[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]








 
                          FOCUS ON THE FARM ECONOMY

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

                                HEARINGS

                               BEFORE THE

                      SUBCOMMITTEE ON GENERAL FARM
                    COMMODITIES AND RISK MANAGEMENT

                                AND THE

        SUBCOMMITTEE ON COMMODITY EXCHANGES, ENERGY, AND CREDIT

                                AND THE

                            SUBCOMMITTEE ON
               BIOTECHNOLOGY, HORTICULTURE, AND RESEARCH

                                AND THE

                       SUBCOMMITTEE ON NUTRITION

                                AND THE

               SUBCOMMITTEE ON CONSERVATION AND FORESTRY

                                AND THE

           SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                    APRIL 14, 19, 27, 28, 2016; AND
                            MAY 17, 24, 2016

                               ----------                              

                           Serial No. 114-49

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov
















                       FOCUS ON THE FARM ECONOMY

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

                                HEARINGS

                               BEFORE THE

                      SUBCOMMITTEE ON GENERAL FARM
                    COMMODITIES AND RISK MANAGEMENT

                                AND THE

        SUBCOMMITTEE ON COMMODITY EXCHANGES, ENERGY, AND CREDIT

                                AND THE

                            SUBCOMMITTEE ON
               BIOTECHNOLOGY, HORTICULTURE, AND RESEARCH

                                AND THE

                       SUBCOMMITTEE ON NUTRITION

                                AND THE

               SUBCOMMITTEE ON CONSERVATION AND FORESTRY

                                AND THE

           SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      APRIL 14, 19, 27, 28, 2016;
                            MAY 17, 24, 2016

                               __________

                           Serial No. 114-49

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov
                                 ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

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                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

                                 ______

      Subcommittee on General Farm Commodities and Risk Management

             ERIC A. ``RICK'' CRAWFORD, Arkansas, Chairman

FRANK D. LUCAS, Oklahoma             TIMOTHY J. WALZ, Minnesota, 
RANDY NEUGEBAUER, Texas              Ranking Minority Member
MIKE ROGERS, Alabama                 CHERI BUSTOS, Illinois
BOB GIBBS, Ohio                      GWEN GRAHAM, Florida
AUSTIN SCOTT, Georgia                BRAD ASHFORD, Nebraska
JEFF DENHAM, California              DAVID SCOTT, Georgia
DOUG LaMALFA, California             JIM COSTA, California
JACKIE WALORSKI, Indiana             SEAN PATRICK MALONEY, New York
RICK W. ALLEN, Georgia               ANN KIRKPATRICK, Arizona
MIKE BOST, Illinois
RALPH LEE ABRAHAM, Louisiana

                                  (ii)


        Subcommittee on Commodity Exchanges, Energy, and Credit

                    AUSTIN SCOTT, Georgia, Chairman

BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia, Ranking 
FRANK D. LUCAS, Oklahoma             Minority Member
RANDY NEUGEBAUER, Texas              FILEMON VELA, Texas
MIKE ROGERS, Alabama                 SEAN PATRICK MALONEY, New York
DOUG LaMALFA, California             ANN KIRKPATRICK, Arizona
RODNEY DAVIS, Illinois               PETE AGUILAR, California
TRENT KELLY, Mississippi

                                 ______

       Subcommittee on Biotechnology, Horticulture, and Research

                    RODNEY DAVIS, Illinois, Chairman

GLENN THOMPSON, Pennsylvania         SUZAN K. DelBENE, Washington, 
AUSTIN SCOTT, Georgia                Ranking Minority Member
CHRISTOPHER P. GIBSON, New York      MARCIA L. FUDGE, Ohio
JEFF DENHAM, California              JAMES P. McGOVERN, Massachusetts
TED S. YOHO, Florida                 ANN M. KUSTER, New Hampshire
JOHN R. MOOLENAAR, Michigan          GWEN GRAHAM, Florida
DAN NEWHOUSE, Washington

                                 ______

                       Subcommittee on Nutrition

                  JACKIE WALORSKI, Indiana, Chairwoman

RANDY NEUGEBAUER, Texas              JAMES P. McGOVERN, Massachusetts,  
GLENN THOMPSON, Pennsylvania         Ranking Minority Member
BOB GIBBS, Ohio                      MARCIA L. FUDGE, Ohio
ERIC A. ``RICK'' CRAWFORD, Arkansas  ALMA S. ADAMS, North Carolina
VICKY HARTZLER, Missouri             MICHELLE LUJAN GRISHAM, New Mexico
DAN BENISHEK, Michigan               PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 BRAD ASHFORD, Nebraska
DAVID ROUZER, North Carolina         SUZAN K. DelBENE, Washington
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan

                                 ______

               Subcommittee on Conservation and Forestry

                 GLENN THOMPSON, Pennsylvania, Chairman

FRANK D. LUCAS, Oklahoma             MICHELLE LUJAN GRISHAM, New 
STEVE KING, Iowa                     Mexico, Ranking Minority Member
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
DAN BENISHEK, Michigan               SUZAN K. DelBENE, Washington
RICK W. ALLEN, Georgia               ANN KIRKPATRICK, Arizona
MIKE BOST, Illinois

                                 (iii)


           Subcommittee on Livestock and Foreign Agriculture

                 DAVID ROUZER, North Carolina, Chairman

BOB GOODLATTE, Virginia              JIM COSTA, California, Ranking 
STEVE KING, Iowa                     Minority Member
SCOTT DesJARLAIS, Tennessee          STACEY E. PLASKETT, Virgin Islands
VICKY HARTZLER, Missouri             FILEMON VELA, Texas
TED S. YOHO, Florida                 RICHARD M. NOLAN, Minnesota
DAN NEWHOUSE, Washington             CHERI BUSTOS, Illinois
TRENT KELLY, Mississippi

                                  (iv)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page

Thursday, April 14, 2016--Subcommittee on General Farm Commodities and 
                            Risk Management

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     3
Crawford, Hon. Eric A. ``Rick'', a Representative in Congress 
  from Arkansas, opening statement...............................     1
    Prepared statement...........................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................    38
Walz, Hon. Timothy J., a Representative in Congress from 
  Minnesota, opening statement...................................     3

                               Witnesses

Duvall, Vincent ``Zippy'', President, American Farm Bureau 
  Federation, Washington, D.C....................................     4
    Prepared statement...........................................     5
Johnson, Roger, President, National Farmers Union, Washington, 
  D.C............................................................    10
    Prepared statement...........................................    11
Johansson, Ph.D., Robert, Chief Economist, U.S. Department of 
  Agriculture, Washington, D.C...................................    16
    Prepared statement...........................................    18
Outlaw, Ph.D., Joe L., Professor and Extension Economist, 
  Department of Agricultural Economics, Texas A&M University; Co-
  Director, Agricultural and Food Policy Center, College Station, 
  TX.............................................................    27
    Prepared statement...........................................    29

 Tuesday, April 19, 2016--Subcommittee on Commodity Exchanges, Energy, 
                               and Credit

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................    51
Scott, Hon. Austin, a Representative in Congress from Georgia, 
  opening statement..............................................    51
    Prepared statement...........................................    52
Scott, Hon. David, a Representative in Congress from Georgia, 
  opening statement..............................................    53

                               Witnesses

Buzby, Timothy L., President and Chief Executive Officer, Federal 
  Agricultural Mortgage Corporation (Farmer Mac), Washington, 
  D.C............................................................    54
    Prepared statement...........................................    55
Featherstone, Ph.D., Allen M., Professor and Head, Director of 
  Master in Agribusiness Program, Department of Agricultural 
  Economics, Kansas State University, Manhattan, KS..............    76
    Prepared statement...........................................    78
Nelson, Randy, President, CHS Capital LLC, Inver Grove Heights, 
  MN.............................................................   100
    Prepared statement...........................................   101

Wednesday, April 27, 2016--Subcommittee on Biotechnology, Horticulture, 
                              and Research

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................   180
Davis, Hon. Rodney, a Representative in Congress from Illinois, 
  opening statement..............................................   121
    Prepared statement...........................................   123
DelBene, Hon. Suzan K., a Representative in Congress from 
  Washington, opening statement..................................   124

                               Witnesses

Conner, Hon. Charles F., President and Chief Executive Officer, 
  National Council of Farmer Cooperatives, Washington, D.C.......   125
    Prepared statement...........................................   127
    Submitted questions..........................................   231
Witte, Hon. Jeff M., Secretary/Director, New Mexico Department of 
  Agriculture; Member, Board of Directors, National Association 
  of State Departments of Agriculture, Las Cruces, NM............   135
    Prepared statement...........................................   137
    Submitted questions..........................................   238
Torrey, Maureen J., Vice President, Torrey Farms, Inc., Elba, NY; 
  on behalf of United Fresh Produce Association..................   148
    Prepared statement...........................................   149
    Supplementary material submitted by Robert L. Guenther, 
      Senior Vice President, Public Policy, United Fresh Produce 
      Association................................................   189
Woods, Kate, Vice President, Northwest Horticultural Council, 
  Yakima, WA.....................................................   152
    Prepared statement...........................................   153
    Submitted questions..........................................   259
Guebert, Jr., Richard L., President, Illinois Farm Bureau; 
  Member, Board of Directors, American Farm Bureau Federation, 
  Bloomington, IL................................................   155
    Prepared statement...........................................   157
    Submitted questions..........................................   263
Murden, Dale, President, Texas Citrus Mutual, Mission, TX........   165
    Prepared statement...........................................   166
    Submitted questions..........................................   273
Vroom, Jay, President and Chief Executive Officer, CropLife 
  America, Washington, D.C.......................................   169
    Prepared statement...........................................   170
    Supplementary material.......................................   192
    Submitted questions..........................................   277

                           Submitted Material

Bond, Bill, Executive Director, Minnesota Crop Production 
  Retailers, submitted letter....................................   196
Covello, Kelly, President, Almond Hullers & Processors 
  Association, submitted statement...............................   197
Jones, Keith, Executive Director, Biopesticide Industry Alliance, 
  submitted statement............................................   199
Keeling, John, Executive Vice President and Chief Executive 
  Officer, National Potato Council, submitted letter.............   201
Nassif, J.D., Hon. Tom, President and Chief Executive Officer, 
  Western Growers Association, submitted statement...............   202
Smith, Cindy Baker, Senior Vice President and Director of Global 
  Regulatory and Product Development, AMVAC Chemical Corporation, 
  submitted letter...............................................   210
Valadez, Christopher, Director, Environmental, and Regulatory 
  Affairs, California Fresh Fruit Association, submitted letter..   211
Wenger, Paul, President, California Farm Bureau Federation, 
  submitted letter...............................................   212
Wilkins, Richard, President, American Soybean Association, 
  submitted statement............................................   213
AmericanHort, submitted statement................................   214
American Seed Trade Association, submitted statement.............   218
American Society for Horticultural Science, submitted statement..   220
Biotechnology Innovation Organization, submitted statement.......   221
National Turfgrass Federation, submitted statement...............   229
RISE (Responsible Industry for a Sound Environment), submitted 
  statement......................................................   230

          Thursday, April 28, 2016--Subcommittee on Nutrition

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................   289
McGovern, Hon. James P., a Representative in Congress from 
  Massachusetts, opening statement...............................   289
Walorski, Hon. Jackie, a Representative in Congress from Indiana, 
  opening statement..............................................   287
    Prepared statement...........................................   288

                               Witnesses

Henderson, Ph.D., Jason R., Associate Dean and Assistant Vice 
  President of Engagement, College of Agriculture, Purdue 
  University; Director, Cooperative Extension Service, Purdue 
  University, West Lafayette, IN.................................   290
    Prepared statement...........................................   292
Leibtag, Ph.D., Ephraim, Assistant Administrator, Economic 
  Research Service, U.S. Department of Agriculture, Washington, 
  D.C............................................................   302
    Prepared statement...........................................   303
Harig, Andrew, Senior Director of Sustainability, Tax, and Trade, 
  Food Marketing Institute, Arlington, VA........................   307
    Prepared statement...........................................   309

    Tuesday, May 17, 2016--Subcommittee on Conservation and Forestry

Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................   371
Lujan Grisham, Hon. Michelle, a Representative in Congress from 
  New Mexico, opening statement..................................   331
Thompson, Hon. Glenn, a Representative in Congress from 
  Pennsylvania, opening statement................................   329
    Prepared statement...........................................   330

                               Witnesses

Ebert, Richard R., President, Pennsylvania Farm Bureau; Member, 
  Board of Directors, American Farm Bureau Federation, 
  Blairsville, PA................................................   333
    Prepared statement...........................................   334
English, J.D., Katherine R., Partner, English Family Limited 
  Partnership, LLC, Fort Myers, FL; on behalf of Florida Farm 
  Bureau Federation; American Farm Bureau Federation.............   340
    Prepared statement...........................................   342
O'Toole, Patrick, President, Family Farm Alliance, Savery, WY....   348
    Prepared statement...........................................   349
Gould, Celia R., Director, Idaho State Department of Agriculture, 
  Boise, ID; on behalf of National Association of State 
  Departments of Agriculture.....................................   373
    Prepared statement...........................................   375
McDaniel, Lee, President, National Association of Conservation 
  Districts, Washington, D.C.....................................   380
    Prepared statement...........................................   382
McClure, Terry W., President, McClure Farms LLC, Grover Hill, OH.   384
    Prepared statement...........................................   386
Buman, Tom, Chief Executive Officer, Agren, Carroll, IA..........   389
    Prepared statement...........................................   391

     Tuesday, May 24, 2016--Subcommittee on Livestock and Foreign 
                              Agriculture

Costa, Hon. Jim, a Representative in Congress from California, 
  opening statement..............................................   423
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................   425
Rouzer, Hon. David, a Representative in Congress from North 
  Carolina, opening statement....................................   421
    Prepared statement...........................................   422

                               Witnesses

Anderson, Ph.D., David P., Professor and Extension Economist, 
  Livestock and Food Products Marketing, AgriLife Extension 
  Service, Agricultural and Food Policy Center, Texas A&M 
  University, College Station, TX................................   427
    Prepared statement...........................................   428
Brown, Ph.D., Scott, Extension Assistant Professor, Department of 
  Agricultural and Applied Economics, University of Missouri; 
  State Agricultural Economics Extension Specialist, University 
  of Missouri Extension, Columbia, MO............................   431
    Prepared statement...........................................   433
Zimmerman, John, Member, Board of Directors, National Turkey 
  Federation, Northfield, MN.....................................   437
    Prepared statement...........................................   439
Mooney, Randy, Chairman, National Milk Producers Federation and 
  Dairy Farmers of America, Rogersville, MO......................   441
    Prepared statement...........................................   443
Herring, David, Member, Board of Directors, National Pork 
  Producers Council, Newton Grove, NC............................   449
    Prepared statement...........................................   451
Brunner, Tracy, President, National Cattlemen's Beef Association; 
  Cow Camp Feedyard Inc., Ramona, KS.............................   458
    Prepared statement...........................................   459

                           Submitted Material

Livestock Marketing Association, submitted statement.............   475









                      FOCUS ON THE FARM ECONOMY

                   (GROWING FARM FINANCIAL PRESSURE)

                              ----------                              


                        THURSDAY, APRIL 14, 2016

                  House of Representatives,
         Subcommittee on General Farm Commodities and Risk 
                                                Management,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Eric A. 
``Rick'' Crawford [Chairman of the Subcommittee] presiding.
    Members present: Representatives Crawford, Neugebauer, 
Austin Scott of Georgia, Denham, LaMalfa, Allen, Bost, Conaway 
(ex officio), Walz, Bustos, Graham, Ashford, David Scott of 
Georgia, Kirkpatrick, and Peterson (ex officio).
    Staff present: Bart Fischer, Callie McAdams, Haley Graves, 
Matt Schertz, Mollie Wilken, Skylar Sowder, Stephanie Addison, 
John Konya, Anne Simmons, Liz Friedlander, Matthew MacKenzie, 
Mike Stranz, Nicole Scott, and Carly Reedholm.

    OPENING STATEMENT OF HON. ERIC A. ``RICK'' CRAWFORD, A 
            REPRESENTATIVE IN CONGRESS FROM ARKANSAS

    The Chairman. This hearing of the Committee on Agriculture 
on Focus on the Farm Economy: Growing Farm Financial Pressure, 
will come to order.
    As many of you know, this is the first hearing in a series 
focused on the farm economy. Every Subcommittee will play a 
role in highlighting current conditions on our farms and 
ranches and in rural America today. Today, the economic 
conditions in farm and ranch country are fundamentally 
different than the conditions we faced when we crafted the 2014 
Farm Bill. In just 3 years, net farm income has fallen by 56 
percent. You have to go back to the start of the Great 
Depression to find a comparable collapse in net farm income.
    During the farm bill debate, we committed to the principle 
that farm policy should not be written to make the good times 
even better. Instead, the goal was to provide producers with 
risk management tools for the bad times that are always bound 
to happen in this boom or bust industry of farming and 
ranching.
    While some safety net features of the farm bill may meet 
the current economic test, other features have yet to prove 
their mettle. Two important questions we must keep asking are: 
first, can the existing safety net meet the growing challenges 
of prolonged periods of depressed prices; and second, will 
these policies be effective when farmers and ranchers need them 
most. We know the answer already in the case of STAX for 
cotton. Crop insurance is not designed to withstand the 
pressures caused by the predatory trading practices of China 
and India. I want to thank the leadership of this Committee for 
pressing USDA for action to address the growing crisis in 
cotton country. I am hopeful Secretary Vilsack will announce 
soon that immediate and meaningful help is on the way. I am 
also hopeful that we will continue to work toward a more 
permanent solution to a serious problem for cotton farmers that 
is not going away anytime soon.
    Next year, we will head into a new Congress, and we will 
write a new farm bill. As we head into that long and difficult 
process, I hope our colleagues who are less directly involved 
in agriculture or farm policy will reflect on just how 
critically important farm policy is in responding to a crisis 
that can happen overnight. While we were able to deliver a farm 
bill in 2014 that saved taxpayers some $23 billion, primarily 
through the elimination of the direct payment program, our 
colleagues must now appreciate that we will struggle mightily 
to write an effective farm bill in 2018 with the very limited 
amount of money we have left.
    I believe it is time to look beyond the farm safety net for 
budget savings and deficit reduction, as our farmers have 
already been asked to shoulder their fair share of the burden. 
For my colleagues who will share the responsibility of writing 
a new farm bill, I hope that the lessons from the 2014 Farm 
Bill will not be lost on us: the best safety net is the kind 
that will be there not when times are good but when the bottom 
is falling out.
    [The prepared statement of Mr. Crawford follows:]

Prepared Statement of Hon. Eric A. ``Rick'' Crawford, a Representative 
                       in Congress from Arkansas
    As many of you know, this is the first hearing in a series focused 
on the farm economy. Every Subcommittee will play a role in 
highlighting current conditions on our farms and ranches and in rural 
America today.
    Today, the economic conditions in farm and ranch country are 
fundamentally different than the conditions we faced when we crafted 
the 2014 Farm Bill. In just 3 years, net farm income has fallen by 56 
percent. You would need to go back to the start of the Great Depression 
to find a comparable collapse in net farm income.
    During the farm bill debate, we committed to the principle that 
farm policy should not be written to make the good times even better. 
Instead, the goal was to provide producers with risk management tools 
for the bad times that are always bound to come around in the boom-or-
bust business of farming and ranching. While some safety net features 
of the farm bill may meet the current economic test, other features 
have yet to prove their mettle. Two important questions we must keep 
asking are: First, can the existing safety-net meet the growing 
challenges of a prolonged period of depressed prices? And second, will 
these policies be effective when farmers and ranchers need them most?
    We know the answer already in the case of STAX for cotton. Crop 
insurance is not designed to withstand the pressures caused by the 
predatory trading practices of China and India. I want to thank the 
leadership of this Committee for pressing USDA for action to address 
the growing crisis in cotton country. I am hopeful Secretary Vilsack 
will announce soon that immediate and meaningful help is on the way. I 
am also hopeful that we will continue to work toward a more permanent 
solution to a serious problem for cotton farmers that is not going away 
anytime soon.
    Next year, we will head into a new Congress, and we will write a 
new farm bill. As we head into that long and difficult process, I hope 
our colleagues who are less directly involved in agriculture or farm 
policy will reflect on just how critically important farm policy is in 
responding to a crisis that can happen overnight.
    While we were able to deliver a farm bill in 2014 that saved 
taxpayers some $23 billion, primarily through the elimination of the 
Direct Payment program, our colleagues must now appreciate that we will 
struggle mightily to write an effective farm bill in 2018 with the very 
limited amount of money we have left. I believe it is time to look 
beyond the farm safety net for budget savings and deficit reduction, as 
our farmers have already been asked to shoulder their fair share of the 
burden.
    For my colleagues who will share the responsibility of writing a 
new farm bill, I hope that the lessons from the 2014 Farm Bill will not 
be lost on us: the best safety net is the kind that will be there not 
when times are good but when the bottom is falling out.
    With that, I recognize my Ranking Member and good friend for his 
opening statement.

    The Chairman. And with that, I would like to recognize the 
Ranking Member and my good friend for his opening statement.

OPENING STATEMENT OF HON. TIMOTHY J. WALZ, A REPRESENTATIVE IN 
                    CONGRESS FROM MINNESOTA

    Mr. Walz. Well thank you, Chairman Crawford, and thank you 
for holding this, and Chairman of the full Committee, Chairman 
Conaway, for your continued vigilance on this. Each of you, 
thank you for bringing your expertise.
    I associate myself with the remarks of Chairman Crawford. 
We know our folks are resilient, but the statistics he gave you 
are correct. Real farm incomes are at a 20+ year low. It 
doesn't look like a lot of relief is on the horizon, and the 
Chairman is right. We wrote that farm bill in a very good time 
for the bad times. I am proud of what we did, but all of us 
know, we are writing the next one and several months ago, we 
weathered a move to open up the farm bill and change crop 
insurance. And I want to thank the Chairman for his absolute 
stalwart defense of that to make sure that did not happen, 
because at this time, more than anything, risk management is 
critical.
    So I am going to yield back my time. I look forward to 
listening to you and give us an on-the-ground assessment of 
what you think is happening now and what is coming.
    And I yield back.
    The Chairman. I thank the Ranking Member, and appreciate 
your leadership and friendship.
    I would also like to recognize the full Committee Chairman 
for any statement he would like to make at this time.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. I would like to briefly thank our witnesses 
for being here today. I am looking forward to your testimony to 
get on the record a better reflection of how things really are 
in rural America and for agriculture. We had a good hearing 
yesterday on the impact the oil and gas industry has on rural 
America and the struggles that are going on there, so I am 
anxious to hear from our witnesses and I appreciate the 
comments of the Ranking Member. I yield back.
    The Chairman. Thank you, Mr. Chairman, and the chair would 
request that other Members submit their opening statements for 
the record so the witnesses may begin their testimony, and to 
ensure that there is ample time for questions.
    I would like to welcome our witnesses to the table. We have 
four today. Mr. Zippy Duvall, President of American Farm Bureau 
Federation in Washington, D.C.; Mr. Roger Johnson, President of 
the National Farmers Union here in Washington, D.C.; Dr. Rob 
Johansson, Chief Economist, U.S. Department of Agriculture here 
in Washington, thanks for being here; and finally, Dr. Joe 
Outlaw, Professor and Extension Economist, and Co-Director, 
Agricultural and Food Policy Center, Department of Ag 
Economics, Texas A&M University in College Station, Texas.
    Thank you to each of you for being here, and you all are 
pretty familiar with the process. I am going to recognize each 
of you for 5 minutes, and you will notice that series of lights 
in front of you. Green means good to go. Yellow, it is just 
like when you are driving, step on the gas because the light is 
fixing to change. And when you see that red light, we will ask 
you to slam on the brakes so we can get to the questions as 
quickly as possible and hear more expanded testimony from you 
through the questioning process.
    With that, I would like to recognize our first witness, Mr. 
Zippy Duvall. You are recognized for 5 minutes.

STATEMENT OF VINCENT ``ZIPPY'' DUVALL, PRESIDENT, AMERICAN FARM 
              BUREAU FEDERATION, WASHINGTON, D.C.

    Mr. Duvall. Good morning, Chairman Crawford and Ranking 
Member Walz. I appreciate you and the Members of the 
Subcommittee giving us the opportunity to be here today.
    Thank you for the opportunity to tell American Farm 
Bureau's story about the state of the economy in farm country. 
My name is Zippy Duvall, and I am a poultry, hay, beef producer 
in Georgia and spent 30 years dairying there. It is my 
privilege to be the President of the American Farm Bureau, the 
nation's largest general farm organization.
    Talking to our economists at AFBF, we do not see a crisis 
today, but we do see one on the horizon. Here are some of the 
latest USDA projections that lead us to say that. USDA projects 
that net cash farm income will fall by 33 percent in 2016, 
compared to 2013, and net farm income has fallen more than 55 
percent over the same period of time. These declines are 
starting to have an impact on the farmer debt-to-asset ratio, 
and a farmer's operating debt has grown from $124 billion in 
2012 to more than $165 billion today. Meanwhile, farmers are 
drawing down on their financial assets, such as cash and 
equity.
    So let me tell you some stories in my own community. Within 
a 10 mile radius of my house, there are two middle aged 
farmers. One left the banking industry and went back home to 
fulfill his love and life and to farm, and he farmed for 10 or 
12 years. In the last 2 years, he went in the hole $100,000 a 
year, and he has sold all his equipment and his cows, said he 
will not put his family's farm real estate at risk, and he is 
calling it quits and looking for a job. He called me looking 
for a job.
    Another one, just a few miles from him, he came home from 
college, and joined his dad in the dairy business, trying to 
make that generational transition, and at the end of that 
transition, he realized there is not going to be enough money 
there for him to maintain his family, his dad is going to sell 
that dairy and he is going to move on to other jobs. Those are 
just two examples of what is happening all over our country, 
and once we start hearing these examples daily, we know that it 
is going to be too late to stop it. It will be upon us.
    So let's talk about what we can do. We can continue to 
financially support the risk management tools in the farm bill, 
and thanks to these programs, we as the agriculture sector 
overall, will hold on. If I do not deliver any other message 
today, I want to deliver one, and that is the Farm Bureau 
members and the Farm Bureau appreciate your continued efforts 
to protect these important farm programs, especially now when 
they are so badly needed.
    So let's talk about other costs and constraints that our 
farmers have facing them today. The Waters of the U.S. rule, if 
it goes into effect, will have a huge impact. So we can stop 
now and think about what our farmers are facing, stop some of 
the overreach of Federal Government through continued 
regulation, and let's just talk about some of them.
    WOTUS, the increased restriction on Federal grazing land 
permits, Food Safety Modernization Act and its implementation, 
the expansion of the spill prevention and control requirements, 
the 6th Circuit decision on pesticide permits, the EPA's 
failure in fully implementing the Renewable Fuel Standard, the 
Interior Department proposing to rewrite the Federal plans to 
protect the sage-grouse, and now, the possibility of a state-
by-state GMO labeling mandate that will threaten our farmers' 
ability to use this important agricultural technology.
    Almost everywhere we look, there are new and expanding 
regulations that are adding cost, more cost to our production. 
The last thing our farmers and ranchers need today is to have 
to face more regulatory burdens.
    Finally, we can help the farm economy by passing TPP. The 
Trans-Pacific Partnership is a great example of action that 
Congress could take to raise farm income without the need of 
boosting government spending. This agreement, when fully 
implemented, will have the potential of raising farm income 
$4.4 billion.
    Mr. Chairman and Members of this Committee, I thank you for 
holding this important hearing. We thank you for standing up 
for the farmers that grow the crops and livestock that put the 
food on our table, that put the clothes on our back, and that 
makes our country more energy independent. And we look forward 
to working with you to find ways to help our farmers through 
this difficult time. Thank you.
    [The prepared statement of Mr. Duvall follows:]

  Prepared Statement of Vincent ``Zippy'' Duvall, President, American 
                Farm Bureau Federation, Washington, D.C.
    Chairman Crawford, Ranking Member Walz, and Members of the 
Subcommittee on General Farm Commodities and Risk Management, thank you 
for the opportunity to share the views of the American Farm Bureau 
Federation (AFBF) on the current state of the agricultural economy.
    I am Zippy Duvall, a beef cattle and hay producer from Georgia, and 
I am privileged to serve as President of AFBF, the nation's largest 
farm organization with nearly 5.9 million member families, and work on 
behalf of our members in every state in the nation and Puerto Rico. Our 
farmer and rancher members grow virtually every crop produced and all 
sectors of the livestock, dairy and poultry industry on farms and 
ranches of every size, using the full range of production systems from 
organic methods to the latest in high-tech and biotechnology tools. And 
we proudly include as members many of the men and women who are our 
neighbors across rural America.
    Let me start with our view of the big picture, Mr. Chairman: We all 
are well aware of the downturn in commodity prices: row crop prices for 
almost everything--corn, peanuts, soybeans, wheat--are down sharply 
from where we were just a couple years ago. Livestock prices also have 
tumbled.
    Just as you all are doing by holding this hearing, farmers and 
ranchers are asking how the outlook for the agricultural economy got 
here after so many years of good prices and higher than normal farm 
income figures.
    In 2003 our nation consumed or exported just over 10 billion 
bushels of corn and about 2.5 billion bushels of soybeans. By the 2009 
marketing year corn use was over 13 billion bushels, and demand for 
soybeans exceeded 3.5 billion bushels--and soybean demand has continued 
to grow and is now over 3.7 billion bushels. The strong growth in 
exports to China and the effects of the Renewable Fuel Standard have 
contributed to this demand growth. The drought in 2012 also cut 
supplies and helped boost some commodity prices to new records.
    You have been well aware of the challenges being faced by the 
cotton sector at every level of that industry. Cotton farmers have seen 
prices tumble from near 80 a pound just a few years back to dipping 
into the 50 range as world supplies of cotton stocks pressure the 
market. Industry analysts indicate there is in excess of 100 million 
bales of cotton lint on hand worldwide, with China alone holding more 
than 60 million bales. The carryover stocks along with strong 
competition from manmade fibers have pushed market returns for cotton 
farmers down an estimated 23 percent in the last 2 years.
    As a former dairy producer, I would also note the picture for dairy 
farmers is just as concerning. Just a couple of years ago, all-milk 
prices were in the range of $20 or more per hundredweight. Recently, we 
have seen all-milk prices decline by more than $5 per hundredweight, 
with projections for this year staying in the $15 to $16 range.
    Other livestock sectors have also been through some challenging 
times. The high feed costs in 2012 forced adjustments. The drought of 
just a couple of years ago, particularly in Texas and Oklahoma and 
still lingering in California, cut the beef herd and stopped dairy 
production growth cold in some parts of the country. To be sure, this 
led to livestock prices that were setting or getting close to record 
levels--and as the old market maxim states, the cure for high prices is 
high prices.
    Farmers and ranchers boosted production in response, bringing more 
land into production and expanding herds and flocks. As we all have 
witnessed, the outcry of just a few years ago regarding rising food 
costs is now pretty much just a memory.
    As our economists have warned over the years, once demand stops 
growing and the inherent delay in those signals reaching farmers and 
ranchers is realized, agriculture experiences a period of effectively 
producing the profit out of the system.
    That is about where we find ourselves today.
    Several reports from United States Department of Agriculture's 
Economic Research Service and the Congressional Research Service have 
done excellent work in laying out the recent past and current condition 
of the farm economy. A capstone statement from USDA's latest 
projections of Farm Income lays this out pretty clearly:

   In 2013 net cash farm income was $135 billion; for 2016, 
        USDA's projection is $91 billion.

   Net farm income, which includes other factors like 
        depreciation, inventory change and other non-cash costs, moved 
        from $123 billion to $55 billion over the same period.

   Longer-term projections by USDA leave net cash income 
        averaging less than $80 billion for the coming decade and net 
        farm income at less than $70 billion.

    It is this long-term expectation of much lower farm income that is 
most concerning. For many of our major commodities, there is little 
domestic demand growth on the horizon. Add to this a strong dollar 
amplified by weaker economic growth in many countries and the 
production expansion by our major competitors, and one also has to be 
concerned over limited hopes for significant export demand growth.
    The bottom line is that farmers and ranchers are being forced to 
tighten their belts and pay much closer attention to their financial 
situation, and they will be in greater need of safety net and risk 
management programs than has been the case for some time--for some, 
since they started farming.
    One other signal, though still in the early stages, is that farmers 
and ranchers are only now beginning to take on additional debt. When 
one examines the financial ratios, such as debt to equity or debt to 
asset, they are at some of the lowest levels ever--but those levels, 
along with debt overall, are starting to climb.
    Of particular concern is the rise in operating debt since 2012. 
Over those last few years, this category has risen from $124 billion to 
over $165 billion, a 33 percent increase. At the same time, as farmers 
and ranchers are adding debt, they have also been drawing down 
financial assets, such as cash or equity. Looking again at 2012--which 
was admittedly a record year--farmers held nearly $134 billion in 
financial assets. For 2016, USDA estimates that figure will drop to 
less than $80 billion. Boosting debt by \1/3\ at the same time as one 
is chewing through \1/3\ of one's savings is not a long-term survival 
strategy, and puts substantial pressure on both the short and 
intermediate terms for farmers and ranchers in managing their 
operations.
    It is this very situation--this economic reality, if you will--that 
makes the safety net programs provided by the farm bill so important. 
Younger and newer farmers and livestock producers are about to go 
through a steep learning curve on the difference between ``variable'' 
and ``total'' costs of production.
    Dr. Gary Schnitkey at the University of Illinois regularly 
publishes cost of production estimates for corn and soybean producers 
in his state. His estimate for the 2016 per bushel cash or variable 
cost--seed, fertilizer, pesticides, fuel, crop insurance, etc.--on a 
highly productive farm in Illinois comes in at $2.40 per bushel for 
corn and $4.79 per bushel for soybeans. USDA is projecting $3.60 per 
bushel for a 2016 corn price and $8.75 per bushel for soybeans.
    But before anyone jumps to the conclusion that this farm is 
operating in the black, recognize that out of the difference in this 
particular projection, a farmer has to pay for equipment, land costs 
and other farm expenses, as well as provide income for his or her 
family to live on. According to Dr. Schnitkey's analysis, cash rents 
ran approximately $236 per acre, effectively leaving nothing to cover 
equipment replacement or for family living for those renting land. For 
those farmers who own their land and have no debt on equipment, they 
will have some return, albeit a small amount. I have included at the 
end of the testimony some graphics showing the returns over variable 
and total costs for several commodities. Should these prices and land 
rents hold, financial stress on those renting land will build. And when 
you add potential interest rate increases, the problem just gets worse.
    The Kansas City Federal Reserve produces its Agricultural Finance 
Databook every quarter. In its latest report, its analysts indicate 
that for the third quarter of 2015 the share of non-performing 
production loans at commercial banks was near historic lows, as is the 
case for the share of total loans that are non-performing at 
agricultural banks. From their perspective, individual farmers and 
ranchers have their own individual financial circumstances they are 
dealing with, but for now the sector, overall, is holding on. But 
warning signs abound, from the crash in farm income to the draw-down in 
financial assets and the buildup of operational debt.
    This again highlights the importance of the safety net and risk 
management tools this Committee has provided for agricultural 
producers. The last thing the sector would need at this point is some 
substantial reduction in the level of Federal commitment, and on behalf 
of Farm Bureau members across the nation, we appreciate your continued 
efforts to protect these important programs.
    There have been and will likely continue to be efforts to cut the 
level of government support provided through the crop insurance 
program. Farm Bureau will strongly oppose attempts to renege on the 
deal we all worked on as the farm bill was developed. Opponents of crop 
insurance need to realize that the program adjusts directly to changes 
in market signals, that the program directly reflects market prices on 
an annual basis.
    Let me touch on one other important feature of crop insurance, 
particularly for the major program crops. It allows farmers to better 
market their crops, knowing that funding to replace any crops 
contracted for early delivery will be there should they be hit by a 
drought. These are precisely the kind of marketing strategies suggested 
to farmers in low price periods. Price the crop before it is planted in 
order to have costs covered. Farmers can do that with insurance as a 
backup to that marketing approach.
    One sector of the agricultural economy that is doing somewhat 
better from a market standpoint are our fruit and tree nut producers. 
While the list of products there is longer than I have time to cover 
here, prices for many citrus products are higher today than last year. 
Unfortunately this is driven in part by production loses coming from 
the citrus greening issues in Florida. If ever there was a need for 
research and technology, it is certainly there. As another example of 
higher fruit prices, apple prices are up in part due to lower supplies 
driven by poor growing conditions last season in Washington State.
    It is not just market realities and farm program issues that our 
farmers and ranchers are facing today that are impacting their 
respective bottom lines.
    Regulatory costs in agriculture are almost too numerous to 
quantify:

   If the new Waters of the U.S. rule goes into full effect, it 
        is bound to put additional costs and uncertainties on farming 
        operations.

   The new Food Safety Modernization Act implementation has 
        implications for farm operations, particularly in the specialty 
        crop sector.

   The expansion of Spill Prevention and Control requirements 
        will add costs and clearly provide no new revenue to the bottom 
        line (and is unlikely to result in any environmental benefit).

   Stalled legislative efforts to overturn the 6th Circuit 
        decision on pesticide permits may leave farmers vulnerable to 
        unjustified citizen lawsuits as they deal with disease and pest 
        outbreaks on their land.

   EPA's failure to fully implement the Renewable Fuel Standard 
        has sent a disturbing signal to the agriculture sector.

    The Department of the Interior's proposal to rewrite Federal plans 
to protect the sage grouse will undoubtedly have implications for 
ranchers in western states. EPA's increasing resistance to registering 
new farm protection tools while also threatening the ones we already 
have, like chlorpyrifos, are very concerning. And we cannot overlook 
the impact of state-by-state GMO labeling mandates that threaten 
farmers' ability to use this important technology to not only boost 
production, but also for the environmental and economic benefits it 
provides. Everywhere we look, costs of complying with ever-expanding 
regulations continue to build. And the last thing farmers and ranchers 
need right now are more unfunded government mandates.
    Tax policy can also play a major role in determining a farm or 
ranch's financial health. Converting the annual ``extenders'' into 
several permanent provisions has certainly been helpful in allowing 
farmers to plan, particularly in terms of equipment purchases or in 
estate planning with the adjustments in the ``death tax.'' But there 
are other provisions that would have been very helpful had they already 
been on the books.
    Finally, demand growth will be critical to helping the sector get 
out of this revenue downturn. The Trans-Pacific Partnership is a great 
example of action Congress could take that would help raise farm income 
without the need to boost government spending. This agreement, when 
fully implemented, will boost animal protein exports to Japan and other 
Asian countries, and has the potential to raise net farm income by $4.4 
billion on an annual basis. Passage of that agreement is one of the 
American Farm Bureau Federation's highest priorities.
    Mr. Chairman, I again thank you and your members for holding this 
important hearing to examine the state of the agricultural economy. I 
also thank you and your colleagues on the full Committee for standing 
up for the men and women who produce the crops and the livestock that 
provide food for our tables, make up the clothes we wear and contribute 
to our energy independence.
    We appreciate your leadership and look forward to working with you 
as you seek ways to ensure America's farmers and ranchers are sustained 
through the economic challenges we face today.
                                [Charts]
Return Over Variable Costs


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Return Over Total Costs





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you, Mr. Duvall, and I have been remiss 
in not congratulating you on your recent election as President 
of American Farm Bureau. We appreciate you being here.
    Mr. Duvall. Thank you, sir. It is my privilege and honor.
    The Chairman. And now, Mr. Johnson, you are recognized for 
5 minutes.

STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION, 
                        WASHINGTON, D.C.

    Mr. Johnson. Thank you, Chairman Crawford, Ranking Member 
Walz, and Members of the Subcommittee for holding this 
important hearing. My name is Roger Johnson, President of the 
200,000 member National Farmers Union.
    There is growing pressure in the countryside as commodity 
prices continue to fall to levels \1/2\ of what they were just 
3 years ago. USDA now forecasts a prolonged period of depressed 
prices, with serious implications for producers accessing 
credit, negative farm budgets, depressed markets, tests to the 
safety net, and increased demand for mediation services 
regarding credit. While still early in the downturn, FSA's loan 
volume demand is up 21 percent over the past year. Requests for 
restructuring services packets are already up 30 percent. 
Mediation activity is up 75 percent, and they anticipate a 23 
percent increase in actual restructuring this year.
    Private creditors are also moving short-term debt to 
medium- and longer-terms. If commodity prices stay stubbornly 
low, next year the number of troubled portfolios for Farm 
Credit Services in my part of North Dakota could increase from 
ten to somewhere between 60 and 100 members in its lending 
area. My local lenders stress the importance of a strong safety 
net. ARC and PLC programs will be higher in the fall. Crop 
insurance does not help shield from low prices, given these low 
prices right now. Nonetheless, my local lender says without 
crop insurance, I would not have ten troubled accounts. I would 
have between 300 and 2,200 troubled accounts. That lender 
services 2,600 members in the center of North Dakota, 99 
percent of whom carry crop insurance.
    Projected 2016 crop budgets from north central North 
Dakota, the same area, paint a very grim picture. Corn alone 
per acre profitability is projected to be a negative $2.61 per 
acre; spring wheat, a negative $14 an acre; canola, a negative 
$30 an acre. Only soybeans show a profit of about $19 an acre. 
Since grain prices peaked in 2012, the prices for wheat and 
soybeans have declined 40 percent. The price of corn has been 
cut in half. At the same time, costs have declined very little 
and are clearly out of line with projected market returns. 
Actual farm management numbers put a finer point on this. In 
2012, net farm income as an average across the state was 
$367,000. A year later in 2013, it was $133,000, in 2014, 
$76,000, last year, $28,000. We expect widespread losses this 
year.
    Title I safety net programs are designed to assist with 
falling commodity prices. Nationwide, signup for ARC County and 
PLC were very high. Without these programs, producers would be 
in a much more difficult spot.
    ARC is relatively complicated and has issues surrounding 
county yield data. We have seen cases in North Dakota, Texas, 
Colorado, Kansas, and South Dakota where the benchmark yields 
and current year yields are from differing sources and not 
providing representative revenue calculations. We are 
requesting administrative policy revisions and urge this 
Committee also to work with us and USDA to resolve some of 
these issues. In the next farm bill, your Committee should 
consider increasing PLC reference prices and look at ways of 
shoring up crop insurance for low price periods.
    This Committee also made significant and important 
investments for livestock producers under the Livestock 
Indemnity Program, which seems to be working quite well. The 
Dairy Margin Protection Program, however, is not working so 
well. It needs better levels of protection and an incentives-
based inventory management program. We would like to see the 
Committee hold regional hearings to discuss dairy pricing and 
regional feed costs. We are also concerned about STAX and its 
lack of responsiveness to cotton producers. We hope Congress 
can work with USDA to expand its authority to assist producers, 
as well as USDA working within its existing authority to 
provide relief.
    While things are challenging in the countryside, there are 
also some bright spots. Organic and local food sectors continue 
to grow, and seem, for the most part, to be less subject to 
falling prices. With the help of this Committee, there are now 
21,000, almost 22,000 certified organic producers in the U.S. 
They have increased by 12 percent last year, a 300 percent 
growth since 2002, and those investments have witnessed 
impressive returns.
    Overall, the ag sector looks to be under increasing stress 
in the coming years. Thank you for the opportunity to testify.
    [The prepared statement of Mr. Johnson follows:]

Prepared Statement of Roger Johnson, President, National Farmers Union, 
                            Washington, D.C.
    Chairman Crawford, Ranking Member Walz, Members of the 
Subcommittee,

    Thank you for the invitation to testify today and the work this 
Committee is doing to understand the challenges that face agriculture. 
My name is Roger Johnson and I serve as President of the National 
Farmers Union (NFU). NFU represents roughly 200,000 family farmers, 
ranchers, fishermen and rural members. NFU works to improve the well-
being and quality of life of family farmers, ranchers and rural 
communities by advocating for grassroots-driven policy adopted annually 
by our membership.
    As the title of this hearing indicates there is growing pressure in 
the countryside as commodity prices continue to decline and farmers and 
ranchers struggle to adjust to lower prices. While still in the first 
few years of this downturn, forecasts by the USDA point to a prolonged 
period of depressed prices. Such a scenario has implications for 
producers accessing credit, negative farm budgets, depressed markets, 
tests to the safety net and increased demand for mediation services. In 
my testimony I will discuss all of these issues and also note some of 
the positive trends we see in agriculture.
Credit
    We are beginning to witness an increase in challenges nationwide 
associated with accessing credit. While still early in the downturn, 
Farm Service Agency's (FSA) Farm Loan Program has seen an uptick in 
activity. Given the makeup of borrowers that utilize FSA's programs, we 
would expect to see challenges in their loan portfolio before problems 
hit other portions of the lending sector. At this time, the FSA's loan 
demand is up 21 percent over the same time last year with $3.4 billion 
of the $6.47 billion in lending authority for Fiscal Year (FY) 2016 
being utilized.
    There are a number of other activities associated with FSA loan 
servicing that can provide helpful insight. USDA's credit teams have 
numerous options to help their borrowers including servicing packets 
for restructuring debt, actual restructuring of loans, loan deferrals, 
debt write-down, debt reduction via conservation contract, state-
sponsored mediations and as an absolute last resort, foreclosure. USDA 
reports that requests for servicing packets are up 30 percent over 
2015; and mediation activity was up 75 percent in FY15. Assuming 
servicing activity continues at a similar rate, FSA anticipates a 23 
percent increase for 2016. Last, FSA, at this time is not aware of any 
increases in foreclosure at this time.
    Moving to private-sector lending, Farm Credit Services of North 
Dakota, which services northwest and north-central North Dakota, based 
out of Minot, is also dealing with some credit challenges in my part of 
the state. It has been a challenging renewal season for them with low 
commodity prices. There was a fair amount of rebalancing to be done in 
order to move operating and equipment costs from short-term to medium- 
and long-term debt. While these actions are useful in the short-term, 
they can lead to larger problems if even lower prices persist. There 
are a handful of producers in this lending area who have already used 
excess capital from prosperous years and now find themselves with very 
little liquidity.
    The good news is that most of the folks who were struggling to find 
enough operating capital have been assisted for this year. There were 
ten customers who really needed to restructure debt, with some using 
FSA loans to bridge till next year. If commodity prices stay stubbornly 
low next year the number of troubled portfolios could increase 
somewhere between 60 and 100 members in the lending area. 
Unfortunately, prices are not the sole driver of profitability. While 
there are currently no worries of drought, eastern North Dakota is very 
dry right now; and weather, as you know, can quickly impact yield. 
Local lenders are concerned that with high yields being necessary to 
protect from low prices, weather-induced yield losses will exacerbate 
an already difficult situation.
    One thing that my local lenders wanted to drive home to members of 
this Committee is the importance of a strong safety net, which I will 
discuss at length below. It is expected that Agriculture Risk Coverage 
(ARC) and Price Loss Coverage (PLC) payments will be higher in the fall 
for my area. Crop insurance, while not a break-even venture, does help 
shield from down prices. My local lender said ``without crop insurance, 
I would not have ten troubled accounts, I would have between 300 and 
2,200 troubled accounts.'' Farm Credit Services of North Dakota 
services 2,600 members, 99 percent of who carry crop insurance, 
underscoring the necessity for a strong safety net. It is also 
important to understand that today's crop insurance products provide 
even lower guarantees as prices decline.
Farm Budgets
    North Dakota State University (NDSU) Extension Service produces 
annual projected crop budgets in an effort to assist producers with 
estimates of revenue and costs for selected crops. The projected 2016 
crop budgets for North Central North Dakota paint a pretty grim 
picture. While these are averages and make a variety of assumptions, it 
nonetheless provides a window into the challenges that my neighbors 
face. By regionalizing the estimates we arrive at a more accurate 
estimate of profitability.\1\
---------------------------------------------------------------------------
    \1\ Swenson, A., & Ron, H. Farm Management Planning Guide Projected 
2016 Crop Budgets North Central North Dakota. North Dakota State 
University. Retrieved April 12, 2016, from https://www.ag.ndsu.edu/
publications/landing-pages/farm-economics-management/2016-north-
central-nd-ec-1654.
---------------------------------------------------------------------------
    I will use corn, spring wheat, soybeans and canola as examples. 
NDSU adds projected direct costs with indirect costs and compares them 
to projected market incomes. The resulting per acre profitability is 
shown below:

----------------------------------------------------------------------------------------------------------------
                                                             Market  Income     Sum of Listed     Profitability
                  Crop                     Projected Price     (Per Acre)      Cost (Per Acre)     (Per Acre)
----------------------------------------------------------------------------------------------------------------
Spring Wheat                                         $5.26           $231.44           $245.51           ^$14.07
Corn                                                 $3.50           $360.50           $363.11            ^$2.61
Soy                                                  $3.50           $243.35           $224.41            $18.94
Canola                                               $.148           $248.64           $279.17           ^$30.53
----------------------------------------------------------------------------------------------------------------

    What is even more alarming is that while the crop budget projects 
$3.50 a bushel corn, the same price at closing on April 7, 2016 in 
Chicago, local cash prices in Minot for delivery to CHS was $2.62. So 
while the crop budget shows a loss of $2.61 an acre, losses will likely 
be much worse.
Prices of Commodities
    As this Committee knows, prices of major commodities have fallen 
dramatically over the last several years and are continuing to decline. 
March National Agricultural Statistics Service's (NASS) Prospective 
Plantings and Grain Stocks reports, project corn planted acreage up six 
percent, soybean acres down less than one percent, wheat acres down 9 
percent and cotton acreage up 11 percent from 2015.\2\ At the same time 
corn stocks are up one percent, soybean stocks are up 15 percent, and 
all wheat stocks are up 20 percent from 2015.\3\ The cumulative effect 
of these projections has been negative to prices. When the reports were 
released 2 weeks ago, May-delivered corn fell 13 to $3.54 a bushel on 
the Chicago Board of Trade, May soybeans dropped 4 to $9.05 and May 
wheat was down 1.25 to $4.6275.\4\ Locally, in western Minnesota corn 
prices dropped 0.20 a bushel at local delivery points.
---------------------------------------------------------------------------
    \2\ Prospective Plantings. (2016). Washington, D.C.: U.S. Dept. of 
Agriculture, Economic National Agriculture Statistics Service.
    \3\ Grain Stocks. (2016). Washington, D.C.: U.S. Dept. of 
Agriculture, Economic National Agriculture Statistics Service.
    \4\ Gregory, M. (2016, March 31). U.S. Farmers to Plant Most Acres 
of Corn Since 2013. Retrieved April 12, 2016, from http://www.ft.com/
fastft/2016/03/31/us-farmers-to-plant-most-acres-of-corn-since-13/.
---------------------------------------------------------------------------
    From a longer-term perspective, since grain prices peaked in 2012, 
the price for wheat and soybeans has declined by 40 percent and the 
price of corn has been cut in half.\5\ At the same time, costs have 
declined very little. Farmers are struggling to balance input costs and 
declining prices. Variable costs or annual input costs, which include 
seed, fertilizer, pesticides, fuel, repairs, crop insurance, drying and 
operating interest, continue to stay high. Farmers are struggling to 
control these costs, which are clearly out of line with projected 
market returns.
---------------------------------------------------------------------------
    \5\ Aakre, D. Think Twice Before Cutting Input Costs. North Dakota 
State University Agriculture Communication. Retrieved April 12, 2016.
---------------------------------------------------------------------------
    Lower spending will not only impact the overall farm economy, but 
when done incorrectly, it could have further negative impacts on farm 
profitability. Negative net farm income will add additional stress to 
family farms.
    Discussions with local seed dealers and coops have substantiated 
concerns over significant shifts in planting. My staff, while out in 
the same geographic area mentioned above, report substantial concern 
over significant shifts from biotech seeds to conventional seeds. Some 
co-ops expressed concern over an inability to meet demand for 
additional fertilizer and chemical treatments needed in order to match 
the yields of biotech traits, while using conventional seeds. In a 
number of locations, coop management is aggressively ordering 
additional chemicals, anticipating much higher mid-season demand.
    The following numbers are courtesy of NDSU's Farm Business 
Management Education program. Net farm income for all participating 
operations (numbering 537-518) at its high in 2012 was $367,317; in 
2013 it was $133,466; in 2014 it was $76,404; and in 2015 it was 
$28,399. Given the negative trends we have witnessed in 2016, and 
projected crop budgets highlighted above, this Committee should expect 
widespread losses this year.
Livestock
    The USDA projects 2016 market prices for choice steers, feeder 
steers, cutter cows, and poultry to continue a downward trend from 2014 
and 2015 annual prices.\6\ USDA has reported livestock producers as 
showing an average loss when comparing total costs of production and 
total gross value of production in 2013 and 2014 for Cows and 
calves.\7\ Research from the University of Tennessee supports this 
continued downward trend, estimating the total production cost of one 
cow in Tennessee at $1,029.19 and the total revenue for that cow at 
$821.54, that's a loss of $207.65.\8\ A Kansas State University report 
validates the trend as well showing livestock producers at a loss when 
comparing gross returns per cow and total costs per cow.\9\
---------------------------------------------------------------------------
    \6\ Livestock, Dairy, & Poultry Outlook. (2016). Washington, D.C.: 
U.S. Dept. of Agriculture, Economic Research Service.
    \7\ Commodity Costs and Returns: Cow-Calf: 2013-14. (2015). 
Washington, D.C.: U.S. Dept. of Agriculture, Economic Research Service.
    \8\ Griffith, A.P., & Bowling, B. (2016, January). 2016 Cow-Calf 
Budget (Rep. No. AE 16-01). Retrieved April 04, 2016, from University 
of Tennessee website: http://economics.ag.utk.edu/budgets/2016/Beef/
CowCalf2016.pdf.
    \9\ Tonsor, G.T., & Reid, R. (2016, March). KSU Beef Cow-Calf 
Budget. Retrieved April 04, 2016, from Kansas State University website: 
http://agmanager.info/livestock/budgets/projected/default.asp.
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    Despite the challenges within the livestock sector, this Committee 
made significant and much needed investments for livestock producers in 
the 2014 Farm Bill. Since its enactment, 14,840 payments have been made 
through the Livestock Indemnity Program, providing a total of 
$114,934,832 in benefits to livestock producers for livestock deaths 
due to adverse weather or animals reintroduced into the wild by the 
Federal Government.\10\ This program, with its ability to make 
retroactive payments, provided much needed relief for producers, 
especially ones that had been impacted by winter storm Atlas. As an 
increase in the occurrence of extreme weather events is predicted for 
2016, these numbers will most likely continue to rise.\11\
---------------------------------------------------------------------------
    \10\ Livestock Indemnity Disaster Program (LIP) Payments as of 
January 28, 2016. (2016). Washington, D.C.: U.S. Dept. of Agriculture, 
Farm Service Agency.
    \11\ National Climate Assessment. (n.d.). Retrieved April 12, 2016, 
from http://nca2014.globalchange.gov/highlights/report-findings/future-
climate.
---------------------------------------------------------------------------
Mediation
    USDA's Certified Agricultural Mediation Program (CAMP) helps 
farmers and ranchers, their lenders, and other persons directly 
affected by the actions of the USDA to resolve disputes. Through 
mediation, a trained, impartial mediator helps participants review 
conflicts, identify options, and agree on solutions. Mediation is a 
valuable tool for settling disputes in many different USDA program 
areas, but for our purposes it is particularly helpful in financial and 
farm loan areas.
    The genesis of USDA's CAMP was the farm financial crisis of the 
1980s. The program was designed to assist financially strapped farm 
families and their lenders explore and implement options to resolve 
serious debt problems and avoid bankruptcy through neutral third-party 
intervention. This third-party intervention helps producers complete 
loan servicing applications with accurate information and provides a 
neutral, confidential and facilitated setting for producers and their 
lenders to frankly discuss and consider all options available to both. 
I was personally involved in North Dakota's Certified Agricultural 
Mediation Program from its beginnings until my election as President of 
National Farmers Union. I served as a farm credit counselor, negotiator 
and mediator during the 1980s, administering the North Dakota 
Agriculture Mediation Program in the late eighties and into the 
nineties. Subsequently I served as North Dakota Agriculture 
Commissioner, overseeing the North Dakota Agriculture Mediation program 
from 1997 to 2009. We provided mediation services to thousands of farm 
families that averted many bankruptcies and foreclosures. Even in those 
cases where farm liquidation could not be avoided, mediation was 
invaluable in the assurance that farm families and their lenders had 
both been heard and treated as fairly as possible.
    Over the years, the program's success and value led to an expansion 
of USDA agencies and issues that are eligible for assistance through 
the USDA's CAMP. NFU is fully supportive of the USDA's CAMP and has 
urged the Secretary of Agriculture and Congress to not only be prepared 
for an uptick in financial distress requests, but also provide the 
necessary funding for the program to be as effective as possible.
A Working Safety Net
    Overall Title I programs are functioning as designed and assisting 
producers with falling commodity prices. USDA deserves serious praise 
when it comes to the rollout and education behind these relatively 
complicated new farm bill programs. But that does not mean that there 
is an absence of flaws both in design and execution of these programs.
    Nationwide, 96 percent of soybean farms, 91 percent of corn farms, 
and 66 percent of wheat farms elected the Agricultural Risk Coverage 
County program (ARC-CO). Seventy-six percent of all base acres enrolled 
in ARC-CO. Over 90 percent of long grain rice, medium grain rice, and 
peanut farms elected the Price Loss Coverage program (PLC).\12\ Totals 
for the 2014 crop year for both the ARC and PLC programs were roughly 
$5.18 billion. Of that total, $772 million went to PLC participants and 
$4.41 billion went to ARC participants.\13\ Without these programs, 
producers would be in a much more difficult spot than they are right 
now. Especially when considering 2016 projections for net cash and net 
farm income, which is set to decline for the third consecutive year 
after reaching recent highs in 2013 for net farm income and 2012 for 
net cash income. Net cash farm income is expected to fall by 2.5 
percent in 2016, while net farm income is forecast to decline by three 
percent. While those numbers do not appear alarming, when stacked on 
declines of 27 and 38 percent reductions in net cash income and net 
farm income that occurred in 2015 the picture worsens.\14\
---------------------------------------------------------------------------
    \12\ ARC/PLC Program. (2016). Washington, D.C.: U.S. Dept. of 
Agriculture, Farm Service Agency.
    \13\ ARC-CO/PLC Payments as of Feb 22, 2016. (2016). Washington, 
D.C.: U.S. Dept. of Agriculture, Farm Service Agency.
    \14\ 2016 Farm Sector Income Forecast. (2016). Washington, D.C.: 
U.S. Dept. of Agriculture, Economic Research Service.
---------------------------------------------------------------------------
    The assistance that Title I programs are providing is also 
complemented by the role of crop insurance. Nothing makes up for strong 
prices, especially not crop insurance. It is not a breakeven program 
and, on average, farmers must incur losses of almost 30 percent before 
their insurance coverage starts to provide assistance. Farmers also 
spend approximately $4 billion per year out of pocket to purchase 
insurance from the private-sector.\15\ All that being said, crop 
insurance, year over year, has provided a meaningful, timely and 
flexible program that fits individual producer demands.
---------------------------------------------------------------------------
    \15\ Crop Insurance Coalition--Protect Crop Insurance. (2016, March 
16). Retrieved April 12, 2016, from http://archive.constantcontact.com/
fs158/1103508273436/archive/11241266725
78.html.
---------------------------------------------------------------------------
    Federal crop insurance is based on fundamental market principles, 
which means high risk areas and high value crops pay higher premiums 
for insurance. This emphasis on crop insurance and risk management has 
replaced constant demand for ad hoc disaster assistance, which is 
subject to congressional wrangling, and is paid for entirely by the 
taxpayer, while not being delivered in a timely manner. In addition to 
price and yield declines, the program helps farmers and ranchers facing 
market conditions greatly impacted by foreign subsidies, tariffs, and 
non-tariff trade barriers. This Committee must protect the integrity of 
crop insurance for the benefit of farmers and ranchers.
Challenges Within the Safety Net
    There are a number of Title I programs that deserve additional 
attention by this Committee. There can be no doubt of the yeoman's work 
that USDA did in compiling data on all crops in all counties for use in 
the ARC program. But problems remain. One problem is the program 
itself.
    ARC has had a number of problems including sign-up problems 
associated with administrative counties. For the benefit of producers 
and program integrity, FSA worked with grower groups to resolve the 
problem for the benefit of producers and administrators alike. At the 
same time, we are also dealing with issues that have not been solved, 
including ARC county yield data. We have seen cases in North Dakota, 
Texas, Colorado, Kansas and South Dakota where the benchmark yields and 
current year yields are from differing sources and are not providing 
representative revenue calculations.
    NFU, along with other grower groups, are requesting administrative 
policy revisions. These revisions include: an allowance for current 
year county yields to be determined using comparable source yield data 
that was used for both the benchmark and current year yields, and 
changes to the ``ARC-CO yield cascade policy.'' The change in cascade 
should be as follows: NASS county yield, NASS adjoining county yield, 
and determinations made by State Committees utilizing RMA yield data, 
unpublished NASS yield data, NASS district yield data and NASS state 
yield data.
    The PLC Program is simple to administer and understand and has 
faced no substantial implementation issues. NFU supported this 
Committee's work as it pushed for the promotion of PLC in the 2014 Farm 
Bill. We had serious concerns over ARC. Price protection and weather 
protection should be separate, with ARC there is a mixture of the two 
that have caused problems from our perspective. NFU would have liked to 
see a single program in the form of PLC that contained higher reference 
prices with crop insurance serving as the backstop.
    NFU has also heard from dairy producers with concerns over the 
Dairy Margin Protection Program (MPP). While this program was always 
intended to be a risk management tool in a sector that historically 
relied on direct payments, it has nonetheless fallen short of 
expectations. Dairy farmers are experiencing an extended period of very 
low milk prices and MPP has been unable to provide meaningful relief 
for farmers during this period of low prices and surplus production. We 
have serious concerns that if this problem goes uncorrected more dairy 
farms will go out of business. We hope this Committee can begin to 
examine a reasonable dairy price setting mechanism that takes into 
account production costs and an incentives-based inventory management 
program. NFU would like to see the Committee hold regional hearings to 
discuss dairy pricing and regional feed costs.
    The last Title I program that our members have concern over is the 
Stacked Income Protection Plan (STAX). The current economic situation 
for cotton is anemic and is threatening to cause long-term and 
potentially irreversible damage to the industry and the associated 
infrastructure. Losses in cotton areas translate into pressure on 
associated businesses, infrastructure and rural economies. The 
infrastructure for the U.S. cotton industry (gins, warehouses, 
marketing coops and merchants, and cottonseed crushers and 
merchandizers) will continue to shrink unless there is a stabilizing 
policy for cotton to help sustain the industry in periods of low prices 
such as currently exists today.
    Cotton futures prices are trading in the 55 to 60 range, the 
lowest levels since 2009. Concerns about world demand, burdensome 
global stocks, a stronger U.S. dollar and general price pressure in 
commodity markets are all factors in the current price environment. 
Lower prices for cotton lint and cottonseed contributed to a decline in 
U.S. average market revenue of $156 per harvested acre in 2014 compared 
to 2013 levels. For the 2015 crop, market revenue from cotton fiber and 
seed will fall short of USDA's full costs of production by more than 
$230 per acre.\16\
---------------------------------------------------------------------------
    \16\ National Cotton Council of America. (n.d.). Retrieved April 
12, 2016, from http://www.cotton.org/.
---------------------------------------------------------------------------
    NFU believes that STAX is not sufficient to solve the current 
situation on its own. To start, STAX only covers roughly 29 percent of 
cotton acres.\17\ NFU, along with other allies including the National 
Cotton Council are supportive of classifying cottonseed as an ``other 
oilseed'' for the purposes of ARC and PLC. We recognize there has been 
a debate over current USDA authority and would urge USDA and Congress 
to find a meaningful path forward. We also hope Congress can work with 
the USDA to expand its authority to assist producers as well as USDA 
working within its existing authority to provide relief.
---------------------------------------------------------------------------
    \17\ Shurley, D. (3 Dec., 2015). STAX: A by-the-numbers look at its 
first year for cotton farmers. Southeast Farm Press. 
---------------------------------------------------------------------------
Bright Spots
    During these difficult times there will be many of conventional 
producers who will manage to get through the down farm economy and in 
some cases come out stronger in the end. There are also bright spots in 
the farm sector where there is additional growth. Organic and local 
foods sectors continue to grow and seem, for the most part, to be less 
subject to falling prices. This Committee, which made record 
investments through the 2014 Farm Bill, deserves credit for the current 
landscape in these sectors. These investments include $11.5 million 
annually for the National Organic Certification Cost-Share, $20 million 
annually for the Organic Agriculture Research and Extension Initiative, 
$5 million over the life of the farm bill for the Organic Production 
and Market Data Initiatives, $5 million for the National Organic 
Program technology upgrades and $30 million annually for the Farmers 
Market and Local Food Promotion Program.\18\
---------------------------------------------------------------------------
    \18\ H.R. 2642.
---------------------------------------------------------------------------
    With the help of this Committee and the 2008 and 2014 Farm Bill 
investments, there are now 21,781 certified organic operations in the 
U.S. According to data released by the Agricultural Marketing Service's 
(AMS) National Organic Program (NOP) in the beginning of April, the 
number of domestic certified organic operations increased by almost 12 
percent between 2014 and 2015. To further highlight the increase in 
demand, the organic sector has undergone nearly 300 percent growth 
since 2002. USDA, with the help of Congress has provided more than $1 
billion in investments to over 40,000 local and regional food 
businesses and infrastructure projects since 2009. Sales estimates of 
local food have totaled $12 billion in 2014, up from $5 billion in 
2008.\19\
---------------------------------------------------------------------------
    \19\ USDA Reports Record Growth In U.S. Organic Producers. (2016). 
Washington, D.C.: U.S. Dept. of Agriculture, Office of Communication.
---------------------------------------------------------------------------
Conclusion
    There are many challenges facing agricultural today. This Committee 
has a challenging task ahead of it as it begins to grapple with these 
problems especially as it looks to crafting the next farm bill. The 
safety net needs to be protected from those entities that would like to 
see it torn apart. There must also be recognition on our part that 
these programs are not perfect and will need to be modified where 
necessary, for the benefit of producers. At the same time some areas of 
agriculture are doing well. Our collective challenge is to continue 
working to provide help when and where needed--and to encourage the 
continued growth and success of our most vital industry--agriculture.
    Thank you.

    The Chairman. Thank you, Mr. Johnson.
    Dr. Johansson, you are recognized for 5 minutes.

          STATEMENT OF ROBERT JOHANSSON, Ph.D., CHIEF
           ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE,
                        WASHINGTON, D.C.

    Dr. Johansson. Mr. Chairman, Ranking Member Walz, and 
Members of the Committee, I am pleased to have this opportunity 
today to discuss the state of agriculture and rural economy in 
the United States. Today I will direct my comments towards the 
macroeconomic forces and the impacts in the broader 
agricultural economy. I have submitted a more detailed 
statement for the record, so today, I will focus my initial 
remarks on three main points.
    First, expected prices for the new crop have fallen from 
recent peaks, which will make it difficult for some producers 
to cover variable costs of production. Globally, production has 
exceeded use for corn, soybeans, and wheat for the past 3 
years. As a result, global stocks have been growing. In 
addition, the value of the U.S. dollar has strengthened, 
resulting from slow and uncertain prospects for growth globally 
and relatively strong and stable growth expected for the United 
States. We anticipate the dollar will remain strong through 
2017, relative to customer and competitor currencies. As a 
result, we project that export values in 2016 will be 10.5 
percent lower compared to 2015. One-third of that decline is 
due to reduced trade value with China.
    Second, producers will respond to the expectation of lower 
prices in several ways that we have already heard about. Facing 
lower expected prices for crops, we know that producers will 
adjust planting decisions, cut back on some inputs, rely on 
capital reserves, take on additional debt, renegotiate land 
rental arrangements, and participate in new farm bill programs. 
We have already seen significant changes in farmers' planting 
intentions with 5 million fewer acres of wheat and almost 4 
million acres of corn, more than our expectation from February. 
Machinery sales have lagged behind the 5 year average for the 
past 2 years. Demand for farm loans has been growing since 2011 
and is expected to continue to grow. For example, as of the end 
of February, FSA's use of funds compared to last year is up 16 
percent for direct operating loans, 25 percent for guaranteed 
operating loans, and eight and 25 percent for the direct and 
guaranteed farm ownership programs, respectively.
    We expect farm bill programs will help farmers adjust to 
lower farm income. Agricultural Risk Coverage Program payments 
last year totaled approximately $4.2 billion, and payments for 
ARC this year are forecast to be approximately $7.2 billion. 
PLC Program payments last year totaled approximately $700 
million and are forecast to be nearly $2 billion this year. In 
addition, many producers who have the ability to choose crop 
insurance to manage risks have unforeseen losses for the 2016 
crop. Overall, government payments are expected to rise from 
about $10.6 billion in calendar year 2015 to about $13.9 
billion this year, and that includes conservation payments of 
approximately $3.5 billion.
    Third, farm incomes will fall in 2016, but household 
incomes are expected to show some positive growth. Farm net 
cash income, as we have heard, is expected to fall by roughly 
three percent relative to last year. Of course, last year's net 
cash income, which includes commodity receipts, cash, farm-
related income, and government payments less cash expenses, 
fell by 27 percent relative to 2014. So, that is a flattening 
of the drop in farm income. In the crop sector, our initial 
projections suggest that crop commodity receipts will be down 
this year by $1.6 billion, a decrease of about a percent. In 
the livestock and dairy sector, our producers will benefit from 
lower feed costs, but will also continue to be affected by 
tighter prospects for trade. Projections indicate a decrease in 
livestock receipts of $7.9 billion, or about four percent.
    However, despite slightly lower aggregate, net cash income, 
we still project that the majority of farm households will see 
some increase in household income in 2016. Median farm 
household income is expected to exceed $81,000 in 2016. That is 
a record. Our initial projections show that median on-farm and 
off-farm incomes are expected to rise slightly in 2016, 
compared to 2015. In general, that means that the majority of 
farm households are in a relatively stable position going into 
the year, but it also means that there will be a group of farms 
that are likely to face significant financial stress in 2016.
    To summarize, the overall farm economy in the U.S. does 
have growing financial pressures. Global production is up. 
Stock levels have been growing. The U.S. dollar is strong, and 
the trade environment is very competitive, all of which mean 
prices are down relative to recent years. Farmers will adjust 
to lower expected sales through a number of strategies to 
minimize unnecessary costs and optimize their production. To 
cover costs, they will utilize capital reserves such as 
financial reserves or new equipment, and may take out new 
operating loans. Currently, interest rates remain very low so 
new debt is not expected to result in significant increase in 
operating costs. We would expect land value and cash rent 
levels to realign to the lower price environment, but more 
slowly than other costs. Last, we expect farmers to utilize new 
farm bill payments to cushion that transition to new lower 
commodity prices.
    However, I will point out that many of our expectations and 
projections for the new crop year and the impacts on the farm 
economy were developed prior to our Outlook Conference at the 
end of February. Since then, farmers have signaled they will 
plant more corn and less wheat than we initially expected. 
Similarly, the Chinese have recently indicated they will start 
to unwind their strong stock position in corn. All of that 
information, as well as spring weather, will ultimately 
determine the acres and management decisions chosen by 
producers this year.
    Mr. Chairman, that concludes my opening statement. I am 
happy to answer any follow up questions that you may have now 
or later for the record. Thank you.
    [The prepared statement of Dr. Johansson follows:]

 Prepared Statement of Robert Johansson, Ph.D., Chief Economist, U.S. 
              Department of Agriculture, Washington, D.C.
    Mr. Chairman and Members of the Committee, I am pleased to have 
this opportunity to discuss the state of agriculture and the rural 
economy in the United States.
    Last year the outlook for the agricultural sector was driven by 
factors, such as transportation issues, energy price declines, and 
drought in the West. This year, while energy prices and drought remain 
important components of the outlook, the overall picture for 
agriculture in the United States is being driven more by macroeconomic 
factors such as economic growth both here and abroad and resulting 
currency adjustments.
    A strong dollar coupled with high-levels of global agricultural 
production leave U.S. producers facing commodity prices that continue 
to decline from record levels and a more difficult trading environment 
than last year. As a result there will be growing financial pressures 
on some producers this year, as expected revenue may not be sufficient 
to cover expected costs. Overall, USDA forecasts that net cash income 
will fall again in 2016.
    Because in some cases expected revenues may not be sufficient to 
cover potential costs, some producers will likely rely on capital 
reserves (farm incomes were at record highs between 2011 and 2014), 
increase demand for loans, lower their input use, and rely on farm 
programs. Overall, the outlook for 2016 is for flat to lower farm 
income in aggregate, but median farm household income is forecast to 
increase 4.5 percent to $81,666, reflecting expected increases in off-
farm income.
    Today, I will direct my comments toward macroeconomic forces and 
the impacts on the broader agricultural economy, as I am sure the other 
two speakers here will discuss farm-level impacts in greater detail.
Macroeconomic Outlook
    [CY] 2015 marked a significant change in the global business cycle. 
Projections for global growth fell consistently throughout 2015. USDA's 
10 year baseline used assumptions that showed world GDP growth rising 
slowly and to plateau at just over three percent. A key component of 
that global slowdown is slowing economic growth in China (see Figure 
1). Baseline projections also assumed China's GDP growth would slow to 
6.1 percent in 2016, 5.7 percent in 2017, and gradually edge down 
towards 5.0 percent. The latest IMF projections now show Chinese growth 
improving slightly with growth at 6.5 percent and 6.2 percent in 2016 
and 2017, respectively.
    While that growth is still relatively high, the slower growth means 
China's GDP is now forecast to be $700 billion lower in 2020 (about 5.7 
percent lower than forecast at this time in 2015). The implication is 
that China will be importing raw materials at a slower pace as it 
embarks on a more consumer- and service-oriented economy compared to 
one fueled more by housing construction and a buildout of its 
manufacturing capacity. Countries that were heavily dependent on 
selling goods and services to China are now facing a reduction in 
economic growth themselves (Australia, Korea, and Brazil, for example). 
By comparison, the United States is expected to be the growth leader 
among developed countries over the next decade. U.S. economic growth is 
expected to be near 2.5 percent in 2016 and 2017 before gradually 
moving to a longer-term growth rate of 2.3 percent
    Driven by the relative strength and safety of the U.S. economy and 
by relatively expansionary monetary policies in many other countries, 
the real value of the dollar increased substantially in 2015 relative 
to competitor and customer currencies, and that growth is expected to 
continue through 2017 (see Figure 2). Clearly, a stronger dollar means 
it is more difficult to sell products to countries with weaker 
currencies, such as Egypt and Nigeria (major wheat importers), and it 
is easier for countries, such as Canada, the EU, Brazil, and Argentina 
to sell their agricultural products abroad, making for an extremely 
competitive trade environment.
    However, a strong economy also helps U.S. producers in several 
ways. First, it is easier for U.S. buyers to import goods, such as 
fertilizer, from countries with weakening currencies, such as Canada, 
Russia, and Ukraine. Second, a stronger U.S. economy provides improved 
off-farm income opportunities for a large majority of U.S. farm 
households. Third, 80 percent of agricultural products are sold 
domestically, so a stronger domestic economy likely means more 
opportunities to sell more U.S. products and provide additional value-
added at home.
Outlook for Trade Is Down in the Near-Term
    Turning to the outlook for trade, U.S. agricultural exports were 
most recently forecast at $125 billion for FY2016 (see Figure 3). That 
is down 10.5 percent from last year, with much of that stemming from 
lower values, not volume, and with \1/3\ of the decline coming from 
reduced sales to China. Yet, while strong competition, reduced demand, 
and lower prices have contributed to falling U.S. export sales, the 
last 5 years, and this year if forecasts hold, mark the 6 top years for 
value of agricultural exports. On the import side, a stronger dollar 
means that U.S. consumers have a greater ability to buy foreign goods. 
This year, agricultural imports are forecast to rise to a record $118.5 
billion. The next USDA trade forecast will be in May.
    The FY 2016 forecast for grain and feed exports is down $4.4 
billion from FY 2015 to $27.2 billion, due to lower volumes of corn and 
feeds and fodders, lower prices, and increased competition from other 
suppliers. Oilseed and product exports are forecast at $25.4 billion, 
down in both value and volume. Soybean exports are projected at 46 
million metric tons in FY 2016, which would be the second highest level 
ever, if realized, after last year's 50.4 million metric tons. Cotton 
exports are forecast $900 million below last year, at $3.2 billion on 
reduced supplies and shrinking global demand. Rice exports are forecast 
at $1.8 billion, $300 million below last year, mostly on declines in 
volume. Livestock products are down $2 billion from last year, to $16 
billion, due to lower prices, while dairy has dropped $700 million due 
to lower prices and strong competition from the EU. However, sales of 
horticultural products driven by tree nut exports and processed fruit 
and vegetables are up by almost $600 million.
    Changing market conditions explain the export projections. For 
example, over the past 10 years, agricultural export volumes to China 
have increased by more than 125 percent. We expect China imports of 
corn to be limited and imports of sorghum and barley to slow in the 
near future, but to continue to grow over the next decade (see Figure 
4). Conversely, for Brazil, we expect its producers to respond to 
relatively high prices for corn and soybeans (given Brazil's currency 
depreciation) and to increase production over the next 10 years. That 
will translate into increased Brazilian exports and greater competition 
for the United States (see Figure 5).
    Overall, global trade of grains and oilseeds is expected to 
increase over the next decade to meet rising global demand. Global 
trade for wheat is projected to increase by 17 percent, for coarse 
grains by 15 percent (25 percent for corn), and for soybeans and 
products by 24 percent (25 percent for soybeans). Based on projected 
yield growth, the world will need to allocate about 50 million more 
acres to corn, wheat and soybeans, at U.S. productivity growth levels, 
to meet the increase in trade demand.
Prices Continue To Soften
    U.S. prices have moderated with weaker demand for U.S. products and 
greater foreign competition. Stock levels have increased, and record 
global crops, largely a result of relatively high prices for much of 
the last decade, have expanded supplies. Since December, the dollar has 
continued to strengthen relative to the Brazilian real and Argentine 
peso; Argentina has taken actions to be more competitive in world 
commodity markets; oil prices and fertilizer prices have weakened; 
China's demand for sorghum has slowed; and the U.S. rice market has 
tightened.
    In February, we released our expectations for the new crop. At that 
time, we expected further price reductions for the 2016/17 crop year 
for corn, soybeans, wheat, rice and cotton as compared to our long-run 
baseline forecast from December of last year. Wheat prices for 2016/17 
were estimated at $4.20 per bushel, a decline of 16 percent from the 
current year. There are signs of weak exports, and we have already seen 
winter wheat area come in below trade expectations suggesting producers 
adjusted their plantings. Corn prices were projected to fall to $3.45 
per bushel for 2016/17. Soybeans prices were forecast at $8.50 per 
bushel in 2016/17. The all-rice price was forecast at $12.90 per 
hundredweight for 2016/17. Cotton prices were projected at 58 per 
pound (see Figure 6).
    Lower commodity prices are expected to idle some land that had been 
brought into production as commodity prices rose in the late 2000s. 
With the continued pressure on margins, based on farmers' intended 
plantings, the total area allocated to major crops in 2016 is expected 
to fall by 2 million acres compared to last year, even as area enrolled 
in the Conservation Reserve Program continues to decline, and would be 
down nearly 6.5 million acres from the recent peak in 2014 (see Figure 
7).
    USDA's Prospective Plantings report released on March 31 reported 
that farmers intend to plant 93.6 million acres of corn in 2016, a 
surprising 3.6 million acres higher than average trade expectations and 
the level we had projected back in February. At that level, under 
normal growing conditions and coupled with already high stock levels, 
domestic corn supplies would be a record and corn prices could fall to 
levels not seen in a decade. Markets quickly reacted to the Prospective 
Plantings report, pushing the Dec. 2016 corn futures to a life of 
contract low. In contrast to corn, planting intentions of 82.2 million 
acres of soybeans were toward the low end of trade expectations. Actual 
winter wheat planted area and spring wheat intended plantings were down 
a combined 5.1 million acres from last year. At 49.6 million acres, all 
wheat planted area would be the lowest total since 1970.
    Along with weather, changes in anticipated harvest time prices and 
input costs between now and planting time will determine final acreage. 
Farmers will adjust their early planting intentions as new information 
becomes available as the planting season unfolds. For example, China 
recently announced that the temporary corn reserve purchase policy in 
northeastern provinces and Inner Mongolia would be replaced by a new 
mechanism of ``market acquisition'' and ``subsidy,'' intended to reduce 
government-held stocks. How that policy will be implemented is unclear 
but it is controversial and contentious in China as it will likely 
affect farm income. The United States has not been exporting very much 
corn to China since 2014. China's main corn supplier has been Ukraine, 
following an agreement between the two countries signed in 2013. 
Nevertheless, this is likely to be another bearish factor on feed grain 
markets. The United States has exported a significant share of sorghum 
and distillers dried grains with solubles (DDGS) production to China in 
the last couple of years, although this trade has slowed and could be 
impacted by the policy change in China.
    Turning to the livestock, dairy and poultry sectors, we project 
that total meat and poultry production will be at a record high of 97 
billion pounds in 2016, as production of beef, pork, broilers (chicken 
bred for meat production), and turkeys all increase. Milk production is 
also projected to be at a record 212 billion pounds in 2016. U.S. meat 
exports are expected to increase in 2016 following declines in beef and 
broiler exports and relatively slow growth in pork exports in 2015 (see 
Figure 8). Exports in 2016 are expected to be up from the last year as 
larger supplies and lower prices increase the attractiveness of U.S. 
products to foreign consumers. Broilers were affected in 2015 by the 
closure of markets to U.S. poultry as a result of the discovery of 
Highly Pathogenic Avian Influenza (HPAI), although many of those 
markets have reopened. However, a relatively strong dollar paired with 
Russia's continued ban on imports of U.S. meat and relatively slow 
economic growth in a number of markets may also constrain export growth 
for meats. Until last year, dairy exports were growing fairly steadily; 
however, the confluence of a strong dollar, large competitor supplies, 
and lower imports in key markets resulted in lower exports in 2015. 
Many of those conditions have carried into 2016, and dairy product 
exports are expected to fall slightly.
    In 2016, prices for cattle, hogs, broilers, and dairy products are 
projected to fall from last year's levels. Fed steer prices are 
forecast to decline to $137 per cwt, down seven percent as increased 
cattle supplies move through feedlots. Hog prices are expected to fall 
to $48 per hundredweight, down five percent from last year. Broiler 
prices are expected to average 86 per pound, down five percent from 
2015. Although domestic demand for milk and milk products provides some 
support for product prices, supplies remain large and export demand for 
certain dairy products has weakened, pressuring prices. Milk prices are 
expected to average $15.25 per cwt in 2016, 10.7 percent lower than in 
2015. Milk prices are expected to decline to an average of $14.55 per 
cwt this quarter, before rebounding in the second half of the year to 
average $15.90 per cwt in the fourth quarter.
Farm Income Is Expected Down
    USDA's farm income forecast from February shows farm budgets 
tightening with lower prices. USDA-ERS projects that net cash income 
and net farm income are both expected to fall slightly compared to 
2015, but by much less than last year. A crop budget calculator from 
University of Illinois has been updated to show expected prices for 
corn and soybeans in 2016 (see Figure 9). Revenue to cover such things 
as rent and salary after accounting for other costs is lower than the 
average cash rent value. This illustrates some places where producers 
could seek to tighten budgets: chemical inputs, seed purchases, crop 
insurance, machinery costs, etc.
    Given the situation and outlook for commodity prices and farm 
income, USDA's Farm Service Agency (FSA) is experiencing strong demand 
in FY 2016 in both direct and guaranteed loan programs. FSA loan 
volumes were up more than 40 percent between 2013 and 2015 and as of 
the end of February, the use of FY 2016 funds compared to levels from a 
year ago were up by 16 percent for direct operating loans, 25 percent 
for guaranteed operating loans, and eight and 25 percent for the direct 
and guaranteed farm ownership programs respectively. That situation is 
indicative of the financial sector as a whole. According to the Kansas 
City Federal Reserve Bank, which collects information about farm 
banking and credit, debt has been increasing at agricultural banks 
since 2011. In late 2015, farm debt at commercial banks was running 
about eight percent higher than in late 2014. However, the Kansas City 
Federal Reserve Bank also notes that interest expenses have remained 
low as a percentage of operating costs.
    We expect farm bill programs to help farmers adjust to lower farm 
income. The largest program, Agricultural Risk Coverage (ARC) payments 
in CY 2015 totaled approximately $4.2 billion. Payments for ARC in CY 
2016 are forecast to be approximately $7.2 billion. Another new farm 
bill program, Price Loss Coverage (PLC), also provide payments of 
approximately $0.7 billion in CY 2015 and are forecast to provide 
nearly $2 billion in CY 2016. In addition, many producers have the 
ability to choose crop insurance to manage risk for their 2016 crop, to 
help offset any unforeseen losses. Overall government payments, which 
are more tied to economic conditions than before, are expected to rise 
from about $10.6 billion in CY 2015 to about $13.9 billion in CY 2016, 
which also includes conservation payments of approximately $3.6 billion 
in Cy 2015 and CY 2016
    The new farm bill also provided producers with more options for 
Federal crop insurance, including new policies like peanut revenue 
insurance and the Stacked Income Protection Plan (STAX) for upland 
cotton. While STAX uptake has been higher in some states than others, 
reaching over 50 percent of planted cotton area in Alabama, generally 
it has been well below purchase of traditional crop insurance revenue 
protection policies. Revenue protection policies cover over 80 percent 
of total cotton planted area in the United States, and reached 94 
percent in Texas. Coverage levels average around 70 percent. In 2015 
STAX covered about 29 percent of insured cotton acres.
Conclusions
    Global crop production for grains and oilseeds have recently 
exceeded global demand and have contributed to stock building and price 
declines over the past year, and those trends are expected to level off 
in 2016. In addition, the U.S. dollar has remained relatively strong 
compared to our competitors and customers for agricultural products. As 
a result the U.S. faces a very competitive trading environment in 2016.
    Lower prices for crops imply a slightly lower forecast for overall 
farm incomes. The new farm programs will benefit many producers, while 
falling energy prices will continue to lower input costs, and new crop 
insurance products will cover more products at higher coverage rates 
than in previous years. While farm cash rents remain high relative to 
expected returns, we are starting to see some declines in cropland 
values and cash rent levels. Domestically, lower commodity prices will 
likely lead to reduced planted acres overall.
    However, record high net farm income levels from several years ago 
helped U.S. producers to strengthen their financial base and that is 
still reflected in the financial outlook. Heading into spring planting 
this year, USDA projects that producers' debts relative to their assets 
will remain near historic lows. A slightly higher debt (mostly from 
operating loans) and lower assets (from some erosion in land values) 
will result in a slight increase in the debt-to-asset level in 2016. 
While borrowing is up, the level of bankruptcies and farm loan 
forfeitures remain at historically low levels.
    In addition, despite slightly lower expected net farm income in 
2016, we still project that a majority of farm households will see 
increases in household income in 2016, a sign of a strong economy, new 
farm bill programs, and falling expenses. Taking a look at the median 
household is often more informative than looking at the average 
household, since the average will be significantly skewed towards the 
much larger farms, even though they represent a minority of households. 
Median farm household income is expected to reach $81,666 in 2016, a 
record. Median U.S. household income and median farm household income 
were nearly the same in 2008. Since that time, farm household income 
has grown more rapidly. In 2014 median farm income was $80,600 and 
median U.S. household income was $53,657 (median U.S. household income 
is not yet available for 2015 or 2016).
    Of course, it is difficult to know what the median farm household 
in the United States looks like. Roughly 60 percent of farm households 
are small, with sales of less than $350,000 and without a full-time 
farm operator. Another 31 percent of farm households are considered 
intermediate and have sales of less than $350,000, but do have a full-
time farm operator in the family. Last, there are roughly nine percent 
of U.S. farm households that would be considered commercial-level 
operations with more than $350,000 in sales. Our initial projections 
show that both on-and-off-farm income for all three groups are expected 
to rise slightly in 2016 compared to 2015. In general, this means that 
the majority of farm households are in a relatively stable position 
going into the year.
                                [Charts]
Figure 1. World GDP Growth Slows, Most Notably in China


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA Agricultural Projections to 2025, February 2016.
Figure 2. U.S. GDP Growth and Real Agriculture Trade-Weighted Exchange 
        Rate
        
        
        
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: USDA Agricultural Projections to 2025, February 2016.
Figure 3. U.S. Agricultural Exports


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Outlook for U.S. Agricultural Trade, February 2016, 
        Data are fiscal year.
Figure 4. Projections Up for China's Imports of Grains, Soybeans, and 
        Cotton


        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: USDA Agricultural Projections to 2025, February 2016.
Figure 5. Projections Up for Brazil's Exports of Corn and Soybeans



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA Agricultural Projections to 2025, February 2016.
Figure 6. Corn, Wheat, and Soybean Prices Soften, But Still Above 2000-
        2003 Average



        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: USDA-NASS (History), OCE (April 2016 WASDE for 2015 
        and Agricultural Outlook Forum for 2016). Wheat, corn, and 
        soybeans are in dollars per bushel; cotton is in cents per 
        pound, and rice is in dollars per hundredweight.
Figure 7. Planting Intentions Down From Last Year



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA-OCE. The 2016 forecasts are from Prospective 
        Plantings, NASS.
Figure 8. U.S. Meat Exports Expected To Increase



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA, World Agricultural Supply and Demand Estimates, 
        April 2016.
Figure 9. Illinois Case Shows Crop Budgets Tightening



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA-OCE; University of Illinois 2016 Crop Budgets, 
        Central Illinois--High Productivity Farmland.

    The Chairman. Thank you, sir.
    And we will finish with Dr. Outlaw. You are recognized for 
5 minutes.

        STATEMENT OF JOE L. OUTLAW, Ph.D., PROFESSOR AND
  EXTENSION ECONOMIST, DEPARTMENT OF AGRICULTURAL ECONOMICS, 
               TEXAS A&M UNIVERSITY; CO-DIRECTOR,
          AGRICULTURAL AND FOOD POLICY CENTER, COLLEGE
                          STATION, TX

    Dr. Outlaw. Chairman Crawford, Ranking Member Walz, and 
Members of the Subcommittee, thank you for the opportunity to 
testify on behalf of the Agriculture and Food Policy Center at 
Texas A&M as you focus on the growing farm financial pressure 
gripping our nation.
    For over 30 years, we have worked with Agriculture 
Committees in both the U.S. Senate and House of 
Representatives, providing Members and Committee staff 
objective research regarding the potential farm level effects 
of agricultural policy changes. Working closely with commercial 
farmers has provided our group with a unique perspective on 
agricultural policy.
    In 1983, we began collecting information from panels of 
four to six farmers or ranchers that make up what we call 
representative farms located in the primary production regions 
of the United States for most of the major ag commodities. The 
results I am going to discuss today focus on the financial 
condition at the end of 2016 and again at the end 2020 for 63 
representative crop farms located in 20 states, and Figure 1 of 
my testimony has their locations, if you are interested. The 
analysis utilizes FAPRI's January baseline commodity price 
projections, and we have a color coding system that I am going 
to discuss. We have developed a color coding system to provide 
a quick way of showing how the farms are doing. Much like your 
stop light here in front of me, a green indication is a farm 
that only has a 25 percent chance of not cash flowing or 25 
percent chance of losing their real equity. A yellow farm is 
indicated by a farm that has between 25 and 50 percent chance 
of losing--not cash flowing, and the same percentage for losing 
their real wealth. A red farm, as we have indicated here, has a 
greater than 50 percent chance of not cash flowing at the end 
of 2016 or 2020, and a greater than 50 percent chance of losing 
their equity. The Figures 2 through 5 provide a listing of the 
farms characterized as either feedgrain and oilseed, wheat, 
cotton or rice. And I just mentioned, the characterization is 
based on the farm's gross receipts, whatever they have, 50 
percent or greater of in terms of their gross receipts.
    As prices change over time, some of these farms that are 
characterized as a cotton farm might actually be doing better 
because of the grains they have switched to instead of cotton, 
and we will talk about that later, I am sure.
    So getting to the results: these results are the worst for 
feedgrains and oilseed farms, as well as wheat and cotton 
farms, that we have ever had in most of my career, at least 
since the early 1990s and probably before that. Specifically, 
11 of 23 feedgrain farms are projected to end the period in 
poor financial conditions, so more than \1/2\. Six of 11 wheat 
farms are projected to end the period in poor financial 
condition, again, more than \1/2\. Eight of 15 cotton farms and 
the only bright spot, only four of 14 rice farms are suspected 
to end the period in 2020 in the red or poor condition. These 
results already include any projected ARC and PLC payments that 
will be triggered by low prices or low incomes in future years.
    We contact our individual representative farm members when 
we need their feedback on important events or issues. For this 
hearing, we specifically asked them about the financial 
situation in their area, how they are dealing with low prices, 
and overall observations of the current financial environment.
    I have four points I would like to make. First, obtaining 
financing is much harder. Although all of our producers were 
financed this year, a number of them had to go back to the bank 
and put up a lot more collateral than they have ever had to in 
their careers. The sentiment most feel is that this year is 
going to be a bad crop year and the situation for financing 
next year is going to be nearly impossible.
    Second, almost everyone said they were putting off 
machinery updates through the lean times. A number reported 
that they are going to reduce hired labor and reduce the amount 
of purchased inputs, which also runs counter to trying to make 
the yield that they are trying to do. Cash rents have come down 
a little, but nowhere the amount that commodity prices have 
fallen, and that is due largely to multi-year lease 
arrangements and some landlords who just will not budge. The 
last is probably the most concerning. Most of them are 
concerned about the future for themselves, but also for young 
farmers who don't tend to have the equity in their operations 
that older farmers would have.
    So I am going to summarize my comments with three points I 
would like to make. First, the low prices being experienced on 
most of covered commodities are well below the cost of 
production for almost all of our representative farms. These 
farms have been shown to represent producers with well below 
the average cost of production. So if our representative farms 
are hurting, the average farm or worse than average farm in 
this country is in terrible shape, and we have just shown that. 
Second, the current poor situation on farms across the country 
would be considerably worse, if not for the safety net provided 
by both Title I commodity programs and policies, and Federal 
crop insurance. There are some who say that commodity policies 
are more important than crop insurance, or vice versa. I don't 
believe it is time to pick and choose a winner there. I think 
they are both incredibly important.
    For lenders, lenders tend to view crop insurance as being 
more important because the insurance guarantee is bankable, 
meaning it is something on which they can base a loan. On the 
other hand, producers see the commodity assistance as the only 
chance they have of coming close to breaking even in a low 
price environment.
    And finally, in my opinion, the interest groups that 
continue to call for changes that would negatively impact these 
key policy tools clearly either have no idea how difficult the 
financial situation is across agriculture, or they simply do 
not care. Farmers in this country deserve better than to 
continually be threatened with changes that I consider a 
dismantling of the safety net.
    Mr. Chairman, that concludes my statement.
    [The prepared statement of Dr. Outlaw follows:]

  Prepared Statement of Joe L. Outlaw, Ph.D., Professor and Extension
       Economist, Department of Agricultural Economics, Texas A&M
 University; Co-Director, Agricultural and Food Policy Center, College 
                              Station, TX
    Chairman Crawford, Ranking Member Walz, and Members of the 
Subcommittee, thank you for the opportunity to testify on behalf of the 
Agricultural and Food Policy Center at Texas A&M University as you 
focus on the growing farm financial pressure gripping our nation. As 
many of you know, our primary focus as been on analyzing the likely 
consequences of policy changes at the farm level with our one-of-a-kind 
dataset of information that we collect from commercial farmers and 
ranchers located across the United States.
    Our Center was formed by our Dean of Agriculture at the request of 
Congressman Charlie Stenholm to provide Congress with objective 
research regarding the financial health of agriculture operations 
across the United States. For over 30 years we have worked with the 
[Agriculture] Committees in both the U.S. Senate and House of 
Representatives providing Members and Committee staff objective 
research regarding the potential farm-level effects of agricultural 
policy changes.
    Working closely with commercial producers has provided our group 
with a unique perspective on agricultural policy. While we normally 
provide the results of policy analyses to your staff without 
commentary, I was specifically asked to provide my perspective today.
    In 1983 we began collecting information from panels of four to six 
farmers or ranchers that make up what we call representative farms 
located in the primary production regions of the United States for most 
of the major agricultural commodities (feedgrain, oilseed, wheat, 
cotton, rice, cow/calf and dairy). Often, two farms are developed in 
each region using separate panels of producers: one is representative 
of moderate size full-time farm operations, and the second panel 
usually represents farms two to three times larger.
    Currently we maintain the information to describe and simulate 
around 100 representative crop and livestock operations in 29 states. 
We have several panels that continue to have the original farmer 
members we started with back in 1983. We update the data to describe 
each representative farm relying on a face-to-face meeting with the 
panels every 2 years. We partner with FAPRI at the University of 
Missouri who provides projected prices, policy variables, and input 
inflation rates. The producer panels are provided pro forma financial 
statements for their representative farm and are asked to verify the 
accuracy of our simulated results for the past year and the 
reasonableness of a 6 year projection. Each panel must approve the 
model's ability to reasonably reflect the economic activity on their 
representative farm prior to using the farm for policy analyses.
    The results I am going to discuss today focus on the financial 
condition at the end of 2016 and 2020 for 63 representative crop farms 
located in 20 states (Figure 1). The analysis utilizes FAPRI's January 
baseline commodity price projections. We have developed a color coding 
system to provide a quick way of showing how the farms are doing. Each 
farm is evaluated based on two criteria--their ability to cash flow and 
maintain real net worth. If a farm has less a 25% chance of not cash 
flowing or losing equity then it is coded green. Yellow farms have 
between a 25% and 50% chance of not cash flowing and losing equity. Red 
farms have greater than a 50% chance of not cash flowing and losing 
equity.
    Figures 2-5 provide a listing of all the farms characterized as 
either feedgrain and oilseed, wheat, cotton or rice along with our 
rating of their financial condition at the end of 2016 and 2020. In 
general, more farms get worse (from green to yellow or yellow to red) 
than get better by 2020. The results for feedgrain and oilseed farms, 
as well as, wheat and cotton farms are the worst (in terms of the 
highest percentage of farms in the poor category) since the late 1990s. 
Specifically,

   11 of the 23 feed grain and oilseed farms are projected to 
        end the baseline period in poor financial condition.

   6 of the 11 wheat farms are projected to end the period in 
        poor financial condition.

   8 of the 15 cotton farms are projected to end the period in 
        poor financial condition.

   4 of the 14 rice farms are expected to end the period in 
        poor financial condition.

    These results already include any projected ARC and PLC support 
that would be triggered by low prices or low incomes in future years. 
Unfortunately, the results should be viewed as optimistic because of an 
assumption we make regarding cash balances. It is important to note 
that ARC support tends to be frontloaded and with prices remaining low 
throughout the projection period, the ARC benchmark declines 
significantly resulting in producers receiving little support by the 
end of the period.
    We contact our individual representative farm members when we need 
their feedback on important events or issues. For this hearing, we 
specifically asked them about the financial situation in their area, 
how they are dealing with low prices, and overall observations of the 
current financial environment. Thus far we have received comments from 
about \1/3\ of the 300 representative crop producers that make up our 
panels. Below are a few generalizations I can make after reviewing all 
of their responses:

  1.  Obtaining financing is much harder. All of our farmers received 
            financing (although almost all knew of farmers in their 
            areas that were forced out of business). Many had to go 
            from bank to bank to secure financing, endure tougher 
            rules, and put up more collateral. Most feel the worst is 
            still yet to come (meaning after this crop year).

  2.  Almost everyone said they are putting off capital/machinery 
            updates due to lean times. Many reported reducing the 
            number of hired laborers and amount of purchased inputs.

  3.  Cash rents have come down a little, but nowhere near the amount 
            that commodity prices and returns have fallen. This is due 
            in-part because some producers have multi-year lease 
            agreements. However several cash lease tenants reported 
            their landlord's have been unwilling to lower cash lease 
            rates. There are a substantial number of farms located in 
            the South and Southeast that have share-lease arrangements. 
            Some of these arrangements have been adjusted to give 
            tenants a slightly larger share of the crop.

  4.  Most are concerned about the future, both for themselves and for 
            young farmers who don't tend to have the equity in their 
            operations that older farmers have.

    In summary, I want to offer a few key points for your 
consideration:
    First, the low prices being experienced by most of our covered 
commodities are well below the cost of production for almost all of our 
representative farms. These farms have been shown to represent 
producers with below-average costs of production. So if our 
representative farms are projected to do poorly, then higher-cost farms 
are in trouble.
    Second, the current poor situation on farms across this country 
would be considerably worse if not for the safety net provided by both 
Title I commodity policies and Federal crop insurance. There are some 
in agriculture who say that commodity policies are more important than 
crop insurance or vice versa. I believe they are equally important--
especially during times of low prices. For example, lenders tend to 
view crop insurance as being more important because the insurance 
guarantee is ``bankable'', meaning it is something on which they can 
base a loan. On the other hand, producers see the commodity assistance 
as the only chance they have of coming close to breaking even in a low 
price environment.
    And finally, in my opinion, the interest groups that continue to 
call for changes that would negatively impact these two key policy 
tools clearly either have no idea how difficult the financial situation 
is across agriculture or they simply do not care. Farmers in this 
country deserve better than to continually be threatened with changes 
that I consider a dismantling of the safety net.
    Mr. Chairman, that completes my statement.
                                [Charts]
Figure 1. AFPC's Representative Crops Farms
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 2. Projected Feedgrain and Oilseed Farm Outlook
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 3. Projected Wheat Farm Outlook
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 4. Projected Cotton Farm Outlook
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 5. Projected Rice Farm Outlook
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Thank you, Dr. Outlaw. I would remind Members 
that they will be recognized for questioning in order of 
seniority for Members who were here at the start of the 
hearing. After that, Members will be recognized in order of 
arrival. I appreciate the Members' understanding.
    With that, I will recognize myself for 5 minutes. Let me 
start with a general question here. What do you say to those 
who look at the situation of agriculture and wonder why don't 
farmers just not plant a certain crop if they don't think they 
will make money doing it? And I will ask Dr. Outlaw first, 
because you have done extensive research on this. If you want 
to start us off?
    Dr. Outlaw. Sure. Basically the producer situation we have 
right now is they are trying to plant the crop they are going 
to take the least loss at. Said differently, they are also 
trying to plant the crop that they might be able to get an 
above average yield on, which would make them come closer to 
breaking even.
    But the big question you asked is specifically why don't 
they just stop? And the reality is that very few farms across 
this country don't have loans that they have taken out on 
equipment, land. These investments are quite large. In order to 
try to service that debt, they have to try to make some money 
back, and so we have people trying to give it a go. I am not 
going to sit here and say that every farmer in the United 
States is in dire straights, but I am telling you that is the 
trend. And to answer your question, basically we have producers 
trying to do something that might, either through a higher than 
average yield or something that happened in the price on the 
commodity side, make money. They don't want to not farm.
    The Chairman. Right.
    Dr. Johansson, what areas of the U.S. are farmers reporting 
the most financial stress? Is there a specific geography, or 
are we pretty much all across the country? And when we talk 
about that kind of stress on farmers, what form does that 
stress take?
    Dr. Johansson. I would say right now, obviously, we have 
talked about the difficulties for cotton farmers this year. 
Prices are expected to be low going into planting this year, 
and are expected to rise significantly over the next 5 years or 
so. So certainly there will be stress in cotton areas, and we 
can come back to that question later.
    Looking at the farm business income from USDA estimates 
recently, the regions and the sectors that we see the most 
declines in crop receipts expected for this year are dairy 
sectors in the Northeast, Midwest, as well as specialty crop 
receipts in Florida and the Pacific Coast. Obviously, we are 
also going to see declines in other areas too, but those are 
the largest that we are showing right now. We do see some 
additional declines in pork receipts and poultry as well, so 
that again will be in the middle part of the country for the 
most part.
    So what form will the stress take? As I mentioned and as we 
have all heard, producers will try and cut back on their losses 
in a lot of different ways, but we would expect at least for 
this year: I can't project out 5 years like Dr. Outlaw just 
did, but at least for this coming year they will be looking for 
increased operating loans when they are having difficulties 
making ends meet, as well as relying on reserves that may have 
been built up over the last 5 years.
    The Chairman. Thank you.
    Mr. Duvall, if you would, I would like to get some 
comparisons here. We note that there were some huge challenges 
for agriculture and ag credit during the 1980s. Based on the 
experience farmers have had over the last few years, how do you 
think the farm environment now compares to that period in the 
1980s? And if it is not as bad as the 1980s, how close are we 
to that level?
    Mr. Duvall. Well, we are at the beginning of what we saw 
eventually in the 1980s, and hopefully we have learned a lot 
from that. Of course, our big concern is about the young men 
and women that went in lately and haven't experienced anything 
like this before. But, once this process starts, you start 
trying to find a way to survive until it comes back, and of 
course through refinancing, delaying your future plans. A man 
my age wants to bring his son back, and I brought my son back 
and purchased another farm. You put those plans on delay to try 
to help him get started. There are so many things that are 
going to happen before we get to that point. But what we see 
happening now are indicators that we are going to get there. 
Right now, we still have good cash and good assets there, and 
our land values are beginning to trend down, but they haven't 
trended down as rapidly as they were during that time. So when 
that starts happening, then we are going to start seeing the 
critical stage that we saw during that time.
    The Chairman. Mr. Johnson, do you concur?
    Mr. Johnson. I do. There is a huge difference between now 
and the 1980s: interest rates. We were looking at interest 
rates approaching 20 percent, in some cases exceeding 20 
percent. And of course, you saw land values drop by 50 percent 
in a period of just a couple years. You saw machinery values go 
even more than a 50 percent drop. And so debt just spiraled out 
of control. We don't have that interest rate environment right 
now, but if that changes, this situation is ripe for going very 
fast in a negative direction, in my opinion.
    The Chairman. Thank you, sir.
    I am going to recognize Ranking Member Walz, for 5 minutes.
    Mr. Walz. Thank you, Chairman. Thank you all for your 
testimony. I would like start, I want to thank you, Dr. Outlaw, 
for that articulate statement on crop insurance, and I hope 
that gets broadcast wide because I do think misinformation, and 
again, when that reared its head at the omnibus, thank goodness 
the Chairman and others stood for that. So I appreciate that.
    I will go quickly here. I want to start with Mr. Johnson 
and Mr. Duvall. Are you seeing a generational difference on how 
producers are handling this in any way?
    Mr. Johnson. Yes, there is a generational difference, and 
the folks that I think we need to be most concerned about are 
those who have started farming in, let's say, the last 10 years 
or 5 years in particular where they started at a time of very 
high prices, high profitability, and extraordinarily high 
costs. And one of the characteristics of an agricultural 
economy is that when market prices go down, the costs go down 
much, much more slowly and they take a lot, lot longer to go 
down. And so you will find the economy move into this sort of 
negative income and negative cash flow situation very quickly. 
If these young farmers haven't had a chance to build up the 
cash reserves that Dr. Johansson talked about, then they just 
don't have the ability to survive nearly as long. That is the 
big concern, in my opinion.
    Mr. Duvall. Yes, sir, one of the bright spots when our 
young people come back home, they are so in tune to all of the 
new technologies that are out there to use, and they are going 
to be so efficient with what they do and have the opportunity 
to exercise that knowledge and that ability to use those 
technologies.
    Of course, that also goes back and speaks volumes about 
research and development and monies that we are spending there 
with the land-grants and everywhere, and how important that is 
to continue and keep making that investment in the future so 
that when times come like this, we have the technologies to be 
able to tighten up our belt just a little bit tighter, maybe 
put the future on hold a little bit, and help us get through 
this time.
    Of course, a lot of our young farmers are dependent on 
their families and their dads to sign the bottom line. Those 
guys that are coming in fresh, they are really going to be in 
for a hard time.
    Mr. Walz. I agree, and this Committee has emphasized 
beginning farmers and ranchers in this generational issue, and 
we have a lot of them in there. Now it is our job to keep them 
in there.
    Section 179, the permanent $500,000 deduction, did that 
help? Is it good? Is it where we were at? I ask that because we 
don't get credit for doing much around here, but we did do 
that.
    Mr. Duvall. Most certainly it has. What you did was a good 
thing to do, and it was of very much help.
    Mr. Walz. So you see a real impact, all right.
    Dr. Johansson, I am going to go to you. You said despite 
slowly lower--because I think I am hearing and we are similar 
on this. We are using the same data, but you seem a little more 
optimistic than the others, and I am trying to understand this 
dynamic of off-farm income and some of that. So your statement 
was slightly lower expected net farm income, but we still 
project the majority of farm households will see increases. I 
don't hear that often, but I trust from the economist. I want 
to hear the dynamic of what is working.
    Dr. Johansson. Well sure. We know that a lot of farm 
households earn income off-farm, so when I talk about household 
income for farms, I am talking about both on-farm and off-farm 
income. So we have seen an increase in farm income relative to 
the U.S. household income. Starting in 2008, following the 
recession, farm household income has been growing faster than 
overall U.S. household income. That is due to a number of 
factors, not just on-farm income. Obviously we had great on-
farm income during those years, but we have had growing off-
farm income. That is from investments, increased opportunities 
for working off the farm as well.
    But you are right. It is the same data, it is just 
explaining it somewhat differently. I am just saying that at 
the midpoint, \1/2\ the farms above this, \1/2\ below this, at 
that midpoint we are likely to see those farms with slight 
positive growth relative to last year. Obviously, last year was 
a big drop from 2014 to 2015, so it wouldn't have been the same 
case last year. I am just saying looking at 2016 relative to 
2015, it is pretty flat in terms of their change in income, 
slightly up. But we do also show that at the 50 percent of 
farms that are below that point are going to be facing some 
financial pressures, and I think that is what we are hearing 
about from the other speakers here. We do see the share of 
farms that are highly leveraged, okay, so when we talk about 
that debt-to-asset ratio around 13 percent being much lower 
than it was in the 1980s, so that is an aggregate. That is a 
good thing. But when we look at the share of farms that are 
highly leveraged, that is also growing, so that is what is 
leading to a lot of the discussion that we are having today.
    Mr. Walz. Great, thank you. I yield back.
    The Chairman. The gentleman yields back, and I recognize 
the full Committee Chairman, Mr. Conaway, for 5 minutes.
    Mr. Conaway. Well thank you, Chairman, and Tim pretty much 
started exactly where I did. Let's follow up a little further, 
Dr. Johansson.
    If the median boot size for the Army is a 9, and we buy all 
size 9 boots, then the folks whose feet are 9 or below are 
going to be happy campers, but those of us who have shoe sizes 
bigger than 9 are not going to be really happy. So I worry that 
when we use those statistics--and it is valid I don't question 
the number itself--but it could be misleading in the sense that 
there are very few of them at the median farm household income 
of $81,600. So how do we communicate better? As part of your 
analysis, did you do sector by sector? Again, all politics are 
local. I represent west Texas. I have a lot of cotton farmers 
that are not at that $81,000 mark, I don't believe. As a part 
of your work, do you have sector by sector work that could be 
used to help flesh out and get a better, clearer picture of the 
stresses? Because I agree with Tim. You sounded a lot more 
optimistic than Dr. Outlaw did in his comments.
    Dr. Johansson. Well, just to go back to the main message 
that I was saying, and then I will address your point here.
    We do see farm prices coming down, and that is going to be 
making it difficult for----
    Mr. Conaway. Farm prices for land or crop prices?
    Dr. Johansson. Crop prices.
    Mr. Conaway. Crop prices.
    Dr. Johansson. Crop prices and livestock prices are 
expected to be much lower this year, and that is leading to a 
lot of the question about how farms are going to meet the 
bottom line in general.
    But when we talk about median and then just aggregating 
that a little bit, so we can look at the midpoint of small 
farms, intermediate farms, and large farms. So commercial farms 
with more than $350,000 in sales, intermediate farms with a 
full-time operator but less than $350,000 in sales, and then 
the 60 percent of farms that are considered small, for example. 
The midpoint of all of those are also reflective of the general 
point, which is \1/2\ of all of those categories are going up, 
so size 9\1/2\ narrow, wide, and extra wide are all going to be 
going up a little bit.
    The point that is worth focusing on is, as you point out, 
we hear about the stress in the lower end of distribution. So 
the new and beginning farmers that are more leveraged, 
producers that may have taken out more loans in the last couple 
years to expand their operations, those operations are going to 
have higher debt-to-asset ratios. It would be nice to compare 
those to the 1980s, but our data for those disaggregate pieces 
we can compare the aggregate numbers back to the 1980s, but we 
can't compare those smaller chunks back to the 1980s. Our data 
only goes back to the 1990s.
    The last thing I will point out is we also follow farm loan 
delinquencies as well as bankruptcy rates, and those are still 
at very low levels. Interest rates, as Mr. Johnson pointed out, 
are at extremely low levels. So there are some areas for 
concern, mainly because we do see expected costs exceeding 
expected returns in a lot of cases, but we do have some----
    Mr. Conaway. Okay, I am a CPA, so when my client's costs 
are higher than their revenues, it is hard to get to $81,000 
net farm income. Does that $81,000 count the program 
contributions and everything else? How do we get our production 
costs higher than production revenues to the point where they 
are making money?
    Dr. Johansson. Yes, that includes program payments as well.
    Mr. Conaway. Okay, all right. Zippy and Mr. Johnson, can 
you give us a couple of examples near your home, talking about 
the ability to get credit, to be able to go to the bank and get 
the working capital you need? Can you talk to us about that?
    Mr. Duvall. Yes, one middle aged farmer that was telling me 
that every time he would go to the bank and talk about an 
operating loan earlier this year, they would say well, what do 
you think Congress is going to do about cottonseed, because he 
was a cotton producer. And that bank was almost sitting there 
waiting to see what was going to happen in this town to whether 
or not they were going to make that operating loan. I haven't 
talked to that young man since to see what happened eventually, 
but that banker was concerned about that.
    I heard just this week that in the panhandle of your county 
there were two cotton farmers that called it quits and are 
moving out, so I am sure you probably heard that, too.
    Mr. Conaway. Mr. Johnson, any comments from your folks 
about lending?
    Mr. Johnson. Yes, thank you, Mr. Chairman.
    The ability to get credit, an indicator of what is 
happening to FSA loans, and if there is something that I would 
encourage the Committee to focus on is making sure that there 
is enough funding for FSA, because that really is the lender of 
last resort. That is where you are going to see commercial 
lenders moving their clients to. And the other alarming thing 
that we hear is a lot of folks are taking their operating 
credit that didn't get repaid last year and rolling it over 
either credit or onto land mortgages. We saw that before the 
1980s collapse. I worked as a credit counselor and a lot of 
those years and literally worked with hundreds of farmers 
facing creditors where they couldn't make their payments. That 
is a very alarming trend. I mean, it makes sense if the economy 
improves in the next year or 2. If it does not, then what you 
do is you put at risk more of the assets, as Mr. Duvall was 
saying, a farmer that didn't want to mortgage the land in order 
to keep farming.
    Mr. Conaway. All right, thank you, gentlemen. I appreciate 
all your testimony.
    The Chairman. The gentleman yields back, and I am pleased 
that the Ranking Member of the full Committee could join us 
today. You are recognized for 5 minutes.

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

    Mr. Peterson. Thank you, Mr. Chairman.
    I am wondering if any of you have reaction to what I am 
hearing out in my part of the world. I don't know if it is that 
way in the South with crop insurance. Crop insurance worked 
very well when the prices were going up and when the prices 
were high, but it is the biggest single problem now that 
producers have in getting credit and surviving this downturn. 
And it is going to get worse, and the ARC program basically 
mirrors the crop insurance system in terms of how it works. Now 
I know in the South most people took the PLC. I don't know 
exactly how it is impacting down there, but I am concerned 
about where this thing is at. I don't know what producers are 
going to do, if they are going to stick with revenue, if they 
are going to go back to yield insurance. I don't know. But, I 
would like your take on this issue, if you have any thoughts on 
it, and any of you that want to respond.
    Mr. Johnson. If I could, Congressman, I would make two 
points. First of all, relative to crop insurance, I absolutely 
agree with you. Crop insurance in good price periods does an 
extraordinarily good job. Most policies that are sold today are 
revenue policies, and so if the price is low, then the revenue 
guarantee is also low. And so we are hearing more concerns 
about that. I would encourage the Committee to spend some time 
looking at that dynamic, because it is in these times when help 
is needed the most.
    The second point I would make is that I know that in the 
last farm bill there was a need to sort of compromise, and that 
compromise ultimately meant that the House PLC Program was made 
an option alongside of the Senate ARC programs. Price 
protection is extraordinarily important in these kinds of time 
periods, and so we were very favorably inclined to support the 
PLC Program that came out of this body, and I would encourage 
you to look at trying to move those reference prices higher in 
order to provide that kind of protection. Your point I fully 
agree with.
    Mr. Duvall. Yes, sir, crop insurance is vitally important 
to our farmers because they can decide if they can come to a 
number what their input costs are and try to buy revenue crop 
insurance to cover that cost. They know that if they don't make 
that crop, they can at least cover the cost of getting that 
crop. So it is vitally important, and of course, dependent on 
the environment they are in, whether or not it is important at 
one time or other, it just depends on the environment. So I 
would agree with your comments. But crop insurance is important 
to our farmers, and there are mixed feelings where I come from 
in Georgia. There are mixed feelings about crop insurance. We 
have been a little bit slow to adapt to it down there. A lot of 
our guys, instead of spending it on premium, put it in pivot 
irrigation systems, guarantee the production of crop from 
weather disaster, of course, but they are slowly but surely 
grasping the idea of crop insurance as revenue protection.
    Dr. Johansson. Yes, I would agree with your comments. I 
know that the producers that I speak to when they come in to 
talk about various farm programs generally start with crop 
insurance, that they want to make sure that USDA is firmly 
supporting that, and certainly we would agree that the program 
is offering coverage of about $100 billion in liability, and a 
lot of that is in revenue coverage, as we heard. So, that is 
providing a large part of the safety net, and as you mentioned, 
movement from the direct payment programs in Title I to more of 
an insurance type of program in ARC PLC where those programs, 
particularly with ARC, do kick in when conditions are 
difficult, and that is why we are going to likely see our 
payments going up this coming year.
    Dr. Outlaw. I probably have a little bit different take on 
this because of all the analyses we do; and, like I said during 
my testimony, both Title I programs are critically important 
and crop insurance is critically important, and they serve the 
same purpose to keep the farmer on the farm, but as Mr. Johnson 
said, during low price times, crop insurance, when you are 
buying a coverage covering 80 percent of a loss, it is not very 
exciting. And so the combination of Title I that provides a 
floor on the income that they were going to receive from low 
prices, plus crop insurance, is about as strong as we are going 
to get in this kind of a budget environment.
    The Chairman. The gentleman's time has expired.
    The gentleman from Illinois, Mr. Bost, is recognized for 5 
minutes.
    Mr. Bost. Thank you, Mr. Chairman.
    This question is for Mr. Duvall and Mr. Johnson. I have 
been hearing in my district producers say that the USDA 
Prospective Planting report that came out, and they tell me 
there is no way that they will be able to have that much corn 
grown in the U.S. this year. You both come from different parts 
of the country, and what is your take on the Prospective 
Planting report, and does the USDA report come close to what 
the producers in Georgia and North Dakota are thinking?
    Mr. Johnson. Thank you, Congressman, for that question.
    I was personally surprised at the increase in corn, but I 
am also very, very pleased I am not the one that has to make 
those projections. I think what farmers will do faced with a 
series of price and profit or loss potential outcomes is they 
are going to look to plant a crop that is going to lose them 
the least or make them the most, and have lower risk. If you 
look at the numbers that I provided in North Dakota, they 
actually suggest that soybeans are going to make money, corn is 
going to lose money. North Dakota is probably not a 
representative corn state. We are kind of on the fringe, so I 
don't know that that is the best example, but I would expect 
that in our area, you would probably see corn go down, soybeans 
go up, just based on that analysis. And that is kind of what we 
have been hearing.
    Mr. Duvall. Of course, those numbers you said are just 
intended planted acres, and we are going to be watching that to 
see if we plant everything we intend to.
    But I would make an observation that if you look at what 
happened weather-wise across the country last year, there were 
a lot of acres that weren't planted.
    Mr. Bost. Right.
    Mr. Duvall. Whether it be drought or too much rain, and if 
I am a farmer, my optimism says I am going to plant those acres 
this year. So you had an increase there just in those acres 
there. But we are going to be watching those numbers, but those 
are intended planted acres.
    Mr. Bost. Mr. Johnson, you actually went down a path that I 
was going to ask next, and that is when North Dakota, and you 
in your testimony said as much as $2 an acre loss on corn. Do 
you think that other high prairie states will be moving back to 
some other crop rather than corn?
    Mr. Johnson. At the end of the day there aren't a whole lot 
of choices for farmers. The one thing that they are going to do 
is they are going to plant.
    Mr. Bost. Right.
    Mr. Johnson. And it is really important, I know folks on 
this Committee understand that. I don't think the general 
public gets that. The general public thinks, ``You know what, 
if you are going to lose money on everything, well then don't 
plant anything, you fool.'' And the fact of the matter is, that 
is not an option for farmers. They have to plant for the 
reasons that Dr. Outlaw mentioned earlier, and lots of reasons. 
I mean, you just have to plant. I farmed most of my life. You 
can't imagine not planting just because you are going to lose 
money. You lose way more money if you don't plant.
    My guess is you may see a fair amount of shifting that 
occurs between that projection and when actual planting 
conditions emerge. In our place, it depends an awful lot on 
what planting conditions are like. If the weather starts 
pushing planting later and later and later, you are going to 
forego corn. You are going to do shorter season crops.
    A contrary point that I would make to a point I made 
earlier is we have talked to some folks who are planting corn 
who are looking to increase the amount of corn acreage because 
they are relatively new in it. They have the ability to do more 
rotational kinds of things so they have ground that was in 
canola or wheat or soybeans that can now move into corn, and 
they look at corn as being a stable yielder, particularly if 
they have very high soil moisture conditions which corn uses a 
lot of.
    Mr. Bost. I understand the plight of the farmer. I was in 
the trucking business for years, so we just kept investing 
until we went broke. So I mean, it is kind of the same.
    Mr. Duvall. I would say from the area that I live in and 
come from in Georgia, a cotton picker can only pick cotton. A 
peanut combine can only combine peanuts. We can't change the 
head on our machines in Georgia and decide to grow another 
crop. We are corn deficit state, which is good for the guys in 
the Midwest, because we have a lot of chicken and cattle to 
feed, but that makes it very difficult in Georgia to be able to 
just change crops, plus to get out of your rotation could cost 
you a lot of money in the future.
    Mr. Bost. Thank you, and I yield back.
    The Chairman. The gentleman yields back.
    I now recognize the gentlelady from Florida, Ms. Graham, 
for 5 minutes.
    Ms. Graham. Thank you, Mr. Chairman, Ranking Member Walz. I 
appreciate this opportunity. Thank you so much to all the 
witnesses.
    Yesterday I had the pleasure of meeting with a couple 
groups from the Florida Farm Bureau, I represent the panhandle 
of Florida, and we discussed the decrease of feed prices and 
also the decrease in milk prices. Mr. Duvall, I would be 
curious if you could help illuminate me a little bit more on 
the relationship between crops and livestock, and why we see 
these broad declines across both.
    Mr. Duvall. Well, it has a lot to do with the stockpiles of 
the crops, whatever crop that might be, and how much is out 
there on the world market, and it has a lot to do with trade.
    I was in the dairy business 30 years, and I will be the 
first one to admit, just about the time I got to understand how 
they priced my milk, they changed it. So dairy is a very, very 
difficult thing to explain. But I do know in listening to my 
neighbors that are in the dairy business, they are in some of 
the most trying times they have ever been in. They come off of 
$20 and $25 milk, and now they are looking at $14 and $15 milk 
in Georgia. And I got out of the dairy business in 2005, and I 
was shipping $17 milk then. So there is absolutely no way that 
they could take the inflation factor and put on what they are 
having to put in their input costs, maybe with the exception of 
feed, but everything else, the inflation goes along with the 
other stuff, and be able to keep up with that kind of price if 
they are coming back to it.
    I am also in the poultry business. I understand how it 
influences the poultry industry. I grow for an integrator, and 
they very often told me what a problem they were having when 
corn was $9 a bushel, but now it is cheap. So they are gaining 
ground as far as the integrators are. In the poultry business, 
as far as broilers, it is pretty good because everybody seems 
to want chicken, and our downtime between batches are really 
close. And for a producer like me, that is a good thing. So, if 
corn is high, that is hard on animal agriculture. If it is low, 
the animal agriculture seems to reap some of the benefit from 
it. But I can't really explain to you, other than the 
stockpiles of commodities and how prices dictate it through, 
especially milk in trade.
    Ms. Graham. Thank you. Does anyone else have anything to 
add to that?
    Mr. Johnson. Well if I could, I would simply make a point 
about dairy, particularly as it relates to this Subcommittee's 
responsibility over the Dairy Margin Protection Program. I know 
that was a new program that was put into place. It needs quite 
a bit of attention. We have had lots of complaints from dairy 
farmers that it just isn't working for them. Most recently, I 
have learned I believe from USDA sources some alarming numbers 
about the premiums that are paid for that program are something 
like $73 million, and yet only about $700,000 has been paid 
out. So that suggests to me that maybe the balance that we have 
struck isn't quite right, that there needs to be some 
``rejiggering'' of what those margins are, and one of the 
things I have suggested in my testimony; listen, I know dairy 
policy is the most complicated policy in all of agriculture. I 
have been in this business most of my life, and when the dairy 
guys all agree on something, that is a time to celebrate. What 
they all agreed on last time was the Dairy Margin Protection 
Program with a supply management piece, and that got lopped 
off. So whether that is part of the mix, that is a question 
that your Committee is going to have to wrestle with. But in 
particular, the ranges that were provided in statute need to be 
adjusted.
    Ms. Graham. That is very good guidance, and I am going to 
try today to work the word rejiggering into my conversations. 
Thank you for providing that word for me today.
    I have other questions but my time is almost expired, so I 
yield back, Mr. Chairman. Thank you. Thank you, gentlemen.
    The Chairman. The gentlelady yields back.
    I recognize the gentleman from Georgia, Mr. Scott, for 5 
minutes.
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
    Mr. Duvall, you sure look like a fellow named Zippy from 
Georgia. Have you ever met him?
    Mr. Duvall. I am afraid I have. There are not many of them 
around.
    Mr. Austin Scott of Georgia. I am glad you are in that 
position. I know you will do a great job for the farmers.
    One of my primary concerns as a Member of this Committee is 
when we get into writing the next farm bill, one of the things 
we have to make sure of is that we don't allow commodity groups 
to be pitted against commodity groups. This is agriculture and 
the rural economy, and quite honestly, feeding Americans, that 
we have to get the policies right for.
    As you know, while the commodity prices are mighty low in 
the farm right now, if you go to the grocery store, you 
wouldn't know it when you check out, and there seems to be a 
big disconnect between what Americans are paying for their 
groceries and what people, who are actually out there growing 
the crop are receiving for it.
    Mr. Austin Scott of Georgia. Dr. Outlaw, I was with an ag 
economist in Tifton a couple of weeks ago and when the meeting 
was over, for every phone call I got from a farmer, I got from 
a banker expressing concerns and if farmers don't do good in my 
part of the world, then nobody makes money. In your analysis, 
which regions of the country are experiencing the most 
financial pressure right now, and which ones do you expect to 
experience the most pressure in the near future?
    Dr. Outlaw. Well, for our purposes, obviously, the South 
and the Southeast, our results would say they are having more 
difficult times. But there are also pockets. We visit with 
these producers quire often and we just came back from North 
Dakota where they were some of the more unhappy people we have 
visited with in quite some time, because they made a decent 
corn crop and then they couldn't ship it, so they were taking 
prices well below what anybody else has to take for their 
commodity because there was real shortage near the time they 
needed to get shipped out. That only happens at a point in 
time, but it happened at the important point in time where they 
had to take low prices for their commodities and that was their 
income for the year.
    So we have pockets around the country, out West, far West, 
and the regions of Oregon and Washington, there are some 
problems there as well. But if you want to just lay it on it, 
it is the South and Southeast.
    Mr. Austin Scott of Georgia. Do you foresee that changing 
as time goes forward, obviously cotton prices have a tremendous 
impact on us, more so than they do the Mideast. Although, I 
will tell you that cotton prices have a tremendous impact on 
Iowa, because that is where the majority of the cotton pickers 
that run in the Southeast come from is from John Deere and 
Acme.
    Dr. Outlaw. My expectation is that producers are looking 
for any crop they possibly can, canola or oilseeds. One of the 
letters I received from a North Carolina producer said they are 
expanding the growth of sweet potatoes in that state 
tremendously as a niche market, trying to find something they 
can make a profit on.
    My expectation is that this group is going to have to do 
something to fix cotton, or we won't have the cotton industry. 
As Dr. Johansson said, looking into the future, all we can do 
is deal with price forecasts, and it doesn't matter whose 
forecast you use, the situation looks really poor. And with the 
price forecast that I am using from FAPRI, which is very 
similar to USDA's long-term outlook----
    Mr. Austin Scott of Georgia. Dr. Outlaw, I am almost out of 
time, but you mentioned cotton a couple of times in there. I am 
extremely concerned about that.
    I want to go back to Mr. Duvall, if I can. Our cotton 
producers can't just--those cotton pickers cost a lot of money, 
and I went past a dealership the other day, a tractor dealer, 
and there were an awful lot of them sitting on the yard. It is 
not just a matter of the farmer, it is the whole infrastructure 
that surrounds the ag economy.
    Could you speak to kind of the ag economy as a whole, from 
the farmer to the tractor dealer to the ginners and the impact 
that it has when farmers can't make that profit?
    Mr. Duvall. Well, if we look at equipment sales, we see 
that small tractors, small horsepower tractors are going up, 
which indicates that that is a different area to sell those 
products in. It is not in agricultural production. But if you 
look at over 100 horsepower and over 100 horsepower four-wheel 
drive, over 100 horsepower is down 33 percent and four-wheel 
drive are down 38 percent across the country. So those 
indications say that hey, as a farmer, I don't know about these 
prices. I am going to try to run this tractor 1 more year 
before I update, and hopefully prices will come back and I will 
be able to do that. Well how many years can he do that before 
it starts caving in? And it is a chain reaction, of course. If 
the farmer makes that decision, that equipment dealer doesn't 
get to sell that piece of equipment and all the people around 
that industry are beginning to start crumbling down.
    We talk about cotton. Cotton has a huge infrastructure 
built around it, just like the Renewable Fuel Standard has a 
big infrastructure built around it. And we need to make sure 
that safety net--it continues how the financial backing to it 
to be able to move forward, and of course, we have already 
discovered the safety net we have in our farm bill does not 
help cotton.
    Mr. Austin Scott of Georgia. Thank you for being here, 
gentlemen.
    The Chairman. The gentleman's time has expired.
    We will move now to the other Mr. Scott from Georgia. I 
recognize you for 5 minutes.
    Mr. David Scott of Georgia. Thank you very much, Chairman 
Crawford. Mr. Duvall, it is good to have you here, and let me 
just say that the Farm Bureau is very lucky to have you as its 
President.
    Mr. Duvall. Thank you, sir.
    Mr. David Scott of Georgia. You are a good man, and Georgia 
is proud of you.
    Mr. Duvall. Thank you, sir.
    Mr. David Scott of Georgia. Let me first start, Mr. Duvall. 
We have heard throughout this hearing of all the downward 
pressures and the crises facing all of our farmers, 
particularly our cotton. I am very concerned about that. 
Georgia is the number two cotton producing state in the nation, 
that is my state, next to Texas. Many of us on this Committee 
have been working with Secretary Vilsack to address and try to 
get you and get cotton folks some help financially. We have 
done this through their two approaches. In the ginning program 
we were working on the CCC, which is another program, if we 
could get some temporary appropriations until we can get back 
into the farm bill, and then we can permanently correct the 
situation. What is your understanding? Are you all pleased with 
how we are moving, and am I accurate in saying that Secretary 
Vilsack is responding and you feel confident we will be able to 
get that money to you through one of those efforts?
    Mr. Duvall. Yes, sir. First, let me make a first comment. 
There is no support of opening up this farm bill that we had, 
so we want to make sure that everybody understands that. We 
know there is a lot more damage to be done by opening it up, so 
we need to find solutions around that. And if we specifically 
talk about cotton, I have had several conversations with the 
cotton groups. We are trying to work hand-in-hand with them to 
move in a direction to find a band aid fix for cotton, and I 
have had particular meetings with the Secretary and he has the 
desire to help. Of course, we think the way to fix it is to 
declare it an other oilseed and fix it that way. We fully 
support the Chairman here, but we also know that there is 
another avenue that has to do with the ginning assistance that 
the Secretary is looking into. And I know the cotton groups, 
ourselves, and the Secretary are looking to try and move 
forward in that direction.
    Mr. David Scott of Georgia. Well the reason I asked that is 
that I have had conversations with the Secretary. My office is 
working with them, and it is my understanding that we are 
proceeding in the direction of doing that.
    Mr. Duvall. Yes, sir.
    Mr. David Scott of Georgia. But that is hearing it from the 
Administration.
    Mr. Duvall. Yes, sir.
    Mr. David Scott of Georgia. So I am anxious to hear back 
from you and the cotton farmers how accurate that is. In other 
words, what I am saying is do I and others who are very 
concerned about the cotton farmers need to apply more pressure, 
or are you saying okay, they are working with us, we are 
hearing from them. That is what I need to hear.
    Mr. Duvall. According to our last communication with the 
cotton groups is that their negotiation or the discussions with 
the Secretary is moving forward but you asked me how I felt. I 
am beginning to lose my patience in this area because we need 
to do something for these farmers really facing difficulty.
    Mr. David Scott of Georgia. Okay. I need to know when I 
need to push a button more----
    Mr. Duvall. Yes, sir.
    Mr. David Scott of Georgia. I have been in touch with them. 
They have gotten back to me. The Obama Administration said they 
are moving. So I am ready to be your Huckleberry on this and we 
need to drive them on further.
    Now let me go to the other issue, because our farmers are 
in great crisis. I have never seen it like this, and it is not 
only this, but it is this massive over-regulation, and nowhere 
is that more personified than in this WOTUS issue with the EPA. 
And what I want to ask the Farm Bureau to do is that this 
ruling, I believe, because the Obama Administration is very 
stubborn on this and it is very hard to get them to see how 
terrible this Waters of the U.S. rule from the EPA is. So there 
may be a point where the farming community itself needs to 
stand up and sue and threaten to sue the EPA if they move 
forward with this terrible rule. And I want you to know that I 
will be delighted to join the farmers in this suit against the 
EPA.
    The Obama Administration and EPA has only 7 or 8 more 
months in this Administration. If they move ahead and we do 
nothing, then we have a rule taking place. But if we move and 
stand up and fight against the EPA with our legal rights, which 
is the foundation of this country, our day in court must be 
held on this rule. Because if it goes into effect, even if it 
is the last day of this Administration, then we have to move to 
overturn it, to remove it with whatever the new one is in.
    So I want to appeal to the farming community that there 
comes a time when farmers have to stand up and fight back, and 
if we can move with legal action against the EPA, because they 
are totally wrong in this, that farmers' property is his 
private property. They need those independent pools and wells 
and digging and ditching so they can have the irrigation, so 
they can have water on their property when we have the 
droughts. The animals still have to have water. The plants have 
to have water. And furthermore, to come on and put additional 
financial pressure on these farmers, to fine them, make them 
pay for permits. They can come on their property night or day, 
anytime. That is wrong. We can make a stand in the courts, and 
the whole point of what I am saying is at least a judge can 
give the farmers a stay until this Administration is gone. And 
then we have another chance, a new day with a new 
Administration that can come in and treat the farmers and our 
agriculture industry with the respect they deserve.
    Mr. Duvall. Yes, sir, and I appreciate what you are saying, 
and I will welcome your assistance to help us. We already have 
a legal team that is already working on it. We are in the 
process of doing that right now.
    Mr. David Scott of Georgia. Good. Put me on it and if I can 
be helpful by having my name on that suit with you, please put 
it on there.
    Mr. Duvall. Yes, sir, and we will bring you up to date of 
where we are at with that.
    Mr. David Scott of Georgia. Thank you.
    The Chairman. The gentleman's time has expired.
    We will continue with Georgia and recognize Mr. Allen, for 
5 minutes.
    Mr. Allen. You can put another Georgian to join Congressman 
Scott on that legal battle.
    First, Zippy, I want to welcome you. It is your first 
testimony before a House Committee as President of the American 
Farm Bureau, and of course, before leading the Farm Bureau, you 
led Georgia's Farm Bureau, and I remember one of my first 
meetings campaigning for Congress was to go down to Macon and 
meet you in your office, and I was delighted to have that 
opportunity to talk with you. Because, being born and raised on 
a farm, if you remember, my brother was also a Commissioner 
there in Columbia County, and you were a former Commissioner, I 
believe, in Green County.
    Mr. Duvall. Yes, sir.
    Mr. Allen. So you have had an incredible career of public 
service, and obviously, too, a great farmer. I have no doubt 
that you are going to do a great job for the farmers across 
America. I am just glad to have you in this position.
    Mr. Duvall. Thank you.
    Mr. Allen. In addition to obviously, President Duvall, we 
have a distinguished panel here, and we have heard and I hear 
it in the district about the farm income being down 56 percent 
over the last 3 years. And it was interesting. We just had the 
Masters golf tournament in Augusta and of course, one of the 
things that they do there is sell a lot of merchandise, which 
is very generous of them to allow patrons to come in and buy 
things that they can remember their trip there.
    But one thing that I did see is that everything that I 
bought was made in China, and last that I have heard is that 
China is paying their farmers $1.40 a pound for cotton. Their 
cotton is inferior to our cotton. Our farmers are getting paid, 
what, I don't know. It was 62. I understand it is below 60 
now a pound on the world market.
    Mr. Duvall. It is 56, 57.
    Mr. Allen. Yes, and our cotton is far superior. It is not 
contaminated. It is not handpicked. It is not contaminated, and 
in fact, and my guess is, that a large amount of our cotton has 
to be used in the making of that material that I purchased at 
the Masters, because their cotton is inferior.
    But what I don't understand is if we are buying all the 
merchandise, why aren't they paying our farmers a fair price 
for cotton? If we are going to be the consumer, and I have 
never heard anybody really address this, and I don't know if 
you have thought about it, and I am hitting you probably blind 
on this question. Or maybe we have talked about it. I don't 
know. But I don't understand if we are the consumer and we are 
going to pay the price for nice cotton goods, why can't we 
demand that we get a fair price for our cotton? Is there any 
task force or anybody that is looking at that as far as in 
World Trade Organization anything like that to your knowledge?
    Mr. Duvall. I can't tell you. I may have some staff that 
could answer that question.
    Mr. Allen. Right.
    Mr. Duvall. I don't know that we have a task force looking 
at that, but I can tell you that China has been the in the 
immediate past buying up big stocks of cotton.
    Mr. Allen. Right.
    Mr. Duvall. They have a tremendous amount of cotton stored 
over there to be able to feed their manufacturing plants that 
are selling it back to us, of course. And you gave me the 
perfect opportunity to say what I have said for so long, and it 
not just deals with Georgia, rural Georgia, but it appeals to 
rural America. If we as a people decide that we are going to 
invest in rural America and further process what we grow here, 
we will put people back to work and we will make rural America 
thrive.
    Mr. Allen. Right.
    Mr. Duvall. And that is exactly what you are saying.
    Mr. Allen. Yes. In other words, we are at their mercy as 
long as we don't have a--is what you are saying.
    Mr. Duvall. That is exactly right.
    Mr. Allen. Yes, and so we have to--we as a country have to 
make that decision, because right now, we are exporting 80 
percent of the cotton in my district.
    Well listen, thank you so much. I am just about out of 
time, but thank you for being here. We need to solve this 
problem because as you know, if we lose our cotton, we are 
going to lose our gins and I don't know how long it would take 
to rebuild that infrastructure?
    Mr. Duvall. It would take, if it could ever be rebuilt, it 
would take years upon years to rebuild it.
    Mr. Allen. Yes.
    Mr. Duvall. Could I make one statement?
    Mr. Allen. Yes, sir.
    Mr. Duvall. If you look at farm assistance from countries, 
developing countries, if you look at us compared to China, 
about 17 of every dollar that goes to a China farmer comes as 
assistance from the government, where we are sitting at about 
7. So they are already at an advantage above us, and their 
cotton producers too are getting better at it.
    Mr. Allen. Let me tell you, all our farmers want is a fair 
fight.
    Mr. Duvall. That is exactly right.
    Mr. Allen. Level playing field.
    Thank you, Zippy. Keep up the good work. I yield back.
    The Chairman. The gentleman yields back.
    The gentleman from California is recognized for 5 minutes.
    Mr. LaMalfa. Thank you, Mr. Chairman. Thank you, panelists, 
for being here today, and I am glad to be able to join in the 
discussion here. I totally get what you are talking about in 
some of the testimony I heard earlier where, around my farm, 
you decide how much farther can you push a tractor or a pickup 
or what have you as opposed to replacing it. I pulled one of 
the D-8s out of the shop the other day built in the 1940s, 
puttered around on that until I had to fix a fuel pump, but 
that is a different thing. So and then last all, the dealer 
brought out a demo rice combine, and so I jumped on there for a 
few minutes and tried that out. By the way, what is the price? 
They said with a 25 macked on header and tracks and rear wheel 
assist, $600,000 for a rice combine. It blew my mind. So, we 
will make our old stuff go another 10 years maybe, but don't 
tell the dealer that.
    Dr. Johansson, you talked about it a little bit earlier. I 
didn't get to hear all of it, but so we saw last year over \1/
2\ million acres of land were fallowed. I am from California 
and we have our own set of problems there, but the drought we 
are temporarily relieved from that. The good Lord has blessed 
us with a lot of rain and snow pack this year, and our lakes 
are filling largely, if we can have those that regulate the 
water let them fill all the way. California has had a respite. 
It has its own problems such as forcing the $15 minimum wage 
and they are looking at decreasing hours you can work on the 
farm without overtime from the standard of 10/60 to 8/40. So we 
have a lot of stuff coming at us in California, and who knows 
if the drought is going to be back in place next year.
    And so I don't quite share the optimism that was talked 
about a little bit earlier with the stability for most farm 
households, and my colleagues here talking about the cotton 
situation and others. So the cost of everything is going up, 
especially in California where we enjoy the bonus of 60, 80 
higher per gallon of fuel. So I know nobody can fix California 
until the attitude changes. But can you elaborate a little more 
on where the optimism comes from for farm households and for 
the farmgate?
    Dr. Johansson. Yes, that is a great question. I would point 
out, as we heard earlier that dairy policy is probably the most 
complicated policy that you can talk about, but certainly 
talking about regional production in California and the West 
Coast rivals that. There is a lot going on out there, as you 
pointed out. Certainly California has been hard-pressed to deal 
with the water issues out there over the last 5 years, and as 
you mentioned, the water situation seems to have improved this 
year, but we are still----
    Mr. LaMalfa. Not everybody is out of the woods in the Simi 
Valley
    Dr. Johansson. We are still 80 percent of normal, so not 
recovering yet. We would want to see 100 percent of normal to 
start recovering.
    So certainly we have seen a lot of changes in production in 
California as a result of the water issues. We have seen some 
fallowing of rice land, for example. We have seen a lot more 
tree nuts going in, and now tree nut prices are coming back 
down. So, back to my point, I obviously talked about the larger 
macroeconomic story of China's economic growth slowing down, 
the global economic conditions slowing, whereas the U.S. is 
relatively stable. So that is causing our dollar to be 
relatively strong. It is causing a lot of prices to come down 
for commodities. Our producers are facing a pretty competitive 
trading environment overseas. Certainly, that is the case for a 
lot of the California commodities that we would see.
    Pointing out this household income story certainly provides 
economists a lot of areas for discussion. There is a lot behind 
those aggregate numbers and when we start digging into them, we 
see the stories that we are talking about today. There are 
farms that are very highly leveraged, and they are going to 
have a hard time finding the financing, paying for the 
financing and meeting the expected costs that we are going to 
see this year, given the fact that prices are coming down. That 
being said, I wouldn't want to say that the bottom end of the 
distribution for financial leverage paints the whole story for 
the whole farm economy. There are a lot of producers out there 
that did relatively well over the last 5 years. They do have 
financial reserves. They did buy a lot of equipment after the 
Section 179 went through. They have new equipment and as 
everybody here would--knows that there are ups and downs in the 
farm economy and we just need to take advantage of the good 
times and hope that the safety net is sufficient to cover the 
times that are more difficult.
    Mr. LaMalfa. It just seems the cost structure has ratcheted 
up and will not be coming down on inputs, whether it is 
machinery or what you put in at the field. Those don't come 
down, so the pendulum not only swings, but pivots and stays 
farther at one side.
    Dr. Johansson. Yes, and the costs certainly don't come down 
at the same time as the prices do, as Mr. Johnson pointed out 
and fortunately, we have seen very low energy prices, even for 
California. Prices have come down and that has helped in a lot 
of the chemical input side. So some input prices are coming 
down and helping on that, and again, fortunately we have very 
low interest rates so taking out loans isn't expected to add a 
lot to up righting costs right now.
    Mr. LaMalfa. All right. I will yield back, Mr. Chairman. 
Thank you.
    The Chairman. The gentleman yields back.
    Before we adjourn, I would like to recognize the Ranking 
Member for any closing comments he would like to make.
    Mr. Walz. I thank the Chairman, and to the witnesses, thank 
you again as always. A lot of good food for thought helping us 
prepare as we go forward, and I would like to associate myself 
with the gentleman from Georgia who commented about value-added 
is a real win for us, if we can do that.
    And I was just going to ask, maybe just a quick yes or no, 
and maybe we could get it later, but Dr. Johansson or Dr. 
Outlaw, have either of you done an analysis on what would 
happen if we reduce or eliminate the RFS, what would happen to 
commodity prices? Has that been done by either one of you?
    Dr. Johansson. There has been reports put out on how prices 
would respond to that. Most of those were done, either when we 
were in the drought back in 2012 or when oil prices were pretty 
high at $100 a barrel, for example. I don't know if I have seen 
any that have been done looking at sort of the low oil price, 
low commodity price environment we are in right now, but the 
Congressional Budget Office put out a report maybe last year on 
this topic.
    Mr. Walz. Well, I appreciate all of your expertise and 
greatly appreciate it. I want to make a note that joining us 
was Minnesota Farm Bureau President Kevin Paap. I appreciate 
his advocacy for our producers in the first district of 
Minnesota. I yield back.
    The Chairman. The gentleman yields back.
    I want to thank the witnesses as well. This has been very 
productive and I look forward to working with you all, going 
forward, and we certainly do have a task in front of us dealing 
with the next farm bill, and we appreciate your input.
    Under the Rules of the Committee, the record today of 
today's hearing will remain open for 10 calendar days to 
receive additional material and supplementary written responses 
from witnesses to any question posed by a Member.
    This hearing of the Subcommittee on General Farm 
Commodities and Risk Management is adjourned.
    [Whereupon, at 11:28 a.m., the Subcommittee was adjourned.]


