of production in favor of other crops would 
eliminate the environmental benefits of wetland creation and habitat 
protection. Farmers are good stewards of the land and operate in an 
environmentally sensitive manner. With regard to rice production, the 
clear and undisputed benefits of it rank the commodity among the top of 
all agricultural systems in terms of a positive environmental impact.
2008 Farm Bill Review
    The Food, Conservation, and Energy Act of 2008 (the Farm Bill) 
continued the traditional mix of safety net features consisting of the 
non-recourse marketing loan and loan deficiency payment program and the 
direct and countercyclical payment program.
    The farm bill also includes the addition of Average Crop Revenue 
Election (ACRE) as an alternative to countercyclical payments for 
producers who agree to a reduction in direct payments and marketing 
loan benefits. The bill also added Supplemental Revenue Assurance 
(SURE) as a standing disaster assistance supplement to Federal crop 
insurance.
    The 2008 Farm Bill made very substantial changes to the payment 
eligibility provisions of the safety net, establishing an adjusted 
gross income (AGI) means test and, albeit unintended by Congress, 
resulting in the very significant tightening of ``actively engaged'' 
requirements for eligibility.
    USDA is still in the process of implementing many of the provisions 
of the 2008 Farm Bill, and the final payment eligibility rules were 
only announced in January of this year. As a consequence, we are still 
adjusting to the many changes contained in the current farm bill, even 
as we begin the process of developing policy recommendations for the 
2012 Farm Bill.
    Regarding ACRE and SURE, frankly, neither policy has proved much 
value to the rice farmer in any of the major growing regions. 
Specifically, in the first year of ACRE sign-up, only eight rice farms 
representing less than 900 acres were enrolled in the program 
nationwide. And SURE has provided little, if any, assistance to rice 
producers, including those producers in the Mid South who last year 
suffered significant monetary losses due to heavy rains and flooding 
occurring prior to and during harvest.
    Regarding the traditional mix of safety net features, the 
nonrecourse marketing loan and loan deficiency payment program and 
countercyclical payment program have not yet provided payments to rice 
farmers. In fact, if the protections provided were ever to trigger for 
rice farmers, the protections would help stem some of the economic 
losses but, frankly, not enough to keep most rice farms in business 
even through 1 year of severely low market prices.
    As such, whatever its imperfections, the Direct Payment alone has 
assisted rice producers in meeting the ongoing and serious price and 
production perils of farming today.
    For rice producers the existing safety net protection levels have 
simply not kept pace with the significant increases in production 
costs. It is for this reason that rice farmers believe strengthening 
the safety net would be helpful in ensuring that producers have the 
ability to adequately manage their risks and access needed credit.
    In Texas, rice producers face other unique challenges. We have seen 
our rice acreage decrease to 185,000 acres. At one time, Texas produced 
as much as 600,000 acres of rice annually. Almost 350,000 acres of rice 
were produced as recently as 1994. Part of this acreage reduction has 
been due to the unintended consequences of decoupling farm program 
payments from production. In effect, this has resulted in significant 
rice acreage in Texas being idled while landowners collect the direct 
payment and potentially the countercyclical payment.
    In sum, despite what one may read in the newspaper or hear on the 
radio or television about Uncle Sam lavishly spending money on the farm 
safety net, rice farmers are certainly not seeing any windfalls and, I 
would respectfully submit, neither are our brethren who produce other 
crops. The public perception about government largess in farm policy, 
so carefully and diligently created and nurtured by critics, is quite 
divorced from reality on the ground. Spending on the rice safety net in 
the farm bill has declined from $1.2 billion to about $400 million 
annually, which is largely made up of only the direct payments.
Crop Insurance
    Even risk management products offered under Federal Crop Insurance 
have been of minimal value to rice farmers to date due to a number of 
factors, including artificially depressed actual production history 
(APH) guarantees, high premium costs for a relatively small insurance 
guarantee; and the fact that the risks associated with rice production 
are unique from the risks of producing many other major crops.
    For instance, since rice is a flood-irrigated crop, drought 
conditions rarely result in significant yield losses as growers simply 
pump additional irrigation water to maintain moisture levels to achieve 
relatively stable yields. However, drought conditions do result in very 
substantial production cost increases connected to the pumping of 
additional water.
    As such, what rice farmers need from Federal crop insurance are 
products that will help protect price risk and increased production and 
input costs, particularly for energy and energy-related inputs. For 
example, fuel, fertilizer, and other energy related inputs represent 
about 70 percent of total variable costs.
    In this vein, the USA Rice Federation has been working for over a 
year now to develop a new generation of crop insurance products that we 
hope will provide meaningful risk management tools for rice producers 
in protecting against sharp, upward spikes in input costs. Our 
objective is to gain approval from the Risk Management Agency (RMA) of 
at least two new products that could be available to growers in time 
for the 2012 crop year. Without these products in place, rice producers 
enter the 2012 Farm Bill debate at a serious disadvantage, having just 
one safety net feature to which they have effective access. We believe 
that there is the authority within the current Federal crop insurance 
statute to greatly expand access to higher quality coverage and we hope 
that USDA will aggressively use that authority given the constraints 
Congress faces in pursuing this end.
Conservation Policies
    Rice producers are excellent conservation stewards and, as such, we 
strongly support and participate in voluntary, incentive-based USDA 
conservation programs.
    Rice producers contribute to beneficial conservation efforts 
through a number of initiatives including the Environmental Quality 
Incentives Program (EQIP), the Conservation Security Program (CSP), and 
the Wetlands Reserve Program (WRP), among others. Through our 
participation, rice producers are maintaining and enhancing the natural 
resources of not just our family farms, but that of our communities, 
states, and our nation as well.
    Rice producers support administration of conservation programs 
primarily at the local level. We appreciate the emphasis Congress has 
placed on technical assistance to producers and we value these services 
from NRCS officials and NRCS-certified third-party providers.
    In regard to the current farm bill, we believe that release of 
final conservation program rules is extremely important, as is their 
consistent implementation and application nationwide. In particular, 
with the strong interest in the 2008 Farm Bill's expanded national-
level Conservation Stewardship Program (CSP) and in the absence of a 
final CSP rule to date, we are hopeful that the Administration will 
quickly complete and release the CSP final rule.
    When the 2002 Farm Bill's Conservation Security Program was being 
implemented, rice producers played a proactive role in working with 
NRCS. More recently, in 2009, the USA Rice Federation filed CSP 
comments with NRCS, including some concerns about provisions in the 
interim final rule. Of specific concern to rice farmers are provisions 
that would administratively impose a payment limit of $40,000 per year 
and a $200,000 contract limit despite the fact that the farm bill does 
not impose either.
    Also, of specific concern are restrictions on the number of 
individuals who may apply or contract for CSP. Earlier this year, only 
one entity per contract was allowed, regardless of whether an operation 
was signed up at the Farm Service Agency (FSA) as a multi-entity 
operation. Moreover, only those listed on the FSA's documents as farm 
operators were eligible to apply and, if deemed eligible, enter into a 
CSP contract. Finally, the rule states that, to be eligible, a CSP 
applicant must have documented control of the land for the proposed 
contract term unless an exception is made by NRCS. However, a CSP 
applicant may not have a 5 year lease on every acre he or she farms. 
Landowner-tenant relationships include many types of arrangements. 
Requiring a 5 year or longer lease is unrealistic in most 
circumstances, both from the perspective of the landowner and the 
tenant.
    In short, rice farmers take very seriously our responsibility to 
care for our land and our natural resources. They are our economic 
lifeblood and an integral part of the legacy that we will leave behind 
to our children and grandchildren.
    But there is also very substantial benefit accruing to the general 
public as a result of the conservation efforts we undertake on the 
farm, including cleaner air and water, wildlife and wildlife habitat, 
reduced soil erosion, and wetlands protection. Accordingly, we believe 
these highly successful, voluntary conservation cost-share efforts are 
properly a shared responsibility.
    Finally, given the fiscal constraints expected in the context of 
the 2012 Farm Bill, I would be remiss not to mention that conservation 
funding is an essential part of any successful farm policy, but it 
should not come at the expense of the farm safety net. A farmer and 
rancher must still be profitable in order to properly care for his or 
her land. The safety net doesn't translate into profitability but it 
does take out some of the deep economic valleys producers would 
otherwise face.
Environmental Policy Challenges
    Unlike conservation efforts under the farm bill, Federal and state 
environmental regulations, which are growing in number, frequently 
appear to put more focus on the means of achieving a desired outcome 
than the outcome itself, thus creating unnecessary inefficiencies and 
added costs to conservation.
    Policy makers should consider working to avoid these less efficient 
regulatory frameworks where effective cost-share conservation efforts 
are proven more effective, while making the cost-share dollars 
available to assist in meeting Federal and state regulatory regimes 
when they are nevertheless imposed on producers.
    Of serious and ongoing concern to rice producers is the economic 
impact of climate change legislation on the U.S. rice industry and 
American agriculture in general. From our vantage point, the cost of 
pending legislation heavily outweighs any potential benefits.
    One of the key areas of focus in our analysis of pending 
legislation is the impact on rice production costs as a result of 
higher costs for major inputs such as fuel, electricity, fertilizer, 
natural gas, and propane. As noted earlier, rice is a flood-irrigated 
crop, requiring energy to pump either ground or surface water. In 
addition, rice is a high yielding crop, utilizing nitrogen fertilizer 
which, in turn, is made using natural gas. Rice must also be dried 
before it can be stored. And, finally, beyond the increased costs of 
field production, rice must be milled before it can be consumed or 
utilized in products, an expense which is also borne by producers if 
they are part of a cooperative. All of these already significant costs 
are expected to substantially increase under pending climate change 
legislation, both in the short and long term, and this does not even 
take into account increased transportation and other costs expected to 
rise as a result.
    We fear that these increased input costs will make us less 
competitive vis-a-vis our major global competitors, such as Vietnam, 
Thailand, Pakistan, and India, whose producers already benefit from 
heavy government protections and which will not likely bind their 
economies to the same level of commitments to reduce greenhouse gas 
emissions, if they will bind themselves to any at all.
    In sum, we are confronted with no economic upside under pending 
climate change legislation but plenty of economic downside. For 
instance, an analysis by the Agricultural and Food Policy Center at 
Texas A&M University estimates that due to the increase in input costs 
for rice and the likelihood of no opportunity to meaningfully 
participate in an offset program, at least at this time, all fourteen 
(14) representative rice farms analyzed would experience lower average 
annual net cash farm income. Moreover, the American Farm Bureau 
Federation estimates that the increase in rice production costs per 
acre could reach as high as $153.00.
    Beyond climate change legislation, our industry is also facing 
numerous additional rules and regulations from the Environmental 
Protection Agency (EPA), including new spray drift guidance, potential 
National Pollutant Discharge Elimination System (NPDES) permits for the 
application of pesticides, Endangered Species Act (ESA) and pesticide 
re-registrations concerns, and additional air quality regulations at 
both the farm and processing stages. Clean Water Act legislation 
currently pending in Congress is also troubling because of the legal 
uncertainty that it would create on the farm. Food Safety and Chemical 
Security legislation also needlessly create anxiety for producers by 
failing to address basic concerns over fairness, including, in the case 
of Food Safety, the failure to provide for a simple indemnification 
program for producers in the case of an FDA-error.
Trade Policy Challenges
    Another key policy focus for our industry is trade since we are 
greatly dependent on export channels to market nearly half of our 
annual production. While many previously negotiated trade agreements 
have promised market access gains for agriculture, much of what was 
promised has yet to materialize or is continually threatened by 
artificial sanitary, phytosanitary (SPS) and other non-tariff barriers.
    In terms of new agreements, rice was completely excluded from the 
free trade agreement negotiated with South Korea, foreclosing any new 
markets for U.S. rice producers in that country. And, the Colombian 
Free Trade Agreement (FTA), which would provide significant new market 
access for the Mid-South rice industry, is stalled.
    Moreover, one market that has the potential to become a top five 
export market almost immediately is Cuba. Unfortunately, the U.S. 
Government maintains restrictions on our agricultural exports to this 
country. Cuba was once the number one export market for U.S. rice prior 
to the embargo and we believe it is potentially a 400,000 to 600,000 
ton market if normal commercial relations are established. In this 
regard we wish to commend Chairman Peterson and Congressman Moran for 
your leadership in introducing legislation to open agricultural trade 
as well as remove travel restrictions to Cuba. We look forward to 
working with you to see this legislation enacted into law.
    I would be remiss if I did not at least touch on the Doha Round 
negotiations of the World Trade Organization (WTO). It suffices to say 
that we are greatly outgunned by high foreign subsidies and tariffs 
and, at least so far, we have seen nothing in the Doha Round 
negotiations that would change any of this. In fact, instead, in many 
ways Doha would make matters worse. Yet, enshrining in our trade 
agreements decisive advantages for our trading partners, including such 
countries as China, India, and Brazil, may be marketed as trade 
liberalization or free trade in Washington or Geneva but we in the 
countryside see it for what it really is: picking winners and losers in 
the global economy based on politics.
    Trade agreements that phase in market access gains over a long 
extended number of years, but reduce farm safety net levels 
immediately, do not constitute fair trade, make economic sense or cash 
flow at the bank.
    Given rising future global demand for food, the U.S. should 
exercise caution in negotiations so as not to arbitrarily forfeit 
America's domestic production to less efficient competitors.
    It is also in light of our highly protected and subsidized 
competition and the importance of trade to our industry that we believe 
it is critical that the U.S. maintain adequate funding and resources 
for our export promotion and market development activities, 
particularly the Market Access Program, Foreign Market Development 
program, and the General Sales Manager (GSM) 102 export credit 
guarantee programs.
Budget Challenges
    As we look ahead to the development of the 2012 Farm Bill, we are 
deeply concerned about the deteriorating budget baseline for 
agriculture.
    As you know, today, less than \1/4\ of 1 percent of the Federal 
budget and less than 17% percent of the USDA budget is dedicated to the 
farm safety net.
    Yet, the re-negotiation of the Standard Reinsurance Agreement (SRA) 
by USDA and the crop insurance companies could result in another 
baseline reduction of nearly $7 billion. Clearly, agriculture cannot 
afford this kind of hemorrhaging in advance of what we understand may 
be a baseline farm bill and at least the potential of another budget 
reconciliation effort. Of equal concern is the adverse impact of such 
cuts on a safety net component that producers are told by lawmakers and 
lenders alike that they will have to rely on more and more.
    As you know, the farm safety net sustained cuts in 2005 during 
budget reconciliation and, again, in 2008 in the context of the farm 
bill even as other policies administered by USDA received funding 
increases, some very substantial. The success of farm legislation has 
always depended upon carefully balanced legislation and coalition-
building. We are deeply concerned that singling out the farm safety net 
for additional cuts may upset this fragile balance.
2012 Farm Bill Development
    The rice industry is working internally to analyze all the existing 
safety net policies and to evaluate their effectiveness in providing a 
measure of protection in the most efficient manner.
    We believe that a strengthening of the farm safety net is 
important. But we also believe that any improvements should be 
accomplished in a manner that does not cause disruption and upheaval in 
the U.S. agriculture production system which continues to provide our 
country and millions around the world with a safe, abundant, and 
affordable supply of food, fiber, and fuel.
    With regard to a whole farm revenue concept, we have serious 
concerns about how such a program would perform for rice producers, 
especially if it has some of the same components as the existing SURE 
program, which is not working for our industry. In general, whole farm 
approaches don't work well for rice farmers, particularly those that 
are diversified with several crops.
    At this time, we would like to share with you the key principles 
that are guiding our work in analyzing the current farm bill policies.

    1. The farm safety net should be strengthened for rice producers by 
        the 2012 Farm Bill.

    2. The Direct Payment Program, or any variant, should confer a 
        stronger safety net for rice producers.

    3. The Marketing Assistance Loan/Loan Deficiency Payment Program 
        should be extended with at least current loan rate levels as a 
        base level safety net for producers and lenders.

    4. The Countercyclical Payment Program, or any variant, should 
        better reflect current market conditions for rice.

    5. ACRE, or any variant, needs to effectively serve all eligible 
        commodities.

    6. SURE, or any variant, needs to effectively serve all eligible 
        commodities and regions.

    7. Crop insurance needs to effectively serve all eligible 
        commodities and regions.

    8. The 2012 Farm Bill should create long-term certainty regarding 
        payment limitations, adjusted gross income requirements, and 
        other eligibility criteria.

    9. There should be no further reduction in pay limits or adjusted 
        gross income requirements or further restrictions on 
        eligibility relative to the current mix of safety net 
        components or the equivalents under any variant.

    10. There should be no further reduction in funding levels for the 
        farm safety net nor any reduction in that safety net funding 
        specific to rice producers.
Conclusion
    In closing, we would like to thank you once again for this 
opportunity to share our views on the current state of the rice 
industry, the diverse challenges we face, and our initial thoughts on 
the development of a 2012 Farm Bill that can help meet the needs of 
producers.
    We look forward to working with you in this regard and I would be 
happy to respond to any questions the Committee may have.

    The Chairman. Thank you very much, Mr. Raun, for your 
testimony.
    Mr. Schniers, welcome to the Committee.

  STATEMENT OF DOYLE SCHNIERS, COTTON PRODUCER, SAN ANGELO, TX

    Mr. Schniers. I want to thank the Chairman, the Ranking 
Member, and Members of the Committee for allowing me to address 
you today.
    I am Doyle Schniers, a cotton and grain farmer from San 
Angelo, Texas. I operate a family farm in Tom Green and 
adjoining counties in partnership with my brother, son, and 
nephew.
    My primary crop is cotton, and my comments today are given 
on behalf of the Southern Rolling Plains Cotton Growers 
Association. The Southern Rolling Plains Cotton Growers 
Association is the certified producer organization which 
represents cotton producers in a 12 county area known as the 
Concho Valley of Texas.
    Cotton is a vital industry in my area, as well as in many 
parts of Texas. The economies of many rural communities are 
dependent on a strong agricultural component. When agriculture 
is prospering, it provides many jobs in rural areas from 
production, to cotton ginning, to warehousing and shipping, to 
agribusinesses, suppliers, to the local hardware stores, to the 
fuel dealer, to restaurants, to schools and hospitals.
    The Southern Rolling Plains Cotton Growers Association 
feels a sound farm policy is critical to maintaining the cotton 
industry in this region and across the Cotton Belt. A strong 
safety net is necessary for us as producers to survive in 
today's economy.
    Our region is a very productive agricultural area. However, 
we are mostly dependent on rainfall in order to make a crop. 
From time to time, the rains do not come at the right times, 
and droughts are a reality.
    With the enormous input costs in production of crops today, 
the loss of a single crop can be devastating to producers. The 
heavy investment in land, equipment, and production expenses 
just does not allow the farmer to have adequate reserves to 
sustain himself during losses from natural disasters.
    Since most of our crops--most of our cotton and most of our 
grain is exported, we are a part of the global economy. The 
21st century world markets and world situations are 
unpredictable and uncertain. We face fluctuating market prices 
that make farm decisions difficult and challenging.
    The core principle of farm programs in the U.S. since the 
Great Depression has been stability; stability that has limited 
the boom and the bust for agricultural producers; stability 
that has provided the consumer with the cheapest, most 
abundant, and the safest food and fiber in the world; stability 
for agricultural lenders to provide the much needed credit for 
agriculture; and stability for manufacturers and developers to 
provide research for the most advanced technology and equipment 
to assist agricultural production.
    In order for us to maintain this level of agricultural 
production in the United States, we must have a sound farm 
policy that will protect the viability of the cotton industry 
and American agriculture.
    There are some key elements to maintaining an effective 
program for cotton: a market-oriented policy that promotes 
quality, efficiency, and competition; allows full production to 
meet market demands; provides an effective financial safety 
net; ensures the availability of competitively-priced U.S. 
cotton to both domestic and international textile mills; 
encourages maximum participation without regard to farm size or 
structure.
    The current farm bill meets most of these principles and 
has worked well for the cotton industry. The past Agriculture 
Committees have fine-tuned the farm program several times, and 
the current program has contributed greatly to the current 
stability in agriculture. To deviate much from this could have 
far-reaching effects on the future of American agriculture.
    A key component of the farm program for cotton is marketing 
loans. This is the safety net most important to cotton 
producers, and allows the producer to secure adequate financing 
and to market his products in an orderly manner. Rural 
financial lenders rely on this program, and it gives them the 
confidence they need to provide credit to farmers. With the 
marketing loan, farmers can sell their products throughout the 
year and take advantage of better market prices.
    We understand that the 2012 Farm Bill debates will include 
new elements and that--new elements that must be considered--
budget pressure and the WTO Brazil case rulings. Agriculture is 
vital--is vital to America, and we must find ways to maintain a 
reasonable safety net for America's farmers.
    The main cotton provisions in the 2008 Farm Bill are 
working well for the cotton industry. While changes will be a 
part of the new farm bill, the safety net for farmers and the 
stability of the industry are critical--critically important. 
We, as a part of the cotton industry, are ready and willing to 
meet the challenges and to consider alternative programs that 
provide an adequate safety net and agricultural stability.
    You have heard me mention stability a lot in this, in this 
talk, and that goes a long way. That's the end. That's the 
final word, is stability in agriculture.
    I would like to thank you for allowing me the opportunity 
to speak to you today.
    [The prepared statement of Mr. Schniers follows:]

 Prepared Statement of Doyle Schniers, Cotton Producer, San Angelo, TX
    I want to thank the Chairman, Ranking Member, and other Members of 
the Committee for allowing me to address you today.
    I am Doyle Schniers, a cotton and grain farmer from San Angelo, 
Texas. I operate a family farm in Tom Green and adjoining counties in 
partnership with my brother, son, and nephew. My primary crop is cotton 
and my comments today are given on behalf of the Southern Rolling 
Plains Cotton Growers Association. The SRPCGA is the certified producer 
organization which represents cotton producers in the 12 county area 
known as the Concho Valley of Texas.
    Cotton is a vital industry in my area, as well as many parts of 
Texas. The economies of many rural communities are dependent on a 
strong agricultural component. When agriculture is prospering, it 
provides many jobs in rural areas--from production, to cotton ginning, 
to warehousing and shipping, to agribusiness suppliers, to the local 
hardware store, to the fuel dealer, to restaurants, to schools and 
hospitals.
    The Southern Rolling Plains Cotton Growers Association feels that a 
sound farm policy is critical to maintaining the cotton industry in 
this region and across the Cotton Belt. A strong safety net is 
necessary for us as producers to survive in today's economy.
    Our region is a very productive agricultural area. However, we are 
mostly dependent on rainfall in order to make a crop. From time to 
time, the rains do not come at the right times and droughts are a 
reality. With the enormous input costs in producing crops today, the 
loss of a single crop can be devastating to producers. The heavy 
investment in land, equipment, and production expenses just does not 
allow the farmer to have adequate reserves to sustain himself during 
losses from natural disasters.
    Since most of our cotton and much of our grain is exported, we are 
a part of the global economy. The 21st century world markets and world 
situations are unpredictable and uncertain. We face fluctuating market 
prices that make farm decisions difficult and challenging.
    The core principal of farm programs in the U. S. since the Great 
Depression has been stability--stability that has limited the boom and 
bust for agricultural producers; stability that has provided the 
consumer with the cheapest, most abundant, and safest food and fiber in 
the world; stability for agricultural lenders to provide the much 
needed credit for agriculture; and stability for manufacturers and 
developers to provide research for the most advanced technology and 
equipment to assist agricultural production.
    In order for us to maintain this level of agricultural production 
in the United States, we must have a sound farm policy that will 
protect the viability of the cotton industry and American agriculture. 
There are some key elements to maintaining an effective program for 
cotton:

    1. A market-oriented policy that promotes quality, efficiency, and 
        competition.

    2. Allows full production to meet market demands.

    3. Provides an effective financial safety net.

    4. Ensures the availability of competitively-priced U.S. cotton to 
        both domestic and international textile mills.

    5. Encourages maximum participation without regard to farm size or 
        structure.

    The current farm bill meets most of these principles and has worked 
well for the cotton industry. The past Agriculture Committees have 
fine-tuned the farm program several times and the current program has 
contributed greatly to the current stability in agriculture. To deviate 
much from this could have far-reaching effects on the future of 
American agriculture.
    The key component of the farm program for cotton is the marketing 
loan program. This is the safety net most important to cotton producers 
and allows the producer to secure adequate financing and to market his 
products in an orderly manner. Rural financial lenders rely on this 
program and it gives them the confidence they need to provide credit to 
farmers. With the marketing loan, farmers can sell their products 
throughout the year and take advantage of better market prices.
    We understand that the 2012 Farm Bill debates will include new 
elements that must be considered--budget pressures and the WTO Brazil 
Case rulings. Agriculture is vital to America and we must find ways to 
maintain a reasonable safety net for America's farmers.
    The ACRE program has not been very attractive for cotton producers, 
as evidenced by the sign-up. If a revenue-based approach is to gain 
support from cotton producers, it will need a more realistic revenue 
target.
    In order for a farm program to be effective, it needs maximum 
participation without regard to farm size or income. The changes in the 
2008 Farm Bill significantly reduced payment limitations and the 
adjusted gross income test was tightened. Any additional changes will 
begin to erode away at the effectiveness of the program and commercial-
size operations will not be able to fully participate.
    Today's farmer is the most conservation minded that U.S. 
agriculture has seen. Programs such as the Conservation Stewardship 
Program encourage improved environmental and conservation practices, 
but should not be used as the primary method of delivering farm 
support. Restrictions and payment limitations in the CSP program have 
limited its effectiveness in our area.
    The Conservation Reserve Program may be affected by budget 
cutbacks. This would release millions of acres of highly erodible land 
from CRP back into crop production. The 2012 Farm Bill needs to address 
this so that fragile, highly-erodible lands remain with permanent 
cover.
    We support a permanent natural disaster program as a part of the 
farm bill, but indications are that the SURE program cannot deliver an 
effective level of disaster assistance.
    Crop insurance is an important risk management tool for farmers in 
our area. Some new insurance products, such as revenue coverage, 
enterprise policies, and group risk coverage, have given a variety of 
options for risk management. These should complement the traditional 
commodity programs, but not be used to replace the current system of 
delivering farm support.
    The cotton industry supports a viable biofuels industry. However, 
the renewable fuels policy changes the competitive balance between 
commodities. This has placed pressure on the cotton infrastructure, 
such as gins and warehouses, in parts of the Cotton Belt. These 
mandates have created market distortions. The support for biofuel crops 
needs to be considered when looking at support for all commodities, 
when evaluating payment limitations, and when developing a one-plan-
for-all program for all commodities.
    The main cotton provisions in the 2008 Farm Bill are working well 
for the cotton industry. While changes will be a part of the new farm 
bill, the safety net for farmers and the stability of the industry are 
critically important. We, as a part of the cotton industry, are ready 
and willing to meet the challenges and to consider alternative programs 
that provide an adequate safety net and agricultural stability.
    Thank you for allowing me the opportunity to speak to you today.

    The Chairman. Thank you very much, Mr. Schniers. We 
appreciate that.
    Mr. Smith, welcome to the Committee.

     STATEMENT OF DAN SMITH, SORGHUM PRODUCER, LOCKNEY, TX

    Mr. Dan Smith. Good morning. On behalf of the National 
Sorghum Producers, I would like to thank you for the 
opportunity to address this Committee and discuss the impact of 
the U.S. farm bill on my operation, the bottom line, of sorghum 
producers nationwide.
    My name is Dan Smith, and I farm near Lockney, Texas, about 
an hour's drive northeast of Lubbock. I farm sorghum, cotton, 
corn, and wheat on a farm homesteaded by my great-grandparents 
100 years ago.
    The National Sorghum Producers realize that it's early in 
the farm bill process, but are interested in fostering an open 
discussion with the Committee. As a farmer, I realize the huge 
impact this one piece of legislation has on my day-to-day 
operation, and I am interested in ensuring farm benefits in the 
next farm bill.
    Regarding the 2008 Farm Bill, I would like to mention that 
the sorghum industry has suffered significant losses 2 years in 
a row because of drought. We'd ask the Committee to urge USDA 
to make Supplemental Revenue Assurance, SURE payments, 
available to eligible producers. We also encourage the 
Committee to authorize payments, based on some percentage, to 
give money back to the farmers and the country.
    Next, I would like to thank the Committee for its work on 
sorghum price elections in the 2008 Farm Bill. This continues 
to work, and they need to increase the crop insurance from 88 
percent of the price of corn, to 97.8 percent of the price of 
corn. For my farm, that translates into $7.33 per acre or more 
for dryland crop insurance coverage, and $41.94 per acre more 
for irrigated crop insurance coverage. Thank you for leveling 
the playing field.
    I also would like to thank the Committee for increasing the 
subsidy on enterprise yields to allow sorghum producers to 
increase coverage on their crop while paying a lower premium. I 
would suggest a change only for enterprise units, which would 
allow the separation of irrigated and non-irrigated practices 
into separate enterprises.
    At the same time, I would ask this Committee to maintain a 
strong crop insurance program in the next farm bill. Crop 
insurance has saved my own operation several times in 
situations where I would have gone out of business if it was 
not for this vital risk management tool. I believe that it is 
vitally important to remind this Committee that farmers across 
the nation provide a safe, reliable, and reasonably priced 
supply of food, fuel, and fiber to the world.
    The current Administration's focus on rural development 
should be more on farm development, because it is the farmer 
that brings money to the rural economy, supports the local 
businesses, and educates our youth.
    As the Committee prepares to develop the farm policy for 
2012 and beyond, remember that the Agriculture Committee has 
done a very good job of making sure increases in farm bill 
spending have been paid for. And we would like to be recognized 
for that fiscal responsibility by maintaining a strong safety 
net for sorghum producers.
    We believe that the Committee should continue to invest in 
the energy title of the farm bill. Currently, more than \1/4\ 
of the United States grain sorghum crop is processed through an 
ethanol plant. The renewable fuels industry is the fastest 
growing value-added market for the sorghum industry.
    Sorghum can be involved in many aspects of the renewable 
fuels industry, including the use of sweet sorghum for sugar-
based ethanol production, high biomass fuels production, and 
ethanol production.
    We encourage the Committee to continue strong support for 
programs like the bio programs for advanced--bioenergy program 
for advanced biofuels, Section 9005, the Biomass Crop 
Assistance Program. Those programs, if implemented correctly, 
will help build cellulosic and sweet sorghum as feedstocks for 
companies looking to make ethanol out of its biomass and 
sugars.
    Finally, we encourage the Committee to support programs 
that reward the use of water sipping crops like sorghum. We 
encourage the Committee to consider the demand on water in the 
area of the Sorghum Belt in developing a conservation program 
and practices.
    Thank you for your time and for your attention, and thank 
you for coming to Lubbock, Texas. And I would be happy to 
answer your questions later on.
    [The prepared statement of Mr. Smith follows:]

     Prepared Statement of Dan Smith, Sorghum Producer, Lockney, TX
Introduction
    On behalf of the National Sorghum Producers, I would like to thank 
the House Committee on Agriculture for the opportunity to discuss the 
next U.S. farm bill and its impact on my operation.
    My name is Dan Smith, and I farm near Lockney, Texas in Floyd, Hale 
and Briscoe Counties. I raise sorghum, cotton, wheat and corn on a 
fourth-generation family farm that was started by my great-grandfather.
    NSP represents U.S. sorghum producers nationwide and our mission is 
to increase the profitability of sorghum producers through legislative 
and regulatory representation. I serve on the NSP legislative committee 
because I understand that the actions of this Committee and the U.S. 
Congress have a great impact on my farming operation.
    NSP supports the work put forth by this Subcommittee in passing the 
2008 Farm Bill and looks forward to working with the Committee to craft 
the next set of vital farm policy. This testimony will focus on various 
areas of farm policy as they relate to sorghum: crop insurance, 
budgets, the importance of the Energy Title to sorghum producers, and 
the sustainability of sorghum.
Industry Overview
    The Great Plains states produce the largest volume of grain 
sorghum, but the crop is grown from Georgia to California and South 
Texas to South Dakota. According to the National Agricultural 
Statistics Service, last year sorghum was produced in many of the 
states that you represent. This includes Kansas, Georgia, Mississippi, 
Colorado, Nebraska, South Dakota, Missouri, Texas, Iowa, Indiana, 
Oregon, North Carolina, Illinois, Maryland, Pennsylvania, Oklahoma, 
North Dakota and Ohio.
    Over the past 15 years, grain sorghum acreage has ranged from a 
high of 13.1 million acres in 1996 to a low of 6.5 million acres 
planted in 2005. Annual production from the last 15 years has ranged 
from 795 million bushels to 277 million bushels, with an approximate 
value of $1.2 billion annually.
    The creation of the Conservation Reserve Program in the 1985 Farm 
Bill had a significant impact on the sorghum industry as producers 
enrolled thousands of sorghum acres in the program. In addition, poor 
crop insurance coverage has played a role in declining acreage.
    Today's sorghum acreage is \1/3\ of its levels prior to the 1985 
Farm Bill. It is a goal of the industry to increase producers' 
profitability and to bring acres back toward the pre-1985 Farm Bill 
level. NSP expects that returning acreage to that level will help 
ensure necessary infrastructure to supply the needs of the ethanol 
industry, livestock industry and export markets.
    In addition, forage sorghum utilized as silage, hay and direct 
grazing represents approximately an additional 5 million acres of 
production. The USDA reported that in 2009, 254,000 acres of sorghum 
were harvested for silage, producing approximately 3.7 million tons of 
silage.
    The U.S. is the world's chief exporter of grain sorghum, and the 
crop ranks fifth in size as a U.S. crop behind corn, soybeans, wheat 
and cotton.
    Grain sorghum is typically exported to three main markets: Mexico, 
Japan and the European Union (EU). Sorghum is a non-transgenic crop. 
According to the April 9, 2010 World Agricultural Supply and Demand 
Estimate (WASDE), U.S. exports will account for 38 percent of this 
year's sorghum use.
    The most important new market for grain sorghum is the ethanol 
industry. According to the latest WASDE report, ethanol production will 
account for 26 percent of domestic grain sorghum usage. This is more 
than triple the amount of the 2007-2008 crop year. This market has even 
more potential with the classification of grain sorghum as an advanced 
biofuels feedstock in the 2008 Farm Bill.
    In addition, the U.S. dominates world sorghum seed production with 
a $200 million seed industry focused on 200,000 acres primarily in the 
Texas Panhandle.
    Sorghum is a unique, drought tolerant crop that is a vital 
component in cropping rotations for many U.S. farmers.
2008 Farm Bill
    USDA has struggled implementing the Supplemental Revenue Assurance 
Program (SURE) that was created in the 2008 Farm Bill. Some sorghum 
producers have suffered through 2 years of drought and are still 
waiting for payments. The program is complicated and FSA is having a 
very difficult time in distributing dollars to producers who need it 
the most. We encourage the Committee to allow for immediate payments 
based on producers' direct payments at some percentage to get money 
into the country. FSA can ``square up'' when SURE is fully implemented.
Crop Insurance
    In the 2008 Farm Bill, Congress instructed RMA to work with five 
independent reviewers to establish a new methodology for implementing 
price elections for the 2010 crop year. This methodology was required 
to be transparent and replicable. As part of the farm bill language, 
RMA was required to supply the data used to compute price elections.
    After extensive work with RMA, I am pleased to report that crop 
insurance price elections for this crop season increased from 88 
percent the price of corn to 97.8 percent the price of corn. For the 
average producer, this increase translates to $20 to $60 more coverage 
per acre depending on location and irrigation strategy. This change in 
price elections will make a huge difference in the insurability of 
sorghum because farmers will have a competitive insurance product. We 
do not expect to hear any longer that a banker will not finance a 
farmer to plant sorghum because it has inadequate insurance coverage.
    I would like to personally thank this Committee on behalf of myself 
and the rest of the nation's sorghum farmers for changing how sorghum 
crop insurance price elections are calculated. While crop insurance is 
a tool I never want to have to use, the reality of weather and the 
nature of farming guarantee that crop insurance will be necessary some 
years.
    At the same time, I ask this Committee to maintain a strong crop 
insurance program in the next farm bill. Crop insurance has saved my 
operation several times in situations where I would have gone out of 
business without this vital risk management tool. Crop insurance is 
extremely important across all crops on my farm and I want to 
underscore that good sorghum crop insurance is indispensable for me.
    I would also like to thank the Committee for increasing the subsidy 
on enterprise units. This has allowed sorghum producers to increase 
coverage on their crop while paying a lower premium. Many sorghum 
producers have taken advantage of this opportunity to increase their 
risk management coverage. I would suggest a change, only for enterprise 
units that would allow the separation of irrigated and non-irrigated 
practices into separate enterprises.
    The action of this Committee and Congress in the 2008 Farm Bill 
will give me more planting options and ability to choose a crop that is 
an agronomic fit for my land. Thank you for working diligently to help 
correct these crop insurance issues in the 2008 Farm Bill.
Balancing the Budget
    As the Committee prepares to develop farm policy for 2012 and 
beyond, I would like to remind you that the agriculture sector has been 
contributing to positive economic growth of our economy. We encourage 
the Committee to recognize the success of investing in rural America. 
We believe the Agriculture Committee has done a very good job of making 
sure increases in farm bill spending have been paid for and we would 
like to be recognized for that fiscal responsibility by maintaining a 
strong safety net for sorghum producers. America's farmers provide a 
safe, efficient and abundant supply of reasonably-priced food, fuel and 
fiber to people around the world. Maintaining a strong farm safety net 
is one key to that success and we urge the Committee to fight for the 
interests of farmers. Cutting commodity programs that viable farm 
businesses rely on will only weaken our national infrastructure for 
these products.
    The current Administration's focus on ``rural development'' should 
be on ``farmer development'' because it is the farmer that truly brings 
money into the rural economy, supports local businesses, and educates 
our youth. Off-farm jobs do not keep my local school district's tax 
base healthy. The school district is heavily dependent on property 
taxes, which are driven by land values, which are driven by farm 
economics.
Trade
    Trade is vital to our marketplace since 38 percent of U.S. grain 
sorghum is exported to Mexico, Japan, the E.U. and numerous other 
markets. We support a robust trade agenda. This includes full funding 
for both the Market Access Program (MAP) and Foreign Market Development 
(FMD) program.
Energy Title
    As previously mentioned, investment in rural America has shown good 
returns for the U.S. Government. We believe that the Committee should 
continue to investment in the Energy Title of the farm bill. Currently, 
more than \1/4\ of the U.S. grain sorghum crop is processed through an 
ethanol plant. The renewable fuels industry is the fastest growing 
value-added market for the sorghum industry.
    We believe that sorghum can be involved in many aspects of the 
renewable fuels industry. For example, the versatility of sorghum is 
attracting attention from the seed industry as it looks at sweet 
sorghum for its potential ethanol production. Biotech companies are 
recognizing the diversity of the sorghum crop and private industry is 
exploring the production of biodiesel out of sorghum.
    We encourage the Committee to continue programs of the Energy Title 
of the 2008 Farm Bill. For example, the Bioenergy Program for Advanced 
Biofuels (Section 9005) has been very positive for the sorghum 
industry. The Biomass Crop Assistance Program (BCAP) assists with the 
establishment, collection, harvest, transportation and storage of 
biomass crops for bioenergy production. If implemented correctly, it 
will help build cellulosic and sweet sorghum as feedstocks for 
companies looking to make ethanol out of its biomass and sugars. 
Neither program has run its course or completed its work. Both programs 
should be maintained in the next farm bill to continue to develop 
existing and emerging markets for farmers who are involved in energy 
crop production.
    At the same time, we encourage the Committee to look at new 
proposals for energy programs in the farm bill that will continue to 
involve the agriculture industry in the business of providing America's 
energy.
Sorghum: Rewarding Sustainability
    Finally, sorghum is a water sipping, highly sustainable cropping 
option for many producers across the U.S. Especially in the semi-arid 
Sorghum Belt, sorghum is an excellent fit for farmers with limited 
irrigation capacity or dryland farmers without predictable rainfall. In 
addition, sorghum tends to use less fertilizer than other crops but 
produces high yield with proper management. As the Committee works to 
reauthorize its conservation programs, we encourage you to consider 
programs that reward decreased use of water in the semi-arid Sorghum 
Belt.
    NSP is prepared to support farm bill language that recognizes the 
sustainability and environmental benefits of crops like sorghum while 
maintaining the profitability of sorghum producers.

    The Chairman. Thank you very much, Mr. Smith, for that 
testimony.
    Mr. Vaughan, welcome to the Committee.

  STATEMENT OF DEE VAUGHAN, CORN, SOYBEAN, WHEAT, COTTON, AND 
                  SORGHUM PRODUCER, DUMAS, TX

    Mr. Vaughan. Good morning, Mr. Chairman, and the Members of 
the Committee. I appreciate the opportunity to offer comments 
on the U.S. farm policy.
    I am Dee Vaughan. I farm in the northern Panhandle. I grow 
corn, wheat, sorghum, soybeans, cotton, and sorghum seed 
production. I serve as a director for both the Corn Producers 
Association of Texas and am Vice President of the Southwest 
Council of Agribusiness.
    The written testimony I submitted contains a lot more 
topics and a lot more detail than I would certainly be able to 
present here this morning.
    Texas farmers are very concerned about the viability of the 
current economic safety net. We are concerned about--I think we 
have established that already, so I'm not going to go through 
all of it--that ACRE is not working as it was intended. SURE is 
not working as it was intended. Crop insurance sometimes fails 
us as well. A lot of these programs need a little work.
    The current program, the current countercyclical and 
marketing loan programs, of course, don't work for grains right 
now. The cost of production has just totally overwhelmed the 
target price and the market low rate. By the time corn gets 
down to $2.42, which is a low rate in my county, I will be 
broke, and all of my neighbors will be as well; the same way 
with the target price of $2.63 for the countercyclical. It just 
doesn't work for us.
    One issue I would like to bring up is the payment limit 
issue. We don't think that the payment limit should be reduced 
any further. You know, we did make a lot of changes to the last 
farm bill. The Committee worked with us as producers. We gave a 
lot. We think that now we need consistency in the way those 
rules are implemented. They shouldn't be changed again.
    One rule in particular, though, that I would say needs to 
be changed is the rule that bans corporations from having 
multiple Social Security Numbers. If two people can form a 
general partnership and draw according to their Social Security 
Nmber, then why can't they form a corporation?
    There are very valid reasons for having corporations. They 
have a business structure. They are very viable. And it's also 
the best way to bring new farmers into an operation, a lot of 
times, is to bring them into a corporation. So why do we 
discriminate against corporations?
    One additional comment I would like to make on crop 
insurance: It is obviously very important to Texas farmers. To 
the extent the USDA is concerned companies are making too much 
money through underwriting gains, then the USDA should use its 
authority to lower the rates. Lower rates would reduce 
underwriting gains, and it would reduce the premiums that 
producers like myself have to pay, and it would reduce the 
government outlay.
    For example, we believe some of the premiums we're paying 
here in Texas are higher than are needed to maintain the 
program. We have had a comparison of premiums for corn, using 
counties in Minnesota, Iowa, Illinois, and Texas, and it shows 
that insurance for irrigated corn in the Texas Panhandle is 
three to five times more expensive than comparable or less 
coverage in the Midwest, despite the fact that our loss ratios 
are virtually the same.
    So we are in the process of going to our RMA. We have 
already talked to people in Washington about this issue, and 
they can't answer why this kind of discrepancy is there. And 
so, where is the process going? And RMA actually is discussing 
the bill, and, hopefully, we will see some response and be able 
to reduce those rates, so that our growers here in Texas can 
buy higher or lower coverage with the savings.
    I want to leave my prepared text at this point and kind of 
delve off and talk about--well, I was going to talk about 
revenue products in my text, but I'm having a lot of concern 
about the direction that the possible revenue plan might go to; 
the fact that--what could it do to crop insurance, the problem 
with revenue products, a program that delves into all of that, 
both price and production. You're trying to do too much with 
one program.
    And I appreciate your comment, Mr. Chairman, about having 
too many programs. I agree with you. I think we need to 
strengthen the ones we have, and maybe eliminate some and 
combine some and make them work better. And probably where 
it's--there has been a proposal thrown out there that you would 
take and bring the ACRE program down to the county level, and 
you wouldn't have to have multi-peril crop insurance. You could 
use that county's average yield.
    Well, the problem with that is when you think about a 
county's average yield, half of the producers, half of the 
production in that county, were below that line. So what do you 
do for those folks if you take away multi-peril crop insurance?
    You can say, ``Well, you can buy supplemental.'' Well, I 
don't know of a supplemental drought insurance policy. I don't 
know of a supplemental flood insurance policy. Supplemental 
hail insurance policies are obviously very expensive. So what 
do we do for those folks?
    If we maintain the multi-peril and go ahead for our 
producers that enroll in that ACRE program at the county level, 
we will say, ``Well, we will just self-insure.'' And so they 
will get out of the insurance program, and those people that 
cannot self-insure are going to be left.
    If your people are paying premiums as a percentage fund, 
the claims will go up, and the loss ratios, of course, will 
climb. And what will they do? Raise the premiums at the multi-
peril insurance company. They don't have any choice, to keep 
the program viable.
    So I see a real problem. You know, we need to--for 
production coverage, we need to drill down to that individual 
level, to that individual, and that's what crop insurance does. 
It comes down to my farm, what I produce that year, based on 
the historical yields that I have made for the past 5 or 10 
years. That is as close as you can get, and you can't do that 
at the county level.
    For price, we have a countercyclical program. As I 
mentioned, it has been overwhelmed by the cost of production, 
where we are today. Why don't we revamp that? Why don't we go 
to a 5 year? I'm just throwing things out. I haven't visited 
about this with anybody. My corn grower buddies may be waiting 
for me at the back door.
    Mr. Chairman, I might need a ride to the airport. Do you 
think you could give me a ride?
    But, at any rate, a 5 year moving average of the price, and 
that would be the target price, if you used 90 percent of that 
policy--again, I'm just throwing numbers out for thinking 
about. And then you can cap it at 25 percent of a 5 year moving 
average. You've got two numbers that the Committee could work 
with, to make it work for producers, as well as working within 
the budget base line.
    Anyway, it's something that we can think about as we go 
forward. Instead of trying to do too much with one program, 
we're trying to do too much with many programs. Let's find some 
middle ground here and use some of the programs we have and 
just make them better.
    If we can reduce the premiums that producers are paying, 
reduce government outlays for crop insurance, possibly we can 
apply those savings, some of that, and the producer can buy a 
higher level of coverage and use that in the crop insurance 
program better. And I apologize for going way over my time.
    [The prepared statement of Mr. Vaughan follows:]

 Prepared Statement of Dee Vaughan, Corn, Soybean, Wheat, Cotton, and 
                      Sorghum Producer, Dumas, TX
    Good morning, Chairman Peterson, Ranking Member Lucas, and Members 
of the Committee. Welcome to Texas. Thank you for holding this hearing 
today to allow those of us involved in Texas agriculture an opportunity 
to offer our views on U.S. farm policy.
    My farm is located in the northern Texas Panhandle near the 
community of Dumas. My main crop is corn but I, like many Texas 
producers, grow multiple crops. I also produce wheat, soybeans, 
sorghum, cotton, and sorghum seed production. I serve as a director for 
both the Corn Producers Association of Texas and the Texas Corn 
Producers Board. I also serve as Vice President of the Southwest 
Council of Agribusiness.
    Mr. Chairman, I want to thank you for starting the farm bill 
discussion now. Sound farm policy, beginning in the 1930s, has been the 
bed rock foundation providing U.S. agriculture with the stability 
needed to become the powerhouse it is today. For decades farmers and 
ranchers have fed and clothed the nation. Now we feed, clothe, and 
provide renewable energy and products. Our surplus agricultural 
production is shipped around the world providing essential calories and 
nourishment for a rapidly growing world population. Consideration of 
farm policy that affects not only producers, but consumers too, should 
not be done in haste.
    I have now farmed for 3 decades plus and I have seen a lot of 
change in agriculture and agricultural policy, most of it for the good, 
but the changes also created challenges.
    To begin I wish to comment on the current commodity title. The 
direct payment provides stability to farmers and lenders. Since it is a 
guaranteed payment lenders allow producers to list it on their balance 
sheet as a receivable or asset. Some lenders use the direct payment and 
the crop insurance guarantee as a basis for determining how much they 
will lend to a given farming operation. Though the direct payment 
program has received some scrutiny through the WTO because of the 
limits on planting of fruit and vegetable crops on program acres, it 
still appears to be one of the most trade compliant parts of the 
commodity title.
    For grain producers, while the countercyclical payment and 
marketing loan programs have been helpful in a couple of year since 
2002 (2005 for example), they have in the last few years been 
overwhelmed by the cost of production. If crop prices drop sharply most 
producers will be in dire financial straits by the time these programs 
make payments. We are very fortunate that as commodity prices fell from 
2008 levels that the cost of production fell as well, leaving most 
producers the ability to generate a profit. If we had seen a repeat of 
the 1970s when crop prices plummeted but input costs remained high the 
country side would be in an uproar. Since agriculture is very dependent 
on energy, not only for fuel, but also in the manufacture of 
fertilizer, crop protection products, and other inputs, we remain very 
vulnerable to sharp rises in the price of oil, natural gas, and 
electricity.
    I am blessed that my area of the state is predominantly irrigated 
and for the most part we have enjoyed good growing conditions for the 
past couple of years. The down state areas of Texas have experienced 
hurricanes, droughts, and floods causing extensive multi year losses. 
The new SURE program does not have a good reputation in Texas. It has 
been very slow in providing relief for some producers, with many 
producers still waiting. Farm Service Agency (FSA) office personnel are 
working without usable computer programs resorting to doing the 
computations by hand. The rules are said to be still in flux and change 
from time to time compounding the problem. One major issue is that FSA 
and Risk Management Agency (RMA) records at times do not match exactly 
which requires further review. Since one of the determinants of SURE is 
based on the average price of the marketing year, producers must wait a 
full year to see if they will even qualify. Any help SURE provides may 
come too late. But, beyond just the timing issue, SURE also just does 
not work for more diverse or larger farm operations because it requires 
aggregation of all farms. Therefore, SURE does not work for the 
majority of irrigated producers, those with a mix of irrigated and non-
irrigated production, or those growing multiple crops.
    ACRE also has proved to be a very complicated program. It is 
difficult to explain to absentee land owners. In a state as large and 
diverse as Texas the state wide loss requirement trigger is a 
tremendous negative. The loss trigger for a geographic area must be 
localized, at least to the county level. ACRE is even less appealing to 
irrigated producers. ACRE requires that all crops on a FSA farm number 
be enrolled in ACRE for the duration of the farm bill. Since ACRE does 
not work for cotton this automatically precludes many producers from 
choosing this option. ACRE, like SURE, uses a season average market 
price for determining eligibility. Producers making the decision on 
whether to enroll in ACRE by June 1 of the current year are speculating 
on what the markets will do for the next 15 months.
    Bottom line for both SURE and ACRE--no lender can count on them and 
so they are of little benefit to me as producer.
    People in and out of government have sought to apply a one size 
fits all payment limitation. This very narrow view point does not take 
into account the differences in cost of production, weather risk, the 
means to produce off farm income, and even the social norms from one 
region of the country to another. The payment limits should not be 
reduced further. The rule limiting corporations to one payment limit 
should be removed. Corporations have definite advantages in many 
business situations, not the least of which is that it is often the 
easiest structure to which beginning farmers can be added. If two or 
more individuals can form a general partnership and receive payments 
directly attributed to their Social Security Numbers then why can the 
same individuals not form a corporation and have the same right? The 
rules that prevent an existing farmer from being able to co-sign 
financing for a beginning farmer should also be reviewed and modified 
to help those wanting to enter production agriculture.
    Our challenge for the next farm bill is how to modify existing 
policy so it is functional in an age of highly variable costs of 
production and revenue, and hopefully this will be done before it is 
actually needed. We should move forward carefully so that policy is 
designed that works for all commodities. Perhaps a single farm policy 
is no longer realistic but we should make sure that no segment is 
disadvantaged as resources are allocated. It makes no sense for me as a 
corn producer to seek policy that is not fair to someone else. 
Agriculture needs to work together. Rest assured the Corn Producers 
Association of Texas wants to work with other agricultural groups and 
the Committee as future policy is developed.
    The current loan and countercyclical programs have provided 
stability to the farm economy for many years until rising input costs 
made the loan rate and target price obsolete. The simplest fix appears 
to be to bring the loan rate and target price into line for today's 
economic reality. Hard numbers that tell a producer and his lender that 
this is the bottom line have great value. Unfortunately, it appears 
that the simple fix is beyond the scope of the budget base line.
    Perhaps some form of revenue program can be crafted that will work 
for grains while cotton, sugar, and perhaps others will want to retain 
the existing marketing loan. Again the word is caution, with thorough 
study of any proposal for unintended consequences. Revenue can be taken 
to mean different things. In 2008 many farmers generated substantial 
gross revenue but their net revenue was small or perhaps even negative 
because of sky rocketing production costs. To be effective any revenue 
plan must be reliable, it must be something a producer can take to 
lenders and say, this is the safety net.
    We must be very careful to not rob the commodity title to enhance 
the conservation programs. Producers and lenders will not be able to 
support additional investment in conservation cost sharing if the farm 
is not profitable.
    In Texas we currently have about 3.3 million acres of Conservation 
Reserve Program (CRP). Over 2.7 million of those acres have contracts 
that will expire by September 30, 2014. The bulk of the acres expire by 
the end of Fiscal Year 2012. Due to changes in the criteria for 
eligibility, most of the expiring contracts are not eligible for a new 
contract. Much of this land should remain in CRP because it is very 
subject to wind erosion. This land will be put back into production 
based on recent experience with contracts that have expired. In 
addition to the erosion issue, placing this land into production will 
place additional demand on the Ogallala Aquifer which is the primary 
source of water for the Texas Panhandle/South Plains region of Texas. 
Since this land has established program base acres it will also be re-
enrolled in the farm program. The eligibility rules should be modified 
to allow more of this land to remain in CRP.
    The Conservation Stewardship Program (CSP) is a program that has 
received mixed reviews from producers. It appears some of the problems 
are growing pains including different interpretations of the rules 
across regions and even county Natural Resources Conservation Service 
(NRCS) offices. One specific problem relates to the payment limit. NRCS 
has been applying a payment limit rule that is even more restrictive 
than the one in place for the commodity title; one payment limit 
regardless of the number of actual persons involved. This has limited 
some producer's ability to fully implement all of the practices they 
would like to undertake. A very positive aspect of the program, 
especially for Texas, is an emphasis on energy and water conservation. 
While the CSP appears to have merit as a conservation program it should 
not be confused as being an economic safety net. Producers will spend 
the full amount they receive plus some to fulfill the requirements of 
their contract with NRCS.
    The Environmental Quality Incentives Program (EQIP) has been an 
excellent tool to help crop and livestock producers implement 
conservation measures. It has been very popular with irrigated 
producers that have used the cost share program to become more 
efficient with the use of water and thus able to conserve water while 
maintaining economic activity. It is very important to maintain local 
control over the setting of priorities and cost share formulas. It is 
very important that the conservation title does not serve as a budget 
reserve to fund other titles. Funds allocated to conservation should be 
available so producers have access to these programs.
    Federal Crop Insurance is very important to Texas producers, and we 
want to see it improved. Texas is an underserved region and there is 
concern that the problem will be compounded if the current negotiation 
of the Standard Reinsurance Agreement does not come to a favorable 
conclusion for all parties. As a tax payer I want programs to be 
efficient and funded only at the proper level, as a producer I need 
good service from my crop insurance provider, and as a producer again, 
I do not want the Committee to lose the budget baseline for the next 
farm bill.
    To the extent that USDA is concerned that companies are making too 
much money through crop insurance underwriting gains, then USDA should 
use its authority to lower rates. Lower rates would reduce the 
underwriting gains, lower the premiums producers pay and reduce 
government outlays to subsidize coverage. For example, we believe that 
some of our crop insurance products are over rated, and thus the 
premiums are higher than needed to maintain the crop insurance program. 
A comparison of crop insurance premiums for corn using counties in 
Minnesota, Iowa, Illinois, and the Texas Panhandle shows that Federal 
Crop Insurance for irrigated corn in the Texas Panhandle/South Plains 
region is three to five times more expensive than comparable levels of 
coverage in the Midwest, despite the fact that the loss ratios are very 
similar. The Corn Producers Association of Texas has been in contact 
with officials at USDA and will soon meet with the staff of the Risk 
Management Agency (RMA) in Kansas City, Missouri concerning the rating 
of crop insurance for irrigated corn in the Texas Panhandle. We will 
also be seeking a biotech endorsement (discounted premium) for all corn 
grown in Texas using biotech traits that demonstrate lower production 
risk.
    Production agriculture is the economic engine for much of rural 
Texas. While production agriculture does not employ as many total 
workers as it once did, due to the adoption of technology, the workers 
it does employ must possess higher skills than before. Computers; crop 
condition sensors; global positioning system guided tractors, 
harvesters, and irrigation systems; integrated pest management, and 
other technologies are now routine on farms. This technology not only 
requires skilled workers on the farm but highly trained technicians to 
provide support services. It is getting harder to find local people to 
fill these positions and some farmers and businesses are recruiting 
from other states. Production agriculture is also rural development. We 
should not fall into the trap of believing that rural development will 
provide the same stability to production agriculture that is provided 
by the commodity title and Federal Crop Insurance. Rural Development 
has its own separate role supporting communities and creating new 
economic activity. Where farmers, ranchers, rural citizens, and 
taxpayers get the most leverage is when production agriculture is 
economically healthy and new markets and businesses are being created 
through rural development efforts, further expanding the economic 
activity within the community.
    Much of what farmers and ranchers produce within the U.S. is 
destined for foreign markets. In the balance of trade equation 
agriculture is the bright spot. It is important for the U.S. to build 
on this success and work to increase our share of these markets. Market 
Access Program (MAP) and Foreign Market Development (FMD) funds help 
producer groups and others to build and maintain these markets. It is 
important that adequate funding be available through the farm bill. To 
build new markets often requires that we seek new trade agreements to 
enable trade to occur in the first place. The Corn Producers 
Association of Texas supports the bilateral agreements pending for 
Panama, South Korea, and Columbia. Conversely it has strong 
reservations about the U.S. offer to the WTO within the Doha round of 
negotiations. The ambiguous language of a WTO agreement means it is 
unlikely we will ever be able to craft a commodity title that will go 
unchallenged by our competitors. We believed our direct payments were 
WTO compliant and yet they have been challenged. It will thus be 
extremely difficult to convert the trade distorting subsidies which the 
U.S. has offered to cut in a way that will allow us to maintain an 
adequate farm program safety net.
    Agricultural research has enabled the constant increase in farm 
productivity. It allows our nation to enjoy the least expensive and 
safest food supply in the world. It is what keeps us competitive in a 
global market place where other exporting nations have fewer 
regulations, cheaper labor and inputs, and hidden subsidies. If we are 
to remain a leader in world agricultural production we must support our 
land-grant university system, USDA Agricultural Research Service, and 
other public research institutions through adequate funding of the 
National Institute of Food and Agriculture.
    Texas, for many years, has maintained a nationally recognized 
Integrated Pest Management (IPM) program. IPM agents and programs 
support producers at the local level with crop scouting, localized 
research, and consulting. When a new problem is detected, often the 
first person farmers and their crop consultants turn to is the local 
IPM agent. Local steering committees of farmers, crop consultants, and 
agribusiness assist the IPM agents by setting priorities for work and 
by providing on farm demonstration sites. Prior to 2008 the funding for 
the IPM program in Texas was \2/3\ state and \1/3\ Federal. The 2008 
Farm Bill changed from formula funding to competitive grant 
application. With an outstanding program in place Texas was not 
concerned about any reduction in funding. Since 2008 grant awards have 
been capped at lower levels each year and Texas in 2010 is receiving 
less than half of the funding it received in 2007. Since most of the 
IPM funding goes to pay local agents, the result has been the loss of 
agents at the local level. The IPM agent that served my county and 
three other adjoining counties moved over a year ago and the position 
is still vacant since there are no funds to hire a replacement. At 
times there are unintended consequences to very small changes in the 
farm bill. The next farm bill will be an opportunity to address this 
issue.
    The last thing I would like to comment on is the MIDAS project at 
USDA. This project will enhance and update the antiquated computer 
information technology system within USDA. Recently Washington, D.C. 
based MIDAS project leaders and Farm Service Agency (FSA) personnel 
came to Texas to get feedback from producers about the project. I was 
very pleased to have an opportunity to attend one of these listening 
sessions. I was impressed that they spent virtually all of the time 
listening to our suggestions. We provided a lengthy list of the 
information producers need online, how the system can help USDA 
personnel, crop insurance agents, and growers be more efficient, and 
how electronic delivery can save USDA money. I want to thank the 
Committee for working to get the necessary funding for the MIDAS 
project. I urge the Committee to work closely with USDA to make the new 
system live up to its full potential.
    I appreciate the opportunity to be able to submit these comments to 
the Committee and that Texas producers will be involved in this process 
as it moves forward. We are very fortunate that the Members of the 
Committee understand agriculture and rural needs.

