[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
            HEARING TO REVIEW THE STATE OF THE FARM ECONOMY

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 17, 2011

                               __________

                            Serial No. 112-4


          Printed for the use of the Committee on Agriculture
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                        COMMITTEE ON AGRICULTURE

                   FRANK D. LUCAS, Oklahoma, Chairman

BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas              LEONARD L. BOSWELL, Iowa
K. MICHAEL CONAWAY, Texas            JOE BACA, California
JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida            JIM COSTA, California
MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
STEPHEN LEE FINCHER, Tennessee       WILLIAM L. OWENS, New York
SCOTT R. TIPTON, Colorado            CHELLIE PINGREE, Maine
STEVE SOUTHERLAND II, Florida        JOE COURTNEY, Connecticut
ERIC A. ``RICK'' CRAWFORD, Arkansas  PETER WELCH, Vermont
MARTHA ROBY, Alabama                 MARCIA L. FUDGE, Ohio
TIM HUELSKAMP, Kansas                GREGORIO KILILI CAMACHO SABLAN, 
SCOTT DesJARLAIS, Tennessee          Northern Mariana Islands
RENEE L. ELLMERS, North Carolina     TERRI A. SEWELL, Alabama
CHRISTOPHER P. GIBSON, New York      JAMES P. McGOVERN, Massachusetts
RANDY HULTGREN, Illinois
VICKY HARTZLER, Missouri
ROBERT T. SCHILLING, Illinois
REID J. RIBBLE, Wisconsin

                                 ______

                           Professional Staff

                      Nicole Scott, Staff Director

                     Kevin J. Kramp, Chief Counsel

                 Tamara Hinton, Communications Director

                Robert L. Larew, Minority Staff Director

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................     1
    Prepared statement...........................................     3
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     4

                                Witness

Vilsack, Hon. Thomas J., Secretary, U.S. Department of 
  Agriculture, Washington, D.C...................................     5
    Prepared statement...........................................     7
    Submitted questions..........................................    51


            HEARING TO REVIEW THE STATE OF THE FARM ECONOMY

                              ----------                              


                      THURSDAY, FEBRUARY 17, 2011

                  House of Representatives,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 11:30 a.m., in Room 
1300, Longworth House Office Building, Hon. Frank D. Lucas 
[Chairman of the Committee] presiding.
    Members present: Representatives Lucas, Johnson, King, 
Neugebauer, Conaway, Schmidt, Thompson, Gibbs, Austin Scott of 
Georgia, Fincher, Southerland, Crawford, Roby, Huelskamp, 
DesJarlais, Ellmers, Gibson, Hultgren, Hartzler, Schilling, 
Ribble, Peterson, Holden, McIntyre, Boswell, Baca, Cuellar, 
Costa, Schrader, Kissell, Owens, Pingree, Courtney, and 
McGovern.
    Staff present: Mike Dunlap, John Goldberg, John Konya, Josh 
Maxwell, Nicole Scott, Debbie Smith, Pelham Straughn, Richard 
G. Thomson, Nona Darrell, Nathan Fretz, Liz Friedlander, Craig 
Jagger, Keith Jones, Mary Knigge, Scott Kushmider, Clark 
Ogilvie, Lisa Shelton, Anne Simmons, and Jamie W. Mitchell.

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

    The Chairman. The Committee on Agriculture hearing to 
review the state of the farm economy will come to order.
    This morning's hearing focuses on the state of the farm 
economy. With all of the bad news out there today, it is nice 
to have something good to report. The state of the U.S. farm 
economy is strong. Our nation's producers are generally 
experiencing good prices and solid production. The USDA is 
forecasting record-high income and exports.
    Importantly, despite the higher farm gate prices, last 
year's rate of inflation for food costs that consumers pay at 
the grocery store, was the lowest on record since 1962. And it 
is expected to track with the same average rate of inflation 
this year. Yet despite the good news, those of us who have been 
around agriculture know all too well that things can change 
quickly.
    The agricultural economy is highly cyclical, and it changes 
like the weather in western Oklahoma: sharp, fast, and without 
notice. This reality helps explain why the mood in farm country 
today is both upbeat and apprehensive. After all, increasing 
production costs, lost equity, and fast-rising farm debt may be 
manageable for producers with strong prices and production, but 
they spell big trouble for those without.
    These facts, along with experience, offer a cautionary note 
to everyone who might be tempted to cite current economic 
conditions on the farm as the predicate for setting long-term 
farm policies.
    Some outside this room might even ask, why should anyone 
other than those directly involved in agriculture care about 
the state of the farm economy. I offer three reasons. First, as 
the Federal Reserve points out, thanks to production 
agriculture, rural America is leading the U.S. economic 
recovery, just as it did through the last recession.
    Second, food security remains important to national 
security. In fact, NPR made this point in a recent story 
entitled, Rising Food Prices Can Topple Governments, Too.
    Third, there will be nine billion people on this planet by 
the year 2050. We will need to double production, using less 
water and land in order to feed all of them. These facts are a 
wake-up call to everyone who believes that agriculture no 
longer matters to our economy. But there is another eye-opener.
    Some of you may have seen the black bumper stickers with a 
blue line across them, with that thin blue line representing 
our police force. Well, today, there are just 210,000 Americans 
out there who are responsible for 80 percent of U.S. 
agricultural production. These Americans support our economy, 
help keep us secure, and in those 210,000 people lies the 
answer to the question of how we are going to feed nine billion 
people come the year 2050. In short, these American men and 
women form a very thin line that we better hold.
    So the question becomes: Are our Federal policies that we 
are pursuing today going to hold or break this line? 
Unfortunately, on a range of issues, new policies coming out of 
Washington are threatening to punch a hole clear through it. We 
know that the EPA has opened up at least ten assaults on 
agriculture, including the strange objectives of eliminating 
dust on farms and treating milk on farms as if it were oil. But 
to put it plainly, EPA is gambling with our economy and wasting 
taxpayer dollars while they are at it.
    Irrational environmental policy is also jeopardizing our 
energy production capacity that, even without the regulation of 
greenhouse gases, is fast approaching a crisis. And by imposing 
margin requirements on end-users under last year's financial 
regulatory reform, Washington has actually managed to add fuel 
to the fire.
    I also feel a very subtle push from the Department that 
seems to take for granted these 210,000 Americans who are 
producing 80 percent of our food. There seems to be a 
prioritization on a small subset of producers in order to 
satisfy certain constituencies.
    I think all of the Members of this Committee support 
marketing opportunities such as organic production, farmers 
markets, and local production, but organic production and these 
other seeming priorities of the Department will not feed the 
nine billion souls that will soon inhibit this planet.
    I do believe the Secretary has agriculture's best interests 
at heart, and I want to work with him to be an advocate for 
farmers and ranchers both inside the Administration and here in 
Congress.
    The bottom line is Washington is being met with a critical 
choice that will have major consequences down the road: We can 
promote the one piece of good news out there today, or we can 
pour cold water on it.
    Fortunately, promoting American agriculture is simple. 
Washington can, first of all, support fiscally responsible 
policies that help level the international playing field; 
second, we can support risk management tools so that producers 
don't go without something as basic as insurance; third, 
support policies that create a pro-growth, business-friendly 
environment that promotes U.S. competitiveness. And, of course, 
finally, the fourth, Washington can just simply get out of the 
way. I believe for most of us in this room, the choice is 
clear.
    I look forward to hearing the testimony of Secretary 
Vilsack and the views of my colleagues on the state of the farm 
economy and on the direction of Federal farm policies that 
could make or break it.
    Now before I turn to yield to my good friend, Mr. Peterson, 
I would simply express a particular appreciation for the 
Secretary's patience today. We started with a series of 15 
votes this morning as we work our way through this open process 
on the continuing resolution to fund the rest of the 
government. I would serve notice to my colleagues here that the 
Secretary has to appear this afternoon before the Senate 
Agriculture Committee. He has a very hard deadline of being 
gone by or before 2 p.m., so we want to be respectful of his 
time.
    [The prepared statement of Mr. Lucas follows:]

Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress 
                             from Oklahoma

    This morning's hearing focuses on the state of the farm economy.
    With all the bad news out there today, it is nice to have something 
good to report: the state of the U.S. farm economy is strong. Our 
nation's producers are generally experiencing good prices and solid 
production. USDA is forecasting record high income and exports.
    Importantly, despite the higher farm gate prices, last year's rate 
of inflation for food costs that consumers pay at the grocery store was 
the lowest on record since 1962, and it is expected to track with the 
average rate of inflation this year.
    Yet, despite the good news, those of us who have been around 
agriculture know all too well that things can turn quickly.
    The agriculture economy is highly cyclical and it changes like the 
weather in western Oklahoma: fast, sharp, and without notice. This 
reality helps explain why the mood in farm country today is both upbeat 
and apprehensive. After all, increasing production costs, lost equity, 
and fast rising farm debt may be manageable for producers with strong 
prices and production--but they spell big trouble for those without.
    These facts, along with experience, offer a cautionary note to 
anyone who might be tempted to cite current economic conditions on the 
farm as the predicate for setting long term farm policies.
    Some outside this room may even ask: why should anyone other than 
those directly involved in agriculture care about the state of the farm 
economy?
    I offer three reasons:
    First, as the Federal Reserve puts it, thanks to production 
agriculture, ``rural America is leading the U.S. economic recovery,'' 
just as it did through the last recession.
    Second, food security remains important to national security. In 
fact, NPR made this point in a recent story entitled, ``Rising Food 
Prices Can Topple Governments, Too''.
    And, third, there will be nine billion people on this planet by the 
year 2050 and we will need to double production, using less water and 
land, in order to feed them all.
    These facts are a wake-up call to anyone who believes that 
agriculture no longer matters to our economy. But there is another eye-
opener.
    Some of you may have seen the black bumper stickers with a thin 
blue line across them, with that thin blue line representing our police 
force. Well, today, there are just 210,000 Americans out there who are 
responsible for 80% of U.S. agricultural production.
    These Americans support our economy, help keep us secure, and in 
these 210,000 people lies the answer to the question of how we are 
going to feed nine billion people come the year 2050. In short, these 
American men and women form a very thin line that we had better hold.
    So, the question becomes, are the Federal policies that we are 
pursuing today going to hold or break this line? Unfortunately, on a 
range of issues, new policies coming out of Washington are threatening 
to punch a hole clear through it.
    We know that EPA has opened up at least ten assaults on 
agriculture, including the strange objectives of eliminating dust on 
farms and treating milk on farms as if it was oil. To put it plainly, 
EPA is gambling with our economy and wasting taxpayer dollars while 
it's at it.
    Irrational environmental policy is also jeopardizing our energy 
production capacity that, even without the regulation of greenhouse 
gases, is fast approaching a crisis. And, by imposing margin 
requirements on end-users under last year's financial regulatory 
reform, Washington has actually managed to add fuel to the fire.
    I also feel a very subtle push from the Department that seems to 
take for granted these 210,000 Americans that are producing 80% of our 
food. There seems to be a prioritization on a small subsection of 
producers in order to satisfy certain constituencies. I think all of 
the Members of this Committee support marketing opportunities such as 
organic production, farmers markets, and local production but organic 
production and these other seeming priorities of the Department will 
NOT FEED the NINE billion souls that will inhabit the planet.
    I do believe the Secretary has agriculture's best interests at 
heart and I want to work with him to be an advocate for farmers and 
ranchers both inside the Administration and here in Congress.
    The bottom line is Washington is being met with a critical choice 
that will have major consequences down the road: we can promote the one 
piece of good news out there today or we can pour cold water on it.
    Fortunately, promoting American agriculture is simple. Washington 
can: (1) support fiscally responsible policies that help level the 
international playing field; (2) support risk management tools so 
producers don't go without something as basic as insurance; (3) support 
policies that create a pro-growth, business-friendly environment that 
promotes U.S. competitiveness; and, finally, (4) Washington should just 
get out of the way.
    I believe for most of us in this room, the choice is clear.
    I look forward to hearing the testimony of Secretary Vilsack and 
the views of my colleagues on the state of the farm economy and on the 
direction of Federal policies that could make or break it.
    And now I yield to my good friend, Mr. Peterson, for any remarks he 
may have.

    The Chairman. With that, I turn to my colleague, Mr. 
Peterson, the Ranking Member, for his opening statement.

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

    Mr. Peterson. Welcome, Secretary Vilsack, back to the 
Committee. I associate myself with the remarks of the Chairman. 
I will try to keep my remarks brief so we can get this done.
    The farm economy is in pretty good shape. Our farmers and 
ranchers have been having a good time due in large part to 
their own efforts; but I also believe that the strong farm bill 
that we passed in 2008 deserves some of the credit for having 
stability in the farm economy. Actually, the farm economy is 
probably the only part of the economy that is actually solid, 
and has been solid primarily through these last years here 
where we have been having trouble.
    We have had problems in dairy. It is not quite as bad now, 
but there are problems there. And there are people who are 
still not recovered, and we hopefully will be able to address 
that this year. It seems like they are coming together around a 
new policy. I agree with the Chairman when he says that part of 
what we have to do is just kind of get out of the way.
    Those of us on our side are also concerned about all of 
these regulations and rules that are being promoted by other 
agencies that are not in our jurisdiction. Some of them are, 
frankly, pretty ridiculous, and some of my farmers are getting 
pretty fed up with it.
    We look forward to working with our colleagues on the other 
side of the aisle to see what we can do. Unfortunately, a lot 
of it is not in our jurisdiction. I wish it was, so we could 
straighten it out.
    We are looking forward to working with the Majority to make 
sure that we continue to have a strong safety net, a strong 
farm bill to undergird agriculture. Today's hearing is a good 
place to start. We have a lot of new Members. This will help 
their education process.
    I remember when I started on the Committee many years ago, 
I was way down in the front and I didn't think I would ever see 
the top row. Some of you new guys are already on the top row so 
you are already ahead of the game. We have a lot of work to do, 
a lot of good Members, and I look forward to working with the 
Chairman and the other Members to make sure that we do the 
right thing for agriculture.
    I yield back.
    The Chairman. I thank the gentleman for his opening 
statement.
    The Chairman. We now turn to our panelist, the Honorable 
Tom Vilsack, Secretary, United States Department of 
Agriculture, Washington, D.C.
    Please begin when you are ready, sir.

STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY, U.S. DEPARTMENT 
                OF AGRICULTURE, WASHINGTON, D.C.

    Secretary Vilsack. Thank you, Mr. Chairman, and Members of 
the Committee. Thank you as well for the opportunity and 
invitation to discuss recent developments in and prospects for 
the farm economy.
    As we enter 2011, the farm economy continues to remain 
strong with U.S. agricultural exports, farm cash receipts, and 
net farm income projected at or above previous record levels. 
Farm household debt levels appear to have stabilized despite 
increasing land values. And while prospects generally look 
bright, recent sharp increases in prices for major crops are 
generating a range of concerns.
    My written statement describes the prospects and recent 
developments in output and input markets and the challenges and 
opportunities they present for U.S. agriculture. In the short 
time I have this morning, I would like to touch on a few of the 
broader trends.
    As you may know, recent data tells us that U.S. farm 
exports reached an all-time high in calendar year 2010. We saw 
a rise in both the value and volume of U.S. agricultural 
exports worldwide. Supported by foreign economic growth, 
particularly in developing countries, U.S. agricultural exports 
are again expected to be a record high in this fiscal year, up 
nearly $18 billion from Fiscal Year 2010, with the agricultural 
trade balance forecasted to be a record $41 billion.
    While we are pleased with these record numbers, we remain 
focused on continuing to open and improve markets for our 
producers. We know that every $1 billion in agricultural 
exports helps to support 8,000 jobs, and we want agriculture to 
continue to play a leading role in the President's National 
Export Initiative in helping to reach the goal of doubling 
exports over the next 5 years.
    The other big trend in exports is the increased importance 
of the Chinese market. The trade numbers just published show 
that for calendar year 2010, China was our number one export 
market, edging out Canada, and accounting for a little over 15 
percent of exports.
    Cash receipts and cash production expenses for producers 
are forecast to reach record levels in 2011; $341 billion and 
$274 billion respectively. Importantly, receipts are rising 
faster than expenses, so net cash farm income is forecast at a 
nominal record of $99 billion this year, up $7 billion from 
last year and nearly $30 billion more from 2009. After 
adjusting for inflation, this year and last year should be 2 of 
the highest income years producers have seen since 1976. So 
these are good times for American agriculture.
    But while all of agriculture experienced a robust recovery 
in 2010 and forecasted for 2011, expenses are also increasing, 
especially prices of farm origin inputs like livestock and 
feed, the price of energy, and operating costs.
    The livestock and dairy industries could face some 
financial pressure in 2011, and bear watching.
    At the same time, many small- and mid-sized operations have 
continued to struggle to earn substantial income from the farm. 
We need to be aware of this reality, and ensure that our work 
to expand domestic markets, in particular, helps them succeed. 
And as we discuss the safety net, we should make sure that we 
are maintaining a strong safety net for producers who need it 
most.
    On the whole, we are optimistic. The balance sheet of U.S. 
agriculture should continue to strengthen again in 2011. 
Consistent with recent trends, increases in debt are forecast 
to be offset by large increases in farm asset values. What is 
astonishing is that in 2 years the farm economy has essentially 
rebuilt the equity lost in 2009. And in 2011, the farm sector's 
debt-to-asset ratio should drop even further below last year's 
11.3 percent.
    Our nation's farmers and ranchers should be celebrated for 
this achievement. Their careful management of debt has played 
an important role in helping them make a strong and quick 
rebound from the financial crisis.
    Commercial banks across the country say loans are 
available, although standards are tight, and farmers are 
increasingly paying them back on time. Exceptions include 
regions dominated by livestock, milk, and poultry production. 
Last year, despite low interest rates, there was a lower demand 
for farm loans than in previous years. At the same time, 
capital spending was up, probably being financed with cash or 
non-bank credit. We hope to see this trend continue, especially 
as a result of the bipartisan tax deal reached in December 
which provides for 100 percent expensing of business 
investments like tractors and combines.
    Farm real estate values rose by an estimated three percent 
in 2010 to a record $1.8 trillion. We expect this trend to 
continue. While this benefits existing landowners, high real 
estate values make it difficult for individuals who may wish to 
enter farming, and increases operating expenses for individuals 
who rent farmland.
    I hope that, moving forward, we can work to confront this 
issue and others as we look to grow the next generation of 
farmers and ranchers and producers. This may mean a solution 
based on sweat equity or another way to provide credit to those 
who wish to farm in this country. But for the good of our 
environment, the quality of life we all enjoy, the relatively 
low cost of food, and for the American economy as a whole, we 
must keep farmland as farmland and farmers on the farm.
    To conclude, as we enter 2011, the U.S. farm economy is 
coming off unprecedented increases in U.S. agricultural 
exports, farm cash receipts, farm income, and asset values for 
the past few years. American agriculture is helping lead the 
recovery from the worst economic collapse since the Great 
Depression, and prospects for the coming year are generally 
bright.
    More normal weather and production increases worldwide 
should lead to improved supply-demand balance in key markets 
such as wheat, corn, and soybeans. With biofuel demand expected 
to continue growing, although at a slower pace in the future, a 
big challenge will be responding to that demand by developing 
new feedstocks, producing on more acres, and producing more per 
acre while protecting the environment.
    I have the utmost confidence, as I am sure the Committee 
Members do as well, that our farmers and ranchers and 
producers, along with assistance from USDA, will be able to 
meet these challenges.
    Mr. Chairman, that completes my statement. I would be happy 
to answer questions.
    [The prepared statement of Secretary Vilsack follows:]

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

    Mr. Chairman, Members of the Committee, thank you for the 
invitation to discuss recent developments in and prospects for the farm 
economy. As we enter 2011, the farm economy continues to remain strong 
with U.S. agricultural exports, farm cash receipts and net farm income 
projected at or above previous record levels. Farm household debt 
levels appear to have stabilized despite increasing land values. While 
prospects generally look bright, recent sharp increases in prices for 
major crops are generating a range of concerns. I will describe the 
prospects and recent developments in output and input markets and the 
challenges and opportunities they present for U.S. agriculture.