                       FOCUS ON THE FARM ECONOMY

                     (TIGHTENING CREDIT CONDITIONS)

                              ----------                              


                        TUESDAY, APRIL 19, 2016

                  House of Representatives,
   Subcommittee on Commodity Exchanges, Energy, and Credit,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Austin 
Scott of Georgia [Chairman of the Subcommittee] presiding.
    Members present: Representatives Austin Scott of Georgia, 
Lucas, Neugebauer, Davis, Conaway (ex officio), Crawford, David 
Scott of Georgia, Vela, Kirkpatrick, and Aguilar.
    Staff present: Bart Fischer, Caleb Crosswhite, Callie 
McAdams, Josh Maxwell, Matt Schertz, Mollie Wilken, Stephanie 
Addison, Faisal Siddiqui, Anne Simmons, Lisa Shelton, Matthew 
MacKenzie, Nicole Scott, and Carly Reedholm.

  OPENING STATEMENT OF HON. AUSTIN SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    The Chairman. Good morning. This hearing of the Committee 
on Agriculture: Focus on the Farm Economy: Tightening Credit 
Conditions, will come to order.
    Mr. Conaway, did you want to say anything before my opening 
statement?

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. No, just a welcome to our witnesses, and I 
look forward to hearing from them, and look forward to this 
hearing of your's and David, the Scott Brothers show, this 
morning.
    The Chairman. Thank you, Mr. Chairman. Good morning, and 
welcome to today's hearing. This is the second in the series of 
hearings that each Subcommittee is holding on the state of the 
farm economy.
    As we know, the agricultural economy is highly cyclical. 
Given the recent 56 percent drop in net farm income and the 
hard times that inevitably come along with that, I believe it 
is important to hold hearings like the one today to make sure 
the credit needs of producers are being met and will continue 
to be met, particularly if current market conditions continue 
into the future.
    While providing credit to America's farmers and ranchers is 
vital, it is a growing challenge for many lenders in the United 
States. Perhaps no one knows this better than lenders in cotton 
country. After a recent period of historic highs, crop prices 
have plummeted due to various factors which were discussed at 
last week's hearing before the General Farm Commodities and 
Risk Management Subcommittee. While input costs have softened, 
they remain near historic highs, and some of our biggest 
foreign competitors are sharply increasing their subsidies, 
tariffs, and non-tariff trade barriers. Unfortunately, 
burdensome government regulations have added to the challenges 
faced by America's farmers and ranchers, with the EPA 
continuing to push for new and costly regulations.
    Meanwhile, farmland values are on a downward trend, and 
while some livestock producers are rebounding on the balance 
sheet with lower feed costs, our western producers are 
struggling with consecutive years of drought. It is times like 
these that our farmers and ranchers are most in need of 
reliable sources of credit at competitive rates. Thankfully, we 
have a network of commercial and community banks, USDA loan 
programs, and the Farm Credit System that each play a crucial 
role in providing that access.
    In order to sustain an abundant supply of food and fiber 
well into the future, we must ensure that a responsible farm 
safety net and sound agricultural credit policies are in place 
now. To that end, I am pleased to welcome a distinguished group 
of witnesses and look forward to learning more from them about 
their perspective on current credit conditions and their 
outlook for credit conditions in rural America.
    [The prepared statement of Mr. Austin Scott follows:]

 Prepared Statement of Hon. Austin Scott, a Representative in Congress 
                              from Georgia
    Good morning, and welcome to today's hearing. This is the second in 
a series of hearings that each Subcommittee is holding on the state of 
the farm economy.
    As we know, the agricultural economy is highly cyclical. Given the 
recent 56 percent drop in net farm income and the hard times that 
inevitably come along with that, I believe it is important to hold 
hearings like the one today to make sure the credit needs of producers 
are being met and will continue to be met, particularly if current 
market conditions continue into the future. While providing credit to 
America's farmers and ranchers is vital, it is a growing challenge for 
many lenders in the United States. Perhaps no one knows this better 
than lenders in cotton country.
    After a recent period of historic highs, crop prices have plummeted 
due to various factors which were discussed at last week's hearing 
before the General Farm Commodities and Risk Management Subcommittee. 
While input costs have softened, they remain near historic highs, and 
some of our biggest foreign competitors are sharply increasing their 
subsidies, tariffs, and non-tariff trade barriers. Unfortunately, 
burdensome government regulations have added to the challenges faced by 
America's farmers and ranchers, with the EPA continuing to push for new 
and costly regulations.
    Meanwhile, farmland values are on a downward trend, and, while 
livestock producers are rebounding on the balance sheet with lower feed 
costs, our western producers are struggling with consecutive years of 
drought.
    It is in times like these that our farmers and ranchers are most in 
need of reliable sources of credit at competitive rates. Thankfully, we 
have a network of commercial and community banks, USDA loan programs, 
and the Farm Credit System that each play a crucial role in providing 
that access.
    In order to sustain an abundant supply of food and fiber well into 
the future, we must ensure that a responsible farm safety net and sound 
agricultural credit policies are in place now.
    To that end, I am pleased to welcome a distinguished group of 
witnesses and look forward to learning more from them about their 
perspective on current credit conditions and their outlook for credit 
conditions in rural America.

    The Chairman. With that, I would like to recognize the 
Ranking Member, Mr. David Scott, also from Georgia, for any 
opening statement that he may have.

  OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN 
                     CONGRESS FROM GEORGIA

    Mr. David Scott of Georgia. Thank you, Chairman Scott, and 
thank you to this distinguished panel for coming to speak with 
us about this very important subject, and I think a very 
critical issue right now of the tightening credit conditions.
    Without access to credit, farmers cannot put a crop in the 
ground, and they cannot do the important work of feeding the 
world. I am especially worried about beginning farmers who are 
the future of production agriculture in this country and in the 
world. If we cannot provide the path to capital for these new 
farmers, we will continue to have an aging population of 
farmers. This is an issue that I am, and this Committee, is 
very much concerned about, beginning farmers. And I want to 
give a shout out and some credit to Farm Credit, who is working 
closely with me in coming up with ways and means that we can 
address the issue of beginning farmers. Because according to 
the 2012 Census of Agriculture, the average age of the 
principle operator of a farm is 58.3 years old. That is nearly 
60 years old, ladies and gentlemen. In 1982, that age was 50.5. 
So within a span of just 30 years, the average age of the 
farmer has gone up nearly 10 years. This trend will continue if 
we don't have new farmers who are taking over family farms, and 
then also getting new faces, young people in this country 
starting out their own agriculture careers.
    I want to add a little word here about our cotton farmers, 
this is a very critical issue. And what the cotton farmers are 
going through now is an example of what so many other farmers 
and growers, whether it is peanuts, whether it is tobacco, 
whether it is watermelons, whatever. Right now cotton farmers 
in my State of Georgia and around the country are in a 
situation where the price of cotton doesn't cover the variable 
costs of production. The cost of cotton doesn't cover the 
variable cost of production, much less the total costs, 
including any land rents that must be paid.
    This is why I say the issue is critical. The Department of 
Agriculture predicts that prices could stay low for the next 3 
to 5 years. That is why this is a crisis. It is a long-term 
issue, and we have to have a long-term strategy to deal with 
it. And with total farm debt forecast to hit $372.5 billion in 
this year alone, I wonder if some farmers will have problems 
accessing credit in 2017 and 2018.
    So we have a lot of issues here. I look forward to hearing 
the panel's comments, and thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Scott.
    The gentleman from Arkansas, Mr. Crawford, is not a Member 
of the Subcommittee, but has joined us today. Pursuant to 
Committee Rule XI(e), I have consulted with the Ranking Member, 
and we are pleased to welcome him to join the questioning of 
the witnesses.
    I would like to welcome our witnesses to the table. Mr. 
Timothy Buzby, President and Chief Executive Officer, Federal 
Agricultural Mortgage Corporation, Washington, D.C.; Dr. Allen 
Featherstone, Professor and Head of the Department of 
Agricultural Economics, Kansas State University, Manhattan, 
Kansas; and Mr. Randy Nelson, President, CHS Capital, LLC, 
Inver Grove Heights, Minnesota.
    Mr. Buzby, please begin when you are ready.

 STATEMENT OF TIMOTHY L. BUZBY, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, FEDERAL AGRICULTURAL MORTGAGE CORPORATION (FARMER 
                     MAC), WASHINGTON, D.C.

    Mr. Buzby. Thank you, Chairman Scott, Ranking Member Scott, 
and distinguished Members of the Subcommittee. Thank you for 
your invitation to appear today to testify on behalf of the 
Federal Agricultural Mortgage Corporation, commonly known as 
Farmer Mac. My name is Tim Buzby, and I am the President and 
CEO of Farmer Mac. I am here to give you a perspective of what 
Farmer Mac is seeing in the field related to credit conditions 
and the overall health of the agricultural financial community.
    As the secondary market created to serve rural America, 
Farmer Mac works with over 900 institutions of all kinds in all 
50 states through its programs, alliances, and partnerships. By 
working with such a vast network of lenders throughout the 
country, Farmer Mac not only introduces more competition into 
the marketplace to help your constituents receive the lowest 
interest rates and most favorable terms possible for their 
financing needs, but we are also able to give you a unique 
perspective on credit conditions across America.
    Allow me to sum up briefly what is in my written testimony 
with a few observations on what Farmer Mac has seen most 
recently.
    Working capital levels are currently being tested. It 
appears farm debt is slowly climbing from historical lows. The 
Farm Credit System reported nearly a seven percent increase in 
loans outstanding for agricultural production, intermediate 
term, and real estate lending in 2015 compared to 2014. 
Commercial banks and savings institutions reported a similar 
percentage increase in loans outstanding for agricultural 
production and real estate lending. Farmer Mac's purchases of 
USDA guaranteed loans increased eight percent from 2014. This 
rising lending activity highlights the growing demand for 
agricultural credit, but also demonstrates the willingness and 
ability of ag lenders to meet that demand.
    Although market data indicates good credit availability in 
early 2016, we urge market participants to exercise caution and 
patience as the current industry cycle plays out. Specifically, 
we believe lenders should apply disciplined lending practices, 
and at the same time, be supportive but firm with their 
customers' requests. Regulators should be aware of the scope of 
potential credit problems, but also should be cognizant that 
agriculture is a long-term endeavor and that sometimes the best 
cure for a troubled credit is not always liquidation. Producers 
should be aware that major increases in agricultural commodity 
prices do not appear to be imminent, and that cost containment 
could provide a new path to a new profitability.
    Congress should continue to support the tools available to 
farmers and ranchers to help offset lower incomes and provide 
access to credit. One of those tools is Farmer Mac, and we 
stand ready and able to continue our mission of providing 
capital to rural America.
    I understand that there is some concern about land values, 
so let me touch briefly on this important matter. Of the nearly 
$3 trillion in farm assets in 2014, over 80 percent was in the 
value of agricultural land and buildings. Between 2004 and 
2014, the USDA estimate of the total value of farm real estate 
increased by more than $1 trillion, a doubling of asset values 
in just 10 years. The rising tide did not affect all regions 
equally. Much of the increases were centered in the midwestern 
United States and major grain producing states.
    Let me give you a couple of observations on this. Revenue 
generated by agricultural real estate has fallen sharply, and 
it is natural for an asset with declining future cash flow 
potential to also decline in value. Farming expenses have not 
fallen at the same rate as farm revenues, which puts additional 
pressure on the ultimate profitability of farmland. The U.S. 
dollar strengthened tremendously in 2015, lowering commodity 
prices and making agricultural exports less attractive in 
foreign markets. Interest rates have not changed significantly 
since 2010 and remain near historic lows. A lower interest rate 
environment supports asset values by reducing the discount rate 
of future cash flows, and it makes the returns on farm assets 
more attractive, relative to other investment opportunities.
    As we look forward, there is great competition in the 
agricultural lending space, and this is particularly helpful 
for borrowers. More and more borrowers are prudently choosing 
to finance farm purchases and refinancing with long-term fixed 
rate mortgages to lock in low and known interest costs.
    At Farmer Mac, we work with lenders of all sizes, from 
those who sell us loans as small as $50,000, to multi-million 
dollar purchases. We have a unique solution for lenders who 
work with small family farms, and those that require 
sophisticated lending facilities. Farmer Mac continues to 
provide a stable source of liquidity, capital, and risk 
management tools to help rural lenders meet the financing needs 
of their customers. With a diverse array of lending products 
and capital sources, Farmer Mac is well positioned to provide 
lenders across America with the sophisticated and low cost 
lending products demanded by today's rural borrowers.
    Thank you, and I would be happy to answer any questions you 
may have.
    [The prepared statement of Mr. Buzby follows:]

 Prepared Statement of Timothy L. Buzby, President and Chief Executive
   Officer, Federal Agricultural Mortgage Corporation (Farmer Mac), 
                            Washington, D.C.
Introduction
    Chairman Scott, Ranking Member Scott, and distinguished Members of 
the Subcommittee, thank you for your invitation to appear today to 
testify on behalf of the Federal Agricultural Mortgage Corporation, 
which is commonly known as ``Farmer Mac.'' My name is Tim Buzby, and I 
am the President and Chief Executive Officer of Farmer Mac. I 
appreciate the opportunity to appear before your Subcommittee today to 
provide some insight about what Farmer Mac sees taking place in the 
rural credit financing markets, especially as it pertains to the 
availability of credit.
Farmer Mac
    Farmer Mac's position at the intersection of Main Street and Wall 
Street allows us to provide a unique perspective about the environment 
for rural credit. We are a stockholder-owned, federally chartered 
corporation that combines private capital and public sponsorship to 
serve a public purpose. Established under legislation first enacted in 
1988, Congress has charged Farmer Mac with the mission of providing a 
secondary market for a variety of loans made to borrowers in rural 
America, including mortgage loans secured by agricultural real estate, 
loans made to rural utility cooperatives, and certain loans guaranteed 
by the U.S. Department of Agriculture (USDA). This secondary market 
increases the availability of long-term credit at stable interest rates 
to America's rural communities, including farmers, ranchers, rural 
residents, and rural utility cooperatives, and provides those borrowers 
with the benefits of capital markets pricing and product innovation. In 
Farmer Mac's role as the secondary market for rural America, we work 
closely with lenders of all sizes, including commercial and community 
banks, Farm Credit System institutions, credit unions, rural utility 
cooperative lenders, and insurance companies to offer more financial 
choices to their rural customers and help them keep pace with today's 
capital-intensive environment.
    For over a quarter-century, Farmer Mac has remained steadfast in 
its mission of delivering capital and liquidity and increasing lender 
competition for the benefit of American agriculture and rural 
communities. Our team of 72 employees located in Johnston, Iowa and 
Washington, D.C. share a mutual passion for rural America and in 
serving our customers. We take pride in the work we do and the 
important role we play in American agriculture. While we work directly 
with rural lenders, ultimately the greatest benefit we are able to 
provide is to your constituents--America's farmers, ranchers, rural 
utility cooperatives, and business owners in rural communities. To 
date, over 1,400 lenders across the nation have used Farmer Mac's 
programs and solutions to increase capital and liquidity and reduce 
their credit risk. By working with such a vast network of rural 
lenders, we inherently introduce more competition into the marketplace, 
which helps your rural constituents to receive the lowest interest 
rates and most favorable terms for their financing needs. In fact, the 
interest rates available to borrowers through the products offered by 
Farmer Mac are some of the most competitive in the market today. 
However, whether or not a rural borrower ultimately chooses a Farmer 
Mac loan product, Farmer Mac's participation in the rural lending arena 
provides that borrower with the opportunity to obtain a low interest 
rate on terms that work for that individual. That is good for rural 
borrowers, their families, their communities, and rural America in 
general. Since its creation, Farmer Mac has helped to fund loans to 
nearly 70,000 borrowers in all 50 states, resulting in approximately 
$39 billion of investment in rural America.
Agricultural Credit Demand and Availability
    American agriculture is no stranger to cyclicality. The industry 
has been through three widely recognized business cycles, the first in 
the 1940s, followed by the second in the late 1970s through the 1980s, 
and most recently beginning in 2005. Each cycle has been characterized 
by a rapid increase in farm profitability followed by a reversion to 
trend or an over-correction below trend. In the trench of the cycle, 
producers often offset lower income levels by consuming working capital 
earned during the profitable years, perhaps selling liquid assets, or 
taking on additional debt to meet cash flow demands of their farming 
operations. For 2016, USDA forecasts a third consecutive year of lower 
farm incomes. While the financial health of the sector remains largely 
intact, the industry is certainly feeling some stress as the current 
cycle nears its trough. Working capital levels are under stress today, 
and it appears farm debt is slowly climbing from historical lows.
    Recent activity in both the retail and secondary lending markets 
underscore the growing need for agricultural financing. According to 
year-end call report data for 2015, the Farm Credit System (FCS) 
reported $147.3 billion in loans outstanding for agricultural 
production, intermediate-term, and real estate lending, up nearly seven 
percent from 2014.\1\ Similarly, commercial banks and savings 
institutions reported $171.9 billion in loans outstanding for 
agricultural production and real estate lending at the end of 2015, 
also up nearly seven percent from 2014.\2\ Applications for credit 
through Farmer Mac's programs remained elevated through 2015. Farmer 
Mac approved more than 80 percent of all applications for Farm & Ranch 
lending during the calendar year and purchased a record $748 million of 
Farm & Ranch loans during the year. Farmer Mac's purchases of Farm 
Service Agency (FSA) and other USDA guaranteed loans also remained 
robust in 2015 with $363 million in transactions, up eight percent from 
2014. This rising lending activity highlights the growing demand for 
agricultural credit but also demonstrates the willingness and ability 
of agricultural lenders to meet that demand.
---------------------------------------------------------------------------
    \1\ Federal Farm Credit Banks Funding Corporation 2015 Annual 
Information Statement (https://www.farmcreditfunding.com/).
    \2\ Federal Financial Institutions Examination Council Quarterly 
Call Report Data, 2015Q4 (https://cdr.ffiec.gov/public/).
---------------------------------------------------------------------------
    Despite the cyclical headwinds from the overall agricultural 
economy, Farmer Mac sees other indicators of credit availability to a 
wide variety of borrowers. In 2015, Farmer Mac purchased or committed 
to purchase loans secured by agricultural real estate that were 
producing more than 70 different agricultural commodities in 42 states 
from over 300 lending institutions. Participating lenders included 
commercial banks, FCS institutions, insurance companies, and many other 
non-bank financial institutions dedicated to serving the financial 
needs of our nation's farmers and ranchers. We continue to see strong 
interest in our programs from rural lenders, with some 80 new lenders 
signed up during 2015 and over 1,200 lenders eligible and approved to 
transact business with Farmer Mac. Approximately 40 percent of all 
Farmer Mac transactions during 2015 involved small operators, and over 
95 percent of transactions involved a family operation. This business 
diversity by borrower location, size, and style as well as by customer 
and industry underscores the breadth and depth of agricultural lending 
today.
    Although market data indicates good credit availability in early 
2016, we urge market participants to exercise caution and patience as 
the current industry cycle plays out. Creditors should apply 
disciplined lending practices and at the same time be supportive but 
firm with their customers' requests. Regulators should be aware of the 
scope of potential credit problems, but they should also be cognizant 
that agriculture is a long-term endeavor and that sometimes the best 
cure for a troubled credit is not always liquidation. Producers should 
be aware that low commodity prices are likely to be with us for a 
while, and that cost containment could provide a new path to renewed 
profitability. Long-term fixed rate debt at today's historically low 
interest rates, which Farmer Mac helps many lenders to provide, can be 
an important tool to help stabilize the cost structure for many 
producers. In addition, lawmakers should continue to support the tools 
available to farmers and ranchers to help offset lower incomes and 
provide access to credit.
Land Values
    Farm real estate represents the overwhelming majority of the 
agricultural balance sheet. Of the nearly $3 trillion in farm assets in 
2014, over 80 percent was in the value of agricultural land and 
buildings. Between 2004 and 2014. the USDA estimate of the total value 
of farm real estate increased by more than $1 trillion, a doubling of 
asset values in just 10 years. The rising tide of farmland values did 
not affect all regions equally--much of the rapid rise in land values 
was centered in the midwestern United States in major grain producing 
states. The USDA reports increases in farmland value of 243 percent in 
Nebraska, 222 percent in Iowa, and 134 percent in Illinois between 2004 
and 2014. These increases are undoubtedly a result of the industry's 
recent expansionary cycle and commodity price boom beginning in 2005.
    More recently, factors influencing farmland values have been mixed. 
As previously mentioned, certain commodity prices have fallen sharply, 
and it is natural for an asset with declining future cash flow 
potential to also decline in total value. Farming expenses have not 
fallen at the same rate as farm revenues, which puts additional 
pressure on the ultimate profitability of farmland. In addition, the 
U.S. dollar strengthened tremendously in 2015, which lowered commodity 
prices and made U.S. agricultural exports less attractive in foreign 
markets. However, several factors have also combined to help support 
farmland values. Interest rates have not changed significantly since 
2010 and remain near historical lows. A lower interest rate environment 
supports asset values by reducing the discount rate of future cash 
flows, and it makes the returns on farm assets more attractive relative 
to other investment opportunities. Additionally, the supply of farmland 
available for sale does not appear to be growing significantly. This 
current trend is particularly significant as lower supplies are 
typically associated with higher market prices. Finally, Federal crop 
insurance and other support offered to farmers such as the Agricultural 
Risk Coverage (ARC), Price Loss Coverage (PLC), and the Margin 
Protection Program (MPP) significantly lower market risk for producers 
and thus lower the inherent revenue volatility of the underlying 
farmland assets. We cannot stress enough how vital the current safety 
net policies are to agricultural lenders. They provide a great level of 
certainty in an industry that is anything but certain.
    The combined market forces described above have netted out a modest 
decline in farmland values through early 2016, focused largely in the 
Midwest. According to the University of Nebraska-Lincoln, land values 
in Nebraska decreased six percent from early 2014 through February 
2016.\3\ A recent survey released by Iowa State University shows the 
value of medium-quality Iowa cropland fell 17 percent from September 
2014 to March 2016.\4\ Similarly, the annual survey results from the 
Illinois Society of Professional Farm Managers and Rural Appraisers 
(ISPFMRA) showed average farmland values in Illinois fell by nine 
percent in 2015.\5\ The relatively modest declines experienced in some 
states are very different from the dramatic changes seen during the 
1980's farm crisis, which is a testament to the strength and resiliency 
of U.S. agriculture today. Indeed, in other parts of the country, the 
appreciation of farmland values continued in 2015. According to data 
from the USDA's National Agricultural Statistics Service (NASS), 
farmland values in western states like Washington, Oregon, and 
California increased in 2015. These states produced a wider variety of 
agricultural products and thus were not so sensitive to changes in 
grain and oilseed prices. Similarly, land values in states like Georgia 
and others in the South and Southeast were near zero or slightly 
positive with a greater diversity of agricultural production.
---------------------------------------------------------------------------
    \3\ 2016 Trends in Nebraska Farmland Markets: Farming and Ranching 
on the Margin. University of Nebraska-Lincoln (http://agecon.unl.edu/
2016-trends-nebraska-farmland-markets-farming-and-ranching-margin).
    \4\ Iowa Farm & Ranch Chapter #2 REALTORS 
Land Institute March 2016 Land Value Survey. Iowa State University 
Extension and Outreach (https://www.extension.iastate.edu/agdm/
wholefarm/html/c2-75.html).
    \5\ 2016 Illinois Farmland Value and Lease Trends. Illinois Society 
of Professional Farm Managers and Rural Appraisers (http://
www.ispfmra.org/).
---------------------------------------------------------------------------
Agricultural Sector Analysis
    Much of the decline in agricultural profitability in recent years 
is a result of market changes for bulk crop commodities like corn, 
soybeans, and cotton. Global supplies of nearly all bulk commodities 
are in surplus, putting downward pressure on world prices. U.S. 
producers are at an added disadvantage with a strengthening dollar that 
puts further downward pressure on both commodity prices (that are 
denominated in U.S. dollars) and the relative value of U.S. exports. 
Cotton producers face additional pressure from significant supplies in 
China, the world's largest consumer of cotton, and signals of the 
country's willingness to liquidate those supplies in large trade 
blocks. Combined, the USDA estimates that the decline in crop prices 
has caused a drop of nearly $50 billion in net farm income between 2013 
and 2016.
    However, bulk commodity producers are not the only ones coming 
under pressure. Milk and dairy product prices are down significantly in 
2016 due to greater competition from foreign producers. Cattle prices 
are softening from historical highs as consumers began to balk at 
record-setting retail beef prices in 2015. Hog prices have decreased 
due to the rebound in hog inventories after the 2013 outbreak of the 
Porcine Epidemic Diarrhea Virus (PEDv) and tighter export markets. 
Poultry producers are also experiencing lower market prices due to 
higher domestic supplies, a result of several import bans on broiler 
meat after the 2015 outbreak of Highly Pathogenic Avian Influenza 
(HPAI). Finally, fruit and nut producers are seeing lower prices and 
tighter export markets affected by the stronger U.S. dollar in 2015. In 
general, the pattern of lower commodity prices has cause an increased 
demand for credit, as well as a need for the lender and borrower to 
work together more collaboratively when addressing the borrower's 
financing needs.
    For additional insight into these and other topics, I have attached 
the spring edition of The Feed, Farmer Mac's quarterly perspective on 
agriculture. While much of what is trending in agriculture today seems 
negative, we believe the medium- and long-term prospects for the sector 
remain favorable, a function of the many years of profitability in the 
last decade, the strength of the farm balance sheet, and the grit of 
America's farmers and ranchers.
Conclusion
    As mentioned at the beginning of my testimony, American agriculture 
has always been cyclical in nature. Farmers and ranchers have long 
memories, and they, more than most, pay close attention to mistakes 
made in the past to avoid them in the future. The conservation programs 
enacted and maintained after the weather-related disasters in the early 
20th century are a prime example of that. Farmers, ranchers, and their 
lenders also learned some hard lessons from the agriculture financial 
crisis of the late 1970s and 1980s. Today, producers are much more 
aware of the need to build working capital as the first line of defense 
against price volatility. I would be remiss if I did not also point out 
that the current low interest rate environment significantly helps 
borrowers. Looking ahead, credit conditions appear to be beginning to 
tighten modestly as the financial impacts of the recent stresses to 
farm incomes are becoming apparent in the financial position of some 
agricultural producers. For producers with higher profit margins and 
strong balance sheets, credit remains available at a low cost, while 
for other producers that lack these attributes, the cost is beginning 
to increase.
    There is no doubt that policies which enable our farmers and 
ranchers to market and sell their commodities overseas are more 
important than ever. It is no secret that we can feed the world, but 
our friends working on the farms and ranches in rural America need the 
tools to do this. Free and fair trade agreements are essential. In 
addition, just as the nation's economy and the world's economy are very 
different than they were in the late 1980s, so is the agricultural 
economy. Farms have naturally grown larger through consolidation, 
especially to help lower costs through scale. This is not necessarily a 
bad thing, but it simply points to a new reality, which depends on 
increasing efficiencies to maintain profitability. The participants in 
the agricultural financing markets have adjusted to these changes, and 
we believe that public policies in this regard should also reflect this 
new environment while continuing to recognize the importance of small 
farms and family operations in maintaining the vitality and diversity 
of American agriculture.
                               Attachment
The Feed [*]
---------------------------------------------------------------------------
    * The Feed is a publication produced by the Federal Agricultural 
Mortgage Corporation (``Farmer Mac''), which distributes this 
publication directly. The information and opinions contained herein 
have been compiled or arrived at from sources believed to be reliable, 
but no representation or warranty, express or implied, by Farmer Mac is 
made as to the accuracy, completeness, or correctness of the 
information, opinions, or the sources from which they were derived. The 
information and opinions contained herein are here for general 
information purposes only and do not constitute investment or 
professional advice. Farmer Mac does not assume any liability for any 
loss, however arising, that may result from the use of or reliance upon 
any such information or opinions by any person. Such information and 
opinions are subject to change without notice, and nothing contained in 
this publication is intended as an offer or solicitation with respect 
to the purchase or sale of any security, including any Farmer Mac 
security. This document may not be reproduced, distributed, or 
published, in whole or in part, for any purposes, without the prior 
written consent of Farmer Mac. All copyrights are reserved.
---------------------------------------------------------------------------
Farmer Mac's Quarterly Perspective on Agriculture
Spring 2016
Issue No. 3
Executive Summary
Production and Market Price Perceptual Map
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Key Highlights
          Farm income in 2016 is expected to be down across most farm 
        business types.
          Farm debt is increasing but now at a decreasing rate; 
        estimated annual farm debt payments are still low compared to 
        the 1980s.
          Agricultural exports face major headwinds, but there are 
        reasons to remain optimistic.

    For the third consecutive year, net farm income is projected to 
fall in 2016 as a result of lower commodity prices and ample global 
supplies. Very few sectors touted higher prices at the end of 2015 
compared to the beginning, and the price forecasts for 2016 are lower 
for most major ag commodities. However, government payments through the 
Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs 
should help offset the lower profitability for crop producers. Farm 
assets were down in 2015 and are projected down again for 2016 due to 
the liquidation of financial assets to meet cash flow needs, lower 
inventory values carried at lower market prices, and small declines in 
real estate values. Real estate and non-real estate debt look to be on 
the rise in 2016 but at a slower pace than during the transition years 
of 2014 and 2015. Weather conditions in the West are improved because 
of El Nino precipitation, particularly in the Pacific Northwest. Though 
considerably more precipitation may be required to fully alleviate the 
effects of the drought, a wet 2016 water year is a good start. The U.S. 
Department of Agriculture (USDA) projects an overall decrease in acres 
planted to crops in 2016, largely driven by lower wheat acreage. Acres 
planted to corn are expected to increase in 2016. Crop prices have 
declined in recent months due to the large carry-in crop from the 2015 
harvest. Stiff competition persists for U.S. dairy producers in foreign 
markets, and lower market prices are likely to remain throughout the 
year. Cattle herds continue to rebuild in 2016, putting downward 
pressure on cattle prices. Reduced profitability for feedlots will 
likely continue to depress cattle prices throughout 2016. Broiler 
prices were down in 2015 on higher cold storage inventories, but demand 
is inching up on the pricing differential between poultry and beef, 
while it is hopeful that avian influenza concerns ease in overseas 
markets. Wine grape producers received lower prices in 2015, which was 
the result of a good harvest, increased interest in mid-to-higher 
priced wines, and increased competition from the craft beer industry. 
Hops prices have soared in response to a tough harvest and the rapid 
growth of craft brewing.
Farm Economy Highlights (Resource 1, 2)
Key Highlights
          USDA economists expect farm income to decline for the third 
        consecutive year in 2016.
          Farm equity is expected fall again in 2016, but farm assets 
        are holding up fairly well.
          Although debt levels continue to increase, estimated 
        inflation-adjusted annual debt payments are still significantly 
        lower than the 1980s.
    The initial USDA projections for the 2016 farm economy could be an 
inflection point. Net farm income, an accrual-based economic measure of 
sector income, is projected to fall by only three percent to $55 
billion. This is a small drop compared to the declines in 2014 and 2015 
of 27 and 38 percent, respectively. Net cash income, the amount of 
income left to producers after they have paid for all cash expenses, is 
also expected to decline in 2016 but by only two percent to $91 
billion. Net cash income is a sounder measure of sector financial 
health for lenders as it gives a better picture of cash available for 
living expenses and debt servicing. Commodity prices have stabilized 
somewhat in early 2016, unfortunately at lower levels, which appears to 
be driving the leveling-off of farm income. This year will represent 
the third consecutive year of lower crop prices and the second year of 
lower livestock and protein prices. Producers in all major classes of 
sector production show stable-to-lower than expected incomes during the 
year with dairy producers showing the largest drop due to declines in 
milk prices. While a third successive decline in farm incomes is 
historically rare, producers are adapting to the lower market price 
environment from a position of relative financial strength.
    Farm assets are also expected to compress in 2016 while debt levels 
are set to expand. Farm assets are expected to decline by just under 
two percent this year to $2.7 trillion, driven by lower real estate 
values, lower crop and livestock inventory values, and lower levels of 
financial assets. The combined effects of the asset value declines 
indicate a realized or unrealized loss of nearly $130 billion since 
2014. Simultaneously, farmers and ranchers are expected to take on 
additional debt loads to offset the lower level of incomes. While the 
total debt load projected for 2016 will hit a nominal high at $372 
billion, when adjusted for inflation, the level of combined farm debt 
does not exceed the historic highs reached in the 1980s. Not only is 
the projected level of farm debt below peak, the annual cash required 
to service that debt is well below the levels witnessed during the farm 
crisis years. By reversing the USDA's debt servicing ratio and 
adjusting for inflation, Figure 2 demonstrates the buildup of debt 
service requirements in the 1980s driven largely by higher interest 
rates. Debt payments today have roughly the same principal component 
but a significantly lower portion attributable to the interest payment. 
Given today's accommodative interest rate environment, the cash flow 
required to service debts remains well below the sector net cash 
income. In 1981, however, the sector debt payments exceeded net cash 
income, causing significant sector-wide financial stress. Today, 
expected net cash income is 1.8 times the estimated sector debt 
payments, just below the historical average of 2.1 times. Clearly, a 
dovish interest rate environment is beneficial to farmers, ranchers, 
and agricultural lenders.
Figure 1: Farm Business Net Cash Income Trends by Year and Production 
        Type
Average Farm Business Net Cash Income by Year
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 2: Real Farm Debt Payments
Inflation-Adjusted Farm Sector Debt Payments
(2009=100)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Special Report: Agricultural Exports and the U.S. Dollar 
        (Resource 3, 4, 5)
Key Highlights
          Agricultural trade represents approximately \1/3\ of the 
        value of U.S. agricultural production.
          The recent strength of the U.S. dollar has proved to be a 
        headwind for agricultural exports.
          Certain states (California, Illinois, and North Dakota, among 
        others) are more sensitive to changes in foreign demand due to 
        a higher percentage of annual agricultural cash receipts 
        exported.
          Bulk commodities (e.g., soybeans, corn, wheat, etc.) 
        represent a high percentage of the total value of U.S. 
        agricultural exports.
          Expanded trade opportunities remain a bright spot in the 
        future of the U.S. agriculture sector.

    Trade is now a major source of demand for the U.S. agriculture 
sector. In 2015, the USDA Foreign Agricultural Service estimates that 
U.S. ag exports fetched $133 billion in receipts, which is roughly 31 
percent of the total value of U.S. agricultural production during the 
calendar year. In 1970, the ratio of agricultural exports to production 
was only 13 percent. Some of the growth has come from expanded trade 
with long-term trading partners like Mexico, Canada, and Japan; 
approximately 40 percent of the value of exports is with these three 
countries, up from 25 percent in 1980. Other growth has come from new 
and expanded markets such as China, where sales of agricultural 
products represent over 15 percent of total U.S. exports, up from just 
five percent in 1980.
    However, there are several conditions that threaten U.S. 
agricultural export markets. First, currency effects from a stronger 
dollar in 2015 have made U.S. agricultural products more expensive 
relative to competitors in Brazil, Australia, and the European Union 
(EU). Figure 3 shows the history of U.S. agricultural trade adjusted 
for inflation overlaid with an index of U.S. dollar strength. During 
all three spikes in U.S. dollar strength, agricultural export values 
declined, particularly in the early 1980s and the 1990s. In fact, the 
correlation coefficient between the two metrics is ^0.71 implying a 
very strong, inverse relationship between the two. In 2015, U.S. ag 
exports slumped by more than 11 percent while the U.S. dollar 
strengthened by 16 percent. The U.S. dollar has weakened somewhat in 
early 2016, but it remains highly elevated compared to 2014. Second, 
global supplies of agricultural products have rebounded significantly 
from the lows experienced in 2012 and 2013. The extraordinary run of 
commodity prices from 2008 through 2013 triggered a worldwide expansion 
in the production of bulk commodities--between 2007 and 2015, world 
production of corn, soybeans, and wheat increased by 22, 46, and 20 
percent, respectively. The rise in global production has increased the 
competition faced by U.S. producers tremendously, particularly from 
South American producers in Brazil and Argentina. Finally, global 
politics have seeped into the farm gate. In 2014, Russia banned imports 
of Western products in retaliation for sanctions related to its 
annexation of Crimea and intervention in Eastern Ukraine. Domestically, 
trade has become a hot-button issue in the 2016 Presidential race, with 
virtually all candidates in both parties stepping back from 
international trade deals like the Trans-Pacific Partnership (TPP). All 
of these circumstances create considerable headwinds for the expansion 
of U.S. agricultural exports.
Figure 3: U.S. Agricultural Exports and the U.S. Dollar
U.S. Agricultural Exports
(2009=100)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Pressure on U.S. agricultural exports will not affect all producers 
equally. Some states export a higher percentage of their agricultural 
production than others. Figure 4 depicts the top ten agricultural 
exporting states and how much of their 2014 cash receipts were 
represented by export values. California had the highest absolute level 
of agricultural exports in 2014, but North Dakota exported the highest 
proportion of its total agricultural cash receipts at 52 percent. The 
higher the proportion of exports to sales, the greater the exposure to 
foreign markets and a downturn in agricultural trade. States like 
California, Illinois, and North Dakota have higher export to sales 
ratios owing to the types of goods produced within their borders. For 
example, California is a major producer of almonds and about 75 percent 
of each almond crop is exported to global markets. Field crops such as 
soybeans and corn represent roughly \1/3\ of U.S. ag exports. Soybeans 
alone represent 16 percent of 2014 U.S. ag export values. Producers of 
these commodities will likely be adversely affected by a slowdown in 
global trade in 2016.
Figure 4: U.S. Agricultural Exports by State of Production
Importance of Exports to State Agriculture
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Despite these headwinds, there are still many good signs for U.S. 
agricultural exports. Over 95 percent of the world's population in 2015 
lived outside the United States, and that number will likely increase 
in the future as emerging markets in Africa and Asia continue to 
develop. The most recent United Nations estimates put world population 
at nine billion by 2040, a full decade earlier than many thought just 5 
years ago. The global population growth presents an incredible 
opportunity for U.S. farmers and ranchers to increase reach and market 
size. The TPP may have lost some steam during the U.S. Presidential 
primary season, but there is still good support for the trade deal in 
many corners of Congress. Trade agreements like the TPP and the 
Transatlantic Trade and Investment Partnership (T-TIP) will open the 
doors to these growing markets, giving a growing number of consumers 
access to the richest, safest, and healthiest food the planet has to 
offer.
Weather (Resource 6, 7)
Key Highlights
          El Nino brought improvement to drought conditions across the 
        West until a mild and dry February, though March was certainly 
        moister.
          California snowpack is improving but appears to be close to 
        normal, rather than a ``blockbuster'' El Nino snow year.
          Soil moisture conditions in the U.S., particularly in the 
        Midwest, are good heading into spring.
          As El Nino conditions begin to wane, warm and dry conditions 
        can form in the Midwest from late spring into mid-summer. 
        Current seasonal forecasts are consistent with this tendency.

    The much-hyped El Nino of 2015-2016 began the year largely living 
up to expectations as widespread rain and snow improved the drought 
situation throughout much of the West. However, a mild and dry February 
halted some of the progress as California Sierra Nevada snow water 
equivalents (SWE) diminished from above normal at the beginning of the 
month to below normal by the end of the month. March trended back 
toward a stormier pattern, which helped bring SWE closer to historical 
averages. Heading into spring, attention in California will turn toward 
reservoir fill rates as the winter snow melts, along with state and 
Federal water allocations for 2016, which are both expected to remain 
modest. Much of the Pacific Northwest has experienced a significant 
improvement in drought conditions through the winter.
    Soil moistures throughout the United States are generally at or 
above normal for this time of year, particularly throughout the 
Midwest. This augurs well for spring planting, provided that moisture 
levels do not increase significantly and impede field work.
    As the 2015-2016 El Nino begins to diminish throughout the spring 
and early summer, the amount and timing of precipitation in the Midwest 
should be monitored. As El Nino events fade, there is often a trend for 
warm and dry weather in the Midwest from late spring into summer. 
Current seasonal forecasts reflect this pattern. This is not to say 
that a widespread drought is expected; however, poorly-timed dry 
weather can certainly affect seed germination and crop growth.
Figure 5: Drought Monitor Map
(USDA, NOAA, University of Nebraska-Lincoln)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 6: U.S. Soil Moisture Ranking
Calculated Soil Moisture Ranking Percentile
April 7, 2016
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Corn & Soybeans (Resource 4, 8)
    For corn and soybean growers, 2016 looks to rhyme fairly well with 
2015. Global supplies of both commodities head into the planting season 
at multi-year highs. World production of corn and soybeans increased 
two and 13 percent, respectively, in 2015, and expectations for 2016 
demonstrate similar levels of production due to record crops in China, 
Argentina, and Brazil. In the U.S., early USDA surveys show more acres 
planted with corn and soybeans in 2016 compared to 2015, with many 
acres coming out of wheat. The higher acres planted may or may not 
increase production, however, as the probability of a dry growing 
season is higher after a strong El Nino weather pattern. Soil moisture 
is very good heading into the plant, so more time will be needed to 
better estimate the size of the U.S. crop in 2016. But supplies are 
ample heading into planting season.
    Demand for corn and soybeans is expected to increase in 2016. Grain 
consuming animal units are up in the early part of the year, and the 
lower feed prices should motivate protein producers to increase the 
number of animals on feed and their time on feed. Ethanol and biodiesel 
production remains steady despite lower oil and gas prices, and lower 
prices at the pumps may lead to an increase in national gasoline 
consumption this travel season. Export market growth will likely be 
limited by intense competition from South American growers in 2016. 
Brazil is expected to have a very large safrinha, or second corn crop, 
which harvests at virtually the same time as the U.S. crop (see Figure 
8). Argentina is quickly developing as a major competitor for U.S. corn 
producers after its recent Presidential election. Specifically, the new 
Administration is very pro-agriculture, and in December of 2015, just 5 
days after the Presidential inauguration, it reduced export tariffs and 
instituted currency controls that will prompt producers to expand 
production and exports of corn. And while Argentina's harvest timing 
does not directly compete with the U.S., a larger supply of spring corn 
will hurt growers with crop in the bins after harvest.
    The net of the supply-demand forces for grains indicate lower 
prices in 2016. The USDA projects a season-average corn price of $3.45 
per bushel (a $0.15 drop from 2015) and a soybean price of $8.50 per 
bushel (a $0.30 drop from 2015). Barring a major supply-side or U.S. 
dollar disruption, these lower prices are likely to persist into 2017.
Figure 7: Historical Crop Plantings and Expectations for 2016
Crop Planting Trends
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 8: Global Crop Harvest Timing Grid
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Dairy (Resource 4, 9, 10)
Key Highlights
          Low world dairy prices persist in response to more than 
        adequate supplies.
          Milk production rose in 2015 for major exports in the U.S., 
        the EU, and Oceania.
          Producer profitability will be tight in 2016 with continued 
        low milk prices but stable production costs.

    Supply-side economics in the dairy industry continue to drag sector 
profitability. USDA data shows U.S. production in the winter months 
from December to February is up by almost two percent on a higher 
number of cows combined with a higher average output per cow. The ratio 
of ending stocks-to-use, a relative measure of dairy supplies in 
inventory at the end of each calendar year, reached its highest levels 
in 2015 since 2009 for many dairy products. Milk production at 
California dairies continues to struggle in early 2016 due to lower 
output per cow. The stress on herds from the extended drought 
conditions is likely the major contributor to the decline, but water 
conditions have improved in many parts of the state. Global supplies 
remain in surplus after strong production in 2015 and slower global 
trade in early 2016.
    Product demand remains muted in the early months of 2016. Domestic 
dairy product use has held steady during the winter months, but exports 
are down dramatically through January. Russia continues its ban on 
Western agricultural imports through August 2016, and their 
disappearance from the import picture has put more European dairy 
products onto the world market. Chinese dairy imports picked up in late 
2015 and early 2016, and that has provided some support to world dairy 
prices. U.S. producers are at an added disadvantage to both the EU and 
Oceania due to the currency effects of a stronger dollar.
    The combined effects of the supply and demand functions imply 
continued pressure on producer profitability in 2016. The Federal Order 
Class III milk price for March was $13.78 per cwt, up slightly from 
February but well below prices in 2014 and 2015. The USDA is 
forecasting an average Class III milk price near $13.90 per cwt for 
2016. Feeding costs could abate somewhat in 2016 if grain and hay 
prices stay low. Supplies are not likely to contract by much, so 
producers must look to control costs and spur demand growth at home and 
in new overseas markets. Implied profit margins based on estimated 
costs of production and a Class III milk price have been negative for 
14 consecutive months, but the implied margins are not nearly as severe 
as they were in 2009 when the dairy industry last faced a major 
cyclical downturn. This year is unlikely to turn into another 2009, as 
restaurant sales remain strong, domestic cheese consumption is holding 
up, and global trade is merely subdued, not closed.
Figure 9: Historical Dairy Profitability
U.S. Average Dairy Returns
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA ERS National Milk Cost of Production Estimates.
Almonds (Resource 11, 12)
Key Highlights
          The 2015 California almond crop weighed in at approximately 
        1.8 billion pounds, roughly equal to the 2014 crop.
          Grower almond prices peaked in early 2015 and have continued 
        to decline into early 2016 on weaker export demand.
          Inventories sit at near-term highs putting downward pressure 
        on prices.

    While the 2015 almond crop failed to break any records, producers 
maintained production levels attained in 2014. California, the state 
that produces nearly 100 percent of all U.S. almonds and over \1/2\ of 
the world's annual supply, spent the entirety of the growing year in a 
deep drought with restricted access to state and Federal water 
allocations. Yields were down again in 2015, likely a factor of the 
deepening drought and early bloom. Lower yields were offset by the 
greater bearing acreage under production, a trend that has been 
increasing in recent years due to more acres planted to orchards. Non-
bearing almond acreage stood at 150,000 acres in 2014, a 20 year high. 
As orchards mature, more of the almond acreage begins to bear nuts, and 
the total potential production increases. Global supplies were up in 
2015 on higher production in Australia and the EU, but U.S. producers 
dominated world trade, as U.S. almonds represented over 85 percent of 
almond shipments in 2015.
    Demand for U.S. almonds weakened during the last year. A robust 
export market in 2014 drove up prices more than 15 percent during the 
year, but both domestic and foreign consumers pulled back in 2015. U.S. 
almond exports fell five percent during the 2014/15 marketing year on 
ample global supply and a stronger U.S. dollar, and domestic 
consumption fell by ten percent. Shipments have picked up in early 
2016, but the drop in demand during 2015 left higher carry-in and 
boosted inventories on the almond balance sheet.
    In response to these market conditions, almond prices have dropped 
considerably since early 2015. The combination of steady supplies and 
lower demand pushed up uncommitted inventories in early 2016 to new 
heights. The Almond Board of California reports inventory levels 
monthly, and while in most years committed shipments of almonds pushed 
the inventory levels into a negative position during the late summer 
months, the last 2 years have seen positive inventories during that 
same period (see Figure 10). However, lower prices and a drop in the 
U.S. dollar are spurring sales, so market prices may find some support 
by mid-year. Reports published by Derco Foods, an almond trading 
company, show its market prices dropping nearly 60 percent in mid-to-
late 2015 from over $5.00 per pound to nearly $2.00 per pound. While 
the average price to growers is likely closer to $3.00 per pound, this 
intense price volatility will negatively affect prices paid to almond 
growers in 2016 and 2017.
Figure 10: U.S. Almond Inventories
U.S. Almond Inventory Trends
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Livestock (Resource 13, 14, 15)
Key Highlights
          Beef market conditions signal herd expansion and lower cow/
        calf prices in the near future.
          Pork production is up in 2016 but the higher supplies and 
        weaker export markets have put downward pressure on hog price 
        expectations.
          Broiler sales continue to struggle overseas and prices are 
        down as a result of large inventories.

Beef
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Beef production in the U.S. is set to rebound in 2016 after a 5 
year slide (Figure 11). Cattle inventories are on the rise and the good 
pasture conditions and cheaper feed prices during 2015 have spurred 
cow/calf operators and feedlots to increase animal weights prior to 
slaughter. Cattle producers are retaining more heifers in 2016, and the 
higher retention signals further expansion into 2017. Demand for beef 
buckled somewhat during 2015 as consumers faced record-high retail 
prices and exporters dealt with a stronger dollar. Since March of 2015, 
retail beef prices have fallen between three and seven percent 
depending on cut and quality. Changes in market prices take time to 
work backward through the supply chain, but fed and feeder cattle 
prices have fallen by almost 20 percent since early 2015.
    The outlook for cattle and beef prices is muddled by competing 
effects of supply and demand. Supplies are certainly headed higher 
thereby signaling lower prices, but demand is also likely to head 
higher in the face of lower retail prices and a stable-to-weaker U.S. 
dollar. Feedlots face mounting losses in early 2016: the implied net 
loss per head peaked in December 2015 at $560 due to the high feeder 
cattle prices (see Figure 12). Feedlots will need to lower placement 
costs in order to swing back to profitability, and that fact may be the 
final straw to push prices down further throughout the year.
Figure 11: Meat Production Trends and Expectations
U.S. Meat Production Trends
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 12: Historical Feedlot Operation Profitability
Iowa Feedlot Returns by Month
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Iowa State University Extension and Outreach, 
        Estimated Livestock Returns.
Hogs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Pork producers are also ramping up production in 2016 but demand 
has been increasing. The USDA estimates U.S. pork production will be up 
2.2 percent this year as a function of both larger litters and higher 
slaughter rates. The hog industry has largely recovered from the 
Porcine Epidemic Diarrhea Virus (PEDv) outbreak of 2014, and that 
recovery has brought about higher hog supplies. China, the world's 
largest producer and consumer of pork, has tightened environmental 
restrictions on hog producers in the last 2 years, and the tighter 
regulation is just beginning to be reflected in the country's annual 
production numbers. Pork production in China fell just under one 
percent in 2015, and output looks to be steady or lower in 2016. Demand 
for pork looks good in early 2016 with the USDA projecting record high 
domestic consumption during the year. The retail price differential 
between pork and beef fell precipitously during 2015, and the relative 
value of pork likely spurred additional demand for swine. Export 
markets look attractive despite the strong U.S. dollar on a shortfall 
of production in China and better-than-expected sales in Japan.
    The factors of supply and demand have had mixed effects on hog 
prices. The rebound of the U.S. hog inventories put clear and immediate 
downward pressure on live hog prices. Prices soared to $85 per 
hundredweight in early 2014 as the PEDv outbreak leveled pig litters, 
but by the end of 2015, prices fell back below historical averages to 
nearly $45 per hundredweight. The increase in pork demand will keep 
prices from falling too much further, and will likely provide support 
throughout 2016. Hog prices could see another dip if slaughter capacity 
gets constrained again in 2016, as most facilities are running at or 
near capacity. Barring a major supply-side disruption, the USDA puts 
the live equivalent price for hogs between $50 and $55 per 
hundredweight throughout the calendar year.
Broilers
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Last, broiler meat production and demand are both up in early 2016. 
More weight per bird and birds per flock are expected, which would 
drive up already high levels of frozen meat stocks. The Highly 
Pathogenic Avian Influenza (HPAI) outbreak of 2015 devastated many egg 
and turkey operations, but broiler production went largely unaffected. 
When many foreign markets, including large importers like China and 
South Korea, banned the importation of U.S. poultry, production soon 
outpaced consumption and stocks built up. The large stocks in cold 
storage pushed broiler meat prices down with wholesale prices falling 
27 percent from January to December. Prices stabilized at the end of 
2015 and into early 2016, but the stocks will take time to draw down. 
Weekly prices have fluctuated a great deal since January 2016 due to 
the oversupply. Domestic demand has been excellent in early 2016 as 
consumers have enjoyed lower relative prices for chicken compared to 
pork or beef for the last 18 months. Exports are down but should pick 
up later in 2016 as the resurgence of HPAI was limited to one case in 
Indiana this January.
    The mixture of supply and demand factors in the broiler industry 
indicate a flat-to-increasing price trend in 2016. The supplies of 
broiler meat continue to build, and production is not slowing down. 
However, U.S. per capita consumption should support the market prices 
that currently range from 80 to 90 per pound. Export markets could 
provide a boost later in the year depending on the international 
response to HPAI. Feed costs are likely to abate in 2016, so 
profitability in the poultry sector should be better in 2016 than in 
2015.
Wine and Beer (Resource 16, 17, 18, 19)
Key Highlights
          California grape crush in 2015 shows good yields but lower 
        prices for most non-premium growing regions.
          Hop growers expanded production in 2015 in response to higher 
        prices and growing demand from the craft beer industry.
          Demand for both wine and beer looks strong in 2016.

    Since the 1970s, the U.S. has continually expanded as a producer 
and consumer of wine. Acres planted to wine grapes in California 
increased four-fold between 1970 and 2014, and in 2014, the U.S. ranked 
fourth in total world wine production behind France, Italy, and Spain. 
California viticulturists generated 3.8 million tons of grapes 
following the 2015 harvest, roughly equaling output from the record 
2014 crush. As a result of the surprisingly good crush in 2015 and 
changes in consumer demographics, average California wine grape prices 
came under pressure last year. According to the Silicon Valley Bank 
(SVB) 2016 Wine Report, sales of low-cost, bulk wine were down 4.5 
percent from 2014 while sales for wines more than $9 per bottle 
increased an average of approximately ten percent. The 
``premiumization'' of wine consumption is causing a divergence of grape 
prices; premium growing regions such as Napa and Sonoma counties 
experienced increases in average prices paid to growers while bulk 
growing regions in the San Joaquin Valley saw decreases in average 
prices paid to growers.
    Consumers are changing agricultural-based adult beverage 
preferences in other ways that threaten the U.S. wine industry: the 
craft and specialty beer industry has been on a major run in the last 
10 years. Between 2006 and 2015, the number of craft beer 
establishments doubled, and the estimated revenues attributable to 
those institutions more than doubled. Hops, a distinguishing ingredient 
for many craft beers, has benefitted from the increase in production. 
Hops prices are up from $2.05 per pound in 2006 to over $4.38 per pound 
in 2015. Market prices have incented higher planted acreage in the 
principal growing regions of Washington, Oregon, and Idaho, and the 
economics have been good enough to spur hops farmers to plant in 
Pennsylvania, New Jersey, and Virginia among other East Coast states 
where craft brewers are closer to final markets. Small hopyards are 
becoming agritourist destinations, and millennial consumers appear to 
expend on craft beers and quality wines in equal amounts depending on 
convenience and value. The U.S. wine industry will certainly experience 
competition from craft brewing, but fortunately there looks to be more 
than enough demand to go around as the millennial generation matures 
into prime consuming age.
Figure 13: Wine Grape Market Trends
Califorina Wine Grape Production and Price Trends
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 14: Craft Beer, Hop Production, and Prices
Craft Beer and Hop Production
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Areas of Interest (Resource 1, 6, 7, 20)
California Drought
    The 2016 water year unquestionably ameliorated a parched 
California, but the Western drought is far from over. Reservoir levels 
throughout the state received a much-needed recharge in March. Lake 
Shasta began 2016 at 31 percent of capacity, and Lake Oroville began 
the year at 29 percent of capacity. The reservoirs approached the end 
of March at 87 and 84 percent of capacity, respectively. Near the end 
of March, California snowpack was also much deeper than recent history 
standing at nearly 90 percent of average. Despite the infusion of much-
needed water and snow this water year, the drought lingers throughout 
the fruitful San Joaquin Valley. According to USDA expense data, 
irrigation costs have skyrocketed during the last few years climbing 
from $400 million per year in 2009 to over $1.1 billion in 2014. 
Drought Monitor reports show significant reductions in Northern 
California during the month of March, but the bulk of Central and 
Southern California remain in the most severe category of drought 
intensity. State Water Project officials announced in March 
agricultural water allocations at 45 percent of contracted amounts, a 
big improvement from the 20 percent allocations in 2015 and the zero 
percent in 2014. These increases should be met with cautious optimism 
in 2016, and conditions must continue to be monitored closely.
Figure 15: California Department of Water Resources Reservoir Level Map 
        (March 23)
Conditions for Major Reservoirs: 23 MAR 2016
Data as of Midnight 23 MAR 2016
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Report Generated: 24-MAR-2016 7:40 a.m.
GMO Labeling Laws
    There is no more divisive topic in food and agribusiness today than 
the use of genetically modified organisms (GMOs) in the food system. 
GMOs can be a principal or secondary ingredient in many finished 
consumer food products, and GMO versions of corn and soybeans are a 
very high percentage of U.S. acres planted. Opponents of GMO crops 
argue that the long-term effects of human consumption of genetically 
engineered food products are unknown, that the genes can increase the 
power or potency of insects and disease, and that once in the food 
production system, the genes that have been modified can end up in 
unexpected places or mutating in unknown ways. Advocates of GMO foods 
argue that science has proven the resulting products are safe for human 
consumption, that they increase plant resistance to a number of 
stresses like drought or disease, and that genes can be modified to 
improve the nutritional content of foods. The debate took a new turn in 
2014 when the State of Vermont enacted a law requiring labels to 
disclose the use of GMO ingredients in consumables that goes into 
effect in July 2016. Many food manufacturers and grocers have attempted 
to fight the legislation citing the burden it creates to have 
independent labeling of goods across state borders. In July 2015, the 
U.S. House of Representatives passed the Safe and Accurate Food 
Labeling Act of 2015 which disallowed states from enacting individual 
food labeling laws and instead created a Federal standard for voluntary 
labeling of foods with GMO ingredients. The bill was referred to the 
U.S. Senate last July, and while it cleared the Senate Agriculture 
Committee early this March, it has failed to gain enough support in the 
wider Senate body, thus ending debate on the bill. July is rapidly 
approaching, and food companies are now starting to prepare for the 
possibility that state-based labeling laws are here to stay. These 
labeling requirements will increase the costs for food manufacturers, 
and those costs may be passed along to producers, consumers, or some 
combination of the two.
Resources
    The information and opinions or conclusions contained herein have 
been compiled or arrived at from the following sources:

  1.  USDA Farm Sector Finances (http://www.ers.usda.gov/topics/farm-
            economy/farm-sector-income-finances.aspx).

  2.  USDA Farm Sector Financial Ratios (http://www.ers.usda.gov/data-
            products/farm-income-and-wealth-statistics/farm-sector-
            financial-ratios.aspx).

  3.  USDA Foreign Agricultural Service Global Agricultural Trade 
            System Data (http://apps.fas.usda.gov/GATS/Default.aspx).

  4.  USDA Foreign Agricultural Service Production, Supply, and 
            Distribution Data (https://apps.fas.usda.gov/psdonline/
            psdhome.aspx).

  5.  United Nations Department of Economic and Social Affairs, 
            Population Division (2015). World Population Prospects: The 
            2015 Revision. New York, United Nations.

  6.  National Drought Mitigation Center's Drought Monitor (UNL/NOAA;
            http://droughtmonitor.unl.edu/).

  7.  NOAA Weather Prediction Center (http://www.wpc.ncep.noaa.gov/).

  8.  USDA Office of the Chief Economist--2016 Commodity Outlooks 
            (http://www.usda.gov/oce/forum/commodity.html#commodity).

  9.  University of Wisconsin--Understanding Dairy Markets (http://
            future.aae.wisc.edu/).

  10. U.S. Dairy Export Council (http://www.usdec.org/).

  11. Almond Board of California Position Reports (http://
            www.almonds.com/newsletters/position-reports).

  12. Derco Foods Almond Price Reports (http://www.dercofoods.com/en/
            english-reports/english-almond-reports).

  13. USDA Economic Research Service Livestock, Dairy, and Poultry 
            Outlook (http://www.ers.usda.gov/publications/ldpm-
            livestock,-dairy,-and-poultry-outlook/.aspx).

  14. Iowa State University Extension (http://www2.econ.iastate.edu/
            estimated-returns/).

  15. USDA Meat Price Spreads (http://www.ers.usda.gov/data-products/
            meat-price-spreads.aspx).

  16. Wine Institute Statistics (http://www.wineinstitute.org/
            resources/statistics).

  17. 2016 Silicon Valley Bank Wine Report (http://www.svb.com/wine-
            report/).

  18. 2015 California Grape Crush Report (http://www.nass.usda.gov/
            Statistics_by_State/California/Publications/Grape_Crush/).

  19. IBISWorld U.S. Craft Beer Production Report (August 2015).

  20. California Department of Water Resources (http://
            cdec.water.ca.gov/index.html).
About The Feed
    The Feed is a quarterly agricultural economic outlook for current 
events and market conditions within agriculture. The report is broad-
based, covers multiple regions and commodities and incorporates data 
and analysis from numerous sources to present a mosaic of the leading 
industry information, with a focus on the latest information from the 
United States Department of Agriculture and their Economic Research 
Service. There are several regularly included sections like weather and 
major industry segments, but the author rotates through other 
industries and topics as they become relevant in the seasonal 
agricultural cycle. Where the report adds value to readers is through 
its unique synthesis of these multiple sources into a single succinct 
report. Please enjoy.
About the Authors
    Author--Jackson Takach, Farmer Mac's resident economist, is a 
Kentucky native whose strong ties to agriculture began while growing up 
in the small farming town of Scottsville. He has since dedicated a 
career to agricultural finance where he can combine his passion for 
rural America with his natural curiosity of the world and his strong 
(and perhaps unrealistic) desire to explain how we interact within it. 
He joined the Farmer Mac team in 2005, and has worked in the research, 
credit, and underwriting departments. Today, his focus includes 
quantitative analysis of credit, interest rate, and other market-based 
risks, as well as monitoring conditions of the agricultural economy, 
operational information systems analysis, and statistical programming. 
He holds a Bachelor's degree in economics from Centre College, a 
Master's degree in agricultural economics from Purdue University, and a 
Master's of Business Administration from Indiana University's Kelley 
School of Business. He has also been a Chartered Financial Analyst 
(CFA) charterholder since 2012.
    Contributing Author--Curt Covington, Farmer Mac's Senior Vice 
President, Agricultural Finance, leads the company's business 
development efforts, as well as the company's credit administration and 
underwriting functions. Curt's passion for rural America developed at a 
young age on his family's grape and tree nut farm in Selma, California. 
He has since leveraged his passion into a long career in ag lending, 
which spans almost 4 decades. In addition to his role at Farmer Mac, 
Curt is a respected leader in the agricultural mortgage industry and is 
actively involved in leadership roles within industry trade groups, 
including the RMA Agricultural Lending Committee, the Agricultural 
Lending Institute, The Agricultural Banking Institute of the Americas, 
and Federal Financial Institutions Examination Council (FFIEC).
    Contributing Author--Brian Brinch, Farmer Mac's Vice President 
Financial Planning and Analysis manages the development of Farmer Mac's 
financial projections and plans, stress testing, and data analytics. 
Brian's interest in Farmer Mac began while attending Pennsylvania State 
University for his Masters in Agricultural and Applied Economics where 
he won the Outstanding Master's Thesis Award for his thesis titled ``An 
Analysis of Farmer Mac Prepayment Penalty Designs''. Prior to his study 
of agricultural economics, Brian received his Bachelor's degree in 
meteorology at Penn State. Today, he is the company's unofficial 
weatherman with an uncanny ability to predict the weather more 
accurately than any news station in the country. Brian is also a CFA 
charterholder and FRM Certified.
About Farmer Mac
    Farmer Mac is the stockholder-owned company created to deliver 
capital and increase lender competition for the benefit of American 
agriculture and rural communities. For more than a quarter-century, 
Farmer Mac has been a vital partner in helping American's rural lenders 
meet the evolving needs of their customers, bringing the financial 
strength of the nation's premier secondary market for agriculture right 
to their customers' farms and ranches. Lenders of all sizes use Farmer 
Mac's broad portfolio of loan products to offer more financial choices 
to their rural customers, helping them keep pace with today's capital-
intensive agricultural industry.
Contacts
          To subscribe to The Feed, please visit www.farmermac.com/
        news-events/the-feed
          For inquiries:

            Megan Pelaez,
            Director--Communications,
            [email protected]
            202.872.5689

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            @JacksonTakach
            @FarmerMacNews

    The Chairman. Dr. Featherstone.

STATEMENT OF ALLEN M. FEATHERSTONE, Ph.D., PROFESSOR AND HEAD, 
               DIRECTOR OF MASTER IN AGRIBUSINESS
  PROGRAM, DEPARTMENT OF AGRICULTURAL ECONOMICS, KANSAS STATE 
                   UNIVERSITY, MANHATTAN, KS

    Dr. Featherstone. Chairman Scott, Ranking Member Scott, and 
Members of the Commodity Exchanges, Energy, and Credit 
Subcommittee of the House Committee on Agriculture, I want to 
thank you for inviting me to testify. My name is Allen 
Featherstone, Professor and Head of the Department of 
Agricultural Economics, Kansas State University.
    With a 56 percent decrease in U.S. net farm income reported 
by USDA occurring over a 3 year period, concern has begun to 
arise regarding the future direction of cash rents and land 
values, along with the overall credit situation. With a decline 
of 56 percent, some regions of the U.S. have experienced 
smaller declines, some larger declines.
    Kansas State University works with roughly 2,000 farmers 
statewide through the Kansas farm management associations. 
These producers provide balance sheet and income statement 
information that allows the understanding of the distribution 
of financial performance, and provides an overall financial 
picture of Kansas farms. The north central region in Kansas is 
the first association where we have completed information for 
2015. They experienced a dramatic change in the profitability 
of production agriculture. Beginning in 2007, net farm income 
in north central Kansas increased from between $85,000 to 
$150,000 per farm per year, 8 years of excellent profitability. 
In 2015, average net farm income in this region dropped 
precipitously from an average per farm of $102,500 in 2014 to 
an average of $11,500, an 89 percent reduction. This was the 
lowest level of net farm income for that region since 1985. 
Based on preliminary analysis with the other five Kansas farm 
management associations within the state, declines in incomes 
of this magnitude will be common across all of Kansas.
    Kansas State University, in conjunction with the University 
of Georgia, conducts a semiannual nationwide survey of lenders 
to understand agricultural credit conditions. The most recent 
survey was conducted in March 2016, and uses similar 
methodology to the University of Michigan Consumer Sentiment 
Survey. The survey obtains agricultural lender sentiment on a 
number of factors for the last 3 months, the next year, and the 
longer-term. Several important changes have occurred in the 
agricultural economy since the fall of 2015 survey. Non-
performing loans have increased during the past 3 months. 
Agricultural lenders expect that non-performing loans will 
increase during the next year. According to the survey, non-
performing loans are expected to increase for corn and soybean 
farms and wheat farms. For the livestock sector, agricultural 
lenders expect more non-performing loans for beef farms and 
dairy farms.
    During the spring 2016 survey, that same survey, 48 percent 
of agricultural lenders indicated that land values decreased, 
45 percent indicated they remained the same, and six indicated 
they increased during the previous 3 months. The expectation of 
land value changes in the next year became markedly more 
negative in the fall of 2015 to the spring of 2016.
    In conclusion, the declining net farm income in 2015 has 
made for an uncertain agricultural lending environment. The 
agricultural production sector and lending sectors are 
intertwined, causing many lenders to be asking the same 
questions as agricultural producers regarding the future, as 
they make decisions regarding loan restructuring and other 
lending decisions.
    If the sector is entering a major readjustment phase, 
several factors should be considered. The averages will not 
drive a bust, but the lower tail of the distribution can; 
therefore, more attention needs to be paid to the distribution 
of financial performance indicators, and less on the averages. 
Given the thinness of agricultural land markets, small 
increases in land parcels on the market can have major effects 
on the price of land. The debt-to-asset ratio was more of a 
lagging indicator of financial stress during the 1980 boom to 
bust cycle where the debt-to-EBITDA (earnings before interest, 
taxes, depreciation, and amortization) ratio was more of a 
leading indicator.
    Farmers and agricultural lenders are entering a current 
downturn in a strong financial position because of several 
years of excellent profitability. Crop year 2016 will be a 
pivotal year in production agriculture. Given that average net 
farm income in some regions were the lowest they have been 
since 1985, a repeat of that in 2016 will cause some 
agricultural producers and lenders to make difficult decisions 
before entering the spring of 2017.
    Thank you.
    [The prepared statement of Dr. Featherstone follows:]

Prepared Statement of Allen M. Featherstone, Ph.D., Professor and Head, 
Director of Master in Agribusiness Program, Department of Agricultural 
           Economics, Kansas State University, Manhattan, KS
    Chairman Scott, Ranking Member Scott, and Members of the Commodity 
Exchanges, Energy, and Credit Subcommittee of the House Committee on 
Agriculture; I want to thank you for inviting me to testify. My name is 
Allen Featherstone, Professor and Head of the Department of 
Agricultural Economics, Kansas State University.
    The agricultural economy suffered from two major boom-bust cycles 
in the 20th century. The first occurred in the 1920s through the mid-
1930s and the second from 1973 to 1986. With the recent decline in net 
farm income, lenders, farmers, and policymakers are beginning to 
question whether 2007 was the start of another major boom-bust cycle 
with 2015 being the beginning of a bust period. There are similarities 
with the 1973 to 1986 cycle, but there are also differences. The last 
two cycles developed differently, and when the next cycle occurs, it 
will likely be unlike the previous cycles.
    U.S. net farm income has declined from $123.3 billion in 2013 to a 
forecasted amount of $56.4 billion in 2015 and by another $1.6 billion 
forecasted for 2016 (USDA-ERS). With a 56% decrease in U.S. net farm 
income occurring over a 3 year period, concern has begun to arise 
regarding the future direction of cash rents and land values along with 
the overall credit situation; the bust phase of a major agricultural 
readjustment. While the balance sheet of the production agriculture 
sector was strong at the end of 2015 due to several years of sector 
profitability, declining net farm incomes could negatively affect land 
values causing the balance sheet to erode because the value of land 
represents in excess of 75% of the asset values on the farm balance 
sheet.
    Kansas State University works with roughly 2,000 farmers statewide 
through the Kansas farm management associations. These commercial 
producers provide balance sheet and income statement information to the 
Department of Agricultural Economics that allows the understanding of 
the distribution in financial performance and provides an overall 
financial picture of Kansas farms.
The Current Situation
    An understanding of the current situation begins by examining the 
net farm income from the U.S., Kansas, and north central Kansas (Figure 
1). The Kansas and north central Kansas numbers are dollars per farm 
and are measured on the left-side of the axis. The aggregate U.S. net 
farm income are measured in billions of dollars and are on the right 
axis. Before 2007, average net farm income per farm in north central 
Kansas ranged in the $43,000 to $53,000 per year. Beginning in 2007, 
net farm income increased to between $85,000 and $150,000 per farm 
through 2014, 8 years of excellent profitability. In 2015, average net 
farm income in this region dropped precipitously from an average of 
$102,508 in 2014 to a 2015 average of $11,452, an 89% reduction. This 
was the lowest average level of nominal net farm income for that region 
since 1985.
    The north central region in Kansas (Figure 1) is the first 
association in the state of Kansas with completed information for 2015, 
and indicates a dramatic change in the profitability of production 
agriculture. Based on preliminary analysis of the other five Kansas 
farm management associations (KFMA) within the state for 2015, declines 
in incomes of this magnitude will be common across all of Kansas and 
likely for similar agricultural production regions in the Midwest and 
Great Plains. In addition, it is important to observe the similarity in 
U.S. and Kansas trends in Figure 1.
    Agricultural land values are an important factor in the overall 
well-being of the production agriculture sector given that they 
represent roughly 80% of the assets on a farmer's balance sheet. Land 
serves as collateral and enhances a farmer's ability to obtain credit. 
Thus, decreases in land values affect the ability to obtain credit. 
According to USDA, from 2006 through 2015, U.S. average cropland value 
increased from $2,300 to $4,130 per acre, an increase of roughly 80%. 
Taking into account inflation, agricultural land values increased by 
roughly 55% in real terms. Figure 2 provides a view of Kansas 
agricultural land values since 1950 adjusted for inflation. Using 2015 
as a base, inflation adjusted land values in 1973, the beginning of the 
last boom-bust period, were about $800 per acre in Kansas. Inflation-
adjusted land values peaked in 1980 at roughly $1,470, an increase of 
85%. Inflation-adjusted land values subsequently fell to $690 in 1987, 
a decline of 53% from the peak. Agricultural land values in Kansas in 
2015 are 101% higher than they were in 2006 in inflation-adjusted 
terms. They are also 38% higher than the peak of the last boom-bust 
cycle in real terms in Kansas.
    Agricultural land markets are driven by the returns to land, farm 
returns and non-agricultural factors such as development potential and 
recreational returns. Therefore, not all states or regions of the 
United States are experiencing the situation that the Corn Belt, Great 
Plains, and South are currently experiencing. The inflation-adjusted 
increase in agricultural land values since 2006 (blue) and the 2015 
land value percentage increase from the 1978 to 1983 high for various 
states (orange) are in Figure 3. Since 2006, Illinois, Oklahoma, and 
Texas (Corn Belt and Great Plains states) have experienced greater than 
a 30% increase in agricultural land values. For these three states, 
current land values are 46% (Illinois), 10% (Oklahoma), and 65% (Texas) 
higher than the inflation-adjusted peak in the last boom-bust cycle. 
Thus, the land value experience is not homogeneous among states and 
regions of the U.S. The Corn Belt and the Great Plains experience is 
different than much of the rest of the U.S.
Credit Conditions
    The Department of Agricultural Economics at Kansas State 
University, in conjunction with Brady Brewer at the University of 
Georgia, conducts a semi-annual nationwide survey of lenders to 
understand agricultural credit conditions. The most recent survey was 
conducted the second half of March 2016 and uses a similar methodology 
to the University of Michigan consumer sentiment survey. The survey 
obtains agricultural lender sentiment on interest rates, spread over 
the cost of funds, farm loan volume, non-performing loans, and land 
values for the last 3 months, the next year, and the longer-term (2 to 
5 years). As an example, participants are asked whether they expect 
interest rates will increase, decrease, or remain the same. If all 
survey participants indicate that an item is expected to increase, the 
index is 200. If all indicate an item is expected to decrease, the 
index is zero. If an equal amount of lenders expects an item to 
increase as expect an item to decrease, the value is 100.
    While this survey is nationwide, responses are concentrated in the 
Midwest and the Great Plains, and to a lesser extent in the South and 
the Atlantic region. The survey respondents are mainly employed by 
commercial banks or the Farm Credit System. The complete report can be 
found at http://www.ageconomics.k-state.edu/research/ag-lender-survey/
index.html (Attachment). Several important changes have occurred in the 
agricultural economy since the fall 2015 survey (Figure 4). Non-
performing loans have increased during the past 3 months as during the 
spring 2016 survey window, 43% of participants indicate that non-
performing loans have increased compared to 12% during the Fall 2015 
survey window. Agricultural lenders expect that non-performing loans 
will increase during the next year, 77% in the spring of 2016 compared 
to 53% in the fall of 2015. Over the next 2 to 5 years, the sentiment 
is that non-performing loans will increase, but that sentiment has 
lessened slightly over the last two surveys. Looking at non-performing 
loans by crop industry sector, non-performing loans are expected to 
increase for corn and soybean farms and wheat farms. For the livestock 
sector, agricultural lenders expect more non-performing loans for beef 
farms and dairy farms.
    The survey also measures lender expectations on agricultural land 
values (Figure 5). During the spring 2016 survey window, 48% of 
agricultural lenders indicate that land values decreased and 45% 
indicate that they remained the same, and 6% indicate they increased 
during the previous 3 months. The spring 2015 results indicated that 
35% indicated decreases, 57% indicated no change, and 8% indicated 
increasing land values for the previous 3 months. The expectation of 
land value changes in the next year became markedly more negative from 
the fall of 2015 to the spring of 2016 with the index falling from 32 
to 16. Currently 84% of lenders expect land values to fall over the 
next year and 16% expect they will remain the same. For the longer-
term, the sentiment has not changed much over the last four surveys; 
roughly 65% expect decreases, 25% expect no change, and the remainder 
expect land price increases. The overall sentiment by agricultural 
lenders turned more pessimistic from the fall of 2015 to the spring of 
2016.
    The survey provides lenders the opportunity to add any other open-
ended comments they would like to make. Table 1 reports the comments 
from those lenders that chose to provide them. Certainly some lenders 
are experiencing difficult agricultural lending conditions.
Measuring Financial Stress
    The concern expressed by agricultural lenders indicate the 
importance of measuring financial stress. One measure that is commonly 
used is the debt-to-asset ratio. Figure 6 from a forthcoming Choices 
article by Paul Ellinger (University of Illinois), Allen Featherstone, 
and Michael Boehlje (Purdue University) takes a look at alternative 
measures of financial stress. The average debt-to-asset ratio in Kansas 
and Illinois was greater than 30% in 2001 and 2002 and it has generally 
declined to 19% for both states by the end of 2014, the most recent 
data available. The average debt-to-asset ratios did not peak until 
1985 and 1986 the United States and Kansas, the end of the last boom-
bust cycle.
    The use of an average debt-to-asset ratio as a measure of financial 
stress without examining the distributional characteristics across 
agricultural producers may be incomplete. A study by Featherstone and 
Chris Boessen (University of Missouri) published in the North Central 
Journal of Agricultural Economics (http://aepp.oxfordjournals.org/
content/16/2/249.abstract) in 1994 examined the loan loss experience of 
a nationwide lender, Equitable Agribusiness during the 1980s farm 
crisis. They found that 75% of the loans that defaulted were originated 
from 1977 to 1980. They also found that 80% of loans defaulted from 
1983 to 1986. The loans that defaulted were made during the time just 
before the land values peaked and most performed for 5 to 6 years 
before they defaulted. They further report that only 10.9% of loans 
made from 1977 to 1980 defaulted, the worst time to be lending to 
agriculture, ex-post. Thus, it is important to examine the margin and 
not the average. During the last financial crisis, many farmers 
experienced financial stress; however, it was a minority of the 
producers moving the sector average. Because, in the Midwest where only 
2% to 4% of agricultural land is sold each year, small increases in the 
land on the market can cause significant land price changes.
    Figure 7 measures the distribution of debt-to-asset ratios for 
Illinois Farm Business Farm Management (FBFM) farms. A common 
underwriting standard in agricultural lending is that the borrower 
should have at least as much at risk as the lender--that is, at least 
50% equity in the business. Figure 7 indicates that 8.7% of Illinois 
farmers did not meet this underwriting standard at the end of 2014.
    An alternative measure that Ellinger, Featherstone and Boehlje 
propose is the Debt-to-EBITDA ratio. In many respects, the use of a 
debt-to-asset ratio is indicative of a lending era that has passed as 
the agricultural lending sector has moved from a collateral based 
lending system (debt-to-assets) to a cash flow based lending system 
(Debt-to-EBITDA). This measure is used in corporate lending and can be 
compared to a Moody's ratings system. In general, a rating of B or 
below is typically believed to be a speculative investment with 
significant or high credit risk, and Ca ratings are highly speculative 
and near or in default. The Debt-to-EBITDA ratios exhibit higher 
variability over time than the debt-to-asset ratios (Figure 8). 
Ellinger, Featherstone, and Boehlje found that the aggregate debt-to-
asset ratios did not peak until 1985 and 1986 for farms in the United 
States and Kansas, whereas the Debt-to-EBITDA ratios were highest in 
1981 and 1982 at the beginning of the farm financial crisis. Thus, the 
debt-to-asset ratio may be more of a lagging indicator. Moreover, the 
financial stress in agriculture in the early 2000s is also more evident 
with the Debt-to-EBITDA measure.
    While the averages, are useful, the distribution of farms are 
important. Ellinger, Featherstone and Boehlje report that the 
proportion of farms with Caa and Ca ratings at the end of 2014 were 
27.8% and 13.4% for Illinois and Kansas, respectively and had increased 
from the 2012 levels of 5.7% in Illinois and 10.7% in Kansas. In 
addition, the percentage of farms in the highest two categories (AAA 
and AA) fell by 14.2% in Illinois over the last 2 years and by 4.4% in 
Kansas over the last year.
    From 2014 to 2015, the average north central Kansas Debt-to-EBITDA 
ratio using data from 243 farms increased from 2.45 to 4.20 or two 
rating classes (Figure 9). A similar net-farm income in 2016 for north 
central Kansas with no change in debt would increase the ratio to 6.54 
and into the Caa category. Other notable changes that occurred on north 
central farms in 2015 was a reduction in average working capital from 
$313,131 to $230,250. This represents a reduction of $82,881 per farm 
or 26.5%. The working capital to assets ratio fell from 12.9% to 9.6%. 
The average debt-to-asset ratio increase from 21.8% to 23.0%.
Comparisons with the 1980s
    Data on individual farms are available from the KFMA since 1973. 
This allows a comparison of the condition at the end of 2014 with the 
condition of farms in 1979; 2 years before the bust began. 
Featherstone, Roessler, and Barry estimated a synthetic Standard & 
Poor's credit scoring model using Farm Credit Loans based on three 
origination ratios; a leverage ratio, a working capital percentage 
ratio, and a capital debt repayment capacity ratio. Their study is 
available in volume 28 issue 1 of the Review of Agricultural Economics. 
(http://aepp.oxfordjournals.org/content/28/1/4.abstract) This model was 
used to synthetically rate each farm in the KFMA data, each year 
assuming all the loans were new loans. The results of this analysis 
allows comparison of the situation at the end of 1979 with the current 
situation (Figure 10). The distribution indicates that the 2014 
distribution has a slightly higher percentage of farms rated in the BB 
and BB+ range and a slightly fewer percentage of farms rated in the 
BB^, B+, and B ranges than in 1979. Thus, the financial condition of 
farms is slightly higher in 2014 than it was in 1979. However, the 
situation changed very quickly from 1979 to 1981.
    Similarly, the distribution of the debt-to-asset ratios were also 
compared. In 1979, the average debt-to-asset ratio was 24.6%, while it 
was 19.0% at the of 2014. There were 19.4% of the farms with a debt-to-
asset ratio greater than 40% in 1979, compared to 12.6% in 2014. 
Finally, there were 1.3% of the farms with a debt-to-asset ratio 
greater than 70% in 1979 compared with 2.3% in 2014. Thus the sector at 
the end of 2014 was in a moderately better leverage position compared 
to 1979.
The Farm Safety Net
    One of the major questions agricultural producers and lenders have 
as we enter a low price environment is the ability of the farm safety 
net to alleviate significant financial hardship in the sector. The farm 
safety net currently consists of crop insurance and either the ARC or 
PLC programs. Revenue insurance products have been valuable in Kansas 
for farmers managing through an extended drought. Table 2 presents an 
example of the minimum revenue guarantee for corn assuming a 150 bushel 
production history and a coverage election of 80%. The lower bound on 
coverage per acre for corn has declined from $678 per acre in 2013 to 
$463 per acre in 2016 with the declining corn price. This represents a 
32% increase in the amount of risk that a farmer is bearing. Similar 
changes occur for soybeans (31%) and winter wheat (41%). Thus, farmers 
are managing a substantially higher level of risk with the 2016 crops 
than they were just 3 years ago.
    While the levels of revenue guaranteed have been dropping, the cost 
of production per acre has been increasing. Table 3 illustrates the ex-
post variable and total cost of production for non-irrigated corn and 
soybean production from the KFMA gathered from actual farm records. 
From 2006, the variable cost per acre for corn production increased 
from $191 to $322 per acre, an increase of nearly 70%. The variable 
cost for soybean production increased from $125 to $229 per acre, an 
increase of nearly 83%.
Land Value Effects
    With the decline in net farm incomes, concerns arise with regards 
to the potential land value effects. Taylor, Featherstone, and Gibson 
have estimated the relationship between net farm income, cash rents, 
and land values in Kansas. Using the net present value model, the 
agricultural land market in Kansas and data from 1973 to 2012, the 
relationship between land values and net farm income was estimated. 
They found that land adjusts to changes in net farm income slowly with 
a 1 year elasticity at the state level of 6.7%. The long-run elasticity 
is 96.9%, which is very close to the 100% suggested by the income 
capitalization model. At the state level, the long-run multiplier for 
income in Kansas is 21.71 which implies a capitalization rate of 4.61%.
    These estimates were used to forecast changes in Kansas land values 
given futures prices and income expectations, ceteris paribus. Futures 
prices were collected for the harvest time contracts through 2018 for 
the July contract from the Kansas City Board of Trade for wheat and 
from the Chicago Board of Trade for the December contract for corn and 
the November contract for soybeans. These prices were adjusted for 
historical basis and used to forecast net farm income through 2018. 
Figure 11 presents the historical corn and soybean price received and 
the expected basis-adjusted price into the future for corn and 
soybeans. In addition, the net farm income was calculated based using 
expected trend yield and the price expectations.
    Corn prices received by Kansas farmers are expected to remain at 
around the $4.00 per bushel range through 2018, while soybean prices 
received are expected to remain around the $8.50 per bushel range 
(Figure 11). Net farm income was the highest in 2012 at $81.91 per 
acre. That amount is expected to decline to $49.01 for 2016. After 
2016, net farm incomes are expected to increase to $53.04 per acre in 
2018.
    The estimated results suggest that Kansas land values would peak in 
2016 and begin to slowly decline. If market conditions were to remain 
the same, land values could ultimately decrease to $1,171 per acre, a 
28% decline from current levels assuming the land price earnings 
multiple returns to the longer-term average of 4.61%. Declines of this 
magnitude could negatively affect the financial condition of the 
sector.
Conclusions
    In conclusion, the declining net farm income in 2015, has made for 
an uncertain agricultural lending environment. The agricultural 
production sector and the agricultural lending sectors are intertwined 
causing many lenders to be asking the same questions as agricultural 
producers regarding the future of production agriculture as they make 
decisions regarding loan restructuring and other normal lending 
decisions. If the sector is entering a major readjustment phase, 
several important factors should be considered.

  (1)  The averages will not drive a bust, but the lower tail of the 
            distribution can. Therefore, more attention needs to be 
            paid to the distribution of financial performance and less 
            on the averages.

  (2)  Given the thinness of agricultural land markets, small increases 
            in land parcels being liquidated can have major effects of 
            the price of land.

  (3)  The debt-to-asset ratio was more of a lagging indicator of 
            financial stress during the 1980s boom-bust cycle whereas 
            the Debt-to-EBITDA ratio was more of a leading indicator.

  (4)  The lending industry has moved more to a cash flow based loan 
            assessment and less of a collateral based loan assessment.

  (5)  Farmers and agricultural lenders are entering the current 
            downturn in a strong financial position because of several 
            years of excellent profitability.

  (6)  Relative to entering adjustment phase in the 1980s, farms are in 
            a moderately stronger financial position.

    [CY] 2016 will be a pivotal year in production agriculture. Given 
that average net farm income in some regions were the lowest they have 
been since 1985, a repeat of that in 2016 will cause some agricultural 
producers and lenders to make difficult decisions before entering the 
spring of 2017.
    Thank you.
                          [Tables and Figures]

    Table 1. Opened-Ended Comments from the Spring 2016 Kansas State
                       Agricultural Lender Survey
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
    ``The ag finance environment is tough. 2015 was very tough.
 Projections for 2016 look worse.''
------------------------------------------------------------------------
    ``Cropland values have declined 15-25% depending on quality. Pasture
 values have stayed fairly constant, although the lack of sales might
 indicate that they are priced too high given the market.''
------------------------------------------------------------------------
    ``With these crop prices expect a significant gut check by the
 producers. I am seeing significant decrease in capital purchases and
 family living. I expect other operating expenses to follow.''
------------------------------------------------------------------------


    Table 1. Opened-Ended Comments from the Spring 2016 Kansas State
                  Agricultural Lender Survey--Continued
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
    ``We are in the early stages of a major correction in the Ag
 economy. Given the accumulation of corn & soybean inventories, this
 could be a prolonged and painful process. Eventually an equilibrium of
 costs and revenues will be reached and the Ag economy will stabilize.
 The producers that made conservative decisions will weather the storm,
 others will need to make major adjustments or fail. We have seen a 20%
 reduction in AG real estate values with more reductions to follow. We
 are seeing values of farm equipment fall by up to 33%. I expect further
 softness in Ag equipment to follow as forced liquidations place more
 equipment on the market and this market will need to find market
 clearing price levels.''
------------------------------------------------------------------------
    ``Stronger dollar is putting pressure on margins in virtually all Ag
 sectors. Dairy has held up surprisingly well vs. world market due to
 domestic demand for butterfat. Expecting tighter margins for cow/calf
 ahead as we are into herd building, expect feedyard margins to improve
 in last quarter of 2016. Potato and onion margins remain tight and
 expecting to remain tight as alternative crops which compete for
 acreage struggle to provide positive margins. The last 7 or so years
 have been very profitable for tree fruit which has spurred orchard
 development. With new orchard acres and more productive plantings
 coming on line it is expected that tree fruit will be coming under
 pressure for next \1/2\ dozen years.''
------------------------------------------------------------------------
    ``We only have one farm loan that is classified. If commodity prices
 remain low, could be more in the future.''
------------------------------------------------------------------------


  Table 2. Crop Revenue Coverage Minimum Revenue Guarantee Example for
                             Corn, 2013-2016
------------------------------------------------------------------------
                     2013           2014          2015          2016
------------------------------------------------------------------------
APH (bushel)             150            150            150           150
    Coverage             80%            80%            80%           80%
     Election
  Guaranteed             120            120            120           120
       Bushel
  Base Price           $5.65          $4.62          $4.15         $3.86
 (per bushel)
Coverage (per           $678           $554           $498          $463
        acre)
------------------------------------------------------------------------


Table 3. KFMA Non-Irrigated Corn and Soybean Cost of Production per Acre
------------------------------------------------------------------------
                            Corn                        Soybean
               ---------------------------------------------------------
                                                Variable
                Variable Cost    Total Cost       Cost       Total Cost
------------------------------------------------------------------------
        2005            $188           $263           $118          $177
        2006            $191           $269           $125          $183
        2007            $231           $331           $145          $229
        2008            $265           $374           $167          $250
        2009            $267           $371           $173          $261
        2010            $268           $382           $176          $268
        2011            $281           $391           $192          $286
        2012            $325           $435           $202          $299
        2013            $308           $420           $224          $342
        2014            $322           $447           $229          $339
------------------------------------------------------------------------
Source: KFMA, 2016.

Figure 1. U.S., North Central Kansas, and Kansas Net Farm Income 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA-ERS, 2016, KFMA, 2016.
Figure 2. Kansas Inflation-Adjusted Land Values, 1950 through 2015
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 3. Inflation-Adjusted Land Value Price Changes since 2006 and 
        the 1980s for Selected States
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
Figure 4. Non-Performing Total Farm Loans--Diffusion Index of Survey 
        Respondents 
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: Brewer, Featherstone, Wilson, and Briggeman.
Figure 5. Land Value Price Expectations 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Brewer, Featherstone, Wilson, and Briggeman.
Figure 6. United States, Illinois, and Kansas Debt-to-Asset Ratios
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Ellinger, Featherstone, and Boehlje.
Figure 7. Distribution of Debt-to-Asset Ratios for Illinois Farms, 
        2003-2014 
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: FBFM, 2016.
Figure 8. U.S., Illinois and Kansas Debt-to-EBITDA Ratios
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Ellinger, Featherstone, Boehlje.
Figure 9. U.S., Kansas, and North Central Kansas Debt-to-EBITDA Ratios
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Figure 10. Synthetic Credit Ratings of Kansas Farm Management 
        Association Farms, 1979 and 2014 
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
Figure 11. Expected Corn and Soybean Prices and Net Farm Income in 
        Kansas, 2016-2018
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
                              [Attachment]
Agricultural Lender Survey
Kansas State University
  Brady Brewer,\1\ Allen Featherstone,\2\ Christine Wilson,\3\ and 
    Brian Briggeman.\4\
---------------------------------------------------------------------------
    \1\ Assistant Professor, University of Georgia.
    \2\ Professor, Head and Director of the Masters of Agribusiness 
Program, Kansas State University.
    \3\ Professor and Director of Undergraduate Programs, Kansas State 
University.
    \4\ Associate Professor, Director of Arthur Capper Cooperative 
Center, Kansas State University.
---------------------------------------------------------------------------
Results: Spring Survey 2016
Survey Summary and Highlights
    For the Spring 2016 edition of the agricultural lender survey, 
lenders from across the nation reported their expectation for interest 
rates, spread over cost of funds, farm dollar volume, non-performing 
loans, and agricultural land values. The major theme from lender 
responses is that the agricultural economy is slowing and that the 
expectations for relief to farmers is a few years away. This sentiment 
is summed up by the comments of one respondent:

          ``We are in the early stages of a major correction in the 
        agricultural economy. Given the accumulation of corn & soybean 
        inventories, this could be a prolonged and painful process. 
        Eventually an equilibrium of costs and revenues will be reached 
        and the agricultural economy will stabilize. The producers that 
        made conservative decisions will weather the storm, others will 
        need to make major adjustments or fail.''

    Many lenders stated that low commodity prices and stubbornly high 
input prices continue to put pressure on cash flows. Below is a summary 
of the highlights from the Spring 2016 survey.

   Short-term expectations are for land values continues to 
        decrease.

   Lenders indicate a reversal in the downward trend for spread 
        over cost of funds. This is the first increase in spread over 
        cost of funds reported since the inception of this survey in 
        Spring 2013, and may be indications of an increased risk 
        premium needed for agricultural lending.

   From Fall 2015 to Spring 2016, lenders noted that the number 
        of non-performing loans rose for total farm loans.

   Lenders expect non-performing loans to continue its rise, 
        particularly for the corn and soybeans, wheat, and beef sub-
        sectors.

   Demand for farm operating loans remains high as liquidity 
        and cash flow are problematic for many producers.

   Respondents reported cash rental rates remain elevated and 
        have been slow to adjust with the decline in commodity prices.

    The Department of Agricultural Economics at Kansas State University 
conducts a semi-annual survey of Agricultural Lenders to gage the 
recent, short term and long term future assessment of the credit 
situation for production agriculture. The results provide a measure of 
the health of the sector in a forward looking manner.
    Each institution surveyed provided their sentiment on the current 
and expected state for: (1) farm loan interest rates; (2) spread over 
cost of funds; (3) farm loan volumes; (4) non-performing loan volumes; 
and (5) agricultural land values. Within each of these key areas, 
different loan types were assessed (farm real-estate, intermediate and 
operating loans) as well as the different agricultural sectors (corn 
and soybeans, wheat, beef, dairy, etc.).
    The survey responses are summarized using a diffusion index. This 
index is calculated by taking the percentage of those indicating 
increase minus the percentage of those indicating decrease plus 100. 
Therefore, an index above (below) 100 indicates respondents expect or 
experienced an increase (decrease) in the measure of interest. For 
example, Figure 2 illustrates that the index for the Spring 2016 
expected long-term farm real estate loan interest rates equals 197. 
This number can be described as 97% more respondents felt farm real 
estate loan interest rates will go up in the long run than those who 
felt interest rates would go down.
Figure 1, Demographics of Survey Respondents
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Figure 1 shows the demographics of the Spring 2016 survey 
respondents by primary service territory. The five territories are: 
Midwest, West, Atlantic, South and Plains. Table 1 has a list of the 
states in each region. Fifty-four percent of survey respondents came 
from the Plains region while 32%, 0%, 7% and 7% came from the Midwest, 
West, Atlantic, and South regions, respectively. Nine percent of 
respondents indicated their respective lending institution was national 
in scope.
    Lenders expect interest rates to rise. Figure 2 shows the continued 
expectation of higher interest rates in the future. Over the past three 
months, 45% of respondents indicated an increase in interest rates for 
farm real estate loans. This rise was partially caused by the increase 
of the Fed Funds Rate by the Federal Reserve in December 2015. Staying 
with past trends, no respondents expect interest rates to decrease in 
the short-term or long-term. Furthermore, this survey was the third 
consecutive survey where no respondent expects a decrease in interest 
rates in the short-term or long-term (Table 2).
Figure 2, Loan Interest Rates--Diffusion Index of Survey Respondents
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The spread over cost of funds is the difference between the loan 
interest rates charged by the lending institution and the interest rate 
paid by the financial institution for the funds that they deploy in 
their business. The reason for obtaining information for both loan 
interest rates and spread over cost of funds is to gauge competition in 
the agricultural lending market. A decrease in the spread over cost of 
funds suggests competition for agricultural loans among lending 
institutions may be increasing. Also, this information may reflect an 
increase in the premium for agricultural lending.
    This survey marks the first time lenders have indicated an increase 
in the spread over cost of funds over the past three months. Figure 3 
shows that survey respondents expect this trend to continue for both 
the short-term and long-term for all loan categories. However, despite 
more respondents reporting an increase in spread over cost of funds, 
the majority of lenders reported no change in the spread over cost of 
funds. Lender expectations for the future increases still remain 
divided with 50% of lenders expecting no long-term change and 50% of 
lenders expecting an increase.
Figure 3, Spread Over Cost of Funds--Diffusion Index of Survey 
        Respondents
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    While farm loan volumes rose significantly over the past 3 months, 
the increase farm real estate loan volumes are expected to slow. Figure 
4 shows the responses for the aggregate amount of agricultural lending. 
Lenders expect total farm loan volumes to continue to increase, but 
farm real estate loan volumes are not expected to rise by as many 
respondents as in previous surveys. The current high demand for funds 
is a reflection of the deteriorating liquidity position of farmers and 
is more pronounced for operating credit.
    The sentiment for farm real estate loans continues on a downward 
trend in the long term that started with the peak in lender expectation 
in Spring 2014. This is partly due to the decreasing demand for 
farmland. The expectation for operating loan volume remains high for 
the short-term and long-term due to lower cash farm receipts, though it 
has decreased slightly in the short-term from the Fall 2015 survey 
likely due to expectations of lower operating expenses. One respondent 
noted:

          ``I am seeing significant decrease in capital purchases and 
        family living. I expect other operating expenses to follow.''
Figure 4, Farm Loan Volume--Diffusion Index of Survey Respondents
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Lenders expect non-performing loans to increase. Figure 5 shows the 
results for non-performing loans analyzed by loan type. 43% of 
respondents indicated an increase in non-performing loans. It is 
concerning that this increase represents a 31% percentage point 
increase from Fall 2015 (Table 2). Agricultural lenders expect that 
non-performing loans will increase during the next year, 77% in the 
spring of 2016 compared to 53% in the fall of 2015. Over the next 2 to 
5 years, the sentiment is that non-performing loans will increase, but 
that sentiment has lessened slightly over the last two surveys.
    With that said, not all lending institutions are feeling the 
pressure. Rising non-performing loans are not necessarily universally 
felt by all lenders. One respondent noted:

          ``We only have one farm loan that is classified. If commodity 
        prices remain low, could be more in the future.''
Figure 5, Non-Performing Loans, By Loan Type--Diffusion Index of Survey 
        Respondents
       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    Non-performing loans are rising across all crop production sectors. 
Figure 6 shows the non-performing loans by crop industry sector. 
Respondents continued to indicate an increase in expectations for non-
performing loans for corn and soybeans and wheat.

          ``With these crop prices expect a significant gut check by 
        the producers.''

    Fruits and vegetables also experienced an increase in the long-term 
expectation for non-performing loans. This is partly due to expanded 
orchard plantings in reaction to recent, sizeable profits.

          ``The last seven or so years have been very profitable for 
        tree fruit which has spurred orchard development. With new 
        orchard acres and more productive plantings coming on line it 
        is expected that tree fruit will be coming under pressure for 
        next half dozen years.''
Figure 6, Non-Performing Loans, By Crop Industry Sector--Diffusion 
        Index of Survey Respondents
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    Similar to the crop sector, non-performing loans for livestock 
producers are expected to rise. Figure 7 shows the non-performing loans 
for various livestock sectors. This was the first survey that 
respondents indicated an increase in non-performing loans for the beef 
sector during the past three months. Recent declines in livestock 
prices are beginning to impact loan performance.

          ``Expecting tighter margins for cow/calf ahead as we are into 
        herd building, expect feed yard margins to improve in last 
        quarter of 2016.''
Figure 7, Non-Performing Loans, By Livestock Industry Sector--Diffusion 
        Index of Survey Respondents
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
    During the spring 2016 survey window, 48% of agricultural lenders 
indicate that land values decreased and 45% indicate that they remained 
the same, and 6% indicate they increased during the previous 3 months. 
The spring 2015 results indicated that 35% indicated decreases, 57% 
indicated no change, and 8% indicated increasing land values for the 
previous three months. The expectation of land value changes in the 
next year became markedly more negative from the fall of 2015 to the 
spring of 2016 with the index falling from 32 to 16. Currently 84% of 
lenders expect land values to fall over the next year and 16% expect 
they will remain the same. For the longer term, the sentiment has not 
changed much over the last four surveys; roughly 65% expect decreases, 
25% expect no change, and the remainder expect land price increases. 
The overall sentiment by agricultural lenders turned more pessimistic 
from the fall of 2015 to the spring of 2016. One respondent stated:

          ``Cropland values have declined 15-25% depending on quality. 
        Pasture values have stayed fairly constant, although the lack 
        of sales might indicate that they are priced too high given the 
        market.''
Figure 8 Land Values--Diffusion Index of Survey Respondents
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                     Table 1, States in Each Region
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Atlantic                             CT, DE, KY, ME, MD, MA, NH, NJ, NY,
                                      NC, PA, RI, TN, VA, VT, WV
South                                AL, AR, FL, GA, LA, MS, SC
Midwest                              IA, IL, IN, MI, MN, MO, OH, WI
Plains                               KS, NE, ND, OK, SD, TX
West                                 AZ, CA, CO, ID, MT, NM, NV, OR, UT,
                                      WA, WY
------------------------------------------------------------------------


                                                                                                      Table 2, Respondent Responses
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Interest Rates                                                                                Spread Over Cost of Funds
                                  ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Farm Real Estate                   Intermediate                       Operating                     Farm Real Estate                   Intermediate                      Operating
                                  ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Lower       Same      Higher     Lower       Same      Higher     Lower       Same      Higher      Lower       Same      Higher     Lower       Same      Higher     Lower       Same      Higher
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Past Three Months
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                              55%        42%         3%        52%        43%         2%        48%        50%         0%         56%        35%        10%        56%        37%         6%        58%        39%         3%
Fall 2013                                17%        44%        39%        12%        58%        30%        18%        70%        12%         36%        56%         8%        30%        61%         9%        32%        61%         7%
Spring 2014                              14%        67%        19%        13%        78%        30%        16%        50%         5%         28%        67%         5%        24%        71%         5%        23%        71%         5%
Fall 2014                                14%        74%        12%        12%        78%         7%        15%        44%         7%         30%        65%         5%        29%        68%         2%        32%        63%         5%
Spring 2015                              19%        76%         5%        11%        89%         0%        11%        89%         0%         30%        70%         0%        26%        74%         0%        25%        75%         0%
Fall 2015                                 5%        79%        13%         8%        78%        11%        11%        81%         6%         32%        63%         3%        22%        72%         3%        25%        69%         3%
Spring 2016                               3%        52%        45%         0%        57%        43%         0%        50%        50%         10%        77%        13%        13%        77%        10%        13%        67%        20%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Short Term
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                              11%        75%        14%        14%        72%        12%        17%        73%         9%         48%        51%         3%        46%        54%         2%        43%        52%         3%
Fall 2013                                 0%        44%        56%         0%        51%        49%         0%        65%        35%         22%        56%        22%        19%        58%        23%        23%        54%        23%
Spring 2014                               5%        50%        45%         5%        50%        45%         7%        53%        40%         32%        60%         9%        31%        58%        11%        27%        60%        13%
Fall 2014                                 2%        44%        53%         2%        46%        51%         2%        50%        48%         23%        63%        14%        22%        66%        12%        22%        61%        17%
Spring 2015                               0%        43%        57%         0%        40%        60%         0%        39%        61%         24%        57%        19%        20%        69%        11%        22%        61%        17%
Fall 2015                                 0%        34%        66%         0%        42%        58%         0%        32%        13%         24%        58%        18%        27%        51%        22%        31%        44%        25%
Spring 2016                               0%        32%        68%         0%        30%        70%         0%        27%        73%          6%        68%        26%         7%        60%        33%         3%        57%        40%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Long Term
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                               2%        14%        85%         2%         9%        88%         2%         8%        89%         31%        34%        38%        30%        29%        38%        27%        32%        40%
Fall 2013                                 0%        19%        81%         0%        21%        79%         0%        19%        81%         14%        42%        44%        12%        42%        46%        14%        44%        42%
Spring 2014                               0%         5%        95%         0%         4%        96%         0%         7%        93%         26%        42%        32%        27%        44%        29%        25%        42%        33%
Fall 2014                                 0%         5%        95%         0%         7%        93%         0%         7%        93%         16%        47%        37%        27%        46%        39%        15%        44%        41%
Spring 2015                               0%         8%        92%         0%         9%        91%         0%         6%        94%         22%        35%        43%        23%        40%        37%        22%        33%        44%
Fall 2015                                 0%         3%        97%         0%         3%        97%         0%         3%        97%         16%        42%        42%        16%        43%        41%        19%        38%        43%
Spring 2016                               0%         3%        97%         0%         3%        97%         0%         3%        97%         16%        35%        48%        13%        37%        50%        13%        33%        53%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                                           Farm Dollar Volume
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Total Farm Loans                                      Farm Real Estate                                        Intermediate                                            Operating
                 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        Lower             Same             Higher             Lower             Same             Higher             Lower             Same             Higher             Lower             Same             Higher
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Past Three Months
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                    32%               22%               45%               12%               35%               52%               28%               46%               22%               40%               26%               31%
Fall 2013                       5%               46%               49%                7%               51%               42%                9%               66%               25%               12%               54%               33%
Spring 2014                    20%               32%               48%                9%               41%               50%               16%               56%               27%               29%               35%               36%
Fall 2014                      12%               35%               53%               16%               40%               44%               20%               44%               37%               12%               29%               59%
Spring 2015                     5%               38%               57%               14%               54%               32%               11%               43%               46%                8%               42%               50%
Fall 2015                       5%               27%               68%                8%               53%               39%                8%               70%               19%                3%               22%               72%
Spring 2016                     0%               33%               67%               10%               42%               48%                7%               47%               47%                7%               23%               70%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Short Term
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                     9%               43%               46%                8%               43%               49%                9%               58%               28%                6%               50%               42%
Fall 2013                       0%               41%               59%                8%               46%               46%                5%               56%               39%                5%               40%               54%
Spring 2014                     2%               21%               77%                3%               38%               59%               22%               29%               49%                4%               24%               73%
Fall 2014                       9%               35%               56%               19%               49%               33%               17%               41%               41%                7%               24%               68%
Spring 2015                     5%               27%               68%               22%               43%               35%               20%               43%               37%                3%               25%               72%
Fall 2015                       3%               14%               81%               13%               47%               37%               24%               41%               32%                0%               14%               83%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                                Table 2, Respondent Responses--Continued
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Total Farm Loans                                      Farm Real Estate                                        Intermediate                                            Operating
                 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        Lower             Same             Higher             Lower             Same             Higher             Lower             Same             Higher             Lower             Same             Higher
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2016                     0%               33%               67%               16%               29%               55%               20%               43%               37%                7%               23%               70%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Long Term
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                     9%               25%               65%               15%               29%               55%               19%               30%               48%                5%               28%               65%
Fall 2013                       2%               36%               63%                8%               42%               49%                5%               47%               47%                4%               33%               63%
Spring 2014                     0%               21%               79%                7%               29%               64%                7%               39%               54%                0%               29%               71%
Fall 2014                       5%               23%               72%               14%               19%               67%               15%               30%               56%               17%               17%               76%
Spring 2015                     3%               27%               70%               11%               35%               54%                8%               28%               64%                0%               28%               72%
Fall 2015                       8%               19%               70%               18%               21%               58%               14%               43%               41%                3%               11%               83%
Spring 2016                     0%               23%               77%               16%               29%               55%               10%               30%               60%                3%               20%               77%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                Non-Performing Loan by Loan Type
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Total Farm Loans                 Farm Real Estate                   Intermediate                       Operating                      Ag Land Values
                           ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
                              Lower       Same      Higher     Lower       Same      Higher     Lower       Same      Higher     Lower       Same      Higher      Lower       Same      Higher
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Past Three Months
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                       28%        58%         0%        27%        63%         0%        27%        61%         0%        24%        63%         3%
Fall 2013                         31%        67%         2%        24%        74%         2%        29%        69%         2%        27%        69%         4%          0%        61%        39%
Spring 2014                       27%        71%         2%        28%        68%         4%        20%        78%         2%        20%        76%         4%         14%        50%        36%
Fall 2014                         32%        68%         0%        29%        68%         3%        29%        71%         0%        26%        66%         9%         14%        69%        17%
Spring 2015                        3%        91%         6%         3%        97%         0%         3%        91%         6%         3%        88%         9%         35%        57%         8%
Fall 2015                          0%        85%        12%         3%        86%         9%         0%        85%        12%         0%        81%        16%         58%        37%         3%
Spring 2016                        0%        57%        43%         0%        74%        26%         0%        67%        33%         0%        47%        53%         48%        45%         0%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Short Term
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                       28%        58%         3%        30%        64%         3%        26%        65%         3%        30%        61%         7%
Fall 2013                         18%        70%        13%        15%        80%         5%        17%        74%         9%        13%        72%        15%         17%        61%        22%
Spring 2014                        9%        69%        22%         9%        71%        20%         9%        74%        17%         8%        63%        29%         33%        52%        16%
Fall 2014                          5%        49%        46%         5%        68%        27%         5%        67%        28%         5%        38%        56%         48%        45%         7%
Spring 2015                        3%        49%        49%         3%        68%        30%         3%        57%        40%         3%        47%        50%         59%        41%         0%
Fall 2015                          3%        41%        53%         3%        57%        37%         3%        47%        47%         3%        24%        71%         71%        24%         3%
Spring 2016                        0%        23%        77%         6%        39%        55%         3%        33%        63%         0%        13%        87%         84%        16%         0%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Long Term
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Spring 2013                       19%        56%        20%        21%        62%        17%        16%        65%        18%        16%        63%        19%
Fall 2013                         14%        46%        40%        12%        49%        39%        11%        53%        36%        11%        45%        45%         46%        44%        10%
Spring 2014                        7%        40%        53%         7%        41%        52%         6%        48%        46%         4%        42%        54%         59%        29%        12%
Fall 2014                         10%        33%        57%        10%        45%        45%        12%        44%        44%        13%        33%        55%         64%        26%        10%
Spring 2015                        3%        35%        62%         3%        49%        49%         3%        42%        56%         3%        27%        70%         65%        32%         3%
Fall 2015                          6%        29%        63%         6%        31%        61%         6%        26%        66%         6%        20%        71%         66%        24%         8%
Spring 2016                       10%        27%        63%        16%        32%        52%        10%        27%        63%        10%        27%        63%         68%        26%         6%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


    The Chairman. Mr. Nelson.

