[Senate Hearing 112-505]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-505

 
                         NOMINATION HEARING OF 
                  MICHAEL T. SCUSE, CHESTER J. CULVER 
                         AND BRUCE J. SHERRICK 

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                               __________

                           DECEMBER 15, 2011

                               __________

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            Committee on Agriculture, Nutrition and Forestry


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            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

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

             Christopher J. Adamo, Majority Staff Director

              Jonathan W. Coppess, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Michael J. Seyfert, Minority Staff Director

                Anne C. Hazlett, Minority Chief Counsel

                                  (ii)



                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Nomination Hearing of Michael T. Scuse, Chester J. Culver and 
  Bruce J. Sherrick..............................................     1

                              ----------                              

                      Thursday, December 15, 2011
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1
Grassley, Hon. Charles, U.S. Senator from the State of Iowa......     2
Coons, Hon. Christopher A., U.S. Senator from the State of 
  Delaware.......................................................     4

                                Panel I

Culver, Hon. Chester John, Iowa, nominated to be a Member of the 
  Board of Directors for the Federal Agricultural Mortgage 
  Corporation....................................................    14
Scuse, Michael T., Delaware, nominated to be Undersecretary of 
  Agriculture for Farm and Foreign Agricultural Services and to 
  be a Member of the Board of Directors of the Commodity Credit 
  Corporation....................................................     5
Sherrick, Bruce J., Ph.D., Illinois, nominated to be a Member of 
  the Board of Directors of the Federal Agricultural Mortgage 
  Corporation....................................................    16
                              ----------                              

                                APPENDIX

Prepared Statements:
    Chambliss, Hon. Saxby:.......................................    26
    Culver, Hon. Chester John:...................................    28
    Scuse, Michael T.:...........................................    31
    Sherrick, Bruce J.:..........................................    33
Document(s) Submitted for the Record:
    Committee Questionnaire and Office of Government Ethics 
      Executive Branch Personnel Public Financial Disclosure 
      Report filed by Hon. Chester John Culver...................    36
    Committee Questionnaire and Office of Government Ethics 
      Executive Branch Personnel Public Financial Disclosure 
      Report filed by Michael T. Scuse...........................    47
    Committee Questionnaire and Office of Government Ethics 
      Executive Branch Personnel Public Financial Disclosure 
      Report filed by Bruce J. Sherrick..........................    72
Question and Answer:
Chambliss, Hon. Saxby:
    Written questions to Hon. Chester John Culver................    81
    Written questions to Michael T. Scuse........................    87
    Written questions to Bruce J. Sherrick.......................    91
Roberts, Hon. Pat:
    Written questions to Hon. Chester John Culver................    80
    Written questions to Michael T. Scuse........................    83
    Written questions to Bruce J. Sherrick.......................    90
Thune, Hon. John:
    Written questions to Hon. Chester John Culver................    82
    Written questions to Michael T. Scuse........................    88
    Written questions to Bruce J. Sherrick.......................    92
Brown, Hon. Sherrod:
    Written questions to Michael T. Scuse........................    86
Culver, Hon. Chester John:
    Written response to questions from Hon. Pat Roberts..........    80
    Written response to questions from Hon. Saxby Chambliss......    81
    Written response to questions from Hon. John Thune...........    82
Scuse, Michael T.:
    Written response to questions from Hon. Pat Roberts..........    83
    Written response to questions from Hon. Sherrod Brown........    86
    Written response to questions from Hon. Saxby Chambliss......    87
    Written response to questions from Hon. John Thune...........    88
Sherrick, Bruce J.:
    Written response to questions from Hon. Pat Roberts..........    90
    Written response to questions from Hon. Saxby Chambliss......    91
    Written response to questions from Hon. John Thune...........    92



                         NOMINATION HEARING OF
                  MICHAEL T. SCUSE, CHESTER J. CULVER
                         AND BRUCE J. SHERRICK

                              ----------                              


                      Thursday, December 15, 2011

                              United States Senate,
           Committee on Agriculture, Nutrition and Forestry
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:35 a.m., in 
room 328A, Russell Senate Office Building, Hon. Debbie 
Stabenow, Chairwoman of the Committee, presiding.
    Present: Stabenow, Harkin, Conrad, Roberts, Cochran, 
Grassley, and Thune.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
 OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION 
                          AND FORESTRY

    Chairwoman Stabenow. Well, good morning and the Senate 
Committee on Agriculture, Nutrition and Forestry, with a lot of 
feedback through the microphone, is called to order. I hope we 
are going to get that fixed. Thank you very much. We are in our 
newly-refurbished, high tech Committee room, so I hope that 
means that all the technology is going to work well here as we 
are back.
    Welcome. Today the Committee is meeting to consider 
important nominations, the nomination of Michael T. Scuse, 
Delaware, to be Under Secretary of Agriculture for Farm and 
Foreign Agricultural Services, and a member of the Board of 
Directors of the Commodity Credit Corporation; as well as two 
nominees for the Board of Directors of the Federal Agricultural 
Mortgage Corporation, also known as Farmer Mac. Governor Chet 
Culver of Iowa and Dr. Bruce Sherrick of Illinois.
    Welcome to all of you and congratulations on your 
nominations. We extend a warm welcome to you and your family 
and friends. I understand that, Mr. Scuse, your wife, Patrice, 
is here with you and we welcome you as well. I would also like 
to welcome Governor Culver's stepbrother, John, who I 
understand is with him today. So welcome.
    These positions are critically important, as we all know, 
for American farmers and ranchers. The Under Secretary of 
Agriculture for the Farm and Foreign Agriculture Services plays 
a key role in enforcing accountability within the Farm Service 
Agency, the Risk Management Agency, and the Foreign Agriculture 
Services Agency.
    The Under Secretary is responsible for making sure that 
taxpayers are getting their money's worth and that we are doing 
everything possible to make USDA services efficient and 
effective for farmers, ranchers, and the families they serve.
    Mr. Scuse, I would hope that you would use the perspective 
you have gained as both a farmer and a long-time public servant 
to improve the operations of the agencies you will continue to 
oversee, assessing how the agencies are measuring performance 
and efficiency, cutting down on duplication, and how customer 
service is being administered and improved. I would appreciate 
your focus in those areas.
    Your nomination comes at a very important time as the 
Committee continues to work to write the next Farm Bill. The 
staff of the Department of Agriculture will be an indispensable 
resource for us as we move forward, and you have been already--
we work very closely with the Department and appreciate the 
input and expertise of the Department.
    All of you really are the boots on the ground implementing 
the programs that we have created and will create so that we 
are able to provide valuable feedback on performance, and I 
appreciate all of that work.
    Governor Culver and Dr. Sherrick, you have been nominated 
to serve as members of the Board for Farmer Mac. Of the 15 
Board members, five are elected by the Farm Credit system 
institutions, five are elected by other financial institutions 
as we know, and five are nominated by the President and 
confirmed by the Senate.
    Those five are particularly important to preserve consumer 
protections for the American people. As Board members, it will 
be your responsibility to ensure that Farmer Mac is managed in 
a safe and sound manner, and with an appropriate balance 
between financial performance and fulfillment of its public 
mission. The availability of credit in rural communities is 
absolutely essential to growth and sustainable economic 
development. It is the job of Farmer Mac to make sure that 
credit is available in rural America.
    I know I speak for all the members of the Committee when we 
say that we take our obligation to advice and consent very 
seriously. We look forward to all of your remarks and the 
opportunity to exercise our constitutional duties. I know that 
Senator Roberts will be joining us in just a bit, and at that 
point, I will turn to him for opening comments.
    Before turning to our excellent panel and the Senator from 
Delaware to make an introduction as well, I do want to turn, 
without objection, to Senator Grassley, who I know is going to 
have to leave, but wants to comment on one of our nominees at 
this point. So, Senator Grassley?