    The Chairman. That's fine. Those were some good ideas you 
threw out there. We'll take a look at them and see. The problem 
with all of these things is what the CBO says about it. The CBO 
doesn't always have the best understanding of the farm 
programs, although it's probably better than it ought to be. 
It's just something we may have to live with.
    And, Mr. Cleavinger, I want you to know that the state 
trigger doesn't work in Minnesota either. That was a mistake, 
and there's also other problems. I think Mr. Vaughan has hit on 
some of them.
    You know, we are not exactly sure what the right strategy, 
going forward, is, but we clearly know that what we put 
together is not a workable situation for the whole country. 
You're just looking to me like we're going to make those things 
work. We're going to have differences in the program within 
different crops, but that's just a reality, I think.
    And that's going to--as I said, one of the reasons why we 
started early was to try to have some time to discuss this and 
work with it before we have to get into actually writing the 
bill.
    I would like to ask each of you: We have this Cuba 
legislation that was brought up by a couple of people, and 
we're hoping to be able to move that out of the Committee here 
the first part of June. I would like a ``yes'' or ``no'' from 
all of you whether you support the H.R. 4645, or whatever the 
number is, that we have introduced, on the trade agreement, 
starting here with Mr. Brown.
    Mr. Brown. My answer would be ``yes.''
    Mr. Heffington. It doesn't affect the cotton industry, but 
we would support it with the other commodities.
    Mr. Cleavinger. With Texas, to me, next to Cuba, it would 
increase our Texas exports by $18.4 million annually, which 
would basically double that, compared to what we have done in 
2009. And we expect the full Committee to support this.
    Mr. Raun. Rice says ``yes.'' I just want to know if all of 
the Committee was checked for firearms before they come in 
here. I think in Texas, and like Brad said, it doesn't affect 
cotton very much, but in Texas, we would be open to that, 
although I know there's some opposition on the Committee as to 
that.
    Mr. Schniers. Yes, we would be very much in favor of it.
    Mr. Dan Smith. Certainly.
    Mr. Vaughan. Yes.
    The Chairman. Okay. Thank you. You know, the other--a 
couple of things were brought up here, and going back to the 
comment I made, again, I think we understand the case of rice, 
that you need a different kind of crop insurance, and we will 
be able--we will do anything to get with the direct payments. 
You know, you've got to make sure that it's going to work, and 
that it's a guaranteed kind of a situation. I think there are 
some ways that we might be able to do that.
    So we intend to look at if there's a better way to 
structure these things, but at the end of the day, if we can't 
figure out anything better, well, then we're going to have to 
try to figure out how to take what we've got and make it a 
little better, somehow or another. So we will look forward to 
working with your industry.
    And cotton, we've got that WTO problem, and we're going to 
have to do something. You know, I don't know what it's going to 
be, but I think it's a little too early to tell. There are some 
ongoing negotiations or discussions going on with the 
Brazilians right now to try to figure out what the heck they're 
actually wanting, because we're not sure.
    But I can guarantee you that things are going to have to 
change, you know. So we look forward to working with you, as 
well, as we, first of all, figure out what it is that we have 
to respond to, and then try to figure out how to make it work.
    But my interest is in providing a safety net for production 
agriculture. And Mr. Vaughan said, ``providing it to the 
farmer, so it works for that farmer or that producer.'' And I 
have a lot of big counties in my district, where the production 
on one side of the county is so different than the production 
on the other, that even the county level doesn't work. So, I 
understand that, and you've got probably bigger differences 
here in Texas than we have in Minnesota.
    So we look forward to working with everybody. We are 
starting this early, so we can start having this dialogue. As I 
said earlier, we're going to--we're hoping to get some ideas on 
paper for you guys to respond to and look at and maybe build 
upon as the place to start, and we have some time now.
    I'm expecting that we're going to start marking our next 
farm bill up maybe about this time next year, maybe a little 
later. So we've got some time to work on this. And as I've told 
people before, my intention is to try to get this bill out of 
the House by December of 2011, and try to get the bill done on 
time.
    So, Mr. Cleavinger, you can know what the farm bill is 
before you're planting your wheat, or, Mr. Raun, before he is 
planting his rice, which hasn't happened for a while.
    So, with that, I recognize the gentleman from Texas, Mr. 
Neugebauer.
    Mr. Neugebauer. Thank you, Mr. Chairman. And I want to echo 
something Mr. Vaughan said, and I think his--we've got, I 
think--the attempt was never to penalize somebody for the 
structure of their entity. We were trying to make that as 
neutral to that as we can and go ahead and put in place the 
payment on it, but still leave the flexibility. And so I think 
that's definitely for people that want to have a sub S 
corporation or something like that. We shouldn't have the 
government making the determination.
    The other piece that I want to talk about, before I go to 
the subject, is one of the things that we heard from the last 
panelists about crop insurance at the various levels, the 
triggers, and how much coverage.
    And one of the things that I think became very evident in a 
lot of the testimony is that we're not offering producers any 
flexibility. It's either take it, or leave it. And most of the 
time your banker says, ``Actually, that's not one of the 
options.''
    And so one of the things that we have to do is, instead of 
the government picking what levels of coverage that you have 
and what the triggers are, is giving the flexibility. And one 
of the things that we worked on in the last farm bill was a 
piece of legislation that actually allowed producers to have 
some flexibility on the coverage, particularly where we have 
the multi-crop producers. We have a number of those that have 
testified that there are obviously different issues with each 
one of those crops and, also, trying to manage the overall risk 
of the amount of capital that you've got employed at that 
particular time based on the market conditions.
    And the market conditions always have to be a factor in 
making a lot of those decisions. And certainly there has been 
fluctuating input costs that we've had where we've had this 
gyrating cost of energy and fertilizer. Obviously, we need more 
flexibility for our safety net program, and in particular, I 
think our crop insurance program.
    And so I look forward to working with the Chairman as we 
sit down and work on that. In a number of your testimonies, we 
talked about CRP, and I think somebody briefly touched on that. 
We have a number of acres that are up for renegotiation, acres 
rolling out.
    And just from the panel, just your perspective, what are 
two--to me, there are two consequences to that. There are 
environmental consequences, letting a lot of this land roll 
out; and, second, there are economic consequences.
    And so I'm just starting out here with Mr. Brown, what are 
the consequences of diminishing the CRP Program, what's your 
perspective on the outcome of that?
    Mr. Brown. That could be positive from two directions. I 
know that a lot of our agribusiness people would really like to 
see this land get back into production, which would be an 
indirect effect on their particular businesses.
    Now, where it would be environmentally, it's hard to say, 
because we all know there's some land that has been handed to 
the CRP that probably didn't necessarily need to be there. We 
have other land that definitely needs to have been there and 
needs to stay there.
    And it's kind of a double-edged sword, as I see it, and I 
can see there being an advantage to a lot of the communities 
where it's coming up.
    As far as environmental issues, I can see a real 
disadvantage if it's chosen to be put back into production.
    Mr. Neugebauer. Okay.
    Mr. Heffington. I would concur with his statement.
    At the time, in the 1980s, when that program came into 
effect, the times were pretty tough, and there were a lot of 
older landowners that didn't have options of renting their land 
out, but that was a viable option for them. I'm not sure how 
the climate has changed today as far as your producers getting 
larger and larger.
    There's definitely some land that needs to remain in that 
program, but it also would have an adverse effect on some of 
the businesses in the communities and would begin to watershed 
and things like that, but the intent to stop it wouldn't be 
acceptable.
    Mr. Cleavinger. Well, we would be in the same position. 
There's a lot of that land that's highly erodible, and it needs 
to stay in the CRP, if it's highly erodible, for environmental 
reasons.
    We need an education program if you're going to bring it 
out, to make sure producers know how to bring it out, out of 
production, or back into production, so that they are properly 
doing it, if that's the road you chose to go down.
    Mr. Neugebauer. Mr. Raun.
    Mr. Raun. Yes, there are virtually zero CRP acres in the 
Texas rice business.
    Mr. Schniers. In our particular area, I would have to say 
there's probably at least 95 percent of what is in there that 
needs to be in there and needs to stay in there. And it is a 
little bit of a worry on what happens with that land when it 
comes out, because while we have a little bit ourselves and 
some around--some adjoining landowners, that we operate, I 
would really hate to see that stuff come out.
    Mr. Dan Smith. Well, in my area, I am concerned that there 
is quite a bit of that land that actually should have never 
been broke out 50, 60 years ago, whatever. And it is quite 
environmentally sensitive.
    But, also, the land--most everything around me, when it 
does come out, it will be dryland. So it's going to be tough, 
especially those first few years, to make any kind of viable 
living going to a dryland crop, rather than CRP.
    Mr. Vaughan. I think some of the concerns we would have, 
besides the environmental--obviously, some of that land needs 
to stay in--would be the budget issue. As far as the farmer, 
those acres have a base, and they will draw broken payments, 
when they are returned into the farm program.
    Then we've got another issue or a major issue, especially 
in the northern Panhandle, where we do have irrigation water on 
a lot of that land. It just adds pressure to the overall 
aquifer, which is the primary--for those of you not from this 
area, it's the primary source of water for irrigation, as well 
as for municipal use, for this whole region.
    Mr. Neugebauer. I appreciate that comment. Mr. Chairman, I 
think that one of the things that we tried to do in the 
conference was look at and offer an amendment that would allow 
the banking--because what we know is that there are some areas 
people would like to roll out, and some areas people would like 
to stay in, but with the county caps, we take some of those 
options away.
    And so one of the things that I think we ought to look at 
again is the ability that if you've got a farmer that wants to 
stay in the program, and you've got a farmer that wants to roll 
out, that has got 2 or 3 years left on their particular 
contract, being able to let them swap those positions.
    The net effect is the same for the program, but, obviously, 
again, giving our producers some choices that we don't 
currently have. So thank you.
    Mr. Cuellar [presiding.] No questions from the gentleman 
from Mississippi?
    Mr. Childers. I'm going to pass now.
    Mr. Cuellar. The gentleman from Alabama, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. A little while ago, I 
was listening to Mr. Cleavinger and Mr. Raun talk about trade 
agreements and the importance of that to their futures. But, 
when it comes to cotton, earlier Mr. Heffington made reference 
to the fact that we've seen the domestic textile industry just 
really die, and I'm from Alabama, and we've really seen it.
    What has that done to your markets? Have those mills that 
have moved South--are they still--are you still selling to 
them? Or what are your primary markets now on cotton?
    Mr. Heffington. I think our primary market is Asia.
    Mr. Rogers. Asia?
    Mr. Heffington. Asia; yes. We do have a denim mill here in 
Littlefield, where I'm from, that buys from the cooperative, 
that buys from producers where cotton is spun.
    But the quality of cotton we grow in west Texas now is 
being demanded by the Asian mills where most domestic textile 
mills have moved. That's why we have to export to compete in 
that market.
    Mr. Rogers. Mr. Schniers, is that true for you?
    Mr. Schniers. Yes. Pretty much China and India, they are 
our number one and two now. So we have to--we have to--we've 
lost these markets here, and we're going to have to take it 
somewhere.
    Mr. Rogers. The trade agreements, are they of much 
concern--as much concern to y'all as they are to rice and 
wheat?
    Mr. Schniers. I definitely think so, because that's the way 
the world has turned. That's the way our commodities have gone 
now.
    And I think it's going to be very hard to get these 
domestic mills back here, once they are gone, and it's very 
important to keep the ones that we have left.
    Mr. Rogers. I think I heard you earlier say that you farm 
6,000 acres. Wasn't that you?
    In our Georgia hearing, we had a cotton farmer there that 
also was talking about: He farms 6,000 acres, and he was 
concerned about discrimination in the farm bill. While he feels 
like he has to farm that much to be able to make the efficiency 
work, to be in business, he said, ``I don't want to be farming 
this big corporate farm that you might see on the West Coast.''
    Are you concerned about the kind of discrimination in our 
policy as we fashion this new bill?
    Mr. Heffington. Oh, yes, sir. You know, I didn't fly here 
in my corporate jet this morning.
    Mr. Rogers. You didn't?
    Mr. Heffington. I'm a first generation producer, and there 
are not very many of those in our area or across the country. 
But my business structure is all family, and we--I farm about 
what 30 producers did when I was just growing up. And the 
technology and the cost of equipment, the cost of seed, the 
cost of fertilizer, the land cost, all of those inputs have 
driven us to sizes that large.
    And it's not different than any other business in America. 
We have had to adapt and be more efficient, taking the economy 
to scale, what's being taken in. But from our research, the 
only government program that discriminates against 
corporations, that we can find, is in the farm policy.
    Doctors, railroads, banks, any other places that have large 
corporations, their subsidies or assistance or policies are not 
discriminatory towards that. And, there are viable reasons to 
have a corporate structure; liability reasons for one, tax 
liabilities, the inheritance tax, and things like that, that's 
the easiest way to bring it.
    I have three sons, and a couple or more farm, and one 
probably doesn't, but to bring them into our operation creates 
significant trouble within the current regulations. But, with 
the corporate structure, with payments tied to direct 
contributions, and Social Security Numbers, that would be much 
better.
    And it's just the most--it's very hard to understand why 
that was written the way it was, and we really don't understand 
that.
    Mr. Rogers. I think all of y'all were here when the first 
panel was here.
    Mr. Holt talked in his testimony about getting rid of 
current piecemeal practice endorsements, and he said that the 
U.S. has profit sharing and making it across the board with the 
rate cuts.
    What are your thoughts? Do any of you feel strongly about 
that?
    Mr. Cleavinger. Well, that's what was in their 
recommendation. As they say, the proof is in the pudding. You 
will have to look at some of those and see how they will affect 
it.
    But there are so many different commodities, different 
corollaries, different areas, different practices. Some of 
those endorsements are necessary. Doing away with all of them 
could be detrimental to certain industries.
    But at the same time there are certain industries, such as 
the rice, that needs some endorsements to get their policies 
set up better. So, if they change, it will probably be harder 
to manage. It's hard to say. You have to look and evaluate it 
with any industry proposal.
    Mr. Rogers. My time has expired, Mr. Chairman. I yield 
back.
    The Chairman [presiding.] The next gentlemen will be Mr. 
Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. The time change 
legislation that was passed that was in your testimony had some 
pretty dramatic numbers or greater costs. Would you like to 
make some comment about that? You did earlier, but as I see 
your written testimony, it's a pretty dramatic increase in your 
cost of production.
    Can you kind of walk us through some of the increases and 
what the recent studies show?
    Mr. Raun. Sure. I think the Farm Bureau has done an 
analysis; also, the AFPC at A&M, through the representative 
farms, has done an analysis on that.
    For rice, as I recall my testimony--you might be able to 
help me with that area.
    Mr. Conaway. You said $150.
    Mr. Raun. Yes, $150 an acre. I have done my own analysis, 
also, looking at my energy costs and fertilizer, so looking at 
the fertilizer and the fuel costs off of--taking them off of 
the 2009--excuse me--the 2008 crop year.
    If time change legislation is passed by the House, it would 
increase energy costs 20 to 50 percent. An operator increase on 
just those two commodities, that being fuel and fertilizer, it 
would range from $88 to $231 an acre increase, $88 to $231.
    Mr. Conaway. Is that with respect to what you generally 
run?
    Mr. Raun. It takes about $1,000 an acre to grow an acre of 
rice.
    Mr. Conaway. As is?
    Mr. Raun. As is. So you would not have rice production in 
the state with those kinds of cost increases.
    Mr. Conaway. With those kinds of cost increases, you 
wouldn't necessarily be able to maintain--to flow those through 
to the price of rice, would you?
    Mr. Raun. With the rice acres and the market, whatever is 
offered is what we have to take. And so we can't--there's no 
way for us to pass on these kinds of costs like that. We have 
to take whatever pricing and accept it, a $200 price increase, 
and there's all of our business.
    Mr. Conaway. Well, that's just--I want to state the obvious 
for the record. Everyone in the room knows that you can't pass 
those increased prices through as costs. Do the others want to 
say anything?
    Mr. Cleavinger. Well, as you're well aware, wheat growers 
are involved--heavily involved in time change legislation, 
through the Chairman.
    And we would love to say ``no'' to this whole business, but 
with the light of the Supreme Court ruling, of EPA regulations, 
and the Clean Air Act, we are greatly concerned that we will 
have EPA legislation, and we are greatly concerned from the 
Congressman saying that they are going to limit EPA regulation.
    I would ask each of you: Are you going to go back--I mean, 
we, in Texas, we understand. We don't want this. But on the 
East Coast and the West Coast, where the American people are 
out there, and those Congressmen, are they going to go to those 
guys and say, ``Well, we're going to limit the very agencies 
that are protecting your welfare''? Are they going to get up 
before a camera and do that?
    And so are we going to--do we not have to come up with some 
solution to this problem? With that Supreme Court ruling 
hanging over our heads, with EPA regulation, we would much 
rather have legislation than EPA regulation and make sure that 
agriculture is represented, and make sure that all of these 
costs aren't going to just devastate us after we lose some 
controls in there. Yes. That's my question.
    Mr. Conaway. Sure. Well, that's a false choice, because I 
do think we can have legislation that will limit EPA and not 
the Draconian increases in energy that the House bill drives. I 
don't think we have to have that bad policy to limit what 
happens over at the EPA. I think we can work and make that 
happen, because the House bill will raise costs.
    I mean, the previous President himself said, under his 
climate change ideas, in which a lot of it is in that House 
bill, our engine costs will necessarily skyrocket.
    Well, I'm not sure I agree with that either, and so I'm not 
willing to take a risk on a bill that would necessarily 
skyrocket your energy costs to do something that an Executive 
Branch agency should do. Congress should do this, in being able 
to rein them in, in a more direct rifle shot basis, than to be 
part of that bad policy on energy across the board.
    We had been conferring about this earlier, and we had a 
hearing on this last week on the whole farm insurance program 
on the U.S. crop. Do you want to share with us your oral 
testimony under those same terms that affects, I guess, the 
farmers as well, but it changes the academics and takes care of 
the proposal from last week as viable.
    Mr. Vaughan. Well, that was what I had alluded to in my 
oral comments, was the fact that that proposal wants to bring 
ACRE down to the county level.
    Mr. Conaway. Okay.
    Mr. Vaughan. And there are various other proposals out 
there that bring it down to the county level.
    My point was that when you do that, you risk destroying 
Federal crop insurance, and if you do that, then what are you 
doing with this proposal to deal with those problems?
    Mr. Conaway. Does anybody else need to say something real 
quick about the time change legislation? Thank you, Mr. 
Chairman.
    The Chairman. I thank the gentleman. The gentleman from 
Nebraska at this time.
    Mr. Smith of Nebraska. Thank you, Mr. Chairman. Mr. Raun, 
when it comes to CSP, have you seen instances where there were 
producers who wish to participate, but they weren't able to 
because of the lack of rules and details?
    Mr. Raun. Absolutely. And we're really optimistic and 
hopeful on this new and final rule that we're waiting for, on 
the amount and the level of the changes, the changes that will 
be made in the CSP program that will correct some of those 
problems.
    But the basic set-up is where only one person working a 
farm number can apply for the ultimate sales to participate, 
and that's one payment. We have lots of farms or farm numbers, 
this FSA farm number, with multiple tenants on it. We might 
have--We have some three, four, five and upward participate, 
ten different farmers.
    The first farmer that went down to the NRCS office had the 
wrong serial number operator for the farm, the wrong serial 
number, and he was the only one eligible to participate in that 
program. So, the program, we thought it was going to be a 
conservation program that would work for all farmers and 
everybody else, but it was really only to be limited to a very 
small amount of the population.
    Mr. Smith of Nebraska. Thank you. Mr. Cleavinger, on your 
reflection on the time change legislation, I appreciate your 
optimism in being able to bring it in, and in an organization 
such as that, but I don't share that optimism today.
    I'm just wondering, from a consumer standpoint, not only on 
their energy bill, but their food bill, what are you thinking 
about on that?
    Mr. Cleavinger. Look, I agree with everything that is said 
about it. I think we need to get rid of it. I think whatever we 
can do to get rid of it, we need to do that.
    What concerns me is: We are just saying ``no,'' and we are 
turning our heads to the fact that the Supreme Court ruled that 
it's not only your--it's your obligation as the EPA to do this.
    And in any of our meetings in California, the former EPA 
Administrator from the previous Administration said, ``Look, we 
wrote the language that this current Administration is saying 
about what's going on about--that EPA would regulate.''
    And so we need to--we've got to have agriculture at the 
table, making sure we are represented and making sure that 
these costs that are going to devastate us, that we have to get 
them under control.
    And I'm not--I agree with you. We need to get rid of them 
and at whatever it takes, but, I don't think we can just say 
``no.'' It didn't work for Nancy Reagan with the drugs because 
we still have drugs.
    And, we just need to be at the table, to make sure that 
agriculture is represented, and that we have a good deal with 
the--if the deal is being made.
    Mr. Smith of Nebraska. Thank you. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman. The gentleman from 
Pennsylvania, Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman. Mr. Cleavinger, is 
going to be the representative for the Northeast here.
    Let me assure you that there are many of us that would love 
to beat up on the EPA and get back to having more business 
industry in agriculture. And having seen the budget triple this 
past year just scares us, the impact that they have on us.
    And I'm very proud to say that public statement in front of 
the cameras at home.
    Mr. Heffington, if you enforce the circumstances in the 
bill under the WTO case, which direction should the cotton 
program go?
    Mr. Heffington. Well, that case is very complicated, 
because it gets into the WTO trade agreements, and that case 
was filed under two previous farm bills. I know we've made some 
significant changes in the cotton program since that time.
    At the time that farm bill was written, the WTO lawyers 
said it was implied. They couldn't fix it anyway. So our cotton 
acres in the United States were cut nearly in half from that 
time.
    I don't know what else--concessions we, as U.S. cotton 
growers, need to do to satisfy whatever they want. And I think 
what the Chairman said is, ``We don't know what they want.''
    You know, the problem we have is--or I have in our 
membership is that we have another country getting to our 
Congress while our policies should be here, and we have other 
countries that are not paying attention to the farm bill pretty 
much.
    And, that's our opinion when you first see the unilateral 
trade agreements, but this is--it's very clouded right now on 
what's going to happen and what needs to be changed, and any 
changes that are made apparently are for our safety. And 
there's some hard questions there, and it's--but it's different 
than whatever they want, what their purpose is.
    And we don't believe it's cotton. It's other goods. That 
was the case that was brought forth. I am sure that doesn't 
clarify your question very well. But we are at a little bit of 
a loss on how to respond to it, also, since we have already 
made significant changes.
    Mr. Thompson. Okay. Thank you.
    Mr. Cleavinger. Thank you.
    Mr. Thompson. Mr. Heffington kind of reflected on the 
estate tax, to be honest, and the future of agriculture in this 
country that's going to keep agriculture, agricultural lands in 
production. And I just wanted to get thoughts and comments on 
the estate tax.
    How do we keep--Mr. Brown, what are the things we should be 
looking at in our farm bill to make sure that that we are 
continuing our legacy and having production in agriculture 
strong in this country with things like estate tax or any other 
concerns that you might have?
    Mr. Brown. Well, of course, agriculture has some great 
concern about estate taxes, and, of course, we would like to 
see it just removed, but we realize that is probably an 
impossibility.
    We would like to see them put it at a realistic level and 
maintain the farms in the family and the businesses that have 
been created over the years, to be able to continue without the 
loss of any of that land and the business that they've put 
together.
    We think it would be outstanding if a level could be 
reached and agreed upon, because during estate planning, et 
cetera and so forth, into the future now, it's impossible. How 
are you going to plan when you don't know what the future will 
hold?
    I hope at some point in time in the near future that this 
level, whatever it is, can be agreed to, and hopefully it will 
be a level that most farms can still be made whole after the 
tax.
    Mr. Thompson. Mr. Heffington.
    Mr. Heffington. It just occurred to me that we just need 
this in agriculture. There are people that have worked their 
whole lives to pay for their farms, and they have paid taxes on 
their income over all of those years, and they have passed 
away, and their children or their heirs have paid a tax on the 
farm so high that they have to sell the farm, and it's already 
been paid for, and taxes have been paid on it for the whole 
time.
    So that is actually a great inequity, and there needs to be 
a solution in that problem. But, personally, I think the 
solution is the corporate structure we discussed earlier; that 
the family members can come in, and we can transition these 
farms with as little--just as best as you could.
    But what Mr. Brown is saying about the levels that there 
can be--reasonable people don't have to sell the whole estate 
to keep it functioning, or put them into economic stress 
because of the assets they have paid for in the first place.
    Mr. Thompson. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman. And I want to thank 
you, the witnesses from the panel, as well. I just want to say 
that I was there when the negotiating session went on, and 
you're aware of the WTO. A lot of times, I was the only Member 
there.
    I read the agreement on the way back, on the plane, going 
through the schedules and stuff. I didn't vote for it, because 
I had actually read what was in it.
    And, we're dealing with trying to figure out what to do 
with the farm bill, and we're dealing with a lot of past 
history and decisions that were made when times were a lot 
different than they are now. We have voted on that, and that is 
what we are trying to untangle here.
    The WTO, you have a situation where they are suing you guys 
over past history. This is not an acceptable situation. We 
cannot afford to be in a system where we are fighting battles 
that don't mean anything in the real world, and frankly----
    [Applause.]
    The Chairman. Because the only solution at this point is 
that we can figure out how to become a negotiator in getting 
any kind of variance out of this deal over here.
    So I'm told that by our great negotiator. I'm told this by 
Mr. Maguire and all of these other guys that are involved in 
this thing; that they are not going to get an agreement unless 
they change their ways, and they figure out some of this stuff, 
because they're not going to give in agriculture without us. 
They're not going to get it either.
    So I will guarantee you that based on this Member, we're 
going to be tough, and we're going to make sure this thing 
works, and we don't get into this stuff in the future.
    [Applause.]
    The Chairman. And with that, we have 11:59. We're doing 
pretty good. So I thank the panel; thank the previous panel; 
thank all of you for being with us today.
    I think this is the biggest crowd we've had. So you can be 
proud of yourself in Texas. It seems like that always is the 
case, the turn-out of the folks down here, and this has been 
very helpful to us, the testimony and the exchange on the 
questions. And we look forward to working with you over the 
next year, to try to figure out what we're going to do.
    And with that, under the rules of the Committee, the record 
of today's hearing will be remain open for 30 calendar days, to 
receive additional material and any written responses from the 
witnesses for any questions that may have been posed by Members 
of the panel, they are submitted. And with that, this hearing 
of the Committee on Ariculture stands adjourned.
    [Whereupon, at 12:02 p.m. (CDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
      
  Submitted Statement by Hon. Collin C. Peterson; on Behalf of Texas 
                  Sheep and Goat Producers Association
2012 Farm Bill
    The sheep industry of the United States benefits from several 
provisions of the current farm bill:
    The Loan Deficiency Program for wool and unshorn pelts with nine 
categories of graded wool loan rates based on a national rate of $1.15/
pound grease and a non graded rate of $0.40 per pound. FAPRI analysis 
supports a national rate of $1.20 to make graded loans actually 
available to industry. Since 2002, only a few months for very limited 
categories has a graded loan made sense over the non graded category. 
The non graded category was intended to provide marketing assistance to 
flocks too small to justify quality grading of wool with laboratory 
testing.
    The National Sheep Industry Improvement Center was authorized in 
the current farm bill with $1 million in mandatory funds and up to $10 
million in appropriation authorized per year of the legislation. The 
American Sheep Industry Association encourages USDA to implement the 
Center and appoint a board in 2010.
    The sheep industry is currently preparing a nationwide plan to 
increase the sheep inventory for additional lamb and wool production. 
Sheep producers and feeders, lamb company executives and wool industry 
representatives comprise the committee developing the plan and release 
in 2010. We understand USDA programs may be helpful in addition to 
industry projects and funding to expand sheep production in America and 
we intend to share the plan with the Agriculture Committees for 
consideration in the next farm bill.
    Two provisions that were suggested for the 2008 bill included a tax 
credit for pharmaceuticals to be developed and labeled for minor use/
minor species such as catfish, goats and sheep.
    Retained ewe lamb program to encourage ewe lambs be kept for 
breeding rather than slaughter in order to increase production.
    The American Sheep Industry Association (ASI) was a strong 
supporter of the Disaster Trust Fund and found the Livestock Indemnity 
Program created in the 2008 legislation to be a lifesaver for ranches 
in the intermountain west and northern plains that lost tens of 
thousands of sheep in severe spring and winter storms of 2008 and 2009.
    ASI also actively supported the authorization of interstate 
shipment of state inspected meat as authorized in the 2008 legislation.
                                 ______
                                 
   Submitted Letter by Wallace L. Darneille, President & CEO, Plains 
                     Cotton Cooperative Association
May 12, 2010

Members,
House Committee on Agriculture,
Washington, D.C.

RE: 2012 Farm Bill

    Chairman Peterson, Ranking Member Lucas, and Members of the House 
Agriculture Committee, I sincerely appreciate the opportunity to submit 
this written testimony regarding the 2012 Farm Bill on behalf of the 
members of Plains Cotton Cooperative Association (PCCA).
    Headquartered in Lubbock, Texas, PCCA is a fully vertically 
integrated farmer-owned cotton marketing cooperative with approximately 
25,000 stockholders. We market cotton produced in Texas, Oklahoma and 
Kansas, making us one of America's largest cotton suppliers with total 
annual sales of over $1 billion. Our mission is simple--to add 
significant value to the cotton marketed for our members.
    We add value to our members' cotton in a number of ways. We own and 
operate cotton warehouse facilities in the three-state region. We own a 
textile mill in Littlefield, Texas, that turns some of our members' 
cotton into denim fabrics. This mill, American Cotton Growers (ACG), 
provides more than 500 jobs in a town of approximately 6,000 residents. 
It is estimated that every textile job supports three additional jobs 
in the community and the region. We also own a denim apparel facility 
in Guatemala employing more than 5,000 people to turn some of ACG's 
fabrics into high-fashion jeans. In other words, PCCA is a field-to-
fashion system working to enhance our members' overall farm income 
while competing in domestic and international markets. It is the issue 
of competition that will dominate the remainder of my comments.
    With the dramatic decline in U.S. textile production capacity 
during the past 12 years, we have been forced to sell as much as 75 
percent of our members' cotton in the international marketplace. Quite 
often, we face formidable competition from highly subsidized foreign 
cotton. Therefore, I encourage the Committee to strongly support export 
programs that are vital to maintaining and expanding U.S. agricultural 
exports. By so doing, you will be supporting farm income, contributing 
favorably to the U.S. balance of trade, and protecting jobs throughout 
the communities where PCCA operates and where our members live.
    With this in mind, I am very concerned by the Administration's 
proposal to cut the Market Access Program (MAP) by 20 percent. MAP has 
proven to be very successful in developing, maintaining and expanding 
long-term export markets for U.S. farm products. A recent study showed 
that each promotional dollar spent in the MAP program generates $35 
worth of export sales. I urge you to maintain the MAP program at the 
highest possible funding level in the next farm bill.
    Despite the incredible success of U.S. agriculture, due in large 
part to past Federal farm policy, we continue to be challenged by those 
who do not understand the importance of our industry to the U.S. 
economy. Even cooperatives like PCCA are threatened by some who 
question whether the Capper-Volstead Act and its limited antitrust 
immunity for farmer cooperatives is still needed or if it should be 
changed. Without this limited immunity, many family farmers, including 
our members, would not be able to compete in today's marketplace due to 
their lack of bargaining power. Nor would they be able to integrate in 
value-added processing operations like those of PCCA.
    Congress has long supported farmer-owned cooperatives and 
recognized they serve many essential functions for U.S. agriculture. I 
respectfully ask that you continue to support these cooperatives and 
maintain the statutes that allow us to operate on behalf of our 
members.
    The 2008 Farm Bill introduced an economic adjustment program for 
the U.S. textile industry. PCCA's denim mill has used this program to 
upgrade our facility in order to compete against cheap, foreign-made 
apparel that has flooded the U.S. market in recent years. We believe it 
is vital to maintain this program in the 2012 Farm Bill for our textile 
operation and the jobs it provides as well as the rest of the remaining 
U.S. textile industry. Equally important, this program will help 
protect the millions of dollars our members have invested in PCCA's 
textile and apparel operations.
    I am writing this letter from a conference in Sanya, China, where 
we are hearing about all the steps the Chinese Government is taking to 
support their farmers. There are many Indians in attendance, and one 
gave a speech on the workings of the cotton price support system in 
their country. A Pakistani is scheduled to speak this afternoon. My 
point is that U.S. farmers must compete in a global marketplace against 
heavily-subsidized cotton from other countries. Thus, it is critical 
that we maintain a safety net which will sustain U.S. agriculture in 
times of low prices while costing our government and our taxpayers very 
little, if anything, when prices rise to higher levels. The 2008 Farm 
Bill has worked extremely well in that regard, and we believe it is a 
very good model for the future.
    In summary, PCCA and its members maintain that sound farm policy is 
essential for the viability of the U.S. cotton industry. Farm policy 
set by the 2012 Farm Bill should:

    1. Be market oriented;

    2. Allow production to meet market demand;

    3. Provide an effective safety net;

    4. Make available competitively-priced U.S. cotton to textile mills 
        in this country and around the world; and

    5. Encourage maximum participation regardless of farm size or 
        structure.

    An effective marketing loan program should continue to be the 
centerpiece of the upland cotton program to provide an effective safety 
net for producers. This marketing loan is the foundation that gives 
banks the assurance they need to make operating loans to our members.
    Finally, I realize you face many challenges due to the current 
budget situation, and I appreciate your responsibilities. I encourage 
you to remember the continued importance of policies contained in the 
farm bill that promote an economically healthy and competitive U.S. 
agriculture industry, while providing American consumers with food and 
fiber at the lowest cost relative to personal disposable income of any 
country in the world.
    Thank you in advance for your consideration and for your dedication 
to America's family farmers.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Wallace L. Darneille,
President & CEO. 
                                 ______
                                 
      Submitted Statement by David Fish, CEO, Breedlove Foods Inc.
USAID Reduces Popular Program Despite Available Funds Money Wasted on 
        High Priced Commodity
    Thank you, Mr. Chairman.
    Breedlove Foods is a nonprofit supplier of nutritious food products 
for hunger relief throughout the world. We are based here in Lubbock 
and use products from our local farmers for our processed foods. We 
also are an employer here in the agricultural sector, providing over 
jobs to many in our community.
    For the past several years, Breedlove and many smaller American 
nonprofit organizations have participated in a unique USAID overseas 
feeding program known as the International Food Relief Partnership 
(IFRP). This program, which was initiated by the Agriculture Committee, 
has been a useful supplement to the health, nutrition, education and 
community assistance activities carried out by these organizations in 
various locations in the world.
    Originally authorized by the Congress in 2000, the IFRP was 
extended in 2008 and provides for a minimum of only $8 million in 
funding annually for smaller U.S. nonprofit organizations. The funds 
for this program come from the much larger P.L. 480 Title II program 
valued at over $1.6 Billion. In 2009, USAID received over 80 proposals 
from such groups, but only chose to fund 30 programs despite having the 
authority to increase the program, without additional appropriations, 
from the much larger Title II program. Many people in need of adequate 
nutrition were denied that opportunity, as a result.
    Recently, USAID issued new guidelines for the 2010 IFRP program and 
will now FURTHER reduce the number of programs to less than 20. This is 
not a financial issue the funds are appropriated for the program at 
least at last year's levels, or more, if USAID chooses to expand the 
program.
    These further reductions are the result of an ill-advised USAID 
decision in January of this year to award nearly $2 million of the $8 
million available to the program to a nonprofit affiliate of a French 
firm for only 302 tons of a very expensive peanut paste commodity. The 
cost to U.S. taxpayers as a result of this decision is a staggering 
$6,400 per ton! Other bids were reportedly less than half that amount.
    We and other critics of this decision have noted that the French 
firm holds a patent on the product to the exclusion of other suppliers 
and we are in the process of challenging that patent. We also question 
the eligibility and capability of the awardee, Edesia, who claims 
nonprofit status through a third party organization and who was only 
established last year and has never produced a product.
    As a result, more funding must now be used for this French 
commodity and less is available to fund even last year's low level of 
30 IFRP programs. We believe USAID should reverse this decision and add 
more funding (already available to them) to the IFRP program in order 
to accommodate what will be a massive number of requests, especially 
for Haiti.
    If USAlD refuses to add available funding to the IFRP Program, then 
we urge the Committee to legislate a substantial increase in the 
minimum funding available for this program--in the next farm bill.
    Thank you.

David Fish,
CEO,
Breedlove Foods Inc.
                                 ______
                                 
  Submitted Statement by Hon. Susan L. King, Representative, State of 
                                 Texas
May 17, 2010

    Dear Chairman Peterson, Congressman Neugebauer, and Members of the 
U.S. House Agriculture Committee:

    Thank you for your dedicated service to our country and your 
potential focus on the nutritional aspects included within the farm 
bill. It was with great interest that I read of your hearing to be held 
today at the Texas Tech University Museum in Lubbock. Unfortunately my 
legislative responsibilities require me to be in Austin or I would be 
in attendance.
    As the 2012 Farm Bill is being formulated and evaluated by 
Congress, I and other Members of the Texas Legislature have a shared 
interest in the area of the Supplemental Nutritional Assistance 
Program. As a Member of the Public Health Committee, I have frequently 
posed the question as to why there is not a way to apply nutritional 
guidelines to the SNAP program in the same manner as other Federal and 
state administered food assistance programs such as Women, Infants and 
Children (WIC) and the National School Lunch Program. It is illogical 
that one or more Federal food assistance programs have nutritional 
guidelines and an education component while the largest program, SNAP, 
has no nutritional guidelines or food choices education for the 
consumer. Should not all citizens, regardless of age, who are receiving 
nutritional assistance have healthy guidelines as well?
    With the national dialogue on childhood obesity, obesity, fitness 
and alarming statistics on Type II Diabetes, the time to change 
taxpayer funded programs to potentially enhance our nations' health is 
now. Instead of allowing the choice of non-nutritional items at 
taxpayers expense, the program could be changed with this life-altering 
parameter. While the basis of one argument is that no nutritional 
guidelines for SNAP is an irresponsible expenditure, we must begin 
first with the priority commitment that only balanced and nutritionally 
sound choices are a proper path for our country. With present health 
care costs, this is a specific way to contribute to decreasing 
nutrition-related diseases both now and in the future.
    It is my understanding that only Congress can enact these changes. 
For the health and nutritional sake of SNAP recipients now and for 
generations going forward, please consider this change at the Federal 
level or at a minimum allow the individual states to have a waiver to 
customize their own guidelines to ensure a balanced food choice 
approach.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Hon. Susan L. King, 
State Representative, District 71.
                                 ______
                                 
    Submitted Statement by Scott McGarraugh, President, Texas Wheat 
                         Producers Association
    Mr. Chairman, Rep. Neugebauer, Rep. Conaway, Rep. Cuellar, and 
other Members of the Committee, welcome to the great Lone Star State of 
Texas. On behalf of the Texas Wheat Producers Association (TWPA), I 
would like to first thank you for allowing me the opportunity to appear 
before you today to discuss the priorities of wheat growers regarding 
the 2012 Farm Bill and the future of U.S. farm policy.
    The Texas Wheat Producers Association was founded in 1950 with the 
sole purpose of providing a strong unified voice for Texas wheat 
producers. The TWPA currently represents over 500 farm families across 
the state and we continue to grow on an annual basis.
    Texas has a long history of production agriculture, and while we 
are not the largest wheat production state in the U.S., we are arguably 
the most diversified in terms of production, weather, geography and 
exports. Texas wheat producers harvest nearly 99 million bushels of 
wheat per year on average, the majority of which is comprised of hard 
red winter wheat. Although Texas is largely recognized for its beef, 
cotton and corn production, sixty percent of our 99 million bushels of 
wheat are exported annually through the Gulf Coast.
    As a lifelong farmer and rancher in Ochiltree County which was once 
noted as the wheat heart of the nation, my operation consists primarily 
of wheat, but also includes milo, oats, hay and a commercial cow-calf 
and stocker cattle operation.
    Federal farm policy and its impacts on American farmers and 
consumers is the focus of the Committee's field hearing today. Mr. 
Chairman and Members of the Committee, as President of the Texas Wheat 
Producers Association, I hope to leave you here today with a better 
understanding of where Texas wheat growers are in regard to policy and 
farm programs.
Farm Support Programs
Budget Baseline
    The TWPA is well aware and very concerned with the possibility of a 
severely constrained budget baseline for future Federal farm programs. 
U.S. farm policies, along with efficient and innovative farmers, have 
helped to minimize safety net expenditures which have chipped away at 
the baseline for these programs. As I am sure you are well aware, the 
Congressional Budget Office (CBO) projected commodity program spending 
for the current farm bill will be less than \1/4\ of 1 percent of the 
Federal budget. For each American that is about 25 cents out of every 
$100 dollars paid in taxes. U.S. farm policy as a whole costs Americans 
just 3 cents per meal or 9 cents a day (Farm Policy Facts). These costs 
are minimal in comparison to other countries' annual income 
expenditures on food alone. I would attest that the farm safety net 
must continue to be robust and the farm bill budget baseline must be 
maintained and preserved in order for consumers to continue to enjoy a 
safe, abundant and affordable food supply as they do today.
Farm Programs
    Texas farmers widely participate in Federal farm support programs 
and view them as vital to ensuring the continuance of the agriculture 
industry in light of its inherent risk and increasing volatility. The 
Direct and Counter-cyclical Payment (DCP) program and marketing loan 
programs are widely utilized by Texas producers. In the instance of 
wheat growers, we have served as a cost saving measure within the 
marketing loan program due to the fact we use the least amount within 
our industry.
    During the 2008 Farm Bill process, farm programs faced pressure to 
be reformed, reduced or eliminated. The TWPA along with other commodity 
groups focused very heavily on maintaining the Direct Payment and with 
help from the House Agriculture Committee we were successful in doing 
so. While the TWPA is open to looking at possible new ways of 
maintaining a safety net for producers, we still see the net benefit 
the agricultural industry receives from direct payments.
    Direct Payments have been very essential in ensuring the vital 
support farmers need to continually meet the demands of the 
agricultural industry. Over the years, Direct Payments have allowed 
producers to continue to purchase needed equipment, seed, chemicals, 
parts, and fuel from dealers and suppliers. In looking at a farm 
forward reaction, due to farmers being able to utilize direct payments 
in the aforementioned way, small business owners, coops, tractor supply 
stores, and many others are able to stay in business and lead to 
creation of jobs and opportunities in rural communities.
    The TWPA is well aware that Direct Payments are constantly under 
scrutiny and attack, but let me remind the Committee that the 
reliability of this program cannot be overlooked in meeting the needs 
of producers that are unable to utilize other Federal safety net 
programs. As Congress looks toward crafting new farm bill legislation, 
the TWPA asks that careful consideration be given to the Direct Payment 
program.
    In addition, Texas wheat producers continue to gather knowledge and 
experience with newer farm programs like ACRE and SURE. According to 
the FSA, 930 farms were enrolled in ACRE in 2009. Of those 930 farms 
897 carried wheat acreage. However, we believe this degree of 
enrollment was largely influenced by the extenuating wheat cropping 
conditions in 2009 and the extended deadline to elect and enroll in the 
program.
    Despite the current enrollment levels, the program is still very 
complex and confusing to producers. It is our recommendation that as 
the ACRE program goes forward the complexity and paperwork involved 
with the program be reduced and that payments be made to producers in a 
more timely manner. There is also concern over the timeliness of both 
the program sign-up for SURE and the delivery of payments to eligible 
producers. However, we do recognize the SURE program as an improvement 
in terms of predictability over an ad hoc disaster program.
    As seems to be a recurring theme in any farm policy discussion, 
farmers in Texas and all across the country say they are inundated with 
the amount of paperwork they complete when signing up for farm 
programs. There is also frustration with the inconsistency in rules and 
regulations associated with the programs. In addition, as the process 
of signing up for farm programs is moving more toward an online 
process, the lack of education on how to utilize this system and the 
stiff penalties associated with unintended mistakes are making 
producers more hesitant to move in that same direction. These programs 
are meant to assist producers; however, the cumbersome process provides 
strong disincentives to participate. I would urge this Committee to 
explore these issues and try to address them.
    Last, the TWPA opposes farm program payment limitations. With 
regards to the Adjusted Gross Income (AGI) eligibility tests for 
producers to receive payments, farmers today--whether on a small or 
large operation--can easily accrue expenditures that far outweigh their 
gross income. The cost of fuel and fertilizer can be extremely 
volatile, and the cost of equipment today can seem outlandish to 
someone unfamiliar with the capital-intensive nature of modern farming. 
Likewise, we may see significant increases in seed costs in the near 
future as there continues to be progress in developing commercially 
viable biotech wheat products. In light of this, it is the 
recommendation of the TWPA that we maintain the current level of AGI of 
non-farm income at $500,000 and on farm income at $750,000 instead of 
looking toward a 25 percent cut as has been proposed by the 
Administration.
Crop Insurance
    The Texas Wheat Producers Association supports maintaining a strong 
crop insurance program as an important risk management tool for 
farmers. Federal premium cost sharing encourages participation and is 
critical to a successful program.
    According to the Risk Management Agency (RMA), in 2009 nearly 6.4 
million acres--or 76 percent of the state's total wheat acres--were 
covered by one of the various available forms of Federal crop 
insurance. Texas grain production is very diversified in large part due 
to climatic weather conditions and also by soil types that vary across 
the state. Because of this diversification and the inevitability to 
predict and control acts of Mother Nature, be it drought, hail storm, 
tornado, or even a freeze, Texas' participation in the Federal crop 
insurance program is very high.
    Because of the high enrollment rates among Texas producers, and the 
need to have a viable, reliable program, the TWPA has always encouraged 
RMA to require crop insurance companies to interpret and apply crop 
insurance rules and regulations in a uniform and timely manner.
    That being said, as we look toward the future, the ongoing Standard 
Reinsurance Agreement (SRA) negotiations are a cause for concern for 
our growers. We understand and agree with the Administration's desire 
to find budget savings. However, the USDA's draft SRA proposal seeking 
$6.9 billion in cuts over ten years to Federal crop insurance programs 
could severely affect the scope of the program. A reduction of this 
magnitude could significantly reduce the accessibility, 
competitiveness, and quality of crop insurance and thus have a negative 
impact on the agriculture industry.
    The TWPA understands that negotiations between insurance providers 
and the RMA are ongoing. We certainly support a mutually agreeable and 
expedient outcome, so long as it does not hinder the competitiveness 
and the quality of crop insurance coverage to producers. In addition, 
we believe any savings achieved through these negotiations should be 
captured in a way to maintain the agriculture budget baseline.
Conservation
    Texas and U.S. farmers have consistently worked to be good stewards 
of the land with which we have been so richly blessed. Texas producers 
have worked at implementing practices that reduce erosion and maintain 
water quality and water management. The conservation program that our 
growers have expressed the most interest in is the Conservation Reserve 
Program (CRP).
Conservation Reserve Program
    The TWPA is very supportive of the use of CRP as a natural resource 
tool to better preserve soil quality and reduce soil erosion. We also 
recognize the erodibility index of 8 as a guideline for establishing 
CRP eligibility, but we encourage flexibility to enroll land that does 
not meet the erodibility index of 8 when environmental or economic 
benefits justify We also encourage more priority designation and more 
access to wind and water points in areas where applicable.
    In the Panhandle and Northern High Plains Region of Texas where I 
live, roughly 507,000 CRP acres will be due for re-enrollment, 
termination, or extension by October 2010. In 2009, 680,000 acres were 
expired and in 2008, 78,000 acres expired. The TWPA would encourage the 
Committee to work closely with the USDA-FSA and NRCS with regards to 
the potential impacts of producer decisions as the October deadline 
approaches and future CRP acres expire.
Trade
    Last, I would like to leave you with some thoughts to consider 
about trade. The TWPA is very supportive of a robust trade agenda 
including passage of the current pending free trade agreements and more 
open trade with Cuba. Trade is essential to our market especially since 
the U.S. typically exports 50% of the U.S. wheat production and 60% of 
Texas's wheat crop. Given the large carryover stocks that are currently 
in play and looking at the current wheat crop conditions nationwide, 
having viable international markets for our wheat is vital. It is more 
important now than ever to maintain and grow our markets: if we fail to 
do this, our competitors will capitalize on the opportunity.
    The U.S.-Colombia FTA is a prime example. Where the U.S. once 
boasted maintaining roughly 85 percent of the Colombian market, 
estimates now show that our share could fall as low as 30 percent if 
Canada, one of our leading competitors, approves a free trade agreement 
before the U.S. That in itself is simply unacceptable, especially when 
we continue to hear on a regular basis from our foreign buyers that the 
U.S. has the highest quality and most readily abundant supply of wheat 
but we cannot export it because of a lack of competitive trading 
conditions.
    Cuba proves another example of the potential for Congressional 
action to significantly benefit the Texas economy. According to a study 
conducted by the Center for North American Studies which was supported 
by Texas AgriLife Research, implementing a bill like H.R. 4645, the 
Travel Restriction Reform and Export Enhancement Act of 2010, would 
increase Texas agricultural exports to Cuba by $18.4 million annually. 
This would nearly double agricultural exports from Texas to Cuba 
compared to 2009.
    Mr. Chairman and Members of the Committee, there are many other 
critical areas of interest affecting Texas wheat farmers, including 
estate tax policy, research funding, rail transportation, and 
environmental regulation. The TWPA looks forward to engaging further in 
these discussions with the Texas Congressional Delegation and the House 
Agriculture Committee as these issues continue to unravel.
    In closing, when looking at constructing the 2012 Farm Bill, Texas 
wheat growers are seeking a robust safety net that reflects the 
realities of today's production system, that helps them manage against 
the risk of volatile weather and market conditions, and supports their 
stewardship efforts on our nation's soil.
    Again, the Texas Wheat Producers Association is privileged and 
honored to represent over 500 family farming operations before this 
Committee today. We look forward to working with you, your staff, and 
the rest of Congress to ensure that production agriculture can and will 
continue to provide a safe, abundant and affordable food supply for the 
U.S. and for the world.
    If Members of the Committee have any questions I would be more than 
happy to respond to them.
    Thank you.
                                 ______
                                 
    Submitted Statement by Joe Rapier, Chairman, Lubbock Chamber of 
                                Commerce
    Mr. Chairman, and Members of the U.S. House Committee on 
Agriculture: Thank you so much for choosing to hold a 2012 Farm Bill 
Hearing in Lubbock.
    Accredited by the U.S. Chamber of Commerce at the highest level of 
distinction with ``Five Stars,'' the Lubbock Chamber of Commerce is the 
largest business federation on the Texas South Plains, representing 
2,200 businesses and the almost 60,000 workers they employ.
    Lubbock's economy is founded and still based on the millions of 
acres of cotton, grain and other row crops efficiently grown by area 
family farming operations that today have a $3.5 billion economic 
impact on Lubbock. This efficiency, unparalleled worldwide, requires 
major capital and technological investments that result in huge risk 
since unexpected losses or increases in input costs cannot be passed 
directly on to consumers.
    We are well aware that the 2008 Farm Bill accounted for less than 2 
percent of the Federal Budget; with almost \3/4\ of that being the 
Nutrition Title alone and less than \1/2\ of 1 percent of the Federal 
Budget dedicated to farm programs.
    From a business standpoint, we believe this 0.5 percent or less of 
the Federal Budget to be a sound investment that, while covering a 
fraction of the costs of equipment, fuel, and other inputs necessary 
for viable and efficient farming operations, provides stability 
critical to the survival of our independent, entrepreneurial family 
farms.
    This investment also allows our area's crops to be sold at 
globally-competitive prices while competing with other governments' 
unfair trade and, in some cases, inhumane labor practices. In the face 
of this, and as long as the nations of the world intervene to the 
extent that they do in agricultural markets, this investment in U.S. 
farm programs is necessary to protect our nation's agricultural 
infrastructure. These support programs are essential for allowing area 
producers to make the investments that will keep U.S. agriculture--and 
with it, the nation--productive and viable.
    We hope our position on this issue is clear. The Lubbock Chamber of 
Commerce supports fiscal restraint and a marked decrease in government 
spending and interference, but spending reductions should be made where 
they are meaningful, where they eliminate true wasteful spending, and 
not where they impact less than 0.5 percent of the Federal budget in an 
area that we find to be a fiscally restrained, sound investment. Such 
spending reductions would be made on the backs of hard-working, 
efficient family farm entrepreneurs and would be detrimental to U.S. 
agriculture.
    Finally, our input would not be complete if we did not address the 
fact that, much like the small businesses we represent, U.S. and 
Lubbock area farmers are already operating in a climate of uncertainty 
regarding what other policies outside the jurisdiction of this 
Committee may come from Washington next in such areas as a climate 
change bill and a looming 55 percent estate tax in 2011. Making major 
changes to existing farm legislation would create yet more uncertainty 
in already uncertain times.
    ``Farm subsidies'' and supposed ``corporate farming'' make for 
fetching headlines, and we know based on our past experience that many 
newspapers and groups, including some fellow business organizations, 
will chime in with these themes as your work on this legislation 
progresses. However, we respectfully urge you to remember the past 
dividends of the investment of a mere \1/2\ of 1 percent or less of the 
Federal budget. This includes a fiscally disciplined, market-oriented 
safety net that has reduced actual farm program spending and created 
certainty around a safe, stable and abundant food supply amidst a world 
economic crisis.
    We are very grateful for the opportunity to provide this Committee 
with input. We wish you and your Colleagues the best as you continue to 
work toward the next farm bill, and we hope you have enjoyed your visit 
to Lubbock.
    Thank you for your service on the U.S. House Committee on 
Agriculture, and thank you for your service to our nation.
                                 ______
                                 
  Supplementary Material Submitted by Billy Bob Brown, Irrigated and 
               Dryland Wheat, Sorghum, and Beef Producer
House Agriculture Committee Testimony . . . Cuba Trade
    Mr. Chairman,

    I am for developing better trade and travel with Cuba. In my 
opinion there is much to gain in commerce, trade and relations.
    Several of us on the Board of Directors of Texas Farm Bureau have 
made fact finding trips to Cuba. I went September of 2008 along with 
Texas Farm Bureau President Kenneth Dierschke. We accompanied a group 
of Texas small business food product companies that were interested in 
exporting to Cuba. Cuba had agreed to let the business's demonstrate 
their products for possible acceptance. The products were a sausage 
product and several different dessert items that would be directed 
toward their tourist industry.
    The interest in the products the Texas companies was outstanding. 
While invitations were issued by Cuban officials to the hotel and 
restaurant tourist trade, almost double the expected number showed up 
for the demonstration. The products were well received as after the 
taste test session, not one morsel of food was left. The products have 
since been approved for import.
    Because of the nature of our trip, we were able to meet and visit 
at length with several of the key officials of trade for Cuba. These 
officials included: Vivana Garcia Fonseca, Director Ministerio del 
Comercio Exterior; Alberto Betancourt Roa, ALIMPORT Chief Adminstrator; 
Ariel Fialo Semino, protein buyer and attorney; Michael Rodriquez 
Chavez, buyer; and Michel Bourg Munoz, buyer. I was impressed by the 
youth of this group. I would put the age of most between 35-50 years. I 
had expected much older officials.
    Cuba is a country of well educated people. Many have attended the 
University of Havana or subsequent university and are bilingual if not 
multi-lingual. The literacy rate in Cuba is estimated to be 99.8 
percent (CIA World Factbook) exceeding that of all other countries in 
the Caribbean and Latin America. It is easy to see they are very 
resourceful as well as realize the conditions in which they exist. They 
are anxious for change.
    As we were considered trade dignitaries of sorts, we were furnished 
a van, driver and guide. This allowed us to travel unimpeded to various 
parts of the country. We found what seems to be tremendous 
opportunities for our exports. Livestock genetics, both beef and dairy, 
lag years behind U.S. herds. Crop science and agronomy is years behind. 
50 percent of Cuba's land is classified as agricultural. According to 
the Food and Agriculture Organization, about 70 percent Cuba's arable 
land has low organic matter content, while 45 percent in low fertility. 
These soil conditions are attributed to poor land management, including 
continuous tillage, overgrazing, lack of fertilization and inadequate 
or improper use of irrigation or drainage systems.
     Because of poor soil conditions, high humidity, timing and amounts 
of rainfall, high insect infestations and lack of pesticide or 
biological controls, Cuba's ability to produce grain and oilseed crops 
is limited and likely to remain so over the long term. As a result, 
Cuba will remain on of the top grain and oilseed product markets in the 
Caribbean region provided the economic conditions there are conducive 
to market growth and the utilization of imported products.
    Vivana Garcia Fonseca, Director Ministerio del Comercio Exterior, 
mentioned several times about the possibility to import corn from the 
United States.
    The location of the United States to Cuba cuts the time and freight 
rates for goods shipped. Shipping time would be cut from weeks to days. 
Rice, for example, comes mostly from Viet Nam. The U.S. has better 
quality and lower freight rate rice that Cuba would like to buy. This 
would apply to other goods as well making the U.S. very competitive on 
the world market when trading with Cuba.
    We have the products Cuba needs and along with our help and 
expertise to utilize the products, Cuba could become, I believe, a more 
open, viable country via expanded trade. The key for expanding U.S. 
exports would be developing a finance package that would allow direct 
buying and selling between countries. Currently it is cash only with a 
third country involvement.
    According to Texas A&M AgriLife Research key findings, in 2009, 
U.S. exports to Cuba were $528 million, supported by $1.6 billion in 
total business activity, and provided 8,600 jobs throughout the U.S. 
economy. If U.S. travel and financial restrictions are removed, up to 
$365 million/year in additional U.S. exports would result, requiring 
$1.1 billion in business activity and 6,000 new jobs. While the U.S. 
agriculture is estimated to receive major economic gains from increased 
exports, non-agricultural sectors such as business and financial 
services, real estate, wholesale and retail trade, and health care are 
also important beneficiaries of increased exports to Cuba, receiving up 
to 45 percent gains in some cases.
    The report goes on to say: Increased access for U.S. travelers is 
also important for stimulating demand for U.S. foods in Cuba over the 
next few years as economic recovery occurs and U.S. firms become better 
positioned to respond to global market opportunities. Cuban revenue 
from tourism was reported to be $2.1 billion in 2009 and was major 
source of foreign exchange. A record 2.4 million tourists visited Cuba 
in 2009.
    The analysis and report were prepared by the Center for North 
American Studies (CNAS), Principal Author, C. Parr Rosson III, 
Professor and Director, North American Studies, Department of 
Agricultural Economics, Texas AgriLife Research, Texas A&M University.
    I see expanding trade with Cuba as a long term win-win. I think it 
will stir coals of free enterprise long smoldering in the Cuban people. 
It will be the wheel-horse toward a more open Cuban society and 
beneficial to the economy of the United States.
    Thank you for allowing me to share my thoughts concerning trade 
with Cuba.


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                         TUESDAY, MAY 18, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                   Sioux Falls, SD.
    The Committee met, pursuant to call, at 8:01 a.m., in the 
Second Floor Theater, Edith Mortenson Center, Augustana 
College, Sioux Falls, South Dakota, Hon. Collin C. Peterson 
[Chairman of the Committee] presiding.
    Members present: Representatives Peterson, Herseth Sandlin, 
Walz, Markey, Kissell, Childers, Goodlatte, Rogers, Conaway, 
Fortenberry, Smith, and Thompson.
    Staff present: Aleta Botts, Dean Goeldner, John Konya, 
Clark Ogilvie, Anne Simmons, April Slayton, Kevin Kramp, Josh 
Mathis, and Sangina Wright.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. This hearing of the Committee on Agriculture 
to review U.S. agriculture policy in advance of the 2012 Farm 
Bill will come to order.
    We have many Members of Congress here. On my side we have 
Ms. Stephanie Herseth Sandlin from South Dakota, our host; Mr. 
Tim Walz, my neighbor to the south in Minnesota; Ms. Betsy 
Markey from Colorado, the northeastern area; Mr. Larry Kissell 
from North Carolina; and Mr. Travis Childers from Mississippi. 
The Ranking Member today is Mr. Bob Goodlatte from Virginia who 
used to be Chairman of the Committee before I was; Mr. Mike 
Rogers from Alabama; Mr. Mike Conaway from Texas; Mr. Jeff 
Fortenberry from Nebraska; Mr. Adrian Smith from Nebraska; and 
Mr. Glenn Thompson from Pennsylvania. So we've got good 
representation here today from the Committee. We're looking 
forward to the testimony.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Good afternoon, and thank you for joining us for today's House 
Agriculture Committee hearing. We are glad to be here in Sioux Falls to 
hear from area farmers and ranchers about the issues facing agriculture 
and rural communities.
    As we demonstrated in 2008, the farm bill is about much more than 
just farms. We continued the safety net that protects farmers and 
ranchers and provides the certainty they rely on to stay in business. 
But we also made historic investments in nutrition, conservation, 
renewable energy, research, rural development, fruit and vegetable 
products, and organic agriculture.
    While traditional farm programs have a relatively small proportion 
of funding, these programs are essential to the continuing success of 
U.S. agriculture. We have a system of independent farmers and ranchers 
working the land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing that they need to 
put a crop in the ground.
    I want to welcome our witnesses and thank them for taking time out 
of this busy time of year to talk to us today. These farm bill hearings 
are the first step in the process of writing the next farm bill. A bill 
this large and that covers so many important issues takes a lot of time 
and effort to get it right, and I am committed to a process that is 
open, transparent, and bipartisan.
    For all those joining us today in the audience, I hope that you 
will also participate in this process by sharing your thoughts on the 
farm bill with us. We have a survey posted on our Committee website, 
and we have cards available today with that web address so that 
everyone has a chance to tell the Committee about what is working and 
what new ideas we should consider for the next farm bill.
    We have a lot of ground to cover, so let's get started.

    The Chairman. And I'm going to recognize our host, Ms. 
Stephanie Herseth Sandlin, to do the opening statement for our 
side and welcome us to South Dakota. So the gentlelady is 
recognized.

    OPENING STATEMENT OF HON. STEPHANIE HERSETH SANDLIN, A 
          REPRESENTATIVE IN CONGRESS FROM SOUTH DAKOTA

    Ms. Herseth Sandlin. Well, thank you, Mr. Chairman, for 
holding a field hearing in South Dakota. I want to thank you 
and Mr. Goodlatte. In 2006 we had a field hearing in 
anticipation of the 2008 Farm Bill when Mr. Goodlatte was 
Chairman of the Committee in western South Dakota, in Wall. 
Some of the folks in attendance today joined us at that 
hearing. I think it highlights the importance of getting an 
early start. You can't start too early when we talk about 
writing the next farm bill in light of the changed economy--
economic circumstances, challenges, opportunities as we proceed 
in the months and years to come in anticipation of what more we 
need to do in public policy for farmers and ranchers and those 
in rural America. I want to welcome my other colleagues from 
other parts of the country, neighboring states, for joining us 
here in Sioux Falls. It's a beautiful day out there today, so I 
know we've got some producers in the fields and some folks that 
are here that will be hurrying home to get out there this 
afternoon. But I do thank you for hosting one of our field 
hearings here and pleased as we wrap up this second series that 
we have so many Members of the Committee in attendance to hear 
the testimony today.
    As we demonstrated in 2008, the farm bill is about much 
more than just farms. We continued the safety net programs that 
protect farmers and ranchers and provide the certainty they 
rely on to stay in business, but we also made historic 
investments in nutrition, in conservation, renewable energy, 
research, rural development, fruit and vegetable products, and 
organic agriculture. While traditional farm programs have a 
relatively small proportion of funding, these programs are 
essential to the continuing success of U.S. agriculture. We 
have a system of independent farmers and ranchers working the 
land, and without the certainty that farm programs provide, 
these farmers would not be able to get the financing they need 
to put a crop in the ground.
    I want to welcome our witnesses. We thank them for taking 
the time out of this very busy time of the year to talk to us 
today. These farm bill hearings are the first step in the 
process of writing the next farm bill. And a bill this large 
that covers so many important issues takes a lot of time and 
effort to get it right, and I'm committed to a process that's 
open, transparent, and bipartisan. And clearly in the work that 
Mr. Peterson and Mr. Goodlatte did in the last farm bill, we 
anticipate that the 2012 Farm Bill will also be open and 
transparent and bipartisan.
    For all those joining us today in the audience, I hope that 
you'll participate in this process by sharing your thoughts on 
the farm bill with us. We have a survey posted on the Committee 
website, and there are cards available today with the web 
address so that everyone can get a chance to tell the Committee 
what's working for you, what isn't working, what we should 
consider for the next farm bill, some of the new programs were 
authorized in 2008. So it's www.agriculture.house.gov. We've 
got a lot of ground to cover, a lot of witnesses, and a lot of 
Members, so I know that the Chairman's looking forward to 
getting right at the witnesses.
    The Chairman. I thank the gentlelady.
    And I recognize the Ranking Member, Mr. Goodlatte, from 
Virginia.

 OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN 
                     CONGRESS FROM VIRGINIA

    Mr. Goodlatte. Thank you, Mr. Chairman.
    It's great to be back in South Dakota. It's great to be 
back with one of my dearest friends in the Congress, 
Congresswoman Stephanie Herseth Sandlin. And I think the 
respect that she commands on the Agriculture Committee is 
reflected by the great turnout we have here. This may be the 
largest number of Members of Congress--six Republicans, six 
Democratics--who have come to participate in this hearing. And 
I look forward to hearing the testimony of all of our witnesses 
as well.
    We have some real challenges compared to when we wrote the 
last farm bill, when we were successful in getting additional 
resources. Unfortunately, we had to go to some other committees 
to get those resources, and when they brought their money, they 
also brought lots of terms and conditions and wishes of their 
own, and definitely played a bigger role than we would have 
liked in the writing of the last farm bill. I know the Chairman 
is committed to not letting that happen again. But we also face 
very difficult economic times now that has impacted the 
resources available to the Federal Government. Just as an 
example, based upon the President's projected budget for next 
year, we are going to spend $1.6 trillion more than we take in; 
70 percent more in spending than we have in revenues. That's 
going to affect the farm bill in terms of the resources 
available to us, so I'll be interested in hearing from all of 
our witnesses today, their views on where we can cut back, 
where we can achieve savings, what programs are not working as 
well as others that could be sacrificed, as well as hearing 
from you how Congress can help you in another way; and that is, 
what can be overbearing Federal Government regulations that 
impact your bottom lines dramatically, what government 
regulations are not working well. We do not need--obviously, we 
need to protect our environment, we need to have safe 
workplaces, but we also need to recognize that micromanagement 
of American agriculture by various government agencies is not 
the best way to achieve the most abundant, most affordable, 
safest food supply in the world. That is achieved by the great 
outstanding work that South Dakota farmers and ranchers and 
others from across the Midwest and around the country have 
achieved for many, many years.
    We also need to take note of the fact that more than \3/4\ 
of the spending in our farm bill goes to nutrition programs and 
does not go to provide assistance to farmers and ranchers and 
others in the pipeline of growing and processing that food. And 
so achieving savings in that area is a major challenge for us 
as well. And I would note that these programs are in 
significant need of reform when you consider the nationwide 
obesity problem that people are now very much aware of. And 
that obviously the problem that we have there is not a shortage 
of food. It is rather a program that is not functioning 
properly to deliver healthy food in the most economic way to 
those who are most in need in our country. So we look forward 
to your testimony today and, again, we are happy to be here in 
South Dakota.
    The Chairman. All right. I thank the gentleman.
    And the other Members, if they have statements, will be 
made part of the record.
    We'd like to welcome our first panel. I think every one of 
the members of this panel grows corn. Most of them grow 
soybeans, some of them wheat, some of them are beef producers. 
So we recognize that they're all producers that are on this 
panel and that's what we wanted to do is hear from the real 
farmers out there.
    Mr. Gary Duffy from Oldham, South Dakota; Rod Gangwish from 
Shelton, Nebraska; Doug Sombke from Conde, South Dakota; Steve 
Masat from Redfield, South Dakota; Kevin Scott from Valley 
Springs, South Dakota; Matthew Wolle from Madelia, Minnesota; 
and Scott VanderWal from Volga, South Dakota. I may have 
screwed up some of the those names, but anyway, welcome to the 
panel.
    Mr. Duffy, your full statements, all of you, will be made 
part of the record. We have a lot of Members here, a lot of 
witnesses, so we'd ask you to stick within the 5 minute rule. 
There will be a light up there that will tell you when the 5 
minutes ends. And so summarize your statements and tell us what 
you think is the most important.
    Mr. Duffy, you're recognized.

         STATEMENT OF GARY DUFFY, CORN, SOYBEAN, WHEAT,
          ALFALFA, HOG, AND BEEF PRODUCER, OLDHAM, SD

    Mr. Duffy. Chairman Peterson, Congresswoman Herseth 
Sandlin, I thank you for this opportunity to share with you 
observations and views regarding implementation of the Food, 
Conservation, and Energy Act of 2008.
    My name is Gary Duffy, and I currently serve as President 
of South Dakota Corn Growers Association. And as you heard, I 
do farm near Oldham.
    The South Dakota Corn Growers Association is a grassroots 
organization representing thousands of corn producers from 
across South Dakota. First I want to state that the SDGCA is 
very much appreciative of the Committee holding this field 
hearing in South Dakota.
    I am also thankful to the leadership of Chairman Peterson 
and Congresswoman Herseth Sandlin's passage of the 2008 Farm 
Bill with the inclusion of the Average Crop Revenue Election 
program. The SDGCA also recognizes the ongoing work by you and 
your respective staff in preparing the 2012 Farm Bill.
    Today I would like to touch upon crop insurance, the ACRE 
Program, the Conservation Stewardship Program, biotechnology, 
and ethanol. Before I talk about the 2008 Farm Bill and the 
vision for the 2012 Farm Bill, I want to discuss the Federal 
Crop Insurance Program. Members of the Committee, Federal crop 
insurance is the greatest risk management tool producers have. 
No one knows what Mother Nature is going to do and the risks 
she brings to our industry. Crop insurance is efficient, 
effective, and a program that works for all crops. It is the 
most important program for all producers. I thank you for your 
support of this critical program.
    One of the signature reforms in the 2008 Farm Bill 
advocated by SDGCA was the adoption of a revenue-based risk 
management program that adjusts with the annual changes in 
market prices and crop yields. This new option in the farm 
safety net--ACRE--represents a fundamental change in U.S. 
commodity programs by reducing market distortions in planting 
decisions, cutting direct payments and lowering loan deficiency 
payments. In contrast to current programs that are linked to 
set target prices and loan rates, producers now have an 
opportunity to access a new risk management program that will 
vary with actual rolling market season average prices and state 
crop yields. Equally important, ACRE is designed to deliver 
assistance when a real loss in crop specific revenue is 
sustained on the farm. It is our view that ACRE, if properly 
implemented, can provide far more effective protection against 
volatile markets and production shortfalls not adequately 
addressed by either Federal crop insurance or the new disaster 
assistance program.
    Because of ACRE's relative complexity to other programs, 
and the inherent difficulty of introducing a significant reform 
along with other changes to the farm bill, South Dakota Corn 
Growers Association acknowledges that this new option presents 
some real challenges for producers to enroll in.
    One of the challenges presented is the landlord has to 
agree to it and enroll in the program for 5 years.
    As an alternative to continuing with the countercyclical 
program, participation in ACRE does not come without trade-
offs, including a 20 percent reduction in direct payments, and 
a 30 percent reduction in the marketing loan rate.
    The Conservation Stewardship Program is a step in the right 
direction. South Dakota has the fifth highest enrollment in the 
program. South Dakota producers are very progressive stewards 
of the land, and this program has rewarded them for their 
efforts.
    Looking ahead to the next farm bill, we believe the CSP 
program allows producers to actively pursue rewards for 
adapting to even more conservation practices. But, we should 
allow the experts in the field to have input into the 
enhancements that are scientifically proven and could logically 
be implemented at the farm level. The enhancement options 
available to farmers through the CSP Program are diverse and 
include both small and extensive actions.
    However, these actions are legislated down from the 
national NRCS, and input at the local level is no longer 
available, nor tailored to a state's unique characteristics. We 
ask you to further change this in the 2012 Farm Bill.
    Biotechnology holds great promise for farmers and consumers 
around the globe. Biotechnology has not only assisted today's 
producers in meeting increased demand for a safe, abundant 
grain supply, it has also benefited rural economies and the 
environment. Farmers understand the advantages the technology 
offers. Nowhere is that more apparent than in South Dakota, 
where our farmers have the highest usage of biotech traits in 
the nation. Ninety-six percent of acres planted in South Dakota 
feature an enhanced trait.
    According to the Food and Agriculture Organization, by 2050 
the world will need 70 percent more food compared to what we 
produce today. Producing 70 percent more food will inevitably 
require more advances in biotechnology, along with wider use of 
existing genetically enhanced foods. American producers stand 
ready to meet this challenge.
    Further advancements in biotechnology are necessary to 
ensure the world can continue to rely on U.S. growers to 
provide high quality food, feed, fiber, and fuel. Yet, as is 
often the case with emerging technologies, some consumers do 
not fully understand the potential of biotechnology.
    We must be committed to cultivating an environment and 
resources for biotechnology to expand and thrive. Please make 
certain that the Federal Government has the resources and tools 
to get technology to market in a scientific and effective 
manner.
    Finally, we are in South Dakota where ethanol is the 
largest market for South Dakota corn. The extension of the 
Volumetric Ethanol Excise Tax Credit will keep a market for 
over 330 million bushels of corn in South Dakota, and provide 
over a hundred thousand jobs in the United States. We need to 
extend VTEEC immediately. Overcoming the blend wall is 
critically needed to create new markets and provide jobs across 
rural America.
    Simply put, we need access to the marketplace, we need E15 
blender pumps in this nation now, we need vehicles with 
flexible fuel technology now. Far too long we have sent our 
American dollar overseas when we can and will spend it right 
here in America right now, if given the opportunity. We simply 
need to act--we simply need access to the marketplace.
    Mr. Chairman, I want to thank you again for this 
opportunity to appear before your Committee and discuss SDGCA's 
concerns. We appreciate your consideration and look forward to 
working with you and your colleagues in the weeks and months 
ahead to resolve these issues. Thank you.
    [The prepared statement of Mr. Duffy follows:]

 Prepared Statement of Gary Duffy, Corn, Soybean, Wheat, Alfalfa, Hog, 
                     and Beef Producer, Oldham, SD
    Chairman Peterson, Congresswoman Herseth Sandlin, I thank you for 
this opportunity to share with you observations and views regarding 
implementation of the Food, Conservation, and Energy Act of 2008.
    My name is Gary Duffy, and I currently serve as President of the 
South Dakota Corn Growers Association (SDCGA). I am from Oldham, South 
Dakota where I farm, raising corn, soybeans and manage a cow/calf herd.
    The South Dakota Corn Growers Association is a grassroots 
organization representing thousands of corn producers from across South 
Dakota. First, I want to state that the SDCGA is very much appreciative 
of the Committee holding this field hearing in South Dakota. I am also 
thankful for the leadership of Chairman Peterson and Congresswoman 
Herseth Sandlin's passage of the 2008 Farm bill with the inclusion of 
the Average Counter Revenue Program. The SDCGA also recognizes the 
ongoing work by you and your respective staff in preparing for the 2012 
Farm bill. Today I would like to touch upon Crop Insurance, the ACRE 
program, the Conservation Security Program, biotechnology and ethanol.
    Before I talk about the 2008 Farm bill and the vision for the 2012 
Farm bill, I want to discuss the Federal Crop Insurance Program. 
Chairman Peterson and Congresswoman Herseth Sandlin, Federal Crop 
Insurance is the greatest risk management tool producers have. No one 
knows what Mother Nature is going to do and the risk she brings to our 
industry. Crop insurance is efficient, effective and a program that 
works for all crops; it is the most important program for all 
producers. I thank you all for your support of this critical program.
    One of the signature reforms in the 2008 Farm Bill advocated by 
SDCGA was the adoption of a revenue based risk management program that 
adjusts with annual changes in market prices and crop yields. This new 
option in the farm safety net, the Average Crop Revenue Election 
(ACRE), represents a fundamental change in U.S. commodity programs by 
reducing market distortions in planting decisions, cutting direct 
payments and lowering loan deficiency payments. In contrast to current 
programs that are linked to set target prices and loan rates, producers 
now have an opportunity to access a new risk management program that 
will vary with actual rolling market season average prices and state 
crop yields. Equally important, ACRE is designed to deliver assistance 
when a real loss in crop specific revenue is sustained on the farm. It 
is our view that ACRE, if properly implemented, can provide far more 
effective protection against volatile markets and production shortfalls 
not adequately addressed by either Federal crop insurance or the new 
disaster assistance program.
    Because of ACRE's relative complexity to other programs and the 
inherent difficulty of introducing a significant reform along with 
other changes to the farm bill, SDCGA acknowledges that this new option 
presents some real challenges for producers to enroll in. One of the 
challenges presented is the landlord has to agree to it and enroll in 
the program for 5 years.
    As an alternative to continuing with the countercyclical program, 
participation in ACRE does not come without trade-offs, including a 20 
percent reduction in direct payments and a 30 percent reduction in the 
marketing loan rate.
    The Conservation Stewardship Program (CSP) is a step in the right 
direction. South Dakota had the fifth highest enrollment in the 
program. South Dakota producers are very progressive stewards of the 
land and this program has rewarded them for their efforts.
    Looking ahead to the next farm bill, we believe the CSP program 
allows producers to actively pursue rewards for adapting to even more 
conservation practices but we should allow the `experts in the field' 
to have input into the enhancements that are scientifically-proven and 
could logically be implemented at the farm level. The enhancement 
options available to farmers through the CSP program are diverse and 
include both small and extensive actions. However, these actions/
enhancements are legislated down from the national NRCS, and input at 
the local level is no longer available, nor tailored to a state's 
unique characteristics. We ask you to consider this change in the 2012 
Farm bill.
Biotechnology
    Biotechnology holds great promise for farmers and consumers around 
the globe. Biotechnology has not only assisted today's producers in 
meeting increased demand for a safe and abundant grain supply, it has 
also benefited rural economies and the environment. Farmers understand 
the advantages the technology offers. Nowhere is that more apparent 
than in South Dakota where our farmers have the highest usage of 
biotechnology traits in the nation. Ninety-six percent of the acres 
planted in South Dakota feature an enhanced trait.
    According to the Food and Agriculture Organization, by 2050 the 
world will need 70 percent more food (compared to what we produce 
today) in order to feed an expected population of 9.1 billion. 
Producing 70 percent more food will inevitably require more advances in 
biotechnology, along with wider use of existing genetically enhanced 
foods. American producers stand ready to meet this challenge.
    Further advancements in biotechnology are necessary to ensure the 
world can continue to rely on U.S. growers to provide high quality 
food, feed, fiber and fuel.
    Yet, as is often the case with emerging technologies, some 
consumers do not fully understand the potential of biotechnology.
    We must be committed to cultivating an environment and resources 
for biotechnology to expand and thrive. Please make certain that the 
Federal Government has the resources and tools to get technology to 
market in a scientific and effective manner.
    Finally, we are in South Dakota where ethanol is the largest market 
for South Dakota corn. The extension of the Volumetric Ethanol Excise 
Tax Credit will keep a market for over 330 million bushels of corn in 
South Dakota and provide over 100,000 jobs in the United States. We 
need to extend VEETC immediately.
    Overcoming the blend wall is critically needed to create new 
markets and provide jobs across rural America. Simply put, we need 
access to the market place. We need E15 and blender pumps in this 
nation now. We need vehicles with flex fuel technology now. Far too 
long we have sent our American dollar overseas when we can and will 
spend it right here in America right now if given the opportunity. We 
simply need access to the marketplace.
    Mr. Chairman, I want to thank you again for this opportunity to 
appear before your Subcommittee and discuss SDCGA's concerns. We 
appreciate your consideration and look forward to working with you and 
your colleagues in the weeks and months ahead to help resolve these 
issues.

    The Chairman. Thank you very much, Mr. Duffy, for that 
testimony. We appreciate it.
    Mr. Gangwish, welcome to the Committee.