 STATEMENT OF RANDY NELSON, PRESIDENT, CHS CAPITAL LLC, INVER 
                       GROVE HEIGHTS, MN

    Mr. Nelson. Chairman Scott, Ranking Member Scott, and 
Members of the Committee, thank you for inviting me to testify 
today. My name is Randy Nelson, President of CHS Capital, and I 
appreciate this opportunity to share with you what we are 
seeing in credit demand among our farmer and cooperative 
owners.
    CHS Capital is a wholly owned subsidiary of CHS, the 
largest nationwide farmer-owned cooperative. Headquartered near 
St. Paul, Minnesota, CHS is a highly diversified Fortune 100 
company that supplies crop nutrients, grain marketing services, 
food and food ingredients, and energy products. We also provide 
a range of business solutions, including insurance and hedging, 
as well as financial services through CHS Capital.
    CHS Capital provides operating and term loans directly to 
cooperatives and individual producers who farm anywhere from 
100 acres to over 100,000 acres. In our view, the decrease in 
crop prices has had a major impact on the financial strength of 
farmers. Low prices, combined with high rent costs, have caused 
nearly all farm projections for 2016 to reflect a shortfall in 
farmers' ability to meet their current obligations.
    We have seen some common trends among many of our 
producers. While some have had their 2014 crop contracted at 
profitable prices, few farmers had their 2015 crop contracted, 
and we have seen limited corn and soybeans contracted for 2016. 
We have seen many farmers who were unable to cash flow their 
operations in 2015, despite record yields across parts of the 
Dakotas and Wisconsin, and most of Minnesota.
    However, thanks to several good years in farming, many 
farmers have built up significant equity in their real estate. 
This provides them with the option to refinance their land and 
inject working capital. While this fixes the working capital 
issue, prices still need to rise in order to service the added 
debt. It is this farm real estate equity that will allow many 
to farm again this year. However, the current outlook at the 
end of 2016: some will reduce their equity to a level that is 
not sufficient to continue farming.
    CHS Capital has received a number of requests to finance a 
number of customers whose primary lender does not want to 
continue to finance their farming operation. CHS Capital is 
able to help some of these customers, but we are also taking a 
closer look at projections and how their equity can support 
future losses. CHS Capital completed term loans totaling $55.5 
million in the first 3 months of 2015, compared with $226.5 
million in loans that have been completed so far in 2016. 
Nearly all of the term loans were written to refinance existing 
real estate versus new real estate purchases. We expect the 
number of term loans to continue to increase if commodity 
prices remain low.
    CHS Capital has seen a significant increase in past due 
loans and requests to extend the prior year's operating loan. 
The low commodity prices have resulted in more customers 
holding on to their inventory in hopes of higher prices, and an 
increasing number have had to liquidate assets in order to 
repay their loan. We have also seen a higher number of 
customers who have not been able to obtain the operating 
funding for the upcoming year.
    With the current stockpiles of grain and the number of 
acres projected to be planted, the outlook through 2016 and 
into 2017 is for crop prices to remain depressed. CHS Capital 
estimates a breakeven cash price for many growers to be in the 
range of $3.90 to $4.25 per bushel for corn. If prices remain 
low throughout 2016, and the outlook is not positive, CHS 
Capital believes that many farmers will choose to preserve 
their equity and rent out their farmland or liquidate assets. 
We believe that this will be especially true for farmers who 
are at or near retirement with no family succession plan. We 
feel that if significant acres of farmland are put on the 
market and farmers are willing to walk away from expensive 
rented ground, rental prices will decline and real estate 
values will devalue. We also believe some young farmers will 
leave or work off the farm, and we believe that continued low 
prices will cause banks to pull away from financing 
agriculture.
    Thank you again for the opportunity to share our views on 
the state of credit in farm country. I look forward to 
answering your questions.
    [The prepared statement of Mr. Nelson follows:]

 Prepared Statement of Randy Nelson, President, CHS Capital LLC, Inver 
                           Grove Heights, MN
    Chairman Scott, Ranking Member Scott, and Members of the Committee, 
thank you for inviting me to testify today. My name is Randy Nelson, 
President of CHS Capital, and I appreciate this opportunity to share 
with you what CHS Capital does, who we serve, and what we are seeing 
right now in credit demand among our farmer and cooperative owners.
About CHS Capital
    CHS Capital is a wholly-owned financing subsidiary of CHS Inc., the 
nation's largest farmer-owned cooperative. Headquartered in Inver Grove 
Heights, Minnesota, CHS Inc. is owned by more than 600,000 producers 
and 1,100 member cooperatives from around the United States, including 
77,000 direct producer-owners and approximately 20,000 preferred stock 
holders. CHS is governed by a 17 member board of directors elected by 
our producer and member co-op stockholders. Our directors are all 
active farmers and ranchers with a broad range of experience in 
agribusiness, as well as other business sectors.
    As a cooperative, CHS also returns cash to our owners every year, 
based on the company's performance and the amount of business an owner 
conducts with CHS during the year. During its Fiscal Year 2016, CHS 
will distribute about $519 million to farmers, ranchers and 
cooperatives across the country. Between fiscal 2012 and 2016 CHS has 
distributed a total of $2.7 billion in cash, a $544 million annual 
average.
    CHS is a highly diversified Fortune 100 company that supplies crop 
nutrients, grain marketing services, animal feed, and food and food 
ingredients. We also operate petroleum refineries and pipelines and 
manufacture, market and distribute refined fuels, lubricants, propane 
and renewable energy products. Additionally, we provide a range of 
business solutions including insurance and hedging, as well as 
financial services through CHS Capital.
    CHS Capital was established in 2005 and provides operating and term 
loans directly to cooperatives and producers. We work with a wide range 
of producers who farm anywhere from 100 acres to over 100,000 acres. We 
work with these producers through CHS-owned locations and independent 
member-owned cooperatives that sell inputs, feed, fuel and other 
supplies to the producer. The loans are offered to help facilitate the 
sale of inputs. The operating loans may be set up to only finance the 
inputs sold by the retailer or they may finance all the farmer's 
operating needs.
    CHS Capital also provides loans for the purchase of market 
livestock, and loans for margin calls that provide pre-qualified 
customers access to additional capital for hedging without affecting 
current operating lines of credit.
Current Financing Trends
    In our view, the decrease in crop prices has had a major impact on 
the financial strength of farmers. The low prices combined with high 
rent costs have caused nearly all farm projections for 2016 to reflect 
a shortfall in their ability to meet their current obligations. Some 
customers are looking for innovative options to increase profitability, 
such as growing specialty crops or purchasing beef heifers to feed, 
rather than selling their grain.
    We have seen some common trends among many of our producers. While 
some farmers had their 2014 crop contracted at profitable prices, few 
farmers had their 2015 crop contracted, and we have seen limited corn 
and soybeans contracted for 2016. We have seen many farmers who were 
unable to cash flow their operation in 2015, despite record yields, 
across parts of the Dakotas and Wisconsin and most of Minnesota.
    The challenges I have mentioned, are now evident in the negative 
working capital on the farmer's balance sheet. However, through the 
benefit of several good years in farming, many have built up 
significant equity in their real estate. This provides them with the 
option to refinance their land to inject working capital. While this 
fixes the working capital issue, prices still need to rise in order to 
service the added debt. It is this real estate equity that will allow 
many to farm again this year. However, with the current outlook, at the 
end of 2016 some will reduce their equity to a level that is not 
sufficient to continue farming.
    CHS Capital has received requests to finance a number of customers 
whose primary lender does not want to continue to finance the farming 
operation. CHS Capital is able to help some of these customers, but at 
the same time, we are also taking a close look at the projections to 
understand the possible shortfall at the end of 2016, and how their 
equity can support these losses.
    In anticipation of the working capital shortfalls, CHS Capital 
began offering term loans to utilize customers' real estate equity to 
improve working capital and finance losses. The chart below provides an 
overview of the number of real estate loans we have processed by year:

------------------------------------------------------------------------
     2012           2013           2014           2015       YTD 3/2016
------------------------------------------------------------------------
           1              0              6             16             7
------------------------------------------------------------------------

    CHS Capital completed term loans totaling $55.5 million in the 
first 3 months of 2015, compared with $226.5 million in loans that we 
have been completed so far in 2016. Nearly all of the term loans were 
written to refinance existing real estate versus new real estate 
purchases. We expect the number of term loans to continue to increase 
if commodity prices remain low.
    CHS Capital has seen a significant increase in past-due loans and 
requests to extend the prior year's operating loan. The low commodity 
prices have resulted in more customers holding their inventory in hopes 
of higher prices, and an increasing number have had to liquidate assets 
in order to repay their loan. We are also seeing a higher number of 
customers who have not been able to obtain the operating funding for 
the upcoming crop year
    The chart below reflects the year over year change in past-due 
customers (customers with a past-due balance in excess of $1,000).
Number of Customers with a Past-Due Balance over $1,000
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The majority of CHS Capital's loans mature in the first quarter so 
an increase in past-due loans during that timeframe is not unusual. 
However, the number of past-due loans is significantly higher than a 
year ago
Looking Ahead
    With the current stockpiles of grain and number of acres projected 
to be planted, the outlook through 2016 and into 2017 is for crop 
prices to remain depressed. A weather issue in one of the major growing 
regions could positively impact prices. CHS Capital estimates the 
breakeven cash price for many growers to be in the range of $3.90-
$4.25/bu. for corn. If prices remain low throughout 2016 and the 
outlook is not positive, CHS Capital believes that many farmers will 
choose to preserve their equity and will rent out their farmland or 
liquidate assets.
    We believe this will be especially true for farmers who are at or 
near retirement with no family succession plan. We believe there is 
also a segment of farmers who will have to liquidate due to high debt 
levels and a lack of equity. We feel that if significant acres of 
farmland are put on the market, and farmers are willing to walk away 
from expensive rented ground, the result will be a decline in rental 
prices and an increased devaluation rate of farm real estate.
    We also believe some of the younger generation of farmers who came 
back to the farm during times of strong prices will leave, or at a 
minimum look for work off the farm. We believe that continued low 
prices will cause banks to pull away from financing production 
agriculture and look for a more stable industry to which they can lend.
    Whether it is through CHS Capital or other segments of our 
enterprise, CHS recognizes the importance of maintaining a safety net 
for agricultural producers. As you and your colleagues on the 
Agriculture Committee examine the current state of the farm economy in 
anticipation of future legislative initiatives, we urge you to craft 
farm policy that covers multi- and single-year losses and strengthens 
risk management tools.
    Thank you again for the opportunity to share our views on the state 
of credit in farm country. I look forward to answering your questions.
                               Attachment
Commercial Financing
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


 
                 Loan Breakdown
                                                      Grand Total on
                                                        Commitments
 
   Ag Supply: 119             Seasonal: 87          $1,127,600,000
       Ethanol: 1         Special Term: 30
        Grain: 56            Amortized: 59
 

Producer Local Financing
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


 
                 Loan Breakdown
                                                      Grand Total on
                                                        Commitments
 
        Crop: 660                   Hedge Line: 34    $222,991,000
                 Livestock: 6Machinery: 20
   Real Estate: 4
 

Producer Country Operations Financing
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


 
                 Loan Breakdown
                                                      Grand Total on
                                                        Commitments
 
      Crop: 3,030                   Hedge Line: 6     $748,221,000
                 Livestock: 12Machinery: 7
  Real Estate: 32
 


    The Chairman. Thank you, gentlemen. The chair would like to 
remind Members that they will be recognized for questioning in 
order of seniority for Members who were here at the start of 
the hearing. After that, Members will be recognized in order of 
arrival. I appreciate Members' understanding.
    Gentlemen, the most recent farm crisis occurred in the 
1980s, and many of those families in that crisis never 
recovered. What are the similarities of the situation in the 
1980s and today, and what are the differences that you see in 
what happened in the 1980s and today?
    Mr. Buzby, we will start with you and just kind of go down.
    Mr. Buzby. One of the major differences between the 1980s 
and now is interest rates. The level of interest rates has been 
at current levels for roughly 5 or 6 years. A dramatic increase 
in interest rates would cause the situation to be much more 
similar to that of the 1980s. A lot was learned in the 1980s. 
Lenders, in particular, take a very historical view when they 
look at the opportunities to finance farmers. I think that is 
very important. It is definitely very instrumental to see 
lenders who were around and lending in the 1980s. There are 
many farmers and young lenders who were not around then, we do 
see them learning from the history and from their colleagues 
who were around then.
    It is important, not only this year, as agriculture has 
come under stress, but as we progress into the next 2 years, I 
think that will be very challenging, in particular, if 
commodity prices stay where they are.
    Dr. Featherstone. I would concur with Mr. Buzby. Probably 
one of the other differences that I would say is the 
opportunity to use fixed rates products. A number of producers 
have used fixed rate products to lock in interest rates on land 
loans, and so roughly 50 percent of their debt is at under 
fixed rates. The other 50 percent is roughly under operating 
that would be subject to changes in interest rates.
    In terms of the land value build up, it is very similar to 
what we saw in the 1970 to 1980 run up when you look at 
inflation-adjusted terms. We are about 30 percent higher in 
places of the Midwest than we were during the peaks. Other 
places around the country did not see a run up, and so it is 
very different. But certainly in the Midwest and the Great 
Plains region, there was quite a run up in land values, which 
is somewhat similar to the 1970-1980 period.
    Mr. Nelson. As I look back at the 1980s, I saw that as 
really a high debt crisis situation, so farmers had leveraged 
their balance sheets significantly. Obviously, as mentioned 
here, the interest rates were much higher than they are today.
    As we look at where we are today, though, lenders and 
farmers have been much more cautious about leveraging their 
balance sheet, giving more opportunity to try and get through 
the downturn and the cash positions that they are seeing today.
    The Chairman. Dr. Featherstone, you said something that 
stands out in your written testimony with regard to the farm 
economy, that the averages will not drive a bust, but the lower 
tail of the distribution can. What is being done to track this? 
How can we track what is happening on these farms at the lower 
tail of the distribution, and is there anything that can be 
done on these farms to help prevent the lower tail of the 
distribution from driving a bust?
    Dr. Featherstone. I think there are a couple issues that 
are important to realize. The worst time in the 1970s that you 
were able to lend was kind of that 1977 to 1980 period. I had 
the opportunity at the beginning of my career to look at how 
those loans performed for a nationwide lender, and roughly 
about 85 to 90 percent of the loans they made in the worst time 
did make it through eventually, although it was very stressful.
    The big thing is there is a need to focus on the downside 
of the distribution and really understand that the agricultural 
land market is a pretty thin market. In a lot of places, you 
are looking at two to three percent of land trading a year, so 
four to five percent, which doesn't seem like a big change 
really can affect price. The other thing is identifying those 
farmers and working with them in terms of restructuring their 
operations and for some of them, it may be working with them to 
figure out whether or not farming is in their future.
    The Chairman. Mr. Scott.
    Mr. David Scott of Georgia. Thank you, Mr. Chairman.
    This has been a good panel, and I would like to ask Mr. 
Buzby, Dr. Featherstone, and Mr. Nelson, because each of you 
touched on this in your testimony.
    Let's suppose I have two graduating seniors, and which is 
the case. I gave the commencement address at University of 
Georgia's School of Agriculture last year, and I also had a 
group of young students who want to be farmers from Ft. Valley 
State in my office last week. And this issue came up. How are 
we going to really address this issue of getting the financing? 
You have young people who want to go into farming, but they are 
hitting a brick wall on two fronts.
    First of all, the high cost of land, the high cost of 
equipment. What is being done to get some help there? And then 
second, many of these graduating students have student loan 
debt, so it is not like if you graduate and you get a degree in 
finance, you go work for a bank, then you get a big salary, but 
in agriculture, you have to seriously go to work. You have to 
get land, you have to get equipment, you have to get property. 
How are we addressing this for this young person that wants to 
go into farming and is faced with college debt, with all the 
other debt?
    And I would like to know just what the land price would be 
for an acre.
    Mr. Buzby. Well certainly for a young beginning farmer, 
entering into farming is an uphill battle. Without the support 
of a family structure and perhaps an older farmer within the 
family who is exiting the business, it is very difficult to get 
started. Certainly where we see an environment where interest 
rates are low for the purchase of land that is helpful, but we 
also still see land values at relatively close to historic 
highs. You also see expensive rental rates if a farmer were to 
enter and begin renting, and the availability of equipment 
financing as well can be challenging.
    With all that said, there is a push amongst lenders, 
particularly in the Farm Credit System and in the banking 
communities to focus on young beginning and small farmers. It 
will continue to be a challenge for many years, and if the 
farming conditions and the farming economy struggle for the 
next several years, I think that will persist and be very 
difficult to enter into farming for beginners, particularly 
those coming right out from school.
    The existence of other debts related to education or other 
things will also only add to that burden. Many years ago, 
looking back to the 1980s, as many people saw struggling on the 
farms, people didn't want to get into agriculture and they kind 
of fled to the coast, got away from agriculture and went into 
different areas, maybe related to ag finance but not in 
agriculture in particular. Over the past decade or so, as 
farmers have done very well, there has been a push for people 
who grew up on the farm, went away to college, and then want to 
come back to the farm, I think that has returned and it has 
really just happened in this last year or so where that is not 
looking as favorable as it has for the last decade.
    Mr. David Scott of Georgia. Well let me just ask you, don't 
you all think it would be helpful--some of us here in Congress 
really feel the pinch on this--and I believe it will be helpful 
if we could develop some financing help here that would take 
care of loan forgiveness for a certain number of students. It 
doesn't have to be everybody, but at least we can start that 
with those who will go into farming, and to give scholarship 
aid to those. So when they come out, at least they will not 
have that hanging over them going in, but it would be 
interesting to know what would you say is the total operating 
cost of the average farm?
    Dr. Featherstone?
    Dr. Featherstone. For the farms that----
    Mr. David Scott of Georgia. And what would be the average 
size farm?
    Dr. Featherstone. Yes, the average size farm, there would, 
probably, in Kansas be about 800 to 1,000 acres. The average 
expenses would be about $500,000. One of the things that may be 
a possibility, and I know the Department of Defense is working 
with transitioning some of the soldiers into farming operations 
where they are trying to match soldiers that have a desire to 
farm with individuals that may be nearing retirement, and so 
perhaps something like that might be a possibility to also look 
for college students.
    Mr. David Scott of Georgia. Thank you, Mr. Chairman.
    The Chairman. Mr. Conaway?
    Mr. Conaway. Thank you, Mr. Chairman, and thank you, 
gentlemen, for being here.
    I would like to understand mechanically what is happening, 
and make sure we get that in the record. With high land prices 
and the risk of those prices dropping, when we look at the 
lending side, what is the normal or what would be the typical 
ratio of collateral value to loan value in most of these 
organizations?
    Mr. Buzby?
    Mr. Buzby. At Farmer Mac, what we see generally industry-
wide is a maximum loan to value ratio of 70 percent.
    Mr. Conaway. All right, so if we had a 30 percent drop in 
the value of land, the bank will be about even with its debt at 
that point in time, so the drop in land prices has to be 
greater than that in order to have a real dramatic impact on 
lending or on those loans.
    Mr. Buzby. Correct.
    Mr. Conaway. Dr. Featherstone, you mentioned farm income. 
Does that include any kind of compensation to the farm family 
itself? Let's say you have the typical family farmer: is he 
taking a salary out of that number? What is that number?
    Dr. Featherstone. Yes, the net farm income that I mentioned 
would not include any other income that they may have.
    Mr. Conaway. So, if it went from $111,000 to $11,000, that 
$11,000 would mean farmers make about $1,000 a month to pay his 
own medical costs and other, normal things that a family would 
have to pay for?
    Dr. Featherstone. Yes, in this situation if all the income 
from the family was from the farm.
    Mr. Conaway. Well that $11,000 is just farming income.
    Dr. Featherstone. It is just the farm income, and so 
therefore, if there were off-farm incomes and that is going to 
be pretty important with regards to the rural economy, making 
sure that that is strong, to provide those job opportunities.
    Mr. Conaway. All right. Mr. Nelson or Mr. Buzby, there are 
a lot of challenges with respect to lending. Obviously, it has 
to be safe and sound. The bank has to be confident that it is 
getting its money back. Are there regulatory burdens associated 
with farming that are exacerbating lending decisions, either 
the regulations to operating a farm or regulations as to how 
you lend to a farmer?
    Mr. Nelson, you were nodding your head. We will let you go 
first.
    Mr. Nelson. Yes, I will make a comment as that pertains to 
CHS Capital. We are regulated in a different way than banks 
are, so it allows us a little bit more flexibility to create 
innovative programs to help out farmers. At the same time, we 
need to make sound decisions around the credit viewpoint and 
what it looks like into 2016. But we do have some innovative 
programs that we have put out here recently to help farmers 
get----
    Mr. Conaway. Right. I guess I am looking for the 
regulations that are preventing you from doing that.
    Mr. Buzby, do you have comments about specific regulations 
that farmers are dealing with that don't really help bankers 
make sound decisions?
    Mr. Buzby. Well, there are a wide spectrum of regulations 
that impact farmers, varying from those that impact the lenders 
and the financial institutions that serve them, but also 
environmental and water laws as well. While many of those laws 
may be from a social accountability standpoint, they may be 
well intended. There can certainly be adverse consequences 
which can adversely affect farming, the value of land that is 
available, and then ultimately the lending decisions that we 
may make.
    Mr. Conaway. Dr. Featherstone, you mentioned that a 
potential leading indicator would be debt-to-earnings before 
interest, taxes, depreciation and improvisation, or the ever 
popular EBITDA. What is that leading indicator telling you now?
    Dr. Featherstone. Essentially, that is beginning to move 
up. I have done some work with this at the university.
    Mr. Conaway. Up good or up bad?
    Dr. Featherstone. It is moving up quite a bit.
    Mr. Conaway. I know. Is up good, or is up bad?
    Dr. Featherstone. Oh, sorry. Moving up is bad in terms of 
the lower that ratio is, the better off you are. For example, 
in north central Kansas, I haven't calculated those numbers 
yet, but they will be negative for this coming year simply 
because you have to look at principle repayment and family 
living when you begin looking at that.
    Mr. Conaway. Okay, but I thought you said it was earnings 
before interest and taxes----
    Dr. Featherstone. Earnings before interest, taxes, 
depreciation----
    Mr. Conaway. Those don't include the farmer's expenses?
    Dr. Featherstone. I misspoke there. It won't be negative.
    Mr. Conaway. But that would be really----
    Dr. Featherstone. Right. I am thinking----
    Mr. Conaway. You said down was good.
    Dr. Featherstone. I am thinking of the capital repayment 
capacity ratio, which will end up going negative for that 
region.
    Mr. Conaway. All right, so as a leading indicator----
    Dr. Featherstone. It is a leading indicator of cash flow 
and just the ability to repay loans.
    Mr. Conaway. Which indicated to you that things are going 
to get worse before they get better at this stage?
    Dr. Featherstone. Unless that changes, yes.
    Mr. Conaway. Okay.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Mr. Aguilar.
    Mr. Aguilar. Thank you, Mr. Chairman.
    Mr. Buzby, you talked a little bit about younger farmers in 
response to the Ranking Member. In California, beginning 
farmers tend to be slightly younger than the national average, 
but the number of beginning farmers has dropped 29 percent 
between 2007 and 2012. What role does the high real estate 
market play in these declining numbers of young farmers 
entering the market? What other factors are discouraging young 
people from managing a farm? And to pick up where the Ranking 
Member left off, what can Congress do to foster some of these 
policies to support young farmers' strengths to combat their 
weaknesses?
    Mr. Buzby. Certainly with respect to land values, the 
situation in California is very different than from what you 
see in the Midwest. USDA, in some ways, in the products that 
they offer can be instrumental in helping young and beginning 
farmers as well. The flexibility that can be offered to farmers 
that can't, whether beginning or seasoned, access credit in the 
traditional markets do see vehicles through USDA that can be 
helpful. Congress's oversight of financial institutions, the 
Farm Credit System, and elsewhere promoting the lending to 
young beginning and small farmers is critical; as well in 
California, in particular, as you see very diverse agriculture 
there that is very capital intensive. There are specific 
challenges in that state alone that are much more difficult to 
address than throughout the Midwest.
    Mr. Aguilar. Thank you.
    Dr. Featherstone, you mentioned a program for returning 
soldiers. Can you elaborate on what that program looks like, 
and where we might be able to take that from a Congressional 
perspective, moving forward?
    Dr. Featherstone. Yes, essentially there is a grant program 
that allows organizations to work with retiring soldiers, and 
the way that it is working in Kansas is Farm Bureau, in 
conjunction with Kansas State University and Fort Riley, which 
is located very close to the campus, were trying to match up 
individuals, teach them basic agriculture skills, try to match 
them up with individuals that could mentor them into the 
process and maybe at some point transition the operation from a 
generation that does not have heirs to the individual that has 
built that human capital.
    Mr. Aguilar. Great, thanks. I think that is a worthy 
program that we should discuss. Some of us are on the Armed 
Services Committee as well, and there could be a connection 
there. I appreciate that answer.
    Dr. Featherstone, and for Mr. Nelson, in recent years in 
the community I am from, a number of farmers in my district--
and you have alluded to this in your testimony--are finding 
that their children don't want to continue the family business. 
These farmers resort to selling their land to fund their 
children's college education or to help finance their own 
future. For many family farmers, it is important to keep the 
business with a trusted source when selling.
    What types of tools are available for those who are 
evaluating what the outlook of their farm is as they are 
selling it, and what factors should be taken into consideration 
so they can find the right time for them to sell, if that is 
the choice that they are making?
    Dr. Featherstone. Until this year, essentially at least in 
Kansas where I am from, there was a strong desire for college 
graduates to go into agriculture. And so as of yet, I am not 
sure we have seen the graduates catch up with reality. I will 
be doing exit interviews the next couple weeks, so I will have 
a better picture of that in a couple weeks. But, the big thing 
is timing, and the big thing is providing some mentorship 
opportunities for those individuals, but certainly timing is 
critical in terms of now is probably not a time that they are 
going to find it very easy to move into the production 
agriculture sector.
    Mr. Nelson. As has already been mentioned here today, for 
the next generation of farmers, it is going to be very, very 
difficult to get into agriculture. Just yesterday I was 
speaking to a customer of ours from Texas, a cotton farmer in 
Texas. He farms 6,000 acres. He has been in farming 38 years. 
And his comment was I don't know who is going to farm my land 
when I retire, because again, he said young people will not 
have the opportunity to come in and purchase land and begin 
farming in this environment.
    We continually need to look at ways to help young farmers 
enter into farming. We are looking at programs today, CHS 
Capital, to help finance and provide operating funding for 
young farmers. But certainly, it will be a challenge in the 
future.
    It is important that farmers also look at succession 
planning, and they need to start that immediately. I think that 
industry could do a much better job in planning ahead so that 
the next generation can come in and continue the operation.
    Mr. Aguilar. Thank you, gentlemen. Thank you, Mr. Chairman.
    The Chairman. Mr. Kelly.
    Mr. Kelly. First of all, and this is to Mr. Buzby, thank 
you, Mr. Chairman, and thank you, witnesses on the panel, for 
being here. I really appreciate it.
    Mr. Buzby, what effect can government regulations such as 
Waters of the U.S., what are they having on our farming right 
now?
    Mr. Buzby. Well certainly there are regulations as, what 
you mentioned, that can have adverse impacts on a farmer and 
his operation, as that also may have a dramatic direct increase 
on the farm itself and the land, certainly making it very 
difficult to provide financing to land that is adversely 
affected by such laws, and also preventing, in some cases, that 
farmer from being able to liquidate his land and sell. I think 
that can be quite a challenge.
    Mr. Kelly. And just following up, what specifically does it 
do to farmland values?
    Mr. Buzby. Dramatic reductions.
    Mr. Kelly. And either of the other two witnesses are 
welcome to comment if you would like.
    Mr. Nelson. Yes, I think that was covered well.
    Mr. Kelly. And Dr. Featherstone, farmers rely on crop 
insurance, you mentioned important points in your written 
testimony about how when the price of commodities decrease, 
farmers with crop insurance take an additional risk because 
their insurance covers less of their variable costs. What are 
the implications of this reduction in risk coverage for 
farmers?
    Dr. Featherstone. The key implication is farmers are 
assuming more of the risk than they did just 2 or 3 years ago. 
Using some numbers that were in the testimony, comparing it to 
2013, which admittedly is the high, they are taking on between 
30 and 40 percent more risk, simply because that guarantee 
decreased. There is the opportunity for them to buy up 
additional higher coverage levels, but certainly with the 
prices decreasing, there is more risk and less of the revenue 
is protected on those revenue products.
    Mr. Kelly. And Mr. Buzby, in your testimony you indicated 
that crop insurance and the other components of farm safety 
net, including ARC and PLC, are extremely important to 
agricultural leaders. Can you elaborate a little bit on this?
    Mr. Buzby. As we have seen in recent times and times of 
drought and other adverse weather conditions, crop insurance 
becomes a safety net, and certainly allows farmers to continue 
their operation where they otherwise may not be able to in a 
particular year. I think for the long-term health and safety 
and risk management of those farmers, those crop insurance 
programs are critical.
    Mr. Kelly. Any of you other witnesses have any comments?
    Mr. Nelson. As a lender, I look at the crop insurance 
program and the government payments as a critical component in 
any kind of credit analysis. So as we look in the future, 
obviously we have seen crop prices drop, which does impact the 
level of coverage from the insurance standpoint and will 
adversely affect potential decisions around credit extension in 
the future.
    Mr. Kelly. And then finally, and this is to anyone on the 
panel who wants to answer, farmland values are the potential 
bubble in the farm real estate, would you give some brief 
examples of if you think the bottom may fall out, and can you 
compare in any way to the 2008-2009 housing crisis? Do you see 
that as a potential with farmland values?
    Mr. Nelson. We have seen over the past year a slight drop 
in farmland values, but nothing real significant. I think there 
is still an optimism in the market around what farming will be 
in the future and a need for farmland, of course, in that 
equation, so I don't see the bottom falling out of this. I 
certainly see a softening of the prices as we go into 2017, if 
the prices stay as they are today.
    Mr. Kelly. Mr. Buzby, do you have a comment on that?
    Mr. Buzby. I would just say that over the years, many 
farmers for decades have been farming and have done well, and 
have very solid balance sheets. The softening in land prices 
that we have seen does present opportunities for some of those 
farmers to purchase additional land, so I think that provides a 
bit of support that should prevent a similar crisis to what we 
saw in housing.
    Mr. Kelly. I thank the witnesses again, and Mr. Chairman, I 
yield back.
    The Chairman. Thank you.
    I now recognize the gentlelady from Arizona, Mrs. 
Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman, Ranking Member 
Scott.
    I want to follow up on my colleague's comments about the 
veterans for farming. I visited, Dr. Featherstone, one of those 
programs in Arizona where the veterans come, they live on the 
farm, they learn to grow a certain crop, and then presumably go 
out and farm. But in talking with them, they are not from 
wealthy families. They come back from the wars with no assets, 
no home. Some of them don't even own a car. And so my question 
is not just for you, Dr. Featherstone, but the entire panel. 
Are you aware of any programs specific for veterans that would 
lend them money to buy a farm and operating capital when they 
have no assets?
    Let's start with you, Mr. Buzby, and we will just go down 
the line.
    Mr. Buzby. Well I think that is challenging. I did allude 
earlier to the USDA and some of the programs that they have for 
beginning farmers; however, they continue to be under financial 
pressure and staffing pressure. I have recently visited a 
number of states where you see the administration of the FSA 
and other USDA programs throughout the country, and in certain 
states, that functions better than it does in other states. So, 
from a service perspective, the funding of those USDA programs, 
the staffing of those programs, and a focus on making them 
successful is critical.
    Mrs. Kirkpatrick. Dr. Featherstone?
    Dr. Featherstone. In some respects it is very hard for the 
asset acquisition, and in some respects that is where the match 
of who the mentor is in terms of whether or not they can set up 
some type of sharing-type process through that mentorship. But 
it is probably going to be a long process, which isn't all that 
unusual for individuals that are in a family farm. Many years 
they work for their parents, who hopefully are their mentors, 
and at some point take over. And so typically, it has been a 
long process in agriculture to acquire those assets to begin to 
take the lead and manage them.
    Mrs. Kirkpatrick. Mr. Nelson?
    Mr. Nelson. Yes, obviously a difficult situation when we 
start looking at lending to the next generation, but I do think 
there are creative ways to accomplish that as you look at 
staging and potentially lending to young farmers or next 
generation farmers, by relying on the equity and support of the 
family, and so there are definitely ways to accomplish that 
task.
    Mrs. Kirkpatrick. Yes, I am really concerned about this and 
maybe the Committee can look into it more. Because in talking 
to these young people, they definitely have the desire to farm, 
and evidently, according to your answers, it really would be 
almost impossible for them to purchase land.
    But let's assume then that they find something they can 
lease. Do you approve leases before you consider lending 
operating capital? And again, just go down the line. I am just 
curious about how that works.
    Mr. Buzby. At Farmer Mac we lend money to owner operators, 
those who buy a farm and operate it themselves. We also lend 
money to farmers that lease their land out. Generally, we have 
not seen to date challenges with getting land leased. As land 
values have come down, and the profitability for farmers who 
are leasing land comes under pressure, there will be demand by 
those operators for the rental lease payments to come down, 
which adversely affects the landlord who we have lent money to. 
So there is a balance there that needs to be struck, and as 
multi-year leases that are 2 or 3 year leases come due, there 
will be pressure on those landlords to reduce rents to the 
operators.
    Mrs. Kirkpatrick. Let me just follow up. Would it be 
possible, say, for a first time veteran farmer then to get 
operating capital on a lease through your company?
    Mr. Buzby. Not through Farmer Mac, no. We lend just on real 
estate.
    Mrs. Kirkpatrick. Dr. Featherstone?
    Dr. Featherstone. I work for a university, so we don't 
lend.
    Mrs. Kirkpatrick. Oh, that is right. Mr. Nelson, you are in 
the private-sector?
    Mr. Nelson. From CHS Capital's standpoint, we do offer 
coverage for lease payments, so it is an option certainly in an 
operating line to finance those kinds of expenses.
    Mrs. Kirkpatrick. I am really concerned. We train them, 
they have the desire, but then the door closes because they 
can't get the capital to buy a farm or to operate. That 
concerns me, Mr. Chairman and Ranking Member.
    My time is running out, but I just want to ask if any of 
you, who typically buys farmland that is up for sale, and do 
any of you have a concern that we might run into a deficit in 
this country in terms of having farmland that is actually being 
farmed?
    Why don't we start with you, Mr. Nelson, and we will go 
down the row the opposite way.
    Mr. Nelson. Yes, surprisingly, we just typically don't see 
a lot of farmland go on the market, even with the situation we 
are in today. A lot of times it is neighboring farmers that 
look to expand their farm that are taking advantage of those 
opportunities. We have had a lot of farmland come into 
production during the good times when we had $7 corn, so there 
are significantly increased acres being farmed today. So I 
don't see that as a concern or shortage, going forward, to meet 
the demand.
    Mrs. Kirkpatrick. As my time has run out, does anyone 
differ with that answer?
    Okay, thank you, Mr. Chairman. I yield back.
    The Chairman. I now recognize the gentleman from Texas, Mr. 
Neugebauer, for 5 minutes.
    Mr. Neugebauer. I thank you, Mr. Chairman.
    Recently, I have had conversations with some of the bankers 
in my district and some of the farmers, and one of the things 
that we are hearing, and it is unfortunate that some of those 
farmers are not being able to renew their loans at the bank. 
And so they are being referred to FSA to see if they can 
arrange their financing.
    The question I have is what kind of trends are you seeing 
in that direction, and also what are the long-term consequences 
of people being forced to move out of traditional financing 
availability?
    Mr. Buzby. The example you give is a very good one, and 
something that we hear quite often here very recently is that 
an operating lender is unwilling to renew an operating loan. 
The farmer is unwilling to pay it back, and what often happens 
is they then refinance their land, their mortgage on their real 
estate to include the operating loan. Hopefully in those cases, 
lock in a long-term fixed rate where rates are now, but 
oftentimes because of the qualifications and credit 
underwriting standards, they are not able to be served in the 
traditional markets and do turn to USDA, sometimes with hybrid 
financing through a private lender and USDA, and sometimes just 
with an FSA loan.
    Mr. Neugebauer. Anybody else want to comment on that?
    Mr. Nelson. I will just comment on what we are seeing in 
CHS Capital. It is mid-April, well past the day when we should 
be seeing applications for operating lines, and we are seeing 
many come in today that have been turned down by other 
financial institutions. So it is definitely a concern, and 
there are farmers that are looking for ways still to finance 
their operation for 2016.
    Mr. Neugebauer. The issue that we have been kind of talking 
about, particularly with the land and something that you 
mentioned, your customer that farms 36,000 acres in Texas, most 
likely could be in my district. And that very important 
question, who is going to farm this land in the future? And 
what we have seen in agriculture, particularly in my part of 
the world, is consolidation. My wife grew up on a cotton farm 
in west Texas, and that family farmed a \1/2\ section, \1/4\ 
section, and they made a living doing that. And those days are 
over, so the farms are bigger, the risks are larger, the 
capital requirements are larger, and some people are renting. I 
don't know that 36,000 acres, if he owns all that land or he 
probably owns some, and leasing some.
    But the question is in the future, who is going to have the 
ability to absorb that? Because we have seen quite a bit of 
consolidation, and as the gentleman from Georgia pointed out, 
the 59, 60 year old farmers, at some point in time, they 
finally say, ``I am not going to do that anymore.''
    Mr. Nelson. Yes, I would like to continue with my example 
with the Texas farmer. He had mentioned that he took on 2,000 
more acres a couple years ago because the farmer couldn't 
continue, but at the same time, what he is saying about 2016, 
he said we are set up for failure. Right now with average 
prices and average yields, we will not be able to pay back our 
operating loan in 2016.
    So the question becomes if things continue as they are, 
what does happen to the extra farmland that comes up for lease 
or purchase? There is definitely going to be a reduction in 
rent values or a reduction in some real estate values to 
actually make that work out in the future farm.
    Mr. Neugebauer. Yes, some of the farmers, just like the one 
in your example, have told me, ``You know what, Randy? This 
year I am going to turn back some acres.'' He said I just can't 
make the numbers work.
    One of the interesting things, and I was in the banking 
business from 1975 to 1983, and we were in a different 
regulatory environment back then, and our bank was a pretty 
large agricultural lender. We carried over farmers from year to 
year and sometimes probably when we shouldn't have, but we knew 
those people. Today's environment is such that with the 
regulatory environment, those days are over if you can't show 
the cash flow and you can't show the equity, just from a 
regulatory perspective, those lenders can't continue to do 
that. And, as we see folks move to FSA at some point in time, 
if the numbers don't work for the conventional lender, it is 
going to be difficult for the FSA to continue with some of 
those.
    So the crop insurance piece is an important piece of it, 
and one of the problems we have in west Texas with cotton is 
that there really is no price protection built into crop 
insurance. And so it doesn't matter whether you can make a crop 
or not. If you make it and you can't make any money doing it, 
then the crop insurance has not really done you a whole lot of 
good.
    With that, Mr. Chairman, I yield back.
    The Chairman. I now recognize the gentleman from Arkansas, 
Mr. Crawford, for 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman. I appreciate you 
allowing me to sit in today.
    I want to talk about crop insurance, and I know that that 
is important from the standpoint of lenders, analyses in 
preparing crop loans and things of that nature. I will put my 
parochial lenses on here and talk about my district for just a 
little bit. My district is home to about \1/2\ of the U.S. rice 
crop, and crop insurance is really kind of a tough sell. We are 
pretty heavily irrigated, as you would know, from rice 
production, and so they spend that money in investing and 
irrigation, and rice is an expensive crop to produce. And then 
another issue that is sort of problematic for rice producers 
with respect to how they secure or provide a little risk 
management is that price discovery is difficult. The rice 
market is very thinly traded, and it makes it expensive to try 
and hedge for the average farmer. So using those types of risk 
management tools are difficult.
    Mr. Nelson, I will start with you. If you might have some 
suggestions on where they should go, and your crop insurance 
products, the actuary base for rice is somewhere around $3 
million. That makes it cost prohibitive to a large degree. But 
what would you recommend as maybe a new approach?
    Mr. Nelson. There is no question that crop insurance adds a 
critical benefit to both farmers and to lenders, but it doesn't 
for the widespread crops. It is not covering all crops, as you 
mentioned on rice. There are certainly issues, what I am 
hearing from a cotton perspective as well. So, as we look at 
the new farm bill, we need to look at how that program can be 
enhanced to create a greater safety net for our producers. And 
some of that has to be not so much price driven potentially in 
the future. Obviously as we see prices drop, the level of 
coverage in that safety net has declined as well. So, we need 
to look at creative ideas beyond just price and expand the 
coverage so it reaches more crops as well.
    Mr. Crawford. Mr. Buzby, any thoughts?
    Mr. Buzby. I would say research and hearing from producers 
themselves, what protections they are looking for. As lenders, 
we look through a slightly different lens. We are looking for 
the ultimate ability for that farmer to be able to pay back 
their loans. The farmers themselves are looking for ways to 
fund their operations, finance the capital needs for their 
operation, but also to sustain their family's sustenance.
    So, they may look at it slightly differently, so I would 
encourage hearing from farmers themselves and producers, as 
opposed to just lenders and others.
    Mr. Crawford. Dr. Featherstone, you are an economist, 
correct?
    Dr. Featherstone. That is true.
    Mr. Crawford. Let's hear your economist perspective.
    Dr. Featherstone. The key thing with crop insurance is to 
allow producers to have choice and to have different types of 
products, and experiment a little bit.
    One of the things that some other countries are working 
with is some weather type insurance contracts where they will 
end up basing the payments out based on rainfall or other types 
of weather-type phenomena. With the increased technology that 
we have to measure sunlight, rainfall, those types of things, 
those might be something to look at down the road.
    Mr. Crawford. I am concerned, in the broad sense, that we 
are looking at crop insurance as sort of the panacea for 
agriculture, and if we tweak it enough, we will be able to come 
up with something that works. I think that we may be going down 
a road where we think we can just insure ourselves into 
prosperity for the ag economy.
    Mr. Nelson, your thoughts on that?
    Mr. Nelson. I agree. We look at crop insurance strictly as 
that worst case situation as a lender, and it provides us with 
some assurance that the downside number risk is going to be 
``X'' amount using insurance. So it is not going to solve the 
problems.
    Mr. Crawford. My other concern, quite frankly, is we talk 
about some of the policy, amendments to the farm bill that were 
introduced that address the AGI and that also address active 
engagement, that in effect what we are really creating is a 
dynamic that almost forces consolidation.
    As an economist, Dr. Featherstone, do you see that?
    Dr. Featherstone. Certainly, there can be those concerns. 
The key thing that we have to get back with insurance is it 
prevents downside risks or helps manage that. We have gotten 
into a situation where it is a profitability or an income 
enhancement, and I didn't collect my life insurance last year, 
and I am very glad that I did not.
    Mr. Crawford. Exactly. Exactly, and that is why I think we 
need to rethink our approach to that. I appreciate you being 
here, and I yield back.
    The Chairman. I will now recognize the former Chairman of 
the Committee, Mr. Lucas, for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman, and I appreciate that, 
and no one has described me as having a key role in this mess, 
so I appreciate the kindness of my colleagues.
    Dr. Featherstone, I will turn to you first. Of course, your 
colleagues at the table can comment if they care to. I 
apologize for being slightly late. There has been discussion 
about how commodity prices have affected land prices, and it is 
impacting people's ability to sell.
    But just as important as it is for primarily our older 
farmers to be able to harvest that lifetime of equity, which 
is, in many cases, the equity in their most recent capital 
asset, their farms. There is also the issue about producers, 
both beginning and established and senior, not being able to 
tap that perceived equity to operate their businesses. Because 
after all, every banker smiles if your farm is paid for or 
mostly paid for, or a high percentage paid for.
    Let's discuss for a moment about how commodity prices have 
affected land prices and how that is affecting day-to-day 
operations on producers who use that as their piggy bank, so to 
speak?
    Dr. Featherstone. Yes, certainly essentially with the run 
up in land values, I think there are a couple of important 
aspects. First, is that it increases the barrier of people 
wanting to enter the farming profession. And so from that 
perspective, there are always two sides to a coin in terms of 
whether or not you are buying or whether or not you are 
selling.
    The other thing, and it will be interesting to see over the 
next couple of years in terms of just what costs are out there 
than can be pulled out of the sector. One of the things we have 
seen in Kansas is essentially a 20 to 25 percent increase in 
variable costs. Some of that is normal economics. When prices 
are high, you are going to spend more to get that last bushel 
out. When prices are low, there are going to be adjustments 
made and over the next couple of years, we are really going to 
see just what that cost structure is in terms of my brother-in-
law's farm. And what they ended up doing is they ended up 
paying for someone to spray to get it timed more correctly. 
However, in this environment they may decide we are going to do 
it ourselves, or maybe we are not going to go for quite that 
yield level, given the price outlook.
    Mr. Lucas. Well put, Professor.
    I represent, of course, a district that has a huge amount 
of state border with the great State of Kansas, and I always 
remind the folks who are not from our region of the country 
that Mr. Steinbeck's book about the 1930s was not an 
agricultural economics text. It was a social statement. With 
that said, in the lifetime of myself, my parents, and my 
grandparents, we have had a number of great catastrophes in the 
South Plains: the Depression of the 1930s and the great drought 
of the 1950s, the economic meltdown of the early 1980s, and now 
hopefully it is broken, the drought in my own area from 2011 
through 2014.
    Some of those things we cannot help. Mother Nature is 
Mother Nature, the weather is the weather. But the other 
issues, such as the 1980s and the 1930s, were bad Federal 
policy almost destroyed entire generations of farmers. That is 
something we can do things about.
    We have talked here today about the challenge in commodity 
prices. We have discussed the nature of the safety net that 
insurance is supposed to provide, either through yield issues 
or price issues, depending on which commodity you are grouped 
in, and it is not all universal. But isn't it fair to say, 
doctor, that a little bit of the challenge we face is the 
combination of things that this Committee doesn't control? For 
instance, the requirements for ethanol, renewable fuels, which 
perhaps drove the consumption of certain feedgrains, perhaps at 
a steeper pace than should, now looking back, have been 
appropriate. Then combine that with God awful weather events, 
the 2012 failure in the Midwest of the corn crop that led to $7 
corn, which then drove the decisions as acres were coming up 
for renewal in CRP. We are dealing with things here that are 
not just the farm bill, isn't a fair statement, doctor, the 
weather, policy decisions and other committees, international 
trade issues. The cotton folks are suffering from a WTO case 
that perhaps was not in their best interest, but all those 
factors together created the situation we are in now.
    Dr. Featherstone. I would concur, and one of the things 
that concerns me most is not within the agricultural sector. It 
is just the value of the dollar, and the macroeconomic effect.
    Simply to give a little bit of indication, if you were in 
Brazil, based on the value of the real, you could consume as if 
you were producing about $14, $15 beans, where in the U.S. we 
are looking at $7, $8 beans. So certainly a lot of what is 
going on here is outside the agricultural policy realm that 
this Committee focuses on.
    Mr. Lucas. Yet there are things that we have to deal with 
on the Committee, you as a policy developer have to try to 
address, and ultimately, our constituents in Oklahoma and 
Kansas put their very capital and life on the line.
    Humor me just one more moment, Mr. Chairman. The old adage 
amongst the country economists, the folks at the feed store is 
the answer to price is price. Seven dollar corn drove planting 
decisions that have now reduced corn by essentially \1/2\. But 
again, the answer to price is price. As you noted earlier on 
inputs and the over exuberance to spend on investing in the 
crop, we will now see that drop, so we will go through a 
rebalancing at some point. I would just note to the esteemed 
Chairmen of this Committee and Subcommittee that perhaps we 
have to take a look at those CRP authorized acres again over 
the course of the next couple years. We don't want to waste 
resources, and soil is our most valuable resource.
    That said, Mr. Chairman, I yield back, and thank you for 
the hearing today.
    The Chairman. Thank you, Mr. Chairman.
    I have one final question. I want to go back to the fact 
that while we are talking a lot about the farmer, it is not 
just the farmer. It is the whole rural economy. It is the 
person who sells the seed and the fertilizer. In cotton 
country, it is the gins. Tractor dealers certainly are directly 
impacted by it. Local car dealers are impacted by it. Local 
banks are impacted by it. Local restaurants are impacted by it. 
Certainly if things are good on the farm, then things are good 
with regard to the rural economy in this country, and if things 
are bad on the farm, things are tough for the whole rural 
economy.
    Mr. Nelson, one of the things that people outside of 
agriculture may not fully understand is that if you can't 
obtain your operating loan, what that actually means to 
farmers, and therefore, that rural economy. Can you explain the 
end result if a farmer is unable to obtain an operating loan?
    Mr. Nelson. There is no question of the negative impact to 
the community. This is a far reaching problem that goes beyond 
just a farmer that is having trouble financing his operation. 
And we are already seeing the impact. We are seeing the impact 
with local cooperatives who are struggling or the margins are 
being compressed. We are seeing, as you mentioned, with the 
machinery dealerships who are not selling new equipment. And so 
this is a far-reaching problem that goes down Main Street in 
the rural communities. And obviously, the operating lines are 
the key for farmers to get in the field, to finance the crop 
inputs, finance planting, finance the harvest of the crops. And 
farmers, as I mentioned before, are having difficulty finding 
operating lending in 2016, and that will have a far-reaching 
impact through rural communities.
    The Chairman. Most of the cotton pickers that run in 
Georgia are made in Iowa, and even though you don't grow any 
cotton in Iowa, certainly that means that they are directly 
tied to the cotton economy.
    With that said, I would yield to Mr. Scott from Georgia for 
any closing statements or final questions he may have.
    Mr. David Scott of Georgia. Yes, thank you, Mr. Chairman. 
This has been, perhaps, the most important hearing that we have 
had this year, because finally we are touching on what is the 
real crisis facing agriculture and farming. And Mr. Nelson, Dr. 
Featherstone, Mr. Buzby, each of you I congratulate you on the 
depth and knowledge that you have of the crisis that our 
farmers are facing with this terrible collapse of the net 
income of farming and the rising categories of debt that they 
have. At what point, and no wonder, as some of the other 
Members of the Committee have pointed out, family members have 
no choice. They can't even go on and continue the family farm.
    The greater tragedy of this is the American people's only 
familiarity with farming and agriculture is Publix or Kroger's. 
We go there and that is about as close as we get to farming. 
And, Chairman Scott, I commend you on pulling this hearing 
together because, hopefully, we are hearing what I call a Paul 
Revere moment. He went around and said, ``The British are 
coming, the British are coming!'' Well we are saying right here 
that trouble is coming to our nation if we don't address these 
critical issues of agriculture and farming in our country, 
beginning farmers, the cost of it, the inability to keep up 
with it, and woe to this country if we don't address it and 
become more and more dependent on foreign nations for our food. 
Man, if we ever get to that point, we are truly done.
    So Mr. Chairman, thank you and I just want to say that when 
our farmers have had trouble before in this country, 
particularly going through the 1920s and then into the 
Depression, the Congress and the Federal Government rose to the 
occasion and helped our farmers. Whether it was for the boll 
weevil or what the farmer was facing, and this is our challenge 
at this crisis to rise to the occasion. It is not just the 
finances. You have that enough on the farm. But as Mr. Kelly 
pointed out, you have over-regulation like the WOTUS rule 
coming at them. We have to address these issues, Mr. Chairman. 
I thank you for this hearing, and I thank the panel members.
    The Chairman. I certainly agree with my colleague from 
Georgia. Americans have never been dependent on a foreign 
country to produce our food supply, and I hope that we never 
are. I think that one of the charges of the Agriculture 
Committee is to make sure that we are able to keep good 
farmers, good families on the farm out there producing the food 
supply that we as Americans need and are dependent on, and I 
just pray that we are never dependent on any foreign source for 
our food supply in this country.
    And with that, under the Rules of the Committee, the record 
of today's hearing will remain open for 10 calendar days to 
receive additional materials and supplemental written responses 
from the witnesses to any question posed by a Member.
    This hearing of the Subcommittee on Commodity Exchanges, 
Energy, and Credit is adjourned.
    [Whereupon, at 11:17 a.m., the Subcommittee was adjourned.]



                       FOCUS ON THE FARM ECONOMY

               (FACTORS IMPACTING THE COST OF PRODUCTION)

                              ----------                              


                       WEDNESDAY, APRIL 27, 2016

                  House of Representatives,
 Subcommittee on Biotechnology, Horticulture, and Research,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:33 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Rodney 
Davis [Chairman of the Subcommittee] presiding.
    Members present: Representatives Davis, Thompson, Yoho, 
Moolenaar, Newhouse, Conaway (ex officio), DelBene, McGovern, 
Kuster, and Peterson (ex officio).
    Staff present: Haley Graves, John Goldberg, Mykel Wedig, 
Stephanie Addison, Faisal Siddiqui, John Konya, Keith Jones, 
Liz Friedlander, Matthew MacKenzie, Mike Stranz, Nicole Scott, 
and Carly Reedholm.

  OPENING STATEMENT OF HON. RODNEY DAVIS, A REPRESENTATIVE IN 
                     CONGRESS FROM ILLINOIS

    The Chairman. This hearing of the Committee on Agriculture 
entitled, Focus on the Farm Economy: Factors Impacting Costs of 
Production, will come to order. And good morning to everyone. 
Thank you to all the witnesses. Some I am very familiar with; 
others I am not. I look forward to hearing your testimony.
    Two weeks ago, the Agriculture Committee commenced a series 
of hearings focused on the farm economy. Each Subcommittee has 
been tasked with highlighting issues within their respective 
jurisdictions that impact the economic well-being of rural 
America.
    In the Biotechnology, Horticulture, and Research 
Subcommittee, we have spent considerable time discussing 
programs and policies that impact specialty crop producers. We 
have highlighted research, education, and extension programs 
that contribute both to the safety and security of our food 
supply, as well as benefit farmers by increasing efficiency, 
productivity and profitability. We have promoted the 
development of local and niche markets for farm products, and 
considered the opportunities and challenges for direct 
marketing. We have drawn the relationship between ag security 
and our national security through an examination of our 
defenses against the introduction of foreign pests and 
diseases.
    We have also engaged the next generation of leaders 
participating in the nation's largest youth development 
program, 4-H, in an ongoing dialogue to enhance relationships 
between rural and urban communities. These youth leaders, 18 of 
our nation's best and brightest, most recently visited with the 
Subcommittee to provide their insights into how we might 
improve the outlook for agriculture through education and 
outreach.
    While much of the work we have done as a Subcommittee has 
brought positive attention to the role of government programs 
and policies which assist rural America, we have also spent 
some time investigating policies that negatively impact 
producers.
    In a hearing more than 2 months ago with EPA Administrator 
McCarthy, Members engaged in extensive questioning regarding 
actions her agency has taken which impose considerable costs 
with questionable, if any benefits. Following this hearing, the 
Committee submitted additional questions for the record. In 
fact, Committee Members, both Republican and Democrat submitted 
approximately 36 pages of questions to the Agency for which we 
have yet to receive a single response. I wish I could say the 
Agency's apparent lack of regard for American agriculture is an 
anomaly, but history tells us otherwise.
    I had an amendment in the 2014 Farm Bill which would 
establish a permanent subcommittee of the EPA Science Advisory 
Board to ensure the voice of agriculture was represented in the 
Agency's decision-making process. Not surprisingly, more than 2 
years later, the EPA leadership has yet to appoint even a 
single member to this Committee. The result of this disregard 
for the law is a continuing flood of decisions and actions 
contrary to the needs and desires of America's farmers and 
ranchers.
    Unfortunately, it is not just the policies of the EPA that 
add unreasonable production costs. The implementation of the 
Food Safety Modernization Act will pose enormous challenges for 
producers and processors with little evidence that some 
requirements will offer quantifiable food safety benefits. We 
have often spoken about the threat of the ill-conceived Vermont 
law governing agricultural biotechnology, yet we are also 
concerned about what many observers believe is unnecessary 
regulatory hurdles researchers must go through to bring new 
applications of biotechnology to the market. As anyone can 
plainly see, the list of overly burdensome regulations 
threatening the farm economy is apparently endless.
    Today, the Subcommittee will focus more broadly on many of 
the factors that contribute positively and negatively to the 
cost of production for our nation's farmers and ranchers. While 
the farm safety net helps somewhat mitigate the impact of 
chronically low prices, our nation's farmers continue to 
operate on very thin, and in some cases, as I hear from my 
constituents, negative margins. Going forward, their ability to 
contain costs will be key to their survival, particularly if 
low prices exist and persist.
    We have invited a distinguished panel of leaders from 
industry and state government to provide their insights into 
the challenges facing our producers along with actions that can 
be taken to enhance the rural economic outlook. The record that 
is created today will be extremely beneficial in directing 
future oversight as well as development of the next farm bill. 
Thank you again, each of you, for being here today.
    I do want to say something very briefly too. I am very 
proud to serve with my Ranking Member, Ms. DelBene. She has 
been a great partner in all of these Subcommittee hearings that 
we just talked about, and really, it has been a pleasure to 
work in conjunction. While we may not agree on every issue, it 
is part of the Agriculture Committee's history that we are just 
not disagreeable.
    [The prepared statement of Mr. Davis follows:]

 Prepared Statement of Hon. Rodney Davis, a Representative in Congress 
                             from Illinois
    Good morning.
    Two weeks ago, the Agriculture Committee commenced a series of 
hearings focused on the farm economy. Each Subcommittee has been tasked 
with highlighting issues within their respective jurisdictions that 
impact the economic well-being of rural America.
    In the Biotechnology, Horticulture, and Research Subcommittee, we 
have spent considerable time discussing programs and policies that 
impact specialty crop producers.
    We have highlighted research, education, and extension programs 
that contribute both to the safety and security of our food supply, as 
well as benefit farmers by increasing efficiency, productivity and 
profitability.
    We have promoted development of local and niche markets for farm 
products, and considered the opportunities and challenges for direct 
marketing.
    We have drawn the relationship between agricultural security and 
our national security through an examination of our defenses against 
the introduction of foreign pests and diseases.
    We have also engaged the next generation of leaders participating 
in the nation's largest youth development program, 4-H, in an ongoing 
dialogue to enhance relationships between rural and urban communities. 
These youth leaders, 18 of our nation's best and brightest, most 
recently visited with the Subcommittee to provide their insights into 
how we might improve the outlook for agriculture through education and 
outreach.
    While much of the work we have done as a Subcommittee has brought 
positive attention to the role of government programs and policies 
which assist rural America, we have also spent some time investigating 
policies that negatively impact producers.
    In a hearing more than 2 months ago with EPA Administrator 
McCarthy, Members engaged in extensive questioning regarding actions 
her agency has taken which impose considerable costs with questionable, 
if any benefits.
    Following this hearing, the Committee submitted additional 
questions for the record. In fact, Committee Members, both Republican 
and Democratic submitted approximately 36 pages of questions to the 
Agency for which we have yet to receive a single response. I wish I 
could say the Agency's apparent lack of regard for American agriculture 
is an anomaly, but history tells us otherwise.
    I had an amendment in the 2014 Farm Bill, which would establish a 
permanent subcommittee of the EPA Science Advisory Board to ensure the 
voice of agriculture was represented in the agency's decision making 
process. Not surprisingly, more than 2 years later, the EPA leadership 
has yet to appoint even a single member to this Committee. The result 
of this disregard for the law is a continuing flood of decisions and 
actions contrary to the needs and desires of America's farmers and 
ranchers.
    Unfortunately, it is not just the policies of the EPA that add 
unreasonable production costs. The implementation of the Food Safety 
Modernization Act will pose enormous challenges for producers and 
processors with little evidence that some requirements will offer 
quantifiable food safety benefits. We have often spoken about the 
threat of the ill-conceived Vermont law governing agricultural 
biotechnology, yet we are also concerned about what many observers 
believe is unnecessary regulatory hurdles researchers must go through 
to bring new applications of biotechnology to the market. As anyone can 
plainly see, the list of overly burdensome regulations threatening the 
farm economy is apparently endless.
    Today, the Subcommittee will focus more broadly on many of the 
factors that contribute positively and negatively to the cost of 
production for our nation's farmers and ranchers. While the farm safety 
net helps somewhat mitigate the impact of chronically low prices, our 
nation's farmers continue to operate on very thin (and in some cases 
negative) margins. Going forward, their ability to contain costs will 
be key to their survival, particularly if low prices persist. We have 
invited a distinguished panel of leaders from industry and state 
government to provide their insights into the challenges facing our 
producers along with actions that can be taken to enhance the rural 
economic outlook. The record that is created today will be extremely 
beneficial in directing future oversight as well as development of the 
next farm bill. Thank you all for being here.
    I now yield to the distinguished Ranking Member, Rep. DelBene for 
any comments she wishes to make.

    The Chairman. Now, I am going to turn it over to my Ranking 
Member, Ms. DelBene, for her opening statement.

OPENING STATEMENT OF HON. SUZAN K. DelBENE, A REPRESENTATIVE IN 
                    CONGRESS FROM WASHINGTON

    Ms. DelBene. Thank you, Mr. Chairman, and it has been a 
pleasure to work with you as well. I want to thank all our 
witnesses for being here with us today, and I want to thank the 
Chairman for holding today's hearing on the farm economy.
    It is critical that we continue to identify the challenges 
that are facing farmers and ranchers today, especially as the 
Committee begins to consider the next farm bill.
    I am honored to represent a district very rich in 
agriculture. The farmers I meet are proud of what they do, and 
they should be.
    When I first came to Congress and in the time leading up to 
the 2014 Farm Bill, I often heard a familiar refrain from 
farmers in my district. They said they need two things: get a 
farm bill done and pass comprehensive immigration reform. 
Passing the 2014 Farm Bill itself was a huge accomplishment, 
but it was also, in my view, one of the best farm bills we have 
ever had for specialty crop growers, which make up a sizable 
percentage of the producers in my district. The investments 
made in programs like the Specialty Crop Research Initiative, 
Specialty Crop Block Grants, and the Organic Research and 
Extension Initiative were unprecedented and they have a huge 
impact in the real world. This is a prime example of how 
Congress should be investing in programs that give us a great 
return on our investment while saving money in the long run.
    Recently, Chairman Davis and I wrote a bipartisan letter in 
support of the National Institute of Food and Agriculture. 
Unfortunately, Congress hasn't appropriated funding at the 
levels authorized in the farm bill, and in the last 4 years the 
Agriculture and Food Research Initiative review process 
identified $3.85 billion in grants worthy of funding. However, 
due to budgetary constraints, the program awarded only \1/4\ of 
the projects that were deemed worthy. This research is a 
critical unmet need that vastly assists producers with pests, 
emerging diseases, and food safety; and ultimately lowers the 
cost of production, which brings me to the second thing that 
farmers I represent said they needed most: comprehensive 
immigration reform.
    Our immigration system is broken and badly in need of 
repair. Last Congress, I was one of the lead sponsors of a 
bipartisan comprehensive immigration reform bill similar to the 
one that passed in the Senate, and I believe this bill would 
have passed if it was just allowed a vote, and while the 
President's executive actions could provide relief to some, it 
does nothing to solve the problem of the unworkable H-2A 
program. For too long, Congress has failed to take meaningful 
action to address our broken immigration system, and as a 
result, we have a deeply flawed system that is not working for 
our farmers, for businesses, for immigrants, or for families.
    I see it all across our state and particularly in my 
district. Farmers can't get the seasonal agricultural workers 
they need to support one of our state's largest industries. 
Students face uncertain futures in the only country they have 
ever really known. Technology businesses still don't have the 
access they need to the global talent pool that could help 
create the next major innovation, and families are being torn 
apart.
    So despite these setbacks, I remain committed to passing 
comprehensive immigration reform, and I will keep working with 
my colleagues on the Agriculture and the House Judiciary 
Committees to get this done. Passing enforcement-only 
mechanisms like border security only or e-verify only would do 
nothing to solve the problem and may make things even worse.
    That being said, producers face a wide variety of 
challenges today, especially in the current agriculture 
economy. Today's panel of witnesses spans a variety of 
perspectives including Northwest horticulture from Washington 
State, so I look forward to hearing all of your testimony. 
Thank you again for being here today, and I yield back.
    The Chairman. I would like to welcome again our witnesses 
to the table to give their opening statement. I would remind 
Members that they will be recognized in order of seniority for 
Members who were here at the start of the hearing, and after 
that, Members will be recognized in order of their arrival for 
a 5 minute time period, and I would appreciate too that the 
oral statements, since we have so many witnesses, to remain 
within that time window too. You'll hear me tap if we start to 
go a little over that.
    Let's start down here at this end. The Honorable Charles 
Conner, President and CEO, National Council of Farmer 
Cooperatives here in Washington, D.C. Mr. Conner, please 
proceed with your testimony.

   STATEMENT OF HON. CHARLES F. CONNER, PRESIDENT AND CHIEF 
             EXECUTIVE OFFICER, NATIONAL COUNCIL OF
             FARMER COOPERATIVES, WASHINGTON, D.C.

    Mr. Conner. Chairman Davis, Ranking Member DelBene, and 
Members of the Subcommittee, thank you for holding today's 
hearing. I am honored to be here on behalf of America's nearly 
3,000 farmer-owned cooperatives and their nearly two million 
producer owners. I applaud the Subcommittee, and the Committee 
as a whole, for taking a deeper dive into the broad range of 
factors impacting the farm economy. This fact-finding will 
enhance, I believe, prospects for completing a new farm bill in 
the future.
    The focus on factors influencing the cost of production is 
especially timely. As we work our way through the bottom of a 
price cycle, producers are looking to improve their margins in 
any way possible. In today's ag economy, the difference between 
making small profits or big losses is controlling your costs 
down to every penny. Producers know that many of these costs 
are beyond their control. Some are driven by markets, others by 
Mother Nature.
    But some costs are also driven by public policy. These 
policies can act either as investments that help lower costs or 
as regulatory hammers that raise them. I would like to touch 
briefly on both.
    Investing in research and fostering innovation falls in the 
former category. The improved efficiencies producers have 
captured in the last 30 years are based on strong research. 
These advances have helped to increase productivity and reduce 
the cost of production. With the support of this Subcommittee, 
vital research initiatives have provided essential knowledge 
and innovation to combat pests, address food safety, comply 
with environmental regulations, and enhance nutritional value. 
NCFC strongly believes research is key to providing long-term 
solutions to agriculture's challenges.
    One important advance of the past few decades warrants 
special mention today: agricultural biotechnology. The United 
States has been a leader in enhancing sound public policy and a 
rational science-based regulatory structure to promote the 
development and use of biotech crops. We hope that our country 
will continue this leadership as new advanced plant-breeding 
techniques look to enter the marketplace. They hold enormous 
promise and are uniquely accessible to public and commercial 
breeders. They also can be used on almost all crops, including 
specialty crops.
    As these new innovations move forward, all of us in 
agriculture must also develop a thoughtful approach for bring 
these technologies to the marketplace and talking to consumers 
about them. Getting things right could mean cost savings across 
a broad swath of agriculture and better future food production. 
But a range of Federal regulatory actions could artificially 
raise costs as well. These regulations deal with the 
environment, immigration, labor, and food safety. They create 
an uncertainty that holds back investment and growth across 
agriculture. These also hit small family farms and small 
agribusinesses the hardest. My written testimony contains a 
long but by no means complete list of regulations impacting 
farmers and their co-ops. In the interest of time, I will not 
go into each one of them now but will be happy to take any 
questions specific to our recommendations.
    At the same time, agriculture is not automatically against 
regulation. There are many examples of regulatory agencies 
working together with stakeholders to develop targeted, 
sensible programs to address common goals. Such a process, 
however, oftentimes requires more resources than simply 
imposing top-down regulations, and it certainly depends upon 
public confidence in our regulatory agencies.
    Finally, it should also be noted that farmers and ranchers 
and cooperatives face regulation imposed upon them by others 
beyond government. We commonly refer to what is called 
regulation by retail. Many food companies and retailers are 
asking much more of our farmers and co-ops in terms of 
sustainability, animal welfare, and other issues.
    Agriculture has a great story to tell. USDA and the 
Subcommittee have played an important role in public education 
about agriculture, and we certainly hope, Mr. Chairman, this 
work continues.
    In conclusion, at a time when producers across the country 
are facing the lowest commodity prices in over a decade, we 
must find ways for producers to grow and to proper. Research 
and innovation are key to doing this, but we also must reduce 
any unnecessary regulations and uncertainty that will hold back 
investment and growth.
    Thank you for the opportunity to testify today, Mr. 
Chairman, and I look forward to your questions.
    [The prepared statement of Mr. Conner follows:]

   Prepared Statement of Hon. Charles F. Conner, President and Chief
Executive Officer, National Council of Farmer Cooperatives, Washington, 
                                  D.C.
    Chairman Davis, Ranking Member DelBene, and Members of the 
Subcommittee, thank you for holding today's hearing on the farm economy 
and factors impacting cost of production.
    I am Chuck Conner, President and Chief Executive Officer of the 
National Council of Farmer Cooperatives (NCFC). NCFC represents the 
interests of America's farmer cooperatives. There are nearly 3,000 
farmer cooperatives across the United States whose members include a 
majority of our nation's more than two million farmers. NCFC members 
also include 22 state and regional councils of cooperatives.
    Farmer-owned cooperatives are central to America's abundant, safe, 
and affordable food, feed, fiber, and fuel supply. Through their 
cooperatives, farmers are able to improve their income from the 
marketplace, manage risk, and strengthen their bargaining power, 
allowing individual producers to compete globally in a way that would 
be impossible to replicate as individual producers.
    By pooling the buying power of hundreds or thousands of individual 
producers, farmer cooperatives are able to supply their members--at a 
competitive price--with nearly every input necessary to run a 
successful farming operation, including access to a dependable source 
of credit. Furthermore, farmer cooperative members also are able to 
capitalize on new marketplace opportunities, including value-added 
processing to meet changing consumer demand.
    On behalf of my members, I thank this Subcommittee for ensuring 
public policy continues to protect and strengthen the ability of 
farmers and ranchers to join together in cooperative efforts in order 
to maintain and promote the economic well-being of farmers, ensure 
access to competitive markets, and help capitalize on market 
opportunities.
    I also applaud this Subcommittee and the Committee as a whole for 
taking a deeper dive into the factors influencing the farm economy. 
This early action and educational focus by the House Agriculture 
Committee will enhance prospects for completing new farm bill 
legislation when the time comes. Even though every farm bill takes its 
own unique path to final enactment, one fact of the process remains the 
same: it has to start somewhere and the sooner the educational process 
starts, the better.
    As this work begins, it is imperative that Federal policies 
provided by the farm bill promote an economically healthy and 
competitive U.S. agriculture sector. These programs serve a variety of 
purposes, including: meeting the food, fuel, and fiber needs of 
consumers worldwide; strengthening farm income; improving our balance 
of trade; promoting rural development; and creating needed jobs here at 
home.
    In examining the dynamics of the farm economy, we are reminded that 
numerous influences--some of which are out of our control--come into 
play. Extremely volatile weather and global markets result in equally 
volatile farm gate prices, yields, and costs of production. Today's 
margins for most agricultural commodities are tight, and farm income 
has retreated significantly from its highs just a few years ago. Our 
common, ultimate goal--and at the heart of the farm bill--is to 
preserve the productive capacity of our farms by maintaining a 
responsive and equitable safety net, combined with adequate funding, 
for all regions and commodities, as well as comprehensive risk 
management tools, such as a strong crop insurance program.
    On behalf of my members, I also appreciate this Subcommittee's 
support and investment to keep U.S. specialty crop production strong, 
including research to enhance competitiveness and further document 
health benefits, and in the prevention and treatment of plant pests and 
diseases that could harm domestic production and international trade.
    Today, I wish to highlight the positive role this Subcommittee can 
have on the farm economy in several areas, including a focus on 
research and fostering innovation, oversight on regulatory issues 
impacting the cost of production along the value chain, and a renewed 
commitment to market promotion and accessibility.
The Value of Research
    American agriculture has long been at the forefront of meeting the 
world's ever expanding needs for food, feed, fuel, and fiber. Many 
factors have contributed to the unparalleled success of American 
agriculture, but one of undeniable importance has been the expansion of 
food production enabled in large part by science-based advances in food 
and agriculture. Improved efficiencies begin with a foundation based on 
strong research.
    With the support of this Subcommittee, vital research initiatives 
have provided essential knowledge and innovation to combat pests and 
diseases, address food safety and security issues, comply with 
environmental regulations, and enhance the nutritional value of certain 
crops. According to the National Coalition for Food and Agriculture 
Research, of which I currently serve as chair, this tremendous pay-off 
of public investments in agricultural research and education over the 
past 50 years amounts to $3,400 of savings on the average American 
family's food bill. Additionally, the beneficial impact of the vital 
funding that effective agricultural research can deliver has been 
identified as a 30 to 1 return on investment for the American taxpayer.
    Thanks to the contributions of agricultural research, we have a 
more affordable, healthier, safer, and more sustainable food, feed, 
fuel, and fiber supply. NCFC strongly believes an important ingredient 
in providing longer-term solutions to American agriculture's challenges 
is increased support for food and agricultural research, and we look 
forward to working with Members of the Subcommittee to build greater 
opportunities for advancements through research in the years to come.
Specialty Crop Research Initiative
    Of specific interest to this Subcommittee is the Specialty Crop 
Research Initiative (SCRI), a program supported broadly within the 
sector. The SCRI program was established to meet the unique needs of 
the specialty crop industry by supplying grants to support research and 
extension. In particular, the SCRI Citrus Disease Research and 
Extension Program (CDRE), which was authorized by the 2014 Farm Bill, 
awards funds to conduct research, extension activities, and technical 
assistance to fight citrus diseases and pests, such as Huanglongbing 
(HLB), commonly referred to as citrus greening.
    This research is vitally important as citrus greening is 
responsible for devastating losses in the citrus industry, threatening 
its future viability. A solution is desperately needed as it has 
already destroyed millions of citrus acres across the U.S. Once a tree 
is infected, there is no cure; research must get out ahead of this 
disease before it is too late. This is just one of the many examples of 
the importance of agricultural research programs and its integral 
relationship to the success of the industry.
Fostering Innovation & Next Generation Technologies
    Inextricably tied to advancements made with research, agricultural 
innovation is important to all Americans because it enables plant and 
animal producers to increase productivity of healthful food using less 
land, while conserving soil and water and reducing on-farm energy 
consumption. These benefits are passed on to consumers in the form of 
an affordable and nutritious food supply, a healthy environment, and a 
strengthened rural economy.
    Growers across the country are using new equipment and information 
systems to improve efficiency and increase profits. Today, advanced 
technologies help ensure the most efficient use of fertilizers and 
chemicals, while modern tractors and combines use of state-of-the-art 
propulsion systems that more efficiently use diesel fuel. Agricultural 
biotechnology also is an important part of this mix.
    In the U.S., biotech crops are ubiquitous and, in fact, represent 
``conventional'' production agriculture as more than 90 percent of 
corn, cotton, canola, soybeans, and sugar beets grown contain at least 
one biotechnology-derived trait. Farmers are also choosing 
biotechnology to grow crops, such as alfalfa, papaya, apples, potatoes, 
and squash. The traits in all of these crops help farmers manage 
potentially devastating insects, weeds, diseases, and weather 
conditions.
    Biotech crops contribute substantially to the rural economy by 
enabling farmers to produce more food in a more time efficient way 
while using fewer inputs. Globally, farmers growing biotech crops saw 
net economic benefits at the farm level amounting to more than $20 
billion in 2013, the most recent year for which there is data, and more 
than $133 billion in the thirty years since biotech crops were first 
introduced. Of the total farm income benefit, 60 percent is due to 
yield gains.
    Gains in productivity associated with biotech crops also have been 
essential in bolstering American agricultural trade, which totaled more 
than $130 billion in 2015.
    Additionally, USDA's Economic Research Service (ERS) has published 
reports noting how the adoption of biotech crops by farm families is 
associated with higher off-farm household income. Two ERS studies, 
which I would like to submit for the record, highlight how biotech 
crops allow farmers to save time, which is then used to generate income 
from off-farm employment. One report highlights that a ten percent 
increase in the use of herbicide tolerant soybeans is associated with a 
16 percent increase in off-farm household income. These statistics 
illustrate how more efficient farming practices, including the use of 
biotechnology, generate greater economic activity in rural communities.
    Looking beyond what we think of as biotechnology today, advanced 
plant breeding techniques hold enormous promise for improving the 
productivity and environmental sustainability of food, feed, fiber, and 
biofuels. By applying newer methods, plant breeders can be more 
efficient and precise at making the same desired changes that can be 
made over a much longer period of time through earlier breeding 
methods. Because these new methods are efficient and economical, they 
are accessible to public and commercial breeders and can be used across 
all agriculturally important crops, including specialty crops.
    As adoption of these new technologies spreads, the U.S. has an 
opportunity to be a leader in the global discussion over their 
regulation, just as it has, in many ways over the past thirty years 
with respect to enabling the research, development, and widespread 
commercialization of beneficial crops developed using agricultural 
biotechnology.
    Given economic benefit related to the current set of biotech crops 
and the significant potential for the commercialization of crops 
derived from other innovative plant breeding techniques, it is 
essential that Congress consistently promotes policies that encourage 
innovation and ensure that Executive Branch actions--regulatory and 
otherwise--foster the growth of a strong 21st Century farming economy. 
We urge you to consistently monitor pre-market regulatory programs at 
USDA, EPA, and FDA to ensure that they are transparent, predictable, 
and science-based. This is particularly important as USDA reexamines 
its pre-market regulatory framework for biotechnology--a process that 
is ongoing and with which NCFC and a large group of stakeholders are 
actively engaged. We will want to keep in close contact with you to 
ensure new pre-market biotechnology regulations at USDA foster 
innovation and create an environment in which farmers of all stripes 
have access to the best seeds.
    NCFC also thanks the full Committee for its work to establish 
national biotech food labeling standards, shepherding a labeling 
uniformity bill through the House of Representatives--a bill that 
gained overwhelming bipartisan support. We appreciate your work and 
will be back to see you soon once the Senate passes their version of 
labeling uniformity. On a similar note related to biotech crop 
detractors causing problems at the city, county, and state levels of 
government (as they have done with labeling), we would like to note our 
concern about local government bans on biotech crop cultivation and 
restrictions on the sale of biotechnology-derived seeds. This issue is 
another one we are monitoring carefully and may need to revisit with 
you at a later date.
Regulatory Impacts on Cost of Production--Issues Beyond Farm Policy
    Beyond an investment in research and ensuring access to technology, 
we must also ensure that our public policy does not hurt the economic 
viability of farm and ranch families across the country. Often these 
issues are outside traditional farm policy and come from corners of the 
Federal Government that may not understand production agriculture. Yet 
a broad range of regulatory actions--those pending at Federal agencies 
or in the pipeline and coming soon to a farm near you--have the 
potential to increase the costs and reduce the margins of cooperatives 
and their farmer and rancher member-owners. Whether the regulations 
deal with the environment, immigration and labor, food safety, or 
financial reform, they can create an uncertainty that threatens to hold 
back investment and growth across the agricultural sector.
    Over 20 million jobs across the country are directly or indirectly 
dependent on agriculture, and account for nearly $1 trillion or 13 
percent of gross national product. If our agricultural sector can 
preserve its competitiveness in the global marketplace, we can grow 
this number and be a strong contributor to a growing economy.
    Congress must ensure that the marketplace, not the Federal 
Government, determines the cost of production for America's farmers and 
ranchers. If our farms, ranches, and cooperatives are weighed down with 
costs imposed by either regulatory actions or delays in the regulatory 
process, farm income will decrease and market share will be lost to our 
competitors.
    The U.S. Environmental Protection Agency (EPA) is often thought of 
first as the main culprit when it comes to regulatory actions impacting 
agriculture, and they have rightfully earned that dubious honor. From 
the expansion of the definitions of the `waters of the U.S.' rulemaking 
to outright circumventing the legal requirements under the 
Administrative Procedures Act (APA) when it comes to registration of 
crop protection products, the cumulative weight of their actions is 
cited by my members as a serious impediment to future investment in 
their operations and businesses.
    Specific to crop protection, Federal laws dictate that the U.S. 
Department of Agriculture (USDA) serve as an important advisor to EPA 
in the regulation of pesticides. Historically, USDA's expertise and 
advice have been evident in the actions EPA has taken to evaluate 
pesticides and their uses. USDA's perspective and knowledge of 
production agriculture is critical since we know that crop protection 
products can increase farm yields as much as 40 percent to even 70 
percent depending on the crop.
    It should concern this Subcommittee to hear the farm community 
expressing increasingly urgent concerns about the lack of seriousness 
with which EPA takes and incorporates USDA expertise, advice, and 
opinions, especially during formal interagency review. In particular, 
it is unclear to what extent USDA expertise was valued and included in 
recent actions, such as Endangered Species consultations, the revised 
Worker Protection Rule, and the recent benefits analysis for seed 
treatments on soybeans. If EPA fails to adequately calculate and/or 
consider the economic costs of these impacts--and beneficial uses--in 
its regulatory proposals, the consequences could be devastating.
    The U.S. has the world's most rigorous pesticide registration and 
review processes. When registering a pesticide, EPA reviews voluminous 
data to ensure that the product is protective of people, wildlife, 
pets, and the environment. Furthermore, under the law, all chemicals 
must be reevaluated every 15 years. Pesticides are regulated by 
assessing `risk' to determine whether and how a product can be used 
safely. In evaluating risk, `hazard' (whether something can cause harm) 
and `exposure' (whether you will be exposed to harm) are balanced 
against the benefit of using a product, such as protection of the 
public health from disease-carrying pests, protection of our nation's 
buildings and infrastructure, protection of the food supply, etc. This 
is something EPA should be confident in and proud to defend. As a 
matter of fact, EPA does a great job defending the merits of our risk-
based system when commenting on the EU's precaution-based regulatory 
scheme. However, recently when EPA regulatory decisions are challenged 
in the U.S., the Agency seems reluctant to defend, or even more 
troubling, is unable to properly provide evidence of its scientific 
decisions.
    Some recent EPA activities appear to focus only on the hazard 
aspect and ignore factors, such as exposure and benefits. EPA's 
proposed mitigation measures for pesticides that are acutely toxic to 
bees are one such example. Should this trend continue, EPA runs the 
risk of encouraging public mistrust surrounding the products that are 
used to protect public health, our infrastructure, and the food supply.
    I anticipate my fellow panelists will cover a variety of EPA-
related issues more fully, and I echo their concerns across the board. 
At this time, I wish to turn attention to several other regulatory 
issues which could have potential impacts on the farm economy.
Regulatory Scope for Innovative New Breeding Techniques
    Just last week, NCFC and several other members of the agriculture 
community had the opportunity to comment on the USDA Animal and Plant 
Health Inspection Service's (APHIS) notice of intent to prepare an 
environmental impact statement on the introduction of the products of 
biotechnology with possible revisions to its biotechnology regulations 
(7 CFR part 340). A prominent theme throughout our comments focused on 
the reducing the regulatory burdens of bringing the latest, most 
precise breeding techniques to market. Embracing modern agriculture is 
the right thing to do for our country, which has a rich history of 
nurturing science, research, and innovation in all areas of the 
economy. The United States is strong and prosperous because American 
leaders embrace the responsible use of technology and set forth public 
policies to move the nation forward in this regard.
    Breeding technologies have rapidly evolved over the last half 
century, enabling plant breeders to be more precise and efficient at 
making the same desired changes that can be made over a much longer 
period of time through earlier breeding methods. In light of the fact 
that no plant pests or noxious weeds have been identified in 30 years 
of regulatory oversight of transgenic plants, including every 
transgenic plant on the market today, the expansion of regulatory scope 
cannot be justified by APHIS from either a scientific or risk 
perspective. Nor is this proposal consistent with the Coordinated 
Framework principle that the focus of regulatory oversight should be on 
the characteristics of the product rather than the process by which it 
was produced.
    Plant varieties developed through the latest breeding methods 
should not be differentially regulated if they are similar or 
indistinguishable from varieties that could have been produced through 
earlier breeding methods. Therefore, the definition of `biotechnology 
product' should only include plants that contain genetic material that 
has been modified through in vitro recombinant deoxyribonucleic acid 
(DNA) techniques for which the modification could not otherwise be 
obtained through conventional breeding.
    Under this definition, new plant varieties should be subject to 
little or no pre-market regulatory review if there is no insertion and 
stable transmission to subsequent generations of genetic material that 
encodes an expressed protein. Additionally, based on over 30 years of 
regulatory experience, if there is insertion and stable transmission of 
genetic material, new plant varieties would also not be subject to a 
pre-market regulatory review if the inserted genetic material is from a 
sexually compatible plant. This regulatory scope would allow plant 
breeders to quickly and efficiently deliver targeted genetic 
improvements that would be possible, but with much greater difficulty, 
using earlier breeding methods. It would also facilitate the use of 
these newer breeding methods in a wide range of crops, including 
specialty crops, and by a wide range of both public and commercial 
plant breeders without modifying current proven and well-established 
standards of safety.
    It is imperative that the U.S. agriculture industry continues to 
lead the way with innovation, research, and product development, but 
also do a better job communicating with the consuming public on the 
benefits and value of such innovation. It is incumbent on all of us in 
agriculture--from the policymaker to the producer--to find 
opportunities that better tell the good story of American agriculture 
that we have worked so hard to achieve. Developing a thoughtful 
approach to how these new technologies are brought to the marketplace 
will be very important and could dramatically impact the cost of 
production in either direction.
Immigration Reform & Capacity Restraints on H-2A
    Farmers and ranchers continue to face a significant challenge in 
finding an adequate, dependable, and flexible workforce. While the 
ultimate solution to these problems is legislative, aspects of how 
Federal agencies run the H-2A seasonal temporary worker program pose 
hurdles to its usage.
    This program is the sole legal visa program available to production 
agriculture; however, it is limited to labor of a `temporary or 
seasonal nature.' Employment of H-2A workers has nearly tripled in the 
past 5 years; yet, it still only accounts for less than ten percent of 
all seasonal farm workers. This growth has occurred despite the 
program's extreme regulatory hurdles, government inefficiencies, and 
high costs.
    Capacity and infrastructure issues at the Departments of State 
(DOS), Homeland Security (DHS), and Labor (DOL) are leading to greater 
processing delays than ever before. This means bureaucratic red tape 
and interruptions in the program are seriously impacting the viability 
and profitability of farmers and ranchers as workers show up at the 
farm well after the date they were needed, and millions of dollars in 
agricultural production is lost in the interim.
    As part of the Agriculture Workforce Coalition (AWC) Steering 
Committee, NCFC has long advocated for immigration reform that meets 
both the short- and long-term workforce requirements of all of 
agriculture. Our primary objective remains legislation that fully 
addresses agriculture's workforce crisis. Congress must come together 
to find a solution. Yet understanding that in the best of scenarios 
such reforms may not come to fruition in the near term and it could be 
years before new programs are up and running, we have sought any and 
all relief possible in order to survive in the meantime.
    We believe there are significant policy measures that the DOS, DHS, 
and DOL could, and should, put into place that do not require 
legislation or even a regulatory change. There are improvements to the 
program that can be made within the agencies' existing authorities that 
will help curtail processing delays and allow for the flexibility 
required to ensure that farmers and ranchers receive the workers they 
so critically need within an appropriate timeframe. Doing so could 
significantly improve the situation for growers and ranchers while the 
agencies continue to fulfill their duties to respect the rights of 
domestic workers and provide homeland security.
    For example, DOL's Office of Foreign Labor Certification (OFLC) has 
a policy that is not supported by the regulations which requires all 
workers requested in any single petition be brought onto the job on the 
start date of the petition. Under the current delays experienced by 
growers at both the OFLC and U.S. Citizenship and Immigration Services 
(USCIS), there is no opportunity to receive these workers by the date 
they are needed. Growers must be given the opportunity to provide a 
start date that is earlier than the actual anticipated start date as a 
`grace period' in an effort to better manage the delays that are being 
forced upon them.
    Additionally, the Validation Instrument for Business Enterprises 
(VIBE) program is inappropriate for agriculture. Consequently, it 
should not be utilized in verifying employers in the H-2A program.
    A number of employers have been receiving Notices of Deficiencies 
(issued by DOL) or Requests for Further Evidence (issued by USCIS) 
related to proving that agriculture is seasonal in nature. These 
notices create an unnecessary and untimely delay in the process. It 
should be recognized that much of production agriculture is inevitably 
seasonal and analysts in both agencies should be instructed not to 
delay the process for that reason, especially during the current 
crisis.
    In view of this crisis, we urge that the three agencies err on the 
side of expediency in processing agricultural employers' H-2A 
applications where possible. The livelihoods of farmers and ranchers 
depend upon timely application processing and visa issuance in advance 
of farmers' dates of need.
    While American agriculture desperately waits for immigration 
reform, NCFC and the AWC will make every effort necessary to try to 
ease the regulatory burdens of the H-2A program so that farmers and 
ranchers have the chance to survive until the broader issue is 
addressed through a legislative fix to our broken immigration system.
Overtime Rule
    Another example of a well-intentioned but detrimental regulation is 
the Overtime Exemption rule. On June 30, 2015, the DOL proposed changes 
to the exemptions for executive, administrative, and professional 
employees under the Fair Labor Standard Act's overtime pay 
requirements. The Department is proposing to double the salary 
threshold from the 20th percentile to the 40th percentile. This vast 
increase from $23,660 to $50,440 will substantially increase labor 
costs, significantly driving up the overall cost of doing business.
    NCFC believes that the Department should maintain the salary 
threshold at the 20th percentile. Maintaining this threshold using 
updated figures would achieve the desired outcome of increasing the 
effectiveness of the salary test, as well as bringing the salary level 
above the poverty line.
    However, if an increase is made, it should not be as severe as 
escalating the threshold to the 40th percentile. A jump to the 40th 
percentile is far too steep and would have grave consequences for 
businesses. In particular, small businesses, like the farmer-owned 
cooperatives NCFC proudly represents, would have a very hard time 
adjusting to such an unnecessarily high surge in the salary threshold 
percentage.
    If the proposed rule were implemented without change, NCFC fears 
numerous unintended consequences would ensue. The reclassification of 
employees could lead to the loss of benefits, flexibility, and 
incentive compensation options. Reclassification for certain positions 
will require employers to track overtime for these jobs, leading 
employers to limit flexible work options which greatly benefit 
employees and their families. Additionally, many employees highly value 
the status that accompanies a salaried, exempt position. Employees 
would be reluctant to give up the professional status of these 
positions. Furthermore, employees may experience fewer opportunities 
for upward mobility as businesses struggle to respond to the severe 
increase in labor costs.
    NCFC has encouraged the Department to refrain from drastically 
increasing the salary threshold and we seek your help in promoting 
policies which support allowing the market to dictate an employee's 
compensation based on the individual's role, skill-set, and experience.
Occupational Safety and Health Administration--Process Safety 
        Management
    Farmers rely on their local cooperatives to supply the inputs 
needed to grow crops safely and efficiently. One of the many inputs 
farmers rely on to return nutrients to the soil is anhydrous ammonia, a 
safe and cost-effective fertilizer with low environmental impact. As is 
the case with most commercially sold chemicals, these facilities 
already comply with extensive storage, handling, and security 
regulations for anhydrous ammonia under the direction of the EPA as 
well as the DHS and DOL's Occupational Safety and Health Administration 
(OSHA), helping to ensure a safe and secure work environment for 
employees and the local community.
    However, on July 22, 2015, OSHA issued a revised policy for the 
retail facility exclusion under the Process Safety Management (PSM) 
Standard (29 CFR 1910.119). Since 1992, OSHA's policy has been that an 
establishment was exempt from PSM coverage if it ``derived more than 50 
percent of its income from direct sales of highly hazardous chemicals 
to the end-user.'' The new policy states: ``Only facilities, or the 
portions of facilities, engaged in retail trade as defined by the 
current and any future updates to sectors 44 and 45 of the NAICS Manual 
may be afforded the retail exemption at 29 CFR 1910.119(a)(2)(i).'' 
Therefore, unless a facility is in NAICS 44 or 45 and holds threshold 
quantities of highly hazardous chemicals (NH3--10,000 lbs, aqua 
ammonia--15,000 lbs), they are now subject to PSM.
    These unexpected changes will place a significant time and cost 
burden on agricultural retailers--approximately 3,800 will be subject 
to new PSM standards. OSHA estimated the cost of compliance with PSM 
standards at $2,100 per facility. However, industry estimates costs 
will be approximately $30,000 for initial compliance, $12,000 for 
annual compliance, $18,000 for 3 year audit, making OSHA's initial 
estimate way off by several factors. These estimates do not include the 
cost of potential upgrades which could easily exceed $70,000 per 
facility if the facility needs to replace one anhydrous ammonia storage 
tank.
    Until OSHA issued its Process Safety Management (PSM) retail 
exemption enforcement memo, farm supply retailers were always exempt 
from the PSM regulations. The PSM standards are intended for chemical 
manufacturers, not agricultural retailers and other retail businesses 
that sell directly to end-users. OSHA's memo is contrary to over 2 
decades of their own enforcement. As a result, many farm supply 
retailers, including our member cooperatives, are either consolidating 
facilities or exiting the anhydrous ammonia business altogether. These 
outcomes could reduce the supply of fertilizer and its delivery 
logistics, drive up the price of food, and ultimately hurt American 
agriculture's ability to produce an abundant food supply.
    Congress sent OSHA a clear message to withdraw the memo in the 
Consolidated Appropriations Act of 2016 with the inclusion of an 
explanatory statement that prohibited OSHA from using funds to 
implement the retail exemption memo unless it goes through the formal 
rulemaking process and the Census Bureau creates a new North American 
Industry Classification System (NAICS) code under either Sector 44 or 
45 for farm supply retailers. In response to the Congressional 
directive, OSHA indicated that they are unwilling to follow the will of 
Congress and withdraw the memo. Therefore, we have requested that the 
Appropriations Subcommittee on Labor, Health, and Human Services, 
Education, and Related Agencies include the following directives in the 
statutory text (not just the explanatory statement or report language) 
of their appropriations bill:

  (1)  OSHA should withdraw the July 22 memo and submit the proposed 
            rule change for full notice and comment rulemaking to allow 
            for adequate stakeholder input.

  (2)  OSHA should submit the rule change for an independent third-
            party cost analysis.

  (3)  Congress should include similar language in the actual text of 
            the FY 2017 Labor HHS Appropriations bill.
Food Safety Modernization Act Implementation
    NCFC is very supportive of science- and risk-based enhancements to 
our nation's food safety system and have been actively engaged as the 
Food and Drug Administration (FDA) implements the Food Safety 
Modernization Act (FSMA). Our association and members appreciate FDA's 
outreach to the agricultural community as it elicited feedback, 
evaluated public comments, and updated regulations to make them more 
appropriate for diverse operations.
    Many of our farmer cooperatives were able to modify their 
operations as the regulatory processes played out and get out head of 
the changes the regulations would mandate. However, given the sheer 
size of FSMA and the multitude of regulations needed to implement the 
law, producers and farmer-owned cooperatives have had to, and will 
continue to make, significant adjustments to the way they do business; 
these changes are not without significant costs.
    While many improvements were made through FSMA, there are still 
parts of the regulation that remain overly burdensome, duplicative, and 
many of which do not actually result in a safer food supply. We 
continue to encourage FDA to consider the additional costs, staff time, 
and record-keeping as operations adapt the way they do business and 
retain records. FDA must ensure that any increase in regulation is 
justified by measurable food safety benefits and that there is 
flexibility to ensure that entities can continue to stay profitable 
while addressing actual risks that are present.
    Specific to the Feed Rule, there have been ongoing discussions 
regarding the use of current Good Manufacturing Practices (CGMPs) in 
lieu of preventive controls to mitigate animal feed manufacturing risks 
and hazards wherever applicable. Use of CGMPs to mitigate these risks 
and hazards would not mean a CGMP is a preventive control. NCFC 
strongly supports this approach and urges FDA to issue a formal written 
concurrence to ensure that stakeholders and FDA staff have a clear 
understanding of this important issue.
    For some of our cooperatives, the Preventive Controls Rule has 
necessitated a rewrite of their Food Safety Plans and a change in focus 
from critical control points to preventive controls for all risks. 
However, a majority do not believe that this has necessarily changed 
any assessment or analysis of the risks inherent in their business, but 
rather just the written plans for addressing those risks, which clearly 
required significant staff time and resources.
    The FDA's enforcement of the Preventative Controls Rule and others 
will be the telling factor. We hope FDA will approach industry with a 
sense of a cooperative effort to ensure food safety for the public, a 
common goal shared with FDA by NCFC and our cooperatives. Additionally, 
precipitous use of the administrative detention or mandatory recall 
could cause market disruption, economic harm, and consumer confusion. 
We encourage FDA to act thoughtfully and in consultation with the 
operations affected in these situations.
    Last, we have remaining trepidations concerning the Sanitary 
Transportation Rule. We are apprehensive that the rule may be 
detrimental to the use of byproducts for cattle feed. Currently, some 
of our members are working with third party dairies or ranchers and 
have a workable program for cattle feed or soil amendments. Some of the 
restrictions in the Sanitary Transportation Rule may cause our members 
to cease using these outlets and turn to landfills instead. Many 
industries have developed a sustainable and cost-effective way to 
manage byproducts of processing facilities and NCFC does not wish to 
see the new requirements hinder a process that has ample benefits and 
has been working successfully for many years.
    The regulatory hurdles faced by producers and their cooperatives 
outlined above are certainly not all inclusive; there are dozens of 
more minor issues whose costs, on their own, may not seem to be 
unreasonable but, when taken as a whole, impose real increases in the 
cost of production. It should be noted, however, that agriculture is 
not reflexively against any regulation. There are many examples of 
sensible regulations that address real needs, are science-based, and 
whose benefits outweigh costs; further, there are many examples of 
regulatory agencies working collaboratively with stakeholders to 
develop targeted, sensible programs to address common goals. Such a 
process, however, often requires more resources than simply imposing 
top-down regulatory requirements and depends on public confidence in 
regulatory agencies.
    Finally, it should also be noted that farmers, ranchers, and 
cooperatives face regulations beyond those imposed by government. 
Increasingly, we are seeing what we call ``regulation by retail.'' Many 
food companies and retailers, responding to what they see as consumer 
demands, are asking much more of our farmers and cooperatives in terms 
of sustainability, animal welfare, and other issues. Agriculture has 
great stories to tell in many of these areas; however, much work 
remains in helping to bridge the gap between farmers and manufacturers 
or retailers. While much of this work will be done by the private-
sector, USDA has been playing an important role in public education 
about agriculture and we hope to see this work continue in the future.
Market Promotion & Accessibility
    Trade is vital to the continued prosperity of cooperatives and 
their farmer and rancher members. With over 95 percent of the world's 
population living outside of the United States, our agricultural 
producers need foreign markets to grow demand and programs that serve 
as catalysts to increased market access.
    I encourage this Subcommittee to continue its strong support of 
export programs that are vital to maintaining and expanding U.S. 
agricultural exports, counter subsidized foreign competition, meet 
humanitarian needs, protect American jobs, and strengthen farm income.
Market Access Program
    The Market Access Program is of particular importance, both because 
it is a vital tool used by producers and their cooperatives to market 
products overseas, and because it represents such a good investment of 
taxpayer dollars with a 35 to 1 return on every dollar spent under the 
program.
    Many specialty crop producers view MAP, above all other programs, 
as their `farm safety net' program. The ability of cooperatives to use 
MAP helps give individual farmers the ability to market their products 
overseas, which they otherwise would not be able to do on their own.
Accessibility
    Additionally, NCFC strongly supports provisions that improve 
accessibility and bring neutrality of form to the Fruit & Vegetable 
Snack Program. Allowing dried, canned, frozen, and fresh fruits and 
vegetables to be offered through the Snack Program will give schools 
more choice in what they offer, and as a result more children to 
benefit from the program. Doing so ultimately also is an efficient use 
of taxpayer dollars as often dried, canned, and frozen fruits and 
vegetables are more the more affordable option. All of these efforts 
work to increase the consumption of healthy, nutrient-rich fruits, 
vegetables, and nuts. NCFC has long advocated that eligibility in 
nutrition programs should be based on the nutritional and health 
properties of food, which are not distinguishable between fresh, 
frozen, canned, or dried forms of fruits, vegetables, and nuts.
    The American Institute for Cancer Research supports the consumption 
of all forms stating, ``Canned and frozen fruits not only offer great 
nutrition, but they are inexpensive and convenient ways to make sure we 
maximize the variety and number of fruit servings needed to protect our 
health.'' Not only is expanding the program in line with sound science 
and the Dietary Guidelines, but it also empowers local school districts 
to decide which forms best fit the needs of their students from a 
nutritional and economic perspective.
Specialty Crop Block Grants
    Since 2006, the Specialty Crop Block Grant Program (SCBGP) has 
served to improve the competitiveness of specialty crops. While 
specialty crops have access to research and Federal marketing programs, 
the industry has not had the benefit of a farm bill direct aid program. 
To make up for the lack of such a program, the SCBGP has offered 
additional Federal assistance to specialty crops. The program delivers 
grants to State Departments of Agriculture for projects dealing with 
many of the issues touched on in my testimony--education, research, 
food safety, pest and plant health, and marketing and promotion--as 
they relate to the specialty crop industry. In Fiscal Year 2015, 755 
grants were awarded to fund integral specialty crop projects. One 
example of the important projects funded by the program is a project 
that included a partnership with the University of Arizona to improve 
food safety by increasing the speed, accuracy, and affordability at 
which E. coli can be detected. As food safety continues to be a focus 
of regulators and consumers, this research plays an imperative role in 
protecting consumers and increasing consumer confidence.
    In conclusion, I realize that this testimony covers a lot of 
ground, some of which may be outside the jurisdiction of the 
Subcommittee, but these issues are no less important and impactful to 
the cost of production and overall farm economy, and are worthy of your 
oversight. Especially at a time when producers across the country are 
facing tight margins, we must identify ways for our agriculture sector 
to prosper, and reduce the burden and uncertainty that threatens to 
hold back investment and growth across the agricultural sector.
    Thank you again for the opportunity to testify today and I look 
forward to your questions.

    The Chairman. Thank you, Mr. Conner, and you were a perfect 
5 minutes. That was great.
    We will see if you can do the same, Mr. Secretary. The next 
witness, the Honorable Jeff Witte, Secretary/Director, New 
Mexico Department of Agriculture in Las Cruces, New Mexico, on 
behalf of the National Association of State Departments of 
Agriculture.

STATEMENT OF HON. JEFF M. WITTE, SECRETARY/DIRECTOR, NEW MEXICO 
DEPARTMENT OF AGRICULTURE; MEMBER, BOARD OF DIRECTORS, NATIONAL 
ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE, LAS CRUCES, NM

    Mr. Witte. Thank you, Mr. Chairman. That is a hard act to 
follow.
    Chairman Davis, Ranking Member DelBene, and Members of the 
Subcommittee, good morning, and thank you for the opportunity 
to testify today on the farm economy and factors impacting the 
costs of production.
    I am going to provide an abbreviated version of my full 
testimony, which will be submitted and has been submitted for 
the record.
    As the Chairman said, my name is Jeff Witte and I serve as 
New Mexico's Secretary of Agriculture and a Member of the Board 
of Directors of the National Association of State Departments 
of Agriculture. I also had the opportunity to serve on the EPA 
Local Government Advisory Committee. My department is 
responsible for a wide range of regulatory programs including 
pesticide use under the Federal Insecticide, Fungicide, and 
Rodenticide Act. In my various roles, I protect consumers, 
promote agriculture, and oversee producers through a host of 
regulatory programs. I sit before you today to discuss the 
successes, challenges and solutions around several Federal 
regulatory actions impacting our rural economies.
    One key success to highlight is the State Managed 
Pollinator Protection Plan, or the MP3 program. These plans 
facilitate collaborative relationships between beekeepers and 
growers. They are a proven success in many states, and we 
appreciate EPA's support to date in using MP3s as a non-
regulatory risk mitigation vehicle. We see this model as a 
possible tool in other areas including biotech coexistence.
    However, there are a number of challenges impacting 
agriculture producers and state agencies across the country. I 
want to highlight two provisions from EPA's final Worker 
Protection Standard Rule from last fall that illustrates some 
regulatory burdens on agriculture that could have been avoided: 
the Application Exclusion Zone, and the designated 
representative provision. The AEZ creates a 100 buffer, 
prohibiting appropriate pest mitigation facilities around the 
application, within 100 of the application equipment. Even 
though EPA is working on interpretive guidance, stating that 
the AEZ goes beyond the Agency's intent, the guidance does not 
carry the authority of a codified Federal regulation and is 
subject to interpretation. And EPA's designated representative 
provision requires providing 2 years of pesticide application 
records to anyone who claims to represent a worker who has been 
on an operation over the past 2 years. We feel these 
initiatives were implemented in violation of the Agency's 
obligations under FIFRA, the Administrative Procedures Act, and 
various Executive Orders. Neither provision provides any 
enhanced regulatory benefits but both place additional economic 
burdens on producers. We have expressed our strong concern that 
EPA did not included the designated representative provision in 
the final rule it provided to this Committee as required under 
FIFRA, and we appreciate Chairman Conaway and Ranking Member 
Peterson for their engagement on this matter.
    Another challenge is EPA's proposed Certification of 
Pesticide Applicators Rule, which will significantly impact 
states by requiring significant overhauls to the state 
programs. We feel EPA greatly understated the impacts to the 
states and the regulated community, and this will be one 
unnecessary burden on the states and our producers. 
Furthermore, states conduct robust investigations of alleged 
pesticide exposure incidents and have provided EPA with volumes 
of data showing overwhelming compliance by the regulated 
community. It is disheartening to see that EPA does not 
incorporate that provision into the regulatory decisions.
    Another regulatory challenge that producers face involves 
the implementation of the Food Safety Modernization Act, which 
dramatically changes the approach to food safety and will 
require a long-term commitment to continuing education from all 
of us. The full cost to farmers to implement FSMA is still 
unknown, but depending upon the size, estimates have reached up 
to $100,000 a year. State Departments of Agriculture are 
working with the FDA to bring expertise to the new framework, 
but we estimate the need of at least $100 million annually to 
state programs to implement this. Further, NASDA is working 
with the FDA to find a balance on water policy and its Produce 
Safety Rule.
    States have long been partners with the Federal agencies to 
serve as co-regulators for many of the regulations imposed by 
the Federal agencies. Regulatory initiatives often lack 
consultation with state regulatory agency partners and are 
implemented with a lack of compliance with controlling 
statutes. This causes regulatory confusion not only to the 
intended recipient of the regulation but to the partner who has 
on-the-ground responsibility. Federal agencies must do better 
to consult in a robust and meaningful way with state regulatory 
partners. Further, our Federal partners must comply with the 
Administrative Procedures Act and other controlling statutes to 
develop scientifically sound and consistent regulations that 
allow agricultural producers to continue to do their jobs.
    I appreciate the opportunity to testify before you today 
and welcome any questions.
    [The prepared statement of Mr. Witte follows:]

   Prepared Statement of Hon. Jeff M. Witte, Secretary/Director, New 
 Mexico Department of Agriculture; Member, Board of Directors, National
    Association of State Departments of Agriculture, Las Cruces, NM
Introduction
    Chairman Davis, Ranking Member DelBene, and distinguished Members 
of the Subcommittee on Biotechnology, Horticulture, and Research: good 
morning and thank you for the invitation to testify on the important 
subject of the farm economy and factors impacting the cost of 
production. I appreciate the opportunity to share a state agency 
perspective on this important topic.
    My name is Jeff Witte, and I proudly serve as New Mexico's 
Secretary of Agriculture and as a Member of the Board of Directors for 
the National Association of State Departments of Agriculture (NASDA). 
NASDA represents the commissioners, secretaries, and directors of the 
State Departments of Agriculture in all fifty states and four 
territories. State Departments of Agriculture are responsible for a 
wide range of programs including food safety, combating the 
introduction and spread of plant and animal diseases, and fostering the 
economic vitality of our rural communities. Environmental protection 
and conservation are also among our chief responsibilities.
    In forty-three states and Puerto Rico, the state department of 
agriculture is the lead state agency responsible for the regulation of 
pesticide use under the Federal Insecticide, Fungicide, and Rodenticide 
Act (FIFRA).\1\
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    \1\ 7 U.S.C.  136, et. seq.
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    In New Mexico, my department is responsible for a wide range of 
regulatory and licensing programs including: apiary registration; 
commercial feed registration; dairy permitting; egg dealer licenses & 
registration; fertilizer & soil conditioner registration; nursery 
licenses; pesticides; weighmaster licenses; and weights & measures 
licensing & registration.
    I am intimately familiar with the regulatory process and the impact 
and challenges regulations have on the producers in my state. For those 
who may not be overly familiar with New Mexico, I invite you all to 
visit and experience the rich diversity of our specialty crop 
industries, which include: chiles (our signature crop); pecans; onions; 
greenhouse & nursery production; an emerging aquaponics industry; and 
countless other innovative and growing agricultural sectors.
    I also serve on EPA's Local Government Advisory Committee (LGAC), 
which is a formal advisory committee, chartered under the Federal 
Advisory Committee Act \2\ and has been in existence since 1993. The 
Committee is composed primarily of elected and appointed local 
officials, along with several state representatives, environmental 
interest groups, and labor interests from across the country. The LGAC 
provides advice and recommendations that assist the EPA in developing a 
stronger partnership with local governments through building state and 
local capacity to deliver environmental services and programs.
---------------------------------------------------------------------------
    \2\ 5 U.S.C. Appendix 2 (1972).
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    In my various roles, I protect consumers, promote agriculture, and 
oversee producers through a host of regulatory programs.
Successes, Challenges & Solutions
    I sit before you today to discuss some of the Federal partnerships 
and initiatives that are working well, highlight a few areas where the 
regulatory process--or lack thereof--has resulted in significant 
negative economic impacts to our producers. And finally, I will offer 
some solutions to ensure our growers, ranchers, and other agricultural 
stakeholders are able to continue to produce our nation's food, fiber, 
and fuel in a productive and collaborative manner while ensuring we 
have the safest food supply in the world.
Successes
    One on-going success story that epitomizes the strength and value 
of the U.S. agricultural community is known as the State Managed 
Pollinator Protection Plan, commonly referred to as an ``MP3.''
    The State Departments of Agriculture, individually and 
collectively, have been actively engaged in identifying the various 
challenges surrounding bee health, and more importantly, developing 
partnerships on the state level to bring forward solutions so 
beekeepers, growers, applicators, and other agricultural stakeholders 
are able to continue to produce our nation's food, fiber, and fuel in a 
collaborative and productive manner.
    There are numerous and complex factors associated with bee health, 
including: parasites and diseases, lack of genetic diversity, need for 
improved forage and nutrition, need for increased collaboration and 
information sharing, and a need for additional research on the 
potential impacts certain pesticides may have on honey bee health. The 
multitude of these stressors do not lend themselves to a single, 
uniform solution that will successfully address all of these variables 
across the diverse and robust agricultural community in all fifty 
states and four territories. However, the MP3 model utilizing the State 
Departments of Agriculture as the vehicle to unify, discuss, and 
develop best management plans has resulted in improved pollinator 
health and a more productive and synergetic relationship between 
beekeepers, growers, applicators, and other agricultural stakeholders. 
In fact, this model is already a proven formula in a number of states 
(California,\3\ Colorado,\4\ Florida,\5\ Mississippi,\6\ and North 
Dakota \7\).
---------------------------------------------------------------------------
    \3\ California Department of Food and Agriculture. 2014. Bee and 
Beehive Information.
http://www.cdfa.ca.gov/plant/pollinators/index.html.
    \4\ Colorado Environmental Pesticide Education Program. Pollinator 
Protection 2013. http://www.cepep.colostate.edu/
Pollinator%20Protection/index.html.
    \5\ Florida Department of Agriculture and Consumer Services. 2014. 
Florida Bee Protection. http://www.freshfromflorida.com/Divisions-
Offices/Agricultural-Environmental-Services/Consumer-Resources/Florida-
Bee-Protection.
    \6\ Mississippi Honeybee Stewardship Program. 2014, http://
www.msfb.org/public_policy/Resource%20pdfs/Bee%20Brochure.pdf.
    \7\ North Dakota Department of Agriculture. 2014. North Dakota 
Pollinator Plant. A North Dakota Department of Agriculture Publication. 
http://www.nd.gov/ndda/files/resource/
NorthDakotaPollinatorPlan2014.pdf.
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    MP3s are built on robust communication efforts, Best Management 
Plans (BMP), and Integrated Pest Management (IPM) programs specifically 
crafted to serve and support local agricultural practices and to ensure 
informed and workable solutions are developed and implemented through 
public-private partnerships at the state level to achieve sound policy 
initiatives. We appreciate the support and partnership we have received 
from our partners at EPA, to date, in identifying MP3s as a successful, 
non-regulatory vehicle to achieve risk mitigation and enhance 
collaboration across the agricultural stakeholder community, and we 
note the White House's National Strategy to Promote the Health of Honey 
Bees and Other Pollinators \8\ recognizes the MP3 as a model for 
success.
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    \8\ White House. (2015). National Strategy to Promote the Health of 
Honey Bees and Other Pollinators. Retrieved from: https://
www.whitehouse.gov/sites/default/files/microsites/ostp/
Pollinator%20Health%20Strategy%202015.pdf.
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    At the same time, we do have significant concerns with a current 
policy proposal EPA published for public comment that is currently 
under review. In this policy proposal, EPA identified 76 active 
ingredients that will impact over 3,500 crop protection tools as 
potentially ``acutely toxic to honeybees'' and subject these tools and 
uses to enhanced label restrictions. We are concerned with both the 
process and the substance of this proposal, neither of which are FIFRA 
compliant or based on a sound, science-based risk assessment approach. 
So we ask this Subcommittee to help ensure EPA's regulatory proposals 
are compliant with their obligations under FIFRA and consistent with 
their role as regulatory partners with the State Departments of 
Agriculture. We feel it is equally as important to allow the MP3s to 
continue to succeed before proceeding with any further regulatory 
action.
    We see great value and applicability with the MP3 model as a tool 
to drive solutions for other challenge areas within the farm gate, and 
we are encouraged with USDA's Federal ``Advisory Committee on 
Biotechnology & 21st Century Agriculture'' (AC21) interest in 
evaluating the MP3 model as a possible vehicle to address some of the 
challenges around coexistence issues.
    From the state perspective, we see the MP3 model as a means to 
cultivate public-private partnerships, and facilitate informed, 
science-based solutions that will address the various challenges around 
pollinator health, coexistence issues, and other complex matters. We 
stand ready to continue to work with EPA, USDA, and all of our Federal 
partners in applying a model of collaboration and communication to 
every challenge we face.
    Continuing the theme of ``Success'' and as we begin to look towards 
the next farm bill, there are two programs I want bring to your 
attention today that have seen great success and effectiveness in 
carrying out their respective missions. The first is known as the 
``Section 10007'' Program and the other is the Specialty Crop Block 
Grants.
    First, I want to commend this Subcommittee, the full Committee, 
APHIS and the grower groups involved with the ``Section 10007'' program 
under the 2014 Farm Bill. As you all well know, this program provides 
funding for Federal, state, Tribal, and nongovernmental efforts to 
protect U.S. plant health across the country. This program brings a 
broad range of stakeholders together to proactively identify and 
achieve plant health protection goals through the Plant Pest and 
Disease Management & Disaster Prevention Program and the National Clean 
Plant Network. This model facilitates cooperation and collaboration 
between Federal, state, and impacted partners, and we feel this model 
has great promise and applicability to address some of the animal 
health and disease challenges on the livestock side.
    Second, I want to note the significant value of USDA's Specialty 
Crop Block Grant program (SCBGP), which is another critical area of 
collaboration between the State Departments of Agriculture, the 
specialty crop industry, and USDA. Since 2009, the State Departments of 
Agriculture have distributed nearly $393 million dollars in grants to 
5,400 project partners that have enhanced the competitiveness of 
specialty crops in the United States. These projects are not just 
increasing consumer access to safe and healthy food but are expanding 
economic opportunities across rural America.
    While we highlight this program as a success and are pleased with 
both the expanded funding and the establishment of the Specialty Crop 
Multi-State Program (SCMP) in the 2014 Farm Bill, we have growing 
concerns that the flexibility the SCBG program was built upon is 
eroding due to increased and unnecessary bureaucratic processes. This 
is especially evident in the establishment of certain performance 
measures for the program. While we all want to ensure the wise use of 
tax dollars, we are concerned these bureaucratic requirements--
especially new sales reporting requirements for marketing projects--are 
simply not feasible for many of the kinds of projects that have made 
this program so successful, and we ask this Subcommittee to take these 
concerns into consideration as we work towards the next farm bill.
Challenges
    Unfortunately, there are a number of challenges impacting, 
complicating, and frustrating agricultural production across the county 
and the state agencies tasked with conducting on the ground compliance 
and enforcement activities. Those challenges include, but are not 
limited to: EPA's Agricultural Worker Protection Standards (WPS); EPA's 
proposed Certification of Pesticide Applicator Rule; EPA's Waters of 
the U.S. rule (WOTUS); EPA's National Pollutant Discharge Elimination 
System (NPDES) duplicative regulatory framework; EPA's proposal to 
Mitigate Exposure to Bees from Acutely Toxic Pesticide Products; 
implementation of the Food Safety Modernization Act (FSMA); the 
Department of Labor's H2-A program; and numerous other regulatory 
initiatives or proposals currently pending in the Federal Register.
    I recognize WOTUS and the NPDES issues are not necessarily the 
focus of today's hearing, but I would be remiss not to mention the 
potential devastating impact these regulatory initiatives hold for 
agriculture across the country, and I refer this Subcommittee to my 
testimony last March in front of the House Agriculture Subcommittee on 
Conservation and Forestry for more information on those issues.
Worker Protection Standards
    Last fall, EPA promulgated its final Worker Protection Standard 
rule that included numerous regulatory compliance and record keeping 
burdens with no definable regulatory benefits. We were especially 
disappointed with EPA's lack of compliance with its own obligations and 
requirements under: FIFRA; the Administrative Procedures Act (APA); \9\ 
the Unfunded Mandates Reform Act (UMRA); \10\ the Regulatory 
Flexibility Act (RFA); \11\ and Executive Orders 13132 \12\ and 
13563.\13\
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    \9\ 5 U.S.C.  500, et. seq.
    \10\ 2 U.S.C.  1501.
    \11\ 5 U.S.C.  601, et. seq.
    \12\ Executive Order No. 13132, Federalism, 64 FR 43255 (1999).
    \13\ Executive Order No. 13563, Improving Regulation and Regulatory 
Review, 76 FR 3821 (2011).
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    I want to elaborate briefly on two specific provisions included the 
final WPS rule that illustrate the negative consequences of a lack of 
adherence to the rulemaking process. First is the final changes to the 
Application Exclusion Zone (AEZ) and the second is the ``designated 
representative'' provision, which essentially allows anyone to arrive 
at a farming operation and demand an accounting of records related to 
pesticide applications over the past 2 years.
    EPA's insertion and final articulation of the AEZ provision goes 
far beyond the Agency's stated intent and creates a 100 buffer 
surrounding the application equipment that, according to the 
regulations now in place, extends beyond the agricultural 
establishment. This provision effectively constitutes a ``taking'' of 
the grower's land and prohibits appropriate pest mitigation activities 
if there is any kind of structure, permanent or otherwise, inhabited or 
vacant within 100 of the agricultural establishment. Furthermore, any 
individual standing or a passing vehicle within 100 of the property 
can effectively cease the grower's application activity.
    I should point out that EPA's Office of General Counsel (OGC) is 
working to issue interpretive guidance stating these unintended 
consequences go beyond the Agency's intent. However, I must also 
emphasize that such guidance does not carry the weight and authority of 
a codified Federal regulation, and courts may have a different 
interpretation from EPA's OGC on this matter. Unless and until EPA 
corrects and amends the regulation, this provision will continue to 
impose unreasonable regulatory and economic burdens for producers and 
subject state lead agencies to enforce unworkable regulations.
    In addition to the AEZ, EPA included the ``designated 
representative'' provision which places an extraordinary burden on 
growers to produce a full accounting of 2 years of application records 
to anyone who arrives on their farm with a piece of paper claiming to 
represent a worker who may have been on that establishment at some 
point over the past 2 years. If the agricultural employer does not 
produce these records they subject themselves to enforcement actions. 
If the agricultural employer does produce these records, the individual 
requesting them is free to use them for any purpose, propaganda, anti-
marketing, litigious or otherwise that he or she sees fit.
    The most frustrating part of the AEZ and ``designated 
representative'' provisions is that these oversights and misguided 
initiatives were implemented outside of the Federal rulemaking process, 
in conflict with the information and input from EPA's state regulatory 
partners and the regulated community, and in violation of the Agency's 
obligations under FIFRA, the APA, and various Executive Orders. Perhaps 
worst of all, neither provision provides any enhanced regulatory 
protections or benefits. These realities, however, do not mitigate the 
economic burdens and liability our producers will be forced to absorb 
under this final Federal regulation.
    We know EPA did not include the ``designated representative'' 
provision in the final rule it provided to this Committee, as the 
Agency is required to do so under FIFRA. We have expressed our strong 
concern and disappointment with EPA's lack of consultation with their 
state regulatory partners, and we want to thank Chairman Conaway and 
Ranking Member Peterson for their attention and on-going engagement on 
this matter.
    These rulemaking and process decisions have consequences. According 
to EPA, the WPS rule will impact an estimated 300,000 or more small 
farms, nurseries, and greenhouses, plus many hundred small commercial 
entities such as aerial and ground applicators contracted to control 
pests. EPA stated in its own economic analysis it could not quantify 
the complete economic impact of the rule. We agree with that 
conclusion, and we feel EPA's economic analysis significantly 
underestimated both the number of impacted operations and the true cost 
this rulemaking will have on the regulated community and the state 
regulatory agencies.
    The new regulations will also require significant staff time to 
provide outreach to workers, handlers, applicators, agricultural 
employers, trainers and other stakeholders. For example, trainers will 
now require retraining, and, according to EPA's implementation 
timeline, this retraining must take place during the same period the 
state agencies are expected to conduct outreach and education to the 
producers in their states. In addition, the average actual on-site 
inspection under the former WPS rule averaged 3 hours in duration, but 
under the new rule these same inspections are anticipated to require 
approximately 50% more time due to the enhanced record keeping and site 
information requirements.
    Equally concerning is that EPA is implementing the WPS rule with 
all of these enhanced regulatory burdens and record keeping 
requirements, but it has yet to provide educational resources or 
training materials to assist their state partners or the regulated 
community to understand the new requirements or how to comply with 
them. This approach to regulatory activity is in direct conflict with 
the fundamental principle of ``educating before you regulate.''
    Without a sound and transparent regulatory framework and the 
resources necessary to educate the regulated community on how to 
comply, all EPA has created is another economic burden on the men and 
women who produce our nation's food, fiber, and fuel. It is absolutely 
essential for EPA to correct the oversights in the WPS rule and provide 
their state partners and the regulated community the time and 
educational resources necessary to ``educate before we regulate.''
Certification of Pesticide Applicators
    Similar to the Worker Protection Standards rule mentioned above, 
states have significant concerns with EPA's Certification of Pesticide 
Applicators pending rule changes.
    As written, the proposed rule will significantly and uniquely 
affect small governments and the state lead agencies charged with 
implementing the proposed changes. In the vast majority of states, the 
proposed rule will require comprehensive regulatory changes and/or new 
state legislative authorities, additional training, staff time, and 
resources for both the state regulatory agency and regulated community 
that go far beyond EPA's Economic Analysis (EA) estimates in order to 
develop, implement, and comply with the proposed changes.
    If EPA promulgates a final rule as written, without fundamentally 
and comprehensively changing substantial portions of its proposal, the 
end result will require a significant number of state lead agencies to 
terminate administration of their certification programs and revert 
this responsibility and cost back to EPA. In short, EPA's proposed rule 
incentivizes both the state regulatory agencies and the regulated 
community to respond to the implementation and compliance requirements 
in a manner that is in direct conflict with the stated objectives for 
publishing this proposed rulemaking.
    This is not a trivial matter as EPA estimated the proposed rule 
will impact over 800,000 small farms and over 400,000 commercial 
applicators, and unfortunately, EPA's EA did not fully and accurately 
account for the costs associated with implementing, complying, and 
enforcing the proposed changes. As a result, the states conducted our 
own economic analysis of the proposed rule using the Texas A&M AgriLife 
Extension Service, Agricultural Economics, Agricultural & Environmental 
Safety's economic model, which found the actual estimated cost to state 
programs will increase by multiple factors of ten above what EPA 
estimated. Applying the Texas A&M economic model to all fifty states 
and four territories clearly demonstrates EPA did not satisfy the 
requirements under UMRA.\14\
---------------------------------------------------------------------------
    \14\ 2 U.S.C.  1501.
---------------------------------------------------------------------------
    EPA claims the primary economic benefits are monetized benefits 
from avoided acute pesticide incidents, qualitative benefits that 
include reduced latent effects of avoided acute pesticide exposures, 
and reduced chronic effects from lower chronic pesticide exposures 
(chronic diseases). To support this claim, EPA cites estimates of 
poorly reported data and anecdotal evidence from poison control 
centers. At the same time, EPA acknowledges the lack of economic 
integrity in these numbers, and subsequently notes it is ``not able to 
quantify the benefits expected to accrue from the proposed changes.''
    It is inappropriate for EPA to indicate or imply a causal 
association between these incomplete data sources to any estimated 
benefits, and as the Secretary of a state agency, I consider it highly 
inappropriate to estimate benefits of a proposed rulemaking on possible 
associations when there is no scientific evidence supporting such 
causal connections.
    Furthermore, EPA is intimately familiar with the routine and robust 
investigations state lead agencies conduct in response to alleged 
pesticide exposure incidents, and we are disappointed EPA has drawn 
various conclusions through unknown and unsubstantiated data to support 
the EA's estimated benefits associated with this proposed rule. I want 
to contrast this dynamic with the reality that states provide EPA with 
volumes of data showing overwhelming compliance by the regulated 
community, and it is disheartening, at best, to see EPA does not 
discuss or incorporate that information into its regulatory decisions.
    In addition to the understated costs to the state lead agencies, 
EPA failed to account for a number of factors impacting the regulated 
community. For example, the Small Business Administration's Advocacy 
Review (SBAR) Panel (hereinafter ``Panel'') reviewed this proposed rule 
and found ``the rule will impose unnecessary and unjustified burdens on 
[small businesses] and that alternatives exist that would reduce the 
economic impact of the rule on small entities while still accomplishing 
the agency's objectives.'' \15\ The Panel noted ``EPA did not estimate 
travel expenses for applicators to obtain training or take exams for 
certification or recertification,'' which will ``. . . impose excessive 
costs in operating their businesses as a result of increased time away 
from the job, travel expenses to attend recertification trainings, and 
the class fee for attending the CEUs.'' \16\ The Panel further 
determined ``EPA's proposal will result in decreased training and 
education rather than the agency's goal of increased training and 
education.'' \17\
---------------------------------------------------------------------------
    \15\ Panel Report of the Small Business Advocacy Review Panel on 
EPA Planned Revisions to Two Related Rules: Worker Protection Standards 
for Agriculture and Certification of Pesticide Applicators.
    \16\ Panel Report of the Small Business Advocacy Review Panel on 
EPA Planned Revisions to Two Related Rules: Worker Protection Standards 
for Agriculture and Certification of Pesticide Applicators.
    \17\ Id.
---------------------------------------------------------------------------
    The Texas A&M Economic Model and the SBA Panel's findings are 
greatly concerning and further demonstrate EPA's significant 
inaccuracies in the actual estimated costs and alleged benefits of the 
proposed rule. We should all be concerned with the lack of thoroughness 
around EPA's economic analysis. We have asked EPA to specifically 
address and respond to the Panel's written comments and 
recommendations, as required under the Small Business Jobs Act of 
2010,\18\ before taking any further actions with this rulemaking, and I 
ask this Subcommittee to continue its oversight of EPA's actions in 
this process to ensure this proposed rulemaking does not become one 
more unfunded mandate on the states and one more unnecessary regulatory 
burden and cost to our producers.
---------------------------------------------------------------------------
    \18\ Pub L. No. 111-240  124 Stat. 2504 (2010)
---------------------------------------------------------------------------
    In addition to understating the economic impact to state agencies 
and the regulated community and incentivizing actions contrary to the 
proposal's stated objectives, we are troubled by EPA's lack of 
compliance with its requirements under: FIFRA; Regulatory Flexibility 
Act (RFA); \19\ and Executive Orders 13132 \20\ and 13563.\21\
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    \19\ 5 U.S.C.  601, et. seq.
    \20\ Executive Order No. 13132, Federalism, 64 FR 43255 (1999).
    \21\ Executive Order No. 13563, Improving Regulation and Regulatory 
Review, 76 FR 3821 (2011).
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    EPA claimed to have ``identified the potential for harmonized 
minimum requirements to enhance state-to-state reciprocity of 
applicator certifications . . .'' \22\ The Agency cited this claim as 
justification for mandating enhanced national minimum requirements 
across all fifty states and territories. In essence, EPA proposed to 
require all state, tribal, and territorial authorities to develop and 
implement a certification program equivalent to the most robust and 
comprehensive framework currently in existence. As a result, the 
proposed rule would place significant undue hardships and enhanced 
requirements on the vast majority of state certification programs, 
which do not have the staff, resources, or administrative capabilities 
to absorb these proposed changes under the proposed implementation 
timeline.
---------------------------------------------------------------------------
    \22\ 80 FR 51369.
---------------------------------------------------------------------------
    EPA further stated the proposed action does not contain any 
federalism implications and would not have substantial direct effects 
on the states or the relationship between the Federal Government and 
the states. However, the proposal has significant federalism 
implications and is in direct conflict with Executive Order 13132, 
which requires ``[a]ny regulatory preemption of state law shall be 
restricted to the minimum level necessary to achieve the objectives of 
the statute pursuant to which the regulations are promulgated.'' \23\
---------------------------------------------------------------------------
    \23\ 64 FR 43257.
---------------------------------------------------------------------------
    The states conducted our own in-depth review of the proposal's 
implications on state regulatory agencies and identified several 
potential federalism issues where a significant number of states will 
be required to amend their state regulations and/or legislative 
authority to comply with the proposed rule changes. We ask this 
Subcommittee to continue your work and oversight to ensure EPA complies 
with both the spirit and intent of Executive Order 13132 and work with 
their state regulatory partners to further review and resolve all 
potential federalism issues prior to any final rulemaking.
    EPA noted this proposed rule \24\ is part of its retrospective 
review plan; however, EPA did not include specific plans or identify 
specific measures needed to effectively evaluate the stated objectives 
of the proposed rule as required under Executive Order 13563 \25\ and 
the retrospective review for ex post evaluation.
---------------------------------------------------------------------------
    \24\ 80 FR 51368.
    \25\ EO No. 13563, Improving Regulation and Regulatory Review, 76 
FR 3821 (2011).
---------------------------------------------------------------------------
    The ex post evaluation under the retrospective review is essential 
to gauge whether the proposed rule was ``designed and written in ways 
that facilitate evaluation of their consequences and thus promote 
retrospective analyses and measurement of `actual results.' '' \26\ So 
we ask this Subcommittee to continue your work and oversight to ensure 
EPA identifies, articulates, and publishes the specific criteria it 
will use to analyze and measure the success of the proposed rule before 
taking any further action with this rulemaking.
---------------------------------------------------------------------------
    \26\ United States. Office of Management and Budget. Office of 
Information and Regulatory Affairs. Memorandum for the Heads of 
Executive Departments and Agencies: Retrospective Analysis of Existing 
Significant Regulations. By Cass Sunstein. April 25, 2011.
---------------------------------------------------------------------------
    In the preamble,\27\ EPA also referenced Executive Order 12866,\28\ 
which requires ``[e]ach Agency shall identify the problem it intends to 
address (including, where applicable, the failures of private markets 
or public institutions that warrant new agency action) as well as 
assess the significance of that problem.'' \29\ EPA made several 
references to the time period that has elapsed since this rule was 
codified; however, a time interval, in and of itself, is not a sound 
justification for a proposed rulemaking and is not in compliance with 
the requirements laid out in any of the above referenced Executive 
Orders or the Agency's retrospective review standards. So we ask this 
Subcommittee to continue its work in ensuring EPA provides further 
explanation and specific information on the problem the Agency intends 
to address, as required under E.O. 12866.
---------------------------------------------------------------------------
    \27\ 80 FR 51399.
    \28\ 58 FR 51735.
    \29\ Id.
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Biotech NOI Proposal
    Another area in need of greater review and discussion is USDA's 
Animal & Plant Health Inspection Service's (APHIS) Notice of Intent 
(NOI) to update Section 340 of the Plant Protection Act, published in 
conjunction with EPA and the U.S. Food and Drug Administration (FDA) 
this past February.
    This NOI outlined alternatives that could change how the agencies 
regulate new breeding techniques and genetic material. The alternatives 
considered could vastly expand regulatory authority, giving APHIS the 
ability to more intensively regulate all but the most traditional of 
breeding techniques--both cutting edge techniques as well as generally 
accepted technologies used for decades.
    States support our Federal agency partners' willingness to revisit, 
revise, and improve Federal regulations to better reflect modern 
technologies and to facilitate an informed and efficient regulatory 
framework that enables producers and other agricultural stakeholders to 
continue to produce our nation's food, fiber, and fuel in a 
collaborative and productive manner. And we appreciate USDA recognizing 
the need to improve the current 7 CFR part 340 regulations. However, 
there are concerns the potential impacts, benefits, and/or unintended 
consequences of several alternatives put forward under the current NOI 
have not been adequately reviewed or explored by the state regulatory 
agencies or the agricultural community.
    One unclear aspect is how the proposal will distinguish between a 
new variety produced from different breeding techniques with the same 
end result. For example, traditional cross breeding and newer breeding 
techniques like gene editing can achieve identical results for disease 
resistance, drought tolerance, etc. The resulting new varieties from 
each process could be indistinguishable from one another with no 
possible test to identify which variety was produced using which 
process, requiring regulatory authorities to rely instead on breeder 
disclosure. Yet, under the proposed framework, one of these breeding 
techniques--gene editing--would be regulated while the other--
traditional cross breeding--would not.
    We are concerned with any proposed revisions to Part 340 that may 
be inconsistent with the spirit and intent of the Coordinated Framework 
or the long-standing, scientific-sound advances demonstrated by more 
over than a century of developing improved and safe adapted plant 
varieties. One such departure from this longstanding framework and body 
of work is the proposed working definition for ``biotechnology'' in the 
NOI that goes far beyond the current regulations and focuses on the 
``process'' by which a new plant variety is developed. If applied to 
Part 340, the proposed definition would require pre-market regulatory 
review of many modifications that could be achieved through 
conventional breeding, and this possible regulatory expansion would go 
beyond the scope and authority of the Coordinated Framework, APHIS's 
regulatory authority, and the science-based risk perspective.
    Furthermore, any future proposed rule should ensure a risk-based, 
transparent, and predictable regulatory framework, and APHIS's 
regulatory oversight must be limited to transgenic products that pose a 
plant pest risk. Plant breeding techniques that do not introduce genes 
from other species--techniques such as gene editing and cisgenics--
should not be regulated under APHIS's regulatory framework.
    Given the regulatory complexity and the potential implications the 
proposed alternatives may raise throughout domestic and international 
markets, I caution against embarking upon any comprehensive program 
changes that have not been adequately explored or vetted. An enhanced 
consultation process will enable APHIS to improve its pre-market 
agricultural biotechnology regulatory system by identifying strategic 
and actionable solutions to address specific challenges and process 
improvements.
    We want this Subcommittee to be aware that the states are 
encouraging USDA to undertake a more thorough and robust review, in 
conjunction and consultation with partner agencies responsible for 
regulating products of biotechnology and the agricultural community, to 
enhance continued alignment, agency roles and responsibilities, and 
improve communication between the Federal, state, and agricultural 
stakeholders.
    While the current regulatory process is not perfect, it has 
operated successfully for decades without adverse plant health impacts 
to U.S. agriculture. So, prior to publication of a proposed rule, we 
are requesting USDA continue to work with the State Departments of 
Agriculture, growers, producers, scientific experts, and the regulated 
community to execute a more robust review of the alternatives 
considered under the current NOI and identify specific modifications to 
enhance or supplement the proposed alternatives through improving 
clarity, transparency, regulatory predictability, and ease of 
implementation.
    We see a clear and identifiable need for the agencies involved to 
conduct a thorough economic impact analysis and comprehensive cost-
benefit analysis to better understand the potential impacts these 
proposed alternatives may have on the rural economy and our producers 
before proceeding further in this process. I believe an enhanced review 
process with the state regulatory agencies and the agricultural 
stakeholder community will result in greater understanding of the 
proposed changes, enhance communication and collaboration among 
partners, and facilitate greater support for future implementation 
proposals.
Ag Labor & H-2A Program
    Due to New Mexico's geographic and demographic composition, our 
producers are not actively involved with the Department of Labor's 
(DOL) H-2A program, but I hear from a number of my colleagues across 
the country that there are significant processing delays with the H-2A 
program. As the Secretary of Agriculture in New Mexico, I have engaged 
with the NASDA membership to discuss these concerns with DOL, and we 
continue to work with the producers across the country to identify 
solutions to these challenges.
    The H-2A Temporary Agricultural Program is run through DOL and 
includes processing components from the U.S. Citizenship and 
Immigration Services (USCIS) and the Department of State. DOL has a 
statutory obligation (8 U.S.C. 1188(b)) to certify applications for 
workers no later than 30 days prior to the date of need, and if the 
application fails to meet certification requirements (if there is 
missing data) an employer must be notified within 7 days of the date of 
filing. January through March is the peak time for DOL to receive 
applications for the H-2A program. In this peak time in 2016, DOL has 
received a 12% increase in applications over last year. Overall, the 
program has seen an 85% increase in requests over the last 5 years.
    Currently, farmers and ranchers across the country are reporting 
delays between 20 to 40 days from the point they needed to receive 
their workers. Depending on the geographical location and crop 
production activity, producers may have a very short harvest window 
when they need H-2A labor. If these workers arrive late due to 
processing issues from DOL or USCIS, the grower is left with a reduced 
crop or no crop at all.
    DOL says these delays result from a lack of resources or processing 
issues from USCIS and State. These agencies need to work together to 
streamline their resources, solve this backlog and communicate the 
status of their review to growers in a timely and transparent manner. 
Without a solution to the Federal processing activities, farmers 
continue to face a pending crisis and a lack of ability to bring their 
crops to market.
    Farmers and ranchers across the country deserve better, and the 
consumers across the world will endure serious economic hardship as the 
cost of their food will continue to rise. We ask this Subcommittee to 
continue your critical engagement on this matter, and we stand ready to 
assist our Federal partners in reducing the economic hardship and 
uncertainty the current H-2A administrative process creates.
Food Safety Modernization Act
    The Food Safety Modernization Act (FSMA), which was passed by 
Congress in 2010, is a massive overhaul of food safety authority which 
gives the U.S. Food and Drug Administration (FDA) authority to regulate 
growers and animal food producers for the first time. It also requires 
foreign producers to meet the same standards, codifies additional 
practices regarding processed foods, and establishes transportation and 
intentional adulteration rules. While NASDA has long maintained support 
for the concepts of FSMA, we have concurrently maintained the need for 
FDA to get the rules right and the need for Congress to fund the 
implementation--especially the need for support for state partnerships.
    NASDA has a robust and collaborative relationship with our partners 
at FDA and we appreciate the intense engagement FDA has undertaken with 
NASDA and state agencies. This change from reacting to contaminants to 
a preventative approach will require a significant cultural change at 
FDA and is not without its challenges. If the rules are too restrictive 
or the administration of the programs lack an understanding of farming, 
we risk upsetting the delicate balance between food security and food 
safety, as well as losing access to nutritious, high-quality fruits and 
vegetables.
    NASDA continues to work with FDA regarding the right balance on 
water policy. We do not believe the consequences of FDA's policy have 
yet been fully realized by FDA and this remains a problem area that 
needs to be resolved. NASDA will continue to engage with FDA to find 
alternate means to achieve the same level of public health protection 
as provided by the published criteria.
    While FDA has significant experience with regulating manufactured 
food facilities, State Departments of Agriculture bring additional 
needed expertise to the new regulatory framework under FSMA. Farms are 
not factories, and an understanding of farming will help to assure we 
have high-quality, wholesome food available that is safe. For example, 
FDA uses the development of guidance as a means to further explain/
describe the requirements of rules. If farmers are going to know what 
to do in order to comply, they will need to understand the nuances of 
guidance and what is expected of them. If this is to work, the states 
must have a seat at the table assisting in the development of 
guidance--another area NASDA is working hard to assure.
    NASDA continues to stress that in order for prevention--as a 
policy--to be achieved we must approach FSMA via an ``educate before 
and while you regulate'' strategy. This will require a long-term 
commitment to continuing education as the backbone of the nation's food 
safety program.
    NASDA believes the most effective way to achieve compliance--and 
reach food safety goals more quickly--is the On-Farm Readiness Reviews 
(OFRR) program. This program is being developed to be provided 
voluntarily, after interested farmers have attended an education 
program. It is intended to be non-regulatory, instructional and 
systematic. While FDA is supportive of this concept and program, OFRR 
must be a long-term goal of the program and funded long-term.
    NASDA appreciates the investment in food safety Congress made in 
the FY16 omnibus bill by increasing funding for FSMA by $104.5 million. 
While this is a substantial down payment, more will be needed in the 
long run. For example, FDA recently announced $19 million in base 
funding for state programs for the Produce Safety rule implementation. 
However, if all 50 states apply for this base funding, over $28 million 
will be needed just for this initial program development. Further, 
NASDA estimates full funding--including a base to operate a program and 
additional funds to fund education, inspections, compliance actions, 
laboratory activities, etc.--will cost at least $40M per year. With the 
expanded involvement by states in the implementation of all three major 
FSMA rules (Produce, Human Food, and Animal Food Safety) we estimate a 
total of $100M annually for the state program needs.
    No testimony on FSMA is complete without mentioning the need for 
concurrent implementation of the same requirements for imported food. 
NASDA requests that Congress ensure FDA is meeting the requirements 
outlined by the legislation regarding imported foods and achieving a 
balanced approach to regulating imported and domestic food.
    While the actual costs to farmers to implement FSMA are still very 
much unknown, they will be significant. Some estimates put the cost to 
comply between $4,700 (for farms with sales from $25,000 up to 
$250,000) and $30,500 (for farms with sales above $500,000) per year. 
Though, these costs could go much higher. For example, estimates by 
some farmers on the costs for them to comply with the produce safety 
rule's water quality standards could reach as high as $65,000 per year 
for some farms in North Carolina and over $100,000 in Florida.
    This uncertainty and estimated cost of compliance has already 
directly impacted producers, and I am familiar with a number of 
producers in New Mexico, who previously grew crops specifically for 
direct sales to consumers, that have since shifted their production to 
other, non-FSMA crops. The true economic impact on rural America is 
difficult, if not impossible, to quantify. But we know the consequences 
of this rulemaking will be far greater than the direct cost of 
compliance to our producers and will impact the availability of locally 
grown, fresh vegetables and produce across the county.
    Finally, this Committee should begin examining potential 
opportunities in the next farm bill to provide agriculture producers 
with programs to help meet FSMA's goals. While it is still early in the 
process, low-cost loan guarantee programs, rural development programs--
perhaps aimed at infrastructure--and other Farm Service Agency or Risk 
Management Agency programs could be helpful options to consider.
    The good news is there are solutions to all of these challenges.
Solutions
    All of these uninformed or misguided regulatory initiatives place 
undue burdens on our agricultural producers, and all of these 
challenges stem from: (1) the lack of consultation with state 
regulatory agency partners; and (2) a lack of compliance with 
controlling statutes, such as FIFRA and the APA.
    State Departments of Agriculture are co-regulators with EPA, USDA, 
FDA, and other Federal agencies over significant aspects of the U.S. 
agricultural industry, and we are partners on numerous Federal 
programs, such as the SCBG program. We have a particular interest in 
our Federal partners' efforts related to reducing regulatory burdens, 
especially with respect to increased flexibility to state regulatory 
partners.
    Last year, NASDA participated in a series of meetings with other 
associations representing state and local government hosted by Shaun 
Donovan, Director of the White House Office of Management and Budget 
(OMB) and Howard Shelanksi, Administrator of OMB's Office of 
Information and Regulatory Affairs. These discussions focused on the 
Administration's efforts around improving regulatory processes and 
improving retrospective regulatory review.
    As we articulated in those discussions, there are several specific 
and actionable deliverables our Federal agency partners and the 
Administration should consider that will result in a more informed, 
applicable, and consistent regulatory framework that both provides the 
necessary regulatory protections and minimizes the impact and 
regulatory burden on both state governments and our agricultural 
producers.
    Those recommendations include:

  1.  Enhance Federalism Consultations: Federal agencies should conduct 
            robust federalism consultations early in the regulatory 
            process, and include participation of a wide range of state 
            regulatory agencies, including State Departments of 
            Agriculture. These consultations should occur prior to 
            publication of a proposed rule. Throughout this process, it 
            is important to emphasize state regulatory agencies are not 
            simply stakeholders, but are instead partners with Federal 
            agencies in the implementation of a host of programs. 
            States can--and should--be used more as resources for 
            Federal agencies. Often states have a wealth of data, 
            experience, and expertise that would help Federal agencies 
            better develop and implement regulatory programs.