STATEMENT OF HON. CHARLES GRASSLEY, U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Thank you for letting me go out of order, 
and it will take about three or four minutes. But also, before 
I introduce Governor Culver, I had the opportunity of meeting 
Michael Scuse in my office and determined he is well-qualified 
for that office. Coming from Delaware, you might not think he 
knows much about agriculture, but he sure does know a lot about 
agriculture and I know agriculture is very important to the 
State of Delaware, even though a lot of times for a small state 
you do not think so.
    It is my pleasure, Madam Chairman and members of the 
Committee, to introduce Governor Culver, and my colleague, 
Senator Harkin, will be coming along later to do the same. I 
speak very highly of him because in the years he served as 
Secretary of State and the years he served as Governor, I had a 
good working relationship with him and know well his devotion 
to public service. And he comes from a family that has a 
history of public service as well.
    So I am pleased that one of the President's nominations for 
Farmer Mac is an Iowan and I would personally congratulate the 
Governor on his nomination and welcome him to this hearing 
today. Governor Culver has served in statewide office in Iowa 
for over a decade, first two terms as Secretary of State and 
then as Governor. So he has seen first-hand many ups and downs 
of the agricultural industry, as so commonly happens in any 
state with agriculture, but it does in Iowa as well.
    The agricultural economy is going through a strong period 
right now, and part of the reason for that is that agricultural 
credit systems have allowed farmers access to the resources 
that they need and have otherwise had difficulty obtaining. 
Governor Culver, living in Iowa his life, as well as serving 
Iowans in those two positions, has a first-hand knowledge of 
how important credit is and the ability to finance farming 
operations, not only to the farmers, but to the prosperity of 
both rural Iowa, and when you look at the job that faces him, 
rural America as a whole.
    While agriculture has had a bright spot in these tough 
economic times, we are still seeing a lot of volatility in 
commodity and import prices. We have to make sure that U.S. 
farmers continue to have the resources available to them as 
they continue to produce a safe and abundant food and fuel 
supply. And Farmer Mac plays a very important role in ensuring 
capital is available to farmers in rural communities.
    So I think, and this Committee will know this after 
Governor Culver testifies, that he will bring a valuable 
perspective and a valuable understanding of rural issues to the 
Board of Directors of Farmer Mac. I want you to know that I 
enthusiastically support his nomination and I urge my 
colleagues to join me in confirming him, and I hope that 
confirmation can be done quickly before we go home for 
Christmas, because obviously it will linger beyond into 
February if we do not do that.
    Again, I welcome Governor Culver and congratulate him on 
his nomination. Thank you, Madam Chairman.
    Chairwoman Stabenow. Well, thank you very much, Senator 
Grassley. Governor Culver, that is high praise coming from a 
very distinguished member of our Committee and we take that 
very seriously. So thank you very much, Senator Grassley.
    I am now going to turn to the Senator from Delaware to tell 
us about Delaware agriculture. Would you like to respond?

 STATEMENT OF HON. CHRISTOPHER A. COONS, U.S. SENATOR FROM THE 
                       STATE OF DELAWARE

    Senator Coons. I would love to. Thank you for the 
opportunity. Senator Stabenow, as Senator Grassley and I have 
previously discussed over breakfast, ag is the biggest business 
in Delaware. Now, someone from a state the size of Michigan may 
not think that is much of a big deal, but for our state, it is 
a big deal.
    Chairwoman Stabenow. That four farms? No, I'm sorry.
    Senator Coons. We get no respect. We get no respect.
    [Laughter.]
    Senator Coons. Poultry is really the sort of beating heart 
of the Delaware agriculture sector, but there are lots of other 
components to it, and I just want to start by saying I am 
grateful, Madam Chairman, for the opportunity to introduce my 
friend and fellow Delawarean, Michael Scuse.
    It is a rare and good day when I see good people advance 
here in Washington, and Michael is one of the best I have ever 
known. He and his wife, Patrice, have been good friends to my 
wife, Annie, and I for a long time. I first got to know him 
well in a public capacity when he was serving as Secretary of 
Agriculture for the State of Delaware, and we had an 
opportunity to get to know each other, both personally and 
professionally. He is passionate about agriculture. He is hard-
working, he is smart, he is genuine, he is a decent man.
    He and his brother continue to run a family farm in Smyrna. 
Like me, he commutes to and from Delaware. His wife, Patrice, 
is with him today and I know that he remains a connected part 
of the tight-knit farm families that are the backbone of rural 
Delaware.
    I worked most closely with Michael when I was the New 
Castle County Executive. The day I announced my candidacy for 
that position, promoting farm preservation and strengthening 
our partnership between the county and state, was one of the 
things I was determined to do. And it was not easy and it 
required a state Secretary of Agriculture who was innovative, 
who was willing to find ways to adapt a program, and who was 
willing to partner with me.
    Largely because of Michael's leadership and the Governor 
under whom he served, Delaware today has the highest percentage 
of preserved productive agriculture farmland of any state in 
the country.
    We also worked together to promote agri-tourism and to 
promote on-farm income sources that were non-traditional, which 
in my county, which is rapidly becoming suburban, was one of 
the few ways we could save for the long-term productive 
agricultural properties.
    So I just wanted to share with you, if I could, by way of 
introduction, that I think Michael's critical work in the State 
of Delaware and now here in Washington, in the United States 
Department of Agriculture, gives him the skills and the 
experience to build on his personal character and values to be 
a great Under Secretary of Agriculture.
    I also think he will contribute significant skills and 
experience to the Commodity Credit Corporation. I think you 
could do no better than to take this great Delawarean and give 
him an opportunity to show everybody in the United States that 
Delaware does not just have a great agriculture sector, it also 
grows great agriculture community leaders and Michael Scuse is 
one of the best. Thank you, Madam.
    Chairwoman Stabenow. Thank you very much, and again, high 
praise from a distinguished member of the Senate. So thank you, 
Senator Coons, for being here. Let me now go forward to 
specifically introduce our first nominee, Mr. Michael Scuse.
    Prior to becoming Acting Under Secretary for Farm and 
Foreign Agricultural Services, Mr. Scuse served as Deputy Under 
Secretary for the Farm and Foreign Agricultural Services 
mission area from 2009 to 2011 with primary responsibility over 
our domestic programs at the Farm Services Agency and the Risk 
Management Agency. Before joining USDA, Mr. Scuse was, as 
Senator Coons, indicated, Delaware's Secretary of Agriculture 
from May 2001 until September 2008 when Governor Ruth Ann 
Minner named him as her Chief of Staff. He lives in----
    Mr. Scuse. Smyrna.
    Chairwoman Stabenow. Smyrna--I am sorry, I was saying that 
wrong--Delaware with his wife, Patrice, as I indicated. And so, 
now I have two things that I need to do, Mr. Scuse, first 
administer an oath that we administer to all of our nominees. I 
would ask you to stand and to raise your right hand.
    Do you swear that the testimony you are about to present is 
the truth, the whole truth, and nothing but the truth, so help 
you God?
    Mr. Scuse. I do.
    Chairwoman Stabenow. Secondly, Mr. Scuse, do you agree that 
if confirmed, you will appear before any duly-constituted 
Committee of Congress if asked to appear?
    Mr. Scuse. I will.
    Chairwoman Stabenow. Thank you very much. At this point, we 
would like to proceed to your testimony. As you know, we have 
asked for five minutes of oral testimony and we are welcome to 
receive any other written testimony you would like to give us. 
So again, welcome, and please proceed.

