[Senate Hearing 112-693]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-693
 
                    RISK MANAGEMENT AND COMMODITIES

                         IN THE 2012 FARM BILL

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


                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,

                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION


                               __________

                             MARCH 15, 2012

                               __________

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


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



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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):

Risk Management and Commodities in the 2012 Farm Bill............     1

                              ----------                              

                        Thursday, March 15, 2012
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry, 
  Washington, DC.................................................     1
Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........     2

                                Panel I

Scuse, Michael, Acting Under Secretary, Farm and Foreign 
  Agricultural Services, U.S. Department of Agriculture, 
  Washington, DC.................................................     5

                                Panel II

Carden, Bob, on behalf of Ruth Gerdes, Crop Insurance Agent, 
  Winter Haven, FL...............................................    27
Garetson, Jarvis, Farmer, Copeland, KS...........................    25
Hills, Hope, Grower, Bangor, MI..................................    24
Rutledge, Steve, Chairman, President, and CEO, Farmers Mutual 
  Insurance Company, West Des Moines, IA.........................    28

                               Panel III

Coley, Chuck, Chairman, National Cotton Council, Vienna, GA......    50
Grissom, Jimbo, President, Western Peanut Growers Association, 
  Seminole, TX...................................................    47
Johnson, Pam, First Vice President, National Corn Growers 
  Association, Floyd, IA.........................................    43
Satterfield, Travis Henry, Partner, Satterfield Farms; Rice 
  Producer, Bolivar County, MS...................................    48
Wellman, Steve, President, American Soybean Association, 
  Syracuse, NE...................................................    42
Younggren, Erik, President, National Association of Wheat 
  Growers, Hallock, MN...........................................    45

                                Panel IV

Best, Ryan, President, Future Farmers of America, Portales, NM...    63
Johnson, Roger, President, National Farmers Union, Washington, DC    60
Stallman, Bob, President, American Farm Bureau Federation, 
  Washington, DC.................................................    61
                              ----------                              

                                APPENDIX

Prepared Statements:
    Lugar, Hon. Richard G.:......................................    74
    Thune, Hon. John:............................................    76
    Best, Ryan:..................................................    78
    Coley, Chuck:................................................    98
    Garetson, Jarvis:............................................   107
    Gerdes, Ruth:................................................   111
    Grissom, Jimbo:..............................................   135
    Hills, Hope:.................................................   141
    Johnson, Pam:................................................   148
    Johnson, Roger:..............................................   161
    Rutledge, Steve:.............................................   179
    Satterfield, Travis Henry:...................................   186
    Scuse, Michael:..............................................   197
    Stallman, Bob:...............................................   205
    Wellman, Steve:..............................................   214
    Younggren, Erik:.............................................   220
Document(s) Submitted for the Record:
Stabenow, Hon. Debbie:
    Crop Insurance Lender letter.................................   232
Johanns, Hon. Mike:
    Testimony from Ruth Gerdes, prepared statement...............   233
Lugar, Hon. Richard G.:
    Canada Sugar Brochure........................................   235
Nelson, Hon. E. Benjamin:
    Introduction of Ruth Gerdes..................................   237
Question and Answer:
Stabenow, Hon. Debbie:
    Written questions to Michael Scuse...........................   268
Roberts, Hon. Pat:
    Written questions to Bob Carden..............................   241
    Written questions to Chuck Coley.............................   244
    Written questions to Jimbo Grissom...........................   248
    Written questions to Hope Hills..............................   250
    Written questions to Pam Johnson.............................   253
    Written questions to Roger Johnson...........................   256
    Written questions to Steve Rutledge..........................   259
    Written questions to Travis Henry Satterfield................   265
    Written questions to Michael Scuse...........................   269
    Written questions to Bob Stallman............................   275
    Written questions to Steve Wellman...........................   280
    Written questions to Erik Younggren..........................   283
Gillibrand, Hon. Kirsten:
    Written questions to Michael Scuse...........................   272
    Written questions to Bob Stallman............................   276
Hon. Klobuchar, Amy:
    Written questions to Bob Carden..............................   243
Thune, Hon. John:
    Written questions to Ryan Best...............................   240
    Written questions to Bob Carden..............................   242
    Written questions to Chuck Coley.............................   245
    Written questions to Jimbo Grissom...........................   249
    Written questions to Hope Hills..............................   250
    Written questions to Pam Johnson.............................   254
    Written questions to Roger Johnson...........................   257
    Written questions to Steve Rutledge..........................   262
    Written questions to Travis Henry Satterfield................   266
    Written questions to Michael Scuse...........................   272
    Written questions to Bob Stallman............................   278
    Written questions to Steve Wellman...........................   281
    Written questions to Erik Younggren..........................   283
Best, Ryan:
    Written response to questions from Hon. John Thune...........   240
Carden, Bob:
    Written response to questions from Hon. Pat Roberts..........   241
    Written response to questions from Hon. John Thune...........   242
    Written response to questions from Hon. Amy Klobuchar........   243
Coley, Chuck:
    Written response to questions from Hon. Pat Roberts..........   244
    Written response to questions from Hon. John Thune...........   245
Garetson, Jarvis:
    Written response to questions from Hon. John Thune...........   247
Grissom, Jimbo:
    Written response to questions from Hon. Pat Roberts..........   248
    Written response to questions from Hon. John Thune...........   249
Hills, Hope:
    Written response to questions from Hon. Pat Roberts..........   250
    Written response to questions from Hon. John Thune...........   250
Johnson, Pam:
    Written response to questions from Hon. Pat Roberts..........   253
    Written response to questions from Hon. John Thune...........   254
Johnson, Roger:
    Written response to questions from Hon. Pat Roberts..........   256
    Written response to questions from Hon. John Thune...........   257
Rutledge, Steve:
    Written response to questions from Hon. Pat Roberts..........   259
    Written response to questions from Hon. John Thune...........   262
Satterfield, Travis Henry:
    Written response to questions from Hon. Pat Roberts..........   265
    Written response to questions from Hon. John Thune...........   266
Scuse, Michael:
    Written response to questions from Hon. Debbie Stabenow......   268
    Written response to questions from Hon. Pat Roberts..........   269
    Written response to questions from Hon. Kirsten Gillibrand...   272
    Written response to questions from Hon. John Thune...........   272
Stallman, Bob:
    Written response to questions from Hon. Pat Roberts..........   275
    Written response to questions from Hon. Kirsten Gillibrand...   276
    Written response to questions from Hon. John Thune...........   278
Wellman, Steve:
    Written response to questions from Hon. Pat Roberts..........   280
    Written response to questions from Hon. John Thune...........   281
Younggren, Erik:
    Written response to questions from Hon. Pat Roberts..........   283
    Written response to questions from Hon. John Thune...........   283



                    RISK MANAGEMENT AND COMMODITIES



                         IN THE 2012 FARM BILL

                              ----------                              


                        Thursday, March 15, 2012

                              United States Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:04 a.m., in 
room SH-216, Hart Senate Office Building, Hon. Debbie Stabenow, 
Chairwoman of the Committee, presiding.
    Present: Senators Stabenow, Baucus, Nelson, Klobuchar, 
Bennet, Roberts, Lugar, Cochran, Chambliss, Johanns, Boozman, 
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. The Committee on Agriculture, 
Nutrition and Forestry will come to order. Good morning. We so 
appreciate all of you being here, and let me first start by 
apologizing for the need to reschedule the hearing today. We 
appreciate your patience and understanding with the uncertainty 
of the Senate schedule. But we have a lot of people to hear 
from today, very, very important testimony on all four of our 
panels, and we have been looking forward to this.
    Nearly a year ago, we kicked off our farm bill work 
exploring the challenges for feeding the world's growing 
population. Today, in our final hearing on the 2012 farm bill, 
we will hear from American farmers about the tools they need to 
continue producing the world's safest, most abundant supply of 
food, fuel, and fiber.
    Every planting season, America's farmers take a huge gamble 
that their investment will pay off, that the sun, the rain, the 
markets will come together in just the right combination so 
they can make a living and support their families.
    We have been lucky these past few years that commodity 
prices have been strong and many farm balance sheets are 
healthy. Yet in the same year that USDA estimates America's 
farmers will take home a record $100 billion in net income, 
crop insurance paid out over $10 billion in indemnities for 
losses.
    We cannot forget that high commodity prices are of 
absolutely no use to a farmer whose crop was lost in a drought 
or flood. One storm can wipe out an entire crop and jeopardize 
a farm in a matter of minutes, whether the crop is Michigan 
cherries or blueberries or Kansas wheat.
    From the very beginning of our farm bill discussions, I 
have urged everyone to focus on principles, not individual 
programs. In every meeting, in every hearing, we have heard 
loud and clear that the main principle for today's farmers is 
risk management. At a time when all of us are struggling to 
lower the deficit, we cannot be focused on favored programs or 
share of the baseline. Our farm policies must be effective and 
defensible, not just in this Committee, not just to America's 
farmers, but to the public at large. That is why the era of 
direct payments is over.
    We are reforming farm policy and transitioning to risk-
based tools that help farmers who have suffered a loss. Today 
farmers will tell us about weather and market and input cost 
risks, how they manage them day to day, year in, year out, the 
decisions they wrestle with, and lessons they have learned.
    In the next few weeks, the Committee will make difficult 
decisions about the future of America's agriculture policy. We 
want to hear about how you manage tight margins, volatile 
markets, ever rising costs, and the unknowns of weather.
    I have heard over and over again from farmers and ranchers 
across the country--we all have--that crop insurance is the 
most important risk management tool. Today we want to hear more 
about how we can strengthen crop insurance to be more effective 
for you. It is absolutely imperative that we get these policies 
right. Sixteen million people in this country have a job 
because of agriculture. I urge us to keep those 16 million 
people in mind today.
    The farm bill is a jobs bill, and no farmer in America 
should lose their job or lose their farm because of conditions 
beyond their control.
    Thanks to everyone for being here. We look forward very 
much to all of your testimony.
    I want to now turn to my friend and colleague, Senator 
Roberts, and I want to say that I very much have appreciated 
our working together through a very challenging year this past 
year, and I look forward to working with Senator Roberts on 
this farm bill. I also want to say that Senator Roberts has a 
long history of service to the farmers of Kansas and America. I 
appreciate his work on crop insurance, making it such a vital 
and effective tool for farmers, and all of his leadership. 
Senator Roberts, over to you.

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

    Senator Roberts. Well, thank you, Madam Chair. I am sort of 
overwhelmed by that introduction. Thank you so terribly much. I 
think, bottom line, we both know that if we do not work 
together in a bipartisan way, we may not get the best possible 
bill but the best bill possible, and we want to get it moving. 
Like yourself--and I want to associate myself with your 
remarks, and apologies to the witnesses having them stay an 
extra day. The vagaries of the schedule in the Senate are 
renowned, but seldom do we acknowledge, at least, that some of 
these times, due to the uncertainty in the schedule, it causes 
a lot of problems for folks who have come all the way to the 
Nation's capital to testify. So thanks to all the witnesses and 
our apologies.
    I could just sort of say ``ditto'' to your opening 
comments. I was looking here, when I said, ``I look forward to 
hearing from everyone as we talk about how we can help farmers 
manage their risk so they can continue to produce the safest, 
most abundant, and least expensive food supply in the world.''
    We do not have the same speech writer, but I think we are 
on the same page.
    Chairwoman Stabenow. We are on the same page.
    Senator Roberts. I hear time and time again, just as you 
have said, that our producers and their lenders, especially 
important in regards to stressing lenders, that crop insurance 
is the cornerstone of the farm safety net.
    Why do you have a farm safety net? I know we get in the 
weeds here in this farm bill hearing on the commodity section 
and on crop insurance and some of the details. We have got to 
feed 9 billion people in the next several decades. We are going 
to have to double ag production if we continue to follow 
through on our country's role of being a humanitarian country 
and also to try to provide food and fiber to areas of the world 
that cannot feed themselves. If you show me a country that 
cannot sustain itself in terms of its food production, you have 
a very chaotic situation, and then you do not have any world 
stability, and you get into the problems that we see today, 
more especially in the Mideast. That is a big-time thing, and 
you have got to really stop and think about the role that the 
farmers and the ranchers play in that. So it is just not a farm 
bill. This is something that affects, as I have said, world 
stability and not only feeding this country but a troubled and 
hungry world.
    But let us get back to crop insurance. If you doubt its 
importance, just look at what crop insurance provided this past 
year. We had the worst drought since the Dust Bowl in Kansas, 
Oklahoma, and Texas, in 2011, last year. We had massive 
flooding along the Mississippi and the Missouri rivers, and 
hurricanes devastated the Northeast. Yet just months after all 
of this ruin, our producers are now tuning up their equipment 
and preparing their fields to put seed in the ground once 
again.
    It is not because of some day-late or dollar-short ad hoc 
disaster package that the farmers are back on their feet 
producing the food that feeds, as I have said before, a 
troubled and hungry world. No, these farmers are able to put 
the seed in the ground again because they managed their risk 
and protected their operations from Mother Nature's destruction 
through the purchase of crop insurance. If that is not a 
success story of the partnership between Government and private 
industry and America's farmers, I do not know what is.
    But just because the program is successful does not mean 
there is not room for improvement. Crop insurance is a big tent 
with plenty of room under it. The program already protects more 
than 250 million acres of cropland in the United States. That 
is two-thirds of the eligible acres. But there are still acres 
that are not protected and producers who cannot afford to 
purchase the kind of protection that they need. The more 
producers under that crop insurance tent and protected from 
disaster, the more stable our food supply and our rural 
economies will be.
    We made great progress last fall in the joint committee 
process in improving crop insurance to bring even more people 
under the tent. So I look forward to continuing our work to 
preserve, protect, and strengthen crop insurance and to hearing 
the thoughts of our witnesses on how to improve upon an 
enormously successful program.
    We are also going to hear from our witnesses about Title I 
farm programs. Let me emphasize that I am committed to working, 
as I know the Chairwoman is and has been, with all of my 
colleagues and those involved in agriculture to find a program 
or a suite of programs that will improve agriculture's safety 
net. I am confident that we can find solutions that we can live 
up to our WTO commitments--that is important--and that will be 
simple for our producers to understand, hopefully, and utilize 
and, also importantly, will be reasonable for the FSA of the 
Department of Agriculture to implement.
    I am also confident we can find solutions that will not 
drive planting decisions and lead farmers to plant for 
Government programs instead of the marketplace.
    Now, there was a time in the not-so-distant past when our 
farm programs greatly distorted planting decisions and led to a 
lot of WTO complications. I, as Chair of the House Ag Committee 
some years ago, along with others here in the Senate--Senator 
Grassley played a key role. He was here earlier. We did 
everything we could to eliminate those distortions. Senator 
Lugar as Chairman played a key, key role in that effort, and I 
thank you, sir, for that effort.
    I generally like to talk about the good old days, but in 
the case of farm policy, old is not necessarily good. Madam 
Chairwoman, we have a lot of work ahead of us, and I look 
forward to hearing from our witnesses. I appreciate everybody 
coming, and I thank you very much.
    Chairwoman Stabenow. Thank you very much.
    We will ask any member who would like to submit an opening 
statement for the record to please do so.
    We have four excellent panels today, and in order to be 
able to move through all of them, because they all represent 
voices that we very much want and need to hear from, we are 
going to enforce the 5-minute rule both on our witnesses and on 
ourselves in terms of asking questions today.
    I am very pleased to have before us once again our first 
witness, Mr. Michael Scuse, who is the Acting Under Secretary 
of Farm and Foreign Agricultural Services. We are looking 
forward to taking away that first word, ``Acting,'' and making 
that permanent. He is from the first State, better known as 
Delaware, and has held various positions in agriculture within 
the State, including Secretary of Agriculture from May of 2001 
to September of 2008. While serving as Delaware's Secretary of 
Agriculture, Mr. Scuse also served as the vice president of the 
National Association of State Departments of Agriculture and 
president of the Northeast Association of State Departments of 
Agriculture.
    Mr. Scuse, welcome again to the Committee, and we would 
look forward to hearing from you.

 STATEMENT OF MICHAEL SCUSE, ACTING UNDER SECRETARY, FARM AND 
FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF AGRICULTURE, 
                         WASHINGTON, DC