  2.  Improve economic analyses that more realistically account for 
            economic costs to states: Federal agencies should engage 
            state regulatory agencies and stakeholders to evaluate 
            proposed regulations, availability of required resources, 
            and whether expected outcomes merit those expenditures.

  3.  Enhance public participation and greater transparency of the 
            regulatory process: Federal agencies should improve public 
            participation and increase transparency of the regulatory 
            process.

  4.  Incorporate flexibility in regulatory programs: Federal agencies 
            should engage state regulatory partners in creating 
            programs that may provide local and state flexibility. We 
            continue to encourage our Federal partners to look for ways 
            to engage state agencies in creating programs to provide 
            additional flexibility--especially when the alternative may 
            be an undue regulatory burden on the regulated community. 
            Such consultation and robust outreach will facilitate 
            recognition of state equivalency regulatory programs and 
            prevent duplicative regulatory layers.

  5.  Renew focus on utilization of best available science: Regulations 
            must be based on the best available, sound, validated, and 
            peer-reviewed science and rely on science-based risk 
            assessments. Moreover, regulatory agencies must ensure 
            policymakers do not misuse or inappropriately apply 
            invalidated or unrelated scientific findings to policy 
            determinations. We especially appreciate the work the 
            Office of Pest Management Policy (OPMP) executes to ensure 
            policy or regulatory initiatives are based on 
            scientifically sound positions. OPMP is an invaluable 
            resource and advocate for including sound science in the 
            development of regulatory actions impacting agriculture, 
            and we encourage increased support for OPMP's activities, 
            as well as ensuring OPMP's perspectives are advanced in the 
            interagency review process.

  6.  Improve stakeholder outreach, especially to rural communities: 
            Federal agencies should enhance educational and outreach 
            efforts to rural communities and provide teleconference 
            access for oral comments, which can be submitted in the 
            docket and become part of the official record.
Conclusion
    State Departments of Agriculture play a critical role in carrying 
out the regulatory programs impacting our agricultural producers. We 
serve as both enforcement agents and ambassadors to our agricultural 
producers, and at a minimum, we have a responsibility and an obligation 
to fulfill the spirit and intent of the statutes, programs, and 
Executive Orders controlling and directing that regulatory development 
process.
    It is essential for our Federal partners to utilize the expertise 
of the states and the producers in those states to inform, develop, and 
implement a scientifically sound, consistent, and transparent 
regulatory framework to ensure our producers are able to continue to 
produce the food, fiber, and fuel our country and much of the world 
depends upon.
    Before I conclude my remarks, I want to offer a solution and point 
out a constant theme all of my colleagues as Secretaries, Directors and 
Commissioner of State Departments of Agriculture discuss throughout the 
country and that is the need to ``Educate before you Regulate.'' We 
have renewed opportunity to ensure true Federal-state partnerships. The 
70th anniversary of the Administrative Procedure Act on June 11th is an 
opportunity to re-educate our Federal partners on both their statutory 
obligations under the APA as well as the ``spirit and intent'' of the 
Federal-state partnership.
    I appreciate the opportunity to testify before you today, and I 
welcome any questions you may have.

    The Chairman. You even had 21 seconds left. It is great. 
Please make sure you harass my Secretary of Agriculture, 
Secretary Poe from Illinois, any chance you can. He is a good 
friend and doing a great job.
    Our next witness is Ms. Maureen Torrey, Vice President of 
Torrey Farms, Incorporated, Elba, New York, on behalf of the 
United Fresh Produce Association. Ms. Torrey, please proceed.

 STATEMENT OF MAUREEN J. TORREY, VICE PRESIDENT, TORREY FARMS, 
 INC., ELBA, NY; ON BEHALF OF UNITED FRESH PRODUCE ASSOCIATION

    Ms. Torrey. Thank you, Subcommittee Chairman Davis and 
Ranking Member DelBene, for the opportunity to testify before 
the Committee today. I appreciate being able to provide my 
perspective as a fresh produce provider.
    While the list of factors that can make the difference 
between a profit and loss is long, I will only share a few.
    First, a little information about Torrey Farms and my 
background. I am an 11th generation farmer in this country. Our 
farm is located in Elba, New York. My brothers, longtime farm 
employees, and I have grown the farm from about 200 acres in 
the late 1970s to a 15,000 acre diverse farm operation from 
fresh market vegetables, processing vegetables, grain, and 
dairy, including a trucking company. We also feel very 
fortunate that the 12th generation and many young people have 
elected to return to our family farm and we are able to provide 
much-needed jobs in our rural community. Our main vegetable 
commodities that we grow and pack year round include cabbage, 
potatoes and onions. We have a summer season of cucumbers, 
squash, green beans, carrots, just to name a few.
    I am also speaking to you as a member of the United Fresh 
Produce Association. As you know, United Fresh is the only 
trade association that represents all segments of the fresh 
fruit and vegetable production chain across the United States. 
I served as Chairman of the Board of Directors in 2006 and 
continue to work on the Government Relations and other 
committees.
    As a member of the specialty crop industry, and as a 
participant in the Federal Government agriculture guest worker 
H-2A program, any summary of the factors impacting the cost of 
production must include an examination of labor issues, as 
labor is our No. 1 cost in our specialty crops and No. 2 in our 
dairy operation. I know that immigration issues are not under 
the parliamentary jurisdiction of this Committee. However, 
America's farmers are greatly affected by the fact that our 
immigration process, including the H-2A program, is badly in 
need of repair, if not complete reform. However, Congress has 
refused to act on much-needed immigration reform that could 
help growers meet their labor needs. So growers are turning 
increasingly to the H-2A program, and recent estimates indicate 
that nearly 8,000 individual employers will hire H-2A workers 
and this number will double, probably within the next 2 to 5 
years. These are not only farms needing many H-2A workers, but 
in the case in New York State, the majority of the farms 
applying for H-2A are only two to four workers. We also need 
our workers for 12 months a year on our farms.
    But the H-2A system barely works for the current level. 
There have been delays in processing the required paperwork at 
key government agencies. The Department of Labor national 
processing center in Chicago and the staff at USCIS have 
reported to Congressional staff that their visa processing is 
taking about 30 days instead of the previous 10 to 15 days. As 
you know, we need our help when we need it in our specialty 
crops. You know we only have a certain amount of time to make 
our crop. Currently at our farm, we were 28 days late in 
getting our workers to plant our onions, which need to be 
finished by May 15th to make our crop for this year.
    This is why United Fresh and counterpart agriculture 
organizations in the Agriculture Workforce Coalition are 
working together to identify and advocate for improvements to 
the H-2A program. I strongly urge the Members of this Committee 
to work with your colleagues to achieve sensible regulatory 
relief.
    Food safety is a crucial issue to the fruit and vegetable 
produce industry too, and we have been working closely with the 
FDA on the Food Safety Modernization Act and will continue to 
work with them as we help with some of the dilemmas and some of 
the interpretations. United Fresh is also the coordinating body 
of the Specialty Farm Alliance Bill, a coalition of over 120 
specialty crop organizations who worked with this Committee in 
the 2014 Farm Bill and were able to produce a lot of things 
that helped our industry greatly, and we look forward to 
working with this Committee again in the coming year.
    I offer support for the efforts of my fellow witnesses and 
colleagues in agriculture to raise awareness with the troubling 
direction the Environmental Protection Agency seems to be 
taking in respect to regulating crop production products. These 
products are essential to the safe and efficient production of 
food and fiber crops and to Integrated Pest Management programs 
regularly used in sustainable farming practices.
    Last, increasing regulations and reporting in all areas of 
farming has taken us away from what we do best: farming, to 
hours and days of constant interpretation of new regulations, 
paperwork and audits.
    I have just given you a few examples of the things that are 
impacting the cost of production, and I appreciate what all the 
Members of this Committee have done to promote agriculture and 
defend farmers' efforts to feed America and the world. Thank 
you again for this opportunity, and I and United Fresh look 
forward to working with you, and I am happy to answer your 
questions.
    [The prepared statement of Ms. Torrey follows:]

Prepared Statement of Maureen J. Torrey, Vice President, Torrey Farms, 
     Inc., Elba, NY; on Behalf of United Fresh Produce Association
    Thank you, Subcommittee Chairman Davis and Ranking Member DelBene, 
for the opportunity to testify before the Biotechnology, Horticulture 
and Research Subcommittee on the topic of Focus on the Farm Economy: 
Factors Impacting Cost of Production. I appreciate being able to 
provide my perspective as a fresh produce provider. While the list of 
factors that can make the difference between a profit and a loss is 
long, I am happy to elaborate on a few in particular, including Federal 
policies that enhance specialty crop production as well as those that 
can be a hindrance.
    First a little information about Torrey Farms. I am an 11th 
generation farmer in the United States with our operation located in 
Elba, New York. My brothers, longtime farm employees and I have grown 
the farm from over 200 acres in the 1970's to a 15,000 acre diverse 
farm operation from fresh market and processing vegetables, grain, and 
dairy to a trucking company. We also feel very fortunate that the 12th 
generation have returned to the family farm and we are able to provide 
much needed employment in our rural community. The vegetable 
commodities that we grow and pack year-round include cabbage, potatoes 
and onions. We have a summer season of cucumbers, squash, green beans, 
carrots, miniature pumpkins and winter squash.
    I am also speaking to you as a member of the United Fresh Produce 
Association. As you may know, United Fresh is the only trade 
association that represents all segments of the fresh fruit and 
vegetable production chain across the United States. I was pleased to 
serve as the Chairman of the Board of Directors of United Fresh in 2006 
and I continue to serve as a member of United Fresh's Government 
Relations Council. I am also a member of key working groups United 
Fresh has established to address Food Safety Modernization Act (FSMA) 
regulations.
    As a member of the specialty crop industry and as a participant in 
the Federal Government's agriculture guestworker program, known as H-
2A, I have to say that any summary of the factors most impacting the 
cost of production must include an examination of labor issues, as 
labor is our No. 1 cost in our specialty crops and No. 2 in our dairy 
operation. I know that immigration issues are not under the 
parliamentary jurisdiction of this Committee. However, America's 
farmers are greatly affected by the fact that our immigration process, 
including the H-2A program, is badly in need of repair, if not complete 
reform. However, Congress has refused to act on much-needed immigration 
reform that could help growers meet their labor needs. So with no real 
reform in sight, growers are turning increasingly to the H-2A program, 
which means that an already faulty system will be burdened even 
further. Recent estimates indicate that nearly 8,000 individual 
employers hire H-2A workers and there are estimates that number could 
double within the next 5 years, possibly sooner. These are not only 
farms needing many H-2A workers, but as is the case in New York State, 
the majority of the farms applying only need two to four workers.
    They also need workers for 12 months on their farms.
    But the system barely works for the current level of usage. There 
have been delays in the processing of required paperwork at key 
government agencies. For example, the Department of Labor national 
processing center in Chicago and staff at USCIS have reported to 
Congressional staff that their visa processing is taking 30 days 
instead of the previous 10 to 15 days. It should go without saying that 
because of the highly time-sensitive nature of bringing a fruit or 
vegetable crop to the marketplace, a delay of even a few days in 
getting an adequate labor force can make all the difference between a 
producer getting a decent return on his or her investment in that crop 
or taking a total loss. Specialty crops have short windows of 
opportunity to ``make'' your crop. Currently, we are 28 days late in 
getting our workers to plant our onions which need to be finished by 
May 15th to make our crop.
    That is why United Fresh and counterpart agriculture organizations 
in the Agriculture Workforce Coalition (AWC) are working together to 
identify and advocate for improvements to the H-2A system. I strongly 
urge the Members of this Subcommittee to work with your colleagues to 
achieve sensible regulatory relief for producers who need this program.
    For fruit and vegetable providers whose commodities go straight to 
consumers, food safety is a crucial issue. As the Members of the 
Subcommittee are aware, FDA and the fresh produce industry have been 
working closely on the implementation of the Food Safety Modernization 
Act (FSMA).
    Thus far in the implementation process, FDA has shown a willingness 
to work with the industry and to be transparent about the agency's 
implementation activities. However, there are some remaining 
implementation issues that could have significant ramifications.
    For example, one of the unintended effects of the FSMA legislation 
itself has created a conundrum for FDA in regulating identical 
facilities that pack or handle raw agricultural commodities sometimes 
under the Produce Safety Rule (PS) and sometimes under the Preventive 
Controls (PC) Rule. As FDA has struggled with trying to write science-
based regulations, the Agency has formulated a strained bifurcation of 
facilities as either on-farm or as secondary activities farms. Although 
identical facilities as far as food safety risks, ``on-farm'' 
facilities fall under the PS Rule while most ``off-farm'' facilities 
fall under the PC Rule. United Fresh estimates that nearly 5,000 
facilities across the country fall into this latter category, requiring 
a vastly different regulatory structure under the PC Rule.
    Under United Fresh's coordination, 22 leading produce organizations 
recently wrote to FDA regarding concerns about such regulatory 
complications and requesting further dialogue with the agency to 
clarify this issue.
    As Members of the Subcommittee may be aware, United Fresh is the 
coordinating body of the Specialty Crop Farm Bill Alliance, a coalition 
of over 120 specialty crop organizations. For each successive farm 
bill, the Alliance has provided a set of recommendations about how 
those programs could maximize the ability of specialty crop producers 
to be successful. The Alliance is grateful that in the 2014 Farm Bill 
this Committee acted on our recommendations, which our industry 
believes are sound policies that will enhance our ability to meet 
America's nutritional needs.
    Briefly, a few highlights of the 2014 Farm Bill that enhance the 
work of specialty crop providers include:

   $80 million a year for the Specialty Crop Research 
        Initiative for industry-specific research;

   $75 million a year for the Plant Pest and Disease Program to 
        eradicate harmful pests and diseases; [and]

   $85 million per year for the Specialty Crop Block Grant 
        program, including a multi-state program.

    In many instances these programs provide services and resources 
that growers are not always able to get on their own. For example, 
since 2008, the Clean Plant Network has provided nearly $30,000,000 in 
support of 35 initiatives in the critical mission of providing clean 
planting stock which is essential to preventing highly dangerous pests 
and pathogens from destroying crops. Another example is the language in 
the 2014 Farm Bill providing for a multi-state program in the Specialty 
Crop Block Grant program that allows for the kind of regional response 
to threats such as plant disease that farmers cannot do individually.
    I want to offer support for efforts of my fellow witnesses and 
colleagues in agriculture to raise awareness about the troubling 
direction the Environmental Protection Agency seems to be taking with 
respect to regulating crop protection products. These products are 
essential to the safe and efficient production of food and fiber crops 
and to IPM (Integrated Pest Management) programs regularly used in 
sustainable farming practices for successful implementation of IPM on 
all farms. I urge the Members of this Subcommittee to work with your 
colleagues to keep these resources available to producers.
    Last, increasing regulations and reporting in all areas of farming 
has taken us away from what we do best: farming, to hours and days of 
constant interpretation of new regulations, paperwork and audits.
    As I indicated at the beginning of my remarks, these are just a 
small sampling of the issues that have a significant effect on the 
ability of producers to stay in business and contribute to their local 
economies. We appreciate all that the Members of this Committee have 
done to promote agriculture and defend farmers' efforts to feed America 
and the world. Thank you again for this opportunity, I and United Fresh 
look forward to working with you and I am happy to answer your 
questions.

    The Chairman. Thank you, Ms. Torrey.
    I now would like to recognize my colleague from the great 
State of Washington, Mr. Newhouse, to introduce our next 
witness.
    Mr. Newhouse. Thank you, Chairman Davis and Ranking Member 
DelBene.
    The Chairman. Washington.
    Mr. Newhouse. Go, Washington.
    First of all, I would like to thank you for holding this 
hearing. As one of Congress's few active farmers, we don't have 
control of a lot of factors that impact our ability to make a 
living including Mother Nature and markets and those things. 
However, we do as Congress and as individuals have some ability 
to affect other factors that influence the cost of production. 
So I certainly appreciate delving into this subject today.
    I am also delighted to be able to introduce someone that 
for years has been an important figure to agriculture in the 
State of Washington. Ms. Kate Woods, who is now the Vice 
President of the Northwest Horticultural Council, hails from 
her family's cattle ranch in Centerville, Washington, which I 
am sure you have all heard of, but if you haven't, it is a 
suburb of the large metropolis of Goldendale, Washington. For 
over 10 years, Kate worked as my predecessor's legislative 
director and handled agricultural issues for him. She now works 
hard to represent tree fruit farmers and packers throughout the 
Pacific Northwest. There are few people in our state or region 
who have the depth and diverse understanding of agricultural 
issues as Kate does, and so Ms. Woods, it is my distinct 
pleasure to welcome you here today. It may be your first time 
on that side of the table, and we look forward to your 
insightful testimony.

      STATEMENT OF KATE WOODS, VICE PRESIDENT, NORTHWEST 
               HORTICULTURAL COUNCIL, YAKIMA, WA

    Ms. Woods. Well, thank you very much, Congressman. I 
certainly appreciate that introduction. And thank you, Chairman 
Davis and Ranking Member DelBene, for the opportunity to 
testify before the Subcommittee today on factors impacting the 
cost of farm production.
    I work for the Northwest Horticultural Council, which 
represents apple, pear and cherry growers, packers, and 
shippers in Idaho, Oregon and Washington on Federal and 
international policy and regulatory issues.
    Our family-owned orchards provide approximately 66 percent 
of the apples, 75 percent of the pears, and 80 percent of the 
sweet cherries grown in the United States. There is no question 
government regulations have had an increasingly significant 
impact on our members in recent years.
    There are a numbers of issues I could highlight, some of 
which I have included in my written testimony today, but I 
would like to focus on a new challenge facing our industry: the 
implementation of the Food Safety Modernization Act. Under this 
law, FDA will regulate on-farm practices for the first time, 
and the number of prescriptive Federal mandates on produce 
packing houses will be increased to an unprecedented level. Six 
of the seven regulations implementing FSMA have been released 
in final form. Today I would like to address the two that will 
most greatly impact the tree fruit industry: the Standards for 
the Growing, Harvesting, Packing and Holding of Produce for 
Human Consumption, or the Produce Safety Rule, and the more 
processor-oriented Current Good Manufacturing Practices and 
Hazard Analysis and Risk-Based Preventive Controls for Human 
Food, or the Preventative Controls for Human Food Rule.
    Let me begin by saying that providing a safe, high-quality 
and healthful product to consumers is the highest priority for 
our members. Not only do their businesses depend on it but our 
growers themselves and their families eat the harvested fruit 
of their orchards. However, these rules coming in at 801 pages 
and 930 pages, respectively, are daunting and confusing. For 
example, while orchards clearly fall under the Produce Safety 
Rule, packing houses and storage facilities must either follow 
the Produce Safety Rule or the Preventive Controls for Human 
Food Rule, which is written for processing facilities. This is 
dependent on a vague farm definition based on ownership 
structure and location, not risk. FDA has acknowledged 
industry's concerns with requiring facilities that perform the 
same operations to follow one of two very different rules, and 
as indicated, intends to enforce the Preventive Control for 
Human Foods Rule on these facilities in a way that is 
consistent as possible as what will be required under the 
Produce Safety Rule.
    However, with less than 5 months before the Preventive 
Controls for Human Food Rule is implemented in September, the 
guidance promised by FDA on what packing houses will actually 
be required to do has yet to be released. Curriculum developed 
to comply with training requirements in the rule does not 
address the reality of packing house operations, and 
individuals with decades of food safety experience within the 
industry and who therefore would be the most likely to be able 
to explain how the rule should be implemented. Produce packing 
operations are being turned away as trainers because they do 
not have a degree in education or science. Questions submitted 
to FDA's Technical Assistance Network on issues as basic as 
which rule a facility falls under is being answered months 
later with a non-answer of, ``Your question will be addressed 
in guidance.'' If you think this sounds confusing, imagine how 
packing house operators are currently feeling.
    Confusion also abounds regarding the Produce Safety Rule. 
For example, the rule requires growers to conduct a certain 
number of tests for each water source but fails to define what 
``each water source'' means or where within the water system 
growers are expected to collect a sample. While this rule will 
not begin taking effect until 2018, guidance and training is 
needed as soon as possible for several reasons. First of all, 
the rule requires the growers to establish a microbial water 
quality profile prior to the rule's enforcement date by 
conducting 20 tests at or near harvest over a period of 2 to 4 
years. Should growers wish to take advantage of the full 2 to 4 
year period to take these tests, they would need to start 
testing in 2016. In the case of cherries, these tests would 
need to begin only a few weeks from now.
    Second, many private food safety audit schemes our growers 
and packers must comply with as required by retailers are 
already beginning to incorporate the Produce Safety Rule 
requirements into their programs. Essentially, this rule is now 
considered by the private marketplace to be the baseline food 
safety standard for produce and growers and packers will be 
required by their customers to comply long before the dates 
outlined in the rule.
    Third, the rule is long and complex. Our growers and 
packers will need time to understand its requirements and make 
the necessary changes to their operations. The bottom line is 
that our growers and packers need guidance, education and 
answers as soon as possible in order to have any chance of 
complying with these costly and confusing regulations, which 
are currently the law of the land in the timeline provided.
    Once again, thank you for the opportunity to testify today, 
and I'll be happy to answer any questions you have.
    [The prepared statement of Ms. Woods follows:]

      Prepared Statement of Kate Woods, Vice President, Northwest 
                   Horticultural Council, Yakima, WA
    Thank you Chairman Davis and Ranking Member DelBene for the 
opportunity to testify before the Subcommittee today on factors 
impacting the cost of farm production. I work for the Northwest 
Horticultural Council, which represents apple, pear, and cherry 
growers, packers, and shippers in Idaho, Oregon, and Washington, on 
Federal and international policy and regulatory issues.
    Our family-owned orchards provide approximately 66 percent of the 
apples, 75 percent of the pears, and 80 percent of the sweet cherries 
grown in the United States. Export markets are critical to our growers, 
with approximately \1/3\ of the crop exported each year.
    There is no question that government policies and regulations have 
had an increasingly significant impact on our growers and packers in 
recent years. On the positive side, USDA's Market Access Program has 
played an invaluable role in leveraging grower dollars to increase 
access to foreign markets for all three of the crops we represent. The 
Agricultural Research Service and grants provided through the Specialty 
Crop Research Initiative and Specialty Crop Block Grant program are key 
to addressing production challenges ranging from pest and disease 
management to enhancing food safety.
    On the negative side, it is becoming more and more difficult to 
find the workers necessary to grow, harvest, and pack the crop. The 
continued delays in processing H-2A visa applications by the U.S. 
Department of Labor are disastrous for perishable tree fruit, where 
every day can mean a significant drop in fruit quality. This burdensome 
program is not meeting the needs of our growers and packers--we need a 
guestworker program that is affordable, reliable, and reasonable, and 
that provides a pathway to legal status for the current workforce so 
that this expertise is not lost.
    The continued decline in access to crop protection tools needed for 
pest and disease control is also having a significant adverse impact on 
our growers, which I'm sure will also be discussed by the other 
witnesses testifying before you today.
    I would like to focus my testimony on a new set of challenges that 
is facing our industry: the implementation of the Food Safety 
Modernization Act (FSMA). Under this law, FDA will regulate on-farm 
practices for the first time, and the number of prescriptive Federal 
mandates on produce packinghouses will be increased to an unprecedented 
level.
    Six of the seven regulations implementing FSMA have been released 
in final form. Today, I would like to address the two rules that will 
most greatly impact the tree fruit industry--the ``Standards for the 
Growing, Harvesting, Packing, and Holding of Produce for Human 
Consumption,'' (Produce Safety Rule), and the more processor-oriented 
``Current Good Manufacturing Practices and Hazard Analysis and Risk-
Based Preventive Controls for Human Food'' (Preventive Controls for 
Human Food rule).
    Let me begin by saying that providing a safe, high-quality, and 
healthful product to consumers is the highest priority for our members. 
Not only does their business depend on it, but our growers themselves 
and their families eat the harvested fruit of their orchards. However, 
these rules--coming in at 801 pages and 930 pages respectively--are 
daunting and confusing.
    For example, while orchards clearly fall under the Produce Safety 
rule, packinghouses and storage facilities must either follow the 
Produce Safety rule or the very different Preventive Controls for Human 
Food rule written for processing facilities. This is dependent on a 
vague farm definition based on ownership structure and location--not 
risk. FDA has acknowledged industry's concern with requiring facilities 
that perform the same operations to follow one of two different rules, 
and has indicated that it intends to enforce the Preventive Controls 
for Human Food rule on these facilities in a way that is as consistent 
as possible with what will be required under the Produce Safety rule.
    However, with less than 5 months before the Preventive Controls for 
Human Food rule is implemented in September, the guidance promised by 
FDA on what packinghouses will actually be required to do has yet to be 
released. Curriculum developed to comply with training requirements in 
the rule does not address the realities of packinghouse operations, and 
individuals with decades of food safety experience within the 
industry--and therefore who would be most likely to be able to explain 
how the rule should be implemented in produce packing operations--are 
being turned away as trainers because they do not have a degree in 
education or science. Questions submitted to FDA's ``Technical 
Assistance Network'' on issues as basic as which rule a facility falls 
under are being answered months later with the non-answer of ``your 
question will be addressed in guidance.''
    If you think this sounds confusing, imagine how packinghouse 
operators are currently feeling.
    Confusion also abounds regarding the Produce Safety rule. For 
example, the rule requires growers to conduct a certain number of tests 
for each water source, but fails to define what ``each water source'' 
means, or where within the water system growers are expected to collect 
the sample.
    While this rule will not begin taking effect until 2018, guidance 
and training is needed as soon as possible for several reasons: first 
of all, the rule requires that growers establish a Microbial Water 
Quality Profile prior to the rule's enforcement date by conducting 20 
tests at or near harvest over a period of 2 to 4 years. Should growers 
wish to take advantage of spreading these costly tests over the full 4 
years, they would need to start testing in 2016. In the case of 
cherries, these tests would need to begin only a few weeks from now.
    Second, many private food safety audit schemes our growers and 
packers must comply with (as required by retailers) are already 
beginning to incorporate the Produce Safety rule requirements into 
their programs. Essentially, this rule is now considered by the private 
marketplace to be the baseline food safety standard for produce, and 
growers and packers will be required by their customers to comply long 
before the dates outlined in the rule.
    Third, the rule is long and complex, and growers and packers will 
need time to understand its requirements and make the necessary changes 
to their operations.
    The bottom line is that our growers and packers need guidance, 
education, and answers as soon as possible, in order to have any chance 
of complying with these costly and confusing regulations--which are now 
the law of the land--in the timeline provided.
    Once again, thank you for the opportunity to come before you today. 
I am happy to answer any questions the Subcommittee may have.

    The Chairman. Thank you, Ms. Woods. Now, you are a former 
staffer, right?
    Ms. Woods. Yes, I am.
    The Chairman. Is this your first time testifying in front 
of this----
    Ms. Woods. Yes, it is.
    The Chairman. How does it feel on the other side?
    Ms. Woods. It is a very different view.
    The Chairman. You can tell Doc Hastings he can still show 
his face around here once in a while. We miss seeing him.
    Ms. Woods. I will let him know that, sir.
    The Chairman. Not enough for him to come back. Welcome, and 
thank you for your testimony.
    Ms. Woods. Thank you very much.
    The Chairman. Up next, a gentleman, he and I have been on 
the same schedule--we were together yesterday and over the last 
few weeks--my good friend, the President of the Illinois Farm 
Bureau, Mr. Rich Guebert. Rich, go ahead and give your 
testimony.

        STATEMENT OF RICHARD L. GUEBERT, Jr., PRESIDENT,
ILLINOIS FARM BUREAU; MEMBER, BOARD OF DIRECTORS, AMERICAN FARM 
               BUREAU FEDERATION, BLOOMINGTON, IL

    Mr. Guebert. Thank you, Chairman Davis, Ranking Member 
DelBene, and the Members of the Subcommittee. Thank you for the 
opportunity to provide testimony to you here today.
    I am President of the Illinois Farm Bureau and pleased to 
testify on behalf of both the Illinois Farm Bureau and the 
American Farm Bureau Federation. My wife, Nancy, and I along 
with our son, Kyle, operate a corn, soybeans and wheat farm in 
Randolph County.
    As we got down to planting corn last week and the week 
before, a number of thoughts came to mind, including the fact 
that we are planting a crop that will most likely return a 
price below the cost of production. I recently went back 
through our records, and a few things jumped out at me. In 
1985, it cost $110 in inputs for an acre of corn, not counting 
land costs. This year I estimate that could well be around $475 
per acre. Our seed costs averaged $72 for a bag of seed corn in 
1985, and this year it will average a little over $340 per bag. 
Nitrogen has increased from $150 to $625 a ton. While some 
things are better like interest rates and fuel prices, Illinois 
Farm Bureau farm management reports that over the past 4 years, 
farm income has dropped six percent per year while costs have 
fallen at \1/2\ that rate. In fact, indexed to inflation, the 
economic return for Illinois farmers after family expenses is 
currently at its lowest level since 1972.
    One thing hasn't changed: farming is still a risky 
business. To give you a personal example, we farm in the 
Mississippi River bottoms about 50 miles south of St. Louis, 
and in 1993, our family planted 1,750 acres of corn, soybeans 
and wheat, and later that year the devastating foods devastated 
our crops and we harvested only 17 acres that fall.
    It is tough to recover from something like that but 
frankly, programs like Federal crop insurance, commodity 
programs that are there to assist to recover from weather-
related issues and disasters and multiple-year price declines, 
I can't imagine what farming, food production or food prices 
would be like in the absence of these essential programs.
    But I want to touch more broadly on the subject of the 
hearing and the factors of cost of production. Some of these 
are positive such as changes Congress has enacted affecting 
covered farm vehicles, improvements to our waterway systems, 
helpful improvements that will affect agriculture drivers and 
shippers. Others are works in progress like the new Food Safety 
Modernization Act regulation where we are hopeful Federal 
regulators would take into account agricultural needs. We also 
hope EPA will move forward with its pending proposal to extend 
Dicamba and Dicamba-tolerant soybeans and cotton, and we 
welcome EPA's support to state-managed pollinator protection 
plans like the one we are developing in Illinois which utilizes 
DriftWatch to help beekeepers and farmers communicate and 
cooperate more efficiently.
    Unfortunately, the list of things that increase our costs 
are even longer but there are a few at the top of the list that 
are most important and most urgent. After all the good work 
that this Committee did to past the Safe and Accurate Food 
Labeling Act, the Senate has refused to pass the bill. Farmers 
across the country and others are increasingly anxious about 
the impact of mandated Federal labeling of GMO foods. We hope 
you will talk to your Senate colleagues and urge them to pass 
this bill.
    The H-2A program is increasingly important to fruit and 
vegetable growers but it is an economic and bureaucratic 
nightmare for growers. Both the U.S. Department of Labor and 
the U.S. Citizenship and Immigration Services are causing 
unnecessary processing delays, and both agencies could make the 
program more efficient. They could start improving it now.
    Come this January, a new EPA rule will grant legal rights 
to anyone showing up at a farmgate claiming to be a designated 
representative of a worker from that farm. We thank the Members 
of the Committee for leading support of H.R. 897, a bill that 
would assure farmers that when they lawfully apply pesticides, 
they are not subject to Clean Water Act permit. Unfortunately, 
the Senate has failed to pass this bill but we are still 
looking for opportunities to enact it this year.
    EPA's new spill prevention rules will undoubtedly impose 
new costs on farmers and ranchers as they comply with the 
regulation containment and prevention requirements, and there 
are other issues as well. The Department of the Interior's 
Sage-Grouse Plan will undoubtedly affect farming and ranching 
operations out West, particularly for those ranchers with 
grazing allotments on public land.
    Mr. Chairman and Members of the Committee, I appreciate 
this opportunity to testify and to share with you some of the 
most pressing issues today facing farmers, and I am pleased to 
answer your questions. Thank you.
    [The prepared statement of Mr. Guebert follows:]

Prepared Statement of Richard L. Guebert, Jr., President, Illinois Farm
 Bureau; Member, Board of Directors, American Farm Bureau Federation, 
                            Bloomington, IL
    Chairman Davis, Ranking Member DelBene, and Members of the 
Subcommittee, thank you for this opportunity to provide testimony to 
the Subcommittee as you focus on the costs of agricultural production 
and factors that have an impact on those costs. My name is Richard 
Guebert, and I am President of the Illinois Farm Bureau. I am pleased 
to testify this morning on behalf of both Illinois Farm Bureau and the 
American Farm Bureau Federation.
    My wife, Nancy, and I with our son, Kyle, operate a corn, soybean 
and wheat farm in Randolph County. As we got down to planting corn last 
week, naturally lots of thoughts raced through my head, including the 
stark fact that we are planting a crop that will most likely return a 
price below our costs of production. Just in case, like any farmer I 
check the markets--regularly. At times when I'm ready to sell, I may 
check the markets 15 or 20 times a day.
    We're not alone. My neighbors and other farmers I represent across 
the state are faced with the same reality. Last year was a great 
production year in Illinois, but the dollar has been strong. Exports 
are down, and competitors in Brazil and Argentina seem lately to have 
the upper hand.
    As I reflect on changes in farming I've seen over the years, 
commodity prices used to be more predictable. They were primarily 
influenced by regional and national factors. It is a world market today 
with much greater volatility. Just in the past 2 weeks we've seen a 
$1.30 a bushel increase in soybean prices because of rain during 
harvest in Brazil. And then overnight on April 22 a drop of 22 a 
bushel. Farmers and ranchers are price takers whether on the input or 
commodity side of the equation.
    I recently went back through my records and discovered that in 1985 
it cost $110 in inputs for an acre of corn, not counting land costs. 
This year I estimate it will cost $475. Our seed costs averaged $72 a 
bag in 1985. This year it will average $340 a bag. We are paying for 
the technology that makes us more productive given what Mother Nature 
throws at us. Despite some resistance--especially in our area of the 
state--our ability to control weeds is still far better than it ever 
was in the past. And I can tell you that our environment is better for 
it.
    Recently, we had some excellent years. Kyle and I invested in new 
equipment and a new grain storage system. In some respects, some of our 
costs like rent, seed, and machinery seem to follow the market. They go 
up, up, up. It seems when prices go down, our input costs--what we pay 
for land, seed, fertilizer and crop protectants--don't fall quite as 
fast. Again, comparing to when I started in farming in the mid 1980's, 
nitrogen has increased from $150 to $625, DAP and urea costs are 3 
higher. Fortunately, interest rates are much lower. I was paying 15-18% 
on my loans in the 1980s. While it's not our biggest cost, the recent 
and sustained drop in fuel prices has also helped.
    I also spend significantly more time on filling out paperwork for 
permits, licenses, and applications.
    In 1985 when I started farming, 400 acres could support a family. 
Today our farm is much larger and supports three families. Revenue from 
our farm goes to pay down debt and pay for inputs. We need to pay for 
repairs--while hoping to make improvements in equipment, technology and 
infrastructure.
    All told, Illinois Farm Business Farm Management reports that over 
the past 4 years, farm income has dropped six percent a year, while 
costs have fallen at \1/2\ that rate. Over the last 18 months we have 
seen our working capital erode over 25%. Our equity is fading into the 
sunset. Illinois farmers are paying taxes this year on a more valuable 
2014 crop. Some are faced with the challenge of paying big tax bills at 
the same time they are buying inputs. Indexed to inflation, the 
economic return for Illinois farmers after family expenses is currently 
at its lowest level since 1972.
    All of this has proven to be a very steep learning curve for a new 
generation of younger and less experienced farmers--like my 40 year old 
son Kyle--who entered the business when times were better.
    When I started farming, I borrowed money over the phone. Not today. 
We know that farm lenders are being closely monitored. In turn, they 
pay close attention to their farmer customer's financial situation. 
Lately there has been some reluctance to lend to younger farmers who 
have not built up any cash reserves. It hasn't been a good time to get 
into corn and soybean farming and that does not bode well for 
agriculture.
    To the consumer, it might seem reasonable that when prices fall, 
farmers should back away and plant less. That's counterintuitive for a 
farmer. Our job is to produce. We have fixed costs to cover. And if we 
give up land we rent, we may never get it back.
    We are eternal optimists. At this time of year, as we sit in the 
planter, each of us hopes that we will produce our best crop ever.
    While farming has changed over the past 35 years, one thing hasn't 
changed. Farming is risky, riskier than most enterprises. I farm in the 
Mississippi River bottoms. In 1993 we planted 1750 acres of corn, 
soybeans and wheat. We invested in inputs to raise the crop. And 
because of flooding we harvested 17 acres in the Fall of 1993. It is 
tough to recover from that.
    In fact, we would not have survived without programs like Federal 
crop insurance and commodity programs. The farm safety net doesn't make 
us whole, nor should it. But it does help us recover from weather-
related disaster and multi-year price declines. Crop insurance and 
commodity programs help farmers manage risk, recover some costs and get 
next year's crop planted while protecting consumers from sticker shock 
at the grocery store. I can't imagine what farming, food production or 
food prices would look like in the absence these essential programs.
    But today, I want to speak about the challenges and opportunities 
that affect farmers and ranchers across the country, not just my own 
state. We are facing stiff headwinds on commodity prices, as AFBF 
President Zippy Duvall testified before the General Farm Commodities 
Subcommittee just 2 weeks ago. He laid out those challenges in detail. 
Naturally, no individual farmer or even a large organization like Farm 
Bureau can dictate or predict what will happen in markets. So we are 
continuing to do what we have done for generations--adapting to more 
challenging conditions, using the resources and tools at our command to 
make the most of our investments and provide high quality food and 
fiber to American consumers and others around the world.
    At heart, every agricultural producer is a risk-taker. If they're 
not, they should probably be doing something else. Our livelihood isn't 
guaranteed. We don't expect it to be. But when it comes to legislation 
and regulations, we would ask that policymakers follow the old adage: 
Primum non nocere. ``First, do no harm.''
    There are bright spots now in Federal policymaking, and I would 
like to touch on those first and to express our appreciation for the 
help and support of the Members of this Committee. Then, I would like 
to make you aware of issues where we are facing and potentially costly 
challenges.
Policies that Have Helped or Can Help to Restrain Production Costs
Transportation
    In recent years, Congress has taken some significant steps on 
Federal transportation policy that are important to producers. These 
efforts have been bipartisan, and we want all the Members of the 
Committee to accept our gratitude for their hard work in making 
important changes to Federal transportation policy. These include:

   Regulatory relief for covered farm vehicle drivers in MAP-
        21.

   A WRRDA bill that made significant improvements to our 
        waterway systems.

   An increase in revenues for the Inland Waterway Trust Fund.

   Additional regulatory clarity for agricultural drivers in 
        the FAST Act.

   The Surface Transportation Board (STB) Reauthorization Act 
        that updated the STB that we hope will benefit all shippers and 
        agricultural producers particularly.

    Unfortunately, in the energy and transportation field we are 
increasingly concerned about the reluctance of EPA to fully implement 
the Renewable Fuel Standard (RFS). Renewable fuels have been a 
tremendous success story for the nation as a whole and to rural 
economies in particular. Thousands of farmers and individuals in rural 
communities have invested millions of dollars in infrastructure to meet 
the goals Congress has set out. The EPA should adhere to Congress' 
intent and fully implement the volumes specified in law.
Food Safety Modernization Act
    Providing a safe food supply is a unified goal for farmers across 
the country and we believe farmers share the responsibility to work to 
meet that goal. Farm Bureau worked actively with the Food and Drug 
Administration as it developed its regulations to implement the Food 
Safety Modernization Act. We were heartened that, in many ways, FDA 
actively engaged the farming community. While the rules are not 
perfect, we do believe that FDA attempted to find solutions that 
balanced the need for public safety with farming realities. Regardless, 
FSMA requirements certainly place increased costs and burdens on 
farmers and open up farms to yet another Federal agency. We will 
continue to work with FDA in the implementation of FSMA so that we see 
limited increases in production costs and the benefit of a safer food 
supply.
Crop Protection
    While Farm Bureau is concerned about EPA's approach on some crop 
protection tools, we are encouraged that EPA is now soliciting public 
comment on the use of Dicamba formulations for deregulated Dicamba-
tolerant soybeans and cotton. Weed and pest management for farmers is 
an ongoing challenge, particularly as some weeds develop resistance to 
common herbicides. There is a growing need for new technologies to 
counteract weed resistance, and Farm Bureau supports EPA registration 
of these uses of Dicamba without onerous restrictions relating to tank 
mixes or buffer zones.
State Managed Pollinator Protection Plans (MP3s)
    AFBF policy supports the continued use of neonicotinoids as well as 
the development and implementation of state-managed Pollinator 
Protection Plans (MP3s). These plans hold the prospect of greater 
communication between growers and beekeepers--an outcome that could 
help the bottom line for beekeepers while allowing crop farmers to 
manage their lands effectively.
Research
    Agricultural research is critically important to solving some of 
society's greatest challenges, including improving human health, 
maintaining our global competitiveness and enhancing our national 
security. While it is true that a dollar of research money spent today 
might not translate immediately to the bottom line of farmers, these 
are truly investment dollars. They make a difference, and a vigorous, 
effective research program holds the promise of keeping more farmers 
more productive in the future.
    In this past year alone, the vulnerability of our food system and 
the necessity of additional research was put on stark display with an 
estimated $3.3 billion in economic losses from a new strain of the 
avian flu and unprecedented drought in places like California. Yet 2015 
also showed the strength of our agricultural research system with the 
development of vaccines and new products like the allergy-free peanut. 
These innovative discoveries are just the tip of the iceberg of what 
agricultural science and technology researchers can deliver with 
sufficient support.
    Apiculture is a sector of agriculture that clearly needs research 
support. The long-term health of the managed honeybee sector has been 
the focus of much attention over the last several years. Farm Bureau 
members include not only dairy producers, corn and soybean farmers, 
fruit and vegetable growers but beekeepers as well. We are working to 
protect their interests and want to do all we can to help the 
beekeeping industry meet the challenges it currently faces.
    As the President's Task Force mentioned last year, overwintering 
losses for beekeepers have been exceptionally high for a number of 
years. While some activists wish to pin the blame entirely on 
pesticides (especially neonicotinoids), the science and the facts point 
to other factors--most prominently the Varroa mite--that most likely 
have a greater impact on hive health. Farm Bureau supports ongoing 
research to assist the honey bee industry, and it is unquestionably 
true that a healthy beekeeping industry is important to agriculture and 
it affects some farmers' bottom line. For example, California almond 
growers are critically dependent on pollination services from managed 
honey bees to pollinate their crop; estimates are that approximately 
two million hives annually support the almond industry in California. 
And the price of pollination services, while it has moderated in more 
recent years, has risen appreciably over the last decade.
    American agriculture needs a healthy bee industry and we should all 
continue to work constructively to surmount the challenges beekeepers 
face while assuring that farmers retain access to critically important 
pesticides.
    In fact in Illinois, we are working hard with our Department of 
Agriculture and other stakeholders to begin the process of developing a 
Pollinator Protection Plan. We feel strongly that farmer stakeholders 
should be at the table and that we collectively arrive at reasonable 
solutions that protect both crops and pollinators. We in Illinois will 
continue to promote communication between neighbors through old 
fashioned face to face conversations, as well as with technology such 
as DriftWatch, an online platform for farmers and beekeepers to share 
location information. We will also continue to educate our members on 
the pesticide misuse complaint process through our Illinois Department 
of Agriculture, as well its apiary inspection process.
Policies that Can Increase Costs to Growers
    Unfortunately, the number of issues where policies actually 
increase cost pressures are more numerous. But I want to draw the 
Subcommittee Members' attention to a few of the most urgent.
Mandatory Labeling of GMO foods
    Probably our greatest concern at the moment is the failure of the 
Senate to take up and pass legislation to prohibit mandatory labeling 
of GMO foods. This failure may well lead to a patchwork of state 
labeling requirements that will be costly and difficult to sort out. If 
Congress cannot solve this problem, there is no question the long-term 
outlook for farmers is higher input costs, potentially lower yields, a 
more challenging environment in controlling pests--and higher costs for 
consumers.
    Farm Bureau is tremendously grateful to the bipartisan leadership 
of this Committee in crafting H.R. 1599, the Safe and Accurate Food 
Labeling Act, and steering its passage through the House. 
Unfortunately, this issue has been stalled in the Senate by our 
opponents. No one who supports American agriculture should pretend that 
mandatory Federal labeling of GMOs will not have a significant impact 
on our bottom line in the future. But let it also be clear that a 
smattering of state labeling requirements is not an acceptable outcome 
either. It is extremely disappointing that some individuals claiming to 
be seeking `compromise' are pressing for policies that will stifle 
innovation, hurt agriculture and raise consumer food costs.
H-2A Processing Delays
    Although an increasing number of fruit and vegetable growers use 
the H-2A program, it still accounts for less than ten percent of hired 
labor in the agricultural sector. A major factor in this low 
utilization rate is the high cost of the program. Typical of the 
unworkable nature of the program are the delays faced by growers due to 
inefficiencies in the U.S. Department of Labor, which processes labor 
certifications. These delays can be devastating to a grower, who 
depends on his workers being present and available to plant, tend, and 
harvest his or her crops.
    Additionally, we have seen increased delays at the United States 
Citizenship and Immigration Services (USCIS) processing center. Both 
agencies could make the program more efficient but have so far declined 
to do so. For example, both agencies refuse to process key forms and 
documentation electronically, insisting instead that these documents be 
sent by standard mail--a process that often causes complications and 
delays that could be easily avoided.
Worker Protection Standards Rule (WPS)
    Last year, EPA imposed a wide range of new obligations on farmers--
more frequent training, record-keeping, designation of `applicator 
exclusion zones' and others--nearly all of which will mean greater 
costs for producers with very little, if any, real benefit for workers 
(in fact, EPA said repeatedly in its original proposal that it could 
not quantify the benefits of many of the new demands it was proposing). 
Even more significantly, however, EPA made a last-minute insertion in 
the rule that could have very pernicious impacts on growers.
    Under the new EPA rule, anyone who shows up at a farm gate claiming 
to be a `designated representative' of a worker can demand a farmer's 
pesticide use information merely by showing a signed piece of paper 
that is supposedly signed by a worker or former worker. The `designated 
representative' can then turn around and publish that information in 
the community, put it online or even start up a petition against the 
farmer.
    We see great potential liability in this provision, with no added 
protections for workers. And we are greatly distressed that EPA did not 
share that provision with this Committee, as it was required to do by 
law. But we want to thank Chairman Conaway and Ranking Member Peterson, 
who are now working on this matter and we hope it can be resolved.
Property Rights and Grazing
    While Illinois might not have much grazing of cattle on public 
land, our colleagues out west have pointed out two significant Federal 
initiatives that could impose tremendous new costs on western growers:

   The decision by the Department of the Interior not to list 
        the Sage-Grouse under the Endangered Species Act is bringing 
        with it wholesale changes to Federal land planning in the West. 
        For ranchers who have grazing allotments and whose livelihood 
        is dependent on public lands, we have great anxiety that this 
        step by DOI could mean greatly increased costs to producers.

   Until it was stopped by a Federal court, the U.S. Forest 
        Service had proposed requiring some holders of Federal permits 
        to transfer their state-adjudicated water rights to the USFS. 
        Although the Forest Service has withdrawn the proposal, we 
        remain concerned that the Federal Government, through the USFS 
        as well as the Bureau of Land Management, could revisit this 
        matter and attempt to coerce permit holders, such as ranchers 
        who graze on public lands, to hand over their own property 
        rights under threat of losing their permit.
National Pollutant Discharge Elimination System (NPDES) Permit for 
        Pesticide Applications
    Today farmers are facing a nearly unprecedented situation in which 
a normal pesticide application that is perfectly legal under FIFRA can 
be challenged by environmental groups as a violation of the Clean Water 
Act. The House of Representatives passed legislation (H.R. 897) to 
correct this regulatory `double-jeopardy' and we commend the House 
Agriculture Committee, which played a major role in shepherding this 
bill to a strong bipartisan vote. We are working to have the Senate 
take up the House bill. If we don't succeed, farmers could face 
potential legal jeopardy and uncertainty over their ability to manage 
their crops to prevent infestation of their crops from pests or 
disease.
    In Illinois, we have a General NPDES permit for pesticide 
application. In addition, we have general pesticide applicator 
certification and licensing requirements where farmers must take 
classes and pass exams. Farm Bureau supports the certified applicator 
process because we view it as one way to assure society that people who 
handle these products are trained and knowledgeable. Frankly, that's 
one reason why Farm Bureau is concerned about the changes EPA is 
proposing to the certified applicator program. We are not convinced the 
changes they are requiring--in mandating continuing education credits 
and increased licensure requirements--will result in meaningful 
changes; yet we know they will increase costs and put a real strain on 
extension services and others who often provide training. It's 
important to note the several different agencies, both state and 
Federal, and statutes that impact the single act of applying 
pesticides.
Spill Prevention and Countermeasure (SPCC) Rule for Farms
    Farmers are now facing higher costs due to EPA's new SPCC rule as 
it applies to farms. Storage of oils, including fats, is captured by 
these regulations and the proposed revisions will broaden the 
regulation to more agricultural operations. These regulations impose 
secondary containment requirements, burdensome paperwork requirements, 
and penalties associated with failure to comply. Like the NPDES rule, 
the SPCC will also be directly affected by EPA's WOTUS rule should it 
be implemented.
Pesticide and Pollinator Issues
    As mentioned earlier, AFBF is working actively to further the 
interests of the beekeeping industry. In this effort, we want crop 
producers and beekeepers to work together in a mutual effort to assure 
each other's success. In fact in Illinois, we are working hard with our 
Department of Agriculture and other stakeholders to begin the process 
of developing a Pollinator Protection Plan. We feel strongly that 
farmer stakeholders should be at the table and that we collectively 
arrive at reasonable solutions that protect both crops and pollinators.
    Unfortunately, some activists want to divide us from each other 
because they have a totally separate agenda--which has nothing to do 
with agriculture but everything to do with eliminating pesticides. We 
in Illinois will continue to promote communication between neighbors 
through old fashioned face to face conversations, as well as with 
technology such as DriftWatch, an online platform for farmers and 
beekeepers to share location information. We will also continue to 
educate our members on the pesticide misuse complaint process through 
our Illinois Department of Agriculture, as well its apiary inspection 
process.
    We are concerned that EPA has been reading too many inflammatory 
press releases from environmental groups and not enough science. Just 
in the past year, we have seen the agency take a number of actions that 
are troubling for growers. If the agency continues along this path, we 
are greatly concerned that it will eventually impose higher and higher 
costs on producers by depriving them of the crop protection tools they 
need. To cite just a few examples:

   When the 9th Circuit recently invalidated the registration 
        of sulfoxaflor, EPA essentially said it would not defend its 
        own decision to register the pesticide.

   EPA abruptly withdrew its approval of the Enlist/Duo 
        herbicide on corn and soybeans and has delayed the approval 
        review of that same chemistry for cotton.

   In November, EPA proposed to revoke all tolerances for 
        chlorpyrifos--and despite its reliance on questionable 
        epidemiology studies that are not publicly available and 
        overwhelming requests from the stakeholder community, the 
        agency refused to extend the comment deadline past January 5. 
        Last week, EPA held a Science Advisory Panel (SAP) despite 
        requests from Farm Bureau and others to postpone the panel.

   EPA is under increasing political pressure to use agenda-
        driven science to limit use and pesticide availability under 
        the guise of protecting pollinators--despite the fact that the 
        primary culprit lies elsewhere. In fact, in the ``Report on the 
        National Stakeholders Conference on Honey Bee Health'' held in 
        2012, it was noted that ``The parasitic mite Varroa destructor 
        remains the single most detrimental pest of honey bees, and is 
        closely associated with overwintering colony declines.''
Health Care Costs
    Fruit and vegetable growers are heavily reliant on seasonal workers 
to harvest their crops. For those over the large employer threshold in 
the Affordable Care Act (ACA), the requirement to offer and administer 
health insurance increases the cost of doing business.
    Although the ACA grants an exemption for small seasonal employers, 
the rules are burdensome and confusing. The definition of a seasonal 
worker used to determine if an employer is required to offer health 
insurance is 4 months. The regulation that determines if a seasonal 
employee is considered full time and therefore must be offered coverage 
is 6 months.
    Farm Bureau believes as long as the ACA remains in place, it should 
be made as easy as possible for employers to comply with the law. This 
is why AFBF supports H.R. 863, the Simplifying Technical Aspects 
Regarding Seasonality Act (STARS), a bipartisan bill that would create 
a single definition for seasonal workers and seasonal employees in 
order to streamline and reduce compliance costs associated with the 
Affordable Care Act.
Policies that Can Affect Future Costs
Future Ag Innovation, Part 340 and OSTP Review of the Coordinated 
        Framework
    To remain internationally competitive and lead the world in 
achieving the productivity and efficiency gains required to meet the 
food, fiber and fuel demands and environmental challenges of the 
twenty-first century, U.S. agriculture must stay on the cutting edge of 
technology.
    Therefore, Farm Bureau membership has a strong interest in 
maintaining and improving access to new input technologies, in 
fostering continued public confidence in the U.S. regulatory system and 
in preserving U.S. access to international markets, all while 
preserving and enhancing the coexistence of diverse crops and cropping 
systems.
    The Animal and Plant Health Inspection Service (APHIS) of the U.S. 
Department of Agriculture (USDA) recently requested public comment 
concerning the notice of intent (NOI) to prepare a programmatic 
environmental impact statement in connection with potential changes to 
the regulations regarding the importation, interstate movement, and 
environmental release of certain genetically engineered organisms. We 
are supportive of APHIS's efforts to take a hard look at its 
regulations, to ensure that they are up-to-date with the best-available 
science and utilize the more than 20 years of experience APHIS has in 
reviewing the safety of these crops. However, because the options APHIS 
is considering include potential major departures from the current 
regulatory framework, it is critically important that APHIS does not 
lose sight of the importance of agricultural innovation.
    In agriculture, the value of research, science, and innovation 
cannot be underestimated given serious challenges that lie ahead. 
Between today and the year 2050, farmers will be required to grow twice 
as much food to feed a rapidly growing global population. The U.S. 
Government must consistently promote policies that encourage 
agricultural innovation to enable American farmers to confront serious 
food security and environmental challenges for U.S. agriculture to 
remain competitive.
    Biotechnology has demonstrated significant potential for improving 
food and energy security, enhancing food safety and nutrition, and 
making agricultural and energy production systems more sustainable. The 
current set of biotechnology-derived plants have an impeccable record 
of safe use. During 30 years of research on these plants and 15 years 
of their wide-scale production globally, not a single instance of 
actual harm to human health, animals, or the environment has ever been 
demonstrated. In the United States, more than 90 percent of corn, 
cotton, canola, soybeans, and sugar beets grown in our soil contain at 
least one biotechnology-derived trait.
    For 2 decades, the United States has been viewed as the global 
leader in agricultural biotechnology innovation. Our past success was 
attributable, in part, to a science-based regulatory system, known as 
the Coordinated Framework for the Regulation of Biotechnology that has 
facilitated the development of safe and beneficial products. An 
appropriately-designed, well-functioning regulatory system, working in 
conjunction with government policies that encourage investment in 
agricultural innovation, has provided U.S. farmers and ranchers with 
the tools they need to produce the safe, affordable food supply we 
enjoy today.
    Despite the impressive record of safety and accumulated body of 
scientific knowledge about the technology, the requirements and costs 
of obtaining regulatory clearances for biotechnology products have 
grown and at times have been burdensome and unpredictable, subject to 
delay, and duplicative.
    Irrespective of the cause, the loss of predictability and 
timeliness in the U.S. regulatory system carries a high price that is 
paid by many. As timelines lengthen and the rate of approval of safe GE 
crop products slows, the potential benefits of the new crops are 
withheld from U.S. farmers and society at large.
    Farmers need access to new tools for controlling weeds, for 
withstanding insects and plant pathogens, and for coping with 
environmental stresses such as drought, in order to maintain a 
sufficient global food, fiber and fuel supply. The agricultural biotech 
industry employs tens of thousands of individuals across the country 
and invests millions of dollars each day to develop new technologies 
that farmers can use to help feed a growing global population.
    Recouping the costs of agricultural biotech product discovery and 
development, which currently averages $136 million per product, is 
difficult under the best of circumstances. The direct cost of biotech 
product development is exacerbated by delayed product approval 
timelines and the trend of increased legal costs associated with 
environmental litigation, diminishing the incentive for further 
investments in product discovery and agricultural innovation, 
especially for small acreage crops. Furthermore, the opportunity costs 
from not using biotechnology tools to improve these crops are 
disproportionately born by small farmers and consumers.
    The market for agricultural biotech products is global and growers 
in other countries have adopted biotech crops as quickly and decisively 
as U.S. growers because they are eager to reap the economic and 
environmental benefits provided by GE crops. Not surprisingly, 
countries with consistent, transparent, science-based regulatory 
systems that drive predictable decision-making processes provide 
opportunities for growers to gain access to new biotech products and 
are thus attractive to agricultural biotech companies looking to recoup 
their R&D investments.
    Agricultural biotech companies can and do seek regulatory approvals 
to sell biotech seeds in other countries. However, U.S. farmers are 
totally dependent on the functionality of the U.S. regulatory system to 
support their current and future needs for breakthrough technology 
traits to support their farming operations. U.S. growers cannot retain 
their prominent position in the increasingly competitive, global 
agricultural commodity markets if growers are denied access to the best 
available products, which they clearly need and demand. Regulatory 
hurdles at U.S. agencies that slow reviews for much-needed, safe 
products, such as new herbicide tolerant traits, companion herbicides, 
and new pest resistance traits, ultimately put U.S. commodity producers 
at a competitive disadvantage relative to growers in other countries.
    Regulatory hurdles at U.S. agencies have also deterred the 
diffusion of proven traits into small acreage crops and have severely 
impeded the development of new, innovative ``second generation traits'' 
with broad consumer and environmental benefits, such as fresh fruits 
and vegetables that last longer, staple crops with improved nutritional 
value, and animal feed that would reduce the amount of pollution.
    A series of studies charting the diffusion of proven traits and 
research and development of new traits has shown that the loss of 
interest in developing these products is attributable to disincentives 
posed by the regulatory system. In addition, a report from the 
President's Council of Advisors on Science and Technology has also 
acknowledged the detrimental effect of the current regulatory system on 
product development by public-sector scientists and small companies.
    Breeders have historically integrated the latest discoveries in 
biology and genetics into their methodologies to fully exploit 
existing, and to induce new, genetic variation. Some of the latest 
breeding methods provide new ways to make similar genetic changes. They 
can also make very specific changes in existing genes in a way that 
mimics the changes that occur in nature. By applying these newer 
methods, breeders are more efficient and precise at making the same 
desired changes that can be made over a much longer period of time 
through earlier breeding methods.
    Reviews of the regulatory system, broadly, and proposed changes to 
specific USDA regulatory functions must be science based. The level of 
agency oversight for products of biotechnology ought to be 
proportionate to the actual risk posed by the organism. Policies should 
promote innovation and advancements in plant breeding throughout the 
agricultural economy--in both public and private-sector settings. 
Minimizing unnecessary regulation will allow small and medium sized 
companies and universities to move forward in developing innovative 
products for specific regions of the country.
    Definitions of biotechnology that are too broad don't make sense 
scientifically and will also stifle innovation by (1) erecting pre-
market regulatory barriers that are difficult for small and medium 
sized companies and universities to overcome; and (2) classifying newer 
breeding methods as ``Genetically Modified Organisms'' in the eyes of 
regulators and the public (thus making it more difficult for them to be 
commercially acceptable for a broad range of crops).
    We support a regulatory environment that will enable all kinds of 
plant breeders, including those who grow fruits and vegetables, to 
utilize the broad range of modern breeding methods and advance 
innovative products to the commercial marketplace without facing 
burdensome or non-risk based regulations and stigma.
    Today, with an increased understanding of genetics, the capability 
to sequence plant genomes and the ability to link a specific gene to a 
specific characteristic, plant breeders are able to improve a plant's 
performance more precisely and efficiently by focusing on the plant's 
underlying genetics. Breeders can make very specific changes in 
existing plant genes in a way that mimics the changes that occur in 
nature.
    The development of any new plant variety requires the evaluation of 
thousands of plants, over many years and many locations. The scrutiny 
breeders routinely apply to new variety development is well established 
and has been the foundation for a food supply that is safe, nutritious, 
and diverse.
    These precise techniques help breeders achieve the same result that 
could be achieved via more traditional plant breeding methodologies. 
``Gene editing'' is one of the more common and important techniques 
being utilized.
    Importantly, the U.S. Government must approach this process mindful 
of international implications. While the regulation of these products 
should be based purely on science, this is an opportunity for the U.S. 
Government to lead an active dialogue with international governments to 
ensure that mutually beneficial policy goals are met.
    Throughout the process of considering a new pre-market agricultural 
biotechnology regulatory system, APHIS should work closely with a broad 
range of scientific experts, stakeholders, and other government 
agencies to clarify, improve, and (as needed) modify and supplement the 
regulatory alternatives the agency is considering before publishing a 
proposed rule, with an eye to improving clarity, transparency, 
predictability, and ease of implementation.
    If I may leave one thought with you today . . . our world 
population continues to grow. Farmers must expand markets through 
exports, new markets like biofuels and expanding our livestock 
production. Trade agreements--like the Trans-Pacific Partnership are 
vital. The world population will continue to grow. American farmers 
have proven time and time again we produce the food, fiber and fuel the 
world needs. Please don't restrict, limit or constrain our ability to 
provide what consumers around the world need.
    Farm Bureau appreciates this opportunity to provide this testimony 
to the Committee and we look forward to working with you on these 
issues in the future.

    The Chairman. Thank you, Mr. President, and great seeing 
you again.
    Up next, no panel on this Agriculture Committee is without 
a Texan, and we are proud to be joined by our Chairman from the 
great State of Texas, Mr. Conaway, here.
    Mr. Dale Murden, the President of the Texas Citrus Mutual 
in Mission, Texas, please feel free to offer your testimony.

   STATEMENT OF DALE MURDEN, PRESIDENT, TEXAS CITRUS MUTUAL, 
                          MISSION, TX

    Mr. Murden. Thank you, Chairman Davis, Ranking Member 
DelBene, Members of the Subcommittee. On behalf of the more 
than 600 commercial citrus growers in Texas, I would like to 
express our appreciation for allowing me to share details about 
some of the challenges facing the United States citrus 
industry. My name is Dale Murden. I am a grower and President 
of Texas Citrus Mutual.
    The Texas citrus industry is comprised of almost 27,000 
across three counties in lower south Texas. We grow more than 
nine million cartons of fresh grapefruit and oranges each year 
and another five million cartons of juice fruit. Citrus growers 
in California, Florida and Texas face a broad range of 
challenges. Like other sectors of agriculture we are 
consistently asked to do more with less. For example, look 
toward the confusion and challenges with the implementation of 
the Food Safety Modernization Act, along with our consistent 
concerns regarding labor needs. However, in my testimony today 
I will focus on pest and disease issues facing growers, which 
threaten our very existence and causes me to wonder if I will 
be in business in another year or so.
    In the last few years, we in Texas have found ourselves in 
not one but three Federal quarantines due to pest and disease 
outbreaks. We are battling Mexican fruit flies once again even 
after it was declared eradicated. We have discovered citrus 
canker, although it was eradicated back in the 1940s. And of 
course, you have all heard about HLB and citrus greening that 
is currently devastating the Florida industry and is now 
prevalent in Texas.
    Simply put, these issues have cost Texas citrus growers 
millions to battle these new issues and more as care costs have 
increased from an average of about $1,400 an acre to well over 
$2,000 per acre just in the last several years. Citrus growers 
in the United States are in need of solutions and Federal 
investments to counter the effects of the many pest and disease 
issues we are faced with.
    I would like to take a minute to highlight several programs 
implemented in the last farm bill that we do feel are making a 
difference. Funds from the farm bill section 10007 program are 
supporting USDA and state partners in their efforts to 
eradicate and find cures for pest and disease issues, the 
Citrus Disease Research and Extension Program under the 
Specialty Crop Research Initiative. They are helping 
researchers develop methods to culture HLB so that it can be 
studied more efficiently. In addition, these funds support 
scientists searching for bactericides that can reduce or 
eliminate the disease in efforts to breed HLB-resistant root 
stocks. Much of the breeding relies on virus-free and 
genetically diverse germplasm, which is maintained at the 
Citrus National Clean Plant Network Centers.
    Another tool that we will increasingly rely on for 
solutions is biotechnology. As USDA moves forward with its 
updates to part 340, I would ask the Committee to be intimately 
engaged. More regulation and the threat of litigation from 
anti-modern ag groups would stifle innovation. If USDA gets the 
updates to part 340 wrong, we will not have a viable ag sector 
in this country. That is how important biotechnology is to the 
future of agriculture.
    When I stop to consider the research and eradication 
activities underway to tackle the serious challenges facing 
citrus, I am reminded of the hard work this Subcommittee and 
your colleagues in the full Committee put in to see the last 
farm bill to completion and want to thank you for those 
efforts.
    As we look forward to the next farm bill, I am also hopeful 
that funds can be made available to rehabilitate some of the 
very aging USDA facilities that carry out much of the work that 
growers like me are counting on. However, recent actions by the 
EPA have done significant harm to our access to the very tools 
USDA and academic scientists suggest we use. In January, EPA in 
collaboration with Health Canada published a preliminary risk 
assessment on imidacloprid regarding the potential for the 
chemistry to have a sublethal impact on bees. EPA chose to put 
out a press release with the lead statement saying the 
assessment shows a threat to pollinators while EPA's partner in 
the assessment, Health Canada, put out a very different 
message, simply stating, ``Regulatory reviews shows slim risks 
to bees from imidacloprid.''
    One of the use patterns highlighted in the EPA's press 
release was foliar applications to citrus and cotton during 
bloom. As a grower of both of these commodities, this was 
especially inflammatory as neither of these crops even use bees 
for pollination purposes much less they didn't consider that we 
don't spray during the bloom. But again, the Agency didn't 
share that fact.
    As a farmer, I know that come next season the same pests 
and perhaps some new ones will be in my fields impacting my 
crop but I have no idea if I will have a product to treat them 
with. As a citrus grower, the risk side of my assessment is 
very high, and the financial benefits of growing food in this 
country continue to dwindle. In short, the United States citrus 
industry as you know it is in extreme trouble.
    Thanks again, Mr. Chairman, for holding this important 
hearing, and for all that you and the Subcommittee are doing. 
We need and appreciate your help.
    [The prepared statement of Mr. Murden follows:]

  Prepared Statement of Dale Murden, President, Texas Citrus Mutual, 
                              Mission, TX
    Thank you, Chairman Davis, Ranking Member DelBene, and Members of 
the Subcommittee. On behalf of the more than 400 commercial citrus 
growers in Texas, I want to express our appreciation for convening this 
hearing and allowing me to share details about some of the challenges 
facing the U.S. citrus industry and many of the small, family-owned 
growers in this country.
    My name is Dale Murden. I am President of Texas Citrus Mutual and a 
farmer. My family and I currently grow citrus, sorghum and raise cattle 
near Harlingen, Texas.
    The Texas citrus industry is comprised of almost 27,000 acres 
across three counties in the Lower Rio Grande Valley where we grow more 
than nine million cartons of fresh grapefruits and oranges each year 
and another five million cartons for fruit juice. Farmgate value of 
citrus is about $100 million per year with approximately $5 million of 
it coming from organic production.
    Citrus growers in California, Florida and Texas face a broad range 
of challenges, from labor shortages to plant pests and diseases, that 
threaten our very existence as an industry. Like other sectors of 
agriculture we are consistently asked to do more with less. Look also 
toward the confusion and challenges with the implementation of the Food 
Safety Modernization Act (FSMA). However, for my testimony today I will 
focus on two challenges facing growers that cause me to wonder if I 
will be in business in another year or 2 or 3--Mexican Fruit Fly and 
Huanglongbing (also known as HLB or Citrus Greening). My intention is 
to illustrate the very real threat these pests and pathogens pose to 
our industry and a contradictory Federal response that leaves growers 
vulnerable.
Mexican Fruit Fly
    The Mexican fruit fly--or MexFly--is native to parts of Central 
America but has now spread across the border and into the lower Rio 
Grande Valley of Texas. The MexFly is a significant problem for citrus 
fruits, which are extremely susceptible to infestation. Economic losses 
result from direct damage caused by the larvae that feed on the fruit 
pulp.
    Eradication efforts have been underway for years. Since 1986, Texas 
has participated in a fruit fly control program headed by USDA-APHIS, 
to eradicate the fruit fly from Texas and the Mexican state of 
Tamaulipas. In 2012 APHIS thought they had successfully eradicated the 
MexFly. However, the pest has recently reemerged and just last week 
APHIS found a mated female MexFly in the Granjeno area of Hidalgo 
County causing them to expand the quarantine zone in that county to 234 
miles\2\.
    The small fruit fly triggers big economic losses. Last year proved 
especially hard for one small grove operation in Brownsville after a 
Mexican fruit fly was found in a neighboring back yard tree. The 
discovery triggered a decision to quarantine the area and the grower 
was no longer able to harvest his crop for the year, leaving thousands 
of dollars of inventory on the trees with no hope for harvest. The 
problem has reached a crisis level, since January 2014. There have been 
fruit fly quarantine areas off and on in the entire citrus growing 
region of South Texas.
Huanglongbing (HLB or Citrus Greening)
    Recent finds of the disease HLB and its vector, the Asian Citrus 
Psyllid (ACP), has growers of all sizes in south Texas extremely 
concerned. There is no known cure for this disease and we've learned 
from the experience of our friends in Florida that its impacts are 
devastating. Since HLB was first detected in Florida in 2005, 
approximately 90% of production acres are now infected and production 
has been cut by more than \1/2\, costing the state nearly $8 billion in 
revenue.
    Greening was first discovered in a Texas grove in January of 2012. 
Three short years later, we have confirmed that trees located in almost 
100 groves valley-wide show signs of the disease. With the extremely 
long latency period of this disease, it is unclear how many more trees 
have already been infected.
    What this has done to growers in terms of dollars is hard to 
quantify. When it was first discovered in Texas, we removed not only 
infected trees, but several of the surrounding trees as well. This 
translated to lost income, and with no replacement trees to plant, it 
also equated to a loss of future income as well. Today, positive HLB 
finds have become so widespread, that most growers have discontinued 
tree removal.
    In a desperate attempt to mitigate the effects of HLB, most growers 
have initiated aggressive psyllid spray programs to try to slow the 
spread of infestation until a cure can be found. This strategy requires 
treatments above and beyond our regular care programs and has increased 
our grove care expenses by almost $400 per acre or 22%.
Developing Solutions
    Considering these challenges, citrus growers in Texas and elsewhere 
are in need of solutions, and Federal investments to counter the 
effects of HLB and MexFly are vital. Surveys, diagnoses, research and 
eradication programs are critical to the survivability of the citrus 
industry in the U.S.
    Funds from the farm bill's section 10007 program, also known as the 
Plant Pest and Disease Management and Disaster Prevention Program, are 
supporting USDA and state partners in their regular surveying for new 
incursions of MexFly and arming them with the tools for its rapid 
identification. These dollars help scientists in devising eradication 
strategies and executing on those strategies, which include a mixture 
of biocontrols and insecticides.
    On HLB, [section] 10007 has been vital to slowing the diseases 
spread by providing the industry with recommendations on the best 
practices for pesticide rotations and treatment timings to take on the 
psyllid. This program has also funded the training of canines to detect 
the disease, which has been shown as the most reliable early detection 
method. Heat treatment protocols identified through [section] 10007-
funded projects show promise in the ability to treat infected stock 
providing temporary relief from the disease.
    Through the Citrus Disease Research and Extension (CDRE) program 
under the Specialty Crop Research Initiative (SCRI) researchers are 
developing methods to culture HLB so that it can be studied more 
efficiently. In addition, these funds support scientists searching for 
bactericides that can reduce or eliminate the disease and efforts to 
breed HLB resistant rootstock. Much of the breeding relies on virus-
free and genetically diverse germplasm maintained at the Citrus 
National Clean Plant Network Centers (NCPN) in Florida and California.
    When I consider the breadth of research and eradication activities 
underway to tackle the serious challenges facing citrus, much of it 
through farm bill programs, I am reminded of the hard work this 
Subcommittee and your colleagues in the full Committee put in to see 
the last farm bill to completion. Thank you for those efforts.
    As we look toward the next farm bill I am hopeful funds can be made 
available to rehabilitate some of the USDA facilities that carry out 
much of the work that growers like me are counting on. The USDA 
scientists, who are doing much of the research, need facilities and 
equipment that are up to the task to allow them to execute on the work 
we expect from them.
EPA Undermining Solutions
    However, while we look to act on the information gleaned from the 
research and look ahead to the tools currently in development, as a 
result of this Committee's investments, we are frustrated by the fact 
that actions of another Federal agency serve to undermine these efforts 
and the associated investments.
    Recent actions by the EPA have done significant harm to our access 
to the very tools USDA and academic scientists are suggesting we use, 
while their public comments erode the consumer's confidence in our 
stewardship of the land we grow on. In January, EPA, in collaboration 
with Health Canada, published a preliminary risk assessment \1\ on 
imidacloprid, a neonicotinoid, regarding the potential for the 
chemistry to have a sublethal impact on bees. The results were 
generally positive with only three use patterns out of the 37 evaluated 
showing some level of concern.
---------------------------------------------------------------------------
    \1\ https://www.regulations.gov/#!docketDetail;D=EPA-HQ-OPP-2008-
0844.
---------------------------------------------------------------------------
    Yet the agency decided to put out a press release with the lead 
statement \2\ saying the assessment ``shows a threat to some 
pollinators,'' and ``indicates that imidacloprid potentially poses risk 
to hives when the pesticide comes in contact with certain crops that 
attract pollinators.'' In contrast, EPA's partner in the assessment, 
Health Canada, put out a very different message resulting in Canadian 
news coverage \3\ stating, ``regulatory reviews show slim risk to bees 
from imidacloprid.''
---------------------------------------------------------------------------
    \2\ https://yosemite.epa.gov/opa/admpress.nsf/0/
63E7FB0E47B1AA3685257F320050A7E3.
    \3\ http://www.agcanada.com/daily/regulatory-reviews-show-slim-
risk-to-bees-from-imidacloprid.
---------------------------------------------------------------------------
    In the same EPA press release the Assistant Administrator for the 
Office of Chemical Safety and Pollution Prevention stated that the, EPA 
is committed, ``to protecting bees and reversing bee loss.'' However, 
the USDA-ARS clearly identifies a long list of issues impacting bee 
health including parasites, pathogens, lack of genetic diversity, 
beekeeper practices, habitat loss and, yes, pesticides, including the 
ones used by beekeepers to manage their primary pest, Varroa mites. Yet 
they place all of their emphasis on agricultural crop uses of 
pesticides.
    In addition, bee losses have already reversed. After hitting a low 
of 2.3 million hives in 2008,\4\ the number of hives have again been 
increasing and the 2015 USDA-NASS Honey Report \5\ showed that there 
were an estimated 2.74 million colonies, the highest number in 20 
years. The EPA is well aware of these facts yet that is not the 
narrative they present to the public.
---------------------------------------------------------------------------
    \4\ http://usda.mannlib.cornell.edu/usda/nass/Hone//2000s/2009/
Hone-02-27-2009.pdf.
    \5\ http://usda.mannlib.cornell.edu/usda/nass/Hone//2010s/2015/
Hone-03-20-2015.pdf.
---------------------------------------------------------------------------
    One of the use patterns that was highlighted as a potential concern 
in the preliminary risk assessment and again in the EPA's press release 
was foliar applications to citrus. But again, the agency did not share 
the fact that with minor tweaks in the timing of the application the 
risk could be easily mitigated. To many growers it seems like the EPA 
is helping to push an anti-pesticide agenda.
    Other products, like flubendiamide (Belt) and sulfoxaflor (Closer), 
both pivotal tools in fighting ACP, are in the process of being 
canceled or have been canceled. In the case of Closer, which I consider 
to be my best option for protecting my trees from HLB, the registration 
was canceled by a court decision. However, despite EPA's ability to 
grant Texas and Florida citrus an emergency use (Section 18) the agency 
has signaled that it will not grant them.
    The hope for more new products to be approved for citrus has 
largely evaporated after the EPA sent letters to the registrants 
instructing them to withdraw new use applications for neonicotinoids. 
The agency made this move without first evaluating the products' risks 
or considering benefits. When we look to the chemicals that have been 
registered and reregistered for decades like the organophosphates, such 
as chlorpyrifos, EPA has proposed to revoke the tolerances.
    As a farmer I know that come next season the same pests, and 
perhaps a new one or two, will be in my field impacting my crop but I 
have no idea if I will have a product to treat them with. As a citrus 
grower, the risk side of my assessment is very high and the financial 
benefits of growing food in this country continue to dwindle.
    Finally, another tool that we will increasingly rely on for 
solutions is biotechnology. As USDA moves forward with its updates to 
Part 340, I ask that the Committee be intimately engaged. Earlier in 
the year, USDA published a Notice of Intent that included suggestions 
on how they might move forward. It included a significant expansion of 
the agency's authority into aspects of plant breeding that have been 
around since the 1950s and never before regulated. Other aspects of the 
NOI appear to infuse greater subjectivity and open up their process to 
outside challenges. More regulation and the threat of litigation, from 
anti-modern agriculture groups, would stifle innovation. If USDA gets 
the updates to Part 340 wrong, we will not have a viable agricultural 
sector in this country. That is how important biotechnology is to the 
future of agriculture.
    I would like to thank you for your attention today on these 
critical issues. In short, the United States citrus industry as you 
know it, is in extreme trouble. We are fighting to preserve our very 
way of life and are doing everything in our power to prevent total 
eradication of an essential U.S. industry.
    Thank you again, Mr. Chairman, for holding this important hearing 
and for all that you and the Subcommittee are doing. I look forward to 
working with you in the future.

    The Chairman. Thank you, Mr. Murden, for your testimony, 
and thanks for being here today.
    Although, his bio says he is from Washington, D.C., he is a 
native Illinoisan also. Great to see you again. The next 
witness is Mr. Jay Vroom, President of CropLife America, and 
another good friend of mine, so please let's hear your 
testimony, Jay.

STATEMENT OF JAY VROOM, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
               CropLife AMERICA, WASHINGTON, D.C.

    Mr. Vroom. Thank you, Mr. Chairman. Good morning. Thank 
you, Ranking Member DelBene, and the entire panel, for inviting 
us to share with you some perspectives on behalf of the members 
of CropLife America. Our members produce, distribute, innovate 
and deliver virtually all of the crop protection tools and crop 
biotechnology traits used by American farmers and literally 
millions of other farmers around the world.
    So I would like to start off by wishing all of us Happy 
Earth Day. So probably most of us think well, Earth Day was 
last Friday. So the whole world picks 1 day out of 365 days 
every year to celebrate Earth Day. Those of us in agriculture 
recognize that Earth Day is every day, certainly in farming, as 
we go about the business of producing an abundant supply of 
food and fiber.
    Twenty years ago this Earth Day, there are a lot of us 
fretting as we had for a number of years about how would we 
ever find a policy path forward to solve the Delaney clause 
that was a pesticide policy matter jurisdiction between this 
Committee and the Energy and Commerce Committee, and yet 
because of the wisdom of Members in this body and eventually in 
the Senate, by August 3, 1996, President Clinton signed into 
law the Food Quality Protection Act, a high-speed policy action 
that was the benefit of a lot of good work that started right 
here in this Committee hearing room. I say that because it 
relates to one of the three things that I want to point out 
here in my oral remarks, and that has to do with the settled 
process that then evolved after passage of the Food Quality 
Protection Act that put in place by EPA and the U.S. Department 
of Agriculture this sweeping new law 20 years ago, and yet last 
week EPA impaneled another Science Advisory Panel to look at 
the information from a New York City epidemiology study that 
claims to have found detections of chlorpyrifos, one of the 
important insecticides in use in agriculture, along with other 
organophosphates when they previously had Science Advisory 
Panels look at the same information in 2008 and 2012 and didn't 
get the answer that EPA was looking for. So, here we are again 
in 2016 with another EPA SAP looking at this epidemiology 
information; and unfortunately, they should act on the same 
kind of basis from this SAP, and that would be that without the 
raw data from this study from New York City where very little, 
if any, farming is done. This tool ought to still be available 
to farmers in the United States.
    I pointed out when I appeared before the SAP last week, Mr. 
Chairman, that your provision in the 2014 Farm Bill still 
hadn't been implemented to provide an agricultural advisory 
committee to EPA's SAP/SAB system. If they had that, maybe they 
would have better input before that even gets started going 
down a path like what we would regard as an unfortunate loss of 
resources in conducting this SAP last week.
    Another point I wanted to make is the International Agency 
for Research on Cancer over 10 months ago brought out a 
stunning finding that the widely used herbicide glyphosate 
might be a carcinogen completely in contrast to every other 
scientific study and government review on the planet for the 
last 30 or 40 years. We believe that there is an agenda in the 
Office of Research and Development at EPA to try to take this 
important tool away from farmers, and if you look at the 
selection of who the U.S. Government representative was to IARC 
that yielded this bizarre finding, I think there is a thread 
there. So we would invite further oversight from this Committee 
as well as the Energy and Commerce Committee to look at some of 
these key questions.
    It is all about the future. We are all pretty well fed in 
this country today but as we know, the population is growing. 
The rest of the world wants to have diets more like what we 
enjoy here in America, and continuing to keep that engine of 
innovation and research, which also helps to lower costs 
eventually for growers but also provide a safe and abundant 
food supply with care to the environment is what we are all 
about. We hope that you will continue to work with all of us in 
agriculture to ensure that that bright future continues to be 
bright for the young people that will take over in the future.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Vroom follows:]

Prepared Statement of Jay Vroom, President and Chief Executive Officer, 
                   CropLife America, Washington, D.C.
    Thank you, Chairman Davis and Ranking Member DelBene, for the 
opportunity to address the Subcommittee on behalf of CropLife America 
and its member companies. CropLife America's member companies, and our 
counterparts at RISE, develop, manufacture, formulate and distribute 
crop protection products for American agriculture and specialty uses 
outside of agriculture, such as for the promotion of public health and 
commercial pest management.
    America's nutritious and affordable food supply depends on the 
availability of safe, effective crop protection products. Our members 
support modern agriculture by looking forward: each year the crop 
protection industry spends hundreds of millions of dollars on research 
and development, with much of that investment going into producing data 
that meets or exceeds the Environmental Protection Agency's (EPA) 
information requirements and requests for pesticides.
    Technology, innovation and adoption is a key factor in advancing 
farmer profitability and rural economies. A recent study commissioned 
by CropLife America showed profitability gains on the farm by the 
careful use of crop protection tools resulted in the annual generation 
of $33 billion in off-farm wages for more over one million American 
workers. (Link to report available here: www.croplifeamerica.org/
economic-impact and CLA statement here: http://www.croplifeamerica.org/
wp-content/uploads/2015/08/CLA-Socio-Economic-Report.pdf)
    CropLife America has a long history of working cooperatively with 
EPA on issues affecting crop protection, human health and the 
environment. But, recently, the crop protection businesses that support 
American agriculture have seen serious deviations from the regular 
order, transparency and scientific integrity of EPA's risk assessment 
based pesticide review process. These departures have made it difficult 
to provide business predictability for producers and users and they 
potentially inhibit investment in more advanced products.
    We hope that today's hearing will help put EPA and agriculture back 
on a path to a more productive dialogue that leads to reasonable, 
timely regulatory decisions and solutions to shared concerns. A return 
to established regulatory process and sound science will help our 
industry support rural communities and improve farm incomes.
    I would like to begin by reminding the Subcommittee of CropLife's 
longstanding support of the House, and now the Senate, effort to 
overturn the 6th Circuit court's requirement for Clean Water Act NPDES 
permits for pesticide applications over or to waters of the United 
States. Strong bipartisan support exists in the House and Senate for a 
legislative fix and pesticide users are well overdue for relief from 
the double regulation of pesticides under this water permit--especially 
those protecting public health from pest borne diseases like West Nile 
and Zika.
    The NPDES permit poses a substantial paperwork burden on operators. 
But, most significantly, it creates legal jeopardy due to the potential 
for citizen suits based solely on mistakes, missed deadlines, or, even 
a neighbors `judgement.' This is especially true now, since EPA's final 
Clean Water Rule expands the jurisdiction of what is determined to be a 
Federal waterbody. If the rule is allowed to be implemented, it would 
substantially increase the number and type of applications that could 
be subject to NPDES pesticide permit coverage and liability. We thank 
the Committee for your bipartisan efforts to unwind this burden and ask 
that you continue to look for vehicles to finally provide relief to 
pesticide users conducting FIFRA compliant applications.
    CropLife America and pesticide stakeholders have every reason to 
believe the current array of our most serious challenges are more about 
political science that actual science. On several occasions, EPA 
officials have alluded to policy decisions being driven by `Internet 
campaigns, social media' and NGO `write-in campaigns.' The result of 
this internal response to external forces is a systemic breakdown in 
established regulatory process within EPA's pesticide program and a 
deviation away from FIFRA risk assessment based science towards 
precaution.
    EPA is shifting focus to not just consider, but instead elevate and 
rely on less robust science, including epidemiological studies and 
models, rather than real-world and verified laboratory data. For 
example, in proposing to revoke the ``tolerance'' for chlorpyrifos--
which could make the product virtually unmarketable--EPA is choosing to 
rely heavily on a decades-old epidemiological study, referred to as the 
Columbia Study, that suggests a correlation between adverse health 
outcomes for some children allegedly exposed to the pesticide in cities 
and for which Columbia will not publicly release the raw data from 
their study. At the same time, EPA is pushing aside the findings of 
long-standing verified laboratory studies and important new 
toxicological data that do exist about chlorpyrifos, all of which are 
available and subject to public scrutiny and demonstrate that the 
product is safe for agricultural use.
    Just last week, EPA impaneled a Scientific Advisory Panel--or SAP--
to once again look at this Columbia epidemiological study. Twice 
previously--in 2008 and 2012--SAP's did the same work and both rejected 
the Columbia work. Last week's 3 day session should reach the same 
outcome based on the material presented.
    As a part of my presentation at the SAP, I noted the provision put 
in the 2014 Farm Bill, at your insistence mister Chairman, which 
instructs EPA's Scientific Advisory Board to create an Agricultural 
Advisory Committee within the SAP structure. (Link to CLA statement on 
SAP available here http://www.croplifeamerica.org/croplife-america-
pushes-for-transparent-robust-data-at-fifra-sap/.) I noted that it is 
very unfortunate that EPA has yet to finalize and impanel that group.
    In the review of other pesticides, EPA has pivoted to relying 
extensively on new ultra-conservative models for predicting consumptive 
exposures from drinking water. Further, the agency will not even 
consider other assessment methods that would allow for the factoring in 
of robust, real-world water monitoring data. Denying the use of this 
actual data could mean the loss of products for some existing crop uses 
or preclude access for new crop uses.
    In evaluating the potential impacts of pesticides to pollinators, 
CropLife America believes that the pesticide program has been overly 
influenced by unscientific pressure from social media and other 
politicized campaigns. EPA attempted to ``regulate by letter'' on 
mandates for key seed treatments applications and in forcing label 
changes where we believe Administrative Procedures Act requirements for 
a public notice and comment were not properly followed. EPA went on to 
release a draft report suggesting that soybean crops did not benefit 
from neonicotinoid seed treatments, despite public findings from USDA 
demonstrating the products' benefits to the crop. Fortunately, the 
overarching White House Pollinator Task Force Report--called for by 
President Obama--is more balanced. But, unfortunately, the devil still 
remains in the actual regulatory details formulated at EPA.
    This Subcommittee may be aware of the activities of the United 
Nations World Health Organization (WHO) International Agency for 
Research on Cancer--known as ``IARC.'' As Reuters reported last week, 
this is the agency that `ranks bacon alongside plutonium' as a 
carcinogen. One of IARC's other monographs recently concluded that the 
herbicide glyphosate is a carcinogen, too--notwithstanding all the 
prior science and risk assessment pointing to the opposite conclusion 
and demonstrating the safety of its use. Oddly, the U.S. Government's 
representative to this IARC monograph came from EPA's Office of 
Research and Development--not the Office of Pesticide Programs where 
the expertise in glyphosate resides. Further, since this surprise IARC 
action on glyphosate, many governments around the world have refuted 
the finding . . . but, our own U.S. EPA has yet to do so! EPA's 
reluctance to defend its own scientific findings and the safe use of 
such an important, widely used and well-studied product is very 
troubling.
    You may be wondering, ``does CLA think EPA does anything right?'' 
Of course. Most recently, EPA robustly defended the use of risk 
assessment based decision making and routinely argued against the 
precautionary principle during trade negotiations, including leading 
the effort to resolve environmental policy disputes during TTP 
discussions with Asian-Pacific nations and during ongoing T-TIP 
negotiations between the U.S. and European Union (Link to example of 
EPA-EU interaction available here: http://www.usda-eu.org/wp-content/
uploads/2015/01/United-States-Submission-Endocrine-Disrupters-2015-01-
20.pdf).
    EPA can be credited for their recent use of PRIA funds to advance 
new product approvals. However, we do ask that the Committee continue 
to provide careful oversight of the Pesticide Registration Improvement 
Act and, also, help to ensure that appropriators fund these critical 
program mechanisms at the agency.
    Recently, CropLife helped the market research firm, Phillips 
McDougall, develop a study that shows the overall cost to discover and 
advance a new crop protection product averages $286 million--up 21% 
over the previous 5 years! (Link to CLA statement with imbedded report 
available here: http://www.croplifeamerica.org/cost-of-crop-protection-
innovation-increases-to-286-million-per-product/.) The biggest driver 
in that cost increase appears to be regulatory compliance. That 
statistic demonstrates why it is so important to be sure that U.S. 
regulatory requirements are assessments of real science and safety 
advancements, not simply reactions to non-scientific political 
ideologies.
    Despite EPA's significant deviations from process, science and, 
perhaps, even the law, the crop protection industry stands with farmers 
and rural communities as we all weather the uncertain economic and 
regulatory headwinds ahead--we hold a positive and long view for 
American agriculture. Tremendous, measurable increases in farm 
productivity and improved stewardship demonstrate that agricultural 
technology helps not only farmers but also creates jobs and economic 
development beyond the farm gate. CropLife America commits to the 
Committee to be full partners in providing the best crop protection and 
pest management tools that the law will allow in order to support rural 
communities and improve farm income.
    Thank you for the opportunity to testify today and I welcome your 
questions.

    The Chairman. Thank you, Mr. Vroom, and thank you for your 
comments on the EPA. I hope they are watching on closed circuit 
today, and if they are, I would like to remind them again, 
there are 36 pages of unanswered questions from both 
Republicans and Democrats that we submitted after our last 
hearing with Administrator McCarthy, but hopefully the cricket 
sound will end soon.
    I am going to begin the questioning period really quickly 
with Mr. Guebert, this is the home field advantage. You get to 
go first.
    What would be the impact on growers both in terms of costs 
and access to new innovative applications if a mandatory 
warning label for foods derived through modern biotechnology 
were to become the law of the land?
    Mr. Guebert. What we have seen, Mr. Chairman, if it is 
mandatory, we would have some real challenges. As you well know 
in agriculture, we are price takers, and we do not have those 
opportunities and industry has those opportunities to pass on 
those extra costs, and it would really have an impact, not only 
to the agricultural community but to the consumer in the long 
run. We would expect it to cause chaos throughout the whole 
marketplace and industry to make sure that the right product is 
on the right shelf in the right state if 50 other states have 
their own labeling law.
    The Chairman. Thank you, Mr. President.
    Let the record show just about a month ago, Secretary 
Vilsack sat at that same table and used the word chaos to 
describe what kind of impact the Vermont law going into effect 
without a national solution would mean to America too. So I am 
glad to see you agree with Secretary Vilsack.
    Mr. Vroom, rather than going through the normal public 
process to propose to cancel a registration, to your knowledge, 
has the EPA ever asked a court to order to vacate a 
registration, and if so, please describe any of those 
circumstances.
    Mr. Vroom. So there are lots of nuances with regard to how 
the law gets prosecuted and followed. I suspect that EPA would 
say that they have never actually asked a court to resolve a 
matter against a pesticide product that would overrule the 
existing science but clearly there are plenty of court cases 
where that kind of outcome has come about. So without putting 
public words in EPA's mouth, I would say the answer is clearly 
yes, that there is a lot of sue-and-settle kinds of activity in 
all kinds of agricultural matters including pesticide 
technologies that are appropriately licensed after a thorough 
review of the science.
    Another point that I would like to make is that we have 
heard a lot from our friends and colleagues at the 
Environmental Protection Agency that they are under lots of 
pressure. They rarely would call it political pressure but they 
extensively talk about the social-media pressure that they are 
facing from Facebook moms and teens on Twitter. And so it 
behooves all of us in agriculture to step up to those same 
social media plates and to also weigh in with the important 
messages as well. So one of the things that we have invented is 
a red fly swatter that says on it, ``Let's return science to 
pesticide regulation.'' We have a campaign going on social 
media, #scienceorswat, and again, we need to step and get into 
those social media venues and tell the truth about the 
importance of science in this overall pesticide regulatory 
agenda.
    But clearly the courts and the way negotiations occur in 
settling court cases is a very important matter and one of 
concern to all of us in the agricultural technology space.
    The Chairman. Thank you, Mr. Vroom. I am shocked to hear 
that government officials are getting criticized via social 
media. Really? It never happens around here ever.
    I would like to now recognize Ranking Member DelBene for 
questions.
    Ms. DelBene. Thank you, Mr. Chairman.
    Many of you mentioned the struggle that producers are 
having in finding the workers necessary to grow and harvest 
crops, and I want your feedback on how agriculture can be a 
voice of reason in what has been a very contentious debate on 
immigration reform. Also, please speak a little bit about why 
immigration reform is sorely needed, but also some of the 
things you would like to see in reform. I guess I will point 
that to you, Mr. Conner.
    Mr. Conner. Ranking Member DelBene, thank you. We believe 
this is a critical regulatory issue facing American 
agriculture. To repeat what everyone knows, 60 to 70 percent of 
our hired workforce in American agriculture are workers who 
would have documentation problems. We have talked a little bit 
this morning about H-2A reform. I would remind this Committee 
that that still, even with the growth and interest in H-2A is 
less than ten percent of our total workforce. So we are not 
solving the problem. We can make H-2A better and more 
streamlined, and it desperately needs that, but ultimately it 
is about dealing with the 60 to 70 percent of the workforce out 
there that are involved in putting food and fiber on all our 
shelves every single day. We cannot do what we do without those 
workers, and at some point that problem has to be addressed.
    Ms. DelBene. Ms. Torrey, you also mentioned this in your 
testimony. Do you have any additional thoughts you want to add?
    Ms. Torrey. Immigration reform is very important. Many of 
these people that are part of that 60 to 70 percent are people 
that are in mid-management on our farms and have gained skills 
that are very important to providing all their jobs besides the 
farm, and research has shown that for every farmworker I have 
there are another four jobs created.
    The other thing that we are seeing we are having to change 
the type of specialty crops that we are growing. We will see 
some of these fruits and vegetables no longer grown in the 
United States because of the lack of labor. We are trying to do 
a Band-Aid approach now with the H-2A program but the program 
is costly, not only for the paperwork but also for what you 
have to pay in order to have your workers at your farm. You 
never know what curve ball you are going to get. I have to have 
my order in at least 65 to 70 days ahead so that my crops only 
need 45 days to be planted and harvested and I don't know how 
Mother Nature is going to work with us. As I said, labor is our 
number one cost on our vegetable farm and our number two cost 
on our dairy farm. An example in our rural community, I can 
grow 1,000 acres of onions and my payroll is $2.5 million for 
50 families. If I take that same thousand acres and put it into 
field corn, my labor bill will be about $80,000 to $90,000. And 
our rural communities need these jobs. Growing these specialty 
crops offer more benefits.
    Ms. DelBene. Thank you.
    Issues related to the regulation of pesticides are very 
relevant not only to growers in my district but also the 
general public as well, and we need to acknowledge the public 
concerns about safety of pesticides for human health and the 
environment. But, it is also critical that the Federal 
Government address these concerns based on the best available 
science. Without that, our regulatory reputation and consumer 
education will suffer.
    Mr. Vroom, you brought this up. Can you describe what your 
member companies do to evaluate health and environmental 
impacts of their products and what the EPA currently requires?
    Mr. Vroom. Absolutely. So in summary, it is incredibly 
comprehensive and the system that EPA has evolved with inputs 
from a wide array of scientific community here and around the 
world really is the model for regulators in every other part of 
the globe. So there are about 130 different discrete scientific 
test areas that EPA mandates that companies test the products 
on so it has to do with the toxicological impacts for potential 
human health effects, both chronic and acute risks, and then 
also environmental exposures, environmental degradation 
studies, the potential for residues of the applied crop 
protection products ending up in either surface or ground 
waters, and this is not a static set of scientific tests. They 
evolved over time, and occasionally once a new scientific study 
is unveiled and implemented, it is discovered that it is 
redundant or duplicative with other tests that already exist, 
so we have actually seen a few of those kinds of tests 
moderated over time because the resources weren't appropriately 
being utilized, but our industry is always willing to step 
forward and negotiate and find the sweet spot, if you will, of 
what science is needed to prove and re-prove the safety of 
these products. It is just as important with regard to 
reevaluating older products that are on the market and ensuring 
that their risk profile is acceptable to the public as it is to 
get new products to the marketplace. So it is a very exhaustive 
system that gets lots of scientific input from all corners of 
society, and we believe that it represents a franchise ensuring 
level of safety that the public should be comfortable with.
    Ms. DelBene. My time has expired. Thank you very much. I 
yield back, Mr. Chairman.
    The Chairman. Thank you, Ms. DelBene.
    I now recognize my colleague, the gentleman from 
Washington, Mr. Newhouse, for questions.
    Mr. Newhouse. Thank you, Mr. Chairman, and thanks, 
everyone, for being here this morning.
    Ms. Woods, I wanted to ask you a question after listening 
and reading your testimony. I am increasingly concerned with 
the challenges that our growers and packers are facing due to 
what sounds like really a lack of clarification and education 
on how to comply with the new Food Safety Modernization Act 
rules. You mentioned food industry experts who have been 
working for decades in the industry that are unable to get 
certified to offer any kind of compliance instruction. Could 
you highlight some of the difficulties that you are seeing that 
our growers and packers are facing?
    Ms. Woods. Certainly. Just to kind of give you an idea of 
how this problem came about, when the Preventive Controls for 
Human Food rule was first released last fall and we realized 
that some packing houses were going to be falling under the 
Preventive Controls rule, industry brought up concerns with FDA 
and FDA did acknowledge those concerns and said they were going 
to try to be as flexible as possible and enforce the Preventive 
Controls rule on those packing houses similarly as possible as 
what was required under the Produce Safety rule. So we did 
appreciate that. It didn't completely address the problem but 
unfortunately, when the curriculum was released for the 
training that is required under the rule, it did not include 
any of the information the FDA had noted on how packing houses 
would be treated differently. We were running into a time 
crunch. It's 6 months until some packing houses are going to be 
required to be in compliance with this training requirement so 
we worked with a qualified trainer from the Washington State 
Department of Agriculture to put on a training for some of our 
most qualified food safety professionals, and this was a train 
the trainer course. Our intent was twofold; first, to identify 
specific areas where the constituents could be strengthened to 
better fit the needs of produce packers, and the second thing 
was to make sure that we had some people within industry who 
were at least qualified to provide the training so that we 
would have people who understand packing house operations who 
would be teaching these courses. Unfortunately, out of the 12 
people who applied to be trainers, ten were rejected. Several 
of them reapplied multiple times to provide additional 
information about all of the food safety training they had 
provided and were again rejected, and the primary reason we 
were given was because they didn't have a degree in education 
or science, which is going to be a problem throughout the 
produce industry because in many cases the people who are in 
these food safety positions and who have been for a number of 
years, they don't come from that background.
    So it really is creating a challenge of trying to not only 
meet the letter of the law on the training requirements, but 
also to make sure that our packing houses actually understand 
what they will be required to do to comply.
    Mr. Newhouse. That is problematic and challenging. I am 
glad to see WSDA's involvement in a positive way.
    Ms. Woods. Yes. They have been very helpful.
    Mr. Newhouse. Mr. Vroom, as you are well aware in regards 
to the ESA obligations, the EPA just released a biological 
evaluation for three active ingredients. I think each one was 
thousands of pages long. And based on very conservative 
precautionary assumptions that seem inconsistent with what you 
mentioned, that some of these things with available scientific 
data on these compounds. Is it true the assertions made that 
these three pesticides are harming 80 to 100 percent of all 
listed species as they suggest? Also, if this biological 
assessment approach is continued, what will the long-term 
effects be on access to pest management tools?
    Mr. Vroom. So the simple answer is no, and in fact, if that 
allegation were true based on these biological opinion 
documents produced by the Agency and in coordination with the 
ESA authorities, the National Marine Fishery Service and Fish 
and Wildlife Service, those species likely would be extinct 
because these products have been used in commerce by farmers 
and others including those undertaking public health protection 
with mosquito control to reduce disease vector threats for 
decades, 40, in some cases 50 years for these three compounds, 
and of course, one of them is a very essential part of some of 
the mosquito control activities of Mosquito Control Districts.
    So if that outcome were finalized, and this is the second 
time that the Federal Government has tried to get these three 
biological opinions completed to satisfied the Endangered 
Species Act review, it would be devastating and a precedent 
that not only could most crop protection products not meet, but 
probably a lot of other activities in agriculture would also be 
subject to similar kinds of restraints.
    Mr. Newhouse. Thank you, Mr. Vroom.
    Mr. Chairman, I see my time is expired but I hope there is 
a second round, I don't want to let my former colleague from 
New Mexico off the hook too easily.
    The Chairman. Secretary Witte, we will see if he gets that 
second round. We will just let everybody else go over so you 
can have a reprieve.
    I am going to recognize my colleague who entered with a 
very loud door bang----
    Ms. Kuster. I apologize.
    The Chairman. She does that all the time. Do not let her 
apologize like that. Ms. Kuster, you are recognized for your 
round of questions.
    Ms. Kuster. Thank you, Chairman Davis and Ranking Member 
DelBene, for holding this important hearing, and thank you to 
our panel of witnesses for being with us today.
    I am one of only two Members from New England sitting on 
the House Agriculture Committee, and I have been proud to 
support the small family farms that are ubiquitous around my 
state and our entire region.
    In New Hampshire, we have 4,400 farms that cover nearly \1/
2\ million acres of farmland averaging out to roughly 100 acres 
per farm. Of the 4,000 farms, a large number focus their 
production on specialty crops that contribute to the health and 
vitality of our local and rural communities. New Hampshire 
producers have significantly benefited from the Specialty Crop 
Block Grant program, which has funded grant projects focused on 
food safety, pest and disease prevention, and industry 
marketing.
    So I wanted to direct my attention to Ms. Torrey. I was 
pleased to read in your testimony that you highlighted several 
benefits of the Specialty Crop Block Grant program. Could you 
provide some specific on-the-ground examples of how this 
Federal program has enhanced specialty crop production for 
farmers and are there ways that this program can be 
administered more efficiently to support specialty crop 
producers?
    Ms. Torrey. This program is very important from not only a 
large specialty crop producer but to your home gardener. At our 
farm level, we are seeing increased disease and pest activity, 
and basically because we have changed some of the ways that we 
farm: hoop houses, the greenhouses so our good New England cold 
weather is not taking the----
    Ms. Kuster. Hoop houses are very successful in New 
Hampshire. It has made a big difference.
    Ms. Torrey. Correct, but they also harbor over-winter pests 
that were killed with our 0 weather in New York and in New 
England. We have a global economy and we see different insects 
and pests coming in: potato blight, tomato blight, a lot of 
research going on with that. We have seen new broccoli 
varieties that we can grow in the East that offer better 
nutrition and are adapted to our weather. Onion disease, downy 
mildew. It is such an important part of a specialty crop and is 
enabling us to continue to grow many corps that we might lose 
to these new diseases and pests that seem to be increasing.
    Ms. Kuster. And do you have any recommendations about the 
administration of the program, anything that you have been 
frustrated by or you think we can improve upon?
    Ms. Torrey. I think each state is giving a section of the 
specialty crop where their research center can apply for the 
different grants. Our frustration has been, we need to look at 
some of the crucial needs of what needs to be done and maybe 
not some needs that have already been addressed previously, and 
home in on the primary needs of industry.
    Ms. Kuster. Okay. That is very helpful.
    And my second question is for Secretary Witte from New 
Mexico. Mr. Secretary, in your testimony, you described the 
growing concerns about the flexibility of the Specialty Crop 
Multi-State program that was part of our 2014 Farm Bill. As 
this Committee continues to identify farm bill programs that 
can be improved for our next farm bill, can you expand on some 
of the challenges you face with the Specialty Crop Multi-State 
program and specifically how can this program be improved to 
enhance competitiveness of specialty crops in the marketplace?
    Mr. Witte. Sure. Thank you. The Specialty Crop Block Grant 
is a very important program for our state as well. When you 
talk about flexibility in administration, the reporting, the 
sales reporting, the new sales reporting requirements, that 
gets very specific, and a lot of time when you issue these 
grants, it takes years to do the reporting on the increase in 
sales. It doesn't just happen just like that in agriculture. 
And so that is a challenge. The administration of the multi-
state program where states have to go through another state 
potentially to administer a program, that becomes very 
cumbersome both to the state that is having to administer that 
and the state that is working the project. And so the reduced 
flexibility to do your own thing with multi-states, it needs to 
be looked at.
    Ms. Kuster. Great. Thank you so much. My time is up, and 
Mr. Chairman, I yield back. Thank you.
    The Chairman. Thank you, Ms. Kuster. Thank you for your 
questions. Thank you for your time and your service to this 
Subcommittee.
    Mr. Thompson from the great Commonwealth of Pennsylvania.
    Mr. Thompson. Thank you, Mr. Chairman, and thanks to all 
members of the panel for your expertise and being here. It is 
an important topic today.
    I want to start with Mr. Guebert. This past weekend, or 
Monday night actually--it is all a blur--I had the privilege 
and honor of returning to my home high school which is in my 
Congressional district where 2 years ago they started a 4-H 
program and an ag education program after decades of it not 
being there, and then in the second year, I mean, this was a 
cafeteria that was full of kids and their blue jackets, and it 
was just amazing what those teachers have done, and I am so 
proud of them: 4-H is such an important program.
    But my question centers around looking at the Census data, 
the average age of farmers is 58 despite large participation 
and positive experience in programs like 4-H like I saw at Bald 
Eagle Area on Monday night. In those few years that program has 
been in place, they actually have had some students come back 
from one of my other alma maters, Penn State University, kids 
that got introduced to agriculture education at the high school 
and are now freshmen and sophomores at that wonderful land-
grant university and the College of Agricultural Science. It 
seems the passion for agriculture begins to dip as kids do grow 
older. To what extent do you think rising regulatory costs and 
limited profit margins deter young people from choosing 
agriculture as a profession or, more specifically, all those 
things deter parents, farmers from encouraging their kids to 
follow in their footsteps?
    Mr. Guebert. Mr. Thompson, thank you very much for the 
question and, as you look back, nothing puts more of a gleam in 
your eye than when I am at a meeting or at a convention or a 
conference when you see those blue-and-gold jackets and the 
green uniforms that some 4-H kids wear. It is really 
tremendous. We have had programs in our state where 
conferences, it is just enlightening to see the energy that 
those students have today and how smart they really are.
    If you look back a few years ago, go back to the 1970s and 
the 1980s, and times were pretty tough in the 1980s, and a lot 
of parents discouraged their sons and daughters or their 
grandchildren to come back to the farm because they did not see 
that there was a future there. You look at the Census data, we 
are growing older; but, from time to time, the more meetings I 
attend, I see more of an energy and more young people coming 
back to the farm, and we have seen that in the last decade or 
the last number of years of good farming opportunities and the 
encouragement not only in agriculture or in farming, per se, 
but the opportunities that surround agriculture whether it is 
mechanization, plant and soil sciences, the breeding, the 
industry. There are unique opportunities for the young people 
that are coming back and wanting to be engaged in food and what 
is important to them and what their parents have talked about 
for a number of years. It is just really enlightening to see 
the young people that want to be engaged.
    Mr. Thompson. Thank you.
    Secretary Witte, the pollinator issue, it is extremely 
complex. Some have oversimplified, I believe, by pointing to a 
single cause related to certain crop protection practices, but 
I don't believe the science supports that conclusion.
    In developing your State Managed Pollinator Protection 
Plan, how have you considered for the complexity of this issue?
    Mr. Witte. Well, thank you for the question. It is a 
complex issue, and my staff just recently completed a survey 
doing the survey work as part of their pollinator plan. We 
found that in 23 out of 24 of the hives that were surveyed, 
Varroa mite was the issue, and we started about the pests that 
were associated with the honeybee, and part of that issue is 
that we have a limited commercial population of beekeepers and 
an extensive hobbyist population of beekeepers. A lot of these 
programs don't take into account that factor and how that 
impacts the commercial beekeeping population. So we have a lot 
of work to do with both, and the beekeepers are walking side-
by-side with us, and that is the nice thing about this MP3 
program is it is a collaborative effort, and you have to look 
at the entire picture, not just one aspect of it, all the way 
through, and that is what our group is doing.
    Mr. Thompson. Very good. Thank you.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Chairman Mike Conaway.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. Thank you, Chairman Davis. I appreciate that. 
Thanks to our panel for being here.
    Mr. Murden, I want to talk to you about citrus greening and 
the revocation of pesticide registration, product registration, 
the impact it has, as well as does USDA have the infrastructure 
to fight the Mexican fruit fly?
    Mr. Murden. No. In the case of the Mexican fruit fly, we 
have a sterile rearing facility down there that is an old World 
War II Army base that was old before World War II. We put Band-
Aids on top of Band-Aids to try to keep the thing going, and it 
is fighting a battle with two arms tied behind your back. So 
no, there are facilities around the United States that are 
deteriorating and falling apart, and we need some help there.
    In regards to the HLB problem, the citrus psyllid: just to 
back up a little bit, we have 750,000 estimated dooryard citrus 
trees in the Valley. Everybody has a lime tree in their 
backyard. So USDA and the industry go forth with collaborative 
outreach efforts based on lists of pesticides that you can go 
get at Lowe's or Home Depot. Well, EPA goes and takes them away 
from you and so the folks are in there trying to find chemicals 
that were approved and ready to go to try to help us with this 
outreach program and they are not there anymore. So we are 
sending a very mixed message as to how to go about and help. I 
hope that answered your question.
    Mr. Conaway. Yes. Someone told me that the largest orange 
tree orchard in California is in the backyards of all those 
homes out there.
    Mr. Murden. Yes. Well, that 750,000 acres in the Valley, if 
you tried to do that per acre, that's the equivalent of about 
4,000 acres.
    Mr. Conaway. Mr. Conner, given your background across a 
wide swath of service to a variety of folks, can you talk to us 
about the importance of investment in agricultural research and 
maybe some examples that has had a positive impact on the 
industry?
    Mr. Conner. Mr. Chairman, in my written and oral testimony, 
I went to this point strongly. I mean, we believe that the 
investment that this Committee has fostered and has occurred 
through our Department of Agriculture has really been 
responsible for a major decrease in the cost of producing food 
in this country whether it is pests, which have been talked 
about extensively today, technology, better food products, less 
water consumption. These are all very, very positive returns on 
investment from our work in agricultural research and we would 
encourage this Committee to continue down that course. That is 
the very positive aspect of cost of production. There is a 
negative aspect too for some of these other things but our 
investment in agricultural research has really made us the 
premier food producers on this planet.
    Mr. Conaway. Thank you.
    Mr. Vroom, all Executive Branch agencies have a set pattern 
of rulemaking they have to go through, the Administrative 
Procedures Act, all kinds of things. Have you seen EPA sending 
pesticide registrants letters telling them of new requirements 
that aren't in existing regs that they are just kind of back-
dooring them into the system?
    Mr. Vroom. Thank you, Mr. Chairman. Yes, there is quite a 
history. It has been growing over the years but it seems to be 
more frequent occurrence. We would refer to this as regulation 
by letter as opposed to using the due process that is set out 
in the regulations under FIFRA, the jurisdiction of this 
Committee, to go to the Federal Register with notice and 
comment rulemaking, or to publish on matters of lesser 
importance, guidance in the Federal Register to do this either 
by a direct e-mail or other communication to a registrant, or 
through a press release. Sometimes we learn, by reading in 
social media or otherwise that EPA is making a change in 
direction. And so it is troubling. It is hard to have a 
predictable regulatory environment when these kinds of 
surprises occur.
    Mr. Conaway. Has EPA tried to enforce those letter-based 
requirements on a registrant? Have they put enforcement actions 
or fined anybody as a result of that?
    Mr. Vroom. Yes, absolutely, and the other aspect of this is 
that our industry for pesticide product approvals is governed 
by two laws, the FIFRA law, the pesticide law--this is the 
jurisdiction of this Committee--and the Food, Drug, and 
Cosmetic Act that is the jurisdiction of the Energy and 
Commerce Committee here on the House side. Unfortunately, the 
due-process protections for defending the tolerances that are 
established under the Food, Drug, and Cosmetic Act are a little 
lower a hurdle for EPA to prosecute and trying to revoke a 
tolerance as opposed to the more thorough adjudicatory 
protections that the pesticide company would have under FIFRA, 
and that is the reason it is troubling to us that EPA is now 
proposing to revoke only the tolerances for chlorpyrifos 
without simultaneously initiating under FIFRA a registration 
cancellation. We think that the law is clear that both laws say 
that you need a tolerance as well as a registration to come on 
to the market and that the same kind of constraint and burden 
ought to be on the regulatory authority if the regulator 
believes that there is a reason to restrict the product or to 
drive it off of the marketplace. So a lot of important matters 
that are attendant to due process that we think are being 
skipped in the current Administration, and it of course has 
occurred in other Administrations but with much more frequency 
today.
    Mr. Conaway. Thank you.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Mr. Chairman, if you had time to yield back, 
I would gladly accept it.
    Mr. Conaway. I was going to make some comment to Mr. Witte 
about a recent connection with our families but I will talk to 
you after this is over with.
    The Chairman. I learned one thing as the Subcommittee 
Chairman. If the Chairman wants to take some extra time, feel 
free.
    Mr. Conaway. You will aspire to be Chairman one of these 
days and then you will have that wonderful power.
    The Chairman. Since we are going to go ahead and go into a 
second round of questions, I had a couple I left off earlier.
    Mr. Conner, in 2012 and 2013, our counterparts over in the 
U.S. Senate overwhelmingly rejected farm bill amendments to 
allow for state-by-state GMO food labeling laws. In each vote, 
over 70 Senators sided with our Federal approach, yet now the 
Senate is being blocked from being able to bring the issue up 
for a vote on the merits, and with some companies already 
announcing their plans to reformulate food products to exclude 
biotech ingredients, what does this mean for producer 
production costs and ultimately consumer food prices?
    Mr. Conner. Thank you for the question, and I just want to 
say in front of both of you, I came in this Committee for your 
prompt action last year to solve this problem by putting in 
place a preemption of Federal labeling requirements. We 
continue to work with the United States Senate to try to get 
them to pass legislation to do the same as the House did last 
fall.
    The Chairman. Since you mentioned that, can you tell me 
where does this currently stand in the Senate? Is there some 
magical compromise yet?
    Mr. Conner. There has been one vote, as you know. That vote 
failed with the Majority Leader reserving the right to move to 
a second vote, and we are working to modify the so-called 
Roberts language in such a way that it would get to the 60 vote 
threshold in the Senate. Those negotiations are active as we 
speak.
    The Chairman. Wasn't there, like last week or 2 weeks ago, 
supposed to be a compromise that----
    Mr. Conner. Compromise, as you know, is an elusive term, 
Mr. Chairman, but----
    The Chairman. So there is no white smoke going through the 
chimney over there?
    Mr. Conner. It is down to what I would call three buckets 
of issues, and again, negotiations are very, very active. We 
remain optimistic that there will be compromise language that 
could not only get to the 60 vote threshold in the Senate and 
pass the Senate but we are hopeful, Mr. Chairman, something 
that you could take up again in the House and pass rather 
quickly because we are running out of time. July 1st, the full 
implementation of this horrible Vermont law is nearly upon us. 
The consequences of that, you mentioned food prices, $1,000 per 
family per year is the consequence of Vermont, and it is just 
simply unacceptable.
    The Chairman. I happen to agree with you, Mr. Conner, and 
while you are talking to our colleagues in the Senate, let them 
know that this bill that was a compromise over here with 
bipartisan support came out of this Agriculture Committee with 
bipartisan support out of the House, and bipartisan is pretty 
offensive to us on this side of the Capitol to hear from 
Senators say that this is their most partisan issue they are 
dealing with. Well, it didn't become partisan until it got over 
there, and we are not seeing any action, we are seeing a lot of 
talk, and you can vent some frustration to us when we pass a 
bipartisan bill that is a good compromise. Now they want us to 
take a look it again on our side. It is very difficult for us. 
So please let them know our frustrations.
    Mr. Conner. We are striving for that bipartisanship, Mr. 
Chairman. I noted earlier in the hearing that Chairman Roberts 
actually stuck his head in the door and hopefully he was on his 
way to meet with Ranking Member Stabenow to get this ironed 
out.
    The Chairman. Well, I hope the goalposts don't continue to 
move at that meeting. My staff is not happy I said that but Ms. 
Woods, you understand that, don't you?
    All right. I would like to go to Mr. Guebert next. Sorry, 
Rich. What are the Farm Bureau's top priorities for the 
research and horticulture titles in the next farm bill?
    Mr. Guebert. Well, Mr. Chairman, thank you very much for 
the question, research has always been very important to 
agriculture for new products, new technology coming onto the 
market that gives us the opportunities to grow more with less 
crop protectants, to use different crop nutrients in the right 
place, and particularly in the seed industry that gives us the 
seeds, and the technology, that we can produce more on an acre 
of cropland.
    But, our members have always had concerns about research 
and development and unbiased that come from the university 
side, land-grant colleges, but what we have seen over the years 
is a lack of funds and dollars that are available for research, 
dollars that could be passed on to different universities. It 
is getting tougher and tougher for universities to garner those 
dollars to put into the professors hands, to do the research at 
the university level where it gives farmers the greatest 
confidence of what is being done is in the best interest of the 
project, going forward.
    We have had some real challenges and issues in Illinois 
with not only research dollars but fiscal issues in the state, 
and our universities are up against some really tough times and 
competing roughly in private practice or in public-private 
partnerships to find those dollars to continue to do their 
research whether it is on the specialty grower side, ag seed 
side, whatever the issue. We need more dollars to come out into 
the land-grant universities and universities.
    The Chairman. Thank you, Mr. President. I would like to 
add, I think you would join me in applauding Governor Rauner 
for signing a recent bill that helped fund our higher education 
institutions including the University of Illinois, our land-
grant institution that you mentioned.
    Secretary Witte, I am very sorry I was unable to wait out 
Mr. Newhouse, your former colleague. I recognize Mr. Newhouse 
for questions.
    Mr. Newhouse. You did your best, though, I could tell. 
Thank you, Mr. Chairman.
    Just a couple of more questions come to mind. We could talk 
about this issue for a long time, and like I said, I appreciate 
the focus on it, but Director Witte, you and I served together. 
I was a former director of my state's department of 
agriculture, and you coming to represent NASDA today is a 
tremendous testimony to your ability, and I just wanted to 
mention that NASDA does a great job of not only identifying 
issues, but advocating for the industry and helping to solve 
problems that we face in agriculture today. So I just wanted to 
make mention of that.
    But I did want to talk to you or ask you about some of 
these regulations that are coming down the pipeline. As you 
know, to get it right as a director of a state agency, to make 
these things work for not only a state but the farmers, for the 
consumers, our whole economy, we have to have a trust between 
the Federal regulators and the rest of us, and that 
communication is very important between the two parties. So 
keeping in mind some of the recent rulemakings whether it is 
the worker protection rules, some of the Endangered Species Act 
findings, pesticide regulations which we have talked about a 
lot, other things, would you say that there has been sufficient 
communication, trust and shared goals between the states, 
between farmers, between consumers and the Federal regulators 
who are trying to put these rules into place?
    Mr. Witte. Wow. Mr. Chairman, I am glad time is not up 
because I am very happy to address this question.
    Communication is key. States are typically co-regulators 
with the Federal laws. In the case of EPA, we have to implement 
the on-the-ground ``boots-on-the-ground'' kind of regulations 
that they come up with. Having early input is key, and we 
advocate and we try to work with the agencies to make sure our 
input is early and is structured in such a way that it's 
beneficial to the agency. On the WOTUS rule, my department 
submitted 38 pages of comments on our view of how to fix it. We 
are a dry state, but not according to WOTUS, and when you start 
thinking about the collaboration and then the on-the-ground 
implementation, the worker protection standards, the 
certification and training rule, we have to implement that, and 
in many cases we have told EPA early on that their proposed 
rules go contrary to what our existing statutes. We are going 
to need time to fix our statutes because they are going to be 
in conflict. We don't get a response back, and it is not like 
we were even at the table, and that is frustrating because we 
are the folks that have to do that, and in some cases I have 
heard states talk about if we can't implement that with our 
effective input, then we are going to turn it back to EPA, and 
that is not what the country needs.
    Agencies at the Federal level, agencies at the state level 
have limited resources, and we can't be tripping over each 
other in enforcement. It has worked very well in the past to 
have the states on the ground implementing these rules and 
doing the regulatory compliance assistance, ``educate before 
you regulate'' kind of activities, and if it is going to 
change, it is going to be bad for the agriculture, it is going 
to be bad for the country.
    So early consultation, effective consultation and having 
the agencies understand and truly look at what we are 
commenting on is key, and it hasn't been happening.
    Mr. Newhouse. Thank you very much. I appreciate that, and 
that is a good segue. I wanted to go back to Ms. Woods just 
real quickly.
    FDA, from my understanding, has been working well with 
industry, working with us as concerns come up. They have even 
suggested that there will be more time to educate growers, and 
like Director Witte said, ``educate before you regulate,'' 
which is a great concept. Do you think that this will be 
ultimately helpful for growers and packers to help ease into 
the FSMA rules and will this make a difference even for some of 
those private inspectors that you talked about with some of the 
gap programs?
    Ms. Woods. I can tell you that our members certainly did 
appreciate especially Deputy Commissioner Michael Taylor's 
outreach to the industry while these rules were being 
developed, and we certainly do appreciate his intent to take an 
``educate before you regulate'' approach. Part of our concern 
is FDA traditionally has been a very enforcement-minded agency, 
and it would really take a change in culture all the way down 
to the auditor, who is going to be visiting these farms and 
packing houses, to really achieve this ``educate before you 
regulate'' ideal.
    Second, Deputy Commissioner Taylor is going to be stepping 
down from the agency next month, and by the time the Produce 
Safety Rule is actually implementing, we are going to be 
entering a new Administration. So we would certainly like to 
see that ``educate before you regulate'' approach come down. 
And in addition, almost the reverse as well where the agency 
continues to work with industry on identifying concerns and 
really relying on their expertise as well to help identify the 
positions that they ultimately end up taking, but we are not 
relying that that is actually going to be what ends up 
happening.
    Mr. Newhouse. Yes, I would like to see that too and we will 
continue to work with the agency. In my experience, and I'm 
sure Secretary Witte's experience, it is much better to help 
people into compliance than it is to beat them into submission, 
and so hopefully we can follow along that line of thinking.
    Unless there is a third round of questioning, Mr. Chairman, 
I will relinquish my time. Thank you.
    The Chairman. I am going to finish that third round of 
questioning really quickly with one last question for each 
member of the panel.
    Please for time's sake and my hunger's sake limit it to 1 
minute. I just want to know from each of you if the EPA or the 
USDA were sitting where you are today and you are sitting in my 
chair, what is the most pressing question your organization 
would ask them relating to their impact on the rural economy? 
It doesn't have to be a question either. You can make a 
statement. Go ahead. We will start--actually, we are going to 
go to this way. Mr. Vroom. Go ahead, Jay.
    Mr. Vroom. Thank you, Mr. Chairman. So it very simply is, 
put the right priority on the right science as you apply that 
base of facts to your regulatory decision-making and policy 
establishment. Again, it is not for today as much as it is for 
the future, laying the groundwork for the precedents that will 
lead us forward to continue to be a world leader with regard to 
innovation and research in both the public- and private-sectors 
so those future tools--and I have the benefit of seeing behind 
the curtain with some of our member companies some of the 
really exciting new technologies that are out there, and I 
would just also like to commend Mr. Thompson for having 
mentioned the youth organizations, 4-H and FFA, that are 
training the young people to be ready to farm and to be ready 
to be in agribusiness and to serve in government as well 
because those organizations are really vital. I happen to have 
the honor of serving on the National FFA Foundation Board right 
now and can tell you that what Mr. Guebert talked about, those 
youth organizations are essential because farming and 
agribusiness today is so complicated that they have to have 
that training to go forward.
    The Chairman. Thank you. Mr. Murden?
    Mr. Murden. My message would be simple to EPA is, think 
before you issue damning press releases with half-truths.
    The Chairman. Thank you.
    Mr. Murden. They are hurtful.
    The Chairman. They are very much so. Thank you for your 
comments, and thank you for gaining some time back from Mr. 
Vroom.
    Rich?
    Mr. Guebert. Just three things. One, don't throw science 
out with the bathwater. Use that and bring common sense back to 
the table to make it work.
    The Chairman. So you can't cherry-pick when you want to 
believe science?
    Mr. Guebert. Right. Don't pick and choose. And last but not 
lease, don't handicap the farmer and industry to provide the 
opportunity to feed the world. We have millions of mouths to 
feed. We can do it, we have done it, and we will continue to do 
it.
    The Chairman. Thanks, Rich.
    Ms. Woods, are you having fun yet?
    Ms. Woods. Oh, yes.
    The Chairman. All right.
    Ms. Woods. I would say rely on actual data whenever 
possible and not modeling.
    The Chairman. Thank you.
    Ms. Torrey?
    Ms. Torrey. I am going to echo many of the things that have 
been said, but we need to make decisions using guidance from 
the grassroots and from people actually in the field. Also, 
decisions need to be made on sound science, and we need to make 
our regulations simpler and easier to understand.
    The Chairman. Thank you very much.
    Secretary Witte?
    Mr. Witte. Yes. My farmers tell me certainty and 
consistency are key to our success. There is a reason why we do 
a farm bill over 5 years for many reasons, but farming is not a 
1 year endeavor. You plan for the next cycle, and the cycle can 
be long-term. So regulatory certainty is key to success, and 
you have to be consistent in your implementation of the 
regulations.
    The Chairman. Thank you, Mr. Secretary.
    Mr. Conner.
    Mr. Conner. My admonishment to them, Mr. Chairman, would 
be, believe in your science, stay true to it, but then help us 
communicate the results of that to consumers and the general 
public.
    The Chairman. Well, thank you, and I would like to add, the 
next time any of you talk to the EPA, can you let them know we 
would appreciate them actually appointing somebody to the ag 
portion of the Science Advisory Board? It seemed like an easy 
thing to do 2 years ago but obviously not.
    In closing, I do want to say again thank you to each and 
every one of you for taking the time today. Your testimony is 
crucial. As I laid out in my opening statement, what we are 
trying to do on this Committee and each Subcommittee is to lay 
out how we can actually ensure that the agricultural economy of 
this country continues to feed the world and continues to 
remain strong.
    We all have our own geographical differences. We all have 
our own issues that each of your organizations face, but in the 
end we all fall under that umbrella of agriculture, and when we 
fall under that umbrella of agriculture, I see success, and 
success from each and every one of you and your organizations.
    Now, I want to remind each witness that there will likely 
be questions submitted to each of you for the record. Unlike 
the EPA, I don't think there will be 36 pages. However, I would 
encourage you, otherwise you risk the wrath of me making fun of 
you later for not responding, please respond to those 
questions. They will be done in a bipartisan way.
    I would now invite my Ranking Member to offer any closing 
remarks. Seeing none, I would like to remind, for housekeeping 
duties, under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplemental written responses from the 
witnesses to any questions posed by a Member.
    This hearing of the Subcommittee on Biotechnology, 
Horticulture, and Research is adjourned.
    [Whereupon, at 12:13 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
  Supplementary Material Submitted by Robert L. Guenther, Senior Vice 
 President, Public Policy, United Fresh Produce Association; on Behalf 
        of Maureen J. Torrey, Vice President, Torrey Farms, Inc.
June 3, 2016

 
 
 
Hon. Rodney Davis,                   Hon. Suzan K. DelBene,
Chairman,                            Ranking Minority Member,
Subcommittee on Biotechnology,       Subcommittee on Biotechnology,
 Horticulture, and Research,          Horticulture, and Research,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.
 

Re: Supplemental Comments for the Record: House Committee on 
            Agriculture, Subcommittee on Biotechnology, Horticulture 
            and Research Hearing: Focus on the Farm Economy--Factors 
            Impacting the Cost of Production

    Dear Chairman Davis and Ranking Member DelBene:

    United Fresh Produce Association commends the House Agriculture 
Committee for holding hearings regarding the current state of various 
agriculture sectors. We also appreciate the opportunity to have our 
Member and former Chairman of the Board, Maureen Torrey of Torrey 
Farms, Elba, NY, testify before the Biotechnology, Horticulture and 
Research Subcommittee on April 27 on the topic of factors affecting the 
cost of agriculture production. United Fresh is also grateful for the 
opportunity to provide these supplemental views for the hearing record 
on questions posed by Members of the Subcommittee. In addition to the 
comments provided in Maureen's testimony, we would like to elaborate 
further on a variety of issues of interest to the fresh fruit and 
vegetable industry.
    Regarding the subject of biotechnology, in February of this year, 
USDA announced to the public, through a 14 page notice of intent in the 
Federal Register, its plan to completely re-write the United States' 
pre-market biotechnology regulatory framework called ``Part 340.'' 
United Fresh joined with industry counterparts to submit the attached 
comments to the docket.
    As the Committee is aware, United Fresh Produce Association serves 
at the coordinating organization for the Specialty Crop Farm Bill 
Alliance, which has provided farm bill policy recommendations to 
Congress for each farm bill since 2002. Our industry is grateful to the 
Committee and Congress for acting favorably on the Alliance's 
recommendations.
    Each year that the Alliance has offered farm bill recommendations, 
we have stressed that Federal resources for research for specialty 
crops is among our top policy priorities.
    As Congress began work on the 2014 Farm Bill, the Alliance provided 
a variety of recommendations on priorities to address research needs 
such as:

   threats from pests and disease;

   mitigating the negative impact of drought on specialty 
        crops;

   technological innovations;

   improved prevention, detection, monitoring and response to 
        food safety hazards; and

   improved plant breeding and genetics.