   TESTIMONY OF MICHAEL T. SCUSE, DELAWARE, NOMINATED TO BE 
UNDERSECRETARY OF AGRICULTURE FOR FARM AND FOREIGN AGRICULTURAL 
 SERVICES AND TO BE A MEMBER OF THE BOARD OF DIRECTORS OF THE 
                  COMMODITY CREDIT CORPORATION

    Mr. Scuse. Thank you very much. Chairwoman Stabenow and 
members of the Senate Committee on Agriculture, Nutrition and 
Forestry, I want to thank you very much for this opportunity to 
appear before you today. I would also like to thank Senator 
Coons for his very kind introduction. The Senator and I have, 
as he said, had the opportunity to work together for many 
years. I am grateful for his support in the past, as well as 
the Senator's support today.
    Working together, we, I believe, accomplished a great deal 
for Delaware and especially New Castle County, and I look 
forward to working with members of this Committee to further 
agriculture and achieve a tremendous amount as well. So thank 
you very much, Senator Coons.
    I would also like to take this opportunity to again 
introduce to you my wife, Patrice, and as of this past Sunday, 
we have been married 35 years, and much of what I have been 
able to accomplish over the years is, in fact, due to her 
strong support and understanding. I would like to thank her for 
especially her patience and the sacrifices that she has made 
over the last 35 years. You do not get in a position, the 
positions that I have held unless you have someone who is very 
strong helping you get there, and she certainly has been my 
support throughout the years.
    I consider it a tremendous honor to be before this 
Committee nominated by the President and Secretary Vilsack to 
serve as Under Secretary for the Farm and Foreign Agricultural 
Service at the Department of Agriculture. As a farmer, I am 
keenly aware of the responsibility and the privilege of this 
position, the ability to positively impact America's farmers 
and ranchers. Every decision I make I make with our farmers and 
ranchers in mind.
    If confirmed, I will continue this focus and examine 
closely the impact of each and every decision that I make. We 
have the best farmers and ranchers to be found anywhere in the 
world. Our agricultural producers are deeply rooted in this 
nation's history, and they are a big part of our strength as a 
people.
    Even as America recovers from the deepest recession since 
the Great Depression, we are seeing a very strong agriculture 
economy. Agriculture is responsible for one out of every 12 
jobs in America. This year, net cash income and net farm income 
are record in nominal terms, and adjusting for inflation or at 
their highest levels since the early 1970s.
    Farm credit is still tight for some, but expanding more and 
more in many sectors of agriculture, and total farm equity is 
up. U.S. agricultural exports for fiscal year 2011 reached a 
record $137.4 billion. Taken as a whole, the United States is 
in the midst of experiencing the three best years in our 
history in the terms of agricultural exports.
    This has also been a year of unprecedented disaster, 
unfortunately, from above-average snow melt and excessive 
rainfall, tornadoes, flooding, record drought, and finally, 
several major storms. America's farmers and ranchers are the 
best in the world and they are, without a doubt, resilient.
    But at the end of the day, weather is beyond their control. 
These disasters only emphasize the importance of a strong and 
effective safety net for those farmers and ranchers who need 
it. This is a moment of great opportunity in agriculture, and I 
will not downplay the hard work that is needed, nor the long 
road that lies in front of us towards the next Farm Bill.
    If confirmed, I will look forward to working with the 
members of this Committee, and your colleagues in the House, to 
assist to answer any questions or provide any analysis that you 
may need in your endeavor. I would like to recognize today 
those with whom I have had the great privilege to serving at 
USDA.
    The three agencies that I have been working to oversee in 
my current acting role are each staffed, without a doubt, 
immensely capable and experienced public servants. In addition, 
I would like to emphasize my commitment to turning a new page 
on civil rights at USDA. Under Secretary Vilsack's leadership, 
we have made great strides in resolving outstanding civil 
rights claims. Discrimination in any form will not be 
tolerated.
    I would again like to thank you for this opportunity to 
appear before you today, and if confirmed, it will be my 
greatest honor to serve the American farmer and rancher and 
earn his trust. Thank you, Madam Chairwoman.
    [The prepared statement of Mr. Scuse can be found on page 
31 in the appendix.]
    Chairwoman Stabenow. Thank you very much. We have been 
joined by my distinguished colleague, Senator Roberts, and with 
his consent, we will proceed to our questions at this point.
    Mr. Scuse, you have been Acting Under Secretary for nearly 
a year. Can you explain to us what you have learned in that 
role to date, and also what your plans and goals for FFAS, what 
they are, should you be confirmed?
    Mr. Scuse. Madam Chairwoman, thank you. I have learned 
that, again, we have an outstanding and dedicated workforce at 
USDA, and especially the three mission areas that are under me. 
The Farm and Foreign Agricultural Service, we have a dedicated 
workforce not just here, but in offices throughout the world to 
help us facilitate trade and solve some of the trade issues and 
problems that our companies face.
    At the Farm Service Agency, I continue to brag on the work 
that our people in our county offices do, helping our farmers 
and ranchers sign up for programs and assist them. At the Risk 
Management Agency, we have a very dedicated and capable 
workforce there to help us offer new products. As I said 
earlier, the crop insurance is a very important product to help 
us through the very difficult times, and they continue to look 
at ways to make improvements as well as come up with new 
products.
    Where I would like to see us in the future is, we need the 
technology, and I think members of this Committee know that we 
are headed in that direction with our MIDAS program. But the 
need to improve the technology that we have currently in our 
county offices is great, and I think that we need to find ways 
that we can help our farmers and ranchers be more efficient and 
save time in our county offices and save them time and money as 
well.
    The safety net, again, if you look at what we have 
experienced this past year with all the disasters around the 
United States, it is very important that we continue to have a 
safety net to help our farmers and ranchers, whether or not 
just difficult weather conditions, but also price problems as 
well.
    Chairwoman Stabenow. Thank you very much. Let us talk a 
little bit more, when you talk about risk management programs, 
and we all know as we have done hearings this year, field 
hearings, and hearings before the Committee here in Washington 
on important risk management tools, certainly crop insurance is 
at the top of the list.
    When we look at the volatility of the markets, the 
volatility in the weather, the risks that our farmers and 
ranchers face every single day, we know that risk management 
tools are incredibly important. What is the USDA doing to 
improve the delivery and to expand access of these risk 
management tools to all farmers and ranchers?
    Mr. Scuse. Well, thank you. I welcome the opportunity to 
explain some of the things that we are doing. The Risk 
Management Agency and the Federal Crop Insurance Corporation 
Board continues to look at ways that we can offer new products. 
Just as an example, the last--in this past couple of years, we 
have developed a pilot program for camelina production. We have 
also developed a program for sesame production as well to 
protect those sesame growers. And we have been able to greatly 
expand that acreage for that crop.
    Right now we have pilot programs going that are about ready 
to start this next year in California for some of the nut-
producing trees. We also have started a pilot program in 
Louisiana for sweet potato production. So we continue to look 
at ways to make new products available to protect those farmers 
who do not grow what we consider the traditional crops that are 
normally protected through crop insurance.
    We will continue, again because it is important, that we 
have a very good safety net for as many producers as we 
possibly can.
    Chairwoman Stabenow. Well, as you know and as we have 
talked, obviously there are a whole range of underserved crops, 
and certainly fruits and vegetables, specialty crops, are an 
area where we need to make sure that we are doing much more 
work around the crop insurance. We see that in certain regions, 
certainly in the Northeast this year as well, where there was a 
lot of damage and crop insurance was not available for those 
crops. And so, very supportive and interested in seeing you 
continue to move as quickly as you can to be able to expand the 
reach of crop insurance and the effectiveness of crop 
insurance.
    Let me also just ask if you could give us a quick update, 
and I am running out of time, on your efforts to reduce 
paperwork, streamline processes, simplify reporting. This has 
been another big priority for the Committee.
    Mr. Scuse. Well, thank you. Again, I welcome the 