Agricultural Export Developments
    Despite modest domestic economic growth, economic growth, 
especially in less developed countries, and the reduced value of the 
dollar are likely to support global commodity demand, keeping pressure 
on global supplies and prices for a wide range of agricultural 
products.
    U.S. agricultural exports setting records. Supported by foreign 
economic growth particularly in developing countries and crop 
production shortfalls around the world, U.S. agricultural exports are 
expected to be record high this fiscal year. USDA's forecast for U.S. 
agricultural exports for FY 2011 is a record high $126.5 billion, up 
from $108.7 billion in FY 2010, and the previous record of $114.9 
billion in FY 2008. Imports, too, continue to grow and are expected to 
reach $85.5 billion this fiscal year compared with $79 billion last 
year. Nearly half of imports are horticultural products and another 
fifth are sugar and tropical products such as cocoa, coffee and rubber. 
This year, the agricultural trade balance is forecast to be a record 
$41 billion, up from $29.7 billion last year.
    Soybean and wheat exports are forecast to be up in volume and value 
because of less foreign competition due to adverse weather conditions 
in other countries. Corn exports are forecast up in value due to lower 
U.S. production and weather concerns in South America, while higher 
cotton export volume and value reflects tightening global stocks and 
strong Chinese demand. Livestock exports are forecast to rise as the 
volume and value of beef, pork and poultry exports increase. 
Horticultural exports are being helped by the decline in the value of 
the dollar.
    Canada is our number one agricultural export market, accounting for 
14 percent of expected exports this year. China has moved up to number 
two, also with a 14 percent share. Mexico is now number three with an 
expected 13 percent share followed by Japan at number four with a ten 
percent share and the European Union at number five with a seven 
percent share.

Farm Income and Retail Food Price Developments
    U.S. farm income consistently strong. Cash receipts for producers 
are forecast at a record $341 billion in 2011, up $28 billion from 2010 
and $57 billion from 2009. Cash production expenses are forecast to be 
a record $274 billion in 2011, up $20 billion from 2010 and $25 billion 
from 2009. With receipts rising faster than expenses, net cash farm 
income is forecast at a nominal record of $99 billion this year, up $7 
billion from last year and nearly $30 billion from 2009. After 
adjusting for inflation, 5 of the highest income years since 1976 have 
occurred during 2004-2011 (2004, 2005, 2008, 2010, and 2011).
    Cash receipts for both crops and livestock are forecast to reach 
new record highs in 2011. Crop cash receipts are forecast to reach $195 
billion in 2011, exceeding the previous record set in 2008 by $18 
billion. Cash receipts for corn, soybeans, cotton, and fruits and nuts 
are all expected to rise to all-time highs. Cash receipts for wheat 
will likely be up in 2011 but remain below the record level set in 
2008.
    Cash receipts from all livestock species are forecast to reach $146 
billion in 2011, exceeding the previous record by $4 billion. Receipts 
for cattle, hogs and poultry are all expected to set record highs. 
Dairy receipts are forecast to increase in 2011, but remain below 2007 
and 2008 levels. Government payments to producers in 2011 are expected 
to total $10.6 billion, down $1.6 billion from 2010. In 2011, producers 
are forecast to receive $4.7 billion in direct payments, $3 billion in 
conservation payments, $1.9 billion in disaster payments, and $0.8 
billion in tobacco transition program payments. With major crop prices 
forecast to be near or above previous record high levels in 2011, 
countercyclical payments and marketing loan benefits are projected to 
be only $20 million in the coming year.
    The $20 billion increase in cash production expenses since 2010 is 
mainly due to a $4 billion increase in farm origin inputs (livestock, 
feed), $6 billion more in energy-based input costs (fuel, fertilizer, 
electricity, and pesticides), and $6 billion more in other operating 
expenses. The year-over-year increase in feed expenses is projected to 
slightly exceed the increase in livestock cash receipts. If this 
occurs, livestock and dairy producers could be under added financial 
pressure in 2011.
    The balance sheet of U.S. agriculture is expected to strengthen 
again in 2011. Consistent with recent trends, increases in debt are 
forecast to be offset by larger increases in farm asset values. As a 
result, the farm sector's debt-to-asset ratio should drop further below 
last year's 11.3 percent in 2011.
    Retail food price inflation to remain modest. In 2010, the Consumer 
Price Index (CPI) for all food increased by 0.8 percent, the lowest 
annual food inflation rate since 1962. The CPI for food-at-home 
(grocery store) prices increased 0.3 percent, while food-away-from-home 
(restaurant) prices increased by 1.3 percent. Higher commodity and 
energy prices are expected to lead to a stronger increase in retail 
food prices in 2011. For 2011, the CPI for food is currently forecast 
to increase by two to three percent. During the previous spike in 
commodity and energy prices in 2007 and 2008, the CPI for food rose by 
an average of 4.7 percent over the 2 years. The Economic Research 
Service will update its forecast for the CPI for food for 2011 later 
this month.

Developments in Farm Output Markets
    Major crops: global supplies tight. For the 2010/11 marketing year, 
global demand is forecast to exceed global production causing global 
stocks of grains and oilseeds as a percent of use to fall and crop 
prices to rise. Global wheat production is forecast to decline by 5.5 
percent in 2010/11, due primarily to adverse weather and reduced output 
in Russia, Kazakhstan and Ukraine. For corn, increasing global use and 
lower production in the United States is forecast to lead to a 15.6 
percent decline in global ending stocks. And, weather-reduced soybean 
production in Argentina is projected to reduce global soybean stocks.
    For the United States, strong export demand for crops has supported 
above average farm income in recent years. Market fundamentals continue 
to look strong as growth in demand, limited carryover and weather 
concerns have contributed to rising prices for most major crops. U.S. 
carryover of corn, wheat, soybeans and cotton could all decline in 
2010/11 as total use is forecast to exceed production.
    Higher crop prices will likely lead to increased area seeded to 
major crops in the U.S. this spring and increased crop production this 
fall. Assuming normal rainfall over the spring and summer, production 
of major crops will likely be up in 2011, leading to some rebuilding of 
carryover and reduced pressure on crop prices.
    Corn carryover tight in 2010/11. Under nearly ideal planting 
conditions this past spring, corn producers planted 88.2 million acres, 
up from 86.4 million in 2009 and the second largest area planted to 
corn in more than 60 years. Despite the higher acreage, corn production 
dropped by five percent from last year to 12.4 billion bushels. Total 
corn use is forecast to reach a record 13.5 billion bushels in 2010/11, 
reflecting the expanding ethanol industry and continued strong global 
demand for corn. Stocks of corn at the end of 2010/11 marketing year 
are forecast to decline by 60 percent to 675 million bushels, resulting 
in the lowest stock-to-use ratio since 1995/96. The farm price of corn 
is forecast to average a record $5.05-$5.75 per bushel during 2010/11, 
compared with $3.55 per bushel in 2009/10 and the previous record of 
$4.20 in 2007/08.
    Corn acreage likely up in 2011. Corn planted area for 2011 is 
expected to increase as prices and returns have improved considerably 
in recent months. December 2011 futures prices for corn are currently 
more than $2 per bushel above the peak of December 2010 futures last 
February. Current cash prices are more than $3 per bushel above 
February 2010 levels. Given the current outlook for the 2010-crop corn 
and competing crop prices, corn planted area next spring could increase 
three to five percent from 2010. Higher plantings combined with a 
return to trend yields could lead to a record corn crop in 2011 and 
higher carryover stocks in 2011/12.
    Ethanol growth expected to slow. U.S. ethanol production capacity 
is now estimated at 14 billion gallons. Production capacity is expected 
to increase modestly over the coming 18-24 months. New construction 
could add 560 million gallons of additional ethanol production 
capacity, bringing total capacity to about 14.6 billion gallons.
    Most ethanol production in the United States currently uses corn as 
the feedstock. In 2010/11, 4.95 billion bushels of corn are expected to 
be used to produce ethanol, with ethanol use accounting for 37 percent 
of total use and 40 percent of corn production. In comparison, 4.57 
billion bushels of corn were converted into ethanol in 2009/10 
accounting for 35 percent of total use and 35 percent of corn 
production. In contrast to the increase in ethanol use of 382 million 
bushels between 2009/10 and 2010/11, corn ending stocks are projected 
to fall by over 1 billion bushels between the 2 crop years. These 
figures indicate that declining corn production is the primary factor 
contributing to the drop in corn carryover this year and the primary 
factor contributing to the recent increase in corn prices. Furthermore, 
each bushel of ethanol produced from corn yields byproducts, such as 
distiller dried grains, which substitute for corn and other feed 
ingredients in livestock rations.
    The profitability of producing ethanol from corn depends on the 
price of corn, the price of gasoline and the cost of converting corn 
into ethanol. The returns from producing ethanol from corn increase as 
the price of gasoline increases providing an incentive to expand 
ethanol production capacity and to use additional corn for ethanol 
production. If petroleum and gasoline prices move higher over the next 
several months, this will increase the demand for ethanol leading to 
additional corn being used for ethanol production.
    Soybean production down slightly in 2010/11. Soybean planted area 
remained essentially unchanged in 2010 but the average yield per acre 
fell slightly, causing soybean production to fall to 3.33 billion 
bushels, down one percent from last year's record production but still 
the second largest crop on record. U.S. soybean exports are expected to 
increase about six percent from last year's record to 1.6 billion 
bushels, reflecting lower production and reduced competition from South 
America and increasing U.S. exports to China. Meanwhile, soybean crush 
is forecast to decline by 5.5 percent as increasing availability of 
distiller dried grains and stable livestock production lower the demand 
for soybean meal. With lower production and little change in total use, 
carryover levels are forecast to decline seven percent from last year. 
The farm price of soybeans is forecast to average a record $11.20-
$12.20 per bushel for the 2010/11 marketing year, compared with $9.59 
last year and the previous record high of $10.10 in 2007/08.
    Soybean area forecast to increase slightly in 2011. U.S. soybean 
planted area is forecast to increase slightly in 2011. Current futures 
imply a soybean to corn price ratio of 2.2, slightly favoring corn over 
soybeans. However, rotational practices favor soybeans and strong 
soybean prices could encourage farmers to plant soybeans on cropland 
previously planted to rice, sorghum, barley and oats.
    Returns to biodiesel improve. Fifteen percent of 2010/11 soybean 
oil production is expected to be used to produce about 380 million 
gallons of biodiesel. Soybean oil is the feedstock for about 50 percent 
of domestically produced biodiesel. The amount of soybean oil used in 
biodiesel production fell by 17 percent in 2009/10 to 1.7 billion 
pounds, but is expected to increase to 2.9 billion pounds in 2010/11.
    Wheat acreage down, prices up in 2010/11. For 2010/11, wheat 
acreage continued its long term decline falling by nearly 6 million 
acres to 53.6 million, the lowest since 1970. U.S. wheat production is 
estimated at 2.2 billion bushels, essentially unchanged from the 
previous year as lower harvested acreage was offset by improved yields 
per acre. In 2010/11, favorable weather pushed the average yield per 
harvested acre to a new record high of 46.4 bushels per acre, up 1.5 
bushels from the previous record.
    Total wheat supplies for 2010/11 are estimated at 3.3 billion 
bushels, up from 3.0 billion bushels in 2009/10, with higher beginning 
stocks accounting for all of the increase. Higher forecast exports, 
reflecting lower production in competitor countries, could increase 
total use from 2.0 billion bushels in 2009/10 to 2.5 billion in 2010/
11, causing U.S. ending stocks to decline 16 percent to 0.8 billion 
bushels. The average farm price of wheat is forecast to average $5.60-
$5.80 per bushel in 2010/11, compared with $4.87 per bushel for the 
2009/10 crop and the record high of $6.78 in 2008/09.
    Wheat area to expand in 2011/12. Winter wheat seeded area this past 
fall totaled 41.0 million acres, up from 37.3 million acres the 
previous year. Despite the recovery in area, wheat production could be 
down in 2011 as yield per acre drops off from last year's record high. 
Current winter wheat conditions on the Central and Southern Plains are 
not as favorable compared with this time a year ago, because of the 
lack of soil moisture. A much higher percentage of the winter wheat 
crops in Kansas, Oklahoma and Texas are currently rated poor to very 
poor than 1 year ago.
    Cotton area and production up as prices increase. In 2010/11, 
cotton producers responded to improved returns by increasing planted 
area by 20 percent. The area planted to cotton, 10.97 million acres, 
was the highest in 4 years. Cotton area increased across each region of 
the Cotton Belt in 2010. Higher plantings, reduced abandonment and 
improved yields are projected to increase cotton production to 18.3 
million bales in 2010/11, up 50 percent from the previous year and the 
highest in 3 years.
    U.S. cotton use for the 2010/11 season is forecast at 19.35 million 
bales, 25 percent above last season. U.S. mill use is forecast to 
increase slightly while U.S. exports are forecast to increase by nearly 
\1/3\. With larger U.S. exportable supplies available this season and 
foreign import demand rising, U.S. cotton exports are forecast to 
increase to their second highest level on record. U.S. ending stocks 
are forecast to drop to 1.9 million bales in 2010/11, the lowest since 
1924/25. Reflecting the low level of stocks, cotton prices have 
remained relatively high through the early months of the current 
season. The 2010/11 farm price is forecast to average 79--84 cents per 
pound, up from last season's price of 62.9 cents and the previous 
record high of 76.5 cents in 1995/96.
    More cotton area in 2011/12. Rising cotton prices will likely 
attract additional acreage back to cotton production in the United 
States, despite improved returns for corn and soybeans. Cotton planted 
area in the United States could increase as much as 10-15 percent in 
2011. Improved returns could lead producers to plant cotton on cropland 
previously planted to sorghum, rice and other crops as well as 
producing cotton on cropland previously left unplanted due to low 
returns.
    Rice production up, prices moderate. For 2010/11, rice planted area 
increased to 3.64 million acres, up from 3.14 million acres the 
previous year, and the second highest on record. Total rice production 
is up about 11 percent from last year to a record 243 million cwt. 
Total use is forecast to increase by five percent in 2010/11, 
reflecting improvements in both domestic use and export prospects. 
However, the strong increase in production is expected to lead to a 
sharp increase in ending stocks, despite higher total use. U.S. ending 
stocks are projected at 52.8 million cwt. for 2010/11, up 44 percent 
from last year. The farm price of rice is forecast to average $12.15-
$12.65 per cwt. in 2010/11, down from $14.40 per cwt. last season.
    Sugar market remains tight. World and U.S. sugar prices have 
remained high, as potentially tight global supplies continue to weigh 
on the market. In mid-December, Florida's sugarcane producing region 
experienced a severe freeze. According to processor reports, this 
freeze resulted in widespread damage to existing sugarcane crops 
awaiting harvest and recently planted sugarcane meant for harvest next 
year. Nearly all of Australia's sugarcane production is in the 
Northeast. That region received very heavy rainfall in November and 
December damaging that country's sugarcane crop.
    U.S. sugar production for 2010/11 is currently estimated at 8.01 
million short tons, up from last year's crop of 7.97 million tons. With 
import quotas for sugar set at the minimum amount to which the United 
States is committed under the WTO for 2010/11, U.S. sugar imports are 
forecast to fall to 3.25 million tons, down from 3.32 million tons last 
season. U.S. sugar ending stocks are projected to decline about ten 
percent to 1.35 million tons resulting in a stock-to-use ratio of 11.8 
percent, down from 13.3 percent last year.
    Specialty crop sales stabilize. In 2011, specialty crops will 
continue to provide a significant source of cash revenues for U.S. 
producers. Cash receipts for fruits, nuts, vegetables and melons in 
2011 are forecast at $41 billion, unchanged from 2010. Higher cash 
receipts for fruits and nuts are expected to be more than offset by 
lower receipts for vegetables and melons.
    Livestock & livestock products: U.S. production and prices stable. 
Total U.S. production of meat and poultry is forecast to remain stable 
in calendar year 2011, with slight growth forecast in supplies of pork 
and poultry but reduced supplies of beef. Stable production, increased 
exports and some recovery in domestic demand should help maintain 
livestock prices near last year's historic highs.
    For livestock and poultry producers, increasing feed costs will be 
an important component of producer production decisions in the upcoming 
year. In January, the price-feed cost ratios for cattle, broilers, hogs 
and milk, as reported by NASS, were all well below year ago levels. 
While livestock prices are expected to remain strong and further 
improvement in milk prices is likely in the months ahead, higher feed 
costs could lead to below average margins for livestock and dairy 
producers in 2011.
    Cattle prices forecast record high. Commercial cow slaughter 
maintained a high pace during all of 2010. Cow slaughter was the 
largest in well over a decade, even though the U.S. cow herd on January 
1, 2010 was the smallest since 1951. While cattle marketings for the 
last half of 2011 are expected to be lower year-over-year, net 
placements in feedlots during 2010 will likely maintain beef supplies 
during the first half of 2011 near previous year levels. For all of 
2011, beef production is currently forecast to decrease 1.5 percent, 
following a 1.4 percent increase in 2010. Steer prices are expected to 
average a record $102-$109 per cwt. this year, compared with $95 per 
cwt. in 2010.
    Total North American cattle inventories are at their lowest levels 
in decades. With smaller Canadian and Mexican inventories expected in 
2011, U.S. cattle imports are forecast at 2.1 million head for the 
year, down from 2.3 million in 2010.
    Pork production to increase slightly. Pork production in 2011 is 
estimated to increase by 0.4 percent after falling by 2.4 percent in 
2010. While hog prices were up 34 percent in 2010 and are expected to 
average higher in 2011, increases in feed costs are expected to temper 
expansion over the next several months. The Quarterly Hogs and Pigs 
report released by USDA on December 27, 2010, showed lower swine 
inventories and lower farrowing intentions for the first half of 2011. 
During the first-half of 2011, sow farrowings could be about 1.4 
percent lower than in the same period last year.
    While smaller breeding animal inventories and lower farrowing 
intentions often translate into lower pig crops, continued gains in sow 
productivity are expected to largely offset lower farrowing numbers in 
2011. Moreover, continually improving swine genetics and enhanced 
nutrition management practices are expected to continue to move average 
dressed weights slightly ahead of last year's average, helping to push 
pork production slightly ahead of last year's level. Hog prices are 
forecast to average $58-$61 per cwt. in 2011, up from $55 in 2010 and 
$41 in 2009.
    Broiler production to post modest increase in 2011. The outlook for 
growth in broiler meat production for the beginning of 2011 has changed 
considerably over the last several weeks, due to sharp changes in both 
the weekly number of broiler eggs placed in incubators and the number 
of chicks being placed for growout. At the end of November, the number 
of chicks being placed for growout was averaging 5.5 percent higher 
than the previous year. By the first week of January, the average 
number of chicks placed for growout was only 0.8 percent higher than in 
the same period the previous year. This abrupt slowdown is likely the 
result of sharp increases in feed prices, especially coming at a time 
when wholesale prices for many broiler products have been declining. 
Reflecting this slowdown, broiler production is projected to increase 
by about one percent in 2011 following a four percent increase in 2010. 
The price of broilers is forecast to range from 80-85 cents per pound 
in 2011, compared with 83 cents in 2010 and 78 cents in 2009.
    Milk prices to move higher. Milk production is estimated to 
increase by 1.8 percent in 2011 to 196.1 billion pounds. While feed 
costs are up considerably in recent months, a decline in cow numbers 
may not occur until later this year because of the large number of 
replacement heifers available. Milk per cow is forecast to increase 
again this year but at less than the pace for 2010. The gain in output 
per cow last year was due to good weather in addition to moderate feed 
prices.
    In recent weeks, both the domestic and international markets for 
dairy products have tightened considerably leading to a sharp increase 
in wholesale dairy product prices and futures prices for milk. Milk 
output has been affected by cold weather in the U.S. and Europe and 
heavy rains in New Zealand and Australia. Since early January, the 
wholesale prices of cheddar cheese, butter and nonfat dry milk have 
increased by 25-50 percent.
    The all-milk price is forecast to average $17.70-$18.40 per cwt. 
this year, compared with $16.29 in 2010 and $12.93 in 2009. While milk 
prices are forecast to be higher in 2011, increasing feed costs could 
continue to put financial pressure on dairy producers, especially those 
producers that purchase feed at current price levels.