    Mr. Scuse. Thank you very much.
    Chairwoman Stabenow. Senator Roberts, and members of the 
Committee, I thank you very much for the opportunity to speak 
to you today on risk management and commodity programs in light 
of the 2012 farm bill.
    Strong prices are fueling opportunities in rural America, 
both on and off the farm. However, agriculture continues to 
face unique challenges, particularly in regard to markets and 
weather. Input costs and net returns are volatile, and as we 
saw in 2011, farmers always face significant and unexpected 
weather events that pose a direct threat to their businesses.
    Because of such uncertainty, which always exists, even in 
the good times, maintaining a strong safety net in the next 
farm bill is critical. This is particularly true for beginning 
farmers and ranchers.
    For example, we know that established farmers have nearly 
twice the capacity to repay their debts as young farmers. 
Differences like this further underscore the need to ensure our 
safety net meets the diverse needs of today's agricultural 
producers. USDA's safety net consists of crop insurance 
administered by the Risk Management Agency as well as the farm 
programs offered by the Farm Service Agency.
    The primary tool available when disaster strikes is Federal 
crop insurance. The program is delivered through a successful 
public-private partnership which provides diverse, sound risk 
management tools. Producers generally have a choice of crop 
policies with coverage that they can tailor to best fit their 
risk management needs. Reflecting the record disasters we 
experienced last year, the program has paid over $10 billion in 
claims for lost revenue and production losses.
    To ensure crop insurance programs are best tailored to the 
needs of a diverse set of producers, RMA works closely with 
private entities and producer groups to provide products that 
cover an increasing variety of commodities. RMA has also made 
changes to premium rates for corn and soybeans, resulting 
generally in lower premiums. We anticipate that the remaining 
analytical work will be completed in time for any further 
premium rate changes to be implemented for the 2013 crop year 
for corn, soybeans, wheat, cotton, rice, and grain sorghum.
    Recent improvements to the livestock gross margin for dairy 
producers resulted in significantly increased participation in 
the program and exhausting funding in March of fiscal year 
2011, then again in January of fiscal year 2012. Sales had to 
be suspended because funding for the livestock insurance 
products is currently capped by the Federal Crop Insurance Act 
at $20 million in any fiscal year.
    The President has proposed a number of changes to crop 
insurance as part of his plan for economic growth and deficit 
reduction, focusing on key elements which would account for 
more than $7.6 billion in savings over 10 years. In addition to 
crop insurance, since 2009 producers have been able to turn to 
disaster assistance programs authorized under the 2008 farm 
bill. These programs have paid over $3.8 billion to more than 
200,000 producers since their inception. All five programs 
expired on September 30, 2011, and this leaves the Noninsured 
Crop Disaster Assistance Program as FSA's only disaster 
program. Recognizing the critical nature of reliable disaster 
assistance, the President's budget for 2013 would extend the 
2008 farm bill disaster programs or implement similar programs 
of similar costs.
    Turning to commodity programs, high market prices have 
limited countercyclical payments and marketing loan benefits, 
although marketing assistance loans are expected to continue 
providing about $7 billion in interim financing to help 
producers. The President's fiscal year 2013 budget proposes 
eliminating direct payments which are made regardless of 
economic need. This would save $31.1 billion over 10 years.
    Many farmers have been struggling due to tight credit 
markets, and FSA credit programs are a critical piece of the 
safety net in such situations, particularly for beginning 
farmers and ranchers. For fiscal year 2010, use of the 
guaranteed farm ownership program reached an all-time high with 
direct operating and farm ownership obligations nearly double 
those of 2008. About 40 percent of the direct operating farm 
applications are now from first-time borrowers.
    Finally, we recognize that these safety net programs are 
only as strong as our ability to deliver them efficiently to 
producers. In an era of tight budgets and fewer staff, USDA 
must continue to work towards better data sharing and 
streamlined delivery. We are currently working hard 
implementing the Acreage Crop Reporting Streamlining 
Initiative, which also involves NASS and NRCS. This initiative 
will result in common data standards for better reporting, 
ultimately easing the reporting burden on our farmers and 
ranchers. Our long-term vision is to allow producers to provide 
commonly required data just one time instead of two currently.
    I also want to emphasize that we remain committed to 
investing in critical IT improvements through FSA's MIDAS 
project. The first version should be available in 2013.
    In conclusion, looking to the future, the volatile market 
and weather conditions of recent years underscore the 
importance of a strong safety net to producers. In addition, 
the safety net should also take into consideration there is a 
difference between those who are beginning in farming and those 
who have been around awhile. We need to encourage and enable 
the next generation the opportunity to make an honest and 
rewarding life in agriculture.
    Thank you.
    [The prepared statement of Mr. Scuse can be found on page 
197 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much. We 
appreciate your ongoing efforts in working with the Committee 
and your efforts in the Department.
    Mr. Scuse, if you could talk a little bit about 
implementation, I know that there were some difficulties 
implementing new farm bill programs from the 2008 farm bill. I 
wonder if you might explain what were the biggest 
implementation challenges, what assurances you can give us 
about timely implementation of any changes we would make at 
this point, and what are the two or three main issues that you 
think we should keep in mind in designing any program from an 
implementation perspective.
    Mr. Scuse. Well, thank you, Madam Chairwoman. In the 2008 
farm bill, the one we are currently working under, I believe we 
had to implement 15 new programs. We also had to modify, I 
believe, 17 existing programs.
    When you look at the issues that we face, just the 
complexity of trying to implement these programs and to write 
the software that was needed to implement these programs, two 
very complex programs that I will use as an example would be 
ACRE and SURE. These programs are very complex, very different 
than what we had done in the past. The data that is required to 
make the payments under those programs, the information that 
has to be provided by the producers, it created a tremendous 
burden on the staff at USDA to come up with an implementation 
process for those programs.
    We would encourage the Committee to have as simple and as 
easily understandable programs as possible going forward so 
that we can implement them in a timely manner and that our 
farmers and ranchers across the United States will have a 
better understanding, an easier understanding of what we are 
trying to accomplish.
    Chairwoman Stabenow. Well, thank you. I know this is 
something that both Senator Roberts and I are very concerned 
about achieving, both from the standpoint of the Department, 
but particularly from the standpoint of farmers being able to 
use what it is we put into place and have it be effective.
    When we talk about risk and the tenets of risk management, 
reducing the risk for farmers--which is what we are all talking 
about now, how do we provide that risk management--how do you 
see the various programs within the current farm bill meeting 
those criteria of risk management?
    Mr. Scuse. Well, again, I think crop insurance, as Senator 
Roberts pointed out, is a key component for managing risk 
today. It is very important. It is used by a large percentage 
of our farmers and ranchers today across the United States. 
Even those 14 underserved States historically, if you look at 
the numbers, the farmers in those areas have been increasing 
their participation. So I think it is recognized pretty much 
across the United States, the important role that crop 
insurance plays in managing the risk.
    I know that the SURE program has been one of controversy 
because it actually has paid out a year in arrears. But when 
you look at what the SURE program has also accomplished, in 
those areas where we have had major disasters, where there has 
been a secretarial declaration, this provided additional 
assistance to those farmers in areas that did have a 
devastating disaster. So that helped, on top of the regular 
crop insurance that they have had. So I think that those two 
programs have been very important.
    If you look at other programs, I think, the President has 
asked that in his budget the five programs that expired in 
September be renewed or programs similar at a similar cost. If 
you look at what these programs have also done for our 
livestock producers around the United States, I think for the 
first time ever, 2008 really helped our livestock producers for 
those that suffered losses, weather-related losses in areas 
around the United States, and it was used extensively. So these 
programs have been very helpful in our farmers and ranchers 
managing the risk that they have on a daily basis.
    Chairwoman Stabenow. Great. Well, thank you very much. 
Rather than ask another question, I am going to yield back 20 
seconds in the interest of efficiency on the Committee.
    Senator Roberts.
    Senator Roberts. Something very rare for a Chairperson of a 
Committee.
    Chairwoman Stabenow. That is right. Remember that.
    Senator Roberts. I will try to remember that.
    Chairwoman Stabenow. That is right. Remember that.
    Senator Roberts. Michael, I had a lot of concerns with the 
farm bill last fall. That is the one we submitted to the super 
committee. But I was generally pleased with the improvements we 
were able to make to crop insurance during that process, and I 
want to really thank you for all the technical help that you 
and your staff and that of the general counsel provided during 
that process.
    Do you have any feedback or comments on the work we did on 
the crop insurance last fall? Your answer is, ``Yes, and it was 
wonderful work.''
    Mr. Scuse. Yes, and it was wonderful work, Senator.
    Senator Roberts. Thank you. I appreciate that.
    [Laughter.]
    Mr. Scuse. I hope the rest of the questions are that easy.
    Senator Roberts. You know, that did not quite go the way I 
wanted it, but at any rate.
    [Laughter.]
    Senator Roberts. All right. Let me talk a little bit about 
the President's budget, and it is a blueprint. I know the 
Majority Leader has indicated that that is not going to be 
considered in the Senate, but at least it is a blueprint. It 
took money away from crop insurance, and it reinvested it in a 
disaster program, where you have indicated in the case of SURE 
you have to wait 18 months for little, if any, help.
    I have not had a single farmer tell me that they prefer a 
disaster program to crop insurance. My question is: Have you?
    Mr. Scuse. No, I cannot honestly say, Senator, that I have, 
although in my conversations with members of the agricultural 
community, where they have received some of the payments such 
as the SURE payments, they have been very appreciative of what 
they have, in fact, received.
    Senator Roberts. I am sure they have, but the process 
involved involves a lot of paperwork, and as you have 
indicated, a year to 18 months away, that is when you get the 
payment. I am not sure the lender really appreciates that. It 
would seem to me that we could come up with a better way of 
addressing this, if, in fact, the Crop Insurance Program that 
we have tried to strengthen and improve in our markup and what 
we did for the super committee. Obviously, if you have some 
kind of revenue program layered on top of that, or wherever it 
would be, certainly we could hope to do a little better in 
terms of the delivery.
    I am not trying to pick on the SURE program. I know it is 
very helpful, especially in the Northern States.
    The budget proposal just did not take cuts to the 
companies. That is an easy target, although the number of 
companies has really dramatically been reduced down through the 
years or fallen down through the years. But that budget 
proposal cut the premium assistance to farmers and ranchers, 
and that is right out of the producers' pocket, and I just 
wanted to make that comment.
    How do you think the private delivery system of crop 
insurance is actually working?
    Mr. Scuse. Thank you for that question because I think it 
is the very best example that we have of a private-public 
partnership. Our delivery system, in my opinion and in the 
opinion of many others, is outstanding. We are doing a great 
job working with industry to deliver an outstanding product to 
farmers and ranchers across the whole United States. It has 
worked. It has been very effective. I think that for the most 
part everyone is happy with the way that we are currently 
delivering our crop insurance products. If I would have one 
thing to request, it would be going forward that the Risk 
Management Agency and the Crop Insurance Board be given some 
additional flexibility in helping to develop new programs, new 
products for our farmers and ranchers going forward.
    So I would ask for that flexibility going forward, but I 
think the current delivery system is one that is outstanding.
    Senator Roberts. Well, thank you for that comment. Do you 
think the RMA is making too many unilateral decisions and not 
really soliciting the industry's input? We hear that from the 
companies, the agents, all those folks that are responsible for 
delivering the crop insurance. What do you think?
    Mr. Scuse. Senator, I have to disagree with that. I think 
we are listening. We are meeting with industry. In fact, I just 
had a meeting with industry in the past 6 weeks. I have agreed 
to personally sit down with them on a quarterly basis and go 
over the issues, inform them of the direction that RMA is 
headed and solicit their input. My door has always been open, 
as has Administrator Bill Murphy's door always been open.
    So we have regular contact with industry, and we do listen 
to the industry, and we do want and solicit their input in the 
decisionmaking process.
    Senator Roberts. All right, sir. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Baucus.
    Senator Baucus. Thank you, Madam Chairwoman, and thank you, 
Mr. Scuse, very much for attending. I just have two points I 
would like to explore with you: one is the livestock disaster 
assistance programs and, second, the need for greater 
assistance for beginning farmers. You have touched on both.
    It is very clear to me that the disaster programs we 
enacted in 2008 are an improvement over prior years. In prior 
years, whenever there was a disaster, producers, whether grain 
or livestock, had to wait for Congress to decide whether or not 
there was going to be any assistance. When Congress finally did 
act, if it did, then producers had to choose between certain 
years, and it was kind of a hodgepodge, frankly, in my 
judgment, inappropriate for a sophisticated farm program.
    I would just like you to tell us the degree to which you 
think the current disaster--I am talking now about livestock, 
in particular--indemnity, forage, so forth, the plans work and 
the degree to which you think they should be continued. As you 
answer the question, let me tell you that with the disasters we 
have had, whether it was the Mississippi Basin flooding or the 
drought we have had, in Texas especially, it seems to me that 
the livestock programs have helped significantly, provided some 
certainty, some assurance to producers.
    So your thoughts on the livestock programs, the livestock 
disaster programs, the degree that they should be continued or 
perhaps even improved?
    Mr. Scuse. Thank you, Senator. I could not agree with you 
more. These programs are essential to our livestock producers. 
The issues that we have faced since 2008 with extreme cold in 
areas of the country like yours to the flooding that we have 
experienced this past year, the droughts that occurred this 
past year in the southern part of the United States, we have 
been able through the Emergency Livestock Assistance Program 
since 2008 to provide $30 million to our producers. For the 
Livestock Forage Program, that number is $550 million to help 
our livestock producers obtain hay and other grain or forage 
products to feed the livestock in these areas where we are 
facing these tremendous droughts or where flooding has occurred 
and have not been able to pasture. The Livestock Indemnity 
Program, Senator, has paid out $145 million so far.
    So if you look at the assistance that we have been able to 
provide our livestock producers, it is extremely important in 
my mind, and that is one of the reasons why the President has 
recognized the importance of these programs, and that is why he 
has asked for a continuation of these or similar programs. They 
have been very helpful for livestock producers.
    Senator Baucus. Would you have any suggestions to improve 
them? Or do you think they are working pretty well? What do you 
think?
    Mr. Scuse. Senator, I do not know of anything that we 
cannot improve upon, and we would be more than willing to work 
with you and with the Committee to look at ways that we can 
improve upon these very important products for our livestock 
producers.
    Senator Baucus. I appreciate that because, I can tell you, 
in my home State of Montana it has made a big difference. There 
has been a lot of flooding at times and drought, and I have 
talked to a lot of producers who are very grateful, frankly, 
that there is something there. It is, not full indemnification, 
but there is something there that has helped.
    Mr. Scuse. It is. At least there is something there to help 
these producers get them through to the next year. But, again, 
we would be more than willing to work with you and the members 
of the Committee----
    Senator Baucus. I appreciate that. How do we get more 
younger people into agriculture? You know, with land prices 
going up so much and input costs going up so much, it is tough 
to get into it. Then with younger farmers to some degree 
competing with the Government under CRP, I know we have this 
transition program. What do you advise, how do we help get 
younger Americans into farming?
    Mr. Scuse. Well, we are helping young and beginning farmers 
enter into agriculture through our loan program at the Farm 
Service Agency. As you know, it is very difficult for a young 
or beginning person to obtain the credit necessary to get into 
agriculture today because of the high costs. So we are there 
with the Farm Service Agency to help them obtain credit to help 
their young and beginning farmers get started.
    We are exploring ways to help those getting into 
agriculture, make crop insurance more affordable for them, and 
we will probably be coming to the Committee and working
    with the Committee on suggestions to help them obtain crop 
insurance as well.
    Senator Baucus. My time has expired, but I have got to tell 
you, kids come to me and say, ``What can we do?'' It just 
happened yesterday. Some kids from Terry, Montana, out in the 
eastern part of the State, that was their main question: ``What 
can we do? We are young and we want to get into agriculture.'' 
So I hope you will work really aggressively on that.
    Thank you.
    Chairwoman Stabenow. Senator Baucus, just to reinforce 
that, we have Ryan Best, who is the president of the FFA, 
joining us later today. We are going to ask him exactly that.
    Senator Baucus. Good.
    Chairwoman Stabenow. That is such a critical question, so 
thank you very much.
    Senator Johanns.
    Senator Johanns. Thank you, Madam Chair. Good to see you.
    One of the things that occurs to me about this farm bill 
process is that you think about the debt and the deficit and 
everything else going on, and keeping it simple is very, very 
important in delivering a farm bill that is thoughtfully 
crafted, straightforward policy, not wasteful. All of those 
things just make a tremendous amount of sense if we are to get 
a farm bill done this year. So let me ask you some questions 
specifically about keeping it simple relative to risk 
management.
    The first question: Do you see raising target prices as an 
appropriate risk management tool?
    Mr. Scuse. That is a very good question, Senator, and I 
think that in Senator Roberts' opening statement, he pointed 
out that sometimes there are things that are done by the 
Government that have unintended consequences. So whatever is 
done in the farm bill, we have to be very careful that we do 
not have those unintended consequences.
    Senator Johanns. I will just be very honest with you. I 
think it is a bad idea, and the reason I do is because I think 
it is market distorting. I think it sends the wrong signals. 
Instead of managing risk, you are enticing people to plant a 
certain crop because of a Government program. That is what 
occurs to me about raising target prices. Is that what you were 
referring to in reference to Senator Roberts' testimony?
    Mr. Scuse. Yes. Again, there is the opportunity that if 
things are done that go too far, they could have some 
unintended consequences, so, again, that would distort the 
market. So we have to be very careful going forward and 
crafting the next farm bill, and that is why we are willing to 
work with the Committee, provide staff any information that the 
Committee needs going forward to help in crafting a farm bill 
that I think you pointed out, it has to be simple. We want a 
farm bill that is fair across all the commodities from one part 
of the United States to the other and one that is defensible. 
You have pointed out we need to be able to defend this to our 
consumers and to the taxpayers of the United States.
    Senator Johanns. Let me go to my second question then, and 
it relates to the SURE program. I suspect you know that I am on 
record many, many times being very critical of the SURE 
program. I thought it was--when the idea surfaced, it looked 
enormously complicated to implement. I think you have 
substantiated that today. I agree with Senator Roberts. I have 
been all over Nebraska asking farmers about risk management. 
They talk about crop insurance. Nobody supports SURE. It is 
seriously delayed in getting help to the farmer. I mean, it is 
just a very, very flawed program.
    Doesn't it make more sense--and this is absolutely opposite 
of what the administration proposed--instead of spending $7 
billion, or whatever it was, on a program that farmers do not 
even support, to take that and improve the Crop Insurance 
Program and do the things that maybe farmers say about crop 
insurance, like multi-year disaster, and try to deal with those 
situations versus investing it in a program, SURE, that does 
not work for farmers?
    Mr. Scuse. Well, Senator, we are going to continue to try 
to do what we can to improve our Crop Insurance Program. Over 
the last 3 years, we have developed new programs; we have come 
out with pilot programs. We have actually done the rate review 
and looked at our methodology so that we could take a look at 
rates that farmers and ranchers are currently paying. So we are 
going to continue to make those improvements with crop 
insurance to provide more and better products for our farmers 
and ranchers across the United States.
    Having said that, though, in areas of extreme disaster, 
which we have seen this past year, crop insurance may not help 
some of our farmers and ranchers get entirely through to the 
next year.
    Senator Johanns. But my point is that in areas of extreme 
disaster they are going to wait an eternity for any kind of 
help. So if you have now been flooded, like we were along the 
Missouri all last summer, waiting until a year and a half to 
get support does not make a lot of sense.
    Mr. Scuse. That is the complaint that I have heard from the 
agricultural community as well. The SURE program was developed 
as a whole-farm revenue where we look at the revenue from the 
whole farm during a disaster to determine what the payments 
are. So you have to wait for the marketing year to end so you 
can determine what the revenue for the farm was, and I 
understand that. But we will work with the Committee to help 
develop something that will fit the Committee and the farmers' 
needs.
    Senator Johanns. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you.
    Senator Johanns. I took your 20 seconds plus.
    Chairwoman Stabenow. That is all right. Thank you.
    Senator Bennet.
    Senator Bennet. Thank you, Madam Chair, and thank you for 
having this series of hearings. Mr. Scuse, thank you for your 
service.
    As you know, the Chairman and the Ranking Member I think 
worked extremely hard to present the super committee with some 
recommendations about what we ought to do with respect to 
agriculture. Unfortunately, they did not do their job, and now 
we are facing an expiration date for the farm bill this year.
    I wonder if you could share your thoughts with the 
Committee about what from your perspective the administrative 
challenges might be if we do not reauthorize, if we do not pass 
a bill. What would the USDA face if we delay reauthorization? 
What might it mean for Farm Service Agency offices working with 
producers in Colorado, just to take one State that I am 
familiar with?
    Mr. Scuse. Senator, as a farmer, I am more concerned about 
the impact of not having a farm bill on the farm community. 
With the high cost of production today, with the risk that our 
farmers and ranchers face, be it weather related or market 
oriented, to go into next year without a farm bill, without any 
certainty of what the programs are going to be, I think would 
have a huge negative impact and a tremendous burden on our 
farmers and ranchers across the United States.
    We really and truly do need a farm bill going into next 
year, so my concern is not with USDA and what is going to 
happen to us. My concern is what is going to happen to our 
farmers and ranchers if we do not have a farm bill and they do 
not have the information that they need to make good, sound 
business decisions.
    Senator Bennet. I think that is very well said. What will 
that lack of predictability cause for farmers, do you think?
    Mr. Scuse. The uncertainty on what types of crops to plant; 
a great deal of uncertainty as to when to market those products 
that you intend to grow; planting, what can and cannot be 
planted on certain acreage. So it would create a tremendous 
hardship.
    Senator Bennet. You know, one thing I hear a lot is people 
talk at home about they just simply cannot understand the 
dysfunction in Washington. I say often that one of the bright 
spots is the work on the Agriculture Committee where we have a 
very bipartisan approach to what we are trying to do. So I am 
very optimistic that we are going to be able to get this done, 
and I think you are right to focus our attention on our farmers 
and ranchers as the people that are most affected if we fail to 
get it done.
    I wanted to follow up on that question that Senator Baucus 
was asking you about the next generation of farmers in this 
country. We know that only 6 percent of farmers and ranchers in 
the United States are 35 years of age or younger. In my home 
State of Colorado, agriculture generates $40 billion in 
economic activity, and it is frightening to me to think that we 
are struggling to find the next generation to carry on this 
vital and historic State industry. So we need to continue to 
try to break down the barriers that prevent young people from 
pursuing agriculture, and I wonder if you could speak with more 
specificity about how the agency's risk management tools like 
crop insurance and others are helping to accomplish this goal?
    Mr. Scuse. Senator, there are a lot of different ways that 
we can help, in my opinion, to get young people involved in 
agriculture. Right now I think that the best thing that we have 
going for us today is our market prices. When you look at 
commodity prices where they are today, when you look at the 
livestock prices and where they are today, there is hope that 
they are going to be able to actually make a living in farming. 
Unlike in past years with low commodity prices, low livestock 
prices, our young people were going to be going out there 
working with no hope of ever really making a decent living. 
Today, with the prices, I think that is one encouragement.
    Through our loan programs at USDA, where our young people 
are having difficulty obtaining credit from traditional 
commercial lending institutions, we are there to provide 
assistance for them. And, again, we are looking at ways through 
the Risk Management Agency to make crop insurance more 
affordable for them, so once they obtain the credit that we can 
help them buy the coverage that they need to protect their 
investment. So we are looking into doing that, but there are 
things that we are looking at doing going forward to encourage 
and help our young people.
    Senator Johanns. Thank you. Thank you for your testimony.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Grassley.
    Senator Grassley. Thank you, Madam Chairman. Thank you, Mr. 
Secretary, for coming to my office where we had a chance to 
visit and get acquainted. I appreciated it very much. I have 
just a couple questions, two different subjects.
    There are still people who are attempting to meet the 
actively engaged test by simply saying that they are involved 
in the management of a farming operation, but the participation 
seems to be one or two conference calls a year with other 
partners in the farming operation. These so-called managers--
and I use that word loosely--of the farms who do not really 
provide any necessary function in my judgment should not be 
receiving farm payments. You know I have been involved in that 
issue for a long period of time, and we passed some legislation 
in the last farm bill that we thought would take care of it. 
But I do not think it has really taken care of it in a very 
good way.
    Wouldn't you agree that people who are not providing any 
real management for the farm should not be allowed to get farm 
payments? If you agree with that, do you have any comments 
about what FSA is actively doing to close the loophole?
    Mr. Scuse. Well, Senator, I would agree that we should only 
be making payments to those who should, in fact, be receiving 
them. I know that there was an attempt in the last farm bill to 
close and restrict it additionally. There is a feeling, as you 
just indicated, that maybe that did not happen. But we are 
willing to work with you and the members of the Committee to 
see what can be done for further clarification.
    Senator Grassley. I do not think you have to work with 
members of the Committee. I just think you have to carry out 
the intent and spirit of what we passed in the last farm bill. 
But if you want to consult with us, I will be glad to consult 
with you.
    Mr. Scuse. We would appreciate the opportunity for that 
conversation, Senator. And, again, we thank you for the 
comment.
    Senator Grassley. Okay. The Crop Insurance Program has been 
a true success story. Farmers have skin in the game by paying 
part of the premium, and we are able to help ensure farmers 
make it through tough times and severe crop losses and a lot of 
other things that are beyond the control of farmers, like 
politics, international things, energy policy, the Strait of 
Hormuz being closed, and who knows what is going to affect 
farmers' income. So that is where the Crop Insurance Program 
comes in very well. It helps ensure that we continue to have a 
safe and abundant food supply as well.
    That being said, I continue to hear from independent crop 
insurance agents regarding frustrations with the SRA process. 
It seems to me the biggest complaint is the lack of input that 
these agents feel that they had in the process. Do you have any 
suggestions for improving the SRA process if, in fact, you feel 
it needs to be improved, and if so, addressing some of the 
concerns of the independent agencies? Or might you think that 
the agents might not have a point? Although I want you to know 
that I believe they do have a point. Go ahead.
    Mr. Scuse. Thank you, Senator. As I stated before, my door 
is always open, as is Administrator Bill Murphy's door, to 
listen to the agents as well as the companies. I have taken 
several meetings with the agents, as has Mr. Murphy, but in the 
negotiation for the Standard Reinsurance Agreement, that is an 
agreement between the Government and the companies, not the 
agents, because the agents are working for the companies. So 
that agreement has to be done between the Government and the 
agents--or the companies.
    You know, we have had discussions with the agents. I do 
understand that there is some frustration by some of the agents 
on the whole process. But, again, that is a process that 
because of the way it is structured, it has to be done between 
the Government and the companies.
    Senator Grassley. Madam Chairman, I will yield back time, 
except I am going to go down to Judiciary now, and I hope I do 
not lose my order, because when I come back here to ask a 
couple questions of the next panel, then I have got to go to 
the Finance Committee.
    Chairwoman Stabenow. Absolutely. Well, we will protect your 
ranking here in terms of the ability to ask questions. So thank 
you very much, Senator Grassley.
    Senator Klobuchar.
    Senator Klobuchar. Well, thank you very much, Madam 
Chairman. I will tell you that I was just with a number of 
farmers at my weekly Minnesota morning meeting, and they are 
really excited that we are moving ahead with these hearings. I 
know we have a wheat grower testifying later today, so I want 
to thank you and Senator Roberts for holding these hearings and 
moving ahead on this really important bill.
    Minnesota is the Land of 10,000 Lakes, but it could easily 
be called the ``Land of 80,000 Farms.'' We are sixth in the 
country for agriculture.
    Mr. Scuse, in your testimony you point out something that 
all farmers are facing now, and that is the high input costs 
for fertilizer, seed, obviously gas. High input and farmland 
costs mean that farmers need more tools, not less, to manage 
risk. What risk do you think that this Committee should focus 
on as we consider the work that we need to do to reauthorize 
the farm bill?
    Mr. Scuse. Thank you, Senator. Again, I think the 
production side in the last 5 years, as you have pointed out, 
in many cases our production has doubled, which increases a 
tremendous risk on our farmers and ranchers, regardless of what 
you are producing. Even in the livestock industry, if you look 
at the cost of the livestock industry, it basically has doubled 
as well in the last 5 years. Then the price volatility, yes, we 
have experienced several years of very good prices, but as 
members of this Committee know, that can change, and that can 
change very quickly. But we need to make sure that we have 
sound, safe programs available that are, again, simple to 
administer and easy to understand and that are, in fact, 
defensible to the taxpayers and the consumers.
    Senator Klobuchar. Very good. I know that Senator Johanns 
and Senator Roberts asked you about crop insurance, and I 
oppose, as many members of this Committee do, the proposal in 
the President's budget that would cut $8.4 billion from the 
Crop Insurance Program. I do support the work we have been 
doing with the $23 billion in cuts, but I think we actually 
need to strengthen the Crop Insurance Program.
    What efforts are you undertaking at the USDA, understanding 
the cuts we have already seen, to help improve data-sharing 
capabilities to streamline the implementation of crop insurance 
and other farm safety net programs?
    Mr. Scuse. Well, thank you. There are several things that 
we are doing, Senator. We have the Comprehensive Information 
Management System, which is an information system shared by the 
Farm Service Agency and the Risk Management Agency. That will 
help us do the data mining that is necessary to look at some of 
the spending that currently takes place within the programs. We 
have an initiative, the Acreage Crop Reporting Streamlining 
Initiative, right now that we are in the middle of working on. 
That is a project between FSA, RMA, NASS, and NRCS where we are 
coordinating information, as well as streamlining how we 
identify things.
    What this ultimately will do is it will allow our farmers 
and ranchers to do a single crop report rather than currently 
reporting their acreage to the FSA office and their agent, to 
do one crop report and then that information will, in fact, be 
shared. This will also help NRCS and NASS as well in their 
jobs. Then there is the MIDAS project.
    So ultimately where we would like to be is for a farmer and 
rancher to actually do a crop report at home that would go to 
the Farm Service Agency as well as to their crop insurance 
agent.
    Senator Klobuchar. Even though we have had a strong 
agriculture economy with record receipts and exports, you have 
said that you have seen an unusually high number of producers 
applying for direct operating loans from the USDA. What are 
lending conditions like now? What issues are banks and the Farm 
Credit System looking at when deciding on whether to lend to 
farmers?
    Mr. Scuse. Well, Senator, credit still remains tight in the 
agricultural community, and one of the reasons is because of 
the high cost. The amount of money that an individual today has 
to go to a bank and borrow for operating costs is tremendous. 
Because of the risk that is associated with farming, many of 
our traditional commercial lending institutions are very 
reluctant to lend money to those that they deem even a slight 
risk, or especially to a young or beginning farmer. So that is 
why we have seen the increase in the use of our programs over 
the last couple of years.
    Senator Klobuchar. Very good. I am going to ask a dairy 
question, but I am going to let my colleagues go on. I will put 
this in writing. I know you will look forward to getting it.
    Mr. Scuse. Thank you.
    [The question of Senator Klobuchar can be found on page 243 
in the appendix.]
    Senator Klobuchar. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Thune.
    Senator Thune. Thank you, Madam Chairwoman and Senator 
Roberts, for having the hearing, and I appreciate we have got a 
good cross-section of people who are going to be testifying 
today and providing some guidance as we prepare to write this 
farm bill, and so I look forward to the testimony.
    Representing South Dakota, agriculture is our number one 
industry, so I take my position on this Committee very 
seriously and want to make sure that we get a farm bill put in 
place that ensures we have a good economic safety net when 
production and economic downturns occur, but also it preserves 
the Nation's food security and current affordability levels for 
food. I know farmers are very concerned about the issue of 
deficit reduction as well. I think that is something that 
people across this country, particularly in farm country, get 
and want to make sure that we are doing our part.
    I want to thank you, Mr. Secretary, before I start my 
questions, first of all, by saying that the decision was made--
I know you worked with Secretary Vilsack in the recent 
announcement--for an additional 1 million continuous CRP acres 
in the United States. I look forward to seeing more SAFE and 
duck-nesting habitat acres added to South Dakota's portfolio of 
CRP acres, but that was a really important announcement and one 
that we very much appreciate.
    Let me just say, if I might, I think we ought to have 
several goals in this farm bill, particularly with regard to 
the commodity title. First off, we have got to make sure that 
agriculture continues to do its part in reducing the Federal 
deficit, which I mentioned earlier; provides an economic safety 
net only when needed; provides equitable treatment across all 
sectors of commodity production and does not affect farmers' 
planting decisions; and, finally, helps and encourages farmers 
to protect the sustainability of their land. Those are the five 
goals that I think we ought to have in mind as we write the 
commodity title in this farm bill.
    I wanted to ask you, Mr. Secretary, about the ACRE program 
and perhaps your ideas and guidance as we look at what might 
fill the role in the commodity title in this bill. The ACRE 
program required that producers bring in 5 years of production 
records as part of determining acre eligibility and also 
utilized marketing year averages to calculate prices. If a 
revenue protection program would be created in the next farm 
bill to replace ACRE, SURE, and direct and countercyclical 
payments that is not restricted by fruit and vegetable 
plantings, that is not capped by base acres on a farm, and 
which utilizes existing records already available at USDA--and 
when I say that, that would include actual production history 
records from RMA, crop reporting district yields from NASS, RMA 
harvest prices, or an average of the first 5 months of the 
marketing year for a crop if harvest prices are not available--
would you agree that developing a program using those 
parameters would be easier for FSA to administer than ACRE and 
SURE and more likely to provide timely payments?
    I know there was a lot loaded in that question, but if you 
had something that sort of followed those basic parameters, 
would that make more sense than what we have today?
    Mr. Scuse. Senator, there is no doubt that ACRE and SURE 
were very, very difficult for us to administer. I think if you 
look at the low participation in ACRE, it was because it was so 
hard for our producers across the country to fully understand 
and comprehend. I am not too sure that even today I fully 
understand it. So it was a very difficult program to 
understand, and I think that is one of the reasons why we had 
low participation, and it was also very difficult to implement.
    But, we are more than willing to work with the Committee to 
help in the development of programs that are going to be easy 
and that can be understood and easily implemented. So, we are 
looking for, going forward, something that we can administer 
and we can get out in a timely manner. So we are more than 
willing to work with the Committee to help develop something 
that can get the Committee and the members of this Committee to 
where they want to be.
    Senator Thune. Okay. Well, as some of my colleagues know, I 
have worked with some of my colleagues on this Committee to 
develop a program that sort of fits within those parameters I 
mentioned that is more timely delivered and easier to 
administer, I would believe, for FSA and certainly easier to 
understand for producers. So the ARRM program is the program to 
which I am referring.
    In your opinion, is there a danger of having too much 
dependency on crop insurance as a safety net for production 
agriculture? Let me give you an example. If you had certain 
farm bill proposals out there that would add additional layers 
of crop insurance on existing coverage, will that make crop 
insurance an even greater target by increasing subsidy costs 
and potential indemnities further beyond the $10 billion-plus 
that is going to be a record that we set here in 2011?
    Chairwoman Stabenow. I would ask you to be brief in your 
response.
    Mr. Scuse. Very brief. We are out of time.
    Senator, we would have to take a look at it. Again, we 
would be more than willing--the Risk Management Agency and Farm 
Service Agency--to take a very hard look and provide you with 
an answer.
    Senator Thune. Okay. Thank you.
    [The following information can be found on page 272 in the 
appendix.]
    Chairwoman Stabenow. Thank you.
    Senator Lugar.
    Senator Lugar. Thank you. Thank you very much, Chairman.
    Let me just focus on one specific part of the farm 
situation, and that is, the Sugar Act. I want to include in the 
record with your permission, Madam Chairman, a brochure 
recently submitted by the trade people in Canada, and it says, 
``North America's location of choice for confectionary 
manufacturers.''
    The Canadians point out that manufacturers of confectionary 
goods in the United States ought to move to Canada, or if they 
are going to invest any more, they surely ought to invest in 
Canada. They cite the fact that the cost of sugar is 30 to 40 
percent less in Canada and, furthermore, to indicate how much 
of a movement has occurred with these products freely traded in 
the NAFTA Treaty, they say the balance of payments just on 
confectionary goods alone has shifted to a $700 million 
advantage for Canada in the last year. In the charts, they show 
a graph that shows a huge change year by year for the last 10 
years.
    Now, in large part, this is because of our Sugar Act, which 
leaving aside confectioners and the jobs and the manufacturing 
that are involved, that means that each one of us who had a 
spoonful of sugar this morning in coffee paid 30 or 40 percent 
more than we should have for it because of the Sugar Act, 
essentially.
    I raise this because it is a very specific part of farm 
legislation, but it seems to me a totally indefensible one, and 
I state that asking for your opinion as to whether the 
Department of Agriculture would favor removing that from the 
farm bill in which we are now involved. Or is there some aspect 
of the Sugar Act that you would like to defend?
    Mr. Scuse. Well, Senator, there are many factors that go 
into the price for sugar. We are required to run the sugar 
program at no cost, so we have to be very careful about the 
amount of sugar that we import on a yearly basis. But, there 
are a lot of factors that go into what affects the sugar price. 
There have been weather-related issues in other parts of the 
world that have caused a spike in the world sugar price. If you 
look at some of the countries in South America that 
traditionally have supplied sugar, that sugar has gone into 
ethanol production.
    If you look at what has happened to the United States with 
our sugar production, just this past year alone, weather-
related issues, there was a decrease in our beet crop this 
year. So there are a lot of factors that go into this.
    There are many people that are very happy with the way that 
we are currently running the program, and, again, it is being 
run at no cost to the taxpayers of this country. We are trying 
to manage it as best we can, to be fair not just for the 
growers, not just for the refiners, but the end users as well.
    Senator Lugar. That has always been the defense, that there 
was no cost, and other parts of the bill cost money. The cost 
is to each one of us as consumers. As I stated earlier, if you 
used a spoonful of sugar this morning, as an American citizens 
you paid a whole lot more for it than you should have by any 
sort of supply and demand.
    As a matter of fact, confectioners in this country imported 
sugar at very unreasonable cost, over and above all that is 
mandated by USDA, just to stay in business, and that is the 
reason the Canadians are making a plea, and it is a fairly 
successful one. We are talking about jobs now moving out. That 
affects Americans. That is a cost and the cost to each of us as 
consumers.
    Now, I make this point because the Sugar Act is sort of 
hidden beneath the covers in a way. There is, as you say, no 
cost to it, the question of very complex administration. But 
clearly it is an act that raises the price of sugar for those 
who are growing sugar in America. It keeps out sugar so that 
that price remains much higher than it should by any market 
standards, even up and down in the world.
    So I ask for your reconsideration of this. I hope you will 
reconsider it as we deliberate in this Committee.
    I thank you.
    Chairwoman Stabenow. Thank you very much, and the document, 
Senator Lugar, that you asked about will be included in the 
record.
    [The document can be found on page 235 in the appendix.]
    Chairwoman Stabenow. Senator Boozman.
    Senator Boozman. Thank you, Madam Chair.
    Thank you for being here. You just mentioned in regard to 
sugar a number of other factors that determine price and 
problems with production. In regard to target prices, I would 
really encourage us to keep that on the table in the sense that 
certainly, it depends on the price, it depends on the crop. 
There are a number of different issues that go into that. Also, 
as you mentioned, there are trade issues that distort the 
market. So if you look at any program that we do, I think you 
can make the argument that if you go too far, you can have a 
distortion of the market. Certainly none of us wants that in 
the sense we do not want everybody growing the same thing. But 
I would really encourage us to keep target prices on the table 
as we go forward and try and figure it out.
    You also mentioned the importance of getting something that 
was equitable for everyone. The problem is that with our crops 
of today and the different input costs, the different input 
costs throughout the different parts of the country and how you 
are farming, it is really difficult to have a one-size-fits-all 
program. So I hope that you would be, amenable to that.
    The other thing is you mentioned a lot of, decrease in 
funding in your testimony. What does all that total up to ag?
    Mr. Scuse. As decreases in funding for----
    Senator Boozman. In the President's budget.
    Mr. Scuse. I think it is about a $32 billion decrease.
    Senator Boozman. Now, I am an optometrist, and so we 
planned ahead. You know, we have 85 employees. What are you 
planning--what would be next year's decrease?
    Mr. Scuse. Well, that is the decrease that the President is 
recommending for the farm bill, the decrease, which would 
include----
    Senator Boozman. But ag has kind of taken it on the chin 
the last couple of years under the current farm bill.
    Mr. Scuse. Well, outside of the farm bill, in our daily 
operations of funding, the Farm Service Agency has experienced 
since 2010 roughly a 40-percent reduction.
    Senator Boozman. Okay.
    Mr. Scuse. So it has been substantial, but we have also 
seen a tremendous decrease in personnel since 2003. So we are, 
in fact, being very responsible, and we are doing more with 
less all across USDA, but especially at the Farm Service 
Agency.
    Senator Boozman. In regard to the Farm Service Agency, you 
made the point that you are listening to a number of different 
groups throughout the country. You had all of the hearings, and 
FSA is so important in implementing these programs. But, you 
made the point that you are listening, and yet throughout the 
country you had all of the input, you had farmers coming to 
meetings and things, and the reality is that nothing was 
changed. You know, I do not think a single reversal of FSA 
closures happened as a result of all of those meetings 
throughout the country. The law is pretty clear in regard to 
the 20-mile limit and some other things, and I guess what I 
would encourage is we need to listen, but we also need to act 
on what we are hearing.
    Mr. Scuse. I appreciate your words, Senator, but a final 
determination has not actually been done. We did do what was 
required by law, which is to notify Congress of the action that 
was taken. But that is not a final determination. That will not 
come for 90 days after the notice of Congress.
    So there have been a lot of comments that were offered up 
that are in review. In fact, I took a phone call yesterday 
regarding one of the offices. But Congress has been notified, 
but a final determination has not yet been made.
    Senator Boozman. Well, in regard to the law, it is pretty 
clear the law says 20 miles.
    Mr. Scuse. Yes, sir.
    Senator Boozman. Okay. If I were talking to you about 20 
miles, I would not be talking generally as the crow flies. Is 
that----
    Mr. Scuse. We had to use a determination, and the 
determination that we used at FSA was as the crow flies from 
one office to the other. That is how we determined the 20 
miles.
    Senator Boozman. Now, I know that is how you determined it. 
I am just saying that in general conversation and general 
meaning, that would not be the case. I do not think, if we were 
visiting about 20 miles as farmer to farmer or Congressman to 
whomever, that we would have that connotation of as the crow 
flies.
    So, anyway, thank you, and I appreciate your being here.
    Mr. Scuse. Thank you.
    Chairwoman Stabenow. Well, thank you very much, Mr. Scuse. 
We appreciate your time again and your input and the ability to 
work closely with you as we fashion the farm bill. I will say 
in conclusion that you mentioned wanting more flexibility on 
new products under crop insurance, and certainly someone 
representing a diversity of crops, like specialty crops, and 
certainly I know other Senators who represent rice, peanuts, 
other areas where crop insurance currently does not provide the 
risk management they need, we intend to work with you to give 
you that flexibility and to be able to expand on new products 
that are very, very important to making risk management 
successful.
    So thank you very much, and we will excuse you and ask our 
second panel to come forward.
    Mr. Scuse. Madam Chair and members of the Committee, we 
look forward to working with you in the future. Thank you very 
much.
    Chairwoman Stabenow. Thank you very much.
    Well, good morning. We appreciate all of you being here 
and, again, your patience as we have had to reschedule today, 
so I hope you have enjoyed an extra day in Washington and maybe 
seeing some of the cherry blossoms that we had come out just 
for you because you had to wait a day. So we are very 
appreciative that you are here as we begin the second panel.
    Before I introduce our witnesses, I would like to submit 
for the record a letter from the American Bankers Association, 
Independent Community Bankers of America, and the Farm Credit 
Council detailing their support for the Federal Crop Insurance 
Program and its importance for our Nation's farmers and 
ranchers as a vital risk management tool. So, without 
objection, I will submit that for the record.
    [The letter can be found on page 232 in the appendix.]
    Chairwoman Stabenow. Now let me introduce our first 
panelists. We will introduce all four of you and then ask each 
of you to give 5 minutes of opening testimony.
    Our first panelist is Hope Hills. She is from my home State 
of Michigan where she and her husband grow blueberries on their 
213-acre family farm. The farm is located in Bangor, Michigan, 
and has been in her family since the late 1930s. The Hills are 
a member of the MBG Marketing-The Blueberry People and market 
all of their blueberries through their co-op. Mrs. Hills and 
her husband, Mike, have two children and three grandchildren. 
We very much appreciate your testimony and your being here 
today and appreciate your work in Michigan.
    I am now going to turn to Senator Roberts to introduce our 
next witness.
    Senator Roberts. Thank you, Madam Chairman. I welcome 
Jarvis Garetson to Washington. Jarvis is a producer from 
Copeland, Kansas, in the southwest corner of our State, and it 
is an area that was devastated by drought last year. We are 
hoping that Mother Nature will be kinder to us. Jarvis asked me 
to come out and do a rain dance in Dodge City and Copeland, and 
we did get a little moisture. I better get out there again.
    He is a diversified farmer who raises irrigated corn, milo 
wheat, triticale, and soybeans and cotton, as well as dryland 
wheat, and milo and cotton. So he is diversified.
    He and his family also have an interest in grain storage 
facilities, ethanol plants, and a cotton gin. He is a leader in 
his farming community and currently served as the Haskell 
County Farm Bureau President, and I would be remiss, of course, 
if I did not mention that Jarvis is a graduate of the ever 
optimistic Fighting Wildcats of Kansas State University.
    Chairwoman Stabenow. I have heard of Kansas State before.
    [Laughter.]
    Senator Roberts. Even wore a purple scarf at one time, as I 
recall.
    Chairwoman Stabenow. I did, but did you see Michigan State 
in the Big 10? I just want to put that in there for the record.
    [Laughter.]
    Senator Roberts. It would be a long list here if we start 
this.
    Chairwoman Stabenow. I know. I am sorry.
    Senator Roberts. Sorry, I started it. But, at any rate, 
Jarvis, thank you for joining us today, and I look forward to 
hearing about your farm and how it utilized crop insurance to 
make it through the worst drought since the Dust Bowl.
    Madam Chairman, we talk about no hope. Well, Jarvis is a 
perfect representative of the hope that we have out in 
southwest Kansas and, for that matter, our entire State. I 
think that question was raised by Chairman Baucus.
    He and his wife, Amber, have five boys, and they farm the 
farm that was homesteaded by his great-granddad in 1902. That 
is over 100 years. His parent, Jessie and Jerra, farm with him, 
and his brother, Jay. That is the kind of operation that you 
have to build and put together to survive during these very 
difficult times. So I am very proud that he is here. But if 
anybody doubts the ingenuity and the perseverance and the hope 
that farmers have, just let them listen to Jarvis.
    Chairwoman Stabenow. Great. Well, thank you so much.
    Our next witness is Mr. Bob Carden, who is from central 
Florida. He is sitting in today for Ruth Gerdes, who 
unfortunately had to go back to Nebraska today, and as many of 
you know, she went back because of the crop insurance closing 
data, and so Mr. Carden is a long-time leader in the crop 
insurance industry. We appreciate your flexibility and 
willingness to sit in today on short notice, and we very much 
appreciate Ruth Gerdes' willingness to be with us and, again, 
regret that we had to change the schedule. But we are very, 
very happy that you are here with us.
    Finally, we have Mr. Steve Rutledge, who is here, and I 
know that Senator Harkin and Senator Grassley had hoped to be 
here. I know they will be coming back to be able to greet you 
and welcome you as well. Mr. Steve Rutledge is chairman of 
Farmers Mutual Hail in West Des Moines, Iowa. Mr. Rutledge 
managed to build a solid foundation of experience over the past 
30 years, which included positions in all three of Farmers 
Mutual Hail's major departments--crop hail, multi-peril, and 
reinsurance-- and then becoming president and CEO. He has since 
retired but will continue as chairman until the end of this 
year.
    So we welcome all of you, and we would ask you, Ms. Hills, 
to proceed with your testimony.