opportunity to talk about one of the initiatives that we have 
at the Risk Management Agency as well as the Farm Service 
Agency, NAS, and NRCS. We are currently working on an acreage 
crop reporting streamlining initiative. What this will do will 
allow our producers to go into a Farm Service Agency county 
office or to their crop insurance agent and give a single crop 
report.
    As the system is set up today, our farmers and ranchers 
have to give two reports, one to the FSA office as well as 
another one to their agent. We are looking at one-stop 
reporting, and ultimately our goal will be for the farmers and 
ranchers to actually do the crop report right from their home. 
So this is one area that we are looking at to save not just 
time for our county office staff, but the time that our farmers 
and ranchers are having to spend in the office and providing 
them the service that they should have.
    Chairwoman Stabenow. Thank you very much. Senator Roberts?
    Senator Roberts. Well, thank you, Madam Chairman. Michael, 
thank you for coming by my office. We had a good talk at that 
particular time and this sort of builds on the question posed 
by the Chairwoman. Everywhere we went, Lansing, Wichita, and 
then we had a little problem with some gang that got together 
and decided to postpone things for a while, so that did not 
work out.
    But I can tell you that everywhere we went, the number one 
issue of concern was crop insurance. And I know that you have 
just talked about that. Farmers, bankers, ag input suppliers, 
and the overall ag economy certainly depend on the security 
provided by crop insurance. Let me just ask you, first off, do 
you agree with this assessment?
    Mr. Scuse. Crop insurance is, in my opinion, I think crop 
insurance is one of the most important parts of the safety net 
that we have, Senator.
    Senator Roberts. Okay. I appreciate that. Now, you talk 
about extension to other crops, and I appreciate that. Several 
farm bills back, I think I was the person, after being boxed in 
by several proponents of those specialty crops and other crops, 
that finally yielded and said, Well, we have that for program 
crops, but, you know, the producer that produces program crops 
has to have an approved conservation plan, et cetera, et 
cetera, et cetera, before they are eligible for title 1 
programs.
    I wondered if that shoe might fit on the other side. That 
shoe did not fit, but at least I think if we are extending to 
crops that we should and I am for that and I applaud you for 
that effort. But if, in fact, we go back or we have a different 
kind of farm program, whether it is counter cyclical, whether 
it is revenue, whether it is target prices, whatever kind of 
payment that we are talking about when farmers go through a 
tough time--when they do not have a crop it does not apply--and 
that is the key, that when farmers lose a crop, you have got to 
have a good crop insurance program. And $14 billion was taken 
from that program over the two previous farm bills.
    I want to make sure that we strengthen and preserve crop 
insurance. That is my number one goal in whatever farm bill 
that we are able to put together. And we have worked pretty 
hard on that. I just wanted to make very clear that if we 
extend the crop insurance program to underserved crops, I want 
to make sure that it does work for the program crops, which 
combined, really make up the food and fiber that we use to feed 
this country and a troubled and hungry world.
    By that, I do not mean to underscore anything less than 
importance in terms of extending crop insurance to underserved 
crops. It should not be either/or. It should be a whole 
program. Do you agree?
    Mr. Scuse. Senator, I agree with the fact that we need to 
continue to work with and strengthen the program, and if 
confirmed, you have my commitment to work with you and members 
of this Committee to continue to do what we can to strengthen 
crop insurance for our farmers and ranchers.
    Senator Roberts. All right. Thank you, sir. Back when we 
were voting to ratify the trade agreements with Colombia, 
Panama, and South Korea, there was a discussion about a need 
for the Administration to re-engage with China and Japan on 
beef market access. Can you give us a status report on where 
these efforts stand?
    Mr. Scuse. Well, currently, Senator, the Japanese 
government is posing a question to their Food Security Council 
regarding the beef issue, both domestic and foreign. We look 
forward to working with them to resolve the issue on beef trade 
and the age restrictions currently they have in place.
    Ambassador Siddiqui and I were in China in October. We 
engaged the Chinese, at that time, on the various issues that 
are facing our beef producers, not just the age restriction, 
but the offal situation as well, and the numbers that are 
available. But we continue to engage these markets and we will 
continue, Senator, especially if I am confirmed in this 
capacity as the Under Secretary for Farm and Foreign 
Agricultural Service, we will continue to engage these markets 
and do what we can to open them for our farmers and ranchers.
    Senator Roberts. Well, I think the situation is right. We 
just had a delegation from Japan in my office and with the 
exception of one Kobe beef producer who was a little worried 
about tariffs, everybody there said it is time to act. And the 
Ambassador here in Washington wants to go out to Kansas and see 
10,000, 20,000 herd of cattle out there right next to Dodge 
City. So we said we could certainly arrange that for him. But I 
think the time is right and I hope we can seize the moment.
    We do have some unresolved issues with the beef market 
access in Mexico, in Taiwan as well. Do you have any status 
report on those issues?
    Mr. Scuse. I had the opportunity, Senator, to visit with 
some Mexican officials at the Trinational Accord in Texas last 
month. That is a forum where the secretaries and commissioners 
from the states of the United States meet with their 
counterparts from Mexico and Canada. We have had those 
discussions about the issue and we will continue to have those 
discussions to resolve the issues with the Mexicans on beef 
trade.
    Senator Roberts. I thank you for your testimony. Thank you 
so much.
    Chairwoman Stabenow. Thank you. Senator Conrad?
    Senator Conrad. Mr. Scuse, first of all, thank you so much 
for coming to North Dakota frequently and listening to the 
concerns of producers in my state. I certainly appreciate that. 
Is it not the case that you would be replacing Mr. Jim Miller 
as Under Secretary?
    Mr. Scuse. Yes, Senator, that would be the case. I would be 
former Under Secretary Jim Miller's replacement.
    Senator Conrad. And Jim Miller, of course, is my lead 
agricultural advisor. Do you see him here in the room?
    Mr. Scuse. Yes, sir. He has got different glasses on, but I 
still recognize him.
    Senator Conrad. He has had an upgrade. Let me just say 
this. I want to publicly acknowledge the dramatic improvement 
in operations----
    [Laughter.]
    Senator Conrad. --that you have brought to that agency.
    [Laughter.]
    Mr. Scuse. Thank you very much, Senator.
    Senator Roberts. I thought you were going to talk about the 
dramatic improvement of operations in your office.
    Senator Conrad. Well, that, too.
    [Laughter.]
    Senator Conrad. You know, Jim Miller is, I think, somebody 
highly regarded on both sides and I am so delighted that he 
came back to help us with the Farm Bill. But I am also 
delighted in your candidacy for this position, your nomination, 
because you have demonstrated to me repeatedly that you deeply, 
sincerely care about producers.
    Of course, you come from a family that is in this business 
and you have got soybeans and you have got wheat, you have got 
corn in your family operation, and it has just been a delight 
to have you out talking to our producers because you have got 
so much in common. So I just want to say how strongly I support 
this nomination. I just do not think the Administration could 
have done better and we look forward to working with you very 
much.
    If I could just also say that I understand you are an avid 
hunter.
    Mr. Scuse. Yes, Senator.
    Senator Conrad. But the word around FSA is that you do not 
actually kill anything. Is this because you are a poor shot or 
is this----
    Mr. Scuse. Well, Senator, if I may, I am a true 
conservationist and I practice shoot and release.
    Senator Conrad. Well, my understanding is you shoot at and 
do not hit.
    Mr. Scuse. That is my version of shoot and release.
    [Laughter.]
    Senator Conrad. Let me just talk seriously for a moment 
about something that is very much on the mind of my producers 
and that is disaster assistance. As you know, this year in 
North Dakota, and across much of the country, we had one 
disaster after another. We had record prevent plant in the 
State of North Dakota. You fly over North Dakota today there is 
water everywhere. We joke that it is like Lake Agassiz is 
reforming.
    You know, we used to be a lake bed in North Dakota 
thousands of years ago. And you fly over North Dakota today, it 
is like Lake Agassiz is reforming. There is just water 
everywhere, setting us up for another very, very tough year if 
weather conditions continue. We had record flooding last year 
and records that so far exceeded anything that had happened 
before. It has raised questions in people's mind, What is going 
