[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
__________
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Committee on Agriculture, Nutrition, and Forestry
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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
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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
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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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