 STATEMENT OF RODNEY K. GANGWISH, IRRIGATED CORN, AND SOYBEAN 
                     PRODUCER, SHELTON, NE

    Mr. Gangwish. Thank you, Mr. Chairman, Chairman Peterson, 
Mr. Goodlatte, my Congressman, Mr. Smith, and Members of the 
Committee. My name is Rod Gangwish and I'm from south central 
Nebraska near Shelton where I've been involved in farming and 
agribusiness for 36 years. I'm a fourth generation farmer, and 
my wife, our son, and I, farm about 2,200 acres of corn, 
soybeans, and seed corn.
    We're also invested in, and I serve on the board of 
managers, of KAAPA Ethanol, LLC, a farmer-owned ethanol plant 
at Minden Nebraska. And I also hold a leadership role in 
several other KAAPA business entities. KAAPA Cooperative is an 
organization of approximately 500 farmers in central Nebraska 
whose mission is to add value to the production of its members, 
and to bring business opportunities for them to invest in.
    Thank you for holding the hearings across the Midwest and 
for the opportunity to testify. I am representing myself today 
and our family farming operation; however, I'm a past President 
of the National Corn Growers Association and I've been involved 
in farm bill debates as well as other issues affecting American 
agriculture.
    I remember the 1996 Farm Bill. Cash corn price was near $3, 
and farmers did not think they would ever see the price of corn 
below $1.50 again. Corn went to over $5 in 1996, and 3 years 
later it was back to $1.50; and we were selling soybeans below 
$5. This has repeated itself many times over in agriculture's 
history, many times driven by weather. We are very involved in 
a business that has to deal with incredible price volatility.
    We in agriculture are survivors. I, and most of my 
colleagues, had balance sheets that took big hits in the 1980s 
at the height of the farm crisis. Without farm programs during 
those years and in the following years, my colleagues and I may 
not have had farming operations today. Out of necessity, we 
learned to use the loan program, target prices, the LDP 
program, and other programs to have cash flow at the bank. Some 
years the dollars that came from government programs were 
greater than the profit at the end of the year. There were some 
years there was no profit.
    I was planting beans the first of the week--excuse me, the 
first week in May, the day after I received the call inviting 
me to testify at this hearing. On the 8:00 news that morning, a 
recording of Secretary Vilsack, who was speaking at an outlook 
conference, came on the radio in the tractor and he said, ``We 
should treat farmers like what they are: Producers of a cheap, 
safe, and abundant food supply, not only for this country but 
for the world.'' I agree with Secretary Vilsack, although I'm 
not sure what the word treat is to mean. I wish that I could 
farm without any intervention or income from the government--
from any program, farm or otherwise. We could do this if we had 
a free market, free of controls and regulations, free of 
tariffs, without export subsidies or currency manipulation 
worldwide. But the fact is that agriculture is one of the most 
regulated and controlled sectors of our world economy, and the 
U.S. farmer must fit into this system. The ups and downs of the 
world economy, variation in world crop production and weather 
are perils that necessitate some type of farm program that will 
protect and insulate individual farmers from the forces that, 
over time, can come and go but, on a short-term basis, can 
drive them out of business.
    On our farm, we have always participated in the farm 
program, and today we have about 70 percent of our acres in the 
ACRE Program. We look at the ACRE Program a bit like buying a 
put. A portion of the direct payment is given up as protection 
and insurance against the probability of something happening 
that would cause prices or yield to fall below the triggers for 
some reason. I do not like the way the ACRE Program triggers 
with respect to state averages as compared to our farm, but the 
program does cover the systemic loss that would be incurred in 
case of low price or widespread low production. We use hail 
insurance to cover the rest of the uninsured portion as hail is 
our primary peril.
    Most of the corn that we raise on our farm is seed corn. We 
produce for a major seed corn company, raising our crop under 
contract, and managing all aspects of production with the 
exception of harvest and choosing the day of planting, which 
the company decides, as planting day also determines date of 
de-tasseling and the date of harvest. Our problems with growing 
seed corn, which we raise in a rotation basis with soybeans, 
relate primarily to crop insurance. The issue is that we do not 
produce commercial corn and have not produced commercial corn 
on these acres since back in the early 1980s when the yields in 
our area were 150 bushel per acre. Today commercial corn yields 
are routinely in the 230, 250 bushel range in our area. And 
consequently, we have a 150 bushel commercial corn Actual 
Production History, or APH, as opposed to the 240 APHs of our 
neighbors on like land, which is just across the road. This 
severely handicaps us from a crop insurance standpoint as we 
look at going back to raising commercial corn on these seed 
fields with 150 APHs, when our yields would be in the 230+ 
bushel range had we been producing commercial corn rather than 
seed corn. This also impacts us as we look at placing these 
farms in the ACRE Program.
    I spoke with my crop insurance agent about this APH 
problem. He said that the Crop Insurance Professionals 
Association is proposing a correction to the Risk Management 
Agency that would help our situation and also help involve 
other problems with the APHs involving multiple year losses. I 
would encourage the RMA to work with CIPA on their APH 
improvement proposals.
    The main perils that affect our crops in the irrigated 
regions of Nebraska are wind and hail. We use Federal crop 
insurance to insure the bottom portion of our crop and 
supplement it with top end hail insurance. Crop insurance 
provides us the ability to be able to market our crop and 
guarantee us a certain revenue.
    Crop insurance is a vital component of production 
agriculture as it gives producers the ability to forward-market 
based on a guaranteed revenue. Without this guarantee, we are 
fully exposed to any problem our crops may incur over the 
growing season.
    It is imperative that we have an affordable crop insurance 
program.
    I'm going to skip the part on ethanol, and I just want to 
say that the topic of the extension of the tax incentive for 
ethanol, the flexible fuel vehicle requirements, and the 
increase in the blending of the ethanol from E10 to E15 do not 
fit within the parameters of the farm bill, but they are 
significantly related to the profitability of my business.
    And I cannot pass on this opportunity to urge you as 
Members of the Congress to look favorably on these issues when 
they come before you at another time. I want to thank you for 
the opportunity to testify before you, and I'm willing to 
answer questions.
    [The prepared statement of Mr. Gangwish follows:]

 Prepared Statement of Rodney K. Gangwish, Irrigated Corn, and Soybean 
                         Producer, Shelton, NE
    Good morning, Chairman Peterson, and Members of the Committee. My 
name is Rod Gangwish and I am from Shelton, NE located in south central 
Nebraska along the Platte River where I have been involved in farming 
and agribusiness for 36 years. I am a fourth generation farmer and my 
wife and I and our son John farm about 2200 irrigated acres of corn, 
soybeans and seed corn. We are also invested in, and I serve on the 
Board of Managers of KAAPA Ethanol LLC, a farmer owned ethanol plant at 
Minden Nebraska and I also hold a leadership role in several other 
KAAPA business entities. KAAPA Cooperative is an organization of 
approximately 500 farmers in central Nebraska whose mission is to add 
value to the production of its members and to bring business 
opportunities for them to invest in.
    Thank you for holding the hearings across the Midwest and for the 
opportunity to testify. I am representing myself and our family farming 
operation today, however I am a past President of the National Corn 
Growers Association and have been active in past farm bill debates as 
well as other issues affecting American agriculture.
    I remember the 1996 Farm Bill debate. Cash corn price was near 
$3.00 and farmers did not think they would ever again see corn below 
$1.50 again. Corn went to over $5.00 in 1996, 3 years later it was back 
to $1.50 and we were selling soybeans below $5.00. This has repeated 
itself many times over in agriculture's history, many times driven by 
weather; we are involved in a business that has to deal with incredible 
price volatility.
    We in agriculture today are survivors. I and most of my colleagues 
had balance sheets that took big hits in the mid 1980's at the height 
of the farm crisis. Without farm programs during those years and in the 
years that followed, my colleagues and I may not have farming 
operations today. Out of necessity we learned to use the loan program, 
target prices, the LDP program and other programs to cash flow at the 
bank. Some years the dollars that came from government program were 
greater than the profit at the end of the year. There were some years 
that there was no profit--or net income.
    I was planting beans the first week in May the day after I received 
the call inviting me to testify at this hearing. On the 8:00 news that 
morning, a recording of Secretary Vilsack, who was speaking at an 
outlook conference, came on the radio in the tractor and he said, ``We 
should treat farmers like what they are . . . producers of a cheap, 
safe and abundant food supply, not only for this country but for the 
world.'' I agree with Secretary Vilsack, although I am not sure what 
the word ``treat'' is to mean. I wish that I could farm without any 
intervention or income from the government--from any program, farm or 
otherwise. We could do this if we had a free market, free of controls 
and regulations, free of tariffs, without export subsidies or currency 
manipulation world wide. But the fact is that agriculture is one of the 
most regulated and controlled sectors of our world economy and the U.S. 
farmer must fit into this system. The ups and downs of the world 
economy, variation in world crop production and weather, are the perils 
that necessitate some type of farm program that will protect and 
insulate individual farmers from the forces that over time can come and 
go, but on a short term basis can drive them out of business.
    Margins today with $3.00 to $3.50 corn are as narrow as they were 
when corn was $2.00 a few years ago, a result of higher expenses and 
input costs making risk in farming greater today because of the total 
dollars involved. We have a farm bill today with payments, but the 
safety net that would be triggered by a catastrophic drop in price or a 
production related weather peril, is well below a level that would 
provide protection for farmers and assist them in staying in business 
in the short term.
    ACRE--On our farm, we have always participated in the farm program 
and today we have about 70% of our acres in the ACRE program. We look 
at the ACRE program a bit like buying a put. A portion of the direct 
payment is given up as protection and insurance against the probability 
of something happening that would cause prices or yield to fall below 
the triggers for some reason. I do not like the way the ACRE program 
triggers, with respect to state averages as compared to our farm, but 
the program does cover the systemic loss that would be incurred in case 
of low price or wide spread low production. We use hail insurance to 
cover the rest of the uninsured portion as hail is our primary peril.
    Seed Corn--Most of the corn that we raise on our farm is seed corn. 
We produce for a major seed corn company raising our crop under 
contract and managing all aspects of production with the exception of 
harvest and choosing the day of planting, which the company decides, as 
planting day also determines date of de-tasseling and date of harvest. 
Our problems of growing seed, which we raise in a rotation with 
soybeans, relate primarily to crop insurance. The issue is that we do 
not produce commercial corn and have not produced commercial corn on 
these acres since back in the early 1980's when yields were in the 150 
bu. per acre range. Today commercial corn yields are routinely the 230 
to 250 bu. range in our area, and consequently we have a 150 bu. 
commercial corn Actual Production History (APH) as opposed to the 240 
bu. APH's of our neighbors, on like land just across the road. This 
severely handicaps us from a crop insurance standpoint as we look at 
going back to raising commercial corn on these seed fields with 150 bu. 
APH's when our yields would be in the 230+ range had we been producing 
commercial corn rather than seed corn. This also impacts as we look at 
placing the farms into the ACRE program.
    I spoke with my crop insurance agent about this APH problem. He 
said that CIPA (Crop Insurance Professionals Association) is proposing 
a correction to the RMA (Risk Management Agency) that will help my 
situation and also help solve another problem with the APH involving 
multiple year losses. I would like to encourage RMA to work with CIPA 
on their APH improvement proposals.
    Crop Insurance--The main perils that affect our crops in the 
irrigated regions of Nebraska are hail and wind. We use Federal Crop 
Insurance to insure the bottom portion of our crop and supplement it 
with top end hail insurance. Crop insurance provides us the ability to 
be able to market our crop and guarantee us a certain revenue.
    Crop insurance is a vital component of production agriculture as it 
gives producers the ability to forward market based on a guaranteed 
revenue. Without this guarantee we are fully exposed to any problem our 
crops may incur over the growing season.
    Ethanol--Much of the growth of the U.S. ethanol industry has been 
supported by farmers and rural America investing their hard-earned 
dollars in local biorefineries. For the American farmer, the ethanol 
industry provides the opportunity to enjoy some of the value-added to 
their commodity while revitalizing rural communities, creating economic 
opportunity and good paying jobs for American workers, and expanding 
the role of U.S. agriculture in our movement to greater energy 
independence. The programs included in the Energy Title of the 2008 
Farm Bill will greatly contribute to ensuring America's future energy 
security. Congress has a significant opportunity to further advance the 
development of renewable bioenergy, cellulosic ethanol and other 
advanced biofuels technologies in the 2012 Farm Bill. It would be my 
hope that the programs the House Agriculture Committee will include in 
the Energy Title of the 2012 Farm Bill will continue to promote Federal 
procurement of biobased products, expand loan guarantee programs for 
biorefineries and biofuels production facilities, increase research to 
better utilize ethanol co-products such as distillers grains, and 
continue programs to incentivize cellulosic and biomass feedstocks for 
ethanol production and energy production of ethanol plants. Thank you 
for recognizing the potential of biofuels and providing the agriculture 
community a pathway that will provide a more stable and sustainable 
energy future for all Americans.
    The topic of the extension of the tax incentive for ethanol, the 
Flexible Fuel Vehicle requirements and the increase in the blending of 
ethanol from E10 to E15 do not fit within the parameters of the farm 
bill, but they are significantly related to the profitability of my 
business and I cannot pass on this opportunity to urge you as Members 
of Congress to look favorably on these issues when they come before you 
at another time.
    I want to thank you for the opportunity to testify before you and 
share my thoughts. I would be happy to answer any questions.

    The Chairman. Thank you very much, Mr. Gangwish.
    I appreciate you shortening up things a little bit. So I'm 
going to--you know, we've got a lot of witnesses and a lot of 
Members here that will be asking questions, and we've got to be 
back to Washington to vote. When the yellow light comes on, you 
need to wrap it up.
    So, Mr. Sombke, welcome to the Committee.

   STATEMENT OF DOUG SOMBKE, CORN, WHEAT, SOYBEAN, AND BEEF 
                      PRODUCER, CONDE, SD

    Mr. Sombke. Thank you, Mr. Chairman, Mr. Goodlatte. 
Stephanie, thank you. Everything these two gentleman just said, 
ditto. You know----
    The Chairman. Somebody in Lubbock did it in about 2 
minutes, and I gave him a lot of extra credit so----
    Mr. Sombke. Well, first of all, I want you to understand 
that we did--South Dakota Farmers Union did have another 
individual willing to testify today, but he's home planting 
where I should be planting. I've been farming for 32 years, and 
in my area the State of South Dakota, we are way behind in 
planting. We just got started last week one day, and now we've 
been getting just wetter and wetter. Yesterday we were finally 
able to go again. It wasn't pretty. That's all I can tell you. 
There's a lot of trouble out there in the northeast part of the 
State of South Dakota. Thank God President Obama declared it a 
disaster area for us in the State of South Dakota this last 
week. And it's helped us immensely. We at least will be able to 
get FEMA in to help us with our infrastructure. Not only is our 
cropland super wet, we are struggling tremendously with roads 
and bridges and trying to get to the fields, let alone get the 
crop planted.
    So with that, I've also been able to serve as the President 
of South Dakota Farmers Union for the past 5 years along with 
being a farmer, and I can tell you that it's probably one of 
the most rewarding jobs I've ever had. I've been able to talk 
to individuals such as yourself and other Members of Congress 
on behalf of farmers. And that, to me, means a lot more than 
just complaining about it at the coffee shop.
    I know that crop insurance is a big issue with you, and it 
is for farmers as well. But I can tell you this: Without crop 
insurance, as Mr. Duffy indicated, farmers have grown to use 
that as a marketing tool, have been using it to market their 
product when they don't have it available, and bankers have 
come to rely on it as well, our communities have come to rely 
on it. Any change to--a major change to crop insurance would be 
felt very dramatically across rural America, I can tell you 
that.
    My family, I have three sons that farm the farm with me 
today. My last one just graduated from college this last 
weekend. And I'm more than happy to say that they all want to 
come back to agriculture, which is really surprising to me 
considering the trials and tribulations that we go through. The 
good Lord has definitely blessed us in a number of different 
ways, but at the same time, he's placed many challenges in 
front of us. We've been able to supply an abundant amount of 
food for this nation. And we'll continue to do so, but we have 
to be profitable. I think that's the main thing that you've got 
to remember here: Farmers need to remain profitable. Without a 
chance of being able to make a profit, young people will not 
come back to the farm.
    In the State of South Dakota, the average age is 57 years 
old, average age of a farmer. That's up there. I just turned 
50. I'm a grandfather. I'm proud to say that. I'm proud to say 
that I'm 50. But the fact of the matter is, how do I pass my 
farm on to my children and have them continue to do the same? 
I'm a fourth generation farmer in my family. On the farm that I 
farm today, back 32 years ago when I first started farming 
beside my dad, our operating--balance of our operating loan was 
$128,000. Today it's $1.3 million on the same amount of land.
    We need to be profitable. This isn't about farmers just 
making money. This is about rural America making money as well. 
This is how you put the country back to work. You put money 
back into agriculture, agriculture pays you back.
    Simple as that.
    I'm not going to go on any further. You've got my written 
testimony. I appreciate you coming to South Dakota and welcome 
to South Dakota. My mom always told me that if you don't treat 
people the way you wanted to be treated in your home, you're in 
deep trouble with her. So welcome.
    [The prepared statement of Mr. Sombke follows:]

   Prepared Statement of Doug Sombke, Corn, Wheat, Soybean, and Beef 
                          Producer, Conde, SD
    Chairman Peterson, Ranking Member Lucas, and distinguished Members 
of the House Agriculture Committee,

    My name is Doug Sombke, I am a farmer and rancher from rural Conde, 
South Dakota. My three sons and I run a cow/calf and backgrounding 
operation, and we raise corn, wheat, alfalfa and soybeans. I am also 
honored to serve as President of South Dakota Farmers Union. Thank you 
for allowing me the time to submit comments on behalf of South Dakota 
Farmers Union, myself and all South Dakotans.
    Every farm bill brings new rewards and challenges to America's 
agricultural producers, nutrition programs and Federal programs alike. 
The revenue guarantees set forth in this bill will define the future of 
our livelihood for years to come. It is imperative we help you craft 
the best piece of legislation possible that ensures family farmers and 
ranchers the best return on their investment. The following issues are 
of utmost importance to American agriculture.
Derivative Market Reform
    For years, the derivative market has been influenced both 
positively and negatively by outside sources. Whether it has been 
foreign investors, Wall Street brokers or the natural market movement, 
they have all affected the derivative market. While I understand 
profits ensure market viability, those profits should not be achieved 
through market manipulation. Agricultural producers rely on the market 
to survive, and when their bottom line is altered by manipulation in 
the derivative market their livelihood could be in jeopardy. Derivative 
Market reform must be a top priority in any financial reform bill. As 
you know, markets are extremely volatile, and influence from outside 
sources does not help its volatility. Unjustified trends due to 
speculators can ruin agricultural producers by creating wild swings in 
the market. I understand that we cannot have burdensome regulations and 
expect our markets to flourish. However, substantial derivative market 
reform is needed to ensure the markets are protected and overseen in a 
transparent and efficient way.
Disaster Aid & Payments
    Recently in northeastern South Dakota, we have had major problems 
with increased moisture from rain and snow. Early last fall we received 
a tremendous amount of rain, followed by increased snowfall, and then 
more rain this Spring. It has forced us out of our fields and 
unfortunately off of our roads which are nearly impassable. With the 
abundant moisture, our rural roads have not been able to sustain the 
saturation, turning to sinkholes and washing away. While FEMA has 
surveyed the damage and has promised some financial assistance, it 
simply isn't enough. We need to expedite the process of payments to 
counties and townships, and stabilize our infrastructure to ensure 
farmers get their products to market in a timely manner.
Crop Insurance
    The contentious issue of crop insurance continues to be debated in 
almost all farming circles. Federal crop insurance is essential to the 
livelihood of our producers. Farmers are required by ag lenders to 
carry crop insurance to obtain a line of credit. Crop insurance not 
only helps farmers gain access to private funding to finance raising a 
crop, we also use it as a marketing tool which allows us to forward 
market a portion of our crop to capture highs in the market when they 
occur before the crop is harvested. Federal crop insurance ensures that 
Americans have access to an affordable food supply. By maintaining 
Federal crop insurance we will maintain our abundant and low-cost 
supply of food, while ensuring producers the right to a profitable 
bottom line and lifestyle. I would urge the Committee to keep crop 
insurance at their current level in the 2012 Farm Bill.
Trade Standards
    Over the past few years, USDA has changed portions of its 
regionalization standards when it comes to international trade. 
Regionalization of countries that do not meet OIE standards puts the 
United States at greater risk of importing animal diseases, such as 
foot and mouth disease. These diseases could be deadly to our domestic 
supply chain and I would urge the Committee to protect those sources by 
creating new standards for our trading partners. Any regionalized zone 
which includes a nation or state that is not deemed free of contagious 
disease should be required to be surrounded by all disease free border 
sharing entities. This would restrict the flow of disease positive 
animals or raw goods from the region to the U.S. We must help other 
counties control their disease outbreaks. By requiring higher trade 
standards of other countries, it would cut the risk of disease 
spreading in the U.S., while increasing the profitability of our 
domestic producers.
Captive Supply & Competition
    For years the multinational meatpacking companies have manipulated 
domestic meat markets by using captive supply to flood the market at 
the right time. When the captive supply owned by these companies is 
introduced into the market, producers suffer from an over liquidated 
stock which results in lower earnings per head. The cattle industry has 
called for a ban on packer ownership of livestock, which would result 
in an assurance of anti-monopolistic or vertically integrated market. 
Open, competitive markets would help the livestock producer's commodity 
be more profitable.
    The addition of a Competition title to the 2008 Farm Bill was a 
major victory for family farmers and ranchers, and the USDA/DOJ 
hearings on concentration in agricultural markets will provide useful 
information for the Committee as you consider legislative responses to 
the looming threat of corporate monopoly in seed, inputs, crops and 
livestock. We look for stronger legislation on competition, comparable 
to the successful efforts of Congress to get Country of Origin Labeling 
operational in 2008. We can begin by requiring Federal agencies to 
enforce the Packers and Stockyards Act and other existing antitrust 
laws.
COOL and Check-Off Reform
    In the 2008 Farm Bill, final implementation of Country of Origin 
Labeling became a reality. The system has been successful in promoting 
domestic products and providing full information to the consumer 
regarding their food supply. While most retailers have come into full 
compliance with the law, some still have not. I believe stronger 
language may be appropriate in the new farm bill to ensure complete 
implementation of Country of Origin Labeling. Full implementation will 
result in greater consumer confidence and an increased awareness among 
the general public. We must also use other methods to promote our 
domestic and imported products. Requiring a portion of our check off 
dollars be used to promote U.S. only products would be greatly 
beneficial to our domestic producers. Countries which export to the 
U.S. would also be able to use their check off funds to promote their 
country's product which would provide them fair access to the open 
market. Rules should be written to allow this under the next farm bill.
Conclusion
    This is a critical time for agriculture in the United States. I 
understand the difficult job you have before you, and I thank you for 
your service to American agriculture. Mr. Chairman, and Ranking Member 
Lucas, I look forward to working with you and the Committee on these 
important matters, and I look forward to answering any questions that 
you might have. Thank you.

    The Chairman. Thank you very much. And as a Farmers Union 
member, I commend you for your leadership and the work in that 
organization.
    Mr. Masat, welcome to the Committee.

   STATEMENT OF STEVE MASAT, WHEAT, CORN, SOYBEAN, HAY, AND 
                LIVESTOCK PRODUCER, REDFIELD, SD

    Mr. Masat. Mr. Chairman, my name is Steve Masat and I'm 
from Redfield. I'm here representing myself as well as the 
South Dakota Wheat, Incorporated, the wheat producers of South 
Dakota. On my farm, I raise spring wheat and soybeans, corn, 
alfalfa, and I use precision farming on the grain side. I also 
have a feed lot operation as well as a cow/calf. In my 
livestock operation, I do have a committed feedlot. So I do 
work to keep the environment better than the way I left it.
    For you that are not from South Dakota, we mainly grow 
winter wheat, spring wheat, and some hard white wheat, which is 
winter wheat which is new. Been pretty successful at it so far.
    I'm going to summarize some of this stuff, to get your time 
down here. But for the most part, I guess I feel a lot of the 
direct payments, countercyclical payments are kind of working. 
Beyond that, our group is open to any new ideas that producers 
have.
    Crop insurance, I agree with these other three fellows. One 
thing that being a wheat producer up in the part of the state 
that I am from, we cannot get winter wheat coverage because of 
winter kill. I think that's something that needs to be looked 
at, and that is very--been very beneficial to--for wild--or 
waterfowl production.
    The conservation programs, I have participated in the CSP 
Program, I've participated in the EQIP and a small portion in 
CRP. I believe in these programs. CSP is a wonderful program 
for my operation. It's things that I've been doing. It enhances 
things we've been doing. In the Jim River Valley where I live, 
we have salt issues. Good programs. They're being looked at 
correctly.
    Of course, we are big supporters of biofuel. And on to 
biotechnology, we would like to see more research done in 
wheat. And we also--alfalfa would be very important to have in 
part of our operations. And for my own operation, we have the 
draws that we can't farm. Here come the salts. If we could 
plant them into Roundup Ready alfalfa, come across it with the 
bio-plant biotech crops around them, spray Roundup across them, 
we would leave the alfalfa there, we would be better stewards 
of our property. So we think this is very--I think personally 
this is very important.
    With that, I'd like to thank you folks for all coming here. 
I appreciate you coming to the great State of South Dakota and 
thank you.
    [The prepared statement of Mr. Masat follows:]

   Prepared Statement of Steve Masat, Wheat, Corn, Soybean, Hay, and 
                    Livestock Producer, Redfield, SD
    Mr. Chairman, and Members of the House Committee on Agriculture, my 
name is Steve Masat, President of South Dakota Wheat Inc and I am a 
farmer from Redfield, South Dakota. On my family farm I raise spring 
wheat, soybeans, corn, and alfalfa hay, using precision farming 
practices on the grain side of the operation. I also have a cow/calf 
and feedlot operation. In the feedlot operation I am using up-to-date 
conservation practices to protect the environment in which I live in, 
and that is a part of my heritage. I believe that all landowners are or 
should be responsible stewards of the land.
    South Dakota wheat production consists mainly of winter wheat and 
spring wheat with some hard white winter wheat grown as well. South 
Dakota produces on average around 130 million bushels of wheat produced 
in the state on an annual basis. Needless to say wheat is vitally 
important to this state.
    Now to the issue at hand . . . the 2012 Farm Bill.
Farm Programs
    The National Association of Wheat Growers, our national affiliate 
is currently undertaking a survey of wheat producers throughout the 
nation. This initial NAWG survey was designed to generate some 
potential new ideas to explore when approaching the writing of the 2012 
Farm Bill.
    It is important to note that producers seek a safety net, within 
the farm bill that reflects the realities of today's production system. 
We believe this safety net needs to be composed of reliable and 
meaningful programs that provide coverage for producers and keeps in 
mind the role that United States farmers play in the global market.
    For the most part Federal farm programs such as Direct Payments, 
Counter-Cyclical payment programs and marketing loans are established 
and accepted in South Dakota's farming community. The newer farm 
programs such as ACRE and SURE are slowing being reviewed by producers 
and we expect participation in these programs will grow in coming 
years. Beyond that, we are open to considering new and creative ways to 
maintain or improve the overall safety net for wheat growers across the 
country and are exploring ideas to that end.
Crop Insurance
    Crop insurance is and should be a critical part of the farm safety 
net. Last year in South Dakota ninety two percent (92%) of wheat acres 
were covered by crop insurance. In 2009 the wheat crop had an estimated 
value of $500 million.
    Moving forward, we want to make sure that any future changes to the 
crop insurance program do not hamper the provider's ability to 
accurately assess risk and maintain viability. This is vitally 
important if they are to continue to provide protection to wheat 
farmers, especially in the areas of the state that carry the most risk.
    On a side note, in northern South Dakota and in parts of North 
Dakota, there is interest in planting winter wheat because of higher 
yields, crop rotation opportunities and wildlife benefits. 
Unfortunately, crop insurance in northern South Dakota and North Dakota 
does not provide winter kill coverage for winter wheat. South Dakota 
Wheat Inc. has worked with USDA's Risk Management Agency to find a 
solution to this gap in coverage. We will continue to work with RMA and 
other stakeholders to develop agronomic criteria and implement coverage 
that will provide farmers with winterkill protection for their wheat, 
while protecting the integrity of the crop insurance program.
Conservation
    Conservation programs such as CSP, EQIP, WHIP and CRP have been 
embraced by South Dakota producers and these programs need to be 
maintained. Strong leadership by South Dakota's state conservationist 
and the state technical committee has provided many success stories 
throughout the state. Because of a backlog of applications for 
conservation programs there is a need for additional funding. The need 
for additional funding for technical assistance should be considered as 
well.
Biofuels
    Agriculture has and is continuing to provide additional 
alternatives for energy for this nation. The production of biofuels 
from agriculture residues has the potential to provide an additional 
value-added revenue stream for producers. Current research has positive 
results; however there is a need for additional funding of development 
programs to bring advanced biofuels to commercial production.
Biotechnology
    South Dakota producers are enjoying increased production through 
the use of biotechnology in corn and soybeans. South Dakota Wheat Inc. 
is a supporter of the use of biotechnology in wheat. The sustainability 
of agriculture lies within biotechnology through less agronomic inputs 
while maintaining profitability for farmers and ranchers.
Research
    The mapping of the corn, soybean, and sunflower genomes has created 
many additional opportunities for disease and insect resistance within 
those plants as well as the possibility of higher yields. It is 
critical that mapping of the wheat genome be continued, and that 
Federal funding be continued so that the wheat plant may join its 
fellow plants in adopting sustainable agriculture practices.
    I appreciate the opportunity to share the thoughts of South Dakota 
wheat producers on this variety of topics with respect to the future of 
farm policy, look forward to your questions.

    The Chairman. Thank you very much. You guys are earning big 
points here summarizing.
    Mr. Scott, welcome to the Committee.

  STATEMENT OF KEVIN SCOTT, SOYBEAN, CORN, AND HOG PRODUCER, 
                       VALLEY SPRINGS, SD

    Mr. Scott. Good morning, Mr. Chairman, Members of the 
Committee. I'm Kevin Scott, a soybean and corn producer from 
Valley Springs, South Dakota, which is located about 15 miles 
east of Sioux Falls. I appreciate your invitation to appear 
today, to provide some views on the 2008 Farm Bill and future 
farm policy.
    My wife--excuse me. Is my microphone not on? My cord's a 
little stuck. How about that? Are we good to go? My wife 
Jannell and I have been married for 29 years next week, and we 
have six children. I'm a fourth generation family farmer in 
partnership with a brother, and I hope our operation will 
continue to serve the community and provide for future 
generations of the Scott family.
    The farm program, of course, was created as a safety net 
for growers and for food security for the nation. My farm has 
participated and been supported by the safety net provisions 
many times. The 2002 Farm Bill was especially helpful to us in 
a time of extended commodity--low commodity prices. Many farms 
would not have survived without the underlying support we had 
and they had. For those of you who helped pass prior farm 
bills, we thank you and we appreciate what you've done for us.
    In preparations for the--this statement, to get a more 
comprehensive view of current farm policy and how it affects 
farmers in South Dakota, the South Dakota Soybean Association 
members were surveyed about provisions from the 2008 Farm Bill, 
and here are some of their comments.
    Direct payments: They've been around for a number of years, 
and during their history provided much needed support when 
commodity prices were poor. With today's commodity price levels 
being higher, the direct payment program is not as much a 
necessity as it was in the past.
    The SURE disaster assistance: Some perceive it as 
complicated. Multiple program changes occurred after the 
program began. Producers and Farm Service Agency officials were 
hard-pressed to keep up with those changes. It has been a 
pleasant surprise for some producers who incurred losses in 
their operation and did not realize they were eligible for 
compensation.
    Bio-based product initiatives: This initiative has been 
instrumental in helping fund the development and production of 
soy-based products that originate here in South Dakota.
    For example, South Dakota soybean processors in Volga, 
South Dakota have brought to market products that replace 
petroleum-based foams, insulations and plastics with soy-based 
alternatives.
    Conservation programs: U.S. farmers work very hard to 
conserve the resources that provide for our families. We have 
to maintain them or they will not sustain us. And farmers are 
environmentalists. Clean air, water and fertile soil are among 
our most important assets. That's about all I have to say on 
that one.
    The ACRE Program: It's complex, confusing, difficult to 
administer are some of the responses we had. I chose this 
option for many of my farm acres because it was recommended to 
me, and it added a revenue component to the safety net.
    The program adjusts for fluctuating grain prices like crop 
insurance does but uses statewide yield and price points to 
gauge pavement rates. Due to their location, type of crop, and 
livestock operation mix, some of our South Dakota Soybean 
Association members did not think the ACRE provision was as 
good a product as the traditional program. Most said it was 
difficult to determine which program would offer the best 
protection for their farm. And clarity will come with time on 
that program we know.
    Crop insurance: Though crop insurance is not part of the 
2008 Farm Bill, it has become an increasingly important part of 
risk mitigation that is necessary in farming today.
    It is not uncommon to have $600 per acre of expense into a 
corn crop prior to any income. Most farmers cannot afford to 
risk that amount of money without some protection. Crop 
insurance with the Revenue Assurance Option is what I use on my 
farm. It covers up to 75 percent of my expected revenue for the 
crop I am insuring based on spring and fall grain prices and my 
proven 10 year yield history. I can choose to buy more or less 
coverage based on the amount of risk I feel our operation can 
afford. The coverage is also specific to where I farm, not the 
whole state or even the county. Crop insurance is a critically 
important device for growers in South Dakota and the nation to 
help avert risks of production and commodity price 
fluctuations.
    Thank you again, Mr. Chairman, for inviting me to appear 
today and share a few preliminary thoughts on the 2012 Farm 
Bill. The South Dakota Soybean Association and I look forward 
to additional discussions on the farm bill in the future. I'll 
be happy to answer any questions.
    [The prepared statement of Mr. Scott follows:]

  Prepared Statement of Kevin Scott, Soybean, Corn, and Hog Producer, 
                           Valley Springs, SD
    Good morning, Mr. Chairman and Members of the Committee. I am Kevin 
Scott, a soybean and corn producer from Valley Springs, South Dakota 
which is located 15 miles east of Sioux Falls. I appreciate your 
invitation to appear today to provide some views on the 2008 Farm Bill 
and future farm policy.
    My wife Jannell and I have been married for 29 years next week and 
we have six children. I am a fourth generation family farmer in 
partnership with my brother. I hope that our operation will continue to 
serve the community and provide for future generations of the Scott 
family.
    The farm program was created to provide a safety net for growers 
and food security for the nation. My farm has participated and has been 
supported by those ``safety net'' provisions many times. The 2002 Farm 
Bill was especially helpful to us in a time of extended low commodity 
prices. Many farms would not have survived without the underlying 
support they had. For those of you who helped pass prior farm bills, 
thank you. We appreciate what you have done for us.
    In preparing this statement to get a more comprehensive view of 
current farm policy and how it affects farmers in South Dakota, the 
South Dakota Soybean Association members were surveyed about provisions 
from the 2008 Farm Bill. Here are some of their comments:
    Direct payments: They have been around for a number of years and 
during their history provided much needed support when commodity prices 
were poor. With today's commodity price levels being higher, the direct 
payment program is not as much of a necessity as it was in the past.
    SURE disaster assistance: Some perceive it as complicated. Multiple 
program changes occurred after the program began. Producers and Farm 
Service Agency's offices were hard pressed to keep up with those 
changes. It has been a pleasant surprise for some producers who 
incurred losses in their operations and did not realize that they were 
eligible for compensation.
    Bio-based product incentives: This initiative has been instrumental 
in helping fund the development and production of soy-based products 
that originate here in South Dakota. For example, the South Dakota 
Soybean Processors in Volga, South Dakota have brought to market 
products that replace petroleum-based foams, insulation and plastics 
with soy-based alternatives.
    Conservation programs: U.S. farmers work very hard to conserve the 
resources that provide for our families. We have to maintain them or 
they will not sustain us. Farmers are environmentalists. Clean air, 
water and fertile soil are among our most important assets.
    ACRE program: Complex, confusing and difficult to administer are 
common responses. I chose this option for many of my farm acres because 
it was recommended to me and it added a revenue component to the safety 
net. The program adjusts for fluctuating grain prices like crop 
insurance does but uses statewide yield and price points to gage 
payment rates. Due to their location, type of crop and livestock 
operation mix, some of our SDSA members did not think that the ACRE 
provision was as good of a product as the traditional program. Most 
said that it was difficult to determine which program would offer the 
best protection for their farm. Clarity will come with time.
    Crop insurance: Though crop insurance is not part of the 2008 Farm 
Bill, it has become an increasingly important part of risk mitigation 
that is necessary in farming today. It is not uncommon to have $600 per 
acre of expenses into a corn crop prior to any income. Most farmers 
cannot afford to risk that amount of money without some protection. 
Crop insurance with the Revenue Assurance option is what I use on my 
farm. It covers up to 75% of my expected revenue for the crop I am 
insuring based on spring and fall grain prices and my proven 10 year 
yield history. I can choose to buy more or less coverage based on the 
amount of risk I feel our operation can afford. The coverage is also 
specific to where I farm, not the whole state or even the county. Crop 
insurance is a critically important device for growers in South Dakota 
to help avert risks of production and commodity price fluctuations.
    Thank you again, Mr. Chairman, for inviting me to appear today and 
share a few preliminary thoughts on the 2012 Farm Bill. The South 
Dakota Soybean Association and I look forward to additional discussions 
on the farm bill in the future. I will be happy to answer any 
questions.

    The Chairman. Thank you very much, Mr. Scott.
    Mr. Wolle, welcome to the Committee.

  STATEMENT OF MATTHEW J. WOLLE, CORN, SOYBEAN, AND LIVESTOCK 
                     PRODUCER, MADELIA, MN

    Mr. Wolle. Thank you, Mr. Chairman, Congressman Walz.
    I appreciate the invitation to speak in front of you today. 
I'm here representing beginning and young farmers.
    That's my major qualification being up here is I'm young 
and I'm inexperienced. I also use that line in my marriage.
    I've been married about 8 months now to a beautiful woman 
from Rapid City, South Dakota so--but I look forward to 
seriously working on the 2052 Farm Bill long after everyone in 
this room is retired, so I'm taking the long view.
    I'll start off by addressing conservation. EQIP, CRP, CSP--
I participated in these. I feel farmers are the frontline in 
conserving our natural resources in this country. I believe 
that programs we have in place do a very good job of 
encouraging that. And my key point on this would be it's best 
to get beginning farmers and ranchers involved early in these 
programs. So I would encourage you to consider dedicated 
funding for young and beginning farmers in this area of 
conservation. It's best to get them when they're young, when 
they have a long time to practice what they've learned in these 
programs. It will provide much more dividends.
    Risk management: Farming is risky business. The amount of 
risk in a modern farming operation is substantial, and you've 
heard that from established farmers. It's even more substantial 
for young beginning farmers that don't have a net worth to 
sustain losses in their business. Providing a revenue-based 
safety net in case of disasters and market volatility is key, I 
believe, in keeping young people on the land and involved in 
agriculture.
    I believe the ACRE Program is a good start at this.
    It's--for myself in corn and soybeans, we haven't lived 
through the program a full year so it's kind of too soon to 
tell. Hopefully, by the time 2012 rolls around, we'll have 2 
years under our belt and we'll be able to tweak that to make it 
a much more applicable program. Finesse it out, if you will.
    Finally, the major thing I'd like to touch on is farm 
transition. Several key points in this area, tight credit being 
the first one. Most lenders do not want to assume the risk of 
lending to someone with zero net worth--beginning farmers and 
ranchers. As I alluded to earlier, it's very risky. It's 
weather-driven whether you'll get a crop or not. There's market 
volatility depending on what happens in Brazil, what happens in 
China. Many things that are out of our control; therefore, 
lenders look at that and say I'm not going to put my money in 
this. You're not a viable option for me. And they'd much rather 
lend to established producers or let someone else cherry pick, 
if you will, the young beginning farmer after he's got 5 or 6 
or 7 years--if he makes it that long--then take his loan on.
    I believe we should do a fundamental shift from the USDA 
being a lender of last resort to maybe a lender of first 
resort. Could be a--oh, spearhead a new initiative to say, yes, 
we're going to take on young farmers and realize it's risk, but 
we realize that we need young people on the land working the 
land. We need a next generation of farmers.
    I believe loan limits should be increased. The loan law 
process needs to be streamlined. And if I had my druthers, I'd 
like to see succession planting. I believe Iowa and Nebraska at 
the state level have some very good programs that we could 
model at a national level. Minnesota currently does not have 
anything along those lines. Some incentives for older 
generations without an heir apparent to rent to some young 
individual who's not a relative. Get them started in farming, 
pass along a lot of the knowledge that they've accumulated in 
their life farming to the next generation, incentivize them to 
do that in some way.
    I also feel rural development, infrastructure, as well as 
leadership needs to happen. We need young people on the 
alliance committee. We need people on the church board. We need 
young county commissioners. We need young people back to carry 
the load because the older generation has done that for many 
years, and they're tired of all the committee meetings and 
being on the town board. We need young people back there to 
pull the weight and get it over the hill.
    In conclusion, the foundation of our modern society rests 
on the ability of some to produce food for others. I feel the 
main goal of the 2012 Farm Bill should be to ensure that there 
is a well educated, financially viable next generation of 
farmers to carry on the task of feeding the nation.
    Thank you, Mr. Chairman, and Committee Members for your 
time and the opportunity to address the Committee. I look 
forward to answering your questions.
    [The prepared statement of Mr. Wolle follows:]

 Prepared Statement of Matthew J. Wolle, Corn, Soybean, and Livestock 
                         Producer, Madelia, MN
    Chairman Peterson, Congressman Walz, and House Agriculture 
Committee Members, thank you for inviting me to testify today about my 
experiences as a Beginning Farmer and Rancher utilizing the 2008 Farm 
Bill.
    My name is Matthew Wolle and I farm primarily corn and soybeans in 
Watonwan County, Minnesota (South Central MN). I rent approximately 800 
acres from my family that includes the land that my ancestor's 
homesteaded in 1883. My primary business partner is my father and I am 
in the process of developing a farm transfer plan for his operation 
into mine. I am also in the process of acquiring my Grandfather's farm 
land. My wife and I live in the house that my Grandfather built. We are 
every bit a family farm with two prior generation's operations 
transitioning into the third.
    The first crop that I planted was in 2004. I am Beginning Farmer 
and Rancher by the FSA's definition (I have not farmed more than 10 
consecutive years and I materially and substantially participate in the 
operation of my farm). Using this lens, I will share my experiences 
with the Committee about how the 2008 Farm Bill has worked for me. 
There are plenty of experts that can provide technical data and 
statistics on Beginning Farmers and Ranchers, I will provide you with a 
``View from the Cab'' testimony.
Conservation
    I am a past participant in the EQIP program. I was enrolled in the 
areas of residue management, nutrient management, and integrated pest 
management. This program not only motivated me to be a better steward 
of the land, agriculture's primary resource, but also provided me an 
avenue for the education of how to best raise a crop while conserving 
natural resources: 2010 will be my first year for being enrolled in 
CSP. I appreciate the incentives that this program provides and look 
forward to practicing new farming methods because of what I learn. It 
is important beginning farmers and ranchers are given some preferential 
treatment in the selection process for USDA programs as they have the 
most to learn from these programs and will return the benefits to 
environment over a longer period of time. According to my district 
conservationist I was selected to participate in CSP due to my 
Beginning Farmer and Rancher status.
Risk Management
    I chose last year to enroll my whole farm in the ACRE program. 
While this is the first version of the ACRE program and questions about 
its responsiveness to localized catastrophes have some validity, I 
still feel that an extra method of risk management is vital for 
beginning producers who have limited resources and net worth compared 
to established farmers and ranchers. I liked the revenue aspect of the 
ACRE program and the use of 5 year Olympic yields versus the straight 
10 year yield average utilized by the crop insurance industry. I do 
feel that the state wide trigger for an indemnity payment is too large 
and possibly sub state areas would provide more localized protection. I 
do believe that the Federal crop insurance subsidies need to remain at 
current levels to keep crop insurance affordable for beginning farmers 
and ranchers. As I stated earlier--beginning producers need to be able 
to utilize all the risk management methods that are available to them.
Farm Transition
    While I have not used the FSA's Beginning Farmer and Rancher loan 
programs yet, I do anticipate utilizing them some day. I have done some 
research on the programs and feel that they are in general quite 
adequate except for that the loans limits need to be adjusted upwards 
to constantly reflect the price of farmland that beginning producers 
want to acquire. In order to be valid and useful these loan amount 
limits must somehow be related to the cost of land as farmland values 
escalate.
    For the 2012 Farm Bill, I feel more needs to be done to aid young 
people to get into production agriculture. Our farming population is 
aging at an alarming rate. I am always scanning and consistently in the 
lower 10% age bracket at every farmer meeting or agricultural event 
that I attend. This observation is reaffirmed by the MN Department of 
Agriculture's figure that the average age of the Minnesota farmer is 53 
years old. We need to act now to get young agriculturalists into 
production agriculture. The capital requirements for starting up a farm 
are next to impossible to manage for someone with zero net worth. That 
issue, along with access to land, puts young people with an interest to 
farm in a ``no go'' situation. It is my hope that we can build on the 
strengths of the 2008 Farm Bill and make the 2012 Farm Bill better for 
Beginning Farmers and Ranchers. Thank You.

    The Chairman. Thank you very much, Mr. Wolle. And we hope 
there are many more young people like you that come forward and 
get into farming. It's important to the future.
    Mr. VanderWal, welcome to the Committee.

 STATEMENT OF SCOTT VanderWal, CORN, SOYBEAN, SMALL GRAIN, AND 
                    BEEF PRODUCER, VOLGA, SD

    Mr. VanderWal. Thank you, sir. Good morning, Mr. Chairman, 
Representative Herseth Sandlin, and other distinguished Members 
of the House Agriculture Committee.
    My name is Scott VanderWal and I am from Volga, South 
Dakota, and I farm with my family in a diversified operation, 
producing mainly corn and soybeans, and we also operate a 
custom cattle feeding operation. I've served as President of 
the South Dakota Farm Bureau since June of 2004. So that's my 
second full-time job.
    I thank the Committee for conducting this hearing in South 
Dakota, and the Members here today for spending your time and 
effort to come to this Committee. I've done this a couple times 
before, testifying before House Committee hearings, and this 
is, by far, the largest number of Members of the Congress that 
I've seen at these Committee hearings.
    So I appreciate that and appreciate your commitment to the 
very important issue of agriculture in our country.
    The 2012 Farm Bill should treat production agriculture as a 
strategic resource of this nation and be constructed to further 
enhance that resource. A healthy, prospering farm and ranch 
sector is of paramount importance for this country and its 
citizens. In my view, the health of our agriculture industry is 
a national security issue. We've all seen the consequences of 
our reliance on other countries for a major portion of our 
energy needs. The importance of avoiding doing this same thing 
in regard to our food and nutrition needs cannot be overstated.
    I have eight main points that I'd like to make this 
morning. I'm going to keep it very brief by just making a 
couple comments on each one. But these are some of the 
challenges that we see that lie ahead of us as we formulate the 
next farm bill.
    First of all, fiscal responsibility. We recognize that 
restoring this country's fiscal integrity must receive the 
highest priority from everyone, and that includes farmers and 
ranchers. Reduced spending by the Federal Government must 
happen in order to ensure economic opportunity and national 
security for future generations. We do ask that agriculture be 
treated fairly as we go through the process and not suffer 
disproportionate cuts in Federal spending, recognizing that the 
entire USDA budget, including food and nutrition programs, 
amounts to less than \1/2\ of 1 percent of the Federal budget.
    My second point is funding allocation. Farm Bureau supports 
the allocation of funding across the titles of the present farm 
bill. We'll resist shifting funds from one commodity title to 
another one with one exception: Potentially transferring 
dollars from the commodity title to the insurance side of the 
program in an effort to ensure that--to improve that side of 
the issue.
    Third, balance and fairness: Farm Bureau is a general farm 
organization with members that produce all commodities. Our 
overriding goal is to maintain balance and benefits for all 
farm sectors. Shifting benefits from one commodity to another 
is divisive and many times unfair.
    Fourth is world trade. There may be a need to include 
options to comply with existing trade agreement obligations and 
WTO litigation rulings that are in place now. However, we would 
resist efforts aimed at presupposing the outcome of WTO 
negotiations. To do so would reduce our negotiating efforts--or 
our leverage on behalf of the United States.
    And the fifth point I'd like to make is market orientation. 
We favor a market-oriented farm policy with less reliance on 
government and more on market signals, including adequate 
options for insurance and revenue assurance products to help 
producers better manage during times of market fluctuations and 
weather-related hazards.
    Sixth is world markets. The farm bill must enhance U.S. ag 
producers' opportunities to access world markets on a 
competitive basis. Farm Bureau supports the Administration's 
call for a doubling of U.S. exports. We recognize achieving 
that goal would benefit ag producers, jobs, and the overall 
economy.
    We believe a good place to start that expansion would be 
with enactment of the free trade agreements with South Korea, 
Columbia, and Panama. We watch with major concern as those 
three countries continue to develop trade agreements with our 
competitors but we're getting left out. We're no longer 
standing still in ag exports across the world; we're going 
backwards.
    The SURE Program, just a quick comment on that. If the 
shortcomings in the SURE Program are not corrected in the next 
couple of years, an improvement will be necessary in the next 
farm bill. SURE payments are not available until a full year 
after the end of the crop year in which a disaster occurred. 
This needs to be corrected so that assistance is more timely. 
For a producer who's in favor of going out of the business due 
to some kind of a disaster most likely does not have the 
financial ability to hang on for another year waiting for that 
assistance.
    And finally, the ACRE Program. This provision in the 
current farm bill is extremely complicated, and the many 
unknowns have caused producers to hesitate to sign up. In 
addition, the cuts in the DPs and the MALs are more of a 
deterrent in some crops than others.
    So in conclusion, we're certainly committed to working with 
each and every one of you as we go forward in the formulation 
of the next farm bill. And, again, I appreciate your attention 
to this issue today. Thank you.
    [The prepared statement of Mr. VanderWal follows:]

Prepared Statement of Scott VanderWal, Corn, Soybean, Small Grain, and 
                        Beef Producer, Volga, SD
    Mr. Chairman, Representative Herseth Sandlin and other 
distinguished Members of the U.S. House of Representatives Agriculture 
Committee.
    My name is Scott VanderWal of Volga, South Dakota. I farm with my 
family in a diversified operation, producing mainly corn and soybeans 
and operating a custom cattle feeding enterprise. I have served as 
President of the South Dakota Farm Bureau Federation since 2004.
    I thank the Committee for conducting this hearing in South Dakota 
and thank the Committee Members here today for your time, effort, and 
foresight in beginning the development of the next farm bill.
    The 2012 Farm Bill should treat production agriculture as a 
strategic resource of this nation and be constructed to further enhance 
that resource. A healthy, prospering farm and ranch sector is of 
paramount importance for this country and its citizens. In my view, the 
health of the agriculture industry is a national security issue. We 
have all seen the consequences of our reliance on other countries for a 
major portion of our energy needs. The importance of avoiding doing 
this same thing in regard to our food and nutrition needs cannot be 
overstated.
    Some of the challenges that lie ahead as the future farm bill is 
determined include:

    1. Fiscal responsibility--We recognize that restoring this 
        country's fiscal integrity must receive the highest priority 
        from everyone, farmers and ranchers included. Reduced spending 
        by the Federal Government must happen in order to ensure 
        economic opportunity and national security for future 
        generations. We do ask that agriculture be treated fairly and 
        not suffer disproportionate cuts in Federal spending, 
        recognizing that total spending on farm programs including food 
        and nutrition amount to less than \1/2\ of 1 percent of the 
        Federal budget.

    2. Funding allocation--Farm Bureau supports the allocation of 
        funding across the titles of the present farm bill. We will 
        resist shifting funds from one title to another with one 
        exception--potentially transferring dollars from commodity 
        programs to the crop insurance program.

    3. Balance and fairness--Farm Bureau is a general farm 
        organization, with members who produce all commodities. Our 
        overriding goal is to maintain balance and benefits for all 
        farm sectors. Shifting benefits from one commodity to another 
        is divisive and many times unfair.

    4. World trade--There may be a need to include options to comply 
        with existing trade agreement obligations and WTO litigation 
        rulings. However, we resist efforts aimed at presupposing the 
        outcome of WTO negotiations. To do so would reduce the United 
        States negotiating leverage.

    5. Market orientation--We favor a market-oriented farm policy with 
        less reliance on government and more on market signals 
        including adequate options for insurance and revenue assurance 
        products to help producers better manage during times of market 
        fluctuations and weather-related hazards.

    6. World markets--The farm bill must enhance U.S. ag producers' 
        opportunities to access world markets on a competitive basis. 
        Farm Bureau supports the Administration's call for a doubling 
        of U.S. exports. We recognize achieving that goal would benefit 
        ag producers, jobs and the overall economy.

    We believe a good place to start export expansion would be 
        enactment of the free trade agreements with South Korea, 
        Columbia and Panama. We watch with major concern as those three 
        countries continue to develop and sign free trade agreements 
        with our competitors. We are no longer standing still in ag 
        exports and the jobs connected to those exports; rather, we are 
        beginning to retreat.

    7. SURE program--If the shortcomings in the SURE program are not 
        corrected in the next couple of years, an improvement will be 
        necessary in the next farm bill. SURE payments are not 
        available until a full year after the end of the crop year in 
        which a disaster occurred. That needs to be corrected, so that 
        assistance is realized on a more timely basis. A producer who 
        is in danger of going out of business due to some sort of a 
        disaster most likely does not have the financial ability to 
        wait a year or more for that assistance.

    8. ACRE program--This provision in the current farm bill is 
        extremely complicated and the many unknowns cause producers to 
        hesitate to sign up. In addition, the cuts in DP's and MAL's 
        are more of a deterrent in some crops than in others.

    In conclusion, we are committed to assist in developing the next 
farm bill and look forward to working with you in that effort.
    Thank you.

Scott VanderWal,
President, South Dakota Farm Bureau.

