[Senate Hearing 111-1024]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1024
 
                  EXPANDING OUR FOOD AND FIBER SUPPLY
                   THROUGH A STRONG U.S. FARM POLICY

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION


                               __________

                             JUNE 30, 2010

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov



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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                  BLANCHE LINCOLN, Arkansas, Chairman

PATRICK J. LEAHY, Vermont            SAXBY CHAMBLISS, Georgia
TOM HARKIN, Iowa                     RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota            THAD COCHRAN, Mississippi
MAX BAUCUS, Montana                  MITCH MCCONNELL, Kentucky
DEBBIE STABENOW, Michigan            PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska         MIKE JOHANNS, Nebraska
SHERROD BROWN, Ohio                  CHARLES GRASSLEY, Iowa
ROBERT CASEY, Jr., Pennsylvania      JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
MICHAEL BENNET, Colorado
KIRSTEN GILLIBRAND, New York

               Robert Holifield, Majority Staff Director

                    Jessica L. Williams, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                Anne C. Hazlett, Minority Chief Counsel

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Expanding Our Food and Fiber Supply Through a Strong U.S. Farm 
  Policy.........................................................     1

                              ----------                              

                        Wednesday, June 30, 2010
                    STATEMENTS PRESENTED BY SENATORS

 Lincoln, Hon. Blanche L., U.S. Senator from the State of 
  Arkansas, Chairman, Committee on Agriculture, Nutrition, And 
  Forestry.......................................................     1
Chambliss, Hon. Saxby, U.S. Senator from the State of Georgia....     3
Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........    14

                                Panel I

Vilsack, Hon. Tom, Secretary, U.S. Department of Agriculture, 
  Washington, DC.................................................     5

                                Panel II

Johnson, Roger, President, National Farmers Union, Washington, DC    36
Stallman, Bob, President, American Farm Bureau Federation, 
  Washington, DC.................................................    37

                               Panel III

Brantley, Dow, Farmer, England, Arkansas.........................    44
Cochran, Thomas, Farmer, Slyvester, Georgia......................    46
Pawelski, Richard, Farmer, Goshen, New York......................    48
Watne, Mark, Farmer, Jamestown, North Dakota.....................    50
                              ----------                              

                                APPENDIX

Prepared Statements:
    Brown, Hon. Sherrod..........................................    64
    Casey, Hon. Robert P., Jr....................................    65
    Cochran, Hon. Thad...........................................    66
    Harkin, Hon. Tom.............................................    69
    Brantley, Dow................................................    72
    Cochran, Thomas..............................................    78
    Johnson, Roger...............................................    82
    Pawelski, Richard............................................    93
    Stallman, Bob................................................    97
    Vilsack, Hon. Tom............................................   103
    Watne, Mark..................................................   116
Document(s) Submitted for the Record:
Pawelski, Richard:
    Farm Bill Proposal, Crop Insurance Reform, Pawelski Farms, 
      statement for the Record...................................   122
    Written letter to Pawelski Farms from USDA...................   128
Question and Answer:
Lincoln, Hon. Blanche L.:
    Written questions for Hon. Tom Vilsack.......................   132
Chambliss, Hon. Saxby:
    Written questions for Hon. Tom Vilsack.......................   133
Casey, Hon. Robert P., Jr.:
    Written questions for Hon. Tom Vilsack.......................   135
    Written questions for Roger Johnson..........................   136
    Written questions for Bob Stallman...........................   136
Cochran, Hon. Thad:
    Written questions for Hon. Tom Vilsack.......................   137
    Written questions for Bob Stallman...........................   138
Grassley, Hon. Chuck:
    Written questions for Hon. Tom Vilsack.......................   139
    Written questions for Roger Johnson..........................   140
    Written questions for Bob Stallman...........................   141
Harkin, Hon. Tom:
    Written questions for Hon. Tom Vilsack.......................   142
Roberts, Hon. Pat:
    Written questions for Hon. Tom Vilsack.......................   144
Johnson, Roger:
    Written response to questions from Hon. Robert P. Casey, Jr..   145
    Written response to questions from Hon. Chuck Grassley.......   146
Stallman, Bob:
    Written response to questions from Hon. Robert P. Casey, Jr..   149
    Written response to questions from Hon. Thad Cochran.........   151
    Written response to questions from Hon. Chuck Grassley.......   153
Vilsack, Hon. Tom:
    Written response to questions from Hon. Blanche L. Lincoln...   156
    Written response to questions from Hon. Saxby Chambliss......   159
    Written response to questions from Hon. Robert P. Casey, Jr..   172
    Written response to questions from Hon. Thad Cochran.........   177
    Written response to questions from Hon. Chuck Grassley.......   180
    Written response to questions from Hon. Tom Harkin...........   184
    Written response to questions from Hon. Pat Roberts..........   188



                  EXPANDING OUR FOOD AND FIBER SUPPLY
                   THROUGH A STRONG U.S. FARM POLICY

                              ----------                              


                        Wednesday, June 30, 2010

                              United States Senate,
           Committee on Agriculture, Nutrition and Forestry
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:36 a.m., in 
Room SDG50, Dirksen Senate Office Building, Hon. Blanche 
Lincoln, Chairman of the Committee, presiding.
    Present: Senators Lincoln, Harkin, Baucus, Nelson, Brown, 
Casey, Chambliss, Lugar, Cochran, Roberts, Johanns, Thune and 
Grassley.

  STATEMENT OF HON. BLANCHE L. LINCOLN, U.S. SENATOR FROM THE 
    STATE OF ARKANSAS, CHAIRMAN, COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    Chairman Lincoln. Good morning. The Senate Committee on 
Agriculture, Nutrition and Forestry will now come to order. 
This is the first in a series of hearings to help this 
committee prepare for the next Farm Bill. We will be taking an 
inventory of what we have, obviously, from the 2008 Farm Bill 
and ensuring that it is working properly but doing so with our 
eye on the future of farm policy.
    I want to first thank my very good friend Senator Chambliss 
for helping me to organize this hearing, for being a great 
partner on this committee, and for being a steadfast advocate 
for our Nation's farmers and ranchers. America's producers are 
blessed to have such a good friend in their corner and so am I.
    I also want to thank my other distinguished colleagues for 
their attendance here today and for all the work that they do 
on behalf of rural America. This has always been a bipartisan 
committee where we put problem solving and people above 
partisan politics.
    We are privileged to have some excellent witnesses today. I 
very much appreciate Secretary Vilsack as well as Dow Brantley 
from my home state of Arkansas, and all of our witnesses for 
being here to offer their unique perspectives. I look forward 
to hearing from each of you-all.
    I am very honored to be the first Arkansan to serve as 
Chairman of the Senate Agriculture Committee, not to mention 
being a farmer's daughter. Agriculture provides a job for one 
out of every four Arkansans, and it contributes more than 15 
billion each year to my state's economy. I expect that each and 
every one of my colleagues around this table has a similar 
story to tell about the importance of agriculture to their 
state's economy and jobs both on and off the farm. Of course, 
the Farm Bill is one of the most important pieces of 
legislation that Congress considers on behalf of rural America 
and our Nation's farmers and ranchers.
    In the 2008 Farm Bill, we made some significant new 
investments in nutrition, energy, conservation, rural 
development and other priorities while maintaining the 
integrity of the farm safety net. In the next Congress, we will 
be writing the 2012 Farm Bill. In this process, we will have 
the opportunity to build on the good things that we have 
accomplished.
    This first hearing will focus on how well the current 
safety net is working for our Nation's farmers and ranchers. As 
we begin our discussion, I want to share five points that will 
guide me when deliberating the next Farm Bill.
    First, I am proud of our farmers and ranchers. They work 
hard. They put food on our tables, clothes on our back and fuel 
in our cars and trucks. But today, our farmers and ranchers not 
only have to cope with unpredictable weather and unfair global 
markets, but they must also suffer from abuse on TV and in 
newspapers from folks who really ought to know better than to 
bite the hand that feeds them. Our Nation's farmers and 
ranchers need to know that they will never have to apologize to 
this chairman or to this committee for the hard work that they 
do. We appreciate the work that you do every day, and we are 
going to be on your side.
    Second, these Farm Bill deliberations should not be a 
Washington command and control top-to-bottom approach to 
policy. President Reagan used to say that ordinary people see 
things that work in principle and wonder if they work in 
practice, but economists see things that work in practice and 
wonder if they work in principle. In the same way, we in 
Washington may know what policies work in principle, but it is 
our farmers and ranchers who know what works on the ground.
    The good Lord gave us two ears and one mouth, so it is 
important that we use them in that proportion. And it is also 
vitally important that the safety net features of the 2012 Farm 
Bill come from the kitchen tables of places like Stuttgart, 
Arkansas and Cando, North Dakota rather than tables like this 
one.
    Third, we need to look before we leap. More than anything 
else, I think most American farm and ranch families simply want 
steady, predictable, supportive policies coming out of 
Washington and for us to otherwise get out of their way. Huge 
policy fluctuations, mixed signals coming out of Washington, 
and the uncertainty that these things create make it very 
difficult for our producers to compete, invest and plan for the 
future.
    So rather than start from scratch, or from some newfangled 
idea cooked up in Washington, or in some college professor's 
office, we need to reassure our farmers and ranchers that we 
will start where we left off, the 2008 Farm Bill. If we can do 
better by our producers in 2012, great, but if not, current law 
serves as the benchmark from which we will work.
    Fourth, we need to get more creative. The safety net 
provided under the 2008 Farm Bill is not perfect. It can and 
should be strengthened. But Congress does not even have to wait 
for 2012 for that to happen. In fact, Congress does not even 
have to act. For instance, back in 2000, Congress provided USDA 
with very broad authority to develop and approve new tools to 
help producers of all crops and from all regions better manage 
price, production and revenue risk. We need to use this and 
other authorities to their absolute fullest.
    For example, if we could get every farmer in this country 
to 85 percent revenue insurance that is affordable, we would go 
a long way in filling the holes of the current safety net. I 
know my rice farmers are working towards this goal, and I 
suspect farmers from other states are doing the same thing. We 
can make this happen.
    Finally, I was reading an article the other day about the 
OECD rethinking its objectives away from promoting policies 
that discourage food and fiber production towards policies that 
help us meet the needs of a planet that will one day in the 
not-too-distant future host 9 million--not million--billion 
people.
    I believe that this consideration needs to be our 
overarching objective as well. Too often, it takes a crisis to 
remind us of the essentials in life, basic as they may all be. 
But I do not believe it is wise for us to wait for a crisis to 
value our domestic food and fiber production.
    Mike Rowe--and this comes from the mother of twin boys at 
the age of 14--the host of the popular TV program ``Dirty 
Jobs,'' had this to say about the importance of production 
agriculture. ``All jobs rely on one of two industries, mining 
and agriculture. Every tangible thing our society needs is 
either pulled from the ground or grown from the ground. Without 
these fundamental industries, there would be no jobs of any 
kind. There would be no economy. Civilization begins with 
miners and farmers, and polite society is only possible when 
skilled workers transform those raw materials into something 
useful or edible.''
    It is from this perspective that I will hope to approach 
the 2012 Farm Bill. Again, I look forward to hearing from our 
friend, Secretary Vilsack, and all of our distinguished 
witnesses. And I will now would like to yield to my good 
friend, Senator Chambliss, for any opening remarks that he may 
have.

STATEMENT OF HON. SAXBY CHAMBLISS, U.S. SENATOR FROM THE STATE 
                           OF GEORGIA

    Senator Chambliss. Thank you very much, Madam Chairman, and 
thanks for your kind words. Most of all, thanks for your 
friendship and your leadership on this committee. Your 
commitment to agriculture has been unwavering. And as we move 
towards the writing of the next Farm Bill, obviously, we are 
going to be looking to you for that continued leadership that I 
know is going to be there. So thanks for starting off with this 
hearing and moving us in the right direction early on. And I 
thank you for holding this oversight hearing of the current 
farm safety net. U.S. farm policy certainly plays a valuable 
role as we seek to expand our food and fiber supply.
    Farmers form the backbone of rural communities. They are 
employers. They are businessmen and women keeping local 
economies moving. They are conservationists seeking ways to 
improve the productive capability of their land. Farmers are 
also feeding, clothing and providing bioenergy to the world.
    A challenge that I believe our producers can help meet is 
related to the anticipated world population growth. The 
Organization for Economic Cooperation and Development projects 
that production output will have to double over the next 40 
years to feed a world population of 9 billion people in 2050. I 
want to ensure that our farmers and ranchers remain well 
positioned to be the best suppliers of the world's food and 
fiber well into the future.
    Agriculture has a positive story to tell. Agriculture is 
absolutely essential to our everyday lives. And I am pleased to 
learn of new and innovative uses of our agricultural products.
    As a fellow Cotton Belt member, Madam Chairman, you are 
probably familiar with a new cotton product, Fibertect, which 
will aid in the cleanup of the Gulf spill. Many of our 
agriculture products hold tremendous new potential. Programs 
under the jurisdiction of this committee also have a positive 
story to tell in terms of cost to the taxpayer.
    Agriculture spending is a small share, extremely small 
share, of the federal budget. Over the 10-year projected period 
of 2011 to 2020, the Congressional Budget Office estimates 
Commodity Credit Corporation outlays at .24 percent, less than 
one-half of 1 percent of all mandatory and discretionary 
spending. Adding nutrition program spending raises the share to 
just 2.31 percent of the entire federal budget.
    With concern growing over the deficit and debt, mandatory 
spending under this committee's jurisdiction will be the focus 
of increased attention. While many believe that the bulk of 
agriculture program funding goes toward commodity programs, 
that is not simply not the case. In fact, nutrition spending is 
the largest share of the committee's mandatory outlays, 
approximately 81 percent, according to CBO, with spending on 
nutrition programs rising since the Farm Bill due to the 
recession and increased participation. Those and other 
important Farm Bill programs will be reviewed on another day.
    Today's hearing will allow us to exercise oversight of the 
commodity and risk management safety net components of the 2008 
Farm Bill, which is now two years old. In my view, it is 
important for us to focus on oversight at this point rather 
than fully discuss reauthorization of the safety net, as some 
programs, such as the ACRE Program, have not yet distributed 
assistance. We appreciate the Department's work to deliver Farm 
Bill programs to date and look forward to completion of 
outstanding programs.
    Before I conclude, I would like to make a quick mention 
regarding the recent bilateral talks between the United States 
and Brazil. As many of you know, the export credit and cotton 
programs are a particular interest of mine, and recently both 
have been in the news. The announcement last week of a 
framework agreement between both countries sets forth a 
constructive process to find a mutually agreeable resolution to 
the Brazil World Trade Organization case. While there is much 
work and discussion that remain and some parts of the agreement 
are not without concern, I believe that we are on the right 
path.
    Since Congress writes the Farm Bill, we know this will be 
an integral part of the 2012 Farm Bill. But for now, we have an 
opportunity to carefully discuss and find agreeable 
modifications to both programs. The success of the talks is due 
in no small part to the hard work and efforts of Secretary 
Vilsack--and thank you, sir--U.S. Trade representative Ron 
Kirk, Under Secretary Jim Miller and Chief Agriculture 
negotiator Islam Siddiqui. Thanks to you-all for your great 
work.
    We appreciate our witnesses being with us today. I wish to 
say a special thank you to my neighbor, my good friend, Johnny 
Cochran, of my home state. We look forward to hearing your 
perspective on the 2008 Farm Bill and your thoughts about how 
we can ensure a bright future for American food and fiber 
products.
    Thank you very much, Madam Chairman.
    Chairman Lincoln. Thank you, Senator Chambliss.
    If I can just take a moment, seeing a quorum, if I may just 
ask the indulgence of Secretary Vilsack, I think this will be 
beneficial to you as well.
    [Recess.]
    Chairman Lincoln. We will resume our hearing in the 
Committee. And, again, thank you, Senator Chambliss. I 
appreciate that. I thank all the members for their indulgence 
in moving that business forward.
    We do have three panels today, and we are eager to hear 
from our witnesses and to get questions in, as many as 
possible. So in the interest of time, I would certainly like to 
ask members, if they could, to submit their opening statements 
for the record. If anyone wants to say a few words, certainly, 
I am amenable to that. But if there is anybody that needs to 
say anything, we would like to offer your opening statements 
for the record.
    Chairman Lincoln. Well, in that case, welcome, Mr. 
Secretary, to the Committee. Thank you again for your testimony 
today on behalf of the Department. Before we do get started 
with your testimony, I would like to take a moment and say a 
very special thank you for joining me recently in Arkansas and 
visiting the site of the tragic Albert Pike flood that took 20 
lives in the Ouachita National Forest. It meant so much to the 
people of Arkansas to have you there, as well as the chief of 
the Forest Service, Chief Tidwell, to see the devastation 
firsthand and to simply lift those people up in your thoughts 
and prayers as you did. And I am grateful to that.
    I originally had scheduled a hearing for tomorrow looking 
at the flood with Chief Tidwell of the Forest Service and some 
of the first responders. That hearing has been postponed due to 
the passing of Senator Robert Byrd. So we will reschedule that 
at another time. But thank you again for coming.
    Secretary Vilsack, your written testimony will be submitted 
for the record, so hopefully that can help you keep your 
remarks to five minutes. Thank you.