    STATEMENT OF HOPE HILLS, SPICEBUSH CREEK FARMS, BANGOR, 
                            MICHIGAN

    Ms. Hills. Chairwoman Stabenow, Ranking Member Roberts, and 
other members of the Committee, thank you for inviting me here 
today to talk about crop insurance. Chairwoman Stabenow, on 
behalf of Michigan's growers, I want to thank you for being a 
champion of the specialty crop industry and for your strong 
support of farmer co-ops. I am humbled to be here before the 
Committee.
    Today I am here on behalf of the National Council of Farmer 
Cooperatives and as a member of MBG Marketing-The Blueberry 
People.
    My husband, Mike, and I are third-generation blueberry 
growers in Bangor, Michigan. Mike's grandfather first planted 
blueberries in the late 1930s and became a MBG member in 1943.
    Back in the 1930s, some local people thought Mike's 
grandfather was nuts. ``What do you want to plant those for? 
You will never make any money at that.'' Seventy-five years 
later, those same bushes are still producing. They have 
provided income for thousands of people through the years and 
have pumped millions of dollars into the economy.
    We started our farm in 1984 with cuttings from those bushes 
first planted by his grandfather. In fact, our MBG grower 
number is the same one his grandfather had. We farm on 213 
acres, 120 of which are cultivated blueberries. The balance of 
our farm is woodland, wetlands, a packing facility, and farm 
buildings.
    Being a grower is full of risk, and without crop insurance 
it becomes a gamble, a roll of the dice. Our operation, our 
livelihoods are too much to gamble on. We believe strongly in 
crop insurance as a safety net for our operation. We began 
purchasing crop insurance in 2002 and have continued each year 
since.
    The best safety net, however, is one that you never have to 
use. Like most producers today, our risk management goes far 
beyond crop insurance. On our farm, we have invested heavily to 
mitigate the risks we face and give ourselves the best chance 
possible to have a strong crop each year.
    My written testimony contains details of other things we do 
to mitigate risk. All of these things are the first line of 
defense. Crop insurance is the second.
    We all know that agriculture is an unpredictable business 
due to factors far beyond any of our control. Having crop 
insurance brings stability to an otherwise volatile business 
and allows producers to continue farming in the event of a 
disaster. Even though crop insurance is our fourth largest 
annual expense, we continue to purchase it. That is how 
important it is to us.
    In 2008, prices fell considerably for blueberries, and we 
knew it was going to be a lean year. We considered dropping our 
crop insurance due to the cost. But we decided that the cost of 
not having it was far too great. We have been fortunate not to 
have filed a claim in the past 10 years.
    Because we have crop insurance, our lender is more willing 
to finance our operation, which in turn allows us to continue 
to invest in our business and bring money into our local 
economy. That said, it is worth noting that the cost of crop 
insurance without the USDA subsidy would be unaffordable.
    Additionally, the availability of crop insurance is 
especially important for beginning farmers and growers, given 
the investment involved in establishing a farm.
    While crop insurance works for my operation, it may not 
work for all 300 different specialty crops. Addressing the 
sheer number of crops and the nuances of each industry is a 
challenge. Crop insurance for specialty crops is complicated 
for a number of reasons, including the fact that most are 
relatively small markets; most do not have futures or options 
contracts for price discovery; most have complicated good 
farming practices compared to row crops; there are differences 
in potential market impacts between perennial crops like mine 
and annual or semiannual crops; and a large number of non-
weather-related risks have to be taken into consideration.
    Nevertheless, specialty crop growers must have access to a 
safety net. Those of us who need crop insurance really do need 
it.
    In fact, some growers are interested in an insurance 
product that would protect against market disruptions, like a 
food safety incident that caused harm to an industry. There is 
room for innovation to meet the needs of specialty crops in the 
crop insurance arena.
    Another issue surrounding crop insurance is whether 
conservation compliance should be required to participate in 
the program. NCFC opposes linking conservation compliance to 
crop insurance.
    I would like to mention two other issues.
    First, agriculture needs access to a legal, stable 
workforce. None of the issues that I have discussed in my 
testimony matter if there are not people to harvest, pack, and 
process these crops.
    Second, given the critical nature of expanding 
international markets and exports, farm bill programs like the 
Market Access Program are very important.
    In conclusion, agriculture is Michigan's second largest 
industry, contributing $71 billion to the economy annually. It 
also supports one of every four jobs across the State. We need 
to support American agriculture so that Americans can buy 
produce here. We need to have policies in place that allow 
American agriculture to thrive.
    Thank you again for the opportunity to be here today to 
share my experience with crop insurance.
    [The prepared statement of Ms. Hills can be found on page 
141 in the appendix.]
    Chairwoman Stabenow. Thank you so much.
    Mr. Garetson.