    The Chairman. Thank you very much, Mr. VanderWal, and I 
thank all members of the panel for your excellent testimony.
    We'll now go to questions. I'd like to say I think most of 
the Members here read your testimony ahead of time, our staff 
did, so we've been through the details. We appreciate that. But 
sometimes the important stuff is the question part of things.
    So we recognize Ms. Herseth Sandlin for the first 
questions.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. Thank you all 
for your testimony. A number of you touched on the ACRE 
Program. We appreciate the leadership of the South Dakota Corn 
Growers and the National Corn Growers Association working with 
other commodity groups in anticipation of the last farm bill to 
look at a revenue program as an option versus the traditional 
price support programs. So for those of you that addressed ACRE 
and others that want to comment, one of the things that we 
pursued as we were looking at the 2008 Farm Bill was whether or 
not we should be basing this new program on a county basis--so 
the county basis information versus statewide. We know here in 
South Dakota or in neighboring states in our region there are 
such varied weather patterns, and other circumstances by state, 
that that could have possibly been an additional challenge or 
disincentive for producers to enroll.
    So, Mr. Duffy, I know you had identified some challenges, 
others of you talked about the complexity of the program, but 
what are your respective views on whether or not you think, 
either for yourself or other producers in your area, would 
increase participation if we based it on a countywide basis 
versus the statewide basis.
    Mr. Duffy. I think basing it--from my personal opinion, 
basing it on a countywide basis would be an improvement over 
the statewide basis. A bigger improvement would be making it 
more localized yet. Because I live in southeast Kingsbury 
County, and the rainfall that I get in southeast Kingsbury 
County is dramatically different from what they might get in 
western Kingsbury County. But it would be a great improvement.
    I think one of the stumbling blocks as I mentioned is the 
landlords. We were fortunate on our operation that most of the 
landlords that we had to deal with were family, and so they 
trusted our judgment and gave us the go ahead to do that. There 
are a lot of operators that are not in that position to do 
that. So I think there's a major education effort that has to 
be gone through to do that. And so it's complicated enough for 
me to figure out, but for me to explain it to my 75 or 80 year 
old landlord is going to be very tough.
    Ms. Herseth Sandlin. Any disagreement with trying to 
improve it by looking at a more county or local level?
    Yes, Mr. Masat.
    Mr. Masat. I'd like to make one comment. One other thing 
you might consider doing is going off of productivity, and that 
is a number that most county soils have depending on what--
where you are in the state. I know our county has that. That 
might be something that history will equal across the board in 
that county. And I don't know how it is for the rest of the 
part of the United States.
    Ms. Herseth Sandlin. Okay. Thank you.
    Mr. VanderWal.
    Mr. VanderWal. Thank you. Yes, I think most of our members 
would say that if we could zero in on a county basis it would 
enable you to make the program more friendly to more producers. 
The ``however'' on that would be that our economics department 
came up with some numbers that indicate that it could cause a 
budget problem if you go to that kind of a system. So that 
might be just a thing to keep in mind.
    Ms. Herseth Sandlin. Good point, Scott. I appreciate your 
testimony as it relates to the tight budget environment, the 
baseline we'll have to utilize for the next farm bill and the 
allocations and the importance of preserving the safety net, 
either in the commodity title or through the crop insurance 
program.
    One final question. You know, Mr. Gangwish, you had 
mentioned this, but I think all of you that I know so well, we 
know how important the energy title was in the last farm bill. 
And while the VTEEC and the blend wall, they may be outside of 
the parameters of the farm bill, we know how important having 
an additional market in biofuels has been to reducing the 
amount of payments that we've made to corn growers and other 
producers in the commodity title.
    The Chairman and I were reviewing charts here a couple 
weeks ago where we have had zero payments under the LDP and 
countercyclical growth for the last 3 years, at least for corn 
producers. I think a couple of you had mentioned this issue in 
terms of overcoming the blend wall, extending the VTEEC. Do you 
anticipate, based on your increased yields, based on what you 
know is going on in.
    South Dakota or throughout our region, if we don't overcome 
the blend wall, do you anticipate--what do you anticipate in 
the markets in terms of what the safety net may have to 
provide? Historically, I know you had mentioned we never 
thought we'd go under $3.60, $3.70 a bushel, and then we saw 
the drop; and now it's been holding more steady. But any 
thoughts on what we might be facing if we don't deal with some 
of these issues outside the parameters of the farm bill, and 
the impact they could have on the commodity title?
    Mr. Gangwish. Well, I think that we need to continue to 
increase the demand and the use for corn at the same rate that 
we--and the rest of the crops that we grow at the same rate--
that we are increasing our production. And if you look at trend 
line yields, and if we are to believe the geneticists and the 
companies that are developing our seed, we're going to have a 
lot more corn 5 years from now and 10 years from now than we 
produce today.
    I just mentioned that on our farm--when I came back to farm 
in 1974, my dad was bragging about having raised some 150 
bushel corn. Today on the commercial corn that we raise, we 
raise 250, 260, 270, 280 bushel corn, and that's--you know, 
that's just a fact of life. And we're irrigated, we mitigate 
some of the other weather perils by that. But, yes, we need to 
look at this, and it's very important to the profitability of 
American agriculture.
    Ms. Herseth Sandlin [presiding.] My time has expired.
    And we do--as the Chairman stated, we're short on--we have 
some strict time limits today. But if others of you would like 
to comment again, we'd like a written response if you're 
interested on the particular impact without having those 
markets and not overcoming the blend wall on the payments that 
might have to be made with the surplus of grain production that 
we'd see.
    I'd now like to turn it over to, from Virginia, my good 
friend, Mr. Goodlatte.
    Mr. Goodlatte. Thank you. Mr. Duffy, you promote the ACRE 
Program as the best defense against volatile markets if 
properly implemented. Do you think there are problems with the 
program's implementation?
    Mr. Duffy. Well, I think it's a complicated program to get 
your arms around, especially with the state trigger. I know 
what my production history has been. You know, I--as a 
marketer, I'm somewhat guessing on the price, but to have that 
state trigger, it's kind of tough to get your arms around it. 
So I think that's one of the things that we would like to do is 
to get it more localized, at least to the county level.
    Mr. Goodlatte. We've heard from southern producers that 
ACRE doesn't work for them. Do you think the program can be 
changed to benefit producers in all regions.
    Mr. Duffy. I'm sure that there are some tweaks in it. I 
guess I'm only familiar with the corn and the soybean part of 
it. You know, I guess I'm not--I don't feel qualified to answer 
for producers in other parts of the region.
    Mr. Goodlatte. Anybody else have an opinion on it? Mr. 
Scott?
    Mr. Scott. We've talked about the difficulty of the 
implementation of that program; and I've talked to my FSA 
office a number of times and been in there. They said the 
hardware and software portions of this, trying to get it 
figured out on their basis is really tough also. So if the FSA 
can't quite figure the program out, it's really difficult for 
farmers to figure out.
    And as far as us speaking about whether the southern 
producers--it would be easier for them or not to go into the 
ACRE program, it would be real difficult being that it's hard 
for us to know, and we've been in it for a year. But like was 
discussed, it's really hard to know so far, and in time, we'll 
fix that I think.
    Mr. Goodlatte. Following up on the questions from Ms. 
Herseth Sandlin and I recognize as she did that this Committee, 
unfortunately, doesn't have jurisdiction over everything that 
we might like to in resolving this. If the Congress as a whole 
were to create a situation in which consumers had the maximum 
discretion in terms of how they blended their gasoline with 
their ethanol, and were able to create an opportunity for a 
real competitive marketplace in that regard where people would 
make individual decisions about whether--you know, what level 
of ethanol use they wanted to make, how quickly could we move 
in the direction of more free markets overall in terms of 
eliminating the tax credit and lowering the tariff barriers on 
international competition in this area? How competitive do you 
think this growing industry is and how quickly will it be 
strong enough to allow the Federal Government to save a 
substantial amount of money in terms of those tax credits? 
Anybody want to start there?
    Mr. Sombke. Mr. Chairman.
    Mr. Goodlatte. Mr. Sombke.
    Mr. Sombke. Well, first of all, the infrastructure is a 
challenge with that and the education. I mean those of us in 
the Midwest, we've been schooled on blending for several years, 
so we understand it. Those on the coast don't understand it 
quite as well. And how do we get the ethanol from here to the 
coast? That's going to be another limiting factor. When we get 
there, when we get to that point, I think we'll be very 
competitive.
    Mr. Goodlatte. Well, what about producing it on the coast? 
Being someone from one of the coasts, we recognize that we're 
not ever going to be competitive with you in corn production, 
but we certainly hope that in the South and on the East Coast, 
other sources, whether it's timber or other forms of feedstock 
that grows in abundance in our areas but has no useful 
agricultural purpose today being converted, where do you think 
we're headed with cellulosic ethanol?
    Mr. Sombke. I think we're headed down the right path. There 
are a number of plants in the Midwest that are using both, 
refining, getting better. I think that the bio-industry has a 
big future in that area. I think that you'll notice in some 
areas where they're using woodchips. I know they're shipping 
woodchips from our area along the Jim River bottom over into 
Minnesota, burning in the Benson plant, and it's working quite 
well. So I think they're gaining. I think they're making it 
more efficient. I think there's a bright future in that area.
    Mr. Goodlatte. Thank you. Let me ask Mr. VanderWal on a 
separate subject. On my earlier comments about fiscal 
responsibility, your testimony promotes that and I 
wholeheartedly agree with it. Because of Federal overspending, 
have you noticed any tighter credit standards that you and 
other farmers are facing?
    Mr. VanderWal. Personally we have not on my farm. I've 
heard some people saying that it's a little bit more difficult 
to get their operating loan lined up for next year. I think 
more in terms of just bankers wanting more information and more 
documentation, possibly a more concrete marketing plan, things 
that we probably ought to be doing anyway. I haven't ever 
really heard of a lot of people getting flat turned down at 
this point.
    Mr. Goodlatte. Thank you. My time has expired. Thank you. 
Madam Chairman?
    Ms. Herseth Sandlin. Thank you, Mr. Goodlatte. Mr. Walz?
    Mr. Walz. Thank you to the Chairman and to the Ranking 
Member and, of course, to our host, Representative Herseth 
Sandlin. I'm very appreciative to be back here. I--of course as 
she knows, I grew up just a little bit south of Bonesteel on 
the Nebraska side of that, so it's good to be back in the big 
city for a while. I'm very appreciative to be here with my 
colleagues. This is a Committee I very much look forward to. 
The testimony is critically important. And these folks are 
friends and colleagues. I learn much from them. The Ranking 
Member has spent a lot of time helping me see things from a 
different perspective, and that's helpful for us in Congress. 
And so thank you all for being here. Your testimony is 
incredibly helpful. This is how we learn and this is how it's 
written. So I feel very, very good about this.
    Mr. Wolle, thank you for being here. You have other 
qualifications and not just being a gray hair. It comes with 
experience. But the scenario that I--I do thank my colleague, 
Ms. Herseth Sandlin. It is absolutely critical that we look at 
demographics of what's happening on the farm. It is absolutely 
critical we get this right to get our young producers and 
incentivize this in the right way. And both from a market 
perspective of opening up--I think someone said if they're not 
profitable, they're not going to come back to the farm. You're 
absolutely right. That has to happen. But I think we need to 
understand some of the things we're doing to incentivize that.
    And, Matt, you talked about using some of those.
    Anything in particular, if you had one or two things to 
enhance that again from your testimony that you'd leave us with 
of making that job easier? I know the capital requirements are 
a big one but----
    Mr. Wolle. You know, we talk about coordinating cohort 
groups possibly. There's a lot that a farmer--a farmer wears 
many, many hats, and it's--I looked at my father one time when 
we were out fixing something and I said, I wasted my years in 
college because nothing prepared me for this. And there's some 
of that learning in agriculture, but there's also this 
intrinsic knowledge that people learn from making mistakes. If 
I can learn from someone who's made that mistake, then I don't 
have to repeat that mistake. And I don't know how you transfer 
that knowledge from an older generation to a younger 
generation. Having cohort groups of informal learning with 
young farmers and older farmers or some sort of--and getting 
them involved in leadership and commodity groups and Farm 
Bureau, Farmers Union, some way of spearheading that. If 
somehow--you know, you don't need to reinvent the wheel. There 
are organizations already doing this, but maybe coordinating 
them, collaborating together would be key.
    Mr. Walz. Well, we look forward to working more on this. 
And I want to tell you. All of your testimony is--I think all 
of us know. The food, the fuel, the feed, the ability to 
produce the safest, most abundant, affordable crop that feeds 
the world is absolutely critical. There's a lot more that comes 
out of these rural areas. All of us share a lot in common.
    I said--Secretary Vilsack uses a statistic that I like a 
lot. Rural areas have about 15 percent of the population; about 
50 percent of our military folks are in that. It says something 
about the culture that comes out of rural areas.
    I think some of the times we get caught up in the details 
of this. This is a much broader issue. This idea of fiscal 
responsibility is absolutely critical, and it can start right 
here as a model for this. I say this because I think we need to 
be very careful. This idea that all spending is not created 
equal, and the idea that we need to get things right, but when 
you talk about freezing budgets across the board, that means 
you're going to freeze programs that are absolutely useless and 
you're going to freeze programs that should be plussed up, that 
have a return on the dollar and grow the economy. We need to 
start getting out of this it's either or, it's this or that, 
you're for this, you're against that and start dividing. That's 
not the way you do it in your business, and I think we need to 
start figuring out how to grow that pile.
    I love this idea we're talking about increasing markets. I 
love the idea of the value-added that we've all done. And one 
of the things we need to be talking about here is we've got an 
issue in transportation in this country. We need to upgrade our 
transportation system, we need to finish the WRDA bill, we need 
to make sure rail is competitive, and we need to make sure all 
those things are happening together. The banking sector that's 
happening, that's going to impact us. We have all of these 
things that we can't see it in just a vacuum. It has to be much 
broader. And all of you are bringing that extra piece.
    So I look forward to working on this bill because I think, 
once again, the farm bill can be a model for how good 
government can work and how we can incentivize the private 
sector to grow the jobs and create this country. And it should 
be--we can do it and we can make it happen all while being 
fiscally responsible.
    So I thank you, Mr. Chairman, and I yield back.
    The Chairman [presiding.] I thank the gentleman. I now 
recognize the gentleman from Alabama. We were in Alabama on 
Saturday I guess it was, and we learned all about peanuts and 
cotton and all those good crops. And we appreciate Mr. Rogers 
being with us.
    Mr. Rogers. I also had the privilege of helping the 
Chairman eat his first fried dill pickle. I don't know how it 
is here, but if you can batter it and deep fry it, we can eat 
it in Alabama.
    This is my first time in South Dakota, and it's pretty, 
just like your Member of Congress. And I had the great 
privilege yesterday of getting to visit the POET ethanol plant, 
and it was just really exciting to me because they appear to be 
on the cusp of figuring out this cellulosic technology, which 
is going to be a big deal for my region of the country, and I'm 
excited about that.
    But what I want to talk about was crop insurance and direct 
payments. I heard several of you touch on crop insurance. My 
question is simple: If we were able to get the crop insurance 
reimbursement rates higher--maybe 80 percent, 85 percent--with 
a premium that you felt good about--Mr. Scott testified a 
little while ago that direct payments really don't help with 
prices being high--would you be willing to opt out of the 
direct payment and countercyclical payment programs for that 
very favorable crop insurance program? Anybody that wants to 
take it. This is pretty much what I got in Texas yesterday: A 
deafening silence.
    Mr. Scott. A blank stare. I'll----
    Mr. Rogers. Mr. Gangwish.
    Mr. Scott. No, go ahead.
    Mr. Gangwish. I would just say that it depends on what the 
payment is, or it depends on what the protection is. I'm in a 
part of Nebraska that our primary--as I said in my testimony, 
our primary peril is hail, and so we use Federal crop insurance 
to insure the bottom portion and then we buy up with top 
portion coverage. And we can't be without hail insurance 
because one--we only get hail once every 20 years--one year of 
hail could take us out of business. We had that last year in 
2009 where about 60 percent of our acreage was wiped out by 
hail. And--but if we had--if we had as--you mentioned--you said 
an 80 or 85----
    Mr. Rogers. Or it could be 90. I mean, say, if we had a 
crop insurance program that you and the banker found very 
attractive, would that be favorable enough for you to say I'd 
rather have that than direct payments and countercyclical 
payments? Because we have to pay for it some way, this enhanced 
crop insurance program.
    Mr. Duffy. I would look at that because the amount of 
direct payment--ironically, I hadn't thought about it until you 
mentioned it--but the amount of our direct payment is about 
equal to the cost of our crop insurance package for crop 
insurance and hail insurance. They would just about offset each 
other. And if we could replace one with the other, I would look 
at that.
    Mr. Rogers. And that's something that hopefully in this 
farm bill we're going to be able to present that to people like 
y'all, as well as people in the farm credit business, and it 
may be something that you may have that option.
    Mr. Scott, did you have something?
    Mr. Scott. Well, in our area, I mentioned direct payments 
are not quite as important to us. On corn and soybeans, those 
payments are not very high. And--now on the rice and the cotton 
and those sorts of things that you'd probably be more familiar 
with, they're a little higher than that. But in our area, a lot 
of those we tend to be a pass through. A direct payment is 
something that can be visually seen and identified. And land 
rents can go up based on, they know you've got $10, it can go 
on through. That is just my ``2 cents'' there.
    Mr. Rogers. Mr. Masat.
    Mr. Masat. Yes, I'd like to make a comment on that.
    You know, some parts of the United States, Federal--or 
Federal crops are very profitable for the companies. Here in 
South Dakota I don't think it is because we collect a lot.
    So that's something you want to probably consider into your 
thought process. You know, there are going to be thousands of 
acres in the state this year that's going to be preventative 
plant. We go from that to a drought. So it's very variable. 
Just like our counties when we were talking about the other 
programs, we have land that will produce a hundred bushels of 
corn and land that will produce 200+ within 5 miles. So there's 
a lot of variance of what goes on.
    Mr. Rogers. Thank you, Mr. Chairman. I yield back.
    Mr. Duffy. Can I make just a short comment?
    The Chairman. Go ahead, Mr. Duffy.
    Mr. Duffy. I think you can also possibly look at that in 
combination with the ACRE program with some tweaks, and between 
the two of them, I think you could come up with something that 
would work very well.
    The Chairman. I thank the gentleman. What percentage in 
South Dakota signed up in the ACRE program, do you guys know?
    Oh, yes. And I could just take this opportunity--we have 
some people with us that we want to recognize. The FSA State 
director, Craig Schaunaman, is with us. Why don't you stand up 
and be recognized. The State Rural Development Director, Elsie 
Meeks; and the NRS--NRCS State Conservationist, Janet Oertly. 
Why don't you give them a hand for the great job they do.
    We also have the North Dakota FSA State Director, Aaron 
Krauter, is with us. The Nebraska FSA State Director, Dan 
Steinkruger. And the acting Secretary of the South Dakota 
Department of Agriculture, Jon Farris, is with us.
    Mr. Schaunaman, do you know what the percentage is that 
signed up in South Dakota?
    Mr. Schaunaman. Eighteen percent.
    The Chairman. Eighteen? Okay. How about North Dakota?
    Mr. Krauter. Ten percent.
    The Chairman. Ten percent? The--I would assume, like we've 
heard other places, but most people would like us to look at 
going to the county, the county-by-county, rather than state. 
Would you all agree with that? And the area of South Dakota 
that had the disaster problems, I guess the northeast was the 
worst hit, they--will they get SURE payments?
    Mr. Schaunaman. Yes.
    The Chairman. Does anybody know?
    Mr. Schaunaman. Yes, they will, Mr. Chairman.
    The Chairman. Do you know what percentage of people will 
get SURE payments?
    Mr. Schaunaman. I guess percentage-wise, no. Right now 
we've paid out about $31 million in the state in SURE payments, 
most of them going in the northeast corner. Hutchinson County 
directly west of here is another county that's received a lot 
of SURE payments.
    The Chairman. On the wheat, we had a meeting with some 
people, and apparently there's a new crop insurance product 
that's being tried and put together, or some kind of a deal 
that's being put together between Ducks Unlimited and winter 
wheat for cover crops and getting a better insurance coverage. 
Are you guys involved in that effort?
    Mr. Masat. Yes, we are, and that's where I was referring 
to, because we do not have win--and I'm in a county that has no 
winter kill. We plant winter wheat. It has to be inspected in 
the spring. If the stand is not good enough, then they won't 
insure it for us. But the county that's 5 miles away from me, 
both sides have that. That's something that we'd like to see 
expanded all the way up into North Dakota also.
    The Chairman. And we're looking at it even in Minnesota, 
northern Minnesota, to try to move in that direction, get a 
better cover crop, and I think we're going to be successful in 
being able to come up with something that's going to work for 
people. And I think it will be better for wildlife, be better 
for the wheat farmers and better for everybody.
    One other thing. I've got this bill, H.R. 4645, to expand 
trade with Cuba, and we hope to bring that bill up the in first 
part of June in the Committee. Yes or no, do you guys support 
that bill? I see everybody--everybody's on board it looks like. 
We're hoping that we'll be able to get--get some good support 
in the Committee to get that moving, and we'd like to see some 
of these other trade agreements move as well. But if we could 
get Cuba done, I think it's a lot of opportunity, especially 
for wheat, rice. We heard that in some of the other hearings.
    And, we're trying to think out of the box a little bit and 
figure out how to make these programs work better together. You 
know, my own personal opinion is we've got too much. We've kind 
of added stuff on top, different programs, and I don't think 
they work together as well as they should or could. And that's 
one of the things we're trying to do is see how we can make 
these programs work better together with crop insurance, how 
they can be simpler, less complicated, and hopefully maybe more 
efficient, you know. So we look forward to working with you as 
we do that.
    The gentleman from Texas, Mr. Conaway, who we're working on 
to get him to understand the benefits of ethanol. Being an oil 
and gas guy, he's a little bit reluctant, but he's coming along 
I think a little bit maybe.
    Mr. Conaway. Well, thank you, Mr. Chairman. It's not the 
first time I've been thrown under a bus. I went to Havana with 
a group of ten Members of Congress; nine of whom wanted a full 
and open trade with Cuba, and one of which didn't. I was thrown 
under the bus every single meeting there, too. But it is great 
to be in your wonderful state. Like my colleague from Alabama, 
today's my--yesterday was my first time to set foot in South 
Dakota and actually my first time to eat a fried dill pickle 
also. We had them last night at the Ramada Inn. So it's 
terrific to be with you.
    Mr. Rogers. That's why I like South Dakota.
    Mr. Conaway. I feel right at home.
    Mr. Rogers. Exactly.
    Mr. Conaway. I won't take up all of my time. I do want to 
ask one question of Mr. Scott and Mr. Gangwish. Seventy percent 
of your acres--or your acreage is in the ACRE program, and, Mr. 
Scott, your testimony said 75. Have you been through a full 
cycle yet where you signed up with the program, had a crop, did 
or did not collect at this stage?
    Mr. Gangwish. No, 2009 was the first year. And it was kind 
of funny. We signed up at the end of 2009 or halfway through 
for the whole year, and we did not have a claim.
    The--in order to have a claim in the ACRE program, you've 
got to have a pretty significant impact on either price or 
yield. And as I said, it's giving up a bit of the--of your 
direct payment to buy, like, a foot. It's insurance against 
some catastrophic thing. But when you look at the other 
alternative, the rest of the farm bill as it's written, you 
have to really have a disaster to collect anything, we looked 
at it as a progressive, proactive----
    Mr. Conaway. So your share of direct payment was not so 
valuable as to cause you to not get into the ACRE program----
    Mr. Gangwish. We gave up 20 percent of our direct payment.
    Mr. Conaway. Yes.
    Mr. Gangwish. I'm a risk taker. I said I'll give up 20 
percent of it in order--on those--on that 70 percent that we 
signed up to insure against some catastrophic drop in----
    Mr. Conaway. Which crop is that?
    Mr. Gangwish. Corn and soybeans.
    Mr. Conaway. Okay.
    Mr. Gangwish. And if we trade--take corn below $3 and have 
the dry summer this year, we may collect on the ACRE program.
    Mr. Conaway. Okay. Mr. Scott?
    Mr. Gangwish. I'm talking about $3 futures. That will be 
$2.75.
    Mr. Scott. Yes, I would concur with most of that. It just 
was a matter of--our direct payments are not that large, and 
the 20 percent was not much to give up for the potential 
revenue assurance that that program gave us. And at the time, 
the prices were high when we signed up, and so there was a 
significant risk that we could lose value there and collect. 
But there, again, I don't think we'll have any payment this 
year.
    Mr. Conaway. I represent an awful lot of cotton farmers, 
and direct payments to them are a big deal. And they're very 
reluctant to trade one for the other. Mr. Masat?
    Mr. Masat. Yes, I'd like to--I'm on the other--I never took 
that program. I never elected to do it. First of all, we have 
the opportunity ourselves to control the prices, as far as 
locking them in. We don't--you referred to as a put option. We 
can do that in the marketplace ourselves if the market is high 
enough where we can do that. Second of all, we have crop 
insurance to protect our yield. So I guess that's why I chose 
to stay out of it.
    Mr. Conaway. Thank you very much. With respect to what 
appears to be a conflict between oil and gas and ethanol, I 
don't see it as a conflict. We import 65 percent of the crude 
oil we use every day. That's an awful lot of non-U.S. produced 
crude oil that we could--that we don't need. We need--we 
don't--we ought to be buying it from our own self. And so I'm 
not against ethanol. I do want it to be market-based. And I'm 
hesitant to force the infrastructure costs on to merchants and 
retailers. We've got to figure out how to make that work. But I 
represent a lot of independent oil and gas operators in west 
Texas, and we don't see ethanol as a threat to their way of 
life because we import so much crude oil from folks who don't 
like us. We give them that money every single day that we 
shouldn't be doing. And so I think there's plenty of room in 
the market for increased domestic production of crude oil and 
natural gas, as well as all the ethanol we could do, with the 
cellulosic or corn base. It's not a real big fight, but we'll 
keep working at it, Mr. Chairman. I yield back.
    The Chairman. I thank the gentleman. The gentlelady from 
Colorado, Ms. Markey.
    Ms. Markey. Thank you, Mr. Chairman, and thank you, 
Congresswoman, for hosting us in Sioux Falls.
    It's my first time here.
    The Chairman. Is the microphone on?
    Ms. Markey. Is the microphone on? Okay. One of our 
witnesses mentioned that, in terms of the overall budget, that 
our ag programs represent \1/2\ of 1 percent, and that is 
pretty small. And particularly when you think that just a 
little over a hundred years ago, the average American was 
spending about 40 percent of their income on food and now it's 
about ten percent; which means, because of the efficiency of 
the American farmer, the average taxpayer has a lot more money 
in their pocket. But of course, as we've all noted, there's 
always room for improvement and additional efficiencies.
    So with that, Mr. VanderWal, you had mentioned in your 
testimony that you favor market-oriented farm policy with less 
reliance on government and more on market signals. Can you 
expand on that a little bit? You know, what is your thinking 
there? What are some programs where you think there should be 
less regulation by the government, and what do you envision as 
policies that would be more--have additional market signals?
    Mr. VanderWal. Well, thank you for that question.
    That's an excellent one. And it really goes to the heart of 
the policy that we have in Farm Bureau. And I'm not sure I'd 
get any argument from anybody on this policy when I say that, 
ideally, in a utopian world we'd like to get along without any 
government support and keep the government regulations to a 
minimum, and just run our farms the way we need to on an 
economic basis and react to market conditions. The market will 
take care of that on a supply and demand basis. If the price of 
a commodity goes down, somebody out there might switch to a 
different commodity that offers a better price.
    So that's really what we're getting at is we'd like to 
minimize government regulation and try to minimize the 
government support, recognizing that down the road, the 
appetite for urban Congressman especially to spend money on ag 
programs is kind of going away, and we realize that's 
happening. And it kind of gets back to the earlier question 
about the crop insurance versus commodity programs. That's one 
thing I thought of for years that we ought to look at, taking 
that money we spent on commodity programs and putting it into 
an insurance product where we introduce personal 
responsibility. And it really comes down to personal 
responsibility and being able to run our operations the best 
way we can in an effort to feed the country and the world.
    Ms. Markey. So with that, are there particular programs 
right now in the farm bill that you would say are essential and 
others that you--where you think there is too much government 
regulation? Can you maybe list a couple of specific programs?
    Mr. VanderWal. Okay. As far as the parts of the program we 
think would be essential, right now I think the countercyclical 
part of it, whether you're in the CCP or the ACRE program, 
gives us a safety net at this point to keep agriculture 
healthy. I think a lot of people would say let the direct 
payments go if that's necessary. As far as regulations, we see 
a lot of things coming out of EPA right now as far as the Clean 
Air Act, regulating greenhouse gases in there, we oppose that 
because we don't think that the Clean Air Act is the way to do 
that. There are also pesticide drift regulations that the EPA 
is looking at, and I understand they're reconsidering at this 
point.
    These are all things that farmers have been very good 
managers of over the years. We're excellent conservators of our 
environment, and we don't feel that we need those regulations 
adding expense to our bottom line.
    Ms. Markey. And the USDA has played that oversight role in 
the past. Just switching a little bit to CRP. Do any of you on 
the panel have any thoughts on how large the CRP program should 
be, what its focus should be on, and is it better to 
concentrate on continuous practices or general sign-up 
enrollments? Anyone who'd like to address that?
    Mr. Sombke. Madam Representative, I participate in the CRP 
program, and we found it to be very beneficial in those 
marginal grounds. I think that if you ever wanted to expand on 
it, I think we've done that in the past. From the beginning--
I've been in it ever since the beginning. And the old contracts 
are difficult to manage. The new ones now are a lot easier to 
manage. Your flexibility of working to get the noxious weeds 
out, and to allow wildlife habitat to flourish, is better. It's 
been very beneficial in our area for tourism. We've had a lot 
of hunting businesses come and other businesses start up as far 
as the restaurants and lodging. I think that you've got to have 
a balance here, and I think that you also should be able to use 
some of this ground for the biofuels. I think there's an 
opportunity there as well.
    Ms. Markey. Thanks very much. My time has expired.
    The Chairman. The gentleman from Nebraska, Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Chairman, and it is a 
pleasure being with you all. I'm your neighbor right to the 
south, and my district overlooks a part of your wonderful 
country here. And it's great to be with you.
    Thank you all as well for being farmers.
    I think a couple of comments are worthy of unpacking here 
because agriculture in its essence is--agriculture policy is 
environmental policy. Agriculture policy is national security 
policy. Agriculture policy is also energy policy. The farmer is 
the original steward of the land and water, as you pointed out, 
Mr. Scott. The farmer is aggressively participating in helping 
stabilize the most essential part of an economy--the food 
production--and is creating a health--or generally has helped 
create a healthy balance of trade for this country. And now 
we've got huge emerging opportunities in helping secure a new 
energy future through our agricultural policy by helping build 
biofuels into a multiple set of energy options this country has 
to look at to wean ourselves off of our particular independence 
on foreign oil, but also in an environmental and sustainable 
way.
    I say all this because I think it's very important as we, 
who are interested in healthy agriculture income, but also 
public policy position is for the rest of the country to 
understand that agriculture is spending a very limited portion 
of the overall Federal budget. It provides tremendous benefits 
to society at large in those three areas. Yes, the budget's 
going to be very constrained, and we have to be--use the--be 
wise stewards of the resources that we have.
    And agriculture--in particular, these policy hearings--
always need to devolve down into the specifics of programs.
    But what I don't want to miss is an opportunity for all of 
us to speak in a manner that talks about the importance of 
environmental, energy, and national security policy and how 
agriculture helps our country in that regard. But in that 
regard, we tend to in these hearings quickly get into 
adjustments to a particular support program, and perhaps lose 
sight of some of the larger macroeconomic forces at play.
    Congratulations to South Dakota by the way. The average age 
of a farmer is 57; in Nebraska it's 58. Since I've been in 
Congress, it just keeps ticking up. You're a real exception, 
Mr. Wolle. We tend to focus again on the farm support program 
that we have; we tend to, particularly these days, focus on 
energy and then potentially export opportunities, which are 
important opportunities that we should seize upon.
    But let's talk a little bit about other emerging 
opportunities. One of you gentlemen mentioned it in terms of ag 
policy--and, Mr. Sombke, you just talked about it as well--in 
terms of another value-added option that agriculture brings. 
Talk a little bit about that. Because if we're going to attract 
young people, the vibrancy of agriculture and new emerging 
opportunities has to be a part of our ongoing commentary, and 
ongoing presentation that flows out of real market opportunity. 
One of you spoke as well in terms of the production, the use of 
replacing traditional hydrocarbons, the use of ag products and 
replacing hydrocarbons used in plastics. But let's touch a 
moment for other--in terms of other value-added opportunities, 
which I think helps, in some ways, solve this larger question 
as to how do we, again, create a more vibrant agriculture 
marketplace that is going to be particularly attractive to new 
farmers or new people who haven't been involved in agriculture 
at all.
    Mr. Sombke. Thank you, Mr. Chairman--Congressman.
    I'm sorry but in South Dakota we don't have a lot of 
entrepreneur businesses, and in South Dakota we should have 
more. Agriculture, of course, is our number one industry, and I 
feel there's a great area where we can expand that business.
    I think there's a lot of support of businesses that could 
be folded off of value-added businesses as well. The wind 
industry in South Dakota is growing--starting to grow pretty 
good. We're far behind the states surrounding us, but we're 
starting to grow. I think there's a lot of potential for that 
area as well. I think the support businesses in South Dakota 
for agriculture are locally owned. We import a lot of 
businesses from other states to do our work for us. Soil 
sampling for instance. A lot of companies come from Iowa, 
Minnesota, Nebraska to sample soil in the State of South 
Dakota. Why is that? We don't have the people doing that type 
of work. We need to expand on that. We need to find a way to 
put money into those type of businesses. Rural development, a 
great place to start. The wind industry in my area has been 
very beneficial. We have Brigida Hills, Tatanka Hills. Just--GE 
just developed a wind farm of 66 turbines on that ridge, and 
it's been very beneficial to our local community for several 
years now; as they were building this, as they were building up 
to it, and now as we care for them. So there's a lot of 
potential there as well.
    So this isn't just about biofuels or cellulosic ethanol. 
This is about all types of renewables. And for the State of 
South Dakota, I see a huge, huge opportunity for us to continue 
to not only get young people involved in agriculture as we 
become profitable because of these other energy sources, but 
also for the services that we provide, continue to help those 
kids stay in the state.
    Mr. Fortenberry. I must have given a longer speech than I 
thought. My time has expired. I wanted other people to talk, 
but Mr. Chairman----
    The Chairman. The gentleman from North Carolina, Mr. 
Kissell.
    Mr. Kissell. Thank you, Mr. Chairman. And it is good to be 
here in South Dakota and also recognizing the close proximity 
to Minnesota and Nebraska. So it's good to be here in this 
area.
    Matt, you are the young guy on the panel as self-described. 
I'm curious. Your involvement in getting into farming, did you 
come about that because your parents and grandparents are in 
it, or are you just totally new to farming in terms of any 
lineage there, or how did you get into farming?
    Mr. Wolle. Mr. Chairman, Mr. Kissell, I really didn't--you 
know, there are many young people who have the burning desire 
to farm. I mean I know several of them who just don't have a 
connection to get hooked up to farming, but they dream about 
farming. They're working at jobs in town, or they're working 
for the local cooperative selling products, ag industry. But 
they'd really love to farm and run their own business. I kind 
of just stumbled--you know, my father farmed, my grandfather 
farmed. I didn't have tremendous pressure from home. Dad said 
you need to go work off the farm. You need to figure out what 
you want to do.
    And I found out through working in education and in the 
agriculture industry that, boy, farming is a great job. It is--
and don't tell it outside this room--it's one of the best jobs 
in this world. It's risky but the rewards are great. And I 
think that's why these young people see that, and they really--
they want their chance. They're just gnawing at the bit to jump 
in and get the opportunity, but opportunities are very tight, 
very limited.
    Mr. Kissell. Well, it was mentioned that the average age of 
farmers as being 57 and 58. I have now reached the age that 
sounds young to me. But I think one of the concerns--and you 
just brought this up--is people that want to go into farming 
that don't have that grandfather or father that can usher them 
in, or don't have the land there to usher them in.
    I heard on the news going home, I guess, Thursday night 
that the number of degrees being awarded in our university 
systems in an agriculture-based field is up 22 percent. So 
we're seeing--our young people are seeing that there are 
tremendous opportunities in agriculture. I'm just wondering how 
those opportunities really go into the actual art of farming 
itself. And if anybody--Mr. Sombke, I think you said you had 
grandchildren that are on the farm and want to farm. What do 
you see in terms of young people wanting to be on the farms and 
our ability to sustain this art?
    Mr. Sombke. Mr. Chairman, Congressman, on my farm we've 
always kept our kids very involved in the operation. It was 
something that my father didn't do with me. He didn't keep me 
included in the budget process, in the fiscal responsibilities 
of the farm. Just do the work. I was a hired man, okay? On my 
farm I've decided to make sure my kids understand what this is 
like. I mean this is rewarding work. This is the Lord's work. I 
mean he gave us--we're the closest to him as anybody can ever 
be in an occupation. And I want them to understand the rewards 
of that, but I also want them to understand the risk of that 
and financial risk. I mean there are a lot of ways you can make 
a lot more money doing a lot less work than what I do. But, 
there's nothing as rewarding, there's nothing as fulfilling, 
and there's nothing that tells you that you did a good job at 
the end of the day like the work that I do. Even if it's a bad 
day, it's still a better day than sitting in the office where I 
work in the Farmers Union.
    Mr. Kissell. Well, we do appreciate what is done on the 
farm, and this Committee especially. And all the Agriculture 
Committee is committed to helping your government work with you 
to try to enhance what you do. Some of the programs in the ag 
bill, we haven't talked as much about rural development, the 
FSA people that are here, so forth. So are there other aspects 
beyond the biofuels and the crop insurance? Rural development 
is especially important to my part of North Carolina. Is there 
anything else that y'all would like to mention that we haven't 
talked about yet?
    Mr. Sombke. Mr. Chairman, Congressman, this is a topic that 
is very important to me--rural development in South Dakota 
especially. We've been lacking. We've had, I would say, a good 
8 years of doing nothing. We should be further along than we 
are. We should have more opportunities than we do. We should 
have taken advantage of opportunities that we should have, 
could have had. That being said, that's not saying that the 
future isn't bright. I think we can learn from those mistakes. 
If there's ever a place to put more funds, that is the place: 
Rural Development.
    As the young man mentioned about getting started in 
farming, capital is hard to get. The financial reforms recently 
have put a lot of requirements on our banking industry that has 
funneled down to financing of farms. That has pushed the credit 
limits and has also pushed requirements for creditors through 
the banking industry of what they can do and what they can't. 
An established farmer today who is probably a top risk grade is 
probably in the mid now, and so it makes it even harder for a 
young man to get involved. That's why we need Rural Development 
to be able to offer that kind of money to young people and to 
businesses, entrepreneurs that want to start into agriculture 
resources.
    Mr. Kissell. Once again, thank you and thank you, Mr. 
Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Nebraska, Mr. Smith.
    Mr. Smith. Mr. Sombke, you said 8 years of nothing 
happening in rural development; is that really accurate?
    Mr. Sombke. In South Dakota we've had some opportunities 
that have been passed by. I guess that's what I'm saying.
    Mr. Smith. Okay. Thank you. I appreciate the testimony of 
each and every one of you, and I thank you to the Chairman for 
holding the hearing and the great host here with Stephanie 
Herseth Sandlin. And obviously coming from right next door, 
it's convenient so--thanks for showing up as well.
    There are many challenges obviously with agriculture. I 
don't have to tell you that. And I am inspired every time I 
learn of the new innovation that is taking place in 
agriculture. Whether it's growing record yields of crops with 
record low amounts of water due to our research efforts, due to 
new technologies, whether it's biotech or irrigation 
technology, I'm just encouraged to see the advancements. And 
certainly, I don't want to adopt any policies out of Washington 
that would discourage that type of advancement.
    I think that a vibrant ethanol industry is important, not 
only to producers of corn or other feedstocks for ethanol and 
biofuels in general, but to all Americans. And it's a good 
American form of energy, and I want to work for its ultimate 
success and have it flourishing.
    As we look at the obstacles, whether it's the blending wall 
or the infrastructure, what do you think we could do to really 
work at that infrastructure piece so that we could deliver 
ethanol more efficiently? So that consumers would ultimately 
have greater choice that I think consumers are lacking at this 
point? Anyone wishing to tackle that one? Mr. Gangwish.
    Mr. Gangwish. Well, regarding infrastructure, I think the 
ethanol industry right now is selling as much ethanol as it 
produces almost, and one of the things that's holding it back 
is the--you know, we're blending almost as much ethanol and 
gasoline as we're allowed to blend. So we need to increase the 
amount of ethanol up from ten percent to 12 or 15 or whatever 
it is. I run--we've been burning ethanol in our--all of our 
farm equipment, including chain saws and every engine that we 
have on the farm since 1985. I burn regularly up to 30 percent 
in my pickup and my car, whatever, just by going to the pump 
and doing it. And I don't have any problems. And I've got the 
records to back it up, so I know it could be done.
    We have an information issue here as well. Everybody has an 
agenda, and pardon me but I have one, too.
    Mr. Smith. That's okay.
    Mr. Gangwish. But the thing about infrastructure is that if 
we have the regulations changed, or we have the ability to do 
something, the American businessman in cooperation with the 
American farmer will get the job done. And you know, I believe 
that to be the case. So if we have the opportunity to blend 
more ethanol, we'll be able to produce it. And we're going to 
have to blend--you know, we're already producing 13 billion out 
of corn. We can go--and change. We can go up to 15 billion. And 
we're supposed to be going on up to above 20 billion with 
cellulosic ethanol. So we're going to have to do something with 
the amount of ethanol that we're blending in fuel. We know we 
can do it because we're--some of us are already doing it. We're 
not having any troubles. So the infrastructure just needs the 
regulations opened up and it will come.
    Mr. Smith. Okay. Thank you. Anyone else?
    Mr. Wolle. Mr. Chairman, Mr. Smith. I would put that back 
also on corporations. I traveled to Arizona this past winter. I 
had an E85 vehicle. I stopped at Valero oil stations--or gas 
stations--and you know Valero purchased recently several 
ethanol plants in the Midwest--and I was not able to buy E85 
for my E85 vehicle at a Volaro plant. So I have the question 
and I would like you to ask members of Valero, which is an oil 
refinery as well as an ethanol producer: Why? Why can't we get 
it from their plants in the Midwest to their gas stations in 
the Southwest? That is a question I have.
    Mr. Smith. Okay. Very good.
    Mr. Duffy. I guess my comment on that as far as the ethanol 
yield, what we need is market access. And if we have market 
access, I think the infrastructure will fill that need because 
then we do have the market. The other thing that I think we 
need to get is get corn ethanol classified as an advanced 
biofuel, because I think that's a missed opportunity for us. 
And we need to keep the corn ethanol going in order to get to 
the cellulosic ethanol. And again, as that market builds, I 
think the infrastructure will come.
    Mr. Smith. Okay. Thank you. Thank you, Madam Chairman.
    Ms. Herseth Sandlin [presiding.] Thank you, Mr. Smith. I 
now recognize Mr. Childers from Mississippi.
    Mr. Childers. Thank you, Madam Chairman. And the good thing 
about being last is most everything has been asked or said. But 
I--and so on that note, I would just like to say a couple of 
things. That we've enjoyed being in South Dakota with Ms. 
Herseth Sandlin and with all of you. We appreciate all of you 
that came out for this. And these hearings are important.
    I want to commend every single one of you because I have 
often said two of the most rewarding jobs I think in this 
country that get paid the least are teaching and farming.
    But to those of you who do either of those professions, I 
commend you, and especially farming. I'd also be remiss if I 
didn't recognize and let you all know that we have a Rural 
Caucus in the United States House of Representatives. Both 
chairs and both co-chairs are on this panel today 
coincidentally. Tim Walz and I chair and co-chair on the 
Democratic side; Adrian Smith and G.T. Thompson on the 
Republican side. We work toward common rural causes and common 
rural issues such as promoting broadband, which is one of the--
one of our priorities, promoting rural health care, access to 
health care in rural areas and so forth. So I want you to know 
that, and I urge you to visit our website by going to any of 
our websites and just click on the Rural Caucus.
    And last, I want to comment on this. I realize it's a 
little bit off of ag, but I commented to Ms. Herseth Sandlin 
this morning. As we traveled through South Dakota, I want to 
commend this state. I think this is one of the cleanest states 
I've been in. There was no litter on the highways, and I 
commend you for that.
    The Chairman [presiding.] I thank the gentleman. He hasn't 
been to Minnesota yet.
    The gentleman from Pennsylvania, Mr. Thompson.
    Mr. Thompson. Mr. Chairman, just thanks to the panel for 
all the--just great information today. This is so helpful as we 
prepare and work towards this next farm bill.
    I want to come back to a question on credit and zero in on 
young farmers. So, Mr. Wolle, in terms of--some of the other 
panelists have talked about the availability of credit, access 
to financing. And what's your experience as someone who is--you 
know, has established themselves in the agriculture industry? 
Have you found yourself being able to access the credit and the 
financing that you need to have, or are there barriers out 
there?
    Mr. Wolle. Yes, I've been quite fortunate because I--you 
know, I have family that's been established in agriculture. 
They have good relationships with the banker.
    A credit score for farming is not as important as your 
relationship, your abilities to show a cash flow, your ability 
to have access to land, to manage that land, show a marketing 
plan. So I have not experienced some of the struggles because 
I'm one of the fortunate ones. I have a family that got me 
involved in agriculture.
    My father used to love to say anybody with a desire to farm 
can farm until he brought his own son home and started looking 
at it. And you know, at one point, we looked it at it and he 
goes, well, you're basically bankrupt now, so if you go 
bankrupt in 5 years, you're really not out anything. It was a 
real awakening to him to realize what a drain on his 
organization and his business was to bring on a younger member. 
So he--you know, I'm fortunate.
    I look at others--I have mentioned a few of my friends who 
want to get into it and don't have the access to the capital. I 
talked to an associate of mine who's a loan officer for the 
FSA, and he was proud of himself. He said we're a government 
program that makes money. Now I can't--that's anecdotal and 
please research that, but if that's true and you're the lender 
of last resort, what would happen if there's a need there that 
private industry doesn't want to fill or can't fulfill? If 
government stepped in at that and made a profit of that and was 
able to invest that profit into young and beginning farmer 
education programs. I think that would be a win-win. There 
could be a lot of synergy there, but I don't know all the 
intricacies of it.
    Mr. Thompson. Okay. Thank you. Just one more question. I 
want to come back to a topic a number of panelists have talked 
about.
    Mr. Duffy, you kind of led that off in noting the 
importance of biotechnology advancements. And I know one of the 
things I've been trying to work on this past year was urging 
the Secretary to move on Roundup Ready alfalfa. And you had 
mentioned in your testimony that research--what about needing 
research and tools that would advocate to get technology from 
research to market? Any specific ideas? And I'll open that up 
to the panel. What should we be doing?
    Are there specific ideas that you have in terms of how are 
we getting this biotechnology, not just from research, but out 
into the market?
    Mr. Duffy. Well, I guess what I was referring to in my 
testimony is that once these products are developed and they 
come to the government for approval, I want the government to 
have the resources to do the due diligence and the testing that 
needs to be done. This way we can safely say that they are 
proved to go out and--because we do have the environmental 
organizations--there are certain organizations that are 
opposed--deathly opposed to this and they're fighting every 
which way and using every fact they can to do that. So I just 
felt that the government agencies need the resources they need 
to combat that.
    Mr. Thompson. Okay. Any other panelists have any additional 
thoughts on biotechnology advancements or barriers?
    Mr. VanderWal. Thank you, sir. I think consumer acceptance 
is a big one, too. You know, we started out with Roundup Ready 
crops, and it was a benefit to us as farmers, but not 
necessarily to the consumer other than a greater abundance of 
products. But any of these biotechnology things that come out 
need consumer acceptance because that flows through the 
government and affects the regulatory process all the way down 
the line. We deal with that in everything: Environmental 
issues, animal rights issues. It all comes down to what the 
consumer allows things--allows to happen.
    Mr. Thompson. I thank the gentleman. Thank you, Mr. 
Chairman.
    The Chairman. I thank the gentleman, and I want to thank 
this panel for their excellent testimony and for the answers to 
the questions. It's very much helpful to the Committee. And we 
know it's a busy time of the year and not an easy time to get 
away, so we appreciate you doing this.
    So the panel is excused. And we'll give them a hand.
    We've got to keep this moving, so we're going to call the 
next panel. Mr. David Hallberg who's a biofuels representative 
from Omaha, Nebraska. Mr. Scott Weishaar, biofuels 
representative, Sioux Falls, South Dakota. Mr. Jim Neiman, 
forest product producer from Hulett, Wyoming. And Dr. Kevin 
Kephart, Vice President for Research and Dean of the Graduate 
School, South Dakota State University in Brookings.
    Gentlemen, welcome to the Committee, and they'll get you 
set up here.
    [Recess.]
    The Chairman. All right. Mr. Hallberg, welcome to the 
Committee. Your full testimony will be made part of the record. 
I think most of the Members have read your testimony, so if you 
can summarize. We'll try to keep this short for the road here, 
and we appreciate you being with us. So the floor is yours.

STATEMENT OF DAVID E. HALLBERG, BIOFUELS REPRESENTATIVE, OMAHA, 
                               NE

    Mr. Hallberg. Thank you, Mr. Chairman. My name is David 
Hallberg, and I'm CEO of a low carbon fuel technology 
development company in Omaha, Nebraska. I'm a graduate of 
Augustana so it's good to be on campus. I really appreciate the 
work you and your Committee have done. In particular, last year 
on the cap-and-trade bill, your leadership on indirect land use 
was very, very important. And today I'd like to talk a little 
bit about the barriers to financing that are posed by the blend 
wall and focus on that very briefly.
    I passed a graph out there to each of you. I understand it 
may not have gotten attached to your testimony. And it's a--
okay. It basically depicts the 30 years of growth in the 
ethanol industry. It's put together by the ACE organization 
here in Sioux Falls. And I think it's a useful depiction 
because it shows the direct correlation--strong correlation 
between demand stimulus programs from government policies and 
the industry itself. And you'll note the spike that occurred, 
in particular, beginning in 2000 and 2002 with the Daschle-
Lugar Renewable Fuels Standard, which, of course, we all know 
about, the RFS. The RFS2 was signed into law by President Bush 
in 2007. I think the point is, the work you're doing here today 
is extremely important, and ultimately, it's going to play a 
substantial, if not pivotal, role in the growth of the 
industry, going forward.
    Thirty-six years ago this summer I left Sioux Falls after 
graduation for the Middle East. And I was there a year after 
the 1973 war, and it was a very pivotal time for me because it 
reminded me just how important our geopolitical position was. 
When I came back, I went to grad school in Washington, D.C. And 
had the opportunity to work in the United States Senate and 
House for a number of years during the second oil interruption 
in the late 1970s. And from that experience, I formed the 
Renewable Fuels Association in 1981 and was its first CEO.
    I've been in this business ever since internationally and 
domestically. And one of my primary takeaways is that, in fact, 
there is no free market in the transportation fuels business. 
There are very dominant forces. I like to refer to them at big 
oil, multinational oil companies, as opposed to our independent 
friends in Texas. And they obviously have enormous resources. 
Right now, they're playing a masterful game at manipulating the 
market system that's been built up over the last 100 years to 
keep ethanol from moving beyond what we call the blend wall 
that's been referred here today, which is the ten percent limit 
for blending that was set, frankly, 32 years ago with the first 
waiver.
    I think the proof of how pernicious that market control is 
can be found in the marketplace. If you go to NYMEX, last week 
the last time I checked, I think ethanol was about a $1.57 on 
the board, whereas gasoline was $2.35, $2.36. There's a 
76 cents to 85 cents gallon differential before the VTEEC is 
taken into consideration, which is 45 cents.
    And that disparity is even more shocking when we consider 
that ethanol has 30 points more octane. And octane is something 
we won't have time probably to discuss much today because of 
the time limitations. But, it's extremely important as we go 
forward when automakers start to downsize and turbocharge and 
increase the compression of their vehicles to meet the new CAFE 
standards.
    So ethanol has major characteristics in quality 
performance, zero sulfur, higher octane, and it's already more 
than a dollar a gallon below the fair market value in the 
marketplace today. I would submit to you, if we had that right, 
we probably wouldn't be arguing too much about tax credits.
    So I think one of the things we have to do is to talk about 
how we get away from that obviously, and I believe the way to 
get away from that is for this Committee to go back to its 
leadership role that it's played before and try to convince the 
Congress to enact something like S. 1627, which is the Harkin-
Lugar CHOICE Act. There are some other bills similar to it. I 
think you have an open fuel standards bill in the House, Mr. 
Engel. I've referred to that in my testimony. But the bottom 
line is we need to drive our system to emulate the Brazilian 
model.
    I was last in Brazil again a few months ago.
    Ninety-seven percent of the--every automobile sold in 
Brazil is a flex-fuel vehicle made by all the same auto 
manufacturers we have in this country. All of their pumps are 
blender pumps so you can dial your blend; made by the same 
dispenser manufacturers that we have in our country. Yet, the 
debate that's going on now that you'll hear about from big oil 
is these pumps are dangerous, they may blow up, it won't work, 
the cars are too expensive. We all know that's not true. And so 
it's a masterful ploy to keep the market at ten percent when we 
should be at E30, E40, and E50.
    Until we get there, I would submit to you that the capital 
formation that we need, both equity and debt, for next 
generation facilities for the new technologies that are 
emerging will not happen. We need billions of dollars in new 
steel out there, and the folks that have that kind of money 
aren't going to make it available if they believe that our 
national policy will not sustainably allow the increased 
volumes of ethanol that are called for under the RFS.
    My written testimony lists all the benefits of this. I 
won't go through it. You all know them better than I do.
    But I would submit to you that your leadership is 
absolutely critical, hopefully this year when the Senate tries 
to pivot to an energy bill so that we can maybe meet in the 
conference with your bill. Maybe we can come out with something 
that's acceptable to break this market log jam. Thank you very 
much.
    [The prepared statement of Mr. Hallberg follows:]

   Prepared Statement of David E. Hallberg, Biofuels Representative, 
                               Omaha, NE
    Thank you, Mr. Chairman. My name is David Hallberg, and I am CEO of 
a low carbon fuels technology RD&D company based in Omaha, NE. I am a 
graduate of Augustana College, and it is good to be back on campus. You 
and the Members of your Committee are to be commended for your 
leadership and vision in mobilizing this timely round of field hearings 
to solicit public comment as you prepare for the critically important 
task of shaping the 2012 Farm Bill. I am honored by your invitation to 
provide comments on the barriers to capital formation for agri-based 
energy projects. My statement will be brief, and I would like to 
primarily focus on the importance to the nation's rural economy of 
removing market barriers to biofuels, especially the ethanol Blend 
Wall.
    The importance of your Committee's deliberations can be well 
demonstrated by a single slide, which I have attached to my 
statement.\1\ The chart depicts the growth of the U.S. ethanol industry 
over the past thirty years, and it was prepared by Brian Jennings, 
Executive Vice President of the American Coalition of Ethanol (ACE), 
headquartered here in Sioux Falls. As you can see, the chart proves the 
strong correlation between public policy developments and ethanol 
industry growth. One picture is truly worth a thousand words: over the 
past 3 decades, the ethanol industry has most effectively expanded 
capacity when the Federal Government has enacted demand stimulus 
policies like the Daschle-Dole-Harkin reformulated gasoline provisions 
in 1990 (took effect in 1995), and the Daschle-Lugar Renewable Fuels 
Standards (RFS1 and RFS2) in 2000 and 2007. The point is: what you and 
your colleagues are doing here today will ultimately have a 
substantial--if not defining--impact on the future of the domestic 
biofuels industry, and on the nation's campaign to significantly 
reduce, and one day eliminate, its costly dependence upon imported oil.
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    \1\ Source: Brian Jennings, Exec. Vice President, ACE, Sioux Falls, 
SD.
---------------------------------------------------------------------------
    I first became involved in renewable fuels policy as a legislative 
aide in the U.S. Senate and House of Representatives in the 1970's. In 
January 1981, I left the Congress to form the Renewable Fuels 
Association (RFA), and served as its first President/CEO until 1985. I 
have been involved in biofuels industry technology and policy 
development ever since, both domestically and internationally. Based 
upon my 30+ years of experience, I can emphatically say that there is 
no ``free market'' in the transportation fuels business. Unless 
government helps to level the playing field for alternatives like 
renewable ethanol to compete, the oil industry--especially the 
multinational petroleum companies--will erect insurmountable barriers 
to entry, and ensure that ethanol is nothing more than a minor 
contributor to the nation's energy needs.
    However, in large part due to the historic legislative 
achievements--to which you and many of your colleagues have been major 
contributors--the U.S. ethanol industry is the largest in the world, 
even larger than that of Brazil. With their output exceeding 12 billion 
gallons of ethanol this year, domestic producers are fast approaching 
the magical 1 million barrels per day figure, which makes U.S. ethanol 
the third largest source of transportation fuels (gasoline equivalent), 
exceeded only by Canada and Saudi Arabia, and ahead of other major 
suppliers such as Nigeria, Venezuela, and Mexico. By 2015, the U.S. 
ethanol industry is on track to surpass Saudi Arabia to claim second 
place, and approach parity with Canada, depending upon how fast that 
nation builds out its environmentally challenging tar sands capability.
    I am sure this Committee will hear testimony from many others about 
the long list of challenges facing the nation's biofuels industry. 
These issues include the Indirect Land Use Change (IDLUC) controversy 
(which Chairman Peterson and this Committee did so much last year to 
defuse during the House consideration of cap-and-trade legislation); 
definitional changes to the RFS2 law that arbitrarily exclude corn 
starch-derived ethanol regardless of its carbon footprint performance; 
the expiration at the end of this year of the VEETC (blenders' credit) 
and import tariff; country of origin labeling for imported oil; and 
perhaps even a National Low Carbon Fuels Standard (LCFS) to provide 
uniformity nationwide. However, I would like to focus my comments on 
what I believe is the single most important policy challenge 
confronting today's industry: the absence of a sustainable national 
market development program for higher ethanol blends, which will 
require the enactment of legislation similar to S. 1627, the Harkin-
Lugar CHOICE Act.\2\
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    \2\ Consumers Have Options In Choosing Energy (CHOICE). Similar 
legislation, known as the Open Fuel Standards Act, has also been 
introduced in the Senate (S. 835, Brownback, et al.) and House (H.R. 
1476, Engel, et al.). For purposes of this testimony, such proposals 
shall be referred to generically as ``CHOICE.''
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     I am a big fan of Winston Churchill. One of my favorite quotes is 
his 1939 characterization of Russia: ``A riddle wrapped in a mystery 
inside an enigma.''
    That description also fits the U.S. ethanol industry, which has 
grown to become a million barrel per day, multi-billion dollar rural 
economy stimulus program. As the ACE chart shows, the 1990 Clean Air 
Act reformulated gasoline with minimum oxygen vote was historic, but 
the real ``game changer'' was the Daschle-Lugar RFS bill 10 years 
later. By the time RFS1 was signed into law in 2005, the industry had 
started its unprecedented capacity ramp-up. And RFS2, signed by Bush in 
December 2007, requires 36 billion gpy of ethanol by 2022.
    But the ``mystery inside an enigma'' is that ethanol's right hand--
the production side--didn't tell its left hand--the distribution and 
end-use side--what it should be doing. The ethanol industry now faces 
yet another crisis, ironically perhaps the most challenging in 30 
years: the Blend Wall. Big Oil is masterfully manipulating the century-
old petroleum-based transportation fuels bureaucracy to accomplish 
``back-door'' what it was unable to do legislatively: limit ethanol 
blending to 10% of the gasoline pool.\3\ I was legislative director for 
an Iowa Congressman in December 1978 when the first EPA waiver for up 
to 10% ethanol was issued, and at the time, very little ethanol was 
produced domestically. Some of us dreamed it could happen, but few 
expected the industry would ever grow large enough to test its limits. 
However, 32 years later, ethanol supplies are now overwhelming 
allowable outlets (e.g., the Blend Wall has been hit), and ethanol 
prices are plummeting, approaching a dollar per gallon below gasoline. 
Since ethanol is a high octane, zero-sulfur product that allows 
refiners to reduce crude oil losses and refining costs by ``blending 
up'' sub-octane blendstocks, this price disparity is indeed 
shocking.\4\
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    \3\ On December 16, 1978, EPA Administrator Douglas Costle 
``granted without decision'' the Gas Plus, Inc. ``gasohol'' waiver for 
0-10% vol. anhydrous ethanol, 44 FR 20777 (4/6/79).
    \4\ Ethanol is a 115 R + M/2 octane fuel, compared to unleaded 
regular (ULR) gasoline with its 87 octane rating. Higher octane 
blending components are more valuable, and typically fetch higher 
prices than gasoline.
---------------------------------------------------------------------------
    The most pernicious effect of the Blend Wall's price depression 
effect is its ``deterrent effect'' on capital formation (both equity 
and debt) required for new biofuels production capacity to meet the RFS 
targets. Investors and lenders will be unwilling to provide the 
billions of dollars in new investment until they see that the nation 
has put in place a sustainable strategy capable of smoothly absorbing 
the annual increases in production called for under the RFS schedules, 
without having to rely upon the uncertain prospects of securing EPA 
approvals of Clean Air Act waiver petitions.\5\
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    \5\ The extreme difficulties that have been encountered by the most 
recent Growth Energy E15 petition are being closely monitored by the 
financial community, and the threats of sustained litigation, labeling 
uncertainty, and motorist confusion could significantly reduce the 
hoped-for demand stimulus effect, even if EPA's decision later on this 
year is positive.
---------------------------------------------------------------------------
    The Solution = Consumer Choice. One of the most thought provoking 
books I have read in recent years was written by Gal Luft, called 
Turning Oil Into Salt: Energy Independence Through Fuel Choice.\6\ In 
his Epilogue on p. 123, Luft noted that Congress has elected to mandate 
choice for American TV viewers with the digital-analog television 
subsidies,\7\ and asserted that ``choice at the pump is neither more 
difficult nor more costly to achieve than choice on the screen.'' \8\ 
For the nation's economic and energy security, however, it is certainly 
more important.
---------------------------------------------------------------------------
    \6\ ``Turning Oil Into Salt: Energy Independence Through Fuel 
Choice'', Luft and Korin, 2009, www.booksurge.com.
    \7\ Congress has spent $2 billion to date in providing U.S. 
households with $80 worth of coupons to subsidize the cost of 
conversion boxes.
    \8\ It costs automakers considerably less than $100 per vehicle to 
make them flex fuel.
---------------------------------------------------------------------------
    On p. 56, Luft underlined the dramatic success of the Brazilian 
flex fuel program: ``What Brazil's flex fuel program did was open the 
once petroleum dominated transportation fuel market to competition. 
With the majority of their cars flex fuel, Brazilians can now choose 
between gasoline and alcohol at the pump. While between 2005 and 2008 
fuel prices nearly doubled elsewhere, in Brazil, they were almost 
frozen. As a result of its energy independence, Brazil was one of the 
most economically resilient countries in the face of the 2008 oil 
crisis.'' When I visited Brazil last fall, I was impressed by the fact 
that over 95% of all automobiles sold are now flex fuel, and every 
major auto manufacturer now offers FFV's as a matter of course, because 
consumers like and demand them.
    Over the years, our government has mandated numerous automobile 
protections for the health and welfare of its citizens: seat belts; air 
bags; rear view mirrors; even FM radio (for emergency transmissions). 
Luft correctly states: ``An Open Fuel Standard requiring that every car 
sold in America be flex fuel can protect our lives and our economy more 
than all the above.''
    CHOICE Would Be Good for Consumers and Their Elected Officials. 
Americans by nature love the concept of freedom of choice.\9\ By making 
CHOICE law, President Obama and the Congress could offer a consumer who 
wants ``pure'' gasoline for his boat to purchase it. The consumer who 
prefers an E30 blend could have it. And as plug-in electric vehicles 
become more widespread, FFV PHEV's would provide the maximum spectrum 
of choice in transportation fuels, ultimately freeing the U.S. 
completely from its bondage to imported oil.
---------------------------------------------------------------------------
    \9\ In fact, it is fair to argue that failure to have in place 
policies like the RFS and CHOICE actually impose a ``de facto'' mandate 
on American consumers, forcing them to purchase petroleum products, 
most of it imported.
---------------------------------------------------------------------------
    CHOICE Would Be Good for Automakers, and Improved Fuel Efficiency. 
A little noticed, but significant milestone occurred last year when 
President Obama issued an Executive Order that requires an aggressive 
increase in CAFE fuel efficiency standards. As they have for years, all 
auto manufacturers will continue to benefit from the FFV credit.\10\ 
However, by 2016, manufacturers will have to demonstrate that ethanol 
is in fact being used if they are to claim the credit. As if this isn't 
sufficient incentive for automakers to begin now to make the easy 
switch to FFV's, there is another even more important factor: in order 
to comply with the increasingly rigorous standards in the out-years, 
automakers will need to down-size, and apply technologies like direct 
injection and turbo-charging. Preferably, they will want to increase 
compression ratios. All of these beneficial changes will put a premium 
on higher octane fuels, and the most efficient way to increase gasoline 
octane is to add more ethanol.\11\ Increasing the nation's ability to 
utilize high octane higher ethanol blends will make it easier for the 
DOT and NHTSA to ensure compliance with President Obama's stricter 
efficiency requirements. By using high octane, low sulfur ethanol 
instead of increasing the energy intensity of their high severity 
reformers (which also produce high levels of carcinogenic benzene and 
other aromatics), U.S. refiners conserve substantial quantities of 
crude oil, and are able to produce more of the other useful products, 
such as diesel and jet fuel required by the military.
---------------------------------------------------------------------------
    \10\ The FFV credit is worth literally billions of dollars to 
automakers over the next 5 years, see NHTSA regulatory impact statement 
from final rule.
    \11\ When I purchase E30 blends in Sioux City on my way to Sioux 
Falls, I am purchasing a 95 octane, high performance fuel that costs 15 
cpg less than 87 octane unleaded regular gasoline.
---------------------------------------------------------------------------
    CHOICE Would Be Good for the EPA and the Environment. Enactment and 
aggressive implementation of the Harkin-Lugar CHOICE Act would take an 
enormous burden off of EPA's shoulders, which as we speak is struggling 
with the Growth Energy Sec. 211(f) petition to increase allowable 
volumes of ethanol from E10 to E15 for use in ``legacy'' vehicles. Most 
people expect that EPA's ruling later on this summer will be met with 
furious litigation, massive confusion in the marketplace over labeling 
requirements, and retailer resistance due to liability concerns. It is 
not likely to move the demand needle for ethanol much, if at all, and 
the Blend Wall will continue to plague the industry as the RFS volumes 
ratchet up year after year. If CHOICE were the law of the land, within 
several years, there would be no need for the ethanol industry to ever 
go back to the EPA with another waiver request. Another benefit: as 
ethanol volumes in FFV's increase to the E30 level and beyond, the 
gasoline mixture's volatility curve ``bends back'', as ethanol's lower 
volatility begins to assert itself. This means that one of 
environmentalists' greatest objections to ethanol--its evaporative 
emissions--would be eliminated.
    CHOICE Would Be Good for Americans' Health. Increased use of higher 
blends of ethanol will substantially reduce the emissions of 
carcinogenic and mutagenic polycyclic aromatic hydrocarbons (including 
benzene) and other harmful toxics that result from combustion of 
petroleum products. Ethanol combustion simply does not produce these 
deadly PAH's, which are also the primary toxic components of deadly 
cigarette smoke, due to its chemical composition.\12\
---------------------------------------------------------------------------
    \12\ Gasoline aromatics are the major source of toxic pollution in 
the nation's urban air sheds, and are produced during the refining of 
crude oil into gasoline (high severity reforming to increase octane), 
and then combusted into benzene and other carcinogens out the tailpipe.
---------------------------------------------------------------------------
    CHOICE Would Be Good for the Nation's Farmers And Rural Economy. 
Without CHOICE, the Blend Wall will dramatically constrain ethanol 
production. As productivity continues to increase, we will once again 
return to the days of costly corn surpluses, depressed farm income, and 
increased taxpayer outlays.
    CHOICE Would Be Good for Transportation Fuel Retailers and Job 
Creation. Now is the perfect time to modernize the nation's 
transportation fuel infrastructure and underground tank storage system. 
Credit card companies are requiring retailers to install new dispensers 
to prevent identity theft, and blender pump technology is available and 
well proven. Proper implementation of then-Senator Obama's tax credit 
for blender pumps would help to make the incremental cost of such new 
dispensers de minimus,\13\ and the nation's underground storage tank 
system is obsolescent and also requires upgrading. Tens of thousands of 
shovel-ready jobs will be created by the CHOICE Act's requirement to 
install modern blender pump systems.
---------------------------------------------------------------------------
    \13\ Unfortunately, a misguided IRS rulemaking diminishes the value 
of the Obama tax credit.
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    CHOICE Would Be Good for America's Energy and National Security. 
Enactment and aggressive implementation of the CHOICE Act would build 
greater fuel diversity and resiliency into the transportation fuel 
system. Increasing amounts of domestic renewable fuels will not only 
diminish the impact of oil related price spikes, it will increase the 
flexibility of the fuel system to respond to oil refinery outages 
caused by man-made or natural disasters. Ethanol blends could be 
increased in response to supply constraints, as ethanol becomes a more 
fungible transportation fuel.
    CHOICE Is Strongly Supported By The Biofuels Industry. Most the 
nation's leading biofuels advocacy groups have signed the attached 
letter to Senate leadership, advocating enactment of S. 1627 or its 
equivalent.
    A Really Big Idea. In WWII, Winston Churchill observed that 
``Americans' national psychology is such that the bigger the Idea, the 
more wholeheartedly and obstinately do they throw themselves into 
making it a success. It is an admirable characteristic, provided the 
Idea is good.'' As Luft says in his conclusion, ``. . . breaking oil's 
monopoly in the transportation sector is a big idea, one that could 
greatly improve the human condition, our prosperity, and our national 
security. It requires dedicated and enthusiastic leadership.''
    I am confident that this Committee's leadership will once again 
help to move our nation in the right direction, and make us more secure 
economically, strategically, and environmentally. Thank you for this 
opportunity to participate in this important hearing.
                              Attachment 1
U.S. Ethanol Production 1980 Through 2008

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Public policies and market forces help drive demand for 
        ethanol.
                              Attachment 2
April 26, 2010


 
 
 
Hon. Harry Reid,                     Hon. Mitch McConnell
U.S. Senate,                         U.S. Senate,
Washington, D.C.;                    Washington, D.C.;
 
Hon. Jeff Bingaman,                  Hon. Lisa Murkowski,
U.S. Senate,                         U.S. Senate,
Washington, D.C.;                    Washington, D.C.;
 
Hon. Tom Harkin,                     Hon. Richard Lugar,
U.S. Senate,                         U.S. Senate,
Washington, D.C.;                    Washington, D.C.
 


    Dear Senators:

    The undersigned organizations represent a broad cross section of 
renewable energy and alternative fuel interests. We would like to 
express our support for The CHOICE Act (S. 1627), which Senator Harkin 
and Senator Lugar introduced, and to offer our assistance in assuring 
passage of this landmark legislation. The title says it all--consumers 
should have options in choosing energy, or CHOICE, and should be able 
to choose from a range of fuels.
    Since 2005, when Congress passed the first Renewable Fuels 
Standard, the U.S. ethanol industry has created tens of thousands of 
new jobs, generated billions of dollars annually in local and Federal 
tax receipts, and saved motorists $25-$75 billion in imported crude oil 
and gasoline costs each year. This money remains in the U.S. economy 
rather than being sent to foreign oil producers. However, these 
extraordinary contributions to the nation's economic and energy 
security are increasingly threatened by our failure to adopt the highly 
successful Brazilian flex-fuel (FFV) model, and thus demolish the 
looming ``blend wall'' imposed by the lack of flex-fuel vehicles and 
modernized blending pump distribution systems.
    Nearly all vehicles sold in Brazil will be FFVs, capable of using 
virtually any blend of gasoline or ethanol. On a gasoline-equivalent 
basis, more than half of Brazil's transportation fuel is renewable 
ethanol. The world's leading global automakers such as GM, Ford, 
Volkswagen, Fiat and others have heralded the Brazilian transition to 
FFV's as a remarkable success story for a program that was begun only 6 
years ago, and Brazilian consumers are pleased with the increased 
choice and flexibility that the FFV and blender pump dispenser program 
affords them.
    Most Americans would be surprised to know that the only nation that 
produces and uses more ethanol than Brazil is the United States, which 
in 2010 will use about 12 billion gallons of domestically-produced, 
high octane ethanol, primarily as a ten percent high octane blend in 
gasoline. The U.S. ethanol industry displaces more than 800,000 barrels 
per day of imported gasoline, and ranks as the third largest supplier 
of fuel on a gasoline equivalent basis behind only Canada and Saudi 
Arabia, and ahead of Venezuela, Mexico, and Nigeria.
    By introducing The CHOICE Act (S. 1627), you have recognized that 
such a failure to act will impose unacceptable and unnecessary costs on 
American consumers, and the nation's economy and energy security. This 
legislation charts a course for the U.S. to emulate the Brazilian 
experience by requiring that all new vehicles be flex-fuel over a 
period of 5 years. The bill would also ensure an orderly transition to 
modern blender pumps at the retail level, allowing consumers to choose 
from E10 to E85. The bill is properly called The CHOICE Act (Consumers 
Have Options In Choosing Energy) since it would for the first time 
offer consumers a full range of fuel choices, depending on cost and 
personal preferences. The enactment of S. 1627 would offer boat owners 
the option of choosing an ethanol-free blend for their marine equipment 
if that is what they want, or FFV owners the ability to purchase E85 if 
they want to reduce the nation's dangerous dependence on imported oil.
    The enactment of S. 1627 will not only provide American consumers 
with maximum choice in their purchases of transportation fuels, it will 
also stimulate billions of dollars in new domestic biofuels investments 
and create new jobs, in a gradual and orderly manner. Increased blends 
would unfold over a period of years as markets open, consumers' and 
retailers' acceptance grows, and production steadily moves upward to 
meet demand. Much of this new demand will be met by advanced biofuels 
that will reduce carbon footprints far greater than anyone could have 
imagined just a few years ago. Building on America's first generation 
ethanol and biodiesel industry and ensuring additional demand is met 
with low carbon biofuels is the right thing to do for the nation, 
advancing both our economic and national security.
    The nation is at a crossroads in dealing with energy security and 
climate change. If we are to reduce and one day eliminate the billion 
dollars or more each day that we export to foreign oil producers, we 
must act just as Brazil has done to provide consumers with a choice in 
the fuels they purchase and the vehicles they drive. Senator Harkin and 
Senator Lugar's leadership in introducing S. 1627 calls to Congress's 
attention the need to overcome the unnecessary blend wall stalemate 
caused by too few flex-fuel vehicles and too few blender pump fueling 
stations. The enactment of S. 1627 will help take the United States to 
the next level of energy independence and green jobs creation.
            Sincerely,


 
 
 
25 x '25;                            National Corn Growers Association;
Algenol Biofuels;                    Nebraska Ethanol Board;
American Coalition for Ethanol;      New Fuels Alliance;
Clean Fuels Development Coalition;   Osage Bio Energy;
Environmental and Energy Study       Pacific Ethanol, Inc.;
 Institute;
Energy Future Coalition;             Renewable Fuels Association.
Growth Energy;
 


    The Chairman. Thank you very much, Mr. Hallberg. I 
appreciate that testimony.
    The Chairman. Mr. Weishaar, welcome to the Committee.

  STATEMENT OF SCOTT WEISHAAR, BIOFUELS REPRESENTATIVE, SIOUX 
                           FALLS, SD

    Mr. Weishaar. Thanks. Good morning, Mr. Chairman and 
distinguished Committee Members. Thank you for the opportunity 
to visit with you today. My name is Scott Weishaar, and I'm the 
Vice President of Commercial Development for POET. I'd like to 
talk to you about our company's plans to commercialize the 
production of cellulosic ethanol and the hurdles that you can 
help us overcome.
    The ethanol industry has a proud history of meeting and 
beating expectations, proving that America can produce its own 
energy cleanly and efficiently. POET has been involved in that 
mission at every step, but we barely tapped the potential of 
this clean, green renewable fuel. It is clear that Washington 
shares our vision of a nation free of foreign oil dependence, 
and an economy rejuvenated by expanded energy production. 
Policies are in place that will help keep that vision a 
reality. With your help we can take ethanol to new heights and 
provide a real competitor to foreign oil.
    POET headquartered here in Sioux Falls is a 22 year old 
company that annually produces 1.6 billion gallons of ethanol 
and over 4\1/2\ million tons of high quality animal feed from 
our 26 production facilities nationwide. Approximately 18 
months ago, we started up our own pilot scale cellulosic 
ethanol plant that uses corncobs as feedstock, and we plan to 
commercialize this process in Emmetsburg, Iowa.
    POET continues to see more opportunities to expand the 
production of ethanol from corn and improve its production 
processes. Grain yields, which have doubled over the past 50 
years to more than 160 bushels an acre, are expected to double 
again over the next 20 years. Those higher yields would 
generate an additional 13 billion bushels of corn without 
planting an additional single acre. Ethanol is the only growing 
market for that additional corn supply.
    POET is continually making production of corn ethanol more 
efficient and environmentally friendly. Since we were founded, 
our energy and water use per gallon of ethanol has decreased 50 
and 80 percent respectfully. Because the ethanol process is a 
biological process, the opportunities to improve the 
inefficiencies in the future are endless. To that end, if you 
want to capture the full potential of grain-based ethanol, we 
need to let it compete. First, we need to remove indirect land 
use from the statute. Second, we need to remove the prohibition 
of corn from participating in the advanced biofuels section of 
RFS. We call this a discrimination clause. This keeps us from 
competing with big oil.
    Early on, POET saw the potential of cellulose, the most 
common organic compound on Earth, to dramatically increase the 
amount in America's fuel system. For at least the last decade, 
we've pursued the commercialization of cellulosic ethanol. That 
includes our pilot facility in Scotland, South Dakota. Those 
efforts are about to pay off as we break ground this year on 
Project LIBERTY in Emmetsburg, Iowa. Project LIBERTY is a 25 
million gallon per year cellulosic ethanol facility that's 
collocated in an existing grain-based ethanol site.
    This will be an economic windfall for the rural communities 
across the country. Our one plant in Emmetsburg will generate 
$12 million annually just from purchasing crop waste from the 
450 or so farmers that will participate. Most of these farmers 
will need to buy a new piece of equipment or two. This would 
drive the sales of an additional $20 million in that area. 
Actually, one dealership has already announced and moved into 
the Emmetsburg area as a result of the activities surrounding 
Project LIBERTY. But the jobs this will provide are probably 
the greatest benefit. Our plant will directly employ 40 to 50 
workers with another 180 indirect jobs in the areas of 
equipment sales, service, support, biomass transportation, and 
other service-related activities. On top of that, there will be 
about 300 construction jobs for the facility. All this from one 
plant.
    POET envisions much more ambition for the future of the 
cellulosic ethanol. By 2022, we'll be responsible for 3\1/2\ 
billion gallons of nationwide production, taking the impact of 
that one 25 million gallon plant and deploying it across the 
country.
    Recently we laid out a three-step plan that involves 
expanding across our current facilities, looking at other 
grain-based facilities, as well as a 50-State solution where 
the technology can be deployed across our nation. The 
cellulosic ethanol is in need of loan guarantees to get this 
process off the ground. Lenders are hesitant to invest in new 
technologies, and the first few plants will need assistance in 
securing the capital so our industry can prove itself. In 
addition, there must be a long-term extension of the cellulosic 
ethanol production credit, which is set to expire in 2012. This 
credit also needs to be made refundable.
    Cellulosic ethanol will only become a reality if we can get 
the farmers to deliver the material. It often requires new 
equipment and practices. The current BCAP, or Biomass Crop 
Assistance Program, which provides matching funds is a great 
model to help mitigate this risk and entice the farmers to get 
involved in these first stages. It helps the farmers secure 
credit, it attracts more farmers to be participants, and it 
helps offset some of the upfront costs for the first few years. 
Unfortunately, the program expires under the farm bill after 
the 2012 harvest just as POET and other cellulosic plants are 
beginning to ramp up. So we ask lawmakers to give farmers 
security in this new endeavor by granting loan extensions to 
that program.
    Our industry has crashed into the blend wall as we've 
heard. We need to grow the markets. We can grow the markets 
through E15, by creating the market, by getting blender pumps 
out into the places of business, so we can get not only a 
supply as well as a pull activity.
    We ask for three things. We ask to increase the base blend 
allowed in today's vehicles, we ask that all vehicles produced 
in the U.S. are flex-fuel vehicles, and to incentivize the 
installation of blender pumps throughout the nation. With your 
help, we can continue this progress. We have the natural 
resources, the ingenuity, and the technology to reach our 
nation's goal of 36 billion gallons of renewable fuel by 2022.
    I apologize for running a little over, but I wanted to 
thank you for the opportunity to testify today. And on behalf 
of POET and the entire renewable fuels industry, we want to 
thank you for all your hard work and the past support past. 
It's truly making a difference in our nation's energy supply.
    [The prepared statement of Mr. Weishaar follows:]

 Prepared Statement of Scott Weishaar, Biofuels Representative, Sioux 
                               Falls, SD
    Mr. Chairman, and distinguished Committee Members, thank you for 
the opportunity to visit with you today. My name is Scott Weishaar. I 
am the Vice President of Commercial Development for POET. I would like 
to talk with you today about our company's plans to commercialize the 
production of cellulosic ethanol and the hurdles that you can help us 
overcome.
Summary
    The ethanol industry has a proud history of meeting and beating 
expectations, proving that America can produce its own energy cleanly 
and efficiently. We have developed the only real alternative to 
gasoline today in quantities that are finally posing a threat to fossil 
fuel dominance. POET has been involved in that mission at every step.
    But we have barely tapped the potential of this clean, green 
renewable fuel. It is clear that Washington shares our vision of a 
nation free from foreign oil dependence and an economy rejuvenated by 
expanded energy production. Policies are in place that will help that 
vision be a reality: programs such as the Biomass Crop Assistance 
program and the cellulosic ethanol tax credit. But it will take a new 
commitment from Washington to allow these programs to meet their lofty 
goals. With your help, we will take ethanol to new heights and provide 
a real competitor to foreign oil.
POET--Introduction
    POET, the largest ethanol producer in the world, is a leader in 
biorefining through its efficient, vertically integrated approach to 
production. Headquartered in Sioux Falls, S.D., our 22 year old company 
annually produces more than 1.6 billion gallons of ethanol and 4.5 
million tons of high-quality animal feed from 26 production facilities 
nationwide. Approximately 18 months ago, we started up a pilot-scale 
cellulosic ethanol plant, which uses corn cobs as feedstock, and we 
will commercialize the process in Emmetsburg, Iowa.
    The POET development model is unique. It started on the Broin 
family farm in Minnesota and has been spurred by the investment of 
thousands of farmers and individual main street investors. POET's 
business model is to invest in, develop, design, construct and manage 
ethanol production facilities. However, the facilities are independent 
limited liability companies (LLC) owned primarily by individuals and 
local farmers that provide corn to the facility.
    By leveraging business size and position, POET has created very 
successful ethanol production facilities. POET has achieved 
breakthrough progress beyond ethanol processing, extracting 
extraordinary new value from each kernel of corn and is focused on 
producing ethanol to meet the nation's needs for domestic 
transportation fuels.
Corn Ethanol--The Foundation
    Corn ethanol is the foundation of the renewable fuels industry and 
has grown to be the most significant source of renewable energy that is 
powering America. Today, if the U.S. ethanol industry were a foreign 
oil producer, only Canada would supply the U.S. with more gasoline.
    POET continues to see more opportunities to expand the production 
of ethanol from corn and improve the production process. Grain yields, 
which have doubled over the past 50 years to more than 160 bushels per 
acre, are expected to double again over the next 20 years. Those higher 
yields would generate an additional 13 billion bushels of corn, without 
planting a single additional acre. Ethanol is the only growing market 
for that additional supply of corn.
    POET is continually making the production of corn ethanol more 
efficient and environmentally friendly. Since we were founded 22 years 
ago, our energy and water use per gallon of ethanol has decreased by 50 
and 80 percent, respectively. Because ethanol production is a 
biological process, the opportunities to improve efficiency in the 
future are limitless. To that end, we recently announced plans to 
decrease our water use an additional 22 percent by 2014 and will soon 
announce an energy reduction goal.
    We are also replacing natural gas with alternative energy at our 
biorefineries. One example is our nearby plant in Chancellor, S.D. 
which uses waste wood and landfill gas for more than 60% of the plant's 
power. Three of our plants use co-generation and another is powered by 
an anaerobic digester. We are constantly looking for opportunities to 
expand the use of alternative energy at all of our facilities.
Commercialization of Cellulosic Ethanol
    Early on, POET saw the potential of cellulose--the most common 
organic compound on Earth--to drastically increase the amount of 
ethanol in America's fuel system. For at least a decade, we have 
pursued commercialization of cellulosic ethanol, investing time, staff 
and tens of millions of dollars for research that includes our pilot 
facility in Scotland, S.D.
    Those efforts are about to pay off as we break ground this year on 
Project LIBERTY in Emmetsburg, Iowa. Project LIBERTY is a 25 million 
gallon-per-year cellulosic ethanol plant collocated at the site of our 
existing grain-based ethanol plant. Each day, it will process 770 dry 
tons of material--mainly corn cobs with some ``high-cut'' crop waste--
into ethanol. It will also use the by-product lignin to power both the 
cellulosic ethanol plant and the adjacent grain-based ethanol plant, 
cutting fossil fuels out of the ethanol production process. We have 
enjoyed a great partnership with the Department of Energy and the state 
of Iowa in this endeavor and plan full production in early 2012.
    This is an economic windfall for rural communities across the 
country. Our one plant in Emmetsburg will generate $12 million annually 
just from purchasing crop waste from the 450 or so farmers with whom we 
will work.
    Most of these farmers will buy one or two new pieces of equipment. 
With a conservative estimate of $50,000 for each piece of equipment, 
this would drive sales of more than $20 million. One new dealership has 
already announced it will open in Emmetsburg in response to the new 
customers for Project LIBERTY.
    But the jobs this will provide are probably its greatest benefit. 
Our plant will directly employ 40-50 workers, with another 180 indirect 
jobs in areas such as equipment sales, biomass transport, the service 
industry and more. On top of that there will be about 300 jobs for 
construction of the facility.
    This is all from one plant, but POET envisions a much more 
ambitious future for the cellulosic ethanol industry. By 2022, we will 
be responsible for 3.5 billion gallons of production nationwide. Taking 
the impact of that one 25 million gallon plant and multiplying it out 
for 3.5 billion gallons will produce almost unprecedented economic 
growth for rural America.
    POET's specific plan is composed of three parts:

    --1 billion gallons from expanding production to POET's network of 
        26 plants today.

    --1.4 billion gallons from licensing the technology to other grain 
        ethanol producers.

    --1.1 billion gallons from other feedstock that we feel will be 
        adaptable to our technology.

    There are obstacles to realizing that lofty, but achievable goal. 
Cellulosic ethanol faces many of the same challenges the grain-based 
ethanol industry is facing. But specific to the cellulosic ethanol 
industry is the need for loan guarantees to get this important process 
off the ground. Lenders are hesitant to invest in new technology, and 
the first few plants will need assistance securing capital so that the 
industry can prove itself. In addition, there must be a long-term 
extension of the cellulosic ethanol production credit, which is set to 
expire in 2012. This credit also needs to be made refundable.
    POET's plan is part of an even larger cellulosic ethanol picture. 
The previous `Billion Ton Study' illustrates we have the opportunity to 
produce ethanol in all 50 states. (Additional details in Exhibit 2) If 
committed, our country can realize our 2022 vision of 36 billion 
gallons of renewable biofuels.
Farmer Involvement Crucial
    But cellulosic ethanol can only be produced if we get farmers to 
deliver the cellulose. This often requires unfamiliar crops and farming 
techniques for America's agricultural industry. Ethanol producers and 
government agencies have to partner with farmers to navigate this new 
territory.
    POET's process is unique in that it takes advantage of a crop--corn 
cobs--that already grows as part of normal farm operations. But 
incorporating a new harvest into farmers' busy schedules involves risk, 
and we must instill confidence in farmers harvesting biomass for the 
first time.
    The current Biomass Crop Assistance Program (BCAP), which provides 
matching funds for delivered biomass, is a great model for helping 
mitigate that risk to encourage broad participation.

    --It helps farmers secure credit for equipment purchases by showing 
        income for their commitment.

    --It helps the ethanol producer operate with lower feedstock costs 
        during the expensive start-up period.

    --It provides an incentive to attract more farmer participants.

    --It offsets start-up costs for farmers harvesting biomass for the 
        first time.

    Unfortunately, the program expires with the farm bill after the 
2012 harvest, just as POET and other cellulosic ethanol producers are 
ramping up production to full-scale. We ask that lawmakers give farmers 
security in starting this new endeavor by granting a long-term 
extension for the program.
    We need USDA to act quickly in releasing the final BCAP rules. POET 
must apply and be approved before our farmers can apply and be 
approved. That means it is almost impossible to get farmers involved in 
our 2010 harvest. Farmers would also like to submit previous biomass 
harvests for matching funds under the program.
    It is crucial that BCAP be part of the next farm bill. Matching 
payments could be reduced to $15 per ton in return for doubling the 
length of commitment to 4 years. Also, the program could be focused 
strictly on feedstock for use in biofuels.
    BCAP is an effective program that will strengthen the feedstock 
side of cellulosic ethanol production. By extending the program and 
making some minor adjustments, you can solidify the American farmer's 
role in clean fuel production.
Ethanol Industry Challenges
    Despite our country's commitment to renewable fuels and the obvious 
problems caused by our addiction to oil, a number of challenges 
currently face the ethanol industry. The most prominent of these is a 
lack of market access that has stunted development and cut off 
investment. The small market that exists for ethanol in the U.S. today 
has led to an oversupply, which is why ethanol is currently pricing 
significantly below gasoline.
    The restricted market opportunity is the result of a decades-old, 
arbitrary law limiting ethanol to ten percent of the gasoline used in 
standard vehicles and the relatively slow adoption of flex fuel 
vehicles. Consequently, ethanol is limited to ten percent of the 
gasoline supply, which is commonly referred to as the ``blend wall,'' 
and the U.S. has a 90% mandate for oil.
    With current annual gasoline use in the U.S. at approximately 140 
billion gallons, the ten percent market is 14 billion gallons. However, 
it's not realistic to penetrate every single gallon, so experts predict 
the blend wall to be around 12.5 billion gallons. Our industry has 
crashed into this wall--as current ethanol production capacity is 
approximately 13.5 billion gallons.
    For the cellulosic ethanol industry needs a market in order to grow 
and that market doesn't exist today. Two things need to happen to 
create that market.
    The first is to increase the base blend of ethanol in standard 
vehicles from 10 to 15 percent, which will temporarily move the blend 
wall further into the future. The U.S. Environmental Protection Agency 
(EPA) is reviewing a waiver submitted by POET and other ethanol 
producers asking for such an increase and is expected to rule this 
summer. That small increase in ethanol content for standard vehicles is 
supported by academic, industry and government research and would allow 
the ethanol industry room to grow in the near future.
    It would also allow time for the second step necessary for creating 
a larger market for ethanol; building an infrastructure for the use of 
higher ethanol blends. The proliferation of flex fuel vehicles (FFVs) 
and blender pumps has not been fast enough to drive significant ethanol 
demand. More FFVs and blender pumps would allow the consumer to choose 
their preferred blend rate--from no ethanol to 10, 20, 30, 40 or 85 
percent--and drive greater use of ethanol, especially today when it is 
attractively priced.
    In addition to giving the consumer greater choice, an expanded 
ethanol market will give investors and lenders the confidence they need 
finance cellulosic ethanol production. Without a higher base blend, 
there is no place for the first gallons of cellulosic ethanol to go. 
Without a higher blend infrastructure, there is no opportunity to use 
the billions of gallons we will produce in the future.
Role for Policy-Makers
    As you can see, POET has made a significant commitment to the 
production of cellulosic ethanol. You can also see that there is a 
significant role for policy-makers before the work of POET and others 
can change our nation's transportation fuel supply. Specifically, 
government must do the following:

    1. Increase the base blend allowed in today's standard vehicles. 
        The 10% blend wall has halted investment in and development of 
        ethanol. Moving to a 15% blend would open the market and allow 
        ethanol some room to grow in the short term.

    2. Mandate that all new vehicles purchased in the U.S. are FFVS. 
        The cost to make a new car flex fuel is minimal and the 
        potential benefits to consumers are significant. Because it 
        takes 17 years to convert our automobile fleet, we can't afford 
        to delay this any longer. Without this step, it will be 
        virtually impossible to utilize the gallons mandated by the 
        Renewable Fuel Standard.

    3. Incentivize the installation of blender pumps throughout the 
        nation. Without the pumps to dispense higher blends of ethanol, 
        increased numbers of FFVS will have little impact. Blender 
        pumps would provide the needed infrastructure, while giving the 
        consumer the ultimate choice of their ethanol blend. We need to 
        allow the American consumer to choose his or her fuel blend 
        based on performance and price.

    4. Support cellulosic development. In addition to providing market 
        access for cellulosic ethanol, there are three important 
        provisions which policy-makers need to address:

    a. Help the first cellulosic ethanol production facilities to 
            obtain loan guarantees.

    b. Grant long-term extension of the cellulosic ethanol tax credit

    c. Provide longer-term assistance and incentives for farmers who 
            want to produce biomass for cellulosic ethanol production.

    We still face an energy crisis. A 90 percent mandate for gasoline 
in our nation's vehicle fleet ensures that oil's hold on our country's 
economic fortune is strong. But thanks in part to a bold vision in 
Washington for a renewable energy future, the ethanol industry has 
become larger and more efficient each year, a growing challenge to the 
oil industry's dominance.
    With your help, we can continue this progress. We have the natural 
resources, the ingenuity and the technology to reach our nation's goal 
of 36 billion gallons of renewable fuel produced per year by the year 
2022.
    Thank you for the opportunity to testify today. On behalf of POET 
and the entire renewable fuels industry, we thank you for the hard work 
and past support that is truly making a difference in our nation's 
energy supply.
                               Exhibit 2

   Realistic POET biofuels production targets, and our 
        estimates of industry-wide targets (POET announced three-point 
        approach to achieve 3.5B gallons of cellulosic biofuels).

   POET's vision (world's largest ethanol leading the 
        activity):

     1.0B gal from POET Plants.

     1.4B gal from non-POET plants located in the corn 
            belt.

     1.1B gal from non-corn based feedstocks.