Developments in Farm Credit and Land Markets
    Credit conditions appear to be improving. Third quarter 2010 
Federal Reserve Bank surveys indicate moderately improving farm credit 
conditions nationwide. Commercial banks across the country indicated 
ample availability of loan funds, increased loan repayment by farm 
borrowers, increased farm incomes, and fewer requests for renewals and 
extensions than in 2009. Exceptions include regions dominated by 
livestock, milk and poultry production which indicated slightly 
worsening farm credit conditions.
    Banks in all Federal Reserve Bank districts reported lower demand 
for farm loans in 2010, despite historical lows for farm interest 
rates. Capital spending was up, especially for larger items (100-HP 
tractors and combines). The increased capital spending and reduced loan 
demand suggests that these items were being financed with cash or non-
bank credit.
    While farm incomes and credit conditions showed improvement in 
2010, Federal Reserve Bank surveys indicate credit standards for banks 
remain tight. Bankers in all regions except the Kansas City Federal 
Reserve District reported increased collateral requirements on farm 
loans.
    Farmland costs move higher. The value of farm real estate rose by 
an estimated three percent in 2010, to a record $1.8 trillion. Strong 
prices for major crops and record farm income will likely cause the 
value of farm real estate to move higher in 2011. Farm real estate 
accounts for 84 percent of total U.S. farm assets and is the principal 
source of collateral for farm loans. While a benefit for existing 
landowners, high farm real estate values make it difficult for 
individuals who may wish to enter farming and increases operating 
expenses for individuals who rent farmland.

Conclusion
    As we enter 2011, the U.S. farm economy is coming off unprecedented 
increases in U.S. agricultural exports, farm cash receipts, farm 
income, and asset values the past few years. Prospects for coming year 
generally look bright. More normal weather and production increases 
worldwide should lead to improved supply-demand balance in key markets, 
such as wheat, corn and soybeans. With biofuel demand expected to 
continue growing, although at a slower pace in the future, a big 
challenge will be responding to that demand by producing on more acres 
and producing more per acre while protecting the environment. I have 
the utmost confidence that our farmers and ranchers along with the 
assistance of USDA will be able to meet these challenges.
    Mr. Chairman that completes my statement.

                                                                       Attachment
                                                                Farm Economic Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
 Ag. Trade (Bil. $)              FY03                 FY04         FY05         FY06         FY07         FY08         FY09         FY10        FY11F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total exports         56.0                               62.4         62.5         68.6         82.2        114.9         96.3        108.7        126.5
Asia                  21.6                               24.3         22.5         24.9         29.4         43.2         37.6         45.7         54.8
Canada                9.1                                 9.5         10.4         11.6         13.3         16.3         15.5         16.6         18.0
Mexico                7.7                                 8.4          9.3         10.4         12.3         15.2         13.3         13.9         16.0
Total imports         45.7                               52.7         57.7         64.0         70.1         79.3         73.4         79.0         85.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farm Income (Bil. $)             2003                 2004         2005         2006         2007         2008         2009        2010F        2011F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash receipts         216.0                             237.9        240.9        240.6        288.5        318.3        283.4        312.3        340.7
Gov't payments        16.5                               13.0         24.4         15.8         11.9         12.2         12.3         12.2         10.6
Gross cash income     246.8                             266.5        279.7        273.2        318.0        352.0        317.6        345.6        372.5
Cash expenses         174.7                             182.9        193.1        204.8        240.3        261.6        248.5        254.2        273.9
Net cash income       72.1                               83.7         86.7         68.4         77.7         90.4         69.1         91.3         98.6
--------------------------------------------------------------------------------------------------------------------------------------------------------



  Commodity Prices 1              Unit              2003/04      2004/05      2005/06      2006/07      2007/08      2008/09      2009/10      2010/11F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Wheat                   $/bu                             3.40         3.40         3.42         4.26         6.48         6.78         4.87    5.60-5.80
Corn                    $/bu                             2.42         2.06         2.00         3.04         4.20         4.06         3.55    5.05-5.75
Soybeans                $/bu                             7.34         5.74         5.66         6.43        10.10         9.97         9.59  11.20-12.20
Rice                    $/cwt                            8.08         7.33         7.65         9.96        12.80        16.80        14.40  12.15-12.65
Cotton (Upland)          cents/lb                        61.8         41.6         47.7         46.5         59.3         47.8         62.9    79.0-84.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      2004         2005         2006         2007         2008         2009         2010        2011F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hogs                    $/cwt                           52.51        50.05        47.26        47.09        47.84        41.24        55.06        58-61
Steers                  $/cwt                           84.75        87.28        85.41        91.82        92.27        83.25        95.38      102-109
Broilers                 cents/lb                        74.1         70.8         64.4         76.4         79.7         77.6         82.9        80-85
Milk                    $/cwt                           16.13        15.19        12.96        19.21        18.45        12.93        16.30  17.70-18.40
Gasoline                $/gallon                         1.85         2.27         2.58         2.81         3.26         2.35         2.78         3.15
Diesel                  $/gallon                         1.81         2.40         2.70         2.88         3.80         2.46         2.99         3.43
Natural gas (wlhd)      $/K cu. ft.                      5.45         7.26         6.39         6.26         7.98         3.72         4.14         3.97
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Agricultural commodity price forecasts are from USDA, World Agricultural Supply and Demand Estimates report, February 9, 2011. Energy prices are from
  Energy Information Administration, Short Term Energy Outlook, February 8, 2011.
F=forecast.