    The Alliance also recommended that industry relevance play a 
greater role in determining the allocation of Specialty Crop Research 
Initiative (SCRI) grants. We are grateful to the Committee for 
incorporating this proposal into the 2014 Farm Bill and believe that 
such an effort will enhance producer support and interest in the grants 
process. Our members have expressed that the relevancy review process 
is very helpful toward the goal of ensuring that research projects have 
a direct effect on grower needs. Prior to the inclusion of the 
relevancy review process, United Fresh members voiced concerns that 
projects funded under the SCRI process may have had scientific merit, 
but not did not necessarily address the real-world needs of producers. 
We believe that the current process to make industry input a greater 
part of the review effort helps to ensure that research dollars are 
wisely spent. Examples of beneficial research include such efforts as 
disease management and mechanical harvesting in blueberry production; 
Fusarium wilt research in watermelon production; Phytophera c. disease 
management in peppers and melons, as well as research on issues in 
onion post-harvest and variety development in broccoli.
    As the Committee has indicated, the value of SCRI and other 
programs is heightened by grower awareness of these programs. While 
additional outreach efforts would be welcome and we would be pleased to 
work with the Committee and USDA on how best to develop such efforts, 
our members report that there seems to be a significant level of 
information disseminated about research programs through extension 
services, as well as industry publications and meetings.
    Questions have also been raised about the impact of EPA's proposed 
Worker Protection Standard rule, which is set to become effective in 
January 2017. As the Committee is aware, this rule sets new standards 
for the training of and handling of pesticides by farmworkers. Ensuring 
the safe and proper handling of crop protection chemicals is a top 
priority for any conscientious grower. However, United Fresh and many 
others in the agriculture community have expressed concern with the 
manner in which this rule was promulgated, particularly with respect to 
the insertion late in the process of a provision known as the 
``designated representative'' provision. Under this proposal, farm 
workers may authorize a designated representative to receive pesticide 
application-specific information for the operation that employs them. 
To some, this may seem reasonable, but United Fresh sees a number of 
potential problems with this provision. Our concerns were articulated 
in a letter, signed by United Fresh and other agriculture 
organizations, to the [Chairman] and Ranking Member of the Committee in 
March of this year and include:

   Farmers have no way of authenticating such designations.

   Farmers may be legally liable even when presented with 
        fraudulent designations.

   There are no restrictions whatsoever on what ``designated 
        representatives'' may do with farm-specific data once they have 
        obtained it.

   Under the rule, ``designated representatives'' are not 
        required to share the information they receive with the workers 
        who have supposedly signed the designation (thus, undercutting 
        any assertion that this provision would improve worker safety).

   Release of the information is not related in any way to 
        exposure, health or risk to the worker.

   There are no provisions in the rule sanctioning third 
        parties who abuse the provision.

    Given the lack of transparency in the process for bringing this 
rule forward and the lack of accountability in the rule's provisions, 
we urge the Committee to work to ensure that worker safety programs 
such as this maintain high standards of safety for farm workers, 
without increasing growers' vulnerability to spurious attacks by third 
parties with a political agenda to promote.
    Again, thank you to the Committee for holding this hearing and 
opening the record for additional comments. As always, United Fresh 
Produce Association welcomes future opportunities to work with the 
Members of the Committee to develop policies that enhance the 
competitiveness of the specialty crop industry and promote the success 
of America's farmers.
            Thank you for your time and attention,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Robert L. Guenther,
Senior Vice President, Public Policy,
United Fresh Produce Association.
                               attachment
April 21, 2016

  Sidney W. Abel,
  Regulatory Services,
  Animal and Plant Health Inspection Service.

Re: Docket No. APHIS-2014-0054 Environmental Impact Statement on the 
            impacts of possible revisions to the biotechnology 
            regulations

    Dear Mr. Abel,

    On behalf of the organizations listed below that represent many of 
the producers of specialty crops in the United States, we offer the 
following comments submitted in response to the request for comments by 
the USDA Animal and Plant Health Inspection Service (APHIS) on the 
agency's Notice of Intent (NOI) to prepare an Environmental Impact 
Statement (EIS) on the impacts of possible revisions to the 
biotechnology regulations (7 CFR part 340). The process established by 
Part 340 is important to the specialty crop industry as it impacts the 
ability to utilize potentially important technologies that can improve 
the nutritional value and production efficiency of the fruits and 
vegetables we produce.
    We oppose the NOI APHIS proposed working definition for 
``biotechnology'' that would essentially define the initial scope of 
products that would be subject to any of the alternatives described in 
the Notice of Intent:

          Laboratory based techniques to create or modify a genome that 
        result in a viable organism with intended altered phenotypes. 
        Such techniques include, but are not limited to, deleting 
        specific segments of the genome, adding segments to the genome, 
        directed altering of the genome, creating additional genomes, 
        or direct injection and cell fusion beyond the taxonomic family 
        that overcomes natural physiological reproductive or 
        recombination barriers.

    This definition is much broader than what is found in current 
regulations and is entirely based on the process by which a new plant 
variety is developed. If applied to Part 340, this definition would 
require pre-market regulatory review of many modifications that could 
be achieved through conventional breeding. Such a change is not 
warranted and should not be pursued. With our advanced knowledge of the 
genome of a tomato we could, for example, identify which tomato genes 
impact water use. With that knowledge we could use genes from a wild 
tomato variety that uses less water and insert them into commercial 
tomato plants in order to improve water use efficiency. While this type 
of cross-breeding (between otherwise compatible plants) could be 
accomplished using existing breeding techniques, doing so would take 
many, many years. Yet with advanced genome techniques, we will be able 
to save significant time and cost off the breeding process. Likewise 
with modern gene technology we are in a position to more accurately 
identify genes within a plant that control certain traits; thus rather 
than spending years or decades using traditional breeding techniques to 
``turn off'' or ``turn down'' these genetic traits, we can do so in a 
more timely fashion. Historically, we have--as only one example--bred 
apples to be more or less sweet using traditional breeding techniques 
in which we identify apples with such a trait and then emphasize that 
trait, yet using current science we are able to make those types of 
alterations within plants more quickly. Nothing USDA is considering in 
this rulemaking should alter or inhibit this type of scientific 
advancement all of which is an evolution of existing breeding 
techniques using modern technology.
    We believe that the current policies for evaluating the risks to 
health and the environment that may accompany the introduction of 
plants derived from biotechnology have been effective and have not been 
unduly restrictive in allowing innovative technologies to enter the 
market place. The current policies rely largely on the Coordinated 
Frame Work for the Regulation of Biotechnology (Coordinated Framework) 
established by the Executive Branch in 1986. The Coordinated Framework 
incorporated existing Federal laws to utilize the authority and 
expertise of established agencies to evaluate products developed using 
biotechnology. The evaluation of plants developed using biotechnology 
by the USDA is a clear example of why this approach has worked 
effectively. Under this approach USDA applies its significant knowledge 
of growing plants in the environment to evaluate the safety of food 
products regardless of their technological origin.
    Throughout the history of modern agriculture, farmers have needed 
to innovate to be successful and to satisfy the nutritional needs of a 
rapidly growing population. Innovation has allowed agriculture to 
achieve unprecedented success in meeting both food security and 
environmental challenges. In plant agriculture, advances in breeding 
new and improved varieties has been the cornerstone of this success. 
Our advanced knowledge of the genetic structure of fruits and 
vegetables allows improved varieties to be developed more directly and 
more consistently.
    The use of biotechnology is only one aspect of the application of 
this new knowledge. We believe that oversight of this array of new 
enhanced breeding techniques must be rooted in the principle that 
Federal oversight is based on an evaluation of the potential risk from 
the introduction, and not the process, by which it was developed. 
Failure to apply that principle will result in unnecessary costs and 
delays in bringing new products to the marketplace.
    USDA should utilize its existing authority to conduct oversight of 
any new plant varieties in order to protect U.S. agriculture from the 
risks associated with the possible introduction of plant pests and 
noxious weeds. Significant pre-market oversight is only necessary when 
there is reason to believe that the new variety presents a risk to the 
environment based on a potential risk, not the development process. We 
believe it unlikely that new varieties resulting from many advanced 
breeding techniques will require any significant oversight since the 
resulting variety will be indistinguishable from varieties developed by 
conventional breeding techniques.
    Finally, we urge the agency to conduct a robust process to obtain 
input from plant breeders and agricultural producers. We believe that 
their input will strongly support the idea that any changes to the 
current system should be minor and targeted and should allow more 
flexibility to utilize appropriate discretion on which new varieties 
require regulatory oversight. The long safety history and documented 
value of products developed through advanced breeding techniques 
including biotechnology strongly support this approach. Based on the 
current flexibility contained in USDA regulations and USDA's 
significant experience in previous reviews of similar traits developed 
through biotechnology, it may be possible to eliminate the need for 
pre-market regulatory review for many products.
    We appreciate the opportunity to provide these comments to the 
docket on USDA's proposed changes. In coming years, farmers will need 
to provide more food to more people using less resources. Innovation 
has always been critical to our industry and as it will be in the 
future. USDA should not make decisions today that make necessary 
innovations of the future more costly and difficult to achieve.
            Sincerely,


 
 
 
United Fresh Produce Association;    Idaho Potato Commission;
National Potato Council;             Empire State Potato Growers;
U.S. Apple Association;              New York Apple Association;
Fresh Produce Association of the     Oregon Potato Commission;
 Americas;
Western Growers;                     Texas Citrus Mutual;
California Fresh Fruit Association;  Texas International Produce
                                      Association;
Grower-Shipper Association of        Texas Vegetable Association;
 Central California;
Florida Tomato Exchange;             Washington State Potato Commission;
Georgia Fruit and Vegetable Growers  Wisconsin Potato & Vegetable
 Association;                         Growers Association.
Idaho Grower Shippers Association;
 

                                 ______
                                 
  Supplementary Material Submitted by Jay Vroom, President and Chief 
                  Executive Officer, CropLife America
                     letter to hon. gina mc carthy
April 13, 2016

  Hon. Gina McCarthy,
  Administrator,
  U.S. Environmental Protection Agency.

    Dear Administrator McCarthy:

    As organizations representing U.S. agriculture and users of crop 
protection tools and pest control products, we are deeply concerned 
about EPA's planned Scientific Advisory Panel (SAP) meeting, April 19 
to 21, to change the long-accepted, science-based regulatory endpoint 
for the pesticide chlorpyrifos, and we ask you to postpone this hastily 
called meeting.
    Chlorpyrifos is a widely-used and widely-tested chemistry proven to 
be safe and effective for an array of commodities, specialty crops, and 
public health uses throughout the United States.
    With this hasty and rushed SAP, EPA is attempting to fundamentally 
alter its process for evaluating potential risk and regulation of 
pesticides. EPA is moving forward as if the current regulatory process 
developed over 4 decades is broken. Recognizing the abruptness of this 
shift in approach and potential impact to all pesticides, the standards 
to be met for such a change should be set high. The failure to adhere 
to policies and regulations, reliance on a single epidemiological study 
for which the Agency does not even possess the underlying data, and 
lack of a solid basis for the most fundamental assumptions, do not meet 
such a high scientific or policy standard.
    This not only would adversely affect chlorpyrifos; it also sets a 
terrible precedent for other organophosphates and pesticides. This also 
comes at a time when America's production agriculture is facing low 
commodity prices and strained budgets. If EPA proceeds with this 
European-style precautionary approach not based on sound scientific 
principles, we are going to lose valuable crop protection tools. 
Unfortunately, this path would have a chilling effect on the ability of 
companies to bring new and improved products to market--an objective 
sought by EPA--and further harm producers' ability to protect crops and 
compete in domestic and international markets.
    We respectfully ask you to postpone the SAP until there is 
appropriate attention given to the scientific validity of the 
underlying assumptions for this dramatic change in how pesticides are 
regulated. Not only are there scientific questions, but only days have 
been given to review what the Agency has prepared and distributed to 
SAP members and the public.
    Our organizations believe that the Agency's lack of transparency is 
a violation of established EPA processes for review of products under 
the Federal Insecticide, Fungicide & Rodenticide Act (FIFRA). Within 
FIFRA, EPA also is required to review the best available data. In the 
process involving chlorpyrifos, the Agency has fallen woefully short of 
statutory requirements and as stakeholders we expect a consistent and 
scientific approach based on the law.
    We look forward to your response.
            Sincerely,

 
 
 
Agricultural Retailers Association;  Golf Course Superintendents
                                      Association of America;
Almond Hullers & Processors          National Agricultural Aviation
 Association;                         Association;
American Farm Bureau Federation;     National Association of State
AmericanHort;                         Departments of Agriculture;
American Soybean Association;        National Association of Wheat
                                      Growers;
American Society of Sugar Beet       National Corn Growers Association;
 Technologists;
American Sugarbeet Growers           National Cotton Council;
 Association;
Beet Sugar Development Foundation;   National Council of Farmer
                                      Cooperatives;
California Citrus Mutual;            National Pest Management
                                      Association;
California Citrus Quality Council;   National Potato Council;
California Cotton Ginners            National Sorghum Producers;
 Association;
California Cotton Growers            North American Blueberry Council;
 Association;
California Date Commission;          Northwest Horticultural Council;
California Dried Plum Board;         Sunsweet Growers Inc.;
California Fig Advisory Board;       United Fresh Produce Association;
California Fresh Fruit Association;  U.S. Apple Association;
California Specialty Crops Council;  Valley Fig Growers;
California Strawberry Commission;    Washington Friends of Farms &
                                      Forests;
California Walnut Commission;        Washington State Potato Commission;
Cranberry Institute;                 Western Agricultural Processors
                                      Association;
CropLife America;                    Western Growers Association.
Florida Fruit & Vegetable
 Association;
 

CC:

Secretary Thomas ``Tom'' J. Vilsack;
Jason Furman, Chairman of the Council of Economic Advisers;
Jeffrey Zients, Director of the National Economic Council;
Christy Goldfuss, Managing Director, White House Council on 
Environmental Quality;
Chairman Pat Roberts;
Senator Debbie Stabenow;
Chairman K. Michael Conaway;
Congressman Collin C. Peterson.
      submitted comments concerning the scientific advisory panel
EPA's Precedent-Setting Proposal for a New PoD for Chlorpyrifos is Not 
        Based on Sound Science or Established Policy (Initial comments 
        by Dow AgroSciences, LLC. April 8, 2016)
Introduction
    Over 4 decades of carefully developed and designed testing programs 
and risk assessment approaches for how EPA evaluates pesticides are 
being set aside without solid justification for such an abrupt and 
drastic change. The foundations used by EPA for the proposed process 
for setting a new Point of Departure (PoD) for chlorpyrifos, which is 
the subject of this Scientific Advisory Panel (SAP) (April 19-21), fail 
to meet scientific and policy standards. Positions presented as fact 
are, in reality, not supported. Before the specific charge questions 
asked of this SAP are addressed, these foundations should first be 
considered. More relevant charge questions for the SAP should focus on 
how as new hypotheses are generated from epidemiology studies, the EPA 
must establish a science-based approach to evaluate the evidence under 
the standards set for guideline studies.
    This precedent-setting proposal jeopardizes the established, 
accepted science-based regulatory process. The impact of the proposed 
changes to determining a PoD goes beyond just the discussion of 
chlorpyrifos before this SAP. This approach will change regulatory 
endpoints by several orders of magnitude. If adopted, the regulatory 
status of many crop protection products will change and tools needed by 
American farmers will be lost.
    The following are initial comments by Dow AgroSciences. Further, 
more extensive comments will be provided. In addition to these, SAP 
members are referred to supportive articles and information cited at 
the end of these comments.
EPA's Failure To Follow Established Policies Undermine the Scientific 
        Validity of the Proposed Approach To Setting a PoD
    EPA cites a ``transparent process'' and ``systemic reviews'' as 
included in the 2014 Revised Human Health Risk Assessment, then updated 
for the 2015 Literature Review on Neurodevelopment Effects & FQPA 
Safety Factor Determination for the Organophosphate Pesticides 
(Literature Review), and then repeated in the 2015 Chlorpyrifos; 
Tolerance Revocations; Proposed Rule. However, it must be noted EPA has 
not responded to or otherwise addressed public comments submitted in 
response to these documents. EPA is obligated to do so under the 
Federal Insecticide, Fungicide, and Rodenticide Act (``FIFRA'') and the 
Federal Food, Drug, and Cosmetic Act (``FFDCA'') and their implementing 
regulations. The comments submitted by registrants, academics and 
stakeholders are directly relevant to the issues before this SAP and 
should be considered.
    EPA cites OPP's development of a 2010 draft Framework for 
Incorporating Human Epidemiological & Incident Data in Health Risk 
Assessment (Draft Framework). However, EPA has never responded to 
public comments solicited by EPA on this draft, and the Draft Framework 
has never been finalized. Giving epidemiology studies more weight than 
the extensive, required animal studies is premature and not well-
supported if public comments have not been addressed and the Draft 
Framework not finalized.
EPA's Reliance on the Columbia University (CCCEH) Study Undercuts the 
        Basic Scientific and Regulatory Foundation for the Proposal 
        Before This SAP
    A critical, fundamental question is whether data from a single 
epidemiology study can be used to replace decades of animal-based 
research to derive a new regulatory endpoint for chlorpyrifos. The 
regulatory process for accessing human health risks should be rigorous, 
science-based, and transparent; FIFRA, FFDCA, and FQPA (Food Quality 
Protection Act) demand no less. Fundamental to the discussion before 
the SAP is EPA's precedent-setting reliance on the reported results of 
the Columbia Study (CCCEH)--for which the Agency still lacks the 
complete underlying data and for which the scientific validity and 
transparency have been challenged. The Agency has been made aware of 
these challenges in several sets of comments to the chlorpyrifos 
dockets as well as in a critical review by D. Edwards, et al. (2014), 
which has been placed in the docket for this SAP.
Analyses by CCCEH Researchers Do Not Eliminate the Need for Access to 
        the Raw Data
    The EPA is evaluating the CCCEH maternal and cord blood data based 
only upon a frequency distribution provided by the investigators in 
published articles, not the actual data. Although challenged in 
repeated comment periods, EPA has not obtained the complete raw data in 
order for their own independent analysis and verification or peer-
review. Many potential misinterpretations and even false conclusions 
are possible without full analyses of raw data. EPA could not have 
adequately accomplished a complete analysis and confirmation of finding 
in the few meetings and analyses cited. EPA has repeatedly sought, 
without success, all the raw data from the study researchers and has 
previously stated that it could not undertake dose reconstruction and 
analyses of other chemical exposures without the raw data.
The Health Endpoint Selected Is Speculative
    EPA is proposing to use a health endpoint, working memory from an 
IQ test, from a single epidemiology study, which has not been 
replicated in other epidemiology studies. The Agency does not have 
expertise in epidemiology, intelligence testing, or pediatrics to 
select this as the best endpoint, nor are the charge questions for the 
SAP directed at the appropriateness of this endpoint.
    EPA makes assumptions that are unsubstantiated by published reviews 
of the CCCEH and other epidemiology studies. Multiple peer-reviewed 
publications consistently concluded that at exposure levels below 
acetylcholinesterase inhibition, the evidence for adverse human effects 
did not support these assumptions. (Burns, et al. 2013; Eaton, et al. 
2008; Li, et al. 2012; Prueitt, et al. 2011; Reiss, et al. 2015). These 
publications challenge the confidence for using a new endpoint.
Weakness in the Science Undermines the Validity of the Proposed PoD
    Weaknesses in the science used to determine the proposed PoD have 
not been adequately investigated and addressed. For such an abrupt and 
dramatic change in overriding established regulatory approaches and 
policies, the standard for setting a new PoD should be much higher than 
offered by the current proposal
    CCCEH researchers have not accounted for the impact of all 
potential, well-recognized confounding factors and EPA has failed to 
conduct any type of sensitivity analysis. Some members of the 2012 SAP 
cautioned about associating the observed effects in the CCCEH studies 
with a single chemical since there were multi-chemical exposures over 
many important developmental years for the children. This issue has not 
been resolved by the EPA. Therefore, attributing independent 
physiological effects to a single chemical in this type of multi-
chemical exposure scenarios is speculative.
    Chlorpyrifos has been widely-tested in studies that have identified 
a clear Mode of Action (MOA) for potential causation at exposures which 
result in cholinesterase inhibition. The current proposal does not put 
forth a MOA for neurodevelopmental effects at exposures lower than 
associated with cholinesterase inhibition. While EPA notes other cases 
where a MOA for non-pesticides has not been determined, EPA's own 2010 
Draft Framework requires that one be identified for the valid use of 
data from epidemiology studies. Since the extensive animal study data 
base for chlorpyrifos provides clear biological endpoints and MOA's, 
any causal relationship between exposure and effects based on the CCCEH 
is doubtful.
Retention of the 10X Intraspecies Uncertainty Factor (UF) and of the 
        Increase in the FQPA Safety Factor to 10X Are Not Based on 
        Sound Science
Reference to the 10X Intraspecies UF Approach for Methyl Mercury (MeHg) 
        Is Not Relevant
    EPA notes that a 3X and 3X (PK/PD) uncertainty factor was used for 
MeHg as support for a 10X intraspecies UF for chlorpyrifos. However, 
there are critical differences between heavy metals such as methyl 
mercury and chlorpyrifos. For methyl mercury, the biological target has 
been shown to be various brain tissues, the half-life is significantly 
longer, and there is a known positive fetal-maternal gradient, all of 
which are profoundly different than chlorpyrifos, particularly if the 
EPA is proposing a non-cholinergic mechanism in the CCCEH study. 
Therefore, MeHg is not relevant nor a valid case study to inform on or 
regulate chlorpyrifos.
PBPK Model Has Been Updated for Life-Stages of Pregnancy
    EPA notes in the supporting document that the PBPK-PD model was 
updated and submitted to the EPA in April 2015 to address life-stages 
of pregnancy. Updates included predictions of physiological, anatomical 
and chlorpyrifos--specific biochemical changes associated with 
pregnancy and their impact on cholinesterase inhibition in pregnant 
women. These model enhancements were based on well published and 
validated approaches for incorporating pregnancy into models of this 
type. The relevant Data Derived Extrapolation Factor (DDEF) for 
protecting >99% of the population is 4 for all cohorts. As a result, 
the 10X intra-species extrapolation factor for pregnant women could be 
set to 4X. EPA now states the model was not validated with 
chlorpyrifos-specific PK data and therefore cannot be used for this 
life-stage. Although having the model for almost a year, EPA has not 
brought these questions to the researchers to resolve. Rather than 
rejecting the model for this life-stage, EPA should work to address the 
issues and refine the uncertainty factor.
An FQPA Safety Factor of 10X Is Not Justified
    EPA cites its 2015 Literature Review as justification for 
increasing the FQPA Safety Factor from 1X to 10X. However, the 2015 
Literature Review is significantly flawed and reliance on it lacks a 
sound scientific basis. It is built around an attempt to integrate non-
occupational epidemiology studies that had low to unconfirmed exposure 
with the high dose toxicological endpoints derived from scientifically 
valid animal data.
    In the Literature Review, there are critical errors in the 
approach, process, and conclusions: (1) review of published literature 
is incomplete, (2) quality assessment of the literature is arbitrary 
and capricious, (3) estimates of OP exposures are subject to error, (4) 
there is arbitrary use of suggestive evidence for null data, and (5) 
EPA's own 2010 Draft Framework is poorly followed. Burns (2015) offers 
a critical evaluation of the Literature Review and has been placed in 
the current docket.
Conclusions
    EPA is attempting to fundamentally alter the methodology and 
process for evaluating potential risk and regulation of pesticides. 
Central to this is EPA's premise that the current regulatory process 
developed over 4 decades is broken and in the case of chlorpyrifos, 
that the current reliance on cholinesterase inhibition is not 
adequately protective. Recognizing the abruptness of this shift in 
approach and potential impact to all pesticides, the standards to be 
met for such a change should be set high, including, the use of sound, 
validated, replicable science. The failure to adhere to policies and 
regulations, the limitations of the studies used as support, weaknesses 
in the science of determining a new PoD, and lack of a solid basis for 
the most fundamental assumptions, do not meet such a high scientific or 
policy standard.
References and Additional Supporting Materials
Review of EPA's Literature Review
    Burns, C. 2015. Comments on EPA's Literature Review on 
Neurodevelopment Effects & FQPA Safety Factor Determination for the 
Organophosphate Pesticides (document posted in docket EPA-HQ-OPP-2010-
0119). Dated December 22, 2015. Available in dockets: EPA-HQ-OPP-2010-
0019; EPA-HQ-OPP-2015-0653 and the current EPA-HQ-OPP-2016-0062.
Review and Challenges to the Columbia Study (CCEH)
    Edwards, D., Juberg, D., Burns, C., Goodman, J., Li, A., Bartels, 
M., Lickfeldt, D., 2013. Epidemiology Studies Pertaining to 
Chlorpyrifos Exposures: Consideration of Reliability and Utility. 
Submitted by Dow AgroSciences to EPA November 12, 2013. Available in 
dockets: EPA-HQ-OPP-0850-0224; EPA-HQ-OPP-2015-0653 and the current 
EPA-HQ-OPP-2016-0062.
Related to Lack of Adverse Effects Below the Level of 
        Acetylcholinesterase Inhibition
    Burns, C.J., McIntosh, L.J., Mink, P.J., Jurek, A.M., and Li, A.A. 
2013. ``Pesticide exposure and neurodevelopmental outcomes: review of 
the epidemiologic and animal studies,'' J. Toxicol. Environ. Health B. 
Crit. Rev. (16:3-4), pp. 127-283.
    Eaton, D.L., Daroff, R.B., Autrup, H., Bridges, J., Buffler, P., 
Costa, L.G., Coyle, J., McKhann, G., Mobley, W.C., Nadel, L., Neubert, 
D., Schulte-Hermann, R., and Spencer, P.S. 2008. ``Review of the 
toxicology of chlorpyrifos with an emphasis on human exposure and 
neurodevelopment,'' Crit. Rev. Toxicol. (38 Suppl. 2), pp. 1-125.
    Li, A.A., Lowe, K.A., McIntosh, L.J., and Mink, P.J. 2012. 
``Evaluation of epidemiology and animal data for risk assessment: 
chlorpyrifos developmental neurobehavioral outcomes,'' J. Toxicol. 
Environ. Health B. Crit. Rev. (15:2), pp. 109-184.
    Prueitt, R.L., Goodman, J.E., Bailey, L.A., and Rhomberg, L.R. 
2011. ``Hypothesis-based weight-of-evidence evaluation of the 
neurodevelopmental effects of chlorpyrifos,'' Crit. Rev. Toxicol. 
(41:10) Nov, pp. 822-903.
    Reiss, R., Chang, E.T., Richardson, R.J., and Goodman, M. 2015. ``A 
review of epidemiologic studies of low-level exposures to 
organophosphorus insecticides in non-occupational populations,'' Crit. 
Rev. Toxicol. (45:7), pp 531-641.
Submitted to EPA-HQ-OPP-2016-0062
  Dow AgroSciences, LLC,
  9330 Zionsville Rd.,
  Indianapolis, IN 46268.
                                 ______
                                 
   Submitted Letter by Bill Bond, Executive Director, Minnesota Crop 
                          Production Retailers
Wednesday, May 11, 2016

  Hon. Rodney Davis,
  Chairman,
  Subcommittee on Biotechnology, Horticulture, and Research,
  House Committee on Agriculture,
  Washington, D.C.

    Dear Chairman Davis,

    This correspondence is submitted for the record related to the 
April 27, 2016 hearing in the House Subcommittee on Biotechnology, 
Horticulture, and Research titled Focus on the Farm Economy: Factors 
Impacting Cost of Production in which the EPA regulation was a topic 
discussed. As a 60 year old agribusiness association in Minnesota we 
have witnessed an unprecedented series of missteps and confusing 
initiatives and statements which are a major concern to our 250 members 
who serve the 70,000 Minnesota farmers as they strive to provide food, 
feed, and fiber for the U.S. citizens and [the] world population.
    EPA's recent actions diverge from historical practices and/or law. 
MCPR is encouraging Congress to increase its oversight of EPA. Examples 
of worrisome Agency actions are below:

   Issuance by EPA of letters to companies requesting they 
        withdraw pending applications for new uses and re-submit with 
        additional, time consuming and costly data not originally 
        required, slowing time to market and limiting IPM tools. EPA 
        also stated they would not consider new applications for uses 
        without the additional data but have failed to justify the 
        change in policy.

   EPA issued a benefits analysis for treated soybeans without 
        engaging agricultural economics experts at USDA. The Department 
        of Agriculture responded with a public letter chastising EPA 
        for conducting an ``incomplete'' study and for creating 
        confusion for farmers.

   In an odd move, the EPA appealed to the 9th Circuit to 
        request the court vacate the Agency's registration of the 
        combined use of two established herbicides. NGOs had petitioned 
        EPA to cancel the registration citing documents from the patent 
        filings from Dow that may have indicated ``synergistic 
        effects'' would increase toxicity when the two products are 
        combined. It is odd that the Agency essentially sued itself 
        over its own action, which undermines confidence in its 
        processes.

   EPA released a risk assessment [in] selected media, along 
        with a related press release, before releasing it to the public 
        seeking to shape coverage. The press release included 
        statements that inflated the risks identified in the analysis. 
        The press release from the Canadian Government, which 
        cooperated with EPA on the analysis, conflicted with EPA's.

   EPA has sought to revoke a pesticide registration based on 
        ``theoretical modeling'' that showed a potential risk from its 
        use while rejecting more credible data from 6 years of real-
        world monitoring of use.

   EPA proposed a rule to reduce exposure to pesticides by 
        honey bees of commercial pollination services that is not based 
        on a risk assessment and was published without the required 
        notification of the USDA. USDA publicly criticized EPA for this 
        and questioned whether the Agency followed other statutory 
        regulatory process requirements.

    Please continue your oversight of this Federal agency which is 
operating suboptimal and is counterproductive to the interests of 
agriculture in the USA.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Bill Bond,
Executive Director, Minnesota Crop Production Retailers.
                                 ______
                                 
   Submitted Statement by Kelly Covello, President, Almond Hullers & 
                         Processors Association
    Dear Chairman Davis, Ranking Member DelBene, Subcommittee Members:

    Thank you for accepting our input on factors affecting the 
productivity of the U.S. farm economy. On behalf of our industry, we 
appreciate the opportunity to provide our thoughts on this important 
subject.
    The Almond Hullers & Processors Association (AHPA) is a trade 
association that was established in 1980 and our members represent over 
90% of the California almond industry based on volume. The association 
is dedicated to innovative leadership and advocacy, ensuring the 
sustainability and success of the California almond community.
    California Almonds are California's No. 1 agricultural export and 
No. 2 agricultural crop valued at $5.9 billion in 2014 according to the 
California Department of Food & Agriculture. California produces 80 
percent of the world's almonds and 100 percent of the U.S. commercial 
supply. The California Almond industry supports California's economic 
well-being by generating more than 100,000 jobs and more than $21 
billion gross revenue across all industries in the state, adding about 
$11 billion to the size of the state's total economy.
    Finding ways to do things better, faster and more efficiently is 
what drives advancements in all industries, and farming is no 
exception. Modern agriculture's success depends on the availability of 
new technologies to help farmers grow more food, more sustainably, than 
ever before. Production costs are a key component of this success and a 
major factor affecting a farm operation's long-term viability. 
Unfortunately, the impact of higher costs associated with pesticide 
regulations does not appear to be a consideration when it comes to 
implementing today's Federal regulatory policies.
    The average farm today feeds almost six times as many people as it 
did in 1950 and Americans spend \1/2\ as much of their personal income 
on food as they did then. Also, the success allows the majority of the 
U.S. population (98%) to use their talents outside of growing food and 
fiber. This success has accompanied a move toward greater human health 
and environmental safety. Improved mechanization, soil management and 
nutrition, combined with investments in research and innovations in 
crop protection breeding have produced more high-quality food on less 
land, while preserving our natural resources for future generations.
    Despite this amazing success story, there are some who question the 
very innovations that have helped make our food more abundant and 
affordable to millions of people worldwide. Unfortunately, this 
attitude can ``take root'' in a society that is largely disconnected 
from farming. As less than two percent of all Americans work on a farm, 
a lack of understanding about farming can lead to wrong assumptions 
about how our food is produced. Misinformation can be quickly 
disseminated, unfortunately at times aided by a sympathetic media that 
gives credence to their unsupported claims.
    We fear these negative voices can be persuasive, and unfortunately 
often successful in their influence. While we support the need for 
strong regulatory oversight, it can only be effective if it is based on 
sound scientific principles. We believe recent actions taken by the 
U.S. Environmental Protection Agency have diverged from these 
principles, which threaten the future success of modern agriculture. 
Some examples are included below:

   Without any justifying evidence, the EPA has proposed 
        changing its long-standing policy of scientific risk assessment 
        in favor of hazard-based regulation with regard to pesticides 
        that are ``acutely toxic'' to pollinators. This ignores the 
        well-accepted scientific premise that both toxicity and 
        exposure data are needed to determine a true assessment of risk 
        and unnecessarily denies farmers the use of important products 
        that have shown little or no impact to bees.

   The U.S. Department of Agriculture has been critical of the 
        EPA's proposed rule regarding pollinators, because of EPA's 
        lack of a risk assessment, along with asking EPA to ``carefully 
        consider the economic impact this proposal may have on numerous 
        specialty crop farmers and the rural economies they contribute 
        to across the U.S.''

   Following a 5 year pollinator risk assessment of a popular 
        insecticide, the EPA provided its report to selected media, 
        along with a related press release, before issuing it to the 
        public. Instead of accurately describing the report's findings 
        (which found little risk to bees), the EPA's press release 
        greatly inflated the potential risks and unnecessarily 
        frightened the public.

   The EPA has sought to revoke the use of an insecticide 
        important to grower IPM programs, including almonds, based on 
        its own theoretical modeling which claims a potential risk to 
        certain invertebrates found in farm ponds, despite 6 years of 
        real-world monitoring that shows no indication of harm.

   Under pressure from anti-pesticide activists, the EPA asked 
        the 9th Circuit Court to vacate the registration of a herbicide 
        already approved by the Agency--essentially suing itself to 
        nullify procedural protections to the registrant that are 
        guaranteed by Federal law.

   EPA proposed to revoke the tolerances of another well-used 
        insecticide due to drinking water concerns, again based on 
        modeling, and despite years and widespread testing of surface 
        waters showing residues were much lower than modeled.

     EPA chose to propose the route of tolerance revocation 
            rather than the proper legal route of requesting a 
            cancellation of the registration of the pesticide. EPA's 
            choice prevents external judicial review of their decision 
            as laid out in FIFRA.

    The common thread in these examples is an agency that appears 
increasingly less focused on a science-based approach to assessing 
risk. Whether this is due to external pressures from groups that are 
vehemently opposed to modern agriculture, or a lack of understanding 
about what it takes to grow a crop, the trend is disturbing and 
dangerous. One need only to look at Europe, where the politicization of 
regulatory decision-making and the adoption of risk-adverse policies 
over scientific risk assessment has resulted in a reduction of tools 
available to farmers and decreased public confidence in the benefits of 
technological innovation.
    Modern agriculture has been good for farmers, but it also has been 
good for the general public, the environment and our nation's economy. 
Our growers need the tools that come from innovation, which helps 
increase our productivity and improves our cost efficiency. With a 
world population that is expected to exceed nine billion people in the 
next 30 years, we need more, not less, tools to do the job. And we need 
a regulatory agency that understands and balances benefits and costs to 
farmers, the public, and the environment.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Kelly Covello,
President.
                                 ______
                                 
 Submitted Statement by Keith Jones, Executive Director, Biopesticide 
                           Industry Alliance
Overview of the Biopesticide Industry
    The biopesticide industry is a $1.6 billion industry.\1\ The 
industry is projected to grow at a compound annual growth rate of 16% 
through 2019.\2\ This industry's growth is fueled by two major factors 
including consumers' demands for safer pest control products that can 
be used in both conventional and organic agricultural programs. The 
second major impetus to growth comes from innovation and technology, 
adding science-based jobs and contributing to the economy while at the 
same time providing growers, pest control applicators and public health 
officials with effective and safe pest control options.
---------------------------------------------------------------------------
    \1\ The Kline Group. Global Biopesticides: An Overview of Natural 
and Microbial Pesticides. 2015.
    \2\ Biopesticides Market by Active Ingredient (Microbials & 
Biorationals), by Type (Bioinsecticides, Biofungicides, Bionematicides 
& Bioherbicides), by Application, by Formulation, by Crop Type & by 
Geography--Global Trends & Forecast to 2019.
---------------------------------------------------------------------------
    Biopesticides are low risk pesticides that are naturally derived 
from or synthetic equivalents of plants, bacteria, fungi, and minerals, 
generally posing little risk to humans or the environment. Growers use 
biopesticides to control plant disease, insects, weeds and other pests. 
Biopesticides can be used to protect our food supply in food processing 
establishments as well as protect the public from pest-borne illness 
and disease by controlling or repelling rats, fleas, ticks and 
mosquitoes. The members of this industry segment, from small start-up 
to large established companies, have active research and development 
programs to address a broad array of pest problems on the farm as well 
as emerging threats such as Zika virus.
    Generally, biopesticides are not persistent and pose little risk to 
people, birds, fish, bees and other wildlife. They help to maintain 
beneficial insect populations, break down quickly in the environment, 
and provide low risk alternative tools for conventional growers in 
integrated pest management programs.
Benefits of Biopesticides
    Growers, pest control applicators and public health professionals 
are increasingly turning to biopesticides because they provide the 
following significant benefits:

   Biopesticides are versatile and functional in both organic 
        and conventional production systems.

   Biopesticides allow organic growers to control pests while 
        maintaining USDA National Organic Program (NOP) certified 
        status.

   Biopesticides fit with integrated pest management systems 
        and contribute to environmentally responsible production 
        systems--while not compromising crop yield and quality.

   Biopesticides may offer greater flexibility when harvesting 
        crops because of short pre-harvest and restricted entry 
        intervals or waiting periods before individuals can enter a 
        treated area.

   Biopesticides are important public health protection tools. 
        They are used in food processing establishments to protect our 
        food supply and in mosquito and tick control programs to 
        protect the public from diseases like West Nile virus, Lyme 
        disease and other pest-borne illness.

   Because naturally derived biopesticides often control pests 
        through multiple modes of actions they can be less prone to 
        pest resistance.
Biopesticide Regulation
    The United States has one of the world's most robust programs to 
review and register biopesticides and is unique in that specific 
expertise has been developed within a single division of the 
Environmental Protection Agency (EPA). The EPA's Office of Pesticide 
Programs houses the Biopesticide and Pollution Prevention Division 
(BPPD), which conducts vigorous reviews of biopesticide products before 
they can be registered and brought to market. The Federal Insecticide, 
Fungicide, and Rodenticide Act (FIFRA) and Pesticide Registration and 
Improvement Act (PRIA) ensure that the highest safety standards are met 
while including specific incentives to encourage the adoption of these 
beneficial pest control products through tiered data requirements, 
significantly reduced registration fees and shorter timelines compared 
to conventional pesticides.
    There are some instances where regulation could unnecessarily limit 
growers' ability to use biopesticides. Three such examples are (1) 
EPA's proposal to Mitigate Exposure to Bees from Acutely Toxic 
Pesticides, (2) when science-based risk decisions for exemptions from 
tolerance are trumped by legal interpretations and policy 
considerations that do not give priority to lower risk pesticides and 
(3) the U.S. Department of Agriculture National Organic Program (USDA-
NOP) work with EPA to address inert ingredients allowed in pesticides 
approved for organic production without industry's input on the effect 
of their decisions.
EPA Proposal to Mitigate Exposure to Bees from Acutely Toxic Pesticide 
        Products
    In some cases, ``catch-all'' pesticide policies, which do not 
distinguish between types of pesticide products, fail to recognize the 
significant benefits associated with biopesticides and actually create 
obstacles to product registration. EPA's proposal to Mitigation 
Exposure to Bees from Acutely Toxic Pesticides is one such example.
    In May 2015, EPA proposed mitigation measures for pesticides that 
are considered acutely toxic to bees. We are concerned that EPA's 
proposed approach to pollinator mitigation departs from FIFRA's risk-
based standard and simply applies a hazard-based bright line number 
standard which leaves little or no room for varying interpretation. The 
proposed hazard classification is an indiscriminate trigger that could 
result in unnecessary restrictions on the use of biopesticides. This 
approach would deprive conventional growers from using some 
biochemicals in an integrated pest management program and severely 
diminish the already limited number of tools organic growers can use to 
control pests.
Science-Based Risk Assessments
    Biopesticides are usually exempt from tolerances because of their 
negligible risk based on general lack of adverse health effects and low 
dietary exposure. An exemption from tolerance allows the biopesticide 
to be broadly labeled and used on any crop without the need for costly 
residue testing. However, over the past few years EPA has asserted that 
exemptions from tolerance for biopesticides cannot incorporate 
limitations from the label such as pre-harvest intervals and 
application rates to minimize exposure because FDA cannot enforce that 
label. Enforcement of the pesticide label has always been the 
responsibility of EPA and its state partners. EPA's new legal 
interpretation is unnecessarily restrictive. Moreover, it is at odds 
with EPA's past practice with biopesticides, its current practice with 
other pesticide product ingredients, and with the manner in which FDA 
has implemented the food safety provisions of the Federal Food, Drug, 
and Cosmetic Act for decades.
    The label is the law and a fundamental compliance tool for all 
pesticide products. EPA and FDA can--and have in the past--worked 
together to ensure enforcement of tolerances and the biopesticide 
industry sees no reason that a label cannot be used effectively with 
tolerance exempt biopesticides when necessary. Moreover, EPA's narrow 
legal interpretation without the context of science drives unnecessary 
cost and time to a biopesticide registration. Since most biopesticides 
are targeted to minor crops such as vegetables and fruit, the expected 
revenues are considerably smaller. Unnecessary regulatory hurdles for 
low risk pesticides stifle the innovation we all seek to foster.
    The biopesticide industry is keenly supportive of stringent safety 
standards to protect consumers as well as our industry and reputation. 
The biopesticide industry has raised the issue of ``exemptions with 
label imitations'' to EPA and provided our recommendations. We 
understand that this matter as well as other concerns relating to 
biopesticide risk assessment are under active discussion at EPA with 
the goal of developing Office of Pesticide Program-wide guidance so 
that substances such as biopesticides, antimicrobials and inert 
ingredients are assessed in a consistent manner. The biopesticide 
industry looks forward to having the opportunity to comment on this 
guidance.
Inert Ingredients Allowed by the National Organic Program
    Inert ingredients are an integral part of effective biopesticide 
formulations, which require years of research to provide stability, 
crop safety and efficacy. Inerts are reviewed to stringent safety 
criteria by the EPA. In order for biopesticides to be used in organic 
production, the pesticide active ingredient and any inert ingredients 
in the formulation must be approved by the USDA National Organic 
Program (NOP). Because biopesticide active ingredients are often 
fragile, naturally derived ingredients, the inerts in the formulation 
are a vital part of making the product stable and efficacious. If 
certain inert ingredients are no longer allowed in organic production, 
growers could be left without critical tools to produce NOP compliant 
organic crops.
    The National Organic Program regulations, 7 CFR Part 205, allow for 
the use of synthetic inert ingredients in pesticide formulas which 
appear on the EPA's List 4--Inerts of Minimal Concern. Because EPA no 
longer maintains this list, the NOP is also looking at future criteria 
for the review of inert ingredients. Although under consideration, the 
NOSB does not yet have a draft process nor has it approved a new inert 
in 12 years making it difficult for industry to innovate new products 
with the desirable characteristics of biopesticides.
    Unfortunately, the biopesticide industry is not adequately 
represented in discussions on appropriate new criteria even though we 
are the only industry that can provide important technical guidance 
about the current inert ingredients used in organic pesticides and the 
feasibility of formulation changes. The USDA NOP and its National 
Organic Standards Board (NOSB), established under the Federal Advisory 
Committee Act (FACA), works with EPA on policy and procedures to assist 
the development and adoption of an alternative inert evaluation that 
adheres to the National Organic Program philosophy. The biopesticide 
industry would like to be a part of that discussion, since it will have 
a major effect on our business, and FACA's requirements support our 
participation in that effort. Last, the industry would like to note 
that any stress or change to the U.S. system further places the 
industry and growers at a trade disadvantage in reciprocal organic 
agreements with other countries.
Conclusion
    The rapidly growing biopesticide industry is adding jobs and 
contributing to the economy while also providing organic and 
conventional growers, pest control applicators and public health 
officials with effective pest control tools that are safe for the 
environment and help reduce pesticide resistance. In order for the 
industry to continue to provide rural America with these pest control 
solutions, it is essential that regulations recognize the significant 
benefits associated with these products.
                                 ______
                                 
 Submitted Letter by John Keeling, Executive Vice President and Chief 
               Executive Officer, National Potato Council
May 4, 2016

  Hon. Rodney Davis
  Chairman,
  Subcommittee on Biotechnology, Horticulture, and Research,
  House Committee on Agriculture,
  Washington, D.C.;

  Hon. Suzan K. DelBene,
  Ranking Minority Member,
  Subcommittee on Biotechnology, Horticulture, and Research,
  House Committee on Agriculture,
  Washington, D.C.

Re: Focus on the Farm Economy: Factors Impacting Cost of Production, 
            April 27

    Dear Chairman Davis and Ranking Member DelBene:

    The National Potato Council (NPC) applauds the Committee for 
holding this important hearing. We appreciate the opportunity to 
provide comments regarding the impact that EPA actions are having on 
the economic well-being of potato farmers. We ask that these comments 
be entered as part of the hearing record.
    The NPC provides a unified voice for the U.S. potato industry on 
national legislative, regulatory, environmental and trade issues to 
promote the increased profitability for growers and greater consumption 
of potatoes. NPC plays a significant role analyzing policy that 
directly affects the U.S. grower's ability to compete both domestically 
and globally.
    America's safe and affordable supply of food, including the 44 
billion pounds of potatoes grown domestically every year, depends upon 
many factors regulated by the government, including crop protection 
products. It concerns NPC that several recent actions by EPA point to 
the agency's decreasing commitment to transparency and scientific 
integrity. In a recent preliminary registration review process for 
imidacloprid, EPA deviated from nearly 40 years of established process. 
Potato growers utilize Imidacloprid as an integral part of their 
Integrated Pest Management Plans for their potato crop and for their 
rotational crops. This product provides the opportunity to target 
specific pests and reduce any impacts on beneficial insects. The loss 
of Imidacloprid and other neonicotinoids would reduce the effectiveness 
of IPM programs and would increase the use of other broad spectrum crop 
protection products.
    The potential loss of approved pest management products such as 
imidacloprid and chlorpyrifos would harm growers' ability to farm and 
could inhibit future investment in alternative pesticides. The case of 
chlorpyrifos raises serious questions about the agency's use of data to 
support regulatory decision making. EPA's decision to rely on a single 
epidemiological study during the recent Scientific Advisory Panel 
review of chlorpyrifos April 19-21 means the Agency was choosing not to 
use findings from verified laboratory studies, which have more 
scientific weight.
    While the panel agreed with NPC and others that the science from 
the epi study was not conclusive, EPA should not have based the review 
on such scant data.
    In addition to ignoring sound science, EPA's policy decisions that 
are coming down the road would have serious negative effects on rural 
communities, farm incomes, and U.S. exports. With the U.S. exporting 
hundreds of millions of potatoes to Japan, Canada, and Mexico, a loss 
in production could negatively affect future export prospects and 
endanger the ability of the potato industry to benefit from the tariff 
reductions contained in the Trans-Pacific Partnership once it is 
approved.
    We strongly agree with and support the testimony provided by 
CropLife America. In particular, NPC believes a return to established 
regulatory process and sound science will help U.S. farm economy, keep 
the costs of production stable and accordingly prevent rising costs for 
consumers. Most importantly, the NPC has asked EPA to seek the input of 
the growers who are most impacted by their decisions. Growers and 
agricultural groups are directly affected by regulatory actions, and to 
not obtain their feedback is to ignore useful information that can 
inform a science-based regulatory approach.
    Thank you for consideration of these comments.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
John Keeling,
Executive Vice President and CEO,
National Potato Council.
                                 ______
                                 
   Submitted Statement by Hon. Tom Nassif, J.D., President and Chief 
             Executive Officer, Western Growers Association
    Western Growers is pleased to have the opportunity to provide 
comments to the Subcommittee on Biotechnology, Horticulture, and 
Research following its April 27 hearing entitled, Focus on the Farm 
Economy: Factors Impacting Cost of Production. Western Growers is a 90 
year old trade organization representing local and regional family 
farmers growing fresh fruits, nuts and vegetables in Arizona, 
California and Colorado. Our members and their workers provide \1/2\ 
the nation's fresh fruits, vegetables and tree nuts, including nearly 
\1/2\ of America's fresh organic produce. Western Growers members 
produce in--and directly contribute to the economies of--over 25 
states. In total, Western Growers members account for nearly \1/2\ of 
the annual fresh produce grown in the United States and a majority of 
the tree nuts. For generations we have provided variety and healthy 
choices to consumers. Indeed, Western Growers' has long had the slogan: 
``We grow the best medicine.''
    Western Growers commends the Subcommittee on Biotechnology, 
Horticulture, and Research for holding the April 27 hearing focusing on 
factors, both positive and negative, impacting the cost of production. 
Our members must meet ever growing regulatory and marketplace demands, 
several of which are described below.
Innovation
    Western Growers would like to bring to the attention of the 
Subcommittee some of the steps we are taking in response to policy 
challenges that raise production costs. Western Growers members and the 
Association itself have invested heavily in propelling forward cutting 
edge agricultural research. During 2013-14, led by and partially funded 
by Western Growers members, the University of Arizona opened a research 
and innovation center in Yuma, Arizona. The Yuma Center of Excellence 
for Desert Agriculture provides rapid, direct value-adding responses to 
issues important for desert crop production systems.
    During the spring of last year, Western Growers announced several 
new partnerships around agricultural research and technology. First, 
Western Growers and Silicon Valley Global Partners (SVG Partners) 
entered into a strategic alliance agreement to find, accelerate, 
advance and invest in innovative solutions intended to solve critical 
challenges to production agriculture. Through technology we will 
produce more with less water, labor and inputs. In December 2015, 
Western Growers launched the Center for Innovation and Technology in 
Salinas, California as an agricultural technology incubator that brings 
innovative entrepreneurs together with farmers and other agricultural 
companies to collaborate on bringing emerging technologies to market.
    As a way to propel this activity, Western Growers and its members 
are involved as sponsors of Forbes' Reinventing America: The AgTech 
Summit in Salinas July 13-14, 2016. This summit will highlight emerging 
agricultural technologies from around the world. In addition, other 
mutual efforts include participation and collaboration in the SVG 
Thrive Accelerator program and the SVG Technology Growth Fund which are 
designed to help identify and then provide joint venture operating 
capital to agriculture technology companies.
    We cannot however carry the burden of innovation on our own. 
Clearly the Federal Government has a key role in stimulating 
innovation. While more resources should be allocated to these types of 
research priorities across the Federal budget within all relevant 
Departments, the Federal Government also has, at minimum, a role in 
helping to facilitate better and wiser use of funds that are already 
available both from private- and public-sector sources. The produce 
industry is stepping up to address challenge in the long-term through 
technology and innovation--the Federal Government must do the same.
Crop Protection
    Western Growers is concerned about recent activity at EPA impacting 
the use of crop protection tools. Our members deal with a host of pest 
threats. Western Growers urges the Subcommittee to work to protect the 
tools our members rely on. Western Growers has historically engaged 
with state and Federal agencies to provide further protections to the 
workers, bystanders, public and the environment while at the same time 
preserving access to important tools. We strongly contend that 
decisions that reduce access to and/or flexibility to use key compounds 
must be predicated on clear and credible science and full evaluation of 
the risks and benefits of regulation.
    Crop protection concerns are particularly acute for the citrus 
industry as it fights to ward [off] Huanglongbing (HLB) or citrus 
greening. Last spring, the interagency Pollinator Health Task Force put 
out a strategy to better understand pollinator losses and improve 
pollinator health. Pursuant to this White House initiative, EPA is 
studying the pollinator risk of four neonicotinoid pesticides, which 
have been targeted as a potential cause of bee decline. In January, EPA 
released a draft pollinator risk assessment of one of the four 
compounds, imidacloprid, and found that use of these products on only 
citrus and cotton to surpass a threshold for harm to bees. In general, 
that substantive analysis was done well. Unfortunately, we know that 
EPA is under pressure to respond to public concern about the impact of 
pesticides on pollinators--concerns which may not be based in science. 
Perhaps as a result of these activist concerns, EPA's public statement 
gave the impression of widespread risk, even while the study itself 
affirmed the safety of imidacloprid in almost all cases. We urge the 
Committee to compare EPA's inflammatory press release with far more 
scientifically based press releases from companion study authors 
California EPA and Canadian Public Health (see Attachment[s] 1, [2, and 
3). While EPA has not yet proposed any regulatory action pursuant to 
the report, this misleading narrative gives fodder to state and local 
restrictions. Western Growers urges a balanced, science based approach 
as is outlined in the White House strategy. As Members of Congress you 
can urge EPA to remain scientifically focused and not make these types 
of inflammatory statements. In addition, you can help ensure that, 
going forward, inflammatory rhetoric does not color future regulation.
    In addition, EPA has proposed a blanket revocation of all 
tolerances for chlorpyrifos. This is an imprudent and overly broad 
proposal that is predicated on EPA's lack of information, poor 
understanding of the agricultural settings in which this product is 
used and generic models that do not fit western drinking water systems. 
Western Growers has expressed concerns regarding the over reliance on 
epidemiologic studies and specifically the Columbia study. We remain 
concerned that the authors have not provided the raw data for review 
and that without this data neither EPA nor the affected public can 
review the ``validity, completeness and reliability'' of information 
being used to make these policy decisions. While epidemiologic studies 
have historically been used to supplement EPA's analysis of substances 
it appears to us that this Administration seeks to rely upon these 
studies as the main evaluation tool for crop protection substances. 
This change should be examined by Congress to ensure there is merit to 
such a shift, just as we in the regulated community or EPA itself must 
be able to examine underlying data of these epidemiological studies 
themselves.
    Beyond the impacts of EPA's actions on any particular compound, 
Western Growers emphasizes the importance of a transparent, predictable 
science based process that fully engages the community of users while 
at the same time encouraging investment in newer, safe and better 
performing pesticides to meet crop protection challenges. It will be 
difficult to meet the challenges of growing food for a growing world 
without a fully capable toolbox.
Biotech
    Western Growers asks the Committee to engage on USDA's Notice of 
Intent to update Section 340 of the Plant Protection Act. Currently the 
Executive Branch is taking comments and debating whether the high level 
of regulatory oversight used for transgenic biotech should apply to 
other uses of biotechnology. For example, using gene editing professors 
at Penn State recently announced that they were able to ``turn off'' 
the gene in mushrooms that cause them to brown thus extending shelf-
life. These mushroom products did not go through any additional 
regulatory oversight than would mushrooms that went through normal 
breeding techniques. Traditional breeding techniques and new breeding 
techniques such as gene editing can achieve identical results. The 
rules for biotechnology should not deviate from rules currently in 
place for normal plant breeding. If something can be accomplished more 
quickly, accurately and cheaply through gene technology rather than 
traditional breeding techniques then the Federal Government should not 
make any changes to regulatory systems.
H-2A and Labor
    Fruit, vegetable and tree nut producers heavily rely upon a large 
group of skilled farm laborers in order to harvest and produce our 
nation's crops. Labor shortages have grown increasingly acute in our 
industry and it is critical that Congress step up to address this 
issue. While immigration reform and a new guest worker program will be 
the best long-term solution to our labor issues, we understand as an 
industry that we have to look at current solutions as well. In that 
regard, the industry will likely be forced to rely on the current H-2A 
program for meeting the labor demands we face.
    Indeed, labor shortages and pressures have grown to such a level 
that growers across California, Arizona, Colorado and other western 
states are turning to the H-2A program in greater numbers, including in 
areas that have had little exposure to the program in the past. This 
has resulted in a significant increase in H-2A applications across all 
western states. Unfortunately, as our growers increasingly use the 
program we are experiencing its downsides with greater frequency. 
During the first quarter of 2016 processing delays for H-2A 
applications became particularly acute. Western Growers urges the 
Subcommittee and all Members of Congress to engage on this issue. The 
current H-2A system must be improved while Congress works through a 
more complete replacement. Specifically, Congress should help ensure 
that the three Federal agencies involved in running the program are 
doing so with a minimum of red tape and with maximum efficiency. In 
addition, over the last 5 years we have seen a huge increase in H-2A 
applications yet funding to modernize computers and hire staff have 
shrunk, Congress needs to properly resource these agencies as use 
increases.
Food Safety Modernization Act
    Although it is not widely discussed, the Food and Drug 
[Administration] (FDA) is to be commended for their roll out of the new 
regulations authorized under the Food Safety Modernization Act (FSMA). 
In fact, their process of consultation with affected parties, 
development of a draft regulation based on broad consultation, along 
with the formal comment process which they extended in order to more 
fully understand the affected community, and the resulting care they 
took to address all commentary prior to the publication of ``Final'' 
rules should serve as a model for other agencies.
    The FDA's process has resulted in a set of regulations that while 
not universally embraced are credible and will result in safer food. 
While Western Growers believes there is still ambiguity in a few 
areas--for instance which operations are covered under which rule and 
the need for FDA to develop some process for recognizing food safety 
programs authorized and administered under state-Federal marketing 
authorities--we are confident that FDA will clarify these questions in 
guidance and FAQs that are under development. In addition, as several 
compliance dates are approaching, it is imperative that the agency has 
the resources to ensure a successful implementation of FSMA rules.
    Western Growers is strongly committed to food safety. Our industry 
is known for being proactive and has already started to develop 
resources and conduct outreach to assist impacted parties to work 
towards implementation of FSMA rules and food safety. No one can 
guarantee safety every bite, every time but we should guarantee that 
every operation is implementing robust food safety measures and the 
FSMA regulations will help ensure that is taking place. Finally, one 
issue that we do want to raise for Congress, is that as operators 
certify--to FDA's satisfaction--that operations are in compliance with 
FSMA we would ask that Congress work with FDA and producers to find 
ways to reduce criminal liability for unintentional food safety 
violations.
Drought
    Western agriculture is severely impacted by drought conditions--
indeed so much so that some of our growers have fallowed production, 
destroyed orchards, laid off employees or worse. In response to this 
crisis producers across the West are taking steps to use both less 
water and use what water we have more efficiently. Members of Congress 
should never forget that over a hundred years ago it was the efforts of 
the Federal Government that led to the development of water resources 
across the West which in turn lead to an explosion in the population of 
all western states. Western states however face a crisis point and 
while producers are adapting as best they can, the Federal Government 
can and must do more. Congress has a responsibility to comprehensively 
tackle this issue and do so immediately. In the long-term Congress 
needs to help reduce regulations that impede construction of new 
conveyance and storage systems--whether that storage is above ground or 
below--and we need to have both direct Federal assistance as well as 
create new financing tools to help local communities to pay for 
construction. In the short-term, we also need to ensure that water 
systems are operated with the proper balance between environmental 
concerns and concerns for fellow citizens.
Conclusion
    Western Growers commends the Subcommittee's leadership on examining 
the factors impacting cost of production. Western Growers' members 
understand that we will need to grow more food while facing diminishing 
natural and human resources. The fresh produce industry is innovating 
to meet these challenges, but the Federal Government has a critical 
role to play.
    We look forward to working with the Committee on this issue.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Hon. Tom Nassif, J.D.
                              attachment 1
Re-evaluation Note
REV2016-04
Joint PMRA/USEPA Re-evaluation Update for the Pollinator Risk 
        Assessment of the Neonicotinoid Insecticides
(publie aussi en francais) 6 January 2016
http://www.hc-sc.gc.ca/cps-spc/alt_formats/pdf/pubs/pest/_decisions/
rev2016-04/rev2016-04-eng.pdf

    This document is published by the Health Canada Pest Management 
Regulatory Agency. For further information, please contact:

 
 
 
Publications                         Internet: pmra.publications@hc-
                                      sc.gc.ca
                                     healthcanada.gc.ca/pmra
Pest Management Regulatory Agency    Facsimile: 613-736-3758
Health Canada                        Information Service:
2720 Riverside Drive                 1-800-267-6315 or 613-736-3799
A.L. 6607 D                          [email protected]
Ottawa, Ontario K1A 0K9
ISSN:                                1925-0630 (print)
                                     925-0649 (online)
Catalogue number:                    H113-5/2016-4E (print version)
                                     H113-5/2016-4E-PDF (PDF version)
 

Her Majesty the Queen in Right of Canada, represented by the Minister 
            of Health Canada, 2016

          All rights reserved. No part of this information (publication 
        or product) may be reproduced or transmitted in any form or by 
        any means, electronic, mechanical, photocopying, recording or 
        otherwise, or stored in a retrieval system, without prior 
        written permission of the Minister of Public Works and 
        Government Services Canada, Ottawa, Ontario K1A 0S5.
Introduction
    In May 2015, Health Canada's Pest Management Regulatory Agency 
(PMRA) and the United States Environmental Protection Agency's Office 
of Pesticide Programs (USEPA OPP) (Agencies) announced, as an 
initiative of the Regulatory Cooperation Council, that they would be 
collaborating on a bilateral pesticide re-evaluation process for the 
pollinator assessment of three neonicotinoid pesticides (clothianidin, 
imidacloprid, and thiamethoxam), based on the jointly developed 
harmonized Pollinator Risk Assessment Framework.\1\ The Agencies have 
been working closely with the California Department of Pesticide 
Regulation (CDPR). In addition, USEPA OPP and CDPR are using the same 
framework to conduct a co-operative re-evaluation of dinotefuran, a 
neonicotinoid pesticide which is registered in the United States but 
not in Canada.
---------------------------------------------------------------------------
    \1\ http://www2.epa.gov/sites/production/files/2014-06/documents/
pollinator_risk_assess
ment_guidance_06_19_14.pdf.
---------------------------------------------------------------------------
    These pesticides are nitroguanidine neonicotinoids, a group of 
insecticides that have been approved for use in the United States and 
Canada for a number of years. In recent years, there have been reports 
in scientific literature suggesting that exposure to neonicotinoids may 
impact pollinator health; however, these studies have generally been 
conducted under laboratory situations, or in the field with exposure to 
doses that are higher than would normally be encountered in the 
environment.
    In support of science-based risk management decisions, the Agencies 
are relying on the harmonized Pollinator Risk Assessment Framework 
methodology to conduct the pollinator risk assessment for the 
neonicotinoids. The Framework relies on a tiered approach which begins 
with conservative exposure assumptions and laboratory toxicity data 
conducted with individual bees, then progresses to more realistic 
exposure measurements in nectar and pollen, as well as colony level bee 
studies conducted in the field.
    Data required under the Framework has been divided into three 
tiers. Tier 1 consists of laboratory toxicity studies with both adult 
and larval honey bees exposed for acute and chronic durations. Tier 2 
effects studies include feeding and tunnel studies in which honey bee 
hives are exposed to neonicotinoids in a more realistic setting than 
the laboratory. Tier 2 residue studies measure exposure based on pollen 
and nectar residue data from neonicotinoid products applied to crops 
using different application methods. Tier 3 studies are generally 
large-scale field studies that most closely resemble an in-field 
exposure scenario for honey bees.
    Neonicotinoid registrants have submitted, or are in the process of 
conducting, a number of studies to support their chemical-specific 
pollinator risk assessments. The Agencies will use these studies as 
well as information from published literature in the tiered risk 
assessment approach. All relevant scientific information will be 
considered alongside incident data in a weight-of-evidence approach, 
which considers if the information is robust and consistent, for the 
risk characterization.
    This document provides a status update on the pollinator risk 
assessments of clothianidin, imidacloprid, thiamethoxam, and 
dinotefuran.
Status of Registrant Data Submission and Review by the Agencies
    Over 350 pollinator studies have been submitted by the 
neonicotinoid registrants and are currently undergoing a cooperative 
review by all three agencies. To date, over 300 of the studies received 
have been reviewed by at least one agency. While progress is being made 
with the study reviews, there are additional studies that are currently 
being conducted which are required for the completion of the re-
evaluations.
Status of Open Literature Review
    The Agencies will incorporate information from the body of peer-
reviewed scientific literature into the pollinator risk assessments. 
Studies may include information about neonicotinoid residues in pollen/
nectar as well as lethal and sublethal effects (foraging behavior, 
etc.) to different life stages (larvae, adults) in honey bee hives, and 
overall colony health. Studies on different types of bees (for example 
bumble bees and solitary bees) will also be included.
    The Agencies have conducted a number of literature searches which 
have identified hundreds of peer reviewed scientific studies. After a 
screen of the results, the Agencies prioritized about 250 open 
literature studies for further evaluation based on whether they 
assessed the residues or effects described above. Studies which are 
considered to be informative will be incorporated into the pollinator 
risk assessment. The Agencies continue to monitor current research 
findings and will incorporate more recent information as it becomes 
available.
Next Steps
    Since the Agencies began the imidacloprid review about a year 
before the other neonicotinoids, imidacloprid is further along in the 
review process and initial findings have been presented in preliminary 
pollinator risk assessment documents:

   Health Canada's PMRA--Re-evaluation of Imidacloprid--
        Preliminary Pollinator Assessment.

   USEPA--Preliminary Pollinator Assessment to Support the 
        Registration Review of Imidacloprid.

    See table below for anticipated milestones for the pollinator 
assessments. The publication of each document will be followed by a 
public consultation period.

------------------------------------------------------------------------
       Neonicotinoid              Assessment         PMRA/USEPA/CDPR \1\
------------------------------------------------------------------------
Imidacloprid                Preliminary             Jan. 2016
                            Final                   Dec. 2016
Clothianidin                Preliminary             Dec. 2016
                            Final                   Dec. 2017
Thiamethoxam                Preliminary             Dec. 2016
                            Final                   Dec. 2017
Dinotefuran                 Preliminary             Dec. 2016 \2\
                            Final                   Dec. 2017 \2\
------------------------------------------------------------------------
\1\ CDPR plans to issue its determination with respect to its
  reevaluation of neonicotinoids (clothianidin, dinotefuran,
  imidacloprid, and thiamethoxam) on or before 1 July 2018.
\2\ Not Applicable to PMRA.

Additional Information
    The issue of pollinator health is complex, and is likely influenced 
by a number of factors including pests, pathogens and viruses, 
nutrition, pesticide exposure, bee management practices, and lack of 
genetic diversity. The PMRA and USEPA OPP, as the Federal regulators of 
pesticides in Canada and the United States, respectively, are working 
together to protect bees and other pollinators from pesticide exposure.
    Information regarding PMRA's and USEPA OPP's actions to protect 
pollinators and additional resources can be found at:

          Health Canada's PMRA--www.healthcanada.gc.ca/pollinators
          USEPA--http://www2.epa.gov/pollinator-protection
                             [attachment 2]
Neonicotinoid Reevaluation Progress and Protecting Bee Health
http://www.cdpr.ca.gov/docs/registration/reevaluation/chemicals/
neonicoti
noids.htm

    The California Department of Pesticide Regulation (DPR) is at the 
national forefront of the effort to protect bee health, taking 
proactive steps and a scientific approach to address concerns about the 
impact of pesticides on bees and pollinators health.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Apiary training sponsored by DPR, Parlier, CA June 2014.
U.S. EPA Releases Preliminary Pollinator Risk Assessment for 
        Neonicotinoid Insecticide Imidacloprid
    As part of DPR, U.S. Environmental Protection Agency's (U.S. 
EPA's), and Pest Management Regulatory Agency (PMRA) Health Canada's 
ongoing collaborative efforts to assure the protection of pollinators 
from neonicotinoid exposure, two imidacloprid preliminary pollinator 
risk assessment publications are available for public review. U.S. 
EPA's assessment (http://www.regulations.gov/#!documentDetail;D=EPA-HQ-
OPP-2008-0844-0140), which was prepared in collaboration with DPR, 
indicates potential risk to pollinators at the hive level (as opposed 
to risks to individual bees) from use of imidacloprid on agricultural 
crops that are attractive to pollinators. PMRA Health Canada's 
imidacloprid pollinator-only assessment (http://www.hc-sc.gc.ca/cps-
spc/pest/part/consultations/_rev2016-05/index-eng.php) reaches the same 
preliminary conclusions as U.S. EPA's. A joint status report (http://
www.regulations.gov/#!documentDetail;D=EPA-HQ-OPP-2008-0844-0141) from 
all three agencies on the progress of neonicotinoid pollinator 
assessments for the neonicotinoids--clothianidin, thiamethoxam, and 
dinotefuran--is also available.
    During U.S. EPA's comment period and PMRA Health Canada's 
consultation period, the agencies will work with the manufacturers and 
other stakeholders to discuss possible early actions to reduce risks to 
pollinators from imidacloprid containing products. U.S. EPA's 60 day 
public comment period begins upon publication in the Federal Register. 
After the comment period ends, U.S. EPA may revise the pollinator 
assessment based on comments received and, if necessary, take action to 
reduce risks from imidacloprid containing products. Other supporting 
documents associated with the imidacloprid registration review are 
available in U.S. EPA's Docket EPA-HQ-OPP-2008-0844 (http://
www.regulations.gov/#!docketDetail;D=EPA-HQ-OPP-2008-0844) on 
regulations.gov Web site. There is an option to sign up for daily, 
weekly, or monthly e-mail alerts when U.S. EPA modifies the docket.
    This imidacloprid assessment is the first of four preliminary 
pollinator risk assessments for neonicotinoid containing insecticides. 
Preliminary pollinator-only risk assessments for the other compounds--
clothianidin, thiamethoxam, and dinotefuran--are anticipated to be 
released for public comment in December 2016. A comprehensive risk 
assessment for imidacloprid, including human health and ecological 
risk, is anticipated to be released in December 2016. A comprehensive 
risk assessment for clothianidin, thiamethoxam, and dinotefuran are 
anticipated to be released in December 2017.
Reevaluation
    In 2009, DPR initiated the reevaluation of certain pesticide 
products containing four neonicotinoid chemicals: imidacloprid, 
thiamethoxam, clothianidin, and dinotefuran. Reevaluation is the legal 
mechanism that allows DPR to require the companies who have registered 
products for use in California to conduct tests and submit data for 
analysis by DPR scientists. The purpose of the reevaluation process is 
to provide DPR with a better understanding of the effects of 
neonicotinoids use on pollinators and provide a credible scientific 
basis for potential regulatory action to eliminate any significant 
impact resulting from their use on bee health.
    DPR partnered with scientists at the U.S. EPA's Office of Pesticide 
Programs and PMRA Health Canada to ensure that the required studies, 
and methods and procedures used to conduct studies on the effects of 
neonicotinoids provide useful and reliable information across the board 
to all three agencies for use in guiding their regulatory actions. A 
unified approach across jurisdictions is critical as bees and 
beekeepers are not limited by state borders, nor are their importance 
to agriculture and society.
    A considerable volume of scientific research has been required to 
be conducted in specified ways as designed by DPR or in collaboration 
with its partners to elicit the most important and useful data for 
regulatory purposes. Much of this data has been submitted and 
evaluated. However, there is more work to be done in order to assure 
that any actions taken actually address the perceived decline in bee 
health.
    Each of the four neonicotinoid pesticides have different 
application rates for specific crops, requiring a substantial number of 
studies to understand the impact of the different pesticides using the 
application methods used for each crop group. Studies were required for 
each of the four neonicotinoids as used in the most relevant 
representative situations to determine the level of residue that 
remains in the pollen, nectar, and leaves of plants after multiple 
applications--residue if found in high enough levels, could result in 
lethal exposure to adult pollinators. Tests were then required to 
determine what levels of neonicotinoid pesticide would have lethal 
effects on pollinator larv#. Finally, U.S. EPA required higher tiered 
honey bees studies with input from both DPR and PMRA Health Canada. 
Tier II studies, or honey bee feeding studies, examine the effects on 
colonies following exposures to known concentrations of a pesticide in 
a food source fed to a bee colony. Tier III studies, or full field 
studies, is a field-level test that looks at long-term effects under 
environmentally realistic exposure conditions. Each set of requirements 
pushed the research one step further after inconclusive or preliminary 
results and analysis showed no likely significant hazards from 
neonicotinoid use under existing labels. DPR anticipates receipt of the 
final results of these studies by the end of 2016.
Other Information and Proactive Actions to Protect Bee Health
  b DPR protects honey bees from the effects of pesticides by working 
        with County Agricultural Commissioners, agricultural producers, 
        beekeepers and other agencies to develop and implement 
        regulatory measures as well as voluntary measures to Protect 
        Bee Health (http://www.cdpr.ca.gov/docs/enforce/pollinators/).

  b DPR continues to work closely with the U.S. EPA and PMRA Health 
        Canada. To protect bees and other pollinators DPR collaborated 
        on making product labels (instructions) much easier to 
        understand. The labels clearly explain that the uses of some 
        neonicotinoids pesticide products are prohibited where bees are 
        present. The updated labels have a bee advisory box and icon 
        with information on routes of exposure and spray drift 
        precautions. DPR made it a priority to review the amended 
        labels in order to get them out into the California 
        marketplace. All affected California products contain the 
        pollinator protection label language.

  b Reevaluation Timeline (http://www.cdpr.ca.gov/docs/registration/
        reevaluation/chemicals/neonic_timeline.htm)

  b Reevaluation Notice (http://www.cdpr.ca.gov/docs/registration/
        canot/2009/ca2009-02.pdf), PDF (59 kb)

    d Example Letters to Registrants (http://www.cdpr.ca.gov/docs/
            registration/reevaluation/example_letter.pdf), PDF (233 kb) 
            (September 15, 2009)

  b List of Products Included in Reevaluation (http://www.cdpr.ca.gov/
        docs/registration/reevaluation/chemicals/
        niclistofproducts.pdf), PDF (110 kb)

    For content questions, contact:

Denise Alder,
1001 I Street, P.O. Box 4015,
Sacramento, CA 95812-4015
Phone: (916) 324-3522
E-mail: [email protected]
                             [attachment 3]
EPA Releases the First of Four Preliminary Risk Assessments for 
        Insecticides Potentially Harmful to Bees
https://www.epa.gov/pesticides/epa-releases-first-four-preliminary-
risk-assessments-insecticides-potentially-harmful

January 6, 2016

    The U.S. Environmental Protection Agency (EPA) has announced a 
preliminary pollinator risk assessment for the neonicotinoid 
insecticide, imidacloprid, which shows a threat to some pollinators. 
EPA's assessment, prepared in collaboration with California's 
Department of Pesticide Regulation, indicates that imidacloprid 
potentially poses risk to hives when the pesticide comes in contact 
with certain crops that attract pollinators.
    ``Delivering on the President's National Pollinator Strategy means 
EPA is committed not only to protecting bees and reversing bee loss, 
but for the first time assessing the health of the colony for the 
neonicotinoid pesticides,'' said Jim Jones Assistant Administrator of 
the Office of Chemical Safety and Pollution Prevention. ``Using science 
as our guide, this preliminary assessment reflects our collaboration 
with the State of California and Canada to assess the results of the 
most recent testing required by EPA.''
    The preliminary risk assessment identified a residue level for 
imidacloprid of 25 ppb, which sets a threshold above which effects on 
pollinator hives are likely to be seen, and at that level and below 
which effects are unlikely. These effects include decreases in 
pollinators as well as less honey produced.
    For example, data show that citrus and cotton may have residues of 
the pesticide in pollen and nectar above the threshold level. Other 
crops such as corn and leafy vegetables either do not produce nectar or 
have residues below the threshold. Additional data is being generated 
on these and other crops to help EPA evaluate whether imidacloprid 
poses a risk to hives.
    The imidacloprid assessment is the first of four preliminary 
pollinator risk assessments for the neonicotinoid insecticides. 
Preliminary pollinator risk assessments for three other neonicotinoids, 
clothianidin, thiamethoxam, and dinotefuran, are scheduled to be 
released for public comment in December 2016.
    A preliminary risk assessment of all ecological effects for 
imidacloprid, including a revised pollinator assessment and impacts on 
other species such as aquatic and terrestrial animals and plants will 
also be released in December 2016.
    In addition to working with California, EPA coordinated efforts 
with Canada's Pest Management Regulatory Agency. Canada's Imidacloprid 
pollinator-only assessment--also released today--reaches the same 
preliminary conclusions as EPA's report.
    The 60 day public comment period will begin upon publication in the 
Federal Register. After the comment period ends, EPA may revise the 
pollinator assessment based on comments received and, if necessary, 
take action to reduce risks from the insecticide.
    In 2015, EPA proposed to prohibit the use of pesticides that are 
toxic to bees, including the neonicotinoids, when crops are in bloom 
and bees are under contract for pollination services. The Agency 
temporarily halted the approval of new outdoor neonicotinoid pesticide 
uses until new bee data is submitted and pollinator risk assessments 
are complete.
    EPA encourages stakeholders and interested members of the public to 
visit the imidacloprid docket and sign up for e-mail alerts to be 
automatically notified when the agency opens the public comment period 
for the pollinator-only risk assessment. The risk assessment and other 
supporting documents are available in the docket at: https://
www.regulations.gov/#!docketBrowser;rpp=25;so=DESC;sb=postedDate;po=0;
dct=SR;D=EPA-HQ-OPP-2008-0844.
    EPA is also planning to hold a webinar on the imidacloprid 
assessment in early February. The times and details will be posted at: 
How We Assess Risk to Pollinators (https://www.epa.gov/pollinator-
protection/how-we-assess-risks-pollinators).
    Contact Us (https://www.epa.gov/pesticides/forms/contact-us-about-
pesticides) to ask a question, provide feedback, or report a problem.

    Last updated on April 6, 2016.
                                 ______
                                 
   Submitted Letter by Cindy Baker Smith, Senior Vice President and 
 Director of Global Regulatory and Product Development, AMVAC Chemical
                              Corporation
April 26, 2016

  House Committee on Agriculture.

    Honorable Members of the House Committee on Agriculture:

    AMVAC would like to submit these comments to the record for your 
upcoming ``Hearing on Federal Actions and Policies Affecting Costs of 
Production and Impacting the Rural Economy'', April 27, 2016. AMVAC 
fully supports the comments made by Jay Vroom, President of CropLife 
America.
    Additionally, as a basic manufacturer of crop protection products 
based in California but with additional plants in Alabama, Missouri and 
Idaho, we are quite concerned by the recent changes in the way that EPA 
is making their decisions. The products we develop, register and 
manufacture here in the U.S. are critical in agricultural crops to 
protect corn, cotton, potatoes and other fruits and vegetables from 
pests (insects, weeds and disease) that would otherwise destroy their 
crops. Congress passed FIFRA and FQPA to establish appropriate 
standards to ensure the products registered by EPA can be used without 
harm to people or the environment. There is language in the statutes 
that properly requires that EPA decisions be made use reliable and 
available data. Agriculture and the consumers it feeds deserve science 
based and transparent decisions made by the government that regulates 
their food supply. EPA's proposal to revoke all the tolerances for 
critical products based on use of models that don't reflect actual 
exposure (drinking water models) and epidemiological studies for which 
the raw data has not been received or reviewed and also for which there 
are serious questions about whether any exposure to the products 
actually results in alleged effects does not meet any of the standards. 
The data used are not reliable and available, the process is not 
transparent and sound scientific principles are not being followed.
    AMVAC encourages the House Committee on Agriculture to require EPA 
return to the principles laid out by then Vice President Al Gore after 
the passage of FQPA to have a transparent regulatory process that uses 
the best available science and data.
            Sincerely, 
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Cindy Baker Smith,
Senior VP and Director of Global Regulatory and Product Development.
                                 ______
                                 
 Submitted Letter by Christopher Valadez, Director, Environmental, and 
         Regulatory Affairs, California Fresh Fruit Association
May 10, 2016

  Hon. Rodney Davis,
  Chairman,
  Subcommittee on Biotechnology, Horticulture, and Research,
  House Committee on Agriculture,
  Washington, D.C.

Re: April 27th Subcommittee Hearing, Focus on the Farm Economy: Factors 
            Impacting the Cost of Production

    Dear Chairman Davis,

    The California Fresh Fruit Association (CFFA) is a voluntary, 
nonprofit agricultural trade association representing California's 
permanent, fresh fruit (except citrus and avocados) industry on 
legislative and regulatory issues at state, Federal and international 
levels. Our membership is comprised of growers, shippers, and marketers 
of the approximate $3 billion fresh grape, blueberry and deciduous tree 
fruit industry. On their behalf I write to provide input on regulatory 
decision-making affecting the continued viability of our farming 
sector.
    As received through testimony before the Subcommittee on 
Biotechnology, Horticulture and Research, the viability of production 
agriculture is dependent upon the availability of new crop protection 
technologies to help growers meet current and future food demands in a 
manner that is both economically and environmentally sustainable. 
Unfortunately, activism on the part of a vocal minority has appeared to 
capture the attention of those responsible for making decisions on the 
use of critically important crop protection tools which has led to 
outcomes jeopardizing their continued use via a shift in decision 
making away from science and risk-based determinations to an 
overreliance upon precaution, particularly in cases where available 
data would suggest otherwise.
    To that point, actions undertaken by the U.S. Environmental 
Protection Agency (EPA) have caused concern due to the appearance of 
politically driven outcomes that fail to adequately factor for the 
economic benefits derived from the continued use of important crop 
protection materials. For instance, the U.S. Department of Agriculture 
has voiced criticism of the EPA's proposed pollinator rule having asked 
the Agency to consider the economic impact of the proposal onto the 
specialty crop sector and onto rural economies.\1\ Following a 5 year 
pollinator risk assessment of imidacloprid, the EPA issued an 
imbalanced press release focusing on risks to pollinators without 
emphasizing the overall finding in the report which found minimal risk 
to bees. In another example, EPA sought to revoke use of the 
insecticide flubendiamide based on theoretical modeling claiming a 
potential risk to certain invertebrates found in farm ponds despite 
evidence supporting its continued use which includes real-world 
monitoring data showing no indication of harm.
---------------------------------------------------------------------------
    \1\ August 25, 2015 Comments to Mr. Jack Housenger, Director, 
Office of Pesticide Programs on the EPA proposed rule: Mitigation of 
Exposure to Bees from Acutely Toxic Pesticide Products.
---------------------------------------------------------------------------
    Adopting risk-adverse policies over science-based risk assessment 
results in the reduction of critically important crop protection tools, 
which in turn stands to negatively impact both productivity and the 
continued viability of our farm sector. Our growers expect EPA to 
employ a rigorous science and risk based evaluation of crop protection 
tools that balances the benefits derived from their use with credible 
risks. By continuing to explore EPA decision-making processes and 
asking for an accounting of rationale used to support negatively 
impactful decisions, when data and benefits support continuing the use 
of important crop protection materials, your efforts will help to 
ensure we have a regulatory agency that understands and supports the 
needs of the farming community. To discuss further please feel free to 
contact Christopher Valadez (Redacted).
            Regards,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Christopher Valadez,
Director, Environmental, and Regulatory Affairs,
California Fresh Fruit Association.
                                 ______
                                 
  Submitted Letter by Paul Wenger, President, California Farm Bureau 
                               Federation
May 11, 2016

 
 
 
Hon. Rodney Davis,                   Hon. Suzan K. DelBene,
Chairman,                            Ranking Minority Member,
Subcommittee on Biotechnology,       Subcommittee on Biotechnology,
 Horticulture, and Research,          Horticulture, and Research,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.
 

    Dear Chairman Davis, Ranking Member DelBene, and Subcommittee 
Members:

    The California Farm Bureau Federation (CFBF) is California's 
largest farm organization, comprised of 53 county Farm Bureaus, 
representing over 53,000 farm families and individual members 
throughout the state's 56 counties. CFBF strives to protect and improve 
the ability of farmers and ranchers engaged in production agriculture 
to provide a reliable supply of food and fiber through responsible 
stewardship of California's resources.
    CFBF appreciates the Subcommittee and Committee as a whole for the 
opportunity to provide input on [Focus on] the Farm Economy: Factors 
Impacting the Cost of Production. Modern agriculture's success depends 
on the availability of new technologies to help farmers grow more food, 
more sustainably, than ever before. Production costs are a key 
component of this success and a major factor affecting a farm 
operation's long-term viability.
    Although there are many factors affecting the cost of farming 
operations, we would like to focus our comments on those associated 
with today's environmental regulations. Unfortunately, the impact of 
higher costs associated with pesticide regulations does not appear to 
be a consideration when it comes to implementing today's Federal 
regulatory policies. If the U.S. Environmental Protection Agency (EPA) 
fails to adequately calculate and/or consider the economic costs of 
these impacts and beneficial uses in its regulatory proposals, the 
consequences could be devastating.
    By almost any measure, American agriculture is a success story. 
Farmers and ranchers are producing more food on less land and using 
more sustainable practices than ever before. In addition to the hard 
work and dedication of today's growers, a key reason for this success 
can be explained in one word: innovation. Agricultural research 
investment from both land-grant universities and science-based 
industries has enabled our productivity to rise to unprecedented 
levels.
    However, modern agriculture's success is not appreciated by 
everyone. There are some who wish to drag our industry backwards, in a 
futile pursuit of a pristine image of farming that never existed. These 
groups represent only a small segment of our society, but they are 
vocal, influential, and frequently challenge the new technologies that 
come to agriculture. Unfortunately, these activists appear to have 
undue influence on EPA, especially when it comes to regulatory 
policies. All too often, this results in senseless registration delays 
and restrictions which threaten the ability of farmers to protect their 
crops.
    While CFBF supports the need for regulatory oversight, we are 
concerned that the EPA is shifting its focus from science-based risk 
assessment to a more troubling precautionary approach. Regulatory 
oversight can only be effective if it is based on sound scientific 
principles. Recent actions taken by the EPA have diverged from these 
principles and threaten the future success of modern agriculture. The 
following are indisputable examples of this dangerous trend:

   Following new guidance regarding pollinator warnings on 
        labels, the EPA proposed changing the basis of its long-
        standing policy of scientific risk assessment in favor of a 
        ``hazard-based'' approach. This completely ignores the 
        importance of exposure when determining risk, breaking a 
        fundamental tenet of toxicology.

   As part of its proposed rule regarding pollinators, the EPA 
        issued letters to registrants requesting them to withdraw all 
        pending applications for new label uses. The EPA is demanding 
        that applications be resubmitted only after developing 
        additional, costly and time-consuming data not originally 
        required--but failed to provide sufficient justification to 
        this change in policy.

   The EPA conducted a benefits analysis of insecticide-treated 
        seeds on soybeans without consulting farmers or other 
        agricultural experts, including USDA economists, resulting in 
        the publication of a misleading report that significantly 
        undervalued the benefits these products possess.

   After completing a 5 year review of an insecticide's 
        potential impact on honey bee health, the EPA misled the public 
        by issuing a press release that basically ignored the low risk 
        potential found in their review. Instead of taking the 
        opportunity to reassure the public, the EPA needlessly took an 
        alarmist approach that further diminished our ability to 
        educate using science.

   The EPA recently moved to cancel the registration of a new 
        insecticide, important to grower integrated pest management 
        (IPM) programs, without undergoing a full review process. The 
        revocation is based on theoretical modeling which claims 
        certain organisms living at the bottom of agricultural ponds 
        are at risk, despite 6 years of real-world monitoring showing 
        no evidence of harm.

   In a move that defies belief, the EPA asked the 9th Circuit 
        Court to revoke an existing herbicide label the agency had 
        previously approved--essentially suing itself to nullify 
        procedural protections to the registrant that are guaranteed by 
        Federal law.

    The common thread in these examples is an agency that appears 
increasingly focused on trivial risks and less interested in the 
important benefits these technologies bring to society. Whether this is 
due to external pressures from activist groups that are vehemently 
opposed to modern agriculture, or a lack of understanding about what it 
takes to grow a crop, the trend is disturbing and dangerous.
    The global economy demands that we be best-in-class in managing our 
production. Investment costs in the seed and chemical technologies we 
use today are expensive, but they have helped us optimize our 
operational capacity to stay one step ahead of our global competitors. 
Moreover, these technologies enable us to avoid costs associated with 
older practices that no longer meet the high standards required by 
today's best management practices.
    Farmers and ranchers depend upon the new technologies that come 
from investment in innovation. Yes, we want the EPA to ensure these 
technologies are safe for humans and the environment, but we also want 
the agency to be responsive to the legitimate concerns of agriculture 
when developing regulatory policy. Modern agriculture has been good for 
farmers and ranchers, the general public, the environment, and our 
nation's economy. Because innovation is the life-blood of not just our 
industry but the nation as a whole, we believe the EPA should support 
safe new technologies instead of finding undue reasons to deny them.
    Thank you again for the opportunity to provide input on the farm 
economy.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Paul Wenger,
President.
                                 ______
                                 
  Submitted Statement by Richard Wilkins, President, American Soybean 
                              Association
    Thank you to Chairman Davis and Ranking Member DelBene for holding 
today's hearing. The American Soybean Association (ASA) appreciates the 
opportunity to provide a statement to the Subcommittee. ASA represents 
all U.S. soybean farmers on domestic and international issues of 
importance to the soybean industry. ASA's advocacy efforts are made 
possible through the voluntary membership in ASA by over 22,500 farmers 
in 31 states where soybeans are grown.
    Soybean farmers, like producers of all crops, are especially 
focused this spring on the topic of today's hearing: the factors that 
contribute positively and negatively to their cost of production. With 
commodity prices down by an average of 40 percent since 2013 and land 
rents remaining relatively high, farmers are looking to productivity 
gains through agricultural research and technological innovation as 
ways to reduce per-unit costs. And we know that, if the U.S. is going 
to continue to provide food, feed, fiber and fuel to a world population 
expected to reach 9.7 billion by 2050, it must be done on the same or 
less land and in a sustainable way. Agricultural research and 
technology have been and will continue to provide the tools for 
achieving this goal.
    ASA would like to associate ourselves with testimony provided by 
several of your witnesses. In particular, we support the statement 
offered by Chuck Conner representing the National Council of Farmer 
Cooperatives regarding the vital importance of agricultural research. 
ASA has long supported full funding for USDA's flagship competitive 
research program, the Agriculture and Food Research Initiative (AFRI) 
and that remains our top agricultural appropriations priority for FY 
2017. At the same time, we strongly support the research programs 
carried out by a national network of land-grant universities. The 
fruits of this research positively and directly affect the cost of 
production for America's soybean farmers, and we want to make sure the 
Subcommittee understands how deeply soybean farmers value agricultural 
research and the land-grant system.
    ASA also shares the concern of many of the witnesses about farmers' 
continued access to important crop protection products, and the sense 
that the Environmental Protection Agency is consciously delaying 
decisions to bring and keep products on the market, as well as 
declining to defend its own science-based process and decisions.
    We expressed many of these concerns in a January 2016 letter to the 
House Agriculture Committee. We again highlight these recent decisions:

   The 9th Circuit invalidated the registration of sulfoxaflor; 
        EPA has indicated that it will not defend its own decision to 
        register sulfoxaflor.

   EPA abruptly withdrew its approval of the Enlist/Duo 
        herbicide on corn and soybeans.

   EPA proposed to revoke all tolerances for chlorpyrifos based 
        on questionable epidemiology studies that are not publicly 
        available.

   EPA moved to cancel registration of flubendiamide without 
        notice and comment or weighing grower interests.

   EPA published a paper which concluded that neonicotinoid 
        seed treatments ``provide negligible overall benefits to 
        soybean production in most situations'' and that ``in most 
        cases there is no difference in soybean yield when soybean seed 
        was treated with neonicotinoids versus not receiving any insect 
        control treatment.'' USDA was not consulted and issued a strong 
        response that contradicted EPA's conclusions. ASA also objected 
        to the paper, noting that actual experience from soybean 
        farmers proved differently.

    The United States has the world's most rigorous pesticide 
registration and review processes. EPA has historically relied on a 
predictable, science-based process for crop protection products--one 
that the public and farmers have trusted to keep air, soil and water 
safe. We urge the Subcommittee to direct the EPA to return to this 
risk-based system so that farmers and consumers again trust in EPA 
decision-making.
    Again, thank you for holding this hearing and for the opportunity 
to provide testimony.
                                 ______
                                 
                  Submitted Statement by AmericanHort
    Dear Chairman Davis, Ranking Member DelBene, Subcommittee Members:

    Thank you for this opportunity to submit official testimony for the 
hearing record on this important topic. AmericanHort is the national 
trade organization representing the horticulture industry. AmericanHort 
supports nearly 16,000 member and affiliated businesses that include 
plant breeders, greenhouse and nursery growers, garden retailers, 
distributors, interior and exterior landscape professionals, florists, 
students, educators, researchers, manufacturers, and all of those who 
are part of the industry market chain.
    While the Great Recession had a very negative impact on much of our 
industry, a slow but steady rebound is underway. The production value 
of nursery and greenhouse crops reached $16.7 billion in 2013. The 
horticulture industry's plant production, wholesale, retail, and 
landscape service components have annual sales of $163 billion, and 
sustain over 1,150,000 full- and part-time jobs.
    Nursery and greenhouse plants are produced in all 50 states. At 
farm gate they represent about \1/3\ of the value of all specialty 
crops, and about 15% of the total value of U.S. crop production. This 
places our sector ahead of other major crop sectors such as wheat and 
cotton.
    Our industry also provides a critical linkage between increasingly 
urban consumers and the agricultural sector. ``Seek first to 
understand,'' best-selling author Stephen Covey urges. Getting their 
hands in the soil and learning to grow plants is the best way for many 
consumers to understand in a small way the lives and labors of our 
growers.
    In this hearing statement, we focus on four issues impacting 
production costs and profitability--pest prevention, tools and inputs, 
labor, and research and market development. We then elaborate on how 
some key programs under the jurisdiction of the Subcommittee are 
helping.
Pest Prevention
    Our industry produces literally thousands of plant species and 
varieties. Nearly every invasive foreign plant pest that is introduced 
into the U.S. as an inadvertent consequence of international trade and 
travel finds suitable host plants somewhere in our industry. Introduced 
pests (including insects, pathogens, and weeds) often cause plant 
damage and loss, and market access can be jeopardized due to Federal or 
state quarantines intended to limit pest spread.
    In the year 2000, Congress modernized and streamlined the 
authorities under which USDA's Animal & Plant Health Inspection Service 
implements its efforts to safeguard American plant agriculture from 
such threats. At that time, AmericanHort (then the American Nursery & 
Landscape Association) co-chaired an external review of the APHIS plant 
safeguarding mission. The resulting report presented several hundred 
recommendations and a blueprint for the implementation program that 
followed.
    Beyond APHIS' historic approach and activities, Section 10007 of 
the Horticulture title of the farm bill features two very important 
components which have improved capacity, collaboration, and efficacy of 
efforts to prevent, detect, contain, and mitigate foreign invasive 
plant pests. The first is the National Clean Plant Network, NCPN, which 
provides high quality asexually propagated plant material free of 
targeted plant pathogens and pests that cause economic loss to protect 
the environment and ensure the global competitiveness of specialty crop 
producers.
    NCPN currently serves an array of high-value crop sectors that are 
vulnerable to high-consequence foreign pathogens. Sectors served 
include apples and pears, stone fruits, citrus, berries, grapevines, 
hops, roses, and sweet potatoes. A network of centers providing 
diagnostics and therapy enables the safe and orderly importation of new 
varieties, which contributes to the competitiveness and success of our 
growers. We attach some background information on the economic 
importance of clean plant programs.
    Sec. 10007 enables other important pest prevention and mitigation 
efforts, many of which involve Federal, state, and industry 
collaboration. For example, a pilot program known as Systems Approach 
to Nursery Certification (SANC) is now underway with the goal of 
modernizing the system for certifying nursery and greenhouse plants for 
interstate shipment by embracing hazard analysis, identification of 
critical control points, and application of management measures to 
mitigate pest and pathogen risk.
    Finally, a large and growing share of our industry's production 
starts overseas as young plants or vegetative cuttings subject to 
further growth and development here in the U.S. They are highly 
perishable and must enter free of regulated pests. An efficient 
inspection and clearance process is critical to our growers' success.
Tools in the Toolkit
    Effective plant production depends on an array of tools in the 
toolkit for both plant breeding and pest management. With this in mind, 
and as a ``minor use'' crop, we are deeply concerned that decisions 
regarding plant breeding and product availability for pest management 
are made based on sound science. This is true as well for efforts to 
respond to threats to pollinator health. Despite the advancements in 
new breeding technologies in recent years, the greenhouse and nursery 
production industry has benefited little. The fragmented pattern of 
ownership, the sheer number of species and varieties used, intellectual 
property issues, and high regulatory costs of permits have all rendered 
these promising new breeding technologies cost prohibitive and 
inaccessible to our industry. However, some of the newer technologies, 
such as gene editing, are much more economical. In many cases the 
resulting plant product is similar to historically used breeding 
practices but created in far less development time.
    These powerful tools could finally become a reality for our 
industry, provided that the associated regulatory framework does not 
overreach and become too costly. Potential gains are huge with respect 
to traits such as disease resistance and environmental stress 
tolerance. As USDA-APHIS reviews its biotechnology regulatory framework 
especially as it applies to genetically engineered plants, we urge 
restraint, so as to not unduly restrict ongoing nursery and greenhouse 
crop breeding operations and stifle future innovation.
    Horticulture is a major stakeholder in the pollinator health 
debate. On one hand, we are professional producers of trees, shrubs, 
vines, and flowers that are ``critical infrastructure'' for providing 
habitat and forage. Experts across the spectrum agree that improved 
habitat and forage are critical to ensuring healthy and diverse 
pollinator populations.
    On the other hand, our growers must also manage pests, and of 
course systemic insecticides generally--and neonicotinoids in 
particular--are at the center of the debate. The neonics have become 
integral in pest management for many reasons--they are broadly 
effective against invasive and often regulated insect pests, and have 
generally better worker safety and environmental profiles than many 
alternatives. They are also the subject of vigorous debate with respect 
to potential pollinator impacts.
    With a total of 76 active ingredients--including the neonics--
subject to enhanced data requirements for pollinator impacts, it is 
crucial that the Environmental Protection Agency follows the science. 
It is equally important that USDA's relevant research programs serve up 
solutions with respect to effective invasive pest management that 
ensures pollinator stewardship. We are deeply concerned that hasty or 
unsound regulatory decisions--as well as ``retail regulation''--may 
leave a toolkit that fails to enable our industry to effectively manage 
pest threats, mitigate the development of pesticide resistance, and 
meet quarantine and shipping requirements.
Labor and the Immigration Reform Imperative
    For many specialty crop producers, hired labor is the single 
biggest production expense. That is certainly true for nursery and 
greenhouse growers, where labor often constitutes 30 to 50 percent of 
production costs. And yet, labor-intensive agricultural sectors are in 
the midst of a worsening labor crisis characterized by the following:

   Aging and attrition of the current workforce;

   Very little workforce replenishment, either by domestic or 
        foreign workers;

   Growing reliance on the only legal visa option, H-2A, though 
        the program is mired in bureaucracy and dysfunction;

   Little prospect for near-term Congressional action that 
        would bring our immigration and agricultural visa system into 
        the 21st century.

    While often overlooked by critics, farmers are constantly striving 
to innovate, and to adopt mechanization, automation, and labor-saving 
strategies where possible. With respect to mechanization, the easy work 
has been done, and there are many functions workers perform that are 
not likely amenable to mechanization. That said, mechanization research 
is long-term and speculative and isn't likely to happen without a 
Federal partner. Much USDA research in this space seems to have been 
deemphasized; meanwhile, the Department of Labor spends over $50 
million each year through the Workforce Innovation and Opportunity Act 
to provide farm workers with the training and skills to exit 
agricultural employment!
    While the prospect for legislative reforms is not bright, hope 
springs eternal. After all, even in the narrow context of agriculture, 
legislative reforms are essential to the goals of stabilizing the 
workforce and ensuring a workforce in the future. Studies and reports 
have demonstrated the catastrophic economic lost opportunity to the 
U.S. if current and potential production of high-value specialty crops 
shifts overseas because the U.S. has an unending labor drought and a 
dearth of solutions.
    Members of the Agriculture Committee are well positioned to 
articulate these truths, and to work across the aisle toward enactment 
of badly needed reforms. Our growers and producers need your 
leadership.
Research and Market Development
    Robust research is key to innovation and progress. With declining 
funding and capacity in many of the traditional institutions conducting 
ag and hort research, targeted programs like the Specialty Crop 
Research Initiative are growing in importance. And, organizations like 
the Horticultural Research Institute, the AmericanHort foundation, are 
creatively raising funds and partnering with others to advance priority 
research.
    A key example of such leveraging can be found in the ``intelligent 
sprayer'' project that was initially funded through the USDA 
Agricultural Research Service's (ARS) Floriculture and Nursery Research 
Initiative (FNRI), with industry support through HRI. Through the FNRI, 
ARS and land-grant university scientists developed and trialed 
innovative pesticide application technology that has delivered 
impressive results: 47% to 70% reduction in pesticide active ingredient 
applied, reductions in drift and off-target spray, and cost savings of 
up to $280 per acre. Please see the attached summary for further 
details.
    This groundbreaking work more recently received support through the 
Specialty Crop Research Initiative. This next phase of the project 
seeks to enable existing spray equipment to be retrofitted with the new 
technology, allowing cost savings and enhanced environmental protection 
without the need to necessarily acquire a major new piece of equipment. 
This is ``partnership in action'' that underscores the importance of 
these programs toward achieving profitable farms and broader societal 
goals.
    Landscape horticulture is in the early stages of a major 
marketplace transition, from the historic use of trees, shrubs, 
flowers, and plants primarily for aesthetic enhancement, to a world 
where plants and landscapes are properly seen as investments that 
deliver tangible returns in the form of ecosystem services, enhanced 
human health and well-being, and economic benefits like increased 
property values.
    For our industry, the Specialty Crop Block Grant program has served 
a key role in engaging consumers to invest in plants and landscaping 
for these reasons, through a unique outreach program called Plant 
Something. However, a new and unrealistic performance measure 
requirement to report actual dollar sales increases, applied to 
marketing proposals only, is problematic. For most specialty crops, 
including nursery and floriculture crops, annual baseline sales data in 
the retail setting do not exist. Individual companies often consider 
sales as proprietary business information. Total sales are influenced 
by many factors, and the impact of marketing efforts is often broader 
than that covered by a grant in any one year.
    To have to build in a major statistical gathering and evaluation 
mechanism as part of each marketing grant proposal would not constitute 
a wise use of limited program resources. Expanding markets for and 
consumption of specialty crops is a key goal of this program, and this 
new performance measure--applied only to marketing proposals--should be 
sidelined.
Conclusion
    Thank you for the opportunity to share perspectives of the 
horticulture industry with regard to factors impacting the cost of 
production and the success and future potential of our growers. We 
welcome questions and feedback.
                               attachment
This Could Change Everything
Mechanization at Its Finest: Technology that Automatically Adjusts 
        Spray Output to the Structure of the Crop
          Controlled spray output that matches plant canopies brings 
        many benefits. Using this new sprayer technologies, Nelson has 
        experienced the following:
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          The bottom line--effective pest management that is much more 
        cost-effective and environmentally friendly than the air-blast 
        sprayers it replaces.

    Dan Nelson, of Hans Nelson and Sons Nursery in Boring, Oregon, is 
usually a pretty laid-back fellow-until the conversation turns to spray 
technology and the recent advancements made possible by a unique 
partnership effort involving the Horticultural Research Institute, 
USDA's Agricultural Research Service, and several universities. Then, 
Nelson gets animated.
    His passion for pest management innovation is easy to understand. 
Nelson and Sons has been fortunate to be one of six test sites for the 
new ``intelligent sprayer'' technology developed at the USDA-ARS 
research station in Wooster, Ohio. Dr. Heping Zhu and his staff 
designed and built the first prototypes. Their objective was simple: 
develop an advanced and affordable pest management spray application 
system that employs intelligent technology to automatically match spray 
output to the structure of the crop.
How It Works
    The technology starts with a variable-rate air assisted sprayer. It 
uses a laser scanning sensor that feeds data into a tractor-mounted 
computer. The computer feeds information to 40 individual solenoids 
each with a tee jet spray nozzle. The data coming from the laser 
computer activates individual nozzles based on what the laser sees. 
When nothing is seen, the nozzles are not activated.
Our Support
    This remarkable research advancement is a perfect example of 
progress through partnerships. The Horticultural Research Institute, 
AmericanHort's research and development affiliate, believed in the 
potential of this project and its visionary scientist team led by Dr. 
Zhu. HRI provided some of the initial funding to get the project going. 
That demonstration of industry commitment opened the door to further 
funding through our Floriculture and Nursery Research Initiative 
partnership with USDA-ARS. Eventually, additional funding came through 
the Specialty Crop Research Initiative, a program AmericanHort has 
supported through the farm bill. University research and extension 
involvement in Ohio, Oregon, and Tennessee has helped transform a 
research theory into an industry reality.
What's Next
    The ``smart sprayer'' project is now at the commercialization 
phase. And, the research team led by Dr. Zhu is now working to make the 
technology adaptable to existing equipment, eventually allowing many 
growers to retrofit existing spray equipment to reap the benefits of 
this work. The project showcases what can be achieved when the 
industry's own research dollars, through HRI, are leveraged through 
partnerships to move the industry forward.
                                 ______
                                 
         Submitted Statement by American Seed Trade Association
    Innovative, science-based solutions are fundamental to meet our 
growing agricultural needs. Since 1948, total U.S. agricultural output 
has more than doubled. The ability of the farm sector to feed far more 
people today while using less farmland than 6 decades ago is attributed 
to increases in agricultural productivity. The major driver of growth 
in agricultural productivity is innovation, and it will continue to be 
critical as we look for ways to sustainably feed nine billion people in 
the coming years.
    Founded in 1883, ASTA's mission is to enhance the development and 
movement of quality seed worldwide. ASTA's diverse membership consists 
of over 700 companies involved in seed production, distribution, plant 
breeding and related industries in North America. ASTA represents all 
varieties of seeds, including grasses, forages, flowers, vegetables, 
row crops and cereals. Many ASTA members are research-intensive 
companies engaged in the discovery, development and marketing of seed 
varieties with enhanced agronomic and end-use quality characteristics.
    Research programs authorized in the farm bill are critical to 
advancing agriculture, and these programs have shown a high rate of 
return for the dollars invested. The programs outlined below are 
particularly important for the seed industry's mission to provide 
better seed to improve the quality of life for all of us. It is 
important to note, however, that the promise of U.S. research 
investments will not be fully realized if the regulatory burden for 
commercialization of these tools is too great. Congress must ensure 
that Executive branch actions, regulatory and otherwise, foster the 
growth of a strong 21st century farming economy through science-based 
decision making.
Farm Bill--Research Title
    Agriculture and Food Research Initiative (AFRI) is the premier 
competitive grants program for fundamental and applied research, 
extension, and education to support our nation's food and agricultural 
systems. While the 2014 Farm Bill authorized $700 million for AFRI, 
annual appropriations have not met this authorization target. Failure 
to meet this commitment could deter the next generation of scientists 
from pursuing critical research in agriculture innovations that could 
benefits all Americans.
    Due to limited funding, only a small percentage of NIFA grant 
applications are awarded each year. In light of this situation, 
Congress may wish to refine the review process to maximize impact of 
the sparse research dollars available. For example, the Specialty Crop 
Research Initiative has a two-step review process so that proposals are 
reviewed and ranked by a panel of specialty crop industry 
representatives as well as peer reviewed by research experts.
    Foundation for Food and Agriculture Research provides an innovative 
solution to increase funding and leverage current and future 
investments in research. The Foundation provides a structure for new 
public-private collaborations that will further USDA's research mission 
by addressing knowledge gaps in water use, soil health and plant 
efficiency. While still in the beginning stages of operation, the 
Foundation intends to complement USDA's portfolio of intramural and 
extramural research programs to solve current and future challenges and 
provide a mechanism for rapid response for emerging issues. We support 
its continued authorization and funding in future farm bills.
    National Genetic Resources Program was established to acquire, 
characterize, preserve, document, and distribute germplasm of all 
lifeforms important for food and agricultural production to scientists. 
These materials are the key to increasing genetic diversity to reduce 
vulnerability of crops to pests, diseases, and environmental stress. 
The program is authorized at $1 million in the farm bill. Twenty-six 
National Plant Germplasm System labs are funded with further annual 
appropriations of $44 million. The U.S. germplasm system is enviable 
for its size and scope. However, current funding through the farm bill 
and annual appropriations is insufficient to maintain and distribute 
the collections to U.S. researchers who use those materials to develop 
varieties for all types of cropping systems and landscape uses. Without 
sufficient funding, the collections are deteriorating, and the 
beneficial attributes of the collected materials are going 
undiscovered.
Farm Bill--Horticulture Title
    The National Seed Health Accreditation Pilot Program (NSHAPP) was 
funded from dollars designated in the Horticulture Title for Plant 
Disease Management and Disaster Prevention Programs (10007)--an 
important funding mechanism for specialty crops. Under the goal of 
enhancing mitigation and rapid response, NSHAPP is developing a model 
for a voluntary system of testing imported seed for pathogens of 
phytosanitary concern that can be continuously adapted to emerging 
pathogens. The USDA-APHIS National Seed Health System has coordinated 
with the seed industry in a unique partnership to screen imported seed 
with diagnostic testing to prevent the introduction of previously 
undetectable and economically damaging seed-transmitted pathogens. 
Continued funding for plant disease management programs in the farm 
bill is important for the horticulture sector to address pressing 
problems.
Regulatory Oversight
    Thanks to seed improvement, farmers can count on increased 
varieties of crops, consistent and reliable harvests, and greater 
yields. The result is increased quality and quantity of our food 
supply, quality of life, and a more sustainable future.
    Many breeders now have access to newer tools that take advantage of 
a better understanding of plant genetics. Innovative plant breeding 
techniques, such as gene editing, hold enormous promise for improving 
the productivity and environmental sustainability of food, feed, fiber, 
and biofuels. Today, with the capability to sequence plant genomes and 
the ability to link a specific gene(s) to a specific characteristic, 
breeders are able to more precisely make improvements that mimic the 
improvements that happen in nature or through traditional plant 
breeding.
    By applying newer methods, plant breeders can be more efficient and 
precise at making the same desired changes that can be made over a much 
longer period of time through earlier breeding methods. Opportunities 
abound for the use of precise breeding techniques, such as gene editing 
in horticultural crops including: improved disease resistance and 
yield, water and nitrogen-use efficiency, and enhanced nutrition, 
colors, flavors and shelf-life. Because these new methods are efficient 
and economical, they are accessible to public and commercial plant 
breeders and can be used across all agriculturally important crops, 
including field, vegetables, and specialty crops.
    All plant varieties are regulated in the U.S., and plant breeders 
have a phenomenal track record of safety. USDA has a process for 
determining if a plant product will be subject to a pre-market review, 
and they have recently determined that a number of products (e.g., a 
non-browning mushroom) do not pose any risk that would require further 
USDA review. Scientists and breeders are now conducting critical 
performance evaluations of those varieties prior to bringing them to 
market.
    As farmers strive to address production challenges in the 21st 
century, it is important that they have access to the most 
sophisticated tools. It would have significant ramifications for the 
rural economy if the U.S. was no longer a leader in agriculture 
innovation. Recently, USDA's Animal and Plant Health Inspection 
Services (APHIS) began the process of implementing an overhaul of its 
biotechnology pre-market regulations through a Notice of Intent 
published in the Federal Register. In comments to APHIS, the American 
Seed Trade Association (ASTA) and a wide range of agriculture 
organizations have raised concerns that the proposal goes well beyond 
the scope of what the agency reviews today. In particular, APHIS's 
proposals create ambiguity as to what processes and products will 
receive pre-market regulatory scrutiny and to what degree.
    A transparent regulatory system that is based on the risk posed by 
the product and not on the specific process used to develop the product 
will encourage innovation in the U.S. In turn, that innovation will 
benefit growers and all participants in the food and feed value-chain. 
Congress must stay actively engaged to monitor how USDA intends to 
implement proposed changes to the regulatory system. APHIS should be 
encouraged to consult with other Federal agencies, international 
regulatory bodies, and stakeholders so that the sweeping changes they 
have outlined do not have unintended consequences to trade and 
innovation. Other countries are moving towards not regulating newer 
breeding methods under their GMO regulations. This is the approach that 
ASTA supports as it is science-based and presents the best opportunity 
to ensure a promising future for agriculture.
                                 ______
                                 
   Submitted Statement by American Society for Horticultural Science
    The American Society for Horticultural Science (ASHS), the 
professional society of horticulture researchers and educators supports 
continuation of USDA's competitive extramural and intramural research 
programs. These programs fall under both the National Institute for 
Food & Agriculture (NIFA), and the Agriculture Research Service (ARS)--
agencies dedicated to expanding knowledge and innovation for abundant, 
healthy, and safe agricultural products. We believe vibrant innovative 
research programs must remain in place to meet rising domestic and 
global demands for accessible and affordable food and plant sources. 
USDA lists horticulture as comprising 50% of total crop farm-gate 
value. As such, specialty crop research is the essential common 
denominator for basic and applied science that ensures quality growth 
and production of nutritious foods, as well as enabling responsible 
environmental stewardship and harnessing new forms of energy.
    For ASHS members, some of the most commonly used NIFA programs are 
the Specialty Crop Research Initiative (SCRI), the Organic Agriculture 
Research and Education Initiative (OREI), the Specialty Crop Block 
Grant program, and Hatch and Smith-Lever capacity funding for land-
grant institutions.
    SCRI addresses a host of challenges with fruits, vegetables, and 
ornamentals. Recent projects funded by this successful initiative are 
helping the potato and citrus industries ward off devastating psyllid-
borne diseases. Each of these $3.5 billion industries is threatened by 
this harmful infestation. Interdisciplinary teams are identifying 
pathogen origins, and implementing effective means to arrest their 
spread and eventual eradication. What has been learned about potato 
zebra chip now informs strategies for halting citrus greening. While 
Texas potato growers have already saved several hundred million 
dollars, the savings in production costs is even greater because the 
spread of zebra chip to California and the Pacific Northwest has been 
stopped. SCRI's model of coordinated management has made many of these 
projects successful on a much greater scale, serving the needs of the 
specialty crop industry, and providing measurable dividends for 
taxpayer investments.
    OREI's dual research and education components make it another 
popular program used by ASHS. One recent OREI success story deals with 
food safety. Specifically, tracking foodborne pathogens in leafy greens 
and other vegetables at production and distribution levels. 
Sanitization techniques, and use of various herbal substances, are part 
of this OREI grant which tests various handling methods for ensuring 
that disease-free specialty crops make it to retail outlets and 
consumers.
    Specialty Crop Block Grants allow states to fund projects having 
state-specific needs. One such Block Grant trained Illinois farmers to 
use high tunnels (unheated greenhouses) to provide top quality 
vegetables for local consumers over a longer growing season. 
Implementation of new techniques and technologies allows more 
productivity and profitability for Illinois' horticulture growers in an 
area known more for corn and soybeans. Block Grants recently helped 
fund a ``Grassroots'' education exhibit at the U.S. National Arboretum 
in Washington, DC. Using both visual and interactive tools, visitors 
learn about turf's history, and its many modern-day uses courtesy of 
horticulture science.
    Capacity funding for land-grant institutions allow ASHS member 
scientists to solve problems not effectively addressed by competitive 
grant models. ASHS supports adjusting appropriations for these programs 
for inflation so that our land-grants maintain adequate research 
capacity to assure the nation's food security needs. A recent capacity-
funded project, ``Improving Sustainability in Fruit Tree Production 
through Changes in Rootstock Use,'' is the basis of a revolution in 
U.S. apple production. These high-density, disease-resistant orchards 
lower production costs for growers by approximately $250 million per 
year, while reducing environmental impact and improving apple quality. 
Capacity funding also provides critical foundations for all intra- and 
extramural research. These funds provide unique and invaluable 
education, training, and extension opportunities that sustain new 
generations of agriculture scientists.
    As Howard Buffett, a businessman, philanthropist, and farmer 
recently said in an interview with PBS, ``land-grant universities are 
what built our agricultural system into a powerhouse.'' Utilizing 
collaborative partnerships between academia, government, and private 
industry, ASHS views the combination of capacity and competitive 
research--in collaboration with private industry--as maintaining 
America's powerhouse role for horticulture science and all of 
agriculture.
                                 ______
                                 
      Submitted Statement by Biotechnology Innovation Organization
    The Biotechnology Innovation Organization (BIO) is pleased to 
submit this testimony to the House Committee on Agriculture, 
Subcommittee on Biotechnology, Horticulture, and Research. BIO is the 
world's largest biotechnology trade association representing 1,000 
companies, academic institutions, state biotechnology centers and 
related organizations across the United States and in more than 30 
other nations. BIO members are involved in the research and development 
of healthcare, agricultural, industrial and environmental biotechnology 
products, and BIO represents the majority of the biotechnology product 
developers in North America.
Introduction
    Scientific advancements across the American economy are responsible 
for accelerating economic growth through improved productivity. New 
technologies, in agricultural and industrial biotechnology and beyond, 
create new products and processes; stimulate the creation of new 
companies and new industries; improve existing products; and lower 
manufacturing costs. They also provide public- and private-sector 
researchers with the tools and techniques necessary for discovering new 
products that hold tremendous potential for society. Over the past 200 
years, the primary scientific drivers of technology development were 
physics and chemistry. But today, in the 21st Century, society is 
leveraging a deep and rich understanding of the fundamental mechanics 
of life and its molecular components to drive the development of an 
array of biologically-based technologies that fuel innovation, 
stimulate greater economic growth, and transform American lives for the 
better.
    For agriculture, biological breakthroughs are enabling farmers to 
rise to the grand challenge confronting it: doing more with less. 
Throughout history, as human population growth drove ever-increasing 
demand for food, animal feed, fuel and fiber, our agricultural 
production systems kept pace. In the mid-20th century, fears of a 
population-driven food crisis led to research and investment to 
intensify crop production. This ``Green Revolution'' saved one billion 
from famine; halved the global percentage of undernourished people; 
improved rural economies; and protected approximately 2.2 to 3.8 
billion acres of land from being cleared for crop production.
    Society still faces the challenge of feeding an ever-expanding 
population, which will reach nine billion by 2050 and require at least 
a 70 percent increase in food, feed and fuel production. However, this 
time the challenge of increasing agricultural production is exacerbated 
by a confluence of interacting pressures in addition to population 
growth: increased competition for water, land and energy; a dietary 
shift from cereals to animal products; diminishing supplies of fossil 
fuels--the source of most agrochemicals; resources degraded from past 
activities; and the global effects of climate change. The Green 
Revolution allowed society to produce more with more inputs, most of 
which are derived from nonrenewable resources. Our current challenge is 
to produce more with less and to do so in a sustainable fashion. 
Biotechnology provides a set of precise, yet flexible, tools for 
meeting that challenge.
Creating an Environment in Which Biotechnology Innovation Flourishes
    To meet the challenges of today and tomorrow, Congress must 
consistently promote policies that encourage biotechnology innovation 
and ensure Executive Branch actions, regulatory and otherwise, foster 
the growth of a strong 21st Century farming and biobased economy. BIO 
recommends the House Agriculture Committee and the broader House 
Membership consider the following policies that foster current and 
future innovation:

   Promoting predictable, science and risk based regulatory 
        policy at USDA, EPA, and FDA.

   Promoting national consistency regarding the labeling of 
        bioengineered food.

   Promoting national consistency regarding the cultivation & 
        movement of bioengineered seeds.

   Promoting patent laws that drive critical life science 
        discoveries.

   Promoting U.S. Government efforts to avoid trade barriers or 
        trade disruptions related to non-harmonious policies and 
        practices.

   Promoting investments in public-sector agricultural 
        research.

   Promoting public education about agricultural innovation.

   Promoting the development of animal biotechnology products 
        that prevent and mitigate major livestock disease outbreaks.

   Promoting policies that nurture innovation and investment in 
        advanced biofuels, renewable chemicals, and biobased products.

   Promoting a strong and steady Renewable Fuel Standard (RFS)
Plant Biotechnology
Value to Farmers, Productivity, and the Rural Economy
    For the past 2 decades, the products of agricultural biotechnology 
have been commercially available and widely used by farmers around the 
world. In the U.S., more than 90 percent of corn, cotton, canola, 
soybeans, and sugarbeets grown contain at least one biotechnology-
derived trait to help farmers better manage pests, weeds, disease, and 
harsh weather conditions. Because biotech crops make up such a large 
portion of American production agriculture, they have a major positive 
impact on the overall strength of the rural economy.
    Gains in productivity associated with biotech crops help grow the 
American agricultural trade surplus because so many biotech crop 
harvests are dedicated to foreign markets. In Fiscal Year 2015, U.S. 
agricultural exports totaled more than $143 billion contributing to a 
$27.5 billion agricultural trade surplus. We can thank biotechnology, 
in part, for strong and steady growth in the U.S. agricultural export 
market, particularly for corn and soybeans.
    Additionally, USDA has published reports noting how the adoption of 
biotech crops by farm families is associated with higher off-farm 
household income. Farming efficiencies associated with the use of 
biotech crops allow farmers to save time, which is then used to 
generate income from off-farm employment. One USDA report highlights 
that a ten percent increase in the use of herbicide tolerant soybeans, 
for example, is associated with a 16 percent increase in off-farm 
household income. These statistics illustrate how more efficient 
farming practices, such as the use of biotechnology, generate greater 
economic activity in rural communities.
    It is also noteworthy that, according to the White House National 
Bioeconomy Blueprint, published in 2012, U.S. revenues from biotech 
crops totaled more than $75 billion. The investments by companies in 
research, development and commercialization of these crops has 
generated good jobs all across our country.
    The pattern of rapid and persistent adoption of biotech crops 
occurs in other countries where farmers have access to them. Globally, 
farmers growing biotech crops saw net economic benefits at the farm 
level of more than $20 billion in a single year (2013). When compared 
to non-biotech crops, biotech crops increase farmer profits 68%, on 
average due to increased yields (21.6%) and decreased chemical 
pesticide use (^36.9%). (Figure 1 and Table 1). Yield and profit gains 
are higher in developing countries than in industrialized countries.\1\
---------------------------------------------------------------------------
    \1\ Klumper W., Qaim M. (2014) A Meta-Analysis of the Impacts of 
Genetically Modified Crops. PLoS ONE 9(11): e111629. doi:10.1371/
journal.pone.0111629.
---------------------------------------------------------------------------
Figure 1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Impacts of Biotech Crop Adoption. Average percentage 
        differences between biotech and non-biotech crops are shown. 
        Results refer to all GM crops, including herbicide-tolerant and 
        insect-resistant traits. A total of 147 original studies 
        comparing biotech and non-biotech crops were included in the 
        analysis. The number of observations varies by outcome 
        variable; yield: 451; pesticide quantity: 121; pesticide cost: 
        193; total production cost: 115; farmer profit: 136. *** 
        indicates statistical significance at the 1% level.
          Klumper W., Qaim M. (2014) A Meta-Analysis of the Impacts of 
        Genetically Modified Crops. PLoS ONE 9(11): e111629. 
        doi:10.1371/journal.pone.0111629.

                                 Table 1
------------------------------------------------------------------------
                                           Insect           Herbicide
 Outcome variable     All GM crops       resistance         tolerance
------------------------------------------------------------------------
         Yield           *** 21.57         *** 24.85           ** 9.29
                    (15.65; 27.48)    (18.49; 31.22)     (1.78; 16.80)
           n/m             451/100            353/83             94/25
Pesticide quantity      *** ^36.93       *** ^41 .67              2.43
                    (^48.01; ^25.86)  (^51.99; ^31.36)  (^20.26; 25.12)
           n/m              121/37            108/31              13/7
Pesticide cost          *** ^39.15        *** ^43.43        *** ^25.29
                    (^46.96; ^31.33)  (^51.64; ^35.22)  (^33.84; ^16.74)
           n/m              193/57            145/45             48/15
                   -----------------------------------------------------
  Total production            3.25           ** 5.24             ^6.83
   cost...........   (^1.76; 8.25)     (0.25; 10.73)    (^16.43; 2.77)
  n/m.............          115/46             96/38             19/10
                   -----------------------------------------------------
  Farmer profit...       *** 68.21         *** 68.78             64.29
                    (46.31; 90.12)    (46.45; 91.11)    (^24.73; 153.31)
  n/m.............          136/42            119/36              17/9
------------------------------------------------------------------------
Average percentage differences between GM and non-GM crops are shown
  with 95% confidence intervals in parentheses.
*, **, *** indicate statistical significance at the 10%, 5%, and 1%
  level, respectively.
n is the number of observations, m the number of different primary
  datasets from which these observations are derived.
doi:10.1371/journal.pone.0111629.t002.
Klumper W., Qaim M. (2014) A Meta-Analysis of the Impacts of Genetically
  Modified Crops. PLoS ONE 9(11): e111629. doi:10.1371/
  journal.pone.0111629.

Predictable, Risk Appropriate Regulation
   U.S. Department of Agriculture (USDA)

      Recently, USDA's Animal and Plant Health Inspection Services 
        (APHIS) began the process of implementing an overhaul of its 
        biotechnology pre-market regulations. Some of the regulatory 
        systems APHIS is considering, which were publicized in the 
        Federal Register in February, go well beyond the scope of what 
        the agency reviews today.
      While many stakeholders agree with APHIS's goal of making 
        improvements to its pre-market regulatory system so the scope 
        of regulation better aligns with the actual risk posed by 
        biotechnology products, much of what APHIS described in the 
        Federal Register raises concerns about how the agency will 
        actually achieve its goal.
      APHIS must get this project right. Congress should stay actively 
        engaged and monitor what the agency is considering. It will be 
        essential that any new APHIS pre-market regulatory structure 
        (1) continue to promote innovation that enables American 
        farmers to remain competitive while simultaneously confronting 
        serious food security and environmental challenges; (2) is 
        predictable, transparent, and based on science and actual risk 
        of the product; and (3) is developed in close consultation with 
        a broad range of scientific experts, stakeholders, and other 
        government agencies responsible for biotechnology policy, such 
        as the U.S. Food and Drug Administration, the U.S. 
        Environmental Protection Agency, and the Office of the U.S. 
        Trade Representative.

   U.S. Environmental Protection Agency (EPA)

      Biotech crops are particularly beneficial to the environment, 
        which should be noteworthy to the EPA. Widespread adoption of 
        these crops since the early 1990s have resulted in significant 
        reductions in insecticide use, substitution of less toxic 
        herbicides, and significant labor savings for farmers. Their 
        use reduces agriculture's energy consumption and facilitates 
        the use of no-till agriculture, which prevents soil erosion and 
        reduces CO2 emissions. According to peer reviewed 
        publications measuring environmental impacts, the use of 
        biotech seeds has reduced the environmental footprint of 
        agriculture by 18 percent.
      The EPA is responsible for assessing the safety of pesticide--
        like substances, known as Plant Incorporated Protectants 
        (PIPs), produced by certain biotech crops. The most common of 
        these are the so-called ``Bt'' crops, which produce a protein 
        derived from soil bacteria that confers insect resistance to 
        the plant. In its own independent analysis, the EPA confirmed 
        the environmental safety of the PIPs that it reviews. Not only 
        are Bt crops safe for the environment, but they also typically 
        result in significantly less insecticide use. The EPA also 
        approves new uses of previously registered herbicides on 
        biotech plants that are developed to resist those herbicides.
      The EPA's regulatory performance with respect to ag-biotech 
        products has declined over the years, as regulatory 
        requirements and costs have increased significantly. Even 
        though Congress enacted the Pesticide Registration Improvement 
        Act (PRIA) to impose very specific time limits for reviews of 
        new uses and registration of new PIPs in biotech plants, the 
        EPA's Office of Pesticide Products (OPP) routinely extends the 
        legally-mandated time limits for biotech products. 
        Additionally, the EPA has made several attempts in recent years 
        to expand its authority over agricultural biotechnology 
        products. BIO urges the Committee to exercise appropriate 
        Congressional oversight to ensure OPP is following legally-
        mandated timelines and that the EPA is, more generally, not 
        unnecessarily expanding regulatory authority.
National Uniformity for Labeling, Cultivation, and Seed Movement
    It is essential that policies related to bioengineered food 
labeling and the cultivation and movement of bioengineered seeds and 
plants be nationally uniform to promote the smooth movement of food and 
feed crops and other agricultural products into, out of, and within the 
United States. Avoiding trade barriers and disruptions is vital to 
agricultural commerce and the nation's economy and should be 
facilitated to the greatest extent possible.

   Labeling

      Some consumers are expressing a desire to know, via food product 
        labeling, whether they are purchasing or consuming food that 
        contains ingredients that were developed through biotechnology, 
        and some manufacturers want to respond to this consumer 
        interest. Some states and localities are requiring 
        bioengineered food product labeling, creating the potential for 
        conflicting legal and regulatory requirements, increased costs 
        of food for all consumers, and substantial disruptions in, and 
        adverse economic effects on, interstate commerce and trade. To 
        prevent the negative repercussions associated with state-by-
        state food labeling laws, the Congress should quickly enact 
        national bioengineered food labeling legislation.

   Cultivation/Seed Movement

      Some states and localities have attempted to ban or otherwise 
        restrict the movement, introduction, development, planting, 
        cultivation, harvesting, production, marketing, sale, or other 
        use of bioengineered foods, diminishing the beneficial economic 
        effects of economies of scale and creating the potential for 
        substantial disruptions and adverse economic effects on 
        interstate commerce and trade. Indeed, some localities have 
        even enacted bans on the cultivation of bioengineered seeds and 
        plants, causing distress and harm to farmers and resulting in 
        considerable litigation.
      The petition process established for bioengineered plants under 
        the U.S. Coordinated Framework for the Regulation of 
        Biotechnology and the Plant Protection Act provides seed 
        developers with the national clearance they need to 
        commercialize bioengineered crops, provides farmers with 
        clarity with respect to the crops they can legally grow, and 
        provides farmers, agribusinesses, food companies, and consumers 
        with confirmation that bioengineered crops are as safe to grow, 
        market, and consume as non-bioengineered crops.
      State and local cultivation bans and restrictions, however 
        passionately their supporters may favor them, pose a direct 
        threat to the reliability of the Federal system of uniform 
        science-based regulation that governs agricultural 
        biotechnology in the United States. State and local bans and 
        other measures result in a patchwork of laws governing farming. 
        This is a serious and unnecessary obstacle to interstate 
        commerce; local governments lack the expertise and resources to 
        second-guess the expert decisions of national regulatory 
        agencies.
Animal Biotechnology
    The budding animal biotechnology industry has potential to solve 
numerous human, animal, and environmental challenges but is at a 
crossroads. Its future in the United States is in danger because 
universities and companies, which have developed numerous innovative 
applications over the past 3 decades, are impeded by costly, 
unpredictable regulations that are not proportionate to the product's 
risk.
    The House Agriculture Committee should be keenly interested in the 
viability of the animal biotechnology sector, because its products can 
prevent or mitigate animal diseases that cause tremendous pain and 
hardship for livestock producers and damage the rural economy. 
Unfortunately development of many of these products has either moved to 
other countries, such as China and Brazil, or been abandoned due to 
unnecessarily burdensome regulations:

   In 1998, researchers at the USDA developed dairy cows that 
        required fewer antibiotics due to increased amounts of a 
        naturally occurring enzyme, lysostaphin, in their milk. This 
        enzyme, which occurs in high amounts in human milk, provided 
        resistance to mastitis, the number one reason antibiotics are 
        used in dairy cattle. Mastitis costs U.S. farmers $1.7-$2 
        billion every year.

   South Dakota scientists have produced beef cattle that are 
        capable of resisting ``Mad Cow Disease'' or Bovine Spongiform 
        Encephalopathy (BSE). A cow that carried BSE was discovered in 
        the U.S. in December 2003. In 2004, the disease cost U.S. beef 
        producers $4.7 billion because international markets were 
        closed to U.S. beef.

   In 2010, scientists developed chickens that are unable to 
        transmit avian influenza. In 2015 alone, almost 50 million 
        chickens and turkeys were destroyed in the U.S. due to an 
        outbreak of the H5N2 strain of ``bird flu.'' The total economic 
        cost to Iowa alone was over $1 billion in 2015.

    Many diseases can jump from animals to humans, as evidenced by the 
137 human cases of H7H9 avian flu with 45 deaths through 2013. 
Therefore, regulations that impede development of disease-resistant 
farm animals threaten the physical health of people in rural 
environments in addition to their economic well-being.
Industrial Biotechnology
    While feeding and healing the world, biotechnology is also helping 
society to develop and commercialize new feedstocks and biological 
catalysts for production of advanced biofuels, renewable chemicals, and 
biobased products. The biobased industry created four million jobs and 
contributed $369 billion to the U.S. economy in 2013. The jobs 
multiplier for this industry is high, at 2.64, and these jobs benefit 
rural communities.\2\ Because these feedstocks, manufacturing methods, 
and products are based on plants and biological processes, they are 
more efficient, sustainable and environmentally friendly. According to 
a McKinsey report, the production of renewable chemicals, which go into 
products like plastics, textiles, and cosmetics, is expected to grow at 
twice the rate of the overall chemical market, comprising 11 to 13 
percent of total chemical industry revenues by the year 2020. 
Importantly, the development and use of biomass for fuels and chemicals 
in an American biobased economy, by necessity, cannot be outsourced to 
other countries.
---------------------------------------------------------------------------
    \2\ An Economic Impact Analysis of the U.S. Biobased Products 
Industry--A Report to the Congress of the United States of America. 
Golden, J.S., et. al 2015. Joint publication of the Duke Center for 
Sustainability and Commerce and the Supply Chain Resource Cooperative 
at North Carolina State University.