   50-state solution:

     Feedstock & geographically driven.

     POET technology is transferrable to other feedstock 
            (i.e.,: the 50 state solution).
The `50 State' Solution

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The Chairman. Thank you very much, Mr. Weishaar. We 
appreciate that.
    Mr. Neiman, welcome to the Committee.

STATEMENT OF JIM D. NEIMAN, FOREST PRODUCT PRODUCER, HULETT, WY

    Mr. Neiman. Thank you, Mr. Chairman. Thank you for the 
opportunity to present testimony today. You need it a little 
closer? Okay. Is that okay?
    My name is Jim Neiman, and I'm the Vice President and CEO 
of Neiman Enterprises. We own three sawmills in the Black 
Hills--one in Wyoming and two in South Dakota--along with 
Heartland Pellets in South Dakota. Our company directly 
supports over 700 Black Hills families through our 475 
employees and 250 independent contractors.
    I appreciate your attention to the future of our nation's 
forest. A healthy forest products industry is critical to the 
future of our nation's forest. Our loggers are the forest's 
primary tool to achieve the desired forest conditions and 
forest management objectives. Further, the timber supply from 
the national forests make it possible for our company to 
operate on, and contribute to, the management objectives on 
private lands. The single most important factor to sustain our 
sawmills is the supply of timber sales from the Black Hills 
National Forest. Without a consistent supply of timber, no mill 
owner can justify to invest and to maintain competitiveness in 
a very competitive industry. My company is seriously exploring 
a partnership to construct a $55 million, 20 megawatt 
electrical co-gen. facility in Spearfish, South Dakota that 
would also produce steam for our dry kilns, heater buildings, 
and supply steam to Black Hills State University. The benefits 
of this facility would include increased supply of renewable 
energy, better utilization of forest biomass, and additional 
local jobs.
    I need three things to make this work. First, a consistent 
and predictable supply of timber sales from the Black Hills 
National Forest. Second, I need an inclusive definition of 
biomass in the Renewable Electricity Standard. The Renewable 
Fuels Standard definition excluded nearly all woody biomass 
from Federal lands from counting towards renewable biofuels. 
H.R. 2454, the American Climate and Energy Security Act passed 
by the House last year, contains too many restrictions on 
Federal woody biomass to be workable. My recommendation to 
Congress is that any woody biomass from national forests, which 
conforms to the applicable law and conforms to forest plan, 
should qualify as renewable biomass under the RES. The third is 
production tax credit parity. Electricity from biomass should 
get the same production tax credit as solar and wind. H.R. 
4374, which was introduced by Representatives Herseth Sandlin 
and Herger, would accomplish this perfectly.
    The Forest Service's mission is to sustain the health, 
diversity, and productivity of the nation's forest and 
grasslands to meet the needs of present and future generations, 
it is very important. When I look at national forest statistics 
of acres burned or acres of trees killed on beetle epidemics, 
I'm not sure the Forest Service is achieving that mission.
    Most of the current timber sales in the Black Hills 
National Forest respond to the pine beetle epidemic. Instead of 
always responding to crisis, the national forest should develop 
and implement proactive strategies to prevent a crisis in the 
first place. In the Black Hills, we know what it takes to 
reduce the risk of the pine beetles. Simply put, the problem is 
primarily a function of tree density. Dense stands have a 
higher risk of bugs and fire, and thin stands have a much lower 
risk. In the last decade, mountain pine beetles have killed 
trees on nearly 400,000 acres in the Black Hills alone. I 
provided each of you two photos to show the effects of the pine 
beetle in the Black Hills.
    Annual growth of the Black Hills forest timberlands far 
exceeds annual harvest. Increasing the national forest timber 
sale program would have multiple benefits, including 
stabilizing forest products companies, adding green jobs to our 
local economy, strengthening our nation's manufacturing sector, 
increasing the health of our forest, and increasing flows of 
clean water.
    I would like to enter into the record this letter from 
Federal Forest Resource Coalition to Representative Norm Dicks 
into the--this letter into the record and respectfully ask that 
the Committee support that request from the increase--an 
increase to 3 billion board feet in the Forest Service's Fiscal 
Year 2011 timber sale program.
    Again, I am honored that you asked me to testify today, and 
I would be delighted to work with you, Chairman Peterson, and 
with Representative Herseth Sandlin in the future to help solve 
some of these issues. My pleasure. Thank you.
    [The prepared statement of Mr. Neiman follows:]

 Prepared Statement of Jim D. Neiman, Forest Product Producer, Hulett, 
                                   WY
Introduction
    Thank you Chairman Peterson, Representative Herseth Sandlin, 
Representative Lummis, and Members of the Subcommittee for the 
opportunity to testify today.
    My name is Jim Neiman, and I am the Vice President and CEO of 
Neiman Enterprises, Inc. I am also the President of the Board of 
Trustees for the University of Wyoming, plus I serve on the Board of 
the Hulett National Bank, the Hulett Airport, the Black Hills Forest 
Resource Association, and the Intermountain Forest Association.
    My family has been in the ranching business for five generations 
and in the forest products business for three generations. We currently 
own and operate three sawmills and one pellet mill in the Black Hills 
of South Dakota and Wyoming. Our company directly supports about 700 
Black Hills families through our 475 employees and 250 independent 
contractors. We produce lumber for wholesale and retail markets 
throughout the United States, plus shop grade lumber for window and 
door companies. We also sell sawmill by-products, such as bark, 
sawdust, shavings, and chips for decorative bark, particle board, pulp 
and paper, animal bedding, and wood pellets.
Background
    I appreciate the Committee's attention to the future of our 
nation's forests. Our company relies on the Black Hills National 
Forest, which straddles the Wyoming-South Dakota border, for 
approximately 75% of our timber supply. The remainder of our timber 
comes from Federal, state and private timberlands in South Dakota, 
Wyoming, Montana and Nebraska.
    The very first timber sale from the national forests, Case No. 1, 
was sold to Homestake Mining Company in 1899 from the Black Hills NF 
near Nemo, South Dakota. Since then, the management of the Black Hills 
NF has been generally very successful. However, the last 10 years have 
been challenging, to say the least. In 1999, Forest Service Chief 
Dombeck remanded the 1997 forest plan revision, a traumatic event that 
resulted in no new timber sales for most of FYs 2000 and 2001, and 
required two forest plan amendments and 5 years to fix the problems 
identified in the Chief's decision. In total, the Black Hills NF spent 
16 years completing a 10 to 15 year forest plan. Since 2000, forest 
fires have burned 184,000 acres of the Black Hills NF, and a mountain 
pine beetle epidemic has exploded, affecting 396,000 acres to date.
    The mountain pine beetle epidemic is a function of numerous 
variables. The most significant variable, and the one over which we 
have the most control, is the underlying condition of the forest. 
Simply put, there are too many trees competing for finite resources. 
Reducing the risks of mountain pine beetle in ponderosa pine isn't 
rocket science. Dr. John Schmid, arguably the world's leading 
researcher on mountain pine beetles, has maintained a series of plots 
in the Black Hills for nearly 25 years. His bottom-line finding is that 
the duration and intensity of mountain pine beetle infestations are 
primarily a function of the number of trees in the stand--the more 
trees, the higher the risk of mountain pine beetles. Conversely, 
thinned stands have a significantly lower risk of mountain pine 
beetles.
Maintaining a Viable Forest Products Industry as a Management Tool
    A healthy forest products industry is critical to achieving long-
term forest health objectives on the Black Hills NF. Further, the 
timber supply from the national forest makes it possible for our 
company to exist to manage timberlands for private landowners. We have 
a diverse, integrated forest products industry in the Black Hills that 
depends heavily on the Black Hills NF selling the Allowable Sales 
Quantity (ASQ) established in the forest plan. Unfortunately, the 
Forest Service has fallen far short of achieving the ASQ, with 
detrimental effects to both the Forest and the forest products 
companies.
    The single most important factor affecting the viability of our 
company is the supply of timber sales from the Black Hills NF. Without 
a consistent, predictable supply of timber sales from the Black Hills 
NF, I cannot justify the investments to keep our mills on the cutting 
edge of technology, or expanding into new products that will better 
utilize small-diameter trees and help to achieve forest health 
objectives.
    The annual growth on the Black Hills National Forest, and virtually 
every other national forest, is significantly higher than the annual 
harvest (Attachment 1). Consequently the overstocking and mountain pine 
beetle risk are compounded each year by new growth, ultimately leading 
to even higher risks of mountain pine beetles and fires.
    Two thousand and nine was the most challenging year for the forest 
products industry since the Great Depression. The Western Wood Products 
Association (WWPA) recently predicted 2010 lumber demand of 32.9 
billion board feet, an increase from 2009 levels, but far below the 
all-time high of 64.3 billion board feet in 2005. Home construction and 
remodeling account for nearly 70% of U.S. lumber consumption. WWPA 
recently predicted 618,000 housing starts in 2010, an increase from 
2009, but only about \1/3\ of the 2005 level.
    The national forests can help sustain the industry by being a 
reliable supplier of fiber, both for areas dominated by national forest 
timber and places where private landowners are reluctant to sell into 
depressed log markets. Losing infrastructure will harm all landowners 
and make the task of managing the national forests more difficult. The 
Forest Service would better serve rural communities if they would 
recognize the connection between the timber program and jobs. A 
conservative estimate of jobs created per 1 million board feet of 
timber harvested is 11.4 direct and indirect jobs.
Forest Planning and Implementation
    There is no excuse for not incorporating long-term forest health 
strategies into every forest plan, yet many forest plans have been 
approved with scant attention to long-term desired conditions that will 
minimize the risks of fires and insect epidemics. Over the past decade, 
the States of South Dakota and Wyoming, along with local counties, have 
prioritized their involvement in forest planning as Cooperating 
Agencies, and that has been a very positive development.
    Even the best forest plan has little real value if the necessary 
resources are not available for plan implementation. Adequate funding 
is a perennial issue. Compared to the costs of fire suppression, 
rehabilitation and restoration, preventative management is a bargain. I 
did a cursory analysis of the costs and revenues associated with a 
recent timber sale on the Black Hills NF that was designed specifically 
to reduce the risk of forest fires. The net project cost, including 
NEPA and sale preparation expenses minus timber sale revenues, was $260 
per acre. Compared to the $901 cost per acre for suppression and 
rehabilitation for the 2005 Ricco Fire, that investment of $260 per 
acre looks pretty smart.
    On average, NEPA compliance represents about 50% of the Forest 
Service's cost of analyzing, preparing and selling a timber sale. The 
Forest Service's appeals process is still a cumbersome, time consuming 
and expensive means of resolving issues. If a decision is appealed and 
remanded, there is no process for the responsible Line Officer to 
quickly address and repair the flaws; instead, the process requires a 
new round of analysis, public review and comment, and another appeal 
period before the modified project can be implemented. This simply 
cannot happen in less than 6 months. The President's 2011 Budget 
contains a proposal for a pre-decisional Objection Process, and I urge 
the Committee to strongly endorse that approach.
    I am also concerned about the lack of a process that allows prompt 
salvage of dead trees following a fire or insect epidemic. Prompt 
salvage of dead trees is the common-sense response that most private 
landowners would make to utilize the dead trees and start the process 
of restoration. Salvage of fire-killed trees will also reduce the risk 
of a re-burn 10 or 20 years into the future, when dead trees have 
fallen to the ground and become additional fuel. However, salvage of 
fire-killed trees following a forest fire on the national forests is no 
longer a routine ``next step.'' In contrast, all of the Forest 
Service's actions to suppress a fire and implement emergency 
rehabilitation are designed to move quickly. One suggestion is to allow 
the Forest Service to consider salvage of fire-killed trees as part of 
the total response of fire suppression, rehabilitation, and 
restoration.
    The Healthy Forests Restoration Act (HFRA) is working well, 
although in some instances the Forest Service appears to be too 
cautious about using HFRA. In particular, the HFRA Administrative 
Review process significantly increases the incentives for parties to be 
a constructive part of the analysis and design process. Recently, 
Representative Herseth Sandlin introduced H.R. 4233, which expands the 
Federal lands on which hazardous fuel reduction projects can be 
conducted, and adds protection of infrastructure in rural communities 
as an additional purpose of the Healthy Forest Restoration Act. I 
believe those amendments would be very helpful.
    The Forest Service needs adequate funding as well as 
accountability. The net effect of the creation of a new ``Integrated 
Resource Restoration'' account in the FY 2011 President's Budget may be 
to change the predictability and accountability for these funds. If 
adopted as proposed, the outputs will become `acres treated' rather 
than targets for sawtimber. This `acres treated' number is difficult to 
plug in a business plan and take to the bank. The only language related 
to targets in the 2011 budget reduced outputs from 2.5 to 2.4 billion 
board feet, nationally. Increasing the FY 2011 Forest Products line 
item by $57 million over the FY 2010 level would increase the Forest 
Service's timber harvest level to 3.0 billion board feet, thus creating 
6,600 new jobs while simultaneously improving the health of the 
national forests and reducing the potential for catastrophic fires.
    On a related issue, 3 weeks ago, Representatives Herseth Sandlin, 
Lummis and eight other Members of Congress sent a letter to Secretary 
Vilsack stating that `the bark beetle epidemics warrant an emergency 
response' and requesting that the Secretary `develop a comprehensive 
and proactive strategy for responding to the bark beetle epidemics', 
including scope of work, estimated costs and sources of funds. I urge 
you to support that request.
Definition of Biomass
    My company is seriously exploring a partnership to construct and 
operate a $50 million, 19 MW electrical co-generation facility adjacent 
to our sawmill in Spearfish, SD. The benefits of this facility include:

    (a) Increasing our nation's supply of renewable energy, thus 
        decreasing our dependency on foreign oil.

    (b) Utilization of slash from timber sales on the Black Hills NF 
        and private timberlands. About 5,000 large slash piles are 
        created each year, and most of those are burned during the 
        winter months. That generates huge volumes of smoke and carbon, 
        and frankly, wastes a resource.

    (c) 40 to 50 additional jobs for families in our local community.

    The definition of Renewable Biomass in the Renewable Electricity 
Standard (RES) is critical. The Renewable Fuels Standard (RFS) 
definition excluded nearly all woody biomass from Federal lands from 
counting toward renewable biofuels. HR 2454, the American Climate and 
Energy Security Act passed by the House last year contains so many 
restrictions on Federal woody biomass that it may prove to be 
unworkable. My recommendation to Congress is that any woody biomass 
from the national forests, which conforms to applicable laws, including 
NFMA and NEPA, and the forest plan, should qualify as renewable biomass 
under the RES.
Biomass Crop Assistance Program
    Title IX of the 2008 Farm Bill established the Biomass Crop 
Assistance Program (BCAP) to support the establishment and production 
of crops for conversion to bioenergy and to assist with collection, 
harvest, storage, and transportation of eligible material, including 
woody biomass, for use in a biomass conversion facility. This well-
intended program didn't help companies that weren't already in the 
biomass business and in some cases diverted raw materials from panel 
manufacturers to biomass co-generation facilities. I am concerned that 
BCAP disrupts the vital relationship between existing infrastructure 
and national forest management. Using programs designed to encourage 
green jobs to create new companies has the unintended consequence of 
generating new competition against the primary infrastructure our 
forest managers depend on--for land management, hazardous fuel 
reduction, removal of beetle-killed timber, and other important forest 
health restoration goals. At a time when lumber prices are at historic 
lows and threaten the stability of what little industry remains, these 
programs could hasten the decline of our most vital management tool.
National Forest Advisory Board
    In January 2003, the Secretary of Agriculture approved the 
formation of a National Forest Advisory Board for the Black Hills NF. 
Fifteen members were subsequently appointed to the Board based on 
familiarity with national forest issues, ability to represent a 
particular interest group, and demonstrated skill in working toward 
mutually beneficial solutions.
    The formation of the advisory board was one of the recommendations 
of an August 2001 Forest Summit, convened by then-Senator Tom Daschle 
in Rapid City. Since then, the National Forest Advisory Board has 
become an integral part of the management of the Black Hills NF. The 
Board's primary duty is to ``provide advice and recommendations on a 
broad range of forest issues such as forest plan revisions or 
amendments, travel management, forest monitoring and evaluation, and 
site-specific projects having forestwide implications.''
    This Advisory Board has made great contributions to management of 
the Black Hills NF through public airing and constructive discussion of 
contentious issues by a group representing diverse interests. I believe 
it could serve as a model for other national forests.
Reforestation
    Finally, I'm concerned about the reforestation backlog on the 
national forests. In April 2005, the GAO reported that national forest 
reforestation needs are accumulating because of the increased acreage 
affected by natural disturbances, i.e., forest fires and insect 
epidemics. I would like to see Congress require the Forest Service to 
identify reforestation needs, and then develop a strategy to accomplish 
that reforestation. Reforestation would yield multiple benefits, 
including water quality, wildlife habitat, and carbon capture and 
sequestration.
Conclusion
    In summary, I want to thank you for the privilege of testifying 
here today. Management of the national forests is complex and sometimes 
contentious, and requires capable leadership. My company is committed 
to sustainable forest management, jobs, families and communities. As I 
said earlier, I'm the 3rd generation entrusted with running our 
business, and I started grooming the 4th generation years ago. Of all 
the variables I deal with, the one that keeps me awake most at nights 
is the long-term reliability of a national forest timber sale program. 
Again, I am honored that you asked me to testify today, and I would be 
delighted to work with Chairman Peterson, Representative Herseth 
Sandlin, and the Committee in finding solutions to the many issues 
discussed here today.
                              Attachment 1
National Forest Growth and Removals
All National Forest Timberlands--1953-2007

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                              Attachment 2
Federal Forest Resource Coalition
February 16, 2010

Hon. Norman D. Dicks,
Chairman,
Interior, Environment and Related Agencies Subcommittee,
House Committee on Appropriations,
Washington, D.C.

Re: FY 2011 Forest Products Budget

    Dear Mr. Chairman:

    As representatives of the major forest products organizations in 
the United States, we have come together to address the crisis facing 
our national forests and the communities that rely upon them. Millions 
of acres in our national forests are over-grown, infested with various 
insects and diseases, and have been neglected for too long. It has hurt 
the environment, resulted in more intense forest fires, increased the 
cost of fire suppression, and cost us thousands of jobs. Our nation's 
forest products infrastructure, which includes sawmills, papermills, 
skilled loggers, and other wood products manufacturers, faces extreme 
challenges in the present economic climate, and lacks an adequate and 
predictable supply of timber from national forests.
    We have begun an important dialogue with the Obama Administration 
about how best to restore the forests, increase active management of 
more acres and, concomitantly, revitalize the forest products industry. 
We are hopeful about the course ahead.
    At the same time, however, we believe that the Congress must 
improve upon the FY 2011 budget that was submitted by the 
Administration and reach more acres more quickly. Chairman Lincoln 
asked the Administration to increase funding for the forest products 
line item by $57 million over last year, and you recently joined a 
number of your colleagues in seeking an increase of $151 million in the 
forest products account. An increase of $57 million would increase the 
timber harvest to 48% of the amount allowed under the current approved 
forest plans (or 3 bbf); an increase of $151 million would increase the 
timber harvest to 65% of the amount allowed under the current approved 
forest plans (or 4 bbf). We urge the Subcommittee to adopt a budget 
that is consistent with these letters, which are attached.
    We estimate that an increase of $57 million in the forest products 
account could produce 6,500 jobs, and an increase of $151 million could 
produce over 17,000 jobs in some of the most hard-hit rural 
communities. That is a very efficient ratio between investment and jobs 
creation.
    We support the concept of forest restoration as applied to the 
national forests; indeed it is vital. Well-managed national forests are 
critical to America. They provide recreation, clean air and water, as 
well as jobs, support for local education, and paper and building 
materials for an expanding economy. We intend to work with the Obama 
Administration to help rebuild support for the national forests and 
explain to all Americans the goals and management policy of the 
forests. To that end, we are continuing our discussions with the 
Administration to better understand the new Integrated Restoration 
proposal and how it will improve the health of our national forests, 
our local communities and the forest products infrastructure. The goal 
should be to save the remaining infrastructure and then expand the 
infrastructure to produce more jobs.
    We are at a crossroads in the forest products industry with FY 2011 
being a critical year. In FY 2011, we believe it is essential to 
provide additional levels of funding to the forest products program to 
ramp up meaningful forest management and restoration efforts. It is 
time to put people back to work in the struggling forest products 
industry. Thank you very much for your consideration. We ask that this 
letter be made a part of your hearing record.
            Sincerely,

Owen Graham,
Alaska Forest Association, Ketchikan, AK;

Chip Murray,
American Forest & Paper Association, Washington, D.C.;

Tom Partin, Ann Forest Burns,
American Forest Resource Council, Portland, OR;

Jim Geisinger,
Associated Oregon Loggers, Salem, OR;

Dave Bischel, Steve Brink,
California Forestry Association, Sacramento, CA;

Nancy Fishering,
Colorado Timber Industry Association, Montrose, CO;

Jim Riley,
Intermountain Forest Association, Coeur d' Alene, ID;

Wayne Brandt,
Minnesota Forest Industries, Duluth, MN;

Keith Olson,
Montana Logging Association, Kalispell, MT;

Ellen Simpson,
Montana Wood Products Association, Helena, MT;

Jim Crouch,
Ouachita Timber Purchasers Group, Russellville, AR;

Tom Troxel, Coordinator,
Intermountain Forest Association;

Marshall Matz, Counsel,
Olsson, Frank, & Weeda.
                              attachment i
Forest Products

                   USDA Targets, 2011 Proposed Budget
------------------------------------------------------------------------
                  Forest                      Excess K-V
                 Products    Salvage Sale  (mmbf)  (p. 15-
 Fiscal Year    (bbf)  (p.    (mmbf)  (p.      3 budget      Total (bbf)
               25 overview)  29 overview)   justification)
------------------------------------------------------------------------
        2006          1.530           974            329       2.833 bbf
        2007          1.611           517            372       2.500 bbf
        2008          2.484           472            179       3.135 bbf
        2009          2.415           294             92       2.801 bbf
        2010          2.546           195            168       2.909 bbf
              ----------------------------------------------------------
        2011          2.400           184            132       2.716 bbf
   (proposed)
------------------------------------------------------------------------


               House Coalition/Sen. Lincoln Budget Request
------------------------------------------------------------------------
                     2010           2011          2012          2013
------------------------------------------------------------------------
     Funding            $382           $439           $486          $533
      Request     (President      (Request)      (Request)     (Request)
   (Million)          Obama)
------------------------------------------------------------------------
    INCREASE        Baseline            $57           $104          $151
------------------------------------------------------------------------
New/Retained        BASELINE          6,600         12,100        17,600
         Jobs
------------------------------------------------------------------------
 Sale Volume             2.4            3.0            3.5           4.0
     (Billion
  Board Feet)
------------------------------------------------------------------------
         ASQ             38%            48%            56%           65%
------------------------------------------------------------------------
Goal: Build upon the USDA targets to reach 3.0 bbf in 2011.

                             attachment ii
December 17, 2009

Hon. Barack Obama,
President,
United States of America,
Washington. D.C.

    Dear Mr. President:

    As members active on forestry issues we write to you today 
regarding the current state of our nation's forests. Our Federal, 
state, and private forests have served as an economic and social 
cornerstone in American history. However, past policies have largely 
ignored forest health. With your leadership, we have the opportunity to 
improve management of our forests that benefits clean water, clean air. 
and rural economies.
    Our forests are under extreme stress from drought, insects, 
diseases, wildfire and poor management. While the recent economic 
downturn has severely debilitated urban America, rural America has been 
in a recession for many years. America's forests can and should be 
managed to maintain healthy forests, provide jobs, produce biomass, 
sequester carbon, and supply goods and services to help rebuild our 
rural economy.
    With just a modest increase in funding for forest management at the 
USDA Forest Service we can reverse this trend and put people back to 
work. Studies indicate that an increase of $151 million in forest 
management funds for the FY 2011 budget will create over 17,600 jobs. 
Implementing this level of forest management will also help stunt the 
steep decline in our nation's forest products industry, which provides 
our rural communities with a significant source of employment.
    Mr. President, it is important to point out that while this forest 
management initiative will help create jobs, it will not be sacrificing 
the environment. Indeed this initiative will improve the environment. 
As proper forest management is expanded to reach more acres there will 
be greater carbon sequestration and more clean water for all Americans. 
Increased forest management funding will also help us to begin to 
reverse the threat posed by growing hazardous fuel levels, insect 
infestations and disease outbreaks that are fueling record catastrophic 
wildfires. These wildfires are consuming a growing proportion of the 
agency's budget and are a major source of CO2 emissions in 
many forested states.
    The attached charts have also been provided to USDA, OMB and CEQ on 
how best to restore our forests. We believe it is important to note 
that this level of funding and expanded forest restoration would still 
leave the National Forest System far below the approved timber sale 
levels of the existing USDA forest plans. We hope this information is 
helpful during your consideration. We stand ready to work with you to 
improve forest health and management. Together, we can help properly 
manage our forests and support our rural forested communities at a time 
when they need it most. Thank you for your consideration.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
Hon. Kurt Schrader,                  Hon. Stephanie Herseth Sandlin,
Member of Congress;                  Member of Congress;
 

                              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                     

 
 
 
Hon. Peter A. DeFazio,               Hon. Rick Larsen,
Member of Congress;                  Member of Congress;
 

                              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                     

 
 
 
Hon. Norman D. Dicks,                Hon. John T. Salazar,
Member of Congress;                  Member of Congress;
 

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Hon. Steve Kagen,                    Hon. Mike Ross,
Member of Congress;                  Member of Congress;
 

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Hon. James L. Oberstar,              Hon. David Wu,
Member of Congress;                  Member of Congress;
 

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Hon. Dennis Moore,                   Hon. Charlie Melancon,
Member of Congress;                  Member of Congress;
 

                              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                     
 
Hon. Jim Matheson,                   Hon. Marion Berry,
Member of Congress;                  Member of Congress;
 

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Hon. Mike Thompson,                  Hon. Sam Farr,
Member of Congress;                  Member of Congress;
 

                              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                 
 
Hon. Walt Minnick,                   Hon. Betsy Markey,
Member of Congress;                  Member of Congress.
 

                                 charts
National Forest Timber Sale Volume Sold
Timber Restoration Program

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Source: Bureau of Census, FS Cut and Sold Records.
National Forest Growth and Removals
All National Forest Timberlands--1953-2007

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Western Bark Beetle Mortality: 2004-2008

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Printing Date: July 21, 2009.
                             attachment iii
November 20, 2009

President,
United States of America,
Washington. D.C.

    Dear Mr. President:

    For generations, Americans have depended upon the health of our 
forests for outdoor recreation and to maintain livelihoods. The health 
of our rural communities and the health or our National Forests are 
inextricably linked. Unfortunately, many or our national forests are 
literally dying.
    I take great pride in the long success our National Forest service 
workers have had in managing and conserving our national forests. 
However, with limited resources, our forest supervisors race 
considerable challenges in accessing and managing all of the forest. 
Consequently, we are losing millions of acres of National Forests to 
disease, infestation, and more frequent and intense forest fires. The 
results are detrimental for our rural communities and our ecosystems in 
which water quality, carbon sequestration, and wildlife habitat are all 
negatively impacted.
    Additional funds are desperately needed and I am writing to 
encourage you to consider a very modest increase in forest management 
funds for the USDA Forest Service as a part of the 2011 budget. With an 
increase of just $57 million in forest management funds in 2011 budget 
we can create over 6,000 jobs. It is important to note that with this 
level of restoration it would still leave the national forest program 
far below the approved USDA forest plans.
    Improved forest management will help the environment by restoring 
forest health, increasing carbon sequestration, improving wildlife 
habitat and producing more clean water for all Americans. What's more, 
implementing this level of forest management will help arrest the steep 
decline in the nation's forest wood, pulp, and paper products industry, 
which provides a vital source of employment in many rural communities.
    The attached charts and information on how best to restore our 
forests have been provided to USDA, OMB and CEQ. I found them so 
powerful, however, that I felt they should be included in this letter.
    Thank you for your consideration. I look forward to working with 
you to improve forest health and management. There is not a moment to 
waste.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Hon. Blanche L. Lincoln,
Chairman.
                              Attachment 3

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Photo looking north September 10, 2009.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    The Chairman. Thank you very much, Mr. Neiman.
    Dr. Kephart, welcome to the Committee.

   STATEMENT OF KEVIN D. KEPHART, Ph.D., VICE PRESIDENT FOR 
           RESEARCH, AND DEAN, GRADUATE SCHOOL, SOUTH
             DAKOTA STATE UNIVERSITY, BROOKINGS, SD

    Dr. Kephart. Thank you. I wish to thank Chairman Peterson, 
Representative Herseth Sandlin, and the other distinguished 
Members of the House Committee on Agriculture for the 
opportunity to appear today.
    I'm Kevin Kephart, Vice President for Research and Dean of 
the Graduate School at South Dakota State University. I'm also 
the national chair of the Sun Grant Initiative.
    Through Title VII of the farm bill, land-grant institutions 
generate intellectual synergy, leverage resources and 
expertise, and have a track record of solving problems for 
American agriculture. The 2008 Farm Bill brings important 
changes to USDA. Section 7511 creates the National Institute of 
Food and Agriculture, or NIFA, and replaces the Cooperative 
State Research Education and Extension Service. NIFA is 
elevating scientific rigor and is establishing a national 
institute on par with the National Institutes of Health and the 
National Science Foundation.
    As a hallmark, NIFA has established the Agriculture and 
Food Research Initiative, or AFRI. This is a competitive 
research program to replace the former CSREES National Research 
Initiative. Implementation of AFRI is currently underway, and 
addresses the nation's most urgent issues in agriculture, food, 
and human nutrition. Overall, land-grant college deans and 
administrative heads indicate to me that they are cautiously 
optimistic about progress to date in implementing the NIFA.
    Title VII also supports land-grant capacity programs, 
including Hatch, Evans-Allen, Smith-Lever and the McIntire-
Stennis funds that serve as the foundation of state 
agricultural experiment stations and the Cooperative Extension 
Services. These authorizations link scientists with 
stakeholders, industry, and Federal agencies to address the 
issues at local and regional scales. Higher education and 
public outreach are linked to the land-grant system so that 
research and education are synergistic.
    Title VII authorizations such as AFRI, capacity funds, and 
specialized programs such as SARE and the Sun Grant represent a 
balanced portfolio of diverse research resources. The Sun Grant 
program was reauthorized in the 2008 Farm Bill as Section 7526. 
The mission of the Sun Grant program is to advance bioenergy 
and bio-based products in order to enhance national energy 
security, promote diversification and the environmental 
sustainability of agricultural production, and promote economic 
diversification in rural areas.
    Five land-grant universities serve as regional Sun Grant 
centers, including South Dakota State University, Oklahoma 
State University, the University of Tennessee, Oregon State 
University, and Cornell. Each center is guided by stakeholder 
input through their regional advisory councils. The Sun Grant 
program collaborates with the Department of Transportation and 
the Department of Energy, as well as USDA. And Section 7526 has 
attracted agencies to the Sun Grant as a means of facilitating 
their own goals in renewable energy.
    For example, DOE's Office of Biomass Programs is supporting 
the DOE Sun Grant Regional Feedstock Partnership.
    Sun Grant centers have successfully conducted rigorous 
competitive regional research solicitations. And today, the Sun 
Grant program has implemented 123 competitively awarded 
regional research projects in 37 states with DOT and DOE funds, 
and has implemented 110 field trials in 36 states through the 
DOE Regional Feedstock Partnership. And I'd refer you to page 
four in the written testimony to show you how those projects 
are dispersed across the country.
    The White House recently released a plan entitled, Growing 
America's Fuel: An Innovation Approach to Achieving the 
President's Biofuel Target. The plan calls for setting biofuels 
production targets and then implementing Federal programs 
designed to meet the targets. The Administration's Growing 
America's Fuel Plan misses the mark on at least two issues, 
however. First, the role of EPA in the sustainability segment 
must be weighed carefully. Environmental issues are only one 
component of sustainability, and USDA and DOE and the 
universities could better lead that segment of the plan. Second 
in the plan is to provide $10 million to establish five 
regional feedstock centers within the USDA-Agricultural 
Research Service. The proposed USDA-ARS centers duplicate the 
Sun Grant program. Congress has already established five 
regional Sun Grant centers that serve the same purposes that 
are described in the White House plan.
    Title VII of the 2008 Farm Bill enables research that will 
advance agriculture. Economists at the University of Nebraska 
recently reported that during the period of 1949 to 1991 the 
average annual social rate of return on public agricultural 
research was 27 percent. The average rates of return during 
this period of time for the S&P 500 and NASDAQ were nine and 12 
percent respectively. Title VII also has profound influence on 
practically every student in agriculture and related fields. 
The public investment in agricultural research is critical for 
future social and economic benefits to the nation. I thank you 
for your hard work and commitment to bringing a better future 
to the United States through a balanced agricultural research 
portfolio.
    [The prepared statement of Dr. Kephart follows:]

   Prepared Statement of Kevin D. Kephart, Ph.D., Vice President for 
   Research, and Dean, Graduate School, South Dakota State University
    On behalf of South Dakota State University, I wish to thank 
Chairman Peterson for the opportunity to address the House Committee on 
Agriculture. As the Congress evaluates the current farm bill, the 
nation continues to be at a critical juncture in terms of its energy 
security. Our future economic and strategic security is eroding because 
of our nation's excessive dependence on imported petroleum. This has 
led to much debate and speculation about the role renewable fuels can 
and should play in our effort to eliminate our dependence on foreign 
oil, and whether or not the agricultural industry can produce the 
necessary food, energy, and social services that will be demanded by a 
world with nine billion people. I think that as Americans we can agree 
that the continued use of fossil energy merely passes on our current 
challenges to future generations, including environmental concerns and 
the issue of long-term energy supply. American agriculture represents 
an important part of the solution toward reversing these concerns. 
American farmers, agribusinesses, and agricultural scientists can lead 
the world in development of renewable agriculture-based energy sources; 
however, the Congress must enact policies, programs, and funding that 
empower these sectors.
    Through the farm bill, the House Committee on Agriculture has 
profound influence on higher education and public research in the 
United States. Title VII (i.e., the Research Title) delivers essential 
authorizations by which the Land-Grant community carries out their 
mission. The foundational programs in Title VII make the nation's Land-
Grant institutions an international powerhouse. Because of the farm 
bill authorizations, land-grant institutions communicate with each 
other, generate intellectual synergy, leverage resources and expertise, 
and have a track record of solving problems for agricultural producers 
and rural communities.
USDA-REE Reorganization
    The 2008 Farm Bill is reinvigorating agricultural research and the 
Land-Grant community. Section 7511 creates the National Institute of 
Food and Agriculture (NIFA). Under this section, NIFA is to replace the 
Cooperative State Research, Education, and Extension Service (CSREES). 
The reinvigoration will result from elevating scientific rigor and 
establishing a national institute on par with the National Institutes 
of Health and the National Science Foundation. Additionally, NIFA is to 
be directed by an agricultural or food science scholar of national 
renown.
    USDA-Research, Education and Economics (USDA-REE) has made progress 
toward establishing NIFA as directed in the farm bill. I have received 
input from Land-Grant college deans and administrative heads indicating 
that they are cautiously optimistic about the progress to date. It is 
clear that NIFA is established as a new administrative entity and that 
the CSREES structure is being transferred. Last autumn, Dr. Roger 
Beachy was confirmed as the first NIFA director and I appreciate how he 
has implemented NIFA programs. As a hallmark for the new agency, NIFA 
has established the Agricultural and Food Research Initiative (AFRI) to 
replace the former CSREES National Research Initiative.
    The AFRI has been implemented to meet the nation's most urgent 
issues in agriculture, food, and human nutrition. The AFRI is a 
competitive program with broad eligibility to Land-Grant institutions, 
Federal agencies (e.g., USDA-ARS), and other entities (e.g., non Land-
Grants and private corporations). The breadth of eligibility stands to 
redefine public agricultural research.
    The AFRI will establish Coordinated Agricultural Projects with 
relatively high funding levels of $5 million per year and 5 year 
durations. These large grants will be comprised of multi-institutional 
teams that integrate research, Extension, and education. The current 
priority issue areas include:

   Childhood Obesity Prevention ($25 million with FY 2010 
        funds).

   Global Food Security ($19 million with FY 2010 funds).

   Food Safety ($20 million with FY 2010 funds).

   Climate Change ($55 million with FY 2010 funds).

   Sustainable Bioenergy ($40 million with FY 2010 funds)

    Implementation of AFRI is currently under way and eligible 
institutions are actively developing teams, research plans, and 
proposals. I feel that NIFA has introduced AFRI effectively and that 
meaningful results are forthcoming.
    The 2008 Farm Bill also supports the Land-Grant community through 
continued support of the capacity programs. These programs include the 
Hatch, Evans-Allen, Smith-Lever, and McIntire-Stennis funds that serve 
as the foundation of state agricultural experiment stations, and state 
Cooperative Extension Services. These authorizations and corresponding 
appropriations are the heart of what makes the Land-Grant system unique 
in the world by linking state scientists with stakeholders, industry, 
and Federal agencies to address problems and opportunities at local and 
regional scales. Perhaps most important, higher education and public 
outreach are linked through the Land-Grant system so that research and 
education are mutually beneficial. The Land-Grant institutions are 
charged with addressing national problems at a local level and on 
behalf of local stakeholders. The long-term capacity that is provided 
by the capacity funds positions the institutions to be immediately 
responsive to problems. Even in the current budgetary restraints faced 
by each state, the agricultural experiment stations continue to be 
supported and Federal appropriations are leveraged several fold with 
non-Federal funds.
    These components of today's NIFA are critical elements of the 
nation's agricultural research capacity. The several authorizations 
provided by Title VII, such as AFRI competitive funds, capacity funds, 
and specialized programs such as SARE and Sun Grant, represent a 
balanced portfolio of diverse research resources. Diversity is an 
essential key element of sustainability.
Sun Grant Program
    The Sun Grant Program was first authorized in January 2004 in 
section 9011 as an amendment to Title IX of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 8109). The program was reauthorized in 
the 2008 Farm Bill as section 7526 with annual appropriations limits of 
$75 million. Additionally, Sun Grant is authorized as section 5201(m) 
under provisions of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users of 2005 [SAFETEA-LU (23 
U.S.C. 118)]. These authorizations culminated planning and development 
since 2001 by Land-Grant universities and the Congress.
    The mission of the Sun Grant Program is to:

   Enhance national energy security through the development, 
        distribution, and implementation of biobased energy 
        technologies;

   Promote diversification in, and the environmental 
        sustainability of agricultural production in the United States 
        through biobased energy and product technologies;

   Promote economic diversification in rural areas of the 
        United States through biobased energy and product technologies; 
        and

   Enhance the efficiency of bioenergy and biomass research and 
        development programs through improved coordination and 
        collaboration between the Department of Agriculture and the 
        Department of Energy, and the Land-Grant colleges and 
        universities.

    Five Land-Grant universities serve as regional Sun Grant centers, 
including South Dakota State University, Oklahoma State University, the 
University of Tennessee, Oregon State University, and Cornell 
University. The regional centers emphasize research, Extension, and 
educational programs on renewable energy technologies while promoting 
biobased industries in rural communities. Each center is authorized to 
receive base Federal funding to establish them as leading research, 
Extension, and higher education institutions for the biobased economy. 
Each center is guided by stakeholder input through their regional 
advisory councils.
    Other key guidelines define how the regional Sun Grant centers 
function:

   Appropriations are to be allocated evenly among the five 
        regions.

   No more than 25% of regional funds will be used directly for 
        a center's programs.

   The remaining 75% of regional funds are to be allocated 
        within a region to Land-Grant institutions through competitive 
        processes.

   Research, Extension, and educational programs on bioenergy 
        and biobased products will include activities aimed at 
        technology development and technology implementation.

    Since passage of the authorization, the Sun Grant Program has 
developed collaborative working relations and projects with the U.S. 
Department of Transportation (DOT), U.S. Department of Energy (DOE), 
and USDA. The farm bill authorization has attracted agencies to the Sun 
Grant Program as a means of facilitating their own goals toward 
developing renewable energy. For example, funding for the Sun Grant 
Program is included in the President's FY 2011 Budget Request in DOE's 
Office of the Biomass Program (OBP) to support the DOE Regional 
Feedstock Partnership. The regional centers already facilitate ongoing 
and proposed federally-funded research, Extension and education 
programs in their respective regions. These programs embrace the multi-
state, multi-function, multi-disciplinary integrated approach that is 
at the heart of how Land-Grants address national problems. The Sun 
Grant centers have developed rigorous competitive regional programs to 
identify excellent projects. Today, the Sun Grant Program has 
implemented 123 competitively awarded regional research projects in 37 
states (Figure 1) and has implemented 110 field trials in 36 states 
through the DOE Regional Feedstock Partnership (Figure 2).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Figure 1. Sun Grant research projects awarded through regional 
        competition. The projects are funded through DOT or DOE funds.

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Figure 2. Field trials implemented by the DOE-Sun Grant 
        Regional Feedstock Partnership. Feedstock species were 
        identified by DOE as models to determine sustainability 
        measures and production supply curves.

    The scope of Sun Grant research is very broad. Feedstock 
development includes camelina, palm, eutropha, hazelnut, sorghum, 
switchgrass, prairie cordgrass, cup plant and many other species. 
Development of conversion processes includes new pretreatments and 
organisms for fermentation and includes improved processes for 
biodiesel, gasification, and pyrolysis. One project is using 
nanotechnology to recover enzymes so that ethanol production costs can 
be reduced. Sun Grant-funded work has examined state-based policies in 
Western states and has developed GIS models to site biorefineries in 
the Southeastern U.S.
    Some examples of outcomes of Sun Grant-supported research include:
Western Regional Sun Grant Center at Oregon State University
   Washington State University is developing a pyrolysis based 
        biorefinery that will process forest residues and will permit 
        production of pyrolysis oils, lipids, or anhydro-sugars that 
        can be fermented to ethanol.

   The University of Nevada-Reno is developing salt basin algae 
        for biofuels production and carbon sequestration. Halophytic 
        algae are an ideal renewable energy resource because they grow 
        on marginal lands with brackish or saline water and have been 
        shown to be 30 times more productive than terrestrial 
        feedstocks. The team is evaluating algae strains and mutants 
        for high production of triacylglycerols under different growing 
        conditions and identify genes related to oil production by 
        microarray analysis. Ultimately, this project will provide an 
        assessment of the potential of algae as a biodiesel feedstock. 
        The lipid and starch contents of 19 halophytic green algal 
        strains of the genus Dunaliella were determined for their 
        suitability for use as feedstocks for biofuels.

   Oregon State University is developing camelina as a low-
        input oilseed crop for the Pacific Northwest. They have 
        determined correct planting dates in environments in which 
        camelina yield performance is likely to be best, but these 
        windows will vary by environment. Fall-planted camelina can 
        withstand cold winter temperatures with little snow cover as 
        well as the combination of cold and wet soil conditions in the 
        region. They found that residual herbicides and slug predation 
        create challenges for camelina survival in the Willamette 
        Valley. Broadcast and drilled seedings showed similar 
        performance levels.
North Central Regional Sun Grant Center at South Dakota State 
        University
   South Dakota State University has plant breeding and 
        genetics projects to identify native perennial plants, such as 
        prairie cordgrass, that can produce lignocellulosic feedstock 
        on marginal land (wet & salty) in amounts equal to or greater 
        than switchgrass on prime farmland in the North Central Region.

   The University of Wyoming has developed nanotechnology to 
        recover and reuse enzymes necessary for converting 
        lignocellulosic feedstocks into second-generation biofuel. 
        Laboratory-scale results indicate the enzymes can be recovered, 
        cleaned and reused several times with limited reduction in 
        enzymatic activity saving the cost of new enzymes which can be 
        up to 25% of the cost of biofuel production.

   The University of Minnesota is developing microwave 
        technology to design, engineer, and test a low capital cost, 
        mobile pyrolysis unit to convert lignocellulosic biomass into 
        bio-oil which can be refined into a drop-in transportation 
        fuel.
South Central Regional Sun Grant Center at Oklahoma State University
   Texas A&M University has developed sorghum lines that 
        optimize the endosperm for ethanol conversion and distiller's 
        grain feed for low rain-fed Texas environments. These lines 
        represented advanced lines that have a wild-type endosperm, the 
        high amylopectin waxy grain trait or the high protein 
        digestible/high lysine grain trait. The combination of these 
        two modified endosperm traits into a single sorghum hybrid will 
        be the optimal endosperm architecture for low energy and high 
        ethanol yield.

   Oklahoma State University has developed a unique downdraft 
        gasifier optimized for low bulk density biomass feedstocks, 
        such as switchgrass, to generate synthesis gas high in carbon 
        monoxide and hydrogen concentrations and low in tar and 
        particulate contents. This gasifier has been demonstrated to 
        potential industries for commercialization.

   Texas A&M University has finalized the design and 
        development of a skid-mounted fluidized bed gasifier that can 
        be relocated using a mobile trailer. Various feedstocks have 
        been gasified including sorghum biomass, animal manure (dairy 
        and poultry litter), switchgrass, wood chips and straw. A 
        patent has been filed and numerous companies have shown 
        interest in commercialization.
Northeast Regional Sun Grant Center at Cornell University
   The University of Massachusetts has collected twenty 
        hyperthermophile bacteria from a geothermal vent off the coast 
        of Washington and Oregon. The bacteria that grow at 200 
        Fahrenheit and have been observed to convert cellulose to 
        hydrogen and grew on cellulose at a rate approximately 30% 
        faster than any other microbe previously reported. These 
        microorganisms have great potential for industrial 
        applications.

   Rutgers University is developing hazelnut as a potential new 
        oil-producing crop for the northeastern U.S. The Rutgers team 
        has identified some promising cultivars that have resistance to 
        Eastern Filbert Blight, a disease that makes hazelnut 
        production difficult in the Northeast. Initial results suggest 
        hazelnut trees could produce almost twice as much oil per acre 
        as soybeans.

   Cornell University is evaluating the potential performance 
        of a broad range of grasses and production methods for ethanol 
        production capacity to help plant breeders select the best 
        bioenergy grass cultivars. Lignocellulosic ethanol can be 
        produced from sugars in the cell walls of grasses, but not all 
        sugars are the same. The Cornell University research team is 
        evaluating ethanol production capacity in grasses by examining 
        the types of sugars stored in cell walls. Compositional 
        analysis revealed that the grasses could be clustered into two 
        different groups--one with more useful (fermentable) sugars 
        (cellulose, xylose and arabinose) in the cell walls, and a 
        second group with sugars that are not as readily fermentable 
        (rhamnose, fucose and mannose).
Southeast Regional Sun Grant Center at the University of Tennessee
   The University of Tennessee has developed an innovative 
        biomass site assessment tool, known as BioSAT (www.biosat.net). 
        As the only model incorporating biomass from both agricultural 
        and forest sectors in the analysis, it covers the 33 eastern 
        states and offers convenient web access for clients. The 
        investment has been leveraged with support from the U.S. Forest 
        Service and other partners to establish a broad-based program 
        addressing the unique information needs presented by bioenergy 
        issues.

   The University of Tennessee has advanced the use of ionic 
        liquids to pretreat woody biomass for greater enzyme access to 
        cellulose. After a 3 day exposure to ionic liquid, 95 percent 
        conversion of cellulose was achieved in 8 hours, while the 
        untreated wood released less than ten percent of sugars even 
        after 72 hours. The dramatic improvement was attributed to both 
        physical (loss of crystalline structure) and chemical changes 
        in the biomass.

   The University of Kentucky is developing Clostridium 
        thermocellum, an anaerobic bacterium that can directly convert 
        cellulose into ethanol. Their work has shown that C. 
        thermocellum at elevated pressure (7.0 MPa, and 13.0 MPa) 
        increased the ethanol:acetate ratio by more than 100-fold 
        compared to that under atmospheric pressure. In revealing the 
        ability to control product selectivity by environmentally 
        manipulating carbon and electron flows, a novel approach to 
        directing microbial metabolism is being exploited.
Recent Developments from the Administration
    The Obama Administration is also working on strategies to address 
the daunting challenges of agriculture. For example, the White House 
released a plan last January entitled ``Growing America's Fuel: An 
Innovation Approach to Achieving the President's Biofuel Target.'' The 
plan identifies key segments of the bioenergy supply chain and 
identifies Federal agencies to lead research, development, and policy 
efforts. The supply chain/agency assignments include:


------------------------------------------------------------------------
                  Supply Chain Segment               Lead Agency
------------------------------------------------------------------------
     1.      Discovery Science              DOE Office of Science.
     2.      Feedstock Development          USDA REE and Forest Service
                                             (FS).
     3.      Feedstock Production Systems   USDA REE and FS.
     4.      Pilot Scale Conversion and     USDA REE and FS.
              Biorefinery Facilities
     5.      Full-scale and Widespread      USDA-Rural Development (RD)
              Deployment of Commercial       and FS.
              Facilities.
     6.      Regulatory Compliance          Environmental Protection
                                             Agency (EPA) and USDA.
     7.      Sustainability                 EPA and USDA.
     8.      Policy Support                 All.
     9.      Dissemination of Best          USDA-NIFA.
              Practices and Technical
              Assistance
    10.      Feedstock Supply Chain         USDA-REE, FS, RD and
              Workforce Development          Universities.
------------------------------------------------------------------------


    The plan calls for setting biofuels production targets, then 
implementing Federal programs designed to meet the targets. It also 
identifies a full complement of feasibility measures to provide 
guidance on program evolution. There is support for the 
Administration's Growing America's Fuel plan; however, it misses the 
mark on at least two issues. First, the role of EPA in the 
sustainability segment must be weighed carefully. Environmental issues 
are only one component of sustainability and agencies such as USDA or 
DOE would be better leads because of their research capacities. Second, 
the President's FY 2011 budget proposes to allocate $10 million to 
establish five Regional Feedstock Centers within the USDA-Agricultural 
Research Service (ARS). The USDA-ARS centers are to plan and develop 
regional supply chain systems that link feedstock development, 
production, logistics, conversion, co-product production and 
distribution. Additionally, the proposed USDA-ARS centers are to 
``coordinate with DOE to enhance work underway through DOE's Regional 
Feedstock Partnerships and the Bioenergy Research Centers.'' The 
proposed USDA-ARS centers duplicate the Sun Grant Program. The Congress 
has already established five regional Sun Grant centers that serve the 
same purpose described in the White House report. Moreover, the DOE 
Office of Biomass Programs contacted the leadership of the Sun Grant 
Program in 2006 to establish the Regional Feedstock Partnership. The 
Sun Grant centers have been coordinating the Regional Feedstock 
Partnership since that time and have included participation of USDA-ARS 
and private industry scientists.
Return on the Public Investment
    Title VII of the 2008 Farm Bill is critical for the nation's 
future. The authorizations and associated appropriations enable 
critical research and development that will advance agriculture, feed 
the world's growing population, sustain the environment, support global 
commerce, and benefit world peace. These are not exaggerated goals and 
an analysis of past public investment will likely support these claims. 
Indeed, economists at the University of Nebraska recently studied the 
internal rates of return to public investment in agricultural research. 
During the period of 1949 to 1991, the mean social rate of return was 
27% and the mean own-state return was 17%. The average rates of return 
during this period for the S&P 500 and NASDAQ were 9% and 12%, 
respectively. The public investment in agricultural research is 
critical for future social and economic benefits to the nation.
    Perhaps more important, the farm bill truly impacts higher 
education. Each year, the month of May brings celebrations at 
university commencement events across America. Graduate students at the 
nation's Land-Grant institutions are being recognized for their 
accomplishments in original research. Title VII of the farm bill has a 
profoundly positive influence on the work of practically every student 
in agriculture and related fields. The research mission is at the heart 
of the Land-Grant system. Research provides for an advanced curriculum 
for future generations of students. It assures us that we will have a 
highly educated workforce and a vast nation of leaders. Research 
supports continuous education long after students leave their alma 
maters.
    Thank you for the opportunity to visit with you today. Thank you 
for your hard work and commitment to bringing a better future to the 
United States through a balanced research portfolio.
References
    Plastina, A., and L. Fulginiti. 2009. Rates of Return to Public 
Agricultural Research in the 48 U.S. States. In: International Assoc. 
Agric. Econ. Conf., Beijing, China, August 16-22, 2009.
    White House. 2010. Growing America's Fuel: An Innovation Approach 
to Achieving the President's Biofuels Targets. http://
www.whitehouse.gov/sites/default/files/rss_viewer/
growing_americas_fuels.PDF. Accessed 7 May 2010.
    USDA-NIFA. 2010. The National Institute of Food and Agriculture. 
http://www.nifa.usda.gov/. Accessed 7 May 2010.
    USDA-NIFA. 2010. The Agriculture and Food Research Initiative. 
http://www.nifa.usda.gov/funding/afri/afri.html. Accessed 7 May 2010.

    The Chairman. Thank you very much, Dr. Kephart, and we 
thank all of the panelists for that excellent testimony. I'd 
like to recognize someone else that I didn't see out in the 
audience. It's a little bright up here, but Richard Peterson is 
here from the Minnesota FSA committee representing Linda 
Hennen, who does a great job for us in Minnesota. Where is 
Richard? Is he still around or is he--there he is. My slightly 
older brother, Richard Peterson.
    Who--thank you for what you do.
    The gentlelady from South Dakota.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. Some of our 
witnesses have identified, in their written testimony, 
utilization of the BCAP program, Biomass Crops Assistance 
Program. And like ACRE, this is something that we authorized in 
the last farm bill. I think, going forward, as it's been 
implemented how it's working, how it's not working, some 
modifications will be necessary. So we thank the witnesses for 
their insights there.
    But I would ask my colleagues, if you look at the photos 
from the Black Hills National Forest, you can see where Custer 
State Park on the left, compared to wilderness areas on the 
national forest to the right, the dramatic difference in terms 
of the beetle infestation, and how aggressive the state has 
been. We have both the former and acting Secretaries of 
Agriculture for the State of South Dakota--Mr. Even and Mr. 
Farris--who have been working with local officials, county 
commissioners, Federal forest officials, not being concerned 
with who's wearing what hat, but how to have a strategy to get 
on top of this problem in the Black Hills National Forest.
    And our colleague, Cynthia Lummis, and I have sent a letter 
to Secretary Vilsack asking for a comprehensive strategy of 
dealing with the pine beetle epidemic. And I would just 
request, in light of Mr. Neiman's testimony and some of the 
others that are here from western South Dakota, ask all of my 
colleagues here to work with us and ask the Secretary to 
present that strategy. Because in June of this year, in the 
last farm bill, we authorized and required states to present 
plans to identify the problems in the forests in their areas, 
whether it's private, state, and Federal, to have a 
comprehensive strategy. This is a crisis.
    We have--and then if you see in the second picture the fuel 
hazard that this presents in our western forests as well as the 
potential for woody biomass, as Mr. Neiman testified. But we 
have to change the definition for renewable biomass to count 
towards the RFS. That will create jobs. It will take some of 
the pressures off--on the BCAP that the BCAP program 
unintentionally introduced with some of the competition for 
traditional uses of those products. And I know that Mr. 
Thompson in Pennsylvania and others have recognized that 
problem.
    I do want to pose a question to Dr. Kephart because Mr. 
Goodlatte and Mr. Peterson will recall in the 2008 Farm Bill we 
all worked together to preserve, but make responsible changes 
to the Sun Grant Initiative. And as Dr. Kephart testified, the 
Administration has put forward a budget in which we should all 
be a little bit concerned that we're going to duplicate 
something that we already have. In circumstances of tight 
budget environment, we brought this to the attention of the 
Chairwoman of the Agriculture Appropriations Committee, Ms. 
DeLauro.
    But, Dr. Kephart, could you share with the Committee any 
conversations you've had with the Administration or USDA about 
the duplication of the program, and what has been their 
response. Could you share, kind of enlighten us as to why you 
think the Administration did duplicate this program based on 
prior conversations that you had with the Administration last 
summer and last fall?
    Dr. Kephart. Well, our conversations with the 
Administration in regard to the Sun Grant began on--nearly a 
year ago. Dr. Rajiv Shah at that time was the Under Secretary 
for REE and invited those of us in leadership in the Sun Grant 
to come to Washington and explain the program to him, and our 
conversations with him were excellent. We were happy to receive 
the invitation and go to town to visit with him.
    They asked for a--some immediate plans on some steps 
forward on assisting them to work with us to bring the Sun 
Grant program forward. So at that point in time, we provided a 
report in late August to talk about what our priorities are 
that have been based on our conferences and workshops across 
the country on stakeholder input, where we saw some of the 
limitations and needs of cellulosic feedstocks are, and how to 
advance that. And that's related to white papers that we've 
written in that regard before.
    What happened subsequent to that was Dr. Shah, as you might 
know, moved on to USAID; and only recently has a new nomination 
to REE been put forward, and I believe that confirmation is 
going forward on the Senate side. But the Administration went 
ahead and moved forward, working with USDA to come up with this 
Growing America's Fuel Plan, which, by and large, I like.
    I like it because a lot of the words that are in there are 
reminiscent of what we put forward in August, including the 
regional aspect, prioritizing research that's regional and 
local on feedstocks, because that's what's relevant, but also 
this need for five centers across the country to coordinate 
that. The important difference is that they made those five 
centers under the leadership of USDA-ARS specifically and not 
the land-grant community. And so that was the primary change 
that I wanted to alert you to in regard to the plan.
    The Chairman. I thank the gentlelady. I recognize the 
former Chairman, Mr. Goodlatte, for questions.
    Mr. Goodlatte. Thank you, Mr. Chairman. Mr. Neiman, I was 
very interested and pleased to receive these photographs. They 
amply illustrate some of the problems we have in our national 
forests. And I represent a district in the East that is not 
dissimilar to many western districts. About \1/3\ of the land 
in my district in the western part of Virginia is owned by the 
Federal Government in the George Washington and the Jefferson 
National Forest primarily. We have some of the same issues with 
wilderness areas and the inability to be able to properly 
manage them.
    I was also interested in your comments about the pressure 
that is placed on industries that are unable to get an adequate 
supply of timber for whatever purpose they might make, because 
of the fact that our national forests are closed off to them. 
In fact, in my district, about \2/3\ of the district is 
forested; \1/2\ of that is in Federal Government lands and \1/
2\ in private lands. And 97 percent of the stock that comes for 
the five paper mills that are located in my district, the 
hardwood lumber industry that is significant in my district and 
other uses, comes off of the private lands and three percent 
off of the Federal lands in an average year.
    We have tried for a long time, but we have been fighting a 
losing battle with environmental organizations, some of which 
have taken extreme positions regarding this. As you may know, 
the Sierra Club has maintained a position that there should be 
no commercial timber harvesting on any of our national forest, 
191 million acres of national forestland. And I wonder if you 
have any thoughts on how we can counter that. I think it's both 
economically and environmentally unsound to maintain that 
policy, but I wonder what your thoughts are about it. How do we 
counter that kind of, I don't know, can't see the forest for 
the trees kind mind-set on the part of some extreme 
environmental organizations?
    Mr. Neiman. Thank you very much. Your comments seem to 
parallel the Black Hills very much. We are fairly fortunate 
here. We have had extremely strong support from both states and 
the counties at the local level, which has helped us 
tremendously. But take a quick snapshot of the Black Hills 
when, about 25 years after General Custer came through, the 
very first U.S. Forest Service timber sale in the United States 
was by Nemo. So this is the oldest managed forest, the Black 
Hills.
    At that time, the forest had 1\1/2\ billion board feet of 
inventory. We have removed, since the first miners hit, around 
6 billion board feet of timber. The inventory today reached 6 
billion board feet on the Black Hills National Forest about the 
turn of 2000. Now we've lost a hundred and some thousand acres. 
It's probably in the 5\1/2\ to 5\3/4\ billion inventory. It's 
overstocked. When you look at the whole forest----
    Mr. Goodlatte. You say you've lost. Is that due to a forest 
fire or insect infestation or what?
    Mr. Neiman. Well, the total forest is now being reduced due 
to bugs. Mother Nature is taking care of itself. It's either 
going to be properly managed by humans, or Mother Nature is 
going to take care of it in an indirect way that's going to 
have devastating consequences to stream flow and water 
conditions. In our case, a 24 inch ponderosa pine drinks 200 to 
300 gallons a day if the water's available. If it's not, it 
has--it's susceptible to attack from bugs.
    Let's look to the big picture on the national forest scene. 
The growth on--well, first on the Black Hills, the growth is 
around 150 to 170 million board feet. We're removing about 85 a 
year, so we're lucky and fortunate compared to your forest to 
remove half of it. All the forests nationwide are growing 20 
billion board feet a year. Twenty billion board feet, and we're 
allowing the removal of 2\1/2\ billion? We wonder why we have 
health condition problems. You're hitting right in the center 
of it, so I feel for your area. The disease and bugs are going 
to keep increasing in your area like it has the Black Hills 
and, particularly, Colorado and Wyoming.
    Mr. Goodlatte. I agree. Thank you very much. Thank you, 
Madam Chairman.
    Ms. Herseth Sandlin [presiding.] Thank you, Mr. Goodlatte. 
Mr. Walz.
    Mr. Walz. Thank you, Representative Herseth Sandlin. Thank 
you all for your testimony and your work in this industry. I am 
very appreciative of it.
    Dr. Kephart, I'd like to just compliment and associate 
myself with your focusing on Title VII. That is very, very 
important. The research side of things I think is critical. It 
goes back to our being good stewards, and I think being 
visionary in how we invest in this.
    And as we have this debate on the farm bill, I would go 
back to what I said earlier with the groups who were here. 
These investments that can pay off in the long run, and with 
farm programs costing us a year less than we spend in 6 weeks 
in Iraq, you have to put these things into perspective on what 
the long-range goal of these things looks like.
    The one thing I want to ask is it's the 800 pound gorilla 
in this ethanol debate, or I should say the 800 pound hog: How 
do we work things out with our livestock industry? I know 
there's not enough time here, but this is an issue that 
continues to come up. It does not need to be an issue that 
divides farm country. It's one where we have many overlapping 
concerns. How would you respond to this? Maybe Mr. Hallberg and 
Mr. Weishaar first, if you could respond to it from a livestock 
perspective.
    Mr. Hallberg. Well, it's an excellent question, 
Congressman. I remember when I sat in front of committees like 
this 32 years ago with the RFA. We had food versus fuel debates 
then as the industry was just starting up. I think it's 
unfortunate that we do have the schism that you've just talked 
about, because as you know, \1/3\ of the bushel of corn, which 
is the starch, goes to ethanol, and another \1/3\ to 
CO2, and the other \1/3\ is a very high value animal 
feed.
    One suggestion I would make, because I think a lot of this 
is perception, and a lot of it's distorted, frankly, by some of 
our friends in the PR industry, the Department of Agriculture 
reports utilization of corn for ethanol, as you know, on a 
nonadjusted basis. So in other words, if we're going to make 15 
billion gallons of ethanol in a year, they'll say roughly 3 
gallons per bushel. They say 5 billion bushels of corn have 
been used for ethanol, and then another 5.65 billion bushels 
have been used for animal feed.
    The fact of matter is, at least a third and, in fact, on a 
TDN, on a total digestible nutrient basis, up to a half of that 
bushel of corn goes into the nutrient value of the feed 
especially for ruminant animals, and it's improving for hogs 
and poultry. So I think part of this could be a little bit 
better education of the press. In fact, the CBO reported it 
wrong when they did the food versus fuels study. So we just 
need to have a little bit more dialogue about what really is 
happening.
    Mr. Weishaar. Yes. Yes, thank you, Congressman. And just to 
add to Mr. Hallberg's comments, I think he hit the real key, is 
I think the biofuels industry, in particular the ethanol 
industry, is not given credit for its feed product. It's viewed 
as a pure consumer of corn, and I think the general populace 
forgets that from our manufacturing process we have a renewable 
fuel, but we also have a very highly desirable, protein rich 
animal feed.
    So I think by getting that education and understanding what 
comes in and what comes out is imperative. So speaking 
specifically with producing 1.6 billion gallons of fuel, we 
produced over 4\1/2\ million tons of animal feed this last 
year. And I think, again to Mr. Hallberg's point, that's one 
thing that sometimes the communication maybe isn't quite as 
efficient as it should be.
    Mr. Walz. Well, I appreciate that. And I look forward to 
this discussion of getting this right.
    There's no reason this should divide us. Our livestock 
industry is critically important to this country as well as our 
biofuel. So thank you both. I yield back.
    The Chairman [presiding.] I thank the gentleman. The 
gentleman from Texas, Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I just have one quick 
one. Mr. Weishaar, we enjoyed a tour of your plant in 
Chancellor yesterday. Terrific exposure for me. It's the first 
time I've been through a plant like that. The use of methane 
gas coming off the landfill. I mean the goal to do away--you 
know, to eliminate most, if not all, your need for natural gas. 
All of those things are really worthy to moving forward.
    What I was unable to distinguish, though, was how much of 
that wonderful plant did the Federal taxpayer underwrite in 
ways that a normal corporation wouldn't get? In other words, 
you obviously get to depreciate the equipment and all those 
kinds of things. That's a standard kind of deal. But I don't--
couldn't tell, and I don't necessarily think you need to answer 
that off the top of your head. But as we look at these things, 
as I hear words like loan guarantees and production credits, 
you would want to make them refundable, expanded grants, 
mandates for flex-fuel cars, all of those things costs money. 
And we find ourselves having mortgaged our grandchildren and 
great grandchildren's futures because good-hearted Americans, 
well intended, have looked to their Federal Government to do 
things, and have asked their Federal Government, and i.e., the 
Federal taxpayer, to make those kind of commitments that we 
can't afford for a lot of variety of things.
    You did mention one thing I would like some clarification 
on. You said that your company will be responsible for 3.2 
billion gallons of the biomass. Does that mean if you don't 
make it, you'll pay some penalty?
    What do you mean by the word responsible?
    Mr. Weishaar. Okay. There are a couple of things in there, 
Congressman. Maybe I'll start with that one and work backwards.
    Our company laid out a vision several weeks ago to produce 
3.5 billion gallons of cellulosic ethanol in which one segment 
of that would be a billion gallons of Bolton cellulosic 
facilities at our own 26 plants. An additional 1.4 billion 
gallons is where we would license that technology to other 
grain-based ethanol facilities, again, to produce ethanol in 
conjunction with their facility, and then 1.1 billion gallons 
would be nongrain-based ethanol facilities across the nation.
    Mr. Conaway. Okay. But the word responsible means if you 
don't make it, are there penalties for your company to----
    Mr. Weishaar. No, sir. I may have misspoken. That's our 
vision that we're driving the organization toward.
    Mr. Conaway. Well, I need to continue to have these 
conversations because I'm not sold yet but appreciate being 
here. And I yield back.
    The Chairman. The gentlelady from Colorado, Ms. Markey.
    Ms. Markey. Thank you, Mr. Chairman. Thank you for being 
here for your discussion on the pine beetle problem, which, as 
you know, is a very serious problem across the West. We heard 
in our farm bill hearing in Cheyenne just a couple of weeks ago 
in Colorado a hundred thousand trees a day are falling. And so, 
of course, it has huge implications for the environment, for 
tourism, for the economy, for fire, and it is a crisis. So I'm 
glad that we're taking this very, very seriously.
    But on a different matter, quickly, Mr. Hallberg, as you 
mentioned in your testimony, the use of plug-in electric 
vehicles are becoming much more widespread. What do you see as 
the long-term niche market then for cellulosic ethanol?
    And we also know that a huge consumption of fuel is in--is 
jet fuel, and that will never be electric. Are there--do you 
see future applications in the aviation industry for biofuels 
and cellulosic ethanol?
    Mr. Hallberg. Yes, that's an excellent question. The jet 
fuel market I think is going to be addressed less by ethanol 
than obviously it will by so-called drop-in fuels or fuels that 
are more suited for the jet engine characteristics. I think 
that our fuel--transportation fuel system is obviously 
enormous. It's the largest in the world. The gasoline side, 
it's 140 billion gallons a year; diesel, it's 30 billion. The 
ability for this nation with the choice approach so that 
there's a flex-fuel vehicle that's also going to morph into a 
PHEV, a plug-in hybrid, to actually back out imported crude I 
think is enormous.
    And, in fact, the technologies will follow the capital as 
the market pull, the demand pull develops. I think we're seeing 
that already, although we're a little disappointed in the 
timing. So I think wind and--wind-generated electricity, I 
think the drop-in fuels have a role. Ethanol importance has 
been overlooked because of the octane component that we're 
going to need as I mentioned for these higher performance, 
higher efficiency engines that will be developed post-2016. All 
those together should get us off the foreign oil barrel I think 
within the next 15 to 20 years.
    Ms. Markey. Thank you, Mr. Chairman.
    The Chairman. Thank you--oh, Dr. Kephart.
    Dr. Kephart. If I could make one comment, Congresswoman 
Markey. I believe that cellulosic feedstocks have a great 
future in the sectors that you brought up, both power 
production and in drop-in fuels. One problem or limitation that 
we have to keep--be aware of on cellulosic feedstocks is, yes, 
there's a lot of cellulose there, but there's also quite a bit 
of lignin, and lignin is not fermentable in a biological 
system. So there are thermochemical processes that many of us 
across the country, and many folks across the country in Sun 
Grant are working on to produce, for example, synthesis gas.
    Gasified biomass can generate power. We're working on 
procedures to produce pyrolysis oil, or a lot like a crude oil 
that could be used as a low-grade boiler fuel to heat buildings 
or generate power, or to refine it into jet fuel or diesel or 
other drop-in fuels. And actually at SDSU, we're working on a 
cellulosic project for JP8, a military grade of jet fuel. So 
that is a feedstock source, including these woody biomass 
issues in public lands could fit well into those types of 
pools.
    The Chairman. I thank the gentlelady. The gentleman from 
Nebraska, Mr. Fortenberry.
    Mr. Fortenberry. Thank you all for appearing today. One 
quick question regarding the science of this. What's the latest 
information on the energy output to input equation for ethanol?
    Mr. Hallberg. I think to me the most recent and I think the 
most thorough that's been peer-reviewed in the Journal of 
Industrial Ecology actually was done by Dr. Ken Cassman of the 
University of Nebraska-Lincoln. And they have been thorough to 
the point of actually surveying every facility. And as you 
know, 75 percent of the capacity of this industry has been 
added in the last 3 or 4 years. So they've gotten up to speed 
on the new technology. The new facilities that are being built 
today are extremely efficient, and those numbers are 2.0 to 1. 
Actually, that's a little confusing to people because it's 
actually more dramatic than that in terms of the reduced amount 
of BTUs in for the output out.
    But they're extremely efficient facilities.
    Mr. Fortenberry. And examples of where the collocation of 
energy inputs and outputs are taking advantage of synergistic 
opportunities that greatly increase that equation, where does 
that bump to? What are the outliers?
    Mr. Weishaar. Well, I'll talk on two different points. One 
was from our Chancellor facility where we're actually 
offsetting fossil fuel. In other words, we're using waste 
landfill gas or waste wood. That obviously helps the economic 
model because our fossil fuel use is greatly reduced.
    The other segment is the Project LIBERTY in Emmetsburg, 
Iowa where we'll actually be using the lignin that's an output 
through anaerobic digestion system. That will displace all of 
our natural gas use for not only the cellulosic plant, but the 
existing 50 million gallon corn ethanol plant.
    So again, as these technologies from an energy utilization, 
from water reduction, from a biological standpoint, in other 
words, the enzymes and the processes themselves become tweaked 
and more refined, we will see less water, less--less energy 
utilization and greater yields, which will move it even beyond 
some of the numbers that Mr. Hallberg shared.
    Mr. Fortenberry. Well, remember, it was just a few short 
years ago we had no new energy bill at all, and here we've 
quickly advanced from a debate about whether this was maybe 1.3 
to 1 or so to now being more clear at about two to one. But 
again, the opportunities for collocation of the synergistic 
energy input and output uses greatly increase that equation.
    Let's go back to the issue of the blend wall. To me it 
seems like that's, again, a short-term measure that actually 
would be very beneficial in terms of integrating ethanol and 
biofuels into the transportation mainstream as it currently 
exists. But the longer term question is the fuller integration 
of the transportation infrastructure to accommodate biofuels. 
Now that doesn't have to be a long-term question necessarily, 
but clearly it might be a medium-term question. Do I have that 
pretty well clear? I mean we've got to be able to go to a 
higher blend immediately. It might, again, fix a certain 
difficulty right now in the market. But that's within the 
current confines of the way in which the transportation 
infrastructure is currently set up.
    Mr. Hallberg. Congressman, I think that's a critical point, 
and even if EPA gets E15 right, there's going to be litigation 
that will go on for a long time and there would be a lot of 
uncertainty. So moving the demand needle is a question mark. 
The CHOICE Act or something like the Brazilian model, they 
started that process 6 years ago where they started the flex-
fuel vehicle introductions. And it is now, as I said, almost 97 
percent of every vehicle sold so--and it's massive.
    If you look at the economies of the world that took the oil 
shock 2 years ago, Brazil is the least affected. And that's on 
the record. It was so resilient because of its ability to move 
over and displace the $150 crude gasoline.
    So that is where we have to go. Five years from now, 
hopefully the industry could be at a point where it doesn't 
have to go to EPA and ask for a waiver for legacy vehicles, 
because we've turned the fleet over and people can put E30, 
E40, E50 in.
    Mr. Fortenberry. I think you make an interesting point as 
well. This is what is actually holding back capital investment 
in the industry, this level of uncertainty. Thank you, Mr. 
Chairman.
    The Chairman. I thank the gentleman. And the other Members 
have foregone their questions, so we're going to wrap it up 
here. We want to thank this panel for their excellent testimony 
and answers to our questions. We'll look forward to working 
with you on these issues as we go forward. I want to thank the 
previous panel, thank all of the folks for being here today, 
the folks that watched us on the web.
    Again, we encourage anybody that has ideas to contact us 
through our website, www.agriculture.house.gov.
    And with that, under the rules of the Committee, the record 
of today's hearing will remain open for 30 calendar days to 
receive additional material and supplementary written responses 
from the witnesses to any question posed by a Member.
    [Whereupon, at 11:51 a.m. (CDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
   Submitted Statement by Paul Kieffer, Alfalfa Producer, Sturgis, SD