on here? Because on the Souris River, we had record flood 
levels, and not just a little bit above previous, but way above 
anything previously seen.
    On the Missouri, we had record releases from the dams, and 
again, not just a little bit over the line, as Senator Roberts 
knows, but dramatic records. And so, with respect to the 
disaster program, the SURE program, what would happen, in your 
judgment, if that was not available in this next year?
    Mr. Scuse. Well, Senator, those five programs that we no 
longer have as of the last of September were very important 
programs to our farmers and ranchers. The SURE program 
supplemented the crop insurance that most of our producers are 
now today carrying. So it has been, in the last few years, a 
very important part of the safety net.
    As our livestock indemnity program, the emergency livestock 
assistance program, these programs have been very important to 
our producers across the United States for various crops. 
Especially for the livestock producers who traditionally, 
through past farm bills, have not had any assistance, this was 
a major step forward.
    So I think that is one of the reasons, when you looked at 
what the President said that he would like to have, that he 
said, you know, we would like to have these five programs or 
something similar because of what they have done for our 
farmers and ranchers across the United States.
    Senator Conrad. Well, I appreciate that. My time has 
expired, but, Madam Chairwoman, if I just might, on the next 
panel, Governor Culver is here. He is a dear friend, somebody I 
have high regard for, and I hope that we can report these 
nominations quickly and get these people confirmed. We are 
lucky to have people of this quality and character make 
themselves available for public service.
    Chairwoman Stabenow. Thank you very much. Senator Cochran?
    Senator Cochran. Madam Chairman, thank you for convening 
this hearing. I am pleased to join you and the other members in 
welcoming our witnesses this morning. In hearing the witness 
mention the seriousness of the challenge that we face with 
flooding, and the Senator from North Dakota eloquently 
describing the practice consequences of that in that part of 
our country, we have had serious problems down in the 
Southeast, too.
    The Mississippi River has been backed up to cover record 
flooded areas and we still have a lot of producers worried 
about the long-term consequences of this. And I am glad to hear 
the sympathetic and interested response that you gave to the 
fact that we do have serious responsibilities at the Federal 
level to try to help manage the challenges that this brings to 
production agriculture and the producers themselves.
    Do you have any suggestions at this point about changes in 
commodity programs or any disaster assistance programs that 
might be considered by this Committee as we propose 
improvements or changes in agriculture disaster benefit 
programs?
    Mr. Scuse. Senator, as this Committee moves forward with 
the crafting of the next Farm Bill, I and the staff under me 
would be more than glad and willing to assist you in providing 
you with information and any help that we can in the creation 
of the next Farm Bill. So I, if confirmed, look forward to 
working with you and members of this
    Committee on that next Farm Bill and providing you with the 
assistance that you need.
    Senator Cochran. Well, thank you. I think your experience 
and the contacts that you have in the agriculture communities 
nationwide will be a big help in explaining what our challenges 
are.
    Mr. Scuse. Thank you, Senator.
    Senator Cochran. So best wishes to you in this new 
responsibility.
    Mr. Scuse. Thank you.
    Chairwoman Stabenow. Well, thank you very much. I 
understand that Senator Harkin does not have questions at this 
time, and so we will thank you for your presence and excuse you 
and look forward to having the opportunity to vote and, I feel 
confident, bring your nomination forward. So we look forward to 
continuing to work with you, and I appreciate all of your 
efforts. So thank you.
    Mr. Scuse. Madam Chairwoman, I thank you again for the 
opportunity to be here today and answer the questions posed by 
the Committee. And, Senator Roberts, when I left your office 
the other day, you said I should think of two things when I 
wake up in the morning. This morning I woke up thinking of beef 
and crop insurance. Thank you.
    Chairwoman Stabenow. Well, I could give you a couple 
others, too.
    Mr. Scuse. I will be more than glad.
    Chairwoman Stabenow. All right. Well, thank you very, very 
much.
    We would like to ask our second panel, two distinguished 
nominees, to come forward at this time.
    Good morning. It is our pleasure to have both of you, and I 
am going to turn now to Senator Harkin to introduce Governor 
Chet Culver.
    Senator Harkin. Thank you very much, Madam Chair and 
Ranking Member Roberts, members of the Committee. It is indeed 
my honor this morning to introduce and highly commend to the 
Committee someone I have known since he was a little boy. I 
like to always comment that some people do not realize that 
Chet Culver actually was little at one time. So that is my way 
of saying I have known him all his life.
    I strongly support his nomination to serve as a member of 
the Board of Directors of the Federal Agricultural Mortgage 
Corporation, commonly known as Farmer Mac. Chet Culver has 
served Iowans as our 40th Governor from 2007 to 2011; prior to 
that served eight years as our Secretary of State and served 
with distinction and strong accomplishments in both positions.
    During his tenure as Governor, Iowa was recognized as one 
of the best run states in the nation. During a time of great 
fiscal and economic challenges, he managed a $6 billion annual 
state budget, improved our state's bond rating so that the 
three major bond rating agencies awarded Iowa their highest 
rating. That made Iowa one of only nine states to earn the 
highest rating from all three agencies.
    Thanks to Governor Culver's leadership, Forbes Magazine 
ranked Iowa the number one place in America for business and 
careers. CNBC rated Iowa one of the top states for business. 
And again, this is during the height of recession.
    So while balancing four budgets, Governor Culver increased 
the minimum wage, increased teacher salaries to the national 
average, expanded health care for uninsured Iowa children, and, 
I think again, one of his signature accomplishments is 
expanding early learning statewide. So we have statewide pre-
school in the State of Iowa.
    In addition, he invested millions in new jobs, new roads, 
bridges, renewable energy, flood prevention at a time when also 
protecting our cash reserves. He successfully dealt with the 
severe flooding in 2008, the worst natural disaster in Iowa's 
history. I mentioned some of his achievements.
    I would also mention the creation of the Iowa Office of 
Energy Independence, the Iowa Power Fund, which has invested 
more than $65 million in 40 Iowa renewable energy research and 
development and early stage commercialization projects. I 
mention this because this state investment leveraged over $200 
million in private investment into Iowa's renewable energy 
sector. Under Governor Culver's leadership, Iowa moved to first 
in the world, not in the nation, but first in the world in per 
capita use of renewable energy and now produces nearly 20 
percent of all of our energy needs from renewable resources.
    I go through all that because obviously with this 
background and this experience, Governor Culver knows 
agriculture, he knows rural communities, he knows business, how 
to manage budgets and finances, and will be an outstanding 
member of the Board of Directors of Farmer Mac.
    Again, I know his wife could not be here with him, Mari, 
and his kids are in school and could not be here, but I would 
note in passing his great devotion to a great family he has in 
his wife, Mari, and his two kids, Claire and John. And so, I 
commend Governor Culver highly to this Committee for this 
position.
    Chairwoman Stabenow. Well, thank you very much. Very high 
praise coming from a very distinguished member of this 
Committee. So we welcome you and let me introduce our second 
nominee as well for Farmer Mac, Dr. Bruce Sherrick. Dr. 
Sherrick is currently a professor in the Department of 
Agricultural Economics at the University of Illinois where he 
teaches undergraduate and graduate courses in applied finance 
and financial modeling. He is also a partner in the consulting 
firm, Integrated Financial Analytics and Research.
    Now I have two things that I need to ask both of you to do 
and if you both stand and first let me administer the oath that 
we have for all nominees, and if you would rise and raise your 
right hand?
    Do you swear that the testimony you are about to present is 
the truth, the whole truth, and nothing but the truth, so help 
you God?
    Mr. Culver. I do.
    Mr. Sherrick. I do.
    Chairwoman Stabenow. Thank you. And secondly, do you agree 
that if confirmed, you will appear before any duly constituted 
Committee of Congress if asked to appear?
    Mr. Culver. I will.
    Mr. Sherrick. I will.
    Chairwoman Stabenow. Thank you very much. Governor Culver, 
we will ask you to proceed, and as you know, we ask for five 
minutes of testimony. Anything else in writing you would like 
to give us we would welcome.