 STATEMENT OF JARVIS GARETSON, PRODUCER, HASKELL COUNTY, KANSAS

    Mr. Garetson. Chairwoman Stabenow, Ranking Member Roberts, 
and other Senators that are here on the Committee, thank you so 
much for having us here today. What a joy to be in our own 
capital. It is great to have great people sitting on a 
Committee as important as this Ag Committee is, and I just want 
to thank you so much for the opportunity to allow me as a 
producer to share my story.
    As Senator Roberts pointed out, in 1902 my great-
grandfather homesteaded in Haskell County, Kansas, broke out 
the sod. Through blood, sweat, and tears, keeping hold of his 
bootstraps to keep them pulled up and trodding through the 
plains of Kansas and then his tilled fields, to raising my 
grandfather, to him raising my father, my father raising myself 
and my brother or sisters, and now my wife and I raising our 
five boys on that original homestead means a lot.
    We have got our blood in this land. It means the world to 
us, and the opportunity to continue operating the same soil for 
another 100-plus years is one of my brother and my goals of our 
operation.
    With that, as Senator Roberts alluded to, we went through 
the most devastating crop year in history. We had on our farm 
less than 5 inches of rain in 18 months concluding on the last 
year of 2011. That is by far less than what we received through 
the Dust Bowl in Haskell County. So you take a record low 
annual rainfall. We had the most 100-degree days in a growing 
season and the highest average wind speed through a growing 
season and the stars perfectly aligned for a major farm 
disaster. Without Federal crop insurance, specifically the 
enterprise units that we use on our farm, we would be having a 
farm sale this spring instead of preparing to plant the next 
crop.
    With that, my brother and I use Federal crop insurance as a 
major portion of our risk management on our farm. My brother 
and I started farming with money at risk in 1994 when our 
grandfather retired. We continue to make those payments, and 
without the Federal crop insurance this past year, well, 
absolutely we would not have been able to make them, let alone 
our annual payments to our lenders for our real estate, our 
equipment loans, and our operating loans.
    Federal crop insurance is paramount to the success and 
longevity of our farm, and our lender has made it very clear 
that he wishes all of his customers carried crop insurance as 
we do.
    My grandfather, bless his heart, decided he could afford to 
be self-insured. Times were a little different when he was 
starting. As has been alluded to, the high price of inputs, we 
just cannot run the risk, as Ms. Hills stated, not to carry it, 
and we would love to pay the premium and never have to use it. 
However, we all have insurance on our car or our house for just 
in case.
    One item that I would like to suggest the Committee 
consider for improving the Crop Insurance Program is I would 
highly encourage to have the ability to have enterprise units 
by practice, meaning enterprise units for our irrigated 
farmland and enterprise units for our dryland acreage as a 
separate policy. That would allow us the flexibility that we 
would need to make better cropping rotation decisions based on 
what insurance available we would have.
    I would also like to suggest that--it is not even a 
suggestion. I would reiterate the previous testimony of how 
efficient the delivery of our Crop Insurance Program has been 
through our agents. If there is a bad agent, they do not last 
long. We have excellent agents in our county, and I would 
reiterate that the delivery is very good, and I would hate to 
see it move away from the private sector.
    Thank you.
    [The prepared statement of Mr. Garetson can be found on 
page 107 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Carden.

    STATEMENT OF BOB CARDEN, CROP INSURANCE AGENT, CARDEN & 
  ASSOCIATES, INC., WINTER HAVEN, FLORIDA, ON BEHALF OF RUTH 
  GERDES, PRESIDENT, THE AUBURN AGENCY CROP INSURANCE, INC., 
                        AUBURN, NEBRASKA

    Mr. Carden. Chairwoman Stabenow, Senator Roberts, and 
members of the Committee, my name is Bob Carden, and I am a 
crop insurance agent in Winter Haven, Florida. I am here today 
to pitch-hit for my friend, Ruth Gerdes, who is an agent in 
Auburn, Nebraska. Ruth was supposed to testify yesterday, but 
she had to go back home because today is the sales closing date 
for Nebraska farmers.
    The testimony I offer is on behalf of CIPA, the Big ``I,'' 
the PIAA, and the Agents Division of AACI. If Ruth were here, 
she would tell you that years ago she and her husband almost 
lost their family farm after suffering back-to-back crop losses 
and how she figured out that they would not have been in that 
fix if they had proper crop insurance.
    Well, Ruth ultimately became an agent because she did not 
want anyone else to suffer what she and her family had 
suffered.
    Now, I have been through the same ordeal. After a freeze 
devastated our citrus groves in 1989, I had a lot of sleepless 
nights worrying if I could pay the bills. At one point I even 
worked three jobs to hold on to that farm. I can remember 
thinking then, if only we had a decent crop insurance policy.
    Well, today you could fill football stadiums with families 
whose farms have been saved by crop insurance. In fact, one of 
the best witnesses on how indispensable crop insurance is to 
the family farm is not at this table. Yesterday he would have 
been seated behind Ruth, but he, too, had to get back to work. 
His name is Mike Woltemath. Mike and his family farm outside of 
Hamburg, Iowa. They saw their land, their home, their 
equipment, and everything they worked for all their lives go 
underwater during last spring's flooding.
    The picture you have and the testimony you received from 
Ruth of Mike's farm is deceiving because it still looks 
beautiful in that picture. But those around this table who have 
seen the devastation of flooding know the wreckage that it 
leaves behind.
    Mike and producers across this country are what crop 
insurance is all about. It is not about agents or companies or 
anyone else. It is about the farmers.
    So I wish that each of you could have visited with Mike 
today because he traveled all this way to carry just two 
messages.
    The first is: Do no harm to crop insurance. Do not cut crop 
insurance but build on it.
    And, second, do not let the Government take over the 
delivery of crop insurance. While Government can take years to 
pay a producer on a loss, under private delivery of crop 
insurance farmers are paid in a matter of a few weeks.
    As agents, we are not 9:00 to 5:00 employees. We are judged 
on the quality of risk management advice and service that we 
provide on some very high stakes decisions-- decisions that 
could make or break a producer's operation. We are part 
insurer, part financial adviser, part risk management and 
mitigation team, part farm bill interpreter, and part shoulder 
of a friend to lean on during tough times.
    As agents, we are not judged by when we punch in or punch 
out but by the results of the advice we give and being there 
whenever our customers call, and sometimes even when they do 
not.
    Crop insurance was created in 1938 because, without Federal 
involvement, farmers would not have insurance. But run by the 
Government, it languished for 42 years. What happened next is 
what made crop insurance what it is today. In 1980, Congress 
turned delivery of the program over to the private sector. In 
1994 and 2000, Congress passed sweeping improvements, thanks in 
part to the leadership of this Committee's Ranking Member. In 
1996, Kansas State Professor Art Barnaby worked within industry 
to develop revenue products.
    Crop insurance, which today covers $114 billion in 
liability and which farmers say is their most important risk 
management tool, stands on the shoulders of people like those 
seated around this table.
    Since the 200 crop insurance bill, I believe the Government 
has made some mistaken policy choices that could undermine the 
success of crop insurance. But I am not here to dwell on these 
points today except to point out that we never know what we 
have got until we lose it.
    Instead, like every farmer, I must look forward, hopefully 
and with confidence and faith, and see opportunity in the 
toughest challenges. Budget constraints and critics of farm 
policy that threaten to undo the important work that people 
around this table have done over so many years to ensure that 
people like Mike from Hamburg, Iowa, can continue to do what he 
does every day. To feed, clothe, and fuel this country and 
millions around the world are certainly tough challenges. But I 
have seen the people around this table in action before, and I 
have faith, hope, and confidence that you will overcome these 
challenges and, yes, find opportunity along the way, not only 
to protect crop insurance but to improve it for all our 
Nation's farmers.
    Thank you, and thank you for letting me be here.
    Chairwoman Stabenow. Thank you very much.
    Mr. Rutledge, welcome.