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 Submitted Statement by Richard W. Kieffer, Alfalfa Producer, Sturgis, 
                                   SD

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 Submitted Statement by Hon. Frank J. Kloucek, Senator, State of South 
                                 Dakota
    Dear House Committee Members:

    I wish to thank Rep. Herseth Sandlin for the invitation to attend 
today's field hearing and am offering this written input. I am Senator 
Frank Kloucek 20 year legislator and family farmer from Scotland. Key 
issues and concerns that must be addressed in the farm bill and in 
other legislation are included in this letter. Thank you for coming to 
South Dakota!
    Ethanol: I strongly encourage raising the Ethanol blend wall from 
10 percent to 15 percent for the good of our nation, environment and 
agriculture. American Coalition for Ethanol (ACE) and Growth Energy 
(Jeff Broin's group) have much documentation to support this move. An 
interim 12 or 13 percent may be needed to bridge the gap in the 
industry. Farm payment limitations are needed. There is no need for 
payments to non family farm corporations. There is support for a yearly 
$100,000 cap on farm payments to individuals with no cap on commodity 
credit loans. There is a need for a grain reserve program.
    Conservation Reserve: Both a wetland reserve and regular reserve 
program are needed and do an excellent job of helping on erosion 
prevention, water storage, flood prevention and ecosystem system 
balance. Expanded funding for farmstead shelter belts through EQIP and 
WHIP is greatly needed.
    Crop insurance: The current program is needed and should be left 
with the private sector. However some type of a cap should be placed on 
company and top executive profits for these companies that exist 
because of the government's involvement in the Crop insurance program. 
We do not want to be in a situation with crop insurance like war 
profiteers, oil companies Auto manufacturers Home loans, Wall Street 
and Derivatives. Yearly crop insurance payments to farmers should also 
be capped at $100,000. Policies should be more uniform and farmer 
friendly.
    Expansion of winter wheat winter kill coverage, crop flooding 
coverage for more than 2 years, elimination of two crop history for 
prevent plant coverage, level playing field for all producers to get 
good information on insurance products, allowing agents more 
flexibility to give good advice to producers on products available act.
    Horse processing: We need immediate reinstatement of Federal horse 
inspection by USDA and state inspected horse processing plants are 
allowed to ship interstate and for export. All travel restrictions be 
lifted on horses going to slaughter. This is a highly emotional issue. 
Decisions based on factual information must prevail. We can not 
continue without horse processing without paying a huge economic price.
    Food Safety: The need for more Federal meat inspectors to check on 
safety of imported ground beef pork lamb and chicken is greatly needed. 
Also imported meat for beef jerky is always a safety concern.
    Country of origin labeling and expansion of state inspected meats 
must continue and is greatly needed. I commend both Rep. Herseth 
Sandlin and Senator Johnson for there work in this area.
    Expansion of Rural Economic Development loans for Small State 
inspected meat processing plants and beginning farmer loans must 
continue and is greatly needed. Rep. Herseth Sandlin and Senator 
Johnson need to be commended for their work in these areas.
    Packer ownership of livestock should absolutely not be allowed 
prior to 14 days before slaughter.
                              attachment 1
Facts on Horse Processing
  u The general public is extremely uneducated about livestock, 
        especially horse processing.

  u 90% of the U.S. population has been off the farm for 3 generations; 
        that's approx. 60 years!

  u Closing of last 3 processing facilities in 2007 led to more than 
        100,000 homeless horses annually.

  u Over 170,000 unwanted horses are potentially neglected or abused 
        every year.\1\

  u Horse processing relieves unwanted horses of needless suffering

  u ``Unwanted horses'' are horses which are no longer wanted by their 
        current owner because they are ill, elderly, lame, 
        uncontrollable, or the owner can no longer afford to properly 
        care for the horse.\1\

  u Top 5 reasons horses become unwanted are due to:

    1. Economics,

    2. Old age or injuries of the horse,

    3. Loss of owner interest or use for the horse,

    4. Unmanageability of the horse, or

    5. A change in the owner's employment status.\1\

  u Horses are considered livestock because they are prey animals, not 
        predators such as cats and dogs.

  u Transportation of unwanted horses across Mexican and Canadian 
        borders has increased by 300%, since 2006.\2\

  u Horses travel almost three times the distance to Canadian and 
        Mexican processing plants (Ex: Lebanon, KS to Ft. Worth, TX = 9 
        hours, compared to Lebanon, KS to Zacatecas, Mexico = 25 hours) 
        \3\

  u Only 1% of the total U.S. horse population was processed for human 
        consumption in 2006.\2\

  u The largest markets of horse meat are France, Belgium, Holland, 
        Japan, and Italy.\1\

  u Average life span of a domestic horse ranges between 25-30 years.

  u Approximately 2,700 new rescue facilities would need to be built 
        each year to care for increasing numbers of unwanted horses.\4\

  u $1,000 is the average cost to euthanize, render, and cremate a 
        horse.

  u Over $26 million lost in revenue from Equine Industry, without 
        availability of horse processing.\2\

  u Currently, the BLM is overstocked by 10,000 wild horses and 
        burros.\5\

  u Minimum yearly cost of responsibly owning a horse is $2,500.\1\

  u The captive bolt is considered one of the three accepted humane 
        ways to euthanize a horse.\6\

  u According to the AVMA, responsible breeding and horse ownership is 
        the answer to bringing the numbers of unwanted horses down, not 
        eliminating slaughter.\6\

  u States lack the man-power, law enforcement, and financial ability 
        to care for seized horses.\6\

  u Horse survey revealed 70% of all horses at slaughter plants were in 
        good, fat, or obese condition; 72% were considered ``sound of 
        limb''; 84% were of average age; and 96% had no behavioral 
        issues.\1\

  u Present economic state has declined price of horses at sale barns 
        by over $400.
References
    \1\ 2009 Unwanted Horses Survey--Unwanted Horse Coalition.
    \2\ Messer, N.T. ``Plight of the Unwanted Horse.''
    \3\ Mapquest.com.
    \4\ AAEP.org.
    \5\ BLM.gov.
    \6\ AVMA.org. ``Unwanted Horses FAQ.''
                              attachment 2
District 1 South Dakota Farmers Union Resolutions Adopted Saturday 
        April 17th Meeting Delmont Steakhouse and Lounge Delmont, SD
Resolution I
[Send to Legislators in District 1 & Senate and House Leadership]
    We the members of District 1 SDFU strongly encourage our state 
legislators to reinstate funding for DDN Technology for K-12 Schools, 
South Dakota State Fair, Cooperative Extension and Experiment Farm yet 
this year before July 1st. The cuts should be found from across the 
board state budget cuts from non Federal matching money.
Resolution II
[Send to Governor Rounds 500 East Capitol Pierre and Steve Wegman, 
        South Dakota Wind Energy Association 300 East Capitol Pierre]
    We the members of District 1 SDFU encourage development of 
community based wind development such as South East South Dakota Wind 
LLC to ensure more money flowing into local communities from wind 
development.
Resolution III
[Send to Mike Kenyon, Dept. of Revenue, 445 East Capitol Pierre]
    We the members of District 1 SDFU support native grass, pasture and 
bay ground being assessed at lower assessed valuation rates especially 
land that is underwater at least 2 out of 3 years instead of 3 out of 3 
year provision.
Resolution IV
[Send to Doug Hagel USDA Risk Mgt., 3490 Gabel Road Suite 100, 
        Billings, Montana 59102 & Congressional Delegation]
    We the members of District 1 SDFU ask that crop ground flooded out 
3 years in a row still be eligible for Federal crop insurance. [James 
River Valley flooding.]
Resolution V
[Send to Dusty Oedekoven State Veterinarian, 411 South 4th Street 
        Pierre]
[Submitted by Terry Sestak]
    Whereas: The Human Society of the U.S. is using unethical tactics 
for their agenda.
    Whereas: The HSUS lacks true support for animal care.
    Therefore be it resolved that we the members of District 1 SDFU 
urge that factual information be distributed to dispel allegations of 
mistreatment of animals in the ranching and farming sectors.
Resolution VI
[Doug Hagel USDA Risk Mgt. ect. same as Resolution IV & Congressional 
        Delegation]
    We the member of Dist 1 SDFU support adding winter kill to Federal 
Crop Insurance Coverage [Wheat insurance for Southeast South Dakota: 
Yankton, Turner, Clay, Union and Minnehaha Counties.]
Resolution VII
[Send to Dusty Oedekoven State Veterinarian ect. see Resolution V]
    We the members of District 1 SDFU request that State Locker Plants 
be allowed to use their smoke houses on weekends to help insure timely 
production of a quality product to meet the demand. We also strongly 
encourage voluntary inspection of custom kill state inspected meats.
Resolution VIII
    We the members of District 1 SDFU wish to thank the Delmont 
Steakhouse & Lounge for the meeting room, excellent food and 
hospitality, Mayor Ervin Bietz for the Welcome, Douglas County 
President Greg Putnam for the Response, Lester Vogeli for the Secretary 
& Treasurers Report, Denis Feilmeier for the Coop Report, Terry Sestak 
for the State Board Report, Denise Mushitz for the District 1 Education 
Report, Terry Sestak, Denise Mushitz, Elaine Zirpel, Phyllis Stadlman, 
& Agnes Pavlin for the state convention report, Lester Vogeli for the 
noon prayer, Ervin Bietz guest speaker for the update on state 
inspected meats, & Senator Frank Kloucek for the Legislative Report. We 
wish to thank Douglas County for hosting and the door prizes and 
everyone who helped make the April 17th meeting in Delmont a success in 
any way. [Please send resolution correspondence to Senator Frank 
Kloucek [Redacted].]
                              attachment 3
Farm Forum
Opinion: First Producer Deserves First Profit
Opinion of Robert Thullner
Farmer and rancher from Herreid, S.D.
Dated: May 14, 2010

    The National Cattlemen's Beef Association (NCBA) supported by the 
American Meat Institute (AMI) are going against its fellow man by 
lobbying that corn used by the ethanol industry will cause a shortage 
and price rise for the feed input costs for the feeding of livestock.
    As a cattleman and grain producer all commodities deserve a just 
profit. When the livestock industry could not afford to feed and market 
product during the 1930s, the excess livestock were destroyed or usable 
small animals were given to the needy.
    We have destroyed the small livestock feeder by employing cheap 
grains subsidized by the U.S. taxpayers through government payments. It 
would be nostalgic to think that a smaller industry could return to a 
time when the feeder fed only his raised livestock and grain and 
utilized grazing for growth to insure a just livelihood for the family 
heritage.
    The NCBA's cheap input cattle feeders have alternatives, through 
future pricing of grain by using the futures buy protection with the 
most accountable program to grow and harvest their own. These same 
feeders are probably waiting in line to claim the co-products derived 
from the ethanol industry across the country and are eyeing the future 
ship loads of imported product available for use in this country.
    Will the NCBA also attack the growers of forage when cellulosic 
ethanol production expands?
    We all know that some parts of the Earth surface are only suitable 
for livestock procreation and must be complimented with areas of 
fertile, tillable with sufficient moisture to grow grains from 
sustainable cultivated crop production regions.
    A fallacy of the NCBA is that the livestock industry does not rely 
on our government for enrichment. When compared to crop production 
agriculture. NCBA livestock producers need to be reminded that they 
have received many emergency payments over the past decades. Through 
such programs as meat purchases for the school lunch, export markets 
secured by our government, public land grazing, rural water and 
permanent pasture structures complimented with cross fencing, waiting 
for the release of soil bank and conservation reserve acres to be 
released for emergency haying and grazing and now annual percentage 
harvesting of (CRP), feed trucking costs, livestock loss indemnity 
program, health inspection and grading, price reporting, Packers and 
Stockyards oversight and making sure that producers pay the USDA check-
off for each animal sold so the NCBA can administer the proceeds.
    The check-off program is the biggest guaranteed government 
collected windfall for the NCBA organization with a business objective 
to feed cattle from around the world in large concentrated and captive 
sites and adding imported commingled meat at the expense of the grain 
producers profit.
    NCBA and AMI must have it clarified that they do not own the feeder 
cattle and grain components first, unless these cattle feeding and 
processing industry memberships are already involved in vertical 
integration. If this is the scenario then lobbying is meaningless, 
because the profits are already virtually guaranteed at the meat 
counter.
                                 ______
                                 
Submitted Statement by Kraig R. Naasz, President & CEO, American Frozen 
                             Food Institute
    Chairman Peterson, Ranking Member Lucas and Members of the 
Committee, I am pleased to submit this testimony relative to the 2012 
Farm Bill on behalf of the American Frozen Food Institute.
    The American Frozen Food Institute (AFFI) serves the frozen food 
industry by advocating its interests in Washington, D.C., and 
communicating the value of frozen food products to the public. The 
Institute is comprised of 500 members including producers, growers, 
shippers and warehouses, and represents every segment of the $70 
billion frozen food industry. As a member-driven association, AFFI 
exists to advance the frozen food industry's agenda in the 21st 
century.
    AFFI believes the U.S. Department of Agriculture's (USDA) child 
nutrition programs must purchase food mindful of the shrinking 
purchasing power of the dollar without compromising nutritional value 
or safety. Frozen foods can help USDA meet this challenge.
    As you know, Section 32 is a permanent appropriation that, since 
1935 has, contributed the equivalent of 30 percent of annual customs 
receipts to support the farm sector through a variety of activities. 
Today, most of this annual appropriation is transferred to the USDA 
child nutrition account. This is an important appropriation, and AFFI 
urges the Committee to continue its support for Section 32 funds.
    Domestic feeding programs reap numerous benefits from allocation of 
Section 32 funds. First, much of the Section 32 appropriation 
transferred to the Food and Nutrition Service (FNS) child nutrition 
account is utilized to provide cash and commodity subsidies to schools 
that feed our nation's children. Second, a significant amount of 
Section 32 funds provide for direct purchases of non-price-supported 
commodities that are provided to schools and other feeding sites, 
including soup kitchens, food banks and other organizations serving 
those in need.
Frozen Fruits & Vegetables in All Feeding Programs
    The frozen food industry appreciates the recognition and inclusion 
of frozen foods in the last farm bill, the Farm, Nutrition, and 
Bioenergy Act of 2008. We applauded the accompanying Manager's 
Statement on Section 32 Purchases that stated, foods purchased for 
schools and service institutions ``may be in frozen, canned, dried, or 
fresh form.''
    Frozen fruits and vegetables have been found to be nutritionally 
equivalent and In some cases, superior to their raw counterparts. This 
was acknowledged by an FDA ruling published in the Federal Register on 
March 25, 1998, stating that after reviewing the science, it was 
determined that frozen and raw produce should be treated similarly In 
terms of the ``healthy'' label. Further, the study found ``. . . single 
ingredient frozen fruits and vegetables are nutritionally the same as 
raw fruits and vegetables. Moreover, these foods can contribute 
significantly to a healthy diet and to achieving compliance with 
dietary guidelines.'' Public health agencies, including the USDA, the 
U.S. Department of Health and Human Services (HHS), and the Centers for 
Disease Control and Prevention (CDC), have all recognized the 
nutritional contribution of frozen fruits and vegetables by 
recommending their inclusion in the diet. AFFI respectfully requests 
frozen fruits and vegetables be included in all Federal feeding 
programs, including USDA's Fruit and Vegetable Snack Program.
Benefits of Frozen Food
    Frozen foods offer a number of unique advantages, including 
nutrition, safety, convenience and economic value, which make them a 
natural fit for use in Federal programs.
    The freezing process naturally extends the shelf life of foods, 
while locking in nutritional value. Food with extended shelf life 
always makes economic sense since reduced spoilage means less food is 
wasted and dollars are saved. Frozen foods can be stored Without 
nutritional diminishment. Importantly, most frozen foods, including 
fruits and vegetables, are available year round.
    Moreover, frozen foods are safe. In a scientific article for the 
International Journal of Food Microbiology, Douglas Archer, Ph.D., 
reviewed the positive food safety record of frozen foods. In the paper 
entitled, ``Freezing: an underutilized food safety technology?'' Archer 
wrote, ``It also seems clear that there are researchable areas that 
might lead to an increased use of freezing as a barrier to foodborne 
pathogens. It seems that freezing may be an underutilized food safety 
technology that can be enhanced to become a major hurdle for pathogen 
survival.''
Conclusions
    For the health conscious, nutrition minded and/or obesity 
concerned, frozen foods provide attractive nutritional options. For the 
economically stressed and budget confined, frozen foods provide an 
affordable option that does not sacrifice nutritional value. For those 
anxious about food safety, frozen foods provide a secure reliable 
option that is safe, tasty and healthy. For the highly discriminating 
food critic, frozen foods provide options that are convenient, 
nutritious and tasty to the most discerning of palates. For all these 
reasons and more, 2012 Farm Bill programs should allow for the 
utilization of frozen foods. AFFI and the frozen food industry look 
forward to working with the Committee to maximize the benefit of farm 
bill programs to provide nutritious food for domestic feeding programs.
            Respectfully submitted,

Kraig R. Naasz,
President & CEO,
American Frozen Food Institute.
                                 ______
                                 
  Submitted Statement Richard Renelt, Pork and Grain Producer, South 
                                 Dakota
Packer's Rise to Dominance of the Pork Industry--Not Fair It Is Time 
        For A Change of Policy
    Dear Representative Peterson:

    The need for government regulation of large corporate entities 
extends beyond the banking industry. I am a 68 year old pork producer 
who has lived and experienced the transformation of a pork industry 
that was protected from corporate predatory practices by the Packers 
and Stockyard Act to an industry in which the Packers and Stockyard Act 
was circumvented by the stroke of President Ronald Reagan pen in 1980.
    From a timing point of view, Packers could not have been granted a 
better opportunity to pounce, and producers could not have been more 
vulnerable to corporate looting:

    1. Farmer's net income was near zero and had little or no financial 
        cushion even after receiving government subsidies.

    2. There was an abundance of cheap consumer subsidized corn.

    3. Packer lawyers insured that mandated farmer check-off fees be 
        limited for pork promotion only.

    4. Shackle space for spot market hogs could be legally reduced and 
        phased out.

    5. The reduction of shackle space as packers grew their breeding 
        herds, would provide multiple opportunities to steal hogs from 
        farmers.

    6. Packers capitalized on increasing pork margins and declining 
        spot market prices.

    7. Packers were free to use the benefits of farmer mandated 
        promotional advertising to invest in hog production.

    It is clear that packers were not the lowest cost producers and 
used farmers as pawns to enhance their position in the pork industry. 
It should be no surprise that since 1980, the pork industry has been 
transformed from farmers owning and caring for the pigs to be processed 
by packers, to packers owning or indirectly owning their processing 
needs with immigrants providing the bulk of the labor.
    Once again packers are flexing their political muscle in Washington 
with an all assault in killing the Ethanol Industry. Without the access 
to cheap consumer subsidized grains and very few spot market hogs to 
acquire, even with cheap immigrant labor; packers have exhausted all 
options in squeezing competition from the industry.
    Packers, farm producers and rural America would benefit from a 
policy that in time would limit packer ownership of hogs to no more 
than 50% of their processing needs. Packers would benefit in that it 
would reduce their exposure and risk to fluctuating production costs. 
Farmers would benefit in that they would regain opportunities provided 
within a free enterprise system and hog ownership. Providing provisions 
within the new farm bill, which in time would level the playing field 
for farm producers, should be the final goal.
                                 ______
                                 
                   Submitted Statement by Nestle USA
About Nestle USA
    Nestle USA appreciates the opportunity to provide testimony to the 
House Committee on Agriculture in preparation for the 2012 Farm Bill. 
Named one of ``The World's Most Admired Food Companies'' in Fortune 
magazine for thirteen consecutive years, Nestle provides quality brands 
and products that bring flavor to life every day. From nutritious meals 
with LEAN CUISINE' to baking traditions with 
NESTLE' TOLL HOUSE', Nestle USA makes delicious, 
convenient, and nutritious food and beverage products that enrich the 
very experience of life itself. That's what ``Nestle. Good Food, Good 
Life'' is all about.
About LIBBY'S'
    Our comments will deal with an aspect of future farm policy that is 
important to one of our outstanding brands, LIBBY'S' 
Pumpkin. A classic American brand for more than 75 years, 
LIBBY'S' cans 100% pure pumpkin and easy pumpkin pie mix. 
The design of current U.S. farm policy poses challenges to the farmers 
who grow pumpkins under contract for us, and we respectfully ask that 
Congress modify these policies in order to accommodate the needs of 
pumpkin growers.
Pumpkin Production for the Processing Market
    Normally, almost all pumpkins contracted for the processing market 
are grown within a 90 mile radius of Peoria, Illinois, the region where 
LIBBY'S' and its major competitor in the pumpkin market 
maintain processing plants. (LIBBY'S' plant is located in 
Morton, Illinois, about 9 miles from Peoria.) These pumpkins are fall-
harvested and are grown in rotation with corn and soybeans. The 
processing market does not involve a large number of acres: At most, 
farmers require about 25,000 acres to fulfill their present and likely 
future contracts with processing companies.
    Last year, excessive moisture in Illinois contributed to a shortage 
of canned pumpkin because of an inability to harvest the crop. This 
year, the industry has contracted acres in five additional states in 
hopes of preventing another shortage. However, that is an atypical 
practice: Normally, transportation costs make it prohibitive to 
contract for production in distant areas.
    In addition to weather problems in Illinois, companies' options for 
building relationships with new growers are severely constrained by 
U.S. farm policy. As consumers and the media become aware of the 
pumpkin shortage (The Washington Post published an article about the 
situation on June 2, 2010), they will also increasingly realize that 
the design of Federal farm programs makes it difficult for farmers to 
diversify their output and enter into profitable relationships with 
food companies. In fact, it is not only the weather but also government 
policy that has rendered grocery shelves nearly bare of canned pumpkin.
Conflict with Farm Programs
    Under U.S. farm programs, the calculation of ``base acres'' is a 
fundamental factor in the amount of program benefits for which a farm 
qualifies. Certain restrictions apply to what can be planted on base 
acres. Notably, fruits and vegetables generally cannot be planted 
without loss of base acre credit (as to the acres planted to fruits and 
vegetables) and complete loss of program benefits for the year in which 
the specialty crop production occurs. There are some limited exceptions 
to this prohibition, but they have not generally been helpful in 
addressing the situation of Illinois pumpkin growers.
    Particularly after the incorporation of soybean acreage into base 
acres under the 2002 farm legislation, the program rules have created 
difficulties for contract pumpkin growers and made it difficult for 
LIBBY'S' to attract sufficient acreage. Although producers 
find pumpkins an economically attractive supplement to corn and 
soybeans, and are in a position to forgo program benefits on those 
acres they devote to pumpkins, it is not economically viable for them 
to renounce all program benefits on an entire farm, simply in order to 
plant pumpkins on a relatively small portion of that farm. Farmers who 
have ``extra'' productive land not associated with base acres are free 
to grow pumpkins on these acres, but even so, the amount of suitable 
land that can be contracted is small.
Pilot Program in 2008 Farm Bill
    A pilot program in Sec. 1107(d) of the Food, Conservation, and 
Energy Act of 2008 was intended to address this problem, as well as 
similar situations affecting other commodities, primarily contract-
grown vegetables for the canning market. The pilot program provides for 
a reduction in base acres (and hence payments) for the year in which a 
producer plants the designated specialty crop, with these base acres 
restored in subsequent years if the producer ceases specialty crop 
production.
    The pilot program is limited to seven Midwest states, and to a 
designated number of acres within each of these states. The program 
covers cucumbers, green peas, lima beans, pumpkins, snap beans, sweet 
corn and tomatoes, all of which must be grown for processing in order 
to be eligible.
Limitations of the Pilot Program
    Because the pilot program for the state of Illinois is limited to 
9,000 acres and all the designated vegetables are eligible for these 
acres, the program does not afford sufficient acres to cover the needs 
of pumpkin processors. Therefore, we continue to face challenges in 
attracting enough acres to meet demand for pumpkin at the pre-
Thanksgiving demand peak.
    The basic structure of the pilot program is sound. We acknowledge 
that Congress does not wish to lift completely the restriction on fruit 
and vegetable production on base acres--especially the restriction on 
production for the fresh market. We understand that an acreage shift 
that might be minor for corn and soybeans could have a large impact on 
specialty crop markets. Therefore, we also acknowledge that Congress is 
likely to place limitations on the number of acres that can qualify for 
a temporary base-acres reduction without the loss of all payments for 
an entire farm.
    In essence, the problem with the pilot program is that its state 
acreage caps are too small and it is not available in most states. 
Modest expansion of these caps, along with an expansion of eligibility 
to all states, as well as extension of the program for crop years after 
2012, could solve the problem for those farmers who produce pumpkins 
for LIBBY'S'. We believe that an acreage cap of about 25,000 
acres should be sufficient to produce the amount of processing pumpkins 
needed by the industry during the lifetime of the 2012 Farm Bill. 
However, we believe all states should eligible to contract acres within 
this cap, for two reasons.
    First, as noted earlier, while in practical terms it is likely that 
the overwhelming majority of such acres will be in the state of 
Illinois when market conditions are normal, simply because of 
transportation costs, nevertheless the experience of recent years 
demonstrates that the industry sometimes needs the flexibility to 
contract in additional states without jeopardizing program benefits for 
farmers in those states. Second, from the standpoint of program design 
and equity, it seems appropriate to afford similar benefits and 
opportunities to farmers, regardless of the state in which their farm 
happens to be located.
    (We have confined our comments to pumpkins, since that is the crop 
of concern to LIBBY'S'. However, we certainly would not 
object to corresponding expansion of the pilot program with respect to 
other contract vegetables for the processing market that are covered by 
the existing program.)
No Harm to Other Growers
    Modifying the pilot program to accommodate more contract pumpkin 
production will not affect the Halloween market for fresh pumpkins. 
These are grown all over the United States and would be neither 
penalized nor subsidized by the modification we request.
    Neither would a modification of the pilot program harm growers of 
other specialty crops: The modification we are requesting would apply 
only to pumpkins for the processing market. (As noted above, we would 
not object to modifications that might be needed to accommodate other 
vegetables grown for processing, and such modifications should in turn 
pose no threat to producers of these commodities for the fresh market.)
Benefits for Overall Farm Program
    It is no secret that other countries have become bolder and more 
litigious in challenging U.S. farm programs at the World Trade 
Organization. Already, it appears that the Committee on Agriculture 
will need to grapple with modifications to the cotton program as a 
result of an adverse WTO finding.
    In previous WTO jurisprudence, the ``green box'' (non-trade-
distorting) status of direct payments has been called into question. 
The case did not invalidate these payments since they were not directly 
at issue, but it did assert that they failed to meet the test in the 
WTO Agreement on Agriculture for bona fide decoupled payments, 
precisely because of growers' inability to produce fruits and 
vegetables on acres receiving direct payments.
    While nothing we are proposing would completely lift these planting 
restrictions, we believe that direct payments should be at least 
somewhat more defensible in any future challenge, to the extent that 
the United States can show that it has structured its programs to 
accommodate the planting of specialty crops. Such structural 
accommodations would seem to constitute an important part of any 
defense of the payments against a WTO challenge--something that 
certainly cannot be ruled out in the years ahead. In that sense, 
expanding the scope of planting allowances for pumpkins can actually 
benefit producers of wheat, cotton, rice, corn, soybeans, peanuts and 
other oilseed crops.
Conclusion
    The change we are requesting is modest and limited in scope. 
However, we believe it represents sound public policy.

    1. Pumpkins are a nutritious vegetable food whose consumption 
        should be encouraged. Pumpkins are naturally low in calories 
        and fat with no trans fat, saturated fat or cholesterol. One 
        serving is naturally sodium free and is an excellent source of 
        fiber and high in Vitamin A (with 80% as Beta-Carotene, an 
        antioxidant). Pumpkins provide added value for Midwest corn and 
        soybean producers. Besides being a beneficial rotation crop 
        that enhances corn yields in the year following pumpkin 
        production, pumpkins are normally more profitable for farmers 
        on an acre-for-acre basis.

    2. Pumpkins are a source of diversification for farmers. Many 
        policymakers have recognized the drawbacks of producers 
        becoming dependent on one or two crops. Specialty crops like 
        pumpkins allow diversification, but with an assured market and 
        at a known price.

    3. The changes we are requesting will make U.S. farm programs more 
        flexible, more diverse, and better able to accommodate changing 
        market needs and demand trends. At the same time, the requested 
        changes will not have an adverse impact on growers of any 
        commodity, and will--to the extent that payments are forgone--
        save money for the Federal Government in a time of historically 
        high budget deficits.

    We appreciate the Committee's consideration of our views, and look 
forward to working with the Committee in the 2012 Farm Bill to improve 
U.S. agricultural policy.
  Submitted Letter by Keith Trego, Northern Great Plains Working Group
June 11, 2010

House Committee on Agriculture,
Washington, D.C.

RE: Recommendations for Conservation Programs in the 2012 Farm Bill

    Dear Sirs:

    The Northern Great Plains Working Group (NGPWG) is a local 
coalition of organizations and agencies committed to the continuance of 
the wildlife benefits of farm bill initiatives in the Dakotas and 
Montana, with special interest for the Prairie Pothole Region. The 
NGPWG believes that unique opportunities exist to provide all 
agricultural producers an opportunity to strengthen and expand 
conservation of natural resources in the 2012 Farm Bill. When properly 
administered, recommended programs and policies hold great potential to 
stabilize the national farm economy, restore and conserve our natural 
resources, address the potential for responsible renewable energy 
production on agricultural lands, strengthen public support for Federal 
farm policy through responsible expenditure of tax dollars, and assure 
long-term strategic production of food and fiber through the 
implementation of sustainable agricultural practices.
    The NGPWG would like to have the recommendations found on the 
following pages to be included in the House Committee on Agriculture's 
farm bill field hearing record:
Conservation Compliance (Swampbuster)
    The NGPWG recommends that Wetland Compliance, better known as 
Swampbuster, should be retained with one modification. Swampbuster has 
been effective in protecting hundreds of thousands of acres of wetlands 
since its inception in the Food Security Act of 1985. Coupled with 
several wetland conservation programs, such as CRP and WRP that provide 
incentives and alternatives to producers who experience difficulty with 
farming in and around wetlands, Swampbuster provides a balanced 
approach to wetland protection. However, one important form of Federal 
assistance, crop insurance, is no longer included as one of the Federal 
program benefits that landowners would be ineligible for if found in 
violation of Swampbuster. When Swampbuster was first enacted in 1985, 
crop insurance was included as one of the Federal program benefits that 
a person would no longer be eligible to receive if found in violation. 
In the Food, Agriculture, Conservation and Trade Act of 1990, crop 
insurance was removed from the list of ineligible Federal program 
benefits. Crop insurance (and disaster assistance) is an important part 
of the safety net that helps producers manage risk on their farm, but 
should not provide incentive to convert marginal lands, including 
wetlands, to cropland.
Conservation Compliance (Sodsaver)
    The Highly Erodible Land compliance provision, better known as 
Sodbuster, has done very little since its inception in the Food 
Security Act of 1985 to slow conversion of grassland to cropland. Data 
from the USDA National Resources Inventory illustrate that more than 7 
million acres of rangeland have been converted to other uses, primarily 
cropland, from 1997-2007 (USDA-NRI 2007). In the Dakotas and Montana, 
data from FSA indicate that more than 500,000 acres of native prairie 
were converted to cropland from 2002-2007. Conversion of native prairie 
creates marginal cropland at best and contributes to the continued 
steep decline in grassland birds, which are the most significantly 
declining group of species in North America. Marginal cropland is prone 
to failure, requiring disbursement of an ever increasing portion of the 
Federal budget for crop insurance and disaster payments. A 2007 GAO 
report found that Federal crop insurance and disaster assistance 
payments are providing an important incentive to expand crop production 
on native prairie. Stronger compliance provisions are needed to stem 
conversion of grasslands. We recommend enactment of a ``Sodsaver'' 
provision that requires ineligibility for Federal crop insurance and 
disaster assistance payments on acreage of native prairie without a 
previous cropping history that is converted to cropland.
Conservation Reserve Program (CRP)
    Reauthorize CRP and expand the current acreage cap to the 
originally-authorized level of 45 million acres. CRP remains an 
extremely popular program with producers and continues to provide 
significant benefits to wildlife, water quality, and soil conservation. 
Maintain co-equal CRP objectives of reduced soil erosion, water 
quality, and wildlife habitat. Require USDA to regularly review and 
update CRP rental rates to ensure that CRP rental rates are competitive 
with cash rental rates. Reauthorize the Farmable Wetlands Program 
(FWP). Require USDA to prioritize the following in both the general 
sign-up EBI and the Continuous CRP sign-up: (a) wetlands; (b) unique 
habitats that benefit the conservation of at-risk or state/national 
species identified in state wildlife action plans; (c) habitats of 
national significance; and (d) State Conservation Priority Areas (CPA).
    Ensure expiring CRP contracts with wetlands and CPA's are 
prioritized for re-enrollments. Require management appropriate for the 
location that preserves soil, water, and wildlife habitat quality 
values for the duration of the CRP contract. Cropping history dates 
from the 2008 Farm Bill should be maintained to prevent recently 
converted grasslands from being eligible for CRP. Increase involvement 
of state, Federal, and nongovernmental fish and wildlife agencies in 
the administration and management of CRP, especially in matters 
relating to the Primary Nesting Season and vegetation management 
cycles, by establishment of state Habitat Technical Teams (HTTs). 
Increase acreage allocations for CP-38 (State Acres for Wildlife 
Enhancement) to 50,000 acres.
    The NGPWG recommends that Congress consider the establishment of a 
pilot conservation practice that dedicates a subset of CRP acres in the 
Northern Great Plains to long-term, grass-based agriculture in order to 
create a ``working lands'' component within the program. Such a program 
would provide longer-term contracts of 20-50 years with more frequent 
use (haying and grazing) allowed and reduced rental payments to offset 
the allowed use. Grazing shall be allowed annually throughout the year 
under an approved NRCS grazing plan. Haying will be allowed annually, 
but only 50 percent of a field can be hayed each year, and it must be 
restricted to time periods outside of the Primary Nesting Season.
Wetland Reserve Program (WRP)
    Changes in the 2008 Farm Bill made the Wetland Reserve Program more 
effective in protecting, restoring, or enhancing wetlands. The program 
can now target potential participants who wish to maintain the WRP 
easement as part of an agricultural operation under compatible use 
permits. However, additional streamlining would allow NRCS to further 
implement the intent of Congress in establishing WRP, one of which was 
to remove marginal croplands from production to alleviate annual 
expenses related to cropping. The NGPWG recommends that NRCS be allowed 
to delegate to the State Conservationist the authority to approve the 7 
year ownership waiver. This would expedite the easement acquisition 
process. Additionally, in order to achieve the benefits of WRP, 
including restoring wetlands and their functions, NRCS should be 
allowed to provide 100 percent financial assistance to restore wetlands 
and associated habitat for 30 year easements.
Environmental Quality Incentives Program (EQIP)
    Reauthorize the program and allocate a minimum of 10 percent of 
EQIP dollars for wildlife habitat creation, restoration or enhancement. 
Assign co-equal status for fish and wildlife concerns with soil and 
water concerns in EQIP. In order to achieve co-equal status, Habitat 
Technical Teams (HTTs) need to be formed to develop, review, and 
recommend fish and wildlife habitat criteria related to USDA and NRCS 
conservation programs. HTTs can provide NRCS with the needed guidance 
to allocate funds toward specific conservation practices to effectively 
and efficiently meet EQIP fish and wildlife objectives. This process 
would move fish and wildlife into co-equal status with other resource 
concerns and assure that all states consider and promote wildlife 
habitat along with other priorities for EQIP. State, regional, and 
other conservation plans are readily available to strategically 
implement the program under EQIP (i.e., National Fish Habitat Action 
Plan, state wildlife action plans, etc.).
Wildlife Habitat Incentive Program (WHIP)
    As the need to focus more attention on declining and at-risk 
wildlife species becomes increasingly apparent, WHIP's role among farm 
bill conservation programs becomes all the more essential. The program, 
specifically established to help landowners develop and enhance fish 
and wildlife habitat on their property with both financial and 
technical assistance, has the ability on its own or in concert with 
conservation partnerships to address important management needs 
identified in national, regional, or state plans (i.e., state wildlife 
action plans). In order to accomplish this goal effectively, however, 
WHIP needs to be authorized to provide incentive payments or some level 
of replacement of foregone income, in addition to cost-share payments 
the program currently provides. Materials and input costs are only a 
portion of the price tag required to implement beneficial wildlife 
habitat improvement projects. Initiation of wildlife habitat projects 
often requires modifications in the use of the property which can 
result in temporary lost income. An incentive payment, in addition to 
cost-sharing, would make the transition of production land to wildlife 
habitat a more feasible venture.
    The flexibility of this program is its hallmark and should be 
continued to provide for the complex needs of diverse suites of species 
in a wide array of habitats. To best custom fit the features of 
projects to meet the complexities of species and habitat requirements, 
readily available technical assistance for the landowner at the local 
level is crucial. This can be achieved with additional technical 
assistance funding for NRCS, as well as the establishment and use of 
Habitat Technical Teams (HTTs), a cadre offish and wildlife 
professionals to advise NRCS on implementation of WHIP projects. The 
program should also continue to be available to non-producers, as it 
has been in the past.
Conservation Stewardship Program (CSP)
    Continue the Conservation Stewardship Program requiring fish and 
wildlife habitat as a criterion for participation. CSP can provide an 
avenue for participants to provide fish and wildlife habitat on 
enrolled land. Habitat Technical Teams (HTTs) can provide NRCS with 
needed guidance in the development of regionalized quality wildlife 
enhancement activities.
Grassland Reserve Program (GRP)
    The NGPWG recommends that Congress reauthorize GRP and expand the 
acreage cap to 10 million acres, with up to 30 percent of the acres 
dedicated to protection of native grasslands in the Northern Great 
Plains, and at least 20 percent of the acres dedicated to protect 
grasslands (both native and tame) currently in existence under CRP. A 
minimum of 60 percent of GRP funds should be used for purchasing 
permanent easements. The 2012 Farm Bill should authorize a minimum of 
3.0 million acres for enrollment annually during FY 2013-2016. Payments 
for easements limited by state law to 99 years should be calculated at 
90 percent of the value of permanent easements. The GRP was originally 
authorized in the 2002 Farm Bill with a statutory spending cap of $254 
million and an acreage cap of 2 million acres. For FY 2003-2006, only 
$217 million was provided and 909,000 acres enrolled. The 2008 Farm 
Bill authorized an additional 1.22 million acres. GRP is a voluntary 
conservation program designed to assist producers in protecting, 
restoring, and enhancing grassland, including rangeland, pastureland, 
shrub land and certain other lands. GRP emphasizes support for working 
grazing operations, enhancement of plant and animal biodiversity, and 
protection of grassland and land containing shrubs and forbs under 
threat of conversion to other uses. GRP is an agriculture land 
protection program and is one of the few farm bill benefits offered to 
grassland agriculture producers. GRP funding and acreage authorization 
have been woefully inadequate. Landowner demand for the program far 
exceeds the funding provided. A well-funded GRP has the potential to 
positively stabilize land use and secure the future of sustainable 
agriculture in the Northern Great Plains.
Farmland Protection Program (FPP)
    While the Farmland Protection Program has been used sparingly in 
the Dakotas and Montana, it remains an important tool for protection of 
agricultural land and associated conservation benefits. In a state such 
as North Dakota where the duration of conservation easements is 
restricted by state law, the NGPWG recommends that the Secretary 
require the inclusion of an additional statement that clarifies the 
Federal right in FPP and assures the permanent nature of the easement, 
thereby safeguarding the Federal investment and ensuring participating 
landowners ability to claim a charitable donation or qualified 
conservation contribution as defined by section 170(h) of the Internal 
Revenue Code of 1986. In the case of existing FPP easements in states 
with such easement restrictions, FPP easement language should be 
amended to add the referenced clarifying language to assure the 
permanent nature of any easement purchased using FPP funds. We also 
recommend that the funding aspect of FPP be enhanced by allowing more 
flexibility. We suggest changing the eligible entity's share of the 
cost of purchasing a conservation easement or other interest in 
eligible land from the requirement of ``an amount not less than 25 
percent'' to ``an amount up to 35 percent'' of the acquisition purchase 
price. At the same time the participating private landowner should be 
allowed a charitable donation or qualified conservation contribution 
``of up to 35 percent of the acquisition purchase price.''
Biomass Crop Assistance Program (BCAP)
    The NGPWG supports the concept of renewable energy production from 
dedicated perennial energy crops produced on agricultural lands. In 
general, we also support the establishment and purpose of BCAP as 
outlined in the 2008 Farm Bill and associated legislative intent 
outlined in the Statement of Managers.
    We offer our support, scientific expertise, and collaborative 
spirit to work with all partners to ensure renewable energy 
opportunities also translate into sound natural resource management for 
the region. With proper planning, research, and input from diverse 
stakeholders, we are confident that acres planted to dedicated biomass 
energy crops may serve the dual purpose of providing energy feedstock 
and provide multiple conservation benefits such as fish and wildlife 
habitat, reduced soil erosion, and flood water retention.
    The NGPWG supports identified exclusions of lands eligible for BCAP 
including Federal or state-owned land, land that is native sod as of 
the date of enactment of the 2008 Farm Bill, and land enrolled in CRP, 
GRP, or WRP. Existing conservation programs, most notably the CRP, 
which provide undisturbed cover for wildlife, forage and pasture 
reserves to livestock producers in times of drought or flood emergency, 
and a host of societal benefits, have already proven themselves 
successful and cost effective. They not only provide landscape 
benefits, but also save tax dollars on lands that would otherwise be 
recipients of various agricultural support programs. For these and 
other reasons, we advocate that no lands under CRP contract be 
converted to biomass production, but rather that active cropland acres 
be converted to biomass production using pilot, plant-siting criteria 
and landscape planning in combination with appropriate producer 
incentives to ensure necessary supplies of biomass deliverable in a 
cost effective manner. Existing, successful conservation program lands 
should remain in their current use. However, if a pilot conservation 
practice designating a ``working lands'' component of CRP were 
established, as suggested in earlier comments, we would wholeheartedly 
support and encourage use of cover harvested from those acres be 
utilized for BCAP.
    We advocate that the 2012 Farm Bill incorporate best management 
practices for production, harvest, transportation, and conversion of 
biomass for energy production based on the best science available.
    As the Northern Great Plains Working Group, we appreciate the 
opportunity to provide our recommendations to be included in the House 
Committee on Agriculture's field hearing record.
            Sincerely,

            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Keith Trego,
Northern Great Plains Working Group.

CC:

ND Senator Kent Conrad,
ND Senator Byron L. Dorgan,
ND Congressman Earl Pomeroy,
SD Senator Tim Johnson,
SD Senator John Thune,
SD Congresswoman Stephanie Herseth Sandlin,
MT Senator Max Baucus,
MT Senator Jon Tester,
MT Congressman Denny Rehberg.


 HEARING TO REVIEW U.S. AGRICULTURE POLICY IN ADVANCE OF THE 2012 FARM 
                                  BILL

                              ----------                              


                         MONDAY, JUNE 28, 2010

                          House of Representatives,
                                  Committee on Agriculture,
                                                  Fayetteville, NC.
    The Committee met, pursuant to call, at 9:36 a.m., in 
Section A, Crown Expo Center, 1960 Coliseum Drive, 
Fayetteville, North Carolina; Hon. Mike McIntyre [Member of the 
Committee on Agriculture] presiding.
    Members present: Representatives McIntyre, Kissell, 
Etheridge, and Thompson.
    Staff present: April Slayton, Liz Friedlander, Scott 
Kuschmider, John Konya, Claiborn Crain, Michael Dunlap, and 
Sangina Wright.

 OPENING STATEMENT OF HON. MIKE McINTYRE, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    Mr. McIntyre. The hearing of the Committee on Agriculture 
of the United States House of Representatives is now called to 
order.
    We come together to review the U.S. agriculture policy in 
advance of the 2012 Farm Bill, a bill which will include not 
only many issues involving farming and the farming community, 
but also agribusiness and many of our rural economic 
development enterprises and concerns, small business and how it 
also affects other entities such as law enforcement, emergency 
personnel, fire departments, broadband access--a number of 
other things that affect economic opportunities in rural 
America. So the hearing is quite a broad one in terms of how 
the farm bill is not only, of course, about our farms and 
farmers, but also much more than that when we consider energy, 
conservation, credit, all of the concerns that affect rural 
America. And in our case, here in North Carolina as the host 
state, 85 percent of North Carolina is classified as rural. So 
we are talking about policies that will affect 85 percent of 
North Carolina today--85 of our 100 counties are classified as 
such. So the math is easy when we say 85 percent of our state 
is affected.
    I am Mike McIntyre, I am happy to be hosting this today and 
serving at the request of our full Committee Chairman Collin 
Peterson to be able to chair this hearing of the full Committee 
today. As many of you know, I also serve as Chairman of the 
Subcommittee on Rural Development, Biotechnology, Specialty 
Crops, and Foreign Agriculture. So I am privileged today that 
we would have this here in southeastern North Carolina. I am 
also privileged to be joined by colleagues from right here who 
also represent the Fayetteville area. Larry Kissell, a Member 
of the full Committee, and Bob Etheridge, who is of course a 
former Member of the full Committee, but also now serves us so 
well on Ways and Means Committee. And then, of course, Glenn 
Thompson, who has come to be with us today and is serving in 
the capacity as Ranking Member. I will let each of them have 
the opportunity to make some brief comments as we begin the 
meeting.
    Let me first of all apologize, many of you know I do not 
normally sound this raspy, I have had a few issues today with 
some illness involving my father who was in the hospital over 
part of the weekend. He fell again last night when he went 
home, and I have also been dealing with laryngitis myself. So 
hence, the unusual start to this morning for me. But we will 
try to go right ahead and stay on schedule. We do go into 
session in Washington tonight, so we are going to follow the 
scenario as scheduled so that we can complete this hearing in a 
timely fashion this morning.
    I want to thank all of you for coming today. We already 
have a full house and they are literally bringing in more 
chairs with the standing room only crowd. It is a great 
testimony to the commitment we have here in not only the 7th 
Congressional District but also in the host community of 
Fayetteville and Cumberland County, and also for all of North 
Carolina. So we are honored to have this hearing for this part 
of the country right here in North Carolina today.
    I would like to remind Members to speak directly and 
closely to the microphone, as well as our witnesses today, to 
make sure that everyone can hear what is being said.
    Now I would like to call on Mr. Thompson, who is here, and 
he has traveled the farthest to be with us, to introduce 
himself and to make any opening comments. Mr. Thompson.

 OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN 
                   CONGRESS FROM PENNSYLVANIA

    Mr. Thompson. Thank you, Chairman McIntyre--thank you for 
inviting me to attend this hearing today and being a part of 
it. I also would like to extend my gratitude to the Crown Expo 
Center, a wonderful facility, and the good folks in 
Fayetteville who welcomed the Committee here today.
    I represent Pennsylvania's 5th Congressional District, but 
I will tell you that a very important part of my education came 
from Chapel Hill, so it is good to be back in North Carolina.
    Over the past few months, the House Agriculture Committee 
has been on a tour of America's heartland holding hearings in 
more than five states, and over a 4 day period in May, I 
attended field hearings in Georgia, Alabama, Texas and South 
Dakota. It has really been a wonderful experience for me to 
hear the stories of a large cross section of the various 
agricultural industries and to hear from those whose 
livelihoods are most affected by Federal agriculture policy.
    Equally so, it is always refreshing to leave Washington, 
D.C., especially with the Agriculture Committee which, by and 
large, is a great bipartisan working group. And in the current 
environment, this is just something you do not hear about.
    I believe the 2008 Farm Bill is a good representation of 
that spirit of consensus, and I look forward to continuing our 
information gathering sessions. This will allow the Committee 
to craft policies that will better serve our agricultural 
sectors and provide long-term stability to our farmers and our 
ranchers. There is a big world out there and we must ensure 
that the United States is fully equipped with the tools that it 
needs to compete in the global market.
    Most farms are small businesses and remain the backbone of 
the strength of the economy in rural America. Moving towards 
2012, the Committee must do everything in its power to 
alleviate burdens on these family businesses and create an 
environment that will foster positive economic growth.
    I look forward to the testimony of the witnesses today and 
I thank all the witnesses in advance, and I yield back.
    Mr. McIntyre. Thank you so much, and thank you for 
traveling all the way from northwestern Pennsylvania to be with 
us today, Mr. Thompson. It is good to have you here and also as 
close as we can get you to Chapel Hill.
    Before I make a full opening statement and trying to save 
my voice some, I am going to go ahead and yield to my good 
friends and colleagues from North Carolina. First, Larry 
Kissell.

 OPENING STATEMENT OF HON. LARRY KISSELL, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    Mr. Kissell. Thank you, Mr. Chairman; Mr. Ranking Member. 
Welcome, everybody here today and of course, greetings from the 
8th District of North Carolina that begins just a little ways 
from here and goes west to Charlotte. So all the good folks 
from wherever you came from, especially the 8th District, we 
welcome you today.
    I do have a brief opening remarks I want to read into the 
record.
    I am very pleased that the Agriculture Committee has 
decided to hold this hearing today. I am proud to serve as a 
Member of the Agriculture Committee where we work to protect 
and assist our nation's ranchers, farmers and rural citizens. 
We all know the farm bill affects various regions of the 
country in very different ways. While certain programs may work 
well for farmers in the West or Midwest, those same programs 
may not be as effective in the South and vice versa.
    I am confident that the panelists today will provide the 
Committee with a southern perspective and information that will 
enhance the next farm bill, and will allow us to work even 
better to bring a cross section of the country into play for 
the farm bill.
    As many of you know, agriculture is North Carolina's number 
one industry, responsible for over $70 billion in economic 
activity. North Carolina is one of the top states in the 
production of tobacco, cotton, soybeans, poultry and hogs. 
While we continue to be a leader in these traditional 
commodities, North Carolina has quickly become the nation's 
third most diverse agricultural economy.
    While the agriculture community has grown ever more diverse 
in its scope over the years, so has the farm bill. Aside from 
the protection of traditional farms and ranches, the farm bill 
also greatly affects renewable energy, rural development and 
Federal nutrition programs.
    With that in mind, I want to thank all the panelists for 
agreeing to appear before us today and I feel that the 
panelists also represent a large part of the broad population 
affected by this farm bill legislation.
    Thank you so much, Mr. Chairman, I yield back.
    Mr. McIntyre. Thank you, Mr. Kissell. Mr. Bob Etheridge.

 STATEMENT OF HON. BOB ETHERIDGE, A REPRESENTATIVE IN CONGRESS 
                      FROM NORTH CAROLINA

    Mr. Etheridge. Mr. Chairman, thank you and to the Ranking 
Member and to Chairman Peterson and Ranking Member Lucas. I 
appreciate them allowing a field hearing to be held here and 
Mr. McIntyre taking the lead in it.
    I am going to be brief, Mr. Chairman, and actually submit 
my statement for the record. The only thing I want to say is 
that to all of you, we call it a food bill, but actually in the 
last farm bill, it was the first one that we actually called a 
nutrition and energy bill, simply because that better states 
what we are about.
    Agriculture is important, it is the biggest industry, but 
it reaches--as the Chairman has said already, the title and 
responsibilities are so much greater than they have ever been. 
For the first time, in the last legislation, we actually have 
an energy title, a substantial part, looking to the future of 
how the folks who till the soil, the people who utilize 
agriculture can really be a part of the answer to America's 
energy needs for the future.
    As the Chairman said, I sit on the Ways and Means 
Committee, I am proud to be the first North Carolinian there in 
over 50 years, but more importantly, I sit on the Trade 
Subcommittee that deals with all the trade treaties and other 
stuff we deal with in agriculture. It is an important piece 
with other areas and I am very pleased that we have just, with 
the White House's help, opened up for poultry and slowly coming 
with pork, the trade opportunities with Russia and with China 
again. That will have a significant impact on rural North 
Carolina. And I would encourage all of you as you leave, if you 
are from Robeson County or over in that area, offer up a prayer 
for rain, we need some rain.
    I yield back.
    Mr. McIntyre. Thank you so much, Congressman Etheridge.
    Thanks again for all of you all coming here today. I 
particularly, before anything else is said, want to thank the 
House Agriculture Committee staff who has done yeoman's work in 
preparing and making sure everything was in order for this trip 
down to North Carolina. So thanks to you all. And I want to 
thank the local Congressional staff, from my office especially, 
but also from our other local Congressional offices. If you 
will join me in giving these wonderful staff people a big hand.
    [Applause.]
    Mr. McIntyre. The Agriculture Committee has traveled around 
the country listening to farmers and ranchers about the current 
farm bill, what parts are working well and what needs to be 
improved. And today, of course, it is our turn, not only for 
this part of North Carolina, but to speak on behalf of all of 
North Carolina and this region of the country. And that is why 
I am especially thrilled that Congressman Thompson would come 
down from Pennsylvania, because we realize that local problems 
also can have significant impact on what we do nationally with 
regard to farm policy, and with affecting economic opportunity 
in rural America.
    We know North Carolina plays an important role in our 
nation's agricultural economy, and here we can set a great 
example for the entire nation. We have an agriculturally 
diverse state and we have been a leader in agricultural 
biotechnology and research in particular, which I mentioned 
earlier is under the Subcommittee that I chair. I have been 
particularly thrilled to give national examples of things like 
the agricultural biotechnology associate degree, the first 
offered in the nation is right down the road at Southeastern 
Community College in Whiteville, for example. And when we look 
at biofuels and the opportunity for bioenergy research, algae 
being converted into bioenergy just a little further down the 
coast in Brunswick County at Brunswick Community College or the 
Bio-Ag Network for the entire State of North Carolina being 
centered out of Robeson Community College just 30 miles south 
of here down I-95 at Robeson Community College in my home 
county. Or when we look at the great work that is being done in 
marine biotechnology at UNC-Wilmington with the new Marine 
Biotechnology Center that is getting ready to have ground 
broken in just a few weeks, and how that ties in specifically 
with what we are doing in aquaculture as well as agriculture in 
conjunction with the bio-ag network out of Robeson Community 
College. But the list goes on and on. Our great community 
college network in North Carolina, those are but some examples, 
there are many more.
    And we know between NC State University and the great 
research in particular that they have been doing in 
agriculture, not only currently but through the years, as well 
as the other great universities in our state university system, 
we are very grateful for the example North Carolina can set on 
a national level. From commodities to livestock, from renewable 
energy to rural broadband and helping small business and rural 
entrepreneurs, we want to keep North Carolina moving forward 
and as a positive national example.
    What we hear from our witnesses today will be invaluable as 
we work to achieve that goal of making sure that this new farm 
bill coming up in the year as we look ahead now will be 
something that, for years to come, will continue to make 
positive inroads for rural economic development, for 
biotechnology and for, of course, doing the right thing by our 
agribusinesses and definitely by our farmers and farming 
communities.
    The popular safety net many producers are familiar with is 
just one part of a bill that affects nutrition and conservation 
programs, rural economic development, farm and forest-based 
renewable energy, fruits, vegetables and organic and local 
agricultural promotion. If there are ways to strengthen the 
farm safety net, promote renewable energy, grow the rural 
economy given the resources that are already available to the 
Agriculture Committee, then that is the direction we should 
consider moving toward.
    Getting a farm bill enacted into law is never easy, and we 
know it is not an easy proposition with so many different types 
of interests and concerns. We all are committed to working 
together in a bipartisan fashion, as we have always sought to 
do through this Committee, to make sure we get the best 
possible bill crafted with the best policies possible. We would 
far rather you say today here is what we suggest, here is an 
idea we would like you to hear, here is a problem that we have 
a suggested way of fixing rather than wonder why did they not 
think of this, why did anybody not say anything about that 
issue. Well, say it. Today is the opportunity to do it.
    We hope our witnesses will be straight-forward and candid 
about what is working so that we do not take that for granted 
and think well, nobody talked about it, so let us move on. If 
it is working and you like it, tell us. If it is not working 
and you do not like it, I am sure you will tell us too. But we 
need to know then what do you suggest, what is your suggestion, 
because you are on the front lines. That is why we have these 
hearings so that no one is second-guessing what you actually 
think is best.
    For all those who are joining us today in the audience, 
thank you again for taking time to come. I want to also say 
thank you particularly to the 7th Congressional District 
Advisory Committee on Agriculture and Jimmy Pate is our great 
Chairman. I know many members of this advisory committee that I 
work with regularly are here today as well. Thank you for your 
constant work on agriculture issues, and thank you for 
constantly giving me the opportunity to work with you on these 
ground-level issues that affect what you do every day.
    For those who may be watching on the Committee's live web-
cast, we welcome you for joining us as well. We have a survey 
posted on the Committee website, please note this so that if 
you are not testifying today, but think of an answer or think 
of a solution or suggestion, you can contribute. The website is 
agriculture.house.gov. It is that simple, 
agriculture.house.gov. You can send in your suggestions. And we 
invite all those watching by web-cast, or those who may later 
read about this in the newspaper or hear about it through other 
media, to join us in giving us your suggestions.
    We also have cards available with the web address so that 
everyone has a chance to tell the Committee what is working and 
what new ideas you would like us to consider for the next farm 
bill. All comments received via the web form before July 28, 
which is 1 month from now, will be included in the Committee's 
farm bill hearing record. So it will not just be a nice thought 
that you happened to send in. It will be included in the 
official record if you get it to us by July 28, so please take 
advantage of that opportunity. We want everyone to know this is 
America's opportunity to help us move forward in the places 
that we love and are so endeared to, and for many that we call 
home.
    So thank you for coming today to help us improve that 
quality of life. Due to the scheduling commitments of some of 
our witnesses on the first panel and wanting to make sure that 
we have time to hear the witnesses on the second panel, and 
that we all have time to still get back to Washington to vote 
this evening since we go into session at 6:00, I remind our 
witnesses that we will adhere to the 5 minute time limit. If 
you choose to read your testimony, make sure you can read it in 
5 minutes or we will have to stop it. If you cannot read it 
within 5 minutes, then please highlight the most important 
points so that you can get those out within the 5 minutes that 
you have. And then we will proceed in a timely fashion allowing 
Members to also adhere to the 5 minute limit for questioning. 
That way, we can make sure that every witness is heard, every 
Member has a chance to ask a question, and that way we can 
proceed to the second panel to do the same and therefore finish 
in a timely fashion.
    With that said, we now call our first panel to begin 
testimony. And for those who still need a seat, we are still 
bringing in chairs. Our first panel of witnesses today includes 
Mr. Ronald Allen, who is representing row crops, timber, pork, 
poultry and beef and is a producer in all of those areas. And 
Ronald, we welcome you today.
    Mr. Steven Burke, who is the biofuels representative from 
Oxford, North Carolina; thank you for joining us.
    Mr. Frank Lee who represents corn, cotton, wheat, soybean 
and beef cattle production from the Raleigh area.
    Mr. Allen McLaurin, cotton producer from Laurinburg.
    Thank you all for joining us today. Ronald Allen was the 
only one I did not say where he was from, but Ronald has worked 
in Lumberton, he has lived in Bladen County, and also holds a 
position with one of our great farm organizations and credit 
organizations here in Cumberland County. Thank you all for 
being with us today. I would now like to call upon our first 
witness to proceed and that would be Mr. Ronald Allen.

STATEMENT OF RONALD J. ALLEN, ROW CROP, TIMBER, PORK, POULTRY, 
              AND BEEF PRODUCER, FAYETTEVILLE, NC

    Mr. Allen. Thank you, Mr. Chairman. Today I am representing 
Farm Credit and Farm Credit Administration.
    I would like to thank, number one, the Committee for 
conducting this hearing to begin the early discussion of the 
2012 Farm Bill. And I appreciate the opportunity to testify. My 
name is Ronald Allen and I am a farmer-rancher from Bladenboro 
about 40 miles south of the Crown Coliseum. I have been 
involved in farming for over 23 years and my operation consists 
of row crops, timber, eight swine nurseries, 12 poultry houses 
and the Allen Brothers Hunting Preserve. I also have a 150 head 
cow/calf operation. For the past 5 years, I have served as 
board Chairman of Cape Fear Farm Credit, an agricultural 
lending cooperative headquartered here in Fayetteville. I am 
testifying today as a farmer-rancher and a Director of Cape 
Fear Farm Credit and I will share some of the issues that 
affect the Farm Credit System's ability to provide credit for 
American farmers.
    As you are well aware, agriculture is an extremely capital 
intensive business and Cape Fear Farm Credit has been 
instrumental in the success of my family's farming operation 
and our ability to expand over the years.
    At this time, I will forego reading the testimony but I 
will cover some of the major, important bullet points.
    A little background on Cape Fear Farm Credit; Cape Fear 
Farm Credit is part of the Farm Credit System with nearly 
500,000 members which serves every county in America and has 
loans in excess of $160 billion. Cape Fear Farm Credit is an 
agriculture lending cooperative locally owned by member 
borrowers who elect a board of directors. Cape Fear Farm 
Credit's annual volume is nearly $1 billion. Cape Fear Farm 
Credit has approximately 3,000 members. We are the dominant ag 
lender in our chartered territory which consists of 12 counties 
in southeastern North Carolina.
    The patronage program: Member borrowers share in profits of 
the cooperative. This helps reduce the cost of borrowing money. 
Patronage paid since 1988 totals more than $158 million. This 
shows Cape Fear Farm Credit's financial strength and commitment 
to ag.
    Rural America Bond Program: This creates a flow of money to 
rural areas. Several projects that Cape Fear Farm Credit has 
financed include the North Carolina Future Farmers of America 
dining hall, a nursing home and a charter school.
    Commitment to agriculture: During the recent recession, we 
continued to make credit available and did not turn away any 
farmers due to the lack of funding. Cape Fear Farm Credit 
worked with troubled borrowers, family farms and homes. We are 
the lead lender in North Carolina's only ethanol plant.
    The Farm Credit System: Thanks to the Agriculture Committee 
for being aggressive in efforts to ensure the Farm Credit 
System is not caught up in the financial regulatory reform 
legislation. The Farm Credit System already has borrower's 
rights more stringent than commercial banks. A big thank you 
would go to the Agriculture Committee; we already have a strong 
regulator in the FCA.
    Reforming housing GSEs: The Farm Credit System is a 
cooperative. This sets us apart from any other GSE such as 
Fannie Mae or Freddie Mac. Please exclude the Farm Credit 
System in the GSE reform legislation.
    Young, beginning and small farmers: Cape Fear Farm Credit 
is committed to providing credit to young, beginning and small 
farmers. To help us in this mission, we would like your help in 
increasing the guaranteed loan program limit through the Farm 
Service Agency, the FSA, to $3 million. Presently it is at 
$1,112,000. We would ask for an increase.
    Crop insurance: It is an important risk management tool for 
farmers. It is important that our customers have adequate 
coverage.
    In closing, I am proud to be a farmer-rancher from North 
Carolina. Ag is the number one industry in North Carolina. Ag 
contributes over $70 billion annually to the state's economy, 
it employs over 17 percent of the workforce.
    I would like to thank you for the opportunity to testify on 
behalf of Cape Fear Farm Credit, Farm Credit Service and I 
appreciate the work that the Committee is doing to support ag 
and rural America.
    [The prepared statement of Mr. Allen follows:]

Prepared Statement of Ronald J. Allen, Row Crop, Timber, Pork, Poultry, 
                  and Beef Producer, Fayetteville, NC
    Good morning. I'd like to thank the Agriculture Committee for 
conducting this hearing to begin early discussions on the 2012 Farm 
Bill, and I appreciate the opportunity to testify. My name is Ronald 
Allen, and I am a farmer from Bladenboro, North Carolina, about forty 
miles south of the Crown Coliseum. I have been involved in farming for 
23 years, and my operation consists of row crops, timber, eight swine 
nurseries, twelve poultry houses, and a hunting preserve. I also have a 
150 head beef cow/calf operation. For the last 5 years I have served as 
Board Chairman of Cape Fear Farm Credit, an agricultural lending 
cooperative headquartered here in Fayetteville, North Carolina. I am 
testifying today as a farmer and director of Cape Fear Farm Credit, and 
I will share some of the issues that affect the Farm Credit System's 
ability to provide credit to American farmers. As you are well aware, 
agriculture is an extremely capital intensive business, and Cape Fear 
Farm Credit has been instrumental in the success of my family's farming 
operation and our ability to expand over the years.
Farm Credit System
    To give you a brief background, the Farm Credit System was 
established in 1916 to provide a dependable source of credit for 
farmers and rural America. Today the System provides more than \1/3\ of 
the credit needed by those who live and work in rural areas. It 
provides more than $160 billion in loans, leases and related services 
to farmers, rural homeowners, agribusinesses, and agricultural and 
rural utility cooperatives. These people depend on the Farm Credit 
System's funding to provide high quality food and products enjoyed in 
the United States and around the world. The Farm Credit System has 
nearly 500,000 members, and there is a Farm Credit office that services 
every county in the United States.
Cape Fear Farm Credit
    Specifically speaking of our local cooperative, Cape Fear Farm 
Credit has close to $1 billion in loans outstanding to approximately 
3,000 members, making it the dominant agricultural lender across its 
twelve-county chartered territory in southeastern North Carolina. Our 
cooperative structure is important to member-borrowers giving them a 
say in how Cape Fear Farm Credit operates, and allowing them to share 
in the profits. Earnings are retained each year by Cape Fear Farm 
Credit, and a portion of these earnings are often returned to its 
member-borrowers, in the form of a patronage dividend, effectively 
reducing the customers' cost of borrowing money. Since 1988, Cape Fear 
Farm Credit has distributed $158 million to its member-borrowers 
through the patronage program. The ability to distribute this level of 
patronage demonstrates Cape Fear Farm Credit's financial strength and 
commitment to agriculture and rural development in southeastern North 
Carolina.
    Cape Fear Farm Credit utilizes its Rural America Bond Program to 
help create a flow of money to rural areas for community revitalization 
and development projects, rural infrastructure, and essential community 
services just to name a few. Several specific projects include the 
financing of the North Carolina FFA dining hall at the FFA Center, a 
nursing home, and a charter school.
    During the downturn in the economy and throughout the recession, 
Cape Fear Farm Credit continued to make credit available to agriculture 
and our rural communities. With 52 percent of Cape Fear Farm Credit's 
loan portfolio in poultry and swine, you can imagine the tremendous 
amount of stress contract growers faced during the last 2 years with 
several major poultry and swine integrators filing bankruptcy causing a 
loss of integrator contracts. Due to its strength and employees' 
knowledge of these industries, Cape Fear Farm Credit was able to work 
with these troubled borrowers to create restructure plans ensuring the 
borrowers' did not lose their homes and farms that had been in the 
family for generations.
    I would like to thank the Agriculture Committee for being 
aggressive in its efforts to ensure the Farm Credit System is not 
caught up in the financial regulatory reform legislation. The System is 
currently working closely with Chairman Peterson and Ranking Member 
Lucas to ensure we are not included in the legislation, and we 
appreciate your leadership in this regard as well as the support of the 
entire Committee.
    Over the years, the Agriculture Committee has worked to ensure the 
System has borrower rights in place and a strong independent regulator, 
Farm Credit Administration, which oversees the safety and soundness of 
the System. The wisdom of the Committee in these actions ensured the 
Farm Credit System was not part of the problem in the recent financial 
crisis and is continuing to provide essential credit and financial 
services to those who work and live in rural North Carolina. During the 
recent financial crisis, the Farm Credit System did not turn down a 
simple customer due to lack of financing. The market had a great deal 
of confidence in the Farm Credit System, so we were able to continue to 
serve our customers from a funding standpoint.
    The Farm Credit System is aware that Congress has an interest in 
reforming housing GSE's as quickly as next year. The Farm Credit System 
is a cooperative which sets us apart from the other housing GSE's such 
as Fannie Mae and Freddie Mac. The System is also the oldest and 
longest serving GSE in the country and focuses exclusively on serving 
the nation's agricultural and rural sectors. Please be watchful of 
efforts that may include the Farm Credit System in conversations 
concerning Fannie Mae and Freddie Mac as Farm Credit does not need to 
be included in these efforts.
Young, Beginning, and Small Farmers (YBS)
    According to the 2007 Agriculture Census, the average age of a 
farmer in the United States is 57 years old. Another alarming statistic 
is that while most age segments have increased from 2002 data, those 
principal operators less than 45 years of age have decreased by 21 
percent which is a testament that fewer young farmers are becoming 
involved in production agriculture. In planning for the 2012 Farm Bill, 
we need to ensure that adequate programs are in place to assist in 
making it feasible for young, beginning and small producers (YBS) to 
enter into production agriculture.
    Cape Fear Farm Credit often utilizes the Guaranteed Farm Loan 
program through Farm Service Agency. The FSA Guaranteed Loan program 
assists Cape Fear Farm Credit in extending credit to young, beginning 
and small farmers that have a limited net worth or may not qualify 
under its standard loan programs. Cape Fear Farm Credit often runs into 
roadblocks with the current loan size of $1,112,000 as many of the loan 
requests exceed the current limitation. I would urge the Committee to 
consider increasing the guaranteed loan amount to $3 million.
Crop Insurance
    Crop insurance is one of the most vital risk management tools for 
American farmers today. The Farm Credit System believes in a strong, 
vibrant program to ensure we can continue to finance farmers in rural 
America. It is extremely important that our customers have adequate 
coverage.
    As a farmer from North Carolina, I am proud that agriculture is the 
number one industry in our state, contributing over $70 billion 
annually to the state's economy and employing over 17 percent of the 
workforce. I'd like to thank you for allowing me to take part in this 
initial discussion on the 2012 Farm Bill, and I appreciate all the work 
that the Committee is doing in support of agriculture and rural 
America.

    Mr. McIntyre. Thank you very much and thank you for your 
testimony that you have submitted in writing, which is very, 
very helpful.
    Mr. Steven Burke.