    The Chairman. Thank you, Mr. Secretary.
    Mr. Secretary, you rightly point out that the farm economy 
continues to remain strong. I am concerned about stability. 
Over the last 62 years, which is a little longer than both your 
and my personal frame of reference, the nominal monthly, 
average price for wheat in my home State of Oklahoma, has 
reached a historic high on 21 occasions; 21 months out of 62 
years. In all but one of those instances, the price dropped 
back below that high within the following year. And the one 
exception was December of 1950 when it took 18 months to fall 
back below that high. Are you concerned about the price 
stability in the commodities?
    Secretary Vilsack. Mr. Chairman, I think you always should 
be concerned about stability for the reasons that you have 
articulated in your question. Having said that, one of the 
things that is driving the current increases in prices is the 
growing global demand. And that in part is as a result of 
improving global economic conditions and the development of 
middle classes in a number of developing nations.
    So the combination of that, combined with our efforts and 
others, to try to increase agricultural productivity, not just 
in the United States but globally, to meet the demands that you 
again rightly indicated in terms of an increasing world 
population, the combination of those two things should help us 
encourage greater stability in the market.
    The Chairman. Mr. Secretary, I will admit that I am a 
little concerned about the effect that weather patterns in 
Russia and China and not enough moisture, and too much moisture 
in Australia, are having on the attitudes of the markets and 
current prices.
    My question is to follow up on basically what you have 
said: So you believe we have reached a new plateau based on 
this demand change?
    Secretary Vilsack. Well, one thing that I know that is 
certain about agriculture, Mr. Chairman, is that there is a 
great deal of uncertainty. I think you always have to be wary.
    Another reason for my confidence generally is that I think 
there are extraordinary productivity gains that will continue 
to be developed from improved production processes and improved 
science. So while we have serious challenges, the challenge 
that I am most concerned about isn't so much price stability as 
it is who is actually going to be on the farm to produce the 
crops that are necessary.
    You mentioned the small number of farmers; and in our 
lifetime, we have gone from 15 percent of our population being 
on the farm to now less than one percent. So that is a deep 
concern that I have in terms of who is actually going to be 
able to do the work.
    The Chairman. Secretary, let's visit for a moment about the 
Administration's budget proposal for agriculture in justifying 
the lower AGI threshold and their proposal for reducing direct 
payments. There was a quote in, I believe it was Reuters News 
Service, referencing an Administration official who said direct 
payments, ``distort production and drive up the value of 
farmland.''
    Do you agree with that statement, Mr. Secretary?
    Secretary Vilsack. The proposal we made, Mr. Chairman, is 
one, that we have consistently made and we have discussed 
before, and that is the view that the safety net needs to be 
directed to the people who are in need of it most. What we are 
proposing impacts roughly two percent of farmers, roughly 
30,000 of the 2.1 million producers in this country. It is 
really designed in response to the economic reality we face. 
When the farm bill was passed in 2008, the economy was in a 
much different place than it is today, and we all recognize 
that we have a responsibility to focus on deficits, and 
everyone is going to have to share in that responsibility.
    The Chairman. As the Committee crafts a 5 year farm bill 
policy which has to take into consideration not just the good 
times at this point in time, but where we may be 5 years down 
the road, and we have to factor in our international trade 
obligations under the WTO, I guess I come back just one more 
moment to this direct payment question. Do you believe that the 
direct payments actually distort production decisions in the 
way that they are crafted to be independent of the production 
process right now?
    Secretary Vilsack. Well, given the size of the direct 
payments, I am not sure that I would necessarily suggest that 
it is market-distorting. I am not quite sure who made that 
comment. It didn't come from me, and I don't believe it came 
from USDA. I think there are some very small programs within 
the farm bill that involve storage, that one could potentially 
argue have some capacity to alter market decisions, but I don't 
believe that applies necessarily to direct payments.
    The Chairman. I can't necessarily speak for all of the 
regions of the country, but in my home area, wheat country, on 
a $1,500 piece of land, the direct payment is something like 
$15, one percent. We have debated whether that is relevant or 
not. It seems like one percent----
    Secretary Vilsack. Mr. Chairman----
    The Chairman. Please.
    Secretary Vilsack. I thought this whole discussion was 
succinctly stated at a Farm Bureau meeting I attended in 
Atlanta. I think what we have to decide, and I mean ``we'' 
collectively, what we have to decide is whether or not we want 
a safety net process that provides a small amount of payments 
over each year, regardless of whether it is a great year, bad 
year, or middle year, or whether we really want to take a look 
at some other concept that would provide for much greater help 
when you absolutely need it.
    And I think there is an ongoing conversation about 
appropriate risk management tools, and I look forward to 
working with the Committee as you all craft a farm bill to try 
to hone in on that particular question. I think it is an 
important one.
    The Chairman. You are entirely right, Mr. Secretary. And as 
we craft those policy decisions, we have to craft decisions 
that will enable us to win fights in the WTO court. I may not 
have voted to join the GATT in 1995, but we are a part of it 
and we will have to live with it.
    I now turn to the Ranking Member for any questions he may 
have.
    Mr. Peterson. Thank you, Mr. Chairman.
    Mr. Secretary, I think I read yesterday or the day before 
some kind of report out of your Dairy Industry Advisory 
Committee. Are they done with their report or was that--I don't 
know where I read it, but there was a discussion about some 
consensus. Where is that process and when are they going to do 
a final report?
    Secretary Vilsack. Representative, we anticipate a report 
the first week of March. They have finished their meetings, and 
they are in the process of finalizing the draft of the report.
    While the reality is that this committee and this council 
represented virtually every interest in dairy, and as you well 
know, those interests are quite varied, there was a great deal 
of agreement. I wouldn't say there was unanimous consensus with 
the committee and council, but there was a good deal of 
agreement.
    I think this is a real opportunity for us this year to work 
with those who have been working on a variety of different 
ideas in dairy so that we can perhaps, in this part of 
agriculture, create far greater price stability and far less 
volatility than we have seen. We have lost roughly 45 percent 
of our dairy producers in just the last 10 years, and part of 
it is the peaks and valleys are steeper, they come quicker, and 
it is much more difficult for people to rebound.
    Mr. Peterson. I assume this group has been following the 
National Milk Producers Federation's Foundation for the Future 
discussion, and that is part of their focus as they have gone 
through this?
    Secretary Vilsack. There has been an awareness of what 
National Milk Producers Federation has put together, the four-
point plan that you are well aware of, and the discussions that 
took place in the council certainly tracked along the lines of 
what National Milk Producers Federation was looking at. Again, 
I am not going to suggest there was complete unanimity 
concerning what National Milk Producers Federation has 
proposed. But there is a basis, a strong foundation, and a 
consensus among dairy generally that this is the time to do 
something. Despite the fact that we are seeing rebounding 
prices, I think everyone knows that we can't afford this 
continued volatility.
    Mr. Peterson. I assume that group has come to the 
conclusion that most people who have looked at this think, and 
that is the current system is not working. It is just 
inadequate to address the problems. I feel like we really can't 
afford to wait for the farm bill to address this, if it is 
possible. I am concerned about what could happen in the 
interim.
    What is your feeling on that? Do you think we should be 
moving sooner rather than later if we can get a consensus?
    Secretary Vilsack. We are certainly willing to work with 
whatever the wishes of the Committee are. I would answer it 
this way. Given the tremendous drop that occurred in a 
relatively short period of time since 2008, I think it behooves 
us to really look at a solution as quickly as possible so that 
we have the best chance of stabilizing and broadening the price 
band. Especially since there appears to be energy and focus in 
the industry on this, I don't think you would necessarily want 
to lose that focus and that energy if it gets wrapped up into a 
much broader conversation involving the farm bill generally.
    Mr. Peterson. You announced a new CRP sign-up, I believe, 
in Pheasants Forever; right?
    Secretary Vilsack. I did.
    Mr. Peterson. That is going to take place when?
    Secretary Vilsack. I think it is next month.
    Mr. Peterson. By the way, I have handed out to some of you, 
but this is the 25th anniversary of CRP, which I would argue is 
the most successful conservation program we have ever had, and 
I have pens here if anybody wants one.
    In the last sign-up do you have any tracking information--
and my general sense is what is coming out is land that is 
probably more suitable to be farmed and what is going in is 
maybe stuff that shouldn't be farmed. That seems to be what is 
going on. Do you have a way to track what came out last year, 
if that all went back into production? Is there a deal now at 
the Department where you are able to determine that?
    Secretary Vilsack. I am not sure that we can pin it down to 
the specific acre, but your observation is accurate, which is 
that a lot of the land that was put into the program a number 
of years ago perhaps is better suited for crop production. And 
what is going into the program, because of the nature of the 
program and the nature of the scoring system, is 
environmentally sensitive and land that actually probably ought 
not to be farmed. And our expectation/anticipation is that we 
will be very close to the cap that was established of 32 
million acres.
    I have been told we don't actually track specific 
production, so I am not sure that we can answer the specific 
question of what goes in and what goes out. But I can assure 
you that we are focused on land that is environmentally 
sensitive and not likely to be particularly productive--or as 
productive.
    Mr. Peterson. Thank you, Mr. Secretary, and Mr. Chairman.
    The Chairman. The chair now recognizes the gentleman from 
Illinois, Mr. Johnson, for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman. And thank you for 
your initiative in convening this hearing. And thank you, Mr. 
Secretary, for your attendance here.
    By the way, the Ranking Member has indicated to me, in 
light of the fact that we haven't gotten a COLA increase for 
the last 2 years, that these are on sale through the Peterson 
office for, what, $5 for ten. I am only kidding. They are nice 
pens, and a wonderful tribute to a great program.
    Let me say that some of my comments I am going to actually 
reserve. I realize you are not Lisa Jackson nor her surrogate. 
I think I speak for Members of this Committee, and I certainly 
speak for the people of the 15th District of Illinois when I 
would advocate very strongly that you, Mr. Secretary, as part 
of the Administration, convey to Ms. Jackson, the 
Administrator, that her actions as EPA director are causing 
literal havoc within the agricultural community and we need to 
get that raging bull by the horns before it destroys American 
agriculture. That is simply a preface, and I realize you are 
not responsible for her actions, but you are part of an 
Administration that shares a President. My hope is that you can 
play a role as our advocate in that regard.
    Let me say, I think you pointed out to begin with, an 
extraordinarily important point, and that is while we are 
seeing an increase in prices and that times are good, that 
doesn't mean in 6 months or 9 months or 2 years that we might 
not see the converse. And I am particularly concerned with some 
of the proposals in the President's budget that might not 
reflect that we are locking permanent changes into the budget 
that might not anticipate those times that inevitably come 
within the ag community.
    Would you agree we always face a degree of instability, and 
before permanent changes are made, those should reflect the 
likelihood or lack of likelihood of that volatility?
    Secretary Vilsack. Representative, agriculture is subject 
to change. There are a lot of factors that go into whether or 
not it is a good year or not.
    But at the same time, we have to be flexible enough in the 
21st century to be able to respond to circumstances more 
quickly than perhaps we have in the past.
    Mr. Johnson. I guess my narrow question is: Do you think 
that the President's proposal with respect to direct payments, 
crop insurance, conservation cuts, and restoring SNAP money in 
the President's budget proposal reflects that volatility; or do 
you not?
    Secretary Vilsack. I believe it does. The direct payment--
--
    Mr. Johnson. I only have 2 minutes. I just wanted a yes or 
no. I don't agree with you. I don't think it does reflect that. 
But I asked you the question, and you gave the answer.
    Let me focus on trade for a moment. We have three pending 
trade agreements: one, Korea signed in June of 2007; one with 
Panama in June of 2007; and one with Colombia in November of 
2006. This is from your own Department, Mr. Vilsack.
    The belief is that failure to ratify the Korea Free Trade 
Agreement would put our exporters at a tremendous competitive 
disadvantage, specifically with the EU, with respect to 
livestock and otherwise; that failure to execute the Panama 
agreement would erode from 51 percent to only a fraction of 
that given our competition from Costa Rica, Chili, El Salvador 
and other countries that have those agreements. And last, the 
Colombia Free Trade Agreement which Speaker Pelosi refused to 
bring before the Chamber, the U.S. has already paid a huge 
price for that. Our agricultural imports fell from 44 percent 
in 2007 to 27 percent in 2009.
    My question is: Are you willing to advocate on behalf of 
these three agreements, first, with the Administration to get 
them to get the paperwork to us; and then second, with the 
House and the Senate to see ratification of those three 
agreements?
    Secretary Vilsack. I look forward to making a strong effort 
in the Korea Free Trade Agreement which I hope will be before 
this body very soon.
    There are still a few details that have to be worked out on 
Colombia and Panama; and when they are, I will be more than 
happy to be supportive of them because of the positive impacts 
those agreements will have on agriculture.
    Mr. Johnson. My question is: Will you commit to a specific 
time frame by which the Administration will have those to the 
Congress and also lobbying on their behalf?
    Secretary Vilsack. Well, I am happy to advocate on behalf 
of the agreements; but I don't know that it is necessarily my 
call to commit the Administration to a specific time frame.
    Mr. Johnson. But you would agree that ratification of these 
three agreements which have been pending for up to 5 years are 
critically important to American agriculture as we try to meet 
the objective of meeting a double demand in the world food 
consumption by 2050.
    Secretary Vilsack. I think trade agreements, both bilateral 
and multilateral, are extremely important, as well as breaking 
down barriers. That is one of the reasons why we are seeing a 
record export year. We are focused on that, and we will 
continue to be focused on that.
    Mr. Johnson. Well, I am taking that, and I assume other 
Members of this Committee are talking that to be--and we 
appreciate your commitment to advocate on behalf of these 
agreements, to lobby on their behalf, and make sure that they 
are ratified.
    The Chairman. The gentleman's time has expired.
    I turn to the gentleman from Pennsylvania, Mr. Holden, for 
5 minutes.
    Mr. Holden. Thank you, Mr. Chairman.
    Mr. Secretary, as you know, in the last farm bill, we 
established a conservation program for the producers in the 
Chesapeake Bay watershed. And I want to commend you and Chief 
White and the Department for the way you have implemented that 
program. You have done a great, outstanding job. But despite 
this record-setting investment, we are facing an Executive 
Order from the President that will put further regulations and 
rules on our producers. And in the last Congress, Mr. Goodlatte 
and I tried to work on legislation that would give USDA a 
larger say in implementing this Executive Order, and we 
continue to work on legislation in this Congress. We are just 
not ready to introduce it yet.
    But my question is: In the interim, lacking guidance from 
the Congress, have you and your Department had ongoing 
conversations with the EPA about how they intend to implement 
the Executive Order in the watershed?
    Secretary Vilsack. We have, Representative, and a couple of 
things. We are working closely with the EPA, as we did with the 
Department of the Interior, to see whether or not there is some 
process by which we can use the resources available to USDA to 
encourage conservation in exchange for producers embracing 
those conservation practices. They would receive some degree of 
regulatory certainty from the EPA and other agencies.
    I think this an exciting new opportunity for us. We have 
done this in the sage grouse issue out in the West, and we are 
looking at ways to figure out ways to build on that success.
    Mr. Holden. I am glad to hear it. I think we need to get 
you some legislation, though, to give you some greater 
authority, and we intend to work on that in the very near 
future.
    Actually, Mr. Secretary, last year we passed the mandatory 
electronic price reporting for dairy. How is that process 
going?
    Secretary Vilsack. Well, Congressman, you passed it, but 
you didn't provide any resources for it. So what we have done 
is we have attempted to figure out is there a way in which we 
can provide some degree of reporting. There are two functions 
here. There is the reporting function and then there is the 
auditing function. We think we will be able to do something 
this year on just basic information being provided on a weekly 
basis. I think what you really want ultimately is numbers that 
you are very confident in, and that requires the auditing 
function. That is a much more expensive operation. If we 
receive the resources, we would be happy to follow through.
    Mr. Holden. How much money are we talking about for full 
implementation?
    Secretary Vilsack. I think the projection was $2.5 million. 
That is my memory. I could be wrong, but it is somewhere in 
that neighborhood.
    Mr. Holden. Thank you. I yield back the balance of my time.
    The Chairman. The chair now recognizes the gentleman from 
Pennsylvania, Mr. Thompson, for 5 minutes.
    Mr. Thompson. Thank you, Mr. Chairman, Ranking Member. And, 
Mr. Secretary, it is always good to see you.
    My first question has to do with forestry and just seeking 
to see what numbers are out there. My frame of reference, 
obviously, is the Allegheny National Forest. I was curious on a 
national level if what my experience has been in the ANF 
parallels forestry, our national forests across the country in 
terms of timber production. The plan in the Allegheny National 
Forest, the management plan calls for harvesting up to 90 
million board feet. That is a pretty high number, a good 
number. Traditionally, we have been struggling with about 20 
million, although this year the forest is up to 40 million 
board feet. Just about 40. It is a step in the right direction.
    We have a long ways to go to get up to good, full, healthy 
practices where we can harvest in a sustainable way, which is 
obviously good for the forest as well. In your opinion, do we 
have data to show, do other forests have similar experiences?
    Secretary Vilsack. I think it is fair to say that over 
time, the amount of board feet has been reduced. But we are in 
the process of putting together a new forest planning rule 
which we think is designed to balance appropriately all of the 
multiple uses that forests are now engaged in. There are the 
energy issues, the mineral extraction issues, the forest timber 
issue, the recreation, and the energy issue is one that I think 
holds a tremendous amount of opportunity to create new economic 
opportunity in rural communities.
    The forest plan rule was just released for comment. We are 
engaged in the most transparent process ever in an effort to 
try to gauge as much support for this concept as possible. It 
is a whole landscape approach where we are tying what we do 
with the forest, with what we do on private working lands. And 
we are also sort of changing the focus on this. We really want 
our forests to be resilient.
    As you probably know, in some parts of the country there 
are serious problems with bark beetle infestations and things 
of that nature. I think you are going to see a balanced 
approach and recognizing the enormous economic opportunities as 
well as recreational opportunities that our forests present.
    Mr. Thompson. Recognizing its multiple uses, although 
frankly when I look at the charters with the ANF, it really is 
about providing sustainable resources for the country, and so 
timber, oil, natural gas, and minerals. I know that bumping to 
that 40 million board feet, a small part of that was the 
clearing of timber for oil and natural gas drilling. Our forest 
was oil-filmed before it was ever a forest years ago, so that 
has helped get those numbers up.
    One of the things that I was surprised to find out, and 
this is something that I would like to follow up more on at 
another time, is that those timber sales, which are usually bid 
at market price--if a timber sale is specific to oil or natural 
gas, those pad sites, 5 to 10 acres if it is a horizontal well, 
and less than that obviously if it is vertical well, the Forest 
Service puts a 17 percent premium on. It is like a 17 percent 
tax on top of the market price, which I have to believe 
obviously suppresses the market for that timber, those who are 
bidding on it. One of the things I would like to find out, what 
is the rationale behind that, a 17 percent premium on top of 
the market bid?
    Secretary Vilsack. If you will give me an opportunity to 
ask that question myself, I will be glad to get you the answer.
    Mr. Thompson. That would be great. If you follow up with 
me, I would appreciate it.
    I want to thank you in my remaining time regarding the 
ruling with the Roundup Ready' alfalfa. I was 
pleased to see that. I think that has really provided some 
certainty at a proper time for our farmers as they are ordering 
their seed for this year. That Roundup Ready' 
alfalfa, I don't think that it is a USDA figure, but a third 
party has shown that it is going to help increase profitability 
by about $100 an acre. When it comes to dairy farming, anything 
that we can do on that side of the column is a good thing.
    Are there other things that USDA is looking at in terms of 
helping to prevent the situation, to keep feed costs down?
    Secretary Vilsack. Well, it is obviously in part a result 
of market forces and the demand, strong demand for all of our 
feed. There is not a tremendous amount we can do to focus on 