  STATEMENT OF STEVE RUTLEDGE, CHAIRMAN, FARMERS MUTUAL HAIL 
            INSURANCE COMPANY, WEST DES MOINES, IOWA

    Mr. Rutledge. Madam Chairwoman, Ranking Member Roberts, and 
members of the Committee, I am here today to speak on behalf of 
the 15 companies who deliver the Federal Crop Insurance 
Program, and I do thank you for this opportunity.
    Going last, it seems we do sing the same song a bit, but, 
nonetheless, you have my written testimony, and from that you 
know that I have been in the crop insurance business for a very 
long time. Many of those earlier years were spent as an 
adjuster, and I cannot tell you how many times I have seen the 
relief and gratitude on a farmer's face when they realize that, 
because of crop insurance, they will be back in the fields in 
the spring and their lives will go on uninterrupted.
    This past year was no different. 2011 was perhaps one of 
the most destructive weather years in recent history. With 
large farm losses and record high indemnity payments, farmers 
who might otherwise be out of business are already back in the 
fields preparing for what we all hope will be a much better 
2012 crop year.
    When farmers and ranchers are left picking up the pieces 
after disasters, we are proud to help them by providing prompt 
delivery of indemnity benefits, often within 30 days or less, 
compared to up to 30-month delivery with other programs. The 
responsiveness of the private sector delivery system and the 
Crop Insurance Program itself is truly unmatched.
    However, crop insurance is more than just periodic 
indemnity payments. It is the key to financial stability for 
America's farmers and ranchers, enabling them to supply our 
country with food, fiber, feed, and fuel. It helps provide a 
farmer access to operating capital, which might otherwise be 
highly restricted. And, equally important, farmers have also 
integrated crop insurance and marketing to the point where they 
are very willing to buy crop insurance at high coverage levels 
to ensure the adequacy of resources to cover forward marketing 
commitments should disaster strike.
    This has not always been the case. Congress has taken great 
steps to enhance crop insurance over the years. Reform 
legislation enacted in 1994 and again in 2000 strengthened the 
public-private partnership of program delivery and encouraged 
greater farmer participation. These steps put us on the path to 
success by combining Federal dollars with farmers' premiums to 
make otherwise cost-prohibitive policies affordable to farmers 
of all sizes and all backgrounds, including those of limited 
resources and social disadvantage.
    I want to share some figures with you to demonstrate just 
how you have made a positive impact on farmers and ranchers. In 
2011, crop insurance provided over $113 billion in liability 
protection. That is compared with only $28 billion in 1998. 
Also in 2011, nearly 265 million acres were insured compared 
with about 180 million acres in 1998. In terms of the level of 
protection producers are buying, well over half the coverage is 
now at the 75-percent level or greater, and about a fourth is 
at the 80-or 85-percent level.
    Today crop insurance is the cornerstone of risk management 
and provides coverage for more than 100 crops across the 
country. As development of the 2012 farm bill progresses, crop 
insurance is in a unique situation. Crop prices and price 
volatility are expected to remain well above historical levels, 
posing significant risks. With this vulnerability comes an 
increasing sensitivity to further changes to the program and 
the delivery system.
    We respectfully caution against changes to crop insurance 
that could negatively impact farmers and ranchers. Since 2008, 
crop insurance has taken more than $12 billion in Federal 
funding cuts, which sets agriculture apart as one of the only 
sectors, if not the only, to take repeated budget cuts in order 
to help reduce the deficit.
    Additional cuts such as those proposed in the President's 
budget could have the unintended effect of impairing the 
delivery system, reducing service, and even limiting coverage 
to producers. In short, we risk undoing the great progress made 
in protecting U.S. agriculture.
    What Mother Nature or the extremely volatile commodity 
markets have in store for farmers and ranchers this year is 
unknown. But those of us in the crop insurance delivery system 
will be ready to help ensure their survival when disaster does 
strike.
    Thank you again.
    [The prepared statement of Mr. Rutledge can be found on 
page 179 in the appendix.]
    Chairwoman Stabenow. Well, thank you so much to all of you.
    Ms. Hills, let me start with you. You talked about the fact 
that you have never had an indemnity payment, but that it was 
important for you beyond the payment to have crop insurance. 
You mentioned that a little bit, but I wonder if you might talk 
a little bit more about why from your perspective it is 
important to have crop insurance even though you have been 
fortunate and not had a payout.
    Ms. Hills. The most important thing is peace of mind, 
especially this time of year when you wake up in the morning 
and you do not know. This year we have already had extreme 
temperatures fluctuating up to 40 degrees above normal. I 
talked to my husband yesterday. He said the bushes are moving 
way too far. So this may be a year that we do need it, and we 
need that protection.
    Our lender is more willing to loan us that money that we 
need to finance our operation. We take that financing, and we 
invest it back into risk management, such as wind machines, 
irrigation, pest and disease management. Those are all things 
that we need, and we need that financing, and he is willing to 
do that.
    Chairwoman Stabenow. Great. Well, thank you very much, and 
I share your concern, watching the weather, that we do not get 
an April frost or snowstorm in Michigan like we have done in 
the past that has wiped out crops. So let us hope we do not.
    Mr. Rutledge, could you talk a little bit more about the 
context for--put in context the numbers you talked about. Of 
course, we have talked about the $10 billion in payout for 
2011, and you mentioned the total liability in acres, but a 
little bit more context from the standpoint of the kind of 
crops and farmers covered and the amount of the losses that you 
have seen in the last year.
    Mr. Rutledge. In 2011, out of slightly over 1 million 
policies in the country, there were about 380,000 that suffered 
losses. Not all of those were total losses. Some were partial. 
But they covered over 77 different crops, over 72 million 
acres, and out of the 380,000 that had claims, I imagine there 
had to be tens of thousands who probably would have had the 
farm for sale, as Mr. Garetson talked about, had it not been 
for crop insurance.
    Chairwoman Stabenow. Thank you.
    Mr. Carden, talk from an agent's standpoint. What are the 
major factors and issues that you work through with farmers as 
they decide what to purchase? How has your advice in their 
purchase decisions changed over the last 5 or 10 years?
    Mr. Carden. Well, I think the changes go--I will address it 
in reverse order.
    Chairwoman Stabenow. Sure.
    Mr. Carden. The changes really come with the level of 
complexity in the program, some of which ties to just the 
general complexity of farming in general, the increase in input 
costs and some of the different risks that are out there now 
that maybe were not there 10 or 12 years ago. I know I mainly 
work in a specialty crop environment with citrus, vegetables, 
and things like that. They have had a number of nonnative 
invasive pests and things like that that have come into the 
area, and how to manage that, we cannot really control those 
with crop insurance in those policies, but we do control the 
other sides of it and how to weigh out their expenses on the 
one side versus their expenses for the things that we can 
insure them for. So we will spend a lot of time doing that.
    With those in the tree and bush crops, with the diseases 
that are there, it is really critical to know the numbers of 
trees that you actually have producing and things like that, so 
trying to go over those, to make sure we have got an accurate 
picture of what we are really insuring and that they are 
actually protected the way that they should be. So it is things 
like that. It is a process that--in our case our sales closing 
date is April 15th. That is a process that we started with our 
people in November. Then we will go through the summer 
reassessing at certain point what they have and making 
adjustments accordingly.
    Chairwoman Stabenow. Great. Thank you.
    Just briefly, Mr. Garetson, when you are talking about the 
benefits of crop insurance, could you talk about how this helps 
you as it relates to marketing your crop or your ability to get 
operating loans from the bank and the other ways in which this 
is important?
    Mr. Garetson. Yes. In terms of marketing our crops, we 
carry the 85-percent enterprise unit level, and it allows us to 
go out and market up to 85 percent, in essence, of what we 
believe we will raise or what the insured amount is. So we can 
be more aggressive on the marketing of our crops, so we do not 
have to be exposed to more of that market risk. Then on the 
lending side, as I stated, it is just paramount because, in 
essence, it is guaranteed income to our lender, and our lender 
recognizes that value and is willing to loan us more money 
because we have got that guarantee versus if we carried either 
a lower level or no crop insurance at all, the amount that we 
would be authorized to borrow would be much less.
    Chairwoman Stabenow. Thank you very much. I am over my 
time.
    Senator Roberts.
    Senator Roberts. Madam Chairwoman, I want to acknowledge 
that you have already submitted for the record the letter we 
received from the lending community, specifically the American 
Bankers Association, the Farm Credit Council, and the 
Independent Community Bankers regarding crop insurance as an 
important component of lending decisions, and I think we have 
certainly mentioned that more than once here during this 
hearing.
    Senator Thune brought up an interesting situation where he 
said if we strengthen and improve crop insurance to the point 
or add more on to it, it does not become a better target or a 
greater target. And, of course, all of agriculture is a target 
when people talk about cutting spending.
    I just want the record to show that we cut--``we.'' I did 
not. We did cut in the farm bill in 2008 $6 billion, SRA cut $6 
billion, that is $12 billion we have already cut. I know Mr. 
Rutledge has some real feelings about that. I just would like 
to ask you, Jarvis, you are sitting around the kitchen table 
there with Jay and your parents, and you are going through 
another dry year. You are talking about target prices, and that 
is not going to do you any good. Then the countercyclical 
program is not going to do you any good. The SURE program is 
one where you do not get a payment for 18 months, and the FSA 
Director has already testified he still does not understand the 
ACRE program.
    So what do those programs do for you as opposed to crop 
insurance and the whole strengthen and improve it and maybe add 
a revenue program on top of that if that is possible? We are, 
looking at those options. But I do not understand this business 
of how if we strengthen and improve our crop insurance so that 
you are sitting around the kitchen table and you can go another 
year, hopefully, and hopefully we get some moisture. But of the 
four that have been mentioned, if you take all of that, it has 
no effect on you. Is that correct?
    Mr. Garetson. That is correct. A high target price is 
great, but if you do not have any bushels, it does not do much 
good either. The SURE payment, waiting 18 months, as stated 
earlier in previous testimony, does not do much for my lender. 
So those are kind of unacceptable risk management strategies. 
The direct payments, however nice, they do not fix a disaster. 
And, obviously, as a producer, I do not want to give up any 
benefit that I currently have. However, knowing the Federal 
budget situation and knowing that I need to be involved in 
helping to fix that, I am definitely willing to prioritize 
where I want the cuts to come and what I am willing to give up.
    As I stated, I am willing to give up everything except crop 
insurance, and I will lobby or fight or testify or whatever I 
need to do for however long to make sure that that stays 
intact.
    Senator Roberts. I appreciate that.
    Mr. Rutledge, there is a lot of talk these days about 
reconfiguring the Title I farm programs to center on a revenue 
program. The Chairwoman and I have been wrestling with that for 
quite a while. Does this concern you at all? If so, can you 
discuss and rank some of the specific things we can do as we 
develop a revenue program to minimize your concerns?
    Mr. Rutledge. As I understand most of the proposals, they 
would provide benefits similar to those of crop insurance, 
particularly at the higher coverage levels. I think this would 
lead farmers to buy down, buy lower levels of coverage.
    After Congress having spent 30 years or more building the 
program up to the level that we currently have, I see that as 
potentially a step backward for crop insurance. So that would 
be one of our primary concerns.
    Senator Roberts. Am I out of time or is the timer off?
    Chairwoman Stabenow. I am sorry. We were just--something 
happened with the timer, and I think that we were down to zero 
and it went back up to 5 minutes, and I would object to Senator 
Roberts getting an additional----
    Senator Roberts. That is just like running the clock up at 
the University of Nebraska with Kansas State plays.
    [Laughter.]
    Chairwoman Stabenow. I think you were just about at zero, 
Senator Roberts.
    Senator Roberts. I had one more tremendously important 
question, but I will have to submit it for the record. Thank 
you.
    [The question of Senator Roberts can be found on page 259 
in the appendix.]
    Chairwoman Stabenow. Thank you very much, and I apologize 
for that. We will make sure that does not happen again.
    Senator Johanns.
    Senator Johanns. You know, I think, Madam Chair, I was 
called on ahead of time--or ahead of Senator Grassley last 
time, but he was actually sitting here when I walked in, so I 
think he is ahead of me.
    Chairwoman Stabenow. Well, our list had you ahead of 
Senator Grassley, but if that is wrong, we will----
    Senator Johanns. I will yield to the Senator from Iowa.
    Chairwoman Stabenow. Senator Grassley.
    Senator Grassley. I will tell you how I was operating, 
maybe like some other Committee does. When the gavel goes down, 
that establishes the seniority for the questioning.
    Chairwoman Stabenow. That is supposed to do that and----
    Senator Grassley. So I walked out just as soon as you 
started to talk, not because I did not want to hear you.
    Chairwoman Stabenow. Okay. I will remember that.
    [Laughter.]
    Senator Grassley. Mr. Rutledge, farmers continue to tell me 
that the crop insurance is a vital tool for managing risk, and 
they want to keep it the way it is because they know, as I 
think you have said, $12 billion has already been contributed 
from crop insurance to paying down the national debt.
    My question: I certainly support maintaining crop 
insurance, but is there anything, in your opinion, that we can 
do to improve crop insurance for Iowa farmers? But maybe I 
should not just limit it to Iowa farmers. Any suggestions you 
have?
    Mr. Rutledge. Well, I think the major crops have fairly 
good programs available to them. There is always a need for new 
products to be developed for some crops that we just do not 
have a real good fit for. I think that as we work with the Risk 
Management Agency--Under Secretary Scuse mentioned the frequent 
meetings that we plan to have going forward. It would help, as 
we have those meetings, if we are able to be provided 
information on a little bit more timely basis sometimes. This 
past year, we were somewhat surprised by the timing of the 
announcements of the rate changes, which caused some scrambling 
around to buy reinsurance for some companies.
    But I think the program works very well. The biggest fear 
we have, I guess, would be that changes would harm the program 
going forward.
    Does that answer your question, Senator?
    Senator Grassley. Yes. I would follow up, just from what 
you reminded me of something. Do you feel that we have the 
number of people that it takes to administer the program? Very 
basic to the Crop Insurance Program was that we wanted to be 
able to service the farmers.
    Mr. Rutledge. Efficiency is the primary goal of most of the 
15 companies that are left, and, actually, where we have--as a 
company, the bulk of our employees are in our IT department. It 
is a very complex program, as Mr. Garetson and Mr. Carden 
talked about. If there was any way that we could simplify it, 
make it work a little bit more smoothly, that would be 
beneficial. But it does take a tremendous number of people, not 
just from the company's perspective, but I think there are 
between 12,000 and 13,000 agents across the country. They are 
busy. Well, as you know, Ms. Gerdes had to go home for sales 
closing. We cannot really afford to lose any of the people we 
have and have this program continue as it is.
    Senator Grassley. Okay, my last question is about whatever 
we end up with a new commodity title, and I am not sure how 
much you have followed some of the proposals that have been 
floating around. I am not asking about any particular proposal, 
but if you are familiar with any of them in general, what 
aspects of the Revenue Assurance Program's proposals cause the 
crop insurance industry the most concern?
    Mr. Rutledge. As I tried to answer Senator Roberts when the 
clock went kerblooey, most of those proposals, as I understand 
them, do have benefits that are similar to crop insurance, and 
the concern would be that they would buy down coverage, buy 
less crop insurance. After having spent over 30 years building 
up the program to where it is now, that would seem like a step 
backward to me. So that would be our primary concern.
    Senator Grassley. Okay. I will yield back my time. I do not 
think I will be able to be here for the next panel. We have an 
Iowan on there. Would you welcome him for me?
    Chairwoman Stabenow. I absolutely will, yes.
    Senator Grassley. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Johanns.
    Senator Johanns. Madam Chair, thank you.
    Madam Chair, thank you so much for mentioning Ruth Gerdes. 
She is somebody I go to when I have questions about crop 
insurance. We had a roundtable with farmers, and just so we get 
the benefit of her time in Washington, I would ask that the 
statement she prepared be made part of the record.
    Chairwoman Stabenow. Without objection.
    Senator Johanns. Great.
    [The prepared statement of Ms. Gerdes can be found on page 
111 in the appendix.]
    Senator Johanns. Mr. Rutledge, let me follow right up with 
you because I think you are making a very, very important point 
here. Then I am going to, if I could, turn to--is it Mr. 
Garetson? Garetson. I want to kind of ask this question of both 
of you. As I visit with farmers in our State, and some other 
States, too, they talk about risk management in kind of a 
holistic sort of way. It is crop insurance. You know, they like 
their crop insurance. The message I get out of the forums I 
have done is do everything you can to protect what we have.
    But then they also do some work on the boards. They are 
sophisticated and smart people, and they understand this better 
than I do, to be honest about it. So they are also managing 
their risk there.
    Is that your experience, Mr. Rutledge, as you work with the 
industry, that there is kind of a multifaceted approach to risk 
management?
    Mr. Rutledge. Absolutely. The insurance portion is a very 
important part, but the revenue protection that is provided 
allows farmers to forward contract with minimal risk. There was 
a time when I think less than 5 percent of farmers had a 
marketing plan, and I think that number now has grown multifold 
with the ability to forward contract because they have the 
protection from the crop insurance policy. So it really does do 
far more than just pay for loss of bushels. It provides that 
flexibility to run your business the way you want to, to 
forward market, to have a marketing plan that fits your 
operation, and----
    Senator Johanns. The banker typically expects it, too.
    Mr. Rutledge. Absolutely.
    Senator Johanns. A banker is not going to loan a lot of 
money without you having some risk protection, a plan in terms 
of how you are going to deal with risk.
    Mr. Rutledge. Absolutely. I do not know that you could get 
a loan----
    Senator Johanns. Otherwise.
    Mr. Rutledge. Yes, without crop insurance. In earlier 
questions to Under Secretary Scuse, I think the question was 
asked about beginning farmers. They need a lot of money to get 
started, and without crop insurance, they would never be able 
to get a loan. You know, that would be primary, I think, for 
them as beginning farmers.
    Senator Johanns. Mr. Garetson, do you agree with Mr. 
Rutledge's assessment on this? Is this how you are managing 
your risk with your operation?
    Mr. Garetson. Yes, it is. I do agree with Mr. Rutledge, and 
it is exactly how we manage our risk. What the crop insurance 
revenue guarantees, it allows us to go out and forward contract 
a higher percentage of our expected bushels based off of our 
APHs, and with the assurance that if we have a crop failure or 
a hailstorm that hits half our farm and we lose bushels there, 
it would put us below our ability to deliver those bushels. We 
have got the crop insurance behind that to provide us with 
revenue to buy out of those contracts or to buy bushels to 
deliver in place of our own.
    Senator Johanns. Yes. Very, very important testimony, 
because it leads me to an observation. I have only got 35 
seconds left so I will not ask this in a question, but it leads 
me to an observation. Farmers tell me, ``Crop insurance is 
working. Please protect it.'' All of the ideas, then, about 
plussing it up or adding to it or whatever I think have a real 
risk for crop insurance. I think you could end up taking a very 
good product that farmers have learned to work with, with the 
crop insurance and marketing and working with their banker, and 
you literally could disrupt that balance. Like I said, I have 
run out of time so I cannot even ask you about that 
observation, so write me a letter and let me know what you 
think about that.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you. Thank you very much.
    Senator Klobuchar.
    Senator Klobuchar. Well, thank you very much, Madam 
Chairman and Senator Roberts. Thank you all for being here.
    As Co-Chair of the Congressional Farmer Co-op Caucus with 
Senator Thune, I was interested to hear more about the 
importance of crop insurance for farm co-ops, so I thought I 
would ask you that, Ms. Hills. Understanding that co-ops are as 
diverse as the farmers that they serve, how do you see crop 
insurance helping to mitigate the risk your farmer owners face? 
How does this benefit the strength of the co-op?
    Ms. Hills. Well, if we have crop insurance, of course, then 
we are able to survive from year to year, and it allows us to 
continue to be with the co-op.
    I am sorry. Could you kind of ask me that again? Then I 
could----
    Senator Klobuchar. Well, no, that is fine. It is just that 
I think people do not always understand that co-ops are very 
different depending on the farmers that they serve, the 
importance of farmers' co-ops, and the fact that crop insurance 
really helps you to mitigate the risk when you have--with the 
weather volatility, market volatility, whatever there is, crop 
insurance is especially necessary for smaller farmers that 
would join together in a co-op.
    Ms. Hills. Yes, it is.
    Senator Klobuchar. Okay. Very good. Thank you. Good answer.
    Then, Mr. Garetson, I thought I would ask you about 
precision farming, and in your testimony you talked about 
developments in precision agriculture. At our conservation 
hearing that we had back in February, there was a farmer from 
Minnesota who testified, and he talked about how the technology 
actually saves him money and produces environmental benefits in 
addition to saving money. How do you think we can encourage FSA 
and RMA to do a better job using data from precision 
agriculture to help increase the delivery efficiency of our 
farm programs?
    Mr. Garetson. Yes, on our farm we were early adopters of 
technology, and I believe with the communications available 
now, especially through wireless communication with cell phones 
or smartphones and then with the GPS reference technology, I do 
not think FSA, given the right steps, would have to do much of 
a measurement service anymore because on our farm we put in 
boundaries that we record with GPS locations that identify how 
many acres are within that field by crop. And----
    Senator Klobuchar. Could you just explain for the viewers 
at home--like 50 people--how you actually do this, like how you 
use the GPS technology?
    Mr. Garetson. On our equipment, tractors or sprayers or 
combines--or I have even adapted it to use in my pickup; some 
use it on their four-wheelers or ATVs--you have a receiver that 
receives signal from the satellites that are in orbit. 
Typically, there are 7 to 12 that you are getting a signal from 
which cross-references your position on the face of the Earth, 
and then it just records that position as you drive at whatever 
interval you want, if you want it every 1 second or half second 
or a tenth of a second. Then it has a program within it that, 
once you make that boundary or border, figures the area within 
that circle or rectangle or polygon or whatever shape your 
field is. So real briefly, that is how you make that map of the 
field, and when I take that into FSA and compare that to how 
they draw their maps out, a few times I am two-tenths too many 
acres or two-tenths too less. But I do not know that I have 
ever been more than half an acre just off of what I do versus 
what they come up with.
    So it can get real close and very accurate, and then with 
the technology, with cell phones, smartphones, or uplink with 
the satellites that are already communicating, I think we can 
get real-time data collection on whether it is bushels or acres 
or absolutely planting dates and crop.
    Senator Klobuchar. Right, so it just--I am going to move on 
to Mr. Carden here, but it just helps to make it more 
economical and do your smartest planting, I would guess, having 
that information.
    Okay. Mr. Carden, crop insurance is often compared to car 
insurance or home insurance when people who are not as familiar 
with it talk about it and are trying to estimate the cost it 
should take for private companies to deliver it. How does the 
delivery of crop insurance differ from the other types of 
insurance like car or home insurance? Then could you also 
answer the question about the volatility that we have seen in 
today's marketplace and how it has changed the relationship 
with the agents and the producers? Are you seeing producers 
significantly re-evaluating their risk?
    Chairwoman Stabenow. I will have to ask you to make that 
very short, please.
    Mr. Carden. Okay. Well, basically I think there is a great 
deal of difference between a comparison between crop insurance 
and auto insurance. Auto insurance is basically something you 
write once, and you simply renew it at its same level year 
after year in most cases. You may have a visit with your agent 
annually afterwards to look at what is there, but it is usually 
a pretty short meeting. At least when I meet with my auto 
insurance agent, that is the way it goes.
    With crop insurance, I meet with a grower at least--we have 
at least five contacts a year, and there is no way to get 
around that, no matter what. In most cases we have more than 
that. It just takes that much to keep up with what they are 
doing and make sure they are adequately protected and that they 
understand the protection that they have.
    Chairwoman Stabenow. Thank you.
    Senator Klobuchar. All right. Thank you. I will do the 
second question in writing.
    [The question of Senator Klobuchar can be found on page 243 
in the appendix.]
    Senator Klobuchar. Thanks.
    Chairwoman Stabenow. Thank you very much.
    Senator Lugar.
    Senator Lugar. Madam Chair, I want to ask a question of Mr. 
Rutledge, although others may have some more thoughts.
    On the Lugar farm in Indianapolis, Indiana, we have three 
basic situations: soybeans, corn, and hardwood trees. Now, last 
year, I purchased the 85-percent level of crop insurance, and 
that was a blessing because our corn was knocked over by very 
bad winds in one field, and we lost 50 percent of the crop, and 
we had prompt payment from the crop insurance people, for which 
we are grateful.
    But nothing happened to any of my trees, but you hear from 
time to time about the ash bore or at least in the case of my 
black walnuts some disease is coming close to us, so this has 
led me to wonder what I ought to be doing with regard to my 
trees. This is shared by other walnut growers throughout 
Indiana or other tree people with whom I visit.
    Let me expand that question and pick up Ms. Hills' thought. 
There are fruits and vegetables on many farms, and I think you, 
Mr. Carden, mentioned there may be 71 different types of crops. 
It is not clear at all to most of us how all of this can be 
covered. Some would say there are lots of complications--you 
did so in your testimony--about doing blueberries the same way 
that you do corn, for example. But if we are as a Committee 
trying to think of whole-farm insurance, whatever happens on 
the farm, how do we go about that as a practical matter? 
Senator Johanns has said you do not want to jeopardize a 
program that is working well, apparently, with the major crops, 
and I do not want to do that. At the same time I am impressed 
by constituents who really want to know if this is the way the 
farm bill is going, the end of various other situations, how do 
we provide a sense of whole-farm insurance in which something 
happens at the Federal level, but you can buy additional 
insurance for whatever your crop or your specialty may be? Do 
you have any thoughts about that, Mr. Rutledge?
    Mr. Rutledge. Senator, I know you can buy whole-farm crop 
insurance. I am not sure if your trees would be included in 
there, to be truthful.
    Senator Lugar. Probably not, but should they be? In other 
words, I have got a farm; I have got income coming from each of 
these situations. So that is very important to me to figure 
out, and so while we are writing a farm bill, I want to think 
about trees as well as blueberries and apples and whatever. I 
think we better think of all of this because we are in basic 
reform here, I think, in this farm bill. We are moving really 
toward the insurance and the liabilities that come whatever you 
do on the farm. What would you do, Ms. Hills, given your 
situation?
    Ms. Hills. Well, we only grow blueberries on our farm.
    Senator Lugar. Yes.
    Ms. Hills. So I can only speak for those?
    Senator Lugar. Are those insured?
    Ms. Hills. Yes, they are. They are insured through our crop 
insurance. We have an AGR 6575 policy and a CAT policy, so it 
is multi-peril. Whole farm, because we only grow blueberries, 
but if I had a farm that had multiple crops on it, I would 
probably want the ability to have insurance to cover all 
those--everything that brings me money on that farm.
    Senator Lugar. Is that doable given your experience as 
professionals in this business?
    Ms. Hills. I do not see why it could not be doable.
    Mr. Rutledge. If I may, the one difficulty with whole-farm 
insurance is the marketing aspect that we talked about with 
Senator Johanns. With enterprise units you have an entire crop 
covered, and you know exactly what you can market. You can do 
some of that with whole-farm insurance. But when you include 
crops where there is no reference prices and that type of 
thing, that impacts the marketing plans that you might have. So 
it is something that needs some work, I guess.
    Senator Lugar. So if we were writing the bill, we would 
need to find some reference of pricing for each of these 
situations. At least that would be one point, I suppose, to 
help you administer the payments and so forth.
    Mr. Rutledge. I think that is the case with a number of 
specialty crops, you need a reference price to provide revenue 
coverage, which crop insurance can do. You just need that.
    Senator Lugar. Thank you. Thank you all--yes, go ahead.
    Mr. Carden. Senator, I was going to say there is a product 
out there that RMA has called ``AGR,'' which is adjusted gross 
revenue. It is based on your revenue shown on your tax returns 
over the last 5 years. It is a product that they have not 
really expanded or ever utilized maybe as well as it could be. 
It is definitely only offered in a very limited area and a very 
limited basis. But that could be potentially an all-
encompassing thing because it comes right off the Schedule F.
    Senator Lugar. Total farm, total tax return.
    Mr. Carden. Total farm revenue, that is right.
    Senator Lugar. Thank you.
    Chairwoman Stabenow. Well, thank you all very much, and we 
will proceed to our third panel, unless Senator Nelson had a 
question for this panel. If not, we will proceed to our third 
panel. Thank you very much. This is very helpful. Thank you. We 
will ask our third panel to join us at this time.
    Well, good morning. We are very pleased to have you with us 
and, again, appreciate your staying an extra day to be able to 
be here for this very important testimony.
    I am going to ask Senator Nelson to introduce our first 
witness. I know Senator Johanns would also like to make a 
comment. So, Senator Nelson?
    Senator Nelson. Well, thank you, Madam Chairwoman. Before I 
begin, I would request unanimous consent that my introductory 
remarks for Ruth Gerdes, who was unable to testify during 
today's panel because of the hearing's changed date, be entered 
into the record as well.
    Chairwoman Stabenow. Without objection.
    Senator Nelson. Thank you.
    [The remarks of Senator Nelson follow:]
    Senator Nelson. Chairwoman Stabenow and Ranking Member 
Roberts, I have a particular honor and am very pleased today to 
introduce and welcome Steve Wellman, president of the American 
Soybean Association, to testify before the Committee this 
afternoon. Steve farms near Syracuse, Nebraska, where, in 
addition to soybeans, he grows corn, winter wheat, and alfalfa, 
and also manages a cow-calf herd.
    Since 2006, he has served the American Soybean Association 
in a number of roles. In addition to his working with ASA, he 
has been active with Nebraska's corn growers and cattlemen and 
has served as both president and vice president of his local 
cooperative. Through Steve's many leadership roles in 
agriculture, I have had the opportunity to work with him on a 
number of issues important to both soybean producers and 
Nebraska's other farmers and ranchers. I am confident that 
today he will provide a sound understanding of how farm 
programs work and the benefits of Federal crop insurance as a 
risk management tool, while laying out proposals on how the 
Committee can maintain a strong safety net which benefits 
farmers and rural communities.
    It is truly my honor today to welcome Steve and have this 
opportunity to introduce him as a Nebraskan. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Senator Johanns.
    Senator Johanns. Thank you, Madam Chair. Let me do two 
things very quickly.
    The first thing I would like to do is to acknowledge Pam 
Johnson who is here. Pam and I actually went to high school 
together in Osage, Iowa, where I grew up on a small dairy farm, 
and, Pam, if you are back there in Osage and they are 
wondering, tell folks I found work in Nebraska. All right?
    Chairwoman Stabenow. I am going to be asking for some 
private stories you can use along the way.
    Senator Johanns. Be careful, Pam.
    [Laughter.]
    Senator Johanns. Then I also want to add my words of 
welcome to Steve Wellman. Steve is a successful farmer near 
Syracuse, Nebraska. He really embodies what we love about 
values of rural America. Not only is he eyeball deep in 
managing the farm and doing the work necessary there, but he 
has been active in the Soybean Association and other community 
matters.
    I might also mention that Steve's daughter, Sarah, worked 
for me recently and just did a wonderful job.
    So, Steve, glad to have you here. I do a weekly media call, 
so I need to step out to take care of that, but thank you for 
this opportunity.
    Chairwoman Stabenow. Well, thank you very much.
    Now it is my pleasure to introduce Ms. Pam Johnson, and I 
know that you heard from Senator Grassley, who was here 
earlier, that he sends his best wishes and thanks, as well as 
Senator Harkin as well. It is great to see you again and to 
have you on the panel.
    Currently the vice president of the National Corn Growers 
Association, Ms. Johnson lives in Floyd, Iowa, where she and 
her husband raise corn and soybeans. She also manages a seed 
business and invests in value-added businesses such as ethanol 
and biodiesel. Mrs. Johnson also serves as director of the Iowa 
Corn Growers Association and is former chairwoman of the Iowa 
Corn Promotion Board. We are so glad you are here.
    I would like to now turn to Senator Klobuchar for the next 
introduction.
    Senator Klobuchar. Well, thank you very much, Madam 
Chairman. I am pleased to introduce a witness from my home 
State who is going to talk about his experience with crop 
insurance and farm safety net programs on his farm in 
Minnesota. That is Erik Younggren. He is a fourth-generation 
farmer in Hallock. Hallock is really far up north in Minnesota. 
It gets a little cold. He farms alongside his two cousins and 
his wife, Angela. Mr. Younggren raises a variety of crops, 
including wheat, sugar beets, and soybeans.
    On March 3rd, Mr. Younggren was elected as the president of 
the National Association of Wheat Growers. He has been an 
active member of the Minnesota Association of Wheat Growers, 
and he has represented his State on the Wheat Growers Domestic 
and Trade Policy Operations and Planning and Budget Committees. 
He is a graduate of Minnesota State University at Moorhead with 
a bachelor's degree in finance and a minor in economics.
    I want to thank Erik for being here today to testify.
    Chairwoman Stabenow. Great. Well, thank you very much.
    Next we have Mr. Jimbo Grissom. Mr. Grissom is the 
president of the Western Peanut Growers Association and has 
been farming since 1978--when you were 5 years old, right?
    [Laughter.]
    Chairwoman Stabenow. He has grown everything from peanuts 
to corn to cotton to wheat. He credits his wife for not only 
taking care of him and his family, but also being a good hands-
on business partner. We welcome you here today.
    Now I believe Senator Cochran had wanted to make the 
following introduction but is not here, and so I am pleased to 
be able to introduce Mr. Travis Satterfield. Mr. Satterfield is 
a partner with Satterfield Farms in Benoit, Mississippi. He has 
held multiple positions, including chairman and director on 
various farm policy task forces, Farm Bureau federations, and 
committees in Mississippi and Arkansas. We are very pleased to 
have you here with us today as well.
    Then we have Mr. Chuck Coley, and again--I just 
introduced--Senator Cochran, I do not know if you want to say a 
word. I just introduced Mr. Satterfield who is from your home 
State of Mississippi, and so I think I was just a minute ahead 
of your getting here, but certainly you are welcome to say a 
word of greeting.
    Senator Cochran. Well, I am happy to join you in welcoming 
the panel of witnesses. Their testimony is very important to 
our understanding of the challenges faced by producers, and I 
am glad you are including rice producers and a very fine 
representative from our State who is knowledgeable and 
successful in spite of the unusual challenges that that 
vocation presents.
    Thank you.
    Chairwoman Stabenow. Thank you very much.
    Last, but certainly not least, Mr. Chuck Coley is currently 
Chairman of the National Cotton Council of America in Vienna, 
Georgia. In addition, he is the president of Coley Gin and 
Fertilizer Company. Mr. Coley and his wife have a son and a 
daughter, and we very much appreciate your being on the panel 
today.
    We will turn first to Mr. Wellman. Welcome.

    STATEMENT OF STEVE WELLMAN, PRESIDENT, AMERICAN SOYBEAN 
                ASSOCIATION, SYRACUSE, NEBRASKA

    Mr. Wellman. Well, thank you, Madam Chairwoman and members 
of the Committee. A special thanks to Senator Nelson and 
Senator Johanns for the fine introduction.
    The American Soybean Association represents soybean farmers 
on national and international issues, and it is certainly my 
pleasure to appear before you all today to discuss to discuss 
commodity programs and risk management for the 2012 farm bill.
    First of all, I want to explain why an income safety net is 
essential for production agriculture. U.S. agriculture has been 
and remains based on the family farm. As mentioned, my farm 
consists of several crops. We have a fourth-generation farm, 
over 1,800 acres and a cattle herd. We do have one full-time 
employee.
    In 1995 and 1996, prices were relatively high, and Congress 
decided to phase out the target price program to reduce costs. 
Three years later, prices for most commodities fell sharply in 
the wake of the Asian financial crisis. By 2001, they were down 
by 45 percent, and Congress stepped in with emergency 
assistance. On my farm, during 1998 to 2003, Government support 
exceeded my net income from grain farming. Government support, 
including crop insurance indemnities, was vital to keeping my 
neighbors and myself in business.
    With one out of every 12 U.S. jobs tied to agriculture, a 
positive trade balance for ag products, renewable fuel 
production, plus the security of a large portion of our 
country's food supply grown here, farming is an essential asset 
for our Nation's economy and security. Government support for 
risk management and crop insurance programs are investments to 
protect our country's valuable asset. Farmers want to make 
their living from the market, not from the Government. We 
support policies that allow and encourage us to respond to 
market signals. We believe we provide our country and a growing 
world with an abundant supply of high-quality food, feed, 
fiber, and fuel at reasonable prices.
    When I started farming in 1981, in order to be eligible for 
payments, we were restricted to growing crops on acreage bases 
determined for each farm. This resulted in planting distortions 
and overproduction of crops already in surplus. It prevented 
farmers from responding to market signals that called for 
production of crops which did not have acreage bases, including 
soybeans.
    In 1996, Congress enacted the Freedom to Farm legislation. 
The Government safety net was decoupled from planting 
decisions, and producers were allowed to plant any program crop 
on their farm. The result has been a return to competitiveness 
and greater profitability for U.S. agriculture. Soybean 
plantings grew from 60 million acres in 1995 to 75 million 
acres in 2010. For soybeans, maintaining planting flexibility 
is of paramount importance.
    Now to ASA's position on completing a new farm bill in 
2012. We recognize that agriculture should do its fair share to 
lower Federal spending. We also recognize that cuts in 
commodities will come from elimination of the direct payment 
program and that existing programs will need to be 
restructured.
    ASA supports a revenue-based program that complements the 
existing crop insurance program. Losses that exceed a specified 
revenue threshold would be partially offset. This approach 
includes a single farm-level trigger under which farmers would 
be required to document losses on a commodity-specific basis, 
so payments would be made only when actual losses occur.
    While payments under this program would be tied to current-
year production, we believe it will not distort planting 
decisions and production. Documenting actual losses in order to 
receive revenue payments would be a deterrent to ``planting for 
the program.'' Additionally, using recent average prices to 
determine the revenue threshold would make the program 
responsive to market price movements over time. Also, revenue 
payments would be made on a percentage of actual revenue 
losses, thereby further limiting the possibility of planting 
distortions.
    We acknowledge that a revenue-based program may not be 
appropriate for all producers of certain commodities or in 
areas where yield variability is relatively low, so we support 
providing flexibility or alternative programs for these 
producers. However, they must not have the potential to affect 
planting decisions and reduce planting flexibility.
    ASA strongly supports the existing Crop Insurance Program 
as the foundation of risk management. Soybean producers 
actively participate in crop insurance and oppose any 
restructuring of the program or reductions in its baseline. 
Also, ASA opposes subjecting crop insurance participation to 
conservation compliance requirements.
    In summary, I emphasize the importance of completing the 
farm bill now, keeping crop insurance as the foundation for the 
safety net, and complementing it with a revenue program. Farm 
policy must maintain planting flexibility and limit the 
possibility of planting distortions. Allowing producers to 
respond to markets while managing risk has been the most 
valuable policy provided under the current farm program and 
must be maintained.
    I thank you for the opportunity and look forward to 
answering questions.
    [The prepared statement of Mr. Wellman can be found on page 
214 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Ms. Johnson.