STATEMENT OF W. STEVEN BURKE, BIOFUELS REPRESENTATIVE, OXFORD, 
                               NC

    Mr. Burke. Mr. Chairman and Committee Members, I am Steven 
Burke, President and CEO of the Biofuels Center of North 
Carolina, a private nonprofit corporation. The Center was 
established by the legislature in 2007 to implement a policy, 
strategic and agricultural imperative to gain large internal 
capacity for alternatives to petroleum-based liquid fuels.
    The Center is located on North Carolina's Biofuels Campus 
in the Granville County town of Oxford. The 426 acre campus is 
a former USDA tobacco research station turned over to the state 
in 2005.
    North Carolina's goal is ambitious. By 2017, ten percent of 
the state's liquid transportation fuels will come from biofuels 
grown and produced internally. By current estimates, up to 600 
million gallons will be required.
    The goal is not impossible if a key recognition underlies 
policy and activities--development of large biofuels capacity 
must be seen as landscape changing, actually and figuratively; 
and as such, must be judged nothing less than a societal and 
civic imperative.
    That changed landscape is manifest 19 miles due west of 
this room in the small town of Raeford, in one of North 
Carolina's three most economically disadvantaged counties. The 
newly opened Clean Burn Fuels production facility, the largest 
ethanol site on the East Coast, will soon yield over 60 million 
gallons annually. How do we think about the value and 
duplication of this facility across North Carolina? I address 
the question under two large headings:
    First, North Carolina's nationally unique biofuels 
endeavor. Strong in agricultural heritage and capabilities, 
this state is well prepared to shape and expanded the role for 
its land with growth in production of biofuels. Six factors 
shape North Carolina's approach to biofuels development.
    One, biofuels development is technology development. 
Biofuels must be seen and shaped as a technology. Like any new 
technology, this one will take time, prove expensive, yield 
risks and solve problems.
    Two, a comprehensive approach is required. Our approach is 
comprehensive, based on the recognition that piecemeal 
attention to resources and tasks yields less success. The 
nation's only state-based agency constituted with a 
comprehensive mandate, the Center addresses over time research, 
growing, agronomic analysis, pilot and large-scale production, 
company development, distribution, land and land use, 
environmental and policy issues, sustainability and public 
preparation. No other Federal-state models appear to have 
assumed the task of identifying all such components in a 
comprehensive framework. Encouraging such models can prove 
valuable for USDA.
    Three, sustained commitment is required. Technologies, a 
landscape changing sector and visionary goals do not come about 
quickly or easily.
    Four, the endeavor is civic in scale and responsibility. 
Biofuels both springs from and shapes large societal 
imperatives--science, technology, agriculture and growers, 
crops and forests, policy and strategy, public behaviors and 
even car culture, land and land use, energy, comprehensive 
energy policy, economic gain, production and distribution, 
climate, verified and functional sustainability. As such, 
biofuels is nothing less than a civic endeavor.
    Five, feedstocks and biomass must be sustainable. 
Sustainability of varied crop- and tree-based resources over 
time must be ensured, for the feedstock requirements and 
drawdowns will be staggeringly large in North Carolina and 
beyond. Environmental, agricultural, and economic imperatives 
must be simultaneously served and balanced.
    Six, the imperative is unquestioned. Smart places and 
leaders now understand that gaining alternatives to petroleum-
based fuels is requisite for our future.
    Second, gaining from current and future farm bill 
provisions.
    The 2008 Farm Bill purposely strengthens the 
agriculturally-based biofuels sector and verifies the value of 
purposeful biofuels development to rural economic gain, energy 
independence and the agricultural endeavor.
    My submitted testimony highlighted those areas in which we 
have found success to be manifest and encouraged. The 2012 Farm 
Bill can well build on these appropriate strategies with new 
thinking or thrusts in several areas. I highlight two contained 
in my submitted testimony.
    One, evaluate the national agricultural biofuels status. 
Analysis of outcomes, learning, and experience for feedstocks, 
growing and production can funnel new programs into targeted 
areas.
    Two, force attention by mandate and bully pulpit if not by 
programs and innovative activities to comprehensive models at 
the state and regional levels.
    Thank you, Mr. Chairman and Members for the opportunity to 
share our experience.
    [The prepared statement of Mr. Burke follows:]

Prepared Statement of W. Steven Burke, Biofuels Representative, Oxford, 
                                   NC
    Mr. Chairman and Committee Members: I am Steven Burke, President 
and CEO of the Biofuels Center of North Carolina. A private nonprofit 
corporation, the Center was established by the North Carolina 
Legislature in 2007 to implement a policy, strategic, and agricultural 
imperative: to gain large internal capacity for alternatives to 
petroleum-based liquid fuels.
    The Center is located on North Carolina's Biofuels Campus, in the 
Granville County Town of Oxford. The 426 acre Campus is a former lead 
USDA Tobacco Research Station established in 1910 and turned over to 
the state in 2005. The movement from tobacco to biofuels nicely 
symbolizes evolutionary changes in state and national agriculture.
    North Carolina's goal is ambitious: by 2017, 10% of the state's 
liquid transportation fuels will come from biofuels grown and produced 
internally. By current estimates, up to 600M gallons will be required.
    The goal is not impossible, if a key recognition underlies policy 
and activities: development of large biofuels capacity must be seen as 
landscape changing, actually and figuratively, and as such must be 
judged nothing less than a societal and civic imperative. Such thinking 
shapes North Carolina's approach and, as a result, our response to farm 
bill and USDA programs.
    Meeting so ambitious a goal requires long-term strategic thinking 
as well as varied partnerships, each based on shared commitment to gain 
from the state's biofuels endeavor. Collaborations include obvious 
partners, such as USDA, the North Carolina Department of Agriculture, 
the Farm Bureau, and others in the agricultural sector. New 
partnerships also create innovative solutions, some unconventional. For 
example, the Center is shaping with the NC Military Growth Task Force a 
project to highlight the connection between our state's military bases 
and regionally grown biofuels. Like other partnerships, it will reveal 
the non-standard thinking required for a landscape-changing new sector.
    That changed landscape is manifest 19 miles due west of this room 
in the small Town of Raeford, in one of North Carolina's three most 
economically disadvantaged counties. The newly opened Clean Burn Fuels 
production facility, the largest ethanol site on the East Coast, will 
soon yield over 60M gallons annually. How can we think about the value 
and duplication of this facility across North Carolina's land?
    Human life has been shaped by dependency upon the land--for food, 
for key materials, and for much energy. Although the last century was 
shaped by non-land based energy sources for most vehicular 
transportation, common sense and strategic reality now impel movement 
from carbon-emitting, variably available, politically destabilizing, 
and environmentally intrusive petroleum. Costly by many measures, that 
about-to-end-era freed the land unrealistically and only temporarily 
from its place in energy production.
    Agriculture and the land are, so to speak, back and strengthened . 
. . for energy production. Both must provide expanding capacities to 
fuel our vehicles as well as our diets and materials for daily life.
    Are we equipped to gain so much from our land and our agriculture, 
both crop- and tree-based? What approaches and policies will enable our 
doing so?
    The questions are key for the sustained survival, under favorable 
terms, of our societies and way of life. They are also necessarily 
important to the thinking of both this Committee and North Carolina.
    I address the questions under two large headings:

   North Carolina's Nationally Unique Biofuels Endeavor.

   Gaining From Current and Future Farm Bill Provisions.
North Carolina's Nationally Unique Biofuels Endeavor
    Strong in agricultural heritage and capabilities, North Carolina is 
well prepared to shape an expanded role for its land. By policy and by 
establishment of its Biofuels Center, the state has committed to enrich 
its agricultural sector with growth and production of biofuels. Because 
doing so also enriches our economy, our energy security, and those 
rural areas most in need of vitalization, the commitment is the best 
juncture of policy, persons, and societal gain.
    Six factors and recognitions shape North Carolina's approach to 
biofuels development:

    1. Biofuels Development is Technology Development.

    Biofuels must be seen and shaped as a technology--demanding and 
        complicated, exploratory and entrepreneurial. Despite large 
        production of ethanol in the Midwest and Brazil, the technology 
        is new and unfolding, at an early stage comparable to main-
        frame computers. Like any new technology, biofuels will take 
        time, prove expensive, yield risks and setbacks, and 
        necessarily solve its problems. As technologies must, it will 
        engage our best thinking, arouse entrepreneurial imagination, 
        trigger new governmental programs and policies, yield large 
        economic return, force leadership, and make the place better. 
        Although based on agriculture--the first technology around 
        which human societies formed--biofuels is as technologically 
        complex as the devices in our pockets. Failure to understand 
        this complexity lessens the speed and effectiveness with which 
        programs and funding move biofuels along the process of 
        technology development, from societal need and research to 
        outcome and change.

    2. A Comprehensive Approach Is Required.

    North Carolina's approach to biofuels development is comprehensive, 
        based on the recognition that piecemeal attention to resources 
        and tasks yields less success. A dovetailed framework of 
        strategy and activities must integrate every aspect of 
        biofuels, from societal policy to new fuels enthusiastically 
        placed in vehicles. The nation's only state-based agency 
        constituted with a comprehensive mandate, the Center addresses 
        over time: research, growing and agronomic analysis, pilot and 
        large scale production, company development, distribution, land 
        and land use, environmental and policy issues, and public 
        preparation. Specific requirements are varied: farmers and 
        landowners must commit to new feedstocks and new uses of 
        biomass; economic analyses must verify that money can be made 
        in growing, production, and distribution; consequential issues 
        must be addressed, for large impact will be seen on land, 
        biodiversity, water, and the environment. Credibly addressing 
        issues will in fact likely prove crucial in coming years to 
        sustained growth of the biofuels sector; addressing them is a 
        responsibility as well as the task of a life-based technology. 
        Problems must be solved; models for sustainability must be 
        crafted. While few would argue that these are the tasks of 
        biofuels development, no other Federal or state models appear 
        to have assumed the task of identifying, funding, and 
        addressing them in a comprehensive framework.

    Encouraging such models can prove valuable to the USDA, and will 
        perhaps prove necessary for the success and survival of a 
        national biofuels endeavor expanding in feedstocks, geography, 
        and strategic importance.

    3. Sustained Commitment Is Required.

    North Carolina grants that a long-term commitment is required. 
        Technologies, a landscape changing sector, and visionary goals 
        do not come about quickly or easily. As such, a sustained 
        endeavor, over 15+ years, will yield daunting tasks and 
        developing groundwork in the short term but verifiable and 
        large return in the long-term.

    4. The Endeavor is Civic in Scale and Responsibility.

    Biofuels both springs from and shapes large societal imperatives: 
        science and technology, agriculture and growers, crops and 
        forests, policy and strategy, public behaviors and car culture, 
        land and land use, energy and comprehensive energy policy, 
        economic gain, production and distribution, climate, verified 
        and functional sustainability, and something of daily survival 
        in a changing world. As such, biofuels is nothing less than a 
        civic endeavor. Smart places, agencies, and policy leaders 
        should include it among imperatives for deliberate civic 
        attention. Synthesis among the imperatives is challenging but 
        required. As with any civic and societal mandate, the key 
        framing question is constant and large: how can this endeavor 
        make better our place and our future?

    5. Feedstocks and Biomass Must Be Sustainable.

    Sustainability of varied crop- and tree-based resources over time 
        must be ensured, for the feedstock requirements and drawdown in 
        coming years--particularly if petroleum is constrained more 
        quickly than expected--will be staggeringly large in North 
        Carolina and beyond. Environmental, agricultural, and economic 
        imperatives must be simultaneously served and balanced. While 
        farmers are accustomed at thinking in such terms, not all 
        parties seeing gain from biofuels necessarily will be, 
        particularly in the short-term.

    Leadership in the sustainability of this sector, through new 
        programs and policies as well as model projects, will be 
        increasingly needed. The USDA and the farm bill can be visible 
        and forceful.

    6. The Imperative Is Unquestioned.

    Smart places and leaders understand now that gaining alternatives 
        to petroleum based fuels is not just desirable, not a luxury, 
        and not just a useful addition to the agricultural sector. 
        Biofuels are requisite for our future. Our best problem-solving 
        and most targeted programs must be shaped to ensure their 
        availability and benefit.
Gaining From Current and Future Farm Bill Provisions
    The 2008 Farm Bill purposefully strengthens the agriculturally 
based biofuels sector and verifies the value of purposeful biofuels 
development to rural economic gain, energy independence, and the 
agricultural endeavor.
    Key biofuels-directed emphases and programs have proven soundly 
useful:

   High priority for research and funding for cellulosic 
        feedstocks, such as switchgrass and woody biomass, targets both 
        national and North Carolina development.

   Title VII Research programs for research, development and 
        demonstration of biomass-based renewable energy and biofuels 
        are increasingly essential. Steadily expanding needs will be 
        inevitable in coming years, particularly if fuel crises 
        intrude.

   Title IX Energy programs usefully trigger and support a new 
        sector with grants, loans and other incentives. The valuable 
        Biomass Crop Assistance Program, supporting the production of 
        dedicated crop and forest cellulosic feedstocks, will grow in 
        importance and can be expanded to even more innovative new 
        crops and new kinds of contract growing. The earlier mentioned 
        Clean Burn Fuels facility gained from Title IX loan guarantees.

   Title XV Trade and Taxes, continues appropriate biofuels tax 
        incentives, but also appropriately reduces those for corn-based 
        ethanol as it expands tax credits for cellulosic ethanol.

   Other programs--in total yielding as close to a 
        comprehensive framework as can be expected of a complicated 
        Federal bill--each contribute and should be maintained if not 
        strengthened, including: increased emphasis on cellulosic 
        ethanol production through blender tax credits; promotion of 
        cellulosic feedstocks production; grants and loan guarantees 
        for biofuels research, development and production; studies of 
        the environmental impacts of increased biofuels use; expansion 
        of the biobased marketing program to encourage Federal 
        procurement of bio-based products; and research on the use of 
        low-value forest biomass for energy.

   The required joint study by USDA, DOE, EPA and DOT on the 
        infrastructure needs and approaches for expanding the domestic 
        production, transport and distribution of biofuels can prove 
        imperative if the nation is to comprehensively, with minimal 
        agency overlap and maximum national impact, shape a years' long 
        biofuels mandate.

    The 2012 Farm Bill can well build on these appropriate programs 
with new thinking, expansion, or thrusts in eight areas:

    1. Evaluate the national agricultural biofuels status. Analysis of 
        outcomes, learning, and experience for feedstocks, growing, and 
        production can funnel new programs into targeted areas of 
        emphasis--accelerating both economic and strategic gain.

    2. Force attention, by mandate and bully pulpit if not by programs 
        and innovative activities, to comprehensive models at the state 
        and regional levels.

    3. Strengthen by every means the application of core agricultural 
        capabilities, programs, and research to a new and still 
        unfolding sector.

    4. Increase loan guarantees and other incentives for a growing 
        number of production facilities varying in type and technology.

    5. Develop and implement bold and practical strategies, policies, 
        and programs to match a new and expanding sector to ever more 
        land--and, in doing so, ensure that new biofuels working lands 
        are exemplars of environmental, agricultural, and community 
        stewardship.

    6. By mandate and programs, catalyze and support programmatic, 
        policy, and behavioral attention to the imperative for 
        sustainability. Research, data, and models will necessarily be 
        developed, monitored, and evolved over time.

    7. Envision and develop, with national urgency, a program to brand 
        technologically-based agricultural biofuels as an innovative 
        and remunerative sector worthy of compelling both equivocal and 
        new farmers.

    8. Initiate leadership in identifying the international issues of 
        crop- and tree-based agricultural biomass. In time, as for any 
        resource of international importance and survival, new policies 
        will be required. Forward-thinking farm bill provisions can 
        benefit the American biofuels endeavor and also catalyze smart 
        policy thinking in an increasingly competitive new sector 
        worldwide.

    Mr. McIntyre. Thank you very much. Thank you for being at 
the cutting edge of biofuels research and work.
    I would like to call on Mr. Kissell to introduce our next 
speakers, if you would do that.
    Mr. Kissell. I am glad to introduce to you Frank Lee. And I 
am going to relocate Frank from Raleigh, where he is speaking 
on behalf of Farm Bureau today. He is also a very diverse 
farmer from Norwood in the beautiful Stanly County. He will be 
speaking to us. So, Frank.

STATEMENT OF FRANK LEE, CORN, COTTON, WHEAT, SOYBEAN, AND BEEF 
                  CATTLE PRODUCER, NORWOOD, NC

    Mr. Lee. Good morning, Mr. Chairman and Members of the 
Committee.
    My name is Frank Lee. I am a corn, cotton, soybean, wheat, 
timber and beef cattle producer from Norwood, North Carolina. I 
have been farming for 35 years and I served--started out in the 
ASCS Committee, I was a county committeeman, and then became a 
FSA county committeeman for 18 years, so I have a fair 
understanding of how the farm programs work. I would like to 
make a comment that over my career, I have noticed that farm 
programs have gotten more and more complex, and I hope you will 
work to simplify the farm programs under the new farm bill.
    I am a proud constituent of Congressman Larry Kissell who 
represents the 8th Congressional District. I am a member of the 
Stanly County Farm Bureau Board of Directors and it is an honor 
to testify before you today.
    North Carolina Farm Bureau is a general farm organization 
with over 500,000 family members across the state. North 
Carolina has the nation's third most diversified agricultural 
economy and the number one industry in North Carolina is 
agriculture.
    North Carolina farmers are generally pleased with the 
current farm bill. We are extremely grateful to the Agriculture 
Committee for all the hard work that went into putting together 
the last bill. We know it was no easy task due to the budget, 
and we understand it will be more of a challenge as we move 
forward with the new bill, given the budget outlook for 2012. 
However, as Congress begins to focus on writing the next 
version of this important law, it is more vital than ever that 
you all craft a bill that will continue to give us the market-
based tools we need to succeed and provide an effective 
financial safety net, so the American public can continue to 
have a safe and abundant food supply.
    North Carolina farmers support the direct and 
countercyclical payments program that was included in the last 
farm bill. Farmers understand the programs and they work well. 
We also support the marketing loan program.
    The ACRE program has not been widely utilized by North 
Carolina's farmers. If ACRE is part of the 2012 Farm Bill, we 
would like to see improvements that make it more useful for 
diversified farming operations.
    Cotton farmers are very concerned about the WTO cotton 
dispute with Brazil and how that will impact us in the next 
farm bill. We certainly understand and support the need to 
comply with our international trade agreements, but it is 
crucial that the cotton program in the next farm bill still 
include a viable safety net for North Carolina farmers.
    Trade is critically important for North Carolina 
agriculture. Huge trade deficits exist in other segments of the 
economy but agricultural products have a trade surplus of $22 
billion for the U.S. economy. North Carolina alone contributes 
$3 billion to our agricultural exports.
    We need to comply with our international trade agreements, 
but it is vital to give strong consideration and support to any 
programs, such as the Market Access Program, that assists with 
increasing agriculture exports as we move forward.
    The 2008 Farm Bill extended or created several key farm 
energy provisions. These programs, such as the Rural Energy for 
America Program, have incrementally improved our utilization of 
renewable resources to power our farms and communities and help 
to make our farms more energy efficient. These initiatives are 
critical to decreasing our reliance on foreign sources, as well 
as reducing the impact energy costs have on our family farms.
    Dairy farmers have continued to suffer and unfortunately 
the number of North Carolina dairy producers has continued to 
decline due to tough economic times. Drastic swings in milk 
prices have devastated dairymen in the Southeast. We must 
continue to develop dairy policies that keep production in line 
with consumption and help these farmers stay in business.
    Farmers continue to need an affordable and reliable crop 
insurance program. It is critical that Congress works to 
maintain a crop insurance initiative that is affordable and 
allows farmers to manage risks associated with production 
agriculture.
    As we move forward with the next farm bill, it is important 
that we continue to educate the public that the farm bill is 
not just about a price support system for farmers, it is about 
an investment in rural America and America as a whole. The 
authorities in the farm bill, particularly in the rural 
development title, are crucial to economic development and help 
address rural community needs such as schools, hospitals, 
housing and local infrastructure. The public and private 
partnerships that are created through USDA Rural Development 
and folks like the NC Rural Center help capitalize on every 
dollar spent and invested in rural North Carolina. There is no 
doubt that a strong rural development title in the next farm 
bill will continue to assist with local infrastructure, 
economic development and increase the quality of life for folks 
who live in rural communities.
    To summarize, the North Carolina Farm Bureau believes that 
the 2008 Farm Bill is working well. We understand that you have 
budget constraints while developing the 2012 Farm Bill; 
however, I cannot stress to you how vital it is that the 
overall bill provide an adequate safety net for producers who 
continue to provide food, feed and fiber to the world. We look 
forward to working with the Agriculture Committee as this 
process moves forward.
    Thank you, Mr. Chairman, for allowing me to testify.
    [The prepared statement of Mr. Lee follows:]

Prepared Statement of Frank Lee, Corn, Cotton, Wheat, Soybean, and Beef 
                      Cattle Producer, Norwood, NC
    Good morning Mr. Chairman and Members of the Committee.
    My name is Frank Lee. I am a corn, cotton, soybean, wheat, timber 
and beef cattle producer from Norwood, North Carolina. I am a proud 
constituent of Congressman Larry Kissell who represents the 8th 
Congressional District. I am a member of the Stanly County Farm Bureau 
Board of Directors and it is an honor to testify before you today.
    North Carolina Farm Bureau is a general farm organization with over 
500,000 family members across the state. North Carolina has the 
nation's third most diversified agriculture economy. In fact, 
agriculture is North Carolina's number one industry accounting for over 
$70 billion in annual economic activity and just under \1/5\ of our 
state's jobs.
    North Carolina farmers are generally pleased with the current farm 
bill. We are extremely grateful to the Agriculture Committee for all 
the hard work that went into putting together the last farm bill. We 
know it was no easy task due to the budget and we understand it will be 
more of a challenge as we move forward with a new bill given the budget 
outlook for 2012. However, as Congress begins to focus on writing the 
next version of this important law, it is more vital than ever that you 
all craft a bill that will continue to give us the market based tools 
we need to succeed and provide an effective financial ``safety net'' so 
the American public continues to have a safe and abundant food supply.
    North Carolina's farmers support the direct and countercyclical 
payments (DCP) program that was included in the last farm bill. Farmers 
understand the programs and they work well. We also support the 
marketing loan program.
    The ACRE program has not been widely utilized by North Carolina's 
farmers. If ACRE is a part of the 2012 Farm Bill, I would like to see 
improvements that make it more useful for diversified farming 
operations.
    Cotton farmers are very concerned about the WTO cotton dispute with 
Brazil and how that will impact us in the next farm bill. We certainly 
understand and support the need to comply by our international trade 
agreements, but it is crucial that the cotton program in the next farm 
bill still include a viable safety net needed by North Carolina 
farmers.
    Trade is a critically important issue for the future of North 
Carolina agriculture. Huge trade deficits exist for many segments of 
the economy, but when it comes to American agriculture products, we 
have a trade surplus that actually provides over $22 billion to the 
U.S. economy. For North Carolina alone, agriculture exports exceeded $3 
billion in 2008, which is an increase of over 70 percent from 2004.
    Again, we need to comply with our international trade agreements, 
but it is vital to give strong consideration and support to any 
programs, such as the Market Access Program, that assist with 
increasing agriculture exports as we move forward.
    During the course of your hearings and debates on the next farm 
bill, the issue of limiting farm bill payments will continue to be 
raised. The North Carolina Farm Bureau opposes payment limits and means 
testing to determine eligibility for farm programs. The size and scope 
of farming operations is often driven by economics and capturing 
economies of scale and not greed as many would have you to believe.
    We are supportive of the conservation programs that were included 
in the 2008 Farm Bill. It is important to keep in mind the balance of 
funding levels for conservation and making sure we have a strong 
commodity safety net in place as you all move forward with changes in 
the farm bill.
    The 2008 Farm Bill extended or created several key farm energy 
provisions. These programs, such as the Rural Energy for America 
program, have incrementally improved our utilization of renewable 
resources to power our farms and communities and helped to make our 
farms more energy efficient. These initiatives are critical to 
decreasing our reliance on foreign energy sources as well as reducing 
the impact energy costs have on our family farms.
    As you all know, the dairy industry continues to suffer and 
unfortunately the number of North Carolina dairy producers continue to 
decline due to tough economic times. Drastic swings in milk prices have 
devastated dairymen in the Southeast. We must continue to develop dairy 
policies that keep production in line with consumption.
    The 2008 Farm Bill contained--for the first time--a title dedicated 
to specialty crops. It also funding for states for various programs 
through the Specialty Crop Block Grant Initiative. These important 
programs help expand opportunities for direct producer-to-consumer 
marketing, improve farmers markets, roadside stands and community-
supported agriculture initiatives and help fruit and vegetable 
producers address food safety, pest and disease management issues.
    Farmers continue to need an affordable and reliable crop insurance 
program. It is critical that Congress works to maintain a crop 
insurance initiative that is affordable and allows farmers to properly 
manage the risks associated with production agriculture. The program 
should be based on realistic estimates and information.
    As we move forward with the next farm bill, it is important that we 
continue to educate the public that the farm bill is not just about a 
price support system for farmers, it's about an investment in rural 
America and American as a whole. The authorities in the farm bill, 
particularly the in the Rural Development title, are crucial to 
economic development and help address rural community needs such as 
schools, hospitals, housing and local infrastructure. The public and 
private partnerships that are created through USDA Rural Development 
and folks like the NC Rural Center help capitalize on every dollar 
spent and invested in rural North Carolina. There is no doubt that a 
strong Rural Development title in the next farm bill will continue to 
assist with local infrastructure, economic development and increase the 
quality of life for folks who live in rural communities.
    To summarize, the North Carolina Farm Bureau believes that the 2008 
Farm Bill is working well. We understand that you have budget 
constraints to manage while developing the 2012 bill; however, I cannot 
stress to you enough how vital it is that the overall bill provide an 
adequate safety net for producers who will continue to provide food, 
feed and fiber to the world. We look forward to working with the 
Agriculture Committee as this process moves forward.
    Thank you, Mr. Chairman, for allowing me to testify before the 
Committee. I look forward to your questions.

    Mr. McIntyre. Thank you very much, Mr. Lee, and thank you 
for traveling here to be with us.
    Mr. Kissell, would you like to introduce the next one?
    Mr. Kissell. Another constituent from the 8th District, 
Allen McLaurin from Scotland County, he works with the Z.V. 
Pate Company in Laurel Hill, North Carolina. The Z.V. Pate 
Company represents a lot of agricultural interests as well as 
other interests, commercial interests. And Allen is here today 
to talk primarily about the cotton industry in terms of 
agriculture. Allen.

  STATEMENT OF ALLEN McLAURIN, COTTON PRODUCER, LAURINBURG, NC

    Mr. McLaurin. Thank you, Congressman Kissell, Congressman 
Etheridge, McIntyre, thank you for the opportunity of being 
here and especially Congressman Thompson for taking time to 
come down from Pennsylvania to be part of this panel and listen 
to what we have to say, and hopefully you will realize there is 
life outside of Chapel Hill in this great state.
    My name is Allen McLaurin. I am a cotton farmer primarily, 
but also grow peanuts, corn, soybeans down in Scotland County 
on a personal farm of my own plus a family operation farm known 
as Z.V. Pate's down in Scotland County.
    As mentioned earlier, as Congressman Kissell and Mr. Lee 
and others mentioned, agriculture is still the largest industry 
here in North Carolina, and we feel that cotton continues to be 
the cornerstone of this industry with a lot of history right 
here in our great state. We have a large number of producers, 
ginners, warehouse and textile mills in operation here today.
    In the Southeast cotton region consisting of Virginia, 
North Carolina, South Carolina, Georgia, Alabama and Florida, 
the ripple effect from cotton alone is responsible for over 
173,000 jobs and generates an economic activity surpassing $47 
billion annually.
    Our overall thoughts regarding sound farm policy: Our 
industry maintains that sound farm policy is essential for the 
viability of the cotton industry in the Southeast region and 
the United States.
    Effective farm policy should adhere to several principles. 
It should be market-oriented with a goal of promoting quality, 
efficiency and domestic competition; it should allow for full 
production to meet market demand; and due to uncertainty of 
weather and markets, farm policy should provide for an 
effective financial safety net for farmers without regard to 
farm size or structure.
    I believe the 2008 Farm Bill meets most of these principles 
and has worked well for the cotton industry. And I commend this 
Committee for the work they did on this legislation for the 
2008 Farm Bill.
    The centerpiece of the upland cotton program and 
traditional commodity programs has been without question an 
effective marketing loan program. It provides a safety net for 
producers, but does not harm the competitiveness of U.S. 
commodities. It is a program component that makes sense, that 
works and that serves many critical purposes. Because it is 
well-understood and a fundamental part of commodity policy, the 
marketing loan gives rural banks the confidence they need to 
make critical operating loans available that farmers depend on 
to operate.
    I believe the USDA has overstepped the intent of Congress 
in key payment eligibility provisions and issued regulations 
that are overly complicated and restrictive. Sound policy 
provisions are of little value if commercial size farm 
operations are ineligible for benefits. The vast majority of 
these are true family farm operations and have expanded in size 
with the intent to lower cost per unit of production. In other 
words, getting closer to economies of scale. I will give you an 
example. Back in the 1980s, early 1980s, when I started 
farming, a two-row cotton picker we would go out and buy would 
handle right at 300 acres of cotton, a typical family sized 
farm in the state, and it would run about $35,000. Today, you 
go out and buy a six-row cotton picker, it runs about $550,000 
or more plus it is capable of harvesting 1,800-2,000 acres. So 
our sizes have increased on our family farms, and of course 
commodity prices for the most part have not.
    While I oppose any artificial payment limitations, I 
advocate administering the current provisions within the intent 
of Congress and strongly oppose any further restrictions.
    In summary, our industry believes the cotton provisions of 
the 2008 Farm Bill are working well. If policy changes are 
inevitable as part of the 2012 Farm Bill, the cotton industry 
remains ready to work with the Agriculture Committee to explore 
alternative programs that can provide the needed safety net to 
our industry in a manner that is consistent with our 
international trade obligations and within budget constraints.
    I thank each and every one of you for the opportunity and 
will be willing to answer any questions you may have. Thank 
you.
    [The prepared statement of Mr. McLaurin follows:]

 Prepared Statement of Allen McLaurin, Cotton Producer, Laurinburg, NC
    Chairman Peterson, Congressmen McIntyre and Kissell, other Members 
of the Committee and guests, my name is Allen McLaurin. I am cotton, 
peanut and grain producer from Laurinburg, North Carolina. I am also 
farm manager for Z.V. Pate, Inc. a diversified agriculture entity 
located in Scotland County. Thank you for hosting this hearing and for 
the opportunity to testify before you regarding farm policy issues.
    Agriculture is far and away the single largest industry in North 
Carolina with cotton being the cornerstone in our region and throughout 
the Cotton Belt. Its scope and economic impact extends well beyond the 
approximately 19,000 farmers that plant between 9 and 12 million acres 
of cotton each year in the 17 cotton-producing states. Taking into 
account diversified cropping patterns, cotton farmers cultivate more 
than 30 million acres of land each year.
    Processors and distributors of cotton fiber and downstream 
manufacturers of cotton apparel and home-furnishings are located in 
virtually every state with much of this infrastructure located right 
here in North Carolina. Beyond the farm-gate, the distribution and 
processing of cotton includes cotton gins, independent merchants and 
cooperative merchandisers, warehouses, cottonseed distributors and 
processors, and textile mills. Nationally, farms and businesses 
directly involved in the production, distribution and processing of 
cotton employ almost 200,000 workers and produce direct business 
revenue of more than $27 billion. Accounting for the ripple effect of 
cotton through the broader economy, direct and indirect employment 
surpasses 420,000 workers with economic activity well in excess of $100 
billion.
    In the six-state region of Alabama, Florida, Georgia, North 
Carolina, South Carolina and Virginia, the cotton industry's ripple 
effect is responsible for over 173,000 jobs and generates economic 
activity surpassing $47 billion annually.
    Sound farm policy is essential for an economically viable 
agriculture. Effective farm policy should adhere to several principals:

    (1) It should be market-oriented with a goal of promoting quality, 
        efficiency and domestic competition;

    (2) It should allow for full production to meet market demand; and

    (3) Because of the uncertainty of weather and markets, farm policy 
        should provide for an effective financial safety net for 
        farmers without regard to farm size or structure.

    I believe the 2008 Farm Bill meets most of these principles and has 
worked well for the cotton industry. We are very grateful to the 
Agriculture Committee for the work done on this legislation.
    The centerpiece of the upland cotton program and traditional 
commodity programs has been without question, an effective marketing 
loan program. It provides a safety net for producers but does not harm 
the competitiveness of U.S. commodities. It is a program component that 
makes sense, that works, and that serves many critical purposes. 
Because it is well-understood and a fundamental part of commodity 
policy, the marketing loan gives rural banks the confidence they need 
to make critical operating loans available. This foundational program 
has also been the lever to move other important reforms, such as 
standardized bales and bale packaging for cotton, electronic warehouse 
receipts, and heightened standards for storage and elevator facilities 
for cotton and for other commodities.
    With respect to cotton, while the 2008 Farm Bill maintained the 
marketing loan and several other program components from prior law, the 
bill also made many reforms, such as a revision in the calculation of 
cotton premiums and discounts on the USDA loan schedule, placing a 
ceiling on the payment of storage credits for cotton under loan, and an 
economic adjustment program for the U.S. textile industry.
    Fundamentally, we continue to support the 2008 Farm Bill's approach 
to the cotton program and all of its components, from the marketing 
loan to direct and countercyclical payments. Each component serves a 
distinct purpose that is extremely beneficial to North Carolina 
farmers.
    The 2012 Farm Bill debate, however, will take place with several 
new and increased points of pressure. Record budget deficits will put 
intense pressure on funding. The WTO Brazil Case puts cotton's 
marketing loan and countercyclical programs under special scrutiny even 
though the cotton program, as revised by the 2008 bill, has never been 
evaluated by a WTO Panel. Ongoing negotiations in the Doha Round of 
trade negotiations could result in a dramatically altered landscape for 
domestic commodity support. If circumstances arise that make it 
impossible to maintain a reasonable safety net using existing delivery 
mechanisms, the cotton industry will look at alternatives.
    As evidenced by recent sign-ups, the ACRE program has not been a 
very attractive alternative for cotton farmers in our region or across 
the Cotton Belt. The support mechanisms within ACRE do not provide an 
adequate safety net for cotton farmers when compared to the traditional 
DCP program. If a revenue-based approach is to find support among 
cotton producers, a more reasonable revenue target would have to be 
established. I applaud Chairman Peterson's recent statements that he 
would support changing the current ACRE calculations from a state wide 
to a county wide basis. This is definitely a step in the right 
direction.
    Even as our industry commits to an in-depth review of the structure 
of the cotton program, I must emphasize our commitment to the 
principles I outlined earlier in my statement. One of those principles 
is that effective farm policy must maximize participation without 
regard to farm size or income. The 2008 Farm Bill contained significant 
changes with respect to payment limitations and payment eligibility. In 
general, the limitations were made more restrictive, and the adjusted 
gross income test was substantially tightened.
    In addition to the legislative changes, I believe that USDA over-
stepped the intent of Congress in key payment eligibility provisions 
and issued regulations that are overly complicated and restrictive. 
Sound farm policy provisions are of little value if commercial-size 
farming operations are ineligible for benefits. A new model six row 
cotton picker costs approximately $550,000. This picker can reasonably 
be expected to harvest roughly 18 to 2,000 acres. In order to justify 
purchasing a second picker, a grower would basically have to double the 
size of his operation. Unlike a grain combine, this machine is capable 
of doing only one thing and that is pick cotton. The vast majority of 
these commercial-size operations are true family farms that have 
expanded in size in an attempt to lower per unit cost of production 
(economy of scale).
    Conservation programs were strengthened in the 2008 Farm Bill. The 
Conservation Stewardship Program and similar conservation programs can 
lead to improved environmental and conservation practices but should 
not serve as the primary delivery mechanism for farm program support. 
The Conservation Stewardship Program has also been hampered by overly 
restrictive payment limitations contrived by USDA regulators--
restrictions that I do not believe are supported by the statute. USDA's 
unilateral decision to exclude commercial-size farming operations 
dramatically limits the environmental and conservation benefits to 
North Carolina that are possible with this program. In an effort to 
improve the effectiveness of these programs, I recommend that all 
conservation payments and other administrative responsibilities be 
turned over to the Farm Service Agency. In other words, let FSA do the 
paper work which in turn will enable the Natural Resources Conservation 
Service to devote all their efforts and expertise towards providing 
technical assistance. Furthermore, lack of consistency between county 
offices is often an issue. For example, a producer who farms in more 
than one county may or may not qualify for a like conservation program 
or practice and often times at varying levels of support.
    I support a permanent natural disaster program as part of the farm 
bill, but my understanding so far with the SURE program indicates it 
cannot provide an effective level of natural disaster assistance. I 
understand that some growers have yet to receive assistance for 
disasters that occurred back in 2008. This is hardly reassurance to the 
banks that must grapple with the decision to continue to make 
production loans to these growers. I recognize the challenge facing 
Congress to make improvements in this program. Without increased 
baseline spending authority, there will be no funds to even continue 
the program in the next farm bill much less make the necessary 
improvements for it to be an effective disaster relief mechanism. 
However, I would oppose reallocating existing spending authority from 
current farm programs to apply to SURE.
    Crop insurance is an essential risk management tool for cotton 
producers in our region. As a matter of fact, over 87% of all cotton 
acres in North Carolina purchase buy-up coverage. Our industry 
continues to examine concepts that improve the various cotton crop 
insurance products. Revenue coverage, enterprise policy rates and group 
risk products are examples of improved products that can provide a menu 
of risk options for growers. However, as you are well aware, the profit 
margin in agriculture is very narrow. In other words, a 10% to 15% loss 
would jeopardize whether or not I as a farmer will be able to service 
my debt let alone make a profit. Being able to insure my crop at a 
higher buy-up level would be of real benefit. Another change I do 
support would be to allow separate enterprise units for irrigated and 
non-irrigated practices in the same county. Some growers do not opt for 
the enterprise unit deal (with the additional subsidy) because it 
throws their irrigated and non-irrigated units together. However, we 
continue to view the current insurance products as complements to 
traditional commodity programs but do not consider those programs as a 
replacement system for delivering farm program support.
    While the cotton industry supports a viable biofuels industry, it 
must be recognized that benefits are not equally shared by all 
commodity producers. Renewable fuels mandates and other policies 
regarding biofuels have changed the competitive balance between 
commodities, placing severe pressure on cotton infrastructure in 
certain parts of the Cotton Belt. Mandated demand can result in 
excessive and harmful market distortions. The support given to biofuel 
crops must be taken into consideration when comparing relative levels 
of support across commodities, when evaluating payment limitations and 
before trying to mandate a one-size-fits-all farm program for biofuel 
and non-biofuel commodities.
    In summary, our industry believes the cotton provisions of the 2008 
Farm Bill are working well. If policy changes are inevitable as part of 
the 2012 Farm Bill, the cotton industry remains ready to work with the 
Agriculture Committees to explore alternative programs that can provide 
the needed safety net to our industry in a manner that is consistent 
with our international trade obligations and within budget constraints.
    Mr. Chairman, thank you for holding this hearing in North Carolina 
and for allowing me to be a part of the discussion.

    Mr. McIntyre. Thank you so much, Mr. McLaurin. Thanks to 
all the panelists. We do have an opportunity now for questions.
    To Mr. Allen, I would like to ask you if you have first or 
second hand knowledge about the lack of credit availability for 
producers. And if so, is this problem more specific to banks or 
to Farm Credit itself?
    Mr. Allen. I do not have it, sir.
    Mr. McIntyre. Can you tell us what the credit situation has 
been here in North Carolina following the economic downturn, 
particularly in rural communities and how that has affected 
Farm Credit?
    Mr. Allen. Yes, sir. Credit conditions are extremely good 
for the background that Farm Credit has done. We have had some 
issues in the poultry side, we have had some in the swine and 
we have had some downturn in other areas. But at this point, we 
are strong and it looks like we will have a very good year for 
Farm Credit.
    Mr. McIntyre. Mr. Burke, with your leadership and ground 
breaking in the area of biofuels, do you propose a way to 
evaluate the national biofuels status as you put it in your 
testimony?
    Mr. Burke. Yes, sir, this is a new technology that is 
taking shape throughout the nation. Experience has been gained 
in different states and different institutions and different 
companies. When we are in the business of shaping new 
technologies, we often are unable to take stock of what we have 
learned. As a result, in many cases, the policies under which 
both state and Federal programs are developed are at best very 
indecisive, and sometimes lag behind what we have learned. I 
would suggest that the USDA, in partnership with other 
organizations, which has been suggested in the current farm 
bill, undertake an incisive, multi-part study, a status report, 
a snapshot of the biofuels sector across this country. That 
will be a useful foundation for the agricultural energy 
components of the 2012 Farm Bill. It will be a large task, it 
will be a demanding task, it will require diminished territory 
on the part of agencies, it will also require that most 
difficult of precedents for policy--synthesis of what we have 
learned.
    Mr. McIntyre. We have heard in Washington from various 
constituencies regarding the impact that the use of biomass for 
bioenergy is going to have on existing woody biomass users from 
building materials to mulch. What are your thoughts on 
balancing new uses like bioenergy against existing uses?
    Mr. Burke. Throughout human history, we have mostly been 
dependent on the land and what it yields for fueling ourselves, 
for fueling our energy and for the materials for daily life. 
Emerging biofuels as well as other new sectors shows us that 
once again, we must grapple with and understand how the land 
can support ever so many of the requirements of our survival. 
New sectors and existing sectors will require drawdown of our 
agricultural resources and, in particular, trees. We count four 
in North Carolina--the traditional forest and forest products 
sector; second, biofuels; third, the utilization of biomass for 
electric energy products; and fourth, new sectors barely 
emerging including the developing and shipping of wood pellets 
to Europe and other countries.
    To enable sustainable, environmentally and economically 
useful drawdown of these materials will trigger our best 
resources for thinking and for new policies. It is possible 
under intensive management and good sustainable mandates to 
yield outcome for all four of these sectors. Doing so, however, 
will neither be easy, it will yield some contention, some 
overlap. It should require our best thinking.
    Mr. McIntyre. Can you say what you think would be the 
single biggest thing we can do to spur investment in biofuels?
    Mr. Burke. Continue with and increase some of the 
absolutely necessary financial imperatives underlying a new 
technology. First, self-evident, increase and continue funding 
for science and research. Second, increase the loan guarantees 
and other incentives for new facilities. The Clean Burn Fuels 
facility that I referenced in my testimony benefited from loan 
guarantees in Title IX of the current farm bill. Third, more 
subtle, lead with attention to environmental and sustainability 
and related issues for what we will possibly find in coming 
years, that science will move along well, growing will move 
along well, and production facilities can be funded. However, 
there will be uncertainty about funding production facilities 
if in fact we fear or find that environmental issues and 
insufficient attention to sustainable biomass truncate 
investment. So lead also with policies.
    Mr. McIntyre. Thank you very much.
    Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman, and thanks to the 
panel for your testimony.
    Mr. Allen, in your testimony, you referenced the 2007 
Census of Agriculture and the average age of farmers, which 
obviously is graying. You also noted that the principal 
operators less than 45 years of age have decreased by 21 
percent, which adds to the testimony of fewer young farmers. I 
wanted to just kind of talk about that a little further. What 
are you observations, why is that occurring, and what are the 
barriers for young farmers to go into the industry?
    Mr. Allen. Well, obviously the capital investments are what 
we have to work on. And what I have asked you for was an 
increase from $1,112,000 to $3 million for the young beginning 
farmers from FSA. That would give them a jump start. You know, 
back in our lifetime, capital was not as big an issue as it is 
today. Of course, the price of the commodity has not changed as 
much, so you have to get more out of an acre and you have to 
find ways to cut costs.
    For young and beginning farmers, it is a tremendous risk 
now more than it has ever been before. And what we try to do 
through the Farm Credit System is to make sure that we educate 
and we partner with these young guys to make sure they are on 
the right and narrow road, because what you do not want to do 
is get them involved and then some type of bankruptcy or 
whatever occurs. So just working with them, but the increase 
from the jump start from the $1.112 million to the $3 million 
would help a lot.
    Mr. Thompson. The legacy of passing along the farm 
operations to the next generation, any additional thoughts 
there?
    Mr. Allen. Yes, that is a troubling aspect because in the 
nature of the 1950s and the 1960s, it was a tradition you were 
going to farm in your father's footsteps. That is certainly 
changing because of real estate encroachment from, in our case 
encroachment from Fort Bragg and neighboring real estate 
continues to climb, and obviously it is easier to make the sale 
than it is to farm. So there are a lot of challenges for the 
generations to come.
    Mr. Thompson. Thanks. Mr. Lee, you mentioned the critical 
role exports play in supporting North Carolina's agriculture. 
Do you feel that the free trade agreements that we currently 
have pending would help to expand the industry, your industry's 
ability to sell your products abroad?
    Mr. Lee. I am really not competent to comment on that. I 
will say that I am in favor of free trade, and the economics I 
understand is that any free trade agreement, any time there is 
a change, there is going to be winners and losers. But the net 
effect on both ends is a good one. So we are in a global 
economy and free trade is just a fact of life, and we have to 
adapt to it and work with it.
    Mr. Thompson. One of the first hearings we had, somebody 
described it I thought pretty cleverly, they said there are 303 
million stomachs in the United States and six billion or 
something like that worldwide, so the market for the 
agriculture community with trade is pretty positive.
    Do you support the current system of marketing loans, 
direct payments and countercyclical, or would you support a 
complete change?
    Mr. Lee. I think our present system, there is room for 
improvement. I would support a complete change if I knew what 
the change was. I think there certainly could be improvements 
on it.
    Mr. Thompson. I appreciate your service and role within 
Farm Bureau and you mentioned dairy, I know the dairy in my 
district--well, dairy across the country is really bleeding to 
death financially today, and I think as part of the 2012 Farm 
Bill, we have a commitment, we have a Dairy Caucus that was 
restarted and is really looking at that system. The current 
dairy policy focuses mainly on the final price dairy farmers 
receive but pays little attention to profitability. As we 
consider new farm policies, I guess the question is to see what 
discussion perhaps is taking place within your Farm Bureau 
leadership, should we emphasize profit over price?
    Mr. Lee. Well, a farmer has got to make a profit if he is 
going to stay in business. My family used to be in the dairy 
business 40 years ago. We had a small dairy, and in my home 
county 40 years ago, there were over 30 dairies and I think 
there are two left now.
    Mr. Thompson. Wow.
    Mr. Lee. Dairy is like everything else, those that have 
stayed in it have gotten bigger, but the price has gotten so 
low that even the most efficient producers could not make any 
money. With the nature of the dairy industry and the nature of 
their products which are perishable--and this is just my 
opinion, it is not Farm Bureau's opinion--but in my opinion, 
you need some type of supply management to allow the dairy 
industry to be viable.
    From what I understand in Canada, they have a pretty strict 
system. You cannot just go out and get in the dairy business, 
you have to--it is essentially like an allotment or a permit 
system to own dairy cows. And my understanding is that works--
there are limits into entering the business and how the farmers 
that are in the business can grow, but there is a stability in 
price and supply and the farmers--from what I understand, the 
Canadian farmers have survived much better than American dairy 
farmers.
    Mr. Thompson. Thank you. Thank you, Mr. Chairman.
    Mr. McIntyre. Thank you, Mr. Thompson.
    Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman.
    Mr. Allen, I would just like to thank Farm Credit, the 
members and administrators for the great job you all do in 
supporting agriculture interests. You talked about the 
financial packages that have gone through and that you all have 
been able to stay exempt from a lot of this. It is because you 
do a great job and we appreciate that.
    Mr. Allen. Thank you, sir.
    Mr. Kissell. Allen, we had hearings this week and it was 
mentioned we are having hearings about the safety net and how 
can we have the risks for our farmers be covered. Mr. Allen 
pointed out we need for that to be covered. But one of the 
things that came up too, Mr. McLaurin, was talking about the 
Brazil case with our cotton interests and how we are basically 
holding off for the next farm bill to make adjustments there to 
be WTO compliant.
    What might be the interest of our cotton farmers in terms--
what would you like to see in terms of that Brazil case, and 
what you know about that that would be good for our cotton 
folks?
    Mr. McLaurin. Congressman, I agree with Mr. Allen down on 
the end of the row that we as farmers need to have a safety net 
in the farm bill. The marketing loan program has worked 
exceptionally well for the cotton industry, the DCP program, in 
particular direct payments and countercyclical payments. I do 
know last week, as you are aware, Brazil came up and they 
tentatively reached an agreement, we think, on all this 
negotiation that has gone on for a couple of years. And of 
course it has been translated now I think from Portuguese to 
English so we can understand what is going on.
    But we hope this next farm bill will have some sort of 
safety net. It is awfully hard to farm and make capital 
expenditures not knowing next year what might hold with 
commodity prices. Not only would we like to see the 
continuation of the existing bill similar to what we have 
today, but possibly, a 10 year farm bill or something we can 
plan out in the future. But we are willing to work with you any 
way we can, because I know there will be some changes made 
regarding decisions made in the Brazil case.
    Mr. Kissell. Mr. Lee, continuing along this line of the 
safety net for farmers, one of the programs introduced in the 
last farm bill was the ACRE program. From your standpoint, Farm 
Bureau's standpoint, how has this program been received by 
farmers, the implementation of it in terms of--we have heard in 
some places that it just has not been as easy to implement, 
taken a lot of time to do the paperwork on this. Do you have 
any thoughts on this?
    Mr. Lee. I think for most farmers in North Carolina where 
we are very diversified, it is just too complicated. I think 
this program was designed for the Midwest. I think it may work 
well where there is a corn, soybean farmer in the Midwest. But 
for most North Carolina farmers, it is just not a good fit.
    Mr. Kissell. And Mr. Lee and Mr. McLaurin both, a lot of 
conservation programs, new programs put into the last farm 
bill, some of which we have heard about, may have been good 
programs, but were not adequately funded; any particular 
aspects of the last farm bill that you would like to highlight 
as good or bad and maybe a quick reason why? Allen, you want to 
go first?
    Mr. McLaurin. The Conservation Stewardship Program is a 
good program. There are some inconsistencies in the program 
from county to county and what may work in one county, the 
other county interprets maybe differently. There is some talk 
possibly of allowing the FSA to kind of administer the funding 
part of these programs and let the district, Soil Conservation, 
actually do the technical services like we did years ago. But 
anyway, it is a pretty good program.
    As far as going back to the farm bill, you asked about what 
we could do better for the farm bill, and there again, I think 
something along the lines of the Marketing Loan Program that 
you had in this farm bill, if there is some way we could add 
stability, it is going to be very important.
    Mr. Kissell. Frank.
    Mr. Lee. I agree with Allen, the Conservation Stewardship 
Program is a good program. It is not a perfect program, but it 
encourages farmers to move in the right direction because 
conservation--soil is our basic resource and we have to take 
care of that for the next generation.
    Mr. Kissell. I thank the gentleman.
    Mr. Chairman, I think the red light is on. If we get a 
chance, I have one more quick question for the second round.
    Mr. McIntyre. All right, thank you.
    Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman.
    Mr. Lee and Mr. McLaurin--let me thank all of you for your 
testimony, but a quick question because you both sort of 
touched on it. In my capacity, as I sit on Ways and Means 
Subcommittee on Trade, we are in constant struggle on issues 
brought up in the WTO Brazil case. And it was really brought up 
under the old farm bill, not on the current one, but they are 
ongoing battles. And as you know, last week, thanks to pressure 
from the farm community and a variety of other groups and many 
of my colleagues here at this hearing today, Russia agreed to 
open up their poultry market after a long delay over issues 
that I will not get into.
    However, we are going to keep the pressure up because there 
are a lot of issues we have to deal with as it relates to 
having a viable cotton program for our communities. If we do 
not have a good source of markets here in the United States, I 
greatly fear that growing cotton is going to be a tough job 
because of the market purchases here, and the current farm bill 
has a WTO-compliant provision in it that was negotiated by the 
gin folks, by the manufacturers and by the cotton growers.
    So my question is this--for economic assistance, it 
provides assistance for gins, it provides assistance for the 
manufacturers and it really is tied up, some pieces that we did 
this past week are tied up in what is called the extenders, are 
tied up in the Senate. That did not pass last week to give some 
credit for our shirt manufacturers and others, and I hope that 
gets done soon. But what are you hearing from industry or 
growers as a possible scenario if we continue to fall short on 
these negotiations, if we do not get them through? And are you 
or any of the farmers, if this should happen, we do not have 
domestic markets and all we find ourselves is on the 
international market selling raw materials, what does that do 
to our farmers as we look at a new farm bill for the future of 
commodities?
    Mr. McLaurin. That is a good question, I will let my friend 
Mr. Lee answer that first.
    [Laughter.]
    Mr. Lee. Thank you.
    Well, as cotton--I started growing cotton in 1995 and at 
that time, \2/3\ of the cotton roughly was used domestically, 
and now I think the last figure I heard is maybe \1/3\ of it is 
used domestically. So as cotton farmers, we are dependent upon 
the export markets. It is a difficult situation, I can argue 
both sides of it.
    I have been to Brazil and been to some Brazilian cotton 
farms where they have thousands of acres. From what I saw in 
Brazil, most of the cotton production is on those large farms. 
It is going to be hard for me to compete with them because they 
have cheap labor and cheap land. Of course, we have some 
advantages of infrastructure in this country, but we are just 
going to have to do whatever it takes to market our cotton on 
the world market if we are going to have a viable cotton 
industry.
    Let me make a comment on agriculture in general. I think we 
need to do whatever it takes to protect our agricultural base 
in this country, because agriculture is such a vital--vitally 
important for our national security. It is one thing to import 
automobiles and consumer electronics and petroleum, but you do 
not want to import all your food and fiber. You want to be--
even if it costs you a little more, you want to--I think we can 
justify and I know this is somewhat protectionist, but I 
remember something I read years ago about Europe. In Europe, 
they do not mind spending some money to subsidize farmers 
because there are people there that can remember when you could 
not buy food at any price.
    Mr. Etheridge. Thank you. I think you are absolutely right 
and they do theirs under the guise of conservation.
    [Applause.]
    Mr. Etheridge. And I do believe, and I agree with you, that 
our food policy has to be a national defense policy. And 
sometimes we tend to forget that as we start these 
negotiations.
    I hope I have enough time, Mr. Chairman, to get to Mr. 
Allen. And out of full disclosure, I am--I borrow money from 
Farm Credit. So let me ask this question. Given your loan 
portfolio currently is heavy in poultry and in pork, as you and 
I both know, as we look down the road, what are you thinking in 
terms of the challenges for adequate credit and an adequate 
crop insurance program for those areas that benefit producers, 
poultry and pork. We do it in other commodities.
    Mr. Allen. Well, we hope we can. I hope you guys look to 
that to help us, again a safety net. You know, pork prices have 
been tanking for some time, and obviously the bankruptcy of 
Pilgrim's Pride has had a big impact in our neck of the woods, 
as you well know. But we are coming out of that and thanks to 
the exports from Russia, maybe opening up, and other places. 
You know, we have the greatest farmers in America in the world, 
but we just need you guys up in Washington to stay in touch 
with us and see how we can--if you see something coming, get 
with us, and we will help you any way we can. And we just need 
to keep that dialogue open to make that happen.
    Mr. Etheridge. Thank you. And thank you, Mr. Chairman. And 
I would only say in closing on this, when we talk about export 
markets, we really have to be vigilant because we can see what 
happens when one country decides they want to just stick it to 
us and stop imports. All of a sudden we find ourselves in a 
tough situation negotiating out of it, and our farmers pay the 
price.
    Thank you and I yield back.
    Mr. McIntyre. Thank you so much, Congressman Etheridge.
    Congressman Kissell, I believe you had another question you 
wanted to ask?
    Mr. Kissell. I would like to ask Mr. Burke a question. Mr. 
Burke was nice enough, along with several other people, to come 
to Raeford, North Carolina, which is home of the ethanol plant 
that he referenced a couple of times, for a biofuels summit 
back earlier this year. And incredible research taking place, 
incredible opportunities for our part of North Carolina and 
agriculture in general.
    Mr. Burke, it was mentioned at another farm hearing I went 
to in South Dakota where the ethanol may be even more advanced 
into flex fuel pumps and infrastructure that they have in 
place. It was mentioned that if government just got out of the 
way, that with biofuels we could handle all our transportation 
energy needs with biofuels and not have to have any foreign oil 
coming in.
    With regards to resource availability, what would be your 
comment on that statement?
    Mr. Burke. I would characterize that as desirable and 
highly unlikely. An increasing population and an increase in 
needs of different sorts, even with increase also in 
efficiency, will require that in coming years we have a range 
of different ways to propel our vehicles. The task will be to 
determine what is the balance between conventional petroleum 
fuels, biofuels, electric vehicles, hybrid vehicles and 
different combinations of all of those.
    Those estimates that posit that we could in time support 
from our land and from our agricultural resources all of our 
transportation needs seem at present unfeasible.
    Mr. Kissell. Thank you, sir. Thank you, Mr. Chairman.
    Mr. McIntyre. Thank you very much.
    I would just like to ask Mr. Lee and Mr. McLaurin. I know 
you, Mr. Lee, in particular mentioned tough choices in your 
testimony that would have to be made in the context of writing 
the next farm bill. In this day of budgetary concerns and 
everyone is concerned about the deficit and making sure we do 
not run up more national debt, what programs would you regard 
as the most essential out of all in the farm bill that you 
think are absolutes, that absolutely have to be preserved in 
the farm bill? I would like you and Mr. McLaurin to each name 
the very top things you consider the most essential.
    Mr. Lee. I will go ahead and pass that on to him.
    Mr. McLaurin. I think, Congressman, safety net in the 
program is going to be most important. The Marketing Loan 
Program has worked exceptionally well for us, and as we move 
forward with cotton and addressing the WTO agreements and what 
they may address with our international trade, our marketing 
program--Congressman Etheridge asked earlier about cotton in 
the future in particular, and I think that we are very 
fortunate right here in North Carolina with some of our textile 
manufacturers. Congressman Kissell has been involved in that 
industry, but some of them right now are fairly profitable in 
spinning cotton. Hopefully we can bring this industry back to 
life in the state. We have drastically reduced our acres of 
cotton down to a little over 10 million acres across the U.S. 
this year, so there is a future for cotton here and a safety 
net is all we ask for. But how you create that in 2012 Farm 
Bill, I do not know.
    Mr. McIntyre. Thank you. Mr. Lee.
    Mr. Lee. I agree the safety net is critically important for 
farmers so we can weather the tough times. Agriculture is a 
business that is subject to the whims of weather and nature, 
and market swings and things beyond our control. So there are 
times we all need a little help.
    I think rural development money is important to help 
maintain rural communities and the quality of life there. I 
think the nutrition program is important, because I do not 
think we want to see anybody hungry in this nation with the 
greatest agricultural system in the world.
    But I will say that I see a crisis in our country, a budget 
crisis and we are fighting two wars and a deep recession. We 
have young men and women and military families making terrible 
sacrifices, and speaking for myself, I am willing to make a 
sacrifice in my program benefits and I think it is necessary 
when you write the farm bill. And I am not going to be mad at 
you if you cut my benefits, because I see that we are going to 
have to cut benefits across government spending to bring our 
revenue and spending levels in line with what they should be.
    Thank you.
    Mr. McIntyre. Thank you. Anybody else have a burning 
question?
    [No response.]
    Mr. McIntyre. If not, I would like to thank our first 
panel, thank you for your patience, thank you for your 
expertise and if you do have additional comments other than 
what you may have submitted already in writing, you have 30 
days from now to add any additional comments if you would like 
to submit them to the record.
    With that, we will excuse the first panel and welcome the 
second panel to please come forward. If you want to stand up 
and stretch for just a moment in the audience, we will take 
literally about 2 minutes and we will proceed.
    [Recess.]
    Mr. McIntyre. We will resume the hearing after a short 
momentary break. We will welcome panel two. And as folks are 
resuming their seats, I wanted to make a few comments.
    First of all before our friends from the North Carolina 
Biofuels Center leave us, one of the persons here on behalf of 
the Biofuels Center is Ashley Jones, who is the daughter of 
Congressman Walter Jones. Congressman Jones was going to 
attempt to be here today and was unable to do so, but I 
particularly want to thank Ms. Jones in her dual capacity, not 
only on behalf of the Biofuels Center but also being the 
daughter of Congressman Jones. Thank you, Ashley.
    And I also want to thank Congressman Butterfield's office, 
who is represented here today as well. Without objection, I 
would ask the panel that we allow Congressman Butterfield's 
full statement to be entered into the record.
    Today also, I would like to note that there are several 
local and state elected officials that are here that will be in 
and out and will be among you. I hope you will take time to 
speak to our local and regional and state elected officials. We 
also have a lot of state and local organizations that we work 
with constantly and have a great respect for. Many of their 
officers are here today. Thank you for your commitment. I know 
that the EMCs both individually and through their statewide 
organization as well as our friends from Cape Fear Farm Credit, 
from telephone co-ops and from other entities that work 
constantly on a regional or statewide basis to improve rural 
economic development as well as agribusiness and opportunities 
for agriculture, are here today. So thank you all for making 
the concerted effort that you have to join us today.
    Today we also have representatives of state directors from 
the USDA. Aaron Martin is the State Executive Director of the 
Farm Service Agency. J.B. Martin, Jr. with the Natural 
Resources Conservation Service is the State Conservationist. 
They each have representatives here today. But the man himself 
is here, who is our State Rural Development Director, Randall 
Gore. Mr. Gore, stand up and thank you, a native of Brunswick 
County. Thank you for being with us today.
    [Applause.]
    Mr. McIntyre. So thanks to all of you. Everyone here is 
important and for the farmers and citizens and others involved 
in private industry and business as well, thank you for what 
you bring to this forum. I remind everybody once again that 
there are cards for distribution that you can pick up that 
allow you to participate in the web-cast. We want to make sure 
that your statements are sent in so everybody can give us some 
ideas and comments to participate today. Even if you are not 
technically at the table to testify, you can still send in your 
comments. www.agriculture.house.gov. So please do that and do 
it no later than literally 1 month from today, July 28, so that 
we can have your comments as part of the official record.
    With that, I am pleased that we are moving right along on 
schedule. As indicated earlier, we allow witnesses up to 5 
minutes to testify, and then questions up to 5 minutes to be 
asked by the panel members, in order to keep us on a timely 
schedule.
    With that, we now welcome our second panel today and would 
like to invite each of them to testify. I know we have a slight 
change. On behalf of Billy Ray Hall, the rural economic 
development representative from the North Carolina Rural 
Center, who had an unexpected situation in his family with 
health as well as I did with mine. I want to thank Mr. Patrick 
Woodie, Vice President for Rural Programs at the North Carolina 
Rural Center for being with us today.
    Our good friend Randall Jones from just down the road in 
Robeson County represents the electric co-ops and he 
particularly will be speaking with regard to those concerns, 
and is here from Red Springs, North Carolina.
    Mr. Tommy Porter, pork, beef and poultry producer from 
Concord, North Carolina.
    And Mr. Dan Ward just down the road from Clarkton, North 
Carolina, who has worked very valiantly on behalf of our peanut 
producers.
    With that, we welcome the second panel and we will ask Mr. 
Woodie to please begin.

          STATEMENT OF PATRICK WOODIE, RURAL ECONOMIC
          DEVELOPMENT REPRESENTATIVE, RALEIGH, NC; ON
                    BEHALF OF BILLY RAY HALL

    Mr. Woodie. Thank you, Chairman McIntyre and Representative 
Thompson, Representative Etheridge and Representative Kissell 
for this opportunity to speak today about the rural development 
needs of this country and the great opportunities that lie 
before us.
    My name is Patrick Woodie, Vice President of Rural 
Development Programs for the North Carolina Rural Economic 
Development Center representing our President Billy Ray Hall 
today.
    The Rural Center has worked to make life better for people 
in rural North Carolina. As a statewide nonprofit organization, 
the center has developed, promoted and implemented sound 
economic development strategies to improve the quality of life 
of all rural North Carolinians. Throughout these 2 decades, the 
Center has had a very productive partnership with USDA Rural 
Development working together on ventures that brought new jobs 
and businesses, infrastructure improvements, innovative 
technology and community facilities to many of our rural 
communities.
    First let me begin by underscoring that rural is important 
in North Carolina. There are five states that account for 25 
percent of the rural population. North Carolina is one of those 
five and generally ranks second behind Texas. Depending on 
whose definition you use, the population of rural North 
Carolina is as high as 4.6 million people. That is larger than 
the populations of half the states in this country.
    North Carolina also has the distinction of having the 
highest number of rural school children. That does not mean 
they all graduate. Fewer than seven in ten finish high school, 
and it does not mean they will not move away for better jobs. 
But in farm vernacular, we have good seed corn and plenty of 
it.
    And to every extent possible, North Carolina takes care of 
its own. We have a very strong philanthropic sector. We have a 
Governor who, when the economic chips were down this year, 
found a way to put dollars into rural development. And we have 
a General Assembly that has never flagged in its commitment to 
rural people, and has fully supported the work of the Rural 
Center for more than 22 years.
    I repeat, rural is important in North Carolina.
    Yet, along with these assets, we face many challenges and 
our rural people are struggling at the economic edge. Some live 
in places where poverty is a legacy, 24 counties in North 
Carolina had a poverty rate of over 20 percent in 2008. 
Altogether, there are more than half a million rural North 
Carolinians who now live in poverty.
    The economy of rural North Carolina has undergone seismic 
change as you well know. For years, nearly every small town in 
our state had one or several manufacturing facilities that are 
now gone. Manufacturing employment hit its peak in 1995 and 
after the recession of 2001, we thought we could not bleed any 
more. Then the recession of 2008 struck. In the period of 2000-
2008, rural North Carolina lost 34 percent of its manufacturing 
jobs, for a total loss of 134,440 jobs.
    In fact, unemployment did not hit its high in rural North 
Carolina until this past February of 12.7 percent, and today, 
five of our rural counties still have unemployment rates over 
14 percent.
    The hardship is serious, it is widespread and it will not 
be resolved quickly. To address these needs, we must move on 
several fronts simultaneously. And we have five areas we would 
like to emphasize.
    First, we must continue large-scale investments in rural 
infrastructure. In Fiscal Year 2008, the Rural Center joined in 
a partnership with USDA using our state appropriations combined 
with USDA resources and funded a combined $250 million to 
address basic water and wastewater needs in rural areas. 
Thirteen of our rural communities currently have applications 
pending for USDA grants and loans totaling $8.3 million. That 
will leverage total investment of $36 million.
    The most recent recession has affected available revenues. 
Between 2008 and 2009, total state and Federal assistance for 
water and wastewater infrastructure in North Carolina declined 
by $20 million in spite of the ARRA investment during that same 
time period.
    Second, we must stimulate small business growth and 
entrepreneurship development. North Carolina was among the 
first to recognize the importance of home-grown jobs. Rural 
communities will become increasingly dependent on risk-taking 
and innovative individuals to create jobs.
    At the Rural Center, we have responded to the challenges 
facing rural businesses with the North Carolina Micro-
Enterprise Loan Program along with a venture capital program 
that together have made over 1,400 business loans valued at 
nearly $11 million.
    Small business is the key to this recovery and your 
continued investment in funding USDA programs aimed toward 
small businesses is extremely necessary.
    Third, we must stimulate deployment of broadband 
technology.
    Fourth, as you heard from Steven Burke, we must invest in 
the opportunity to supply renewable energy for all America.
    Fifth, we must never fail to address economic innovation 
across rural America.
    And finally, in closing, let me offer just a few 
observations:
    I hope that we can soon get beyond the clashes of opinion 
over large-scale agriculture versus local food systems. Rural 
communities need both and they have much to learn from each 
other.
    Federal dollars from the Recovery Act have been critical at 
a time when rural communities were suffering, at perhaps their 
lowest point. We would be truly in desperate straits were it 
not for that.
    Rural America needs at most a mandatory ongoing water and 
sewer program with predictable funding streams and favorable 
terms with your consideration of increasing the number of 
grants available over loans.
    And we believe that we could have no greater partner at the 
Rural Center than USDA Rural Development, and we believe that 
our partnership is a model that other states should consider.
    Thank you for the invitation to speak today and for your 
presence here at a time when so many rural communities need 
your attention to be focused on them. Thank you.
    [The prepared statement of Mr. Hall follows:]

   Submitted Statement by Billy Ray Hall, Rural Economic Development 
                      Representative, Raleigh, NC
    Thank you Chairman McIntyre and Representative Thompson for this 
opportunity to speak today about the rural development needs of this 
country and the great opportunities that lie before us.
    I am Billy Ray Hall, President of the North Carolina Rural Economic 
Development Center (Rural Center). For more than twenty years, the 
Rural Center has worked to make life better for people in rural North 
Carolina. As a statewide nonprofit organization, the Rural Center has 
developed, promoted, and implemented sound economic strategies to 
improve the quality of life of rural North Carolinians. Throughout 
these two decades, the Rural Center has had a very productive 
partnership with USDA Rural Development, working together on ventures 
that brought new jobs and businesses, infrastructure improvements, 
innovative technology, and community facilities to rural communities.
    First, let me underscore that rural is important in North Carolina.

   There are five states that account for 25 percent of the 
        rural population. North Carolina is one of those five and, in 
        fact, is generally ranked second behind Texas. Depending on 
        whose definition you use, the rural population in North 
        Carolina is as high as 4.6 million people. That's larger than 
        the populations of half the states in this country.

   North Carolina also has the distinction of having the 
        highest number of rural schoolchildren. That doesn't mean they 
        all graduate--fewer than seven in ten finish high school. And 
        it doesn't mean that many won't move away to find jobs. But, in 
        farm vernacular, we've got good seed corn and plenty of it.

   And, to every extent possible North Carolina takes care of 
        its own. We have a strong and active philanthropic sector 
        that's been a friend to rural people for many decades. We have 
        a Governor who, when the economic chips were down this year, 
        found a way to put dollars into rural development. We have a 
        General Assembly that has never flagged in its commitment to 
        rural people, including its full support for the North Carolina 
        Rural Economic Development Center for more than 22 years.

    I repeat . . . rural is important in North Carolina.
    Yet, even with these assets, too many of our rural people are 
struggling at the economic edge.

   Some live in places where poverty is a legacy passed from 
        one generation to another. Some are newly poor. In 2008, 24 
        rural counties in North Carolina had poverty rates over 20 
        percent. Together, these 24 counties--concentrated in eastern 
        North Carolina, near the coast, and in south-central North 
        Carolina--are home to more than 250,000 rural poor. Altogether 
        there are more than a half million rural North Carolinians who 
        now live in poverty.

   The economy of rural North Carolina has undergone seismic 
        change. For years, nearly every small town in North Carolina 
        was home to one or more manufacturing facilities. These 
        manufacturing jobs, often in textiles and other traditional 
        industries, have been on the decline since a peak in 1995. The 
        recession of 2001 hit, and we found ourselves on the front page 
        of nearly every paper in the nation because of our massive job 
        losses. Just when we thought we couldn't bleed any more, the 
        recession of 2008 struck. In the period 2000-2008, rural North 
        Carolina lost 34 percent of its manufacturing jobs for a total 
        loss of 134,440 jobs. And we know those numbers continued to 
        worsen as the recession wore on.

   In fact, unemployment in our 85 rural counties did not peak 
        until February of this year--at 12.7 percent. That figure 
        dropped to 10.6 percent in April, but five rural counties still 
        have unemployment rates of over 14 percent.

   It is no surprise that North Carolina leads the nation in 
        trade-affected layoffs.

    The hardship in North Carolina is serious, it is widespread, and it 
will not be resolved quickly. To address current needs, we must move on 
several fronts simultaneously. We look to USDA to continue as our 
strong Federal partner.

    First, we must continue large-scale investments in rural 
infrastructure. 

    The partnership with USDA's Rural Development Office is essential 
to our rural areas' efforts to provide safe drinking water and 
environmentally sound waste disposal at rates that our rural citizens 
can afford.

   In (Federal) FY 2008, the Rural Center joined North 
        Carolina's Rural Development Office in a memorandum of 
        agreement to combine our resources to meet more of the water 
        and wastewater needs of rural North Carolinians. We were able 
        to gain the support of our General Assembly, and together the 
        Rural Center and USDA targeted a combined $250 million to 
        address basic water and wastewater needs. For example, 13 of 
        our rural communities currently have applications pending for 
        USDA grants and loans. Their approval will trigger a Rural 
        Center investment of $8.3 million and total investments of $36 
        million in critically needed water and sewer projects. We have 
        a wonderful joint record of accomplishment, but we still have 
        an estimated $16 billion in unmet water and wastewater 
        infrastructure demand. Unfortunately, neither the Rural 
        Center's special state funding nor the USDA money we were able 
        to tap is a recurring appropriation.

   The recent recession affected available revenues. Between 
        2008 and 2009 total state and Federal assistance for water and 
        wastewater infrastructure in North Carolina declined by $20 
        million--that's despite the significant infusion of ARRA money 
        during that time period.

   Recently we calculated the unmet water and sewer needs in 
        the most distressed rural areas of North Carolina. A total of 
        150 water and sewer projects in those most economically 
        distressed rural counties were deemed ``ready to proceed'' but 
        exceeded the ARRA allotment for our state's revolving loan 
        funds by more than $200 million. In fact, only a quarter of all 
        rural eligible projects could be funded, leaving more than half 
        a billion dollars in shovel-ready projects in need of financial 
        assistance for construction to begin. This unfunded amount far 
        exceeds the total amount of state and Federal assistance for 
        water and wastewater infrastructure for all of North Carolina.