the cost side. We can create opportunities to either increase 
markets so the prices remain strong through exports and 
domestic use, or we can provide opportunities through our 
credit process. We are focused on increasing research and 
development in both livestock production and protection, so we 
expand significantly our opportunities to profit. And we are 
also working, as you probably know, on some of the impacts of 
ethanol production and the feed by-products that are produced 
as a result of that process and how they might be able to 
assist us in sort of stretching our feed dollar more 
effectively. But on that side of the equation, it is a little 
bit more difficult than it is on the demand side.
    Mr. Thompson. Thank you very much, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    I now turn to the gentleman from North Carolina, Mr. 
Kissell, for his 5 minutes.
    Mr. Kissell. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being here.
    Mr. Secretary, I believe it was in December you announced 
in the GIPSA rule that you were going to have a cost-benefit 
analysis done. I am wondering what the timeline on that 
analysis might be. And also, once it is done, are you going to 
allow a time for public comment before the rule is imposed?
    Secretary Vilsack. Well, we extended the time for comment 
prior to that decision, and we received a substantial number of 
comments which are in the process of being categorized and 
reviewed. Those comments are going to help significantly inform 
what Joe Glauber and his team will do in terms of the analysis. 
You know, I would like to give you a specific time frame; but 
at the end of the day, my instructions to Joe and his team was 
to do it right and to take the time necessary to do it right 
and as complete as possible. We believe we have a pretty good 
idea of the concerns that people have raised from the comments, 
and we are obviously anxious to get this process completed as 
appropriately and as quickly as possible.
    Mr. Kissell. Thank you, sir. I yield back my time.
    The Chairman. The gentleman yields back his time.
    I now recognize the gentleman from Ohio, Mr. Gibbs, for 5 
minutes.
    Mr. Gibbs. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for coming in.
    I appreciate your remarks. Since I have been farming and 
involved in agriculture and agricultural policy in the mid-
1970s, we always said farmers were going to get their income 
from the market. In recent years, as least on the grain side, 
that is happening. We are not getting it from LDPs and stuff 
like we did in years past, as you are aware.
    I think when we craft the next farm bill, I think there 
will be a lot of discussion about the safety net programs, and 
what falls into there is the Crop Insurance Program and base 
payments. So I just wanted to reflect now on that a little bit.
    When you talk about the sectors and regions and sectors 
that are having some challenges--livestock, dairy and poultry--
I recently talked this week with one of my large hog producers 
in Ohio, and he is really concerned about the cost of feed and 
the ethanol relationship.
    Can you expand a little, because you haven't really 
mentioned it, I have always been supportive of the ethanol 
industry and all that, but his comments were when you have the 
subsidy and the mandate of a certain amount, a certain percent 
of ethanol and all that, and the relationship, and now you see 
the usage of corn maybe exceeding the feed usage on a national 
basis, what would be the impact if some of the policy on 
ethanol, government policy, changes to the market and its 
effects?
    Secretary Vilsack. Well, I think we got a slight indication 
of what would happen if you prematurely withdraw the support 
for a maturing industry when we allowed the biodiesel tax 
credit to lapse prematurely. It resulted in 50 percent of the 
production being cut and 12,000 jobs being lost.
    So what I have been saying is that I think there is an 
opportunity for us to discuss how those incentives are best 
used to produce a very stable and secure market for renewable 
fuel; the reason for it being that we know that when we reach 
the 36 billion gallon threshold that the Congress has set, we 
are going to have a million additional jobs, up to a million 
additional jobs in rural America, which are very much needed, 
and $100 billion of capital investment. So to me it is an 
opportunity for us to not only stabilize markets but also to 
make sure that we create jobs.
    I think two things: Number one, I think there needs to be 
some discussion about how we might be able to make the supply 
of ethanol more convenient, which is why there is a discussion 
about blender pumps and the ability to potentially incent the 
blender pumps as opposed to the way we are incenting the 
industry today.
    I think there is a discussion that could took place in 
terms of the number of flexible fuel vehicles that are actually 
produced by our automakers and how we might be able to 
encourage more automobiles that can use higher blends of 
ethanol.
    Finally, it is very important for us to expand 
significantly the feedstocks that are used to produce ethanol 
so that we are not as reliant on a single feedstock as we are 
today. That is the reason we announced recently three 
biorefineries, primarily in the South, taking a look at woody 
biomass and some other waste products. That is why we have 68 
feasibility studies under our REAP program to take a look at 
everything from algae to crop residue to ways in which we can 
accelerate the cellulosic ethanol opportunities.
    Mr. Gibbs. I appreciate that, and look forward to working 
with you. In Ohio, we have a project that we have been working 
on through Ohio State University, a crop that produces natural 
rubber. And what is really exciting about that, when they 
extract the latex out of the roots, it is a stream ready to 
ferment for ethanol. So that is some of those other issues. I 
don't know if you are aware of that.
    Secretary Vilsack. I have actually seen and spent time with 
the Ohio State folks, and have actually seen the production 
process that they have. That is the kind of thing that I think 
is exciting because there are multiple uses that can generate 
from those kinds of production processes.
    Mr. Gibbs. I yield back my time.
    The Chairman. I now recognize the gentlelady from Maine for 
5 minutes.
    Ms. Pingree. Thank you very much, Mr. Chairman.
    Mr. Secretary, thank you for being here today. I appreciate 
your testimony and your work on behalf of all of our farmers. I 
might have a slightly different perspective than a lot of 
Members on the Committee, but I was actually disappointed by 
the decision to fully regulate Roundup Ready' 
alfalfa without any conditions. I think I have a lot of 
colleagues and certainly a lot of constituents who have 
concerns about the continued deregulation of genetically 
engineered crops and the long-term consequences for the organic 
and non-GE conventional sectors, maintenance and expansion of 
lucrative export opportunities and consumer choice. I also 
think the issue of liability for organic and non-GE farmers 
remains unresolved.
    I was initially encouraged by your steps to address 
measures for much-needed contamination prevention practices and 
oversight. And given the significant economic impacts of 
continued deregulation for the organic and non-GE sectors, do 
you have steps you plan to take to address contamination in the 
farmer's fields and liability needs? I know this is a 
complicated issue, but I appreciate your comment.
    Secretary Vilsack. I appreciate the question. I just simply 
point out that at USDA we think we are doing something right, 
but on alfalfa we are likely to get sued for the decision we 
made. And on sugarbeets, we are likely to get sued on the other 
side for the decision we made. So we must be doing something 
right.
    But specifically to your question, the conversation that we 
facilitated was an extraordinarily important one, and it was 
worth the difficulties that it created from a sense of the germ 
plasma concerns that were expressed, and the ability that we 
always would have access to nonconventional alfalfa seed. And 
we tried to address that specific concern outside of the rule 
by creating another opportunity within USDA in terms of its 
Germplasma Protection Program to use a more isolated site in 
Idaho to be able to guarantee that we would always have a 
supply of non-GE seed.
    Second, there is some interesting research being done in 
corn on cross-pollination, and whether or not you can create 
something within corn that would allow it to defend itself from 
a foreign gene or pollen that would be contrary to what you 
wanted to do. The question is: Is there a way in which that 
research could inform a similar type of opportunity within 
alfalfa? We are reconstituting two advisory groups, one on 
germplasms, one on just basic general discussion of 
biotechnology to go more deeply into these discussions.
    Our view at USDA is it is not either/or, as some would like 
to suggest. It really is about how can we have as diverse an 
agriculture as possible so everyone can do what they feel and 
they decide is best for their operation. The more the merrier 
because it creates domestic markets. And both types create 
opportunities from an export perspective. And it is the type of 
thing that will generate more farmers and more opportunities 
within agriculture.
    So we are trying to have that tough conversation. It is 
difficult to have it in the context of constant litigation, but 
that is where we find ourselves today. As I say, no matter what 
we do, there is always somebody that is dissatisfied with it. 
What we are trying to do is say rather than constantly 
litigating, maybe we can have a conversation and figure out 
ways in which we can at least find where the common ground 
exists. I think we did a lot of that in alfalfa. I know a lot 
of folks are not happy, but we certainly did more than we would 
have done had the conversation not taken place.
    Ms. Pingree. I do appreciate your pursuing the conversation 
and looking for ways to resolve some of this. I am not sure 
that the suggestions you are working on now are going to be 
enough, but I look forward to being in the continuing dialogue 
with you.
    I have one last quick question. If I don't have time to get 
your entire answer, I will ask it later.
    I see the Administration's budget for the National Organic 
Program includes an increase of $3 million to strength 
enforcement capacity to protect the integrity of the USDA 
organic seal. I am just interested in knowing what the 
additional dollars will be used for; particularly in regard to 
foreign products, how they will be used?
    Secretary Vilsack. In the foreign area, we are most focused 
right now on negotiating equivalency agreements. We reached one 
with Canada last year, and we are in intense conversations with 
the EU right now. And our view is if we can develop a common 
understanding and a common agreement about what constitutes 
equivalence, it will be a way to protect the brand. I mean, at 
the end of the day, the value added to organic is basically 
that you can guarantee that it is indeed organic. And this 
resource is primarily designed to make sure that folks who are 
alleging that they are producing organic are actually living up 
to the standards that have been set by the industry.
    Ms. Pingree. Thank you very much.
    The Chairman. The gentlewoman's time has expired.
    The chair now recognizes the gentleman from Tennessee, Mr. 
Fincher.
    Mr. Fincher. Thank you, Mr. Chairman.
    As a seven-generation farmer, the phrase ``Some days you're 
the windshield, some days you're the bug,'' that kind of goes 
with the farming industry.
    I think what we need to make sure that we do is we have a 
slow, steady approach. The consumer is who benefits or who is 
hurt by whatever happens here. Not only are commodity prices in 
a great place for the ag industry all over this country, but 
rising input costs, fertilizer costs, fuel prices, seed prices, 
land, rent, as far as the inflation of the prices, all factor 
into the decisions that are going to be made over the next 
couple of years with the new farm bill.
    As a farmer, as an active farmer, the amount of regulations 
that we are dealing with from EPA and other agencies are really 
becoming an issue. I think I hear you today saying that you are 
standing with the ag community to make sure, and again I think 
who is hurt here is the consumer in the end, because we don't 
want to ever get to the place where there are no farmers left 
and we go to the grocery store and there are only a few loaves 
of bread or a few cartons of eggs or a few gallons of milk 
because we have regulated our farmers out of business.
    We can compete with the rest of the world as good as 
anyone. But the free market, it really works well when we let 
it do its job. No doubt we can agree that there is a certain 
amount of oversight and regulation that we comply with. But 
again, Washington bureaucrats printing or making a computer 
program, and then trying to implement that program on the farm, 
sometimes doesn't always pan out.
    So your commitment to us today, again, Mr. Chairman and his 
commonsense approach and his remarks, and the Ranking Member as 
well, as we move forward, maybe in a deregulation process to 
make sure we can, as farmers and as this Committee, do our part 
to making sure that the ag community does prosper and stays 
intact a for long term, for our future generations. Nobody 
wants to see it anymore than I do for my children.
    But again, thank you for your service. The regulations are 
a big, big problem for us.
    Thank you.
    Secretary Vilsack. Representative, I wonder if I can just 
respond to your comments in this way. One of the first things I 
did was to establish a good relationship with Administrator 
Jackson and encourage her to actually take time to visit farm 
country, which she has done. We also encouraged her to engage 
in regular conversations with commodity and livestock groups, 
which she has done. We continually work with her ag 
representative, Larry Ellsworth, in an effort to try to make 
sure that there is a complete understanding of the impact that 
certain proposed regulations or thoughts might have on 
production agriculture in particular.
    You know, I think there has been a willingness to listen, 
and there have been adjustments made as a result of that. And 
we are going to continue to do that. There is no question 
farmers, in my view, are the ones who are most concerned about 
stewardship, because at the end of the day they live or die 
based on the capacity of the soil to produce, and they are very 
interested in making sure that we have clean and healthy water 
for a multitude of reasons.
    So there is a good relationship. We are going to continue 
to work and do our job to make sure that there is an 
understanding of the impact of the regulations.
    Mr. Fincher. Thank you, Mr. Secretary. The high prices of 
commodities now, they probably won't always stay this high. So 
a safety net as we move forward is critical to ensuring that 
our farmers stay profitable in the long term.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. The chair now recognizes the gentleman from 
Massachusetts, Mr. McGovern, for 5 minutes.
    Mr. McGovern. Thank you, Mr. Chairman. Mr. Secretary, 
welcome, and thank you for being here.
    Let me begin by saying that hunger and nutrition are the 
main reasons why I sought to get a seat on the Agriculture 
Committee because this Committee, not only domestically but 
internationally, is key to providing a safety net for those who 
are falling through the cracks. And internationally, it is a 
national security issue.
    And I appreciate the Department's support for the McGovern-
Dole school feeding program, and I appreciate your leadership 
here domestically. I appreciate the President's commitment to 
end childhood hunger by 2015. I want to see him do that. I 
appreciate your commitment to making sure that the food stamp 
or the SNAP program is adequate to meet the needs of those who 
are experiencing difficult times during this difficult economy.
    During the 110th and 111th Congresses, we saw the greatest 
improvements in investments in SNAP in generations. Yet much of 
that funding was used to offset the FMAP bill and the child--
the Nutrition Reauthorization bill, and I am pleased that the 
Administration has included the restoration of some of these 
cuts in their 2012 budget request. And you know there are some 
who complain that a huge portion of agriculture's budget goes 
to food and nutrition issues. I think that is a good thing from 
my perspective.
    But I also remind people that as the economy gets better, 
and people are more secure than the obligation to provide a 
helping hand, whether it is SNAP or other programs decreases. 
So the answer to that is to get the economy moving again.
    I also--you heard people in the context they will tell you 
about entitlement reform saying that well, we need to take a 
hard look at the SNAP program. It is my understanding, and I 
appreciate your comment when I am finished, that GAO did a 
recent study not too long ago that this is one of the most 
efficiently-run programs in the Federal Government, that if 
there is an error rated sometimes it is mostly that we don't 
provide enough, not that we provide too much.
    The other thing I want to say is that I recognize that the 
battle to end hunger in this country and to meet your goal of 
ending childhood hunger in the United States by 2015 does not 
solely rest with USDA, there are other departments and other 
agencies that have a role in this. I urge the President, along 
with Congresswoman Jo Ann Emerson, that one of the things that 
might be useful to develop a holistic plan so that we get this 
right because we are investing an awful lot of money in these 
programs. There was a White House Conference on Food and 
Nutrition, one domestically and one internationally this way so 
that everybody who has a role in this can actually figure out 
what their assignment is. Make sure there is interagency and 
interdepartmental communication, which I am sure there were 
some, but to come up with the plan so we all know what to do, 
and it makes it easier here in Congress then to advocate, 
because it is not just the Agriculture Committee, there are 
other committees involved. I mean children and nutrition falls 
under the Education and Labor Committee. But I don't see us 
kind of working in a coordinated way to actually come up with a 
plan. And so I would appreciate your comments on the SNAP 
program but also on maybe the prospects of trying to get some 
people together with the White House on a summit that would 
bring everybody together.
    Secretary Vilsack. Representative, I appreciate your 
passion on this issue, and let me see if I can respond as 
quickly as I can in the time remaining. Number one, the reason 
why I think the Recovery Act included a commitment to the SNAP 
program was not just because there were going to be more people 
in need of that assistance, but because it was indeed perhaps 
the most effective stimulus in terms of immediate impact on the 
economy. Ninety-seven percent of SNAP benefits are spent within 
30 days.
    And when people can produce and when people can purchase 
more at the grocery store, it obviously means that more has to 
be packed, and processed, and shipped, and transported and 
produced and so forth, those are all jobs. Every dollar spent 
in SNAP generates about $1.80 to $1.90 in economic activity, so 
it is a stimulus effect, number one
    Number two, there is a misunderstanding of who actually 
receives SNAP benefits. There are a lot of senior citizens who 
receive it and there are obviously a lot of children. Only ten 
percent of the SNAP recipients are cash welfare recipients so 
it is roughly the working poor, the folks who are struggling 
are helped out with this program.
    The error rate for the last several years, we have had an 
error rate that is less than six percent. Last year it was very 
close to 3\1/2\ percent, which, given the amount of increase 
that has taken place in the program, another eight million 
people added to the program, the fact that we went down in the 
error rate does suggest and support your notion that we are 
doing a good job, but we can always do a better job and we are 
focused on that.
    In terms of the issue of a summit, I will say that there is 
very good coordination on the international side with Feed the 
Future Initiative, the State Department, USAID and USDA are 
working very collaboratively. And I think that represents a 
good model for us perhaps on the domestic side. I am certainly 
happy to talk to folks about your idea. Anything that can allow 
us to do a better job in a more coordinated, integrated 
fashion, I am all for it.
    The Chairman. The gentleman's time has expired. And before 
we turn to the next individual, I would point out I share Mr. 
McGovern's observations and points, and with projected 75 
percent of all the farm bill spending in this 5 year cycle to 
go to it, we are trying.
    I now recognize the gentleman from Georgia, Mr. Scott for 5 
minutes.
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. And 
Mr. Secretary, thank you for being with us today. And I would 
point out you have been a governor before and were reelected as 
governor, so you did some things right I would think, in your 
state.
    Secretary Vilsack. Representative King might disagree.
    Mr. Austin Scott of Georgia. You hit on a point with our 
economy, I want to come back to. Stable markets create jobs. Is 
that a fair statement, that the more stable the markets are the 
more job creation we can count on in this country?
    Secretary Vilsack. I would say that the more stable the 
markets are, the easier it is for people to be able to plan and 
therefore the more stable the job market is.
    Mr. Austin Scott of Georgia. So you would an agree then 
that regulatory uncertainty is bad for the economy?
    Secretary Vilsack. I am not--well, I don't want to be 
argumentative. Obviously if there is confusion about 
regulation, that is not a good thing.
    Mr. Austin Scott of Georgia. I guess I go back to what you 
said when, I think it was Mr. Holden that asked the question, 
and you essentially indicated that the American farmer was 
going have to barter with the EPA for regulatory certainty. 
And----
    Secretary Vilsack. Well, I don't think that is--that is not 
what I intended. Let me give it another shot and perhaps maybe 
I need to do a better job explaining this. I think what is of 
concern to a lot of farmers is when they are asked to embrace 
conservation programs, which they are happy to do and they want 
to do. And then the rules change after they have basically 
taken certain steps, that it makes it difficult for them. And 
so what we are trying to do is give them a degree of certainty 
that when you take these steps, you won't have to worry about 
the rules changing, and we think that is a good thing.
    Mr. Austin Scott of Georgia. And that also changes the 
value of the assets that they own. I mean, the bottom line is 
when the government changes the rules after the decision has 
been made, the individual should be allowed to go back and make 
a different decision based on the new rules, but the EPA 
doesn't work that way.
    Let me tell you what the EPA did about a week ago in Tifton 
as far as working with them. They walked into a family man's 
business, a little business in Tifton, Georgia, they asked him 
to show them their lead-based paint disclosure forms and he 
could not do it. And their idea of negotiating with him is that 
they moved him from $30,000 per house and $150,000 fine to 
$10,000 per house and a $50,000 fine. That is how the EPA 
operates in today's day and time.
    So I say that to come back to this point, are you, as the 
Secretary and the head of USDA, willing to go to bat for the 
United States farmer, who I would remind you, you can't end 
hunger without the United States farmer. And without the United 
States farmer, every SNAP dollar doesn't go as far for the SNAP 
recipient. So are you, as the head of USDA, willing to go to 
bat on behalf of the United States farmer with the EPA?