 STATEMENT OF PAM JOHNSON, FIRST VICE PRESIDENT, NATIONAL CORN 
                GROWERS ASSOCIATION, FLOYD, IOWA

    Ms. Johnson. Madam Chairwoman, Ranking Member Roberts, and 
members of the Senate Ag Committee, on behalf----
    Senator Roberts. Mic.
    Ms. Johnson. On behalf of the National Corn Growers 
Association----
    Senator Roberts. It is still not on.
    Chairwoman Stabenow. The microphone is not on for some 
reason.
    Ms. Johnson. Mine says--can you hear me?
    Chairwoman Stabenow. There it is.
    Ms. Johnson. Madam Chairwoman, Ranking Member Roberts, and 
members of the Senate Ag Committee, on behalf of the National 
Corn Growers Association, I thank you for the opportunity to 
share our views today on the importance of risk management 
programs for family farmers.
    My name is Pam Johnson. I am a sixth-generation farmer from 
Floyd, Iowa, where I raise corn and
    soybeans with my husband and two sons. I serve as first 
vice president of the NCGA.
    When we farmers go to the field this year to plant, tend, 
and harvest a crop, we are putting many dollars, a whole year's 
work, and our entire yearly income at risk. Traditionally, we 
worry about the risks from drought, floods, plant disease, and 
pests, but now the risks are broader, deeper, and larger. We 
are all interconnected on a global scale. Risks to agriculture 
come from many unexpected and diverse places: international 
incidents, economic crises around the world, world trade 
policies, and the price of a barrel of oil. The list goes on. 
We may do everything right with the decisions that we make on 
our farm for management, but there are still years when we 
cannot cover the losses.
    These threats are hard on me, but they are even more 
devastating to young farm families like my two sons who are 
just getting started in agriculture. The ability to purchase 
Federal crop insurance and have access to flexible, revenue-
based risk management programs to mitigate these risks is even 
more critical today.
    The context for the 2012 farm bill and strong risk 
management is this: U.S. agriculture must be prepared to take 
on an even greater role in meeting growing demands of 
consumers, both here and abroad. Billions of people in the 
world are hungry, and the numbers rise. We simply cannot afford 
to underestimate these challenges as well as our ability to 
help respond to meet the needs for food and energy.
    NCGA has invested time and resources to develop and analyze 
concepts for a new farm bill that would help farmers in time of 
need and be a good investment for taxpayer dollars. So what did 
we learn? That risk management is priority number one and that 
Federal crop insurance is the cornerstone of a sound farm 
safety net for the future.
    Secondly, we recognize the need for a supplemental risk 
management tool to protect against multi-year revenue losses 
from adverse weather or price declines not adequately covered 
by crop insurance, such as happened in the 1980s farm crisis or 
the Asian financial collapse.
    NCGA has called for a transition away from direct payments 
to a revenue-based risk management tool that complements crop 
insurance. Our growers have decided that it is time to move 
toward a farm policy that better addresses today's production 
and volatile market risks. We support building on the revenue-
based program reforms that were adopted in the 2008 farm bill. 
In our view, we believe that the Aggregate Risk Revenue 
Management Program proposed by Senators Brown, Thune, Lugar, 
and Durbin builds on that reform to effectively address the 
risk management needs well into the future. ARRM would use crop 
reporting districts as the area to determine payments. Our 
analysis shows that using a crop reporting district would 
better serve farmers in their times of need.
    Some growers prefer having a trigger closer to the farm, 
but the tradeoff is lower price protection that would be 
necessary to meet budget constraints.
    While NCGA supports an area-wide revenue program, we 
realize that producers in every region of the country face 
different risks. We look forward to working with them and other 
commodity organizations to develop a revenue protection program 
for all areas of the country.
    There are certain things that the Federal Government must 
do for its citizens. Providing food security is one of them. 
Countries around the world understand the important role that 
agriculture plays in their economies. They, too, provide 
assistance to farmers when they need it and robustly invest in 
ag programs and research. The 2012 farm bill presents an 
opportunity to advance needed improvements in the commodity 
title that can work more effectively with a strong research 
crop--with a strong Federal Crop Insurance Program.
    NCGA appreciates the difficult task before your Committee 
to write a comprehensive and balanced farm bill, especially 
under the current budget situation. But we urge Congress to 
pass a farm bill this year.
    I thank you for your time today and your consideration of 
our policy recommendations.
    [The prepared statement of Ms. Johnson can be found on page 
148 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Younggren, welcome.

STATEMENT OF ERIK YOUNGGREN, PRESIDENT, NATIONAL ASSOCIATION OF 
               WHEAT GROWERS, HALLOCK, MINNESOTA

    Mr. Younggren. Madam Chairwoman, Ranking Member Roberts, 
and members of the Committee, thank you for the opportunity to 
address you today. I am Erik Younggren, a fourth-generation 
wheat farmer from Hallock, Minnesota. I also serve as current 
president of the National Association of Wheat Growers.
    We know you and your staffs have been working diligently 
since last fall to craft an appropriate and well-functioning 
2012 farm bill. Today I hope to share some of my experiences in 
working my family's farm as well as the National Association of 
Wheat Growers' afety net policy priorities.
    First and foremost, the Nation's wheat farmers call on you 
to reauthorize this legislation this year before the expiration 
of the current bill on September 30th. Our farmers will head 
into their fields to begin planting the 2013 crop as soon as 
August of this year. They need to know what the Federal farm 
safety net will look like to make appropriate business 
decisions.
    I am also here to reiterate a message you have heard for 
months and even today on this panel. We strongly oppose any 
reductions to the baseline available for the Crop Insurance 
Program. My farm's history shows how important crop insurance 
has become. We farm in the Red River Valley in the northwest 
corner of Minnesota. Our land is prone to frequent spring 
flooding, heavy thunderstorms, and late or early killing 
frosts. Our humid summers are also conducive to yield-robbing 
rains.
    Because of these factors, crop insurance has been an 
important tool over the decades. In 1985, my dad insured 65 
percent of his APH that would have paid a maximum of $115 per 
acre for a premium of $4.57. Comparatively, in 2011, I paid 
$11.40 an acre for coverage of $326 in revenue. Still, this 
left me with unprotected expected revenue of more than $220 an 
acre.
    During the mid-1990s, our wheat yields were hit a tragic 
blow with a disease called Fusarium head blight, commonly known 
as ``scab.'' Yields waffled between 15 and 25 bushels per acre, 
maybe up to 30, and we were thrilled to hit 40. Because crop 
insurance is based on historical yields, our insurance 
protection dropped to somewhere between $90 and $100 an acre.
    By the early 2000s, researchers had started to make headway 
on scab, but we were predominantly wet, so our yields continued 
to suffer. Insurance that provided $115 of protection in 1985 
shrunk to provide only $91 of protection by 2000. We started 
purchasing crop revenue coverage, and this allowed me to insure 
revenue for the first time, as opposed to just yield. Although 
this is a better tool, through the 2000s our crop insurance 
protection continued to decline while we fought to rid our 
insurance guarantee calculation of low yields suffered through 
the 1990s. Because of our crop rotation, we plant wheat only 
two or three times every 5 years. This means it can take 15 
years to get a low yield worked out of our APH calculation. 
Some well-timed disaster programs kept many farms in our area 
afloat through the low production years of the late 1990s and 
early 2000s.
    On behalf of the farmers in my area, I would like to thank 
the Committee members for creating revenue-based crop 
insurance. These products have evolved over time to provide 
economical options for the premium that is shared between 
farmers and the Nation's taxpayers.
    While our farm has benefited tremendously from the 
evolution of the Crop Insurance Program, the National 
Association of Wheat Growers realizes crop insurance by itself 
is not a fully functioning safety net. We recognize different 
production areas of the country rely on different farm 
programs. Therefore, we support multiple safety net programs, 
including a disaster program in Title I. As you modify Title I 
in the 2012 bill, we urge you to outline programs that follow 
these principles: they must be dependable and understandable 
for farmers and their farm partners; they must be affordable 
and defensible to the taxpayer; they must be defensible to our 
Nation's trading partners; and we ask you to ensure that 
spending within Title I, including funding for direct payments, 
remains in Title I.
    NAWG supports a revenue-based program modeled on ACRE and 
SURE, with an on-farm trigger and coverage by commodity on as 
many planted acres, versus base acres, as possible. We believe 
coverage close to the farm provides a more effective safety net 
for farms with losses than coverage at the State, crop report 
district, or county levels.
    We also ask you to ensure that any program changes do not 
affect planting decisions and allow producers planting 
flexibility, which has been a central tenet to the last three 
farm bills.
    On behalf of the Nation's wheat farmers, I appreciate your 
attention to my perspective on our Nation's agricultural risk 
management programs and that of the National Association of 
Wheat Growers. We are committed to working with you and the 
vast array of other stakeholders in the coming months as you 
outline a path forward through these serious and uncharted 
fiscal times. I am happy to answer any questions you may have.
    [The prepared statement of Mr. Younggren can be found on 
page 220 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    I just have to say as an aside, Mr. Younggren, that the 
very first bill I introduced in the House in 1997 as a freshman 
was on wheat scab. It was creating the research project that 
was developed, and then I had to explain to my constituents 
that my first bill was on wheat scab and explaining what that 
was. But I am very glad that we did that, and we have actually 
come a long way since then.
    Mr. Grissom, welcome.

 STATEMENT OF JIMBO GRISSOM, PRESIDENT, WESTERN PEANUT GROWERS 
                  ASSOCIATION, SEMINOLE, TEXAS

    Mr. Grissom. Good morning, Madam Chairman, Ranking Member, 
and Committee members. Thank you for the opportunity to be here 
today and speak on behalf of the three peanut-growing regions: 
the Southeast, the Virginia-Carolinas, and the Southwest. I am 
here to testify as a proponent for crop insurance.
    From recent firsthand experience, I can say without 
reservation that I would not be able to farm this coming year 
if it were not for the availability and purchasing of a revenue 
insurance policy on cotton that I planted last year. This type 
of revenue insurance policy is not the only risk management 
tool that is needed by any means, but it is necessary and a 
valued tool.
    As you are aware, the Southwest suffered from one of the 
worst droughts in our history. In West Texas, in the area in 
which I live and farm, for the entire year I received 1.2 
inches of rain on my farm, and it fell two-or three-tenths of 
an inch at a time.
    In addition to the drought, we had extreme winds and 
excessive heat throughout the 2011 growing season. Winds of 20 
to 40 miles per hour were almost a daily event in the early 
growing season, plus there were several days on which the 60-
mile-per-hour winds were sustained.
    We had 131 days with temperatures that were 90 degrees or 
higher. Consistent high temperatures and no humidity will cause 
peanuts to quit producing. Mine and many other peanut yields 
were cut by two-thirds, with fields normally producing 5,000 
pounds per acre only yielding 1,700 pounds. Some crops appeared 
or looked good, but when pulled up there was nothing there to 
harvest.
    I am a peanut farmer, a third-generation peanut farmer. It 
is the commodity that I identify myself with as to what I farm. 
I would like to be able to continue to farm peanuts and pass 
the legacy on to my children, as my father did for me.
    Peanuts are also a healthy treat, providing consumers with 
one of the cheapest sources of protein available. To keep 
producing peanuts, there is no doubt that we need to improve 
our risk management tools, starting with the need for a viable 
insurance program through RMA.
    We need to have a revenue insurance policy similar to that 
which is currently available to other commodities. In the past, 
we have been told we could not have a policy like other 
commodities because the price of peanuts is not established by 
a futures market or a futures contract. We researched the 
possibility of our commodity being traded on the futures 
market, but were told that peanuts were too thinly traded so it 
was not possible.
    We accepted this until 2-1/2 years ago when growers from 
across the Nation began working with RMA and private industry 
to develop a pricing mechanism and a peanut revenue policy. The 
good news is that we have found a pricing mechanism. Industry 
experts believe the Rotterdam price offers the best equitable 
solution to develop a revenue insurance program. We will be 
submitting the final proposal to RMA the first part of April.
    What we are asking for in the next farm bill, since most of 
the commodity options that are being discussed this year seem 
to be based on the existence of revenue crop insurance as a 
foundation of the policy, we solicit your support for the 
proposal we are submitting to RMA, which uses the Rotterdam 
price. It is critical that we get a viable peanut revenue 
insurance program in place for the 2013 crop. We also ask that 
the relative price for all four peanut varieties be adjusted 
from the Rotterdam price.
    In addition to these new improvements in peanut revenue 
crop insurance, we need to provide peanut farmers with a 
producer's choice between a countercyclical type program with a 
$534-per-ton target price and a $355-per-ton marketing loan, or 
a new revenue program based on the Rotterdam price with a $355-
per-ton marketing loan.
    We also ask the Agriculture Committee to continue all other 
elements of the peanut title from the 2008 farm bill.
    We thank you for your time. We look forward to working with 
the Committee to fix the peanut crop insurance this year and at 
the same time craft a new peanut program that will work for all 
peanut growers.
    Thank you.
    [The prepared statement of Mr. Grissom can be found on page 
135 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much, and we look 
forward to working with you on this.
    Mr. Satterfield.

  STATEMENT OF TRAVIS HENRY SATTERFIELD, PARTNER, SATTERFIELD 
  FARMS, BOLIVAR COUNTY, MISSISSIPPI, ON BEHALF OF U.S. RICE 
         PRODUCERS ASSOCIATION AND USA RICE FEDERATION

    Mr. Satterfield. Chairwoman Stabenow, Senator Roberts, and 
members of the Committee, thank you for holding this hearing. I 
appreciate the opportunity to offer the perspective of 
America's rice producers to you.
    My name is Travis Satterfield. I am a rice, corn, soybean, 
and wheat producer from Benoit, Mississippi, and I have been 
farming now for 42 years. I serve as an officer in a number of 
farm groups, including the Mississippi Rice Council, the 
Mississippi Farm Bureau, and the Delta Council.
    Rice is produced in 10 States and has a presence in 23 
States where we contribute to the economy and jobs, including 
$34 billion in annual economic activity and supporting 128,000 
jobs. We export 40 to 50 percent of our crop each year. That 
helps our agriculture ease part of America's mammoth trade 
deficit. Rice is good for the environment, creating a habitat 
for millions of migratory birds, and rice is good for your 
health as recommended by the Federal Dietary Guidelines.
    Last year, we as producers spent $320 billion in 
communities across the country to produce $410 billion in farm 
goods, and as Senator Roberts has spoken many times about how 
important agriculture is to national and global security, with 
the population expected to surge to 9 billion in just a short 
while, farm policy is important for all these reasons, plus 
some others. Without U.S. farm policy, American producers would 
be hurt by global markets, markets distorted by high foreign 
subsidies and tariffs that two separate studies show are 
sharply increasing even as funding for U.S. farm policy sets 
record lows.
    U.S. farmers and ranchers are locked out of markets 
promised to us under trade deals passed. We are locked out 
under the very terms of these same deals. We are even locked 
out by our own Government when it prohibits us from selling 
food to another country. U.S. farm policy has operated under 
budget for over a decade and has been cut by about $18 billion 
and today accounts for only about one-quarter of 1 percent of 
the total Federal budget. Meanwhile, American consumers are 
spending a smaller percentage of their hard-earned disposable 
income on groceries that are cheaper than anywhere else in the 
world.
    We in agriculture appreciate what our congressional leaders 
were able to accomplish last fall. The amount of deficit 
reduction agreed upon in the super committee process was 
significant, while still providing amounts necessary to develop 
a comprehensive farm program.
    I want to express our gratitude for the 2008 farm bill and 
for standing by it against heavy headwinds, and we thank you.
    Looking ahead for the 2012 farm bill, I think rice farmers 
feel disadvantaged because of one component of the current U.S. 
policy that has effectively worked for rice is the direct 
payment, and that is apparently going away. Rice farmers 
strongly support existing farm policy, and our preference is 
for a proportional reduction in existing policy. However, we 
understand that the existing political climate is not conducive 
to that policy option. We wish that crop insurance worked 
effectively for rice, and many in our industry have been 
working for 4 years trying to make this happen. Currently we do 
not have an effective policy.
    So what are we looking for in a farm bill? Well, for one 
thing we would like very much the ability for any farmer to 
have options to choose from a menu of risk management tools 
that will work best on addressing real perils that he faces on 
his own farm. The other thing that we think is incredibly 
important is to be sure that the options out there have price 
protection that is meaningful to today's cost and price 
environment. This is what farm bills are for.
    Although I do not know all the details of the 2011 package 
developed by the Ag Committee, I think the reported framework 
is about right. Give producers a choice. Help producers deal 
with prolonged price losses and that uninsured deductible. Push 
to make crop insurance work for all of us, and then hope like 
heck that we have a healthy farm economy that we will not need 
any of that.
    I think we need a 5-year farm bill in 2012. I believe that 
the political environment makes it a tall order. But if we in 
agriculture on and off the Hill can manage to come together on 
a bill, that would at least give us a fighting chance.
    Thank you for the opportunity to offer my thoughts.
    [The prepared statement of Mr. Satterfield can be found on 
page 186 in the appendix.]
    Chairwoman Stabenow. Thank you very much, and we look 
forward to working with you.
    Mr. Coley.