 STATEMENT OF HON. TOM VILSACK, SECRETARY, U.S. DEPARTMENT OF 
                          AGRICULTURE

    Secretary Vilsack. Thank you, Madam Chair and Senator 
Chambliss and other members of the Committee. Thank you for the 
opportunity to be here.
    First and foremost, Madam Chair, our condolences continue 
to be extended to the families of those who were tragically 
lost as a result of that very devastating flood in Arkansas. 
And I appreciate the opportunity to spend a few minutes--
recognizing that the focus of this hearing will likely be more 
on the implementation of the 2008 Farm Bill, permit me for just 
a couple of minutes to talk a little bit about the 2012 Farm 
Bill.
    My staff and I met several weeks ago to begin that process, 
and during the course of our conversation, it occurred to me 
that we did not have a very clear understanding or appreciation 
of the vision and the results that we sought from a 2012 Farm 
Bill. And I asked the staff to think about that, and it 
concluded for them that for my perception and from my vantage 
point, what I am most interested in is trying to increase 
populations in our rural communities, in our rural areas and 
also improve incomes.
    Why am I interested in increasing populations? Well, the 
sad reality is that in 56 percent of the counties in rural 
America today, we have lost population. And with that, as 
everyone knows, you lose political influence. You have fewer 
people who understand, as members of this Committee understand, 
the hardworking folks who live, work and raise their families 
in those rural communities.
    It is particularly true in the area of production 
agriculture and particularly true in small commercial 
operations, the operations where you may have 200,000, $300,000 
in sales every year. Over the last 10 years, we have lost 
141,000 of those operators. And I think we ought to get very 
serious, as we consider the 2012 Farm Bill, about how we can 
replenish and rebuild that population center, how can we focus 
policies and procedures and programs and efforts to increase 
small and medium-sized farming operations.
    Let me suggest one idea that this committee might consider. 
We had at one point in time not long ago a goal and a national 
commitment to increase the national police force by 100,000 
police officers. We have talked about the need for additional 
teachers in our classrooms.
    Why not set as a goal for the 2012 Farm Bill the ability to 
add at least 100,000 additional farmers in the area of the 
small farming and commercial operations?
    Why not establish local advisory councils in communities 
across the country, to identify, recruit and encourage and 
incent young people to consider a life of farming?
    Why not develop a system similar to case management in 
Human Services that would enable those young people to have 
assistance to work themselves through the many programs that 
are created in a Farm Bill?
    Why not create a venue where new farmers can get help with 
business planning, with marketing and the other ingredients of 
successful entrepreneurship?
    Why not expand our efforts to encourage transitions from 
those seeking to retire to those seeking to start in the 
farming business?
    Why not place the Nation's attention on our need for young 
farmers on the same plane as police officers and teachers, as 
they are equally important to the future of this country?
    The sad reality is that the farming community is aging. The 
average age of a farmer today in America is 57 years of age. 
Five years ago it was 55. We have had an increase of 30 percent 
of the farmers over the age of 75 and a decrease in the number 
of farmers under the age of 25 by 20 percent.
    I think it is important, as you-all begin your discussions 
and deliberations of the Farm Bill, that we focus an aggressive 
effort on helping beginning farmers begin.
    At the same time, I think we also have to pay attention to 
those who live, work and raise their families in rural 
communities that are not necessarily only connected to farming 
but may be living in these small towns, providing other 
services and assisting these farm families. The sad reality of 
rural America is that 90 percent of the persistent poverty 
counties in this country exist in rural America. The sad 
reality is that the per capita income differential between 
those who live in rural communities and those who live in urban 
centers is about $11,000 per capita.
    I think it is important and necessary that we really focus 
our attention and efforts as well on building and revitalizing 
the rural economy generally. I think we need to focus on 
building regional economy, providing greater flexibility in our 
programs and making sure that our programs are simplified from 
an application and process standpoint.
    In short, Madam Chair, I think we need to begin focusing on 
very clear result orientation to the Farm Bill. If we can 
rebuild the farming population, if we can increase populations 
in rural communities, if we can increase income levels for farm 
families and for rural families, I think we will not only 
benefit rural America, we will benefit the country.
    With that, Madam Chair, I will be happy to answer 
questions.
    [The prepared statement of Secretary Vilsack can be found 
on page 103 in the appendix.]
    Chairman Lincoln. Well, thank you, Mr. Secretary, again for 
joining us today. And hopefully, in the next panel, we have got 
some young farmers in here that can talk to the concerns and 
the challenges that are faced by young farmers in this country. 
So I certainly appreciate that and certainly your objective 
there. Just a couple of questions from me and then I will turn 
it to my colleague.
    One thing I would like to visit with, and it is something 
we have talked about an awful lot recently--and I have some 
disappointment that the Department was unable to come up with 
any ideas that would help the House and Senate Ag committees 
preserve the baseline for our use in the 2012 Farm Bill.
    Obviously, the $4 billion designated for deficit reduction 
out of the crop insurance cannot be recaptured. But it is not 
clear that the increased spending that you are contemplating 
for the Conservation Reserve Program will impact the CBO 
baseline since they assume that the retired acreage will 
already be at the cap in the out years.
    If we cannot capture the full 2 billion in additional crop 
insurance and Conservation Program spending in the CBO baseline 
that will be developed after the new SRA is signed, can you at 
least hopefully assure the Committee that you will remind OMB 
that the Crop Insurance Program and the Agriculture Committee 
already gave at the office when it comes to future budget cuts? 
And that was something we experienced, and we have experienced 
it year after year as we do these farm bills, is that we seem 
to give and give and give, and it is very rarely is it 
remembered.
    I hope that we can look to you for that assistance in 
reminding OMB.
    Secretary Vilsack. Well, let me, first of all, emphatically 
say that we have begun that process publicly in encouraging not 
just OMB but the entire country to understand and appreciate 
that agriculture has led in this effort to try to not only 
focus on the Farm Bill baseline but the Nation's baseline. 
There is, I think, agreement that there is a need to address 
deficits in a meaningful way. Failure to address deficits could 
lead to inflation, interest rates which would be very harmful 
to those who farm and live in rural America.
    Having said that, I think it is also important to recognize 
that the CRP program is a very popular program and one in which 
we currently need the additional resources in order to meet the 
32-million-acre threshold which we are working under. It has 
been well received out in the countryside, and it is an 
opportunity again for us to do what is right for our farm 
families and also for the environment.
    We will continue to work with the Committee, continue to 
work with Congress to preserve that 2 billion, and we will 
certainly continually remind OMB and anyone else who is 
interested in this that this part of the budget has given. And 
it might be interesting to know if everyone else gave in a 
proportion to what we gave, how quickly we could get the 
deficit under control.
    Chairman Lincoln. Absolutely. Well, I appreciate that. And 
again, in building the foundation to be able to feed 9 billion 
people globally, not to mention encouraging young farmers to 
come in and to be able to make a living in agriculture to feed 
their families, and to raise their children, and to do all of 
those things, I think it is going to be really critical that we 
remind people that time and time again, production agriculture 
has given. And we have been willing to come to the table, 
whether it is deficit reduction or just making sure that we are 
being responsible within the confines of our own budget 
baselines in this Committee, and I hope that we will have your 
assistance in doing that.
    My staff has also been working with the Risk Management 
Agency to find a way to provide insurance against the higher 
harvest costs farmers incur when high winds result in downed 
rice in their fields, and, obviously, with these capital 
intensive crops and some of these types of circumstances. RMA 
has been very helpful so far in suggesting possible approaches, 
but the sooner that we can get such a product in place, 
certainly, the better off my rice farmers in Arkansas and I 
know rice farmers across the country would be.
    What are the prospects for developing such an insurance 
policy?
    Secretary Vilsack. Madam Chair, specifically, I would like 
to have the opportunity to specifically respond to your 
question in writing, if I might. But take this opportunity to 
indicate to you that we are constantly looking for ways in 
which we can expand opportunity. One of the things that we are 
hopeful of doing with the resources that we are recapturing 
from the SRA negotiations is to expand on our range and forage 
and pastoral land programs, long overdue. And we continue to 
look at specialty crops in a variety of other ways in which we 
can provide assistance and help.
    We appreciate and understand that risk management is a very 
critical component of a safety net, and the more we can figure 
out how to spread that opportunity to more producers, covering 
more risk, the better off they will be and the better we will 
be. So we are committed to continually looking for ways in 
which we can expand coverage.
    Chairman Lincoln. Well, I appreciate it. I know you have 
commented to me several times, ``It seems like the Committee's 
dealing an awful lot with risk management these days,'' whether 
it is the financial world or agriculture, and I appreciate 
that. So I will look forward to getting your written response 
and suggestions there.
    One last note. One complaint that I hear from many farmers 
is that the safety net programs have become very complicated, 
and especially the ACRE and the SURE Program. We also have 
other programs that are similar to these, such as crop 
insurance and counter-cyclical payments.
    Do you think that these programs complement each other or 
do they work at cross purposes?
    Secretary Vilsack. Well, I think there has got to be work 
done on ACRE. There is no question about that. We were asking 
farmers to basically give up the known for the unknown. We were 
asking them to enroll for the life of the Farm Bill instead of 
being able reevaluate the impact and effect of that decision.
    We know that this particular program was not particularly 
geared towards all commodities. It was more favorably inclined 
towards some commodities. Certainly, the rice and cotton 
producers and peanut producers were not necessarily enamored 
with the ACRE Program. So I think there is still work to be 
done. When only 8 percent of farms and 13 percent of total base 
acres are included in the program, it tells you that there is 
still additional work that needs to be done.
    Candidly, I think we have a lot of work to do in terms of 
simplifying all of these programs and encouraging and improving 
our technologies so that we can provide quicker service and 
better service. We are still dealing with a very antiquated 
technology system in our Farm Service offices. We have started 
the MIDAS Program. We have started to stabilize our technology, 
but it is going to take a couple of years for us to get the job 
done. And hopefully, we can maintain the resources that have 
been provided in the last year or two.
    With that, I think when we have better technology and if we 
can focus in the discussions on the Farm Bill on trying to 
simplify these programs, I think we will all be better off.
    Chairman Lincoln. Well, thank you, Mr. Secretary. Just one 
adage there. Crop insurance really does not work very well in 
my state. And since crop insurance does not well, SURE does not 
work well. One of the reasons I have been fighting for disaster 
assistance is that I have got foreclosures now on a lot of my 
farms because they did not receive any '08 disaster or '09 
disaster and, of course, going into a 2010 crop year without 
those resources or having suffered from that, it just makes it 
a very, very difficult circumstance.
    So I hope that we will work together to improve the safety 
net program dealing with crop disasters and certainly hopefully 
work together in terms of any disaster assistance that we can 
provide farmers that are really in need right now.
    Secretary Vilsack. Madam Chair, just 15 seconds. On the 
issue of credit, we obviously have been working very closely 
with our own credit operations to see whether or not we can 
forebear or restructure loans to farmers who are struggling. At 
the same time, we have done as much as we can to convince and 
encourage our commercial bankers with which we have a guarantee 
relationship to do the same.
    Chairman Lincoln. Thank you.
    Senator Chambliss.
    Senator Chambliss. Thanks very much, Madam Chairman.
    And, Mr. Secretary, I would be remiss if I did not comment 
very quickly on a matter that you and I talked very briefly 
about before the hearing and to thank you for the great work 
that your department is doing in continuing to provide 
assistance to the people of Afghanistan.
    If we are going to be successful in the war on terror, it 
is interesting to note that the U.S. Department of Agriculture 
plays a very key role in that. And we have a number of 
volunteers from my state who have been in and out of 
Afghanistan, as well as a number of other folks from around the 
country who are providing assistance to the people of 
Afghanistan. And it is all under your leadership and the 
leadership that has continued from the previous administration. 
So I thank you for that good work that you are doing there, and 
again, I look forward to visiting that country with you soon.
    Also, I appreciate your comment about the average age of 
farmers. We have talked about that on this committee ever since 
I have been a member of Congress. And it is difficult to try to 
devise methods to encourage young people to come into farming 
when, just as they step right out of college, for example, and 
into the world of farming, they immediately have got to incur 
hundreds and hundreds of thousands of dollars of debt to buy 
equipment, to rent land or buy land. For somebody with 
absolutely no ability to have credit extended to them, 
obviously, it makes it very difficult.
    I am not sure what the answer is, but I think the way that 
we have approached it thus far has been the best way that is 
available. That is, some sort of safety net program that at 
least when they go in and speak to the banker guarantees that 
banker that he is going to have some income coming in, that 
farmer is going to have some income coming to pay him the debt 
that he is going to have to incur to step out there in the 
world of farming, which is so uncertain.
    As Chairman Lincoln alluded to, the disaster situation we 
have got right now, this is my 16th year on the Ag
    Committee in both the House and the Senate. We have never 
had a year when in some part of the country, some farmer, some 
group of farmers did not have an agricultural disaster. And it 
is a very difficult issue, but as we move into this Farm Bill, 
I appreciate your ideas and appreciate your bringing it up now 
so that we can put it at the top of the list and think about 
ways that we can encourage farmers, young farmers, to engage in 
this business because that age of 57 is rising, unfortunately. 
It is not falling.
    I want to first of all mention the five pillars that I have 
heard you talk about that will make rural America stronger. One 
is trade. Two is rural broadband access. Three is renewable 
energy. Four is conservation, and five is research. I do not 
disagree with any of those as being critically important to the 
world of agriculture. But ensuring that new farmers find a way 
to be a part of the 21st Century of agriculture is listed as a 
``concern'', and we just talked for a minute about that.
    Where do production agriculture and commodity and risk 
management programs fit into that picture of those five 
pillars?
    Secretary Vilsack. Senator, when we talk about the five 
pillars, we talk about the first pillar being improving incomes 
for farmers, and that involves a variety of issues. One is 
trade, obviously, expanding export markets. This year, we are 
fortunate. We are on track to have perhaps the second best 
export opportunity we have seen in agriculture since we have 
been keeping records. The first six months of our fiscal year 
were actually a record. Continued good news with the 
President's leadership in opening up the poultry market in 
Russia should help those numbers as well.
    It is also about expanding domestic markets and creating 
opportunities. That is one of the reasons why we are focused on 
trying to better link local production with local consumption. 
This is not just about small, very, very small operations. This 
is about production agriculture, the ability of schools, 
institutional purchasers of food to be able to access things 
locally. Sometimes you would be surprised that there are folks 
in small communities who are purchasing food from far, far away 
that do not realize or appreciate what is being grown and 
raised in their area. And that is why we are focusing on trying 
to rebuild the supply chain with local slaughter facilities and 
mobile slaughter facilities with storage facilities, also 
creating job opportunities. So it is very important to 
understand and appreciate that production agriculture is 
critically key to that first pillar.
    Obviously, having a safety net is important. It is very 
important when you take a look at the overall farm income. If 
you take a look at all farmers of all sizes and you ask the 
question how much of their income comes from farming 
operations, if you include all farmers, only 9 percent of their 
income comes from the farming operations. So it is obvious that 
we need to do work there. If you look at just large production 
agriculture, still 30 percent of their income has to come from 
off the farm.
    So I think there is still work to be done in expanding 
markets and providing assistance and help, but it is clearly 
one of the key keys to revitalizing the economy. And that is 
why we also focus on energy, providing new ways and new 
opportunities to use the crops and the waste product that is 
produced from agriculture, I think has an exciting potential. 
If we get to 36 billion gallons of renewable fuel in this 
country by the year 2012, we will see $95 billion of additional 
investment in rural America and 800,000 jobs and obviously 
increased bottom lines for farmers and ranchers. So that is one 
of the reasons why we focus a great deal on that.
    I might just say just very briefly as it relates to the 
issue of beginning farmers, I think one of the focuses should 
be on how we might be able to incent sweat equity opportunities 
in beginning farming operations so that the credit needs are 
not as great as they are today. And the other is to take a look 
at our guaranteed programs and determine whether or not there 
is a difference between a guaranteed loan and a guaranteed 
payment of a loan. Whether or not it is possible to provide 
guarantees of payments during difficult times as opposed to 
waiting until the loan has to be foreclosed on to trigger the 
guarantee, could that possibly open up more credit, could it 
make it more available to young farmers and make it easier for 
them to get started.
    These are some of the ways that are being discussed, and I 
think they are obviously a lot of ideas that we need to think 
about. But it is clear we have to think about it and we have to 
get the Nation's attention focused on it.
    Senator Chambliss. Let me just throw out one suggestion to 
you there. Leasing of equipment has become more and more common 
practice. And rather than thinking in terms of these young 
folks going out and having to purchase equipment, if we could 
get creative and develop some programs that incentivize maybe 
the leasing for short-term periods and have some sort of credit 
programs really focused on that aspect, it would be a huge 
benefit, obviously, to our agribusiness people as well as to 
the farmers. And I look forward to dialoguing with you on that.
    My time is up, but I cannot not comment on the proposal in 
the President's 2011 budget to not only take some money out of 
the baseline, the Farm Bill baseline, for risk management but 
also the reduction in direct payments as well as the adjusted 
gross income limitations are issues that are very much a 
concern to me.
    This is an issue that we dealt with in a very significant 
way in the 2008 Farm Bill, and I will have to tell you that 
there was very much in the way of discussion about these 
issues. I see Senator Johanns down there. He was the secretary 
during those days, and he will remember well the discussions 
between the administration and this committee. And we made 
significant changes, and to now step in and take another whack 
at two of the basic safety net programs is something that this 
committee is going to look long and hard at because we want to 
make our contribution.
    No farmer has ever told me that they did not believe in 
paying their fair share when it came to dealing with the issue 
of deficit reduction, but in taking those two programs now and 
once again trying to make significant reductions in them, I 
think is going to be met with a lot of resistance on this 
committee. But in any event, we look forward to continuing to 
work with you on that and all the other difficult issues as we 
move into the next Farm Bill debate.
    Thank you, Madam Chairman.
    Chairman Lincoln. Senator Brown.
    Senator Brown. Thank you, Madam Chair, for holding this 
hearing and thank you for your exceptional work on the 
derivatives issue. I wanted to thank you publicly for your 
leadership on that very important issue.
    Mr. Secretary, welcome. I appreciated your work, your 
discussion earlier on the ACRE Program. I would like to pursue 
that, that and one other issue, for a couple of moments.
    The ACRE compromise that ended up in the final bill 
obviously was not particularly close to but in the right 
direction from where Senator Harkin and--then Chairman Harkin 
and Senator Durbin and I advocated. The program is--you 
mentioned in your testimony, it is complicated. It has made it 
difficult for farmers to make their election decision.
    How do we simplify the process? Give me some very 
prescriptive words on how we simplify the process so that there 
is higher participation. How do we improve the program during 
the next Farm Bill as we just move forward?
    Secretary Vilsack. I think there are a couple things, 
Senator. I think, first of all, the fact that you are making a 
farmer commit to a decision, particularly at the outset of this 
program, asking him or her to give up a certain percentage of 
payments and protections for something that is not quite known 
and then suggesting that they need to be locked in for an 
extended period of time, that this is not a year-to-year kind 
of operation, that they are essentially locked in for the life 
of the Farm Bill, it makes it difficult for folks to be 
interested in trying a new program out.
    Secondly, there is some concern that the program is based 
on state data as opposed to individual county data. That may be 
adding a level of complexity to it, but it may make it easier 
for people to calculate how it may actually impact their 
operations and it may become a more popular program.
    We are seeing--as I said, we have a relatively small 
percentage of farms enrolled in this. I think it is obviously 
focused on trying to figure out how you would deal with what 
the Chair indicated, which is how do you get to some level of 
protection, some level of assistance that assures that you are 
going to get a good part of your production costs back and so 
that the risk of farming is minimized.
    But I think if you take a look at giving people a little 
more flexibility within the program and you also take a look at 
the data that you are going to use in making the calculations, 
it might make it more popular and more interesting for people. 
And I think as people see the impacts of it on their neighbors 
who elected ACRE, hopefully, we will see improvements in----
    Senator Brown. You are getting generally good reports back 
from those who have enrolled, correct?
    Secretary Vilsack. Good reports in the sense that I think 
people are satisfied with the election that they have made, not 
necessarily good reports--and that is part of our challenge and 
part of our issue, is to make sure that we do as good a job as 
possible articulating and explaining these new programs.
    It is again somewhat difficult for the 3,000 Farm Service 
Agency offices to institute new programs when you realize how 
much they were required to institute by virtue of the enormous 
work you-all did on the 2008 Farm Bill, and then having to do a 
lot of it with very antiquated technology, it creates a very 
difficult, stressful time for folks. So, hopefully, people are 
getting more comfortable with the program and in a better 
position to explain it to their friends and neighbors.
    Senator Brown. Thank you. Another question I wanted to ask 
you, you, of course, are familiar with the struggles that dairy 
farmers across the country have undergone with high costs and 
low prices. Senator Casey and I worked on the Feed Cost 
Adjuster provision to help farmers when the cost of feed 
spiked.
    Give me an assessment of how that provision has worked.
    Secretary Vilsack. We are still working. I mean, the 
program is providing some degree of assistance and help, but it 
is not enough to avoid a substantial amount of stress in dairy. 
And I think that is because we really have to address this in a 
much more holistic and comprehensive way. It is one of the 
reasons why I asked the Dairy Council to be formed and asked 
and challenged them to come up with a consensus view on how we 
might be able to end what we are seeing as more peaks and 
valleys in the pricing of dairy, which makes it very difficult 
for operators to have a difficult year and recoup the losses 
that they incur in these very, very difficult years, because 
they are more frequent and they are more severe, and the highs 
are not as high as they need to be and they do not last as long 
as they need to last in order for people to recover.
    So I think really what we need to look at is a very 
significant effort at trying to figure out how we stabilize the 
price band in dairy. Absent that, you can tinker with programs 
and you can provide assistance as we did last year and as we 
are continuing to do this year, over a billion and a half 
dollars in assistance to the dairy industry. You are going to 
continue to have to do that until we figure out how to 
stabilize that price band. And, hopefully, the Dairy Council is 
focused on that. I know the Milk Federation has come up with 
some ideas and thoughts that are provoking some good deal of 
discussion, and, hopefully, we can get a consensus across the 
country, and we do not get into a situation which we have had 
in the past where there are regional differences that prevent a 
consensus in moving forward.
    Senator Brown. Okay. Thank you.
    Thank you, Madam Chair.
    Chairman Lincoln. Senator Roberts.

 STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF 
                             KANSAS

    Senator Roberts. Well, thank you. Thank you, Madam 
Chairman, and I think you said it would be preferable that if 
we would not give opening comments and just keep them to a few 
words. Obviously, that is an oxymoron for senators, especially 
this one. But I want to rip through here, about two or three 
minutes and then have a question for the Secretary.
    Are we going to have a second round?
    Chairman Lincoln. If you need one.
    Senator Roberts. I would like to ask some specifics about 
crop insurance.
    Anyway, thank you, and let me just say that you gave one of 
the best opening statements I have heard in the House Ag 
Committee or Senate Ag Committee. I think that you have shown 
again that you are a true champion for all farmers, all of 
agriculture, and I truly appreciate it. I supported the 2008 
bill with 79 other senators and overriding a presidential veto 
twice.
    Mr. Secretary, thank you for taking your very valuable 
time. You have been all over the country with a listening tour 
to come and visit with us. It seems like yesterday the 
Conference Committee met in this very room till the early hours 
in the morning. I think we met in the House first. That is when 
Charlie Rangel made the announcement he did not know why he was 
here but he was told to be there, and it sort of went from 
there.
    But at any rate, here we are two years, 12 days after the 
bill became public law. Already folks want to move on to 
drafting the next bill. I am not sure that this is wise, but 
that is what we are doing. It is always good to look back first 
and then try to see where we are headed down the road or what 
trail we take.
    The Secretary's testimony points out that the commodity 
title and the statute programs are yet to be fully implemented. 
I know, I think there is 21 regulations yet to come out, and I 
hope it is appropriate to find out what farmers and ranchers 
think of the current bill before we start suggesting any 
drastic changes and program cuts. Although I find the 
Secretary's comments about trying to repopulate rural areas 
through rural development, I hope through farm income, very 
interesting and very pertinent.
    I am here today to relay the concerns and experiences of 
our producers in Kansas. Mr. Secretary, I am pleased that you 
have joined us. I want to thank you--or I am asking you to pass 
a thank you on to Under Secretary Concannon for agreeing to 
come out to Kansas to work with me on the bonus commodities 
issue within the senior nutrition programs. We depend on that. 
That was a pilot program that has worked very well. I am going 
to be out there in August, and we have issued a request for him 
to come out and join me, and we will have a good time. We will 
buy him a big steak in Dodge City and the whole thing.
    One of the responsibilities, I think, for a Secretary of 
Agriculture--and I am not trying to tell you what your job is. 
But I think I asked during your confirmation hearings, is who 
is going to be the champion for agriculture, for farmers and 
ranchers, somebody to help tell their story to those who 
neither understand nor appreciate the miracle of modern 
agriculture. And the Chairman talked about that, one in four 
people in Arkansas employed by agriculture, same thing in 
Kansas, same thing in Iowa, same thing in the Dakotas, same 
thing, Georgia.
    Today's producers face challenges from many different 
directions, including their government. And you spent most of 
your term touring rural America, which is a very good thing, a 
very positive thing. We have a former secretary that did that 
sitting over here to my left, doing the same kind of thing. 
Basically, you have seen firsthand the struggles of farm 
country.
    Of all the rural investment tools in our tool belt, perhaps 
the most effective is our commodity and crop insurance 
portfolio. The dollars that our producers receive through these 
programs, demanded by their lenders by the way, get passed 
through to lenders, to grocery stores, to mechanics, to 
implement dealers, churches and many more.
    Now, I am talking about Crop Insurance and the Direct 
Payment Program. I know that they come under a lot of 
criticism. Usually, that is the first thing people talk about, 
about cutting something in agriculture, but I think that is 
very misleading. And I know there is a lot of talk about the 
ACRE Program and the problem with it and how complex it is. 1.8 
percent of Kansas wheat farmers took part in that program out 
of a 75,000 ballpark figure. So something has to be done to 
make that program more beneficial, and the one we have ongoing 
is obviously the Direct Program and the Crop Insurance Program.
    I know you want to be of help to these areas, and we want 
to be partners in that effort, but our producers, 
unfortunately, are hearing a different message from your 
colleagues in other agencies, not the USDA but other agencies. 
And I am talking about the ever-tightening ratchet of federal 
regulation. The Chairman talked about that somewhat.
    Whether it calls for overly burdensome and unreasonable 
carbon and dust standards, rural fugitive dust is back. I dealt 
with that when I was a staffer, I dealt with it when I was a 
member of Congress, and now we are dealing with it again. I 
think it has been in some pile, and somebody just jerks it out 
of there and says, well, here we go again, or to regulate every 
pothole and play as if it were the Missouri River, these are 
very, very small little ponds where no self-respecting duck 
would ever land.
    So producers are being squeezed. They feel attacked by some 
federal officials and agencies, and especially the press. I am 
so upset in regards to the lack of press from people who 
understand production agriculture, which has actually become a 
pejorative. People used to win Nobel Peace Prizes for our 
ability to feed this country and a troubled and hungry world. 
And yet now, if you are not small--definition of a small family 
farmer, I guess we could say it would be 5 foot 2, but there is 
a 6 foot 3 guy out in Kansas who has a 10,000-acre operation 
that is just operating on the edge. But that individual plus 
other individuals in Kansas produce 400 million bushels of 
wheat, and if that is endangered, our capacity to feed this 
country and to make everybody pay one dime out of their 
disposable income dollar for food, they are going to pay more. 
And then when we have a Haiti disaster, we cannot respond.
    So I am not very happy with the press in regards to how 
they describe farming only as small family farmers. I am not 
opposed to that at all. I am for all of agriculture, and you 
have done a great job in highlighting that. A matter of fact, 
you have educated probably more consumers than almost any other 
secretary and you deserve the credit.
    At any rate, the American farmer and rancher supplies food 
and fiber not just for our benefit but for that of the many 
nations in need. I went through that. But they are criticized 
for the programs that help provide this very assistance. I am 
back again to crop insurance and the direct payment.
    The fact of the matter is our producers are not competing 
against themselves. We are competing against Brazil, Europe, 
Australia, other parts of the world. We all know that story. 
Our Farm Bill takes modest steps to level the scale of 
international competition, but, Mr. Secretary, we need a lot 
more help in that area.
    So as you are advocate in chief of agriculture, let me just 
ask you a question. How are you working to defend and protect 
our farmers and ranchers, all of agriculture? And I know I 
heard you say to repopulate the areas. And I know that we keep 
hearing about small family farmers, and we have put that on the 
size, we put that on income or whatever. But the folks that 
really--that one farmer out there and three sons, one son went 
to Denver, one son went to Kansas City, one son stayed. His 
daughter stayed, and now he is farming 10,000 acres, maybe 
20,000 acres. And yet, it is high-risk agriculture, and he has 
to depend on crop insurance, has to depend on that direct 
payment, and his contribution to this country is tremendous. 
And yet somehow, he is pilloried by the press as some big 
business farmer that does not need any help at all.
    So I am just asking, in your opinion--I do not think we 
have swung the pendulum too far because you have done a good 
job, but in your opinion, how can we better defend or better 
tell our story in agriculture from the standpoint of production 
agriculture?
    Secretary Vilsack. Senator, boy.
    How much time do we have, Madam Chair?
    Senator Roberts. Well, I went over three minutes and 54 
seconds, and so I am way over.
    Chairman Lincoln. He went a little over, but I found myself 
agreeing with him, so it was hard to cut him off.
    Secretary Vilsack. Let me try to answer this question, 
Senator, and I would be more than happy to have a more extended 
conversation with you about this, just to give you a couple 
things.
    First of all, on the press issue, I absolutely agree with 
you. I absolutely agree with you, and it is one of the great 
frustrations. And I am sure Senator Johanns when he was 
secretary probably had the same feeling.
    I was watching one of the morning shows a couple weeks ago, 
and they were highlighting a fellow who had written a book, 
suggesting that the worst thing that ever happened to humankind 
was agriculture. So I came to the office enraged, and I said to 
the communications folks at my shop, ``Call that show up and 
ask them for equal time.'' We have yet to hear from them. We 
have yet to hear from them. That is wrong. Major newspapers----
    Senator Roberts. Well, name the program here and now. You 
know, go get 'em. You are on, man.
    [Laughter.]
    Secretary Vilsack. It is ``Morning Joe,'' and----
    Senator Roberts. Joe did that?
    Secretary Vilsack. Well, I do not know that--Joe may not 
have been on that day.
    Senator Roberts. Did he have a roll with his cup of coffee?
    [Laughter.]
    Secretary Vilsack. But it irritated me to the point where 
we asked for equal time. And many major newspapers are reducing 
staffs and reducing it in agriculture at a time----
    Senator Roberts. You are exactly right.
    Secretary Vilsack. --when agriculture is absolutely so 
fundamentally important.
    Senator Chambliss referred to Afghanistan. You do not win 
in Afghanistan until and unless you have a functioning 
agricultural economy in that country.
    Senator Roberts. Yes, the Taliban killed everybody. I mean, 
we had zero. If they make $400 a month, they can make it and 
they will not grow poppies, but they do not do it with $400 a 
month, and now we have National Guard people over there 
teaching them basic agriculture.
    Secretary Vilsack. Well, here is the deal. If they grow 
tables grapes or they grow saffron or they grow pomegranates, 
they can make three, four, fix, six, eight times what they are 
making selling poppy. We just have to create a system of credit 
and so forth. So that is one thing.
    Secondly, you mentioned the issue of regulation, and I know 
that is a frustration. As I traveled around the country 
listening to folks, there is deep concern about this. So what 
we have done and what we have started is we are bringing the 
major commodity groups, the major livestock groups, and the 
major specialty crop groups into a joint meeting with myself 
and the administrator of EPA.
    It is the first time that this kind of conversation has 
been taking place on that level. We are setting up working 
groups so that there is an effort to have ongoing dialogue, so 
that there is a clarity of understanding and positions relative 
to regulations, what is and is not being considered. 
Oftentimes, what we find is that what is out in the countryside 
is not necessarily what is actually happening. So helping with 
those discussions, I think is important.
    But the last thing I will say is this. You ask how do we 
relate this to ordinary folks. I think it is important for 
Americans to understand that they have something that nobody 
else in the world has. No one else in the world has this, and 
it is because of our farm families and our farm laborers. They 
spend somewhere in the neighborhood of 10 percent of their 
take-home pay for food. Everybody else in the developed world 
spends 25 percent or 30 percent--or in the developing world, 40 
or 50 or 60 percent of their pay in food.
    So the question we ought to be asking Americans is, what do 
you do with that extra 10 to 15 percent of your income. Do you 
buy a nicer house? Do you have a vacation home? Do you have a 
retirement fund? Do you have something for college education 
for your children? Do you buy a nicer home? What do you do with 
that 10 to 15 percent, and when was the last time you thanked a 
farmer for it? Because a farmer and farm laborers are in part 
significantly responsible for that.
    Part of the reason why I think it is important to put the 
emphasis in having a goal and encouraging the number of farmers 
to increase in this country is to give people a concrete way of 
explaining to the rest of the country that without farmers, we 
would not be able to do anything. It all starts with farmers. I 
mean, you may never need a police officer, and I hope you never 
do need a police officer. But every day, two, three times a 
day, you need a farmer.
    Chairman Lincoln. Here, here.
    Senator Roberts. I thank you for that statement. Thank you, 
Mr. Secretary.
    Chairman Lincoln. Senator Johanns.
    Senator Johanns. Thank you very much.
    Let me, if I might, start out where I think this discussion 
relative to the Farm Bill does need to start out, and that is 
an analysis of the baseline because there can be a lot of great 
ideas, and there are a lot of great ideas out there. But the 
reality is we have to figure out how to deal with this within 
the confines of the budget we have.
    Now, Mr. Secretary, I think there is a whole host of 
factors at work here, but there is outside forces. There is the 
desire by this country to bring down the deficit, and that is 
going to put pressure on every budget. You have got internal 
forces; certain programs are growing.
    We just had a debate about the Child Nutrition Program, 
which I think every member of this committee supports. The 
offset, where did it come from, it came from a very well-
received program EQUIP, or it looks like that is where it is 
going to come from. You have crop insurance. You have got a 4-
billion-dollar squeeze there. The Permanent Disaster Relief 
programs are, as I understand it, a part of the baseline only 
through the 2008 bill.
    Chairman Peterson has already said, ``Look, when we look at 
the baseline for this upcoming Farm Bill, we need to focus on 
what is within our jurisdiction.'' I think that is just a way 
of saying, look, we are not going to go out and ask somebody 
else to try to find money beyond what is there.
    So I guess what I would like your thoughts about, it seems 
to me as we think about this upcoming Farm Bill, in some 
respects, it is going to be important to recognize that because 
of these financial restrictions, this may be a time where we 
just simply decide what is it about the '08 bill, which was 
really based upon the '02 bill that we like, and how do we 
focus on keeping those in place, how do we keep those programs 
in place because there is no likely going to be much 
opportunity for expansion.
    Would you agree with that analysis?
    Secretary Vilsack. Senator, I certainly would. Somewhat 
complicated by the fact that not all of the programs within the 
2008 Farm Bill were carried through the entire term of the 2008 
Farm Bill, so they are--and you may have alluded to that in 
your comments. So that creates a slightly deeper hole than you 
would normally be faced with.
    Having said that, I think the challenge for us at USDA is 
to provide assistance and help to this committee and to the 
House committee on how we can do a better job, how we can learn 
from the experiences that we have had the last couple of years 
in an effort to try to squeeze as much effectiveness out of 
these dollars as we possibly can.
    But I think your analysis of where this starts is 
important, and I think the Chair's comments is that we have to 
constantly remind the outside world and the folks inside in the 
inside world of the fact of the decisions that have already 
been made that have already affected the baseline so that there 
is not an expectation.
    I mean, to be honest with you, one of the concerns I had 
was when the Commission was appointed to take a look at the 
budget issues. There was Medicaid, Medicare and Social 
Security, but then they talked about farm programs. And I 
thought to myself, well, farm programs, the first three are the 
ones that you really got to have to deal with. And 
proportionally, if everyone else gave as much as we have 
already given, it would be interesting to see what the deficit 
would be.
    Senator Johanns. You would solve a lot of the problem.
    Secretary Vilsack. Yes.
    Senator Johanns. The other thing that would be very, very 
helpful to me, I think there is this perception that the Crop 
Insurance Program has gotten less and less and less and less. 
And the reality is, at least from the numbers I am looking at, 
that program has grown pretty significantly, while at the same 
time, the Commodity Program, largely due to not paying money 
out on counter-cyclical, has gone down.
    What would be helpful to me, and I think to the Committee, 
is if Joe Glauber and some others could kind of give us 
analysis of what is driving that because it may be a good 
thing. It may be a direction that we want to pursue, and it may 
not. But very clearly, you can see an increase in crop 
insurance payments and a decrease in commodity payments. And I 
just want to know the inner workings of that. Other than to 
look at the macro numbers, I have not been able to get a sense 
of what is driving that. I think it would be helpful to the 
debate if you would task your people to maybe provide us some 
more information on that.
    Secretary Vilsack. Senator, we will do that.
    Senator Johanns. Okay. Great. Thank you.
    Chairman Lincoln. Senator Thune.
    Senator Thune. Thank you, Madam Chair. I want to thank you 
and Senator Chambliss for holding this hearing.
    Secretary Vilsack, welcome. It is always nice to have you 
here, and it seems like we just did finish the 2008 Farm Bill 
and we are already talking about the next one. But I think it 
is always appropriate to evaluate the effectiveness of these 
programs and to discuss ways to improve U.S. farm policy in the 
coming years.
    My view is that a strong ag industry that provides the 
food, feed, fiber and energy for the country really is the 
backbone of our rural economy. And I think it is going to be 
important going forward as we look at the next Farm Bill to 
determine how best we can stretch every taxpayer dollar within 
the Farm Bill's jurisdiction because there is going to be, as 
you know, a tremendous amount of pressure, budgetary pressures. 
And my guess is we will be authorizing, reauthorizing the Farm 
Bill at or below the existing baseline.
    So it seems to me at least that farm safety net programs 
are accounting for a smaller and smaller portion of the overall 
Farm Bill. It is important that these programs continue to 
provide the most effective, efficient and targeted protections 
for our agricultural producers. And, of course, we have got 
some revenue-based safety net programs that we have been 
attempting to get implemented and with mixed results, but I 
hope that we can continue to refine those and make those more 
effective and more attractive to our producers.
    I want to focus, briefly, though, however, on one aspect. I 
said food, feed, fiber and energy. And to me, the energy issue 
is relevant, is interconnected now with farm policy, because in 
many respects, when you have a corn price that is at a decent 
level because there is demand for corn, some of which is for 
energy production, it means then that in many cases LDP 
payments and counter-cyclical payments are not being made. So 
it does impact in a very direct way, I think, the commodity 
title of the Farm Bill when you have got a robust renewable 
fuels, biofuels industry in this country.
    For that reason, I am concerned about where we are headed 
with respect to policy on ethanol and biofuels. And I wanted to 
ask if you agree with the EPA announcement to delay the 
decision on approval of E15.
    Secretary Vilsack. Senator, I would like the permission to 
agree with half of the statement of EPA, which was an 
indication that they are prepared in the fall to authorize E15. 
The question is what level and what make vehicles and what year 
vehicles will be covered by that. As I understand it, there is 
additional testing that is being conducted by the Department of 
Energy on some of the older vehicle models and on smaller 
engines so that there is a determination of what is 
appropriate. And I think the fact that the EPA is proceeding 
with working on labeling is an indication of the direction.
    So we took this at USDA as an indication that we want to 
take this as a positive sign. This is an industry that must 
grow, that needs to grow. So what we did, what I tasked our 
team to do is to say, okay, Congress has set 36 billion 
gallons, a threshold. What do we have to do? How many 
biorefineries do we need? Where do they need to be? What kind 
of feedstock are we going to need? How do we make this an 
industry that is national in scope so that it has the kind of 
support, both political and financial, that it needs to survive 
and to thrive? What distribution systems need to be put in 
place? What kind of blender pumps do we need? What do we need 
to do in terms of providing assistance and help to expand 
blender pumps? And what do we need to do to ask the question 
whether the existing assistance that we are providing the 
industry needs to be calibrated or recalibrated to focus on 
distribution and encouraging the promotion and development of 
flexible fuel vehicles?
    I think that has got to be part of the conversation, and I 
think as we talk about energy in this country, as we deal with 
what is going on in the Gulf, it just seems to me that we ought 
to be reminding Americans that we have the capacity in our farm 
fields and our forested areas and our grasslands to be 
enormously far more independent than we have been of fossil 
fuel, of foreign oil and of oil generally. And I think we ought 
to be promoting this. And so we are full speed ahead at USDA on 
trying to build out a biofuels industry.
    Senator Thune. Do you think we are hitting--are we hitting 
the E10 wall?
    Secretary Vilsack. I think we are very, very close to 
hitting the E10 wall, which is why this determination is 
important. The sooner that it is made, obviously, the better. 
The more expansive it is made, the better. But even if it is--
no matter when it is made or how it is made, there still is the 
issue of how do you build out the industry, how do you make it 
a nationwide industry, how do you build and support the 
biorefineries, how do we use the Farm Bill programs that you-
all have put in place in an effective way, and what do we do 
about distribution?
    I am concerned that we are going to have production 
capacity, then no distribution capacity that is convenient and 
co-located, and that it will create confusion among consumers 
and not particularly an interest in the industry. And even if 
we have production and distribution, if we do not have enough 
vehicles, if we are not continually encouraging flexible fuel 
vehicles, there will not be the demand.
    Senator Thune. Right.
    Secretary Vilsack. So we have to balance all of that at the 
same time.
    Senator Thune. And I agree with everything you are saying, 
but to get to the infrastructure to support the pipelines, the 
blender pumps, the flex fuel vehicles that are all essential, 
in my view, in creating a market for this, you also have to, in 
my view, get these blend levels raised. And I do not know.
    I mean, do you think we can achieve what the RFS calls for 
absent higher blends?
    Secretary Vilsack. I think it is going to be difficult to 
do that, which is why we are supporting and encouraging EPA to 
get to E15 as quickly as possible.
    Senator Thune. Good. And I hope that USDA is leaning 
heavily on them to do that because the sooner the better. I 
mean, this is----
    Secretary Vilsack. You asked Administrator Jackson 
something; I talk to her about it every day, and it is 
something--when I see Secretary Chu, it is something I talk to 
him about every day. This is very, very important, and it is 
important because it will help. It is the key, one of the keys, 
principal keys, to revitalizing the rural economy.
    Senator Thune. Good.
    All right. I see my time has expired. Thank you, Madam 
Chair.
    Chairman Lincoln. Thank you.
    Senator Cochran is not with us, so Senator Lugar, go to 
you.
    Senator Lugar. Thank you, Madam Chairman.
    Mr. Secretary, I took advantage of the opportunity at the 
White House yesterday to talk to Secretary Jackson about the 
same issue that Senator Thune has been addressing. And I 
commend you not only for thinking about the blend but also the 
distribution problems, the overall industry problems. I think 
these are crucial, and to the extent that you and your 
administration were able to move on them, this would be 
tremendous.
    Likewise, I appreciate your earlier remarks about 
encouragement of younger farmers, and that is imperative and 
may require some creativity on the part of our committee 
working with you. But I appreciate very much that opening 
statement.
    My question, however, today, is with regard to Congress' 
debate of the 2008 Farm Bill. At that time, I shared my 
frustration with colleagues. We were specifically ignoring a 
ruling by the World Trade Organization that Farm Bill programs 
largely associated with cotton production were in violation of 
our trade agreements. In fact, during the debate, I offered an 
amendment that would have created a fast track process to amend 
offending statutory language upon a final WTO ruling. I agreed 
to retract my amendment upon offers to resolve the issue 
through compromise, which ultimately did not occur.
    Predictably, upon exhaustion of appeals by the United 
States, is now held in violation of the trade agreements by the 
WTO, and Brazil has legal authority to impose over $800 million 
annually in retaliation against U.S. interests. Now, while I 
applaud the fact that the U.S. has reached an agreement with 
Brazil to stave off that retaliation, it is not without cost. 
The administration and USDA have agreed to provide the 
Brazilian farm sector with nearly $150 million annually in 
taxpayer dollars without explicit authority from Congress.
    I would appreciate your response to these questions. Please 
explain the Department's legal authority to provide these 
payments to Brazil and relied upon precedent. Does the 
administration support immediate reform of the Farm Bill 
programs found in violation of our WTO trade rules in order to 
preserve taxpayer resources and abide by our trading 
commitments? And while Congress ultimately determines annual 
appropriations, the administration suggests spending and saving 
priorities through the annual budget requests.
    Should USDA continue to make payments to the Brazilians, 
would you support offsetting those payments through 
corresponding reductions in farm program payments, specifically 
from the trade offending provisions?
    Secretary Vilsack. Senator, we--before I agreed to enter 
into negotiations along the lines of what ultimately became the 
framework for an agreement, I asked whether or not we had the 
capacity and authority within, I believe, the Commodity Credit 
Program to basically provide the resources to fund this 
settlement. And I was assured by our lawyers that this was the 
case. I would be more than happy to provide to you a more 
detailed explanation in terms of chapter and verse of that 
opinion. I am frank to say I just asked for the go-ahead and 
got it. I did not go into great detail in terms of the actual 
specific language, but they were reasonably certain that they 
had the authority to proceed, and we will provide you with that 
information.
    As it relates to the necessity of reforming the Farm Bill, 
as you know, the framework and structure of this agreement 
provides for modifications of the credit program, which we have 
done and which we were planning on doing anyway. It also 
provided for APHIS to be perhaps a bit more timely in terms of 
responding to requests from Brazil on certain commodities, 
which they are in the process of doing without compromising the 
safety and security of our food supply.
    There was also an understanding that we would enter into 
conversations and discussions about how we could potentially 
create a better program that was not violating WTO rules and 
regulations. Obviously, we will have to work with the 
Committee, the respective committees, and I recognize and 
respect that there are differences in opinion within this 
committee, I suspect, on these very issues. But we are 
committed to working with you so that we not just have a 
framework for a resolution but we actually get this behind us.
    Senator Lugar. Well, I appreciate that, and I hope that you 
will forward to the Committee the legal findings, at least of 
your attorneys, because, literally, the situation is one in 
which we entered into this Farm Bill knowing that we were 
potentially going to be found in violation--we needed to set 
some contingency in the event that was the case. We did not. So 
as a result, we were levied with an $800 million burden, not 
farming. This is all of American industry, and the Brazilians 
have the ability to retaliate against everything that is in our 
trade situation.
    Secretary Vilsack. Senator, that was one of the concerns 
that I had about this situation was that there was a concern on 
our part that they would interfere with intellectual property, 
which would carry with it a far greater economic consequence 
than the $850 million price tag.
    Senator Lugar. So temporarily, as you say, we have settled 
with the Brazilians for 150 million a year, but this goes on 
and on. This is not a one-time situation, and literally, in 
framework in which they got a ruling for 800 million. Now, 
granted, we have a responsibility in the Congress, but so does 
the administration. And this is why I have certain frustration 
about this.
    I think, by and large, the American taxpayers are oblivious 
to the fact that we are on the hook for 800 million against our 
entire trade apparatus because of a program, in this specific 
case, the cotton program. I hope there are not other programs 
that we have that are likely to run aground and run into other 
difficulties, because, if so, we better highlight those while 
we are thinking about the next Farm Bill right now. This is 
huge in comparison to all the baseline discussions we have had 
and the rest of the budget.
    Secretary Vilsack. It might be instructive for the 
Committee if we put together a list of current WTO cases and 
complaints. As I testify here, the obvious one is the COOL 
litigation that Mexico and Canada have precipitated, which we 
feel very strongly about, but nevertheless, there is that case 
pending. And how long it takes and when it gets resolved is 
another matter.
    Senator Lugar. Thank you very much.
    Chairman Lincoln. Senator Grassley.
    Senator Grassley. Thank you, Madam Chairman. And, thank 
you, Mr. Secretary.
    Senator Thune touched on biofuels, so I will not bring that 
up. Senator Brown touched on dairy. I will not bring that up. I 
have four questions in regard to the SURE Program. I will only 
ask one and then submit the others for answer in writing, 
because if there is one part of the Farm Bill that I have heard 
complaints about, it is about the implementation, and more 
importantly, maybe the complexity of SURE. And it is not your 
problem that it is complex. That is what we have done here.
    We have had a very large payment in Iowa under this 
program, but I am not certain that it has always been 
equitable. It is my understanding that Iowa has about 185 
million in payments that have already been made for 2008, and 
we are on track to hit 300 million before we close out 2008.
    My question to you is, do you know about regional 
differences that have been discovered, and if you do, could you 
explain what you know about those? Because that is something 
that has cropped up as a problem.
    Secretary Vilsack. Senator, I know that in terms of the--I 
think it is a billion and a half dollars that have been paid 
out so far in terms of the overall disaster programs that you 
established. A significant percentage of that amount has been 
paid in what I refer to as the Midwest and Plains states. 
Whether or not there are--I mean, there are significant 
regional differences, I mean, I think it is it depends on the 
size of the state, and it depends on the number of farmers, 
obviously.
    But we can provide you with a list of states--I have it 
right here--in terms of the amounts that have been paid out to 
date under SURE. It is a little over $965 million that have 
been paid out. And there are obviously states--well, 
Pennsylvania, for example, has received very little. Texas has 
received a good deal. Iowa, looking quickly at this, has 
received the most. So you have got Pennsylvania with hardly 
anything and Iowa with--Pennsylvania has got $49,000, and Iowa 
has 185 million, so I think that is----
    Senator Grassley. Well, thank you for that. I want to just 
point out something, and you do not have to answer this. But I 
have heard a lot of people in southern Iowa that hay and forage 
acres were being taken into account for revenue, which are not 
crops that typically sell but are instead used for feed on 
farms. One area of consideration is removing the requirement on 
crop insurance for crops that are not true risk crops. In other 