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   Farm Bill Energy Title Programs

      Industrial biotechnology is unlocking the potential of 
        agriculture and forestry, enabling the production of a new 
        generation of advanced biofuels, renewable chemicals, and 
        biobased products produced from biomass, to create new 
        opportunities for rural economic prosperity and energy 
        security. Farm bill energy programs, such as an expanded 
        Biorefinery Assistance Program that promotes the development of 
        standalone renewable chemicals facilities; the Biomass Crop 
        Assistance Program; and the Biobased Markets Program, in 
        combination with complementary Federal policies like the 
        Renewable Fuel Standard (RFS) and supportive tax policies, are 
        speeding technologies to commercial reality. We must continue 
        investments in America's energy and agricultural future.

   A Strong, Steady Renewable Fuel Standard (RFS)

      Though not a policy within the jurisdiction of the House 
        Agriculture Committee, BIO draws your attention to its support 
        for a strong RFS. Because of the incentives created by the RFS, 
        and the stability of the program generally, BIO members are 
        producing commercial quantities of advanced biofuels. When 
        properly administered in accordance with the RFS statute, the 
        policy drives investment and ensures a steady and increasing 
        market for renewable fuels in the United States, which in turn 
        maintains and furthers investment in that market.
Promoting Patent Laws that Drive Life Science Discoveries
    Agricultural innovation depends upon clear, predictable, and 
enforceable patent rights. Without these patent rights, new products 
used to produce healthful food, protect crops, preserve the 
environment, and improve human & animal health will be more costly to 
develop. Companies and universities expend tremendous resources to 
research and develop economically and environmentally beneficial 
technologies to help feed, fuel, clothe, and heal people and animals. 
But developing new products is a slow, uncertain, and expensive 
process. It can easily take a decade or longer and more than $100 
million to commercialize a single product. Strong patents are critical 
to ensure a return on investments of time and money, which in turn 
supports future investments in the industry that directly benefit 
American agricultural producers. Given the critical role that 
innovation plays in modern farming, we urge Congress to carefully 
consider the impact of any changes to the patent system on the 
agricultural innovation community.
    BIO also urges the Congress to enact the Defend Trade Secrets Act, 
bipartisan legislation that would promote economic growth by enabling 
America's most innovative companies to effectively protect their trade 
secrets from theft. Strong trade secret protection can help retain and 
increase American jobs.
Defending Science-Based Agency Actions through Public Education
    Regrettably, there is a tremendous amount of misinformation about 
agricultural biotechnology in the public domain. Dedicated educational 
resources will ensure key Federal agencies responsible for the safety 
of our nation's food supply--the U.S. Food and Drug Administration 
(FDA) and the U.S. Department of Agriculture (USDA)--are able to more 
easily convey to the public science- and fact-based information about 
food.
    As has been previously discussed, biotechnology innovation is 
important to all Americans because it enables plant and animal 
producers to increase production of healthful food using less land, 
while conserving soil, water, and on-farm energy. These benefits are 
passed on to consumers who reap the advantage of affordable food 
prices, greater access to nutritious food, an improved environment, a 
strengthened rural economy, and enhanced domestic and international 
food security.
    Embracing modern agriculture is the right thing to do for our 
country, which has a rich history of nurturing science, research, and 
innovation in all areas of the economy, including farming. As President 
Obama stated in December 2011, ``The world is shifting to an innovation 
economy and nobody does innovation better than America.'' This 
Presidential quote is displayed prominently in the National Bioeconomy 
Blueprint, which embraces and promotes the use of biotechnology as a 
significant driver of American economic growth.
    The United States is strong and prosperous because American leaders 
embrace the responsible use of technology and set forth public policies 
to move the nation forward in this regard. Science education plays an 
important role in this forward momentum.
Trade
    As a member of the broad U.S. agricultural biotechnology value 
chain, BIO supports efforts to improve the domestic and international 
marketability for bioengineered crops, which are critical to U.S. 
farmers and represent the vast majority of corn, soybean, and cotton 
acreage in the United States. We appreciate the work done, to date, by 
the Administration and the Congress to elevate agricultural 
biotechnology trade challenges with global partners and to seek both 
short- and long-term policy solutions. The Office of the Secretary and 
the Foreign Agricultural Service at USDA, along with the Office of the 
U.S. Trade Representative, play a central role in coordinating 
international trade initiatives related to agricultural biotechnology 
for the U.S. Government. BIO asks these entities, and others at USDA 
that play a role in trade policy execution, receive appropriate support 
by the Congress.
Agricultural Research
    Commitments by the Congress to public-sector agricultural research 
are at the heart of the USDA's core responsibilities. Research drives 
innovative solutions to real-world agronomic challenges. The 2014 Farm 
Bill authorized $700 million for the Agriculture and Food Research 
Initiative (AFRI), which is the premier competitive grants program for 
fundamental and applied research, extension, and education to support 
American agriculture, and created the Foundation for Food and 
Agriculture Research, which is designed to better leverage public- and 
private-sector investments in agricultural research. We urge Members of 
the Agriculture Committee to work with their counterparts on the 
Appropriations Committee to ensure these key research programs are 
fully operational and have the funding necessary to ensure agronomists 
have the ability to solve challenges and rapidly respond to emerging 
threats.
                               attachment
Agricultural Biotechnology Innovation
    Overview: The value of science and agricultural innovation cannot 
be underestimated. Between today and the year 2050, farmers will be 
required to grow twice as much food to feed rapidly growing numbers of 
people inhabiting [Earth]. Food will be grown in the face of 
increasingly severe weather and environmental conditions, with greater 
strains on water, soil, and energy resources. To enable American 
farmers to confront serious food security and environmental challenges, 
while still growing enough food to feed hungry people, Congress must 
consistently promote policies that encourage agricultural innovation 
and ensure Executive branch actions, regulatory and otherwise, foster 
the growth of a strong 21st Century farming economy.
    For the past 2 decades, the products of agricultural biotechnology 
have been commercially available and widely used by farmers around the 
world. In the U.S., more than 90 percent of corn, cotton, canola, 
soybeans, and sugar beets grown contain at least one biotechnology-
derived trait. Because biotech crops make up such a large segment of 
the American production farming sector, they have a big impact on the 
overall strength of the rural economy.
    Globally, farmers growing biotech crops saw net economic benefits 
at the farm level amounting to more than $20 billion in 2013. Of the 
total farm income benefit, 60 percent was due to yield gains. Gains in 
productivity associated with biotech crops help grow the American 
agricultural trade surplus because so many biotech crop harvests are 
dedicated to foreign markets. In Fiscal Year 2015, U.S. agricultural 
exports totaled more than $143 billion contributing to a $27.5 billion 
agricultural trade surplus. We can thank biotechnology, in part, for 
strong and steady growth in the U.S. ag-export market, particularly for 
corn and soybeans. Additionally, USDA has published reports noting how 
the adoption of biotech crops by farm families is associated with 
higher off-farm household income. Farming efficiencies associated with 
the use of biotech crops allow farmers to save time, which is then used 
to generate income from off-farm employment. One USDA report highlights 
that a ten percent increase in the use of herbicide tolerant soybeans, 
for example, is associated with a 16 percent increase in off-farm 
household income. These statistics illustrate how more efficient 
farming practices, such as the use of biotechnology, generate greater 
economic activity in rural communities.
    It is also noteworthy that, according to the White House National 
Bioeconomy Blueprint, published in 2012, U.S. revenues from biotech 
crops totaled more than $75 billion. The investments by companies in 
research, development and commercialization of these crops has 
generated good jobs all across our country.

    Congress can create an environment in which agricultural innovation 
flourishes by:

   Promoting predictable, transparent, science and risk based 
        regulatory policy at USDA, EPA, and FDA.

   Promoting national consistency regarding the labeling of 
        bioengineered food.

   Promoting national consistency regarding the cultivation & 
        movement of bioengineered seeds.

   Promoting patent laws that drive critical life science 
        discoveries.

   Promoting U.S. Government efforts to avoid trade barriers or 
        trade disruptions related to non-harmonious policies and 
        practices.

   Promoting investments in public-sector agricultural 
        research.

   Promoting public education about agricultural innovation.

   Promoting policies that foster innovation & investment in 
        advanced biofuels, renewable chemicals, and biobased products.
Messages for Key Issues
Predictable, Risk Appropriate Regulation
    Recently, USDA's Animal and Plant Health Inspection Services 
(APHIS) began the process of implementing an overhaul of its 
biotechnology pre-market regulations. Some of the regulatory systems 
APHIS is considering, which were publicized in the Federal Register in 
February, go well beyond the scope of what the agency reviews today.
    While many stakeholders agree with APHIS's goal of making 
improvements to its pre-market regulatory system so the scope of 
regulation better aligns with the actual risk posed by biotechnology 
products, much of what APHIS described in the Federal Register raises 
concerns about how the agency will actually achieve its goal.
    APHIS must get this project right. Congress should stay actively 
engaged and monitor what the agency is considering. It will be 
essential that any new APHIS pre-market regulatory structure (1) 
continue to promote innovation that enables American farmers to remain 
competitive while simultaneously confronting serious food security and 
environmental challenges; (2) is predictable, transparent, and based on 
science and actual risk of the product; and (3) is developed in close 
consultation with a broad range of scientific experts, stakeholders, 
and other government agencies responsible for biotechnology policy, 
such as FDA, EPA, and USTR.
National Uniformity for Labeling, Cultivation, and Seed Movement
    It is essential that policies related to bioengineered food 
labeling and the cultivation and movement of bioengineered seeds be 
nationally uniform to promote the smooth movement of food and feed 
crops and other agricultural products into, out of, and within the 
United States. Avoiding trade barriers and disruptions is vital to 
agricultural commerce and the nation's economy and should be 
facilitated to the greatest extent possible.
Labeling
    Some consumers are expressing a desire to know, via food product 
labeling, whether they are purchasing or consuming food that contains 
ingredients that were developed through biotechnology, and some 
manufacturers want to respond to this consumer interest. Some states 
and localities are requiring bioengineered food product labeling, 
creating the potential for conflicting legal and regulatory 
requirements, increased costs of food for all consumers, and 
substantial disruptions in, and adverse economic effects on, interstate 
commerce and trade. To prevent the negative repercussions associated 
with state-by-state food labeling laws, the Congress should quickly 
enact national bioengineered food labeling legislation.
Cultivation/Seed Movement
    Some localities have attempted to ban or otherwise restrict the 
movement, introduction, development, planting, cultivation, harvesting, 
production, marketing, sale, or other use of bioengineered foods, 
diminishing the beneficial economic effects of economies of scale and 
creating the potential for substantial disruptions and adverse economic 
effects on interstate commerce and trade.
    The petition process established for bioengineered plants under the 
U.S. Coordinated Framework for the Regulation of Biotechnology and the 
Plant Protection Act provides seed developers with the national 
clearance they need to commercialize bioengineered crops, provides 
farmers with clarity with respect to the crops they can legally grow, 
and provides farmers, agribusinesses, food companies, and consumers 
with confirmation that bioengineered crops are as safe to grow, market, 
and consume as non-bioengineered crops.
    Local cultivation bans, however passionately their supporters may 
favor them, pose a direct threat to the reliability of the Federal 
system of uniform science-based regulation that governs agricultural 
biotechnology in the United States. Local bans result in a patchwork of 
laws governing farming. This is a serious and unnecessary obstacle to 
interstate commerce; local governments lack the expertise and resources 
to second-guess the expert decisions of national regulatory agencies.
Biofuels, Renewable Chemicals, and Biobased Products
    Farm bill energy programs (Title IX) generate new revenue streams 
for American manufacturers, high-tech and construction jobs in rural 
America, and additional income streams for farm families. 
Authorizations and funding for farm bill energy programs are critical 
to a strong rural, biobased economy.
    Key provisions of the farm bill energy title important to the 
biotechnology innovation sector include: (1) mandatory, rather than 
discretionary, funding; (2) a robust Section 9003 Biorefinery 
Assistance Program that offers continued eligibility to renewable 
chemicals producers; (3) a strong Biobased Markets Program, Biomass 
Crop Assistance Program, and Biomass Research & Development initiative; 
and (4) a commitment to greater research on other efforts that grow the 
biobased economy.
                                 ______
                                 
          Submitted Statement by National Turfgrass Federation
    The National Turfgrass Federation (NTF), a nonprofit organization 
formed in 2007, coordinates and advocates for turfgrass research within 
the Federal Government and private industry. Prior to the 2008 Farm 
Bill, NTF believed a more visible role was needed for the turf industry 
to promote its economic, environmental, and aesthetic values to 
society. Following successful inclusion of ``turf'' and ``sod'' as 
horticulture crops in the 2008 Farm Bill, NTF continues to pursue 
competitive research grants under USDA's National Institute for Food & 
Agriculture (NIFA), and intramural research within USDA's 
[Agricultural] Research Service (ARS). These efforts are augmented by 
our National Turfgrass Evaluation Program (NTEP), designed to conduct 
uniform evaluation of turf varieties, the results of which help 
determine adaptable cultivars for efficient use and low maintenance 
costs. We believe these approaches offer valuable cross-sections of 
experimentation, analysis, and extension outreach to scientists, 
producers, commercial retailers, and consumers. It also benefits 
collaborative research with private industry.
    Turf is ranked as America's fourth largest crop, comprising 
approximately 60 million acres nationwide. It forms the foundation for 
lawns, gardens, commercial and ornamental landscapes, parks, recreation 
fields, golf courses, and medians along our nation's highways. Turf 
also impedes soil erosion and contaminant runoff into streams, bays, 
and waterways. As a result, NTF believes turf research is critical for 
many of America's greenscape initiatives, and for creating 
environmental buffer zones for acreage preservation.
    Three of our most active and successful research areas are the 
following: the Specialty Crop Research Initiative (SCRI), where turf 
science is developing sustainable grasses adaptable to various 
climates, and requiring less water and chemical fertilizer 
applications; Specialty Crop Block Grants, two of which were recently 
utilized to construct ``Grassroots'' education exhibits at the multi-
field Maryland SoccerPlex & Discovery Sports Center in Montgomery Co., 
Maryland and the U.S. National Arboretum in Washington, D.C.; and many 
success stories with Smith-Lever Extension, an active education and 
outreach area for turf for over 80 years. A considerable amount of 
turf's extension resources relate to sports fields, commercial 
landscapes, and residential lawns. Extension also conveys discoveries 
from applied research toward sustainable practices lowering maintenance 
costs, and increasing durability of grass types based on usage and 
climate growth factors. Both critical factors in drought-stricken areas 
of the West.
    In the past decade, turf has received a lower percentage of 
research related to other specialty crops. While SCRI, Block Grants, 
Extension, and Hatch/Evans-Allen funding remain vitally important, NTF 
members also utilize research funds from the United States Golf 
Association (USGA), Golf Course Superintendents of America Association, 
and numerous chemical companies. Rather than limit funding sources, NTF 
prefers a balance between USDA grants and private industry. We believe 
this enhances scientific collaboration, and affords more comprehensive 
results for turf producers and consumers. As such, NTF is a strong 
supporter of NIFA's new Foundation for Food & Agriculture Research 
(FFAR). We welcome FFAR's mission to establish ties between government, 
academia, and private industry. This also creates new avenues for 
exchanging ideas, and increasing awareness of budgetary parameters for 
research within each of those entities.
                                 ______
                                 
     Submitted Statement by RISE (Responsible Industry for a Sound 
                             Environment)
    Thank you to Chairman Davis and Ranking Member DelBene for holding 
today's hearing and furthering this important dialogue. RISE is the 
national not-for-profit trade association representing close to 200 
manufacturers, formulators and distributors of specialty pesticide and 
fertilizer products to both the professional and consumer markets. Our 
members provide solutions to nursery and greenhouse production, 
vegetation management, lawn and garden customers, sport field managers, 
golf course superintendents, structural pest control operators and to 
public health officials.
    Americans on and off the farm seek the solutions we provide to pest 
problems and to enhance green spaces in and around their home, on the 
sportsfields where their children play, and in the lakes and on the 
golf courses where they recreate. Our role in the protection of the 
public from disease carrying pests, protecting America's waters and 
infrastructure from invasives, and providing healthy green spaces.
    Unfortunately, some EPA actions are restricting our ability to 
create inspiring and healthy places where people live, work and play.
    We highlight today two of our primary concerns, Clean Water Act 
permits National Pollutant Discharge Elimination System (NPDES) and the 
expansion of the Water of the United States Rule, and EPA proposals 
that are contrary to the risk based approach required under the Federal 
Insecticide Fungicide and Rodenticide Act (FIFRA).
Clean Water Act Permits and the Waters of the United States (WOTUS) 
        Rule
    To begin, the courts, not Congress, in October 2011, via National 
Cotton Council v. EPA created the new requirement that National 
Pollutant Discharge Elimination System (NPDES) permits be required for 
pesticide applications ``to, over, or near'' water. Congress and EPA 
never intended to regulate pesticide applications with Clean Water Act 
NPDES permits. Requiring NPDES permits is duplicative of the long-
standing Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)-
based regulatory process and provides no additional protection to water 
beyond those already in place via FIFRA.
    Additionally, these permits are creating significant financial 
strain for small businesses, cities, counties, and states which we will 
highlight further below. We laud this Committee and the U.S. House of 
Representatives for passing the ``The Reducing Regulatory Burdens Act'' 
on several occasions since 2011. This legislation would clarify that 
NPDES permits should not be required for the application of EPA-
approved pesticides. We support the current bill, H.R. 897, and 
encourage Congress to pass the measure. Additionally, the impacts 
associated with NPDES permits are exponentially increased with the 
recent expansion of the Clean Water Act definition of Water of the 
United States (WOTUS) regulation promulgated by EPA and the U.S. Army 
Corps of Engineers. The new rule, will subject additional water bodies 
to NPDES permit requirements including man-made water bodies, 
irrigation canals, and ponds or other water bodies that have a 
``significant nexus'' to a larger water body. Again, we appreciate the 
efforts of the Agriculture Committee, the House Transportation and the 
U.S. House of Representatives for passing legislation to compel the 
agencies to withdraw this rule.
    Should the rule go into effect, state, county, city, commercial, 
professional and residential businesses and individuals will see an 
immediate impact to their ability to protect public health, safety and 
property. Currently, all applicators providing vector control services 
must acquire NPDES permits to apply larvicides in water defined by the 
CWA. These applications are vital to protecting people and pets from 
mosquito-borne diseases like Zika Virus, West Nile Virus, Dengue Fever, 
heartworm, Eastern and Western Equine Encephalitis, and Chikungunya. 
The rule will require more resources to comply due to the significant 
expansion of regulated waters which will likely lead to a reduction of 
resources available for the actual work of public health protection.
    We are also concerned that the rule will negatively impact our 
national security, power, highway, rail and waterway infrastructure. 
Delays due to the expanded cost and liability of the expanded 
definition of WOTUS may result in clogged waterways and shipping lanes 
from invasive species, improperly maintained utility rights of way, 
transmission and transformer sites, and degradation of species habitat 
and the environment from invasive and noxious species. As just one 
example, Oregon's Department of Environmental Quality had to halt 
invasive species treatments due to permitting costs and liability.
    We encourage Congress to continue to look for opportunities to 
require EPA and the Corps to withdraw the rule.
EPA Policies Must Uphold FIFRA's Risk Based Standard
    FIFRA establishes a risk-based pesticide regulation standard and is 
the gold standard world-wide. Recent EPA activities appear to undermine 
this standard, which is a concern requiring immediate and ongoing 
attention.
    EPA's proposed mitigation measures for pesticides that are acutely 
toxic to bees are one such example. The agency's approach to pollinator 
mitigation departs from FIFRA's risk-based standard and simply applies 
a hazard-based standard. The proposed hazard classification is an 
indiscriminate trigger and a clear moving away from the statutory risk-
based standard and Congressional intent. Additionally, we are concerned 
by EPA's proposal to add an additional 10 safety factor to certain 
products, despite previously determining that the additional factor was 
not needed based on data. The inappropriate imposition of these safety 
factors would impact many uses, including mosquito control.
    Finally, we call your attention to the recent habit of the Office 
of Pesticide Program of sending pesticide registrants letters that 
outline new regulatory requirements, which appears to circumvent the 
rulemaking process.
    We ask the Subcommittee to continue to conduct appropriate 
oversight to ensure that EPA does not circumvent the rulemaking process 
or abandon FIFRA's risk-based standard in favor of precautionary 
principle-driven policies.
Conclusion
    Thank you again for your attention and leadership on the issues 
discussed today. We are committed to work with you and EPA to continue 
to provide the plant health and pest management solutions necessary to 
create inspiring and healthy places where we live, work and play.

          RISE is the national not-for-profit trade association 
        representing more than 200 manufacturers, formulators, 
        distributors and other industry leaders of specialty pesticide 
        and fertilizer products to both the professional and consumer 
        markets. RISE member companies manufacture more than 90 percent 
        of domestically produced specialty pesticides used in the 
        United States, including a wide range of products used on 
        lawns, gardens, sport fields, golf courses, and to protect 
        public health.
                                 ______
                                 
                          Submitted Questions
Response from Hon. Charles F. Conner, President and Chief Executive 
        Officer, National Council of Farmer Cooperatives
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Market Access Program
    Question 1. Could you offer some examples of how the Market Access 
Program (MAP) has helped your members?
    Answer. Many of our members rely on the Market Access Program (MAP) 
to assist them in marketing products overseas. One example of a co-op 
who has successfully utilized MAP is Blue Diamond Growers. Blue Diamond 
has used funding to support its branded export and promotion activities 
since 1986, the year the MAP program began. In 1986, the cooperative 
marketed 240 million pounds of almonds while today it sells more than 2 
billion pounds. Over the same period, Blue Diamond has seen its exports 
grow to over $750 million in export sales, which represents over 62 
percent of total sales for 2012. In recent years, Blue Diamond has 
supported export expansion in the United Kingdom and Chinese markets by 
utilizing MAP funds for product trials, grass roots consumer marketing, 
and participation at in-country consumer food shows by carefully 
targeting press outlets in the countries of interest.
    In China and Hong Kong particularly, Blue Diamond successfully 
introduced its product to younger consumers. Blue Diamond's marketing 
strategy in this market included a focus on bold flavors and MAP funds 
were used to successfully introduce young Chinese and Hong Kong 
consumers to the brand.
Biotechnology
    Question 2. How should we improve regulatory efficiency in a way 
that enables genetic innovation so that we, as a nation, are better 
able to meet global food security challenges?
    Answer. NCFC supports policies that enhance the ability of 
producers to use new practices and technologies to produce their crops, 
so long as the practices are based on proven science, are economically 
and environmentally sound and ensure food safety. Additionally, we 
strongly support the safety and science-based risk assessments 
conducted as part of the regulation of biotechnology crops. Farmer 
cooperatives are stakeholders in the development, deregulation, and 
commercialization of biotechnology crops, and the actions taken by 
government agencies on these crops have a direct and indirect impact on 
timely access to future traits now under development.
    Breeders have a long history of developing new crop varieties that 
are more efficient and precise at producing the same desired 
characteristics that would normally occur through traditional breeding 
techniques, which require longer development time. Furthermore, these 
new varieties have a proven track record of health and safety for over 
twenty years. However, unknown costs, approval delays, and ambiguity of 
regulatory scope can stymie investments in agricultural innovation. In 
our modern agriculture system, time is critical to meeting the mounting 
pressures of global food insecurity and an array of environmental 
challenges, while maintaining competitiveness in the global 
marketplace. The U.S. Government must establish a regulatory 
environment that facilitates efficient agricultural innovation to 
enable American farmers to overcome these serious hurdles.
    When considering changes to the regulatory approval process of 
biotechnology products, APHIS should focus its attention within the 
boundaries of its statutory authority. Narrowly, regulatory oversight 
should focus on the specific outcome of a trait, regardless of the 
process used to achieve it, and the level of risk to plant health, 
while maintaining a clear and unambiguous process.

    Question 3. It seems food companies are moving forward in an effort 
to comply with the Vermont GMO food labeling law. In doing so, doesn't 
this state law create a de facto mandatory labeling system for the rest 
of the country? What implications will that have for farm to fork? If 
the Vermont law stands due to inaction by Congress or slow action in 
the courts, what does this mean for your members?
    Answer. If Congress is unable to pass a uniform framework for 
labeling foods containing biotech ingredients, Vermont's labeling law, 
a state with 600 thousand residents, essentially will place mandatory 
labeling requirements and will dictate food labeling policy for the 320 
million people that live in this country. In effect, we have promoted 
the Vermont Attorney General as the most powerful voice dictating food 
policy--over this Committee or its Senate counterpart, over the 
Secretary of Agriculture. Meanwhile, we are denying farmers technology 
that has cut fuel use, reduced erosion, and cut greenhouse gas 
emissions, and adding over $1,000 per year per family in added food 
costs at the grocery store.
    Furthermore, if food companies are forced to comply with Vermont's 
labeling requirements, many of them will likely choose to reformulate 
their products to avoid labeling and stigmatizing their products. As a 
result, food companies would have to rely on foreign imports to fulfill 
production since 90 percent of corn and soybeans in this country are 
grown using biotechnology. It would have a devastating impact on our 
nation's environment and economy.

    Question 4. What are some newer breeding methods, in terms of 
biotechnology? Are they regulated by the government?
    Answer. The fundamental goal of plant breeding is to solve 
problems. Today, with an increased understanding of how plants operate, 
plant breeders are able to more precisely improve a plant's 
characteristics by efficiently focusing on the underlying genetics. 
With processes such as gene editing, breeders are able to make specific 
changes in existing plants in a way that mimics the changes that occur 
in nature. Equally important, breeding improved varieties can be 
accomplished in far less time than ever before enabling plant breeders 
to keep up with rapidly evolving pests and diseases.
    Different from GMOs, the newer methods used by plant breeders focus 
on using a plant's own genes to create a desired trait, such as disease 
resistance or drought tolerance. It is a more precise way of improving 
plants. The improved seed does not have any ``foreign'' DNA.

    Question 5. It has been said that USDA is considering changing 
their biotechnology regulations. Does your organization support this?
    Answer. We feel it is appropriate for USDA to revisit their biotech 
regulations based on the nearly 30 years of experience they have with 
regulating biotech products. These products have been hugely beneficial 
for farmers and are completely safe for consumers and the environment.
    However, USDA is proposing sweeping changes and must do much more 
to consult with impacted stakeholders, other agencies, and 
international regulators before finalizing a proposed rule. They are 
considering completely changing what and how they regulate which would 
have significant unintended consequences both for innovation in U.S. 
agriculture and for U.S. agricultural exports.

    Question 6. What are the opportunities for the next generation of 
innovative tools for farmers?
    Answer. The overriding benefit to plant breeders, farmers and 
consumers is time. For breeders, it is essentially a race against the 
rapid evolution of diseases and pests and dealing with the weather.
    Plant breeders know much more today about how plants function. They 
can use that knowledge to be more efficient and precise at making the 
same desired changes that can be made over a much longer period of time 
using traditional breeding methods. There are terrific opportunities 
for the use of precise breeding techniques, such as gene editing, to 
address the most serious pests and diseases confronting specialty crops 
and also to improve products for consumers with enhanced nutrition, 
colors, flavors, and shelf-life.
    Because new methods like gene editing are efficient and economical, 
they are accessible to public and commercial plant breeders and can be 
used across all agriculturally important crops, including food, feed, 
fiber, and fuel crops.

    Question 7. The headlines of major newspapers and many of the cable 
news shows cast American agriculture in a negative light--though many 
of those stories are rife with inaccuracies. Unfortunately, these 
stories drive policy such as what we see with mandatory biotech warning 
labels. What recommendations do you have for your colleagues in the 
industry to engage the public to counter these negative attacks? What 
is your group doing to avoid repeating history so we don't have the 
consumer distrust with these new technologies like we do with current 
biotech breeding techniques?
    Answer. The food and agriculture industry is embracing the fact 
that today's consumers want to know more about how their food is 
produced. We welcome the opportunity to be the source of that 
information and share all the good things farmers are doing to provide 
safe, affordable food to the American consumer. In fact, several 
members of our coalition have committed to a new initiative giving 
consumers easy, instantaneous access to information about the 
ingredients in the foods they are purchasing through their website and 
other technologies. These are methods of reaching out to those 
consumers who desire the information in a meaningful, informative way--
ways that an on-package symbol cannot provide.
    Also, just recently the House included a provision in the FY 2017 
USDA/FDA Appropriations act to provide $3 million for FDA and USDA to 
better inform the public about the application of biotechnology to food 
and agricultural production. NCFC applauds the appropriators for 
including the provision that will promote farmers' access to modern 
agricultural tools and advancements in plant and animal agricultural 
applications that are helping society meet current and future food 
production challenges.
Pesticides
    Question 8. Many people who rely on pesticides to protect their 
health and property have stated that one or more of EPA's recent 
actions have taken away their access to important products needed to 
fight pests. What should EPA be doing to ensure that those producers 
will have the time-proven products and the new, effective products 
available to meet their needs?
    Answer. Our members care about is the ability to defend against 
pest threats to their crops, food, homes, and health. For example, NCFC 
has reminded the Agency of the need for new, effective weed management 
tools. Prominent academics, farm group leaders, and many others have 
said multiple modes of action are the most effective way to deal with 
weed resistance issues while preserving environmentally beneficial 
cropping systems like no-till or conservation tillage. Yet, when it 
comes to crop protection product registrations at EPA, some innovative 
products that can help growers meet these goals have been either 
sitting at the Agency for several years, or in some cases, courts have 
intervened to vacate registrations. If EPA continues to fail to 
adequately calculate and/or consider the economic costs of these 
impacts--and beneficial uses--in its regulatory proposals, the 
consequences could be devastating.

    General Regulatory Impact

    Question 9. Public policy has an enormous impact on the economic 
viability of farms. Can you offer a couple examples of recent 
regulatory actions that have had a negative impact? What about 
legislative actions at the state or national level?
    Answer. We must ensure that our public policy does not hurt the 
economic viability of farm and ranch families across the country. Often 
these issues are outside traditional farm policy and come from corners 
of the Federal Government that may not understand production 
agriculture. Yet, a broad range of regulatory actions--those pending at 
Federal agencies or in the pipeline and coming soon to a farm near 
you--have the potential to increase the costs and reduce the margins of 
cooperatives and their farmer and rancher member-owners. Whether the 
regulations deal with the environment, immigration and labor, food 
safety, or financial reform, they can create an uncertainty that 
threatens to hold back investment and growth across the agricultural 
sector.
    Farmers and ranchers deal with numerous government agencies; their 
regulatory burdens run the gamut. One example of a regulatory challenge 
currently facing farmers is the administration of the H-2A agricultural 
worker program which is creating a growing number of delays in the 
timely processing of applications and visa petitions. This breakdown is 
impacting growers and ranchers who are trying to hire workers in time 
for harvest and threatening millions of dollars in perishable 
agricultural products.
    For instance, the Department of Labor's (DOL) Office of Foreign 
Labor Certification (OFLC) has a policy that is not supported by 
current regulations which requires all workers requested in any single 
petition be brought onto the job on the start date of the petition. 
With the current delays at both the OFLC and U.S. Citizenship and 
Immigration Services (USCIS), farmers and ranchers are unable to 
receive these workers by the date they are actually needed. Growers 
must be given the opportunity to provide a start date that is earlier 
than the actual anticipated start date as a ``grace period'' in an 
effort to combat the administrative delays.
    Furthermore, the Validation Instrument for Business Enterprises 
(VIBE) program, as it is currently administered, is inappropriate for 
the H-2A program. VIBE requires an annual subscription to Dunn & 
Bradstreet which is an additional expense for growers. It is highly 
unusual for family farms to subscribe to Dunn & Bradstreet except to 
comply with the VIBE program.
    Last, numerous employers have been receiving Notices of 
Deficiencies (DOL) or Requests for Further Evidence (USCIS) related to 
proving that agriculture is in fact seasonal in nature. These notices 
create an unnecessary delay in the process which jeopardizes the 
viability of large segments of the agricultural economy.

    Question 10. Does your organization support passage of H.R. 897, 
the Reducing Regulatory Burdens Act of 2015? Do you believe the burden 
and liabilities of obtaining a water permit are limiting or delaying 
mosquito control applications that control viruses like Zika and 
protect human health?
    Answer. Pesticides play an important role in protecting the 
nation's food supply, public health, natural resources, infrastructure, 
and green spaces. They are used not only to protect crops from 
destructive pests, but also to manage mosquitoes and other disease 
carrying pests, invasive weeds and animals that can choke our 
waterways, impede power generation, and damage our forests and 
recreation areas. However, pesticide users must now comply with the 
added requirement that certain pesticide applications--already 
stringently regulated under the FIFRA--obtain a Clean Water Act (CWA) 
National Pollutant Discharge Elimination System (NPDES) permit issued 
by the Environmental Protection Agency (EPA) or delegated states. 
Legislation is needed to clarify that Federal law does not require 
water permits for FIFRA-compliant pesticide applications.
    Americans are at an increasing threat from vector-borne diseases. 
West Nile Virus and encephalitis have been serious problems for the 
last several years, but new diseases such as dengue fever and 
Chikungunya are now an increasing threat to Americans and particularly 
infants. Sadly, new vector-borne threats continue to emerge. In Mexico 
and South America, the mosquito-borne Zika virus is responsible for 
infants being borne with significant birth defects. NCFC strongly 
believes that such duplicative paperwork requirements like that of the 
pesticide NPDES permit stand to take scarce resources away from their 
intended use.
    NCFC seeks legislative action to remedy counterproductive 
regulatory measures, resource burdens, and legal liabilities created by 
the new NPDES general permit for certain pesticide applications. 
Specifically, we urge Congress to pass H.R. 897, the Reducing 
Regulatory Burdens Act of 2015, in order to clarify that NPDES permits 
are not required for FIFRA-registered pesticides when applied according 
to their product label.

    Question 11. What do you believe will happen if H.R. 897 is not 
enacted and President Obama's WOTUS rule goes into effect?
    Answer. This issue now takes on new importance in light of the 
unprecedented overreach by EPA in the recently-finalized regulation 
redefining what qualifies as a `water of the United States'. The number 
and nature of pesticide applications subject to permitting will see a 
significant increase due to the expansion of EPA's definition of what 
is considered a water of the U.S.
    EPA took comments on an Information Collection Request (ICR) on the 
likely costs and burdens associated with the upcoming 2016 revisions to 
EPA's and states' NPDES general permits for pesticides applied into, 
over or near a ``water of the U.S.'' (WOTUS). Comments were filed 
highlighting the broad concurrence of state water agencies that no 
environmental benefits ensue from this double permitting, current 
economic and legal burdens, and the redundant compliance requirements 
of the NPDES permits given EPA regulation of such pesticide use under 
FIFRA.

    Question 12. We've heard a lot about the need for oversight of the 
EPA's pesticide program. What are your organization's top priorities 
for regulatory oversight?
    Answer. Specific to crop protection, Federal laws dictate that the 
U.S. Department of Agriculture (USDA) serve as an important advisor to 
EPA in the regulation of pesticides. Historically, USDA's expertise and 
advice have been evident in the actions EPA has taken to evaluate 
pesticides and their uses. USDA's perspective and knowledge of 
production agriculture is critical since we know that crop protection 
products can increase farm yields as much as 40 percent to even 70 
percent depending on the crop.
    It should concern this Subcommittee to hear the farm community 
expressing increasingly urgent concerns about the lack of seriousness 
with which EPA takes and incorporates USDA expertise, advice, and 
opinions, especially during formal interagency review. In particular, 
it is unclear to what extent USDA expertise was valued and included in 
recent actions, such as Endangered Species consultations, the revised 
Worker Protection Rule, and the recent benefits analysis for seed 
treatments on soybeans.
    NCFC members have heard a lot about what actions EPA has or is 
planning to take that impact the use of pesticides. It would be very 
helpful for this Subcommittee to instruct EPA to develop a 
comprehensive list of all the agency actions (not just rulemakings) 
over the last 8 years and those planned thru the end of this year that 
restricted or have the potential to restrict existing or new uses of 
pesticides.
    One such example occurred October 2015 when EPA proposed to revoke 
all tolerances for the important insecticide, Chlorpyrifos. In a huge 
departure from established scientific protocol and findings, EPA based 
this proposal on a decade's old, previously dismissed epidemiological 
study, known as the Columbia Study, that no one, perhaps even including 
EPA, has ever seen the actual data on to verify its validity. Further, 
EPA went so far as to impanel a special Scientific Advisory Panel to 
assess how to best use the epidemiological study during review.
    Many parts of these actions are scientifically troubling, not least 
of which is the fundamental question of whether this particular study 
should be used at all, rather than figuring out how it should be used 
which is a presumption that runs afoul of previous expert 
recommendations. We are concerned that EPA has not been able to fully 
review all of the collected human epidemiology data because the authors 
of the studies in question have declined to provide the underlying data 
despite repeated Agency requests.
    EPA currently bases its health and safety standards for pesticide 
regulation on robust studies following EPA-approved protocols. 
Exposures in these studies are known, effects are documented, human 
health impacts are determined, results can be replicated, and the 
underlying data are available for EPA evaluation. When data conflicts 
and decisions must be made, higher quality data must be used over data 
of lesser quality. Other data may form a basis for additional 
investigation, but it cannot not be accorded greater weight than high-
quality guideline studies specifically designed for regulatory use. To 
do so would result in serious damage to the scientific credibility of 
EPA risk assessments.
    Other recent activities by the Office of Pesticide Programs appear 
to circumvent the rulemaking process altogether by creating new 
`internal' policies, `interpretations' and `assumptions,' or sending 
pesticide registrants letters that outline what are effectively new 
regulatory provisions. This ``regulation by letter'' procedure was used 
by EPA to mandate registrants include pollinator statements and a 
graphic on certain pesticide products, as well as for the Agency's 
pyrethroid labeling initiative.
    In short, Congress also should conduct immediate and on-going 
oversight of EPA to ensure it stays within statutory boundaries.
    Question 13. The United States has the world's most rigorous 
pesticide registration and review processes. Yet, when EPA's regulatory 
decisions are challenged in court, the Agency has not enjoyed many 
recent successes in defending its scientific process or decisions. Are 
these actions undermining EPA's credibility with the public?
    Answer. FIFRA is a risk-based standard. Under the law, when 
pesticides are registered with EPA, the Agency determines the hazards 
associated with the product as well as any likely exposure. EPA is also 
supposed to take into account the benefits of a product, such as 
protection of the public health from disease-carrying pests, protection 
of our nation's buildings and infrastructure, protection of the food 
supply, etc. This is something EPA should be confident in and proud to 
defend. As a matter of fact, EPA does a great job defending the merits 
of our risk-based system when commenting on the European Union's 
precaution-based regulatory scheme. But, recently it seems when EPA 
regulatory decisions are challenged in the U.S., you seem reluctant to 
defend or, even more troubling, unable to properly provide evidence of 
the Agency's scientific decisions.
    If the Agency is not robustly defending its regulatory decisions, 
they run the risk of encouraging public mistrust about the products 
that are used to protect public health, our infrastructure and the food 
supply. However, some recent EPA activities appear to focus only on the 
hazard aspect and ignore factors like exposure and benefits. EPA's 
proposed mitigation measures for pesticides that are acutely toxic to 
bees are one such example. We also saw backsliding on this point during 
the public debate on the Worker Protection Standard, where EPA seemed 
to question whether workers were at unreasonable risk even if properly 
trained and applying pesticides according to the label.
Food Safety Modernization Act
    Question 14. You talk about the farm definition in FDA's produce 
safety rule. Can you explain what this definition is, and why it is 
important? Do you support revising the Farm definition?
    Answer. The Preventive Controls for Human Food final rule contains 
a distinction between two types of farms: a Primary Production Farm and 
a Secondary Activities Farm. These definitions are important because 
operations that fall within these definitions are not covered under 
this rule. However, they may be covered under the Produce Safety final 
rule.
    A Primary Production Farm is ``an operation under one management in 
one general, but not necessarily contiguous, location devoted to the 
growing of crops, the harvesting of crops, the raising of animals 
(including seafood), or any combination of these activities. This kind 
of farm can pack or hold raw agricultural commodities such as fresh 
produce and may conduct certain manufacturing/processing activities, 
such as dehydrating grapes to produce raisins and packaging and 
labeling raisins.'' The definition is expanded to cover packing or 
holding raw agricultural commodities (such as fresh produce) that are 
grown on a farm that is under different ownership.
    A Secondary Activities Farm is ``an operation not located on the 
Primary Production Farm that is devoted to harvesting, packing and/or 
holding raw agricultural commodities. It must be majority owned by the 
Primary Production Farm that supplies the majority of the raw 
agricultural commodities harvested, packed, or held by the Secondary 
Activities Farm.'' This particular definition was included to account 
for farmers involved in off-farm packing to ensure their operations 
would fall under the definition of ``farm.''

    Question 15. What does your group see as the most burdensome aspect 
of FSMA?
    Answer. While it is hard to rank the most burdensome aspect of 
FSMA, many of our members feel like it is death by a thousand cuts. FDA 
recognized many of our complaints and altered the rules; however, there 
are still overly burdensome and duplicative aspects that do not 
actually result in a safer food supply. While not adding much to the 
food safety side, they will drive up costs and require additional staff 
time and record-keeping as operations adapt the way they do business 
and retain records.
    For example, the Sanitary Transportation Rule may cause harm in the 
use of byproducts for cattle feed. Byproducts are the peels, stems, 
etc. that are removed during processing. Currently, working with third 
party dairies or ranchers, some of our members have a workable program 
for cattle feed or soil amendment. These byproducts are often sent off 
for immediate delivery and fed to animals within a short timeframe. 
Additionally, these products are commonly fed to grazing animals that 
regularly feed from the ground. Excessive regulations should not be 
applied during the transportation of an animal feed that is ultimately 
going to be deposited on the ground and exposed to the elements. We do 
not wish to see a sustainable and cost-effective way to manage 
byproducts of processing facilities discontinued because of these 
regulations.
Research
    Question 16. Can you highlight some specific benefits from USDA 
research that your members have experienced?
    Answer. The Specialty Crop Research Initiative (SCRI) is a great 
example of a robust research program broadly supported by the sector. 
The SCRI program was established to meet the unique needs of the 
specialty crop industry by supplying grants to support research and 
extension. In particular, the SCRI Citrus Disease Research and 
Extension Program (CDRE) are of significant importance to our citrus 
cooperatives. The program was authorized by the 2014 Farm Bill and 
awards funds to conduct research, extension activities, and technical 
assistance to fight citrus diseases and pests, such as Huanglongbing 
(HLB), commonly referred to as citrus greening. Citrus greening is a 
serious concern to our citrus cooperatives with research on how to 
combat the disease remains a top priority. Citrus greening is 
responsible for devastating losses in the citrus industry, threatening 
its future viability. A solution is desperately needed as it has 
already destroyed millions of citrus acres across the U.S. Once a tree 
is infected, there is no cure; research must get out ahead of this 
disease before it is too late. This is just one of the many examples of 
the importance of agricultural research programs and its integral 
relationship to the success of farmer cooperatives and the agricultural 
industry as a whole.
Farm Bill
    Question 17. What are your top priorities for Congressional 
oversight of programs affecting your members?
    Answer. Given the diversity of NCFC's members, our interest in the 
farm bill go from beginning to end--whether that is examining the 
efficacy of new commodity title programs to the benefit of voluntary, 
locally-led conservation programs to the value of nutrition, trade 
promotion, and research programs.
    Early action and an educational focus by the House Agriculture 
Committee will enhance prospects for completing new farm bill 
legislation when the time comes. Even though every farm bill takes its 
own unique path to final enactment, one fact of the process remains the 
same: it has to start somewhere and the sooner the educational process 
starts, the better.
    As this work begins, it is imperative that Federal policies 
provided by the farm bill promote an economically healthy and 
competitive U.S. agriculture sector. These programs serve a variety of 
purposes, including: meeting the food, fuel, and fiber needs of 
consumers worldwide; strengthening farm income; improving our balance 
of trade; promoting rural development; and creating needed jobs here at 
home.
    In examining the dynamics of the farm economy, we are reminded that 
numerous influences--some of which are out of our control--come into 
play. Extremely volatile weather and global markets result in equally 
volatile farm gate prices, yields, and costs of production. Today's 
margins for most agricultural commodities are tight, and farm income 
has retreated significantly from its highs just a few years ago. Our 
common, ultimate goal--and at the heart of the farm bill--is to 
preserve the productive capacity of our farms by maintaining a 
responsive and equitable safety net, combined with adequate funding, 
for all regions and commodities, as well as comprehensive risk 
management tools, such as a strong crop insurance program.
    Congress must ensure that the marketplace, not the Federal 
Government, determines the cost of production for America's farmers and 
ranchers. If our farms, ranches, and cooperatives are weighed down with 
costs imposed by either regulatory actions or delays in the regulatory 
process, farm income will decrease and market share will be lost to our 
competitors.
Labor Regulation
    Question 18. What costs will businesses incur as a result of 
overtime regulations?
    Answer. These costs will be crippling for small businesses, such as 
many farmer co-ops. Two examples we can point to within our membership 
are a farm supply and marketing cooperative in Illinois and a 
diversified energy, grain, and food cooperative in Minnesota. Based on 
the Illinois Cooperative's initial calculations, the new threshold test 
could affect approximately 900 employees and add an additional cost of 
$4.5 million to the cooperative. Based on the Minnesota Cooperative's 
initial calculations, the new threshold test could affect approximately 
270 employees and add an additional cost of $1million to the 
cooperative.
    This is certainly a case of one size does not fit all. The average 
salary in many rural areas and small towns outside of major 
metropolitan areas and in certain lower-wage regions of the country is 
substantially lower than the national average. Many, possibly most, 
current salaried managers and supervisors will probably revert from 
being salaried to hourly employees. DOL's aggressive move puts rural 
America at a huge disadvantage.

    Question 19. Are you opposed to raising the salary threshold above 
the poverty level?
    Answer. No, NCFC understands an update is needed since the salary 
threshold has not been updated since 2004, however, we believe that DOL 
should maintain the threshold at the 20th percentile. Maintaining this 
threshold using updated figures would achieve the desired outcome of 
increasing the effectiveness of the salary test, as well as bring the 
salary level above the poverty line.

    Question 20. What are some of the extraneous impacts OSHA's July 
2015 revised interpretation of Process Safety Management standards has 
on the agriculture community?
    Answer. Do to the elevated cost requirements of compliance with PSM 
standards, many of our co-ops have decided to no longer sell anhydrous 
ammonia at their retail facilities. These actions have several 
trickling effects on the farming industry. Fewer locations selling the 
fertilizer means farmers will be forced to travel much further distance 
to purchase it and haul it back to their farms, increasing the amount 
of time the chemical spends on public roadways. Furthermore, if farmers 
don't have access to anhydrous ammonia, they will likely replace it 
with the next best fertilizer, urea, a less effective, more expensive 
dry fertilizer. Farmers would have to purchase new equipment to apply 
the dry fertilizer and they would need to apply more of it to the land 
to achieve the same results they had with anhydrous.

    Question 21. How can this Subcommittee provide oversight on the 
Process Safety Management (PSM) issue?
    Answer. It is clear that OSHA is not going to review its July 2015 
memo or its unintended impacts on agriculture retailers and producers 
unless it is forced to do so by Congress. OSHA's response to Congress's 
directive contained in the report language of the 2016 Omnibus 
Appropriations to carry out a notice and comment rulemaking procedure, 
conduct a third-party cost benefit analysis and to establish a new 
classification at the Census Bureau specifically for farm supply 
retailers, was to delay enforcement through the end of the fiscal year. 
This Subcommittee could be most helpful by encouraging the 
Appropriations Subcommittee on Labor, Health and Human Services, 
Education and Related agencies to include statutory language in the 
2017 Appropriations bill.
Response from Hon. Jeff M. Witte, Secretary/Director, New Mexico 
        Department of Agriculture; Member, Board of Directors, National 
        Association of State Departments of Agriculture
June 2, 2016

 
 
 
Hon. Rodney Davis,                   Hon. Suzan K. DelBene,
Chairman,                            Ranking Minority Member,
Subcommittee on Biotechnology,       Subcommittee on Biotechnology,
 Horticulture, and Research,          Horticulture, and Research,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.
 

Re: Questions for the Record: House Committee on Agriculture, 
            Subcommittee on Biotechnology, Horticulture, and Research 
            Public Hearing: Focus on the Farm Economy_Factors Impacting 
            the Cost of Production

    Dear Chairman Davis and Ranking Member DelBene:

    The National Association of State Departments of Agriculture 
(NASDA) submits the following responses to the Questions for Record on 
behalf of The Honorable Jeff Witte, Secretary for the New Mexico 
Department of Agriculture, to the House Agriculture's Subcommittee on 
Biotechnology, Horticulture, and Research following the April 27, 2016 
Public Hearing: Focus on the Farm Economy--Factors Impacting the Cost 
of Production.
    NASDA represents the Commissioners, Secretaries, and Directors of 
agriculture in all fifty states and four territories. As elected and 
appointed officials, our members are strong advocates for American 
agriculture and are partners with a number of Federal agencies in 
regulating, marketing, and providing services to the agricultural 
community. NASDA appreciates the Subcommittee extending the invitation 
and opportunity to Secretary Witte to testify on our behalf, and upon 
your request, NASDA is pleased to provide additional information or 
clarification regarding the following responses.
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Market Access Program
    Question 1. Could you offer some examples of how the Market Access 
Program (MAP) has helped your members?
    Answer. MAP encourages the development, maintenance, and expansion 
of commercial agricultural export markets through public-private 
partnerships. The program especially helps small businesses in urban, 
suburban, and rural areas access foreign markets and increase export 
opportunities.
    For example, NASDA produces the U.S.A. Pavilion at the Americas 
Food & Beverage Show in cooperation with the Foreign Agricultural 
Service (FAS) and with the support of MAP funds. At the 2015 Americas 
show FAS and NASDA supported a U.S.A. Pavilion with 132 U.S. 
exhibitors, mostly small and medium-size companies. Other FAS 
cooperator groups such as U.S.A. Poultry & Egg Export Council, U.S. 
Meat Export Federation, and the Southern U.S. Trade Association are 
regular exhibitors within the U.S.A. Pavilion and host educational 
seminars and receptions. U.S.A. Pavilion exhibitors reported on-site 
export sales of $4.625 million and projected an additional $31.02 
million in sales of U.S. agricultural and food products over the next 
twelve months. 67% of the USA Pavilion exhibitors closed or expected to 
close new business in a new (to them) export market.
    By contrast, foreign countries invest significantly more resources 
into promoting and marketing their respective agricultural products. 
For example, according to a 2013 study (An Analysis of Competitor 
Countries' Market Development Programs, Agralytica Consulting, June 
2013) twelve countries and the European Union spent an estimated $1.8 
billion, including $700 million in public funds, on export promotion 
for agri-food products. For comparison, the same study found in 2011 
the total U.S. export promotion public expenditure was $256 million. 
Compared to agricultural production value, the U.S. public spending on 
export market development is among the lowest relative to these twelve 
nations.
Biotechnology
    Question 2. How should we improve regulatory efficiency in a way 
that enables genetic innovation so that we, as a nation, are better 
able to meet global food security challenges?
    Answer. NASDA supports our Federal agency partners' in revising and 
improving Federal regulations (consistent with the Coordinated 
Framework for the Regulation of Biotechnology) to better reflect modern 
technologies and to facilitate an informed and efficient regulatory 
framework that enables producers to meet the growing global demand for 
food while helping farmers and ranchers achieve the sustainability 
goals of their land and operations for generations to come.
    NASDA recommends Federal agencies undertake a thorough and robust 
review of the current regulatory structure, in conjunction and 
consultation with partner agencies responsible for regulating products 
of biotechnology and the agricultural community, to enhance continued 
alignment, agency roles and responsibilities, and improve communication 
between the Federal, state, and agricultural stakeholders.
    NASDA stands ready to assist our Federal partners and the 
agricultural community to ensure any improvements reflect and 
incorporate the best available science, provide a consistent regulatory 
framework, facilitate innovation, and enable our producers, growers, 
and other agricultural stakeholders to continue to produce our nation's 
food, fiber, and fuel in a collaborative and productive manner.

    Question 3. It seems food companies are moving forward in an effort 
to comply with the Vermont GMO food labeling law. In doing so, doesn't 
this state law create a de facto mandatory labeling system for the rest 
of the country? What implications will that have for farm to fork? If 
the Vermont law stands due to inaction by Congress or slow action in 
the courts, what does this mean for your members?
    Answer. NASDA is concerned that without a Federal solution, a 
patchwork of state labeling laws will add significant complications for 
food companies and disadvantage agricultural producers. We are already 
seeing food companies implementing national labeling decisions in order 
to comply with one state's law.
    In addition, we are concerned with a patchwork of requirements that 
result in labels approved for use in one state not complying with the 
requirements of another state. In fact, this is already playing out. We 
are aware of at least one company's ``Vermont compliant'' label for a 
flavored dairy product that was rejected by another state's review for 
compliance with that state's dairy labeling requirements. This creates 
a regulatory nightmare for food producers who use flavored dairy 
products in their recipes by creating the need for regionalizing stock 
keeping units (SKUs) or pulling their entire product line from a state. 
Until a national, uniform standard is enacted there will be a patchwork 
of state laws that threaten the prosperity of America's agriculture and 
unnecessarily complicate and frustrate the stream-of-commerce 
throughout the food industry. These costs and challenges will 
ultimately be passed onto the consumer. Congress must act now to avoid 
this economic impact.

    Question 4. It has been said that USDA is considering changing 
their biotechnology regulations. Does your organization support this?
    Answer. Please see response to Question 2 above. In addition, we 
applaud Congressmen Newhouse's and Schrader's leadership in calling for 
a more thorough review of these sweeping regulatory changes to better 
identify any unintended consequences this proposal may bring before 
USDA proceeds further with this rulemaking process.
Pesticides
    Question 5. Many people who rely on pesticides to protect their 
health and property have stated that one or more of EPA's recent 
actions have taken away their access to important products needed to 
fight pests. What should EPA be doing to ensure that those producers 
will have the time-proven products and the new, effective products 
available to meet their needs?
    Answer. Regardless of the Agency's final registration decision, it 
is essential for EPA to comply with the Federal Insecticide, Fungicide, 
and Rodenticide Act (FIFRA),\1\ which requires these decisions be made 
on a scientifically-sound, risk-benefit basis throughout the Agency's 
registration and reregistration review process. Equally important is 
the need for EPA to ensure adherence to both the spirit and intent of 
the: Regulatory Flexibility Act; \2\ Unfunded Mandates Reform Act; \3\ 
Executive Orders 13132 \4\ & 13563 \5\; and develop actuarially sound 
Economic Analysis with all of its proposed rulemakings.
---------------------------------------------------------------------------
    \1\ 7 U.S.C.  136, et. seq.
    \2\ 5 U.S.C.  601, et. seq.
    \3\ 2 U.S.C.  1501.
    \4\ Executive Order No. 13132, Federalism, 64 FR 43255 (1999).
    \5\ Executive Order No. 13563, Improving Regulation and Regulatory 
Review, 76 FR 3821 (2011).
---------------------------------------------------------------------------
    Regulations must be based on the best available, sound, validated, 
and peer-reviewed science and rely on science-based risk assessments. 
Moreover, regulatory agencies must ensure policymakers do not misuse or 
inappropriately apply invalidated or unrelated scientific findings to 
policy determinations.
    NASDA especially appreciates the work USDA's Office of Pest 
Management Policy (OPMP) executes to ensure policy or regulatory 
initiatives are based on scientifically sound positions. OPMP is an 
invaluable resource and advocate for including sound science in the 
development of regulatory actions impacting agriculture. NASDA 
encourages increased support for OPMP's activities, as well as ensuring 
OPMP's perspectives are advanced in the interagency review process.
    In summary, EPA must adhere to the statutory guidelines and process 
requirements articulated under FIFRA and other controlling statutes as 
the Agency executes its science-based registration and review of these 
critical crop protection tools. NASDA appreciates the work of OPMP and 
the oversight of this Subcommittee to help ensure EPA complies with 
these obligations as it fulfills its mission.

    Question 6. Public policy has an enormous impact on the economic 
viability of farms. Can you offer a couple examples of recent 
regulatory actions that have had a negative impact? What about 
legislative actions at the state or national level?
    Answer. There are a number of regulatory actions negatively 
impacting, complicating, and frustrating agricultural production across 
the county, and to date, the economic impact of these initiatives are 
difficult, if not impossible, to quantify. In addition to the economic 
burden placed on producers, these regulatory policies also result in 
unfunded mandates to the state lead agencies tasked with conducting on 
the ground compliance and enforcement activities.
    Those challenges include, but are not limited to: EPA's 
Agricultural Worker Protection Standards (WPS); EPA's proposed 
Certification of Pesticide Applicator Rule; EPA's Waters of the U.S. 
rule (WOTUS); EPA's National Pollutant Discharge Elimination System 
(NPDES) duplicative regulatory framework; and EPA's proposal to 
Mitigate Exposure to Bees from Acutely Toxic Pesticide Products.
    One specific example illustrating the economic impact regulatory 
initiatives may have on producers and state lead agencies is found in 
EPA's Certification of Pesticide Applicators proposed rule. Under this 
proposal, EPA's Economic Analysis \6\ (EA) claims the rule changes will 
result in an estimated $80.5 million in monetized benefits with 
corresponding estimated costs to be $47.2 million; however, the 
Agency's EA significantly underestimated the costs of the proposed rule 
and overstated the anticipated economic benefits the proposed changes 
may bring. NASDA has urged EPA to republish an updated EA based on 
sound methodology that takes into consideration the numerous factors 
outlined in both the Small Business Advocacy Review Panel's 
(hereinafter ``Panel'') comments and the Texas A&M AgriLife Extension 
Service, Agricultural Economics, Agricultural & Environmental Safety's 
EA.
---------------------------------------------------------------------------
    \6\ Pesticides; Certification of Pesticide Applicators, 80 FR 51356 
(Aug. 24, 2015) (to be codified 40 CFR 171).
---------------------------------------------------------------------------
    The Texas A&M AgriLife Extension compiled a comprehensive EA tool 
to assist states in determining an accurate depiction of the 
anticipated economic impact to the state lead agencies. This economic 
model demonstrated numerous shortfalls in EPA's EA. Following review 
and application of the Texas A&M model to their individual programs 
under the proposed rule changes, states found the estimated cost to 
their state program will actually increase by multiple factors of ten 
above what EPA's EA stated, and EPA's EA failed to identify the 
significant amount of funding states contribute to their own 
certification programs, which is not accounted for in cooperative 
agreement budgets. In several states, EPA funding contributes only five 
to ten percent of the state's total cost to conduct their certification 
program. In addition, the Agency's EA did not fully account for the 
significant internal administrative costs (including but not limited to 
information technology and tracking programs) state lead agencies will 
be required to absorb in order to implement these proposed rule 
changes. Many of these administrative operations require multi-year 
agreements and obligations, which cannot be unwound or altered without 
significant financial investment and/or penalties.
    In addition to the significantly understated costs to the state 
lead agencies, the Agency's EA failed to account for a number of 
factors impacting the regulated community. For example, the SBA Panel 
noted ``EPA did not estimate travel expenses for applicators to obtain 
training or take exams for certification or recertification,'' which 
will ``. . . impose excessive costs in operating their businesses as a 
result of increased time away from the job, travel expenses to attend 
recertification trainings, and the class fee for attending the CEUs.'' 
\7\ The SBA Panel also found ``EPA's proposal will result in decreased 
training and education rather than the Agency's goal of increased 
training and education.'' \8\ The SBA Panel's findings are greatly 
concerning and further demonstrate the significant oversight in the 
actual estimated costs of the proposed rule.
---------------------------------------------------------------------------
    \7\ Panel Report of the Small Business Advocacy Review Panel on EPA 
Planned Revisions to Two Related Rules: Worker Protection Standards for 
Agriculture and Certification of Pesticide Applicators.
    \8\ Id.
---------------------------------------------------------------------------
    EPA's EA claims the primary economic benefits are monetized 
benefits from avoided acute pesticide incidents, qualitative benefits 
(including reduced latent effects of avoided acute pesticide 
exposures), and reduced chronic effects from lower chronic pesticide 
exposures (chronic diseases). To support this claim, EPA's EA cites 
estimates of poorly reported data and anecdotal evidence from poison 
control centers. EPA acknowledged the lack of economic integrity in 
these numbers, and it is inappropriate for EPA to indicate or imply a 
causal association between these data sources and any estimated 
benefits. EPA is intimately familiar with the routine and robust 
investigations state lead agencies conduct in response to alleged 
pesticide exposure incidents. NASDA is disappointed EPA drew various 
conclusions through unknown and unsubstantiated data to support the 
EA's estimated benefits associated with this proposed rule, and we want 
to contrast this dynamic with the reality that states provide EPA with 
volumes of data showing overwhelming compliance by the regulated 
community. It is disheartening, at best, to see EPA does not discuss or 
incorporate that information into its regulatory decisions.
    The Agency cites a reduction in exposures and associated risks 
under the EA's estimated benefits to the proposed rule, but the Agency 
subsequently notes it is ``not able to quantify the benefits expected 
to accrue from the proposed changes.'' NASDA considers it inappropriate 
to estimate benefits based on possible associations when there is no 
scientific evidence supporting such causal connections. EPA conducts a 
comprehensive and rigorous process for registering and re-evaluating 
pesticides, and EPA devotes significant resources to the regulation of 
pesticides to ensure each pesticide product meets the FIFRA requirement 
to not cause unreasonable adverse effects to the human health and the 
environment. NASDA fully supports EPA's scientifically-based review and 
registration approval process. However, the EA identifies estimated 
benefits based on implied or causal connections not supported by 
scientific data. This is in direct conflict with the Agency's 
registration and reregistration review programs.
    In reviewing the oversights of EPA's EA and applying the sound 
methodology of Texas A&M's model, it is clear the actual estimated cost 
of the proposed rule significantly understates the cost and burden to 
both the state lead agency and the regulated community without 
sufficient or comparable benefits. NASDA has requested EPA work with 
Texas A&M AgriLife Extension, the State Departments of Agriculture, and 
the regulated community to revise and republish an updated EA to better 
quantify the actual estimated costs and benefits, if any, of the 
proposed rule changes before the Agency takes any further action with 
this proposal.

    Question 7. In the National Strategy to Promote the Health of Honey 
Bees and Other Pollinators and the EPA Proposal to Mitigate Exposure to 
Bees from Acutely Toxic Pesticide Products, EPA offered support for 
voluntary stewardship methods to reduce exposures during the planting 
of pesticide treated seed. And, on January 4, 2016, EPA released its 
preliminary pollinator assessment for one pesticide indicating that it 
posed a low-potential risk to bees when used as a seed treatment. Do 
you have any specific concerns with the National Strategy document?
    Answer. NASDA members, individually and collectively, have been 
actively engaged in identifying the various factors impacting 
pollinator health, and more importantly, developing public-private 
partnerships on the state level to bring forward sound solutions to 
protect and promote honeybees and other native pollinators. These 
public-private partnerships are commonly referred to as State Managed 
Pollinator Protection Plans, or ``MP3s.''
    NASDA points to the scientific review of the 2007 National Academy 
of Sciences (NAS) report, Status of Pollinators in North America, and 
the 2013 U.S. Department of Agriculture (USDA)--U.S. Environmental 
Protection Agency (EPA) joint report, National Stakeholders Conference 
on Honey Bee Health,\9\ which found there are numerous and complex 
factors associated with bee health, including: parasites and diseases, 
lack of genetic diversity, need for improved forage and nutrition, need 
for increased collaboration and information sharing, and a need for 
additional research on the potential impacts certain pesticides may 
have on honey bee health. The Report found the parasitic mite, Varroa 
destructor, a known cause for amplified levels of viruses and closely 
associate with overwintering colony declines, to be the single most 
detrimental pest of honeybees.
---------------------------------------------------------------------------
    \9\ Report on the National Stakeholders Conference on Honey Bee 
Health (March 2012). Retrieved from: http://www.usda.gov/documents/
ReportHoneyBeeHealth.pdf.
---------------------------------------------------------------------------
    These complex factors do not lend themselves to a single, uniform 
regulatory solution. However, a state-by-state approach utilizing the 
State Departments of Agriculture as the vehicle to unify, discuss, and 
develop MP3s built on robust communication efforts, Best Management 
Plans (BMP), and Integrated Pest Management (IPM) programs specifically 
crafted to serve and support local agricultural practices and producers 
is already a proven formula in a number of states (California,\10\ 
Colorado,\11\ Florida,\12\ Mississippi,\13\ and North Dakota \14\). We 
appreciate the support and partnership we have received from our 
partners at EPA, to date, in identifying MP3s as a successful, non-
regulatory vehicle to achieve risk mitigation and enhance collaboration 
across the agricultural stakeholder community, and we note the White 
House's National Strategy to Promote the Health of Honey Bees and Other 
Pollinators \15\ recognizes the MP3 as a model for success.
---------------------------------------------------------------------------
    \10\ California Department of Food and Agriculture. 2014. Bee and 
Beehive Information.
http://www.cdfa.ca.gov/plant/pollinators/index.html.
    \11\ Colorado Environmental Pesticide Education Program. Pollinator 
Protection 2013. http://www.cepep.colostate.edu/
Pollinator%20Protection/index.html.
    \12\ Florida Department of Agriculture and Consumer Services. 2014. 
Florida Bee Protection. http://www.freshfromflorida.com/Divisions-
Offices/Agricultural-Environmental-Services/Consumer-Resources/Florida-
Bee-Protection.
    \13\ Mississippi Honeybee Stewardship Program. 2014 http://
www.msfb.org/public_policy/Resource%20pdfs/Bee%20Brochure.pdf.
    \14\ North Dakota Department of Agriculture. 2014. North Dakota 
Pollinator Plant. A North Dakota Department of Agriculture Publication. 
http://www.nd.gov/ndda/files/resource/
NorthDakotaPollinatorPlan2014.pdf.
    \15\ White House. (2015). National Strategy to Promote the Health 
of Honey Bees and Other Pollinators. Retrieved from: https://
www.whitehouse.gov/sites/default/files/microsites/ostp/
Pollinator%20Health%20Strategy%202015.pdf.
---------------------------------------------------------------------------
    At the same time, we do have significant concerns with a current 
policy proposal EPA published for public comment that is currently 
under review. In this policy proposal, EPA identified 76 active 
ingredients that will impact over 3,500 crop protection tools as 
potentially ``acutely toxic to honeybees'' and subject these tools and 
uses to enhanced label restrictions. We are concerned with both the 
process and the substance of this proposal; neither of which are FIFRA 
compliant or based on a sound, science-based risk assessment approach. 
So we ask this Subcommittee to help ensure EPA's regulatory proposals 
are compliant with their obligations under FIFRA and consistent with 
their role as regulatory partners with the State Departments of 
Agriculture.
    As previously noted, the state department of agriculture in forty-
three states and Puerto Rico is the state lead state agency responsible 
for the regulation of pesticide use under FIFRA. NASDA members are well 
versed in the robust scientific review and approval process EPA 
undertakes in reviewing and registering pesticides. EPA registered 
neonicotinoids as ``reduced risk'' alternatives to organophosphates and 
other older classes of chemistry, and EPA is currently undertaking a 
re-evaluation of clothianidin, imidacloprid, and thiamethoxam under its 
registration review program.
    NASDA recommends the continued support and development of state-
specific MP3s to achieve sound policy initiatives, ensure access to 
appropriate crop protection tools, and to protect and promote 
pollinator health before any further regulatory actions are considered.

    Question 8. Does your organization support passage of H.R. 897, the 
Reducing Regulatory Burdens Act of 2015? Do you believe the burden and 
liabilities of obtaining a water permit are limiting or delaying 
mosquito control applications that control viruses like Zika and 
protect human health?
    Answer. NASDA strongly supported passage of H.R. 897, the Reducing 
Regulatory Burdens Act of 2015, and NASDA supported the passage of H.R. 
897, the Zika Vector Control Act.
    This legislation is necessary to clarify that Federal law does not 
require this redundant permit for already regulated pesticide 
applications. NASDA is concerned the additional permitting burdens 
stemming from the National Cotton Council v. EPA decision have made it 
more expensive and presented increased risk of litigation for mosquito 
control districts and private applicators to conduct control 
activities. This has led to few applications and fewer private 
applicators willing to conduct these control activities.

    Question 9. What do you believe will happen if H.R. 897 is not 
enacted and President Obama's WOTUS rule goes into effect?
    Answer. Taken together, NPDES permitting requirements stemming from 
NCC v. EPA and the WOTUS rule present significant legal vulnerabilities 
for farmers and pesticide applicators. Because many ditches and 
ephemeral or intermittent features in or near farm fields, pastures, 
and woodlots are likely to become newly-jurisdictional under the rule, 
application in or around those features of terrestrial pesticides 
(those products lacking a FIFRA label explicitly allowing application 
into, over, or near ``waters'') might result in CWA violations and 
citizen suit vulnerabilities from inadvertent pesticide contact with 
these types of newly-jurisdictional waters.
    For use of FIFRA-labeled aquatic pesticides, EPA's Pesticide 
General Permit (PGP) covers use patterns for: (1) mosquito and other 
flying insect pest control; (2) weed and algae control; (3) animal pest 
control; and (4) forest canopy pest control. Agricultural use patterns 
of terrestrial pesticides are not covered under the PGP.
    This raises a number of questions and concerns: for example, would 
farmers and ranchers routinely making seasonal treatment of, noxious 
weeds in fields containing dry ephemeral conveyances or manmade ditches 
now also be required to comply with NPDES permit requirements? If so, 
would these producers need to secure individual NPDES permits, since 
terrestrial pesticide use is not covered by the PGP? Most applicators 
using terrestrial pesticides may not be aware that treatment areas they 
are treating may for the first time contain newly-jurisdictional 
``waters,'' and in addition to FIFRA label requirements, they might now 
also need to comply with NPDES performance requirements for ``aquatic'' 
pesticide applications. This would pose an extreme difficulty for 
commercial applicators applying terrestrial pesticides by air, when 
such ephemeral features could well be unmarked, dry or hidden by 
vegetation. These concerns also extend beyond pesticide use, and we are 
also concerned that the application of other agricultural inputs in a 
similar manner, such as fertilizer, would also be problematic under the 
proposed rule.

    Question 10. The public is threatened by insect-borne diseases--
West Nile Virus is a good example. Some of the critical products used 
to control mosquitoes are also the backbone of Integrated Pest 
Management plans. Can you tell us your thoughts regarding EPA's plans 
for OP's (organophosphates) used to protect public health against very 
dangerous and prolific pests?
    Answer. NASDA notes pesticides (including organophosphates) are an 
important component of Integrated Pest Management (IPM) programs for 
both agriculture production systems and vector control activities to 
protect human health.
    NASDA is intimately familiar with EPA's rigorous and exhaustive 
scientific review under FIFRA, and we support the development, 
approval, and use of various crop protection and vector control tools 
to better protect human health and to assist farmers in continuing to 
produce our nation's food, fiber, and fuel.

    Question 11. We've heard a lot about the need for oversight of the 
EPA's pesticide program. What are your organization's top priorities 
for regulatory oversight?
    Answer. As regulatory partners with EPA and other Federal agencies 
over significant aspects of the U.S. agricultural industry, NASDA has a 
particular interest in EPA's efforts related to reducing regulatory 
burdens, especially with respect to increased flexibility to state 
regulatory partners.
    Last year, NASDA was pleased to participate in a series of meetings 
with other associations representing state and local government hosted 
by Shaun Donovan, Director of the White House Office of Management and 
Budget (OMB) and Howard Shelanksi, Administrator of OMB's Office of 
Information and Regulatory Affairs. These discussions focused on the 
Administration's efforts around improving regulatory processes and 
improving retrospective regulatory review.
    As NASDA articulated in those discussions and reiterates here, the 
Administration should consider the following principles to minimize the 
impact of regulations on both state governments and the regulated 
community:

  1.  Enhance Federalism Consultations: Federal agencies should conduct 
            robust federalism consultations early in the regulatory 
            process, and include participation of a wide range of state 
            regulatory agencies, including State Departments of 
            Agriculture.

  2.  Improve economic analyses that more realistically account for 
            economic costs to states: Federal agencies should engage 
            state regulatory agencies and stakeholders to evaluate 
            proposed regulations, availability of required resources, 
            and whether expected outcomes merit those expenditures.

  3.  Enhance public participation and greater transparency of the 
            regulatory process: Federal agencies should improve public 
            participation and increase transparency of the regulatory 
            process.

  4.  Incorporate flexibility in state regulatory programs: Federal 
            agencies should engage state regulatory partners in 
            creating programs that may provide local and state 
            flexibility.

  5.  Renew focus on utilization of best available science: OMB should 
            ensure agencies consistently and appropriately apply best 
            available science to the regulatory system.

  6.  Improve stakeholder outreach, especially to rural communities: 
            Federal agencies should enhance educational and outreach 
            efforts to rural communities and provide teleconference 
            access for oral comments, which can be submitted in the 
            docket and become part of the official record.

    In addition to these principles outlined above, it is essential for 
EPA to comply with its obligations under: FIFRA; \16\ the Regulatory 
Flexibility Act; \17\ the Unfunded Mandates Reform Act; \18\ Executive 
Orders 13132 \19\ & 13563 \20\; and develop actuarially sound Economic 
Analysis with all of its proposed rulemakings.
---------------------------------------------------------------------------
    \16\ 7 U.S.C.  136, et. seq.
    \17\ 5 U.S.C.  601, et. seq.
    \18\ 2 U.S.C.  1501.
    \19\ Executive Order No. 13132, Federalism, 64 FR 43255 (1999).
    \20\ Executive Order No. 13563, Improving Regulation and Regulatory 
Review, 76 FR 3821 (2011).

    Question 12. In publishing the final worker protection standard 
rule, the EPA included a ``designated representative'' provision that 
had not been previously provided to the Committee as required in law. 
We have some questions about this provision . . .
    Answer. EPA inclusion of the ``designated representative'' 
provision was implemented outside of the Federal rulemaking process, in 
conflict with the information and input from EPA's state regulatory 
partners and the regulated community, and in violation of the Agency's 
obligations under FIFRA; \21\ the Administrative Procedures Act (APA); 
\22\ the Unfunded Mandates Reform Act (UMRA); \23\ the Regulatory 
Flexibility Act (RFA); \24\ and Executive Orders 13132 \25\ and 13563 
\26\.
---------------------------------------------------------------------------
    \21\ 7 U.S.C.  136, et. seq.
    \22\ 5 U.S.C.  500, et. seq.
    \23\ 2 U.S.C.  1501.
    \24\ 5 U.S.C.  601, et. seq.
    \25\ Executive Order No. 13132, Federalism, 64 FR 43255 (1999).
    \26\ Executive Order No. 13563, Improving Regulation and Regulatory 
Review, 76 FR 3821 (2011).
---------------------------------------------------------------------------
    This provision places an extraordinary burden on growers to produce 
a full accounting of 2 years of application records to anyone who 
arrives on their farm with a piece of paper claiming to represent a 
worker who may have been on that establishment at some point over the 
past 2 years. If the agricultural employer does not produce these 
records they subject themselves to enforcement actions. If the 
agricultural employer does produce these records, the individual 
requesting them is free to use them for any purpose, propaganda, anti-
marketing, litigious or otherwise that he or she sees fit.
    EPA did not include the ``designated representative'' provision in 
the final rule it provided to Congress, as the Agency is required to do 
so under law. We have expressed our strong concern and disappointment 
with EPA's lack of consultation with their state regulatory partners, 
and we want to thank Chairman Conaway and Ranking Member Peterson for 
their attention and on-going engagement on this matter.
    Also concerning is EPA's implementation of the WPS rule with all of 
these enhanced regulatory burdens and record keeping requirements, but 
the Agency has yet to provide educational resources or training 
materials to assist their state partners and the regulated community to 
understand the new requirements and how to comply with them.
    Without a sound and transparent regulatory framework and the 
resources necessary to educate the regulated community on how to 
comply, all EPA has created is another economic burden on the men and 
women who produce our nation's food, fiber, and fuel. It is absolutely 
essential for EPA to correct the oversights in the WPS rule and provide 
their state partners and the regulated community the time and 
educational resources necessary to ``educate before we regulate.''

    Question 13. The President has stressed the importance and value of 
transparency in EPA's action to ensure the use of sound science and 
reliable data. EPA is increasingly reliant on epidemiological and 
modeling data to essentially overrule volumes of actual `hard science' 
laboratory and monitoring data. Was this fundamental change in policy 
put out for public notice and comment so that impacted stakeholders 
like you would have an opportunity to comment?
    Answer. We are not aware of any public notice and comment regarding 
this policy change, but we continue to encourage EPA and all of our 
Federal partners to recognize the considerable expertise of State 
Departments of Agriculture through Federalism consultations early in 
the regulatory process.
    Federalism consultations must be broad-based and include 
representatives from associations representing all relevant state 
agencies. Federalism consultations should occur early in the regulatory 
process and allow significant opportunities for robust participation. 
Throughout this process, it is important to emphasize that state 
regulatory agencies are not simply stakeholders, but are instead 
partners with Federal agencies in the implementation of a host of 
programs. States can--and should--be used more as resources for Federal 
agencies. Often states have a wealth of data, experience, and expertise 
that would help Federal agencies better develop and implement sound 
regulatory programs.
    Unfortunately, the federalism consultations conducted by agencies 
are often perfunctory and do not allow regulator-to-regulator dialogue 
on issues of mutual interest. Additionally, on those occasions when 
consultation does occur, it is often limited to only a handful of 
associations representing state and local governments and does not 
necessarily include the representatives from associations representing 
the state agencies that will be most impacted by the proposed 
regulation. Though some Federal agencies include other state and local 
representatives in their consultation processes, additional focus on 
ensuring federalism consultations include the appropriate parties would 
be very beneficial.
    One striking example of a regulatory initiative that would have 
greatly benefited from Federalism consultations with the states is the 
EPA and Army Corps of Engineers (Corps) Rule to Define ``Water of the 
United States'' Under the Clean Water Act (Docket ID No. EPA-HQ-OW-
2011-0880) \27\ and the so-called `Interpretive Rule' for Agricultural 
Conservation Practices (EPA-HQ-OW-2013-0820).\28\
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    \27\ National Association of State Departments of Agriculture. 
(2014, November 14). NASDA's Comments Regarding Proposed Regulatory 
Changes to the Definition of ``Water of the United States'' Under the 
Clean Water Act. http://www.nasda.org/Policy/9617/10937/30804.aspx.
    \28\ National Association of State Departments of Agriculture. 
(2014, July 7). NASDA's Comments Regarding Notice of Availability 
Regarding the Exemption From Permitting Under Section 404(f)(1)(A). 
http://www.nasda.org/Policy/9617/10937/28232.aspx.
---------------------------------------------------------------------------
    The WOTUS proposal will have tremendous impacts on state agencies, 
yet EPA and the Corps failed to consult with state agencies during the 
development of the proposal. While we appreciated the outreach the 
agencies engaged in following the release of the proposal, many of the 
rule's flaws identified during the post-release outreach could have 
been brought to light earlier, resulting in an improved proposal.
    It is critical for OMB to require EPA (and all Federal agencies) to 
conduct robust federalism consultations early in the regulatory process 
and include participation of a wide range of state regulatory agencies, 
including State Departments of Agriculture.

    Question 14. The United States has the world's most rigorous 
pesticide registration and review processes. Yet, when EPA's regulatory 
decisions are challenged in court, the Agency has not enjoyed many 
recent successes in defending its scientific process or decisions. Are 
these actions undermining EPA's credibility with the public?
    Answer. As regulatory partners with EPA, NASDA members are well 
versed in the robust scientific review and approval process the Agency 
is required to undertake under FIFRA, and NASDA is concerned the 
potential impact and precedent various judicial decisions have had and 
may continue to have on current and future registrations of important 
crop protection tools.
    We have significant concerns with the Judicial Branch's obvious 
lack of deference to the Agency's expertise and execution of its 
responsibilities under FIFRA, and the Courts are not the right vehicle 
to develop and implement policy. We note the importance of defending 
the Agency's robust scientific review process under FIFRA, and we stand 
ready to work with EPA to ensure the Agency's scientifically-sound 
decisions are recognized and defended. Enhanced consultations with the 
State Departments of Agriculture will assist EPA in this effort.

Food Safety Modernization Act
    Question 15. Can you describe the consultation process that FDA 
engaged in with industry in developing the regulations under the Food 
Safety Modernization Act?
    Answer. The magnitude of the rules needed to implement FSMA (seven 
major rules) has necessitated an enhanced level of engagement and 
dialogue beyond the traditional ``public notice and comment'' 
rulemaking process, and we appreciate FDA's Foods & Veterinary Medicine 
Deputy Commissioner Mike Taylor's leadership in identifying and 
facilitating this dialogue between Federal and state agency partners.
    NASDA has encouraged and supported FDA's expanded engagement in 
undertaking a secondary review of several proposals, the supplemental 
publication of four of the major rules, additional ``listening 
sessions,'' and several on-farm site visits within the states. These 
activities have resulted in significant improvements in the rule 
requirements, but there are three remaining areas of concern: (1) the 
magnitude of the rules are still overwhelming; (2) the means FDA 
proposes to regulate agricultural water are burdensome, costly, and go 
beyond the benefit to public health; and (3) the bifurcated regulation 
of packing houses, based on ownership rather than on risk.

    Question 16. Prior to passage of the Food Safety Modernization Act, 
there was a great deal of debate surrounding the question of what 
authority the FDA should have over food production. Many Members 
present at the time raised questions about granting the FDA the power 
to tell farmers how to farm. From the standpoint of food safety, do you 
believe FDA has the resources and expertise, more so than the USDA and 
State Ag Departments, to regulate on farm production practices?
    Answer. FDA has notable expertise in various food safety 
activities, but the Agency has little experience or institutional 
expertise related to agricultural practices. NASDA member agencies 
currently administer feed control programs in 47 states and human food 
safety programs in 19 states. NASDA is actively engaged in FSMA 
implementation, and forty State Departments of Agriculture have 
indicated intent to develop a state produce safety program.
    NASDA submitted over 250 pages of testimony to the docket regarding 
the seven major rules, and after extensive, technical review NASDA has 
identified a minimal need of $100 million annually to implement three 
major rules under FSMA: Human Food Preventive Controls, Animal Food 
Preventive Controls and Produce Safety. This necessary level of Federal 
funding is essential to enable State Departments of Agriculture to 
develop a produce safety program in the states.
    Adequately funding imported food safety programs is of equal 
importance to ensure a balanced playing field for American farmers and 
to provide the necessary educational and training resources to 
facilitate regulatory compliance activities for both the regulatory 
agencies and the regulated community. The State Departments of 
Agriculture are best positioned to facilitate the education of our 
Federal partners on the broad and diverse agricultural practices across 
the country, and we stand ready to continue to assist FDA in this 
process.

    Question 17. There was a great deal of concern when Congress passed 
the Food Safety Modernization Act that FDA's lack of resources and 
expertise would ultimately result in a ``one-size-fits-all'' approach 
to regulation. Do the final rules adequately account for the variation 
between crops, geographical growing locations, and even the associated 
risk profiles of the products produced in the U.S.?
    Answer. The ability of the final rules to adequately account for 
variations between crops, geographical growing locations, and 
associated risk profiles of U.S. products remains an open question.
    FDA has established a fairly flexible position through commitments 
to use alternatives and waivers as a part of the regulatory process. 
These are important means to reach reasonable solutions; however, the 
way in which ``substitute'' means of compliance are shared will make a 
difference in whether all producers may be aware of potentially less 
costly options to achieve compliance. Variances will be submitted by a 
state or foreign government and FDA will approve/deny these options, 
which should be publicly available. Alternatives under the rule are 
options believed by a grower to achieve the same level of public health 
protection as the FDA rule and will remain in a grower's file.
    This is most relevant in the instance of the water standard and 
also potentially related to other issues addressed within the guidance, 
yet to be developed or published. If FDA is willing to remain flexible 
and seek additional ways to be flexible, it seems as though another 
category of flexibility will evolve--that of an alternative that 
becomes a part of guidance or some other mechanism to share 
alternatives between farmers--which farmers can access and choose 
rather than the published rule per se.
    We likely do not yet know the extent of FDA's ability to accept a 
culture change; however, the future of American agriculture may depend 
upon the agency's ability to better understand food production. Farms 
are not factories, nor should--nor can--they become factories. How the 
agency chooses to deal with the variations listed in your questions 
will determine how flexible the rules are once they are implemented 
[including advice made available through guidance development].
    NASDA has developed an implementation framework, which is a roadmap 
for states to consider as they develop a state produce safety program. 
One of the chapters within that document is a ``dispute resolution'' 
chapter. Precisely because of the premise of your question, and our own 
experience interacting with FDA (certainly the ``enforcement culture'' 
of FDA rather than the prevention/compliance culture of FDA), it is 
imperative state and FDA programs have a mechanism to sort through the 
differences between farming and food manufacturing. Achieving a 
``prevention culture'' will hinge on achieving a balance between the 
requirements needed to achieve the dual goals of food production and 
food safety, where both public health and food security are important 
goals.

    Question 18. How different are current food safety practices from 
what the Food Safety Modernization Act will require?
    Answer. While moving to a prevention strategy is prudent and noting 
the expansion of those entities covered was anticipated in the passage 
of FSMA, the amount of requirements FDA created to comply with newly 
established standards and requirements is beyond ``a tweak'' in food 
safety policy. In moving to a ``prevention'' statute, FSMA expanded the 
regulated community to include many more entities: farmers that grow 
fruits and vegetables (generally consumed raw); packing houses on-farm 
and owned by farmers; packing houses mentioned above; animal feed 
mills; and pet food establishments, at a minimum, while codifying 
advanced food safety practices for the already regulated manufactured 
food arena.
    Changes to the Human Food Preventive Control rule are consistent 
with the direction the program was progressing prior to the passage of 
FSMA, except more preventive controls are put in place under the new 
rules. Product testing, environmental monitoring and supplier 
verification are all new requirements. Good Manufacturing Practices 
(GMPs) are not new to the major processed food producers; however, 
small to medium sized facilities will likely find these requirements 
will require substantial changes in practices. FDA choosing to define 
packing sheds based on ownership rather than a foodborne risk has 
created another category of ``facilities'' that will now be regulated 
as a manufactured food location that were previously ``farms,'' per se.
    Water testing has been done by farmers under third-party audits, 
but FDA's Water Standards are substantially beyond any previous 
requirements. The other major standards include: use of manure as a 
soil amendment, intrusion of animals, worker sanitation and hygiene. It 
will depend upon what FDA includes in guidance to better understand the 
magnitude of expectation for these additional standards.
    Continuing education is essential to helping producers adopt better 
agricultural practices and stay on top of what is known to have caused 
recent outbreaks and avoid the same practices that resulted in unsafe 
produce. A program initially developed by NASDA to assist in this 
effort is the ``On-Farm Readiness Review,'' which is in the process of 
being pilot tested by NASDA, the states, Cooperative Extension 
(hereinafter ``Extension''), and FDA.

    Question 19. How do requirements under the Food Safety 
Modernization Act compare to existing industry requirements that are 
enforced through third-party audits?
    Answer. There are substantial differences based on the likelihood 
FDA will require compliance with many of the actual requirements 
through guidance to the industry, which have yet to be published. USDA 
is planning to change its Good Agricultural Practices (GAP) program to 
adopt FSMA requirements. It is too early to tell whether FSMA 
implementation will reduce the number of audits/visits; however, 
farmers that produce fruits and vegetables already cite audit fatigue 
and on-farm visit fatigue as an existing burden on their time and 
resources.

    Question 20. You talk about the farm definition in FDA's produce 
safety rule. Can you explain what this definition is, and why it is 
important? Do you support revising the Farm definition?
    Answer. The definition of ``farm'' is important in determining 
which entities will be regulated under the Produce Safety rule and 
which ones may be partially regulated under the Human Food Preventive 
Controls (HFPC) rule. By FDA's definition, some packing sheds are 
regulated as farms; others, although identical in function, may be 
regulated as ``facilities''--based on ownership, not based on risk-
based practices.
    More requirements exist for those regulated under the HFPC, 
including: registration requirements, product testing, environmental 
monitoring and supplier verification. Also, mixed-type facilities are 
by definition an establishment that engages in both: (1) activities 
that are exempt from registration under section 415 of the Federal 
Food, Drug, and Cosmetic Act; and (2) activities that require the 
establishment to be registered. As a result, mixed-type facilities will 
be regulated under both the HFPC rule and the Produce Safety rule. We 
believe improvements can be made in the definition of farm. Below are 
excerpts from NASDA's comments to the docket regarding definition of 
farm:

    FDA's definition of a ``farm'' is as follows:

    The definition of a `farm' is clarified to cover two types of farm 
operations. Operations defined as farms are not subject to the 
preventive controls rule.

   Primary Production Farm: This is an operation under one 
        management in one general, but not necessarily contiguous, 
        location devoted to the growing of crops, the harvesting of 
        crops, the raising of animals (including seafood), or any 
        combination of these activities. This kind of farm can pack or 
        hold raw agricultural commodities such as fresh produce and may 
        conduct certain manufacturing/processing activities, such as 
        dehydrating grapes to produce raisins and packaging and 
        labeling raisins.

      The supplemental rule proposed, and the final rule includes, a 
        change to expand the definition of ``farm'' to include packing 
        or holding raw agricultural commodities (such as fresh produce) 
        that are grown on a farm under a different ownership. The final 
        rule also includes within the ``farm'' definition companies 
        that solely harvest crops from farms.

   Secondary Activities Farm: This is an operation not located 
        on the Primary Production Farm that is devoted to harvesting, 
        packing and/or holding raw agricultural commodities. It must be 
        majority owned by the Primary Production Farm that supplies the 
        majority of the raw agricultural commodities harvested, packed, 
        or held by the Secondary Activities Farm.

      This definition for a Secondary Activities Farm was provided, in 
        part, so that farmers involved in certain formerly off-farm 
        packing now fit under the definition of ``farm,'' as the 
        packing is still part of the farming operation. In addition to 
        off-farm produce packing operations, another example of a 
        Secondary Activities Farm could be an operation in which nuts 
        are hulled and dehydrated by an operation not located at the 
        orchard before going to a processing plant. If the farmer that 
        owns the orchards and supplies the majority of the nuts is a 
        majority owner of the hulling/dehydrating facility, that 
        operation is a Secondary Activities Farm.

   Primary Production and Secondary Activities Farms conducting 
        activities on produce covered by the Produce Safety Rule will 
        be required to comply with that rule.

    Revise  1.227 to read as follows: The definitions of terms in 
section 201 of the Federal Food, Drug, and Cosmetic Act apply to such 
terms when used in this subpart. In addition, for the purposes of this 
subpart:

          Farm means:

                  1. Primary production farm. A primary production farm 
                is an operation under one management in one general 
                (but not necessarily contiguous) physical location 
                devoted to the growing of crops, the harvesting of 
                crops, the raising of animals (including seafood), or 
                any combination of these activities. The term ``farm'' 
                includes operations that, in addition to these 
                activities:

                          i. Pack or hold raw agricultural commodities;

                          ii. Pack or hold processed food, provided 
                        that all processed food used in such activities 
                        is either consumed on that farm or another farm 
                        under the same management, or is processed food 
                        identified in paragraph (1)(iii)(B)(1) of this 
                        definition; and

                          iii. Manufacture/process food, provided that:

                                  (a) All food used in such activities 
                                is consumed on that farm or another 
                                farm under the same management; or

                                  (b) Any manufacturing/processing of 
                                food that is not consumed on that farm 
                                or another farm under the same 
                                management consists only of:

                                          [I]. Drying/dehydrating raw 
                                        agricultural commodities to 
                                        create a distinct commodity 
                                        (such as drying/dehydrating 
                                        grapes to produce raisins), and 
                                        packaging and labeling such 
                                        commodities, without additional 
                                        manufacturing/processing (an 
                                        example of additional 
                                        manufacturing/processing is 
                                        slicing);

                                          [II]. Treatment to manipulate 
                                        the ripening of raw 
                                        agricultural commodities (such 
                                        as by treating produce with 
                                        ethylene gas), and packaging 
                                        and labeling treated raw 
                                        agricultural commodities, 
                                        without additional 
                                        manufacturing/processing; and

                                          [III]. Packaging and labeling 
                                        raw agricultural commodities, 
                                        when these activities do not 
                                        involve additional 
                                        manufacturing/processing (an 
                                        example of additional 
                                        manufacturing/processing is 
                                        irradiation); or

                  2. Secondary activities farm. A secondary activities 
                farm is an operation, not located on a primary 
                production farm, devoted to harvesting (such as hulling 
                or shelling), packing, and/or holding of raw 
                agricultural commodities, provided that the primary 
                production farm(s) that grows, harvests, and/or raises 
                the majority of the raw agricultural commodities 
                harvested, packed, and/or held by the secondary 
                activities farm owns, or jointly owns, a majority 
                interest in the secondary activities farm. A secondary 
                activities farm may also conduct those additional 
                activities allowed on a primary production farm as 
                described in paragraphs (1)(ii) and (iii) of this 
                definition.

    Question 21. Can you talk a bit about the food safety training 
challenges associated with FSMA implementation?
    Answer. Delays: FDA and USDA-AMS cooperated in 2010 to establish a 
Produce Safety Alliance (PSA) at Cornell University. NASDA commended 
this forward-thinking collaboration bringing Federal agencies together 
working towards a common good. The PSA developed train-the-trainer and 
producer training courses with input from a wide array of experts. Two 
of the program's goals have been to: (1) develop a standardized 
education program based on GAPs and co-management; and (2) to include 
the Produce Safety rule requirements, when available. The process for 
developing the entire training program, used by the PSA, has been 
transparent and inclusive.
    Since the rule was published, FDA has requested to modify the 
education program. The PSA initial training program is a basic-level 
FSMA prerequisite requirement, and the desire to perfect this level of 
training misses the importance of the education and value of continuing 
education as a means to safer food. Long-term education is a key 
principle to achieving prevention, and even while the education is 
being postponed the compliance dates remain firm. It is imperative to 
provide state regulatory agencies and the regulated community the time, 
education, and resources necessary to facilitate implementation and 
compliance of these comprehensive regulatory changes.
    Continuing Education: Prevention, as a policy, requires sustained 
opportunities to present ``core and more'' information to producers. 
Prevention will not occur if all that is accomplished is a perfected, 
basic-level enforcement-oriented training course. As time goes by, we 
will learn more about the cause of outbreaks, means to avoid 
contamination, practices that increase or mitigate risk, and more. We 
will not prevent outbreaks if we do not emphasize a long-term 
commitment to provide education to producers. On-Farm Readiness Reviews 
and inspections of farms will provide additional and valuable 
educational information. The guidance document, yet to be published, 
will also require another updated education program. While subsequent 
education programs may not be expressly required under the rule, the 
benefit of these opportunities should assure that producers will 
participate, especially as this relates to compliance with FSMA and 
facilitating market access.
    Lack of guidance: FDA has made it clear that much of the policy 
producers need to comply with is contingent on the guidance the agency 
will publish in the coming months. It is also one of the key points FDA 
has apparently raised with the PSA. Much of the value of the education 
may derive from the requirements found in guidance; however, the 
guidance documents are months away from publication and will require 
additional, continuing education to keep producers abreast of the 
requirements.
    While NASDA supports the education programs being developed by 
Extension for GAP and FSMA, we also recognize some of the GAP program 
audits have established practices that will not ``pass muster'' as food 
safety practices. To get through the transition, NASDA has been working 
on an ``On-Farm Readiness Review'' program. We are concerned farmers 
may have a false sense of security based on the use of audits over the 
past decade as a surrogate for inspections, and USDA and FDA's 
continued pronouncement that if farms are GAP certified, ``they are 
most of the way there'' (in compliance with FSMA). The rule FDA has 
promulgated is quite a bit more restrictive and enforcement oriented 
than the GAP requirements, and we believe farmers deserve an 
opportunity to know what is meant by ``being most the way there.''
    We believe having Extension and state regulatory personnel perform 
a voluntary, non-regulatory review of farms can help assure farmers 
that the practices they are using meet/will meet the standards in FSMA 
and/or what changes need to be made to achieve compliance. This can 
help farmers know which practices they use on the farm are ``FSMA 
compliant.'' The purpose of our collective actions should be to improve 
the likelihood that fruits and vegetables produced by American farmers 
are safe, and there should be an emphasis on ensuring farmers are doing 
it right (not looking to see if we can catch someone doing something 
wrong). The emphasis of training needs to be on helping producers meet 
the standards and providing oversight on farms. The On-Farm Readiness 
Review program should help to focus efforts on compliance and support 
food safety practices.

    Question 22. What are the differences between FDA's Produce Safety 
rule and the Preventive Controls for Human Food rule?
    Answer. The Produce Safety rule spells out what covered farms will 
be required to do (i.e., identify reasonably foreseeable biological 
hazards and take appropriate science-based measures to minimize risks 
associated with growing, harvesting, packing and holding of raw 
agricultural commodities generally consumed raw). The HFPC rule 
regulates the processed food industry and incorporates the general 
requirements found in the pre-FSMA Food, Drug and Cosmetic Act while 
adding Preventive Controls--HACCP, risk-based hazard analysis, product 
testing, environmental monitoring and supplier verification to the 
requirements for most processed foods.
    FDA's definition of ``farm'' and the agency's choice to regulate 
packing operations based on ownership rather than on risk means some 
packing house activities will be regulated under the Preventive 
Controls for Human Food rule while identical activities at other 
locations will be regulated as normal farm activities. Farmers growing 
produce will need to be versed in both rules in order to determine how 
FSMA may apply to their farms. FDA could have chosen to establish one 
rule that governed the newly regulated produce industry.

    Question 23. What does your group see as the most burdensome aspect 
of FSMA?
    Answer. The water standard in the Produce Safety rule is based on a 
standard intended as a guideline for the unintended consumption of 
recreational water when swimming and establishes a frequency of testing 
based on statistical confidence of a scientific testing result rather 
than on a practical basis of: ``do you test your water source(s)?''; 
``have you ever had a positive result?''; and ``if you have, do you 
have a mitigation strategy?''
    Some farmers have estimated the potential cost for testing to meet 
FDA's rule will be over $100,000. This approach seems more directed at 
assuming all water is contaminated until proven safe--a ``precautionary 
principle'' approach--rather than a preventive strategy, especially for 
those locations that have been testing for years without finding 
contamination. FDA justifies its position based on the flexibility the 
agency provides under alternatives and variances. However, alternatives 
are not pre-approved, so even though farmers believe they have an 
alternative means of assessing/characterizing water sources as safe 
(based on past experiences and the lack of any foodborne incidents), 
they won't know if that ``alternative'' is acceptable until after an 
inspection--an apparent ``Catch 22.''
    Farmers, not wanting to be out of compliance, will likely adhere to 
the FDA's more costly way of showing compliance when other equally 
effective means may be just as available and a great deal more 
practical. Addressing and agreeing to pre-approval of alternatives, at 
least for the water standard, will enable farmers to evaluate 
alternative compliance means due to the projected costs associated with 
meeting FDA's published standard. FDA has indicated a willingness to 
discuss other means of achieving compliance with the water standard; 
perhaps we will see pre-approved ``alternatives'' take shape through 
guidance, continuing education, or some other mechanism.
    Lack of available guidance: FDA has long supplemented its rules by 
providing non-binding guidance documents addressing the agency's 
current thinking on how the industry can comply.
    FDA established a Technical Assistance Network (TAN) where 
``experts'' respond to individual questions and develop ``Frequently 
Asked Question'' documents and searchable files for general reference. 
The TAN is a welcome advancement, but FDA needs to shorten its response 
time and improve response accuracy to assist the regulated community in 
amending its practices, evaluating costs, and amortizing necessary 
investments. TAN will only be effective if it provides producers enough 
time to understand and execute compliance activities, and this window 
of opportunity is quickly closing.
    Issues with partnerships with Federal agencies: The Federal 
Government frequently seeks assistance from state agencies, and in many 
instances, states have concurrent and/or similar authorities. As 
regulatory partners with our Federal partners, FDA should not 
categorize State Departments of Agriculture as ``stakeholders.'' 
Enhanced cooperation is clearly needed, and interactions between 
governmental partners can and should be improved.
    FDA has a confidential information sharing systems requiring 
commissioning and/or credentialing, and no one questions the need for 
the protection of confidential information. Other Federal agencies have 
figured out ways to share information that does not require the same 
level of control and legal documentation FDA requires. FDA has improved 
this process with the use of signed agreements (20.88) for state 
agencies and association staff; however, FDA's procedures still include 
unnecessary bureaucratic processes that provide no enhanced protections 
of confidential information but interfere with ``getting the job 
done.''
    Two rules--not one: FDA organized its Produce Safety rule around 
FDA's organizational structure rather than the regulated industry. This 
approach will make it more difficult for the regulated community to 
understand the regulations and how to comply with them. Rules that are 
clear, concise, and straightforward generally will result in higher 
rates of compliance. Rules that are complex, cumbersome, and difficult 
to find or follow will confuse the regulated community and minimize any 
regulatory benefits. Had FDA crafted one rule for producers of fruits 
and vegetables, the regulated community would have had a better chance 
of finding the rules and reaching a high level of compliance.
    Heretofore unidentified hazards/risks: Compliance with the Produce 
Safety rule will require producers to: ``determine hazards'' within 
their operations, determine how they propose to mitigate them, and show 
they have actually accomplished that goal.
    This sounds reasonable except when it comes to how to deal with 
previously unknown hazards/risks. If a previously unknown, 
unrecognized, unknowable, unrecognizable hazard causes a foodborne 
outbreak, the responsibility for producers to have previously 
identified these and mitigate them creates an unreachable goal and 
establishes an enforceable/enforcement standard. This dynamic does not 
accomplish the ``preventive'' approach Congress passed under FSMA.
    The goal of FSMA might better be realized by creating an incentive 
to identify these kinds of potential problems and focus on determining 
the likelihood of occurrence and the means to avoid them. While the way 
the rules are written allows them to be enforced (hold someone 
accountable), they do not necessarily stress prevention and the need 
for all parties--industry, educators, regulators and the public--to 
become partners in preventing foodborne illnesses. To have written the 
rules differently would have helped to support the culture change we 
believe FSMA envisioned.
    Imported Food Parity: It is essential for FDA to require the same 
level of compliance for foreign producers as required for domestic 
producers. If FDA does not adequately address imposing the standards on 
foreign food imported into the U.S., the burden of FDA's expanded 
regulation of agriculture will adversely affect U.S. farmers and make 
some foods more costly to produce domestically than imported food from 
foreign countries--partially because of a lower cost to comply 
overseas.
    We continue to observe and understand what criteria FDA will use in 
determining if a country's Food Safety System is deemed equivalent to 
the U.S. standard (FSMA compliant). If a country is approved and the 
cost burden (applying Food Safety Standards) is not the same, it will 
create a disadvantage in the market for domestically produced foods. 
This is especially true as it relates to water testing cost for the 
growing of fresh fruits and vegetables.

    See below Appendix for additional information on FSMA.
Research
    Question 24. Increasing availability of funds for research is a 
common goal. Recognizing fiscal constraints though, are we focusing our 
resources on the correct priorities?
    Answer. NASDA believes increased public research funding is 
especially needed in the areas of positive agricultural economic 
viability, pollinator health, food safety, water quality and other 
emerging priority issues. Competitive research grant programs and 
support of land-grant universities are keys to accelerating this 
research and making it publicly accessible.
    NASDA also believes research could benefit from a more focused 
approach on practical, modern solutions for agriculture that producers 
can use. This prioritization would benefit from increased stakeholder 
input and state outreach to help determine the need for on-the-ground 
solutions.
Farm Bill
    Question 25. We have heard about the devastating impacts citrus 
greening has had on the citrus industry. Can you elaborate on the 
research being conducted to combat citrus greening?
    Answer. One area for the Subcommittee to provide additional 
oversight is USDA's Specialty Crop Block Grant program (SCBGP). This 
program is a critical area of collaboration between the State 
Departments of Agriculture, the specialty crop industry, and USDA. 
Since 2009, the State Departments of Agriculture have distributed 
nearly $393 million in grants to 5,400 project partners that have 
enhanced the competitiveness of specialty crops in the United States. 
NASDA thanks Congress for the expanded funding of SCBGP and creation of 
the Specialty Crop Multi-State Program (SCMP) in the 2014 Farm Bill. 
These projects are not just increasing consumer access to safe and 
healthy food but are expanding economic opportunities across rural 
America. Unfortunately the program has become increasingly restricted 
by bureaucracy of USDA and the flexibility which has defined this 
program is eroding.
Citrus Pest/Disease and Pollinators
    Question 26. What practices are in place to ensure that pesticides 
are not applied when pollinators may be present?
    Answer. In addition to EPA's extensive registration review, label 
restrictions, and certified applicator training specific to 
pollinators, NASDA members, individually and collectively, have been 
actively engaged in developing public-private partnerships on the state 
level, known as ``MP3s'' (see response to Question 7 above).
    An MP3 is a set of recommendations and practices that facilitate a 
collaborative approach to implementing risk mitigation practices for 
beekeepers, growers, and applicators while allowing for the appropriate 
and necessary use of crop protection tools. MP3s account for the wide 
variation in regulatory authorities across the states and territories 
by providing each respective jurisdiction the needed flexibility to 
develop plans based on their agricultural systems and regulatory 
authority.
    The primary purpose of the MP3 is to establish a systematic and 
comprehensive method for beekeepers, growers, applicators, landowners, 
and agricultural stakeholders to cooperate and communicate in a timely 
manner allowing all parties to operate successfully, mitigate potential 
pesticide exposure to bees, and allow for the effective management of 
various pest stressors.
    MP3s are tailored to the distinct and diverse agricultural 
operations in each respective state and region, and the plans in place 
have demonstrated success in reducing losses to bee production while 
allowing crop producers to retain and utilize important crop protection 
tools. MP3s bring forward sound solutions to ensure growers, 
applicators, beekeepers, and other agricultural stakeholders are able 
to continue to produce our nation's food, fiber, and fuel in a 
productive and collaborative manner.
Labor Regulation
    Question 27. What are some of the extraneous impacts OSHA's July 
2015 revised interpretation of Process Safety Management standards has 
on the agriculture community?
    Answer. OSHA's July 2015 policy change that revoked the ``retail 
exemption'' for agricultural retailers drastically expands the number 
of retailers required to comply with Process Safety Management (PSM). 
This will harm agriculture through increased costs, limiting access to 
anhydrous ammonia, and continuing a cycle of regulatory overreach.
    PSM compliance requires increased paperwork and structural business 
changes. Many of these changes would require outside consultants or 
additional staff to gather and create further safety information, 
conduct further analyses of facilities, and pursue new permits. One 
large retailer, who owns large facilities currently regulated under PSM 
has teams of 4-6 people who manage this regulation. This is unfeasible 
for small retailers that many producers in rural America rely on. OSHA 
told attendees during a public meeting at the North Dakota Department 
of Agriculture that they are worried about ``mom and pop retailers'' 
who were previously exempt. These are the retailers who will be put out 
of business by these increased burdens.
    Further, OSHA did not conduct a formal economic analysis, so 
retailers are unaware of the estimated cost impacts. The agency 
estimates the cost of compliance is $2,100/facility. Industry estimates 
$30,000 for initial compliance, $12,000 for annual compliance, and 
$18,000 for a 3 year audit, an aggregate of $100 million.
    As a result of increased costs, many agriculture retailers will be 
forced out of business. This will limit farmers' access to this 
necessary fertilizer and cause many farmers to buy their own anhydrous 
nurse (storage) tanks. Anhydrous ammonia is not regulated at the on-
farm level. OSHA claims they issued the PSM policy change to increase 
safety, but the Agency has not demonstrated any safety impacts of the 
policy change, which will in-fact decrease safety.
    Finally, OSHA issued this policy change with little public input 
and zero prepared guidance for the regulated community. OSHA first gave 
notice of this policy change in a Request for Information (RFI) 
(https://www.osha.gov/pls/oshaweb/
owadisp.show_document?p_table=FEDERAL_REGISTER&p_id=24053). Only 
thirteen comments addressed the issue and almost no industry 
stakeholders were aware of the change. This regulation will have 
widespread effects across the agriculture industry and exceeds the cost 
threshold of $100 million; thus OSHA should have pursued a formal 
rulemaking. In conjunction with numerous industry groups, NASDA, and 
Members of Congress have asked OSHA specific questions regarding 
implementation. NASDA members have received no formal response from 
OSHA. OSHA needs to pursue a formal rulemaking to provide answers and 
certainty to the regulated community.

    Question 28. How can this Subcommittee provide oversight on the 
Process Safety Management (PSM) issue?
    Answer. OSHA has communicated very little about this memo with the 
regulated agricultural community. We would appreciate any efforts by 
the Subcommittee to help identify what safety impacts OSHA believes 
this policy change will have, urge them to do a comprehensive economic 
analysis, and ultimately urge them to withdraw this poorly conceived 
change. Language was included in the omnibus bill last fall requiring 
OSHA to not enforce the policy change in FY 2016, and as a result, OSHA 
delayed implementation until October 1, 2016. We encourage the 
Committee to work with stakeholders and committees of jurisdiction on a 
permanent solution.
Questions Submitted by Hon. John R. Moolenaar, a Representative in 
        Congress from Michigan
    Question 1. Good morning and thank you for being here to discuss 
the important topic of the farm economy and factors which impact the 
cost of production. Agriculture is a leading industry in Michigan's 
Fourth District, and changes, such as proposed rules by USDA and the 
EPA, can have serious consequences for our producers.
    USDA's Agricultural Marketing Service recently proposed a new rule 
to amend organic livestock and poultry practices, including poultry 
living conditions. After years of established rules under the National 
Organic Program, this rule would eliminate outdoor porches as an option 
for egg farmers. As we focus on the costs of production, I'm interested 
in the potential costs this proposed rule will have on organic egg 
producers. USDA has recognized that producers facing difficulty with 
compliance could choose to surrender their organic certification and 
transition to an alternate label, such as cage-free, which would reduce 
their annual profits.
    In my home state of Michigan, commercial organic egg producers 
provide a strong market for feed from organic corn and soybeans. I've 
met with producers who have expressed how this proposed rule will 
effectively halt their organic farming operations.
    Secretary Witte, with NASDA's work to provide growth for new 
markets, such as organic agriculture, how do you see this rule 
affecting markets for your farmers?
    Answer. A number of NASDA members have expressed concerns with 
USDA's Organic Livestock and Poultry Practices Proposed Rule, and NASDA 
requested a 60 day comment period extension on April 28, 2016 citing 
the significant need to consult with growers, handlers, state 
veterinarians, environmental health officials, and other stakeholders 
in the organic community in order to provide informed comments.
    Promoting our state's agricultural producers--including organic 
farmers, ranchers, and value-added food producers--is a key activity 
for NASDA members, and in fifteen states the NASDA member serve as the 
organic certifying agent under the National Organic Program (NOP).
    We have heard reports of producers needing to reduce stocking rates 
by as much as 50% to meet the outdoor space requirements outlined in 
the proposal, and the proposal will require producers to make 
significant investments to either acquire new lands or replace barns, 
which may or may not be on schedule for replacement.
    The proposal will effectively render almost \1/2\ (45%) of all 
organic eggs in today's grocery store out of compliance with the 
proposed outdoor access requirements. This will cause an extensive 
shift in the marketplace resulting in reduced availability of organic 
eggs which will lead to increased costs to consumers.
    Question 2. The proposed rule also requires organic hens to be 
directly exposed to the outdoors. In light of last year's Avian 
Influenza outbreak and the millions of dollars that State of 
Departments of Agriculture have spent to fight the spread of the 
outbreak, are you concerned that the USDA identifies increased 
mortality from disease as an effect of this proposed rule? Among NASDA 
members, are state veterinarians looking into this?
    I understand this is a relatively new rule, and I would encourage 
NASDA, your members, and state veterinarians to look into some of these 
concerns further.
    Answer. In the proposed rule, USDA acknowledges a 60% increase in 
hen mortality due to ``increased predation, disease and parasites from 
greater outdoor access.'' As written, this proposal significantly 
compromises the biosecurity measures the poultry industry has been 
working to improve since last year's Highly Pathogenic Avian Influenza 
(HPAI) outbreak. Not only would eliminating porches seriously curtail 
the ability of organic egg producers to comply with the USDA-Veterinary 
Services' (VS) request to enhance biosecurity barriers to disease 
introduction from wild birds, but it will also make it difficult for 
producers to comply with the U.S. Food and Drug Administration's (FDA) 
requirements to prevent the introduction of Salmonella enteritis from 
wild birds and other sources. This proposal seems to be in direct 
conflict with other USDA agency requests to enhance biosecurity 
barriers to dampen disease introduction from wild birds. Allowing 
porches to remain as an acceptable organic practice will allow 
producers to maintain appropriate biosecurity measures for the sake of 
both animal health, food safety, and our farm economy.
    NASDA members have engaged our state veterinarians and the National 
Association of State Animal Health Officials, an affiliate of NASDA, to 
conduct a thorough review of the proposal's implications on biosecurity 
and animal health activities, and we will continue to discuss this 
proposal throughout our regional meetings this summer to further 
identify and quantify the proposal's impacts on animal health. 
Additional time is needed to fully review, evaluate, and provide 
meaningful input on this proposed rulemaking.
                                appendix
    Producers Should Be Able To Find All of the Requirements Regulating 
Their Operation in One Rule

    The goal should be to assure producers that they will find all 
regulations affecting them in one place.

    FSMA is a historic law and the rules implementing the law are 
monumental. It appears that FDA has published the rules so the 
administration of them will fit within FDA's existing organizational 
structure. FDA must make every attempt possible to make complying with 
the law and rules crystal clear and easy to understand--even if that 
entails reorganizing its current organizational structure. In addition, 
producers should not have to hunt through myriad regulations to 
determine what rules cover their operations. If FDA intends to regulate 
producers beyond the requirements found in this rule, FDA should 
redraft these regulations to include those other provisions in this 
rule. This includes the mixed-type facilities regulations in the 
Preventive Controls: Food and Feed rules.

    Redefine ``Farm'' and ``Harvest''

    The current definition of farm first appeared word for word in the 
Federal Register over 10 years ago on October 10, 2003 (68 FR 58961), 
under the definitions promulgated after the Bioterrorism Act of 2002. 
Accordingly, many farms have been operating outside the definition of a 
farm since that definition came into effect. Until now, the FDA has not 
actively pursued enforcement actions against farms that pack or hold 
RACs grown on another farm for a failure to register as a food 
facility. However, under the regulations that will apply to both 
produce growers (proposed Part 112) and to food facilities (proposed 
Part 117), FDA has an obligation to resolve the ambiguity. NASDA 
requests FDA take advantage of this opportunity to redefine ``farm'' in 
a manner that resembles modern agricultural contracting practices to 
permit effective and uniform enforcement of the proposed definitions in 
order to increase public health protection.
    The definition of farm currently has little relationship to farming 
and the marketing of farm products in the modern U.S. agriculture 
industry. The original definition of farm created under the auspices of 
an exemption from the food facility registration requirement of the 
Bioterrorism Act of 2002 did not seek to define farming in a way that 
resembled farming practices for the purposes of food safety. The 
Bioterrorism Act of 2002 only sought to identify farming operations as 
a means to exempt farms from the food facility registration requirement 
under section 415 of the FD&C Act. In order to create an integrated 
food safety system, it is now critical that FDA create a definition 
that describes farming operations as they exist and operate, in order 
to properly regulate farm products under regulations designed for the 
farm.
    Farms that handle farm products in their harvested form are not 
best addressed under the food facility regulation. The FDA should 
address farms handling farm products as farms under the produce rule 
rather than as food facilities. As currently written, the regulatory 
definition of farm in 21 CFR Part 1 places thousands of farms under the 
preventive controls rule on the basis of only minimal pack, hold, and 
harvest activities, none of which change the status of a RAC and that 
do not increase the food safety risk to the RAC.
    The current definition of farm included in 21 CFR 1.227(b)(3) 
remains substantively unchanged from that proposed in the produce rule, 
which only moves the second sentence about washing into the proposed 
definition of harvesting. NASDA agrees with the FDA that this change to 
the definition leaves the definition of farm essentially unchanged.

    Farm definition at present: 21 CFR 1.227:

          ``(3) Farm means a facility in one general physical location 
        devoted to the growing and harvesting of crops, the raising of 
        animals (including seafood), or both. Washing, trimming of 
        outer leaves of, and cooling produce are considered part of 
        harvesting. The term `farm' includes:

                  (i) Facilities that pack or hold food, provided that 
                all food used in such activities is grown, raised, or 
                consumed on that farm or another farm under the same 
                ownership; and
                  (ii) Facilities that manufacture/process food, 
                provided that all food used in such activities is 
                consumed on that farm or another farm under the same 
                ownership.'' (emphasis added).

    Consequences Under the Current Definition

    Under both the current and proposed definitions, pack and hold 
activities indicated under subparagraph (1) are considered activities 
of the farm, only if all food used in such activities is grown, raised, 
or consumed on that farm. Thus, if any pack and hold activities are 
performed on produce not grown on the farm, it appears that all pack 
and hold activities are excluded from the definition of farming. NASDA 
seeks clarification from FDA on the application and interpretation of 
subparagraph (1) for packing and holding activities.
    As a result any farm that packs or holds a single RAC grown on 
another farm is outside the definition of a farm for all pack and hold 
activities. Consequently, the farm now changes from a farm to a mixed-
type facility subject to:

  1.  Section 415 of the FD&C Act, Food Facility Registration;

  2.  Preventive controls regulations and likely the produce 
            regulation;

  3.  Traceability requirements under record-keeping in 414(b) of the 
            FD&C Act for the immediate prior and immediate subsequent 
            source and recipient of food, and;

  4.  Potentially subject to the high-risk record-keeping requirements 
            to be promulgated under section 204(d) of FSMA (21 U.S.C. 
            2223(d)).

    Under current farming and food industry practices, it is common for 
a farmer to cover a produce contract if a harvest comes up short or is 
otherwise not ready by purchasing RACs from a neighboring farm and 
sending it through a washing system before packing the RAC. This is 
such a commonplace activity that most farmers do not separately track 
such transactions or treat the produce differently than their own RACs. 
In other circumstances, a farm participating in a community supported 
agriculture by aggregating products grown on various farms will be 
considered a mixed-type facility subject to additional regulation. This 
classification can have a devastating impact on community supported 
agriculture programs and other programs that support ``locavore'' 
movements.
    Under the current definition, limited packing & holding of others' 
RACs would change the entire pack and hold operation from a farm into a 
food facility. The complexity of these regulations does not facilitate 
recognition of such an activity as one that triggers section 415 
registration and subsequent regulations. In many cases, this activity 
has not been identified by regulators or industry as a mixed-facility 
activity. The current definition of farm does not fit the current farm 
functions.

    Redefine ``Farm'' to Resemble Farm Practices

    More importantly, FDA has the potential to clarify the definition 
of a farm without increasing risks to food safety by aligning farm 
activities with farm regulation. The new definition of farm would 
accomplish several major objectives:

  1.  More effectively separate farms from mixed-farm facilities (as 
            farms that perform activities that change the status of a 
            RAC) and facilities;

  2.  Maintain ``facility'' status for activities that changes the 
            ``status'' of a RAC and maintain the ``farm'' status for 
            businesses that perform activities that do not change the 
            ``status'' of a RAC (see FR 3679, Table 2, for examples of 
            ``status'' activities);

  3.  Extend the coverage of the produce rule over more produce than 
            just products grown on an individual's farm or another farm 
            under the same ownership; and

  4.  Reduce the ambiguities that mixed-type facilities face related to 
            coverage under multiple regulations.

    In order to better define farm, NASDA suggests that FDA change the 
definition of farm and harvest (and thereby expand the produce rule) to 
cover pack and hold activities of a farm to RACs not grown on the farm 
under a few limited conditions: (1) the expanded pack & hold activities 
performed on RACs grown on another farm do not exceed the sales of RACs 
grown on the farm over a 3 year rolling average; (2) RACs handled under 
the expanded pack & hold definition applies only to farms attempting to 
grow RACs in the same scientific genus.

          (3) Farm means a facility in one general physical location 
        devoted to the growing and harvesting of crops, the raising of 
        animals (including seafood), or both. The term ``farm'' 
        includes:

                  (i) Facilities that pack or hold food, provided that 
                the primary purpose of the pack and hold activities are 
                to pack and hold food grown, raised, or consumed on 
                that farm or another farm under the same ownership.

                          (A) A farm's primary purpose for packing and 
                        holding activities is to pack and hold food 
                        grown, raised, or consumed on that farm or 
                        another under the same ownership, if the 
                        average annual monetary value of sales (during 
                        the 3 year period preceding the applicable 
                        calendar year) of food packed or held at the 
                        facility grown, raised, or consumed on that 
                        farm or another under the same ownership 
                        exceeds the average annual monetary value of 
                        sales of food packed and held not grown, 
                        raised, or consumed on that farm or another 
                        under the same ownership; and
                          (B) The farm performing pack and hold 
                        activities grew or attempted to grow RACs of 
                        the same genus as those being packed or held.

                  (ii) Facilities that manufacture/process food, 
                provided that all food used in such activities is 
                consumed on that farm or another farm under the same 
                ownership.

    This definition follows the ``primary function'' limitation in the 
definition of a retail food establishment under 21 CFR 1.227(b)(11). 
The retail food establishment definition permits a retail food 
establishment to remain exempt from the food facility registration 
requirements if a majority of its food sales are directly to customers. 
Following the same reasoning, expanding the definition of farm would 
allow farms to treat RACs as products of their own farm for the purpose 
of pack and hold activities and for these activities to be subject to 
regulation under the produce rule.
    This would be an important change because as the preventive 
controls regulation is currently written, the aforementioned pack and 
hold activities are exempt from subpart C for on-farm VSBs and SBs 
under 117.5(g)(4), (6), and (9). As currently written, the activities 
covered under 117.5(4), (6), and (9) are exempt from Subpart C because 
FDA recognizes they are a low-risk food/activity combination. These 
facilities are already subject to Part 112 for the pack and hold 
activities performed on RACs grown on the farm and have food safety 
processes in place for the facility. Expanding the farm-specific food 
safety processes to these additional RACs will not increase the risk to 
food safety.
    The GMPs at 21 CFR 110.19 exclude establishments engaged solely in 
the harvesting, storage, or distribution of one or more `raw 
agricultural commodities' as defined in section 201(r) of the Act. GMPs 
are not currently applied to farms performing any pack and hold 
activities. As such, no specific regulation currently exists that would 
apply to these activities. By redefining farm to include pack and hold 
activities performed on select RACs not grown on the farm, FDA has an 
opportunity to provide uniform and effective regulation of all farm 
pack and hold activities under farm-specific regulation.

    Redefine ``Harvesting'' to Resemble Farm Practices

    NASDA calls on the FDA to consider redefining ``harvest'' because 
many practices associated with harvesting are performed by third 
parties. The current definition of ``harvesting'' is ``limited to 
activities performed on raw agricultural commodities on the farm on 
which they were grown or raised, or another farm under the same 
ownership.'' At first glance, this requirement is perfectly logical 
because it would follow that ``harvesting'' should only happen on a 
farm where a RAC is grown and harvesting is ``for the purpose of 
removing raw agricultural commodities from the place they are grown or 
raised and preparing them for use as food.'' However, advanced farming 
practices, unique crop harvesting methods, and the incredible expenses 
of such systems make the sole ownership of such equipment not possible 
in all situations. As a result, it is common to perform job-sharing and 
equipment sharing for harvesting functions.
    For example, drying grains for storage can be a necessary part of 
the harvest process in order to prevent mold, but only few farmers have 
the financial means necessary to have an individual grain drying setup. 
As a result, most farms take grain to a co-op or elevator for drying 
and often storage purposes. Another example, the shelling of hazelnuts 
or sunflower seeds is a routine step in the harvest for the purpose of 
storage and for the purpose of processing, but most farmers have 
hazelnuts or sunflower seeds shelled at a separate facility because the 
cost of ownership of a shelling machine is impractical.
    There are over 400 different food products grown in the U.S. For 
climate, growing season and market purposes, these crops are often 
grouped in critical masses and the farms growing them often work 
cooperatively to grow, harvest, and market the products. While the 
farmers each operate independent businesses, their cooperation and 
resource sharing is an important part of cost efficiency. It is not a 
behavior that FDA should discourage, yet, the level of regulation that 
will result from such cooperative farming will do just that.
    NASDA requests the FDA consider removing the sentence 
``[h]arvesting is limited to activities performed on raw agricultural 
commodities on the farm on which they were grown, raised, or another 
farm under the same ownership'' from the definition of harvest. 
Removing this limitation will allow ``harvesting'' activities to remain 
part of ``farm'' activities. Moreover, NASDA's position is that a 
harvesting activity such as washing, cooling, shelling, drying, and 
husking are harvesting activities wherever performed and by whomever 
performs them and should be treated accordingly.
    The rule does not consider the function of co-ops in performing 
``harvesting'' activities which are commonly performed by a third party 
facility, not engaged in farming. Shelling and drying are considered 
low-risk food/activity combinations when performed by on-farm mixed-
type facilities. NASDA's position is that these co-ops should also be 
exempt from regulation under Subpart C, because they also perform low-
risk food/activity combinations on RACs which do not change their 
status.

    Inconsistency Between Retail Establishment and Farm Definitions

    Because the definition of a retail food establishment turns on the 
``primary function'' of the facility rather than the strict confines of 
the ``all activities subject to section 415 registration requirement,'' 
the FDA creates a double-standard where retail food establishments may 
process 49% of their sales as food not for direct sale to consumers and 
remain exempt from section 415 registration and the preventive control 
regulation. On the other hand, an on-farm mixed-type facility with a 
farm operation that sells blueberries grown on another farm 
constituting 1% of overall food sales would be subject section 415 
registration requirement, the traceability provisions in section 306 of 
the Bioterrorism Act of 2002, and preventive controls currently 
proposed. This creates a significant and unequal burden on mixed-
facilities which is avoided by retail food establishments selling up to 
49% of food as wholesale. NASDA supports creating a similar safe haven 
that exists for retail establishments, applicable to those farm-mixed 
type facilities performing only limited packing & holding of RACs not 
grown on the farm. In particular, these activities should remain part 
of the farm definition because if the pack and hold activities are 
performed on the farm's own RACs, they would remain under the farming 
definition.
    NASDA's request for redefinition of a farm based on the ``primary 
function'' for packing and holding remains consistent with the values 
of food safety, merely shifting whole produce of farms that perform 
packing and holding activities into the produce safety regulation 
specifically written to address safe produce production.

    Define Crop for the Purposes of the Farm Definition

    The definition of farm refers to, but does not define, crop. Food 
is broadly defined under the FD&C Act and NASDA believes it is also 
important that crop be defined because farming is not solely about the 
production of food. Crops are used in the production of biofuels, 
clothing, biodegradable household products and more. Accordingly, it is 
imperative that FDA distinguish between crops and food.
    NASDA requests that FDA adopt a definition for ``crop,'' and define 
crop as ``edible or inedible cultivated or harvested plants;'' 
realizing that FDA does not intend to regulate all crops or parts of 
crops.

    Clarify Terms in Farm and Organization Size

    Clarify ``Same Ownership''

    Under farm activities regulated by the proposed produce rule and 
the preventive controls rule, ownership of RACs is critical to 
determine the extent of regulation. Certain activities performed on a 
product grown on the farm or another under the same ownership is 
covered under the definition of ``farm,'' while the same activity 
performed on a RAC not grown on the farm will be regulated under Part 
117. For example, washing RACs is treated as a harvest activity, but 
only if performed on products grown on the farm.
    For example, if a RAC is grown on the farm or ``another under the 
same ownership,'' it is more likely the action such as washing will be 
covered under the definition of ``farm'' and be exempt from the 
preventive controls rule. On the other hand, the same activity 
performed on a RAC not grown on the farm or ``another under the same 
ownership,'' is no longer an activity of the farm and is regulated 
under Part 117.
    NASDA seeks clarification of how FDA will interpret ``same 
ownership'' and suggests FDA consider streamlining distinctions between 
products of a farm and not of the same farm on the basis of control, 
rather than on a false-distinction of ``same ownership.'' Within the 
agriculture industry, farms are often owned under several different 
names, but operated as a single farm using the same equipment. This is 
commonly the case with multi-generational farms. The farm operation 
will likely consist of several divisions of ownership but all under 
management as a single farm. For example, some properties may be owned 
by one LLC owned by the parents, other property owned by another LLC 
owned by the younger generation, and jointly owned properties. Many 
states have programs geared at supporting young farmers that require 
the property be in the name of the young farmer, even if the property 
is farmed collectively.
    NASDA suggests FDA adopt a more flexible interpretation of farm 
than ``same ownership'' by considering a definition that considers the 
operational function of a farm such as ``common'' ownership or 
``operational management.''
    NASDA also seeks clarification on how FDA will treat farm 
agreements between farms that are owned by an individual, but are 
jointly farmed and controlled under an agreement based on output 
shares. It is not uncommon for farmers to explore farming a new 
commodity by jointly farming it. For example, farmers may do this by 
using land owned by one farmer, equipment owned by another farmer, and 
labor or resources owned by a third. This arrangement could result in a 
30/30/40 ownership of the RACs produced. NASDA requests that FDA permit 
any farmer in a jointly pursued venture to treat the RACs as the farm's 
``own RAC'' for the purposes of harvesting, packing and holding.
    In addition, although not considered a joint venture, many produce 
packing operations will use a facility as a shared space either owned 
by one or owned by several farmers. NASDA requests FDA clarify how 
ownership or responsibility for these facilities will be established 
for the purpose of facility registration or whether facility 
registration is unnecessary if all farmers using the facility have 
ownership shares in all of the produce. NASDA requests that FDA develop 
and share guidelines for how these types of determinations will be 
made, as the current proposed definitions leave these businesses 
uncertain as to their status and the appropriate path to compliance.
Response from Kate Woods, Vice President, Northwest Horticultural 
        Council
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Market Access Program
    Question 1. Could you offer some examples of how the Market Access 
Program (MAP) has helped your members?
    Answer. I will give you three examples of how MAP has helped our 
members. First, the Washington Apple Commission invested $10,000 in MAP 
funds to participate in a Global Shopping Festival with TMall, China's 
largest online shopping platform, last November. This was only 7 months 
after the United States gained access to China's market for all apple 
varieties, and the event led to the sale of approximately 416,000 
pounds of apples. Beyond the actual sales, this event helped expose 
thousands of Chinese consumers to Washington apples, with an estimated 
300,000 click-through hits on our product. It is conservatively 
estimated that 30 consumers were reached for every MAP dollar spent.
    In the sweet cherry realm, Northwest Cherry Growers used $40,775 in 
combined MAP and grower dollars in 2014 to conduct in-store sampling, 
product introduction, and best practices training in Danang and Can Tho 
City in Vietnam. This helped lead to a 39.4 percent increase in sales 
over 2013 in this growing market.
    For pear growers, MAP funds invested in the United Arab Emirates 
(UAE) by Pear Bureau Northwest in 2014 on training seminars, reverse 
trade missions, and trade merchandising have helped enhance importers' 
confidence in handling pear varieties like Green Bartlett and Red 
Anjou, which were previously not prevalent in the UAE market. This 
market has grown exponentially from being only a minor market for 
Pacific Northwest pears to the third largest in only a few years.
Pesticides
    Question 2. Public policy has an enormous impact on the economic 
viability of farms. Can you offer a couple examples of recent 
regulatory actions that have had a negative impact? What about 
legislative actions at the state or national level?
    Answer. As I noted in my opening statement, government policies and 
regulations have had an increasingly significant--and often negative--
impact on growers and packers in recent years. My first example would 
be the H-2A program. The regulation underlying this farm-labor program 
makes it very burdensome and costly, to the point of putting it out of 
reach for many small- and medium-size growers. Even worse, the 
Department of Labor is administering the program in a way that makes it 
even more unworkable. Visa applications are often processed far beyond 
the time limit set by the regulation, leading to delays of days or 
weeks in workers arriving in the orchard. As I noted in my testimony, 
even a 1 day delay can mean a significant drop in fruit quality for our 
members.
    My second example is the Food Safety Modernization Act. Through 
FSMA, Congress directed a Federal agency with no experience in farming 
to regulate on-farm practices for the first time for produce ranging 
from apples to cabbage. The agency developed a set of final rules so 
complex that over \1/2\ of our industry's packinghouses are defined as 
farms, while the others must follow a completely different rule, and so 
confusing that, even with implementation dates rapidly approaching, FDA 
has been unable or unwilling to provide even basic guidance on how to 
implement the rules on the farm.
Food Safety Modernization Act
    Question 3. Can you describe the consultation process that FDA 
engaged in with industry in developing the regulations under the Food 
Safety Modernization Act?
    Answer. I cannot speak to their engagement with other industries, 
but will tell you how they engaged with the Pacific Northwest tree 
fruit industry during this period for the Produce Safety rule. As 
required by law, FDA published its initial draft regulatory proposals 
in the Federal Register for public comment. The Northwest Horticultural 
Council provided comprehensive comments that outlined serious concerns 
with several of the rules, including the Produce Safety rule. FDA 
Deputy Commissioner Michael Taylor and other agency officials then 
visited several Washington state orchards and packinghouses. We 
appreciated the field trip by FDA, and the agency's interest in 
learning more about our industry.
    In September of 2014, FDA released an updated draft of the Produce 
Safety rule for public comment that, while including some improvements 
over the previous version, still did not fully address the industry's 
most serious concerns with the proposed rule--primarily dealing with 
unworkable water testing requirements and what rule packinghouses would 
fall under. The Northwest Horticultural Council provided additional 
comments on this newer version. When the final version was released in 
November of 2015, it again included minor improvements, but still did 
not fully address industry concerns.