 TESTIMONY OF HON. CHESTER JOHN CULVER, IOWA, NOMINATED TO BE 
 MEMBER OF THE BOARD OF DIRECTORS FOR THE FEDERAL AGRICULTURAL 
                      MORTGAGE CORPORATION

    Mr. Culver. Well, first of all, Madam Chairwoman, thank you 
very much, and Ranking Member Roberts, thank you as well for 
holding this hearing today. I also want to acknowledge and 
thank Senator Harkin for his kind words, and Senator Grassley 
as well who made comments earlier.
    All the distinguished members of this Committee, thank you 
as well for having this hearing this morning. It is truly an 
honor to be here with you. It is also an honor to be nominated 
to serve as a member of the Board of Directors of the Federal 
Agricultural Mortgage Corporation, and I want to thank 
President Obama for the confidence he has shown in me by 
nominating me to this Board.
    As the former Governor of Iowa, I know the tremendous 
responsibilities of Farmer Mac and the pivotal role that it 
plays on a daily basis to increase the availability of long-
term credit at stable interest rates to segments of rural 
America. As an Iowan, I have maintained a life-long love for 
rural America, its rich and vibrant landscape, culture, 
history, and its people.
    I believe I understand the needs of rural citizens and the 
particular economic development and infrastructure challenges 
of the Midwest. Throughout my career, I have been fortunate to 
work on behalf of all Iowans as a consumer and environmental 
advocate, as an educator, as Secretary of State, and as 
Governor, and now as a small business owner, to make Iowa and 
this nation a better place to live, work, and raise a family.
    I understand the needs and challenges that confront our 
farmers, ranchers, small businesses, energy suppliers, rural 
communities, and rural schools in this country. I am also aware 
of the inter-relationship between agribusiness, urban 
communities, manufacturers, and the financial sector. As we 
like to say in Iowa, from silos to smokestacks.
    If confirmed as a member of the Farmer Mac Board, I want to 
assure you, the Congress, employees of Farmer Mac, and the 
citizens of this great diverse country that I will do my utmost 
to ensure that the Agency upholds its mandate effectively to 
provide a secondary market for qualified agricultural mortgage 
loans, rural utility loans, and the guaranteed portions of the 
agricultural and rural development loans guaranteed by the U.S. 
Department of Agriculture.
    I am also motivated and committed to helping to provide a 
stable and reliable financial backbone in rural America. In the 
face of these difficult challenges, I remain optimistic about 
the limitless potential rural America has to both feed the 
world and help secure this country's energy future.
    Chairwoman Stabenow.and Ranking Member Roberts, I welcome 
the opportunity to tackle the challenges that lie ahead at 
Farmer Mac and I sincerely thank you for this confirmation 
hearing and for affording me the opportunity to offer this 
brief statement today.
    In closing, I want to thank the Committee staff for its 
time and attention it has given to my nomination. If confirmed, 
I intend to work closely with you, Madam Chairwoman, Senator 
Roberts, members of this Committee, and your staffs to preserve 
our shared objectives. I am committed to maintaining the very 
productive and close working relationship that exists between 
this Committee and Farmer Mac. I am happy and pleased to 
respond to any questions that you may now have.
    [The prepared statement of Mr. Culver can be found on page 
28 in the appendix.]
    Chairwoman Stabenow. Thank you very much. Dr. Sherrick, 
welcome.

 TESTIMONY OF BRUCE J. SHERRICK, Ph.D., ILLINOIS, NOMINATED TO 
     BE A MEMBER OF THE BOARD OF DIRECTORS OF THE FEDERAL 
               AGRICULTURAL MORTGAGE CORPORATION