words, allowing producers to decide what their risk crops are 
and whether they want to purchase insurance for them and then 
only being eligible for sure on those acres and crops that they 
have chosen to insure.
    Would you have any thoughts on a proposal like that?
    Secretary Vilsack. I would like the opportunity to have our 
team think about that before I responded to it, Senator. I do 
know that we--in the implementation of the SURE Program and 
referencing hay, and particularly in Iowa, there was a glitch 
in which we had to make a slight adjustment because of record 
keeping issues that some farmers had difficulty with.
    I can understand why there is frustration here because the 
way it is set up, you actually have to have a full year's data 
before you can make the calculation for payments. So we are now 
in the process of doing 2008, 2009, and people are dealing with 
2010 difficulties. So I understand and appreciate why there is 
some concern.
    It was further complicated by the fact that there were 
adjustments made in the Recovery Act, which we had to 
recalculate into the SURE Program, further complicated by the 
fact that, again, our technology's pretty antiquated and it is 
difficult to institute a new program with antiquated technology 
and do it in a quick way. So a combination of all those things, 
it is perfectly understandable why people in the field are 
frustrated.
    Senator Grassley. Yes. One other thing, I think that you 
have highlighted and tried to do a good job in the area of 
civil rights that had some shortcomings from a lot of previous 
administrations. I have been an advocate for this Pigford 
African American settlement. Now that the Extenders Bill might 
not move, have you got any suggestions how we might move 
forward on getting that money out?
    Secretary Vilsack. Senator, our hope would be that you find 
a vehicle, a legislative vehicle. We have identified an offset 
that you can tack that onto so that we can get these people--
begin the process of getting these folks paid what they are 
entitled to. And at the same time, we are setting up a process 
by which we are going to offer a settlement opportunity for the 
folks in the Garcia and the Love cases, and we are in, I think, 
significant negotiations with the plaintiffs in the Keepseagle 
case. The goal of all of this is to close this chapter and 
start a new chapter in civil rights within the USDA.
    Senator Grassley. Thank you, Madam Chairman.
    Chairman Lincoln. Senator Nelson.
    Senator Nelson. Thank you, Madam Chairman.
    Mr. Secretary, throughout the efforts on putting together 
the Standard Reinsurance Agreement, I am sure I am not alone, 
but I have heard from a number of agents over the impact of the 
proposed SRA cuts we have on the delivery system. As a matter 
of fact, some have raised the question about whether or not 
they would have access and availability--the producers will 
continue to have access and availability to agents if the new 
and more rigid cap on agents' commissions reduces the number of 
insurance agents providing service, particularly in rural 
communities, recognizing the space distances between 
communities and what impact that could have.
    In addition, a question; does the Department foresee that 
these cuts will have a detrimental impact on high-risk areas 
that crop insurance companies may see as simply too risky to 
insure so that they no longer decide to provide service there 
as in western Nebraska where we had the multi-year drought that 
went from at least 2000 to 2005, longer in some areas.
    So I guess what I am saying is while we recognize the need 
to take some cuts, we do not want to impair the program to the 
point where service is impacted and reduced and the possibility 
that some crops will just simply be redlined, if you will, as 
being too risky to cover. I wonder if you have any thoughts on 
that.
    Secretary Vilsack. I do, Senator. First of all, we 
obviously share with you the concern about the stability and 
solvency of this very important piece of the safety net, and we 
understand and appreciate the role that agents play in 
providing service. I would say that we are confident that this 
agreement is fair to farmers because it does not necessarily 
increase costs to them. In fact, many farmers may as a result 
of our proposal see a decrease in crop insurance premiums. It 
also, we believe, will help to expand coverage under the 
pasture, forage and range land portions of the product, which 
we have been talking about for some time, but we have now 
identified the resources to be able to make that happen, so we 
think an expansion of the program.
    We think that in terms of the agents, while it is true that 
they may not make as much as they made last year, they will 
certainly make more than they made several years ago, and it 
is, I think, a fair return for the work that needs to be done.
    The companies suggested that the A&O be about $1.3 billion 
and then that number would be adjusted for inflation from this 
point forward. Interestingly enough, that $1.3 billion number 
for A&O is roughly the same as the 2010 number would be under 
the current agreement.
    So because of the way in which this is structured, we think 
this is fair to the taxpayers. We think it is fair to the 
agents, fair to the companies, and most importantly of all, it 
maintains the program, it expands the program, and offers many 
producers the possibility of reduced crop insurance premiums.
    Senator Nelson. Well, as long as it does not result in a 
reduction in availability of a program for certain kinds of 
crops because now the lost costs are projected to be much 
higher and maybe even higher than the premium would suggest. So 
I hope that this is not the case. As a matter of fact----
    Secretary Vilsack. Senator, can I just----
    Senator Nelson. Yes, sure.
    Secretary Vilsack. To that point, just to be clear, we 
asked to do an analysis, an outside analysis, of what we think 
a reasonable rate of return would be for companies. What we 
found was a reasonable rate would be somewhere in the 
neighborhood of 12 percent, and the previous year, the 
companies had a 26 percent return on investment. Historically, 
it has been about 17 percent. This agreement takes it down to 
about 14 and a half percent. So it is above the 12 percent 
number, slightly below the 17 percent number, but we think that 
is a reasonable number that should not necessarily result in a 
reduction of coverage.
    Senator Nelson. Well, it assumes that lost costs are going 
to be even over a period of time and premiums will be even over 
a period of time. If you have unusual losses or an unusual 
year, you will see that this number probably will not maintain. 
But let's see how it works.
    I had a call yesterday from a gentleman that indicated that 
some producers would prefer to select crop insurance over 
direct payments as a way of risk management. In other words, 
that they would prefer to insure against unforeseen future 
events that could affect their livelihood rather than having 
direct payments.
    I think that is an interesting thought. I hope the 
Department would take a look at that. Obviously, one of the 
things one would want would be that if they are going to give 
up the coverage of direct payments, perhaps they ought to have 
some reduction, something to reduce the size of the premium in 
order to secure that kind of risk management. I wonder if 
anyone has brought that up as an internal discussion within the 
Department.
    Secretary Vilsack. Senator----
    Senator Nelson. It could be optional. It is not something 
that would be mandatory.
    Secretary Vilsack. I think your question offers me the 
opportunity to sort of explain how we see our role in all of 
this, and if we are off base on this, we obviously need to be 
told. Our view is that you-all will be writing the Farm Bill 
and our job is to provide the assistance and advice and 
analysis that you need. Senator Johanns has asked for an 
analysis, which was perfectly appropriate.
    We may very well throw out some ideas and some concepts for 
consideration, as I did today with beginning farmers. But in 
terms of direction, we are looking to you to direct us in terms 
of what you need.
    Now, I can tell you that we have had inquiries from House 
members of the Ag Committee in terms of how much money are we 
currently spending in totality in the safety net and is there a 
better way of channeling those resources in a way that provides 
greater protection and fairer protection and broader protection 
for farmers that they would like. And I think that those are 
questions that we always need to be asking at this point in 
time when we enter into a Farm Bill discussion. Learn from 
previous experience, perfect on what we have done, and always 
question whether or not there is a better way. And that is 
obviously what we are interested in helping you do.
    Secretary Nelson. Well, I wonder if you would undertake 
some sort of analysis on what could be accomplished if there 
could be a program offered as a voluntary program to move away 
from direct payments into a risk management arrangement that is 
based on an insurance model. I appreciate that.
    Thank you, Madam Chairman.
    Chairman Lincoln. Yes, certainly.
    I know Senator Baucus has to get somewhere, and I want to 
thank Senator Casey for being just a heck of a nice guy.
    Senator Baucus.
    Senator Baucus. Thank you, Madam Chairman.
    First, I want to thank my colleague from Pennsylvania. I am 
on this Deficit Reduction Commission, and my deficit time today 
has been about an hour. I need to get back to it. Thank you 
very, very much. And thank you, Madam Chairman, for holding 
this important hearing.
    I would just like to state, just for a fact because it is 
true, that agriculture is still Montana's number one industry. 
It has been for as long as I can remember. It clearly is today. 
It is 3 billion of our state's economy, and that might be small 
by other state standards, but it means so much to our state, 
Mr. Secretary. I know you know that.
    I also thank you for coming to Montana. I commend you on 
lots of actions you have taken with respect to Montana, several 
conversations we have had, and I appreciate your candor and 
your forthrightness and your follow-up on assurances that you 
made. That means a lot to me personally. I just wanted to thank 
you very much for that.
    When we wrote the last Farm Bill, before we wrote it, I 
spent a lot of time traveling around Montana. I made a major 
effort. I went to the major cities in our state to ask farmers 
what do they think about the next Farm Bill, what should it 
contain. When I say cities, I do not mean like Great Falls, 
Missoula. I mean major communities. I had about ten of these 
around the state.
    There were various themes that became apparent. One is the 
need for much better, efficient ag disaster assistance. Our 
farmers very much were concerned about the time it took for 
Congress to pass agricultural disaster assistance. Sometime it 
took a long time. Sometimes some farmers were helped and other 
farmers were not when it should be the other way around. 
Sometimes it was tied. We had to wait until some other bigger 
disaster came long. It just did not work. And sometimes the 
payment had to be one year, not to another. We had to choose 
between years, et cetera.
    And so I authored the Ag Disaster Trust Fund in the Farm 
Bill, and I am very happy that it is there. And, of course, it 
is not perfect, but at least there is much more assurance that 
farmers when they incur a disaster are paid properly and the 
right farmers are paid. It is better than what we had 
previously. And I just want to thank you, Mr. Secretary, for 
helping to implement that.
    One of the programs funded obviously in the Trust Fund, as 
has been discussed a few times already this morning, is the 
SURE Program, the Supplemental Revenue Assistance Payments 
Program. So I have a couple of questions about the program.
    First is, does the administration view the SURE Program as 
an effective part of disaster assistance safety net? And 
second, since it is funded only through 2011, does the 
administration see enough value in it to support it being fully 
funded in the 2012 Farm Bill? And I might add, I would like to 
hear what suggestions you might have to deal with this 
administration glitch. As it is, it just takes a long time for 
farmers to get compensated. If you could just comment on SURE, 
its importance and the degree to which you want to recommend 
that we pursue it in the 2012 Farm Bill.
    Secretary Vilsack. Senator, first of all, recognizing your 
leadership in this, I think it is important to recognize that 
and to thank you for it. I will say that for the farmers that 
are predominantly covered by the SURE Program, it is a very 
important component of a safety net because there can be and 
there are on a frequent basis things that cannot be 
anticipated, disasters of significant proportion that impact 
and affect farmers. And there has to be some way short of ad 
hoc disaster programs on an ongoing basis, which you dealt with 
before SURE.
    Having said that, I think I have to recognize that in the 
Chairwoman's state, that is a program that does not necessarily 
work as well because of the nature of farming in Arkansas and 
in some of the other southern states. So I think as we look at 
the future, I think we have to recognize that whatever program 
you create to try to provide a permanent disaster assistance 
program, it has to be available to the diversity of farming in 
America.
    Then to Senator Nelson's point, which is that there are 
conversations and discussions about all the money that is spent 
in the safety net, are we comfortable that it is being spent in 
precisely the most effective and fair way, that is obviously a 
conversation you-all are going to have.
    So whether or not SURE survives in its current form or you 
have something that is a modification to it or you have 
something that builds on it, that, I think, is yet to be 
determined. But it is very clear, you have to have some vehicle 
because I think your farmers' concerns were appropriate. They 
have a disaster, and the disaster creates an immediate need. 
And you have to have a program that responds to the immediate 
need. And with all due respect, sometimes it takes awhile for 
Congress to basically do the necessary legislative steps to get 
the need fulfilled. And then it takes time for us to distribute 
the resources.
    I think we showed the capacity to get resources out the 
door quickly with the dairy program that you-all passed at the 
end of last year. We got that out in record time.
    There has been a delay on the SURE Program simply because 
of the complexity of the calculations that are required and the 
antiquated nature of our technology. I have said that a couple 
of times today. I just need to emphasize it.
    We are dealing with 1980, 1990 technology. In no other area 
of government, I think that has to do as much as we have to do 
in terms of regular folks, interconnection with regular folks, 
could deal with the kind of technology we are dealing with. So 
the fact that we have got a billion and a half dollars out the 
door already in these disaster programs, I think is a testimony 
to the hardworking folks at the local level, the Farm Service 
Agency. But we have got to do a better job on technology, and 
we have got to figure out ways to simplify these programs. And 
I do not have the answers today, but I think by identifying the 
problems early and having this conversation early, I think we 
will do a better job of finding those solutions.
    Senator Baucus. I appreciate that, and clearly, we want to 
work together. This Committee, I know I can speak for the 
Chairman. We want to work with you. It is right. SURE works 
better in some parts of the country than other parts, and that 
is why disaster assistance is set up in a multifaceted way, to 
make it work. But thank you very much, Mr. Secretary.
    Thank you, Madam Chairman. And thank you, Senator Casey.
    Chairman Lincoln. Senator Casey, thank you for your 
patience.
    Senator Casey. Thank you, Madam Chair.
    And I want to commend the work Senator Baucus is doing on a 
whole host of fronts, including the challenge of the deficit, 
so we are happy to yield a little time to that. We are 
grateful.
    Mr. Secretary, thank you for being here once again. You 
have been in this room a number of times, and I think every 
time you have been here, I have asked you about the dairy 
issue. But we are particularly grateful for your work and your 
commitment, not only as Secretary of Agriculture and all of the 
difficult challenges you face and we all face, but, in 
particular, the time you have spent being available and 
accessible to us, either here in Washington or back in our 
states and in this case, Pennsylvania. I know you are a native. 
We want to get you back there as often as we can, but we are 
grateful for the time you spend there.
    You know better than I, I think. You understand this issue, 
the challenge that dairy farm families face with regard to the 
cost of production being so difficult. You also, I think, 
understand and you have given meaning to this difficult issue 
we face when we encounter families that are suffering through 
this, so many families that have led and continue to lead lives 
of struggle and real stress because of the economy and because 
of the impact on dairy farmers and their families.
    I remember early in my time in the Senate way back in 2007, 
on a very, very cold day going to Wayne County, Pennsylvania, 
you know, where that is in the northeastern corner of our 
state, and meeting Joe Davitt and talking to him about whether 
or not he would be able to continue that tradition in his 
family going back several generations. And he told me at the 
time he did not think he could and was despondent about that, 
and I think in many ways his life and his struggle encapsulates 
the struggle that so many families face.
    But in the face of that, we have taken action. In your 
testimony, I was looking on page 5. I know you were not able to 
get through all of this today, but the Milk Income Loss 
Contract Program, the so-called MILC Program, $930 million. You 
mentioned the impact, although it is limited of the feed cost 
adjuster that we worked on. But under your leadership, 290 
million in additional direct payments to dairy producers, 60 
million for the purchase of cheese and other products, 
expediting the purchase of cheese and cheese products, helping 
both farmers and food banks, and increasing the purchase price 
for cheddar blocks, barrels and nonfat dry milk in the Dairy 
Products Price Support Program. So a lot of actions you have 
taken, whether they are in furtherance or in the development of 
programs as it relates to appropriations, emergency actions you 
have taken, all of that is meaningful and has had an impact.
    I guess I ask you what more can we do to help you, to give 
you more options or resources or tools to combat this terribly 
difficult challenge by way of new programs, by way of 
adjustments or changes to existing programs, by way of 
appropriations, number three. And I guess number four, looking 
down the road a bit as you have done today so appropriately, 
are there strategies that we can employ in the 2012 Farm Bill 
that will attack this problem with even more impact? I know 
that is a lot, but as best you can.
    Secretary Vilsack. Well, first of all, Senator, no one in 
Congress has been more focused on this issue than you have, and 
that is one of the reasons why we have taken the action we have 
taken is because of your request for us to----
    Senator Casey. Thank you.
    Secretary Vilsack. --continue to move. And it is a crisis, 
and it is a crisis because 10 years ago, we had 110,000 more 
people in the dairy business than we had--and today we have 
65,000. So we have lost half of our dairy operators in this 
country. I certainly am sensitive to the pain that you have 
discussed in terms of your constituent. I heard a number of 
similar conversations and stories on my rural tour, as well as 
just last week in Wisconsin when we had a hearing, part of the 
consolidation and competition hearings that the Department of 
Justice and the USDA are cosponsoring around the country. We 
went to Madison, Wisconsin, and we focused on dairy.
    I think that there were many concerns expressed about the 
way in which markets are setting prices and basically have 
control over what is being--how things are priced and whether 
or not there is a need for an examination of that structure and 
system.
    Here is the problem. I mean, we took all of these steps 
last year in an effort to try to get folks through a tough 
time. And initially, the industry reacted as it needed to, 
which was a very systematic and thoughtful reduction of herd so 
that the amount of oversupply was reduced. And as it was being 
reduced, prices began to rebound and we began to see strength 
again in the industry.
    Just about the time we got to see that strength in a 
significant way, folks decided that it was okay to increase 
their herds, and we got right back into the situation in the 
first part of this year that we were in, in 2009. So that led 
me to believe that we cannot just simply look at individual 
assistance programs as we have in the past. So we really do 
need to look at a holistic and comprehensive response, and that 
is why we put the Dairy Council together. We have 
representatives from all across the country. Our co-chair is 
from Pennsylvania. And we have just basically challenged them; 
can you come up with a consensus position within the dairy 
industry as to what needs to be done in terms of supply, in 
terms of pricing, in terms of marketing so that we have greater 
stability and a broader price band that we have today and 
greater distance between the very high and lows that men and 
women in the dairy industry experience? And how do we make sure 
that the folks who are producing the milk and the cheese and 
the cream and the butter get their fair share of the value, the 
retail value of those products? I mean, the reality is that 
they get a very, very small percentage of the retail value 
corresponding to the amount of work and effort and capital it 
takes.
    So those issues are being discussed and reviewed, and I 
would say, in terms of responding to your question of what more 
can you do, give us some time to formulate a more comprehensive 
approach and then basically take a look at it and see whether 
or not it is something that you could be supportive of and 
champion, because at the end of the day, it has got to be a 
more comprehensive approach than this sort of ad hoc, band-aid 
approach that we have had.
    There are just too many people losing, too many people 
leaving, and I too have heard very sad stories. The first week 
I was in office, I talked to the widow of a dairyman who took 
his own life because of being distraught and distressed over 
credit circumstances. And so it is a painful memory that will 
not leave me as long as I am in this job.
    Senator Casey. Well, thanks so much for your enduring 
commitment on this. We look forward to continue to work with 
you. Thank you so much.
    Chairman Lincoln. Thank you, Senator Casey.
    We do have a vote coming up at noon, and so I want to--
since it is the same question I was going to ask, I am going to 
yield to Senator Chambliss and then we will yield to Senator 
Roberts for the remaining questions.
    Senator Chambliss. Thanks, Madam Chairman.
    Mr. Secretary, as USDA has partnered with the Internal 
Revenue Service to monitor compliance with the income level 
restriction for farm program participation, I am curious to 
know if the list of those flagged by the IRS and then supplied 
to the USDA will be subject to release under the Freedom of 
Information Act. While I realize that tax information is not 
subject to release, I also understand the list transmitted to 
USDA from the IRS will actually have no tax data contained in 
it.
    Secretary Vilsack. Senator, that is a question I am not 
prepared to answer today. I will get you an answer as quickly 
as I can. I know that we made concerted efforts in the MOU and 
in the discussions with the IRS to make sure there was a 
firewall, appropriate firewall, in terms of the information we 
were receiving, that it would not be disclosed either 
intentionally or unintentionally. I do not know whether it is 
subject to the Freedom of Information Act, and I will be more 
than happy to get that answer to you. I just do not know.
    Senator Chambliss. All right. If you will please, I would 
appreciate it. Thanks very much.
    Secretary Vilsack. Thank you.
    Chairman Lincoln. Senator Roberts.
    Senator Roberts. Thank you, Madam Chairman.
    And again, Mr. Secretary, thank you for coming up, and I do 
look forward to having a good conversation with you at your 
convenience. I know you are very busy.
    In regards to crop insurance, the thing that concerns me is 
that when back in the dark ages when I used to be somebody and 
I was chairman of the House Ag Committee, there were 30 
insurance companies in the business, crop insurance business, 
and they would concentrate in certain areas of the country with 
certain commodities. Now there is 12.
    I am very worried that if we cut $12 billion--well, not if, 
we have. But if we continue down this road, you are going to 
have a hodgepodge of coverage that is not a national program. 
That is not what Bob Kerrey and I worked on and Dick Lugar 
worked on very hard with the Crop Insurance Program. But if we 
do not preserve that, I just worry, both from the lending 
standpoint and the producers' standpoint, we are going to be in 
a lot of trouble. So I am just going to leave it there, and 
then I look forward to having a good discussion with you.
    We are about 60 percent finished with harvest this year. I 
am going to be very bullish and say we are going to approach 
400 million bushels. I hope that is the case. Some of have had 
a very good year; others, a poor year. The weather has been--
Mother Nature, I do not know what we did to Mother Nature, but 
she has not been very kind to us.
    But at any rate, no matter who you talk to, all of our 
farmers are concerned, and they do not understand the widening 
basis. Now, by that I mean the difference between the future 
price at the Board of Trade and those and the price at the 
country elevator. That is a buck fifty difference, over a buck 
fifty. And you know the stories that will come out in regards 
to who is at fault and whatever. I think I have a gnat here 
from the Board of Trade that is giving me some problems.
    Global wheat production is up. This is what I get back. 
Storage capacity is full. Transportation costs are high. And 
they say we just have to have more demand, and obviously, that 
gets back to a trade agenda. That gets back to several 
countries that we have been working with for a considerable 
amount of time but unfortunately have not been able to 
consummate any kind of a trade agreement. So I guess in order 
to explain to farmers this widening basis--and if you have some 
kind of a formula or some kind of a short explanation, I would 
sure like to hear it and I know they would.
    What are we going to do to address this concern on the over 
basis?
    Secretary Vilsack. If I understand your question properly--
let me say this. We are working very hard to try to create a 
good deal of momentum behind a trade agenda that basically 
allows us to do a better job of reducing oversupplies of 
commodities that we have the extraordinary capacity to produce, 
and to do it in a way that provides greater income 
opportunities for those producers. And it involves taking a 
look at trade not as every country being looked at in the same 
way, but actually individualizing our approach to each 
individual country depending upon where they are in terms of 
their market maturity and in terms of their market 
sophistication.
    So you have got countries right now where we are trying to 
build a relationship that someday will lead to a trading 
opportunity. They are fragile markets. You have got markets 
that are very closed and which we are trying to open them up. I 
use India as an example there. We have had a significant 
difficulty on a number of areas with India trying to get them 
to be more cooperative in opening up our markets. Then there 
are maturing markets like China where we are confronted with a 
series of issues concerning quality, phytosanitary, sanitary 
barriers that we are trying to knock down. It is the reason why 
we have spent a lot of time promoting more technical assistance 
teams traveling around the world trying to knock those barriers 
down. And then you have got mature markets, very mature markets 
like Japan, where we are making a concerted effort to brand 
American products more successfully.
    The area of--the wheat issue is a difficult one, and it is 
one that worries me because of the price differential. We are 
looking at ways in which we can provide assistance and help 
through our lending programs, but I wish I had a better answer 
for you, Senator. I am afraid I do not, other than we are 
working hard to expand opportunities.
    Senator Roberts. Well, I know you get the same question as 
I do, and I have difficulty trying to explain it. Here is a 
farmer who is getting, what, 2.80 at the country elevator going 
over the scales and then he looks at the future price at the 
Board of Trade, and it is 3.50 or 3.80 or 3.90. And he asked 
me, ``Senator Roberts, how do you explain this?'' or ``Pat, how 
do you explain this?'' And I have a little trouble doing that.
    Secretary Vilsack. Well----
    Senator Roberts. Bob Stallman has the answer, so I am 
sorry. I mean, he will come up with the answer with his 
testimony, I am sure.
    Secretary Vilsack. We face that in virtually every 
commodity in terms of the producer putting a lot of the labor 
and a great deal of capital and then getting a relatively small 
percentage of the retail value or the market value of----
    Senator Roberts. Exactly.
    Secretary Vilsack. --the product. And I think that is one 
of the reasons why we are having these consolidation and 
competition hearings, is to determine whether or not there is 
anything within the current structure of how these commodities 
are being marketed. Is there insufficient transparency, for 
example? Is there the capacity for folks to differentiate from 
producers that is not fair? Are there special deals and 
sweetheart deals that distort the market? Is there just a 
general markup that takes place when you have got as many steps 
in the process as you have?
    It is one of the reasons why, candidly, we are trying to 
figure out a way to better connect local producers with local 
consumers by bringing some of the processing facilities at a 
smaller way down into the more local area to see if there is a 
way in which we can do a better job of converting those crops 
so that you have competition for that wheat, so that you have 
got competition for the corn or the hogs or whatever.
    When I have got it figured out, I will let you know, 
Senator. When you have it figured out, I would appreciate it if 
you let me know.
    Senator Roberts. All right. We will get together on it. We 
will have some meaningful dialogue.
    Thank you, Madam Chairman.
    Chairman Lincoln. Thank you, Senator Roberts.
    Mr. Secretary, I want to applaud the Administration's 
effort in moving Korea, the Korean Free Trade Agreement, and 
hope and encourage that we can also see Columbia and Panama 
follow suit, and would certainly say that the self-imposed ban 
that we have on our products and exports into Cuba is another 
issue. The President's comments have been that we can create 
jobs by increasing exports, and I hope that we will work with 
the Administration to see those happen in all of these 
different areas where there is meaningful opportunities for our 
products to be able to go into those countries, and I look 
forward to working with you.
    Thank you for your patience and your willingness to be 
here. We certainly appreciate working with you, and we look 
forward to not only work on a 2012 Farm Bill but a 2008 
implementation and so many other issues that are important to 
rural America and certainly our hardworking farm families and 
ranchers across the country.
    Secretary Vilsack. Madam Chair, thank you. And just to 
point out and to remind folks who might be watching this or 
listening to it, there is always conversation in this country 
about trade deficits. It is often not appreciated or recognized 
that in agriculture, we have a surplus. We anticipate it could 
be $28 billion, and for every billion dollars of ag trade, it 
is somewhere between 8 and 9,000 jobs. It is one of the reasons 
why ag is responsible nationwide for one out of every 12 jobs. 
Thank you.
    Chairman Lincoln. We appreciate it. We look forward to 
continuing that. Thank you so much.
    I would like to ask the witnesses of the second panel to 
come forward and be seated. We are going to run up against a 
vote, so we want to make sure we move forward. So I am going to 
go ahead and introduce them as they are taking their seats.
    Bob Stallman, a rice and cattle producer from Columbus, 
Texas, is president of the American Farm Bureau Federation, the 
11th president in the organization's history. Mr. Stallman was 
first elected president on January the 13th, 2000. He is the 
first American Farm Bureau Federation president from the Lone 
Star state, and we welcome him here.
    Roger Johnson is the 14th president of the National Farmers 
Union. He was elected to serve in this role at the 
organization's 107th anniversary convention in 2009. Prior to 
leading the family farm organization, Johnson is a third-
generation family farmer from Turtle Lake, North Dakota; served 
as North Dakota agricultural commissioner, a position he was 
first elected to in 1996.
    Mr. Johnson and Mr. Stallman, your written testimony will 
be submitted for the record, so we appreciate all of that and 
would certainly ask you to try to keep your remarks to five 
minutes.
    Mr. Johnson.

 STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION

    Mr. Johnson. Thank you, Madam Chair and members of the 
Committee for the opportunity to testify. You have heard my 
introduction. It is again in writing. Let me get directly to 
the point, if I can, because I know your time is short and we 
are running late.
    I just have a number of observations that I think are 
important as we begin to look at the next farm bill 
development. We want to sort of take a high-level look and see 
what is working and what is not, and what some of the needs 
might be for future farm programs.
    Certainly, the 2008 Farm Bill, we think was an improvement 
over many of the predecessor bills, but there still is room for 
improvement that remains. As many have said during this here, 
the United States is the--our agriculture has the producers of 
the safest, most abundant and most affordable food supply in 
the world. That certainly is something that we want to make 
sure that we maintain as we begin looking at the next farm 
bill.
    It is often asked why a domestic farm policy, and I think 
it is important that we have a little bit of discussion about 
why that is important. The history of U.S. agriculture shows 
that the challenges that we have always faced are persistently 
low incomes in agriculture, persistent high volatility, and 
that has become an even larger issue in the last couple of 
decades as we have made some changes to farm policy, 
particularly higher price volatility and excess capacity. When 
I first started farming many years ago, I was told we are at 
this high price point and we are going to be here, it is clear 
sailing, so get in the business and get ready for the ride, and 
we all know what has happened.
    To buttress this argument, I have showed a number of charts 
because, quite often, it is argued that really the answer to 
this is we can trade our way out of it. And while trade is 
extraordinarily important, we need to recognize that it by 
itself is not going to solve this problem. In the bottom line 
chart I show on page 5, which really shows that if you look at 
the major commodities, wheat, corn and soybeans over the last 
30 years, on real terms, on a volume basis, our trading volume 
has been basically flat as a country. And so that is not going 
to be by itself--while it is an important part of what we want 
to do, it is not going to solve those three critical problems 
that I pointed out at the beginning.
    On page 6, I show a chart that shows the distribution of 
where we spend money on these safety net programs. More than 
half of it goes to crop insurance. We would argue appropriately 
so. The next largest chunk goes to direct payments, and then a 
number of smaller slices to try and deal with what we would 
argue are the more important pieces of the safety net, those 
parts of the program that kick in when times are tough and go 
away when times are good. It is difficult for us to argue 
persuasively to the general public that we need to subsidize 
agriculture more when we are in very high income time periods. 
It is much less difficult to make the argument when times are 
difficult. And so we think that we ought to be putting more of 
our efforts into those kinds of things that are counter-
cyclical in nature that help through tough times, not good 
times.
    I have comments about the ACRE Program. Several of the 
observations that have been made already dealing with the 
statewide trigger, we think it needs to be a county, even 
better if you could make it a local producer trigger. That 
would be very helpful for that program. In many ways, the ACRE 
Program and the SURE Program were both new programs, came at 
the same problem from different directions in the last Farm 
Bill.
    We think the SURE Program is extraordinarily important, and 
if you make some of the adjustments that have been talked about 
in ACRE, it will more closely mirror what the SURE Program was 
trying to do, the big difference being that the SURE Program is 
appropriately coupled to crop insurance. So having crop 
insurance expanded into more commodities, into more 
geographical areas, we think is a very good thing. Having the 
SURE Program tied to that is a very good thing. Having programs 
that work in a counter-cyclical fashion are also a very good 
thing.
    Finally, let me just make a last point that I make in the 
last couple pages of my testimony. And it is that some years 
ago, we threw away a number of public policy tools that we 
would argue you need to be reconsidering. You heard a lot of 
dialogue about the dairy problem that we have. And one of the 
things that the dairy industry is coming together around is 
some sort of supply management program.
    We think you ought to seriously look at whether we ought to 
have some sort of supply management that is incorporated into 
other parts of the Farm Bill and included with that, of course, 
is some sort of a strategic reserve. The final point is in this 
country, we think energy is important enough to have a 
strategic oil reserve, but we do not have a strategic food 
reserve and perhaps we ought to. Thank you.
    [The prepared statement of Mr. Johnson can be found on page 
82 in the appendix.]
    Chairman Lincoln. Mr. Stallman, we will ask questions after 
you both complete your testimony, so thank you.

  STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU 
                           FEDERATION

    Mr. Stallman. Madam Chairman, Ranking Member Chambliss, 
thank you for allowing us the opportunity to present before 
this Committee today, and thank you for holding the hearing.
    I would like to start by saying that our farmers can 
generally point to at least one safety net program included in 
the 2008 Farm Bill that they utilize on their farm, although it 
does depend on what kind of farmer you talk to and in what part 
of the country they farm as to what portions of the Farm Bill 
producers find most useful. Most farmers, though, in most 
states rely in some way on the safety net provided in the 2008 
Farm Bill.
    That said, we know we will face many challenges in writing 
the 2012 Farm Bill, including the budget environment and the 
need to balance the interests of a multitude of players. At 
Farm Bureau, we have just started the process of evaluating the 
programs in the 2008 Farm Bill, grappling with budget 
constraints and considering future policy recommendations.
    We are not here today to present to this Committee a 
proposal for the 2012 Farm Bill, but we have outlined five 
general principles that we will follow when we develop and 
evaluate our future proposals.
    One, the options we support will be fiscally responsible. 
Two, the basic funding structure of the 2008 Farm Bill will not 
be altered. In other words, money will not be shifted from one 
title of the Farm Bill to another. Three, the proposals we 
support will aim to benefit all of the agricultural sectors. 
Four, World Trade rulings will be considered. And five, 
consideration will be given to the stable business environment 
that is critical to success in agriculture.
    While our farmers are generally content with the safety net 
provided in the 2008 Farm Bill, it can sometimes feel like you 
are reading the old children's story ``Goldilocks and the Three 
Bears.'' When you talk to individual farmers, some farmers 
think the safety net coverage provided under the 2008 Farm Bill 
is just right. But in other cases and for other farmers, the 
coverage is sometimes too little. In a small number of cases, 
the coverage may even be duplicative and too much.
    Without fail, farmers that farm different crops in 
different parts of the country rely most heavily on different 
pieces of the safety net. And the complexity of the 
interactions between the commodity program safety nets and crop 
insurance, it can probably best be illustrated by looking at 
two state examples. A farmer in Illinois might have a multitude 
of layers of protection for both price and yield risk exposure 
first through the ACRE Program, then through buy-up crop 
insurance, and then through the SURE Program.
    In fact, Illinois has some of the highest levels of ACRE 
participation; 26,000 out of the 134,000 farmers in the U.S. 
reside in Illinois that have signed up for the ACRE Program. 
That is about 17 percent. Buy-up crop insurance coverage is the 
norm. About 95 percent of Illinois farmers have buy-up crop 
insurance. And farmers in disaster and contiguous counties are 
expected to benefit from the SURE Program.
    But these same programs might not provide a farmer in 
Mississippi with the same depth of safety net coverage. For 
example, ACRE has not proven to be a useful program in 
Mississippi for a variety of reasons. Only 165 out of the 
22,435 farmers in Mississippi that could qualify have signed up 
for the program. Many farmers in the region, particularly 
cotton farmers, experienced very low prices in 2007 and 2008, 
which were the base years for setting the support level for 
ACRE.
    In Mississippi, the direct payment and marketing loan 
portions of the traditional safety net are critical, and the 
cuts required to participate in this portion of the safety net 
were too steep to attract farmers to ACRE, particularly when 
their bankers are more comfortable with the greater certainty 
of direct and marketing loan payments.
    The use of buy-up crop insurance is also not as prevalent 
in Mississippi as it is in the state of Illinois. Only 41 
percent of the farmers have buy-up coverage in Mississippi. 
Again, there are a lot of reasons a farmer in Mississippi might 
not purchase buy-up levels of crop insurance. In many cases, 
the availability of programs is not as robust and sometimes 
coverage is prohibitively expensive. In other cases, the 
products offered simply do not align with the types of risks 
faced by Mississippi farmers.
    Without the purchase of buy-up crop insurance, the value of 
SURE as a disaster program is also minimized. Again, almost all 
of our farmers can find at least one component of the commodity 
title that works for their farm, but it depends on who you ask 
as to which programs work best and are utilized the most.
    Given the great deal of discussion that has already 
occurred regarding whole farm revenue programs, we would be 
remiss if it we did not at least briefly discuss our thoughts 
on this topic. Both the adjusted gross income crop insurance 
product and SURE provide us with case studies of whole farm 
revenue programs. And from those cases, we have determined 
potential problem areas to consider as future farm policy is 
designed.
    One, the complexity of such programs makes them unpopular; 
two, such programs can be difficult for USDA to implement which 
in turns delays payments to farmers; three, including livestock 
in such programs adds an additional layer of complexity that 
can be cumbersome to overcome; and last, the paperwork and 
confidential information that can be required to sign up for a 
revenue program is daunting to farmers and often discourages 
participation. Having said that, we at American Farm Bureau are 
doing research and analysis on different provisions related to 
whole farm revenue insurance.
    In conclusion, we appreciate the hard work of this 
Committee to provide America's farmers with a practical safety 
net that allows us to continue to produce the safest, most 
abundant, least expensive food supply in the world. Thank you 
for the opportunity to be with you this morning. I look forward 
to questions.
    [The prepared statement of Mr. Stallman can be found on 
page 97 in the appendix.]
    Chairman Lincoln. Well, thanks to both of you, gentleman, 
for being here and for your continued availability for us to 
work with you in the Committee as we move forward on the 2012 
Farm Bill in months to come.
    Just listening to Mr. Stallman's testimony, Mr. Johnson, in 
your written testimony, you characterized direct payments as 
the least effective way to smooth farm income. So I guess what 
would be your response to farmers described as, say, 
Mississippi in the testimony here who have described direct 
payments as the only program they can rely on and the only one 
classified as green box under WTO rules?
    Mr. Johnson. Well, thank you, Madam Chair. Obviously, a lot 
of the issues that Mr. Stallman mentioned are the same issues 
that our members debate at conventions as they determine what 
policy we ought to be supporting, and we do, in fact, have some 
states who have policies supporting direct payments. But across 
the country in our organization, we have fairly strong policy 
with respect to direct payments principally because it is so 
difficult to publicly justify when you have farmers in very 
high income years receiving the same payment that they receive 
in very low income years.
    While that may be WTO legal, one of the reasons that we are 
suggesting that you think about throwing back into the toolbox 
some of the tools that we have used dealing with supply 
management and reserves is because you may also be able to 
bring in some WTO legal vehicles by doing that. Another feature 
that we have seen is we sort of made this major shift in farm 
policy beginning in the mid to late '80s and going through the 
'90s is that you saw pretty much all of the tools looking at a 
reaction instead of trying to prevent the event from occurring, 
and so that is another reason to include those.
    Our members believe very strongly that you ought to design 
farm policy such that it helps folks when times are tough. That 
ought to be sort of the overriding goal here. And that is why 
we strongly support things like crop insurance, like the SURE 
Program, counter-cyclical payments, some of the supply and 
reserve programs that I talked on. We would acknowledge that 
direct payments are WTO legal. Lots of things are, but that 
does not necessarily make them the best policy.
    The final point I would make, Madam Chair, is that we also 
think, as many have said here today and before, that this 
Congress is going to struggle mightily with figuring out where 
are you going to get the resources to put the right tools in 
the toolbox for this next Farm Bill. You are likely going to be 
having fewer dollars. You are likely going to have even more 
demands on those dollars. And so it requires us to figure out 
what works best and where should we prioritize those dollars.
    Chairman Lincoln. Well, I thank you very much, and you are 
right. Those are going to be tough questions. Certainly, 
looking at what is the most important safety net programs, for 
example, is crop insurance more valuable than direct payments? 
I mean, that is your question there, but also note that the 
participation in ACRE and certainly, from my area, SURE, have 
been fairly low.
    How do we improve that? How do we improve on their ability 
to help producers in different areas of the country? Is ACRE 
more valuable than counter-cyclical in terms of the counter-
cyclical payment?
    Mr. Johnson. Sure.
    Chairman Lincoln. And I guess the real question then that 
we must ask, and I would ask both of you-all, is that 
traditionally, Congress has tried very hard to keep the 
structure of different components of the farm safety net the 
same across various regions of the country.
    In your opinion, is it time for Congress to take a second 
look at that approach?
    Mr. Stallman.
    Mr. Stallman. Well, I know Chairman Peterson has talked 
about that to some extent. Our position is that we have to be 
very careful in terms of our overall farm policy structure not 
to be favoring certain regions or favoring certain commodities 
over another. As a general for our organization, we have to 
take into account the interests of all producers. And it may 
very well be that the complexity of American agriculture is 
such that the only way you can ultimately design safety net 
programs that work sort of across the board is to take a more 
targeted approach by commodities, for instance. And so that 
would be one option that would certainly be worth looking at as 
we move forward in the discussion of this Farm Bill.
    Chairman Lincoln. Thank you.
    Mr. Johnson.
    Mr. Johnson. Yes, if I can add to that, I think to more 
specifically answer your question, Madam Chair, I think the 
challenge that we really have is to figure out how to make crop 
insurance work better because it is--I think there is a lot of 
support behind the principle that government ought to help when 
times are tough, but individuals have an obligation to do what 
they can to help themselves first. That is the important 
principle behind crop insurance.
    Now, it means we have to design it in such a fashion that 
it is going to--there will be an incentive for farmers in your 
state to, in fact, carry crop insurance. We have to make sure 
it works for them. And if works for them, a lot of these other 
programs, SURE being a perfect example, that are very closely 
tied to it will work much better.
    At the same time, you will avert all sort of the problems 
that we always experience with ad hoc disasters, the political 
problem of trying to get it passed. You have to be 
extraordinarily capable to get that done, and you are making it 
happen this year, but it is not an easy lift. We all know that, 
and we also know that it tends to not always be as targeted in 
where it helps, that you tend to have to write the language so 
that maybe you help people that really we think should not have 
been helped and maybe it does not help as much some of those 
that should have been. And it depends on a crisis happening 
someplace and enough political--and the crisis happening in 
enough places that you can get enough political gumption 
together to get something passed.
    Chairman Lincoln. Well, I certainly appreciate that, but 
just watching and listening to my producers in Arkansas and 
knowing that both '08 and '09 disasters have still not been 
dealt with through the programs that are traditional now for 
that kind of assistance--and certainly knowing the fact that we 
are maybe perhaps more prone to disasters, but certainly, we 
are definitely designed to better utilize capital-intensive 
crops in terms of what we grow best. And it is a challenge, and 
so it is important for us to look and make sure that whatever 
we are designing, that is going to be fair and helpful across 
the country to the diversity of producers that we have in a way 
that is going to make sure that everyone has the kind of 
assistance that they need. So we look forward to working with 
you-all.
    Senator Chambliss.
    Senator Chambliss. Thanks, Madam Chairman.
    I think you-all have pretty well outlined the difficulty 
that we face every five years or six years when we write a farm 
bill. In theory, Mr. Johnson, what you say is right on target, 
that Washington ought not to be sending out checks to America's 
farmers unless times are tough. And in the good years, we have 
seen smaller checks going, but with the Direct Payment Program, 
we still do send them out irrespective of whether it is a good 
year or a bad year.
    Obviously, every time we write a Farm Bill, we run head 
first into that WTO issue. And it seems like that exactly the 
opposite ought to be true, and the counter-cyclical ought to be 
more WTO compliant. That is the argument we always make, but 
the Brazil cotton case has taught us a lesson there. And it 
just happened to be cotton that time, and who knows what it is 
going to be next time.
    But we have got to figure this out between now and 2012. 
And as we think in terms of that, this cookie-cutter approach 
that we have had to adopt, whether it is crop insurance or 
whether it is commodity title, is going to have to be looked at 
and, Lord knows, I think we could all agree that the input 
costs for a bushel of corn in Georgia is significantly higher 
than for a input cost of a bushel of corn in Iowa. But how you 
adjust to that, I do not know. We never have been able to 
figure that out.
    But you guys, we know how smart you are, and you have smart 
people working for you. And we look forward to you-all figuring 
out these answers and giving them to us. But you are also right 
on the fact that we are going to have less money to work with, 
and, philosophically, we always run into issues that are more 
and more difficult to overcome each farm bill, particularly 
with fewer and fewer members of particularly the House coming 
from truly rural districts. It makes it more and more 
difficult.
    Though we talk about crop insurance--and I would say that 
when I first came to Congress, we had a crop insurance program 
that was primarily designed for Midwest farmers. I mean, that 
was generally accepted that nobody in my part of the world and 
I doubt in Arkansas bought crop insurance in any big numbers 
because it just did not work. You could not get a return on 
your investment. But we have gradually changed that, and I 
think we have incentivized farmers now all over the country to 
purchase crop insurance.
    But the demand you talk about, Roger, with respect to the 
money that is going to be there, is there right now with 
respect to crop insurance. We have got a pecan program that is 
working well. It is a good program, but it takes up part of the 
money. We have got demands from specialty crop growers of 
vegetables, for example. Again, I do not know how we deal with 
that, but it needs to be on the table and up for discussion as 
we move forward into this next Farm Bill.
    But before I leave crop insurance, both of you know we have 
had this recent SRA renegotiation. Give me your thoughts here.
    Bob, let's start with you. What do you think about this new 
SRA agreement?
    Mr. Stallman. Well, in terms of budget, obviously, and it 
was already discussed with Secretary Vilsack, is the reduction 
in the budget baseline and taking the dollars and taking them 
away, basically, if you will, from the Farm Bill. That is of 
great concern to us.
    We have some of the concerns that if you do have the 
reductions that are being talked about in the current SRA 
proposal that is out there, that there may be a tendency to 
have some cherry-picking in certain regions of the country. You 
may have a tendency for more marketing efforts in those parts 
of the country, which are more profitable and those parts of 
the country where crop insurance is perhaps a little more 
difficult sell, if you will, that the service there may not be 
as good.
    Long term, we do have a lot of variability in terms of 
returns and what the premiums are based on what crop prices are 
and those kind of things. I am not sure that the SRA as it 
exists now adequately takes into account that volatility or 
that variability over the course of a long period of time, but 
that remains to be seen. Our goal is to, once again, have a 
delivery mechanism and the products available that will allow 
crop insurance to be a successful program for our producers.
    Senator Chambliss. Mr. Johnson.
    Mr. Johnson. Well, thank you, Senator. I doubt that there 
is much difference between the way the two of us would view 
this. We signed on to a letter early on after the first SRA 
draft was proposed, expressing a number of concerns, the ones 
that have already been talked about, access, cost, those sorts 
of things.
    The worry that you may actually see insurance companies 
pulling out of certain areas, I will say in defense of USDA 
that as they moved forward, it got better. Was it as far as we 
would have liked? Probably not. But we all face these 
challenges. The challenge they faced with that is not unlike 
the challenge you face with how do you put the right mix 
together for a Farm Bill.
    I know that one of the huge issues that we face from a 
public perception standpoint was that we had--because of the 
anomaly, the extraordinarily high price run-up in '08 in 
particular, that you had insurance agent commissions that were 
extraordinarily high. And people in your and my home 
communities knew that and did not feel good about that. And so 
then there is a tendency to say, well, we want to make sure 
that does not happen, and so you tend to sometimes overreact.
    Well, public perceptions are that this is the business that 
you-all are in. We all have to react to them, and we have to do 
it in a fashion that, hopefully, is as rational as possible and 
does not get too deep into the heat of the moment.
    At the end of the day, crop insurance has got to be an 
important part of the next Farm Bill. It just has to be. It is 
the principal part of the safety net that we have right now. 
And you-all have struggled, I think, mightily and bend over 
backwards over the years to make it more and more expansive to 
pick up different crops, different regions; in some ways, even 
livestock have been pulled into this. And I think it is a 
process that we will just have to keep working on, but it is 
getting better.
    Senator Chambliss. Well, I thank both of you for your 
leadership of your respective organizations. You are always in 
constant communication with us, and you truly do represent the 
folks who are the most affected by Farm Bills. And without the 
correct kind of input coming from the ground level, we simply 
cannot write a very positive Farm Bill. So we thank you for 
your continued dialogue with us. Thanks for being here today, 
and we look forward to staying in touch.
    Chairman Lincoln. Thank you, gentlemen. We do see you-all 
are going to be a tremendous resource for us as we move 
forward, and we are grateful that you are here today and 
grateful that you will be there as we go through these steps. 
So thank you very much for being here today, and we look 
forward to continuing to work with you.
    I would like to ask the witnesses of the third panel to 
come forward as the gentlemen are leaving. I will go ahead and 
get started with that. We will probably have an interruption, 
but I think Senator Chambliss and I will be able to manage with 
the vote so that we can continue the hearing and get through.
    The third panel and final panel is composed of a diverse 
group of producers. They are Dow Brantley from England, 
Arkansas; Thomas ``Johnny'' Cochran from Sylvester, Georgia; 
Chris Pawelski from Goshen, New York; and Mark Watne from 
Jamestown, North Dakota.
    I just remind all of you-all that your written testimony 
will be submitted for the record. I will also take this 
opportunity to say that members may have questions that they 
would like to submit. I know Senator Harkin had a few 
questions. It may have been of the Secretary, but certainly of 
either of these second and third panels, they may have 
questions. And if they do, we will be sure to get these 
questions to you so you can answer them.
    Beginning with Dow Brantley, Dow is third-generation farmer 
and a partner of Brantley Farming Company in England, Arkansas. 
Dow joined the family operation in 2000 and produces cotton, 
corn, rice and soybeans on approximately 8500 acres. He is 
active in the National Cotton Council, USA Rice Federation, 
Arkansas Ag Council and the Arkansas Farm Bureau.
    Dow, thank you for being here and a very special thanks. 
Your father has been a tremendous mentor to me. I am grateful 
to all of your family for what you-all do for us in Arkansas. 
So if you will give your testimony, then we will continue down.

      STATEMENT OF DOW BRANTLEY, FARMER, ENGLAND, ARKANSAS

    Mr. Brantley. Thank you, Chairman Lincoln, Ranking Member 
Chambliss. Thank you for holding this hearing today. I am 
honored to have the opportunity to offer testimony before you 
concerning my views on the current farm policy and the 
development of the 2012 Farm Bill.
    The 2008 Farm Bill provides a sound and safe, stable farm 
policy foundation that is essential for our farming operation 
by continuing the traditional mix of safety net features 
consisting of the Nonrecourse Marketing Loan and Loan 
Deficiency Payment Program and the Direct and Counter-Cyclical 
Payment Program.
    While the Counter-Cyclical and Marketing Loan programs have 
been helpful in the past, they have recently been overwhelmed 
by the cost of production. If crop prices drop sharply, most 
producers, including me, will be in dire financial straits by 
the time these program make payments. While there has been much 
debate about the effectiveness of direct payments, I believe 
they are an integral part of our farm program delivery system 
and should be maintained.
    The 2008 Farm Bill made very substantial changes to the 
payment eligibility provisions of the safety net, establishing 
an additional adjusted gross income means test and a very 
significant tightening of actively engaged in farming 
requirement eligibility.
    In my opinion, the USDA overstepped the intent of Congress 
in payment eligibility provisions and issued regulations that 
are overly complicated and restrictive. The FSA's overly 
restrictive financing rules, legally incorrect, active personal 
management rules and multiple sets of actively engaged in 
farming rules, which are inconsistent when applied to different 
commodity and conservation programs within the same program 
year, are a few examples of problems that we are facing. Sound 
farm policy provisions are of little value if commercial-size 
farming operations are ineligible for benefits.
    The 2008 Farm Bill included the addition of ACRE Program as 
an alternative to counter-cyclical payments for producers who 
agreed to a reduction in direct payments and marketing loan 
benefits. The bill also included SURE Program as a standing 
disaster assistance supplement for federal crop insurance. The 
support mechanisms within ACRE do not provide adequate safety 
net for the cotton or rice producers when compared to 
traditional DCP Program.
    If a revenue-based approach is to find support among us 
producers, a more reasonable revenue target would have to be 
established. In my home county, we have 1,650 producers, and no 
one has elected to participate in ACRE. In fact, only two 
producers in the entire state have chosen ACRE.
    The SURE Program has provided little, if any, assistance to 
row crop producers in the mid South who last year suffered 
significant monetary losses due to heavy rains and flooding 
occurring prior to and during harvest.
    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 do not support relocating existing 
spending authority from current farm programs to apply to SURE.
    Crop insurance as a whole has not worked on our farm or 
many others like ours in Arkansas. Our farm is 100 percent 
irrigated, and on average, our yields are very consistent. Our 
financial problems occur with the higher production costs due 
to irrigation or a weather event in the fall that disrupts our 
harvest and ultimately affects the quality of our crops. These 
circumstances cannot be hedged against.
    For example, the coverage available under this current mix 
of federal crop insurance policies is not as well suited to 
rice or other mid South crops as compared to producers of other 
crops in other regions. What rice producers need from federal 
crop insurance are products that will help protect against 
price risk and an increased production and input cost, 
particularly energy and energy-related inputs. The rice 
industry has been working for over a year now to develop new 
generation crop insurance products that we hope will provide 
meaningful risk management tools for rice producers to protect 
against sharp upward spikes in input cost.
    My family has participated in several conservation programs 
over the years, and programs such as EQUIP, WRP and CRP have 
helped us become better stewards of the land and better 
conserve our natural resources. Conservation programs such as 
the new CSP Program, I think, can lead to improved 
environmental and conservation practices; however, I believe 
that this program is not succeeding in the way that it could.
    Of all the conservation programs offered by the USDA, the 
CSP Program might have the most potential in terms of actually 
producing the desired results that are beneficial to both the 
environment and the farmer. This program is a win-win for 
everyone; however, it has always been vastly underfunded. The 
CSP Program has been hampered by overly restrictive payment 
limitations contrived by the USDA regulators, restrictions I do 
not believe are supported by the statute.
    In summary, I appreciate the work of this committee in 
crafting the 2008 Farm Bill. I know that the next Farm Bill 
presents its own set of challenges, especially due to 
inadequate budget authority and international trade 
obligations. Based on my experience in working with the USA 
Rice Federation, the National Cotton Council and the Farm 
Bureau, I know they will work closely with this committee to 
ensure that we have an effective farm policy. Thank you for the 
opportunity to present my views today.
    [The prepared statement of Mr. Brantley can be found on 
page 72 in the appendix.]
    Senator Chambliss [presiding]. Thank you very much, Mr. 
Brantley.
    Next is Johnny Cochran, from Worth County, which is the 
adjoining county to my home county and very similar from a 
production agriculture standpoint. Johnny is a farmer and grows 
primarily peanuts and cotton and has a livestock operation, 
also a timber farmer, probably used to grow a little tobacco 
from time to time, but now that is a thing of the past in our 
part of the world. Johnny has been recognized as Farm Family of 
the Year on several different occasions and also as 
Conservation Man of the Year.
    I often talk about the fact that we want folks up here who 
get dirt under the fingernails to explain farming operations, 
and Johnny is the real deal. He does get dirt under his 
fingernails and is extremely active from a production 
agriculture standpoint in our part of the world. So, Johnny, 
thanks for being here. We look forward to your testimony.