   The USDA's Rural Water and Waste Disposal Grants and Loans 
        have helped the rural communities in our state meet many 
        critical water and sewer challenges. Our partners in Rural 
        Development have responded to challenges that threatened the 
        health of our rural people with failing septic systems and 
        contaminated wells, to the emergency need to keep the water 
        flowing during the extended drought of 2007-08, and to the 
        necessity of finding alternative water supplies when the level 
        of groundwater aquifers dropped dramatically. The continued 
        authorization and increased appropriations for that program are 
        vital to protecting the health and well-being of rural citizens 
        and the economies of their communities. This appropriation 
        should be mandatory under the farm bill and re-establish a more 
        generous allocation to grants rather than loans for distressed 
        communities.

    Second, we must stimulate small business growth and 
entrepreneurship development. 

    As a result of plant closings and job losses suffered by our rural 
communities, North Carolina was among the first to recognize the 
importance of homegrown jobs. In the economy of the future, rural 
communities will become increasingly dependent on risk-taking and 
innovative individuals to create jobs and grow businesses.

   Small business is already a powerful force in the rural 
        areas of our state. Rural North Carolina has 87,000 businesses 
        with at least one but fewer than 50 employees. These small 
        businesses account for more than 95 percent of all businesses 
        in the state's 85 rural counties. In addition, there are nearly 
        288,000 self-employment businesses in rural areas. North 
        Carolina's small businesses added more than 125,000 jobs during 
        the period 2001-08 while companies with more than 100 employees 
        lost 40,000 jobs over that same period. A survey in 2005 showed 
        that more than 60 percent of rural businesses are started by 
        individuals who grew up in rural North Carolina and most 
        indicate no intention of selling or relocating their 
        businesses.

   Yet small business owners cite serious concerns. These 
        include a sense of isolation, lack of knowledge about emerging 
        markets, lack of access to capital, limited understanding of 
        available business support services, and the need for more 
        training and education programs tailored for different sectors 
        and levels of experience.

   The Rural Center began responding to these needs nearly 20 
        years ago with the creation of the North Carolina 
        Microenterprise Loan Program. We now also operate a venture 
        capital fund that enables the growth of existing businesses in 
        our most economically distressed communities. Together these 
        two programs have made over 1,400 business loans valued at 
        nearly $11 million. Through two loan-loss reserve programs, we 
        have leveraged another $104 million in private lending, leading 
        to the creation or retention of more than 27,000 jobs. With the 
        creation of the Institute for Rural Entrepreneurship in 2003, 
        we intensified efforts to serve the needs of entrepreneurs and 
        develop statewide policies in support of entrepreneurship and 
        small business growth. Just last year, we joined with several 
        state partners to launch a new project helping laid-off workers 
        hone the skills that can lead them to become successful, self-
        employed entrepreneurs. So far that program, funded by the U.S. 
        Department of Labor, has resulted in the creation of 60 small 
        businesses. In these and other ways, we have created a model 
        for the nation in how to fuel rural economic growth, and we 
        know that with determination and resources, we can do more--and 
        so can other states.

   To support the emergence of a dynamic, growing small 
        business sector in rural North Carolina and rural America, we 
        encourage USDA to expand its investments in rural 
        entrepreneurs. The Rural Center participated in the discussions 
        that led to Federal funding for qualified intermediary 
        organizations such as ours to provide technical assistance 
        under the rural entrepreneurship and microenterprise assistance 
        program (RMAP). We support increased funding for RMAP in 
        general and specifically propose an increase in funding levels 
        for non-lending technical assistance providers. We also support 
        continued and expanded funding for the Rural Business 
        Opportunity Grant to improve entrepreneurship infrastructure.

    Third, we must stimulate deployment of broadband technology.

    Broadband connectivity is vital to local economic development and 
job creation, standing in importance alongside water, sewer, roads and 
electricity. Communities that lack adequate broadband access will fail 
to retain existing business or create new commerce through 
entrepreneurship--plain and simple.

   North Carolina has had a nationally recognized state 
        broadband authority since 2001 and has served as a national 
        model for efforts to expand broadband access. Yet, 
        approximately 17 percent of the households in North Carolina 
        still have no high-speed Internet service available to them.

   We are encouraged by the renewed focus on broadband for our 
        country and for North Carolina, as demonstrated through the 
        American Recovery and Reinvestment Act programs of the U.S. 
        Department of Agriculture and the U.S. Department of Commerce 
        and with the March release of the National Broadband Plan from 
        the Federal Communications Commission.

   We applaud the goals of the National Broadband Plan, but ask 
        that Washington not forget the focus on rural solutions. The 
        National Broadband Plan calls for increased broadband speeds 
        for all households, but targets just a fraction of the 
        population for ultra high-speed broadband. The possibility 
        exists that rural America will be left out of the quest for 
        higher speeds and that pockets of underserved or even unserved 
        areas will remain. Rural America needs the same broadband 
        access and speeds that urban America needs.

   Adequate broadband service is critical to building the base 
        for a competitive economy across all of America. Research shows 
        that a higher percentage of rural citizens in North Carolina 
        operate home-based businesses than do urban North Carolina 
        citizens. Broadband is the platform that enables them to 
        operate these businesses. We expect that is true all over rural 
        America.

   We look to you, and the USDA, to continue to focus on 
        solutions and funding sources for broadband deployment to rural 
        areas. North Carolina recently produced 40 competitive 
        applications for funding consideration by the Rural Utilities 
        Service for the ARRA-funded Broadband Initiatives Program (BIP) 
        to build out last-mile broadband infrastructure in our state. 
        We ask that the Rural Utilities Service implement any lessons 
        learned from the BIP program and update and expand its 
        historical grant and loan programs, traditionally geared toward 
        telephone service, to offer continued assistance for broadband 
        deployment.

   We also encourage the USDA to consider the benefit of 
        funding for Web applications. In Rutherford County, the 
        Foothills Connect Farmers Fresh Market program has provided 
        enhanced incomes to more than 60 local farmers. Using an online 
        platform that connects local farmers to chefs in neighboring 
        metropolitan areas, these farmers have learned to use 
        computers, to bar code their products and to grow foods that 
        chefs in our major cities wish to buy. Broadband Internet is 
        the platform that enables this network of growers and chefs to 
        operate. The Farmers Fresh program is now expanding into other 
        areas of the state. With support at the early stage, other Web-
        based applications can lead to new and expanded business 
        opportunities across rural America.

    Fourth, we must seize the opportunity to supply renewable energy 
for all of America.

    Rural areas offer many advantages to the renewable energy sector 
that can translate into opportunities for farm businesses. Utilities 
and renewable energy brokers are seeking and finding sites in rural 
areas where the availability of land and exposure to sun and wind 
create potential for electric generation. North Carolina farmers who 
once supported their families and communities by growing tobacco are 
now exploring business ventures that can tap into the emerging interest 
in renewable energy sources, including biofuels.

   Like many states, North Carolina has set a renewable energy 
        portfolio standard calling for private electric utilities to 
        obtain 12.5 percent of their power from renewable sources and 
        efficiency measures by 2021. (Electric cooperatives have a 
        standard of 10 percent.) But the market price for renewable 
        energy certificates is far from stable and hard to predict as 
        utilities strive to meet their first targets in 2012.

   Many farmers in North Carolina also are looking for 
        profitable ways to grow feedstock for the emerging biofuels 
        industry. Working with farmers, universities and agricultural 
        leaders, the North Carolina Biofuels Center has set a goal of 
        having 10 percent of liquid fuel sold in North Carolina come 
        from locally grown and produced biofuels. North Carolina has 
        over 17.6 million acres in underutilized timberland, which 
        makes woody biomass a significant resource with great potential 
        for advanced biofuels development.

   Programs under the farm bill are contributing to North 
        Carolina's ability to move forward with the development of 
        renewable energy, and they have the potential to do even more. 
        For example, by supporting farmers producing biofuel 
        feedstocks, the Bioenergy Program for Advanced Biofuels has 
        assisted three North Carolina energy projects. Development is 
        under way on several other projects that we hope will qualify 
        for the Biorefinery Assistance Program. And the Rural Energy 
        for America Program has funded 60 North Carolina projects, 
        addressing both renewable energy generation and energy 
        conservation. As we witness the ongoing catastrophe in the Gulf 
        of Mexico, we receive daily confirmation of the critical 
        importance of the continued emphasis on these measures.

   Similarly, USDA's Rural Energy for America Program (REAP) 
        has attracted tremendous interest from rural businesses and 
        farms seeking to make their operations more efficient and 
        renewable energy generation feasible. The number of REAP 
        projects approved by USDA has grown steadily over the past four 
        years and is expected to reach 100 this year in North Carolina 
        alone, with a dollar value exceeding $13 million in loans and 
        grants.

   This year we are hopeful the North Carolina General Assembly 
        will fund the Agricultural Efficiency and Innovation Cost-share 
        Program, which will assist farmers with energy audits that will 
        identify ways to save energy and prove the feasibility of 
        energy-efficient technologies and equipment. With energy audits 
        in hand, more farmers will be able to apply for REAP loans and 
        grants and leverage Federal assistance for their energy 
        improvements.

   I know that this year's REAP funding deadline is Wednesday, 
        but looking to the future, we encourage you to increase REAP 
        appropriations from the current $100 million to meet more of 
        the demand. Additional benefits will accrue if you will extend 
        more energy technical assistance to farmers, businesses and 
        communities in the most distressed areas, to help them 
        recognize the best energy opportunities and make sound 
        investments.

    Fifth, we must invest in economic innovation across rural America. 

    Rural North Carolina has many challenges. But opportunities abound 
and can be realized through the application of creative ideas and 
resources.

   In Carteret County, a marine scientist, on his own time and 
        dime, is testing a new way of raising oysters that could 
        significantly increase production, jobs and income for fishing 
        families.

   In Burke and Cleveland counties, small and mid-size 
        manufacturers are implementing new ways to increase energy 
        efficiency and improve the bottom line.

   In Bertie County, biotechnology is taking root through 
        efforts to create a pilot extraction facility that will explore 
        new farm-raised plants for use in the pharmaceutical industry.

   Secretary Vilsack clearly recognizes the critical role of 
        innovation. In fact, he said recently: ``This country has got 
        to get serious again about a strong, vibrant, creative, 
        innovative rural America. And I can guarantee you the USDA is 
        committed to making that happen.'' USDA's continued investments 
        are vital to encourage and seed rural innovation, whether that 
        innovation is the idea that will create a profitable niche for 
        local agriculture or the regional partnership that will enable 
        more efficient use of resources while enhancing the rural 
        quality of life. With that help, rural Americans and rural 
        communities can thrive.

    In closing, I would like to make a few brief observations:

   Open debate over important issues is critical. It is one of 
        the great privileges of living in this country. It's what helps 
        us to get things right. But I hope that we can soon get beyond 
        the clashes of opinion over large-scale agriculture versus 
        local food systems. We need both, and they have much to learn 
        from one another. I also hope we can rise above the conflicts 
        over agriculture funding versus rural development funding. One 
        cannot survive without the other. We must put less time into 
        debates about who gets a piece of the pie and work together to 
        create a bigger economic pie.

   Federal dollars from the American Recovery and Reinvestment 
        Act have provided a lifeline for states during the recent 
        recession. Without this money, we would be in truly desperate 
        straits. But I would like to stress today, to USDA and to 
        Members of Congress, that what rural North Carolina and rural 
        America need most are mandatory, on-going programs with 
        predictable funding streams and terms. Small, rural, 
        understaffed communities simply do not have the capacity to 
        compete in a fast-moving, ever-changing funding environment.

   USDA Rural Development in North Carolina has been a great 
        partner to the North Carolina Rural Center. We have 
        successfully combined resources from the Federal and state 
        levels to serve the rural communities of this state in ways 
        that far surpass what either of us could have done 
        individually. We believe we have a model for other states to 
        consider. We ask that as Congress and USDA consider future 
        funding, you remember that there are highly capable 
        intermediary organizations that can and should be viewed as 
        valued partners at the state level.

   Finally, we live in an urbanizing nation. Today, by some 
        measures, more than 80 percent of the population lives in urban 
        areas. It is therefore natural for ``rural'' to be viewed 
        through an urban lens as the place where ``our'' food is 
        produced, the place where ``our'' water supply comes from, the 
        place ``we'' go for recreation as a break from the city and the 
        suburbs. We depend on USDA to maintain the rural lens. We 
        applaud the new focus on cross-agency collaboration at the 
        Federal level, and we look to USDA to carry the rural message 
        into these partnerships.

    Thank you for this invitation to speak today. Your presence here--
at a time when matters of the nation are so urgent and consuming--
speaks to your commitment to rural people and to rural places.

    Mr. McIntyre. Thank you, and please give our best wishes to 
Mr. Hall.
    Mr. Jones.

       STATEMENT OF RANDALL JONES, ELECTRIC COOPERATIVE 
                REPRESENTATIVE, RED SPRINGS, NC

    Mr. Jones. Congressman McIntyre, Congressman Kissell, 
Congressman Etheridge and also Congressman Thompson; thank you 
for being here today for your farm bill hearing.
    I am going to be speaking a little away from the electric 
utility industry side, to speak about another important entity 
of what we feel is very important to rural America and that 
being broadband access.
    So again, I am Randall Jones, President and CEO of Lumbee 
River Electric Membership Corporation in Red Springs. Also, I 
am a resident of Robeson County.
    Lumbee River Electric Membership is an electric cooperative 
that provides electric service to some 4,000 to 6,000 members 
living in Cumberland, Hoke, Robeson and Scotland Counties. We 
have been a part of our communities since 1940. From the very 
beginning, we have been committed to providing electric and 
other value-added services that provide the quality of life in 
the communities we serve.
    Over the last 2 years, there has been much conversation on 
the national level about the need for a network across the 
entire country that can bring broadband access to all 
Americans. In many respects, this need to expand broadband 
access across America is very similar to the experience we had 
related to electric back in the late 1930 and 1940s. At that 
time, electric was quickly becoming available in most urban 
areas of the United States. Unfortunately, rural America was 
unable to fully participate in the economic benefits that 
having electricity available could bring. Just like back in the 
1930s and 1940s when Lumbee River EMC, along with other 
cooperatives across this country, came together to bring 
electricity and the resulting economic prosperity to rural 
America, we are here to support this effort.
    To this end, Lumbee River EMC has put together a proposal 
that would bring advanced fiber-to-the-home broadband access 
via high speed fiber optic network to end-users in our rural 
service area. Our last mile infrastructure project will provide 
high speed broadband services that are urgently needed in rural 
communities by directly connecting homes, businesses, public 
service agencies and key community institutions.
    To put this in perspective, once approved, this advanced 
fiber-to-the-home network will provide broadband access to over 
11,000 homes as well as 95 critical community facilities and 
public safety entities. This includes everything from health 
care facilities to libraries and schools. In addition, it is 
anticipated that more than 50 new jobs will be created as a 
direct result of this effort.
    We feel that cooperatives are uniquely positioned to help 
lead this effort. First, we have vast experience in providing 
cost effective services to rural America that require 
significant financial investments. Lumbee River EMC has for 
years balanced improving the electrical infrastructure in rural 
southeastern North Carolina while controlling the cost that our 
membership has to pay.
    Second, we have certain components of the necessary 
infrastructure already in place. By taking advantage of the 
poles that are in place to provide electric service, we can 
minimize the duplication of facilities and more effectively 
manage them.
    Third, in the case of Lumbee River EMC, we already have 
some experience with fiber optics. We are currently using a 
much smaller network to connect our substations to help 
facilitate various technologies that we are implementing.
    We are certain that everyone agrees that the need for 
expanding broadband networks into rural America is the only way 
that we can ensure the future economic health of these regions. 
This will not happen without the commitment of our Federal 
Government. In addition, we believe that the electric 
cooperatives are uniquely positioned to participate as a 
significant contributor to this implementation. We at Lumbee 
River EMC would appreciate any support you can provide our 
efforts to bring this critical service to our membership.
    And also, Mr. Chairman, I would like to say speaking of 
broadband, we also would like to ask for your continuing 
support from RUS in the financing of our infrastructures that 
we have in place for rural America.
    Thank you for being here and thank you for allowing me to 
testify.
    [The prepared statement of Mr. Jones follows:]

       Prepared Statement of Randall Jones, Electric Cooperative 
                    Representative, Red Springs, NC
    Good morning. My name is Randall Jones and I am the CEO for Lumbee 
River Electric Membership Corporation located in Red Springs. Also, I 
am a resident of Robeson County.
    As you may know, Lumbee River EMC is an electric cooperative that 
provides electric service to some 46,000 members living in Cumberland, 
Hoke, Robeson, and Scotland counties. We have been a part of our 
communities since 1940. From the very beginning, we have been committed 
to providing electric and other value-added services that improve the 
quality of life in the communities we serve.
    Over the last 2 years there has been much conversation on the 
national level about the need for a network across the entire country 
that can bring broadband access to all Americans. In many respects, 
this need to expand broadband access across America is very similar to 
the experience we all had related to electricity back in the late 1930s 
and early 1940s. At that time, electricity was quickly becoming 
available in most urban areas of the United States. Unfortunately, 
rural America was unable to fully participate in the economic benefits 
that having electricity available could bring. Just like back in the 
late 1930s and early 1940s when Lumbee River EMC, along with other 
cooperatives across this country, came together to bring electricity, 
and as the resulting economic prosperity to rural America, we are here 
to support this effort.
    To this end, Lumbee River EMC has put together a proposal that 
would provide advance fiber-to-the-home (FTTH) broadband services via a 
high speed fiber optic network to end users in our rural service area. 
Our last mile infrastructure project will provide high speed broadband 
services that are urgently needed in rural communities by directly 
connecting homes, businesses, public service agencies and key community 
institutions.
    To put this in perspective, once approved, this advanced fiber-to-
the-home network will provide broadband access to over 11,000 homes as 
well as 95 critical community facilities and public safety entities. 
This includes everything from health care facilities to libraries and 
schools. In addition, it is anticipated that more than 50 new jobs will 
be created as a direct result of this effort.
    We feel that cooperatives are uniquely positioned to help lead this 
effort. First, we have vast experience in providing cost effective 
services to rural America that require significant financial 
investments. Lumbee River EMC has for years balanced improving the 
electrical infrastructure in rural southeastern North Carolina while 
controlling the cost that our membership has to pay. Second, we have 
certain components of the necessary infrastructure already in place. By 
taking advantage of the poles that are in place to provide electric 
service, we can minimize the duplication of facilities and more 
efficiently manage them. Third, in the case of Lumbee River EMC, we 
already have some experience with fiber optics. We are currently using 
a much smaller network to connect our substations to help facilitate 
various technologies that we are implementing.
    We are certain that everyone agrees that the need for expanding 
broadband networks into rural America is the only way we can insure the 
future economic health of these regions. This will not happened without 
the commitment of our Federal Government. In addition, we believe that 
electric cooperatives are uniquely positioned to participate as a 
significant contributor to this implementation. We at Lumbee River EMC 
would appreciate any support you can provide our efforts to bring this 
critical service to our membership. Thank you.

    Mr. McIntyre. Thank you. Thank you for your timely 
testimony and I know you have also traveled to Washington to 
testify, and thank you for your effort you give, Mr. Jones.
    Mr. Kissell, do you want to introduce our next panelist?
    Mr. Kissell. With pleasure; thank you, Mr. Chairman. I will 
introduce Tommy Porter from Cabarrus County. It is good to hear 
all these North Carolina names and you do not have to worry 
about and wonder where they are, you know. And it is just very 
good. Tommy, we appreciate you being here today. Tommy is more 
in the livestock end of the agriculture, and we are looking 
forward to hearing your testimony.

 STATEMENT OF THOMAS ``TOMMY'' E. PORTER, Jr., PORK, BEEF, AND 
                 POULTRY PRODUCER, CONCORD, NC

    Mr. Porter. Thank you, Congressman Kissell. Mr. Chairman, 
Members of the panel, it is an honor for me to be here today 
and thank you for listening to us.
    Again, my name is Tommy Porter, I am a livestock producer 
from Cabarrus County here in North Carolina. My operation 
consists of a 2,200 sow farrow-to-wean operation; approximately 
300 cow/calf momma cow operation and also a poultry operation.
    My understanding of the farm bill, it is a comprehensive 
piece of legislation and as far as it pertains to farming, it 
would be to enhance competitiveness for American farmers in a 
global market. Two important parts of this bill would be the 
conservation and trade part.
    In the conservation part, there are programs in there that 
are vital to livestock producers that would pertain to water 
quality. We keep hearing more and more about are we going to 
fall under air emissions controls as far as livestock are 
concerned.
    In the conservation part of it and the air part of it, an 
example is the EQIP part of the farm bill, that presents money, 
cost share programs, that greatly help livestock producers.
    Moving on to trade, we all know how important trade is, 
especially for the pork and poultry industry in this country. 
We know what naming a disease, for example H1N1--and I am 
hesitant to say swine flu--what great economic impact that had. 
I think there was a ban of 27 countries that banned U.S. pork, 
which cost American pork producers somewhere around $861 
million, just from a simple naming of a disease.
    Also, livestock producers, we greatly need an abundant, 
steady and affordable supply of feed grains as we are the 
largest consumer of feed grains produced in the U.S.
    No doubt in these hearings and in the past, you have heard 
from well-funded animal extremist groups, from other well-
funded groups that the ultimate goal, they would like for there 
to be no animal agriculture in this country. I ask that you be 
very aware of this and do not allow unintended consequences to 
come from decisions put forward by these groups.
    Simply put, a national farm policy that provides 
stabilization of food and fiber production is a benefit to 
everyone, the consumer and the American farmer. And I would 
like just to sum up, which keeps it very simple for me. There 
are two things in this country that we must keep in this 
country at all cost. The first is a very strong and viable 
military for our national defense; the second is a food supply, 
a domestic food supply. And without the second, we could not 
have the first.
    Again, I thank you for listening to me; thank you for being 
here.
    [The prepared statement of Mr. Porter follows:]

Prepared Statement of Thomas ``Tommy'' E. Porter, Jr., Pork, Beef, and 
                     Poultry Producer, Concord, NC
    Mr. Chairman, Committee Members and other field hearing 
participants,

    My name is Tommy Porter. My family and I own and operate Porter 
Farms in Cabarrus County here in North Carolina. Our farming operation 
is diversified--it includes poultry production (four pullet houses and 
a layer operation), a cow/calf operation and pork production with a 
2,200 sow, farrow-to-wean multiplier unit.
    As I come before you today, I want to thank each of you for the 
opportunity to provide input as you consider the Federal agricultural 
policies that will affect me and my fellow North Carolina livestock 
farmers. I thank you for giving producers like me a chance to provide 
input in your planning.
    Let me begin with some general comments and thoughts.
    I understand that a farm bill is a comprehensive piece of 
legislation. From my review of its purpose and history, I also 
understand that a farm bill's focus should be on farm programs and 
policies to enhance the competitiveness of U.S. agriculture.
    This includes conservation and trade programming that are vital to 
our country's livestock and poultry producers. On the other hand, it 
should not include outside interests on behalf of those who want to 
hurt farmers, food security and resource conservation.
    Please allow me to expand.
    First, regarding the subject of conservation and natural resource 
stewardship, North Carolina's pork, poultry and cattle producers are 
committed to running productive operations while meeting or even 
exceeding environmental expectations. We have fought hard for science-
based, affordable and effective regulatory policies that achieve the 
goals of today's environmental statues. In order for us to meet these 
costly demands while maintaining production, the Federal Government 
must provide support to help us defray some of the costs of compliance 
through conservation programs of the farm bill.
    We need simple conservational title programs that give us cost-
share or technical assistance. By simple, I mean processes and programs 
that do not complicate or hinder the delivery of services in the field. 
Whether it's the opportunity for me or fellow pork producers to install 
cup waterers in our barns for better water management or the chance to 
purchase additional irrigation equipment, we need EQIP and other 
conservation provisions. With air quality objectives and requirements 
likely ahead of us, we will need EQIP to help us there too.
    While we need simple conservation title programs, we also must have 
programs that increase quality and safety, and promote the role of 
pork, chicken and beef in a healthy diet. And that leads me to the 
subject of market access and trade. Expanded access to foreign markets, 
continuing promotion of U.S. exports and aggressive pursuit of export 
business all mean a great deal to U.S. protein producers.
    For example, at present, there is strong global demand for pork 
products. With 96% of the world's population outside of the United 
States, programs and trade efforts in other countries are important to 
America's pork producers. The U.S. is the low-cost producer of pork in 
the world. We are the number one exporter of pork in the world and 
these pork exports benefit the economy in two ways: it helps increase 
the prices that pork producers are paid for the hogs they market, but 
it also helps retain jobs through many rural communities across North 
Carolina and in some cases, create new jobs.
    Last year pork producers experienced firsthand the importance of 
protecting access to current export markets. Twenty-seven countries 
placed bans on U.S. pork and pork products following an outbreak of 
H1N1 human influenza on the North American continent in spite of the 
fact that there is absolutely no evidence to indicate that the virus 
can be conveyed to humans through the consumption of pork. The 
limitations on our access to those markets greatly impacted pork 
producers at a time when we were already under economic stress. Market 
access is key to the viability of pork producers like me across the 
country.
    Furthermore, I want to stress another point--farm programs that 
help manage or control costs of production related to input costs are 
vitally important to America's producers like me. Corn and soybean meal 
comprise a significant cost of raising livestock and poultry. The 
entire impact of feed grain programs and renewable energy programs 
should be carefully considered, including their impact on the cost of 
producing meat protein sources.
    Also, we realize people and organizations with extreme agendas will 
be calling on you to expand the focus of the farm bill to include their 
special interests. In advance of those distractions, I thank you for 
keeping your focus on a national farm policy that stabilizes food and 
fiber production for everyone. Outside agendas related to animal 
welfare guidelines, packer ownership bans, and other activist interests 
should not be the focus of a national farm bill. Many of these groups 
who will lobby you are well-funded and strategically coordinated and 
would like to ban farm animal production. I ask that you not be 
influenced by people who are not animal care experts and really have no 
knowledge of the animal care and husbandry practices that I employ on 
my farm everyday.
    In summary, as a livestock and poultry producer, I stress the idea 
that farm bill programs should be aimed at reducing or controlling 
costs of production, increasing the prices received for livestock and 
poultry products, and increasing the quality of U.S. meat and poultry 
products. Simply put, a national farm policy bill that provides 
stabilization of food and fiber production is a benefit to everyone--
farmers and consumers.
    Thank you for allowing me to visit with you today and sharing my 
perspective as a farmer.

    Mr. McIntyre. Thank you very much.
    Mr. Dan Ward.

      STATEMENT OF DAN WARD, PEANUT PRODUCER, CLARKTON, NC

    Mr. Ward. Good morning, Congressman McIntyre and Members of 
the Committee. My name is Dan Ward, I am a peanut farmer from 
Bladen County, North Carolina. I am currently an alternate on 
the National Peanut Board and Chairman of the North Carolina 
Farm Bureau Commodity Committee. I currently serve on 
Congressman McIntyre's Ag Advisory Committee and am a past 
President of the North Carolina Peanut Growers Association.
    My family has been producing peanuts since before I was 
born. Today, we are farming 330 acres of peanuts, 1,400 acres 
of corn and 100 acres of soybeans.
    I would like to stress several points today: peanut 
producers support the marketing loan program; current safety 
net provisions are not sufficient for southern agriculture; CSP 
and green programs need to be strengthened and fully funded; 
the need for continued support by USDA for peanut exports; and 
preservation of the marketing loan program is of utmost 
importance. It is the only provision of the current farm 
programs that covers all of a farmer's production. It is an 
essential tool in marketing our commodities and provides a 
floor for prices. Most of the peanut crop in recent years has 
utilized the loan, and any substantial changes to the loan 
program would cause extreme hardship on peanut producers.
    Mr. Chairman, as I am sure you are aware, southern 
agriculture is very diverse. Many producers plant peanuts, 
corn, soybeans, cotton, wheat, vegetables and tobacco. Each of 
these crops has different equipment requirements. Also, soil 
types and rainfall patterns result in differing yield potential 
within the state and even within counties.
    Because of this variability in yields, the ACRE program 
does not work for southern agriculture. The requirement that 
the state must trigger has the potential of inequitable 
administration of this program. Some areas of the state could 
experience a major loss while the rest of the state has above 
average yields. If revenue assurance is to be considered as 
improving the safety net, then this question of variability 
within a state must be addressed.
    Recently peanut growers have asked the Risk Management 
Agency to develop an affordable crop revenue coverage policy 
for peanuts. This would protect farmers against price and yield 
risk. I would support any reasonable price reporting 
requirement necessary to make a CRC policy work.
    The Conservation Stewardship Program includes provisions 
for a crop rotation program. This program encourages longer 
rotations, which are effective in reducing the need for 
agricultural chemical application. This is environmentally 
sound and desirable, and also will improve crop yields. The 
Department has finally implemented this program, but producers 
have not been able to utilize it because of insufficient 
funding. Farmers are conservationists at heart. We are doing 
our part every day to protect the environment and our farm and 
our families. But it is expensive and we need assistance from 
programs like CSP.
    Nutrition and feeding programs at USDA are very important 
to peanut producers. The school lunch program is utilized by 
school systems all over this country. Without it, many children 
would go hungry. Peanut products are an important menu choice 
and over the past year the peanut industry has asked the USDA 
to increase purchases of peanut products and they are 
increasing.
    Exports of peanuts are important to U.S. peanut farmers. 
USDA's Foreign Agricultural Service and the peanut industry 
have cooperated in our effort to increase exports. Current 
world market conditions are presenting the industry with an 
opportunity to expand peanut exports. We appreciate the funding 
we have received in the past and hope that the Department will 
continue to fund export enhancement programs at current or 
increased levels.
    Mr. Chairman and Committee Members, I do not envy you and 
your job of writing a new farm bill. I know you will be under 
intense pressure to decrease funding for agricultural programs 
and increase other programs under the Department's 
jurisdiction. Many farmers are struggling financially while 
providing this nation with the best quality, lowest priced food 
supply in the world. Current farm programs are making that 
possible. Program reductions will put many farmers out of 
business. This would surely result in higher food prices and 
put even more pressure on nutritional budgets.
    Mr. Chairman, thank you and the Committee for your concern 
for agriculture.
    [The prepared statement of Mr. Ward follows:]

     Prepared Statement of Dan Ward, Peanut Producer, Clarkton, NC
    Good morning, Chairman Peterson, Members of the Committee, My name 
is Dan Ward. I am a peanut farmer from Bladen County, North Carolina. I 
am currently an alternate on the National Peanut Board, and Chairman of 
the NC Farm Bureau Peanut Commodity Committee. I currently serve on 
Congressman McIntyre's Ag Advisory Committee and I am a past President 
of the North Carolina Peanut Growers Association.
    My family has been producing peanuts since before I was born. Today 
we are farming 330 acres of peanuts, 1,400 acres of corn and 100 acres 
of soybeans. On behalf of the peanut farmers of North Carolina, I 
welcome you to the Tar Heel State. Thank you for your willingness to 
come here and listen to the concerns of North Carolina farmers. Mr. 
Chairman, we appreciate the leadership you demonstrated in getting the 
2008 Farm Bill passed. We also know that you and the Committee will 
face unprecedented fiscal challenges while writing the next farm bill. 
I would like to stress several points today and look forward to your 
questions and comments. The major points are:

    1. Peanut producers support the marketing loan program.

    2. Current safety net provisions are not sufficient for southern 
        agriculture.

    3. CSP and ``green programs'' need to be strengthened and fully 
        funded.

    4. The need for continued support by USDA for peanut exports.

    Preservation of the marketing loan program is of utmost importance. 
It is the only provision of current farm programs that covers all of a 
farmer's production. It is an essential tool in marketing our 
commodities and provides a floor for prices. Most of the peanut crop in 
recent years has utilized the loan and any substantial changes to the 
loan program would cause extreme hardship on peanut producers.
    Mr. Chairman, as I am sure you are aware, southern agriculture is 
very diverse. Many producers plant peanuts, corn, soybeans, cotton, 
wheat, vegetables and tobacco. Each of these crops has different 
equipment requirements. Also soil types and rain fall patterns result 
in differing yield potential within the state and even within counties.
    Because of this variability in yields, the ACRE Program does not 
work for southern agriculture. The requirement that the state must 
trigger has the potential of inequitable administration of the program. 
Some areas of the state could experience a major loss while the rest of 
the state has above average yields. If revenue insurance is to be 
considered as improving the safety net, then this question of 
variability within a state must be addressed.
    Recently, peanut growers have asked the Risk Management Agency to 
develop an affordable Crop Revenue Coverage policy for peanuts. This 
would protect farmers against price and yield risks. I would support 
any reasonable price reporting requirements necessary to make a CRC 
policy work.
    The Conservation Stewardship Program includes provisions for a crop 
rotation program. This program encourages longer rotations, which are 
effective in reducing the need for agricultural chemical application. 
This is environmentally sound and desirable, and also will improve crop 
yields. The Department has finally implemented this program, but 
producers have not been able to utilize it because of insufficient 
funding. Farmers are conservationists at heart. We are doing our part 
every day to protect the environment and our farms and our families. 
But it is expensive and we need assistance from programs like CSP. It 
is important to me that my farm be operated in a sustainable manner.
    Nutrition and feeding programs at USDA are very important to peanut 
producers. The school lunch program is utilized by school systems all 
over this country. Without it many children would go hungry. Peanut 
products are an important menu choice. Over the past year the peanut 
industry has asked the USDA to increase their purchases of peanut 
products to be used in their feeding programs. I am happy to say that 
their purchases are up and I do think that there is room for continued 
increases in peanut purchases.
    Peanuts do not qualify for the Fresh Fruit and Vegetable Snack 
program. I believe that all school feeding programs should include 
peanuts. At a recent peanut industry meeting, Dr. Mark Manary of 
Washington University in St. Louis detailed the many nutritional 
benefits of peanuts. He discussed how peanuts are being used in Africa 
to combat malnutrition, explaining that no other food contains the 
necessary protein, fat and nutrients at such a reasonable price. With 
our nations epidemic of childhood obesity, peanuts and peanut butter 
should be in the forefront of nutritional meals.
    Exports of peanuts are important to U.S. peanut farmers. USDA 
Foreign Agricultural Service and the peanut industry have cooperated in 
our effort to increase exports. Current world market conditions are 
presenting the industry with an opportunity to expand peanut exports. 
We appreciate the funding we have received in the past and hope that 
the Department will continue to fund export enhancement programs at 
current or increased levels.
    Mr. Chairman, I am concerned about the recent effort by the U.S. 
Department of Transportation to ban peanuts on commercial airline 
flights because of peanut allergies. The peanut industry has spent 
millions of dollars to encourage the development of a vaccine or 
treatment for peanut allergies. We do not wish to minimize the 
seriousness of food allergies. Congress asked 10 years ago that DOT not 
implement a peanut ban unless a scientific peer reviewed study 
indicated a need for the ban. No such study has been done, and I would 
hope that Congress would not allow DOT to continue this action.
    Mr. Chairman and Committee Members, I do not envy you and your job 
of writing a new farm bill. I know you will be under intense pressure 
to decrease funding for agricultural programs and increase other 
programs under the Department's jurisdiction. Many farmers are 
struggling financially while providing this nation with the best 
quality, lowest priced food supply in the world. Current farm programs 
are making that possible. Program reductions will put many farmers out 
of business. This would surely result in higher food prices and put 
even more pressure on nutritional budgets.
    Mr. Chairman, thank you and the Committee for your concern for 
agriculture.

    Mr. McIntyre. Thank you very much, Mr. Ward, and thanks to 
all the panel for your testimony.
    Mr. Woodie, it has been said that U.S. trade policy is the 
biggest driver of unemployment in North Carolina. Would you 
agree with that statement?
    Mr. Woodie. Certainly North Carolina is the most trade 
affected state in the country, we know that in terms of the 
number of jobs that we have lost and the reasons for those job 
losses. We continue to see communities struggling with that 
transition in the economy, seeing the percentage of their total 
rural workforce that is in manufacturing decline significantly. 
Just when you thought you had reached the bottom and could not 
go any lower, we found a new low water mark. And even though we 
believe manufacturing and very different manufacturing will 
continue to be a strong part of the total labor force, we 
certainly have seen the loss of many of those jobs. A lot of it 
is due to foreign competition and the nature of that 
competition.
    Mr. McIntyre. Would you say that the backlog in program 
applications got reduced any by the Recovery Act when it was 
passed?
    Mr. Woodie. No. I do not believe the backlog got reduced, 
though it was significantly able to help meet the need that we 
did have. We closely monitored the ARRA dollars and looked at 
how they worked in conjunction with state dollars that we had 
been appropriated. There were a total of 150 water and sewer 
projects that were submitted as part of the ARRA round. Those 
projects were defined as ready to proceed. And it greatly 
exceeded the capacity of our state revolving water and 
wastewater loan funds to meet those needs by more than $200 
million. More than half a billion dollars in shovel-ready 
projects in need of financial assistance for construction are 
ready to proceed in North Carolina, but for funding.
    Mr. McIntyre. Okay, well, I want to make sure I am clear on 
your answer then, because you said no, that it did not help 
meet the backlog, but then you said it helped significantly 
meet the needs. So are you just saying--please explain that.
    Mr. Woodie. Well, in the absence of that money, we would be 
even further behind. There continues to be a very significant 
backlog. Our state needs to invest about $16 billion in rural 
water and wastewater and stormwater infrastructure between now 
and the year 2030. And the funding streams have not always been 
reliable year in and year out. Were it not for ARRA funding, we 
would be even further behind.
    Mr. McIntyre. In the last farm bill we had, we also had 
monies for water and sewer. Was that of significant help to the 
state projects as well?
    Mr. Woodie. Absolutely. And it was through our partnership 
with USDA Rural Development in this state that we were able to 
use state appropriated dollars to the Rural Center, which are 
all grant dollars, to help USDA leverage those Federal dollars 
into projects on the ground. That resulted in a significant 
increase in funding of water and sewer projects in the State of 
North Carolina during that time period.
    Unfortunately, our funding is nonrecurring funding, it was 
done at the time when the General Assembly was able to dedicate 
resources to water and wastewater, and that is not always the 
case. So reliable funding streams at both the state and Federal 
level are the most important things for our water and sewer 
infrastructure.
    Mr. McIntyre. All right, thank you.
    Mr. Jones--I apologize, let me ask you one more question, 
Mr. Woodie. Have you had a chance to look over the new USDA 
interim rule on the new Microentrepreneur Assistance Program?
    Mr. Woodie. Yes, I have. And we participated in the 
formation of the program along with a lot of other folks across 
the country. We are very pleased to see it, we think it meets a 
critical need of really helping us be able to--and 
organizations like us, to be able to work with the 
intermediaries we do to increase their capacity to deliver 
technical assistance at a local and regional level to small 
business owners who really need that kind of help.
    Mr. McIntyre. Thank you. And for those in the audience, the 
new Micro-Enterprise Assistance Program that emanated from our 
Subcommittee and also this full Committee, was one specifically 
targeted to small businesses that employ less than ten people, 
because they are the fastest job generators of all small 
business, and also usually have the most trouble dealing with 
Federal bureaucracy and the red tape at both the state and 
Federal levels. So we are pleased that that program is now 
being implemented, having come out of the last farm bill, the 
Rural Entrepreneur and Microenterprise Assistance Program.
    Mr. Jones, I was going to ask you--you gave some excellent 
testimony about your desires to work on broadband, can you tell 
us how much of your service area currently does not have 
broadband service? Do you have a percentage or rough estimate?
    Mr. Jones. Congressman, I can tell you that the four 
counties in which we serve, just about all of the rural 
territory does not have broadband access. There are public 
school systems throughout the county that were funded through 
the Federal Government to allow the school systems to get it to 
the schools. One of our concerns is that many of the residents 
out in the rural community that go to those schools do not have 
that broadband access at home.
    Mr. McIntyre. Thank you. Mr. Thompson.
    Mr. Thompson. Thank you, Chairman.
    Mr. Woodie, do you believe that the definition of rural 
which was included in the 2008 Farm Bill was sufficient to 
properly target the areas in need?
    Mr. Woodie. I am not familiar with the definition 
specifically that was used in the farm bill. At the Rural 
Center, we suffer from the fact that there are so many 
definitions of rural and our definition is a little different 
from the one that USDA has used.
    Mr. Thompson. I think that is a significant issue only 
because there are probably as many different definitions of 
rural as there are agencies and departments within the Federal 
agencies.
    Now you cited in your testimony the absence of recurring 
appropriations for water and wastewater programs that you were 
involved in applying for. But the farm bill actually authorizes 
yearly appropriations. Can you clarify which programs you use 
that are not authorized for subsequent years?
    Mr. Woodie. Well, I think the most important thing, as I 
understand it, is that the funding for water and wastewater 
programs through the farm bill be mandatory funding versus non-
mandatory funding. The problem we have experienced is we do not 
apply directly to the Federal Government for any of the USDA 
resources, but we try to work with USDA Rural Development in 
our state to leverage both programs, both our state funding and 
Federal funding, to combine that to make it work for 
communities and real projects on the ground in rural 
communities. So that is sort of the role we play.
    Mr. Thompson. Your testimony also cited the need for more 
training. What specific training do your rural small businesses 
lack? I know that North Carolina has a fairly strong community 
college program, what role do community colleges play in 
filling this training need?
    Mr. Woodie. The community colleges play a very important 
role in North Carolina, and I mentioned earlier that we rely 
heavily upon our intermediaries at the local and regional level 
in terms of really reaching, being the one-on-one service 
provider to rural entrepreneurs. A lot of that is done through 
the small business centers. There is a small business center 
that exists at every campus of the community college system in 
North Carolina. And we work strongly at the Rural Center to 
support increased technical assistance to those intermediaries 
to increase their technical capacity, their ability to reach 
more local business owners. If you get down to the business 
owner level, what they face is really a lot of difficulty in 
navigating the system.
    North Carolina is blessed in many ways in that we do have 
so many programs, both federally funded programs, state funded 
programs, nonprofit funded programs funded through the private 
sector, that offer a lot of assistance to any rural business 
owner or any other business owner in the state. But it is a 
very difficult network to navigate. And so our emphasis has 
been on simplifying that network, having the different cogs in 
that wheel, so to speak, be much more aware of what each other 
does. And what we have tried to do is really adopt a no-wrong-
door policy so that if a small business owner goes to one 
agency and it is not exactly the right fit, that agency knows 
enough about what everybody else is doing to get them to the 
right place to provide that technical assistance that they 
need.
    Mr. Thompson. Great.
    Mr. Jones, I really appreciate your organization--your 
commitment to broadband. You know, business and industry was 
built along riverways and then highways. The broadband highway 
is the future for economic development, and especially in rural 
America.
    At the end of the fiscal year, the broadband funding from 
the stimulus bill will expire. Do you feel it would be useful 
for USDA to have rules for the farm bill broadband program in 
place before the Fiscal Year 2011 begins?
    Mr. Jones. Yes, sir, I do. I know that the announcements 
are being talked about possibly sometime in July for the last 
stimulus funding that was announced, and that is the part of 
the application that we have applied for at Lumbee River. We 
had applied in the first round and did not make it. But there 
were many other states and counties did not make it as well. I 
think there was only one entity in North Carolina that received 
funding in the first round. Our application for the second 
round is in, and we are looking forward and hoping that 
application may be approved.
    Mr. Thompson. Okay, thank you.
    I have a couple of other questions, but I will yield for 
now, Mr. Chairman.
    Mr. McIntyre. Thank you, Mr. Thompson.
    Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman.
    I would like to thank the panelists for being here today. 
Also, I would like to recognize Randy Gore and the work that he 
does for our state and our districts and how much we appreciate 
that.
    Mr. Woodie, if you could pass on to Billy Ray our concerns 
on the medical situation. Mr. Chairman, also in your situation. 
I hope they all go well as time goes on.
    Patrick, I would like to thank you for bringing out the 
information in discussing how rural North Carolina is because, 
in my district, it is very rural and all the situations you 
talked about certainly apply to us.
    One thing I would like to mention, Mr. Porter, you 
mentioned about the importance to national security of 
agriculture and the military. It should not surprise anybody 
what a large percentage of our soldiers come from rural areas. 
There is a like mindset there that is developed there.
    Tommy, you are recognized as a leader of agriculture in 
Cabarrus County and surrounding areas. You have grown your 
business, you are a very effective and efficient farmer. What 
programs do you find, including Farm Credit and the 
availability of credit, to work well as you entertain your 
business opportunities versus ones that maybe we need to look 
at more?
    Mr. Porter. I would say that the Farm Credit Association, 
without Farm Credit I feel safe to say I would not be farming 
to the extent that I am today. Credit is not available through 
commercial banks, there is just not the understanding of 
agriculture, they are not willing to take the risk and work 
with farmers through tough times. So I really cannot say enough 
good about the Farm Credit System and my experience with it.
    Farm Bureau simply put is the voice of agriculture. We 
desperately need someone like that. Farmers are too busy on the 
farm just trying to make a living to spend time in Washington, 
or at the state capitol, or even at the county level for their 
needs to be heard. So organizations such as Farm Bureau are 
vital to our existence.
    Mr. Kissell. And Mr. Jones, this question maybe is a little 
bit away the farm bill that we are looking at, but we are 
looking at legislation that would allow monies to be worked 
through the rural co-ops to be given to your members for them 
to upgrade their heating systems, air conditioning, 
weatherization of the houses to make them more weather 
efficient and fuel efficient. I just wonder what your thoughts 
are on this program.
    Mr. Jones. It is an outstanding program. The electric 
cooperatives have been very supportive toward any of the 
conservation and energy efficiency programs that we are 
implementing along with any of the state or national programs 
and supporting those. I think it is very important that the 
energy policies that we look at today, and where we are as far 
as future need of generation, that we will continue as electric 
cooperatives to support energy efficiency programs and 
renewables and those things that will help in the conservation 
of energy.
    Mr. Kissell. Thank you, sir. And once again, thanks to the 
panelists and I yield back, Mr. Chairman.
    Mr. McIntyre. Thank you, Mr. Kissell. Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman.
    Let me thank each of you for being here. Let me also thank 
Matt Peterson who is here. We talked this morning about 
programs, production agriculture and a host of others. But he 
actually represents one of the leading research universities, 
NC State and really North Carolina A&T, who we have depended on 
in this state for a long time. I think all of you can agree 
that were it not for research over the years, we would not be 
where we are today in our agriculture production, not only just 
here in this state, but across the country. It really is 
research development funds through USDA and some other places, 
but by and large USDA, where they come from.
    Mr. Porter, let me ask you a question if I may. You are 
aware of the importance, and you talked about this, of 
agriculture in our state, but really livestock. Livestock in 
North Carolina has really bloomed. We rank number two in hogs, 
pigs, turkeys, number three in poultry and eggs. And we are 
also going through some tough times there, as we have talked 
about this morning and some difficult changes.
    I would like to know your thoughts on the current grower/
integrator contract system. Does it need changing or should it 
be left alone? We went through that in the last farm bill to 
some extent. Sometimes when you make changes, you have 
unintended consequences such as the USDA GIPSA rule. I think 
there are some concerns as to the end effect as to whether the 
proposed rule changes would be advantageous to growers. I would 
be interested in your thoughts because you are involved in a 
whole host of those areas.
    Mr. Porter. Yes, sir, and I am not familiar with all the 
details of the new particulars that may be coming up. But I 
would be concerned--there is always room for improvement and as 
a producer, no, the integrator never pays me enough. But also 
packer bans and things that would be placed as restrictions on 
the integrator, those could trickle down and have your 
unintended consequences that could drastically hurt the 
producers. So it has to be fair and equitable to all. And in my 
mind, it is a very complicated process, but I would be very 
concerned about the unintended consequences that could come 
about from different regulations.
    Mr. Etheridge. Thank you, I appreciate that. I think it is 
important to get that on the record because many times when 
people want to move something, they forget that for every 
action there ultimately is a reaction.
    Mr. Ward, I know you are aware of the recent attempt by the 
U.S. Department of Transportation to ban peanuts on flights. So 
thanks to Members even on this Committee and my colleagues here 
today, they at least postponed it or called it off for now. 
However, this does bring to light the need to look at food 
allergies. I mean people do have them and we need to think 
about them. What is the peanut industry doing to deal with this 
allergy and what do you think needs to be done, if anything, at 
the Federal level?
    Mr. Ward. Currently the peanut industry is spending a 
tremendous amount of money doing research. We are doing 
research at Duke, Johns Hopkins, Sloan Kettering and other 
universities. The National Peanut Board has spent about $7 
million in the last few years to research the allergies. The 
Peanut Foundation has raised $2 million, that is the research 
arm of the American Peanut Council. And we have raised $2 
million through the industry to research allergies.
    They are coming very close to having an allergen vaccine 
that will work. We do not want the peanuts picked on, we want 
everything to be treated fairly and so that was why the 
Department of Transportation was asked about the peer-reviewed 
study group so that they would be able to rate peanuts along 
with the other allergens.
    Mr. Etheridge. Thank you. Let me ask each one of you this 
question dealing with rural development because we have touched 
on it today. How would you assess the state of the economy in 
rural communities where you live or work, and what is the 
biggest challenge out there for this farm bill that we might do 
to help to make a difference in rural America, in your 
community--one thing. We'll start with you, Mr. Woodie.
    Mr. Woodie. One thing, in my testimony I spoke a lot to 
what is the state of those rural communities, and I know you 
know that extremely well. They are in pretty dire situations, 
very high unemployment, there is a great need for jobs. We 
believe more than ever before in this recovery, small business 
job creation is the key to long term job recovery, and I think 
it needs to be a major emphasis of the farm bill.
    Mr. Etheridge. Jobs.
    Mr. Jones.
    Mr. Jones. I would say basically the same as well, jobs in 
the communities, but also in the jobs I think for small 
businesses, that there has to be the financial tool for those 
small businesses to be able to have the lending funds that they 
do in order to start those new businesses, or to assist in the 
expanding of the existing businesses.
    Mr. Etheridge. Credit.
    Mr. Jones. Credit.
    Mr. Porter. I would agree that small businesses are a key 
and vital part, remembering that agriculture is the number one 
industry in North Carolina, so whatever is done to help 
agriculture can only help these other small businesses.
    Mr. Ward. I would like our safety nets to be continued and 
protected. I think that is one way for me, the row crop lender 
that I deal with, that is one way for us to be protected. If 
safety nets are in place and are working properly, then I will 
have the ability to pay back those people that I use their crop 
supplies, their tractors, their fertilizers. With my safety net 
in place, no matter what the weather turns out, things I cannot 
control, I would be able to pay my bills which would help in my 
rural area make the rural economy a little bit better. That's 
from my standpoint.
    Mr. Etheridge. Thank you. Thank you, Mr. Chairman.
    When you are talking about a safety net, you are really 
talking about a three-legged stool, you are talking about 
countercyclical payments, you are talking about market loans 
and direct payments, those three things. And if any one of 
those are gone that stool is going have a very difficult time 
standing up.
    Thank you, Mr. Chairman, I yield back.
    Mr. McIntyre. Thank you very much.
    Mr. Thompson, you have anything additional?
    Mr. Thompson. Just two quick questions.
    Mr. Porter, your testimony highlighted a need to expand 
exports of agricultural products. Just briefly, what steps do 
you feel the Administration and Congress should be taking to 
address that need?
    Mr. Porter. You are probably getting a little bit above my 
head but any movement, any efforts that could be taken. For 
example, the talks going on with Russia to expand poultry back 
into Russia, that is a great boost to the poultry industry, 
which greatly helps North Carolina.
    The lifting of the bans from the result of the H1N1 virus 
worldwide through the pork industry, as I said earlier, that 
was just devastating. So any talks that could smooth over these 
type of, what I would consider a lot of them are political 
repercussions, and why a lot of these bans are put on. But 
anything to smooth over stuff like that for foreign trade, I 
think would be a great improvement.
    Mr. Thompson. Very good. I think we also need to be real 
careful what we name future flus as opposed to blaming the hogs 
for it.
    Mr. Ward, can you explain what you mean when you say that 
you would support any reasonable reporting requirements 
necessary to make a CRC policy work? Do you mean mandatory 
price reporting for peanuts or something specific to a crop 
insurance program?
    Mr. Ward. Well crop revenue coverage and the RA, the 
revenue assurance programs with the corn and soybeans which we 
carry that kind of insurance on our farm. They use the Chicago 
Board of Trade futures prices to set a spring price and a fall 
price which is an average of the 30 day for different months. 
And that is about as far as I understand that.
    We do not have that with peanuts, there is no futures at 
the Chicago Board of Trade for us to rate what the price is 
this year compared with last year or a year in advance. So USDA 
has been trying to get prices established so that they would 
have a way to base that revenue part on. And I do not 
understand the whole formula, but there is no clear market like 
that. They are depending on individuals within the peanut 
industry to report those prices, and I do not think they have 
been able to find a successful formula yet.
    Mr. Thompson. Thank you. Thank you, Mr. Chairman.
    Mr. McIntyre. Thank you so much.
    Mr. Kissell, you had an additional question?
    Mr. Kissell. Just a follow up. Mr. Ward, we talked about 
Congressman Etheridge's question on peanut allergies. We 
recently held a reverse trade mission where we bring people in 
from another country to our district and talk to them about 
opportunities here. We had a delegation from Israel come in and 
we talked about peanut allergies and they said it is very rare 
in Israel for that to be the case with their population.
    I would encourage you--we have a great research campus in 
Kannapolis, North Carolina, it is a public-private partnership 
between David Murdoch and in North Carolina the seven 
universities there. They look at food allergies. Also a lot of 
corporations come in there. Might want to encourage the folks 
that are working on this to make the contact with our office or 
the research campus, there is a lot of work being done there 
and maybe we could help in that regard.
    Mr. Ward. I would love to.
    Mr. McIntyre. Mr. Ward, let me ask you this, would you 
support an increase in the loan rate for peanuts? And are low 
loan rates a bigger long-term economic threat to peanut 
producers than the lack of peanut buyers? Could you give us 
some insight on that?
    Mr. Ward. I do not know that I would necessarily support an 
increase in the loan rate. I do not want the loan rate 
increased in order to flood the market. That is one of my main 
concerns, if it is working as it is right now. And I do not 
know in the current attitudes in Washington whether we are 
going to get increases. I would like to maintain what we have.
    Mr. McIntyre. All right. And how involved have you been in 
the discussions with RMA to this point regarding a revenue 
coverage policy? Is there an issue particularly sensitive to 
peanuts that RMA needs to take into consideration?
    Mr. Ward. I have not been involved in any of those 
discussions. I know the outer periphery of what I understand is 
they just cannot get a price reporting--they cannot get the 
price reporting data down properly between the prices going to 
the farmers and what the manufacturers or the shellers are 
reporting. And I am not sure where it is going from that.
    Mr. McIntyre. All right, thank you very much.
    Is there any other comment that any of the panelists, in 
light of the discussion or questions, would like to point out 
before we close out this panel?
    [No response.]
    Mr. McIntyre. If not, I would like to thank you all and 
thank all of our witnesses.
    Mr. Etheridge?
    Mr. Etheridge. May I ask Mr. Woodie a final question?
    Mr. McIntyre. Sure.
    Mr. Etheridge. You touched on it earlier talking about 
funding for water and sewer. And in the recovery package last 
year, there were substantial dollars allocated to USDA for that 
specific purpose. I would be interested in your final comments 
for the record because those dollars will not be there in 
coming years. You alluded to it earlier but did not speak to it 
specifically, and as we look out at the tremendous need that is 
going to be there and the climbing dollars, because that was a 
one time infusion. What do you see in terms of the Rural 
Center's involvement in that because you were able to allocate 
state dollars to leverage a lot of those Federal dollars? What 
do you see as our challenge over the next several years without 
those additional leveraging dollars in rural America when we 
talk about developing jobs but you cannot get the jobs unless 
you have rural water and sewer?
    Mr. Woodie. You know, I think our greatest challenge and 
the one that we deal with as a funder and in talking with the 
other funders, which we do on a regular basis, I think the 
biggest challenge that we see--and the biggest fear, quite 
frankly--is that we lose some of the ground we have made up. 
You know, the big challenge is in front of us and the biggest 
problem we have is that there is not reliable, recurring, 
dedicated funding streams that year in and year out give us an 
idea of the resources that we are going to have as a state to 
focus on water and sewer infrastructure. Most other major types 
of infrastructure have more reliable funding streams. Big 
problem at a state level that our state has to come to terms 
with and being able to leverage the state dollars with Federal 
dollars is absolutely essential when we still are a state of 
small towns, and so many of those small towns have small 
systems.
    Mr. Etheridge. Thank you and for the record, many of those 
small towns are on moratoriums.
    Mr. Woodie. Yes.
    Mr. Etheridge. Mr. Chairman, thank you and thank you for 
the opportunity.
    Mr. McIntyre. Yes, sir. And Mr. Jones, if I could ask you, 
has Lumbee River Electric Membership Cooperative made use of 
other USDA Rural Development programs such as the Rural 
Economic Development Loan and Grant Program, which is known as 
the REDLG program? If so, what is your assessment of that 
program or other programs that you avail yourself through USDA?
    Mr. Jones. The USDA rural lending funds have been I think, 
particularly with us, as an electric cooperative, to provide 
those funds in assisting an industry into our counties that we 
serve, also for small businesses through the intermediary 
relending program. It has been very helpful during this time of 
the financial crunches that we saw. We have seen an increase in 
small businesses that have came to us for assistance in 
lending. We probably have, as far as electric cooperatives, one 
of the best programs I think in the state on the lending side. 
I give that support to our board because we do stand as the 
guarantor to those funds, and our Board of Directors has 
supported us in being able to make those loans. And I think it 
is continuing to be critical in support, particularly for small 
business and the REDLG side of industry that may be coming, but 
most importantly I think the intermediary relending program for 
small businesses has been the most important.
    Mr. McIntyre. In your testimony you talked about broadband, 
of course. Can you tell us when you applied for broadband 
funding, did you apply for those under the first or second 
rounds of the funding in the Recovery Act?
    Mr. Jones. Yes, sir, we did the first round and were denied 
on the first round and then we also applied for the second 
round.
    Mr. McIntyre. And then you mentioned RUS in your testimony 
right at the end. The annual broadband loan and grant program 
process with the Rural Utility Service is another program that 
you regularly take advantage of; is that correct?
    Mr. Jones. Yes, sir.
    Mr. McIntyre. The application process, would you say that 
it is one that is fairly straightforward and easy or more 
difficult for you to navigate?
    Mr. Jones. From our experience, we found it to be pretty 
difficult. We have not had the chain of communications I felt 
that we should have been able to have gotten information 
through. Our application process of understanding the steps and 
where those applications stood, there was very limited 
information from it. And Congressman, let me just say that I do 
not think it is all the Department. I think because of those 
funds being rapidly available to them and how they were going 
to distribute those funds has put an extra workload to the 
Department with them finding how they should administer those 
and get those out. So it has been sort of two-fold.
    Mr. McIntyre. Do you have any suggestions yourself about 
how to simplify that process from your perspective?
    Mr. Jones. Well, one of the things I think is that maybe 
through the national level is to bring it back into the state 
level, and maybe have someone on the state level, that will be 
able to communicate with us who has those applications. It is 
just more difficult for us to have that contact on the national 
level. But I think if it was through the region or the state 
level office, that we could have that contact association 
similar to what we do with the loan program, I think would work 
better.
    Mr. McIntyre. Thank you, sir.
    Any other burning questions from any of our panelists or 
any other comments?
    [No response.]
    Mr. McIntyre. Mr. Thompson, would you like to be recognized 
for any closing comments?
    Mr. Thompson. Sure. Thank you first of all, Mr. Chairman, 
for your leadership with this hearing and bringing this hearing 
here and to my colleagues, Congressman Kissell, Congressman 
Etheridge, thank you.
    Thank you to everyone, to the folks here at the Crown Expo 
and all of our witnesses, and frankly everyone here that has an 
important stake in agriculture, extremely important.
    As we are crafting this, we are doing this, I guess we call 
it listening tour more than anything else, and that is 
important because we need, as we craft and prepare for the 2012 
Farm Bill, we need to be listening, we need to build this with 
consensus from the agricultural community. It is extremely 
important as we look at issues, obviously production 
agriculture needs to be strong. Sometimes it gets lost in the 
mix when we start talking about farm bills. We need to be 
looking at food security. There is a lot of risk to our country 
and we all know what those risks are, but I would put food 
security right on top of that list.
    Certainly the fact that we have been blessed in this 
country with quality and affordable food is something that we 
need to continue, and we need to make sure that we preserve and 
maintain a very strong rural America.
    In an environment of struggling economies and challenging 
budgets and just very, very difficult fiscal times that we are 
in now and probably going to extend for a period of time, that 
is the context as we do this listening tour and we prepare for 
the 2012 Farm Bill. That is why it is so important, your input 
is incredibly important so that we are able to set, in the end, 
the right priorities as the bill actually begins to be crafted 
here in the future.
    So thanks once again for, as always, the great North 
Carolina hospitality, it is greatly appreciated, it is an honor 
to be here.
    Mr. McIntyre. Thank you very much.
    Mr. Kissell and Mr. Etheridge, do you have any closing 
comments?
    Mr. Kissell. Just a quick thank you to everybody, all the 
ones at the Crown Center here and the Agriculture Committees 
from Washington, all our districts and you folks that care 
about agriculture, thank you for what you do, thank you for 
coming and it was said here several times, this is national 
security, it is very important. We appreciate the opportunity 
to listen to you guys and to take this back and help us craft a 
good bill.
    Mr. McIntyre. Mr. Etheridge.
    Mr. Etheridge. Thank you. Let me thank each of you for 
coming, for our panelists, for all those who worked and 
certainly for the facilities, it is cool this morning, it is 
awful warm outside.
    Let me touch on something each of my colleagues have said 
here, that you know when you are putting together a farm bill 
and it is going to be no different, this one from the other 
one, it is broader than just the people who till the soil and 
produce it. It really is for the consumer and everyone else.
    The real challenge, I remember when we put it together the 
last time, it is not a partisan issue when you put it together. 
The real issue comes down to regionalism. Across this country, 
agriculture is so diverse, all the products and the communities 
are so diverse and the real issue is very difficult. Mr. 
McIntyre was there last time and I remember had it not been for 
the fact the that Ways and Means Committee was willing to give 
us $10 billion for nutrition, we probably would not have gotten 
a farm bill last time. That was the key ingredient that they 
came up with the money and we were able to add that to the 
nutrition title to make it happen. Those challenges are going 
to be out there again. Working together, we will get a 
destination and reach a good piece of legislation, but it 
always is about regionalization. What fits in California may 
not necessarily fit in North Carolina and vice versa. But that 
is the great challenge we face, that is the great diversity of 
America and we are blessed to have food. Someone mentioned food 
security and I will close with this, Mr. Chairman, that in 
World War II, we were the first nation in the history of the 
world to not only feed our soldiers, but to feed to soldiers of 
other nations. That is our true national security, the ability 
to produce food and fiber at a reasonable price and that is 
safe and consumable.
    Thank you.
    Mr. McIntyre. Thank you very much.
    As Mr. Etheridge indicated, I would also want to say a 
natural tie-in for us here in Fayetteville, the home of Fort 
Bragg and the 82nd Airborne and 18th Airborne Corps, the great 
commitment that this rural area of North Carolina also has to 
our nation's military. And as a Member of the Armed Services 
Committee, I would also want to say something very special that 
as we see the tie-in between agriculture and our national 
security. We have the greatest, and thank the good Lord, the 
best and safest supply of food and fiber in the world. And that 
is a great tribute to the hard work that you as our farmers, 
you involved in the agricultural business community, you 
involved in the credit community that can help the farmers do 
their work and so many of the rest of you who are involved in 
making a difference for our rural economy.
    When I think about that, I also think about the cutting 
edge of biotechnology and biofuels that was mentioned today. 
Yours truly had an opportunity to go to the Pentagon a couple 
of months ago and was the only Member of Congress there. But, 
as Chairman of the Subcommittee on Rural Development, 
Biotechnology, Specialty Crops, and Foreign Agriculture from 
Agriculture and as a Member of the Armed Services Committee, I 
was particularly honored to be there because it was a signing, 
a historic signing, between the Secretary of the Navy, Ray 
Mabus, and the Secretary of Agriculture, Secretary Vilsack, for 
a biofuels agreement as the Navy continues to convert its 
source of energy away from energy sources that we all know we 
tend to get from other countries to biofuels. And then later on 
April 20, which appropriately enough was Earth Day, I had the 
opportunity to travel with the Secretary of the Navy to Pax 
River Naval Air Station, not too far away from the Capitol over 
in Maryland, and witnessed the flying of the F-18 Super Hornet 
Navy jet fighter dubbed the Green Hornet because it was flying 
on biofuels.
    So when we talk about our national defense, and the food 
and fiber supply, and when we break new ground in areas like 
biotechnology and biofuels, this is where we see that the 
nation and our national security absolutely depend and tie in 
with what we are producing in agriculture communities. And 
having personally witnessed that and having the opportunity the 
see that from both angles, from the purview of the Armed 
Services Committee, as well as from the purview, of course, 
from the Agriculture Committee, that is a nexus that we all 
appreciate. I think we are in a location today that is symbolic 
of that, having this agriculture hearing here in Fayetteville 
where we know our military friends often refer to, and we do 
too, as the center of the military universe, when 9-1-1 is 
dialed for a military emergency anywhere in the world, that 
phone rings right here at Fort Bragg. So we appreciate that 
nexus between our national security and our national supply of 
food and fiber and fuel. And we are excited about the new 
opportunities that are going to come our way with regard to 
that as well.
    I also want to remind us that when you hear people debating 
about the Federal budget and the concerns about our national 
economy, let us not forget that only \1/2\ of 1 percent--only 
\1/2\ of 1 percent--of the Federal budget is the agriculture 
budget. So when people are concerned or complaining about how 
much we are spending on agricultural needs, remind them you are 
talking about \1/2\ of 1 percent of the entire Federal budget, 
yet we are feeding the American population and many others as 
we deal with other nations around the world. The Agriculture 
Committee has done quite well with \1/2\ of 1 percent and you 
have a lot to be proud of.
    We stand with you in all that you are doing to indeed 
provide our nation the safest and most abundant supply of food 
and fiber, and for the future fuels as we look to the future 
and work ahead.
    And so thank you for that kind of commitment; thank you for 
that kind of vision. We want this farm bill not to be just more 
of the same or falling back into a routine, if and where it 
needs improvement. As the old saying in the South goes, if it 
ain't broke, don't fix it. So for those areas that are working 
well, that is what we needed to know, that is what we want you 
to continue to give us input and tell us. For the areas that 
are not, let us move ahead, let us prepare as we look at new 
innovative ways to incorporate, whether it be biotechnology and 
biofuels, or whether it be new innovations with regard to 
farming itself, or other ways to improve the economic 
development in the areas of broadband, in the areas of working 
with new program like micro-enterprise assistance and rural 
entrepreneurs. In any way and every way, we want this to be a 
bill that will carry us with vision into the future.
    You all have been a part of that vision today by what you 
have shared. You can continue to be a part of that vision by 
going to the website. You can pick up these cards on your way 
out in case you forget or do not have something to write on, 
but it is real easy, think of agriculture, think of us 
discussing it in the U.S. House and that is part of what we are 
doing right now in our government, so it is 
agriculture.house.gov. And if you are joining us by web, we 
hope that you too will be willing to contribute.
    I do encourage our witness panel to make any additional 
testimony or comments within the next 30 days. However, 
technically under the rules of the Committee, the record of 
today's hearing will remain open for 30 days and just as I said 
earlier to those that want to submit comments by web, you will 
have up to 30 days, we are counting that toward July 28, to be 
able to submit any additional materials, supplementary 
responses posed by any questions today or any other material 
you would like us to have.
    With that, I want to thank all of you for your commitment 
to our country, your commitment to our future and your 
commitment to American agriculture, it makes the difference for 
rural America and economic opportunity for all.
    Thanks for being part of that vision. Thank you for helping 
us now carry that vision, as all of us up here get ready to 
head back to Washington to speak on your behalf. God bless you 
all, travel safely and have a good day.
    This hearing of the Committee on Agriculture is now 
adjourned.
    [Whereupon, at 11:55 a.m. (EDT), the Committee was 
adjourned.]
    [Material submitted for inclusion in the record follows:]
 Submitted Statement by Sue Johnson-Langdon, Executive Director, North 
                 Carolina SweetPotato Commission, Inc.
    Chairman McIntyre and the other Members of the Committee, thank you 
for allowing me to submit written testimony for this hearing in review 
of U.S. agriculture policy in advance of the 2012 Farm Bill. I am Sue 
Johnson-Langdon, Executive Director of the North Carolina SweetPotato 
Commission, Inc.
    The North Carolina SweetPotato Commission was formed in 1961 and 
has been the collective voice for the sweet potato industry for almost 
50 years. Today, the North Carolina SweetPotato Commission represents 
over 350 growers in the state of North Carolina. The Commission and its 
activities of promotion, marketing, education, issue management and 
dissemination of information are funded by an annual assessment and 
dues of its membership. North Carolina leads the nation in sweet potato 
production supplying almost 50% of the annual national supply. 
Congressman McIntyre's 7th District currently represents 12.5 % of the 
total production. North Carolina's growers planted 47,000 acres in 2009 
with a forecasted planting of 50,000 acres for 2010--a 6% increase. 
Across the nation, 109,600 acres of sweet potatoes were planted in 
2009. A 7% increase is expected in 2010. The economic impact of the 
North Carolina crop in farm cash receipts in 2009 was $170.1 million 
which makes sweet potatoes the #1 specialty crop and also ranks within 
the top 10 of the cash receipts for other commodities produced in North 
Carolina.
    Sweet potato consumption continues to rise. The current per capita 
consumption of 5.7 lbs/person represents a 54% increase since 1999 as 
reported by USDA/NASS as being 3.7 lbs/person. The Commission 
attributes the rise in consumption to be due to several factors--the 
superior nutritional values of the sweet potato and the marketing of 
more value-added products such as sweet potato fries, chips and ready 
to eat mashed sweet potatoes. The sweet potato is a complex 
carbohydrate which contains healthful antioxidants, fiber and necessary 
micro-nutrients. Ongoing research at North Carolina State University 
shows that sweet potatoes when consumed do not cause a spike in blood 
sugar thereby making it a good carbohydrate choice for diabetics and 
others who are monitoring their carbohydrate intake.
    Maintaining consumer trust in the safety of their food supply is a 
concern of our sweet potato producers. Although sweet potatoes have a 
historically low risk of pathogen contamination at the farm level, we 
recognize the need for good growing and handling practices; and 
traceability not only on the farm but throughout the entire food 
distribution chain. Food safety is a huge, complex issue especially for 
fruits and vegetables and the cost of implementing good agricultural 
practices, pre harvest residue testing and tracking from the field to 
the point of sale is daunting and can be prohibitive. We believe that 
any regulations and compliance measures should be scientifically based, 
as simplistic as possible, and implemented in stages. Also, a type of 
crop insurance to mitigate loss due to a failed residue test prior to 
harvest is necessary. At this time, all processors and a growing number 
of fresh market retailers require random sampling for residue testing 
of each field prior to harvest. If unacceptable residue is found, the 
grower must destroy the entire field although the failed sample may be 
3-5 individual sweet potatoes in the lot. There is no compensation for 
loss at this time.
    The majority of our production is marketed within the continental 
United States however exports into the UK and Western Europe from North 
Carolina continue to steadily rise--up 8% from the record year of 2009. 
The value of U.S. exports increased in 2009 by 15.5 percent, from 7,596 
metric tons in 2008 to 10,627. The flavorful orange fleshed sweet 
potatoes produced in the United States are not the staple that white 
potatoes are in the UK but they are finding their place in UK 
restaurant menus and also the regular grocery purchases of European 
consumers. In order for sweet potato consumption to increase in the 
United States, other commodities such as white potatoes will decrease. 
The UK and Western European markets represent the opportunity to 
increase our production and thereby our economic stability without 
sacrificing domestic production of other vegetables. We are asking the 
Committee to continue to work with USDA and USTR in opening up other 
markets in Western Europe.
    To summarize, concerning food safety, we ask for the regulations be 
scientifically based, as simplistic as possible and implemented in 
stages over a period of years as well as including a crop loss 
provision if a pre harvest random residue sample fails. We are also 
seeking the continuation of the close relationships with USDA and USTR 
to increase exports to the countries in the UK and Western Europe.
    Thank you, Congressman McIntyre and the House Agricultural 
Committee for allowing us to submit testimony.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Sue Johnson-Langdon,
Executive Director,
North Carolina SweetPotato Commission, Inc.

                                  
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