    Secretary Vilsack. I think we are doing that, Congressman. 
I think we are doing it in terms of the relationship I have 
with the EPA Administrator, the advice and the counsel we 
provide, the letters we write on certain proposed regulations, 
the input that we have encouraged from livestock, a lot of 
groups to the EPA. This notion of regulatory certainty, which I 
think has enormous opportunities to give folks reassurance that 
as they take certain steps, they are not going to have to worry 
about the situation that you just outlined that occurred in 
your district.
    Mr. Austin Scott of Georgia. They are scared, Mr. 
Secretary. The bottom line is the American citizen is scared to 
death right now of the EPA, whether they are farming or any 
other industry. And I appreciate your statement that you are 
going to go to bat on behalf of the farmer and that you have 
been. I would ask you to use a bigger bat.
    The Chairman. The gentleman yields back the balance of his 
time. The chair now turns to the gentleman from Iowa for 5 
minutes.
    Mr. Boswell. Thank you, Mr. Chairman. And good to see you, 
Mr. Secretary, and welcome to our Committee again. Just a 
little bit of dialogue, Mr. Chairman, you made a comment about 
the nine billion people, the population. And that just reminds 
me of some of the other conversation. There is a lot out--
started out a lot of head bumping on organic and traditional, 
and I submit to you, again, to all of us that there is room for 
both, there is, and there still are going to be hungry people.
    I think these things can be worked out. And I would hope 
that we keep working in that direction because they can be. And 
I don't think they are really in competition. As you know, Mr. 
Secretary, in our state, we have had a lot of discussion about 
the crop insurance and we are a big user as you well know. I am 
still having some concerns coming from our agents and I would 
remind you being that some of our colleagues, the Chairman 
included hands on, there are three things that I say we have to 
have in the community to be a farmer, and that is you have to 
have a farmer store, whether it is a co-op or whatever it is. 
You have to have a bank to work with you, and you have to have 
a good insurance agent these days with the high capitalization 
of trying to put in a crop or whatever do you in agriculture. 
So the agents are still concerned, and I would trust that you 
are probably still involved with that and hope you are.
    One thing that has kind of bothered me, and going back to 
some of our history and background, we have both been 
concerned, I think about, is advocates for arbitration and 
fairness in business contracts. And I am a little bit troubled 
about this covenant not to sue. I wonder if you would shed any 
light on why that covenant really should be there?
    Secretary Vilsack. Well, we made an effort to try to 
negotiate with the industry at the instruction of Congress to 
renegotiate every 5 years the Standard Reinsurance Agreement. 
And in order to stabilize the reinsurance agreement, in order 
to provider greater integrity within the program, and in order 
to provide a better deal for taxpayers, we negotiated a series 
of initiatives designed to save money, to make sure that the 
crop insurance program was stabilized in terms of its ability 
to provide coverage and it was solvent. I think the good news 
is that as a result of our efforts, we have actually sold 
14,000 more policies as a result of the expansion that took 
place with rangeland and grasslands areas. And we have also 
instituted a good producer refund and rebate program as a 
result of steps taken to improve the product.
    I think you have to look at this thing on balance and it 
was a negotiated process. And that was one of the things that 
the industry was interested in having. And as a result of the 
magnitude of the deal we struck, it was included.
    Mr. Boswell. So you think the covenant not to sue is still 
necessary to be there?
    Secretary Vilsack. Well, I haven't had a chance to talk to 
Administrator Murphy about that specific issue recently. But, 
on balance, we are pleased that there are more policies being 
sold, that we did effect a savings, and we were able to put 
together the refund. So the things we were focused on happening 
are, in fact, happening.
    Mr. Boswell. I am not questioning that and I appreciate 
that, but I just wanted to lay that out there as a concern. And 
this Committee, Mr. Chairman, I have become an advocate for, I 
guess the best way to put it is just fairness in business 
contracts, so that producer out there can have his say and not 
be forced out when necessary, but I won't go back and rehash 
all that.
    So maybe we can talk about that some more, Mr. Secretary. I 
think I will just leave it there and thank you for your hard 
work.
    The Chairman. The gentleman yields back his time. The 
Chairman recognizes the gentleman from Arkansas, Mr. Crawford, 
for 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here. I would echo the comments of the gentleman 
from Georgia in that I hear every day, day in and day out from 
farmers in my district, the single biggest threat that they 
face is the threat of the EPA that looms over them. And so, 
again, thank you for your commitment there. And I can't ask you 
to comment or speak for the EPA so I won't ask you to. But I 
will ask you to speak on behalf of the USDA and help us really 
understand what the relationship is on a day-to-day basis 
between the USDA and the EPA. And specifically, is there a 
protocol or liaison on a daily basis between USDA and the EPA?
    Secretary Vilsack. I don't want to say on a daily basis. I 
would say this, EPA Administrator Jackson has appointed an ag 
liaison, and I know that that liaison is over in our office 
very frequently. I would say almost on a weekly basis. I know 
there is conversation between that liaison and individuals, 
under secretaries and folks within various mission areas of 
USDA. And I also know that the ag liaison speaks very 
frequently with Robert Bonnie and Sarah Bittleman, who are in 
my office, directly in my office on a variety of issues 
involving EPA's decision-making process. I also know that we 
are writing letters, constantly in meetings in which we are 
addressing concerns, raising questions, asking for 
clarification and making suggests about appropriate 
modifications to what might be considered. I think there is, to 
my knowledge, there is a very robust effort between USDA and 
EPA to make sure they have all the information they need to 
make the right set of decisions.
    Mr. Crawford. Is the EPA, to your knowledge, are they 
implementing policy that may adversely affect farmers with or 
without your input or input from your agency? Or as I said 
before, do you get a fair opportunity to present data on behalf 
of farmers?
    Secretary Vilsack. To my knowledge we have gotten a very 
good opportunity, and I know a number of circumstances where we 
have made a difference in terms of the approach EPA has taken, 
whether it is definitions, whether it is the scope of 
particular regulations; it is one of the reasons why I 
encouraged the Administrator to take some time to visit and 
actually get on the farm and see what is going on in various 
operations. It is why I encouraged the ongoing conversation 
that she has with commodity groups and livestock groups.
    Mr. Crawford. I appreciate that, Mr. Secretary. I yield 
back.
    The Chairman. The gentleman yields back the balance of his 
time. I now turn to the gentleman from Connecticut for 5 
minutes.
    Mr. Courtney. Thank you, Mr. Chairman. Mr. Secretary, the 
last time I saw you I was on the Education and Labor Committee 
and we were working on the Child Nutrition Act, which I am 
pleased, in the lame duck session, we finally got done. 
Congratulations to you and your staff which was a lot of hard 
work. The House bill was still better than the final bill, but 
I won't ask you to comment on that.
    We are now at the point where implementing regulations that 
are in place and I think there is probably almost universal 
noise out there in terms of boards of education that are trying 
to anticipate what the new rules are going to be for food 
service providers, in terms of their qualifications. I mean, 
obviously, one of the goals of this bill was to try and 
increase new nutritional standards and food. I mean, some of 
the finest chefs in the world could probably use some educating 
in terms of what is healthy food so we obviously need to make 
that effort out there.
    But on the other hand, I don't have to tell you, local 
school budgets are still unbelievably stressed right now. So 
there is again worry that this is going to be a high cost to 
school boards. I just wondered if you could sort of comment on 
where the regulations are and whether or not you will be 
working with local and state government to try and make this 
workable for everyone?
    Secretary Vilsack. This is a document that I asked be 
prepared for me personally, which is an implementation plan for 
the Healthy, Hungry-Free Kids Act of 2010. It basically is a 
color-coded--things are progressing, things are not 
progressing, or things are potentially delayed so that I am on 
the point in terms of the major provisions of that proposal.
    From what I can tell, everything that we promised that 
would be done up to this point is and has been done on a timely 
basis. There has been an effort to reach out and to work with 
the School Nutrition Association and others in a very 
collaborative way. We will continue that. And there is also an 
effort--at the same time you mention chefs, there is also an 
effort to actually encourage chefs to move into the schools, to 
work with school personnel.
    There are creative ways to stretch the dollar. We actually 
have a recipe contest now that will end very soon and we are 
going to put together a cookbook of recipes that can be used. 
Fruits and vegetables, and whole grains and low fat dairy on 
the reimbursement level so that folks learn how to be a little 
bit more creative than in the past. So to my knowledge, things 
are on track, and there is a collaborative and transparent 
process.
    Mr. Courtney. You know, I would actually encourage you to 
share that with Members and their offices because, again, I 
think that would be just a helpful thing for all of us to be 
able to let their constituents know that this isn't some 
distant bureaucracy that is going to impose things, that there 
really is a process and that things are, again, being 
implemented in a balanced way.
    Secretary Vilsack. I will only say that there are some 
programs in which you have established statutory requirements 
in terms of when it becomes implemented, so some things may not 
happen in 2011 because you dictated they happen in 2012.
    Mr. Courtney. Thank you. And just in a brief moment here, 
again, the conversation earlier about stable markets and 
regulation, I actually think in some areas, having some 
regulation will help stabilize markets. For dairy farmers in 
Connecticut that are getting killed with high energy costs, the 
lack of regulation in terms of the speculation on energy 
markets is a huge destabilizing factor, either oil delivery 
guys get wiped out because they didn't hedge enough for swings 
in prices. And for the CFTC to get rules out there that limit 
the number of positions that some of these speculators can take 
on products like oil. Frankly, it would be of great benefit to 
farmers and small businesses who are, again, paying prices that 
are completely disconnected from real supply and demand forces.
    We had a hearing on this last week, and I would just say, 
again, it is hard to answer the question about input costs 
which I know you have been asked here today, but clearly 
getting the CFTC Dodd-Frank rules implemented will have the 
effect of stabilizing a lot of these input costs in helping 
people plan, which the swings in prices that are taking place 
right now make almost impossible. I would just leave it at that 
and I yield back, Mr. Chairman.
    The Chairman. The gentleman yields back the balance of his 
time. The chair turns to the gentleman from Tennessee for 5 
minutes.
    Mr. DesJarlais. Thank you, Mr. Chairman. Mr. Secretary, I 
really appreciate your time today. Recently I had the privilege 
of participating in the Tennessee Cattlemen's Association's 
annual meeting. And although they had many concerns, one that 
seemed in the front of their minds was the collapse of Eastern 
Livestock Company, that, as you know, left hundreds of 
livestock producers in dozens of states without payments, 
totaling the excess of $130 million. More importantly, it has 
shaken the confidence in the market and rattled livestock 
producers across the country.
    Last year the Administration created and implemented the 
Poultry Loss Contract Grant Assistance Program to provide $60 
million in assistance to poultry growers whose poultry growing 
arrangements were terminated because of bankruptcy. What steps 
are you taking to help producers impacted by the failure of the 
Eastern Livestock Company? And how do you help restore their 
confidence moving forward?
    Secretary Vilsack. Well, one of the things that has to take 
place, the difference between the poultry circumstance and the 
cattle circumstance that you have alluded to, is that we are 
really not quite finished with that process in terms of exactly 
how it is all going to shake out. Obviously, there are 
bankruptcy proceedings, there may very well be additional steps 
being taken to recover assets from individuals. And until we 
have a clear understanding of precisely what the extent of 
losses might be, it is difficult that we could develop a 
specific proposal.
    Having said that, there is always the opportunity depending 
upon the market to utilize some of the powers under section 32 
if we find that there is a deep concern about farmers' capacity 
to have their purchasing power compromised by virtue of this. 
That is one thing we can do. We can obviously take a look at 
our farm loan programs to try to help folks get through a 
difficult time.
    For non-producers who might be struggling because of what 
took place, we also have Business and Industry Loan programs, 
we also could work with the SBA to provide some assistance. And 
we are obviously collecting data and information concerning 
bond claims. We know that at this point, there is roughly 
almost $37 million of claims that have been filed.
    Mr. DesJarlais. Thank you, Mr. Secretary. Mr. Chairman, I 
yield back.
    The Chairman. The gentleman yields back the balance of his 
time. The chair now turns to the gentleman from Oregon for 5 
minutes.
    Mr. Schrader. Mr. Secretary, I want to start by thanking 
you for coming to Oregon last year and talking with a lot of my 
growers, a lot of my timber people and a bunch of my nursery 
men that had some very serious issues.
    I appreciate the accommodation in some of the APHIS rules 
on the whole pre-notification issue for Phytophthora ramorum.
    I still remain a little concerned and so do my growers. I 
think there was conversation at that meeting and within APHIS 
about trying to get out of the bureaucratic regulatory 
framework of pre-notification that puts a big burden on our 
growers and go to maybe some sort of system-wide approach that 
made more sense.
    I still remain a little concerned that my folks on the West 
Coast, particularly in the counties that are targeted, many of 
which are in my district, that they are actually really doing 
the right thing. They have a very rigorous standard that they 
are looking at. With all due respect to my colleagues from 
around the country, I think if they had the same rigorous 
standards that my folks do, they would find they also are a 
reservoir for this particular issue.
    So I am concerned, I am hoping that this won't be used to 
impede the trade of our crops, if you will. I think just 
naturally in the marketing of crops, it automatically is going 
to do that to a certain extent, so I am curious what steps the 
agency and what steps the Department is taking to make sure 
there is still free trade, if you will, with regard to the 
crops that we are concerned with, the Phytophthora. And whether 
or not the Department is still moving hopefully in an 
expeditious manner and in what time frame to get away from the 
pre-notification rule to something that makes a little more 
sense on a system-wide basis.
    Secretary Vilsack. Well, Congressman, I wish I could give 
you greater certainty on an area that I know is very important 
to your district and to the producers in your district because 
I heard them loudly and clearly. One of the things we did do 
was to provide more time so that they could make adjustments in 
the process. The problem is it is just doggone difficult to 
detect. And oftentimes, it can be present for a long period of 
time before the symptoms manifest themselves, which can 
potentially compromise other plants and other nurseries, that 
is the problem. And we are trying to restrict this to areas 
that have been quarantined in certain regulated counties in 
three states. And we are trying to do this in a way that 
doesn't necessarily significantly inhibit trade. I know that 
you have a different view on this, but until we have a better 
sense about this, until we have better diagnostic tools, I 
don't anticipate that we are going to see a significant change 
in the way we are approaching this in the foreseeable future.
    I would be happy to have our APHIS folks visit with you, 
again, to reassure you that they are doing everything they 
possibly can and in as reasonable a fashion and way as 
possible, not to compromise or jeopardize your producers. But, 
I don't want to mislead you into thinking there is a quick fix 
here, because I don't believe there is.
    Mr. Schrader. Well, I appreciate your honesty and the 
testimony here. Actually, I will take you up on your offer to 
at least meet with the APHIS folks on this, get some of my 
growers in. And ask that the same degree of testing be done 
with the same rigor across this country. If my folks are doing 
the type of testing that hopefully will help end this pest, at 
least in our neck of the woods, I want to make sure it is not, 
referring to your comments on it being a latent type of 
organism, causing it in some of the other areas too. So I would 
look for some assurances we are going to be treated with an 
equal hand.
    Secretary Vilsack. We will have Cindy Smith and her team 
visit with you.
    Mr. Schrader. Thank you, Mr. Secretary.
    Second question, if I may, is regarding the Forest Service, 
following up on the good Representative from Pennsylvania's 
comments earlier. I am concerned about the situation in our 
forests in this country. Everyone talks about sustainable 
yields, and of course, that is in the eye of the beholder these 
days. But, it is unquestionable that our forests are burning up 
at an accelerated rate and our rural communities are unemployed 
right now. And that begs for a thoughtful solution with the 
Forest Service getting actively engaged.
    We also have severe budget deficits, so most every agency, 
particularly the last few days, is enjoying some degree of 
budgetary relief, shall we say, of some of their dollars and 
struggling to make ends meet.
    We had talked at one point when you were out visiting, and 
I talked about this with Secretary Salazar at another meeting 
on county payments about having some of these sales or some of 
the work to clear out the biomass and forests help pay for the 
management of those sales, so that it would not be adding to 
increased economic burden on the part of the Department. Have 
you investigated that? Is there any reason why you would not 
want to investigate that?
    Secretary Vilsack. We are always willing to take a look at 
ways in which we can do our job better. I have one thing that 
we have suggested in the budget process is to take a number of 
smaller programs and provide the Department with greater 
flexibility to do a better job of managing our forests, which 
may lead to better and more extended opportunities. We are 
trying to make sure that folks understand by giving us that 
flexibility, doesn't mean we are not going to focus on all of 
the needs of these small programs, but we get constrained by 
them and therefore can't use the forests for the best and most 
appropriate use given a particular set of circumstances.
    I would also say that, again, to allude back to the forest 
planning rule, I think that the forest planning rule that we 
put in place and that we are suggesting we put in place begins 
to do a better job of explaining the multiple uses that forests 
can create and the economic opportunities that can arise from 
those multiple uses.
    And we need to have assurances that we are taking full 
advantage of those uses, because they are just as 
extraordinary. The President yesterday, with the Great American 
Outdoors announcement, pointed out that there is a huge 
economic opportunity here if we do it right.
    The Chairman. The gentleman's time has expired.
    Mr. Schrader. Thank you.
    The Chairman. The chair would serve note to my colleagues 
for the following recognition that the custom of the Committee 
is that all Members present at the dropping of the gavel, 
recognized by the clerks, are called upon in order of 
seniority. And then from that moment on, after the hearing 
starts, you are called in the order with which you attend the 
hearing. Noting that, I would note for my colleagues next up 
will be Mr. Ribble, and then Mr. Costa, then Mr. Schilling, 
then Mr. King, then Mr. Southerland, Mr. Gibson and Ms. 
Hartzler. And with that, I turn now to the gentleman from 
Wisconsin for his 5 minutes.
    Mr. Ribble. Thank you, Mr. Chairman. And thank you, 
Secretary Vilsack. I have very much enjoyed the conversation 
this morning. And it was good to get your report because so 
much in your report was positive. And I want to talk a little 
bit about some of the good things that are going on, but I do I 
feel in light of some of the comments that were made today that 
you should also hear from northeast Wisconsin. There are very 
few things that are consistent across agriculture. When you 
talk to dairy farmers their issues are different than corn 
growers, and their issues are different than the guys producing 
cranberries or the timber folks. But I will tell you, Mr. 
Secretary, that there has been one consistent thing, and 
everywhere I went in the last year I have asked these members 
of agriculture, job producers in northeast Wisconsin, what is 
the number one threat?
    I expected to hear that the number one threat could have 
been energy costs, because they were rising feed prices or land 
rents. I felt they could have said stability of milk pricing. 
In other things, trade agreements that haven't happened. The 
number one threat that virtually every single person has told 
me is the United States Government and a runaway EPA.
    And please, to the degree that you have any power at all, 
Wisconsin's farmers are pleading with you, as their 
representative in the Obama Administration, for help, it is the 
number one threat. I wish you would take that back to them.
    Going on to a more pleasant topic, that is, the 2,000 dairy 
farmers in my district, we have a robust dairy industry in 
northeast Wisconsin, as you are aware, having lived so close to 
us. As you know the 2009 milk prices plummeted. What is it that 
we can do as Members of this Committee and Members of Congress, 
to help stabilize that and improve that for Wisconsin dairy 
industry and the United States dairy industry? How do we get 
around this whole deal of milk pricing and reducing some of the 
risk?
    Secretary Vilsack. I think we are going to give you a set 
of recommendations here very, very soon from the Dairy Council. 
As you probably know, representatives including representatives 
from Wisconsin dairy have been meeting for the last year and a 
half as a result of what occurred in 2009. And they are going 
to come up with a set of recommendations; National Milk 
Producers Federation has come up with a set of recommendations. 
I know Representative Costa has some ideas and thoughts on 
this.
    I guess the first thing I would suggest is that this is an 