    Question 4. Prior to passage of the Food Safety Modernization Act, 
there was a great deal of debate surrounding the question of what 
authority the FDA should have over food production. Many Members 
present at the time raised questions about granting the FDA the power 
to tell farmers how to farm. From the standpoint of food safety, do you 
believe FDA has the resources and expertise, more so than the USDA and 
State Ag Departments, to regulate on farm production practices?
    Answer. With the longtime role of USDA and State Departments of 
Agriculture in working directly with growers on issues ranging from on-
farm practices to marketing, I believe that the personnel at these 
agencies would have been better equipped than FDA to regulate produce 
safety practices on the farm. Also, FDA Deputy Commissioner Michael 
Taylor has been emphasizing his intent to take an ``educate before 
regulate'' approach to FSMA implementation. With a traditionally 
enforcement-oriented culture at FDA, this will be a much more difficult 
task than it would be at USDA.

    Question 5. There was a great deal of concern when Congress passed 
the Food Safety Modernization Act that FDA's lack of resources and 
expertise would ultimately result in a ``one-size-fits-all'' approach 
to regulation. Do the final rules adequately account for the variation 
between crops, geographical growing locations, and even the associated 
risk profiles of the products produced in the U.S.?
    Answer. When these rules were being drafted, the Northwest 
Horticultural Council advocated for a risk-based, more commodity-
specific approach to food safety that recognizes the different growing 
practices and risks of, for example, a vegetable grown on the ground 
versus an apple grown on the tree. While the final Produce Safety rule 
is an improvement over previous versions and does attempt to provide 
limited flexibility in the form of variances and alternatives to some 
of the provisions, I do not believe that the rule adequately addresses 
the diversity of crops, growing conditions, or risk, in a grower-
friendly way.

    Question 6. How different are current food safety practices from 
what the Food Safety Modernization Act will require?
    Answer. The vast majority of Pacific Northwest tree fruit growers 
and packers have been required by their retailer customers for years to 
meet certain food safety standards. These standards are verified by 
audits, such as the Good Agricultural Practices (GAP) program 
administered by the Agricultural Marketing Service or private audit 
schemes such as GlobalGAP and SQF. Some retailers require a particular 
private audit, plus a unique ``add-on'' particular to their company.
    In the case of the Produce Safety rule, the majority of tree fruit 
growers likely already do about 90 percent of what FSMA requires. The 
biggest differences will be the water testing requirements--existing 
audit schemes have water quality requirements, but don't require the 
number of tests and specificity of a standard that the Produce Safety 
rule does.
    In addition, there are changes in how growers will need to prove, 
or report, how Produce Safety rule requirements are met. For example, 
like FSMA, most third party audit schemes require that all employees 
receive hygiene training. However, FSMA requires that growers have 
documentation certifying when this training, required annually, took 
place. This could be challenging when workers travel from farm to farm 
during the harvest season.
    In terms of the Preventive Controls for Human Food rule, most 
packinghouses already have a food safety plan of some sort due to 
current audit requirements. However, because this rule is written for 
processor facilities, it includes requirements and terminology that our 
industry is not familiar with. In my mind, the biggest challenge for 
packers falling under the Preventive Controls for Human Food rule will 
be explaining how current food safety practices achieve what the rule 
requires, and validating and verifying these practices in a way FDA 
will accept.

    Question 7. How do requirements under the Food Safety Modernization 
Act compare to existing industry requirements that are enforced through 
third-party audits?
    Answer. As stated in my previous answer, the vast majority of tree 
fruit growers and packers already must comply with third party food 
safety audits due to retailer customer requirements. In the case of the 
Produce Safety rule, most tree fruit growers likely already do about 90 
percent of what FSMA requires. The biggest differences will be the 
water testing requirements--existing audit schemes have water quality 
requirements, but don't require the number of tests and specificity of 
a standard that the Produce Safety rule does.
    In addition, there are changes in how growers will need to prove, 
or report, how Produce Safety rule requirements are met. For example, 
like FSMA, most third party audit schemes require that all employees 
receive hygiene training. However, FSMA requires that growers have 
documentation certifying when this training, required annually, took 
place. This could be challenging when workers travel from farm to farm 
during the harvest season.
    Also as stated previously, in terms of packinghouses that must 
comply with the Preventive Controls for Human Food rule, most already 
have a food safety plan of some sort due to current audit requirements. 
However, because this rule is written for processor facilities, it 
includes requirements and terminology that our industry is not familiar 
with. In my mind, the biggest challenge for packers falling under the 
Preventive Controls for Human Food rule will be explaining how current 
food safety practices achieve what the rule requires, and validating 
and verifying these practices in a way FDA will accept.
    It is also important to keep in mind that FSMA regulations are now 
Federal law, as opposed to voluntary contractual standards. Growers can 
be fined and imprisoned for violations.

    Question 8. You talk about the farm definition in FDA's produce 
safety rule. Can you explain what this definition is, and why it is 
important? Do you support revising the Farm definition?
    Answer. The Preventive Controls for Human Food rule identifies a 
farm as either a Primary Production Farm or a Secondary Activities 
Farm. A Primary Production Farm is defined as an operation under one 
management in one general, but not necessarily contiguous, location 
devoted to the growing of crops, the harvesting of crops, the raising 
of animals (including seafood), or any combination of these activities. 
This kind of farm can pack or hold raw agricultural commodities, such 
as fresh produce, and may conduct certain manufacturing or processing 
activities, such as packing and labeling fruit. A Secondary Activities 
Farm is an operation not located on the primary production farm that is 
devoted to harvesting, packing and/or holding raw agricultural 
commodities. The main challenge for our industry is the requirement 
that the Secondary Activities Farm must be majority-owned by the 
Primary Production Farm that supplies the majority of the raw 
agricultural commodities harvested, packed, or held by the facility.
    The farm definition is important because a packinghouse or storage 
facility that meets this definition must follow the Produce Safety 
rule, while one that does not must comply with the Preventive Controls 
for Human Food rule. This latter rule was written for food processing 
facilities, and FDA has acknowledged that it should be applied 
differently to fresh, whole produce packinghouses. For example, FDA has 
stated that the Good Manufacturing Practices included in the rule 
should be emphasized and that packers should look to the Produce Safety 
rule requirements when drafting food safety plans. Unfortunately, the 
official guidance has not been released, and the curriculum developed 
by the Food Safety Preventive Controls Alliance and FDA does not 
reflect these differences.
    The Northwest Horticultural Council submitted comments supporting 
placing all tree fruit packing and storage facilities under the Produce 
Safety rule during the public comment period when the rule was in draft 
form, and continues to support that position.

    Question 9. Can you talk a bit about the food safety training 
challenges associated with FSMA implementation?
    Answer. Yes. I will explain our experience in attempting to provide 
applicable training to tree fruit growers, and packinghouse and storage 
facility operators. When the Preventive Controls for Human Food rule 
was released last September, produce groups expressed significant 
concerns with some packinghouses and storage facilities falling under 
this rule while others would be required to follow the Produce Safety 
rule. FDA responded that they acknowledged this problem and assured us 
that they would work to enforce the Preventive Controls rule on 
packinghouses as similarly as possible to what those falling under the 
Produce Safety rule would be required to do. Examples provided by the 
agency included an emphasis on the Good Manufacturing Practices in the 
rule and encouragement for packinghouses to look toward the Produce 
Safety rule requirements in writing their food safety plan.
    However, when the curriculum was released for the training required 
under the rule, it included none of this information. With 6 months 
before the rule is scheduled to be implemented, the Northwest 
Horticultural Council worked with our sister organization, the 
Washington State Tree Fruit Association, as well as a qualified trainer 
from the Washington State Department of Agriculture, to put on what was 
initially intended to be a ``train-the-trainer'' course for some of our 
most highly qualified food safety professionals within the industry. 
The intent of this course was both to identify areas to strengthen the 
curriculum so that fresh produce packinghouse operators would know what 
they will be required to do to be in compliance with the rule, and to 
ensure that we had qualified trainers who actually understand the 
realities of a tree fruit packinghouse.
    Unfortunately, only two out of twelve applicants were approved to 
become lead trainers. Two of those rejected have been handling food 
safety--and providing extensive food safety training--for some of the 
largest and most sophisticated tree fruit firms in the world for 
decades, because they did not have degrees in education or science.
    This is a problem because, not only is the curriculum not effective 
in educating packinghouse operators on what is required of them under 
the rule, but now we can't even gain access to trainers who understand 
tree fruit packinghouse operations.
    We opted to move forward with the training, even though the Food 
Safety Preventive Controls Alliance refused to allow anyone who took 
the course--including the two that were approved as lead trainers--to 
be certified as lead trainers. The group identified several areas 
within the curriculum that need to be strengthened in order to ensure 
that fresh produce packinghouse staff taking the course understand what 
will be required of them. This includes workbook examples for a non-
processed product without a ``kill'' step, explaining some of the 
terminology that is common for processing facilities but not for 
packinghouses, and explaining how to identify, monitor, and verify 
process controls, versus the critical control points that most of our 
facilities are used to.
    The curriculum for the Produce Safety rule isn't expected to be 
released until at least September of this year. While the Produce 
Safety rule does not begin going into effect until 2018, should growers 
take advantage of the full 4 years provided by the rule to conduct the 
20 water samples on each water source at or near harvest before 2020 (a 
costly process), they would need to begin this year. For Pacific 
Northwest cherry growers, harvest is expected to start in May.
    The Produce Safety rule is vague on the definition of ``each water 
source,'' and when, how, and where on the water system growers are 
required to sample. FDA has responded to questions on this topic by 
saying the agency will address the issues further in guidance. Since 
the curriculum will not be out until after cherry, apple, and pear 
harvest begins this year and we have received no information on when 
guidance is expected, the Washington State Tree Fruit Association has 
brought up three scientists from the Western Center for Food Safety at 
University of California-Davis who have been contracted by FDA to 
conduct research on water sampling, to provide training to industry and 
irrigation districts. The hope is that, since these scientists have 
been funded by FDA to conduct research on water sampling, they will 
have a better understanding than most of what the agency will 
ultimately require.
    However, it is still a guessing game. Growers are left with the 
choice of waiting until further information is provided by FDA on the 
agency's expectations for water sampling and therefore condensing these 
costly tests into a shorter time period, or move forward with sampling 
and risk the agency not accepting the data.

    Question 10. What are the differences between FDA's Produce Safety 
rule and the Preventive Controls for Human Food rule?
    Answer. The rules take completely different approaches to food 
safety. The Produce Safety rule identifies six specific routes to 
contamination and identifies preventive and monitoring actions that 
must be taken. The Preventive Controls for Human Food rule takes a 
process approach, where each facility must identify any possible 
hazard, one or more preventive controls to control that hazard, and 
then steps to validate, verify, and monitor the preventive control, as 
well as corrective actions should something go wrong. While the Produce 
Safety rule encourages a food safety plan and a recall plan, the 
Preventive Controls for Human Food rule requires it.

    Question 11. What does your group see as the most burdensome aspect 
of FSMA?
    Answer. Due to the third party food safety audits that the vast 
majority of growers and packers are required to comply with by their 
retail customers, the tree fruit industry already meets about 90 
percent of FSMA's requirements. I believe that the most burdensome 
aspect of this law for Pacific Northwest tree fruit growers and 
processors will be proving that current food safety practices 
adequately protect public health and meet FSMA standards. This ranges 
from figuring out how FDA expects individual growers to conduct water 
sampling on their unique farms, to determining how to validate that a 
particular water treatment or sanitation practice is an effective 
preventive control for a packer.
Research
    Question 12. Can you highlight some specific benefits from USDA 
research that your members have experienced?
    Answer. As the Subcommittee is aware, access to an adequate labor 
supply to grow and harvest the crop has become an increasingly 
significant problem. During the first year of the Specialty Crop 
Research Initiative program, a grant was provided to a group led by 
Carnagie-Mellon that developed a machine vision system that is a 
critical component of an automated robotic harvester that is now being 
developed and tested by a California company with support from the 
Washington Tree Fruit Research Commission.
    Another example is the RosBREED program, which is delivering non-
GMO DNA tools to accelerate the commercialization of tree fruit 
varieties with enhanced disease resistance and superior consumer 
attributes--reducing production costs and increasing returns.
    The Specialty Crop Block Grant program has also allowed for 
collaboration with groups like the Center for Produce Safety to combine 
private and public resources from different states to fund top-priority 
projects to enhance food safety for produce.
Response from Richard L. Guebert, Jr., President, Illinois Farm Bureau; 
        Member, Board of Directors, American Farm Bureau Federation
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Biotechnology
    Question 1. How should we improve regulatory efficiency in a way 
that enables genetic innovation so that we, as a nation, are better 
able to meet global food security challenges?
    Answer. American Farm Bureau addressed this question in our written 
testimony and in response to this question would refer the Committee to 
our written submission.

    Question 2. Many companies have tens of thousands of stock keeping 
units (SKUs), which are generally used nationwide. How would this 
system be disrupted by a patchwork of state-by-state labeling 
requirements for biotechnology if the Senate minority will not allow a 
vote on national uniformity regarding voluntary marketing labels?
    Answer. In response to obstacles erected in the Senate, several 
major food companies made the decision to label foods nationally to 
comply with Vermont's GMO mandate. Companies are being forced to label 
to comply with Vermont, which ultimately could compel some of these 
companies to reformulate their products and dispense with ingredients 
developed using biotechnology. While larger food companies have been 
very focused on this issue for some time now, thousands of smaller 
companies are now faced with the reality of complying with a very 
costly Vermont law. Small companies have significant compliance 
concerns that are only made worse without a national GMO labeling 
standard in place.
    The Vermont law creates major disruptions in the nationwide food 
supply, a result that is bad for American consumers because GMO 
labeling at its heart is intended to mislead. A substantial portion of 
consumers perceive mandatory on-package label disclosures of GMO use to 
mean that there is a health, safety, or nutrition difference between 
bioengineered food and other food, which scientific reports and our 
regulatory agencies have repeatedly stated is not the case.
    To respond to consumers misled by the pejorative nature of 
mandatory GMO labeling, a growing number of food products will be 
reformulated to avoid GM ingredients, at substantial expense to 
consumers and at the risk of losing innovations that hold enormous 
environmental, nutritional and food security benefits. The trend to 
reformulate away from GM ingredients will be accelerated by the threat 
of another state imposing its own GMO labeling requirement, since the 
differences between the two state laws would require a second set of 
new separate product labeling and distribution systems at substantial 
expense. At the expense of consumers nationwide, Vermont is dictating 
the country's food labeling policy.

    Question 3. Last year, several celebrity chefs were in town to 
lobby for mandatory biotech warning labeling. However, in the same 
breath used to advocate for mandatory warning labels these celebrity 
chefs said they would Not label their menus for biotech because it 
would be difficult to certify and would take up too much space on the 
menu. These chefs were not alone in their hypocrisy. We can find the 
same level of inconsistency in the Vermont statute. Can you comment on 
the various exemptions in the Vermont law, as well as the conflicts 
between Vermont and other state laws?
    Answer. Below are some examples of the inconsistencies between 
state laws:

    Vermont:

   covers ``food.''

   Exemptions:

     animal products and foods bearing USDA labels,

     ``certified'' as non-GE and organic,

     processing aids,

     alcoholic beverages,

     minimal GE content (no more than 0.9%),

     food for immediate consumption (broader than 
            restaurants; guidance says this covers all sandwiches, for 
            example),

     medical food.

   labels:

     ``produced with genetic engineering.''

     ``partially produced with genetic engineering.''

     ``may be produced with genetic engineering.''

    Maine:

   covers ``food'' and ``seed stock.''

   exemptions/exceptions: ``restaurants,'' alcoholic beverages, 
        medical food, food products derived from animals fed GE feed 
        (does not address GE drugs);

   law initially exempts minimal GE content (no more than 
        0.9%), but exemption expires 7/1/2019;

   label: ``produced with genetic engineering.''

    Connecticut:

   covers food intended for human consumption and seed or seed 
        stock that is intended to produce food for human consumption; 
        adds ``infant formula'' to the definition of food.

   exemptions:

     alcoholic beverages,

     food intended for human consumption,

     farm products sold by a farmer at a pick-your-own 
            farm, roadside stand, on-farm market, or farmers' market,

     food consisting of or derived entirely from a non-GE 
            animal, regardless of whether fed or injected with GE food 
            or drug that was produced through means of genetic 
            engineering,

   label: ``Produced with Genetic Engineering.''

    Question 4. It seems food companies are moving forward in an effort 
to comply with the Vermont GMO food labeling law. In doing so, doesn't 
this state law create a de facto mandatory labeling system for the rest 
of the country? What implications will that have for farm to fork? If 
the Vermont law stands due to inaction by Congress or slow action in 
the courts, what does this mean for your members?
    Answer. It means our members' products will be stigmatized by a 
meaningless label while also stifling future agricultural innovation.

    Question 5. What are some newer breeding methods, in terms of 
biotechnology? Are they regulated by the government?
    Answer. Precision breeding techniques (sometimes referred to as new 
breeding techniques) comprise a collection of tools and methods that 
allow plant breeders to change a specific plant gene (to induce genetic 
variability), to silence (turn down or stop) expression of a specific 
plant gene or to introduce a specific gene from a wild relative or 
older variety into a modern, commercial plant variety. An underlying 
common denominator for these techniques is that they more rapidly and 
precisely achieve the same result that could be achieved through more 
traditional plant breeding methodologies. In other words, breeders are 
utilizing the plant's (or its wild relative's) own genetic makeup to 
create genetic variability, leading to improved or new plant 
characteristics. Most of these techniques, particularly those 
techniques sometimes referred to as ``gene editing,'' result in a plant 
variety that does not contain any ``foreign'' DNA from a non-sexually 
compatible species. They all result in a new plant variety with 
characteristics that could have been achieved, albeit much more slowly, 
through more traditional methodologies.
    Yes, plants and seeds are comprehensively regulated by USDA under 
at least two Federal statutes. The Federal Seed Act (FSA) regulates the 
interstate shipment of agricultural and vegetable seeds. The FSA 
requires that seed shipped in interstate commerce be labeled with 
information that allows seed buyers to make informed choices. Seed 
labeling information and advertisements pertaining to the seed must be 
truthful and cannot be misleading. The FSA helps promote uniformity 
among state laws and fair competition within the seed trade.
    The Plant Protection Act (PPA) provides USDA with sweeping 
authority to regulate the movement of any plant or seed if necessary to 
prevent the introduction or dissemination of a plant pest or noxious 
weed that might harm agriculture, the environment, or the economy of 
the United States. This includes authority to require permits for the 
movement or introduction, including importation, of plants and seed. 
USDA is also given the authority to require and take whatever remedial 
measures, including quarantine, treatment and destruction, that the 
agency determines are necessary to prevent the spread of plant pests 
and noxious weeds. The PPA also includes significant inspection and 
enforcement authorities for violations including the authority to seek 
court injunctions and to impose civil and criminal penalties, with 
fines as high as $250,000 per violation and imprisonment of up to 1 
year.
    Gene editing is fundamentally different from the GMOs we have seen 
so far. Plant breeding techniques such as gene editing are 
indistinguishable from techniques that plant breeders have been using 
for decades--inducing genetic variability utilizing the plant's own 
genome. These techniques are being used by plant breeders at 
universities, in small and medium-sized seed companies and by the 
larger technology companies. They are not only important to row crops 
but are particularly important to the vegetable sector. How products of 
these techniques are characterized will be as important as whether they 
are subject to a premarket approval process. We have asked the relevant 
agencies to regulate only things that science says need close 
examination and leave the rest to the market. If we all stick to the 
science and avoid irrational fear, everyone will benefit.

    Question 6. It has been said that USDA is considering changing 
their biotechnology regulations. Does your organization support this?
    Answer. We are supportive of APHIS's efforts to take a hard look at 
its regulations, to ensure that they are up-to-date with the best-
available science and utilize the more than 20 years of experience 
APHIS has in reviewing the safety of these crops. However, because the 
options that APHIS is considering include potential major departures 
from the current regulatory framework, it is critically important that 
APHIS not lose sight of the importance of agricultural innovation.
    APHIS will be best able to successfully improve its pre-market 
agricultural biotechnology regulatory system by making, as needed, 
smart, ``surgical'' changes, strategically focused on addressing 
specific issues, rather than by immediately recommending a radical new 
approach. The current regulatory system has operated quite successfully 
for decades and has resulted in no adverse plant health impacts to U.S. 
agriculture. In the end, making targeted, strategic improvements to the 
current regulatory system will engender broader support, prove easier 
to implement, and have a much more immediate impact with fewer 
unintended consequences.
    APHIS should build on the strengths of its current regulatory 
system and propose narrowly tailored modifications that address 
specific shortcomings. There is no need for the agency to replace a 
mature, well-functioning regulatory system with an entirely new one, in 
the absence of a clear justification.
    APHIS's regulatory proposals should narrowly define the scope of 
regulation, limited to only those products for which APHIS has a 
legitimate, science-based justification for oversight. Whether and how 
to regulate products developed through precision breeding tools that 
are similar to or indistinguishable from products resulting from more 
traditional breeding tools should be carefully considered. Just as 
importantly, the government should not stigmatize products through the 
definition of biotechnology.
    As APHIS considers regulatory improvements, it should also examine 
how regulators can achieve the USDA's stated goals of efficiency 
without major regulatory changes. Opportunities exist within the 
current regulatory framework. For example, the agency could make much 
broader use of the extension process to remove from oversight classes 
of products for which the agency has a great deal of familiarity. The 
agency could also publish guidance clarifying which products are, or 
are not, subject to the current regulations.
    APHIS could propose regulatory revisions to incorporate a new, 
efficient and risk-assessment-based mechanism for adding and removing 
new categories of organisms from its current scope of regulation. This 
mechanism should be clear, transparent, predictable and peer reviewed 
by external experts. APHIS could use this new mechanism to identify new 
categories of organisms that do not need pre-market regulatory review 
more efficiently than with current tools. If APHIS has a reason to 
believe that certain products not captured by the current regulations 
do pose a risk to plant health, APHIS could use the same mechanism to 
add specific new categories of organisms to regulatory oversight.
    Throughout the process of considering a new pre-market agricultural 
biotechnology regulatory system, APHIS should work closely with a broad 
range of scientific experts, stakeholders and other government agencies 
to clarify, improve and (as needed) modify and supplement the 
regulatory alternatives the agency is considering before publishing a 
proposed rule, with an eye to improving clarity, transparency, 
predictability and ease of implementation.

    Question 7. What are the opportunities for the next generation of 
innovative tools for farmers?
    Answer. The opportunities are great and with the potential of 
losing agricultural innovation the risk is huge. Without all the 
options on the table for farmers to utilize, our challenges will be 
even greater. Farmers need all the help they can get to tackle the 
variabilities of what Mother Nature throws our way along with meeting 
the moral imperative of feeding over nine billion people in the 
upcoming decades.

    Question 8. The headlines of major newspapers and many of the cable 
news shows cast American agriculture in a negative light--though many 
of those stories are rife with inaccuracies. Unfortunately, these 
stories drive policy such as what we see with mandatory biotech warning 
labels. What recommendations do you have for your colleagues in the 
industry to engage the public to counter these negative attacks? What 
is your group doing to avoid repeating history so we don't have the 
consumer distrust with these new technologies like we do with current 
biotech breeding techniques?
    Answer. We continually encourage our members to speak up and engage 
the public on what we do in agriculture. We have a variety of venues to 
accomplish that, but we must be at the table. As organizations, we will 
continue to work with groups like GMO Answers and the U.S. Farmers and 
Ranchers Alliance. Farm Bureau has more recently been engaged with 
corporate advocacy, where we invest in different companies to provide a 
voice to our members during shareholder opportunities.
Pesticides
    Question 9. Many people who rely on pesticides to protect their 
health and property have stated that one or more of EPA's recent 
actions have taken away their access to important products needed to 
fight pests. What should EPA be doing to ensure that those producers 
will have the time-proven products and the new, effective products 
available to meet their needs?
    Answer. Protecting crops from diseases and pests is a critical 
component of farming, and Congress has recognized this fact through 
enactment and revisions of the Federal Insecticide, Fungicide, and 
Rodenticide Act (FIFRA). Farmers expect EPA to adhere to the law and to 
Congressional intent: we neither want to use chemicals that do not meet 
the statutory test laid out in FIFRA, nor do we seek to use legal 
chemicals in ways that are prohibited through the label. But it is 
paramount that EPA not undermine the statute or allow a `precautionary 
principle' to creep into its regulation of pesticides. If the agency 
follows the science and the law without prejudging the outcome, we 
believe scientists, regulators, farmers, environmental activists and 
all affected stakeholders can be assured of a safe, reliable outcome.

    Question 10. Public policy has an enormous impact on the economic 
viability of farms. Can you offer a couple examples of recent 
regulatory actions that have had a negative impact? What about 
legislative actions at the state or national level?
    Answer. Certain rulemakings by EPA have had negative impacts on 
farmers and ranchers:

   EPA's WOTUS rule, if implemented, will unquestionably raise 
        regulatory costs and burdens for farmers, ranchers and other 
        landholders;

   EPA's regulation implementing the Spill Prevention, Control 
        and Countermeasures rule has increased costs for farmers and 
        ranchers;

   EPA's recent worker protection standards (WPS) rule has 
        increased record-keeping and other requirements for farmers 
        without any attendant worker benefit;

   We fully anticipate that EPA's Chesapeake bay TMDL will have 
        a negative impact on agriculture in that watershed;

   We are greatly concerned that EPA appears to be on a path to 
        restricting critical crop protection tools for farmers, most 
        notably chlorpyrifos.

    Question 11. In the National Strategy to Promote the Health of 
Honey Bees and Other Pollinators and the EPA Proposal to Mitigate 
Exposure to Bees from Acutely Toxic Pesticide Products, EPA offered 
support for voluntary stewardship methods to reduce exposures during 
the planting of pesticide treated seed. And, on January 4, 2016, EPA 
released its preliminary pollinator assessment for one pesticide 
indicating that it posed a low-potential risk to bees when used as a 
seed treatment. Do you have any specific concerns with the National 
Strategy document?
    Answer. Farm Bureau members include beekeepers and we support 
efforts to promote beekeeping and to ensure that pollinators are not 
unduly vulnerable to pesticides or other environmental challenges. We 
support EPA's initiative on promoting state managed pollinator 
protection plans (MP3s). At the same time, we believe it is critical 
that EPA, when evaluating neonicotinoids, not be swayed by public or 
political pressure and rely instead on sound science in reaching its 
judgments. Neonicotinoids are a valuable tool for farmers as a seed 
treatment, and they are virtually indispensable for citrus growers in 
fighting citrus greening.

    Question 12. Does your organization support passage of H.R. 897, 
the Reducing Regulatory Burdens Act of 2015? Do you believe the burden 
and liabilities of obtaining a water permit are limiting or delaying 
mosquito control applications that control viruses like Zika and 
protect human health?
    Answer. Farm Bureau strongly supports H.R. 897 and is actively 
working for its enactment into law. While we have heard anecdotal 
reports of the negative impact the existing regulatory regime has had 
on mosquito control, we do not have direct evidence to share with the 
Committee.

    Question 13. What do you believe will happen if H.R. 897 is not 
enacted and President Obama's WOTUS rule goes into effect?
    Answer. Farmers are immensely concerned about the impact of WOTUS 
implementation; on top of that, should H.R. 897 not be enacted it could 
have an enormous impact on agricultural activities across the country. 
As long as the threat of a CWA NPDES permit is required for pesticide 
applications, farmers face the possibility of litigation and fines--
simply for following FIFRA when they manage their crops. This is an 
unacceptable situation and should be rectified by Congress.

    Question 14. The public is threatened by insect-borne diseases--
West Nile Virus is a good example. Some of the critical products used 
to control mosquitoes are also the backbone of Integrated Pest 
Management plans. Can you tell us your thoughts regarding EPA's plans 
for OP's (organophosphates) used to protect public health against very 
dangerous and prolific pests?
    Answer. In FIFRA, Congress set out a clear standard for EPA to 
follow. The agency is charged with ensuring that when registering a 
pesticide it does not pose `any unreasonable risk to man or the 
environment, taking into account the economic, social and environmental 
costs and benefits of the use of any pesticide.' We are increasingly 
concerned the agency is departing from that standard and imposing its 
own value judgments, tending more toward a precautionary principle 
which could threaten the availability of many products.

    Question 15. We've heard a lot about the need for oversight of the 
EPA's pesticide program. What are your organization's top priorities 
for regulatory oversight?
    Answer. We would like to see the Committee rigorously review EPA's 
implementation of Congressional intent to ensure that it is following 
the standard established in FIFRA; is not using a precautionary 
principle approach; is conducting itself in an open, transparent 
fashion; is using sound and well-established science; and is not 
manipulating the process to restrict farmers' access to critical crop 
protection tools.

    Question 16. In publishing the final worker protection standard 
rule, the EPA included a ``designated representative'' provision that 
had not been previously provided to the Committee as required in law. 
We have some questions about this provision.
    If a designated representative had information related to pesticide 
use on a farm and wanted to use that information publicly to pressure 
the farm to stop using that pesticide, is there anything in the 
regulation to prevent that from happening?
    Answer. In Farm Bureau's reading of the regulation, there is no 
restriction whatsoever on the use a `designated representative' may 
make of farm-specific pesticide data. Thus, a `designated 
representative' would be free to use the information publicly in a 
manner to put pressure on a farmer to halt using a particular 
pesticide.

    Question 16a. Does the provision grant a right for designated 
representatives to obtain certain pesticide information used on a farm 
upon presentation of a written, signed authorization by a worker?
    Answer. Yes.

    Question 16b. Once a farmer is presented with the written, signed 
authorization, does he or she have a legal obligation to provide the 
information?
    Answer. It is our understanding of the regulation that a farmer 
would have a legal obligation to provide information. However, the 
agency has not been able to clarify a farmer's legal responsibility if 
the information provided does not agree with the farmer's records.

    Question 16c. Once the designated representative has the 
information, are there any restrictions on what the designated 
representative can do with the information?
    Answer. Our reading of the regulation is that there are no 
restrictions on what a `designated representative' may do with the 
information.

    Question 16d. Is there any provision in the WPS to require the 
designated representative to share the information with the worker who 
signed the form?
    Answer. We have found no language in the WPS that would require a 
`designated representative' to share the information with the worker on 
whose behalf the information was purportedly sought.

    Question 16e. Are there any restrictions on who may be a designated 
representative (e.g., an anti-pesticide activist group or legal 
services group)?
    Answer. EPA has prepared an ``FAQ'' document which explicitly 
states that a designated representative must be designated in writing 
by the worker or handler, and can be anybody including but not limited 
to a relative, friend, another worker or handler, someone from a 
nonprofit organization, or a legal representative.

    Question 16f. If a designated representative had information 
related to pesticide use on a farm and wished to publish that 
information broadly, is there anything in the WPS to prevent that from 
happening?
    Answer. We do not see any restrictions in the WPS that prevents 
broad public dissemination of farm-specific pesticide data.
Food Safety Modernization Act
    Question 17. Can you describe the consultation process that FDA 
engaged in with industry in developing the regulations under the Food 
Safety Modernization Act?
    Answer. Over the past 5 years, FDA had numerous avenues for 
stakeholders to engage. Most notably, the agency held multiple public 
meetings and issued proposed and supplemental rulemakings for public 
comment. Farm Bureau also participated in smaller stakeholder meetings 
with FDA where we could discuss varying concerns. We are also aware of 
FDA representatives visiting farms and discussing issues with farmers. 
While the final rules are not perfect and certainly more stakeholder 
involvement can always be done, Farm Bureau does appreciate FDA's 
openness in this process.

    Question 18. Prior to passage of the Food Safety Modernization Act, 
there was a great deal of debate surrounding the question of what 
authority the FDA should have over food production. Many Members 
present at the time raised questions about granting the FDA the power 
to tell farmers how to farm. From the standpoint of food safety, do you 
believe FDA has the resources and expertise, more so than the USDA and 
State Ag Departments, to regulate on farm production practices?
    Answer. Farm Bureau supports USDA being the primary agency 
regulating food safety in America. It is our policy that USDA is better 
equipped to regulate on-farm activities and therefore should have 
jurisdiction over FSMA implementation. In FSMA's current form, Farm 
Bureau supports FDA partnering with the State Ag Departments to assist 
in training and enforcement. While we believe FDA has done outreach, 
there are still grave gaps in its understanding of on-farm practices 
and methods. These gaps could force FDA to have a reactionary response 
to food safety issues and ultimately undermine the Congressional goal 
of a preventative food safety system. Therefore, we are encouraged to 
see that, assuming appropriate funding, most on-farm FSMA 
implementation and enforcement will be performed by the relevant state 
agency.

    Question 19. There was a great deal of concern when Congress passed 
the Food Safety Modernization Act that FDA's lack of resources and 
expertise would ultimately result in a ``one-size-fits-all'' approach 
to regulation. Do the final rules adequately account for the variation 
between crops, geographical growing locations, and even the associated 
risk profiles of the products produced in the U.S.?
    Answer. Farm Bureau supports a science and risk-based approach to 
food safety. The final rules err on the side of inclusivity rather than 
taking a risk-based approach that would have analyzed the risk 
associated with different types of produce and growing conditions. Farm 
Bureau opposes this approach taken by FDA. If FDA had evaluated 
specific raw agricultural products and growing conditions, the 
regulation would better-tailored to meet the objective of public safety 
without unduly burdening farmers.

    Question 20. You talk about the farm definition in FDA's produce 
safety rule. Can you explain what this definition is, and why it is 
important? Do you support revising the Farm definition?
    Answer. The farm definition is perhaps the most critical component 
to the FSMA rules. It dictates what operations are brought under the 
Produce Safety rule and Preventative Controls for Human Food rules, and 
what operations may fall under both. Farm Bureau strongly believes 
farms must be treated as farms, not facilities, and that overlap of the 
rules must be limited to the extent possible.
    In the final rule, FDA created two types of farms. A Primary 
Production Farm is defined as an operation under one management in one 
general, but not necessarily a contiguous, physical location devoted to 
the growing of crops, the harvesting of crops, the raising of animals, 
or any combination of these activities. A primary production farm can 
also pack or hold raw agricultural commodities (regardless of who grew 
or raised them) or manufacture/process, pack, or hold processed foods 
so long as: all such food is consumed on that farm or another farm 
under the same management; or the manufacturing/processing falls into 
limited categories. A Secondary Production Farm is defined as an 
operation not located on a primary production farm devoted to 
harvesting, packing, and/or holding RACs that is owned or jointly owned 
by a Primary Production Farm(s).
    While there have been vast improvements in the farm definition 
throughout the rulemaking process, the arbitrary distinction drawn 
between primary and secondary farms based on ownership is neither 
science- nor risk-based. FDA cannot show any reasonable justification 
related to public safety for drawing this distinction and it places 
many farms that have off-farm packing housing under both the Produce 
Safety and Preventative Controls rules. Farm Bureau would support 
modifying this definition to account for the fact that there is no 
greater risk for RACs packed on-farm versus off-farm.

    Question 21. Can you talk a bit about the food safety training 
challenges associated with FSMA implementation?
    Answer. Pre-compliance training and education is vital to the 
success of FSMA. Currently, farmers are concerned about the rules and 
what they mean for their farms--whether because they have a unique farm 
structure, a variety of crops farmed under a variety of farming 
practices, irrigation water that likely doesn't meet the standards, or 
the distinction between FSMA and GAP, Global GAP, Leafy Green or other 
industry driven standards. FSMA was intended to be a preventative 
systematic approach, Not reactionary enforcement. Currently, Farm 
Bureau is very concerned about the delay in releasing guidance and the 
Produce Safety Alliance curriculum. Large farms will need to be in 
compliance starting in January 2018--a short 20 months away. Farm 
Bureau and other organizations want to assist FDA in this training 
component; however, we need this information to ensure we conduct 
useful and accurate trainings. Farm Bureau urges the Committee to 
engage FDA to expedite this process.

    Question 22. What does your group see as the most burdensome aspect 
of FSMA?
    Answer. FSMA is an incredibly complicated regulatory system. While 
there are numerous parts of the rules that Farm Bureau sees as 
burdensome, the technical water standards, testing, and die off periods 
are likely going to require farmers to hire third party experts to 
assist in conducting testing, determining whether the water meets the 
stringent water standard that FDA failed to show was reasonably 
necessary, and then determining in what ways, when, and for how long 
they can use that water on their farms. Moreover, the increased record 
keeping throughout the supply chain is going to be incredibly expensive 
and time consuming.
Research
    Question 23. USDA has begun implementing a two stage review process 
for competitive grants under the Specialty Crop Research Initiative. 
These two separate reviews take into account both relevancy to the 
industry and scientific peer review. Though not yet implemented, the 
law makes it clear that the relevancy review process should be applied 
to other competitive grants programs such as the Agricultural and Food 
Research Initiative--particularly for applied research grants. Do you 
think that producer support for these programs would grow if relevancy 
review were a component of the grant awards process?
    Answer. A critical review of the NAREE Board is in order because 
that board is authorized to match producer priorities with scientific 
feasibility to achieve what is termed `relevancy.' If that function is 
failing, a new approach is in order.
    Producer support for USDA research and development has always been 
strong. While relevancy review is one important way for USDA to ensure 
producers' voices are heard throughout the grant making process, there 
are much more significant challenges that must be addressed in order to 
grow support not only among producers, but among the general public as 
well. For example, agency-level collaboration between ARS and NIFA 
could be more systematic to reduce duplicative research and make the 
best use of limited agricultural research resources. In addition, a 
greater emphasis needs to be placed on ensuring that external 
communication conveys results in a simple and easy to understand manner 
that resonates in the mainstream. Emphasis must be placed also on 
improving technology transfer and better educating the public about the 
good work USDA research is doing. A modernized Extension service should 
be equipped to carry out this mission.

    Question 24. Increasing availability of funds for research is a 
common goal. Recognizing fiscal constraints though, are we focusing our 
resources on the correct priorities?
    Answer. Competitive grants are widely recognized as having greater 
innovation potential than grants based on other mechanisms, yet the 
proportion of funding for competitive agricultural research remains far 
below the proportion of funding for competitive research in other 
science agencies. Moreover, we believe streamlining dozens of different 
extramural research programs will dramatically improve resource 
allocation. AFBF President Zippy Duvall highlighted the importance of 
research for our members in an April 2016 op-ed (http://thehill.com/
blogs/congress-blog/economy-budget/276427-agricultural-research-is-the-
farmers-ultimate-antacid) [Attachment] published in The Hill.

    Question 25. Can you highlight some specific benefits from USDA 
research that your members have experienced?
    Answer. Since our members represent a broad range of commodities, 
there are numerous examples where USDA-funded research is making a 
difference in the field. Some examples include:

   AFRI-supported research on plant breeding is leading to the 
        development of new cultivars for many critical crops. Fifteen 
        percent of U.S. wheat acreage is planted using cultivars 
        resulting from AFRI investments.

   AFRI-supported research at North Carolina Agricultural & 
        Technical University has led to the development of a hypo-
        allergenic peanut. This product will ideally be available in 
        the market soon.

    Given that AFRI is a young program, we have only scratched the 
surface of what it can produce for America's farmers.

    Question 26. Is information about research and technology 
advancements readily available and communicated within the agriculture 
community?
    Answer. USDA's Office of Technology Transfer (OTT) is responsible 
for ARS' technology transfer program and is delegated the authority to 
administer the patent and licensing program for all intramural research 
conducted by USDA. The OTT helps move ARS research discoveries to the 
marketplace. However, USDA lacks a similar structure dedicated to 
extramural research and moving NIFA-funded discoveries to the 
marketplace. Doing more for tech transfer also provides opportunities 
to create greater awareness for our members and the public of the 
benefits of federally funded research.

    Question 27. To the extent that there are possible improvements in 
the way research information is disseminated, what suggestions would 
you have for USDA's research agencies to improve communication with 
producers?
    Answer. We believe the Extension Service, at least in part, was 
designed to carry out this task. A modernized Extension Service should 
be empowered to effectively serve as USDA's voice communicating clear 
and understandable results to the producer community and the general 
public at large. A more user friendly grants database would also be a 
great tool for better understanding what projects are being supported 
and in what topic areas. We also think that more could be done to 
spotlight specific research success stories as a means of our members, 
policymakers and the general public.

    Question 27a. Is the money being spent through the Agriculture and 
Food Research Initiative and the Specialty Crop Research Initiative 
going towards industry supported research?
    Answer. To the extent that highly ranked projects are funded, yes. 
Due to inadequate funding, proposals within AFRI have an 11% success 
rate. In spite of this, AFRI-funded research projects are already 
making strides in defending agriculture against climate variability, 
water supply, food safety and major threats to plan and animal health 
such as emerging pests and pathogens. It should be noted that AFRI was 
created to also fund the types of basic research that can create a 
pipeline of innovation to serve the agricultural industry well into the 
future.
    For example:

   A multi-state research team is developing novel nutritional, 
        genomic, and genetic improvement technologies to help producers 
        use less feed resources to produce beef for human consumption.

   AFRI-supported research is resulting in new tools that 
        better monitor, prevent, control and manage future outbreaks of 
        avian flu.
Labor Regulation
    Question 28. What are some of the extraneous impacts OSHA's July 
2015 revised interpretation of Process Safety Management standards has 
on the agriculture community?
    Answer. OSHA's expansion of Process Safety Management standards 
will likely have dramatic downstream impacts on farmers utilizing 
anhydrous ammonia. A joint study done by the Ag Retailers Association 
and The Fertilizer Institute estimates that this change costs a minimum 
$27,500 per facility. If the facility can come into compliance, this 
cost will be passed downstream to farmers. If the facility is forced to 
stop selling anhydrous ammonia due to the increased cost, farmers will 
have limited access to this key nitrogen input.

    Question 29. How can this Subcommittee provide oversight on the 
Process Safety Management (PSM) issue?
    Answer. It would be very helpful for the Subcommittee to engage 
with Labor-HHS appropriators to ensure that the following FY16 report 
language be placed in the FY17 legislative text.

          ``The revised enforcement policy relating to the exemption of 
        retail facilities from coverage of the Process Safety 
        Management of Highly Hazardous Chemicals standard (29 CFR 
        1910.119(a)(2)(i)) issued by the Occupational Safety and Health 
        Administration on July 22, 2015, shall not be enforced nor 
        deemed by the Department of Labor to be in effect in Fiscal 
        Year 2017, or future years, until: the Bureau of the Census 
        establishes a new North American Industry Classification System 
        code under Sector 44 or 45 Retail Trade for Farm Supply 
        Retailers; the Secretary of Labor, acting through the Assistant 
        Secretary of Labor for Occupational Safety and Health, has 
        carried out all notice and comment rulemaking procedures and 
        invited meaningful public participation in the rulemaking; and 
        the Secretary, acting through the Assistant Secretary of Labor 
        for Occupational Safety and Health, arranges for an independent 
        third-party to conduct a cost-benefit analysis of such proposed 
        rule, and the Secretary includes such analysis in the 
        publication of the proposed rule.''
                               attachment
The Hill
Agricultural Research Is the Farmer's Ultimate Antacid
April 18, 2016, 11:16 a.m.
By Vincent ``Zippy'' Duvall

    As a poultry farmer, I was worried when avian flu began popping up 
around the country last year. Almost 50 million birds (https://
www.aphis.usda.gov/aphis/ourfocus/animalhealth/animal-disease-
information/avian-influenza-disease/sa_detections_by_states/hpai-2014-
2015-confirmed-detections) were culled in an effort to limit the 
outbreak, even though only slightly more than 200 birds were actually 
sick.
    Since I also raise cattle on my land, I was concerned in 2014, when 
a single case of mad cow disease was discovered in Texas. The disease 
was isolated and eliminated, however, and our food supply was 
protected.
    That's what it's like to be a farmer. Taking care of our animals is 
our top priority, but we have every-day worries that go beyond 
providing our animals access to feed, water and shelter. While we do 
our best to prepare for what we can control, we also want to be ready 
for the uncertainties that are thrown our way.
    Whether our challenge of the day stems from a new government edict 
that affects how we farm, another nation's decision to ban our products 
or an unforeseen disease outbreak, there is really only one solution on 
which we hang our collective hat--cold, hard science.
    Research has helped us increase yields, decrease inputs, and ward 
off plant and animal diseases. Research has made us more productive on 
fewer acres and has decreased our environmental footprint. This 
supports the fact that U.S. families spend a lower percentage of their 
incomes on food than citizens in any other nation.
    But times are changing. The expiration date for the scientific 
findings that underpin our day-to-day work and boost the quality of 
life for all Americans is fast approaching. And you don't need a Ph.D. 
to see that.
    Take avian flu, which laid havoc to Iowa's egg industry last year. 
Killing tens of millions of birds because several hundred contracted 
the flu may seem like an overreaction, but it was the only way we knew 
how to stop the disease before it reached the ``broiler belt'' in the 
South. We need a more effective and modern way of ending these 
outbreaks.
    Scientists at Ohio State and the University of Cincinnati are 
answering this challenge by analyzing the flu virus and how it jumps 
from poultry to people to pigs. This collaboration, funded by the 
USDA's Agriculture and Food Research Initiative (AFRI), is one of many 
exploring new ways to better identify and control future outbreaks.
    AFRI is a relatively new program. Its grant proposals are developed 
by potential researchers and reviewed and ranked by an expert board. 
The program's current budget, however, sits at $350 million--\1/2\ of 
what Congress authorized in the 2008 Farm Bill--and as a result, only a 
small portion of the best research projects get funded.
    The Administration has proposed doubling AFRI's budget to fund the 
program at the level authorized by Congress. To farmers, this feels 
like a good move. We need to find immediate answers to challenges like 
citrus greening. We also need to make sure researchers can fight the 
bugs that will eat into our yields 10 years from now. And we need 
advanced technologies to keep foodborne bacteria from reaching people's 
plates.
    Agricultural scientists can take on these challenges, but they need 
support. In the past 10 years, (http://www.nsf.gov/statistics/fedfunds/
) the total budget for all of the USDA's research programs has grown by 
only 0.2 percent. In the same timeframe, the Department of Energy's 
research budget has grown by 23 percent.
    I am all for keeping the lights on in the dining room, but the 
American people also need a steady supply of safe and healthy food for 
the dinner table.
    Every dollar spent on agricultural research generates $20 for our 
economy, (http://www.apsnet.org/members/outreach/ppb/blog/Lists/Posts/
Post.aspx?ID=23) and we see those returns in safer, more nutritious and 
more plentiful food. But I also see those returns in a quite personal 
way--in fewer worries for my fellow farmers and me. We're in a 
difficult time right now--prices are down, costs are up--and we need 
all the solutions science can discover. Publicly-supported research 
pays dividends to all Americans, and it is an investment we all must 
embrace.

          Duvall, a third generation farmer from Greene County, 
        Georgia, was elected President of the American Farm Bureau 
        Federation in January 2016.
Response from Dale Murden, President, Texas Citrus Mutual
June 7, 2016

 
 
 
Hon. Rodney Davis,                   Hon. Suzan K. DelBene
Chairman,                            Ranking Minority Member,
Subcommittee on Biotechnology,       Subcommittee on Biotechnology,
 Horticulture, and Research,          Horticulture, and Research,
House Committee on Agriculture,      House Committee on Agriculture,
Washington, D.C.;                    Washington, D.C.
 

Re: Questions for the Record: House Committee on Agriculture, 
            Subcommittee on Biotechnology, Horticulture, and Research 
            Public Hearing: Focus on the Farm Economy--Factors 
            Impacting the Cost of Production

    Dear Chairman Davis and Ranking Member DelBene:

    Below are my responses, on behalf of Texas Citrus Mutual, to your 
questions for the record from the House Agriculture's Subcommittee on 
Biotechnology, Horticulture, and Research public hearing, ``Focus on 
the Farm Economy--Factors Impacting the Cost of Production,'' held on 
April 27th, 2016. I greatly appreciated the opportunity to testify in 
front of your Committee and share a grower's perspective on these 
issues.
    Again, thank you for the opportunity to participate in the hearing 
and respond to your questions. Please do not hesitate to contact me if 
you have any further questions.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Dale Murden,
President, Texas Citrus Mutual.
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Biotechnology
    Question 1. How should we improve regulatory efficiency in a way 
that enables genetic innovation so that we, as a nation, are better 
able to meet global food security challenges?
    Answer. U.S. agriculture is innovative and stands willing to adopt 
new developments but negative consumer sentiment and regulatory burdens 
will impede that adoption. The oversight of new plant products derived 
through biotechnology offers us an opportunity to produce more with 
less. It brings the opportunity for increasing yields, reducing inputs, 
and further minimizing food waste all through the development of new 
crop traits. However, if the regulatory burdens are too strict or are 
structure in a way that invites litigation from anti-modern agriculture 
groups, then the vast majority of commodities will be forced to the 
sidelines.

    Question 2. What are some newer breeding methods, in terms of 
biotechnology? Are they regulated by the government?
    Answer. Right now, practices like doubled haploids, cell fusion, 
and embryo rescue are common practices that have been used for decades. 
However, the Part 340 Notice of Intent from USDA-APHIS suggested that 
these techniques could be regulated under a new regulatory approach the 
agency is considering, despite the fact that these techniques have been 
used safely, with tremendous benefits to growers and consumers, and 
without evidence of negative environmental impacts. Some of the new 
techniques like gene editing, CRISPR techniques, and zinc fingers are 
being pursued for new variety development now. Under current 
regulations these plant products would not be regulated unless the 
resulting product was deemed a noxious weed under CFR 360 (USDA-APHIS). 
This is because the plant product would be the result of working within 
the genome of the plant of interest. It is essentially a more direct 
and efficient means of developing a new variety that would otherwise be 
developed using more expensive and time consuming traditionalbreeding.

    Question 3. It has been said that USDA is considering changing 
their biotechnology regulations. Does your organization support this?
    Answer. We support updating the coordinated framework in a manner 
that creates a more transparent and efficient process for the three 
regulatory agencies (EPA, FDA, USDA) engaged in the oversight of 
genetically engineered crops. There is a need for oversight in the 
development of new traits that could not otherwise occur in nature. 
However, we oppose the USDA's interest in expanding their authorities 
to regulate traits that can otherwise be developed using traditional 
breeding or found in nature. This would require the agency to regulate 
based on the process rather than the product, which is antithetical to 
science and not supported by the National Academy of Sciences. It would 
only serve to stigmatize the technology and not add any new safeguards 
to the environment or human health.

    Question 4. What are the opportunities for the next generation of 
innovative tools for farmers?
    Answer. Genetically modified crops (GMOs) have been largely focused 
on pest and herbicide resistance with pretty straightforward 
transformation of a single gene or two into the crop of interest. 
However, these new techniques offer great promise with the potential to 
make multiple small changes or tweaks within gene families that can 
impact things like drought, cold, and heat tolerance, improved 
photosynthetic efficiency, greater fruit durability, etc. The 
opportunities are potentially boundless but what is certain these 
techniques and their ability to do in months what might otherwise take 
decades will allow farmers to grow more with fewer inputs and reduced 
waste. This is the only way we will be able to feed our growing 
population in a sustainable manner.

    Question 5. The headlines of major newspapers and many of the cable 
news shows cast American agriculture in a negative light--though many 
of those stories are rife with inaccuracies. Unfortunately, these 
stories drive policy such as what we see with mandatory biotech warning 
labels. What recommendations do you have for your colleagues in the 
industry to engage the public to counter these negative attacks? What 
is your group doing to avoid repeating history so we don't have the 
consumer distrust with these new technologies like we do with current 
biotech breeding techniques?
    Answer. We must be transparent about the techniques, why they are 
used, and what they accomplish. We must highlight the reports from EPA, 
USDA, FDA, and the most recent National Academy of Sciences report, 
which document the safety and the importance of these new breeding 
techniques.
    In addition, we are in the unfortunate situation where we must more 
regularly counter the false and deceptive claims of other groups. Some 
of these organizations have built up a level of credibility by making 
unsubstantiated, but unchallenged, claims. The agriculture community 
must do our part to reveal them as the charlatans that they are.
Pesticides
    Question 6. Many people who rely on pesticides to protect their 
health and property have stated that one or more of EPA's recent 
actions have taken away their access to important products needed to 
fight pests. What should EPA be doing to ensure that those producers 
will have the time-proven products and the new, effective products 
available to meet their needs?
    Answer. The must immediately stop the use of their new and untested 
modeling formulas used in water, expected environmental concentrations, 
and safety factor calculations. It is my understanding that in the last 
2 years or so EPA has moved their modeling to a much more conservative 
approach which consistently includes the most extreme of circumstances 
in nearly every instance and is not reflective of what occurs in the 
environment. While there is nothing inherently wrong with using models, 
the inputs and assumptions used have the ability to create results with 
tremendous disparities from what is observed through monitoring. The 
EPA has created and has now deployed the statistical equivalent of the 
precautionary principle. This must be halted and they should return to 
using the previous models until they can show that their new models are 
more reflective of what happens in nature.

    Question 7. In the National Strategy to Promote the Health of Honey 
Bees and Other Pollinators and the EPA Proposal to Mitigate Exposure to 
Bees from Acutely Toxic Pesticide Products, EPA offered support for 
voluntary stewardship methods to reduce exposures during the planting 
of pesticide treated seed. And, on January 4, 2016, EPA released its 
preliminary pollinator assessment for one pesticide indicating that it 
posed a low-potential risk to bees when used as a seed treatment. Do 
you have any specific concerns with the National Strategy document?
    Answer. While I am generally supportive of protecting pollinators 
and doing what we can to improve their habitat and forage 
opportunities, the EPA's ``Proposal to Mitigate Exposure to Bees from 
Acutely Toxic Pesticide Products'' was the antithesis of what is 
supposed to be done under FIFRA. The proposal listed 76 Active 
Ingredients (approximately 3,500 products) that would be banned from 
use when a crop is under pollination contract. They made that proposal 
on a hazard number and not a risk assessment and, certainly, with no 
consideration of benefits. Furthermore, those requirements have caused 
a breakdown in communication and collaboration between beekeepers and 
growers where before they worked out arrangement through their 
customer/provider relationship (pollination services).

    Question 8. We've heard a lot about the need for oversight of the 
EPA's pesticide program. What are your organization's top priorities 
for regulatory oversight?
    Answer. We need Congress to dig in deeper to gain a better 
understanding of the drastic changes EPA has made in its modeling 
approach. It was not done in a transparent manner, it is not science 
based--despite their claims--and has drastically reduced the products 
we will have access to and the new tools that will be developed, unless 
something is done about it.

    Question 9. Did the EPA ignore important facts in expressing 
concern about bees and citrus crops?
    Answer. EPA did in fact ignore two very important facts.

  1.  Citrus does not require managed bees for pollination services. In 
            many cases they are a pest in the production process.

  2.  Concentrations of neonicotinoids identified by EPA in the nectar 
            could be easily mitigated by making minor changes in the 
            timing of the applications. The report provided useful 
            information that growers can learn from but EPA decided to 
            use the opportunity to paint citrus in a poor light and 
            further empower activist organizations.

    Question 10. The President has stressed the importance and value of 
transparency in EPA's action to ensure the use of sound science and 
reliable data. EPA is increasingly reliant on epidemiological and 
modeling data to essentially overrule volumes of actual `hard science' 
laboratory and monitoring data. Was this fundamental change in policy 
put out for public notice and comment so that impacted stakeholders 
like you would have an opportunity to comment?
    Answer. The greater emphasis on modeling and specifically the 
change in model used was not made available, opened for comment, or 
demonstrated to stakeholders. It was an internal decision, which only 
became apparent after it was put in use and resulted in moving the 
agency to a more precautionary position.

    Question 11. The United States has the world's most rigorous 
pesticide registration and review processes. Yet, when EPA's regulatory 
decisions are challenged in court, the Agency has not enjoyed many 
recent successes in defending its scientific process or decisions. Are 
these actions undermining EPA's credibility with the public?
    Answer. Absolutely. However, where did the erosion begin? Some of 
the recent actions taken by EPA have undermined their scientific 
credibility, which is being reflected and reinforced in the courts.

    Question 12. If the tools used to manage weeds and pests continue 
to be restricted, taken away, or prevented from getting to the market 
altogether, how does that benefit the economic and environmental 
viability of your members' operations?
    Answer. These decisions by EPA are a drag on the rural economy and 
will likely drive more individuals of the next generation away from 
agriculture.
Research
    Question 13. USDA has begun implementing a two stage review process 
for competitive grants under the Specialty Crop Research Initiative. 
These two separate reviews take into account both relevancy to the 
industry and scientific peer review. Though not yet implemented, the 
law makes it clear that the relevancy review process should be applied 
to other competitive grants programs such as the Agricultural and Food 
Research Initiative--particularly for applied research grants. Do you 
think that producer support for these programs would grow if relevancy 
review were a component of the grant awards process?
    Answer. I believe producer support will grow as will a greater 
diversity of academic research participation if the two-stage process 
is adopted more broadly. The two-stage review has helped improve 
stakeholder and academic relations and we believe much stronger 
projects.

    Question 14. Increasing availability of funds for research is a 
common goal. Recognizing fiscal constraints though, are we focusing our 
resources on the correct priorities?
    Answer. The specialty crop programs developed and supported through 
the last farm bill were exactly what we needed and continue to support.

    Question 15. Is the money being spent through the Agriculture and 
Food Research Initiative and the Specialty Crop Research Initiative 
going towards industry supported research?
    Answer. We have great confidence in the funding being spent on 
citrus research, especially with the formation of the CDRE through the 
2014 Farm Bill. Funds supporting research in HLB resistance 
development, marker assisted breeding, and improved rootstocks will 
serve the industry in overcoming HLB, as well as, set us on a course 
for generally improved fruit quality and more robust citrus varieties.
Farm Bill
    Question 16. What are your top priorities for Congressional 
oversight of programs affecting your members?
    Answer. Our first priority is greater oversight of EPA-OPP. There 
has been a fundamental shift in EPA's risk assessment approach and 
greater light must be shined on their process.
Citrus Pest/Disease and Pollinators
    Question 17. We have heard about the devastating impacts citrus 
greening has had on the citrus industry. Can you elaborate on the 
research being conducted to combat citrus greening?
    Answer. A tremendous amount of work is currently being done on many 
fronts to battle HLB, which is threatening our industry. Scientists at 
the University of Florida and Washington State University are trying to 
culture HLB, which has never been done before. Part of the difficulty 
in studying the disease and identifying it's weaknesses is our 
inability to isolate the organism in culture. These researchers are 
looking to overcome that.
    Another project at the University of Florida is looking to develop 
bactericides that would reduce the pathogens transmission and, 
potentially, cure infected trees. Research at the University of 
California is using virulence proteins from the pathogen to detect its 
presence before symptoms appear and to develop strategies for creating 
citrus rootstocks that are immune to HLB.
    We have great confidence that this multi-pronged approach will lead 
to effective mitigations and the eventual elimination of HLB as a major 
threat to the U.S. citrus industry.

    Question 18. Do you have any particular recommendations on how to 
expedite the development and implementation of citrus greening control 
technologies and strategies?
    Answer. Limiting the regulatory hurdles in biotechnology and crop 
protection tools will allow us to innovate our way out of this issue if 
we can do it quickly. Unfortunately, the regulatory environment is 
currently working against us.

    Question 18a. Considering the recent revocation of pesticide 
product registrations, has industry's ability to combat the spread of 
citrus greening been affected?
    Answer. The loss of Sulfoxaflor (Closer) has been a tremendous loss 
to the citrus industry and has undoubtedly led to the increased spread 
and impact of HLB and its vector, the Asian Citrus Psyllid. In 
addition, the general messaging from EPA has been one of highlighting 
risk--to pollinators in particular--without recognition of benefits. 
This messaging has made it more difficult for the citrus industry to 
encourage homeowners who have citrus trees in their yards to treat for 
the disease and its insect vector. The result of EPA's tone has been to 
diminish our ability to limit citrus production from exposure to HLB.

    Question 19. Getting and keeping pesticide uses for individual 
specialty crops like citrus is especially challenging for growers and 
manufacturers. Has EPA expressed concern about pesticide residues on 
citrus trees as problem for bees?
    Answer. EPA highlighted their concerns about imidacloprid residue 
in citrus specifically in their January announcement. In fact, they 
highlighted their concerns in the lead statement of the press release, 
despite the fact that the report was largely positive and showed little 
concern in most crops and the mitigation for reducing potential 
imidacloprid exposure to bees was simple and just involved a small 
change in the timing of the application.

    Question 20. Do citrus crops rely on pollinators?
    Answer. Citrus does not rely on contract pollination. In the case 
of our seedless varieties like seedless mandarins, bees are a pest, 
causing the development of unwanted seeds through pollination and 
outcrossing.
Response from Jay Vroom, President and Chief Executive Officer, 
        CropLife America
Questions Submitted by Hon. Rodney Davis, a Representative in Congress 
        from Illinois
Pesticides
    Question 1. Many people who rely on pesticides to protect their 
health and property have stated that one or more of EPA's recent 
actions have taken away their access to important products needed to 
fight pests. What should EPA be doing to ensure that those producers 
will have the time-proven products and the new, effective products 
available to meet their needs?
    Answer. EPA should return to operating within the legal boundaries 
and Congressional intent of FIFRA, including FQPA. In recent years, EPA 
has shifted away from risk-based assessment toward reliance on hazard-
only based precaution in taking actions on the review of several crop 
protection products. Pesticides stakeholders ask that Congress conduct 
aggressive oversight of EPA in order to correct the Agency's misguided 
overreach.

    Question 2. Public policy has an enormous impact on the economic 
viability of farms. Can you offer a couple examples of recent 
regulatory actions that have had a negative impact?
    Answer. While CropLife America cannot speak personally for farmers, 
we do know that, in registering pesticides and uses, EPA plays an 
important role in protecting the economic viability of farms and farm 
families. Predictable, transparent process based on risk-based 
assessment is a crucial component to providing the crop protection 
tools needed by American farmers. The balance of the questions that 
follow that will detail several examples of regulatory actions that we 
believe demonstrate a systemic breakdown in EPA's adherence to Federal 
law, established process and sound science.

    Question 2a. What about legislative actions at the state or 
national level?
    Answer. Unfortunately, due to mixed signals from EPA, several 
states are considering, and in some cases have adopted anti-pesticide 
related laws, including product bans, on products reviewed and strictly 
regulated at the Federal level. Some of these state level actions and 
activism are based on EPA's reluctance to defend its own science and 
regulatory process, and nearly all of the actions are founded in 
misinformation and unsound science. Simply banning the use of a 
pesticide product can seem like an easy option to be perceived as doing 
``something'' on pollinator issues. However, given the multitude of 
stressors affecting pollinators, banning a product that is regulated 
and used according to label language will not solve the problem.
    Question 3. In the National Strategy to Promote the Health of Honey 
Bees and Other Pollinators and the EPA Proposal to Mitigate Exposure to 
Bees from Acutely Toxic Pesticide Products, EPA offered support for 
voluntary stewardship methods to reduce exposures during the planting 
of pesticide treated seed. And, on January 4, 2016, EPA released its 
preliminary pollinator assessment for one pesticide indicating that it 
posed a low-potential risk to bees when used as a seed treatment. Do 
you have any specific concerns with the National Strategy document?
    Answer. In May of 2015, the White House's Pollinator Health Task 
Force issued its, ``National Strategy to Promote the Health of Honey 
Bees and Other Pollinators'' (the National Strategy). The three goals 
of the response are repeated often as a guide about what the multitude 
of Federal agencies are collectively striving for: (1) reduce honey bee 
colony losses, (2) protect monarch butterflies, and (3) increase 
pollinator habitat acreage.
    Dozens of programs in multiple agencies across the Federal 
Government address some aspect of pollinator protection and awareness. 
It is not readily apparent to observers in industry, agriculture and 
the private-sector that these multiple Federal efforts are effective, 
coordinated, financially responsible, and not duplicative. We would 
like to see greater evidence of coordinated, directed research to solve 
the concerns for managed pollinators--protection from parasites, 
predators, diseases; thorough understanding of the effects of 
management practices on hive health; and the basics and intricacies of 
nutritional needs. Other livestock industries (beef, dairy, poultry, 
swine, wool, etc.) generally have a precise understanding of 
nutritional needs, disease protection, and management practices 
necessary to achieve consistent high-level production. Most of this is 
a result of, or has benefited greatly from, Federal research efforts 
and funding. This is what the honey bee industry needs.
    Regarding pesticides specifically, EPA's approach to the possible 
impacts of pesticides and pollinators has been inconsistent with 
established policies for risk assessment and individual product 
evaluation against an established, and scientifically valid, set of 
regulatory criteria. EPA has asked for and received significant volumes 
of additional studies which they have requested from pesticide 
companies but it is not clear how or whether this information has been 
used as the basis for whatever latest policy approach.
    Pollinator policies have been characterized by pronouncements which 
truncate the procedures otherwise required by FIFRA when EPA seeks to 
change label requirements, especially when there may be issues of 
dispute between the registrant and the agency. These pronouncements may 
prevent new products which could reduce risk to pollinators from 
reaching the market, and could impose unnecessary additional 
restrictions on products or uses which will not reduce any current risk 
to pollinators. A hazard based, one-size-fits-all approach is not 
consistent with established policies and past practices of EPA, and the 
regulation-by-letter approach violate procedures in FIFRA where they 
may be a disagreement between EPA and the registrant about a specific 
registration.
    The open-ended nature of EPA's ``uncertainties'' as described in 
``EPA's Proposal to Mitigate Exposure to Bees from Acutely Toxic 
Pesticide Products'' released shortly after the National Strategy 
raises some concerns that in the name of ``pollinator protection'' EPA 
will continue to expand its reach to products and uses about which the 
underlying data do not support new restrictions.

    Question 4. Does your organization support passage of H.R. 897, the 
Reducing Regulatory Burdens Act of 2015? Do you believe the burden and 
liabilities of obtaining a water permit are limiting or delaying 
mosquito control applications that control viruses like Zika and 
protect human health?
    Answer. Along with over a hundred other organizations, CLA strongly 
supports H.R. 897, the Zika Vector Control Act, and its current 
inclusion in H.R. 2577. We urge conferees to accept the provision as a 
part of the final conference report on the measure, and we also request 
that the sunset provision for H.R. 897 be removed as significant public 
health threats from mosquito-borne diseases are likely to remain well 
beyond 2018.
    Pesticide users, including those protecting public health from 
mosquito-borne diseases, are now subjected to the court created 
requirement that lawful applications over, to or near `waters of the 
U.S.' obtain a Clean Water Act (CWA) National Pollutant Discharge 
Elimination System (NPDES) permit from the Environmental Protection 
Agency (EPA) or delegated states. H.R. 897, which is a provision 
included in the House passed version of H.R. 2577, would clarify that 
Federal law does not require this redundant permit for already 
regulated pesticide applications.

    Question 5. What do you believe will happen if H.R. 897 is not 
enacted and President Obama's WOTUS rule goes into effect?
    Answer. Under the Federal Insecticide, Fungicide, and Rodenticide 
Act (FIFRA), all pesticides are reviewed and regulated for use with 
strict instructions on the EPA approved product label. A thorough 
review and accounting of impacts to water quality and aquatic species 
is included in every EPA review. Requiring water permits for pesticide 
applications is redundant and provides no additional environmental 
benefit.
    Compliance with the NPDES water permit also imposes duplicative 
resource burdens on thousands of small application businesses and 
farms, as well as the municipal, county, state and Federal agencies 
responsible for protecting natural resources and public health. 
Further, and most menacing, the permit exposes all pesticide users--
regardless of permit eligibility--to the liability of CWA-based citizen 
law suits. In a number of instances, applicators, local and municipal 
governments and homeowner associations can't afford the costs or risk 
of frivolous litigation and have refrained from conducting public 
health applications.
    The water permit threatens the critical role pesticides play in 
protecting human health and the food supply from destructive and 
disease-carrying pests, and for managing invasive weeds to keep open 
waterways and shipping lanes, to maintain rights of way for 
transportation and power generation, and to prevent damage to forests 
and recreation areas. The time and money expended on redundant permit 
compliance drains public and private resources. All this for no 
measurable benefit to the environment. We urge Congress to eliminate 
this unnecessary, expensive, and duplicative regulation by ensuring the 
Zika Vector Control Act, minus any sunset provision, remains in any 
final conference agreement for H.R. 2577.

    Question 6. The public is threatened by insect-borne diseases--West 
Nile Virus is a good example. Some of the critical products used to 
control mosquitoes are also the backbone of Integrated Pest Management 
plans. Can you tell us your thoughts regarding EPA's plans for OP's 
(organophosphates) used to protect public health against very dangerous 
and prolific pests?
    Answer. The Federal Insecticide, Fungicide, and Rodenticide Act is 
a risk-benefit statute. EPA must consider the benefits of pesticides as 
part of its approval and ongoing regulation of pesticides. 
Consideration of product benefits must be integral to its risk 
assessment equation. One example is the intersection of public health 
pesticides and the recently-released Endangered Species Act Draft 
Biological Evaluations the organophosphates diazinon, malathion and 
chlorpyrifos--the latter two being important pesticides in mosquito 
control. The benefits of effective vector control are obvious, 
especially with Zika virus-carrying mosquitos anticipated to enter the 
U.S. this summer.
    EPA must fully consider the intersection of its ESA biological 
evaluation and essential role malathion and chlorpyrifos play in 
effective mosquito control and deliver a risk-benefit based evaluation. 
We are concerned the benefits aspect of the risk-benefit equation has 
been receiving less and less consideration over time as EPA moves 
toward hazard-only risk assessments. The mosquito control tool box is a 
small one with only a handful of products available for adult and 
larval treatments. What we have today works very well and we must 
ensure those few products remain registered for use. If EPA instead 
makes a hazard-only risk assessment in its final biological opinion for 
the three OPs, we run the risk of losing essential products in the 
vector and public health protection tool box.

    Question 7. When evaluating pesticide benefits, is EPA following 
established protocols for consultations with CDC and other Federal 
agencies with public health expertise?
    Answer. EPA follows Food Quality Protection Act-established 
protocols for consultations with Centers for Disease Control and 
Prevention, Department of Defense, and Health and Human Services before 
making product use cancellation decisions relevant to public health 
pesticide uses. Our industry is satisfied with this process. To date, 
we do not see a role for CDC, DOD, or HHS in consultations for new 
products and new uses.

    Question 8. We've heard a lot about the need for oversight of the 
EPA's pesticide program. What are your organization's top priorities 
for regulatory oversight?
    Answer.

    FQPA

    CLA is very troubled by EPA's proposal to apply the additional 10X 
margin of safety to many well studied existing pesticide, including 
many organophosphates used on farms and to protect public health from 
vector borne disease. EPA now using precautionary models and unreliable 
data to suggest that `uncertainty' exists where sound science and 
established process say otherwise.
    In establishing drinking water exposure limits--a component of FQPA 
``risk cup''--EPA has begun using a new ultra-conservative water 
modeling approach which ignores actual water monitoring data and which 
threatens to severely limit uses of products.

    EPA & `Services' Process for Endangered Species Act Consultations

    In 2013, a panel of the National Academy of Sciences (NAS) 
published a report providing guidance to EPA and the Services on six 
key scientific issues at the heart of the agencies' disagreements 
regarding the ecological risk evaluation of pesticides. Since then, the 
agencies have been working to address the NAS report's recommendations, 
and have begun a process for engaging stakeholders and seeking public 
input. EPA is currently scheduled to complete 744 ``registration review 
cases'', involving 1,166 pesticide active ingredients, by 2023. This 
must include a review of potential impacts to the over 1,500 listed 
threatened and endangered species in the U.S. Over 700 additional 
species could be listed as endangered within the next 2 years. Meeting 
EPA's requirements under FIFRA and the Services' requirements under ESA 
add further work to an already demanding administrative burden.
    A 2013 report by Summit Consulting entitled, ``Analysis of Cost 
Estimates and Additional Resources Required for Timely FIFRA/ESA 
Pesticide Registration Review'', found that providing the Services with 
the additional resources they would need to meet their ESA obligations 
regarding registration review would cost the taxpayers an additional 
$474 million. This would represent a potential 13-fold and 25-fold 
budget increase in the National Marine Fisheries Service and Fish and 
Wildlife Service budgets, respectively, in order to open and review 
these pesticide dockets.
    The government's proposal for addressing the ESA-FIFRA issue has 
not stopped the litigation. New lawsuits challenge new product 
registrations, leading to additional regulatory uncertainty. 
Ironically, and contrary to the views expressed by the activist groups 
bringing these legal challenges, this development may have a chilling 
effect on the introduction of new pesticide products that are being 
developed to reduce potential exposures to threatened and endangered 
species and their habitats. The Services do not have adequate resources 
and EPA faces continued litigation under the ESA as it carries out its 
duties under FIFRA. Further, the ESA litigations have diverted the 
restricted Services' resources away from conservation efforts that 
would be more beneficial to the protection and recovery of threatened 
and endangered species.

    Question 9. In publishing the final worker protection standard 
rule, the EPA included a ``designated representative'' provision that 
had not been previously provided to the Committee as required in law. 
We have some questions about this provision.
    If a designated representative had information related to pesticide 
use on a farm and wanted to use that information publicly to pressure 
the farm to stop using that pesticide, is there anything in the 
regulation to prevent that from happening?
    Answer. No, the designated representative provision opens up 
unlimited intrusion onto private farm properties to anyone self-
declaring themselves a worker ``designated representative''.

    Question 9a. Does the provision grant a right for designated 
representatives to obtain certain pesticide information used on a farm 
upon presentation of a written, signed authorization by a worker?
    Answer. Yes, the WPS grants the designated representative access to 
all pesticide use and application records to which the employee which 
otherwise be have access.

    Question 9b. Once a farmer is presented with the written, signed 
authorization, does he or she have a legal obligation to provide the 
information?
    Answer. Potential frivolous liability exposure for farmers is 
unlimited. New rule grossly miscalculated estimated cost impacts to 
farm economy--a cost legacy burden farmers will not fully feel for 
months/years after the end of this Administration.

    Question 9c. Once the designated representative has the 
information, are there any restrictions on what the designated 
representative can do with the information?
    Answer. No, the WPS does not state any restrictions on the use of 
such information or prevent the pesticide use and application from 
being made public.

    Question 9d. Is there any provision in the WPS to require the 
designated representative to share the information with the worker who 
signed the form?
    Answer. The WPS is not specific to that detail. There is no actual 
requirement that the information grant be in turn shared back to the 
employee granting the status.

    Question 9e. Are there any restrictions on who may be a designated 
representative (e.g., an anti-pesticide activist group or legal 
services group)?
    Answer. No, the WPS does not restrict who may be designated by an 
employee.

    Question 9f. If a designated representative had information related 
to pesticide use on a farm and wished to publish that information 
broadly, is there anything in the WPS to prevent that from happening?
    Answer. No, the WPS in no way restricts, limits or precludes any 
information accessed from being released publicly or even used against 
the operation by activists.

    Question 10. Did the EPA ignore important facts in expressing 
concern about bees and citrus crops?
    Answer. See responses to Questions 17 to 27, below.

    Question 11. For years, EPA relied on hundreds of high quality 
studies evaluating all aspects of human susceptibility to pesticides. 
These included studies designed to make sure that children would be 
protected. Even though EPA used those high-quality assessments for 20 
years, EPA now relies primarily on epidemiology studies and some 
journal articles. To what extent has EPA sought stakeholder input on 
this policy change?
    Answer. Epidemiology can be useful in identifying associations 
among environmental factors and health conditions (i.e., correlations). 
However, epidemiology cannot establish cause and effect between a given 
factor and a given health condition (i.e., causation). Thus, 
epidemiological data cannot be used at a rational basis for 
establishing regulatory endpoints leading to final decisions.
    For instance, by sheer chance, associations discovered by 
epidemiology may have no practical meaning or effect. The very nature 
of epidemiological research produces results fraught with uncertainty. 
But, the inherent uncertainty of the discipline should not be confused 
with creating regulatory doubt where other more reliable forms of date 
are available (e.g., toxicological and laboratory data), nor does it 
provide sufficient reason to question decisions based on the more 
substantial data. Determining ``cause and effect'' requires objective, 
reliable research (which may include consideration of the correlations 
suggested by epidemiology studies) to establish plausibility, 
mechanisms and endpoints.
    To date, EPA has not welcomed input from stakeholders on what we 
see as a systemic shift in science and process using questionable 
science. We are very trouble by the consequence of EPA's growing 
willingness to allow preliminary results of epidemiology studies to 
redirect fundamental regulatory policies and trump a large body of 
well-established scientific data. It calls into doubt the entire 
pesticide regulatory framework built on systematic toxicity and 
exposure studies, followed by rigorous risk assessment.

    Question 12. Approximately how many new products or product uses 
have been brought onto the market, and, how many products and uses have 
been restricted or effectively lost in the past 7 years?
    Answer. Products are brought onto and taken off the market for many 
reasons: some for business purposes by a manufacturer, and others 
compelled by EPA due to product use concerns.
    Most recently, our industry can point to the following as examples 
of where we believe EPA led or allowed actions that led to the 
inappropriate removal or restriction of a pesticide:

   Sulfoxaflor--litigation led to [temporary] withdrawal of 
        registration, shortly after initial approval of the active 
        ingredient.

   Enlist Duo--initial registration for use on 2,4-D tolerant 
        soybeans in 2014 was limited to just six states, because of 
        overly cautions [endangered species and drift] concerns. The 
        following year, it was expanded to total of 15 states. That 
        still leaves 35 states without access to this technology.

    Additionally, since 2008, EPA has reported all registration actions 
on agricultural active ingredients on the OPP website.

    Question 13. EPA is legally obligated to weigh the benefits of 
pesticide products, such as protection of the public health from 
disease-carrying pests, protection of our nation's buildings and 
infrastructure, and protection of the food supply. However, recent EPA 
activities appear to focus disproportionately on the hazard side of 
that assessment while discounting factors like exposure and benefits. 
What additional data can crop protection companies provide EPA in order 
to better account for pesticide benefits?
    Answer. We are pleased that EPA robustly defended the use of risk 
assessment in the face of the European Commission's hazard-based 
approach to the regulation of endocrine disruptors. There, EPA 
specifically opposed banning products that may pose a theoretical 
hazard, but which, in reality, pose negligible risks because people are 
not exposed to these products at levels that could cause adverse 
impacts.
http://www.usda-eu.org/wp-content/uploads/2015/01/United-States-
Submission-Endocrine-Disrupters-2015-01-20.pdf at p. 4. We have also 
seen recent instances where EPA is focusing too heavily on the 
potential hazard of crop protection products, without a meaningful 
discussion of exposure or benefits.
    On the exposure side, members are trying to provide more refined 
information on the location of crops, and therefore crop protection 
uses, in relation to listed species, because early examples of 
pesticide use/listed species co-occurrence are vastly over-estimating 
the potential for pesticide exposure to these species.
    We have seen models that vastly overestimate exposure to our 
products. For example, although we've supplied EPA with real world 
examples of water monitoring data, which has been routinely ignored for 
overly conservative modeling that cannot be validated and does not 
reflect conditions in the real world.
    FIFRA requires that EPA's benefits analysis be undertaken in the 
context of the risk assessment--the registration standard is a balance 
of risk and benefit. But recently, EPA stood that standard on its head 
by publishing a portion of an incomplete benefits assessment for public 
comment before the risk assessment was completed, without first 
requesting, receiving, or reviewing all available relevant data; and 
without incorporating those data into its analysis. This has resulted 
in a tremendous amount of confusion among growers and the public on the 
relative risks and benefits of neonicotinoid seed treatment for 
soybeans. It was unnecessary and counterproductive.
    Growers understand the benefits of pesticide use, and they don't 
buy products that do not need or that will not work--the marketplace is 
an effective regulator of product efficacy. For that reason, EPA has 
long declined to review the efficacy data that the statute requires and 
that pesticide developers produce and maintain. Our members are proud 
of the products they produce and the benefits they provide to farmers. 
We continue to offer to work with EPA to help them develop and 
implement ways that they can help the public better understand the 
benefits these products provide not only to growers, but to the public 
at large, and help put the legitimate risks that pesticides may pose in 
the proper context.

    Question 14. The President has stressed the importance and value of 
transparency in EPA's action to ensure the use of sound science and 
reliable data. EPA is increasingly reliant on epidemiological and 
modeling data to essentially overrule volumes of actual `hard science' 
laboratory and monitoring data. Was this fundamental change in policy 
put out for public notice and comment so that impacted stakeholders 
like you would have an opportunity to comment?
    Answer. EPA's did not clearly vet or seek public/stakeholder input 
prior to make the recently observed shift to reliance on the use of 
epidemiological data (i.e., observational data) over existing, verified 
laboratory and monitoring data.
    We are additionally concerned that the position for an expert and 
senior level epidemiologist within the Office of Pesticides Program 
(OPP) has yet to be filled. In order to fully evaluate the quality and 
most appropriate use of epidemiological data, EPA should ensure OPP has 
the expertise specific to that data's value and usefulness in the 
review of pesticides.

    Question 15. The United States has the world's most rigorous 
pesticide registration and review processes. Yet, when EPA's regulatory 
decisions are challenged in court, the Agency has not enjoyed many 
recent successes in defending its scientific process or decisions. Are 
these actions undermining EPA's credibility with the public?
    Answer. While it is true that there has been at least one court 
decision that has called into question how EPA documents its scientific 
processes in regulatory decisions, court decisions are complicated and 
often nuanced and should not undermine EPA's credibility with the 
public. However, certain environmental activist groups adamantly 
against any pesticide use have misconstrued and sensationalized such 
decisions to an extent that they may negatively affect how the public 
views EPA's credibility when regulating pesticides. Unfortunately, EPA 
has done little to combat these misperceptions and has, in some 
instances, taken actions that could further fuel public misconception.
    For instance, despite determining in a preliminary risk assessment 
that the pesticide imidacloprid poses little risk to bee health, the 
EPA press release on that preliminary risk assessment paints a very 
different picture. See ``EPA Releases the First of Four Preliminary 
Risk Assessments for Insecticides Potentially Harmful to Bees,'' 
available at: https://www.epa.gov/pesticides/epa-releases-first-four-
preliminary-risk-assessments-insecticides-potentially-harmful. The 
title alone makes it seem as though imidacloprid may likely cause harm 
to bees, a conclusion not supported by EPA's own scientific 
conclusions. As another example, on April 29, 2016, EPA posted on its 
website an in-depth 87 page Cancer Assessment Document that concluded 
glyphosate is not likely to be carcinogenic to humans. Without any 
explanation, however, that document was taken down from the website on 
May 2. (See http://monsantoblog.com/2016/05/02/monsanto-statement-once-
again-epa-concludes-that-glyphosate-does-not-cause-cancer/.) EPA's 
removal of this final document does nothing but cause unnecessary 
speculation on the validity of EPA's decision.
    In sum, while it may be impossible to convince certain activists of 
EPA's credibility in regulating pesticides, EPA must stand behind its 
own scientific review processes and conclusions. EPA's recent failures 
in this respect do more harm to its credibility with the public than 
any recent court decision.

    Question 16. To what extent is EPA working with the regulated 
industry to improve EPA's ability to defend its pesticide registration 
requirements?
    Answer. It is important to note that all pesticides sold and 
distributed in the United States are regulated by the EPA under FIFRA 
and are registered (licensed) for use according to a safety standard 
that precludes any ``. . . unreasonable adverse effect on the 
environment.'' For pesticides that will be used on food or feed crops, 
the Federal Food Drug & Cosmetic Act (FFDCA) requires that EPA 
determine there is a reasonable certainty that no harm from exposure to 
pesticide residues. These standards are the strictest in the world and 
are a benchmark for regulation in other countries.
    To meet these standards, EPA conducts science-based risk 
assessments prior to registration of a pesticide active ingredient. EPA 
requires over 120 tests that examine the toxicity and environmental 
impacts of the pesticide. It then reviews the data for environmental, 
human health, and dietary risk. In addition to approving the use of the 
pesticide, EPA approves the label for the pesticide, which provides 
directions for use of the product to achieve effective pest control and 
to minimize environmental and human exposures. Once registered, a 
pesticide may be used only according to the label directions.
    EPA is required by law to review a pesticide registration every 15 
years, in a process that (1) requires current data using state-of-the 
art protocols and scientific techniques; (2) reviews studies available 
in the published literature; and (3) requires new risk assessments to 
ensure the registered pesticide complies with all modern policies and 
practices.
    All throughout this process, industry and EPA personnel work 
together to ensure that EPA has the information it needs to assess and 
determine whether a pesticide meets both the requirements of FIFRA and 
the FFDCA. Unfortunately, however, OPP has not been immune to EPA 
budget cuts and currently is severely understaffed and without 
necessary resources. Limited OPP resources has resulted not only in 
registration decisions being delayed well beyond Congressionally-
imposed deadlines, but also in decisions that may not robustly lay out 
the scientific reasoning EPA used in making its decisions. 
Consequently, providing OPP additional resources to timely and robustly 
document registration decisions is the key to EPA's ability to defend 
its decisions. At a minimum, Congress should not cut the resources EPA 
has now, either through appropriations or the renewal of the Pesticide 
Registration Improvement Act, which directly funds OPP's registration 
process.

    Question 17. If the tools used to manage weeds and pests continue 
to be restricted, taken away, or prevented from getting to the market 
altogether, how does that benefit the economic and environmental 
viability of your members' operations?
    Answer. Unless EPA returns to operating within the legal boundaries 
and Congressional intent of FIFRA, including FQPA, pesticide users in 
agriculture, forestry, public health protection and others will lose 
access to existing products and uses, as well as see a decline in the 
number of new technologies coming into the market.
    Without regulatory process predictability and scientific 
transparency, we expect that EPA's shifted away from risk-based 
assessment toward reliance on hazard-only based precaution with compel 
the agency to continue limiting access to existing and new crop 
protection products. For CropLife members, that lack of business 
certainty negatively impacts our industry's ability to bring new, 
improved products to the market to address ever evolving pest threats.
Research
    Question 18. USDA has begun implementing a two stage review process 
for competitive grants under the Specialty Crop Research Initiative. 
These two separate reviews take into account both relevancy to the 
industry and scientific peer review. Though not yet implemented, the 
law makes it clear that the relevancy review process should be applied 
to other competitive grants programs such as the Agricultural and Food 
Research Initiative--particularly for applied research grants. Do you 
think that producer support for these programs would grow if relevancy 
review were a component of the grant awards process?
    Answer. Yes. However, the SCRI Focus Area Priorities should also 
include improvements in regulatory processes and risk assessment. The 
application of scientific discoveries to agriculture is delayed, and 
often prevented, by overly-complex, unpredictable and often unnecessary 
regulatory requirements. In fact, the current regulatory system is a 
major threat to the ability of producers to access new innovations 
needed to remain competitive in the global market place and feed a 
growing world population. Improvements in regulatory systems for 
agricultural technologies should be a focus area for government 
research.

    Question 19. Increasing availability of funds for research is a 
common goal. Recognizing fiscal constraints though, are we focusing our 
resources on the correct priorities?
    Answer. Much of research funding is allocated based on peer review 
of competitive grants. By design, the process of awarding grants 
focuses more on rewarding novel scientific ideas, including basic 
research, and less on research with direct benefits to agriculture and 
food supply.
    The government should prioritize research funding for improving 
regulatory systems for pesticides and biotech traits. Currently, grower 
access to critically-needed technologies is delayed unnecessarily by 
overly complex and lengthy regulatory requirements.
    The government should increase funding for research that is aimed 
directly at increasing agriculture productivity. Further, we believe 
the return of research funding is maximized when it is focused on a 
defined set of priorities with defined targets and metrics for success.
    The government should increase funding for research aimed at 
providing growers with the broadest possible array of productivity 
tools including seed, traits, and pesticides.

    Question 20. Can you highlight some specific benefits from USDA 
research that your members have experienced?
    Answer. The USDA plant introduction stations have worked to expand 
genetic diversity of priority crops and facilitated their conservation 
and utilization in research and crop improvement.
    The USDA Plant Germplasm Preservation Research Unit conducts 
critical research on the preservation of genetic resources, including 
breeding lines for future generations, and shares its findings with a 
global network of gene-banks. These gene banks, including the 
``doomsday seed vault'' in Svalbard, Norway, will ensure that genetic 
diversity, in public and private domains, is protected in the event of 
natural and man-made disasters.
    USDA ARS researchers continuously collaborate with their colleagues 
in the seed and pesticide industry to evaluate new product offerings 
for efficacy and value to growers. ARS research has helped understand 
interactions between pests and their host plants, and conducted 
valuable research to help delay pest resistance to pesticides and 
biotech traits.

    Question 21. Is information about research and technology 
advancements readily available and communicated within the agriculture 
community?
    Answer. There is significant room for improvement in this area. 
Much of the research conducted by ARS scientists is published in 
technical scientific journals, following the academic model. For many 
ARS scientists, career advancement is dependent on numbers of 
publications in scientific journals, just like their academic 
counterparts.
    For the most part, the agricultural community, including growers, 
does not seek information from technical articles in scientific 
journals since these tend to be difficult to understand and more 
focused on fundamental or basic research.
    Government scientists should be encouraged and rewarded for 
disseminating information to the agricultural community via face to 
face interactions, radio interviews and practical tools such as 
extension publications.
    The pesticide and seed industries have a tradition of reaching out 
directly to growers with information about new technologies. Examples 
of effective communications include grower winter meetings, summer 
field days, hands-on demonstrations, booths are farm shows and short 
technical bulletins.

    Question 22. To the extent that there are possible improvements in 
the way research information is disseminated, what suggestions would 
you have for USDA's research agencies to improve communication with 
producers?
    Answer. USDA's researchers should leverage existing communication 
channels between industry and producers to increase face to face 
interactions with farmers. The agriculture industry has a long and 
successful tradition of communicating with producers via winter 
meetings, field days and demonstrations. These interactions would 
provide local USDA staff with opportunities to get to know producers 
personally and would go a long way towards reducing the sense of 
mistrust that many producers feel towards government agencies. Also, 
producers have a lot to gain from receiving research information from 
industry, local extension agents and the USDA is one setting.

    Question 22a. Is the money being spent through the Agriculture and 
Food Research Initiative and the Specialty Crop Research Initiative 
going towards industry supported research?
    Answer. Even though for-profit organizations are eligible to 
receive Federal research funding including AFRI and SCRI, as far as we 
know, private companies do not seek such funding. However, many public 
institutions receive major research funding from Federal granting 
agencies. In many instances, university research programs are supported 
by multiple funding sources which may include private industry and 
Federal grants.

    Question 23. Many of the regulatory challenges highlighted in the 
hearing seem to be exacerbated by limitations in public understanding 
of risk. Are there ways Federal agencies and our land-grant 
universities can improve risk communication to consumers?
    Answer. Yes, the disconnect between science and the public's 
understanding of risk is fueling a mistrust of technology and an 
unfounded fear of safe and effective agricultural innovations. Some 
land-grant universities are at the forefront of improving the public's 
understanding of risk and debunking myths about agricultural 
innovations. However, there are too few scientists in universities or 
Federal agencies who are trained in communications or possess the 
needed tools.
    Federal agencies have a key role to play by funding efforts to 
increase public awareness of the safety and nutritional value of 
products of American agriculture. Funding should be targeted at 
educational programs aimed at combining communication and science 
training.
    Agencies and universities should also reach out to consumers via 
social media and respond to the steady barrage lies about the safety of 
our food. Agencies should do more to inform consumers that: (1) our 
food supply is among the safest in the world, (2) U.S. consumers spend 
a lower portion of their income on food than those in most countries, 
(3) U.S. consumers enjoy year-round access to an ever-expanding array 
of diverse and nutritional foods and ingredients, and (4) these 
benefits would not be possible without current and future agricultural 
innovations in pesticides and biotechnology.
Farm Bill
    Question 24. What are your top priorities for Congressional 
oversight of programs affecting your members?
    Answer. Regulatory burdens on American agriculture have continued 
to grow over the past several years. While pesticide law and regulation 
have not been a traditional component of farm bills past, it is 
nevertheless clear that the regulatory burdens in this space have also 
escalated and numerous recent Agency actions with respect to pesticide 
regulation call into question the Agency's transparency and adherence 
to sound science within the framework of risk-based regulation as 
defined in the Federal Insecticide, Fungicide, and Rodenticide Act 
(FIFRA). Consequently, the prospects for the next farm bill oversight 
and negotiation provide a critical platform for review and debate on 
this specific topic.
    Stakeholder input, Agency transparency, grower impacts and 
consequences, and the very foundations of adhering to current law 
(FIFRA) with respect to risk-based regulation are all ripe for 
Agriculture Committee oversight and engagement within the scope and 
context of the next farm bill. We welcome the opportunity to work 
closely with the Agriculture Committee to ensure that future Agency 
actions protect human health and the environment AND that a predictable 
process for bringing new chemistries to the market is preserved to 
ensure that American agriculture has the critical and necessary tools 
for modern agricultural practices.
Citrus Pest/Disease and Pollinators
    Question 25. We have heard about the devastating impacts citrus 
greening has had on the citrus industry. Can you elaborate on the 
research being conducted to combat citrus greening?
    Answer. The impact of the Asian citrus psyllid-vectored phloem-
limited bacteria Candidatus Liberibacter asiaticus (Clas) has been the 
subject of a focused research program managed by the Citrus Research 
and Development Foundation in Florida. This foundation was created in 
response to recommendations of a National Academy of Sciences Study 
commissioned by the Florida industry when this disease was first 
discovered in Florida in 2005. The research program is an 
internationally coordinated and focused process to leave no stone 
unturned as the Industry searches for solutions to management of this 
devastating disease. The industry's production in Florida has decreased 
by almost 50% since the 2007 crop season. (159 Million boxes to less 80 
Million boxes). Coupled with this loss of production has been increased 
costs of management attempts to control the spread of the disease and 
delay of the decline in infected tree. The CRDF Process has been a very 
effective process in developing the targeted lines of research to date. 
The Federal Government has been supportive of this effort through 
targeted funds directed toward several of the lines of research being 
developed.
    The spectrum of research goes from basic production practices to 
maximize production while minimizing the impacts of the disease through 
cutting edge developments in genomics and advanced breeding techniques 
to confer resistance or tolerance to the disease or genetic tools to 
modify the capacity for vectoring the disease. A complete list of 
funded research is available on the CRDF website.
    While this is a Florida based organization it does not limit the 
scope of its programs to Florida. Researchers from all global 
production regions are engaged. A national Citrus Research Coordinating 
Committee is one of the advisory committees involved in the review and 
decision process to assure all bases are covered.
    Since 2005 a biannual international conference on HLB has been held 
in central Florida to bring the global research community together to 
build a networked and coordinated research program to expedite movement 
of solutions from the research lab to the field.

    Question 26. Do you have any particular recommendations on how to 
expedite the development and implementation of citrus greening control 
technologies and strategies?
    Do you see any particular road blocks that are slowing progress in 
combating citrus greening?
    Considering the recent revocation of pesticide product 
registrations, has industry's ability to combat the spread of citrus 
greening been affected?
    Answer. The regulatory agencies in the U.S. have for the most part 
been very supportive of removing barriers to the development 
commercialization of tools to manage the pest vector and the disease. 
There are newly emerging technologies that may provide a measure of 
support in managing or controlling this devastating pest complex. Some 
of these are nanotechnology, RNAi technology, and genomic targeted 
technology based breeding techniques that will need to be sheparded 
through the process of regulatory oversight and regulatory decision 
making.
    The major road blocks that become apparent over the past few years 
have been mainly litigation driven and were not specifically directed 
toward the uses and regulatory approvals associated with use in Citrus. 
These unintended results of policy changes and proposed mitigation 
programs developed in response to litigation have created uncertainties 
over tools that are important in management of the Asian Citrus 
Psyllid.

    Question 27. Getting and keeping pesticide uses for individual 
specialty crops like citrus is especially challenging for growers and 
manufacturers. Has EPA expressed concern about pesticide residues on 
citrus trees as problem for bees?
    Answer. Citrus has been specifically identified by EPA and USDA as 
a Bee attractive crop. This is primarily due to the concentrated bloom 
and ready source of nectar that serves as a source of ``Orange 
Blossom'' honey. This results in many hives of managed honey bees being 
placed in proximity to citrus during this bloom period. With some of 
the proposed mitigation practices associated with EPA's recent 
announcement for mitigation of acutely toxic compounds could have 
significant impacts depending on how these practice mitigation 
proposals are implemented.

    Question 28. Do citrus crops rely on pollinators?
    Answer. No, citrus crops produce abundant fruit without pollination 
by honey bees. For some varieties of tangerines, pollination by honey 
bees is actually undesirable, as it leads to seed production in the 
fruit, which consumers do not want. Honey produced by bees that forage 
in citrus orchards is of high quality and commands a premium price from 
consumers. Thus, beekeepers need the citrus orchards to produce this 
premium honey, but citrus growers do not need the honey bees to produce 
a crop.
    In Florida, there are some indications that for certain specialty 
citrus varieties yield may be enhanced through the presence of managed 
hives in the grove. The relationship between Beekeepers and Citrus 
producer in Florida has traditionally been informal at best. This 
process has come under a more formal process in the past 3 years. Both 
industries have regulatory oversight through the Florida Department of 
Agriculture and Consumer Services.

    Question 29. What practices are in place to ensure that pesticides 
are not applied when pollinators may be present?
    Answer. Where pesticide application to crops while honey bees are 
present would be a problem, the pesticide product label carries the 
appropriate instructions and precautions that the applicator must 
follow to protect the bees. Such instructions take into account the 
time of season when pertinent pest problems occur, relative to 
flowering; the toxicity of the product to bees; the persistence of the 
product on the crop foliage; and other production practices. As 
necessary, application of the pesticide may be prohibited while the 
crop is in flower, or it may be limited to evening and night-time when 
bees are not foraging in the fields.
    For example, a voluntary program was initiated in Florida by FDACS 
in 2015; it is based on the Citrus Health Management Areas implemented 
under the recommendation of the NAS report that encouraged the 
coordinated large area applications of insect control measures for 
Asian citrus psyllid to limit the movement and spread of infected 
psyllids and the registration requirements for managed hives in Florida 
managed under the State Apiarist office within the Division of plant 
industries. It is based on the presence of bloom for attractiveness to 
bees with a process utilized that was recommended by the beekeepers to 
determine the bloom period. It is defined by 10% bloom to 90% petal 
fall and during this period pesticide applications are controlled. The 
voluntary program depends on establishment of a dialogue pathway 
between beekeepers and growers with in the production areas. The 
primary focus of these programs is the prevention of direct 
applications to concentrated of hives in the production areas. It also 
provides recommendations for timings of applications to preclude 
exposure to large numbers of foraging bees.


 
                       FOCUS ON THE FARM ECONOMY

                     (FOOD PRICES AND THE CONSUMER)

                              ----------                              


                        THURSDAY, APRIL 28, 2016

                  House of Representatives,
                                 Subcommittee on Nutrition,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 2:00 p.m., in 
Room 1300 of the Longworth House Office Building, Hon. Jackie 
Walorski [Chairwoman of the Subcommittee] presiding.
    Members present: Representatives Walorski, Gibbs, Hartzler, 
Benishek, Davis, Abraham, Moolenaar, Conaway (ex officio), 
McGovern, Adams, Ashford, and DelBene.
    Staff present: Callie McAdams, Jadi Chapman, Mary Nowak, 
Mollie Wilken, Stephanie Addison, Lisa Shelton, and Nicole 
Scott.

OPENING STATEMENT OF HON. JACKIE WALORSKI, A REPRESENTATIVE IN 
                     CONGRESS FROM INDIANA

    The Chairwoman. Good afternoon, and welcome to today's 
Nutrition Subcommittee hearing. Thank you to everyone today for 
taking the time to be here and a special thanks to our 
witnesses for lending us their expertise. Today's hearing is 
the fourth in a series, held by each Subcommittee, taking a 
look at the state of the farm economy. This Subcommittee is 
focusing, in particular, on food prices and how every consumer 
is impacted by the economic conditions in farm country.
    The United States has the safest, most abundant, most 
affordable food supply in the world. There are many factors 
that contribute to this. We are blessed with a large amount of 
fertile land to farm, innovative minds that have pioneered 
technologies to increase yields, and an infrastructure network 
that gets products to market quickly and efficiently.
    One factor that tends to be overlooked is the role of 
effective farm policies in keeping prices affordable and stable 
for consumers. While the average American spends 9.8 percent of 
their disposable income on food, those with lower incomes, who 
are already estimated to spend 34 percent of their disposable 
income on food, are much more susceptible to swings in food 
prices. For them, an increase in the price of food means 
foregoing other needed purchases.
    So what goes into determining the price of the food we buy? 
From the farm to your plate, what costs are incurred along the 
way? And how much of what you pay at the grocery store for that 
corn from Indiana or rice from Arkansas flows back to the 
farmer?
    Today, we will examine the whole food supply chain from a 
high level. We will look at the role of farm policy in keeping 
prices stable and at factors that are threatening that 
stability. Finally, we will consider the relationship between 
food prices and disposable income, especially as it relates to 
low-income Americans. We are all well aware that the farm bill 
expires next Congress. As we gear up for that process, it is 
crucial to arm ourselves with facts that will help inform our 
decisions in this Committee and educate our colleagues on the 
importance of farm policies when the time comes for a vote in 
the full House.
    I look forward to hearing from our distinguished panel 
today. Before I conclude, I want to extend a warm welcome in 
particular to a fellow Hoosier that will be testifying today, 
Dr. Jason Henderson from Purdue University. Dr. Henderson is an 
Associate Dean at the College of Agriculture and the Director 
of Purdue Extension. He previously served as Vice President at 
the Federal Reserve Bank of Kansas City, where he tracked the 
agricultural and rural economies. He is an asset to Purdue and 
the State of Indiana and I am thrilled you are here as we 
explore this topic.
    [The prepared statement of Mrs. Walorski follows:]

    Prepared Statement of Hon. Jackie Walorski, a Representative in 
                         Congress from Indiana
    Good morning and welcome to today's Nutrition Subcommittee hearing. 
Thank you to everyone for taking the time to be here and a special 
thanks to our witnesses for lending their expertise.
    Today's hearing is the fourth in a series, held by each 
Subcommittee, taking a look at the state of the farm economy. This 
Subcommittee is focusing, in particular, on food prices and how every 
consumer is impacted by the economic conditions in farm country.
    The United States has the safest, most abundant, most affordable 
food supply in the world. There are many factors that contribute to 
this. We are blessed with a large amount of fertile land to farm, 
innovative minds that have pioneered technologies to increase yields, 
and an infrastructure network that gets products to market quickly and 
efficiently.
    One factor that tends to be overlooked is the role of effective 
farm policies in keeping prices affordable and stable for consumers. 
While the average American spends 9.8% of their disposable income on 
food, those with lower incomes, who are already estimated to spend 34% 
of their disposable income on food, are much more susceptible to swings 
in food prices. For them, an increase in the price of food means 
foregoing other needed purchases.
    So what goes into determining the price of the food we buy? From 
the farm to your plate, what costs are incurred along the way? And how 
much of what you pay at the grocery store for that corn from Indiana or 
rice from Arkansas flows back to the farmer?
    Today, we will examine the whole food supply chain from a high 
level. We will look at the role of farm policy in keeping prices stable 
and at factors that are threatening that stability. Finally, we will 
consider the relationship between food prices and disposable income, 
especially as it relates to low-income Americans.
    We are all well aware that the farm bill expires next Congress. As 
we gear up for that process, it is crucial to arm ourselves with facts 
that will help inform our decisions in this Committee and educate our 
colleagues on the importance of farm policies when the time comes for a 
vote in the full House.
    I look forward to hearing from our distinguished panel.

    The Chairwoman. I would now like to recognize Ranking 
Member McGovern for his opening statement.

 OPENING STATEMENT OF HON. JAMES P. McGOVERN, A REPRESENTATIVE 
                 IN CONGRESS FROM MASSACHUSETTS

    Mr. McGovern. Well thank you very much, Chairwoman 
Walorski, and I want to thank all the witnesses for being here 
today. I am looking forward to hearing from each of you.
    Today's topic, food prices, is an important one, and it is 
one that we really haven't discussed much in previous hearings. 
It is important for us as Members to understand the entirety of 
the food system. It is a complex system, but by and large, it 
is an efficient and effective system. It really is a testament 
to the resiliency and hard work of our farmers and ranchers, 
processors and retailers that we have such a strong farm 
economy, stable and affordable food prices, and such a depth of 
choice and diversity when it comes to the food that we eat.
    But it is important to keep in mind that what many of us 
here often take for granted, easy access to big supermarkets, 
specialty markets, and even farmers' markets is not available 
to everyone in this country, particularly to low-income and 
rural communities. And low-income households are particularly 
sensitive to even minor fluctuations in food prices, as they 
think about how to stretch their food dollar further. During 
the last farm bill, there were attempts to split the nutrition 
title and SNAP from the rest of the farm bill. But I always 
remind people that it is our farmers who grow the food we eat, 
and you can only use SNAP to buy food. So there is a close link 
between our farmers and our Federal food assistance programs. 
It is important that we recognize that relationship.
    So with that, I look forward to your testimony, and I yield 
back my time.
    The Chairwoman. The chair would request that other Members 
submit their opening statements for the record so the witnesses 
may begin their testimony, and to ensure that there is ample 
time for questions.
    The chair would also like to remind Members that they will 
be recognized for questioning in order of seniority for the 
Members who were here at the start of the hearing. After that, 
Members will be recognized in order of arrival. I appreciate 
Members' understanding.
    Witnesses are reminded to limit their oral statements to 5 
minutes. All of the written statements will be included in the 
record. Before I introduce our distinguished panel, I want to 
welcome the Chairman of the Agriculture Committee, Chairman 
Conaway. Thanks for being here today.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. I thank you, and I thank our panelists for 
being here. I look forward to their testimony.
    The Chairwoman. I would like to welcome our panel of 
experts to the table.
    Dr. Jason Henderson, as I said before, Associate Dean and 
Director of Purdue Extension, College of Agriculture, West 
Lafayette, Indiana; Dr. Ephraim Leibtag, Assistant 
Administrator, Economic Research Service, U.S. Department of 
Agriculture, Washington, D.C.; and Mr. Andrew Harig, Senior 
Director of Sustainability, Tax, and Trade, Food Marketing 
Institute, Arlington, Virginia.
    Dr. Henderson, please begin when you are ready.

  STATEMENT OF JASON R. HENDERSON, Ph.D., ASSOCIATE DEAN AND 
ASSISTANT VICE PRESIDENT OF ENGAGEMENT, COLLEGE OF AGRICULTURE, 
                       PURDUE UNIVERSITY;
   DIRECTOR, COOPERATIVE EXTENSION SERVICE, PURDUE UNIVERSITY

    Dr. Henderson. Chairwoman Walorski, Ranking Member 
McGovern, and Members of the Subcommittee, thank you for this 
opportunity to speak with you today. As a representative of 
Purdue Extension, our ability to provide life enhancing, 
research-based educational opportunities hinges on our Federal, 
state, and local partnerships, and these partnerships are 
delivering positive impacts.
    A recent study finds that cooperative extension through the 
Smith-Lever Act kept almost 140,000, or 28 percent more farmers 
from disappearing in U.S. agriculture over the past 3 decades. 
In addition in Indiana, funding for SNAP-Ed and FNEP has 
allowed Purdue Extension to deliver the Nutrition Education 
Program, which has reduced food insecurity by 25 percent for 
program participants. I thank you for your support of USDA, 
NIFA, land-grant universities, and the cooperative extension 
system, which allows us to partner and to enhance lives and 
livelihoods across the nation.
    My comments today will focus on the farm economy and its 
impact on food prices, consumers, particularly those in rural 
communities.
    The combination of sluggish global export demand, flat 
domestic ethanol consumption, burgeoning global supplies, and 
elevated production costs is a recipe for plummeting farm 
revenues and profits. Although farm cycles are common, each 
cycle is unique, and one of the unique features of this cycle 
is the farm safety net. Past farm support often emerged in the 
form of price-related subsidies and supply management, which 
were often criticized, in part, for their impacts on consumers. 
Today, a more market-oriented strategy based on crop insurance 
is the foundation of the safety net, and although crop 
insurance programs have existed since the 1930s, farm crop 
insurance subsidies have increased sharply, raising questions 
about who benefits. And a recent study indicates that while 
taxpayers pay, U.S. farm consumers benefit and would lose $2.5 
billion in economic value if crop insurance subsidies would 
disappear.
    U.S. consumers could also benefit from more stable food 
prices. Low-income consumers who spend a large portion of their 
income on food could benefit the most. However, the benefits 
could be muted for those households living in food deserts, 
locations with limited access to retail stores, such as grocery 
stores. These households could face higher food costs and have 
additional challenges achieving better health outcomes.
    Educational programs for low-income households do help them 
access food and reduce food insecurity. As previously 
mentioned, the Nutrition Education Program reduced food 
insecurity by teaching people how to stretch their food dollar 
and eat healthier food on a limited budget. The Healthy Food 
Systems, Healthy People Initiative of the APLU is another 
example of how partnerships between Federal, state, and local 
agencies, academia, industry, community organizations, and 
local health practitioners can help people make better food 
choices and deliver better health outcomes.
    Declining farm profits cast a ripple effect on the rural 
consumer. Farm capital spending has plummeted, and farm 
households are spending less on Main Street. If poverty rates 
follow those during the 1980s farm crisis, rural poverty rates 
could rise even further. And what is most alarming to me is 
that even during the current farm bill, rural poverty rates 
rose, even in the Midwest, where child poverty rates reached 
20.4 percent in 2013, the peak of the farm bill. Child poverty 
is a multi-dimensional challenge, often rooted in economic, 
social and family issues. Building local and regional capacity 
for economic development is crucial, and through USDA's 
Strengthening Economies Together program, Purdue Extension is 
partnering to help identify community assets that can be 
leveraged into seizing emerging opportunities in rural 
communities. This is just one example in rural development.
    One social issue that we are tackling at Purdue Extension 
is teen drug abuse. We are addressing it by launching the 
Strengthening Families program for parents and youth 10 to 14 
that have been proven to reduce teen drug abuse by 
strengthening parent/teen relationships. In fact, for every 
dollar spent on this program, communities receive almost $10 in 
benefits in the form of less time and treatment, less jail 
time, and less time off work. And youth programs are 
increasingly focused on career readiness. The partnerships with 
government agencies, industry, and nonprofits, Indiana 4-H has 
increased its focus on science education, healthy living to 
prepare youth for future opportunities. For example, in 2013, 
most of the 4-H youth that graduated high school plan to 
continue their education, and 26 percent of them were first 
generation college students. So when you think about dealing 
with rural economies and rural consumers, it is about the 
economy, it is about social issues, it is about the family.
    So in sum, U.S. farmers are facing substantial declines in 
farm profits and crop insurance is the primary safety net for 
U.S. agriculture, and it also appears to benefit U.S. 
consumers. More stable food prices will benefit consumers, 
especially those in low-income households. Yet, those living in 
food deserts may be at a disadvantage, which makes Nutrition 
Education Programs critical. And finally, plummeting farm 
incomes are going to strain rural poverty rates, which are 
already high. And so these approaches often require 
partnerships between government agencies at all levels, 
academic institutions such as land-grants, nonprofits, 
philanthropic entities, industry.
    And on behalf of Purdue Extension, thank you for allowing 
us to be at the heart of many of these partnerships, and I am 
pleased to address any questions that you may have.
    [The prepared statement of Dr. Henderson follows:]

  Prepared Statement of Jason R. Henderson, Ph.D., Associate Dean and
Assistant Vice President of Engagement, College of Agriculture, Purdue 
 University; Director; Cooperative Extension Service, Purdue University
    Chairwoman Walorski, Ranking Member McGovern, and Members of the 
Subcommittee, thank you for the opportunity to speak with you today. As 
a representative of Purdue Extension, I am privileged to work for an 
institution that provides research-based educational opportunities that 
enhance the lives and livelihoods of farmers and consumers throughout 
Indiana, the U.S. and the world. Our ability to provide life enhancing 
educational opportunities hinges on our Federal, state, and local 
partnerships. I thank you for your support of USDA, NIFA, the land-
grant university system, and Cooperative Extension. Through your 
support, Cooperative Extension service has been able to provide 
educational opportunities that have kept farmers on the farm \1\ and 
reduced food insecurity in U.S. households.\2\ My comments today will 
focus on the farm economy, food prices, and the consumer.
---------------------------------------------------------------------------
    \1\ Goetz, Stephan J. and Meri Davlasheridze. (2016). ``State-Level 
Cooperative Extension Spending and Farmer Exits'' Applied Economic 
Perspectives and Policy, April 19, 2016. Downloaded April 25, 2016.
    \2\ Rivera, R.L., & Eicher-Miller, H. (2015). P115 Food Security 
Among Households With Children Improved Following a Nutrition Education 
Intervention. Journal of Nutrition Education and Behavior, 47(4S).
---------------------------------------------------------------------------
Farm Profitability
    Profitability in the U.S. farm economy has fallen sharply in recent 
years. In 2016, U.S. farm profitability, as measured by net farm income 
is expected to drop to $49 billion, down 57 percent from 2013 highs 
(Chart 1). The Economic Research Service (ERS) at the U.S. Department 
of Agriculture (USDA) projects total U.S. farm income to rise over the 
next decade with net farm income approaching $70 billion by 2025. Yet, 
these income levels will remain 40 percent below the booming profit 
levels farmers enjoyed between 2011 and 2013.
Chart 1: U.S. Net Farm Income
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Calculations based on Net Farm Income data from Economic 
        Research Service, U.S. Department of Agriculture and Consumer 
        Price Inflation data from the Bureau of Labor Statistics.

    The decline in farm profitability was more severe than expected. In 
February 2015, USDA projected farm profits to decline to $84.2 billion 
in 2015.\3\ By the end of the year, farm profits had fallen to $56 
billion.
---------------------------------------------------------------------------
    \3\ Westcott, Paul and Janes Hansen. (2015). ``USDA Agricultural 
Projections to 2024.'' Office of the Chief Economist, World 
Agricultural Outlook Board, U.S. Department of Agriculture. Prepared by 
the Interagency Agricultural Projections Committee. Long-term 
Projections Report OCE-2015-1, 97 pp. Downloaded April 25, 2016. 
www.ers.usda.gov/publications/oce-usda-agricultural-projections/
oce151.aspx.
---------------------------------------------------------------------------
    The unexpected decline in farm profitability was driven by a drop 
in U.S. farm commodity prices. Farm prices received by farmers have 
fallen more than ten percent from 2014 highs, with the sharpest 
declines for crop producers (Chart 2). By the spring of 2015, prices 
received for crop production plummeted more than 25 percent below 
recent highs in 2013, with further declines in the fall of 2015. The 
combination of flat global and domestic demand and burgeoning supplies 
slashed farm revenues and profits. The fall in revenues was driven by 
sluggish demand for U.S. farm exports and ethanol. Simultaneously, 
global agricultural production surged in response to previously high 
agricultural commodity prices.
Chart 2: Prices Received and Paid by Farmers
Index 2011=100
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: National Agricultural Statistics Service, U.S. 
        Department of Agriculture.

    At the same time, farm production costs remained historically high. 
The prices paid by farmers remained elevated as input prices paid by 
farmers declined only six percent below 2014 highs (Chart 2), which 
trimmed intermediate product expenses for farmers. However, contract 
labor and factor payments to stakeholders, which includes landlords, 
hired labor, and interest expenses, continued to rise in 2015 with 
further increases expected in 2016. Payments to stakeholders are 
expected to increase by 4.8 percent. Interest expenses are projected to 
jump another 6.8 percent in 2016 after an 18 percent rise the previous 
year. Labor costs are projected to rise 5.0 percent and net rents to 
landlords are expected to rise 2.9 percent after declining in 2015. The 
combination of falling revenues and historically high expenses trimmed 
U.S. farm profits.
    Sharp declines in U.S. farm profitability are not uncommon. 
Historically, farm profitability is cyclical. Since 1900, the U.S. farm 
economy has experienced four farm profit booms: 1910s, 1940s, 1970s, 
and 2010s. Two of those booms ended in farm busts. The 1910s farm boom 
collapsed in the 1920s after World War I with the bust extending 
through the Great Depression. The 1970s farm boom ended with the farm 
financial crisis of the 1980s. One unique feature of the current farm 
boom was the speed by which farm profitability disappeared. The value 
of agricultural production has fallen more sharply in the current farm 
cycle. Three years after its peak, the value of agricultural production 
is down more than 20 percent in the current cycle (Chart 3). In 
contrast, during the 1970/1980s cycle, the value of agricultural 
production declined a more modest ten percent in the first 3 years of 
the farm economy downturn of the 1980s. However, during the 1980s farm 
bust, farm incomes continued to decline 7 years after the farm income 
peak in 1979.
Chart 3: Value of U.S. Agricultural Production
Index Peak Year=100
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Calculations based on Economic Research Service, U.S. 
        Department of Agriculture.
          Note: the Peak year for the 1970/1980s cycle was 1979 and the 
        Peak year for the 2000/2010s cycle is 2013.

    Another unique feature of the current farm downturn is the 
structure of the farm safety net. Past farm downturns underpinned farm 
policies that often used price-related subsidies and supply management 
to support U.S. farm profitability. As profitability plummeted in the 
1920s, farm policy incorporated price subsidies for farmers, such as 
the 1922 Grain Futures Act, the 1929 Agricultural Marketing Act, and 
the 1933 Agricultural Adjustment Act. During the farm bust of the 
1980s, various farm policies were enacted that provided more government 
control of agricultural production through set aside acres and price 
related subsidies. In fact, direct government payments to farmers 
jumped to $17.3 billion in 1983, up from $6.7 billion in 1982 and $2.8 
billion in 1980.\4\ These farm subsidy programs were often criticized 
for their adverse impacts on restrictions on international trade and 
for costs for consumers and taxpayers.\5\
---------------------------------------------------------------------------
    \4\ Direct government payments are measured in real 2009 dollars.
    \5\ Sumner, Daniel A. (2008). ``Agricultural Subsidy Programs'' 
(http://www.econlib.org/library/Enc/AgriculturalSubsidyPrograms.html). 
In David R. Henderson (https://en.wikipedia.org/wiki/
David_R._Henderson) (ed.). Concise Encyclopedia of Economics (https://
en.wikipedia.org/wiki/Concise_Encyclopedia_of_Economics) (2nd ed.). 
Indianapolis: Library of Economics and Liberty (https://
en.wikipedia.org/wiki/Library_of_Economics_and_Liberty). ISBN (https://
en.wikipedia.org/wiki/International_Standard_Book_Number) 978-
0865976658 (https://en.wikipedia.org/wiki/Special:BookSources/978-
0865976658). OCLC (https://en.wikipedia.org/wiki/OCLC) 237794267 
(https://www.worldcat.org/oclc/237794267). Downloaded, April 25, 2016.
---------------------------------------------------------------------------
Chart 4: Direct Government Payments Share of Net Farm Income
Percent
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Calculations based on Economic Research Service, U.S. 
        Department of Agriculture.

    By the mid-1990s, U.S. agricultural policy shifted to a more 
market-oriented farm safety net based in large part on crop insurance. 
The FAIR Act of 1996 started this transition \6\ and after twenty years 
and several farm bills, the share of farm income due to director 
government payments has diminished (Chart 4). Although farm incomes 
have fallen more sharply in the current cycle, direct government 
payments are expected to rise less dramatically. For example, direct 
government payments are projected to reach 25 percent of net farm 
income in 2016 compared to a spike of 65 percent in 1983 and an average 
of 40 percent between 1983 and 1988.
---------------------------------------------------------------------------
    \6\ Tweeten, Luther and Carl Zulauf. (1997). ``Public Policy for 
Agriculture after Commodity Programs.'' Review of Agricultural 
Economics. (19)2, pp. 263-280.
---------------------------------------------------------------------------
    In recent years, crop insurance has emerged as a main safety net 
for U.S. crop producers. Crop insurance programs have existed since the 
Dust Bowl of the 1930s.\7\ Coverage remained limited until the Federal 
Crop Insurance Reform Act of 1994 required crop insurance coverage for 
some other disaster assistance programs. Federal crop insurance 
premiums are subsidized and have increased in recent years. For 
example, government costs for premium subsidies and operating costs 
have increased from $2.8 billion in 2003 to $7.8 billion in 2014 (Chart 
5). The costs of crop insurance are projected to decline further in 
2016 with lower commodity prices.8-9
---------------------------------------------------------------------------
    \7\ Shields, Dennis (2015) ``Proposals to Reduce Premium Subsidies 
for Federal Crop Insurance'' Congressional Research Service Report, 7-
5700, R43951.
    \8\ Congressional Budget Office (2015). ``CBO's March 2015 Baseline 
for Farm Programs'', March 9, 2015. Downloaded April 25, 2016. 
www.cbo.gov/sites/default/files/51317-2015-03-USDA.pdf.
    \9\ Food and Agricultural Policy Research Institute (2015). ``U.S. 
Baseline Briefing Book: Projections for Agricultural and Biofuel 
Markets'' FAPRI-MU Report #02-16, March. Downloaded April 25, 2016. 
www.fapri.missouri.edu/wp-content/uploads/2016/03/FAPRI-MU-Report-02-
16.pdf.
---------------------------------------------------------------------------
Chart 5: Government Costs for Crop Insurance Premiums
Billion Dollars
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Risk Management Association, Congressional Budget 
        Office and Food and Agricultural Policy Research Institute.

    A recent study has shown that the removal of crop insurance would 
hurt U.S. food consumers. Based on 2013 data, eliminating crop 
insurance subsidies would result in lower participation rates and 
reduced food production that would underpin higher food prices.\10\ It 
was estimated that U.S. food consumers would lose $2.5 billion in 
welfare value if crop insurance subsidies would decline with addition 
welfare losses to foreign consumers. In addition, U.S. farmers and 
agricultural producers would lose roughly $8 billion in welfare gains 
through the loss of subsidies. To be sure, U.S. taxpayers would benefit 
from the elimination of crop insurance premium subsidies, yet the net 
general welfare gains would be $932 million. Although, there was 
recognition that the benefits would vary across farm commodity, 
consumer food prices, and U.S. states, the analysis was not able to 
identify the distribution of benefits.
---------------------------------------------------------------------------
    \10\ Jayson L. Lusk. 2015 ``Distributional Effects of Selected Farm 
and Food Policies: The Effects of Crop Insurance, SNAP, and Ethanol 
Promotion.'' Mercatus Working Paper, Mercatus Center at George Mason 
University, Arlington, VA, April 2015.
---------------------------------------------------------------------------
    With the focus on crop insurance and market-based safety, farmer 
education programs have focused on risk management issues to help 
farmers manage farm margins during this downturn. At Purdue Extension, 
the Center for Commercial Agriculture has partnered with the Indiana 
Soybean Alliance to produce on-line resources to help producers 
understand, evaluate, and manage risk.\11\ In 2015, the Farm Service 
Agency partnered with the Cooperative Extension Services across the 
nation to provide farm bill training and educational opportunities to 
help farmers understand various risk management strategies. These 
partnerships are the continuation of long-standing educational programs 
that support farm profitability. Funding for the state Cooperative 
Extension System through the Smith-Lever Act was found to have kept 
almost 137,700 or 28 percent more farmers from disappearing in U.S. 
agriculture from 1983 to 2010.\12\
---------------------------------------------------------------------------
    \11\ Information on the partnership between the Center for 
Commercial Agriculture and Indiana Soybean Alliance is available at 
www.farmriskresources.com.
    \12\ Goetz, Stephan J. and Meri Davlasheridze. (2016). ``State-
Level Cooperative Extension Spending and Farmer Exits'' Applied 
Economic Perspectives and Policy, April 19, 2016. Downloaded April 25, 
2016.
---------------------------------------------------------------------------
Farm and Consumer Food Prices
    In addition to slashing farm incomes, weaker commodity prices will 
place downward pressure on U.S. consumer food prices. However, consumer 
prices do not fluctuate as widely as farm level prices. As a result, 
falling commodity prices at the farm level are more likely to translate 
into slower growth in consumer food prices, not lower consumer food 
prices.
    Historically, food prices at various stages of the food system tend 
to move together. The correlation between farm prices and producer 
prices remains strong (Chart 6). Using data from 1976 to 2015, the 
correlation between prices received by farmers and crude foodstuffs is 
0.96; and the correlation between farm prices and producer prices for 
intermediate and consumer foods is 0.81 and 0.79, respectively. The 
correlation between farm level prices and consumer price inflation 
(CPI) for food is weaker, 0.39.
    The correlations between farm and producer prices for food have 
strengthened over the past 2 decades. For example, between 1976 and 
1995, the correlation between farm level prices and finished consumer 
foods was 0.71. Between 1995 and 2015, the correlation between farm 
level prices and finished consumer food prices strengthened to 0.93. A 
similar trend emerged between farm level prices and other producer 
prices (unprocessed foods and intermediate foods).
Chart 6: U.S. Farm Prices and Producer Prices for Food
Percent Change from Previous Year
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Economic Research Service, U.S. Department of 
        Agriculture.

    Although farm level and producer prices are highly correlated, farm 
level prices demonstrate more volatility than processed producer and 
consumer prices. Farm level prices and producer prices for unprocessed 
foodstuffs have fluctuated widely over the past decade increasing over 
20 percent in 2007 and 2011 and plummeting almost 20 percent in 2009. 
At the same time, producer prices for finished consumer foods rose less 
than ten percent in 2007 and 2011 and edged down slightly in 2009. 
Consumer prices for food (CPI-food) followed similar patterns as the 
producer prices for finished consumer goods, but instead of falling in 
2009, the CPI-food rose more slowly.
    Consumer food prices tend to have less volatility due to the 
stability in other processing and marketing costs. According to USDA, 
farmers received 14.3 percent of the U.S. food bill, with other 
industry segments such as food services, food processing and wholesale 
and retail trade accounting for larger portions of the consumer food 
bill. Due to less processing, consumer foods, such as fresh fruit and 
vegetables, meats, and dairy, tend to have stronger correlations 
between farm level prices and consumer prices. For example, the 
correlation between farm level beef prices and consumer prices for beef 
and veal is 0.82.
    Slower growth in consumer food prices arising from stable farm 
commodity prices could provide benefits to low-income consumers. For 
low-income households, food accounts for a larger share of their 
incomes and household expenditures. For example, households in the 
lowest fifth quintile by income spend over \1/3\ of their income on 
food (Chart 7). In contrast, households in the highest fifth income 
quintile spend less than ten percent of their income on food. Lower 
food prices should allow food consumers to stretch their food dollar 
and increase the quantity and quality of food purchases.
Chart 7: Food Spending by U.S. Household Income
(2014:Q3 to 2015:Q2)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Consumer Expenditure Survey, Bureau of Labor 
        Statistics, April 2016.

    However, the benefits of lower food prices for low-income 
households could be muted for those households living in food deserts. 
Food deserts are locations where affordable and nutritious food is 
difficult to obtain. USDA identifies food desert tracts as those with 
at least 33 percent of the tracts population or a minimum of 500 people 
with low access to a supermarket or large grocery store.\13\ In regards 
to consumer food prices, retail food stores, such as grocery stores, 
provide food at lower prices compared to restaurant prices (Chart 8). 
The gap between restaurant and retail food store prices has widened 
over time as restaurant prices relative to manufacturing prices has 
increased from 2.5 to 3.5 since 1975, while retail food prices relative 
to manufacturing prices has fallen from 1.5 to 1.0. Low-income 
households in food deserts with little access to retail food stores, 
but access to restaurants are facing higher food costs and have 
additional challenges achieving better health outcomes.
---------------------------------------------------------------------------
    \13\ Economic Research Service, USDA. ``Definition of a Food 
Desert'' Downloaded April 25, 2016. www.ers.usda.gov/dataFiles/
Food_Access_Research_Atlas/Download_the_Data/Archived_
Version/archived_documentation.pdf.
---------------------------------------------------------------------------
    Educational programs for low-income households help them overcome 
access to food issues and reduce food insecurity. For example, the 
Nutrition Education Program administered by Purdue Extension has 
reduced food insecurity by 25 percent for low-income households 
participating in this program.\14\ In this federally funded program, 
participants learn how to stretch their food dollar and eat healthier 
foods on a limited budget. Participants learn the health benefits of 
the different food groups and understand food safety practices and how 
to conserve limited food resources.
---------------------------------------------------------------------------
    \14\ Rivera, R.L., and Eicher-Miller, H. (2015). P115 Food Security 
Among Households With Children Improved Following a Nutrition Education 
Intervention. Journal of Nutrition Education and Behavior, 47(4S).
---------------------------------------------------------------------------
Chart 8: Restaurant and Retail Food Store Prices
Ratio to Manufacturers' and Shippers' Prices 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Economic Research Service, U.S. Department of 
        Agriculture.
Impact on the Rural Economy
    Declining profits in agriculture are also straining consumer 
spending, especially in rural America. According to USDA, agriculture 
and its related industries account for 9.3 percent of U.S. employment. 
According to the Bureau of Economic Analysis (BEA), farm earning 
accounted for roughly six percent of the earnings in nonmetropolitan 
counties in 2014 compared to less than \1/2\ of one percent in 
metropolitan counties. Lower farm incomes spillover into the rest of 
the rural economy by reducing spending on farm inputs and household 
consumption.
    Falling farm incomes have led to broader economic strains in rural 
economic activity. Based on BEA data since 1970, nonmetropolitan county 
farm earnings have a strong correlation with earnings in food and 
kindred product manufacturing and agricultural service industry. For 
example, U.S. tractor and combine sales surged with farm income after 
2006 peaking in 2013 (Chart 9). Since then, the sharp decline in farm 
incomes translated into plummeting tractor and combine sales. In fact, 
tractor and combine sales in 2016 are on pace to fall below sales 
posted prior to the farm income boom. Bankers reporting to Federal 
Reserve agricultural credit surveys indicate that farm capital spending 
is expected to decline further in 2016.\15\
---------------------------------------------------------------------------
    \15\ Kauffman, Nathan and Matt Clark (2016) ``Farm Economy Tightens 
Further'' Survey of Agricultural Credit Conditions, Federal Reserve 
Bank of Kansas City, February 11.
---------------------------------------------------------------------------
Chart 9: U.S. Tractor and Combine Sales
Thousands of Units 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Association of Equipment Manufacturers.
          * Estimated based on sales through March 2016.

    In addition to plummeting farm capital spending, farm household 
spending has collapsed with farm incomes. According to bankers in the 
Tenth Federal Reserve District, farm households have cut household 
spending along with capital spending (Chart 10). Reduced household 
spending will place pressure on retail businesses on rural Main 
Streets, rural incomes, and support for charitable organizations in 
rural communities. In total, sharp downturns in agricultural 
profitability often spillover into lower investment, capital spending, 
and household spending in rural communities.
Chart 10: Tenth Federal Reserve District Farm Income, Farm Capital 
        Spending, and Household Spending
Diffusion Index *
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Federal Reserve Bank of Kansas City.
          * Bankers responded to each item by indicating whether 
        conditions during the current quarter were higher than, lower 
        than, or the same as in the year-earlier period. The index 
        numbers are computed by subtracting the percent of bankers that 
        responded ``lower'' from the percent that responded ``higher'' 
        and adding 100.