    Mr. Sherrick. Good morning. Thank you. Chairwoman Stabenow, 
Ranking Member Roberts, and other distinguished members of the 
Committee, I am very honored to have been nominated for service 
on the Board of Directors of the Federal Agricultural Mortgage 
Corporation. Thank you for your time and opportunity to appear 
here today.
    I want to provide a very brief background statement to give 
a little bit of sense of who I am and some experiences that may 
have some relevance for my service in that role. Like many 
people in the agricultural community today, I was born and 
raised on a small, very diversified farm in central Ohio, and I 
was brought up with parents who view that as a teaching 
laboratory, and I was expected to have as many agricultural 
experiences as possible, each with the intent to do two things, 
learn something new and earn money for college.
    Eventually I did go to college and, at the Ohio State 
University, completed all of my degrees with only a brief stint 
in the middle working for a very large agribusiness firm in St. 
Louis who produces a lot of chemicals, and I decided I really 
did need to go back and finish a Ph.D., given that experience.
    After that, I joined one of the top finance programs in the 
country at the University of Illinois where I have been ever 
since. I am currently a professor in agricultural and consumer 
economics with responsibilities in teaching, research, and 
outreach. I was glancing at the clock earlier because at this 
moment, I am actually scheduled to be on a panel in western 
Illinois near Iowa presenting some materials on crop insurance 
reform, in fact, to a large group of farmers with some of my 
colleagues. So this is a better venue, I assure you.
    I have the privilege to be associated with a very dedicated 
group of faculty colleagues at the University of Illinois, who 
approach with sincere interest, promote every aspect of 
agriculture that we can, and that group is known as the farmdoc 
group. We are active in evaluating farm bill prospects at the 
moment, have been active in developing crop insurance products 
and programs, both from the producer level as assistants to RMA 
with independent companies and even private market add-ons to 
the existing insurance products as well.
    I mention these experiences because they have some direct 
relevance in representing poolable risks that also are a key 
cornerstone in risk management activities that producers use to 
manage the extreme agricultural production risk, much like the 
activities of Farmer Mac.
    With Farmer Mac, I have had a different set of professional 
experiences. I was one of the original researchers who built 
the original guarantee pricing model Farmer Mac had before they 
even expanded their authorities to pool mortgages outside their 
initial pools. Since that time, I have been involved with both 
the regulator, their customers, independent research, examining 
the role of securitization in providing conduits from the farm 
through the capital markets in providing stable and reliable 
access to credit in rural America.
    From those experiences, I have had a great deal of a chance 
to observe what they do and understand their role in the access 
to that provision of capital. My current position, as I said, 
it has given me access to an incredibly interesting and very 
diverse set of experiences, but my personal interest has 
allowed me to focus those in the arena of ag-finance, and that 
is a really unique experience and I find myself very 
privileged, both at the university level, with my consulting 
organization, and now to have been considered for membership on 
the Board of Directors to continue that set of interests, and 
if confirmed, would again serve to the best of my abilities.
    Again, I want to thank this group for the opportunity to be 
here today and to be considered for nomination for the Board of 
Directors of Federal Agriculture Mortgage Corporation. Be 
pleased to answer any questions as well.
    [The prepared statement of Mr. Sherrick can be found on 
page 33 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much to both of 
you, and I do want to say, Dr. Sherrick, as a Michigan State 
University graduate, you can tell I am very open-minded that I 
would let an Ohio State graduate appear before the Committee as 
a nominee and not to attempt to block your nomination. We are 
glad to have both of you.
    Let me first start and ask both of you, I am sure you have 
thought about goals and plans for your time on the Board if you 
are confirmed. I wonder if you might talk more specifically 
about what you would like to accomplish in your tenure and what 
you see your role as being in helping to shape the work of 
Farmer Mac? Governor Culver?
    Mr. Culver. Well, thank you, Madam Chair. I really look 
forward to working with Chairman Lowell Junkins and the Board 
to continue to work every day to ensure that there is reliable 
and capital available in rural America. I think they have done 
a good job, last year in particular, during some tough times, 
making sure that credit was available.
    As Senator Conrad noted, rural America, and certainly in 
Iowa and North Dakota and Illinois, we have been hit with real 
disasters, natural disasters, which have caused new challenges 
in many smaller communities. And so, we need to help those main 
street businesses continue to offer services. I think that 
could be a little tricky because some of them were under water 
in communities like Oakville and Columbus Junction, for 
example. The main streets were, and certainly residential and 
businesses were impacted severely, in our case in 2008, with 
historic flooding.
    So I think we might see a new round of challenges, again as 
Senator Conrad noted, due to the natural disasters throughout 
the Midwest and we just have to continue to make sure that 
credit is available to those farmers in those rural communities 
and those businesses that we are counting on to keep our 
economy strong.
    Chairwoman Stabenow. Thank you. Dr. Sherrick?
    Mr. Sherrick. Thank you. For purely coincidental reasons, I 
happened to be at Lehman Brothers the day they declared 
bankruptcy in September of 2008 and witnessed the complete 
destruction, if you will, of the securitization system in 
traditional mortgages and so on. And I have been watching with 
great interest to see if there is any potential for similar 
forces to present themselves in agricultural conduits.
    I do not think there are, but I think it is critical to 
preserve that possibility and the ability for those well-
functioning capital markets to taking full risks, divide them 
up into sensibly-priced possible securities, and have a 
matching of the demands for--and the liquidity services, of 
course, in the sector right now are--you know, there is this 
big bubble of liquidity at the moment. And so, there have been 
some change in the role that Farmer Mac might play.
    I think it is important, even more important in agriculture 
because we have not had the same disruption that the other 
economic--the other financial markets seem to have had. I have 
tried to keep an informal count and I think since Sheila Bair, 
the Chairwoman of the FDIC, made her comments last fall about 
the possible land price bubble, I think I have been asked over 
30 times now to comment on the possibility of an agricultural 
land value bubble.
    I think the lending side response in the '80s was 
profoundly important in understanding how we got to that and 
got out of it. I see that as a role to provide at Farmer Mac 
some careful analysis of the same sort of activities, and to be 
able to move forward through those periods is critical.
    The second area, as Basel 2 becomes more completely 
implemented, some more rational sort of capitalization schemes, 
and that applies both in traditional financial markets and in 
agricultural financial markets, and have been watching, and in 
fact, helping to some degree with FCA's efforts to design 
slightly more rational capital guidelines. And Farmer Mac is 
the natural experiment and the natural place for which these 
pooling activities should and could take place.
    So those are two areas that I think are critical. They may 
sound very macro, in a sense nebulous, from direct questions 
about specific activities, but I think they are really 
important, sort of overarching issues related to the function 
of Farmer Mac as a secondary market for agricultural mortgages.
    Chairwoman Stabenow. Well, I think that is very important 
because folks do not think about that. We talk about rural 
infrastructure a lot and they do not think about the important 
role in the secondary market that Farmer Mac plays. And so, in 
the 2008 Farm Bill, we, as you know, authorized Farmer Mac to 
purchase and to guarantee securities backed by loans made by 
cooperatives and electric and telecommunications infrastructure 
and so on. So I think it is important to recognize the 
significance of those activities. Thank you very much. Senator 
Roberts?
    Senator Roberts. Well, thank you, Madam Chairwoman. 
Governor Culver, just off the subject a little bit, but I sure 
want to thank you for your hands of friendship extended to our 
State of Kansas, allowing some of your five-star basketball 
athletes to come down to KU and K State and play. That is darn 
right neighborly of you and we appreciate it.
    [Laughter.]
    Mr. Culver. We have helped North Carolina a little bit, 
too, lately.
    Senator Roberts. Right. Hope you do not put any tariffs or 
have any trade--we do have a tariff, by the way, in terms of 
our athletes. Not that many. And then also, I think that is 
where Coach Snyder started out, at Kansas State, three times 
coach of the year and just made it again with a team that was 
not expected to do very well. Pardon me for----
    Chairwoman Stabenow. Go right ahead.
    Senator Roberts. --getting off on that. I will behave 
myself doing that.
    Chairwoman Stabenow. I have got leftover purple from my 
visit to Kansas.
    Senator Roberts. Well, Governor and Dr. Sherrick, as you 
have stated, we must ensure--you must ensure the integrity of 
our financial institutions through appropriate oversight. The 
Chairwoman and I get that question every time we are on TV now 
with regard to MF Global and the unexpected demise of that 
trading company. Two hundred years of experience they had and 
now we are witnessing a devastating impact all throughout farm 
country, farmers, ranchers, investors, and businesses, and you 
have all talked about the importance of capital in that very 
important national enterprise.
    So we must do everything possible to prevent any unexpected 
collapses or calamities and these are the days where we have 
unexpected collapses or calamities. One thing happens and then 
another thing happens, something we do not expect, including 
Farmer Mac.
    The Board of Directors, it seems to me, must provide 
oversight and ensure operations are conducted strictly, and I 
would try to emphasize, within existing statutory authority. We 
had four farmers testify and put a human face on what is going 
on out there in farm country with MF Global. Every one of them 
said existing laws were broken and that they are not screaming 
for more regulation. They are screaming for less, so within 
existing statutory authority.
    What will each of you do to contribute to the Board of 
Directors to ensure that Farmer Mac is managed in a safe and 
sound manner according to the authority given by Congress? And 
I know both of you have an extensive background and have the 
ability to do that job and to do it well.
    Mr. Culver. Well, Senator, as a former Governor, I am 
familiar with those responsibilities and obligations, in my 
case, with every state agency, and I think it starts with 
having the best possible staff that are there every single day 
helping to run the operation. I think it is important to have a 
good working relationship with all of the Board members so that 
we keep the lines of communication open and that we have 
opportunities to voice any concern, if we have any, whether it 
is within the organization or outside in terms of some of the 
economic concerns that you raised or the potential related to 
problems down the road.
    But perhaps most importantly, it is keeping the lines of 
communication open with this Committee and with your staff so 
that as you see concerns or if you have questions, that we can 
have that constant dialogue to together kind of stay in front 
of some of these potential problems down the road.
    Senator Roberts. Dr. Sherrick, would you like to say 
something?
    Mr. Sherrick. Thank you. In addition to echoing----
    Senator Roberts. Let me preface it by saying I appreciate 
your talk about the farmland bubble. There is an article in 
today's Wall Street Journal about that same subject right on 
the front page of the business section. I do not know how many 
speculative pieces have been written about it, and I just told 
the Chairwoman, We are going to talk our way into this if we 
are not careful. But please feel free to----
    Mr. Sherrick. Thank you. Had a very interesting set of 
opportunities to respond to that issue as well, most recently 
at a conference the Chicago Fed hosted. And again, there are 
some very dramatic differences from the '80s, of course, when 
there was much more of a lender contribution to the cause, in a 
sense. And in this case, I think if we were to see a 
capitalization change or a rate change that would lead to land 
value changes, it would economy-wide, not agricultural 
specific. So I think it is a very different circumstance.
    It is partly the institutions, to come back to the other 
question, the institutions are different, and one of the things 
that is profoundly different is the environment, legal and 
otherwise, in which they operate. And I have been very 
impressed with Farmer Mac in the past decade or so with the 
extreme attention to detail on simple things like FAS 133 
happens or maintaining not just compliance with the letter, but 
the intent of the law and the regulations while looking for 
authority, perhaps expansion that allows them to provide more 
liquidity services, more important services for agriculture in 