  STATEMENT OF THOMAS ``JOHNNY'' COCHRAN, FARMER, SLYVESTER, 
                            GEORGIA

    Mr. Cochran. Chairman Lincoln, Ranking Member Chambliss, 
thank you for holding this important hearing to review U.S. 
farm policy. My name is Johnny Cochran. I am a fourth-
generation peanut and cotton farmer from Worth County, Georgia.
    The production, processing and marketing of peanuts and 
cotton are the cornerstones of the economy in my rural county. 
That is why a predictable and stable farm policy is important 
to me and my neighbors. Effective farm policy should adhere to 
several principles. It should be market oriented. It should 
allow full production. It should provide a predictable, 
effective financial safety net. It should ensure the 
availability of competitively priced peanuts and cotton to 
domestic and international end users, and it should allow 
participation without regard to farm size or structure.
    A key provision of the cotton and peanut program is the 
Marketing Loan Program. It gives the lenders the confidence to 
provide operating loans. It provides growers the opportunity to 
make orderly marketing decisions. The 2008 Farm Bill made 
significant reforms to cotton program, including revising loan 
premiums and discounts to enhance market orientation, 
establishing a ceiling on payment storage credits, and provided 
the Economic Adjustment Program for the hard-pressed U.S. 
textile industry. Cotton is also the only commodity that 
experienced a reduction in target price.
    The peanut program changed dramatically in the 2002 Farm 
Bill. It moved from a supply management quota program to a 
program similar to other commodities. The 2008 Farm Bill 
continued these changes. For the most part, the program has 
worked well for the peanut industry.
    Unfortunately, the marketing loan has not functioned as it 
was intended because USDA has not followed the Committee's 
direction to consider international prices when calculating the 
peanut loan repayment rate. Thus, the USDA repayment rate we 
saw on Tuesday afternoon is not accurate. I ask this Committee 
to include language in the next Farm Bill that will ensure that 
prices our international competitors are selling peanuts for 
will be considered in establishing the repayment rate.
    The 2008 Farm Bill made historic changes to payment 
limitations and program eligibility. Limitations were made more 
restrictive by eliminating the three entity rule. I understand 
these reforms, but please remember that full-time farmers like 
myself must be eligible for programs to be effective.
    As evidenced by data from recent sign-ups, the ACRE Program 
is not an attractive alternative for cotton and peanut farmers. 
ACRE's target revenue does not provide an adequate safety net 
when compared to traditional DCP programs, and growers and 
their landlords are reluctant to accept a permanent reduction 
in loan and direct payment rate to enroll in ACRE programs.
    I support the Natural Disaster Program, but my concerns are 
that SURE does not provide an effective level of assistance for 
diversified farming operations.
    I want to convey my appreciation to Chairman Lincoln and 
the others in crafting the provisions included in the tax 
extenders package. I hope this legislation will ultimately be 
approved.
    Conservation programs such as Conservation Stewardship and 
EQUIP and others are attractive to producers and will 
facilitate continued improvements in conservation practices. I 
commend the Committee for including the new crop rotation 
program as part of CRP. Although implementation was delayed, I 
believe it is an effective option for peanut producers.
    Crop insurance is an essential risk management tool for 
producers. I believe crop insurance should always be considered 
a complement to good commodity programs but not a substitute.
    In summary, the 2008 Farm Bill's cotton and peanut programs 
have generally worked well. You and your colleagues did an 
excellent job in balancing diverse interests. I recognize the 
2012 Farm Bill debate will take place with record budget 
deficits that will put intense pressure on funding.
    The findings in the WTO Brazil case put cotton's Marketing 
Loan and Counter-Cyclical programs under special scrutiny even 
though the U.S. negotiators have crafted an interim agreement 
that has resulted in Brazil temporarily suspending retaliation.
    I would like to thank you, on behalf of all Georgia 
farmers, for the opportunity present these comments, and I will 
answer your questions.
    Senator Chambliss. Thank you very much.
    Next we have Mr. Chris Pawelski. He is a specialty crop 
farmer from the town of Florida in Orange County, New York. 
Onion farming, like most specialty crop farming, is very hands-
on, labor-intensive form of farming, and Chris is involved in 
all aspects of his family's operation. Currently, he farms with 
his father Richard and his brother Brian. They grow 99 acres of 
onions and 8 acres of butternut squash.
    Mr. Pawelski, welcome.
    [The prepared statement of Mr. Cochran can be found on page 
66 in the appendix.]

    STATEMENT OF RICHARD PAWELSKI, FARMER, GOSHEN, NEW YORK

    Mr. Pawelski. Thank you. I would like to first thank Madam 
Chairman Lincoln and Ranking Member Chambliss first for both 
pronouncing my name correctly. Usually, I tell people say Chris 
something Polish. The fact that both of you pronounced it 
correctly was outstanding, so I would like to thank you for 
that.
    I would also like to thank my Senator Kirsten Gillibrand 
for affording this opportunity to address you today as a 
specialty crop farmer from New York who has had extensive 
experience with the Federal Crop Insurance Program, 
specifically, the Multi-Peril Crop Insurance Program or the 
MCPI policy.
    Though I am testifying alone, my wife Eve who is here with 
me has been full partner over the last 14 years who has worked 
hard with me making the various improvements to our policy, and 
without her hard work and imagination, I would not be here 
today.
    On Monday, I received a letter from the head of RMA, Bill 
Murphy, who was here today, who soundly rejected my wife and my 
reform proposals for the MCPI policy. I will be including it 
for the record for this hearing. Bottom line, when you read the 
letter, you walk away with the notion there is absolutely 
nothing wrong with the MCPI policy and all is functioning well. 
Of course, this does not explain why Congress the last 15 years 
has had to pass multiple crop loss programs as well as create a 
permanent disaster aid program as part of the last Farm Bill.
    Since 1996, our region has been struck by a series of 
catastrophic weather events, and over the years, Eve and I have 
done our very best to improve our policy. This has included 
fixing the expected market price, which was set at less than 
half of what it should be; fixing our replant feature, which 
was set at a fraction of what it should be; and getting a pilot 
program for a no-stages option for our New York onion growers, 
which was done with the hard work of our congressman at the 
time, Bill Gilman.
    Unfortunately, there are two facets of the MCPI policy that 
we have made no headway on, and it is for this reason, for the 
first time since 1996, we on our farm have not purchased buy-up 
coverage for this year, and so have most of the crop growers in 
Orange County. We believe that the minimal catastrophic 
coverage is virtually worthless, but we have paid the 
administrative fee for this coverage so as to have access to 
the USDA programs.
    Crop insurance reform over the years has typically involved 
increasing the federal subsidy rates to make the policies 
cheaper to the farmer, but there is very little discussion as 
to why these policies do not pay out, which is a primary reason 
why farmers are reluctant to participate. Farmers wonder why 
anyone would think making a problematic policy cheaper would 
entice them to buy it. We often ask when will someone address 
the various problematic policy provisions or what I call 
gimmicks that quite often make the policies resemble more of a 
shell game than insurance.
    There are two main provisions I want to discuss. One is a 
facet, which is an all MCPI policy. It is called Production 
Account, and all decrease drastically in value when a farmer's 
actual production history or APH starts to plummet due to 
successive weather disasters. What happened to me last year 
perfectly illustrates the problem.
    In 2009, I grew 41 acres of onions, and I bought the buy-up 
level coverage of 70/100, 70 percent of my crop at 100 percent 
the price. The premium total was $29,507. I paid $9,924. The 
rest was paid by the taxpayer.
    Last season, we had 28 inches of rain during the summer, 
which meant that most of the onions either did not make a bulb 
or many of them and many were rotten. Due to my successive 
disaster years, my APH was lower, so my loss in real terms, 
though, was roughly in the neighborhood of $115,000. But thanks 
to my lower APH and production account, my indemnity was 
$6,729. I did not make back the premium. The insurance company 
pocketed the difference as an underwriting gain. I suffered 
$115,000 crop loss, had 70/100 coverage, and I still owed a 
3,000-dollar premium. You have to ask the question what is the 
purpose of this policy.
    In a hearing held in 2009 by the House Subcommittee for 
Risk Management, the topic of shallow losses repeatedly came 
up. No one seemed to understand why shallow losses are a 
problem. The facet of production account is the reason why 
shallow losses occur. And my wife and I have a proposal, a 
sound proposal, to reform production account to do it, and if 
you read my written testimony, it details it.
    But, essentially, what production account does, it takes a 
percentage of your crop that is not covered plus also whatever 
you salvage and what they are calling a deductible, and what 
they are doing is, they are guaranteeing a loss. And it is a 
sliding scale, and the less damage you have, the greater the 
deductible is. So that is how you can think you have 75 percent 
coverage when, in fact, you do not have that. You can have a 25 
percent loss and get nothing.
    Our idea, our basic reform idea, is basically whatever you 
salvage plus your coverage level cannot exceed 100 percent of 
your APH. So you would actually come close to whatever your 
coverage level is. And again, if you refer to my written 
testimony, you will see it in more detail with examples.
    We have again worked on this for 14 years. Quite often, 
when we talk to people in D.C. at RMA, we have been received 
very positively. Unfortunately, the people who seem to call the 
shots in Kansas City and Raleigh are not as supportive. There 
is stonewalling and arguments over semantics are endless, and 
quite often, the farmer is to blame. Yet the problem always is 
still there with the MCPI policy. And this is a primary tool 
for us, for specialty crop farmers, especially mono-cropping 
specialty crop farmers. This is the only safety net we have, 
and it is inadequate. So unless this policy provision and the 
problem with APHs being skewed due to successive losses, you 
are not going to be able to fix it.
    So I also--in my written testimony, you can ask about it as 
well. I have another example of what production account did a 
couple of years ago where I had onions that I destroyed that 
were immature that made no sense against my indemnity. I can 
explain.
    But in conclusion, I again want to thank you again for this 
hearing and inviting me to appear before you. Again, my wife 
and I have spent a great deal of time and energy trying to 
improve our MCPI policy, and we firmly believe if APH reform 
was done and our proposal to reform production account was 
implemented, the MCPI policy would be a valuable tool and an 
integral part of the specialty crop producers' safety net. 
Thank you.
    [The prepared statement of Mr. Pawelski can be found on 
page 93 in the appendix.]
    Senator Chambliss. Thank you very much.
    Next, Mr. Mark Watne. Mr. Watne farms 1,500 acres of crop 
land in north central North Dakota. He has a family farm 
operation and would be considered at about average in size in 
the state of North Dakota. He primarily raises wheat, barley 
and canola and occasionally plants oats, sunflowers, peas and 
soybeans if market conditions appear to be attractive.
    Mr. Watne, welcome. We look forward to your testimony.