opportunity this year to have a very extensive and appropriate 
conversation that we really can't afford to wait any longer to 
provide greater stability, a broader price band, more distance 
between the peaks and valleys so that we can ensure that we 
keep our producers in business.
    You will look at issues involving supply and risk 
management, you will look at the Federal Marketing Order, you 
will look at a series of other aspects that make up this very 
complex system. It is really, really difficult to understand, 
but having said that, I think there are ways. I think there is 
a growing consensus within dairy that there needs to be 
attention.
    In the past, what you have had is each separate region 
basically saying we have the solution. And I think there is now 
a recognition that maybe it is not one part of the country that 
has the solution, it really does require all the dairymen and 
women to come together.
    Mr. Ribble. And I will speak on behalf of those farmers in 
my district, and from this Member of Congress, we are anxious 
to have that conversation. It is time to try to reduce the 
peaks and valleys and to protect our dairy farmers. I grew up 
milking 42 cows, and that farm is no longer there. And I am so 
proud of what our dairies are doing today in terms of 
production, conservation, energy production. It is a stunning 
act of leadership that I am seeing every single day when I meet 
with our dairymen.
    Secretary Vilsack. Well, that is an interesting point you 
mentioned about energy. One of the things we try to do at USDA 
is to develop a partnership with our dairy producers with 
anaerobic digesters. We have helped to fund close to 50 of 
those digester programs. And we met with a number of 
representatives from the Dairy Council and others about how we 
can continue to promote that kind of partnership.
    Mr. Ribble. Thank you for that. And Mr. Chairman, I yield 
back.
    The Chairman. The gentleman yields back the remainder of 
his time. The chair now recognizes the gentleman from 
California for 5 minutes.
    Mr. Costa. Thank you very much, Mr. Chairman, for this 
important timely hearing. It is always good to have the 
Secretary of Agriculture before the Committee. Mr. Ribble, I 
did not know until now that you and I both share a common bond. 
I suspect other Members of the Committee as well grew up on a 
dairy farm. And if we didn't have this job, we could probably 
get a job milking cows, vaccinating, dehorning and pulling 
calves, some redeemable skills.
    On the timeline in the statement, Mr. Secretary, that you 
just made with regards to the dairy industry and the peaks and 
the valleys, and I think there is a common concern here because 
we have seen, certainly the worst times that I have ever 
witnessed in three generations of a dairy family from 
California. I mean, I heard my parents talk about the tough 
times early on before I was around, but I have never witnessed 
it this bad over a continuing period of time.
    Do you have timelines? You clearly said your commission, my 
legislation, National Milk Producers Federation, I think there 
is consensus, but I would like to be able for us to tell the 
dairymen in the United States that we are going try to come 
together with the response in the next 6 months that tries to 
do the things that you articulated that I think we all feel 
similarly about.
    Secretary Vilsack. Representative, we are happy to work 
with the Chairman in this Committee and the Senate side to do 
whatever is necessary. We are happy to roll up our sleeves and 
begin the work now.
    Mr. Costa. I think we need milestones. I mean, if we don't 
have them in place, things just kind of roll along. Your 
Commission's been in place now for over a year. Do they have a 
concluding report to you----
    Secretary Vilsack. It is coming out the first week of 
March.
    Mr. Costa. Okay, seems to me that is a milestone. So I know 
the Chairman and the Ranking Member have expressed concerns as 
many of us have. It just seems to me that we ought to try to, 
after this hearing, see if there is the will. And if we think 
we have a consensus approach to make the changes for the 
industry we ought to set some timelines.
    Secretary Vilsack. I don't know that it is my place to set 
the timelines. I am happy to work with you on the timelines.
    Mr. Costa. No. I am not asking you to set it for the 
Committee, I am asking for us to sit down together in terms of 
talking about that if there is a consensus then we ought to try 
to--otherwise, the alternative is, it seems to me, that we are 
just going to lay off until the reauthorization of the 2012 
Farm Bill. And if that is the consensus, then so be it, but I 
have dairymen and dairywomen asking me what is happening? Are 
you guys going to act on this, your bill, National Milk 
Producers Federation, what is USDA doing? I mean, we ought to 
tell them we are going to do something, or we are not going to 
do anything until the reauthorization of the 2012 Farm Bill.
    Secretary Vilsack. I think the risk that you run in to not 
doing something this year is that the momentum that has been 
built as a result of the concerns of 2009 which extended into 
2010. I think you run the risk of potentially losing that 
momentum. And I think there is a real desire to get something 
done.
    Mr. Costa. I know under the able leadership of our 
Chairman, we will sit down and talk and maybe see if there is 
something we can come together with.
    Let me move on here because time--I know GIPSA was visited 
earlier in the questions, and, but is not clear to me again on 
what your time frame is there as well.
    Secretary Vilsack. I want to make sure that the analysis 
that you all have requested and that is necessary get done 
properly. We are in the process of categorizing 60,000+ 
comments, 30,000 of which I believe were unique. Those have to 
be analyzed, read and analyzed and sort of characterized. And 
then that will, in turn, inform Joe and his team what needs to 
be done. You know, obviously we want to get this done as soon 
as possible, but we want to get it done right.
    Mr. Costa. I understand. And I will single out the 
correspondence that I had. But there has been some constituent 
inquiries to the USDA that has not received a response, from 
some of the associations out West. And I would like to make 
sure that that is on your radar screen and you respond. I will 
bring that to your attention at a separate time.
    Finally, under the foreign agriculture efforts, I am on the 
Subcommittee and we are meeting with some of the our 
counterparts on market access programs and foreign market 
development programs in terms of our exports. Again, this 
relates to the 2012 Farm Bill, but how well do you think they 
have worked?
    Secretary Vilsack. Well, we have a record year in exports 
and we recently did a study that every dollar that has been 
invested from USDA, in our view, has generated $35 of activity. 
So I would say that is pretty good return for the investment. 
The President has proposed an increase in this area of the 
budget, notwithstanding the difficult fiscal times we face, 
because it is capable of generating more activity and more 
investment.
    Mr. Costa. You expect the South Korea Free Trade Agreement 
to further boost exports?
    Secretary Vilsack. Well, absolutely. Sixty percent of our 
ag trade with Korea will have tariffs reduced immediately.
    Mr. Costa. All right. My time has expired. Thank you very 
much, Mr. Chairman.
    The Chairman. The chair would extend the gentleman's time 
by 1 minute. And would the gentleman yield for kind of a 
question, or comment?
    Mr. Costa. Yes.
    The Chairman. The gentleman brings up the issue of GIPSA, 
and we were all part of the effort of 115 Members of Congress 
back in October when we wrote asking for an economic analysis 
of the proposed GIPSA rule. Those few rules, the gentleman will 
agree, will have more impact on livestock agriculture than this 
GIPSA rule. Thinking about that letter and the discussions 
among the various Members, I turned to the Secretary and I 
asked about the economic impact analysis that will be done is 
critically important. One of the things we ask for and that you 
set the motion in the process, is it possible or could we have 
an assurance that that economic impact analysis can be 
subjected--that cost-benefit analysis, I should say, can be 
subjected to independent peer review and perhaps a notice in 
the comment process? Because there are very few things we will 
do that are more important than the GIPSA rule.
    Secretary Vilsack. Mr. Chairman I will--I want to take an 
opportunity to visit with my team about that request, 
especially as it relates to a peer review. We do want to get 
this done. And we have received thousands of comments. And we 
have received a lot of direction in terms of what ought to be 
included or not included in the analysis. It is fairly 
extensive what has been proposed. And I have a lot of faith and 
confidence in Joe Glauber to be able to do this properly.
    The Chairman. You are absolutely right, Mr. Secretary, and 
getting it right is the most important thing. You demonstrated 
the willingness to add extra time to analyze the process over 
the course of recent months. You obviously care and I 
appreciate that fully, but the ability to have an independent 
peer review, and to have notice and comment time on that cost-
benefit analysis seems to me, and I would yield to the 
gentleman from California, seems to be a very important part of 
getting this right.
    Mr. Costa. Mr. Chairman, I couldn't agree with you more. 
And I appreciate the time to further extend the comments on 
this for the new Members of the Agriculture Committee who 
haven't been a part of our effort in the last Congress. We 
spent a great deal of time in a bipartisan effort to ensure 
that we got this right. And I concur with the Chairman, we 
appreciate the fact that the Secretary extended the time 
period. But the peer review is going to be critical because 
this is an issue that clearly not only affects the livestock 
industry throughout the United States, but it has implications 
in a ripple effect on our ability to export U.S. beef products 
abroad.
    We have seen Japan and we have seen other countries use 
what I would refer to as justifications that I don't think hold 
merit to prevent export, importation of American beef to their 
countries. We had a similar situation in South Korea that we 
had to deal with.
    So getting this right, and getting it right in a way that 
has the consensus of this Committee, as well as those in the 
industry is going to be critical to the long-term well-being of 
the U.S. livestock industry. And I am sure you will continue, 
Mr. Secretary, to find a consensus among the Members of this 
Committee on that point.
    The Chairman. And we will put our request in writing, Mr. 
Secretary. The gentleman's time has expired. The chair now 
turns to the gentleman from Illinois for his 5 minutes, Mr. 
Schilling. 
    Mr. Schilling. Hello, Mr. Secretary. Good to see you again. 
Unlike many in the room, I never worked a farm, but I can make 
a mean pizza. What I would like to talk a little bit about, and 
it is kind of an echo here, is the EPA. I gave you the scenario 
that we have dealt with here in the 17th District of Illinois, 
we are number 48 out of 50 in job creation across the United 
States.
    I have a family-run business that the EPA came in and these 
folks have 35 people employed, they have been open for 33 
years, never had anyone die, no major accidents and they ended 
up getting penalized by the EPA hundreds of thousands of 
dollars. They are in the process right now--they spent over 
$50,000 fighting this thing. I think that I am just going to 
reiterate that we have got to get those folks under control and 
that was just kind of a statement, not a question.
    The other thing that I would like to talk about is for 8 
years I did what I called estate planning. One of the things 
that was very difficult is the family farmer who literally work 
their finger to the bone. What would happen is I would have to 
come out and sell them what we call the last to die policy in 
the event that the last owner died, then they would be able to 
pass the farm down to the kids. And I always had a problem with 
that. I struggle with it because I have yet to ever figure out 
how the government can spend the money better than the children 
of the farmer or the small business.
    As you know, I know President Obama had come out last year, 
and I think it was 35 percent is what they had--I have some 
notes--yes, 35 percent in lame duck and then they just came out 
and they increased it to 45 percent with the cap at $3\1/2\ 
million. Where do you stand on the death tax, as I call it, 
because that is basically what it is, it is a double tax to the 
farmer. Where do you stand on that?
    Secretary Vilsack. I think there are a couple of things. I 
think, certainly, what was done in the tax relief bill that was 
passed last December certainly is extraordinarily helpful. I 
have been told, I have not actually studied this myself, but I 
have been told that roughly 95 percent of farmers and ranchers 
would be covered by that. You constantly have to be looking at 
that because of land prices fluctuating.
    There are also a number of other steps within the estate 
tax laws that basically mitigate the impact and effect of the 
estate tax to the point where you may not have to pay it, or if 
you are required to pay it because you have a very large 
estate, you have a significant amount of time to do it. There 
are also valuation mechanisms that can reduce the overall 
value. It may not necessarily be what the market is on that 
particular day. It may be that alternative use valuations can 
be used. I think there are a lot of ways in which you can 
address the issue of the estate tax, but certainly what was 
done in December was helpful.
    Mr. Schilling. With that I yield back the balance of my 
time.
    The Chairman. The gentleman yields back the balance of his 
time. I now recognize the gentleman from Iowa, Mr. King, for 5 
minutes.
    Mr. King. Thank you, Mr. Chairman. And I thank the 
Secretary for his testimony. I would like to start this out 
with the type of governor you had been. I applauded you for 
assigning the increase in the speed limit on our interstates up 
to 70. It saved me untold hours of productivity that I can use 
for other endeavors. And I appreciate that.
    I would take us back, however, to something, I think, is a 
disagreement, and we have had this discussion in my office with 
regard to the Pigford issue. And in that discussion, I related 
to you that then-Chairman of this Committee, Collin Peterson, 
whom I wish were here at this moment. He and I had a discussion 
of a disagreement where I had pointed out that a placeholder in 
the 2008 Farm Bill would result in $1.3 billion additional 
money going into the Pigford claims, which I have been very 
clear on my judgment that many of them are fraudulent. And we 
had that disagreement.
    The Chairman of this Committee established his opinion to 
me very clearly that he said that the language in the 2008 Farm 
Bill was a hard cap, $100 million and that would resolve all of 
the Pigford claims and put an end to it. I went back after our 
discussion when he told me that I had voted to authorize you to 
negotiate with the farmers to open up and resolve Pigford II. 
As I read the language which I have asked be handed to you, and 
it is section 14-012. I see the $100 million there, I see the 
language there and it reads to me that it is to shall be made 
exclusively from funds made available, and that it shall be the 
complete debt relief to resolve all the issues before Pigford.
    Now often I am the non-lawyer in the room, but I have some 
lawyers around me that read this that concur with me on that. 
And I think, Mr. Secretary, it probably would be better not to 
ask you to render a legal judgment on the language here on 
short notice, but I would ask you if you would respond to that 
inquiry in writing and have you had some time to evaluate the 
language here unless you are prepared today?
    Secretary Vilsack. I just want to make sure I understand 
the question.
    Mr. King. Okay. The question is, do you agree with the 
Ranking Member of this Committee, Collin Peterson, then-
Chairman, that the $100 million that is in the 2008 Farm Bill 
as to put an end--to take care of all outstanding, unresolved 
Pigford claims? And if so, then where did you and Attorney 
General Eric Holder get the authority to negotiate with John 
Boyd to open up this $1.25 billion claim which was attached to 
the Cobell settlement, and passed by the 112th Congress? That 
is one of my questions.
    Secretary Vilsack. Let me just see if I can respond and 
would be happy to amplify on it as well in writing. The reality 
is--the view was that this amount was not sufficient and 
adequate to actually provide the relief that folks needed, 
given the number of potential claims that were not yet fully 
resolved, that this wasn't sufficient.
    Mr. King. And so even though the statute, as I read it, 
says that $100 million shall be all of the money spent to 
resolve all the cases. And it shall be construed so as to 
effectuate its remedial purpose of giving a full determination 
on all the merits for each Pigford claim previously denied that 
determination.
    Secretary Vilsack. Well, the problem is it doesn't actually 
give a full determination because there wasn't sufficient 
resources in this. Plus again, with due respect to the drafting 
of this, it wasn't clear whether any of this money could be 
used to actually process the claims, which is to say putting 
the information together. And when I came into the office, I 
was advised that there was probably insufficient resources to 
both satisfy the claims and also pay the administrative 
expenses associated with it.
    Mr. King. And then so you and Attorney General Holder, I 
presume, with direction from the White House, opened the 
negotiation with John Boyd, the President of the Black Farmers 
Association. And came to a number which I believe was $1.15 
billion, which was the number that was in the CR that passed in 
the 111th Congress that we are operating under now, and that is 
the authority.
    And I am curious to a second question into that as I watch 
my clock tick, is there now a consent decree or is there any 
kind of legal document that binds any of the parties involved 
in Pigford II?
    Secretary Vilsack. First of all, we didn't negotiate with 
Mr. Boyd. There really wasn't a negotiation with Mr. Boyd. 
Second, the court is in the process of reviewing this and will 
essentially--because class action will essentially have to 
bless this, we anticipate that will take place relatively soon.
    Mr. King. And so your authority to reach this conclusion 
that you recommended to the Congress that we appropriate the 
$115--$1.15 billion, what was the source of that authority?
    Secretary Vilsack. The authority was that it was not a 
sufficient amount to resolve the class action that was pending.
    Mr. King. If we have an authorization statute here that 
caps it at $100 million to resolve all of it and--it doesn't 
seem to me that there is any authority beyond that $100 million 
the way I read the section.
    The Chairman. The Secretary can respond.
    Secretary Vilsack. Congressmen, you all obviously can 
change your mind at any point in time, and I think it is only 
fair to say that Congress does, from time to time, change its 
mind about things. And I think that is essentially what you 
did. It was not sufficient to resolve the case, that is the 
problem. And this was a relatively arbitrary number that was 
not necessarily tied directly to a number of claims and the 
amount it would take to settle the case.
    Mr. King. I ask unanimous consent for an additional minute.
    The Chairman. Seeing no objection. One additional minute.
    Mr. King. Thank you, Mr. Chairman. I have a news report in 
front of me regarding Pearlie Reed, USDA Assistant Secretary 
for Administration, individual that does work on your team.
    Secretary Vilsack. Yes.
    Mr. King. And it is reported that he was in Brinkley, 
Arkansas in late January where he told a crowd that Pigford I 
is under review and that those trying to defraud the government 
in Pigford II will go to the penitentiary. I like that last 
part of this phrase. Is Pigford I under review? And is there an 
IG investigation to look at Pigford I?
    Secretary Vilsack. I am not sure what Pearlie is referring 
to there, Congressman. If you give me an opportunity to visit 
with him about what he meant. I am not aware of that, but that 
doesn't mean that it is not happening.
    Mr. King. And are you an aware that there is an 
investigation of Pigford I under review?
    Secretary Vilsack. I am not aware of that. It could very 
well be. Oftentimes, the Inspector General doesn't let us know 
of all the investigations underway.
    The Chairman. The gentleman's time has expired.
    Mr. King. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    The Chairman. The chair now recognizes the gentleman from 
New York, Mr. Owens, for 5 minutes.
    Mr. Owens. Thank you, Mr. Chairman. Mr. Vilsack, thank you 
for coming today. You reported that we have seen a rather 
significant rise in exports of a wide variety of products, 
which is clearly a good thing for us. Is there a point in time 
where the level of exports would create an increase in prices 
within the United States as the result of the export, or do we 
have excess capacity which will allow us to continue to export 
at these levels?
    Secretary Vilsack. I recently saw a study and I have not 
had a chance to determine whether it is appropriate or 
scientifically valid. It suggested there is still a lot of 
untapped potential in terms of our capacity to produce 
agricultural products in this country. That there are probably 
some lands that could be, for example, double-cropped that are 
not being double-cropped and could be done in an 
environmentally appropriate way. So if that report is correct, 
I think there are still opportunities for us to meet the 
domestic needs as well as a growing export market.
    Mr. Owens. And would that also be true in terms of 
returning lands that previously might have been dairy farms 
into crop production in order to meet that demand?
    Secretary Vilsack. Each individual operator is obviously 
going to try to make the decision that is best for their 
operation. And we have lost relatively almost half of our dairy 
producers, so it wouldn't surprise me if that is happening.
    Mr. Owens. Is that something that the Department would 
encourage?
    Secretary Vilsack. I wouldn't say we are encouraging it, 
actually what we are trying to do is try to figure out if there 
is a way in which we can stabilize the dairy industry so that 
we don't continue to lose producers.
    Mr. Owens. And I understand and certainly that is of great 
importance, particularly in my district as in many others, but 
those farms that have gone out of the dairy business, is there 
some type of a plan that the Department has which would 
encourage them to move into crop production, solely for the 
purpose of export that would allow them to be profitable?
    Secretary Vilsack. I wouldn't say there is a specific plan, 
but there are a number of programs that could be available to 
operators that would encourage them to do that, in terms of 
loan grant programs that we have.
    Mr. Owens. Is there someone that can I contact in the 
Department that could assist my office in gathering that 
information?
    Secretary Vilsack. We would be happy to reach out to you, 
our Office of Congressional Relations will do that very soon.
    Mr. Owens. Thank you very much. I yield back.
    The Chairman. The gentleman yields back the balance of his 
time. The chair turns to the gentleman from Florida Mr. 
Southerland.
    Mr. Southerland. Thank you, Mr. Chairman. Mr. Secretary, 
thank you for being with us today. I have a question regarding 
citrus greening. Being from Florida, the citrus industry is 
very critical to our state. Citrus greening is one of the most 
devastating diseases affecting any commercial crop as 
recognized by the National Academy of Sciences. In addition, 