 STATEMENT OF CHUCK COLEY, CHAIRMAN, NATIONAL COTTON COUNCIL, 
                        VIENNA, GEORGIA

    Mr. Coley. Chairwoman Stabenow and Ranking Member Roberts--
--
    Senator Chambliss. Madam Chairman?
    Chairwoman Stabenow. Yes, Senator Chambliss?
    Senator Chambliss. Since I just walked in, can I say a word 
about my good friend, Mr. Coley?
    Chairwoman Stabenow. You may go right ahead.
    Senator Chambliss. Chuck Coley is a dear friend of mine, 
has been for many, many years. He is a farmer in the middle 
part of our State, operates a gin in Vienna, Georgia. Nobody 
could be more appropriate to be before our Committee today to 
talk about cotton and other related issues relative to Southern 
crops. His son actually was on my staff during the last farm 
bill, so we took advantage of Chuck's expertise then.
    So I am very pleased to have him here today making a 
presentation to the Committee. Thanks, Chuck.
    Mr. Coley. Thank you, Senator Chambliss.
    Chairwoman Stabenow.and members of the Committee, I want to 
thank you for holding this hearing and for allowing me to 
present testimony on behalf of the U.S. cotton industry. My 
name is Chuck Coley, and I am a farmer and ginner from Vienna, 
Georgia. We have submitted detailed written testimony, so I 
will use my limited time to express our industry's strong 
support for a balanced, predictable, and sustainable commodity 
policy that allows farmers, their bankers, and downstream 
processors to manage risk over which we and they have little or 
no control.
    We also join the other commodity and farm groups in 
respectfully urging you and your colleagues to be as 
expeditious as possible with this farm bill.
    As most of you know, Texas, Oklahoma, and parts of Kansas 
continue to experience a prolonged drought so severe that even 
operations with irrigation have been unable to produce crops. 
Fortunately, those producers have had access to crop insurance 
products which will enable them to preserve sufficient 
resources to plans and harvest crops when the drought finally 
breaks.
    I can cite the specific example of former Council Chairman 
Woody Anderson, who farms in Colorado City, Texas. Woody has 
invested in drip irrigation, biotech, and precision ag 
equipment. Even with that investment, he was unable to harvest 
a single acre of cotton due to the drought. Without crop 
insurance and other assistance, he would not be able to 
continue to operate his third-generation family farm.
    The availability of effective risk management tools like 
crop insurance is important, even in so-called normal years, to 
provide tools that underpin the producers' ability to invest in 
inputs, technology, and equipment necessary to produce a market 
crop at a price and quality that allows the U.S. to be the most 
reliable cotton producer in the world.
    Weather and other uncontrollable risks are one of the main 
reasons the council supports the development of a revenue 
insurance policy that complements current insurance products. I 
farm with my son, and I own and operate a cotton gin which I 
manage with my wife. As a ginner, I am responsible for 
preserving the value and quality of the cotton produced by my 
customers. I also assist them in marketing the crops. The 
increasing volatility of the commodity markets, particularly 
cotton, has made the risk of marketing the crop incredibly 
challenging. Even those of us who utilize futures markets and 
devote significant time to studying markets find market 
volatility increasingly difficult to manage, and the expenses 
associated with hedging drains our capital resources.
    I would also add in the case of cotton that the traditional 
marketing assistance loan, set well below the market, provides 
important collateral for production loans and allows orderly 
marketing with minimal net cost to the Government and no 
disruption of market signals.
    The farm bill is also important to U.S. textile 
manufacturers who purchase nearly 100 percent of the cotton 
they process and the cotton products from U.S. farmers. The 
ability of U.S. growers to invest in the varieties, technology, 
and equipment necessary to produce a top-quality cotton enables 
our yarn spinners to compete on price and quality in world 
markets and to provide top-paying manufacturing jobs.
    The U.S. cotton industry recognizes that future farm policy 
must fit ever-shrinking budget parameters. In addition, I want 
to emphasize that the U.S. cotton industry is committed to 
working with Congress and the administration to find a 
permanent resolution to the longstanding U.S.-Brazil WTO case. 
We have proposed a risk management product that significantly 
changes the structure of the cotton program and is estimated to 
significantly reduce outlays compared to previous years. It is 
also a 30-percent reduction compared to extending the existing 
cotton program. The changes are substantial and will require 
adjustment in every segment of the cotton industry, but they 
are necessary for us to move forward.
    I want to thank you today for your attention and the 
consideration of my remarks. I look forward to answering any 
questions you have about my testimony or the cotton industry. 
Thank you.
    [The prepared statement of Mr. Coley can be found on page 
98 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much to each and 
every one of you.
    Mr. Coley, let me follow up on your testimony because, of 
course, cotton is in a unique position because of the WTO case 
that we lost to Brazil. So I wonder if you might speak a little 
bit more from your perspective about why the proposal from the 
cotton growers--and we very much appreciate your working to 
come up with something very important to us in our process last 
fall. But why do you believe that this achieves the goal as it 
relates to the WTO case?
    Mr. Coley. The WTO Brazil case was in two parts: the Export 
Credit Guarantee Program and the Upland Cotton Program. Our 
proposal, STAX, the insurance product, makes changes to our 
marketing loan and the countercyclical payment. It would 
eliminate the target price and introduce a formula that would 
allow the marketing loan to adjust lower at times of low 
prices. After accounting for the impacts of deficit reduction 
and baseline funding, the industry has proposed a revenue 
insurance product as a replacement for the DCP and ACRE 
program.
    As part of the WTO case, Brazil challenged the insurance 
program for cotton, but the WTO panel did not find any fault 
with the insurance programs in terms of distorting production, 
trade, or price.
    STAX is only triggered by a loss in revenue, and support is 
established and based on the current prevailing futures market. 
The product does not provide support above the market but 
simply allows the producer to insure a portion of the expected 
market returns.
    If the provisions of this plan of STAX was in the marketing 
loan adjustments in the year 1999 through 2005, the years in 
question with the WTO case, we would have had a 60-percent 
reduction in support in the programs that were deemed to be 
economic injury by the panel.
    We understand the Framework Agreement between the U.S. and 
Brazil calls for resolution of the dispute as part of the 
development of the 2012 farm bill. Our proposal addresses 
cotton, but not the findings regarding the Export Credit 
Guarantee Program, and we look forward to working with Congress 
and the Committee to resolve this dispute.
    Chairwoman Stabenow. Okay. Thank you very much.
    Mr. Younggren, in talking about managing risk, why is the 
wheat growers' proposal structured around planted acres rather 
than base acres? Could you speak a little bit more about that?
    Mr. Younggren. We believe that what we have backed would 
help farmers that have an actual loss on what they are actually 
growing, and we know that base acres were set in the mid-1980s, 
and crop rotations and plantings have changed significantly 
since then.
    Chairwoman Stabenow. All right. Thank you.
    Mrs. Johnson, the corn growers have really led the way on 
our revenue program, and I wonder if you might speak a little 
bit more about why you believe that a supplemental revenue 
program is needed that goes beyond crop insurance.
    Ms. Johnson. Well, as we all heard this morning, we pretty 
much agree on the cornerstone and the foundation should be crop 
insurance. But we found through our research that there are 
certain times when crop insurance does not cover a lot of the 
losses, and those times happened back in the 1980s farm crisis 
or in the financial collapse.
    When a farmer needs more than 1 year's snapshot of what is 
going on in the marketplace and with a revenue-based risk 
management program you have a 5-year Olympic average to look at 
what is going to happen with those losses to revenue, and it 
gives the farmer a chance to adjust to those downward trends, 
and especially if you are looking at multi-year rental 
agreements or purchases or investments on your farm.
    Chairwoman Stabenow. Thank you.
    Mr. Wellman, could you talk a little bit more about how we 
can provide price protection without creating planting 
distortions?
    Mr. Wellman. Yes, thank you for that question. We believe 
that a safety net program does need to protect against price 
declines, but it also needs to allow for planting flexibility 
and not distort planting decisions. We have seen programs in 
the past that have been tied to target prices with the results 
of distorting planting and plantings taking place for the 
program and not for the marketplace.
    A revenue program with a rolling average of actual revenue 
would reflect the current marketplace and the current price 
structure and would have a minimal effect on any planting 
distortions.
    Chairwoman Stabenow. Great. Thank you very much.
    Senator Roberts.
    Senator Roberts. Thank you.
    Mr. Younggren, we are going to be working on a yield plug 
kind of proposal to help your situation with the lower yields 
due to the yield loss. We did a lot of work on that when we 
submitted our first proposal to the super committee, which was 
not very super, but at any rate, I wanted to let you know that.
    There seems to be this myth floating around that if we just 
eliminate the direct payments, conservation compliance 
mysteriously disappears as well. In reality, we know that 
conservation compliance can be attached to any title and farm 
program, and it is also attached to disaster programs and 
conservation programs like EQIP. It seems very thorough to me.
    Do you think that conservation compliance is working? Do 
you believe that we need to add conservation compliance to even 
more programs or specific situations in regards to a farming 
operation?
    Mr. Younggren. Yes, I agree with what you said. 
Conservation compliance is already tied, could be continue to 
be tied to Title I programs. We already have the conservation 
title with EQIP and those things, so we believe that what is 
happening now is very sufficient.
    Senator Roberts. Mr. Grissom, I do not know whether we sent 
that trouble down south or whether you sent it up north, but, 
boy, we sure do not want to go through that again.
    Mr. Grissom. No, sir.
    Senator Roberts. Thank you for your very graphic 
description of what happened to your industry. I know that you 
are not getting much help from the countercyclical program. I 
know certainly of your interest in a target price program, but 
let me just ask if you believe that a revenue crop insurance 
program would help you improve your risk management strategies.
    Mr. Grissom. Yes, sir, it would. In West Texas, sure 
enough. We compete with cotton acres, and without a crop 
revenue type insurance program, peanuts have to compete with 
cotton. When you go to your banker and you ask for a loan to 
farm, the first thing they ask is, ``What is the safety net, 
peanuts versus cotton?'' Some people have been turned down.
    Senator Roberts. Explain the Rotterdam situation to me 
again.
    Mr. Grissom. The Rotterdam price is a methodology used to 
determine peanut prices, and it is the same as when it was used 
by the USDA and AMS, when they were reporting a U.S. shelled 
price for peanuts. It was a very good price that was used, even 
USDA used this price, and that was something that we reflected 
back upon, along with Dr. Stanley Fletcher who worked on it for 
the presentation to RMA in April.
    Senator Roberts. So you are going to be presenting that to 
RMA in April?
    Mr. Grissom. Yes, sir.
    Senator Roberts. Well, I hope we can expedite that, and I 
hope we can be of help to you.
    Mr. Grissom. Thank you.
    Senator Roberts. That would be extremely helpful in solving 
a lot of problems.
    Madam Chairwoman, I have a couple of questions for Mr. 
Satterfield, but I can ask those for the record.
    [The questions of Senator Roberts follow:]
    Senator Roberts. I did want to thank Mr. Coley. I am 
searching here for his son's name who used to work for us. I am 
sure that Saxby will be able to say that. But thank you for 
his--Matt, yes, Matt Coley. What a great young man, and thank 
you so much. Thank you for being so proactive in tackling all 
the challenges we face. Cotton led the way. You have sent a 
real message to the rest of the commodity groups and the farm 
organizations. You have already explained why you went from the 
commodity program to the Crop Insurance Program and the WTO 
situation, so thank you so much for your testimony, and for 
Matt.
    Chairwoman Stabenow. Okay. Thank you very much.
    Senator Chambliss.
    Senator Chambliss. Thanks, Madam Chair. You are right. I 
was talking about Matt earlier there, Mr. Ranking Member, and 
he is a good young man, and he has made Chuck a granddaddy, 
too, which is more significant than working on the farm bill. 
We just want to make sure that young man still has a job after 
this farm bill is completed and he can provide for that little 
baby.
    Mr. Younggren, in your testimony you stated that the 
Countercyclical Price Program has been rendered largely 
ineffective due to a target price for wheat that is far below 
the cost of production and it really has not been triggered in 
10 years or so. Would an updated target price that reflects 
current market conditions and cost of production make it more 
effective, in your opinion?
    Mr. Younggren. We would be concerned about the planting 
intentions and how the other target prices are set as well.
    Senator Chambliss. Well, is that a yes or no as far as 
making it more effective?
    Mr. Younggren. Yes, it would probably make it more 
effective.
    Senator Chambliss. You also recognized in your testimony 
that different production regions of the country rely on a 
variety of farm programs to protect the safety net, and you 
just alluded to that. Do you think that a producer choice 
between a Countercyclical Price Program and a Revenue 
Protection Program would address regional differences?
    Mr. Younggren. A choice between the Countercyclical Program 
as we have now or a revenue----
    Senator Chambliss. Well, basically something similar to----
    Mr. Younggren. Yes, we are interested in the revenue 
programs that work off of crop insurance. We feel that there 
are some holes in crop insurance that the revenue program would 
fill.
    Senator Chambliss. Okay. Mr. Coley, do any of the proposals 
proposed by the other commodity groups or members provide an 
adequate safety net? Do they seem to be configured to work 
better for particular commodities rather than to treat 
everybody equitably?
    Mr. Coley. Senator, other revenue products that are offered 
will not work for cotton because the Olympic average prices do 
not offer an effective safety net for cotton due to the fact 
that we had extreme prices and yield and variations in the 
calculated years. It would reduce the budget baseline, as I 
have said. A reserve product requires a producer's premium, and 
using current crop year prices and futures market leads to a 
more effective and a more bankable safety net for our cotton 
producers.
    Senator Chambliss. Mr. Grissom, apart from the improvements 
you listed for crop insurance, you said you would like 
producers to have a choice between a revenue program and a 
countercyclical-type program, some sort of price protection 
program. Can you amplify on that a little bit and tell us how 
you came up with that conclusion?
    Mr. Grissom. Well, we as the industry got together on a lot 
of these proposals and this is one that was agreed upon. One of 
the reasons for raising the target price to $534, is due to the 
cost of production. Cost of production in peanuts has grown so 
much since 2008, and we were just wanting it to be an either/
or, alternative with a revenue type program for peanuts as the 
options.
    Senator Chambliss. Do you feel like that kind of 
flexibility will give peanut farmers the opportunity, in Texas 
versus Georgia or Arkansas versus South Carolina, the 
opportunity to sit down with their banker and figure out, as 
you said earlier, what is the best proposal for me to be able 
to repay my loan?
    Mr. Grissom. I think it would be very good when you have 
the choice, a farmer is better off in all growing regions, 
whether it is in the Southeast or whether it is in the 
Southwest.
    Senator Chambliss. Okay. You also mentioned that you grow 
other crops, cotton in particular, I think, and I recognize you 
are here to represent peanuts, but do you believe providing 
this producer choice idea and making that available to other 
commodities is a good direction to go in?
    Mr. Grissom. Yes, sir.
    Senator Chambliss. Okay. Ms. Johnson, you stated in your 
testimony that a farmer who suffers a complete yield loss will 
not receive a payment under a price-based program that is tied 
to current production. Now, doesn't the current Crop Insurance 
Program cover yield loss?
    Ms. Johnson. The current Crop Insurance Program does cover 
yield loss, and if I might add, our position of why we support 
the revenue program is I have lived through a time of farm 
bills when we have had countercyclical payments and target 
payments, and the question is for all of us, I think, how do 
you set a meaningful target price that provides a safety net 
and then does not yet cause planting distortions. I think I 
have heard some of that up and down the table, and I believe 
what I hear is that what we are all in support of and I think 
the general consensus is we are looking to expand those revenue 
management programs that would be more effective for each crop 
that sits at this table.
    Senator Chambliss. Thank you very much.
    Chairwoman Stabenow. Thank you.
    Senator Cochran.
    Senator Cochran. Madam Chair, we appreciate your leadership 
on our Committee, and I think the presence of this panel 
illustrates how complicated and challenging the writing of a 
farm bill is going to be for this Committee and working with 
our colleagues over on the House side to resolve differences. I 
think it is very valuable for us to have the benefit of your 
observations here. This panel is experienced and involved in 
agriculture, production agriculture, and so the writing of a 
farm bill is really a sink or swim proposition here. If we make 
a mistake, we really hurt people, and we hurt our economy, and 
we cause disruptions in the job market and labor market. So it 
is a very serious undertaking.
    I think that is another reason why we have seen over the 
years a lot of transition in agriculture, particularly in the 
Deep South. When I was growing up, cotton was a very important 
crop for my grandparents, my mother's parents, on their farm 
near Utica, Mississippi. Over time the family got out of the 
row crop business except for gardens and truck farming to a 
small extent. We went and borrowed some money and bought calves 
to put out on that nice fertile soil and grow rye grass and 
learn to do what you have to do to be in the cattle business. 
It took us about 10 years to get out of the cattle business. 
Some of you may have had similar experiences in the Deep South.
    But we are going to look at what you have suggested to us, 
the entire panel. You do not agree among yourselves on 
everything. We noticed that, and that is natural. We benefit 
from the broad, wide range of diversity that this panel 
represents.
    So I just want to thank you and assure you that we are 
going to be very careful and take care in the drafting of a 
farm bill. We will continue to depend on your reactions as 
challenges during that process develop.
    Thank you very much.
    Chairwoman Stabenow. Senator Boozman.
    Senator Boozman. Thank you, Madam Chairman, and we 
appreciate you all being here. I think one of the concerns I 
have is that we have heard from the administration and ag has 
kind of taken it on the chin the last couple years in doing 
their part to help us with the financial situation we are in. 
One of the concerns I have--and you might want to comment on 
this just with your own personal stuff--is if we go forward 
with draconian cuts, what does that do to the price of food? We 
are so blessed with the country that we are in where food is 
very affordable as compared to the rest of the world. My 
concern is, what does that do to all of us, but specifically 
single moms, people on fixed incomes and things where they 
cannot keep up.
    So how will that affect your--do you have any thoughts 
about the potential for that? Do you see that happening with 
significant decreases in the safety net? What will that do to 
the price of food, the price of the things you produce? Does 
anybody want to tackle that? Yes, Ms. Johnson.
    Ms. Johnson. Well, not just by fortune, but those of us at 
this table that represent many commodities as American farms 
have been able to be successful because we have been on the 
cutting edge, whether it is technology or genetics or whatever 
helps our industry, and also what the Government helps us do 
that we cannot do individually on our farm.
    So in order to be the most productive, competitive farmer 
in a changing global marketplace, I think you have hit the nail 
right on the head.
    Senator Boozman. Very good. Again, somebody can jump into 
this. Understanding the significant differences in production 
costs, practices, and yield variability across different crops 
and regions even within crops, do you feel like there is a 
widespread recognition that trying to force a one-size-fits-all 
approach to farm policy will leave some producers in some 
regions without the effective risk management tools that you 
need in order to compete in today's environment? Now, that is 
one you can sink your teeth into. There have been lots of 
comments.
    Mr. Wellman. Certainly there is a lot of diversity here, 
but we do have some common things that we definitely agree on. 
I think another common thing that really has not--it has been 
mentioned, but the current situation with target prices where 
they are now really give us no revenue protection at all 
compared to the pricing situation, our market prices and the 
cost of production, the current cost of production. So that, we 
also share that same situation, too.
    To address that, we may have to look at alternatives in 
different types of programs that will suit the needs of our 
producers across the board. But I think we also will agree that 
we want to maintain that planting flexibility to react to the 
marketplace and not distort planting decisions based on a 
Government program.
    Specifically for soybeans, we have seen global consumption 
of soybeans increase 152 percent since 1990, so the ability for 
the U.S. farmer to be able to react to that global consumption 
and global demand has been very important. We would hate to see 
the soybean industry here in the United States, if we could not 
have reacted properly to that market demand and that production 
would have ended up in other areas of the world.
    Senator Boozman. Does anybody else want to jump in on that? 
Mr. Satterfield.
    Mr. Satterfield. Senator, I thank you. As has been 
testified here, we all know that there is a great diversity in 
agriculture in this country. We have different crops. We have 
different farming practices. We have different rainfall 
seasons. We have a lot of variables. So I think it is very, 
very difficult to have one program that fits everybody. I 
think, as I alluded to in my testimony, we need a program that 
is meaningful, financially meaningful, to the producers, and I 
think the best way to do that is have that section of the 
country or that group or that commodity to craft a program that 
best fits their needs. It may not be the best for everybody, 
but it fits----
    Senator Boozman. Why does----
    Mr. Satterfield. --a certain segment.
    Senator Boozman. I do not mean to interrupt, but why does 
crop insurance not work for rice as well?
    Mr. Satterfield. Well, crop insurance basically--the first 
component, I think, in protection of crop insurance is yield. 
We do not have a variability in yield that you have in other 
crops. In an irrigated crop, our yield is fairly constant. So 
our main support from a Crop Insurance Program would have to be 
a revenue type of program which would not be so much a yield 
protection, but as a price component. That is why we have 
grappled with trying to find a Crop Insurance Program that 
would fit in our rice situation where you have a pretty 
standard yield. But variability in price is a big factor.
    Senator Boozman. Good. Thank you. I am going to get gaveled 
on by the Chair, so thank you.
    Chairwoman Stabenow. Thank you very much, and I want to 
take the prerogative of the Chair and take a minute from 
Senator Cochran that he did not use, Mr. Satterfield, to ask 
you a question also as well, because in your testimony you 
described the different needs for rice growers in different 
regions, and I have had different conversations. Down in 
Louisiana, folks said, ``Just open up Cuba and we are fine.'' 
Our in California, other rice growers are looking for a county-
level revenue program. So I am wondering why that approach does 
not work for rice growers in other regions.
    Mr. Satterfield. Well, along that line, we have a great 
rice--consumer of rice in your State, the Kellogg company.
    Chairwoman Stabenow. Absolutely.
    Mr. Satterfield. We appreciate their interest in rice very 
much.
    Chairwoman Stabenow. Absolutely.
    Mr. Satterfield. We need another Kellogg's. That would help 
us.
    The big problem in rice is that basically in the U.S. we 
have two types of rice: we have long grain, which, as you 
mentioned, Louisiana and the mid-South are basically the 
producers of long-grain rice; California producers have medium 
or short grain, which is almost--they are different types and 
they go into different markets. California, their market, the 
medium-grain rice has a more stable type market, and it is not 
as--the market for long grain has a lot more flexibility. It 
changes quite a bit. So in order to craft a revenue program, 
you need a constant price in situations that you do not have in 
long-grain rice as you do in medium grain. So it is a little 
different. Although it is the same commodity, it is a different 
type, and there are different marketing situations. That is why 
we have some differences of opinion in the rice industry.
    Chairwoman Stabenow. Well, thank you very much, and thank 
you to each and every one of you. This is very important input 
we are receiving, and, we are moving forward on the farm bill 
and the commodity title. We would love if everyone at this 
table and every other commodity was able to come together on 
one approach. We know the challenges related to that and the 
flexibility that we need. But we are moving forward, and so we 
welcome and need your input as we do that. Our obligation is to 
move forward and make sure farmers have the certainty they need 
in the marketplace, and we are looking forward to working with 
you to do that. Thank you very much.
    Last, but absolutely no least, our fourth panel, we are 
asking our fourth panel to come forward, as they say, batting 
cleanup, very important leaders that will provide a summary 
today for us.
    [Pause.]
    Chairwoman Stabenow. Well, I was going to say, ``Good 
morning,'' but it is now afternoon, and so thank you to all of 
you for being here. As I said, certainly the fourth panel, last 
but not least, we appreciate the leadership of all of you, the 
members you represent. After hearing this morning, we want you 
to have an opportunity to kind of bring this all together for 
us. We are hoping you all have the solutions. That is what we 
are looking for, to clean things up today.
    Let me first start with our first panelist, who certainly 
is no stranger to all of us on our Committee, Mr. Roger 
Johnson. He is the president of the National Farmers Union and 
a third-generation family farmer from North Dakota. Mr. 
Johnson's involvement with NFU is longstanding, participating 
in youth programs. He was a county president. Professionally he 
has also served as North Dakota Agriculture commissioner and 
president of the National Association of State Departments of 
Agriculture. Roger and his wife, Anita, are the proud parents 
of three children and three grandchildren, so welcome.
    Mr. Stallman, also no stranger to this Committee, and we 
very much appreciate your leadership. Since 2000 he has served 
as the elected president of the American Farm Bureau 
Federation. He has also served the organization as the 
president of the Texas Farm Bureau. Mr. Stallman has served on 
the board of trustees and advisory committees of many 
agricultural organizations. Mr. Stallman and his wife, Tracy, 
have two daughters, two sons-in-law, and eight grandchildren.
    Mr. Best, I hope you do not have any grandchildren yet.
    [Laughter.]
    Chairwoman Stabenow. Last, but certainly not least--and we 
redheads have to stick together, Ryan--Mr. Ryan Best, the 
current president of the Future Farmers of America. He leads an 
organization of more than half a million students in 7,489 
chapters across the United States, many in Michigan. Mr. Best 
is currently a junior at New Mexico State University pursuing a 
major in agricultural and extension education and a minor in 
agricultural economics and business.
    We welcome all three of you, and we will ask Mr. Johnson to 
proceed first.

STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION, 
                         WASHINGTON, DC

    Mr. Johnson. Thank you--is my mic on or is it off? Talk, 
red. Okay.
    Thank you, Chairwoman Stabenow, Ranking Member Roberts, and 
members of the Senate Ag Committee. The National Farmers Union 
is grassroots organization of about 200,000 farm family 
members. We are organized in 33 States around the country. Our 
policy positions are developed by our members. Our members 
voted on and formally adopted our principles for this next farm 
bill in two special orders of business that are attached to my 
testimony just under 2 weeks ago at our 110th anniversary 
convention near Omaha, Nebraska.
    Every family farmer, livestock producer, and consumer 
benefits from a strong, effective safety net for our 
commodities. If we have learned anything from the past, it is 
that commodity prices never stay high and do not always return 
a profit to our producers. When prices fall--and we know they 
will--it is critical that a price-based safety net be in place, 
because history tells us that low market prices generally last 
much longer than high prices.
    An effective safety net, including crop insurance, allows 
our producers to continue to produce a safe and abundant food 
supply. Crop insurance is a necessary risk management tool that 
should be provided to a larger variety of commodities and 
specialty crops.
    Unlike most businesses, food, fiber, and fuel production 
faces more uncontrollable variables than most other businesses. 
Therefore, a strong risk management system must be in place.
    A strong safety net also needs to address extreme price 
volatility in commodity markets. We know that long-lasting 
decreases in commodity prices and artificially high price peaks 
are harmful to the entire production supply chain, both 
domestically and internationally.
    NFU commissioned the University of Tennessee's Ag Policy 
Analysis Center to help us develop a farm program that would 
moderate extreme price volatility in commodity markets while 
allowing farmers to receive their income from the marketplace 
rather than from Government payments, saving the Federal 
Government a significant amount of money in the process. I 
would like to draw your attention to the special orders of 
business attached to my testimony that talk about the benefits 
of the Market-Driven Inventory System, MDIS. It is an ag 
commodity program that mitigates price volatility, provides 
advantages to livestock producers, the biofuels industry, and 
to hungry people in this country and around the world.
    In addition, it would reduce Government expenses. It would 
increase the value of crop exports and would maintain net farm 
income over time.
    The central feature of MDIS is a voluntary, farmer-owned, 
and market-driven inventory system based on recourse, not non-
recourse, loan rates, set at a level below total costs of 
production but at a level above variable costs. Once crops are 
placed under loan, they would receive storage payments and 
would be required to remain off the market until a release 
level set at 160 percent of the loan rate is reached. At that 
time storage payments would stop, and the loans would be called 
on a first-in, first-out basis.
    Inventory stocks activity would only be activated when crop 
prices become so low or so high that normally profitable 
agricultural firms are not provided with reasonable investment 
and production signals.
    During the 1998-2010 time period studied, actual Government 
payments for the eight major program crops totaled $152 
billion. If MDIS had been in place during this time frame, 
farmers would have received $56 billion from the Government, 
principally in storage payments, while earning roughly the same 
net farm income over the period as historically received, and 
taxpayers could have saved $100 billion.
    Dr. Ray's analysis shows that if MDIS were in place, 
Government payments could similarly be reduced in the future by 
about 60 percent.
    The MDIS program could have a positive impact on reducing 
the Federal budget deficit, provide a workable safety net for 
farmers for less money, including for beginning farmers, who 
most need market certainty; mitigate high feed costs for 
livestock producers; reduce our dependence on foreign oil due 
to the benefits to the biofuels industry; and, most 
importantly, reduce the number of food-insecure families in 
this country and around the world.
    As a final thought, MDIS could work very well with the 
various proposals that are being considered by your Committee.
    Thank you very much for the opportunity to testify, and I 
look forward to your questions.
    [The prepared statement of Mr. Johnson can be found on page 
161 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Stallman.

  STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU 
                   FEDERATION, WASHINGTON, DC

    Mr. Stallman. Chairwoman Stabenow, Senator Roberts, thank 
you for the opportunity to share the views of the American Farm 
Bureau regarding the development of our new farm bill.
    While some take a simple view of the current agricultural 
economy and conclude farmers do not need a safety net, we all 
know that current market prices will not continue for some 
commodities. We all know that weather disasters will occur in 
some places. History proves this.
    The challenge we all face is how to draft a farm program 
that provides a strong, consistently viable safety net that 
protects farmers against crippling revenue declines, whether 
caused by falling markets or Mother Nature, while at the same 
time remaining cognizant of budget deficit challenges and 
changing public sentiment.
    To help meet this challenge, the Farm Bureau proposes the 
following principles be considered when writing the 2012 farm 
bill:
    The new farm bill must be a fiscally responsible package 
that meets spending reduction targets and assures taxpayers 
that America's farmers are making wise use of tax dollars.
    Continuation of a multi-legged stool remains the best 
approach for providing a fair and effective safety net, which 
should consist of a strong crop insurance program, continuation 
of the current marketing loan provisions, and a catastrophic 
revenue loss program.
    Marketing loans and crop insurance provide individual risk 
protection at the farm level. Directing the third leg toward 
protecting area-wide risk coverage at the county or crop 
reporting district level protects against deep losses while 
minimizing the potential for moral hazard and at the same time 
decreasing administrative costs.
    While ours is a deep loss program, it would not provide 
producers with payments as often as other proposals 
contemplated. It would provide more coverage in times of 
catastrophic losses when assistance is most critical. Because 
the deep loss program would take some of the risk off the table 
for crop insurance providers, individual policies would be re-
rated with crop insurance policy premiums paid by farmers 
decreasing by 9 to 22 percent per year, every year, regardless 
of the payout under the deep loss program.
    As a general farm organization, we place high priority on 
ensuring the new farm bill benefits all American agricultural 
commodity sectors in a balanced, coordinated manner. To 
highlight this, our proposal would include coverage for five 
fruits and vegetables: apples, tomatoes, grapes, potatoes, and 
sweet corn. Conceptually, our proposal can cover all specialty 
crops that have crop insurance available, but we thought it 
best to learn to walk before we run.
    The new farm bill must ensure that producers continue to 
take production signals from the marketplace rather than 
incentivizing them to chase Federal program benefits. 
Approaches that allow producers to pick and choose between 
various program options would impose severe challenges on U.S. 
lawmakers to ensure that one option does not provide more 
Government benefits than the next, thus driving production 
decisions.
    The new farm bill should not allow the benefits from the 
various safety net components to overlap. This is why our 
concept requires that any payment received from the deep loss 
area coverage offset any corresponding indemnity received under 
an individual crop insurance policy.
    The new farm bill should protect producers from deep loss 
events that typically are beyond any producer's control. Our 
concepts benefits would come into play only when they are 
needed rather than being an expected annual supplement to farm 
income. It would eliminate the need for ad hoc disaster 
programs.
    There should be no changes to current farm bill payment 
limitations or means-testing provisions. Conservation 
compliance should not be required as a condition for purchase 
of crop insurance. The new farm bill should include the concept 
of Representative Collin Peterson's bill to reform and improve 
the dairy program.
    We recognize developing a new farm bill requires 
flexibility from all participants in order to achieve these 
principles, and just last week the AFBF board reaffirmed our 
continued belief that our deep loss concept is the best farm 
policy option, particularly in light of the budget realities 
that face the writing of a new farm bill.
    Given the difficulties inherent in this debate, our board 
did indicate an openness to discussing an approach that would 
combine the current crop insurance and marketing loan programs 
with a supplemental area insurance program that sits on top of 
individual crop insurance coverage. But I want to be clear that 
we do have a number of concerns about this type of approach.
    To summarize and close, our deep loss proposal is one leg 
of a three-legged safety net that includes existing crop 
insurance and marketing loan programs. It protects farmers from 
deep systemic risk from weather or markets, and thus eliminates 
the need for ad hoc disaster assistance. It provides to farmers 
crop insurance premium reductions of 9 to 22 percent each and 
every year in addition to any indemnity payments. It would 
deliver policies through private crop insurance providers with 
payments occurring at the same time as other indemnity 
payments. It does not allow overlap of payments with individual 
insurance loss payments. It provides coverage beyond program 
crops to specialty crops. It would likely qualify to be 
notified in the green box non-trade-distorting category under 
the rules of the WTO. It is a fiscally responsible package that 
provides taxpayers and America's farmers with the maximum bang 
for the buck.
    Thank you for the opportunity to present our views. We look 
forward to working with this Committee to craft a new farm bill 
that meets the future needs of America's farmers and ranchers.
    [The prepared statement of Mr. Stallman can be found on 
page 205 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Best.

 STATEMENT OF RYAN W. BEST, NATIONAL PRESIDENT, FUTURE FARMERS 
                OF AMERICA, PORTALES, NEW MEXICO

    Mr. Best. Thank you, Chairwoman Stabenow, Ranking Member 
Roberts, and members of the Committee, for the opportunity to 
speak with you today about something that is very important to 
me, and that is, the future of American agriculture.
    I am Ryan Best, and I am privileged to serve this year as 
president of the national FFA organization. I was raised on a 
production sheep farm in Portales, New Mexico, and I am 
currently a junior at New Mexico State University majoring in 
agricultural and extension education.
    As part of my FFA and agricultural education program in 
high school, I developed an enterprise around sheep and 
diversified livestock production. For me, agriculture is not 
just an occupation, but it is a way of life. My family has been 
involved in production agriculture for seven generations. 
Production agriculture is in my blood, and that is what brings 
me here today. It is my goal to share with you the perspectives 
of the young men and women I represent as president of the FFA.
    Today nearly a million students are enrolled in secondary 
agricultural education courses and are preparing for careers in 
agriculture. The U.S. will need the best and brightest of its 
young people to drive the innovation and efficiencies in 
agriculture that will achieve production goals and meet growing 
demand. We already have in place a pipeline to attract and 
prepare the talent needed to grow our future.
    These are the more than half a million student members of 
the FFA and agricultural education. They are students like Cole 
Vculek, FFA's 2011 American Star Farmer. Cole rented land from 
neighbors to grow two acres of red onions. He quickly added 
more land to raise potatoes, and in 2009 he acquired 200 more 
acres for a corn and soybean rotation. Recently, Cole purchased 
a 640-acre farm from a neighbor. He plans to acquire more 
cropland and continue his business incorporating sugar beets. A 
fifth-generation farmer, Cole epitomizes the innovation and 
growth American agriculture will need to sustain in the coming 
years.
    While many people are familiar with the FFA, less is known 
about the agricultural education program of which FFA is an 
integral part. Today there are 7,400 FFA chapters in all 50 
States, Puerto Rico, and the Virgin Islands. Students are 
preparing for more than 300 careers in the science, business, 
and technology of agriculture, including production.
    It is understandable if some believe that members of FFA--
formerly known as the Future Farmers of America--come primarily 
from rural farming communities and small towns. However, this 
is not accurate. Today's FFA is as diverse as today's 
agriculture. We are reaching nontraditional agricultural 
education students in rural, suburban, and urban communities 
alike, including New York, Philadelphia, Houston, and Chicago. 
In fact, the Chicago High School for Agricultural Sciences was 
home to Corey Flournoy, the first African American National FFA 
President. Today's agricultural education reaches students from 
all backgrounds.
    FFA and agricultural education are helping students to 
establish successful careers in production agriculture. Our 
supervised agricultural experience program provides 
opportunities for students to set career goals in high school 
and then pursue post-secondary education and training for entry 
into production agriculture. Wesley Davis from the Mason County 
Vocational FFA Chapter in West Virginia raises farm fresh eggs 
as a part of his enterprise. He says his supervised 
agricultural experience allows him to see the viability and 
profitability of supplying consumers in his community with 
locally grown fresh eggs. Wesley plans to turn his project into 
a full-time career.
    FFA and agricultural education have a major role in 
ensuring that we have the producers, researchers, 
entrepreneurs, and innovators to meet the challenges we face. 
That is why Secretary Vilsack invited last year's national FFA 
officer team to offer recommendations for the farm bill with 
perspective to the youth. After consulting with FFA members and 
stakeholders, the officers delivered their report to the 
Secretary last December. It is attached to my comments, but it 
comes down to these key points:
    First, the USDA and other Federal agencies should assist 
beginning farmers to start or continue in production 
agriculture.
    Next, USDA should help transition farms from older farmers 
to younger or beginning farmers who may not come from a farm.
    Next, USDA should help keep young people in rural 
communities and make rural communities an even more important 
part of our Nation's economy and society.
    And, finally, the USDA should strengthen the capacity of 
agricultural education to produce more students who pursue 
production agriculture as well as related careers.
    In closing, I want to underscore that agricultural 
education and FFA have been assets to American agriculture for 
the past 85 years. Given the challenges facing American as well 
as global systems of agriculture, investments for tomorrow must 
be made today. The next farm bill provides an opportunity for 
Congress to demonstrate that it, like FFA members across the 
Nation, believes in the future of agriculture ``with a faith 
born not of words, but of deeds.''
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Best can be found on page 78 
in the appendix.]
    Chairwoman Stabenow. Well, thank you very much, Mr. Best. 
You give us great confidence in the future. I was not in FFA, 
but I was in 4H for all my time growing up, and I know how 
important leadership programs like that are, and so we thank 
you for being here. We wanted to make sure we had our current 
leaders with our future leader today.
    Let us start by talking about that. I want to certainly 
talk about the current farm bill, but we are talking about a 5-
year farm bill, but we should be talking about 50 years from 
now, what are we going to see in agriculture. And, Mr. Johnson, 
from your perspective--and Mr. Stallman as well, and then we 
will ask Mr. Best-- obstacles in terms of our future farmers? 
Opportunities? I mean, what should we be focused on?
    Mr. Johnson. Well, thank you, Madam Chair. There are a 
number of things. I think, the previous panels have all talked 
about flexibility. I think that is really very important. They 
have also talked a lot about risk management. That is also 
critically important. If you are talking about beginning 
farmers in particular, beginning farmer leadership programs 
such as FFA and 4H are important. But so, too, are things like 
the Beginning Farmer Institute that we do where we take actual 
beginning farmers and match them up with other beginning 
farmers in other parts of the country to give them a broader 
perspective. I know lots of our organizations do those sorts of 
things.
    Credit programs are very important because, as a beginning 
farmer, the one thing that you almost certainly do not have is 
equity, and so you are highly leveraged, and it is important 
that we have programs that are going to take some of these 
extreme variabilities out of the way of your business plan. 
That is why I would point to one of the central features of the 
program that we are proposing that price variability is really 
important for us to deal with.
    You know, people sometimes forget that we had 6, 7 years of 
$2 corn not very long ago. The market is a whole lot higher 
today. During those low-price periods, farmers make suboptimal 
economic decisions. And, conversely, during these very, very 
high-price periods, we also make suboptimal economic decisions.
    The exuberance that we are all experiencing at land prices 
is a good example of that. If there is anything certain about 
very high commodity prices, it is that the input costs go up 
instantly along with them. We can just look across the board, 
and we will come to understand that.
    Chairwoman Stabenow. Thank you. I know Senator Conrad had 
hoped to be here to introduce you today. He is one of our great 
agricultural leaders on the Committee, but he wanted to send 
his best to you as well.
    Mr. Johnson. Thank you.
    Chairwoman Stabenow. Mr. Stallman.
    Mr. Stallman. Madam Chairwoman, that is an interesting 
question. I contend that agriculture as an industry is changing 
faster than policy can keep up with in many respects. The one 
thing we have to do for our young farmers and ranchers that are 
coming up is obviously encourage them with leadership programs, 
try to get them familiar with what they are facing as they want 
to enter agriculture, and we do a lot of that as an 
organization. But the best thing we can do for the future is to 
create a business environment for them that is conducive for 
them to be able to pursue their dreams of being in the business 
of agriculture. That includes watching the regulatory 
environment to be sure that those restraints are not too 
burdensome. My colleague talks about price variability. I would 
point out that price variability provides the opportunity for 
profit, too.
    So what we must do is provide those tools, and revenue risk 
management tools are a very good one to help adjust to that 
volatility, to deal with it and manage it. But you always want 
to be sure that Government policy does not restrict what the 
marketplace opportunities can offer, and I think overall, for 
the next 50 years, that is the best gift we can give to our 
young farmers and ranchers.
    Chairwoman Stabenow. Thank you.
    Mr. Best, what would you suggest that we be doing?
    Mr. Best. I feel that the best way to contribute to young 
people getting involved in agriculture is to continue and 
strengthen support for agricultural education. In agricultural 
education, we are not just providing students with data. We are 
not just providing students with the overall concept of what 
agriculture is. Students are able to actually dive in and get 
involved on a firsthand basis in what agriculture is. We place 
them on a pathway into a career in agriculture, and then we see 
them through that pathway throughout their years in 
agricultural education. So I feel that that is the best way to 
contribute to adding to the youth getting into agriculture.
    With that being said, I feel that it is important that we 
convey to them that it is an exciting time to be in 
agriculture. Never before have we had such advances in 
technology and innovations that have promoted us to being the 
most efficient we have ever been. It is an exciting time to be 
involved in that and know that we have a place within that 
industry.
    Chairwoman Stabenow. Thank you.
    I am going to ask one more question. I think with the two 
of us here it would take just another minute.
    Mr. Johnson and Mr. Stallman, you both represent large, 
very diverse groups of producers and very important voices in 
terms of farmers and ranchers across the country. You have 
heard today from folks from all kinds of commodities and parts 
of the country. What would you at this point say in terms of 
bringing all of this together from what you have heard today? 
That is what we really have to struggle with, how we take a 
very diverse country, regions of the country, various 
commodities, the need to be fair and effective for all of them. 
What would you suggest after listening today? Mr. Johnson.
    Mr. Johnson. Well, I am glad I am not in your shoes.
    [Laughter.]
    Mr. Johnson. I guess I would say a couple of things.
    First of all, we have been very supportive of the effort 
that I know you and others have been struggling with trying to 
figure out how do you get the right combination of programs. It 
is not an easy task.
    We have for a long time been strong supporters of permanent 
disaster programs. I think if there is anything we share in 
common here, going back to ad hoc disaster programs is really a 
mistake, and we need to create an environment that makes it 
less likely that that will happen.
    I would also provide this observation: There was a lot of 
conversation about crop insurance, and we all support crop 
insurance. Most crop insurance policies sold today are revenue-
based products, and they work very well when you have high 
market prices. In some cases they might even work a little bit 
better than what we would like them to work.
    I had the opportunity to buy $11.06 price protection on my 
wheat in North Dakota several years ago. I am not the best 
farmer in the county, but I know my costs are not anywhere 
close to that. So we need to guard against those sorts of very 
difficult price decisions.
    More importantly, when the market collapses, and if it 
collapses for a long period of time, the revenue products that 
we have been talking about simply do not provide that long-term 
price protection, and we will find a hue and cry coming from 
the countryside, as we did in the late 1990s and early 2000s, 
when we had extended periods of low prices and we did not have 
policies that were going to deal with them. So it is important 
to focus on that, in our judgment.
    Chairwoman Stabenow. Thank you.
    Mr. Stallman.
    Mr. Stallman. Well, the best thing about being a general 
farm organization is being one. The worst thing is also being 
one, because we have to balance all of these regional and 
commodity interests that this Committee will have to balance in 
determining what the farm bill is. We looked a lot at that in 
coming up with our proposal. That is why, we do not have the 
luxury as a general farm organization of looking at an 
individual commodity and saying, this is what we need for this 
individual commodity. So we tried to look at the aggregate and 
what is best in the environment that we are dealing with today, 
which, frankly, could be called revolutionary. Our proposal has 
been called revolutionary, and it is if you look at the pace of 
normal change in farm bills.
    But these times with the budget and fiscal deficits that we 
are dealing with, with changing public sentiment about the role 
of agriculture, having high-price support programs which 
generate checks to producers on an annual basis is something 
the public is rejecting. That is what has happened with direct 
payments. Unfortunately. I am a rice producer. I understand 
direct payments very well. But the reality is that we have to 
look to the future and what the changes in this environment 
are, and, therefore, we do need something that provides a risk 
management tool, and that is why we looked at what was the best 
way of approaching that with limited Federal dollars to help 
provide assistance.
    Once again, we must have a strong Crop Insurance Program 
for us to do that risk management. That is going to be key. But 
I think the days of us crafting separate programs for separate 
producers and, trying to find ways to prop up incomes where 
maybe the marketplace is not indicating that, I think those 
days are difficult and may be past.
    Chairwoman Stabenow. Thank you very much.
    Senator Roberts.
    Senator Roberts. Thank you, Madam Chairwoman.
    Bob, thank you for the 12 years of leadership that you have 
been the head of the American Farm Bureau. Thank you to your 
staff that has been very highly respected and ongoing. You have 
right behind you somebody that has your back that is now on 
your staff who got his teeth cut on the House Ag Committee, 
then with the cattlemen, and has been serving as top gun to 
several Secretaries. I think he set the record for that. He is 
also a renowned rodeo rider, which explains a lot, if you know 
Dale Moore. It is good to see you, Dale.
    Bob, I understand from your written testimony the Farm 
Bureau sees the option of stacking area-wide insurance policies 
on top of individual policies is something that could provide 
value to growers, and I see that type of policy that would 
offer some benefits to growers in places like Kansas. Can you 
tell me a little more about how the Farm Bureau sees this 
program in terms of benefitting farmers across the country?
    Mr. Stallman. Well, our board had a lot of discussion, and 
as I have indicated, we are willing to discuss that approach. 
Our concerns are on several levels. One is the level at which 
that top layer is set. I mean, the devil is always in the 
details. We are concerned that if you set the level of coverage 
too high--and there have been some proposals about 90-and 95-
percent coverage levels--you are really taking too much risk 
out from the producer. When you do that, the law of unintended 
consequences kicks in. You have farmers that are willing to, 
leverage their equity a whole lot more than they would 
otherwise without that. You have the bidding up of cash rents 
and land prices and the normal things that occur from a purely 
agricultural economics perspective. Then that we believe will 
make it more difficult for young farmers and ranchers.
    We also want to be sure that we do this, if we do go down 
this path, on an area basis as opposed to a farm-level trigger. 
We are very concerned that farm-level triggers at that high a 
level of coverage--there is the risk of moral hazard, and 
obviously the costs go up when you use a farm trigger as 
opposed to an area-wide trigger.
    So what we are saying is we are willing to look at some of 
these proposals, and if the parameters are right, maybe it is 
something that we can come to consensus on. We still 
fundamentally believe that flipping it around and letting the 
Government take the deep loss and then giving the producers the 
responsibility of crafting their own risk management with 
existing crop insurance tools at a lower premium presents a 
better option because it has producers with more skin in the 
game, if you will, as opposed to the Government take the top 
layer of losses and the producers taking lower levels.
    Senator Roberts. I appreciate that.
    President Best, Mr. President, you say, ``I hope to be a 
positive influence in the lives of fellow FFA members,'' 
``excited about the opportunity,'' ``being an ambassador to the 
public to share the story of agriculture to Americans,'' 
``speaking on behalf of half a million of the FFA membership.''
    Mr. President, do not share it. Tell it. Shout it to 
everybody that moves in this town. The Chairwoman and I, when 
we sit down and talk to fellow members and say, ``Could you 
just spare a moment? We would like to talk to you a little bit 
about the farm bill,'' we have 17 seconds before there is a 
high glaze. Some people, when you say, ``I want to share some 
talk about a farm bill,'' they simply say, ``Well, just pay 
it.'' That is the level of understanding.
    Now, you, on the other hand, can make a difference. People 
are going to listen to you because of your position, your 
presentation, and the fact that you are a young farmer and the 
fact that you are a president. I know that the Government's 
impact on farmers and ranchers in some areas has nothing to do 
with the Department of Agriculture, but there are a lot of 
other times when regulations stemming from places like the EPA 
and the Department of Labor place higher hurdles in your path.
    The Department of Labor actually proposed new regulations 
for how our young people can work and learn about agriculture, 
and there is not anybody on this Committee or anybody in this 
room that does not care or have the utmost concern for the 
safety and well-being of our young people, all those involved 
in industry, but this proposal has really gone too far. Your 
organization has some feeling about this as well. Could you 
just tell us a little bit about how the FFA views this rule 
from the Labor Department?
    Mr. Best. Yes, sir. As a part of our three-circle model in 
agricultural education, we have a classroom and laboratory 
section, which is where students learn basic skills, followed 
by the Supervised Agriculture Experience Program, and that is 
our experiential learning tactic where students can go out and 
gain hands-on experience within a job occupation. Finally is 
FFA, and that is the leadership aspect that comes into it as 
well as providing incentives for that hands-on experience.
    So with that being said, FFA is very interested in 
protecting the student learner exemption within the Department 
of Labor regulations as that does affect students within our 
supervised agriculture experience projects.
    There are four areas that supervised agriculture experience 
can fall under, and that would be agroscience, production 
agriculture, placement, and entrepreneurship. Of those four, 
one-third of all SAEs fall under the placement category, and 
that definitely affects the student learner exemption within 
the Department of Labor regulations because it does limit FFA 
members from having the opportunity to get involved in a 
placement type situation within their SAE. So we are definitely 
interested in protecting those rights, but at the same time 
maintaining that our students are safe and well taken care of 
while they are doing their projects.
    Senator Roberts. Do you have any neighbors across the road 
where you live?
    Mr. Best. Yes, sir.
    Senator Roberts. Do you feel safe crossing that road and 
going there to help them during the harvest even though they 
have motorized vehicles over there?
    Mr. Best. I do myself, yes, sir.
    Senator Roberts. Good. I hope the Department of Labor 
certainly lets you do that.
    When you meet with fellow FFA leaders, what are the burning 
issues that are discussed? What do your peers see as the 
biggest challenge to maintaining the strongest agriculture 
economy in the world for now and, more importantly, in the 
future? What is the big burning issue?
    Mr. Best. The big burning issue for us comes down to what 
we have been talking about, getting young people to pursue a 
career in agriculture. FFA has been dedicated to doing that for 
the past 85 years, teaching students about the benefits of 
going into agriculture, and we feel that that is one of the 
biggest issues. But we are taking steps to overcome that with 
the recent release of new curriculum, which is allowing for 
advanced pathways within agriculture. We are directing students 
down those pathways. It is not just about telling them about a 
career. It is about motivating them to go into a career. You 
can sit and talk to them all you want, but they are not going 
to just wake up one day and say, ``You know what? I want to be 
a farmer.'' No. They have to be motivated to want to go do 
that. That is what our more than 11,000 agriculture education 
instructors are doing every day. They are motivating their 
students to go into a career in agriculture.
    Senator Roberts. I especially liked your comment on 
different pathways. Everybody does not have to be on the farm.
    Mr. Best. No, sir.
    Senator Roberts. There has been a lot of consolidation, a 
lot of economies of scale, and they are doing amazing work in 
terms of precision and production agriculture. But you can have 
some in your family and other friends that go into other areas 
of agriculture that are just as important.
    Mr. Best. Yes, sir.
    Senator Roberts. Well, thank you very much. I appreciate 
it.
    Mr. Best. Thank you.
    Senator Roberts. Thank you, Madam Chairman.
    Chairwoman Stabenow. Well, thank you to each of you. We 
appreciate your leadership on an ongoing basis and look forward 
to working with you.
    We now move to the next process in terms of putting 
together our recommendations and legislation, and your input 
will continue to be very important to us.
    We will end the hearing today. Any additional questions for 
the record should be submitted to the Committee clerk 5 
business days from today, which is 5:00 p.m. on Thursday, March 
22nd. And, again, thank you very much, and, Mr. Best, we know 
the future is in good hands, and we thank you for being with 
us.
    The meeting is adjourned.
    [Whereupon, at 12:59 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             MARCH 15, 2012



      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             MARCH 15, 2012



      
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                         QUESTIONS AND ANSWERS

                             MARCH 15, 2012



      
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