    STATEMENT OF MARK WATNE, FARMER, JAMESTOWN, NORTH DAKOTA

    Mr. Watne. Thank you very much, Madam Chairperson Blanche 
Lincoln, Ranking Member Chambliss and the rest of the Senate 
Agriculture Committee for my opportunity to testify here today.
    As stated, I am a family farm operation from North Dakota 
and have a wide variety of crops that I raise. If I could, I 
would just generalize a little bit of the reasons for a Farm 
Bill and then get into specifics. I always think the first 
consideration of a Farm Bill is to identify that it is 
necessity for our consumers in this country to have an 
inexpensive, very secure food system in this nation. And as 
many people today have stated, we can see very well that we are 
achieving that goal. I have included a chart in my testimony 
that shows that disposable income that everybody talked about, 
showing that we are spending less than 10 percent of our 
disposable income on food in this country, which is the lowest 
in the world.
    The fact that we in agriculture have the ability to have 
this abundant food supply and the fact that farmers and 
ranchers are efficient at producing this quantity forces prices 
to be lower than what we would like them to be from a farmer's 
perspective. Commodity prices reflect the small amount of 
oversupply beyond demand that is produced each year. This 
unique scenario creates the need for a farm program that 
addresses low commodity prices which hurt farmers. The demand 
for food does not add an extra meal just because food costs 
less. The family does not necessarily add an extra meal because 
of these lower costs of food.
    The nation of consumers would be negatively impacted if we 
had a food system that was based on just-in-time inventory 
which would hold no surplus to meet needs in case of natural 
disasters. Commodity price fluctuations could cause prices to 
rise rapidly and not level off in time to keep our current 
inexpensive food system, which American consumers enjoy.
    If we were to compare our food program to our energy 
program, we could see wide market variations on pricing when we 
rely on outside sources for energy. We certainly would not want 
to become reliant on other sources of food supply from other 
nations in the world. The small portion we spend on the U.S. 
agriculture budget may be one of the best investments we make 
for the benefit of our Nation.
    So the second consideration is how a farm bill is able to 
provide a safety net for farmers and ranchers when the market 
prices or environmental conditions do not allow for adequate 
return to cover our operational costs. In my written testimony, 
I have provided a chart that shows of 537 producers--this is 
tracked by our land grant university-that would have lost money 
or had very low significant income from their operations seven 
of 10 years, if you had taken farm program payments and crop 
insurance out of the mix.
    The current Food and Conservation Energy Act of 2008 and 
many of the preceding farm bills have been relatively 
successful and generally accepted by farmers and ranchers in 
North Dakota. The main concern from farmers regarding these 
bills is that there has not been an adjustment to the counter-
cyclical payments and loan rates to reflect the higher cost of 
production that we as farmers and ranchers are currently 
facing.
    To continue the success--and again, I do believe we have 
had success, and I am very proud to be a farmer when we can 
feed the country very well and the fact that we can continue to 
oversupply the market with abundant food. To continue the 
success, we need to consider a number of items.
    Our Nation's agriculture policy must be directed toward an 
economic system that provides citizens the opportunity to own, 
control and work their own land and remain contributing members 
to their communities and to the country. National farm policy 
should foster a fair and competitive environment that allows 
farmers and ranchers to increase their net farm income, improve 
the quality of rural life and continue to provide a safe, 
reliable supply of food and fiber for this country and the 
world. Farm policy should also provide price production 
protection, contain stock control mechanisms that do not push 
stocks onto the market at a point when prices are lowest and 
ensure competition in the marketplace.
    The following objectives should be included in farm policy; 
a safety net that is counter-cyclical and most importantly, 
indexed to current production cost; directed program payments 
at the production levels of family farmers; realistic and 
meaningful payment limitations; the removal of marketing loan 
caps and upward equalizing of commodity marketing loan rates 
based on historic price shifts between commodities and equal to 
USDA's cost of production.
    We should maintain planning flexibility. We should continue 
the current permanent disaster programs in the Farm Bill, and 
they should be fully implemented in a timely manner. We should 
consider establishing a revolving two-year farm loan reserve of 
commodities to provide an adequate supply of raw materials for 
use as emergency food or renewable energy. We should push for 
international food reserves, which means both importing and 
exporting nations share the cost of maintaining these reserves.
    We need the continuation improvement of all crop insurance 
and coverage on all crops. The Farm Bill should further 
encourage the development of renewable energy, primarily 
ethanol and biofuels as these tools can enhance income and 
lower agricultural budget costs.
    To just wrap this up, probably the most important thing I 
want to pressure on today is that we continue to strengthen the 
Crop Insurance Program and continue to maintain permanent 
disaster. North Dakota, we have had some extreme weather 
conditions as of the last few years ranging from ice storms to 
excessive moisture. These seem to be an abnormal pattern but 
seem to be holding true for a number of years. We have a number 
of farmers, especially in the north central part of the state, 
that are paying a land payment, taxes on their land and costs 
associated with maintaining this land, and land is covered in 
water that they cannot recover any of these expenses.
    So from my perspective, if we do have to make major changes 
in the program--and I do believe the programs are working 
fairly well today--we should consider maybe a shift in the 
direct or decoupled payments to better programs that reflect 
the cost of production plus inflationary safety nets.
    I want to thank you for the opportunity to speak today. I 
think counter-cyclical programs that pay when prices are low 
are much more accepted by taxpayers than the direct payments. 
And again, thanks for the opportunity to speak to the Committee 
today.
    [The prepared statement of Mr. Watne can be found on page 
116 in the appendix.]
    Chairman Lincoln [presiding]. Thank you, Mr. Watne.
    Thank you-all for your patience in terms of our having to 
juggle votes on the floor.
    Again, wanted to welcome Dow Brantley. Obviously, I know 
him from Arkansas. But also want to thank Mr. Cochran. I know 
he is here at the recommendation of Senator Chambliss and 
grateful for your input here today.
    Mr. Pawelski, you are here at the recommendation of Senator 
Gillibrand who speaks very highly of you, and we are grateful 
that you are here today.
    And, Mr. Watne, obviously, at the recommendation of Senator 
Conrad, you are here today. I was with him on the elevator 
going over to the vote, and he wanted to apologize for not 
being here as well. He is at the same Deficit Reduction 
Commission meeting that Senator Baucus had to run off to.
    So I certainly want to tell all four of you-all how much we 
appreciate your being here. And I would just simply say to you 
please do not underestimate the role that you play as we move 
forward, both you and your colleagues across the country. And 
your input is going to be absolutely vital in being able to get 
it right in the structuring of the 2012 Farm Bill.
    So we appreciate that you are here today but hope that you 
will remain in constant contact with us as we move forward and 
look at how we can do a better job at supporting our farm 
families and ranchers across the country. So we really 
appreciate that.
    I guess just some kind of generic questions for you-all 
individually, and I am not sure that you have mentioned it in 
your testimony or not. But would be curious to know what safety 
net programs you-all participate in, and if you would, for your 
region and your crop and other circumstances, if you could pick 
the one that is the most important to you and for what reasons 
and what other programs are important to you, but maybe one 
that is the most important and why. Is it more dependable? Is 
it something that allows you to manage certain aspects of your 
production and your operation?
    So, Dow.
    Mr. Brantley. Thank you. I think two of the most important 
programs for me are the Marketing Loan Program and the Direct 
Payment Program. The Marketing Loan, just the ability to have a 
loan to market my crop over the nine months that we are given 
to do that.
    Now, the Direct Payment is a sense of security for us, for 
our banker, that we have some income coming from the farm or 
from the land that we produce these crops on. Those two 
programs have been key for not only us but anybody in Arkansas 
and across the mid South.
    Chairman Lincoln. Thanks. Do you participate in the other 
programs? Are there any other programs?
    Mr. Brantley. Not administered through the FSA. We are in 
NRCS, several conservation programs.
    Chairman Lincoln. Johnny?
    Mr. Cochran. Along those same lines, the Marketing Loan 
Program in cotton as well as in peanuts, both are very 
important to us. The Marketing Loan Program, like Dow said, 
allows us to market our crop over a nine-month period with 
having cash flow when we harvest the crop, which is much 
needed. And, of course, crop insurance, we do buy up crop 
insurance. It is an essential risk management tool in our farm, 
and we utilize crop insurance to a great----
    Chairman Lincoln. For all of the crops that you grow?
    Mr. Cochran. Yes, ma'am.
    Chairman Lincoln. Great, thanks.
    Mr. Pawelski.
    Mr. Pawelski. For my area, it is mostly on muck soil. It is 
mostly vegetables that are grown, some sod. So as far as risk 
management, crop insurance and NAP are what is available.
    Like we mentioned and my written testimony talks about, we 
have done--my wife and I, like I said, worked 14 years to 
improve our policy the best we can. We have hit the wall. One 
thing I did not talk about--it is in the written form. I did 
not mention orally, but just how bizarre the current policy is.
    In '07, we were wiped out by a flood. The Wallkill River 
flooded, and I had planted. Much of the valley planted, and I 
replanted afterward. I lost 26 acres to the flood, and I 
replanted afterward. And when I replanted, I lost it all again 
plus an additional 10 acres, and other people as well all 
around me, obviously, because it was too hot and too dry.
    The special provision policy for the onions calls for if 
over 50 percent of the crop is damaged, you are allowed to 
destroy the crop in the field. And within the rules itself, it 
says in the--I am not making this up. In the onion law stand 
book, it says that, ``If the damage to harvest or unharvested 
mature onion production exceeds the percentage, or is 50 
percent, no production will be counted if it is not sold.''
    So in other words, if you destroy it, it is not counted 
against you. But RMA interpreted the word ``mature'' is used 
there. That must mean immature should be treated differently. 
So those little plants that were this tall, the 8 or 9 percent 
that were an inch high, even though I destroyed them, they 
counted against our indemnity and subtracted it, even though 
you are not selling them, even though the policy says itself 
later if you have an onion that makes a bulb and you do not 
sell it, you destroy it, it does not count against you. And 
there is no basis for that in the policy itself.
    Whenever we would raise this issue with--again, we first 
raised it with the administrator's office at the time, they 
would say, oh, that makes sense what you are saying, but then 
they would talk to Kansas City who would defend this. There is 
like a level of disconnect there that makes no sense, and that 
is what we really need to--this is the kind of thing we need to 
get it fixed.
    But, currently, as far as risk management safety net stuff, 
crop insurance, we have a conservation program. We have a 
proposal out there for a conservation of muck soils program. 
Our congressman, Congressman Hall, got it in the House version 
last Farm Bill, and we are hoping that it will make it in the 
next version. I know Senator Gillibrand will be talking to you 
about that.
    Chairman Lincoln. Good. Well, those are the kind of 
specifics, though, that are very helpful for us. As I have 
mentioned in my opening statement, that we look at policy and 
oftentimes we just look at the written words as opposed to 
thinking about what your practices are and what you are 
actually going through. And those are critical examples that 
really do help us in so many different ways to try to figure 
that out, so we appreciate that. Thank you.
    Mr. Watne.
    Mr. Watne. On my farm, we participate in just about all the 
programs. We are active in the Direct and Counter-Cyclical 
Program, the DCP. We have used the loan program in the past, 
not as much as late as market prices have been substantially 
higher than loan rates. And, of course, crop insurance.
    But if I had to rate them, the crop insurance in North 
Dakota is probably the primary, most important. We have a lot 
of risk and a lot of weather conditions that impact our crops, 
and without Multi-Peril Crop Insurance, we could show our 
lender at least a minimum amount of return that we can get to 
pay back our loans, we would not be able to get financing in 
the state, so federal crop insurance is a key. And then, of 
course, putting SURE on top of that adds about 11 percent 
potential income increase if we have a major disaster.
    We did look at the ACRE Program briefly this year, and I 
wrote this in my testimony. I was very tempted to sign up for 
it because I see it as a revenue assurance. Just the fact, 
though, that I had to rely on a state trigger and a farm 
trigger at the same time is what scared me away. There is many 
times in North Dakota where the state will not have an overall 
impact where a trigger would be met and a individual farm could 
be met simply be a localized drought or a localized excessive 
rain or potentially a hailstorm. But I would rate federal ----
    Chairman Lincoln. So that is what kept you away from the 
ACRE?
    Mr. Watne. Yes, that state trigger was just too broad. It 
is very likely that you could have a pretty strong loss on your 
farm and not see the state trigger met. So crop insurance, to 
me, is probably our most important one.
    Chairman Lincoln. But you do participate in the Direct 
Payment?
    Mr. Watne. Yes, we do.
    Chairman Lincoln. I just wanted to--I know that you had 
some concerns about that, and I was not sure if your concerns 
were really focused on that you wanted to see it changed or did 
you want to see it eliminated.
    Mr. Watne. What I really want to see is--I think farmers 
are quite proud and they would rather see a system where we 
were paid if we were having a tough time as the market prices 
or something, so a counter-cyclical type payment. I do not want 
that money taken out of the ag baseline. I would rather see it 
shifted to a counter-cyclical type payment.
    Chairman Lincoln. Okay. Well, thank you. And just back to 
what you were talking about in terms of that state trigger 
being broad and certainly to what Mr. Pawelski said, in our 
circumstances in Arkansas, we saw floods, some folks that 
planted twice, some of them three times in the spring after 
being flooded out but then also being flooded out in the fall 
during harvest, finding that they had--I saw thousands of acres 
under water for at least a week to 10 days right before 
harvest, which was unbelievably awful. But some of those were 
localized. Our state probably did hit the state trigger because 
we had so many counties, but nonetheless, I could see how it 
could have been localized even worse.
    Well, thank you-all. Just in general, what is your response 
to the concerns of the complication of safety net programs? Do 
you-all find--I mean, many of you have worked with them through 
the years, and Mr. Pawelski, you have certainly expressed 
concern about the application of certain programs. But the 
complicated nature of that, does anybody want to expand on 
that?
    Mr. Brantley. The complicated nature of the rules that we 
have been given through the 2008 Farm Bill?
    Chairman Lincoln. Well, and the safety net programs in 
general.
    Mr. Brantley. Prior to this Farm Bill, we have been able to 
do all of our own work. My family and I have done our own work 
ourselves in explaining who we are, meeting the payment 
eligibility rules. This Farm Bill has been complicated and so 
confusing, we have had to, along with everybody else, to hire a 
lawyer to make sure that we were doing what is asked of in this 
Farm Bill. The financing rules, it is just unbelievable. I get 
confused even today, and that is what I spend most of my time 
working on day in, day out is making sure that what we have 
done is correct. We still are waiting to be approved from our 
state FSA office on our farm whether we--or the changes we have 
made in our operation have been approved or not.
    Chairman Lincoln. Anybody else?
    Mr. Pawelski. I would say that we have not applied yet for 
the SURE Program because we had a decent year in '08. '09, we 
will be applying, and my understanding is it will not be until 
December. But I have looked it over, and it has had my head 
spinning already. So the application process, I am not looking 
forward to. It seems extremely complicated.
    Crop insurance, that has just been--understand the 
bureaucracy. Again, it has been 14 years my wife and I have 
worked on that. It has got a heck of a learning curve as far as 
understanding how the maze works.
    Chairman Lincoln. Did any of you-all apply for the ACRE 
Program? None?
    Mr. Cochran. I was going to allude to the ACRE Program. As 
I understand it, in Georgia, I do not think there is a single 
farm that is enrolled in the ACRE Program.
    Chairman Lincoln. Dow indicated there is only two in 
Arkansas.
    Mr. Cochran. Yes, with high-input crops, it just does not--
the revenue does not work out in the program.
    Chairman Lincoln. Well, just--yes.
    Mr. Watne. If I could comment about it, the sign-up has 
actually been quite simplified, I think, and for the current 
existing program. I think the confusion has came in when we are 
trying to recalculate what benefits we might get out of SURE or 
even trying to calculate the ACRE Program, the benefits side of 
it. It was not that it was so complicated. It was a little bit 
hard to try to guess what the prices and the market prices 
might do and how that would impact you, and that is where 
farmers got quite nervous when they were looking at it.
    But as far as signing up for the farm program, I found it 
to be quite simple. There is an occasional question or two that 
makes you a little suspicious if they are digging for something 
that you might not want to answer. But the reality has been it 
is substantially easier to sign up at USDA than it has been in 
the past.
    Chairman Lincoln. It has been a general trend, I guess, to 
develop safety net programs that provide protection against 
revenue loss as opposed to yield losses. What would be your 
recommendations on the next Farm Bill to continue in that trend 
or not?
    Mr. Cochran. Well, we would certainly have to be 
considerate of the trade relations and the effects that 
different types of payments will make on our relations. And 
even though the revenue side is ultimately the goal, whether it 
is crop insurance on yield based on whether it is a revenue 
assurance program, we still would have to be careful there. But 
we do need these safety nets.
    Chairman Lincoln. Anybody else?
    Mr. Watne. If I could comment, the revenue insurance, it 
makes a lot of sense that we could have that option, but I do 
get a little fearful because when you start doing it in a light 
of an insurance-type program, that we tend to write 
underwriting rules or things that are based upon avenues to 
save money. And then, of course, it all depends on where you 
base the primary starting point, the price point. If we can do 
that off of a cost of production, the USDA cost of production 
or something, and not based on average market prices from a 
time frame when the prices do not represent the true cost of 
production would make a big difference.
    So revenue insurance can work, but it needs to have some 
basis behind cost of production. And then, of course, it has 
got to be based at a level where the farm itself can qualify 
rather than having to see a large region qualify before you 
trigger the payments.
    Chairman Lincoln. Sure.
    Mr. Brantley. I just might add that it would need to be 
regionalized. The cost of production does not need to be 
represented for the state or the mid South. You need to break 
it--it would need to be broken down into the counties, per se. 
Although our production, our goal of raising rice is the same 
in Arkansas as it is in California, our costs are vastly 
different, and those things would need to be regionalized.
    Chairman Lincoln. Well, thank you.
    I will turn it over to Senator Chambliss.
    Senator Chambliss. Thanks very much. All of you were 
sitting here when we had the conversation with Secretary 
Vilsack relative to getting younger farmers into agriculture, 
and I was in Roberta, Johnny, last Saturday with 200 Georgia 
young farmers. And I dare say that 100 percent of the folks who 
were there that day are young people who are returning to their 
own family farm versus individuals just going out on their own, 
deciding they want to get into farming, and being able to do 
so.
    This is a real problem, and I just want to throw it out 
there if any of you have any comments, suggestions or whatever 
that we might think about. All of you obviously have had 
experience, whether you went back to your family farm or 
whether you began on your own. And I notice in the case of a 
couple of you there, you have children that may be thinking 
about coming back and going into your operation.
    What are your general thoughts--Mr. Brantley, we will start 
with you--relative to the availability of agriculture for young 
people?
    Mr. Brantley. I am fortunate that I was able to join a 
family farm, and you alluded to that fact that most young 
people coming back are able to join a family farm. And it has 
been very difficult for individuals who want to start out on 
their own, for young individuals, to go to the FSA office and 
receive some funding to start a viable operation. I think for 
someone to get in the business today you almost need a mentor. 
You need someone who can help you get started.
    It would take a unique individual today to decide that he 
or she wants to farm and to have the capital to do that. I do 
not know how. I am not that person. Again, I was fortunate to 
join a family operation. There are plenty of those operations 
around that are looking for young people today. Maybe we can 
think of a creative way to start a mentor-type program, and 
that is not the proper word, but some type of a program to 
allow someone that is ready to retire or slow down to have a 
young person who is interested to come in and join their 
operation.
    Mr. Cochran. In Chairman Lincoln's opening remarks, I 
thought I was in the wrong room when she said she had an 
outstanding panel of young farmers.
    [Laughter.]
    Mr. Cochran. That is a problem in Georgia. It is a problem 
I am experiencing in my family. I have a son that has decided 
that after all these years of low wages on the farm, he is 
seeking other avenues.
    But I would venture to say that the biggest problem we have 
in getting a young person established on a farm, a mentor idea 
would be excellent. It is extremely hard for a young person 
with all the desire in the world to go out and get started 
farming on his own. I do not know whether RMA could come up 
with some type of yield program where if you do not have a 
history, you have to start with a T yield, which is 
traditionally a very low yield. Financing is a problem. Crop 
insurance could help cover some of the financial risk certainly 
for a beginning farmer.
    But there are very few avenues for a young person with a 
true desire to farm to have the ability to start farming in our 
community.
    Mr. Pawelski. I started working on the farm when I was five 
years old. My first job was picking up onions that fell out of 
a crate, which I hated. I started driving heavy farm equipment 
on the road by the time I was 11, trucks with no doors and 
stuff like that. And aspects I liked, but by the time I was 
older, I grew tired of it, and I actually went away. My bio 
mentioned I did my graduate work at the University of Iowa, who 
had a great year last year, by the way, in college football. 
But I was a PhD student in broadcasting and film studies. I 
actually studied James Bond.
    But after I got married, I had office jobs, and I would 
look out the window at the guys mowing the lawn. And I was 
wishing I was outside doing what they did, so I moved back to 
the farm. My poor wife who I met in Iowa grad school did not 
have this background from Wisconsin, and I kind of feel sorry 
for her because she has been dragged into this. And it has been 
year after year of disaster and scraping by, and she does all 
the finances. I do not even look. I just work, and I come 
inside, and she pays the bills somehow and credit card to 
credit card and so on and so forth.
    Going back to what Secretary Vilsack said, the best way to 
get people young working on the farms and staying on the farms 
is make it profitable. And the thing is, I am not looking to be 
a Elmer J. Fudd millionaire and own a mansion and a yacht. I 
would just like to make a living. That is what I am looking 
for, making a living.
    There is aspects of farming. I am an hour north of New York 
City, and a lot of people that I know and friends of mine 
commute down to the city. As a matter of fact, my brother, he 
farms part-time and he also is a head hunter. He places people 
in international equities markets in Europe and Asia, so he 
farms part-time and he goes down to the city and meets people 
and places them in these sorts of jobs. A lot of my friends 
commute.
    My commute, I walk outside five feet out the door, and I am 
in my yard where my farm, my barn is. I drive tractors and 
trucks which I love. I wear funny suits where I wear nice Tyvek 
suits and helmets and stuff and spray. I love the work. I see 
my family all the time. I see my boys every day. That is stuff 
that you--my wife's family, where her father used to work 
outside of Chicago, she never had. All I want to do is make 
enough of a living that I can provide for my family.
    And if we can get things like a little better or a safety 
net and I can get a better return on my onions, things that was 
talked about a little later when you were talking Mr. Stallman 
and Mr. Johnson about as far as the--I think it was Senator 
Roberts was talking about the return and the possibility of 
concentration and such. Well, I have got the same thing in my 
crop with how my product is sold, where I am getting $6 for 50 
pounds, and I look in the grocery store at what the price is 
going there, a heck of a lot more for something that is 
virtually nothing value added. But all I am looking for is just 
to make a living, and if we can make it a little bit more 
profitable, I think you will see a lot more people, including 
my kids, staying on the farm.
    Mr. Watne. I really think it is as simple as your last 
statement there. We have to make some reward for the risk that 
is taken in agriculture. We have to get back to profit 
potential. It has been interesting in our state that we are 
finally seeing some young people wanting to come back, and the 
parents instead of telling them whatever you do, do not come 
back to the farm, they are starting to talk maybe you should 
come back to the farm.
    Of course, we see this rapid rise in the price of commodity 
prices and expectations that we may reach new plateaus. I am 
not 100 percent comfortable we have seen these new plateaus 
because we have seen barley prices drop down to LDP rates just 
last year again, but that optimism, the potential for optimism 
and ability for people to make a profit.
    Somewhere along the line, we have to start thinking how we 
can price the amount that we actually need each year on what 
its fair value is rather than pricing every bit of production 
on that small amount of overproduction that we ship into either 
the export market or it sits in storage. I really think we have 
a backwards system in that light. If we have one bushel extra 
production of wheat, we price all the bushels on the one bushel 
of extra production. I said it in my testimony, we need some 
reserve system that does not force the consumer to be reliant 
on a just-in-time inventory but also does not burden the 
marketplace that we drive our prices so low that there is no 
reward for the risks that farmers and ranchers take.
    Senator Chambliss. As Mr. Cochran knows, we have what we 
call the Southeastern Agricultural Expo in my hometown every 
year. It is the largest farm equipment show east of the 
Mississippi River, and I am always amazed at that show as to 
the advancement of technology when it comes to agriculture.
    Mr. Watne, let's start with you. From a technology 
standpoint, what is your biggest asset? Where do you see 
technology with respect to agriculture production going?
    Mr. Watne. Well, there is two areas. One is in just simply 
the way we plant our crop. We are using GPS. We are using very 
large tractors. We do what would be considered a minimum 
tillage, one-pass operation. It has brought our expenses down, 
which has enabled us to continue to produce at these lower 
prices in comparison to what inflation should have did with the 
prices of commodities. The second area is genetics. I really 
think genetics is going to allow a wider area of crop 
selections that we can grow in our state and make us able to 
choose from different crops.
    But all in all, it gets me back to my earlier point. I do 
not believe that there is any worry that we can produce what 
the world needs in food. I also believe we can supply a vast 
percentage of the energy for this nation. I am not the least 
bit concerned that we can meet that demand because technology 
will allow it. So I think that we really have to really rethink 
our pricing mechanisms so we can try to figure out the avenue 
to continue to grow this.
    Technology is very important to our farm, and it has been 
the only savior that has been able to keep our expenses in line 
to keep our farm operational.
    Senator Chambliss. Mr. Pawelski.
    Mr. Pawelski. We still use ACGs from the 1950s and all the 
crawlers, we have a Cat 22, so we are not as advanced as that. 
We have some newer tractors, but technology comes in being that 
we are fruit and vegetables and such, a lot of times the 
development of seeds and stuff, we are on the lower end of the 
scale as far as timewise. We are still waiting for some GMO 
crops. If there was a Roundup ready onion, I would grow that in 
a heartbeat because on muck soils especially, the amount I have 
to apply two different pre-emerge chemicals three times and two 
different post-emerge materials two, three, four times. So if I 
had a one-time spray Roundup ready, I would be doing that.
    We do have some advancements as far as some of our hybrids 
and the like. Technology is more important for me as far as on 
the public policy end. The stuff that I do with this kind of 
thing, with crop insurance, or the stuff I have worked on where 
I have met you one time before on the labor issue when you had 
that meeting set up a few years ago regarding the Immigration 
H2A reform, that I was Senator Clinton's designee at that 
meeting, which was an excellent meeting. I worked with your 
staffer Camila Knowles over the years who is excellent on that 
issue.
    The technology enabled me and my wife, the changes that we 
were able to do with the crop insurance, we never would have 
done 20 years ago or 15 years ago. It has all been we have been 
able to do because of the computer, the Internet, e-mail and 
the like. If it was not for that, we simply would have been 
able to do all of this public policy stuff. That is where it 
has come in handy for us, which has been a benefit not just for 
our farm but for our whole region and in some aspects for our 
state. We are hoping that the other things will happen to us 
down the road more so for our crops, our onion crop as well. 
But that is where it has come into play for us.
    Mr. Cochran. We also use GPS-guided tractors, which is an 
added benefit for the skill--it is a double-edged sword for the 
skill of the operator needed. He needs to have computer skills 
to a degree, but he does not need as good steering wheel 
skills. But that along with the genetically modified cotton 
that we are using has been a tremendous increase in yield, 
which is allowed us to stay in production with the prices that 
we have seen that are not much higher than they were 10 years 
ago, whereas in the last 10 years, the average yield on the 
farm has just about doubled due to genetically altered seed. 
And we are also implementing strip till, which is a very fuel 
efficient way of agricultural production for us.
    Mr. Brantley. I would reiterate a lot of what they said. We 
try to use all the technologies that are available today from 
the computer to the guidance systems. You name it, we will try 
it. Anything that can lower our production cost, we are going 
to give it a try. But it is really exciting to know that the 
technology is there for us to feed and clothe the world the 
next 40 years through doubling our output that we are today.
    What we need or what I need is a simple farm program that 
will back us up in those tough times, a program that is simple 
to understand and operate that allows me to spend most of my 
time growing these crops that we do.
    Senator Chambliss. Well, gentlemen, I cannot thank you 
enough for taking your time, particularly in the middle of a 
busy growing season to come up and give us the benefit of your 
thoughts. This is the first in a number of hearings that we are 
going to have as we lead up to the 2012 Farm Bill. So this will 
not be the last time we look to you for advice and input as to 
some of the issues that we are going to have to be dealing 
with, so thanks to each of you for taking time to come and 
share your thoughts with us today. I hope all of you have your 
best yields ever and the best prices ever.
    Chairman Lincoln. Thank you, Senator Chambliss.
    I, too, want to add my thanks and would just reiterate, 
please do not underestimate the role that you play as we move 
forward. We hope that we will continue to have contact with 
you-all and you can share your ups and downs with us on how we 
can better improve the Farm Bill in 2012. And more importantly, 
I hope you will encourage your colleagues and your 
organizations that you are participatory in, in being able to 
weigh in as well because that is very important for us to hear 
from you. So thank you all so much for taking time to be with 
us today.
    With that, our hearing is adjourned.
    [Whereupon, at 12:56 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             June 30, 2010



      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             June 30, 2010



      
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                         QUESTIONS AND ANSWERS

                             June 30, 2010



      
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