citrus ranks nearly first in the nation in crop value among 
fruit and vegetable specialty crops according to the USDA's 
National Agricultural Statistics Service.
    Timely research on citrus greening and its vector, the 
Asian citrus psyllid, is absolutely essential to ensuring the 
future of citrus production in this country. I am curious if 
you would go into a little explanation as far as what the 
Department is doing with the SCRI initiative and just to help 
give me an understanding, if you don't mind, of what tools you 
are utilizing that you have at your disposal to address this?
    Secretary Vilsack. Well, first of all, a recognition that 
this is a serious problem and it impacts certainly two areas of 
the country, both in terms of where you are from as well as 
concerns we have in the Arizona, California area. Additional 
research opportunities have been directed to try to assist in 
developing a process by which this could be abated. There are 
obviously--quarantine is probably not the right word, but there 
is a way in which we are identifying where this is and we are 
attempting to work with folks in these areas where we have seen 
this to try to contain it as best we can. I don't know that we 
have all the answers in terms of how to eradicate it, but I 
think it is primarily putting additional resources behind 
containment and research to try to figure out how to get rid of 
this.
    Mr. Southerland. I think some of the things that I know, 
the citrus crops are $12.2 billion in the U.S. economy. And a 
lot of people don't realize that this disease has never been 
cured in any other country in the world. It is critical. This 
is a dire challenge we have. I am just interested periodically 
in hearing when you testified as to be able to kind of give us 
an overview.
    Secretary Vilsack. I will have our Congressional Relations 
Office provide you with additional specific information on 
precisely what we are doing. I met with the citrus growers, and 
we are very aware of this concern.
    Mr. Southerland. It is incredible, too, when you realize 
that the citrus growers have self-funded almost $40 million of 
research, and I think they need to be applauded. This is not an 
industry that is waiting for government to fly in and save the 
day. So I think they recognize how critical it is. I want to 
make sure, as representing many in my state, but as you 
mentioned, this deals with several regions of our country, that 
the Department is doing everything within its ability, 
utilizing the tools and the staff and the budget, to make sure 
that this is a priority. It is widely unknown to our nation at 
large, but we love orange juice and we love oranges and what 
they mean to us.
    I have to mention, it is a comment in regard to something I 
know that you are getting tired of hearing. And you know where 
I am going. When you hear that statement, you know the 
precursor of how damaging the reach of the EPA is. It would be 
unfair of me, having met with so many of the farmers in north 
Florida, and I am in District 2 of Florida, so I represent the 
largest Congressional district in Florida. A lot of people 
don't realize, we have almost 70 dairy farmers just in Florida. 
A lot of people don't realize that about Florida. We have 250 
specialty crops in Florida. It is amazing, the fear that they 
are hearing about the EPA and the overreach, especially with 
the nutrient requirements that the EPA is pushing down on the 
State of Florida.
    I will tell you, we are talking about destroying perhaps 
14,500 jobs in Florida in just what it would cost our local 
government in Florida; $21 billion, it is estimated, in new 
water treatment facilities. This has to be a tremendous 
concern. I am concerned that the Administration, which you are 
a part of, every time it hears that you have to come and 
testify--and thank you for coming--that you hear the concern of 
every district because the EPA imposes an incredible threat to 
jobs in this economy recovering.
    Thank you.
    The Chairman. The gentleman's time has expired.
    The chair now recognizes the gentleman from New York, Mr. 
Gibson, for 5 minutes.
    Mr. Gibson. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here today. I appreciate it.
    I represent upstate New York. I have ten counties, 137 
towns. Agriculture is key to our area. I have a panel that 
advises me. They represent all across the ten counties. What I 
thought I would do is take the opportunity to share with you 
the results of a meeting we recently had.
    First of all, you are held in high regard. You have made 
two trips to my district in the last 6 months, and it is very 
much appreciated. You conduct yourself in a very professional 
way, you clearly advocate for farmers, and I want to express my 
appreciation.
    My number one concern, although really there are two. The 
first has actually been hit by leadership and Mr. Costa as 
well, and it has to do with what we are going to do, going 
forward, on price discovery and stability for the dairy market. 
Our farmers, in a perfect world, they would want to have more 
free market forces. They have been listening very carefully for 
the last 18 to 24 months about what National Milk Producers 
Federation has been talking about. The biggest issue our 
farmers have, because we are primarily almost entirely family 
farms, is the stability. The wild oscillation in prices is very 
Darwinian on our farmers.
    What I was impressed with, inasmuch as there is such an 
incredible group with a diversity of opinion, that they care 
very deeply about one another and are ready to pull together. 
So to the extent that we can bring a more rapid conclusion to 
that effort, that would be tremendously appreciated.
    Along with it, and I really don't want to beat a dead horse 
here, but the EPA comes up all of the time. Our farmers up 
there, they are tremendous environmentalists. They believe 
deeply in conservation, but they are exasperated by what they 
view as an overreach. I know that is not your domain, but I 
wanted to share that with you. The spilled milk thing is an 
example. It looks like that is going to come out okay. I had a 
meeting yesterday with EPA, but for farmers who can be 
skeptical, it added more fuel to the fire in terms of why don't 
they come out with that exemption. So to the extent that you 
can advocate for them as well, I think that that would be 
helpful.
    The other piece of this, the Chesapeake watershed also has 
our farmers concerned. In New York State, they are looking at 
potentially going down to countywide standards. There have been 
some estimates in terms of what that cost implementation would 
be, but it is concerning. I know that the budget came forward 
and I think there is $17 million in there now to address this, 
but we think we are going to be on the end of that pipeline and 
our farmers are very concerned of the impact that this 
potential regulation is going to do to their profitability.
    There is some concern about the implementation of Dodd-
Frank for our farmers, using instruments to hedge against risk. 
I know it was not the intent of Congress to use that bill to 
really adversely impact farmers, but of course farmers pull 
together in co-ops, and there is concern about how that is 
going to impact them going forward.
    Finally, this has been a particularly tough winter in 
upstate New York, and of course we love the four seasons and 
that is why we live there. But the heavy snow and the ice has 
impacted as of last count, yesterday, we had 42 farmers who had 
roofs collapse attendant to the snow and ice. Your Department 
has been helpful, and we thank you for that. But anything that 
you can do to help the Administration to declare that a 
disaster area, that would be greatly appreciated. At this 
point, I will pause for your response.
    Secretary Vilsack. The disaster debt declarations, Governor 
Cuomo would have to request it, and we would try to turn those 
around relatively quickly. Once we do, it does create 
opportunities that, absent such a declaration. I would 
encourage you to encourage the Governor to do it on a timely 
basis. We have had, unfortunately, circumstances when the 
Governors have let the time period go by, and there isn't any 
authority I have to waive that time period. It is important to 
do it in a timely basis.
    On the Chesapeake Bay, one of the things that we are doing, 
USDA is attempting to quantify the degree to which producers 
are embracing conservation and stewardship in a way to try to 
allay concerns or fears that folks may have that farmers aren't 
sensitive to the environment. We did one recently in the 
Chesapeake Bay and we did one in the upper Mississippi River 
Basin, and it does reflect, as I indicated earlier, that 
farmers are indeed focused on conservation. The more we can be 
specific about that, I think the easier it is to make that 
case.
    The Chairman. The gentleman's time has expired.
    The chair now turns to the Subcommittee Chairman from 
Texas, Mr. Conaway, for 5 minutes.
    Mr. Conaway. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here. Last year your 
Department authorized or started an ad hoc disaster relief 
program that went to certain states, certain producers. Some 
crops were in and some crops were out, even though the producer 
was on the same farm, same disaster. I hope in your answer you 
will be able to look us in the eye and unequivocally state that 
politics and who might vote for whom absolutely had nothing to 
do with the way that the money was distributed.
    That leads me to the question of can you give us an 
accounting of where the money went and who got it so we can see 
a regional distribution of those moneys.
    And my final question is: With previous ad hoc disaster 
payments, the producers had been required to sign up for crop 
insurance the next year as a condition to get into the program. 
So you waived that or just didn't put that in this time. Can 
you walk us through the criteria used for picking winners and 
losers in that program?
    Secretary Vilsack. I will make an effort to do that. There 
was an effort to try to respond to the fact that when we put 
together the SURE program and other disaster programs, the idea 
in the 2008 Farm Bill was that we would sort of move away from 
what had been the case in previous disasters where you had ad 
hoc disaster relief.
    When we put SURE together, it didn't really do as good a 
job for some producers as others. Cotton and rice producers did 
not fare very well under SURE, and there were circumstances 
where there was a substantial amount of moisture that impacted 
and affected those crops. And in doing so, we tried to 
designate it based on where that condition, the oversupply of 
water, if you will, created difficulties. That allowed us to 
identify roughly a thousand counties where farmers could 
potentially request this assistance.
    We can give you an indication of where the farmers who 
signed up for this, where they come from. There were two other 
components. One was a poultry component which was very 
specifically designated and designed to try to provide 
assistance to poultry producers who were treated very unfairly, 
unfortunately, as a result of the bankruptcy of Pilgrim's Pride 
and other poultry processing facilities. And then there was an 
issue involving aquaculture that had some very difficult times 
with high feed costs.
    So those were the sort of three groups of people that were 
attempted to be assisted.
    We got $20 million out to the aquaculture farmers. That is 
primarily in the South. We have gotten money out, roughly $60 
million, to the poultry producers. That was a handful of 
states. And then the balance, about $170 million as of today, 
but it may very well be closer to $200 million, a little over 
$200 million when it is all said and done, to producers, where 
there were significant rainfalls, involving cotton, rice. And 
because of the nature of the counties, soybeans were also 
included.
    If any of those individuals are in fact going to receive 
SURE payments as a result of SURE basically taking care of 
their crop, then there will be a deduction from their SURE 
payment for anything that they received under this particular 
program. So it sort of addresses the issue of soybeans.
    Mr. Conaway. Well, is this an indication that the SURE 
program has failed? And also, look us in the eye and tell us 
that your new team used political reason--there was absolutely, 
unequivocally, no political considerations given to how you 
came up with the winners and losers under this plan?
    Secretary Vilsack. From my perspective--I am answering your 
question, sir. From my perspective, we did the best job we 
could to handle the difficulties that farmers who were not 
treated fairly or as well as other farmers were under the SURE 
program. I think it is important.
    I wouldn't say the SURE program failed because it certainly 
was beneficial to a lot of producers, and it certainly is the 
right direction. Can it be improved? I think that is part of 
the discussion that will hopefully take place in the 2012 Farm 
Bill. Are there ways of improving that kind of approach, 
because I think there is some merit to the approach.
    Mr. Conaway. And the answer to my question that I have 
asked twice?
    Secretary Vilsack. I thought I answered it, sir.
    Mr. Conaway. Can you look us in the eye and unequivocally 
state that political considerations bore no--had nothing 
whatsoever to do with picking winners and losers under this 
plan?
    Secretary Vilsack. From my perspective, what we did at 
USDA, that is correct. I honestly can't speak for anyone else 
in this process. I can just tell you what we did and why we did 
it.
    Mr. Conaway. Didn't you do it all? Was this a program that 
was done in the White House? Where did this get done, if not in 
your shop?
    Secretary Vilsack. It was done in our shop, and I am 
speaking for our shop. Basically what we did was we took a look 
at where SURE----
    Mr. Conaway. So when we get the map--and I assume you will 
give us the map of where the money went, and overlay that 
against political maps--there won't be any correlation there 
that looks weird by region?
    Secretary Vilsack. I don't think so. It has to do with 
where there was a significant amount of rainfall that made it 
difficult for plants either to be planted or to be harvested. 
And specifically, the crops that were negatively impacted were 
rice and cotton. So you are going to see states in the South--
Mississippi, Arkansas, Alabama--that were obviously impacted 
and affected by this. You will see some counties in Illinois 
that were impacted by this.
    Mr. Conaway. Let me ask you on the record, you didn't 
consider anything from a political standpoint in the way you 
orchestrated this program?
    Secretary Vilsack. No, sir. I asked our staff to put 
together a program that would respond to the concerns that were 
being expressed to us by farmers and producers who felt that 
they were not being treated fairly because SURE didn't address 
their particular crop.
    The Chairman. The gentleman's time has expired.
    The chair now turns to the gentlelady from Missouri for 5 
minutes.
    Mrs. Hartzler. Thank you, Mr. Chairman.
    I would concur with a lot of my other colleagues here. Of 
course EPA is a huge concern. But I wanted to focus on GIPSA, 
and I know it has been discussed before. But in Missouri, there 
was a law passed a few years ago, a Missouri livestock 
marketing law, that went into effect that had basically some of 
the same impact of this proposed rule. It ended up being 
rescinded in a special session of the legislature just a few 
months after it was implemented because of its very onerous 
impact on the livestock industry.
    Swine, they say that based on what happened in Missouri 
with the dropped prices, the impact, that it cost roughly $2.7 
million in a 5 month period. If you were to extrapolate that 
across the United States, if this rule were to be implemented, 
U.S. swine producers would see about a $279 million a year 
impact; cattle, $728 million a year. All together, the hog and 
fed cattle producers would be over a billion dollars.
    So I was wondering, first of all, are you familiar with 
what happened in Missouri as it relates to this proposed rule?
    Secretary Vilsack. I am not specifically familiar with what 
you are talking about.
    Mrs. Hartzler. Okay. What impact does your Department 
believe it will have on the livestock industry dollar-wise if 
this should go into effect?
    Secretary Vilsack. That is the reason we are doing an 
economic analysis. That has not yet been done. We wanted to get 
all of the comments and all the suggestions and concerns on the 
part of folks before we conducted an economic analyses. And we 
are taking all of that into consideration in formulating that 
analysis.
    I would say there was an overarching concern, and there may 
be multiple reasons and explanations for this, but we have lost 
roughly a third of our cattle producers in my lifetime, and 90 
percent of our hog producers. We felt that there is a need to 
ask questions.
    When we did the anti-competition hearings around the 
country, we had a lot of people converse about the need for a 
packers and stockyards review and greater enforcement of 
packers and stockyards. So there was a good-faith effort to try 
to respond to the concerns that we have heard about the 
fairness or the lack of fairness in certain markets.
    We put a rule together, obviously, which generated an awful 
lot of controversy and concern. A lot of people opined about 
it. We have taken all of that information into account, and we 
are going to try to put the best rule possible together.
    Mrs. Hartzler. This is a question as a new person here. So 
if it comes back that everybody's opinion is that it is going 
to be detrimental, will you withdraw the rule? Do you have that 
option, or are you going to move forward regardless?
    Secretary Vilsack. Obviously, if it comes back and there is 
no benefit to the rule at all, obviously there is a problem 
with the way that we have structured the rule. And we would 
obviously have to rethink the position.
    I will tell you that I would like to think that there will 
be consensus on some aspects of agriculture. But what I find in 
this job is that there is almost never consensus. There are 
always at least two sides, and oftentimes multiple sides, 
depending on where you are from and how small, medium-sized or 
large your operation is, and what you are producing.
    And the challenge is to try to make sure that we have a 
fair market. That is what we are trying to do, is just 
establish a fair market. I think we can have a consensus on 
that, but how you get to a fair market, there is a lot of 
difference of opinion on that. There is no question about that.
    Mrs. Hartzler. Well, I just hope you will take into account 
what happened in Missouri to us and why the legislature had to 
rescind it. And hopefully you won't do anything to negatively 
impact the livestock industry.
    Thank you, Mr. Chairman.
    The Chairman. The gentlelady yields back the balance of her 
time.
    That concludes this round of question. This is the point 
where I would customarily, before I adjourn, turn to my Ranking 
Member and ask for closing comments. Instead, I will offer my 
own comments.
    Thank you, Mr. Secretary, for coming here and for 
demonstrating your patience with the schedule we are working 
on, on the floor. I note that whether it is rules or 
regulations, policy, there are a variety of things that this 
very diverse Committee has a lot of questions about, and you 
serve a pivotal role for rural American production ag. Thank 
you.
    With that, under the rules of the Committee, the record of 
today's hearing will remain open for 10 calendar days to 
receive additional material and supplemental written responses 
from the witness to any question posed by a Member of the 
Committee.
    This hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 1:50 p.m., the Committee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                          Submitted Questions
Response from Hon. Thomas J. Vilsack, Secretary, U.S. Department of 
        Agriculture *
---------------------------------------------------------------------------
    * There was no response from the witness by the time this hearing 
went to press.
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Question Submitted by Hon. Timothy V. Johnson, a Representative in 
        Congress from Illinois
    Question. Last October, you announced a biofuels infrastructure 
plan that included assistance through Rural Development to install 
10,000 blender pumps and storage systems over the next five years. 
Given the cost of blender pumps this could be a very expensive 
commitment. Would you further discuss this infrastructure plan and how 
these projects would be funded? Do you envision using grants, loans, or 
loan guarantees? If your intent is to target urban areas where blender 
pumps are not currently deployed, does this mean you intend to utilize 
scarce rural development funds in urban areas, and which Rural 
Development program would be utilized for the deployment of blender 
pumps?
Question Submitted by Hon. Reid J. Ribble, a Representative in Congress 
        from Wisconsin
    Question. Mr. Secretary, I was encouraged to hear the 
Administration announce steps last month to begin to resolve one of the 
largest trade disputes we have that has hampered our agricultural 
exports, particularly of cheeses, to Mexico, a major market. Exports 
help our farm economy to thrive and it has been disconcerting to see 
Mexico impose retaliatory tariffs on cheeses and other agricultural 
products due to our noncompliance with NAFTA. American agriculture 
constantly faces this very same dilemma, as our trading partners often 
try to evade their agreements with us, so it is critical that we ``walk 
our talk'' by abiding by our own commitments. Given the impact this 
dispute has had on one of our largest agricultural markets, can you 
tell me where efforts stand to settle this matter as swiftly as 
possible, and what USDA is doing to continue to impress upon the other 
agencies involved that a resolution is urgent?
Questions Submitted by Hon. Collin C. Peterson, a Representative in 
        Congress from Minnesota
    Question 1. What steps is USDA/FNS taking to build on the Education 
and Administrative Reporting System (EARS) that will evaluate the 
outcomes and impacts of successful programs, over and above the simple 
process measurements?
    Question 2. In implementing SNAP Nutrition Education provisions, 
what steps is USDA/FNS taking to allow states and communities to 
propose and implement demonstration projects prior to FY 2013, using 
existing SNAP Ed resources included in Section 241 of the Healthy 
Hunger Free Kids Act of 2010. How might such demonstration projects be 
helpful to states in national planning and preparation during the 
transition period?
    Question 3. Healthy Incentive Pilot--please provide an update of 
the status and scope of work, including how EBT coding, the timeline, 
potential for establishing baseline data for participants.
    Question 4. Fresh Fruit and Vegetable Snack Program--what will be 
the allotments for the upcoming school year? Is there unspent money 
from last year? What percentage of those schools funded are high-need 
schools?
    Question 5. Fresh Fruit and Vegetable Snack Evaluation--what is the 
status of this report? Are there results that can be shared?
Question Submitted by Hon. William L. Owens, a Representative in 
        Congress from New York
    Question. Last year I was joined by many colleagues from the 
upstate NY delegation, as well as many from the Dairy Farmer Caucus, in 
expressing to the Administration my grave concerns about the prospect 
of expanding U.S.-New Zealand dairy trade through the TPP and the 
billions of dollars in losses that could impose on the U.S. dairy 
economy. I know the state of the U.S. dairy economy has been an issue 
of particular interest to you, as it is to me. What is USDA doing to 
help ensure the Administration is fully aware of the negative impact 
that expanding U.S.-New Zealand dairy trade could have on our dairy 
sector?

                                  
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