rural communities.
    In direct response to how, when I have specific activities 
related to maintaining the provision of these services within 
existing authorities or within a regulatory environment that is 
meant to promote safe and sound operations, I think there are 
two slightly overlooked, at this point, possible future avenues 
of activity.
    One is, as Basel 2-like things are becoming more and more 
promulgated through the economy, there are banks and farm 
credit institutions-like who find it more complicated to 
operate in agricultural markets. I think you need a Farmer Mac 
so that the community bank that cannot make an ag loan anymore 
because it is more complicated, or a Met Life who does not 
quite know how to deal with regulations when they decide 
whether they are a bank or not a bank and has a large portfolio 
of agricultural mortgages, it make sense to have a GSE.
    Importantly, the GSE status, as affiliated with Farmer Mac, 
provides the ability to do something that is part of the 
confidence gain. The recent meltdown, in many ways, is very 
much a battle for confidence. And I think it is very important 
to be able to demonstrate that from a position like Farmer Mac 
to the agricultural lending community.
    There are two major, of course, potential sets of clientele 
for Farmer Mac or farm credit institutions and banks, 
commercial banks lending to agriculture, and they both will be 
faced with increasing difficulty in a sense of maintaining good 
and fair lending practices in agriculture as they go forward 
and as other banking regulations evolve. So I think Farmer Mac 
being able to hold that position and provide those services is, 
in fact, critical to others also maintaining their behavior 
within authorities.
    Chairwoman Stabenow. Thanks very much. Senator Cochran.
    Senator Cochran. Thank you very much for being responsive 
to the questions that our Committee has had of you, and let me 
join with others in congratulating you on your selection as 
members of this Board. We appreciate your undertaking that 
responsibility for us.
    I wonder, in your experience, whether you have come to 
recommend or have this Committee recommend changes in our farm 
credit system that would help improve access to credit and the 
effectiveness of our credit system as it relates to production 
agriculture?
    Mr. Culver. Well, thank you, Senator. I think overall and 
generally speaking that Farmer Mac has worked. I mean, it has 
really been a critically important institution in response to 
the farm crisis in the '80s to try to avoid some serious 
financial strains in rural America. So I do not have any 
particular recommendations. I am anxious, as a new member of 
the Board, to listen and learn and try to better understand 
things that we can do to improve Farmer Mac. I would be 
prepared, perhaps in the future, to come back to this Committee 
with more specific recommendations.
    But I think we need to continue to focus on some of the 
positive things that Farmer Mac has been able to do to help 
rural communities and farmers across this country. I think it 
is my understanding that one of the things that they have done 
well is they have always strived to reform themselves and make 
improvements, which has enabled them, I think, to do a good job 
over these years.
    Senator Cochran. Dr. Sherrick?
    Mr. Sherrick. Thank you for the question. I think it is 
critical these days. If this were 1983, I would have had a much 
more profound and interesting response. Farm credit finds 
itself in incredibly healthy conditions right now with a very 
large amount of both unrealized and unallocated earnings in 
both forms, and prospects for future earnings look pretty good 
as well.
    I do not want to overstate, though, that the producers face 
unprecedented levels of risk, high prices recently, high 
incomes we have heard about, but very volatile margins. High 
input costs as well. And that could change. Farm credit has 
done a very good job, I think, in preparing for that.
    I happen to have had again another just remarkably 
fortunate experience to help FCA develop a stress test for 
their associations and we have run the first one last fall to 
look at the health of all the associations in the system and to 
see what things would stress them. And they are preparing 
differently than they used to.
    Specific changes, I do not have any to promote. I think, 
again, coming to grips with somewhat older capital regulations 
right now, there may be some chances to improve those and to 
become more consistent with other financial markets. But I 
think it is a highly capitalized, fairly well-run system at the 
moment and does not face potential big problems.
    Again, Farmer Mac provides a natural place to warehouse 
some of the risk, especially recognizing seasoning of risks 
within the system, and their capital standards are, in a sense, 
different by design and intent than Farmer Mac's, and the 
secondary market does serve a good role for allocating those 
risks appropriately. Beyond that, I do not have specific 
suggestions.
    Senator Cochran. Well, I am pleased to have an opportunity 
to visit with both of you and to congratulate you on your 
nomination, wish you all the best as you undertake these 
responsibilities that are very important.
    Mr. Sherrick. Thank you, Senator.
    Chairwoman Stabenow. Thank you very much. Senator Thune?
    Senator Thune. Thank you, Madam Chairwoman, and thank our 
panel today for your willingness to serve, and welcome. It is 
great to have you here. I wanted to just ask a question about a 
trend that I see in my State of South Dakota and, Governor, you 
probably see it in your State of Iowa, too.
    According to Iowa State University, the value of Iowa 
farmland jumped 32.5 percent in 2011, and crop land in the 
northern plains in Minnesota was up 26 percent. I have read 
about farmland sales, which are hard to believe, but as high as 
$20,000 an acre. As you are going to be members of the Board of 
Directors at Farmer Mac, my question has to do with what the ag 
real estate lending community can do to keep itself stabilized 
if and when agricultural real estate prices, land values take a 
downturn.
    I am really concerned about sort of a bubble out there. I 
think that sometimes farm bill programs get capitalized in the 
land prices. There are lots of things that are leading to this 
right now and, of course, good strong commodity prices is 
another good reason. But it seems that it is very hard to make, 
at those types of land prices, an operation pencil out.
    Now, the good news, I think, relative to previous times is 
that producers are not as heavily leveraged as they were. A lot 
of people have a lot of equity. They are paying cash for land, 
you know, averaging it out with land they purchased earlier. So 
there are some mitigating factors in that, but it still seems 
like just these land values are completely out of whack with 
what you would think would be normal given what inputs cost 
today and what commodity prices are.
    So how do the lenders--how do you work with the lenders to 
make sure that if and when that happens that we do not have a 
huge problem in the lending community like we saw in years past 
when a similar-type circumstance occurred?
    Mr. Culver. Well, thank you, Senator, for that question. If 
Farmer Mac is not already having a special focus on just the 
land values issues, as you have articulated, I think we need 
to. I mean, within one of our six committees, perhaps we could 
make an effort, on a regular basis, just to have an update on 
the studies, the information out there on land values in rural 
America, and to maybe take a little more time than we have in 
the past to really focus on how real those values are.
    When you asked the question, I remembered I vividly can see 
in my mind a picture in the Des Moines Register of a land sale 
where someone was--they were bidding and the price had gotten 
up to $10,000, $15,000 an acre and it was something that they 
had never seen in that part of the state. So we have to stay on 
top of this and make sure that we are not getting carried away 
in the hype, but we are really being more conservative in 
focusing on the true value of property.
    Mr. Sherrick. Thank you. Very important, very good 
question. I have about a 30-page Power Point prepared on this 
as well that I have been running around the country presenting. 
The last two charts are particularly interesting. If you 
capitalize the cash rent that we are observing by the extremely 
low current interest rates we also are observing, you get 
numbers that look somewhat irrational relative to history.
    But it is different than the bubble. And again, I think 
this is the fourth time I have heard the characterization of it 
as a bubble with the question mark following. Is it a bubble is 
an important thing to first determine. And the fundamentals 
appeared to support current land values if you, again, just 
simply capitalize cash rent in many parts of the country at 
very high levels.
    Now, there are still remarkable things that happen at 
auctions when two neighbors bid for a farm in between that is 
going to sell once in their lifetime.
    Senator Thune. Yeah.
    Mr. Sherrick. Or in my local community, we have a large 
investor, large developer, and a heart surgeon who both want to 
be the first to own a ring of land around all of Champaign. So 
I do not think of those as being the rational question. Those 
are the consumptive questions.
    Senator Thune. Right.
    Mr. Sherrick. But what can lenders do, I think, was part of 
the question. And some of these factors are already happening. 
At the origination level, rational and responsible lenders are 
doing things like stress testing or applying limits on the 
amount of dollars they will lend in per acre regardless of the 
sale price. So farm credit institutions have largely limited 
their LTV ratios more over the past couple of years that 
effectively limit the total amount into a parcel of land on a 
per-acre basis regardless of the sale price. So that is a good 
rational, safe response.
    There are other responses, and in your part of the world, 
kind of the upper Mississippi, the whole section has had higher 
land values that look even more profound because the starting 
values were somewhat lower. In central Illinois, a $10,000 an 
acre sale would be viewed as a bargain today. So I think 
getting some relationship between the production capacity and 
the cash flows associated with that are very important.
    George Morrow in 1886, commented, for the first time that I 
can find in the written record, that land does not cash flow, 
that you should expect that some form of the return should 
accumulate in the form of capital gains. And so, that is a 
rational response that investors use to evaluate it. So it is 
not just the cash flow. It is the long-term prospects for 
change in value as well.
    I think lenders, again in the '80s, if I could point back, 
contributed, in a sense, to the problem rather than solved it. 
And I think this time around, they are aware of that, in 
general and in the large, in helping to prepare for that.
    In the specific case of Farmer Mac, their own capital 
stress test, people have very different views of it depending 
on whether they like the number it presents or not, but it is 
compliant with the particular definition of stress Congress 
wrote 14, 15 years ago that looks at the worst case historic 
land value decline ever experienced, and they continually 
stress their model with the 23 percent land value decline.
    I think that is a very responsible approach to dealing with 
this. Twenty-three percent off of $15,000 an acre is, of 
course, a different number than it was when it was 23 percent 
off of $4,000 an acre. So continuing to keep these current and 
modeling up and reflecting the current realities is the 
important task.
    Senator Thune. And I hope that as you work with the lending 
community, keep this on your radar screen because I think you 
are right. I think that the lenders are in a much better 
position. They are not getting carried away like they did back 
in the '80s, for example, when we went through that huge period 
where we just lost a lot of farms because the farmers got over-
extended and the banks helped them. And the interest rate 
situation is very different today.
    But these land values really are. I mean, in my part of the 
country where I come from, in the middle of South Dakota, we 
are seeing land going for--and part of that, too, is that 
people are bidding it up for pheasant hunting--we have got good 
pheasant cover out there--that you have got some outside 
interests that do that.
    But just for a working farming operation and what use of 
the land for production agriculture would support, it seems 
like these land values are really out of whack. But I know that 
farmers and ranchers themselves are much better capitalized 
than they were before. I think banks are better capitalized and 
sort of better prepared for this. But I just would put it on 
your radar screen as something to keep an eye on. I see my time 
has expired. Thank you, Madam Chairwoman.
    Chairwoman Stabenow. Thank you very much. Good questions 
today and we thank both of you. We are, I can speak for myself, 
very impressed with both of you, your thoughtfulness and 
competence. We are very pleased that both of you are willing to 
come forward and to be involved in public service in this way.
    As you know, we will not be voting today on your 
nomination, but we are working to find a time for a business 
meeting to be able to come together as soon as possible to be 
able to vote. And to that end, I would ask any additional 
questions for the record to be submitted by 5:00 p.m. today so 
we might process those and have the opportunity to vote on your 
nominations. Thank you very much.
    Mr. Culver. Thank you, Madam Chair, and thank you, members 
of the Committee.
    Mr. Sherrick. Thank you as well.
    Chairwoman Stabenow. We are adjourned.
    [Whereupon, at 11:55 a.m., the hearing was adjourned.]
      
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