    Lower farm incomes and reduced spillovers into rural consumer 
spending and ag-related activity could further strain rural poverty 
rates. Since the 1960s, nonmetropolitan poverty rates have been 
substantially higher than poverty rates in metropolitan areas.\16\ 
Although poverty rates are much higher in the South, rural poverty 
rates are higher than urban rates even in the Midwest, which enjoyed 
strong income gains during the recent farm boom. Based on U.S. Census 
Bureau data, in the North Central Extension Region, total poverty rates 
rose from 10.4 percent in 2003 to 14.9 percent in 2013. And, child 
poverty rates rose higher, increasing from 14.4 percent in 2003 to 20.4 
percent in 2013. In fact between 2009 and 2013, 44 percent of 
nonmetropolitan counties faced child poverty rates above 20 percent 
compared to 31 percent of metropolitan counties. These increases in 
child poverty occurred during a period of boom farm profitability that 
underpinned economic strength in many rural communities. Shrinking farm 
incomes and spillovers into rural economies could place additional 
pressure on rural poverty rates. For example, during the last major 
farm downturn in the 1980s, rural poverty rates rose from 13.7 percent 
in 1979 to 18.3 percent in 1983.
---------------------------------------------------------------------------
    \16\ Poverty data is available from the Economic Research Service, 
USDA. http://www.ers.usda.gov/topics/rural-economy-population/rural-
poverty-well-being.aspx.
---------------------------------------------------------------------------
    Holistic approaches to rural economic development are needed to 
combat rural poverty, especially child poverty. Studies on child 
poverty indicate that it is multi-dimensional and programs focused on 
the intergenerational mobility into new economic status tend to target 
family issues, such as parenting or structure that affect investments 
in children, or community issues, such as education, safety and jobs, 
that provide opportunity for economic advancement. For example, the 
National Advisory Committee on Rural Health and Human Services 
recommended action steps to assist rural children and families in 
poverty that encouraged holistic approaches focused on local 
coordination of community health clinics, community agencies, family 
support organizations, and rural community development efforts.\17\ At 
Purdue Extension, the focus on child poverty is increasingly focused on 
a holistic approach that addresses economic opportunities in 
communities and regions and families and their investments in children/
youth. To strengthen local economies, Purdue Extension is partnering 
with Federal and state government agencies to build capacity the local/
regional level. Through the Strengthening Economies Together program, 
Purdue Extension is partnering with USDA to identify community assets 
that can be leveraged into seizing emerging opportunities in rural 
communities. Through the Hometown Collaboration Initiative, Purdue 
Extension is partnering with the Office of Community and Rural Affairs 
in the Indiana State Government to build local capacity in communities 
with less than 25,000 people.
---------------------------------------------------------------------------
    \17\ Child Poverty in Rural America. (2015) National Advisory 
Committee on Rural Health and Human Services, Policy Brief, December. 
http://www.hrsa.gov/advisorycommittees/rural/publications/
childpoverty1215.pdf.
---------------------------------------------------------------------------
    Reducing child poverty also means that programs need to assist 
families as they make investments in their children. With the high 
incidence of teen drug abuse in many rural communities, Purdue 
Extension has launched new parenting programs to strengthen teen-parent 
relationships that are often found to reduce teen drug use. In fact, 
the World Health Organization identified the Strengthening Families 
Program: For Parents and Youth 10-14 created by Iowa State University 
as the premier program reducing substance abuse among teens. For every 
dollar spent on this program, communities receive $9.60 in benefits in 
the form of less time in treatment, less jail time, and less time off 
work. In addition, child and youth programs are increasingly focusing 
on education, career readiness and the development of leadership and 
life skills. Through partnerships with USDA, state and local 
governments and nonprofit philanthropy, Indiana 4-H has increased its 
focus on science education and healthy living to prepare youth for 
future opportunities. In 2013, 91 percent of the 4-H youth that 
graduated high school planned to continue their education at a college, 
university, trade or technical school and 26 percent of them were 
first-generation college students.\18\
---------------------------------------------------------------------------
    \18\ Wilson, Tyler and Renee McKee (2013) Assessing Life Skills 
Developed Through Participation in Indiana 4-H Program--2013. https://
extension.purdue.edu/4h/Pages/impact.aspx.
---------------------------------------------------------------------------
Conclusion
    U.S. farmers are facing substantial declines in farm profits, 
driven by lower commodity prices. With crop insurance as the primary 
safety net for U.S. agriculture, the learning and implementation of 
various risk management techniques are the key to helping farmers 
manage margins in these difficult times. In addition to benefiting 
farmers, crop insurance payments provide economic welfare benefits to 
food consumers.
    Food consumers could also benefit from lower food prices. However, 
consumer food prices are less volatile than farm prices, suggesting 
that consumer prices will not fall with farm prices, but rise at a 
slower pace in 2016. Low-income households spending a larger share of 
their income on food could benefit the most from more stable food 
prices. Yet, low-income households living in food deserts without 
access to larger grocery stores may not be able to take advantage of 
these opportunities as food prices at restaurants have risen more 
sharply that food prices at retail stores. Thus, nutrition education 
programs that teach low-income households how to stretch their food 
dollar are critical to reducing food insecurity.
    Finally, plummeting farm incomes will strain rural economies. Farm 
capital spending on items such as tractors and combines has fallen with 
farm incomes straining non-farm income and employment in agricultural 
input companies. At the same time, farm households have reduced 
household spending which also limits opportunities for consumer 
spending on rural Main Streets. These ripple effects in the rural 
economy pose a challenge to reducing poverty rates, which tend to be 
higher in rural communities. If communities are going to address 
poverty, especially child poverty, holistic approaches that focus on 
leveraging local assets to seize emerging economic opportunities and 
address more social issues such as family health and wellness to 
strengthen the investments in children appear to offer the best 
opportunities. These approaches often require partnerships between 
government agencies at all levels, academic institutions such as land 
grant universities, nonprofit organizations and philanthropic entities 
to enhance the lives and livelihoods of people across the country.

    The Chairwoman. Thank you, Dr. Henderson.
    Dr. Leibtag, you may proceed.

         STATEMENT OF EPHRAIM LEIBTAG, Ph.D., ASSISTANT
         ADMINISTRATOR, ECONOMIC RESEARCH SERVICE, U.S.
          DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Dr. Leibtag. Chairwoman Walorski, Ranking Member McGovern, 
and Members of the Subcommittee, I appreciate this opportunity 
to present information on trends in retail food prices, the 
share of U.S. consumer budget spent on food, and the farm share 
of money that consumers spend on food.
    My remarks are based on the most recent data available from 
USDA's Economic Research Service, as well as other Federal 
statistical agencies, such as the Department of Labor's Bureau 
of Labor Statistics, Department of Commerce's Bureau of 
Economic Analysis, the BEA.
    At ERS, our mission is to inform and enhance public and 
private decision-making on a broad range of economic and policy 
issues related to agriculture, food, the environment, and rural 
development. This afternoon, I will discuss the ERS data on 
retail food prices, consumer spending, and how food spending 
and prices can be linked to the food supply chain.
    These sets of data impact programs and policies affecting 
consumers who plan their diets and food budgets based on which 
foods are available, their associated prices, and other 
factors. The dynamics of retail food markets are driven by 
changing trends in both what and how food companies produce, 
and what consumers choose to eat. A major factor during the 
past 30 years has been the rise in the food away from home 
share of total consumer food spending. Consumers are eating 
more outside the home and paying for the added services and 
convenience. Changes in diet and preferences also influence 
which foods are available and consumed, as do changes in where 
food is produced around the world.
    In order to track and forecast food price changes, the ERS 
uses the Bureau of Labor Statistics Consumer Price Index, the 
CPI, for food and its subcomponents. There are separate food 
indexes for food at home, grocery stores and supermarket-
sourced, as well as food away from home, prepared foods for 
eating and drinking establishments, as well as non-commercial 
food service outlets.
    Looking at our recent trends, overall food prices in 2015 
rose 1.9 percent. Grocery store prices were up 1.2 percent, 
while restaurant prices rose 2.9 percent. Food price inflation 
varies across categories, though. For example, the loss of 
laying hens due to avian influenza led to a spike in egg 
prices, while drought in the Southwest and California 
contributed to higher prices for some fruits, vegetables, and 
dairy products. For 2016, ERS currently predicts grocery store 
prices to rise one to two percent, a rate of inflation that 
would fall below the 20 year average of 2\1/2\ percent across 
the U.S. We update our food price forecast monthly and revise 
estimates if conditions, such as the crop outlook or weather-
related conditions, change significantly.
    To get a better understanding of these food price dynamics, 
we also track producer prices within the food supply chain. 
This uses the BLS Producer Price Index, which provides 
estimates of the price change in food products by food stores 
and restaurants. For many commodities, these prices change in 
greater rate than at the retail level. How much of a change 
depends on retailing costs beyond the raw food ingredients, as 
well as the competition level in the retail market.
    Even when rising production and ingredient costs result in 
increasing retail food prices, impacts might be small relative 
to those underlying costs. For example, in 2011, corn, wheat, 
and soybean prices were up by about 40 percent, while grocery 
store prices rose 4.8 percent.
    One of the reasons for this relative stability of retail 
food prices is the number of industries that contribute to the 
food on the shelves of supermarkets. ERS's Food Dollar series 
details the components of the retail food dollar by industry 
and allows us to understand the factors that impact food 
changes. Data are presented in the Food Dollar series in three 
ways to shed light on different aspects of the food supply 
chain. Based on these estimates, as of 2014, the farm share of 
the U.S. food dollar is estimated to be 17.2 percent.
    Turning now to consumer budgets, ERS estimates that food 
expenditures by families and individuals as a share of 
disposable personal income can be calculated using data from 
the Bureau of Labor Statistics. Broadly speaking, consumers in 
the U.S. and many developed countries spend less than 15 
percent of their income on food, while in developing countries 
consumers may spend upwards of 40 or 50 percent. Within the 
U.S. between 1960 and 2002, the average share of disposable 
income fell from 17\1/2\ to 9.6 percent. This was mostly due to 
rising incomes for consumers overall. But since 2002, the 
average has stabilized between 9\1/2\ and ten percent. Breaking 
this down by income group, ERS analyses show that while 
households spend more money on food at higher income levels, it 
represents a smaller portion of income as these households 
spend money on other goods. The middle income level within the 
U.S. have household spending around 13.4 percent of income on 
food, while the lowest income group spends roughly 34 percent, 
as was mentioned earlier.
    To conclude, our data shows that retail food prices in the 
U.S. are relatively stable. Consumers are therefore able to 
spend a relatively small share of income on food, and devote 
larger amounts of their budget to other goods and services, but 
the extent to which this is the case does depend on the income 
level of a given household.
    Madam Chairwoman, this concludes my statement. I would be 
happy to answer questions.
    [The prepared statement of Dr. Leibtag follows:]

Prepared Statement of Ephraim Leibtag, Ph.D., Assistant Administrator, 
Economic Research Service, U.S. Department of Agriculture, Washington, 
                                  D.C.
    Chairwoman Walorski and Members of the Subcommittee, I appreciate 
this opportunity to present information on trends in retail food 
prices, the share of the average U.S. consumer budget spent on food, 
and the farm share of money spent by consumers on food. My remarks are 
based on the most recent data available from USDA's Economic Research 
Service (ERS) and other Federal Statistical Agencies.
    The mission of ERS is to inform and enhance public and private 
decision-making on a broad range of economic and policy issues related 
to agriculture, food, the environment, and rural development. ERS is a 
trusted resource for objective information, data, and unique economic 
and social science analysis on these topics.
    This afternoon I would like to discuss ERS data on retail food 
prices, consumer spending, and how food spending and prices can be 
linked to the food supply chain. These sets of data impact programs and 
policies affecting individual citizens who plan their diets and food 
budgets based on what foods are available, their associated prices, and 
other factors.
Measuring Retail Food Price Change
    The dynamics of retail food markets are driven by changing trends 
in both what and how companies produce food and what consumers prefer 
to eat. A major factor in the food market during the past 30 years has 
been the rise in food away from home's share of total food spending. 
This increase means consumers are eating more outside of the home and 
paying for added services and convenience when buying food. Changes in 
diets and preferences also impact what foods are available and consumed 
as do changes in where food is produced around the world. In order to 
understand food price dynamics, ERS uses Consumer Price Index (CPI) 
data from the Department of Labor's Bureau of Labor Statistics (BLS). 
BLS publishes food price changes through the monthly collection of 
prices from a representative group of food-stores and foodservice 
establishments.
    The CPI compares prices in a base year to prices in the current 
year. For products purchased by consumers, the All-Items CPI is used to 
represent average increases or decreases in prices paid for retail 
goods and services. The All-Items CPI is composed of a number of sub-
indexes, including the Food CPI.
    There are separate food indexes reported for food-at-home, which 
consists of food sold in retail outlets, and food-away-from-home, which 
consists of meals, entrees, and other prepared foods sold in eating and 
drinking establishments, and non-commercial (institutional) foodservice 
outlets. To obtain the Food CPI, the separate indices of the at-home 
and away-from-home segments are combined, using their respective 
expenditure shares. Expenditure shares are determined based on average 
American consumer purchasing behavior from the Bureau of Labor 
Statistics' Consumer Expenditure survey and updated on an annual basis.
    Looking back at last year, supermarket (food-at-home) prices rose 
1.2 percent overall in 2015, but food price inflation varied across 
food categories. The loss of laying hens due to Highly Pathogenic Avian 
Influenza (HPAI) led to a spike in egg prices, while drought in the 
Southwest and California contributed to higher prices for fruits and 
vegetables and dairy products.
    ERS currently predicts 2016 food-at-home (supermarket) prices to 
rise 1.0 to 2.0 percent--a rate of inflation that would fall below the 
20 year historical average of 2.5 percent. These forecasts are based on 
an assumption of normal weather conditions; however, severe weather or 
other unforeseen events such as unexpected surges in commodity prices 
could potentially drive up food prices beyond the current forecasts. 
The ongoing drought in California is likely to have an impact on the 
state's agricultural production, but because of the prevalence of 
irrigation systems there, the impact on specific commodities will vary. 
Long-term moisture deficits across most of the state remain at near-
record levels. Because California is a major producer of fruits, 
vegetables, tree nuts, and dairy, the drought has potential 
implications for U.S. supplies and prices of affected products this 
year and beyond. Conversely, increases in the strength of the U.S. 
dollar, already up substantially from a year ago, make the sale of 
domestic food products overseas more difficult. This would increase the 
supply of foods on the domestic market, potentially placing downward 
pressure on domestic retail food prices.
    ERS updates its food price forecasts monthly and revises estimates 
if the conditions such as the feed grain crop outlook or weather-
related crop conditions on which they are based change significantly.
    In order to gain insight into factors that influence consumer price 
changes, it is useful to track producer prices within the food supply 
chain. BLS' Producer Price Index (PPI), measures prices received by 
processors, suppliers, and wholesalers, in the food industry and more 
broadly in the economy. Both farm and processed products are included 
in the PPI. Similar to the CPI, the indexes are reported monthly and 
annually. The PPI more closely represents the price change in food 
products purchased by food stores and restaurants. For many food 
commodities, the PPI is more volatile as compared to consumer prices.
    Food service operators purchase both products with a high farm 
value component, such as milk or apple juice, as well as more highly 
processed foods having lower commodity/farm value shares, such as 
cereal or pizza. Suppliers to the food-away-from-home segment offer 
both traditional foods requiring additional preparation, as well as 
highly processed, value-added foods such as heat-and-serve entrees.
    In general, retail food prices are much less volatile than farm-
level prices and tend to rise by a fraction of the change in farm 
prices. The magnitude of response depends on both the retailing costs 
beyond the raw food ingredients and the nature of competition in retail 
food markets.
    Several key factors influence how a cost increase affects the 
prices of food under conditions of competition. For a given increase in 
an input's cost, the larger will be an increase in the food product's 
price when:

   The share of the input in the total cost of producing food 
        products is larger.

   The input has fewer good substitutes in the food production 
        process--that is, few other inputs or processes could be used 
        to produce the food product.

   Consumers have few good substitutes for the food product, in 
        which case consumers do not decrease purchases substantially 
        when the price is higher.

   Prices are expected to remain high for a long period of 
        time.

    Retail prices for fresh fruits, vegetables, and eggs have a 
relatively high farm value share compared to other commodities. Changes 
in farm-level prices of these products have a larger and earlier impact 
on retail prices as a result. There are also seasonality factors 
contributing to volatility of produce (fresh fruits and vegetables) 
prices. Produce supply and price variation are also influenced by 
extremes of weather and growing conditions, such as droughts, floods, 
freezes, and pests. Because most produce commodities are highly 
perishable, supply and prices are highly sensitive to adverse growing 
conditions.
How Changes in Input Costs Affect Retail Food Prices
    When food manufacturers and retailers face increased costs, they 
can respond by:

  1.  absorbing the higher costs by keeping prices steady and accepting 
            a lower profit level,

  2.  passing on at least some of the higher costs by raising the price 
            of products, or

  3.  adjusting the production process and employing fewer units of the 
            higher cost input by substituting one or more other inputs.

    If input costs decrease, companies have the opposite options--
higher profits, lower output prices, or expanded input use. Of the 
three options, the last two can directly affect food prices either by 
raising or lowering the price of food products or by food production 
adjustments that influence the amount of food available and thus 
prices.
    Economic research has shown that retail prices are typically more 
responsive to input cost increases than to decreases. This pattern is 
evident in the U.S. CPI, as retail food prices have, on average, 
increased by two to three percent per year, while commodity prices have 
been more volatile.
    Despite the fact that rising input costs are almost certain to 
result in increasing retail food prices, there are a number of reasons 
to expect that this impact will often be small relative to the changes 
in input costs. For example, the 2012 severe drought in the Midwest 
resulted in sharp increases in the farm prices of corn, soybeans, and a 
number of other commodities important to the food supply chain. 
However, this resulted in only a modest increases in overall retail 
food prices--in 2012, food prices rose 2.6 percent (consistent with the 
historical average).
    Historically, dramatic changes in input costs typically result in 
small changes in the CPI for food and for grocery prices in general. 
For example, in 2011, the average weighted price of corn, wheat, and 
soybeans in the U.S.--important U.S. agricultural inputs into the U.S. 
food supply--increased by nearly 40 percent over 2010 levels. In 
contrast, food-at-home prices rose 4.8 percent between 2010 and 2011. 
Very much in line with this disparity, commodity prices, in general, 
are about ten times more volatile than retail food prices over time.
    One of the most important reasons for the relative stability of 
retail food prices is that a number of industries contribute to food on 
the shelves of supermarkets, and the cost components from each industry 
serve to mitigate much of the volatility seen in commodity prices and 
wholesale food prices. ERS's Food Dollar Series details the cost 
components of the retail food dollar by industry and allows us to 
better understand the factors behind changes in the costs of food.
Food Dollar
    ERS uses data from the Department of Commerce's Bureau of Economic 
Analysis to calculate its Food Dollar series. This Series measures 
annual expenditures by U.S. consumers on domestically produced food. It 
provides an overview of the distribution of shares of the average 
dollar spent on food for each underlying industry or factor, including 
estimates of the farm share of the average dollar spent by consumers on 
food. Data are presented in three primary series--the marketing bill 
series, the industry group series, and the primary factor series--that 
shed light on different aspects of the food supply chain. The three 
series show different ways to split up the same food dollar and I will 
discuss each in turn.
    The farm share of the food dollar is the share received by farmers 
from sales of basic food commodities. The most recent version of this 
data spans from 1993-2014 and the farm share has ranged from slightly 
above 15 percent to as much as 18 percent during the past 20 years. Our 
latest estimates, using 2014 data, show the farm share to be 17.2 
percent of every dollar spent in the U.S. on domestically produced 
food.
    Within the data, we are able to calculate a farm share for both at-
home- and away-from-home foods, with the food-at-home farm share 
currently at 26.2 percent and having ranged from the low to mid 20s for 
the past 20 years. The food-away-from-home farm share is 5.8 percent as 
of 2014 and has ranged from five to ten percent during the past 20 
years. These estimates imply that a variety of other costs also 
comprise the food prices consumers pay and variation in those costs and 
changes over time may influence the prices for consumer food products.
    The second food dollar series, the industry group dollar, breaks 
down the cost of food into 12 major industry groups involved in the 
food production and supply system. Whereas the marketing bill series 
measures proceeds from sales, the industry group series measures value 
added (or costs contributions) across 12 industry groups. For example, 
farmers received 17.2 per food dollar in sales proceeds (farm share), 
but after paying their suppliers such as seed, fertilizer, energy 
inputs, financial services, and agribusiness such as veterinarians and 
equipment suppliers, the farm value added in 2014 amounted to 10.4.
    For a typical dollar spent in 2014 by U.S. consumers on 
domestically produced food, including both grocery store and eating out 
purchases, 32.7 went to pay for services provided by foodservice 
establishments, 15.3 to food processors, and 12.9 to food retailers. 
At 5.1, energy costs per food dollar are up 16 percent since 2009, but 
still below the 6.8 that energy costs contributed in 2008.
    Finally, the primary factors dollar identifies the distribution of 
the food dollar in terms of U.S. worker salaries, rents to food-
industry property owners, output taxes and imports.
    For calendar year 2014, the primary factor series shows that 48.7 
of every food dollar expenditure goes to the salary and benefits of 
domestic workers, 36.6 is dispensed as property income, and the 
remainder is split between output taxes (primarily state and local 
sales taxes) and imported commodities embedded in U.S. produced foods, 
such as imported petroleum products.
Food Spending as a Share of Income and Overall Consumer Spending
    Food expenditures by families and individuals as a share of 
disposable personal income are reported annually by ERS. The annual 
disposable personal income data are reported by the Department of 
Commerce's Bureau of Economic Analysis and used in the ERS analysis.
    ERS' data on share of income spent on food has been tracked for 
over 85 years as the share of income spent on food has fallen steadily 
from around 25 percent to its current 9.7 percent level. Looking at 
trends for the past 50+ years, between 1960 and 2002, the average share 
of disposable personal income spent on total food by Americans fell 
from 17.5 to 9.6 percent. This downward trend was driven by increasing 
income for U.S. consumers during most of those 42 years allowing for 
increased purchases of non-food items.
    Since 2002, the share of disposable income spent on food has 
stabilized and ranged between 9.6 and 10 percent each year. As of 2014 
(the most recent data available), the 9.7 percent of disposable income 
spent on food includes roughly 5.4 percent spent on food at home and 
4.3 percent spent on food away from home. The food-at-home share of 
disposable income has fallen from over 20 percent to its current 5.4 
percent, while the share of income spent on food away from home rose 
from just over three percent to its current 4.3 percent.
    Looking at similar data by income group, ERS analysis shows that 
households spend more money on food at higher income levels, although 
food represents a smaller portion of income as households allocate 
additional funds to other goods. In 2014, for example, U.S. households 
in the middle income quintile spent an average of $5,992 on food, 
representing 13.4 percent of income, while the lowest income households 
spent $3,667 on food, representing 34.1 percent of income.
    Along similar lines, consumers in the U.S. and many developed 
countries spend a relatively small share of their budget on food, 
usually less than 15 percent, while consumers in many other countries 
spend 15 to 30 percent on food. Consumers in developing countries with 
lower average incomes and fewer non-food consumables available may 
spend 40 to 50 percent of their budget on food. These differences are 
driven by overall economic conditions, average household income, food 
market dynamics, and overall food availability in each country.
    To conclude, our data show that retail food prices in the U.S. are 
relatively stable, consumers are therefore able to spend a relatively 
small share of income on food and devote larger amounts of their budget 
to other goods and services.
    Madam Chair, this concludes my statement. I will be happy to answer 
any questions that the Subcommittee may have.

    The Chairwoman. Thank you, Dr. Leibtag.
    Mr. Harig, you can proceed.

         STATEMENT OF ANDREW HARIG, SENIOR DIRECTOR OF
         SUSTAINABILITY, TAX, AND TRADE, FOOD MARKETING
                    INSTITUTE, ARLINGTON, VA

    Mr. Harig. Chairwoman Walorski, Ranking Member McGovern, 
and distinguished Members of the Committee. Thank you for the 
opportunity to testify before the Subcommittee today on food 
prices and the consumer. I am Andrew Harig, Senior Director of 
Sustainability, Tax, and Trade of the Food Marketing Institute, 
which represents food wholesalers and retailers in each 
Congressional district in the U.S.
    Americans of all income levels are intensely price 
conscious when deciding what foods to purchase. In survey after 
survey, low prices remains the single most important attribute 
that consumers seek in deciding where to shop.
    Food retailing is an intensely competitive business that 
averages about a one percent profit margin annually. While 
FMI's members compete on service, quality, and selection, the 
role of prices in driving decision making plays a dominant role 
in how the industry operates. Put simply, we focus so intensely 
on food prices because our consumers demand that we do.
    As the final link in the supply chain, food retail plays a 
crucial role in connecting the American public with farmers and 
ranchers. FMI and our industry feel a strong responsibility to 
create a better understanding of the role that agricultural 
policy and the health of the farm sector play in making sure 
that the United States has the world's safest and most 
affordable food supply.
    A number of our members have launched initiatives over the 
past few years to make this link explicit. These programs range 
from Meet your Farmer sessions at the store level, to expanding 
local purchasing agricultural programs.
    Despite this, we believe the relationship between farm 
level issues and their impact on food prices is not always as 
clear to consumers as it could be, in part due to the shared 
complexity of our industry's pricing model. As the other 
witnesses have made clear, there often dozens, if not hundreds 
of factors that go into the price of a product by the time it 
reaches retailer's shelves. When you consider that the average 
store carries about 40,000 unique items, the number of 
different variables shaping retail prices blend into an 
extremely complex algorithm.
    Admittedly, certain occurrences, including drought and 
crises like the avian influenza, tend to have an obvious link 
to changes in the cost of food. Other factors could be more 
confusing. When huge energy cost increases drove up the price 
of food in 2007 and 2008, many consumers were caught off guard 
by how energy intensive farming, manufacturing, and food 
retailing can be. The disconnect between what is going on at 
the farm level and how it translates into price increases 
raises long-term concerns that the entire supply chain needs to 
address. As the demands on U.S. agriculture increase, it is 
important that consumers understand the changes so that they 
can continue to make the best use of their food dollar.
    One of the most important factors for improving outreach 
across the supply chain is recognizing that many consumers take 
a holistic approach to food prices. They focus less on the cost 
of any single component of their store visit and more on the 
total cost of building and preparing a meal. As a result, 
consumers have become particularly adept, particularly at lower 
income levels, at addressing price increases by scaling back 
the purchase of expensive items and substituting in less 
expensive alternative foods. This has been especially true of 
the protein category. Drought, avian influenza, PEDv, and a 
number of other factors have all contributed to large changes 
in price that consumers have had to adapt to. As these changes 
occurred, consumers adjusted their own purchases to maintain 
their overall quality of their diets.
    Retailers have responded to this by adopting a variety of 
strategies to help the American public in these efforts. A 
number of FMI members, for example, have limited the cost 
increases they pass along to consumers on an extensive list of 
staple products. The last few years have also seen a much 
broader use of private labeled brands that are often lower 
priced than national brands. Retailers have found that as they 
respect and promote a focus on total food costs and the total 
food bill, they are often rewarded with shoppers' loyalty.
    When we talk about food prices, however, it is also 
important to acknowledge the role that regulatory changes play 
in driving the prices paid by consumers. The industry is 
currently in the process of implementing the Food Safety 
Modernization Act, the most significant change to food safety 
laws in over 70 years. FMI supported many of the changes 
proposed in FSMA, but the sheer scope of the law is almost 
certainly going to impact consumers. Similarly, the FDA's Chain 
Restaurant Menu Labeling Regulation could have broad impacts on 
supermarket buy local programs, food waste, and the cost of 
prepared foods at the store level. Even state level laws, such 
as Vermont's GMO labeling requirement, can expand to have 
national implications.
    That being said, the flexibility and resilience shown by 
the American consumer should be heartening to everyone in the 
food supply chain. Despite sometimes sharp and occasionally 
unexpected changes to price in a number of different categories 
over the past few years, consumers continue to adapt their 
purchasing strategies. Moving forward, as new demands are 
placed on the supply chain, producers, manufacturers, and 
retailers are going to be called on to be equally as adaptable.
    Thank you for the opportunity to testify this afternoon. I 
look forward to answering any questions you might have.
    [The prepared statement of Mr. Harig follows:]

Prepared Statement of Andrew Harig, Senior Director of Sustainability, 
        Tax, and Trade, Food Marketing Institute, Arlington, VA
    Chairwoman Walorski, Ranking Member McGovern, and distinguished 
Members of the Subcommittee:

    Thank you for the opportunity to testify before the Subcommittee on 
Nutrition on the issue of food prices and the consumer. My name is 
Andrew Harig and I am Senior Director for Sustainability, Tax and Trade 
at the Food Marketing Institute, which represents food wholesalers and 
retailers in each Congressional district in the U.S.\1\
---------------------------------------------------------------------------
    \1\ Food Marketing Institute proudly advocates on behalf of the 
food retail industry. FMI's U.S. members operate nearly 40,000 retail 
food stores and 25,000 pharmacies, representing a combined annual sales 
volume of almost $770 billion. Through programs in public affairs, food 
safety, research, education and industry relations, FMI offers 
resources and provides valuable benefits to more than 1,225 food retail 
and wholesale member companies in the United States and around the 
world. FMI membership covers the spectrum of diverse venues where food 
is sold, including single owner grocery stores, large multi-store 
supermarket chains and mixed retail stores. For more information, visit 
www.fmi.org and for information regarding the FMI foundation, visit 
www.fmifoundation.org.
---------------------------------------------------------------------------
The Role of Price in Food Retailing
    Over the past fifty years, one of the great--and often unheralded--
success stories of the United States' economy has been that Americans 
devote less of their income to feeding their families today than they 
have at any other point in our history. In 1964, families and 
individuals spent over 15 percent of their disposable income on food; 
by 2014, this number had dropped to under ten percent (see chart 
below). This decrease has been a boon for the overall economy, since it 
freed up disposable income to be diverted into new and productive 
areas.
Percentage of Disposable Income Spent on Food in the United States, 
        1964-2014
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: USDA's Economic Research Service, Data Series: ``Food 
        expenditures by families and individuals as a share of 
        disposable personal income''.

    Despite this long downward trend, however, consumers continue to be 
intensely price conscious in making decisions about the food they 
purchase. For example, \3/4\ of all consumers take price into 
consideration when deciding whether to purchase a product for the first 
time.

      Decision Factors Contributing to the Purchase of New Products
------------------------------------------------------------------------
                                                                Almost
                         Never     Hardly Ever   Sometimes      Always
------------------------------------------------------------------------
Price                          1%           3%          21%          75%
Nutrition Label                5%          10%          38%          46%
Brand Name                     3%          14%          50%          33%
Health Claims                 13%          20%          47%          21%
Organic Claims                22%          27%          34%          17%
------------------------------------------------------------------------
Food Marketing Institute, U.S. Grocery Shopper Trends 2015.

    Once the decision to purchase a product is made, and the consumer 
integrates it into their shopping, they become more flexible on price. 
But sudden changes to the price remain a factor of concern even for 
products for which a consumer expresses a deep loyalty.
    Similarly, ``low prices'' remains the single most important 
attribute that consumers seek in deciding at which store to shop.
Top Store Attributes Rated as ``Very Important'' to Consumers 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Food Marketing Institute, U.S. Grocery Shopper Trends 2015.

    The recession that began in 2008 certainly drove many consumers to 
focus more on what they were paying for groceries, but these impacts 
persist even in 2016. This is true for people at all income levels, not 
just lower-earning households. Overall more than \1/2\ of all consumers 
maintained that they paid about the same for groceries in 2015 than 
they did in 2014, and most are looking to continue holding that line.

                  Changes to Spending Behavior in 2015
------------------------------------------------------------------------
                                  Income       Income of     Income over
                     Total      under $35K  $35,000-$99,999     $100k
------------------------------------------------------------------------
I am spending             52%          50%            54%            52%
 about the same
 on groceries
I am spending             31%          31%            31%            36%
 more on
 groceries
I am spending             16%          19%            15%            12%
 less on
 groceries
------------------------------------------------------------------------
Food Marketing Institute, U.S. Grocery Shopper Trends 2015.

    Food retailing is an intensely competitive industry which averages 
about a one percent profit margin annually. In an industry of our size 
and scope, successful companies cannot afford to ignore even a single 
factor that brings consumers into the store. While FMI's members 
compete on service, quality and selection, the role of prices in 
driving consumer decision making plays a dominant role in the way the 
industry operates. Put simply, we focus so intensely on food prices 
because our consumers demand that we do.
Communicating the Factors that Make-up Food Prices
    As the final link in the supply chain, food retail plays a crucial 
role in connecting consumers with farmers and ranchers. FMI and our 
industry feel a strong sense of responsibility to create a better 
understanding of the role that agricultural policy and the health of 
the farm sector play in making sure that the United States has the 
safest, most wholesome and most affordable food supply in the world. A 
number of our members have launched initiatives over the past few years 
to make this link explicit; these programs range from ``Meet your 
farmer'' sessions at the store level to expanding local agriculture 
programs.
    Despite this, we believe the link between farm-level issues and 
their impact on food prices are not always clear to consumers. In large 
part, this disconnect can probably be traced to the sheer complexity of 
the pricing model in our industry. As the other witnesses have made 
clear, there are often dozens--if not hundreds--of factors that go into 
the price of a product by the time it makes it to FMI members' retail 
shelves. When you consider that the average store carries about 40,000 
unique items, the number of different variables shaping retail prices 
blend into an extremely complex algorithm.
    Admittedly, certain occurrences--including drought and crises like 
avian influenza--tend to have a direct and obvious link to the cost of 
food that most people understand. Other changes can be more confusing, 
however. For example, when huge energy cost increases drove up the 
price of food in 2007 and 2008, many consumers were not necessarily 
focused on just how energy intensive farming, manufacturing and 
retailing food can be. During this period, our members received many 
more calls asking about the reasons behind price increases than we have 
received about the California drought.
    The disconnect between what is going on at the farm-level and how 
it translates into price increases raises long-term concerns that the 
entire supply chain needs to address. For example, as the demands 
placed on U.S. agriculture to feed an ever-expanding population 
increase, it is important that consumers understand these changes so 
that they can continue to make the best use of their food dollar. But 
it is just as important that farmers and ranchers understand the 
changing face of the American consumer so that they can begin planning 
for the changes that are going to be asked of them.
The Understanding of Why Costs Increase May Be Imperfect, But Consumers 
        are Becoming Increasingly Expert at Responding to Them
    As previously noted, the factors underlying cost increases for 
individual commodities or products may not be completely understood at 
the consumer level at certain times. However, many consumers tend to 
take a more holistic approach to how they view food prices. These 
shoppers tend to focus less on the cost of any one component of their 
store visit, and more on the total cost of building and preparing a 
meal.
    As a result, consumers have become particularly adept over the past 
decade at addressing price increases through both scaling back the 
purchase of expensive items and substituting in less expensive 
alternate foods. This has been especially true of proteins, a number of 
which have faced significant challenges in recent years that have led 
to price changes. Drought, avian influenza, PEDv and a number of other 
factors have all contributed to large and unexpected changes in price 
to which consumers have had to adapt. We have seen that as these 
changes occur, consumers make adjustments to their own purchases to 
make sure that the overall quality of their diets is not impacted.
    For instance, over 40 percent of consumers surveyed in FMI's and 
the North American Meat Institute's 2015 Power of Meat Survey admitted 
that price increases changed the way they bought meat and poultry. But 
the strategies they used to address these price increases were 
extremely broad:

 
 
 
Buy the same kinds of meat, but less of it.................        33%
Buy what's on promotion....................................        19%
Buy less expensive items...................................        16%
Volume-based discounts.....................................        13%
Change stores..............................................         5%
Buy premium; eat-out less..................................       * 3%
 
* Food Marketing Institute & the North American Meat Institute, Power of
  Meat 2015.

    Retailers have adopted a number of strategies to aid consumers in 
their efforts to address changes in food prices. A number of FMI's 
members have limited the cost increases they pass along to consumers on 
an extensive list of staple products. The last few years have also seen 
a much broader use of private label brands that are often lower-priced 
than national brands.
    The flexibility and resilience shown by American consumers should 
be heartening to everyone in the food supply chain. Despite sometimes 
sharp (and unexpected) changes to prices in a number of different 
sectors over the past few years, they have continued to adapt their 
purchasing strategies.
A Quick Word on Regulatory Impacts
    When we talk about food prices, it is also important to acknowledge 
the role that regulatory changes play in driving costs paid by 
consumers. The industry is currently in the process of implementing the 
Food Safety Modernization Act (FSMA), the most significant change to 
food safety laws in over thirty years. FMI supported many of the 
changes proposed in FSMA, but the sheer scope of the law is almost 
certainly going to impact consumers. Each of the new FDA rules facing 
retailers are more than 275 pages long, so retailers and wholesalers 
are working hard to understand, interpret and implement all the 
changes. Similarly, the FDA's chain restaurant menu labeling regulation 
could have broad impacts on supermarket ``buy local'' programs, food 
waste and the cost of prepared foods at store level, forcing retailers 
to move from local and produce department sourcing to a more 
standardized food service sourcing--similar to restaurants. Even state 
level laws, such as Vermont's GMO labeling requirement, can expand to 
have national implications that impact consumer prices. For example, if 
companies attempt to reformulate to non-GMO ingredients due to consumer 
concern resulting from a lack of information, we are anticipating a 25% 
increase in cost in the reformulated private brand product (not 
including labeling and distribution costs)--with an almost certain 
impact on low-income customers and local farmers.
    Each of these new regulatory requirements is going to impose costs 
on the system, and with a 1% retail margin, these added costs will 
impact consumer prices. Before Congress considers legislation or an 
agency moves to finalize a regulation, we would urge you to consider 
the broad implications of any new proposal--not only its impact on 
farmers, ranchers, manufacturers and retailers, but also its impact on 
consumers.
Conclusion
    Despite the best efforts of many on this Committee, the challenges 
of the past decade have forced Americans to become incredibly creative 
in how they feed their families and spend their food dollars. This is 
going to have long-term impacts on how Americans shop for food. 
However, FMI's research shows that a new consumer is emerging--one who 
is going to demand both value and broader engagement on the part of 
food companies at every level of the supply chain. This is going to 
mean not only a commitment to greater transparency, but also the 
forging of new partnerships focused on health and wellness. As we begin 
to prepare for the next farm bill, FMI looks forward to continuing to 
work with the Committee to share our research and work to keep the U.S. 
food supply the safest, healthiest, and most affordable in the world.
    Thank you.

    The Chairwoman. Thank you, Mr. Harig.
    Dr. Henderson, and to all of you, thank you for your 
expertise, and we have been focusing at the Subcommittee level 
on the hearing series, The Past, Present, and Future of SNAP. 
And we have heard from a diverse group of witnesses over the 
past several months about the array of challenges that low-
income families face, whether it be access to healthy, 
nutritious food, arranging childcare, transportation, or 
learning the adequate skills for gainful employment. We also 
know, as you all have just alluded to, that the low-income 
individuals have less disposable income to spend on food 
compared to the average American.
    Dr. Henderson, can you just talk a little bit more about 
what role does the consumers' income play in their 
responsiveness to food prices, and then what other factors 
contribute to low-income individuals as they choose to purchase 
different types of things at the grocery store, just to give us 
a little bit more insight? Thanks.
    Dr. Henderson. Thank you. From my perspective, the low-
income consumer when they have a limited food budget and 
limited food dollar, they have to stretch it across many 
different items. When you have higher food prices, they first 
will go through there and start adjusting their allocation of 
what they buy. First of all, I oftentimes think that they look 
at a different component. So instead of buying steaks, they buy 
hamburger. And if they bought one hamburger and it becomes 
really expensive, they look at different types of meats or 
different types of products that are in the grocery store in 
doing those allocations.
    The other challenge that we have, though, with low-income 
households is about in terms of access to foods, those that are 
living in food deserts. Do they have access to grocery stores 
and other types of markets that allow them the variety of food 
choices that they are able to make?
    And then the third part of it is how do we help them 
through education to have a better understanding of the 
nutrition of the product and the choices that they make from a 
nutritional standpoint, and how to stretch their food dollar to 
make those choices when they into a grocery store or a retail 
store to make those personal choices.
    And so when I think about consumers, they have a lot of 
different stages and a lot of different components on making 
that food choice of how to stretch their dollar, let alone how 
do they get to the store in the first place.
    The Chairwoman. And just a follow up question: in Indiana, 
we have a very diverse agricultural economy. We obviously have 
row crops, corn, soybeans, very diverse, though, with other 
things that we grow. And understanding some of the policies 
here, especially because we have all mentioned crop insurance 
and how it helps farmers through difficult times. Can you help 
us make the connection between how those policies work and the 
connection to the abundant and affordable food supply in the 
U.S.? Help us understand what role that farm policy plays and 
how important it is as we look to the future.
    Dr. Henderson. Farm policy and crop insurance, it provides 
the protection against the downside risks of short crop, 
extremely low prices and the risks that you have on the revenue 
generation. What it does is then because it protects against 
the downside risk, it stabilizes production.
    The Chairwoman. Yes.
    Dr. Henderson. And through that, it helps then mitigate and 
stabilize prices that are then pushed through the system. And 
that is where the impact of where the farm policy will impact 
the consumer and provide the benefits that the consumer would 
have.
    And so that is the general mechanism through it is 
stabilizing, potentially increasing crop production in certain 
places, and providing coverage and reducing crisis for the 
consumer at the retail event through increased supplies and 
stable supplies.
    The Chairwoman. And one other thing you mentioned earlier 
was the Nutrition Education Program. Can you talk about some 
examples of how that directly impacts folks and how they are 
able to stretch SNAP dollars, how the programs work together?
    Dr. Henderson. Yes, the Nutrition Education Program in 
Indiana is administered by Purdue Extension. We have staff in 
every county, and so part of what we do in the Nutrition 
Education Program is direct education. We will have our staff, 
program assistants go out and meet individually with families, 
talk to them about their situation, talk to them about 
budgeting, talk to them about food safety, how to reduce food 
waste, but also talk to them about nutritional aspects of food, 
which foods provide the most nutritional benefits. About how 
you think about your shopping experience to maximize your 
dollar and stretch your food dollar, and all these different 
things. It is about a seven-step process. It goes through quite 
a bit of time, over a few months to go through that process. 
But we have seen tremendous benefits when we followed up with 
them about how they have changed their spending patterns, how 
they have been able to stretch their food dollar, they have 
been able to get more nutritional components into their diets, 
and ultimately better health outcomes. So we have been pleased 
with that in terms of a broad measure of food insecurity of 30 
different components that go into it, it has been a real 
benefit.
    The Chairwoman. Thank you. I appreciate it.
    The chair recognizes Mr. McGovern, for 5 minutes.
    Mr. McGovern. Thank you. All of you have highlighted the 
relative stability and affordability of food in this country, 
but there are important distinctions to be made among income 
groups. Billionaires, for example, face no price constraints on 
food, so presumably, their demand is shaped by prices the same 
way it is for you or me. And at the other end of the income 
distribution, very poor households are extremely resource 
constrained. An extra dollar on milk might mean no bus fare to 
work. So for the poor and very poor, their response to minor 
price fluctuations or transportation costs to get to food 
stores would be very, very different.
    Fortunately, we have Federal food assistance programs like 
SNAP that provide assistance with purchasing food to help 
stabilize demand among very poor households. SNAP has important 
short-term benefits, reducing hunger and poverty, increasing 
demand for food, as well as important long-term benefits. 
Families with young children who participate in the program 
were shown to have long-term positive health and education 
outcomes. And we know that SNAP recipients are also consumers. 
Households spend their SNAP dollars quickly in their local 
communities. SNAP has an important economic multiplier effect. 
Every SNAP dollar spent generates about $1.75 in economic 
activity.
    Mr. Harig, can you talk about the economic impact of SNAP 
for food retailers and their communities? And related to that, 
after the stimulus package's boost to SNAP was cut in 2013, I 
heard from supermarkets in my district that they were seeing an 
uptick in SNAP recipients abandoning carts full of food or 
having to put items back because they didn't realize their 
benefit had been cut. I was wondering whether you heard any 
such stories like that? And the other thing is recent proposals 
here in Congress have proposed block granting SNAP, which would 
result in about $150 billion in cuts to the program. Others 
have proposed even more Draconian cuts. Can you talk about the 
impact that such a cut would have on your industry?
    Mr. Harig. Sure. Thank you, Congressman McGovern.
    In terms of the role that SNAP plays with the industry, the 
average SNAP recipient is on the program for a relatively short 
period of time. The last number I saw was about 9 months is the 
average. And certainly during that period, we believe it is 
better both in terms from a business aspect, but also for the 
consumer to continue to be a consumer, to continue to shop in 
stores as opposed to maybe necessarily being reliant on a food 
kitchen or a food pantry. So it does play an important role.
    We can see huge swings in different areas. There are some 
districts in the country where up to 20 percent of consumers 
are on SNAP. Obviously, if you take that out of the grocery 
store, it not only has a dollar impact, but it puts a huge 
strain on the hunger services in the community as well. So SNAP 
plays an important role in helping create a level playing field 
in that, making sure that resources aren't too strained.
    After the change to the program, we always see a period of 
time where there is an adjustment where the information takes a 
while to get down to the consumer level. That is always a 
concern for us. One of the great success stories of it has been 
over the years a switch to EBT, because it has helped take a 
lot of the stigma away from SNAP and people are able to use it 
in a much more discreet way where they don't always have to 
feel like there is a spotlight on them. And so when we start to 
see people having to put staff back or cashiers having to say 
this is no longer eligible, or you have exceeded your amount, 
that is a problem for us, so that is a long-term concern for us 
on the program, too, that we always have time as these changes 
are made to communicate it to the participants and spread the 
word.
    Mr. McGovern. All right, but as it stands right now, the 
benefit for most families doesn't allow them to be able to 
afford groceries for an entire month. Oftentimes they buy 
groceries and they end up at a food bank or a soup kitchen or 
at a church trying to get additional food. I don't know whether 
you want to answer this or not but if we were to do something 
here to further restrict that benefit, to further cut so that 
the benefit would be even less than it is now, what do you 
anticipate the impact would be on the consumers, and also on 
your industry?
    Mr. Harig. Oh, well sure. I mean, we would expect to see 
that those hunger resources would be strained. A lot of us now, 
because our supply chains are very efficient within the 
industry, a lot of the food waste we used to have that went to 
donation doesn't occur, so that has tightened that up. So a lot 
of the donations now are straight donations that our members 
make.
    Mr. McGovern. Right.
    Mr. Harig. Clearly there is going to be more demand for 
that. But, again, it is always a concern for us that people 
have the information available, they know it is coming, so they 
can plan for it to make sure.
    Mr. McGovern. Thank you.
    The Chairwoman. Thank you. The chair recognizes Chairman 
Conaway, for 5 minutes.
    Mr. Conaway. Well thank you, ma'am, and I appreciate that.
    That drop in food stamp benefits in 2013 was scheduled by 
the stimulus bill from 2009, and it was structural to that 
stimulus bill which was done when my colleague on the other 
side was in charge.
    Dr. Leibtag, you mentioned that in the lower quintile, 34 
percent, middle quintile was 13 percent. Let me make sure I 
understand the mechanics. The other three quintiles then, I 
assume that fourth quintile from the first to the bottom would 
be between 34 and 13. How do we get to 9.8 percent overall? The 
top two quintiles, that distorting of the average. How do we 
understand that?
    Dr. Leibtag. So yes, the consumer income in the country, of 
course, varies and the highest income groups are spending quite 
a bit below ten percent of their income.
    Mr. Conaway. Right, I understand that, but how are the 
quintiles broken, where are the breaks on income, I guess for 
the top two quintiles.
    Dr. Leibtag. The way that the break works is that we take 
the entire survey of households' consumer expenditures, and all 
the households report income, and we take \1/5\ of the 
households and that is the first 20 percent, in order of 
income, lowest to highest, second, third, fourth, and fifth. So 
it is dividing the population into five groups.
    Mr. Conaway. Okay, I got you.
    Well as we look at policies here, the top two quintiles are 
never really concerned about increases in food prices. And so 
as we look at policy changes, whatever they might be, I hope 
our team collectively can focus on the bottom two quintiles, 
because those are the folks who have the least flexibility to 
be able to adjust to price changes, and are the most conscious 
about that. So whether it is a farm bill change or a SNAP 
change or whatever it might be, that is the group that I hope 
all of us have in our mind's eye when we discuss food prices.
    For either you or Dr. Henderson, 17.2 percent goes to the 
farmer, the other 82+ percent, where does that go? How is that 
broken up between the other folks in the food chain?
    Dr. Leibtag. So the 17.2 percent is what we call the farm 
share.
    Mr. Conaway. Okay.
    Dr. Leibtag. The remainder is what is known as----
    Mr. Conaway. That is specifically the farm, that is the 
farmer piece?
    Dr. Leibtag. Yes.
    Mr. Conaway. No middle man between him and that 17 percent?
    Dr. Leibtag. The 17 percent is the value of the sales for 
each dollar that goes back to the farmer.
    Mr. Conaway. Okay.
    Dr. Leibtag. Now the farmer has to pay out of that, so 
there are two parts there.
    Mr. Conaway. Right, he has input costs.
    Dr. Leibtag. Yes.
    Mr. Conaway. That is not----
    Dr. Leibtag. But the other 82, 83 percent distributed 
across the other industries in the food supply chain.
    Mr. Conaway. Yes, can you break that up for us between 
distributors and however you break that up?
    Dr. Leibtag. Yes, so there, of course, is wholesale retail 
and food service kind of at the further end the chain. There is 
also transportation, packaging, energy--I am looking down at my 
notes here. We have about 12 categories of industry----
    Mr. Conaway. You said 12?
    Dr. Leibtag. Yes, there are 12 industry groups that 
contribute significantly to the food supply.
    Mr. Conaway. Okay.
    Dr. Leibtag. And that other 82+ percent----
    Mr. Conaway. Which of the 12 gets the most of that? Who is 
the highest?
    Dr. Leibtag. The largest industry share is for food 
service, which is the final----
    Mr. Conaway. Away from home.
    Dr. Leibtag. Away from home.
    Mr. Conaway. All right, and that is what? And that is how 
much?
    Dr. Leibtag. About 32, 33
    Mr. Conaway. It is 33, okay.
    Dr. Leibtag. Yes.
    Mr. Conaway. And the next largest would be?
    Dr. Leibtag. The next--I am looking at my numbers here. The 
next largest in the industry group is food processing at 15, 
retail at 13, and then going down from there.
    Mr. Conaway. All right, I appreciate it. Anything is 
helpful for folks from time to time when they see these--and 
they can be some sizable numbers--either food stamps or support 
programs. Somehow that number is out of context with the 17 
gross that our farmers get. Any sense of what the net is for 
farmers?
    Dr. Leibtag. For our industry series, it is about 10\1/2\ 
percent, or about 10, so they have the 17, then they pay for 
their input costs, like you said.
    Mr. Conaway. All right, but that doesn't count anything to 
them? That is pre-compensation to the farmer?
    Dr. Leibtag. That is right. That takes it back to the farm 
for----
    Mr. Conaway. All the farm inputs, the fertilizer cost, seed 
cost?
    Dr. Leibtag. That has been accounted for from the 17----
    Chairman Conaway. To get down to 10?
    Dr. Leibtag. Yes.
    Mr. Conaway. So that is what he or she then has to feed his 
family or her family off of?
    Dr. Leibtag. That is right.
    Mr. Conaway. I appreciate that. We have some other 
questions, but I yield back to the team. Thank you all for 
being here this morning. I appreciate it.
    The Chairwoman. Thank you. The chair recognizes 
Congresswoman DelBene, for 5 minutes.
    Ms. DelBene. Thank you, Madam Chair, and thanks to all of 
you for being here with us today.
    Dr. Leibtag, in your testimony, you talk about the 
volatility of commodity prices and how higher inputs are 
certain to increase food prices. But what about when prices go 
down? It is particularly relevant in the dairy sector and milk 
prices, when prices go down for the farmer, it seems like 
consumers rarely see lower milk prices. In fact, there is one 
study by the National Farmers Union that showed that if the 
retail price for milk is $3.89, the farmer nets $1.35. So who 
benefits from these lower inputs but higher prices?
    Dr. Leibtag. There has been a good amount of research on 
how the food industry responds to higher and lower costs, and 
there is a good amount of evidence to what you are referring to 
in terms of different responses on the way up versus on the way 
down. And part of the understanding of that difference in 
response is a function of the various parts of the supply chain 
and the decision those producers are able to make.
    We will talk about retail as an example. Retailers 
obviously face uncertainty in terms of the supplies that they 
are going to have to purchase and how much those are going to 
cost. When things fall in the short-term, they may have the 
option to not pass on all of that savings immediately, and part 
of that can be because of the uncertainty. And we do see that 
in a lot of the grocery stores. There are many instances over 
the last 10 or 15 years where there is a quick spike run up and 
you see that pretty quickly at the grocery store throughout the 
supply chain, but then when things drop back down they are 
probably slower to adjust. And I am not a retailer myself, but 
I would venture to say that part of that is the uncertainty. 
They don't know how long it is going to stay low, and if they 
drop too fast, they may come out short. But maybe Mr. Harig who 
is representing retailers may have----
    Mr. Harig. Thank you. Yes, certainly Dr. Leibtag makes a 
good point. It is the uncertainty that drives that a lot, too. 
It can also be if other inputs that aren't necessarily that 
direct input go up at the same time. Energy costs, cost of 
insurance, those other kind of non-food related costs that 
businesses have, those can also go up in the meantime. As I 
said, the algorithm that goes into saying how prices go, there 
are so many elements of it, and sometimes the direct 
relationship always doesn't play out at the store level.
    Ms. DelBene. Based on both of your comments then, would you 
think that it is crucial to ensure that any changes, for 
example, in the dairy safety net if we are talking about milk, 
that any changes in the dairy safety net in the future include 
a mechanism that stabilizes the milk supply so that we avoid 
flooding the market? Also, eliminating price spikes and keeping 
milk pries stable are important so that farmers obviously are 
not impacted when prices go down and consumers aren't being 
charged a higher price, even when inputs go down? Dr. Leibtag, 
I don't know if you have----
    Dr. Henderson. In terms of the stabilizing prices on the 
milk, there has been a lot of different policies that have been 
enacted in there. The determination for policy is, again, going 
to be what is the goal on that role, on those different aspects 
of it in there. What we have seen over the last couple of years 
and just looking at the data is that farm prices and producer 
prices, that would be kind of the wholesale aspect of it, have 
a much stronger correlation. And so what I was seeing is that 
when they are going up and they are coming down, they are a 
much tighter relationship than what has been over the last few 
years than what it was maybe 20 years ago. And so what we have 
seen is much, much stronger correlation which would suggest 
that they are moving together more.
    One of the challenges with the dairy policy is going to be, 
what is the goal? How do you tie it with those fluctuations? 
And it is one of the challenges that farmers traditionally have 
of balancing the inputs and the output costs. And on the crop 
side, that is why you do have the crop insurance program.
    Ms. DelBene. And then quickly, if I can, Dr. Leibtag, the 
maximum SNAP benefit is based on a market model called the 
Thrifty Food Plan, the TFP. I wondered if you could talk about 
how long this has been the basis for SNAP, and has it kept up 
with the needs of recipients?
    Dr. Leibtag. The Thrifty Food Plan is calculated and 
updated on a monthly basis by the Department of Agriculture, 
and it is a food basket based on two objectives, have a 
nutritionally balanced set of foods available, and fit within a 
constraint of costs. You want to have nutritional balance, get 
as close to recommendations as possible, and at the same time, 
have costs not be too high based on affordability. This gets 
updated based on changes in prices on an annual basis, and one 
issue interesting to explore in terms of research is the 
changing behavior in how consumers get their food and what they 
choose to buy, and where. The Thrifty Food Plan is based on 
mostly buying more basic ingredients, purchasing mostly at 
grocery stores, and then going home and making the food. And we 
know, as I mentioned a few minutes ago, that people's behaviors 
change, and so people are making the tradeoff between making 
less at home and buying more either at restaurants, but 
certainly prepared foods.
    The Chairwoman. Dr. Leibtag, I am sorry. I have to cut you 
off. I want to make sure our Members get their votes cast.
    Ms. DelBene. My time has expired.
    The Chairwoman. Thank you. The chair recognizes Mr. 
Benishek.
    Mr. Benishek. Thank you, Madam Chair.
    Well thanks for your testimony. I have heard a lot of 
things that were very interesting.
    Dr. Leibtag, you mentioned noncommercial food outlets in 
your testimony. What is that?
    Dr. Leibtag. You said noncommercial food output?
    Mr. Benishek. I think that was something you mentioned in 
your testimony. What does that mean?
    Dr. Leibtag. I believe you are referring to the factors in 
the food dollar, and let me check on the wording.
    Mr. Benishek. Okay, and I had another question, a follow up 
with the Chairman's. Is 32 percent one of the inputs in the 
non-farm pricing? That was the largest one, and I didn't 
understand what that was. Was that eating out?
    Dr. Leibtag. The overall U.S. food dollar can be broken 
down by the industries that contribute to the food supply 
chain, and so we talked about the ten percent and the 17 
percent for the farm.
    Mr. Benishek. So 32 percent of the food consumed in this 
country is consumed outside the home, is that what that means?
    Dr. Leibtag. Thirty-two percent of the costs of buying food 
are from the food service part of the process. So at the end, 
the food is produced from the farm all the way through the 
chain, and then it gets to the back door of the restaurant, for 
example. Those added 32 percent are the costs of the people 
preparing the foods for you at a restaurant or at a store, 
serving it, et cetera.
    Mr. Benishek. So it includes stores too then?
    Dr. Leibtag. Yes, it is industry-wide. Whatever we would 
consider or define as food service, which is kind of the 
finishing touches, that is what that piece of the dollar goes 
to.
    Mr. Benishek. Well, I heard in your testimony, and you 
talked a little bit about, the change in the nature of 
consumers and I went to the grocery store over the weekend and 
I was surprised by the percentage of the grocery store that was 
dedicated to already prepared foods. I mean, the deli--at least 
in my hometown, there was a little deli, like a counter. At 
this store, the deli was like \1/2\ the store, and it was all 
$9.99 a pound, no matter what it was. It was unbelievable to 
me. It was in D.C., so people must go in there and buy food 
prepared that way, but it was amazing to me coming from a small 
rural area. I couldn't find any Heinz vinegar. It was all 
specialty vinegars, you know what I mean? It was just amazing 
because I was looking for some apple cider vinegar that I use 
to put in my eggs when I poach eggs. But anyway, I didn't want 
to pay a premium price for vinegar. It just was weird going to 
the store. I go to the store at home a lot, but I don't really 
shop here in D.C. that often at the grocery store, so it was 
kind of weird.
    Dr. Henderson, I would like to ask you about this extension 
teaching that you do for consumers. You talked about teaching 
people how to shop and buy food in your testimony, how do you 
identify the people that get that teaching and tell me more 
about what you do. Tell me more about that, because it is 
really interesting. This is a state-funded program from the 
Purdue University Extension Service, right, like Michigan 
State? I am from Michigan, we have a pretty good extension 
service in Michigan State. But you are in every county in 
Indiana, I would imagine?
    Dr. Henderson. Right. The cooperative extension service is 
in all 50 states, and Puerto Rico. At Purdue, we have different 
organizational types of structures, but we are present in 
pretty much every county across the country. In Indiana, we 
have county-based offices which we have had traditionally. Part 
of them is delivering educational programs on health and human 
sciences, and our focus has been health and nutrition.
    Mr. Benishek. How do you identify the people that you are 
teaching?
    Dr. Henderson. How we do that is through our connections in 
local communities, just like many other different educational 
programs. We do----
    Mr. Benishek. So if somebody goes to social services, they 
get referred to you if they get on food stamps or they get 
referred to you, or----
    Dr. Henderson. We will have some partnerships and we give 
them brochures, distributions of our programs to help them. It 
is not required that people on food stamps go through our 
programs. That is not the thing, but we give them the 
educational brochures to help them, how do you help them 
stretch the food dollars.
    Mr. Benishek. Is there some kind of a holistic educational 
program to see what people are--for their situation? In other 
words, they have a situation going on in their home that they 
are getting food stamps, they need some assistance. So are 
there other things beside the food education that you do?
    Dr. Henderson. Yes. In addition to food education, we also 
do family resource management. That is budgeting components is 
the primary example of them. And then we will come in and also 
offer to do other types of budgeting programs to help them 
learn how to stretch their dollar, not just for food, but for 
other areas and how to----
    Mr. Benishek. All right, thank you. Five minutes goes by 
real fast.
    The Chairwoman. But your vinegar story was intriguing.
    The chair recognizes Congresswoman Adams, for 5 minutes.
    Ms. Adams. Thank you, Chairwoman Walorski and Ranking 
Member McGovern, and thank you for your testimony, gentlemen.
    Next month I am introducing the Close the Meal Gap Act of 
2016, which will address one of the most important points of 
today's hearing, that low-income households are spending more 
of their money on food than the national average. This bill 
would permanently authorize a standard medical deduction for 
seniors and disabled individuals applying for SNAP benefits. It 
would incorporate the Low Cost Food Plan into SNAP, and to the 
SNAP formula to take into account how much working people, 
including SNAP recipients, spend on food. It would eliminate 
the cap on the excess shelter deduction in the SNAP formula. It 
would raise the minimum SNAP benefit from $16 to $25. And 
finally, it would allow able-bodied adults to be exempt from 
SNAP work requirements if their state could not provide them 
with a slot in the SNAP Employment and Training Program. It has 
been endorsed by Feeding America, the Food Research and Action 
Center, the National Council on Aging, and others. I certainly 
welcome Members of Congress to support it, sign on to it, and I 
want to thank Congressman McGovern and those on the Committee 
who have done so.
    But Dr. Leibtag, the way we consume food is at the heart of 
why SNAP benefits just aren't enough. USDA Thrifty Food Plan is 
used to estimate how much a minimally nutritious meal should 
cost an individual participating in the program. We expect a 
participant in the program to work, but the benefit amount they 
receive expects them to spend hours each week cooking and 
preparing meals from scratch. A mother, for example, who works 
two and three jobs does not have the time to prepare the food 
that SNAP benefits can pay from one month to another. Does the 
basket of products in the Thrifty Food Plan take into account 
that many SNAP participants purchase more prepared foods, that 
these foods cost more to purchase with their limited SNAP 
benefits? Dr. Leibtag?
    Dr. Leibtag. Thank you for the question. It raises an 
important issue to think about when we look at consumer food 
choices, especially low-income households and how that changes 
over time.
    As I mentioned earlier, as consumer behavior has shifted, 
we have observed the way that people shop, what they find in 
the store changes. The Thrifty Food Plan has a basket, as I 
mentioned, that has a nutritionally balanced group of foods at 
a minimum cost. It does assume most shopping of more basic 
ingredients in the store. So as more prepared foods become the 
norm with their associated higher costs, the Thrifty Food Plan 
may not be covering those types of foods. So at least to a 
question about tradeoffs between time and coverage and between 
time spent working, perhaps, or time spent shopping and 
preparing food versus benefits or the affordability of food.
    Ms. Adams. Does it seem fair and accurate for SNAP benefit 
calculation to assume that households use 30 percent of their 
non-SNAP income for food?
    Dr. Leibtag. I think the 30 percent number is a pretty good 
estimate. From what we mentioned a little earlier, the 20 
percent lowest income households spend about 34 percent of 
their income on food, and so that is, of course, just one 
number, but I would say on average somewhere between 25 and 35 
percent is probably the norm for many households in that group.
    Ms. Adams. Do you know if purchases at these smaller stores 
vary from purchases at larger, traditional grocery stores?
    Dr. Leibtag. What people buy at stores does vary. It does 
vary for the consumer. It also varies based on what is on the 
shelves. One concern about food choice is the types of stores 
people choose to shop at, which could be a function of food 
access. What stores are closest to their homes or to their 
places of work? And so that can be a factor in the choices of 
foods people choose to buy and consume.
    Ms. Adams. Thank you, Madam Chair. I yield back.
    The Chairwoman. Thank you. I just want to update our 
Members really quickly. They are going to be calling votes in a 
couple minutes, but I want to go ahead and recognize 
Congressman Abraham. We will get through his questions and see 
where we are at. Congressman Abraham, for 5 minutes.
    Mr. Abraham. Thank you, Madam Chair. I will be quick.
    Dr. Henderson, I do farming on my property in Louisiana and 
so your comment about farming being very cyclical and very up 
and down is very true. Help us explain that we have the ARC, we 
have the PLC, we have the crop insurance that helps us when we 
have really bad years. Help us make the jump from that 
connection as to how it helps America have the most affordable 
and abundant food, and where does the farm policy play in here?
    Dr. Henderson. Right. The role of farm policy on many of 
these different programs, from crop insurance to ARC and all 
these other different things, the primary benefit of what it 
does is it tries to mitigate the downside risk. It tries to 
take away the uncertainty for the farmer so they can plan long-
term in the fluctuations from year to year. It provides a more 
stable food system. In many ways, it also provides 
opportunities for farmers to plant additional food, and so it 
expands agricultural production. And that translates to the 
consumer a more stable food system than what naturally would 
be, to more stable consumer prices, and ultimately then lower 
prices as you reduce and extract uncertainty out of the system.
    Mr. Abraham. Okay. Madam Chair, I yield back. I just had 
that one question.
    The Chairwoman. The chair recognizes Congressman Ashford, 
for 5 minutes.
    Mr. Ashford. Thank you, Madam Chair, and I just have one 
question because we don't have much time.
    First of all, Dr. Henderson, your work is significant 
because it applies to a lot of what we are dealing with in 
Nebraska with rural poverty and so forth. At the University of 
Nebraska the Buffett Foundation has funded a $50 million early 
childhood program for our state, and actually a global early 
childhood initiative. You are probably aware of it in some 
ways. But how do you see those initiatives, early childhood 
initiatives and the food issue going forward? There is a nexus 
there and food is a big part of it, and healthy food for early 
childhood individuals and families.
    Dr. Henderson. Yes, there is a major nexus between food and 
children.
    Mr. Ashford. Right.
    Dr. Henderson. I think about it----
    Mr. Ashford. Maybe it was a vague question. 
Programmatically, how do we set up or do you have experience in 
dealing with early childhood programs and how we connect that 
to healthy food and healthy start, that sort of thing?
    Dr. Henderson. Yes. One of the different programs that we 
go through with children, we have also been focusing with them 
on how do you prepare healthy meals, and what does a healthy 
meal look like? It is kind of interesting and a longstanding 
tradition of extension is that if you want to teach parents, 
sometimes you teach the children. And so we have been working 
with the children and helping with schools with different types 
of programs of how do you bring in healthy meals, how do you 
teach healthy meals, how do you teach healthy snacks. We have 
been focusing a lot on snacks and doing many different things. 
There is a wide variety of programs that are out there, but 
that is where the focus is, is how do you get them to eat 
healthy? It is giving them opportunities to do that.
    And the other thing that we have been doing is how do you 
teach them to grow food? Because what we are also finding is 
that when they grow food like tomatoes and peppers, they are 
more likely to try it and eat it, and then enjoy it because 
they actually grew it. And so there are some other things in 
terms of that nexus between food and food consumption of how do 
we bring agriculture and consumers together in order to help 
them understand healthy choices?
    Mr. Ashford. Thanks, I ran the Housing Authority in Omaha 
and we initiated some of those programs for Housing Authority 
residents for young people, for children to grow food. And that 
actually has been expanded very successfully in the urban 
areas, so that is good. That is good work.
    Thank you, Madam Chair.
    The Chairwoman. Thank you. The chair recognizes 
Congresswoman Hartzler, for 5 minutes.
    Mrs. Hartzler. Thank you.
    Dr. Henderson, your words strike my heart as a former home 
economics teacher and someone who has taught nutrition for many 
years. I do believe in that and think everybody should take 
family and consumer sciences, and that would help.
    But I would like afterwards more information on your 
program that you referenced with anti-drug program, so I will 
get with you on that, but my question for the panel has to deal 
with GM soybeans, corn, cotton, and different studies that have 
been done that shows that biotechnology has increased crop 
yields by 22 percent, reduced pesticide use by 37 percent, and 
increased farm profits by 68 percent.
    Now even with these large benefits to farmers and the 
environment, there is a vocal portion of Americans that have 
expressed concerns with the use of GM crops. So will each of 
you elaborate on how GM crops affect consumer prices, and 
provide any insight into the rewards and risks of consuming 
GMOs. Do you want to start, Dr. Henderson?
    Dr. Henderson. GM crops have, as you mentioned, done a lot 
of different things to enhance farm profitability, and from the 
consumer standpoint, they have also expanded production, 
allowed us to grow many different crops and increasing yields 
in many different ways. The benefits flow from that directly 
into food prices on those types of consumption aspects of it.
    The other aspect of it, in terms of when you think about 
crops that are somewhat related to GMOs, but not a GMO, per se, 
is that we have been focusing at Purdue Extension on a lot of 
different new technologies that are looking at how do you 
maximize nutrients, and so you don't want all the runoff. How 
do you use sensors in terms of plants to identify those plants 
that grow faster and better than other plants. I am 64", my 
brother is 59". Because plants are different in different 
places, and so how do you identify those plants that are going 
to have the most and best breeding potential and doing 
different things?
    For us at Purdue, we have a huge plant sciences move. 
Looking at those things and how do you adopt technology that 
works in there? We are also, us and colleagues across the 
country, are looking at food for health, identifying plants, 
their traits that enhance health, becoming nutrient-based and 
figuring out how can that help food consumption patterns and 
help identify those foods that can help nutrition and health 
that way as well.
    There are a lot of different technologies that are being 
brought out to support the consumer.
    Mrs. Hartzler. Thank you. Dr. Leibtag?
    Dr. Leibtag. Broadly, as this relates to work on food 
prices, it is correct that as crop yields improve, there are 
ways in which costs can be lowered and they have been lowered, 
and as costs of production are falling or stabilized, that 
certainly has a stabilizing effect on food prices. In terms of 
the various methods of production, what is interesting to track 
and follow is the influence of consumer demand or consumer 
preferences on the way we produce our food and what we produce.
    So what I have seen in the last 10 or 20 years is that 
producers, companies, industry, the ag sector adjust to what 
people want. From an economics perspective, if people want 
different attributes and traits, you would imagine that supply 
and production would meet those and it is just a matter of what 
people want and where they want. And I think that remains to be 
seen in terms of demand for various types of characteristics.
    Mrs. Hartzler. Thank you. Mr. Harig?
    Mr. Harig. Thank you. We are enormously concerned about how 
we are going to continue to feed a growing population. It is 
not just in the United States, it is a global population, and 
we believe that GMOs or genetically engineered products are an 
essential part of that, making sure that there is enough food 
to feed the population. And as we have seen more of an anti-GMO 
effort in place, you can Google GMO and you can find good 
science, but you can also find a lot of junk science that comes 
at the same time. And so our biggest concern is we have always 
said as an industry, if people want to know something, we will 
disclose that to them. We are happy to do that, but we are very 
concerned about the sort of misinformation around it, and the 
possibility that that information is going to drive consumer 
trends and ultimately hurt the ability of the U.S. agriculture 
industry and the U.S. retail industry to feed people in an 
affordable way.
    Mrs. Hartzler. Thank you very much. I yield back.
    The Chairwoman. The chair recognizes Congressman Davis, for 
5 minutes.
    Mr. Davis. Thank you, Madam Chair, and thank you to my 
colleague, Mrs. Hartzler, for bringing up the biotech issue. 
Obviously, as Federal policy-makers, we are here in this 
Committee hearing room talking about how we in America can 
better feed those who are hungry.
    Mr. Harig, you just mentioned feeding the world. I don't 
know how we continue to feed the world with the projected 
increases in population over the next 20 years, billions more--
a billion more individuals. How do we do that without 
genetically modified products and without being able to grow 
more on less land? Can you give me your response on that, sir?
    Mr. Harig. Yes, I don't have an answer for you on that. As 
I said, we think that it is an essential part, and again, some 
of this misinformation is already having an impact, if you can 
look at Africa right now.
    Mr. Davis. All you have to do is look at the Senate.
    Mr. Harig. Yes. No comment on that, but yes.
    Mr. Davis. Feel free to.
    Mr. Harig. No, again, our position has always been if 
people want to know if this is in there, we are happy to 
disclose that. We are happy to let people know what is in their 
food. But this sort of misinformation surrounding it is a big 
concern for us. This idea that people are walking away thinking 
these products are dangerous when there is no science to 
support that right now.
    Mr. Davis. I am going to come back to you, but Dr. 
Henderson looked like he was ready to respond to this, too.
    Dr. Henderson. GMOs are part of the solution, they also 
obviously are not the whole solution. There are a lot of 
different technologies that are emerging. At Purdue University 
and our other land-grants across the whole country that----
    Mr. Davis. Including the University of Illinois, the land-
grant university.
    Dr. Henderson. And so doing many different things of 
looking at traits and figuring out all this is driven by 
customer and customer demand, and how do you provide choices 
for customers and deliver the products that they want to 
receive, which is ultimately what we are here to satisfy is 
customers.
    Mr. Davis. Well Mr. Harig, one quick question. In your 
testimony, you talked about when consumers decide what products 
to buy, like nutrition, biotech labeling and other claims on a 
food label. In your testimony though it indicates that 75 
percent of consumers almost always use price in deciding to 
purchase these new products, far more than they consider any 
other factors. What should this tell us as policy makers about 
what matters to consumers with their purchasing decisions?
    Mr. Harig. Well, I think it is pretty straightforward. I 
mean, price is still the driving factor and will be. We do see 
periods of time in 2004 and 2005, people listed selection and 
quality as higher ranking attributes than price, but since 2008 
and continuing through 2016, price is the main factor they look 
for in both the ability of the store to offer that and the 
products themselves.
    Mr. Davis. Is that due to family economics?
    Mr. Harig. Yes, I mean, it is, and that is actually across 
the board too. If you are at the higher income level, obviously 
you are a little bit less price sensitive, but we still see in 
a lot of our surveys, those shoppers don't necessarily go out 
and say, ``Well, we are going to blow the bank on this just 
because we can.'' They are still value shoppers.
    Mr. Davis. Okay, I guess the last question is for everyone. 
Dr. Leibtag, we will start with you. Do you think science backs 
up the safety of genetically modified products?
    Dr. Leibtag. I don't think that my research background can 
answer that question. So I wouldn't have an opinion at this 
point.
    Mr. Davis. Dr. Henderson?
    Dr. Henderson. I think that with these GMO technologies and 
other technologies out there that we have the safest, most 
abundant food system in the world.
    Mr. Davis. Mr. Harig?
    Mr. Harig. Yes, at FMI we go by what the FDA tells us, and 
they say the products are safe.
    Mr. Davis. Well, and I have a few seconds left and I am 
sorry, Madam Chair, I know we are voting but I am going to use 
them.
    Right now, when we walk into a store and when you are 
teaching families how to shop, you can buy products that say 
non-GMO on the label. Frankly, does anybody really know what 
that means? Is there a set of standards that are in place right 
now?
    Dr. Henderson. From my perspective, that is one of the 
biggest challenges that we have right now. What is GMO?
    And you talk to various different people and they have 
various different answers of what GMO would be, and then we are 
also coming up with all these new different technologies that 
are emerging that push the boundaries of science, and some of 
them are traditional, more programs in doing different things. 
So the definition of GMO is a bit uncertain.
    Mr. Davis. So we are trying to feed people who are hungry. 
We are trying to give them access to food, and at the same 
time, because we don't have a set of standards, we are 
confusing them as to what may be scientifically safe. We have a 
66 percent consensus here on this panel that they are safe, but 
we are telling them this might be bad for you because of 
misinformation.
    So with that, my time has expired.
    The Chairwoman. Gentlemen, I have to cut you off there. 
Thank you, Congressman Davis.
    Mr. McGovern. I was going to ask him to yield, but----
    The Chairwoman. He can't yield now. He is done.
    I appreciate the panel's help in understanding how the farm 
economy affects the prices consumers find at the grocery store. 
Making the connection from farm to fork provides a great 
opportunity for people in both urban and rural areas to better 
understand our food system. Thank you so much to the panel for 
providing the context for our overall look at the farm economy, 
and we thank you for your time.
    Under the Rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional information and supplementary written responses from 
our witnesses to any question posed by a Member.
    This hearing of the Subcommittee on Nutrition is adjourned.
    [Whereupon, at 3:08 p.m., the Subcommittee was adjourned.]



                       FOCUS ON THE FARM ECONOMY

   (IMPACTS OF ENVIRONMENTAL REGULATIONS AND VOLUNTARY CONSERVATION 
                               SOLUTIONS)

                              ----------                              


                         TUESDAY, MAY 17, 2016

                  House of Representatives,
                 Subcommittee on Conservation and Forestry,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:01 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Glenn 
Thompson [Chairman of the Subcommittee] presiding.
    Members present: Representatives Thompson, Lucas, King, 
DesJarlais, Gibson, Allen, Conaway (ex officio), Lujan Grisham, 
Kuster, DelBene, Kirkpatrick, and Peterson (ex officio).
    Staff present: Callie McAdams, Haley Graves, John Weber, 
Josh Maxwell, Patricia Straughn, Stephanie Addison, Faisal 
Siddiqui, John Konya, Anne Simmons, Evan Jurkovich, Liz 
Friedlander, and Nicole Scott.

 OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN 
                   CONGRESS FROM PENNSYLVANIA

    The Chairman. This hearing of the Subcommittee on 
Conservation and Forestry, entitled, Focus on the Farm Economy: 
Impacts of Environmental Regulations and Voluntary Conservation 
Solutions, will come to order.
    Welcome everyone. Good morning. Each Subcommittee of the 
Committee on Agriculture has been tasked with highlighting 
issues within their respective jurisdictions that impact the 
economic well-being of rural America. Through this series of 
hearings on the farm economy, one of the consistent themes has 
been that government rules and regulations are overly 
burdensome and negatively impact the bottom line and long-term 
success of our farmers and ranchers.
    In a hearing more than 2 months ago with EPA Administrator 
McCarthy, Members engaged in extensive questioning regarding 
actions her agency had taken which impose considerable costs 
with questionable, if any, benefits.
    It seems that every day brings a new regulation, new 
litigation, or another case of unelected bureaucrats running 
wild across America's farms and ranches. The Administration's 
extreme environmental agenda, with its blatant disregard for 
the impact it will have on rural America, has increased the 
cost of doing business for America's farmers and ranchers at a 
time when producers are already experiencing a 56 percent drop 
in net farm income over the past 3 years.
    It has become increasingly clear that some government 
agencies and environmental activist organizations ignore or 
otherwise discount the commitment that our farmers and 
ranchers, our foresters make to environmental stewardship. 
Every day, the Administration seems to demonstrate how vastly 
disconnected it is from the folks who provide our food, our 
fiber, and our energy. They do not seem to realize that rural 
America's economy is dependent on agriculture. A thriving 
agriculture sector breeds a healthy rural economy.
    The path the Administration has chosen forces farmers and 
ranchers to spend more and more time complying with 
regulations. Now, I believe that both the environment and those 
who work the land are all better served when our time and 
resources are directed to what really works: locally-led and 
incentive-based approaches that help restore and protect our 
natural resources while encouraging a healthy rural economy.
    The critics forget that farmers and ranchers are the best 
and the original stewards of the land. They continually find 
new and innovative ways to reduce energy usage, reduce 
emissions, and sequester carbon, while still providing America 
with an abundant and affordable food and fiber supply. All of 
us share a common goal: the continued health and vitality of 
our natural resources.
    To me, the path is clear: voluntary conservation programs 
work. If we want a real solution to cleaner natural resources 
then we should continue to focus on incentives, innovation, and 
research that stimulate the rural economy; not backdoor energy 
taxes, mandates and more burdensome regulations.
    Today, our first panel will discuss many of the regulatory 
challenges that impact production on our nation's farmers and 
ranchers. While the farm bill conservation programs somewhat 
mitigate these impacts, our nation's farmers continue to 
operate on very thin, and in some cases negative, margins.
    Our second panel will more broadly discuss the locally-led 
solutions to addressing natural resource concerns. No two 
producers face the same natural resource concerns, and there is 
no shortage of reasons why we must continue to innovate when it 
comes to preserving our natural resources.
    The record that is created today will be extremely 
beneficial. And I want to thank you all for being here.
    [The prepared statement of Mr. Thompson follows:]

Prepared Statement of Hon. Glenn Thompson, a Representative in Congress 
                           from Pennsylvania
    Good morning.
    Each Subcommittee has been tasked with highlighting issues within 
their respective jurisdictions that impact the economic well-being of 
rural America.
    Throughout this series of hearings on the farm economy, one of the 
consistent themes has been that government rules and regulations are 
overly burdensome and negatively impact the bottom line and long-term 
success of our farmers and ranchers.
    In a hearing more than 2 months ago with EPA Administrator 
McCarthy, Members engaged in extensive questioning regarding actions 
her agency has taken which impose considerable costs with questionable, 
if any, benefits.
    It seems that every day brings a new regulation, new litigation, or 
another case of unelected bureaucrats running wild across America's 
farms and ranches. The Administration's extreme environmental agenda, 
with its blatant disregard for the impact it will have on rural 
America, has increased the cost of doing business for America's farmers 
and ranchers at a time when producers are already experiencing a 56 
percent drop in net farm income over the past 3 years.
    It has become increasingly clear that some government agencies and 
environmental activist organizations ignore or otherwise discount the 
commitment our farmers, ranchers and foresters make to environmental 
stewardship.
    Every day the Administration seems to demonstrate how vastly 
disconnected it is from the folks who provide our food, fiber and 
energy. They do not seem to realize that rural America's economy is 
dependent on agriculture. A thriving agriculture sector breeds a 
healthy rural economy.
    The path the Administration has chosen forces farmers and ranchers 
to spend more and more time complying with regulations. I believe that 
both the environment and those who work the land are all better served 
when our time and resources are directed to what really works: locally-
led and incentive-based approaches that help restore and protect our 
natural resources while encouraging a healthy rural economy.
    The critics forget that farmers and ranchers are the best and 
original stewards of the land. They continually find new and innovative 
ways to reduce energy usage, reduce emissions, and sequester carbon 
while still providing America with an abundant and affordable food and 
fiber supply.
    All of us share a common goal: the continued health and vitality of 
our natural resources. To me, the path is clear: voluntary conservation 
programs work. If we want a real solution to cleaner natural resources 
then we should continue to focus on incentives, innovation, and 
research that stimulate the rural economy; not backdoor energy taxes, 
mandates and more burdensome regulations.
    Today, our first panel will discuss many of the regulatory 
challenges that impact production on our nation's farmers and ranchers. 
While the farm bill conservation programs somewhat mitigate these 
impacts, our nation's farmers continue to operate on very thin--and in 
some cases negative--margins.
    Our second panel will more broadly discuss the locally-led 
solutions to addressing natural resource concerns. No two producers 
face the same natural resource concerns, and there is no shortage of 
reasons why we must continue to innovate when it comes to preserving 
our natural resources.
    The record that is created today will be extremely beneficial. 
Thank you all for being here.
    I now yield to the distinguished Ranking Member, Rep. Lujan Grisham 
for any comments she wishes to make.

    The Chairman. I now yield to the distinguished Ranking 
Member, Representative Lujan Grisham, for any comments she 
wishes to make.

      OPENING STATEMENT OF HON. MICHELLE LUJAN GRISHAM, A 
           REPRESENTATIVE IN CONGRESS FROM NEW MEXICO

    Ms. Lujan Grisham. Thank you very much, Mr. Chairman. And 
thank you very much to the panel, and for this hearing.
    Having a hearing on the impacts of environmental 
regulations and voluntary conservation solutions is an 
important opportunity for the entire Committee to better 
understand the challenges that our farmers and ranchers and 
foresters face each and every day on their land. And I would 
agree, actually, that the current regulatory environment can, 
in fact, be very difficult, and at times, extremely costly for 
producers to comply with. However, the genesis of the Federal 
regulations, I hope, are critical in ensuring and are directed 
at having clean and safe water and air. Access to clean and 
safe water and air is not only paramount for the producers that 
rely on these resources for their livelihood, it is also 
critical for protecting the public's health and the 
environment.
    I have heard from many New Mexico producers that compliance 
with Federal regulations can be very challenging, especially 
for small producers that do not have the time or the resources 
to interpret regulations. It is important that Federal 
regulations be clear, concise, uncomplicated, and to make the 
necessary regulatory compliance as easy and affordable as 
possible. Compliance should not be a ``gotcha'' or a profit 
game for anyone.
    I know there are concerns about how some of the more recent 
regulations have been developed and proposed, and quite 
frankly, Mr. Chairman, I share many of those concerns. It is 
clear to me that government can and should be doing a better 
job, especially when it comes to engaging the agricultural 
communities. And while issues of clean air, water, and 
regulatory uncertainty persist, farmers, ranchers, and 
foresters, in my opinion, are doing what they do best; using 
proven and innovative conservation practices that protect our 
resources. An example is one in New Mexico at the State 
University where a researcher, David C. Johnson is working with 
New Mexico ranchers and farmers. Dr. Johnson has been working 
with ranchers and farmers to help improve the health of their 
soils. Minimal changes in land management not only benefitted 
farming and ranching operations, but also helped sequester 
large quantities of carbon into their soils. This conservation 
practice could help reduce greenhouse gases and help states 
meet carbon dioxide reduction requirements under the Clean 
Power Plan 111(d) rule.
    It is also clear to me that promoting conservation efforts 
like these are the key to addressing many of the regulatory 
issues, while preserving our natural resources, bolstering the 
economy and restoring our environment.
    I am looking forward to hearing from all the witnesses 
today. I am especially interested in hearing about how they are 
using the farm bill conservation programs, along with other 
innovative approaches to conservation that we should be 
considering and discussing as we move toward the next farm 
bill.
    Thank you, Mr. Chairman, and I yield back.
    The Chairman. I thank the gentlelady.
    The chair would request that other Members submit their 
opening statements for the record so that the witnesses may 
begin their testimony, and to ensure there is ample time for 
questions. The chair would like to remind Members that they 
will be recognized for questioning in order of seniority for 
Members who were present at the start of the hearing. After 
that, Members will be recognized in the order of their arrival. 
And I appreciate the Members' understanding.
    I would like to welcome our first panel of witnesses this 
morning. First, we have Mr. Richard R. Ebert, President of the 
Pennsylvania Farm Bureau, from Blairsville, Pennsylvania; Ms. 
Kate English, Partner, English Family Partnership, Fort Myers, 
Florida; and Mr. Patrick O'Toole, President of Family Farm 
Alliance, Savery, Wyoming.
    Witnesses are reminded to limit their oral presentations to 
5 minutes. All written statements will be included in the 
record.
    And so, Mr. Ebert, please begin when you are ready.

           STATEMENT OF RICHARD R. EBERT, PRESIDENT,
           PENNSYLVANIA FARM BUREAU; MEMBER, BOARD OF
  DIRECTORS, AMERICAN FARM BUREAU FEDERATION, BLAIRSVILLE, PA

    Mr. Ebert. Good morning, Chairman Thompson, Ranking Member, 
and Members of the Subcommittee.
    Thank you for this invitation. I am Rick Ebert. I have an 
80 head dairy farm in Westmoreland County, Pennsylvania. We 
grow alfalfa, corn, and soybeans. I am the President of 
Pennsylvania Farm Bureau, and serve on the American Farm Bureau 
Board of Directors.
    EPA's Chesapeake Bay regulation gives us a good look at how 
environmental regulations impact farmers. Today, I will 
highlight three things of the Bay regulations: inflexibility, 
bureaucracy, and uncertainty.
    The bottom line, it is difficult for farmers to function in 
this regulatory environment, especially when facing the 
economic challenges described in my testimony.
    Bureaucracy: A massive bureaucracy has cropped up around 
the Bay regulations. How massive? Nearly 60 public bodies have 
been created, a web which farmers are supposed to provide 
input. These meetings produce pages of academic analyses based 
on a model world, but looks nothing like how I farm in the real 
world. I have a degree in animal science and decades of farming 
experience, yet I can't understand EPA science. How does this 
make me part of the process?
    Inflexibility: In farming, one size doesn't fit all. EPA's 
Chesapeake Bay model is inflexible and based upon assumptions 
that are just plain wrong. The model fails to capture and 
credit best management practices, BMPs, unless they are funded 
or verified by the government. For years, EPA has rejected our 
attempts to change this. We are working with state officials 
and Penn State to capture these non-cost-shared BMPs through a 
survey. So far, we have received over 7,000 survey responses. 
But will EPA use this data in their model? Also, NRCS data says 
no-till and conservation tillage are used on nearly 80 percent 
of the cropland in the Bay, while only six percent are under 
continuous till. Yet, EPA's model assumes 50 percent 
conventional tillage, and 50 percent conservation tillage. The 
science just doesn't add up.
    Uncertainty: Last year, EPA withheld $3 million from 
Pennsylvania because they believe we weren't doing enough. Our 
state officials had to guess what changes were needed to 
restore EPA's favor and funding. What is to stop EPA from 
demanding more? Is it fair for farmers to be caught in a tug-
of-war between EPA and state regulations? And even if EPA's 
model is fully implemented, 20 percent of the cropland in the 
watershed will need to be set aside to meet EPA's goals. Who 
will decide what land is fallowed? EPA? We made major progress 
in reducing pollution in the watershed, but EPA still points 
fingers; painting agriculture, farmers just like me, as a 
villain. To EPA I ask, do you really think I am trying to 
pollute? I no-till, I plant cover crops, I have implemented 
nutrient management plans voluntarily, without Federal funding. 
However, in the eyes of EPA's model, it doesn't matter. Does 
that make sense?
    Regulators must understand real-life agriculture. I am a 
small business owner. There is no compliance officer, just me 
and my three sons trying to farm, balancing daily tasks while 
complying with a list of growing regulations, while EPA ignores 
the beneficial practices we employ.
    I consider myself a typical American farmer. I operate a 
small family farm. Our milk goes to a small family business 
where it is processed and used around Pittsburgh. We try to do 
the right thing. We are good stewards. We take excellent care 
of our cows, and we go the extra mile to take care of our land 
and our water, not only because it is the right thing to do, 
but it is my family, my children and grandchildren, who eat 
here, play here, and hopefully one day will work here.
    Thank you.
    [The prepared statement of Mr. Ebert follows:]

  Prepared Statement of Richard R. Ebert, President, Pennsylvania Farm
 Bureau; Member, Board of Directors, American Farm Bureau Federation, 
                            Blairsville, PA
    Chairman Thompson, Ranking Member Grisham, and Members of the 
Subcommittee, thank you for the invitation to appear today to testify 
on ``Focus on the Farm Economy: Impacts of Environmental Regulations 
and Voluntary Conservation Solutions.'' I am Rick Ebert. I operate a 
dairy farm in Blairsville, Westmoreland County. We milk 80 Holstein 
cows and grow alfalfa, corn and soybeans. I am working to bring my 
three sons into the family business.
    I have the privilege of serving as the elected President of 
Pennsylvania Farm Bureau and I was recently elected to serve on the 
American Farm Bureau Federation's Board of Directors. Farm Bureau 
represents farms of all sizes, spanning virtually all commodities grown 
and sold in our great nation. I am pleased to offer this testimony on 
behalf of the American Farm Bureau, the largest farm organization in 
the U.S.
    In Pennsylvania, farming remains an integral and critical component 
of our state's economy. Agricultural production in Pennsylvania 
generated an estimated $7.5 billion in cash receipts in 2014, providing 
$75 billion in total annual economic impact to the Commonwealth. 
However, the same forces that can provide economic benefit to 
Pennsylvania's agricultural industry also have the potential to 
seriously cripple it. While some may consider Pennsylvania agriculture 
to be ``big business'' in the aggregate, the typical business structure 
of individual farm businesses is predominantly those of small business 
operations--family-owned proprietorships and partnerships. As with 
others owning and managing small businesses, Pennsylvania's farm 
families have practically no means to individually control the sharp 
changes in commodity prices and other national and international 
economic forces that can plague profit margins. As I will discuss a bit 
later in my testimony, current trends in national and international 
markets are seriously threatening farm businesses in Pennsylvania, 
including my family's business.
    Many outside of agriculture fail to appreciate the real 
significance of either of these aspects. Agriculture does play a 
pivotal role in the economic vitality of many states and the overall 
vitality of our national economy. And yet, the viability of agriculture 
and the economies that agriculture supports are especially vulnerable 
to volatile economic forces because of the small scale in which 
individual farm businesses operate and their practical inability to 
control those forces.
    Because farmers are likely to regularly experience volatile and 
unpredictable commodity prices, it is critically important for 
individual farm businesses to control their operation costs, especially 
when sharp drops in prices for their products occur. But farmers can't 
be effective in managing costs unless they are very certain of what 
those costs are likely to be for both the short-term and a more long-
term span of several years.
    Compliance with the legal obligations associated with commercial 
business operations is becoming a significant aspect of farmers' 
management of costs. Often, actions by government to increase 
regulatory standards have the effect of increasing a business' costs of 
operation. Some businesses have the economic ability to pass the 
additional costs of increased regulatory standards onto their customers 
merely by increasing the prices of their products. Increasing their 
prices doesn't impact the marketability or consumer demand for their 
products. Individual farm businesses, however, do not the power in the 
market to increase prices. The farm business will have to employ some 
other means--usually reduce or control some other area of cost--to 
offset any increased costs resulting from more stringent regulatory 
standards.
    In order to come close to making sound cost-management decisions, 
farmers must have a thorough understanding of what their operational 
costs will likely be. We can't make good decisions if regulatory 
officials are unable or unwilling to identify the boundaries of 
regulatory standards that will be imposed in the near future or the 
standards that are likely to be imposed for years to come.
    Farmers in Pennsylvania and around our nation are seriously 
frustrated by the two-pronged approach being taken by both Federal and 
state officials, especially in the area of environmental regulation. 
EPA's administrative approach under the current Administration seems to 
be both a pervasive assertion of regulatory authority over virtually 
every aspect of land use and function and a serious lack of effort to 
specifically identify the type of conduct that gives a person any 
confidence of compliance with his or her legal obligations.
    The posture and attitude of Federal officials seem to be that any 
land activity performed may be subject to Federal regulation and that 
the agency make no commitment to defining the extent and limitation of 
regulatory standards unless the individual first seeks a permit or 
other approval from the agency. Farm Bureau and individual farmers have 
raised numerous legitimate questions and have tried to gain specific 
answers from EPA officials about how existing and proposed regulations 
are to be interpreted and applied in the context of specific situations 
that commonly occur on farms. EPA's response has been evasive and 
rhetorical, with no meaningful answer provided. And what may be 
determined today as acceptable conduct may not be acceptable tomorrow 
because of changes in modeling or evaluation of environmental impacts.
    Small businesses owners, especially farmers, cannot sensibly 
function or viably operate their businesses in such a regulatory 
climate and culture.
    Congress has heard from several agricultural sources about the 
impacts of EPA's regulatory posture and strategy in the Chesapeake Bay 
Watershed. I also wish to focus much of the remainder of my testimony 
on EPA's posture in the Bay, because it is a clear example of the real 
challenges that agriculture has faced and will likely face under the 
Federal Government's current exercise of regulatory power.
    EPA's regulatory and administrative oversight in the Bay Watershed 
has consistently been one of inflexibility and bureaucracy. And the 
pervasive efforts and nebulous standards being established or evolving 
through EPA's oversight are leaving farmers in the Bay Watershed with a 
high level of uncertainty about whether their farm production practices 
are legal now or will be legal tomorrow. I'll highlight these themes as 
I discuss the real-life farm- and community-level implications for 
farmers like me.
    I have an average-sized dairy herd and I try to grow as much feed 
as possible for them on the farm. In that way, I look a lot like my 
fellow dairy farmers in Pennsylvania. And, I suspect my farm 
structure--me and my three boys--looks a lot like what farmers across 
Pennsylvania typically have, including those farmers operating farms in 
the Bay Watershed. So when I discuss the potential impacts of Federal 
regulatory oversight to my farm, you can assume there are a lot of 
other farmers who would be similarly impacted.
    In addition, while I live western Pennsylvania and not in the 
Chesapeake Bay Watershed, I am very much impacted by the rules and 
regulations that the Environmental Protection Agency--and our state 
Department of Environmental Protection--have developed as a result of 
their targeted efforts in the region.
    As we talk about environmental regulations and their impact, we 
cannot ignore the challenging situation farmers across the nation are 
facing in terms of commodity prices. As I said earlier in my testimony, 
in the real world of agriculture, individual farming businesses cannot 
make up for the increased costs of regulation by increasing their 
commodity prices. We must adjust other aspects of our businesses and 
financing activities to balance those increased costs.
    Farmers have been experiencing very low prices on the major 
commodities for more than a year now. USDA's Economic Research Service 
(ERS) estimates that total cash income for farm businesses in the 
United States for 2015 is more than 27 percent below that of 2014--
again, more than 27 percent below what farmers received in 2014. 2015's 
income figure is below what farmers received in 2010--the ``recovery 
year'' from the previous serious economic downturn in agriculture's 
economy. And ERS projects another significant drop in cash income for 
the U.S. agricultural sector in 2016--nearly 2.5 percent below what 
farmers received in 2015.
    Since I'm a dairy farmer, I'll highlight how my sector has been 
impacted by price volatility. For example, 2009 and 2010 were 
financially devastating years for the dairy industry. In fact, in 2009 
client dairy farms of PFB's MSC Business Services \1\ lost an average 
of $2.53 per hundredweight. After 2 rough years, milk prices began to 
climb again, reaching all-time highs in 2014, helping farms recover 
from the low prices of previous years. Regardless, for the 6 year 
period of 2008 through 2013, the net profit margin realized on MSC-
client dairy farms only averaged 6 per hundredweight, meaning that 
dairy farmers overall had little to show for 6 years of operation.
---------------------------------------------------------------------------
    \1\ PFB's MSC Business Services provides every aspect of farm and 
agribusiness management. A staff of 40 trained accountants conduct tax 
planning/preparation and business consulting services in farm homes and 
offices across the state. MSC Business Services publishes nearly 900 
individual Dairy Profitability Comparisons annually for clients, giving 
in depth analysis allowing for comparison to similar sized farms and 
the most financially successful farms in the program. See Appendix 1 
for corresponding data.
---------------------------------------------------------------------------
    Costs of production--how much it costs to produce 100 pounds of 
milk--have also increased for Pennsylvania's dairy farmers. Annual 
costs of production have increased significantly from 2009's average of 
$19.50 per hundredweight, jumping to over $23.00 per hundredweight in 
2011, 2012 and 2013, and in 2014, the average rose to $25.14. While we 
don't have the final analysis yet for 2015, based upon my own 
experiences, cost of production in 2015 is likely to be at least as 
much as it was in 2014. Unfortunately, while we had record milk prices 
to offset 2014 production expenses, the picture was very different for 
2015 and, for this year as well, so far.
    Why is this important? For farmers already facing significant 
challenges from volatility in their net operating income, anything that 
adds stress to already tight margins is a bad thing. For farmers like 
myself, who are already treading carefully on a razor's edge of 
profitability, the danger of uncertainty that comes from a growing 
patchwork of environmental regulations--particularly those of us in and 
around the Chesapeake Bay Watershed--is unbelievably frightening and 
potentially debilitating when we need to make decisions about farming, 
expansion and even bringing on the next generation.
    Perhaps the best illustration of uncertainty comes from estimates 
of consequences to agricultural production in the Bay Watershed if the 
nutrient and sediment reduction goals under EPA's Total Maximum Daily 
Load (TMDL) are fully implemented. Those estimates project that some 20 
percent of all cropland--roughly 630,000 acres--in the watershed will 
need to sit idle in order to meet nutrient reduction goals. Not 
surprisingly, EPA has neither confirmed nor denied the accuracy or 
likelihood of these estimates. But EPA has conceded that even if 
Pennsylvania farmers fully comply with all of the legal requirements 
that are ``normally'' imposed under Federal and state regulations, 
Pennsylvania will still fall substantially below the reduction goals 
that EPA has imposed for the Commonwealth.
    When we're talking about privately-owned cropland, who will 
determine what land gets fallowed? Certainly, EPA officials don't 
intend to make individual, local land use decisions. or do they?
    That's the looming uncertainty that I'm talking about.
    And it is in this context that I ask you to place my testimony 
today.
Bureaucracy
    As the EPA's Chesapeake Bay regulations have evolved over the 
years, so too has the massive bureaucracy surrounding this effort. 
There has been a continuous and overbearing stream of Chesapeake Bay 
meetings held by dozens of teams, task forces, working groups, expert 
panels and committees since 2010, when the Chesapeake Bay TMDL was 
first imposed by EPA. And the overwhelming majority of these meetings 
have been held directly or indirectly under the auspices of EPA and its 
exercise of regulatory control in the Bay.
    I suspect that EPA is attempting through its stream of meetings to 
create the image that the agency is working ``in partnership with'' 
affected ``stakeholders'' in the Bay region and is making a serious 
effort with stakeholders to reach ``solutions'' for reducing pollution 
that landowners and local communities can readily and practically do. A 
closer review of these meetings, however, should clearly show you that 
activities performed and work products resulting from these meetings 
are merely an exercise in academics, without any serious consideration 
of how realistic those academic analyses can be attained or feasibly 
implemented by landowners and communities subject to TMDL regulation.
    The driving force behind this host of Bay meetings remains a model 
that attempts to ``project'' outcomes from land use activities based on 
numerous assumptions. Even those who have the technical ability to 
understand EPA's Chesapeake Bay model and the factors that affect 
outcomes in the model will commonly remark there is a significant 
difference between the ``model world'' and the ``real world.''
    I'll just quickly mention that this same EPA model, which drives 
the requirements and limitations imposed on farmers, landowners and 
communities in the Bay watershed, and which measures the environmental 
achievements of Pennsylvania and other Bay states, has been 
significantly modified several times since 2010. And it will be 
significantly changed in the near future, once again moving the target 
of regulatory requirements that EPA will impose on farmers, businesses 
and local communities and the measure of environmental achievement that 
these sectors have attained in the Bay Watershed.
    EPA can attempt to claim that its system of Chesapeake Bay meetings 
is an open and public process and that I--as a farmer--have the 
opportunity to weigh in. Yes, there are token farmer representatives on 
these meeting bodies. But despite my 4 year degree in animal science 
from a well-known and respected university and 34 years of farming 
while implementing modern technologies, I don't understand EPA's 
science. And no farmer can legitimately comprehend and respond to the 
reams of academic analyses that have been produced through these 
meetings and continue to perform the tasks needed to run his or her 
farm business.
    There should be little doubt that EPA's bureaucratic imprint and 
extensive nature of influence and oversight of outcomes in the Bay has 
continued even in the creation and function of ``public input'' bodies 
currently existing in the Bay Watershed.
    The Chesapeake Bay Program is described on its website as ``a 
regional partnership'' that leads and directs the restoration and 
protection of the Chesapeake Bay. Yet all of the members of the 
Program's leadership team are EPA officials. And EPA officials comprise 
a significant presence on numerous input bodies.
    I have attached (Appendix 2) to my testimony a list of nearly 60 
public bodies that have been created under the auspices of Chesapeake 
Bay Program. This is the organizational web through which EPA expects 
individual farmers to engage and provide input.
    As a farmer, I consider myself a practical guy. My inputs are 
measurable. My outputs are measurable. Each year, I have a profit or 
loss statement. My farm's--and my family's--financial future is 
measured by real, tangible things: bushels of corn, tons of silage, 
pounds of milk . . . dollars. Meanwhile, EPA seeks to measure 
environmental impact through complex computer modeling, even though 
several state, interstate and Federal agencies have accurate and 
reliable water quality monitoring stations in rivers, streams and the 
Bay itself.
Inflexibility
    While simple for regulators, one size doesn't usually fit all. It 
especially doesn't work in agriculture--where farms are most certainly 
not alike and where land dynamics change significantly from one part of 
the state to the other. In fact, more recent studies by Penn State 
University and others are showing that not only is EPA's one-size-fits-
all regulatory approach in the Bay Watershed unworkable, it is also 
very inefficient in both managing the costs of environmental 
improvement projects and utilizing public funds in a manner that 
provides the greatest environmental improvement for each dollar of 
public funds spent.
    EPA's Chesapeake Bay model is inflexible. For example, it makes 
assumptions of no-till that conflict with what we know to be true. The 
Conservation Effects Assessment Project (CEAP), undertaken by USDA's 
Natural Resources Conservation Service (NRCS), determined that no-till 
and conservation tillage are used on nearly 80 percent of the 
cultivated cropland in the Bay watershed.
    Furthermore, continuous conventional tillage is used on only six 
percent of the cropland. In fact, the report demonstrates there has 
been substantial adoption of conservation practices between the 2003-
2006 and 2011 reports. Despite NRCS' findings, EPA's model makes the 
assumption that 50 percent of all cultivated crops used conventional 
tillage, with the other half planted using only conservation tillage. 
What amazes me is that when we have reliable data, produced by another 
Federal agency, EPA still refuses to credit farmers for the good work 
we're doing.
    One of the major challenges we continue to face regarding the 
Chesapeake Bay regulations and the resulting Bay Model is the failure 
to capture and credit a multitude of best management practices (BMPs) 
that farmers voluntarily use, without the use of government funds. 
While these are practices have been proven to provide measurable 
impacts in improving water quality, EPA has consistently refused to 
recognize them, unless those practices are administered through 
government cost-share or are personally verified by state or Federal 
regulatory officials. It just doesn't make sense to me.
    For years, EPA officials have flatly rejected attempts by the 
agricultural sector to provide a feasible methodology for recognition 
and crediting of these reported agricultural non-cost-share BMPs that 
would allow verification by persons other than a ``qualified'' 
government official or allow a crediting of pollution reduction for 
reported BMPs on any acre of farmland in which the ``qualified'' 
official has not personally inspected and verified the practice is 
actually performed.
    In Pennsylvania, the departments of Environmental Protection and 
Agriculture have teamed up with Penn State University and agricultural 
organizations--including Farm Bureau--to develop a program to capture 
and verify these BMPs. As part of the effort, farmers in the Bay 
Watershed were asked participate in a survey where they have the 
opportunity to report recognized BMPs and do so in a way that protects 
them from adverse consequences such as enforcement activity. The 
results will be reported and statistically verified, and hopefully 
credited in EPA's Bay Model. Unfortunately, EPA has previously rejected 
similar plans hoping to utilize statistically reliable data collection 
and validation in order to credit Pennsylvania's farmers with nutrient 
and sediment reduction activities. So far, I understand that 
approximately 7,000 surveys have been returned. We are optimistic that 
this survey will help us better capture the practices that farmers are 
using, but in order for this endeavor to be successful, we will need 
the full, continued support of state and Federal officials to convince 
EPA to include this statistically valid data into the Chesapeake Bay 
computer model.
Uncertainty
    In the fall of 2015, EPA summarily decided to withhold $3 million 
in funding because they believed Pennsylvania was not doing enough to 
reduce nutrient and sediment pollution from nonpoint sources. This is 
money that the state could ill-afford to lose considering that Penn 
State University's Environmental and Natural Resources Institute found 
that to fully comply with EPA's pollution reduction mandates by 2025, 
the state would need to incur $3.6 billion in total costs or 
approximately $240 million per year just for initial implementation of 
nonpoint BMPs and infrastructure. In order to both implement and 
maintain such practices and infrastructure, that number rises to $378.3 
million per year. In FY 2014, total state and Federal funding available 
to the state for nitrogen, phosphorus and sediment pollution reduction 
programs statewide, not just for the Bay Watershed, amounted to just 
$146.6 million. In short, while comparatively speaking that $3 million 
withheld by EPA is a small amount, it is absolutely needed.
    EPA failed to provide to either Pennsylvania officials or to 
Pennsylvania citizens specific detail of the supporting reasons or 
bases behind its determination to withhold Federal funding. Similar to 
Pennsylvania's regulated community, officials from Pennsylvania's 
Department of Environmental Protection (DEP) were left trying to guess 
the type and degree of change the agency needed in administrating its 
nonpoint program to restore favor with EPA and finally receive the $3 
million that EPA was withholding from Pennsylvania.
    DEP's administrative response to EPA's decision to withhold Federal 
funds, which DEP has characterized as its ``reboot strategy,'' did 
result in the release of the $3 million being withheld. But similar to 
its initial decision to withhold funds, EPA provided no specific detail 
on which previously deficient components of Pennsylvania's nonpoint 
program were sufficiently remedied under DEP's reboot strategy.
    While I'm glad that Pennsylvania did finally receive needed Federal 
monies for use in Pennsylvania's Bay Watershed, the lack of due process 
shown by EPA in both its initial decision to withhold Federal funds and 
its subsequent decision to release funds to the Commonwealth is very 
disturbing. EPA's manipulation of Federal funding for Pennsylvania was 
arbitrary, at least in appearance if not in reality. What is to stop 
EPA in the future from making greater demands of Pennsylvania and 
imposing more stringent demands of state regulatory programs purely for 
political or ideological purposes? Is it fair for state regulators to 
be forced to play a guessing game with EPA? And more importantly, is it 
fair for farmers to be caught in this tug of war between EPA and state 
regulators? Finally, is it fair for those 33,600 Pennsylvania farmers 
in the Bay watershed to wonder if--despite their best practices--one 
day they will be forced to shutter or significantly reconfigure their 
farms in order for Pennsylvania to meet EPA's arbitrary threat of 
Federal withholding?
    As a farmer, I do several things to satisfy state regulators, but 
as I established earlier, I'm also dealing with tanking milk prices 
while trying to make my farm financially sustainable to bring my sons 
into the family business. I believe I've demonstrated my willingness to 
undertake practices that are better for the environment, but I want to 
do things that make sense for my farm and improves water quality in my 
local community, rather than a water body that is several hundred miles 
away.
    Both state and Federal officials have noted and documented the 
significant progress that Pennsylvania has made in reducing nitrogen 
and phosphorus pollution in the Bay Watershed, including pollution from 
nonpoint sources over the past several decades and more recently during 
the time period that President Obama's Chesapeake Bay Executive Order 
has been in effect.
    At the same time EPA and its cohorts point fingers and paint 
agriculture--farmers just like me--as a villain that impairs water 
quality in the Bay. But their accusations are in direct conflict with 
U.S. Geological Survey data--which showed pretty positive gains on 
water quality in tributaries throughout the Bay Watershed. These gains 
are not because of our revised Bay strategy or EPA's model. It merely 
demonstrates what agriculture has been doing for decades through 
increased knowledge, additional opportunities, technology and time.
    Here's my question for EPA: Do you really think I'm trying to 
pollute?
    I want to do the right thing. On my farm, I've been no-tilling for 
20 years and, for the last 4 to 5 years, I've planted cover crops. I 
maintain a farm conservation plan and a nutrient management plan 
specifically designed for my farm. All of these practices were done 
voluntarily and without Federal dollars. The only time I've used 
Federal dollars for conservation was for help in laying out our contour 
strips on our farm in the 1980s. I know there are many farmers in 
Pennsylvania and in the U.S. who have implemented voluntary practices 
without any Federal funding. Yet, in the eyes of the EPA--and in terms 
of the Bay Model--we don't count.
    Tell me, does that makes sense?
Conclusion
    Bureaucracy. Inflexibility. Uncertainty. These three words 
certainly capture the theme of EPA's Chesapeake Bay regulations and how 
they impact farmers, not just in the watershed, but across 
Pennsylvania, the region and even the nation.
    There's no question that farmers can reap financial benefits from 
implementing best management practices. I've certainly seen that using 
no-till practices on my farm. But there are also can be significant 
costs as well. As much as I--and other farmers--would like to implement 
more practices, I don't have the money to do more without--or even 
sometimes with--state or Federal assistance. As farmers, we are 
dependent on the agricultural economy and right now, that definitely 
adds a major challenge. As I mentioned earlier, there's been a great 
ebb and flow of farm income and margins for nearly 10 years.
    Regulators must be aware of the realities of agriculture. I'm a 
small business owner. I don't have a compliance officer--or a large 
staff--available to dance when the EPA says dance. At the end of the 
day, it's just me and my three sons trying to make a living on the 
farm--trying to balance the day-to-day tasks while complying with an 
ever-growing list of environmental regulations put forth by Federal 
agencies willingly ignoring the beneficial practices we employ.
    I consider myself a typical American farmer. I operate a small 
family farm. Our milk goes to a small family business, where it is 
processed and used in schools and hospitals in and around Pittsburgh, 
Pennsylvania. On our farm, we're trying to do the right thing. We're 
good stewards. We take excellent care of our cows and we go the extra 
mile to take care of our land and our water, not only because it's the 
right thing to do, but because it's my family--my children and 
grandchildren--who eat here, play here and hopefully one day will work 
here.
    Again, thank you for the opportunity to provide testimony to the 
Subcommittee today.
                               Appendix 1

                                              MSC Business Services
                                          Key Dairy Benchmarks per CWT
----------------------------------------------------------------------------------------------------------------
                     2008        2009        2010        2011        2012        2013        2014        Avg.
----------------------------------------------------------------------------------------------------------------
Income
  Milk..........    $19.84      $13.91      $18.05      $21.87      $19.77      $21.40      $25.57      $20.06
  Livestock          $0.93       $0.92       $1.11       $1.20       $1.50       $1.48       $1.87       $1.29
   Income *.....
  Other.........     $1.28       $2.14       $1.36       $1.35       $2.06       $1.59       $1.28       $1.58
                 -----------------------------------------------------------------------------------------------
    Total Income    $22.05      $16.97      $20.52      $24.42      $23.33      $24.47      $28.72      $22.93
                 -----------------------------------------------------------------------------------------------
Expenses
  Management         $2.24       $2.17       $2.14       $2.22       $2.20       $2.10       $2.19       $2.18
   Labor........
  Feed *........     $5.53       $5.13       $5.72       $7.07       $6.60       $6.20       $6.97       $6.17
  Hired Labor...     $1.64       $1.54       $1.56       $1.70       $1.84       $1.97       $2.06       $1.76
  Interest......     $0.85       $0.78       $0.77       $0.79       $0.69       $0.63       $0.63       $0.73
  Rent..........     $0.54       $0.53       $0.56       $0.59       $0.69       $0.77       $0.84       $0.65
  Milk Marketing     $1.00       $1.01       $1.02       $1.06       $1.09       $1.11       $1.14       $1.06
  Dairy Expenses     $2.21       $1.98       $2.05       $2.21       $2.30       $2.23       $2.47       $2.21
  Crops (Seed,       $2.45       $1.89       $1.97       $2.43       $2.85       $2.74       $2.89       $2.46
   Chem., Fert.,
   Fuel)........
  Depreciation..     $1.43       $2.17       $1.49       $1.53       $1.63       $1.55       $1.62       $1.63
  Other.........     $3.62       $2.30       $3.36       $3.78       $3.43       $3.77       $4.33       $3.51
                 -----------------------------------------------------------------------------------------------
    Total           $21.51      $19.50      $20.64      $23.38      $23.32      $23.07      $25.14      $22.37
     Expenses...
                 ===============================================================================================
      Net Margin     $0.54      ^$2.53      ^$0.12       $1.04       $0.01       $1.41       $3.58       $0.56
----------------------------------------------------------------------------------------------------------------
Avg. No. Cows          124         119         127         132         134         149         164
Milk Sold per       20,113      19,750      20,061      19,992      20,036      20,466      20,909
           Cow
----------------------------------------------------------------------------------------------------------------
* Adjusted for Inventory Change (Livestock Inventory for Livestock Income and Crop Inventory for Feed).

                               Appendix 2

     Public Bodies Created Under Auspices of Chesapeake Bay Program
 
 
 
Agricultural Ditch BMPs Expert       Integrated Trends Analysis Team
 Panel
Agricultural Modeling Subcommittee   Land Use Workgroup
Agricultural storm water and         Local Area Targets Task Force
 Tailwater Expert Panel
Agriculture Workgroup                Local Government Advisory Committee
Animal Waste Management Systems      Local Leadership Workgroup
 Phase 6 BMP Expert Panel            Maintain Healthy Watersheds Goal
Best Management Practices             Implementation Team
 Verification Committee
Biosolids Ad Hoc Taskforce           Manure Injection and Incorporation
BMP Verification Review Panel         Phase 6.0 Expert Panel
Boat Pump-Out Expert Review Panel    Manure Treatment Technologies
                                      Expert Panel
Budget and Finance Workgroup         Milestones Workgroup
Citizen Stewardship Team             Modeling Workgroup
Citizen Stewardship Subgroup         Nutrient Management Phase 6.0
                                      Expert Panel
Climate Resiliency Workgroup         Nutrient Management Task Force
Communications Workgroup             Onsite Wastewater Treatment Systems
                                      Expert Panel
Conservation Tillage Phase 6.0       Oyster BMP Expert Panel
 Expert Panel
Cover Crop Phase 6.0 Expert Panel    Scientific and Technical Advisory
                                      Committee
Criteria Assessment Protocol         Scientific Technical Assessment and
 Workgroup (through 2015)             Reporting Team
                                     Shallow Water Modeling Workgroup
Crop Irrigation Management Expert    Status and Trends Workgroup
 Panel                               Stream Health Workgroup
Data Integrity Workgroup
Diversity Action Team                Street and Storm Drain Cleaning BMP
Education Workgroup                   Expert Panel (final report filed
                                      in 2015)
Enhancing, Partnership, Leadership   Submerged Aquatic Vegetation
 and Management Goal Implementation   Workgroup
 Team                                Sustainable Fisheries Goal
                                      Implementation Team
Federal Facilities Workgroup         Toxic Contaminants Workgroup
Fish Habitat Action Team             Trading and Offsets Workgroup
Fish Passage Workgroup               Urban Stormwater Workgroup
Floating Wetlands Expert Panel       Urban Tree Canopy BMP Expert Panel
Forestry Workgroup                   Wastewater Treatment Workgroup
Fostering Chesapeake Stewardship     Water Quality Goal Implementation
 Goal Implementation Team             Team
                                     Watershed Technical Workgroup
Habitat Goal Implementation Team     Wetland Workgroup
Impervious Cover Disconnection       Wetlands Expert Panel
 Expert Panel
Independent Evaluator Workgroup
Integrated Monitoring Networks
 Workgroup
 


    The Chairman. Thank you, Mr. Ebert.
    Ms. English, go ahead and proceed with your 5 minutes of 
oral testimony whenever you are ready.

   STATEMENT OF KATHERINE R. ENGLISH, J.D., PARTNER, ENGLISH 
 FAMILY LIMITED PARTNERSHIP, LLC, FORT MYERS, FL; ON BEHALF OF 
                      FLORIDA FARM BUREAU
          FEDERATION; AMERICAN FARM BUREAU FEDERATION

    Ms. English. Thank you. I would like to thank Chairman 
Thompson, Ranking Member Lujan Grisham, and the fellow Members 
of the House Committee on Agriculture for the opportunity to 
speak with you today about the cost of conservation compliance.
    My name is Kate English. I grow citrus and raise cattle in 
southwest Florida with my family, under the business name of 
the English Family Limited Partnership. I am here today on 
behalf of my family, as well as the Florida Farm Bureau 
Federation, and American Farm Bureau Federation.
    There is a growing gap between farmers' abilities to meet 
the demands imposed upon them by regulatory compliance, and our 
ability to meet these obligations while remaining profitable. 
Rather than try to explain to you in terms of the regulations, 
I thought I would share with you a couple of stories from our 
family farming operation that would help you understand this.
    The first is, our family farm has been in our family since 
1870. Portions of the property were granted to us under the 
Federal Homestead Act, and we have had a pump in the 
Caloosahatchee River, which is now known as C43, as part of an 
Army Corps of Engineers project, since 1890, using low-volume 
irrigation techniques more than 60 years before the first 
literature in the universities covered it.
    The first story I want to tell you is about our water use 
permits. In 1977, a Soil Conservation Service scientist came to 
my grandfather's house and said there is a new program, and you 
are going to need a water use permit. You are going to need to 
have a permit for every well, pump, and surface water 
management structure that you have on your property. And he 
helped him fill out the paperwork, and we sent it in to the 
South Florida Water Management District, which is the local 
partner for the Federal drainage project. In about 3 weeks, we 
had a permit. In 1988, that permit expired and my father and my 
uncles timely applied for a renewal. What they didn't get in 
the mail was a permit. What they got was a request for 
additional information, which they didn't know what to do with. 
And it sat there for 8 years until I was licensed to practice 
law, and was actually working on an application for another 
client. When the reviewer said, do you know anything about 
English Brothers, and I said, yes, it is my fathers and my 
uncles. And he said, well, do you want to finish this water use 
permit? It took me about 3 months, but I got it done.
    The last time I renewed this permit was 5 years ago. I am 
an environmental permitting attorney. It took me 3\1/2\ years, 
and I had to hire the former acting General Counsel of the 
South Florida Water Management District, and the former head of 
the regulatory division in order to successfully complete it, 
for an allocation that was less than the allocation we 
requested in 1977, for a pump my family has had in the river 
since 1890.
    The second story I want to tell you is about citrus 
greening. And we are struggling to survive. Eighty percent of 
the trees in 90 percent of the groves in the State of Florida 
are dying of citrus greening. Congress has been incredibly 
generous to us in terms of research dollars. We just need to 
hold on until the research money works.
    Unfortunately, our friends at EPA are considering de-
listing the very insecticide that we need to control the one 
insect that vectors this disease, the Asian Citrus Psyllid, 
which is an invasive species to Florida. It is not native here. 
We can't survive without controlling this psyllid population. 
We struggle to understand the investment that Congress has 
made, at the same time the EPA is considering de-listing that 
tool that we need.
    The final story I have for you is to tell you the skills my 
family brings to the table. I am an environmental permitting 
lawyer. My sister is the Bureau Chief for Pest and Disease for 
the Florida Department of Agriculture. My father is a 
recognized citrus expert in the Citrus Hall of Fame and the 
Florida Agricultural Hall of Fame. I have an uncle who is a 
CPA, and I have two cousins who are licensed engineers; one of 
whom works on our surface water management system, the other of 
whom spends his summer vacations trying to develop robotic 
technology to harvest our citrus crops, since labor is a 
challenge for us.
    I wonder what families that don't have this level of skill 
in their family farm do. You shouldn't need a lawyer and an 
engineer in order to farm.
    Thank you.
    [The prepared statement of Ms. English follows:]

  Prepared Statement of Katherine R. English, J.D., Partner, English 
 Family Limited Partnership, LLC, Fort Myers, FL; on Behalf of Florida 
                                  Farm
           Bureau Federation; American Farm Bureau Federation
    Good morning, my name is Kate English. I grow citrus in southwest 
Florida with my family under the business name of English Family 
Limited Partnership, LLC. I am here representing my family, as well as 
Florida Farm Bureau Federation and American Farm Bureau Federation.
    I want to thank Chairman Thompson, Ranking Member Lujan Grisham, 
and fellow Members of the House Committee on Agriculture for the 
opportunity to speak with you today about the costs of conservation 
compliance in accordance with the farm bill, and the myriad Federal 
environmental regulations imposed upon Florida agriculture. There 
exists a widening chasm between the demands imposed on farmers by 
regulatory compliance, supplier and consumer requirements, and our 
ability to meet these obligations while remaining profitable enough to 
continue producing the fresh, nutritious food that we all take for 
granted. I am focusing my comments today on the issues of increasing 
complexity, expense of compliance, lack of science-based decision-
making, and lack of partnership with the Federal Government. The point 
of my comments today is that a farmer shouldn't have to have a lawyer 
and an engineer on staff to grow food.
Complexity and Lack of Science
U.S. Environmental Protection Agency's Actions on Nutrients
    Florida farmers work hard to implement effective strategies for 
resource conservation, but they're continually confronted with the 
sentiment that their extensive science-based efforts are never 
sufficient to protect the resource. New regulations expand the 
jurisdiction of agencies far beyond the regulatory space previously 
occupied. A prime example of this is the recent ``waters of the United 
States'' rule. The rule not only expands the regulatory footprint for 
farming and increases the uncertainty we battle daily, but it also 
lacks peer-reviewed sound science. These regulations appear instead to 
be based on public opinion and social media trends rather than facts 
and science. The result is a highly unpredictable regulatory 
environment and uncontrolled costs when faced with compliance based on 
a moving target rather than a rational, science-based goal.
    We are doing more than ever to protect the environment--much of it 
at our own expense--while facing increasingly expensive inputs, 
skyrocketing regulatory compliance costs, and stronger competition in a 
global marketplace in which we are price takers, not price makers. Our 
profit margins are slim at best and these factors are not a recipe for 
long-term success.
    Florida and its farmers have worked hard to address the impacts of 
agriculture on the state's natural systems. We have worked hand-in-hand 
with the State of Florida and other stakeholders to develop programs to 
effectively and responsibly use nutrients and water. Using sound, peer-
reviewed science developed by the University of Florida/Institute of 
Food and Agricultural Sciences, best management practices (BMPs) were 
developed for Florida soils and climate conditions minimizing the use 
of nutrients and managing water use. Florida farmers were quick to 
recognize the benefits of BMPs and readily adopted them, utilizing the 
cost- and time-efficiencies found in better nutrient and irrigation 
management.
    The Florida Department of Environmental Protection reviewed and 
approved these practices, noting their effectiveness in reducing 
nutrients and runoff while protecting the environment.
    At the same time, we have struggled with litigation filed by 
special interest groups against the U.S. Environmental Protection 
Agency (EPA) claiming that Florida's efforts to protect its water 
supply were insufficient to comply with the Clean Water Act. Extensive 
litigation and negotiations at taxpayers' expense finally resulted in a 
settlement that provided for the adoption of Florida's proposed numeric 
nutrient criteria. The settlement recognizes Florida's ability to 
enforce its water quality standards.
    The Florida Department of Environmental Protection's work on Basin 
Management Action Plans (BMAPs) is collaborative and intensive. These 
BMAPs are developed in a joint effort with stakeholders to address 
Total Maximum Daily Load (TMDL) exceedance. For a farm located within a 
BMAP, the Best Management Practices program empowers farmers to avoid 
the significant expense of water quality monitoring (which does not 
include any land management component) and instead address concerns 
about their operation by filing a Notice of Intent to comply with the 
best management practices and then working with the Florida Department 
of Agriculture and Consumer Services to ensure those practices are 
used. The other benefit of the Best Management Practices program is it 
allows farmers to choose from a range of management tools for their 
commodities. The options allow each farmer to customize environmental 
protections based on his or her particular operation.
    Many decades of development created the conditions that we have 
today (though some science is now noting that naturally occurring 
nutrient levels may have been higher than first believed), but special 
interest groups are using litigation against EPA to drive policy 
decisions, including a demand to immediately improve water quality to 
standards that will realistically require decades and billions of 
dollars to achieve. At worst, this strategy could result in removing 
farming from the landscape entirely. The most extreme groups seem to 
seek that result based on my experiences in working with stakeholder 
groups. Members of these most extreme groups slander best management 
practices as mere ``window dressing'' and claim the farmers are not 
performing the practices or the practices do not work because immediate 
results downstream are not apparent. Claims like these drove the 
Florida Legislature to require the Florida Department of Agriculture 
and Consumer Services to begin development on an Implementation 
Assurance Manual, creating yet one more unnecessary level of 
bureaucracy at an additional cost to the farmer.
    In response to these claims, I would instead cite the success of 
farmers in the Everglades Agricultural Area using best management 
practices who have managed to reduce phosphorus discharges from their 
drainage basin by more than 56 percent over the last 20 years. For a 
milestone 20th year, water flowing from farmlands in the Everglades 
Agricultural Area achieved phosphorus reductions that significantly 
exceed those required by Florida's Everglades Forever Act. This 
improvement is the result of farmers implementing improved farming 
techniques under the South Florida Water Management District's Source 
Control Permitting Program. This program has an overall average annual 
phosphorus reduction of 56 percent--more than twice the 25 percent 
required by law.
    We have tools that will work which do not require pyramiding local, 
state and Federal regulation on farmers who are working hard to protect 
their most basic tool and greatest investment, their land. We must use 
reasonable, economically feasible approaches and allow those approaches 
time to work. We cannot survive ever-mounting regulation and ever 
mounting costs of compliance when the benefits of those regulations and 
costs do not result in meaningful improvement.
Removing Products Due to Public Perceptions
    Citrus Greening (Huanglongbing or HLB) disease is spread by a 
single vector, the Asian Citrus Psyllid, first detected on the east 
coast of Florida in June 1998. By September 2000, this pest had spread 
to 31 Florida counties. Currently, 90 percent of all groves and 80 
percent of all citrus trees in Florida are infected with greening 
disease. Once a thriving industry producing more than 250 million 
boxes, this past season Florida citrus growers produced less than 80 
million boxes (90 pound equivalent), the lowest production in more than 
50 years. We are perilously close to falling below the volume of fruit 
required to maintain the industry's infrastructure for processing, 
packing and marketing our crop. We will not long survive if we cannot 
maintain our infrastructure and our markets.
    Congress has been incredibly generous and responsive during this 
time. It has authorized and allocated millions of dollars for research 
in the hopes of finding a cure to this economically devastating 
disease. At the same time, EPA is actively working to remove some of 
the few crop protection products that can control populations of the 
Asian Citrus Psyllid.
    Public sentiment has risen against neonicotinoid chemical use due 
to one-sided media reports and social media campaigns claiming that 
these materials are responsible for the honey bee population decline. 
The research is ongoing, but there are a number of factors that may 
contribute to honey bee population changes. Studies note that 
decreasing population in some locales may be climatic in nature or a 
result of Colony Collapse Disorder (CCD), of which no scientific cause 
has been proven.
    Florida growers have worked with beekeepers to develop schedules to 
time the use of neonicotinoid sprays so that honey bee populations are 
not present when these products are applied or when the ingredients are 
active. Honey bees in Florida citrus groves are transient, as 
beekeepers bring the hives in for the citrus bloom then move the hives 
on to other crops. The pesticides' labels clearly indicate how to use 
the product to minimize the impact to beneficial insects and citrus 
farmers are well aware of the potential harm caused by improper use.
    We have very few options when combating the psyllid and EPA needs 
to make decisions based on sound, peer-reviewed science rather than 
fears and rumors.
Complexity and Conflict
Permitting at All Levels of Government
    The cost of compliance continues to rise due to the volume and 
complexity of information required to obtain and maintain compliance 
with a permit at all levels of government--local, state and Federal. 
Land activities such as leveling, clearing or routine water management 
that used to be allowed, either without a permit or with a minimal 
permit that denoted the activity on the land, now require more complex 
technical information and the fulfillment of ongoing reporting. Permit 
applications that initially could be completed by the farmer in a few 
hours now require many months of preparation and expert assistance from 
legal and engineering professionals to navigate the agencies' review of 
the application, which can take more than a year. These changes have 
exponentially increased the cost of farming and the costs are not 
prorated to the size of the farm, disproportionately impacting small 
and mid-sized farms.
    Much of the information generated for the permitting process 
becomes public information. This information is used to both challenge 
the permits being sought and as fodder for litigation challenging 
existing operations. The statutory provisions that allow third parties 
to sue farmers under the citizen suit provisions of a number of 
environmental laws can create significant financial roadblocks and push 
smaller farmers to consider other options for their land, particularly 
as development presses closer to farms. While a cow or a farm field may 
be aesthetically appealing in concept, the reality of living next door 
to even a small commercial farming operation is most usually perceived 
by a home owner as a nuisance. Right-to-Farm laws found in most states 
do not protect against environmental litigation. Challenging the farm's 
compliance with environmental regulations is typically a very 
successful tool to force a farmer out, especially as he contemplates 
the possibility of having to pay his own attorney's fees along with the 
fees incurred by the people suing him. The result is frequently a sale 
of the property for development.
USDA NRCS Conservation Programs
    USDA's Natural Resources Conservation Service (NRCS) has an 80 year 
history of helping farmers and others ``maintain healthy and productive 
working landscapes.'' The keyword in the above quote from NRCS is 
``working,'' which should be interpreted as a landscape that combines 
commodity production (i.e., agriculture) with ecosystem protection.
    In recent years, the process NRCS uses to help farmers has become 
increasingly complex and difficult to navigate. At the same time, 
staffing challenges at the agency are increasing as experienced 
staffers retire, taking their institutional knowledge with them. Though 
cost-share opportunities exist for the implementation of conservation 
measures, many farmers in Florida avoid these programs due to their 
complexity and lack of transparency. Besides the time and intricate 
detail required to complete the paperwork, under the most recent farm 
bill, NRCS programs can now require the farmer to provide an affidavit 
signed under penalty of perjury that certain practices impacting 
sensitive lands have never occurred on the property. Farmers are often 
unable to obtain the corresponding back-up documentation for the 
affidavit to ensure they are prepared for future audits or compliance 
reviews, so they choose to avoid this program in its entirety.
    To many Florida farmers today, USDA's NRCS is a regulatory entity. 
Contrast that with the view of farmers in the 1970s who welcomed the 
NRCS' ancestor, the Soil Conservation Service, whose scientists 
tirelessly worked to get Florida farms permitted when a new Water 
Resources Act required that every well, pump and surface water 
management system be accounted for and permitted. My grandfather's farm 
in Lee County has those permits that I now work so hard to maintain 
because a Soil Conservation Service scientist came out to the farm and 
educated him about the requirements and helped him with the paperwork.
Citrus Crop and Tree Insurance
    Farmers appreciate the Federal Government's recognition that food 
security is vital to our nation. Congress' crop insurance program helps 
farmers recover from catastrophic crop failures that occur from weather 
and other events. In citrus, we have the distinct benefit of having 
both crop insurance and tree insurance. While the loss of a crop can be 
devastating, the loss of our trees can destroy, and is destroying, our 
industry. This program is quite complex with distinctions being drawn 
about what entity can hold which kind of policy. In addition, to obtain 
any insurance, a grower must provide sworn testimony by affidavit that 
all of his farming operations are in strict compliance with the Food 
Security Act's Swampbuster provisions. Curiously, citrus is not defined 
as one of the commodity crops that must comply with the Swampbuster 
provisions.
Threatened/Endangered Species
    Farmlands frequently provide habitat for threatened and endangered 
species for a number of reasons, such as the availability of prey and 
forage, cover for nesting and denning, and protection from people. 
Farmlands in southwest Florida are providing habitat for the Florida 
panther, the Florida bonneted bat, the crested caracara and the gopher 
tortoise, among other species. Unfortunately, very little recognition 
is given to farmers for the habitat that they're providing. Instead, we 
face the imposition of additional regulations that limit or eliminate 
the farming practices which created the habitat benefitting the species 
in residence. This is particularly apparent when farmers sell the 
development rights over a property and finds, to their surprise that 
they now have a partner in their farm who has no knowledge, 
understanding of the land or farming practices and no economic risk, 
but imposes its management practices all the same. Often these 
management practices are based on the current fashions of wildlife 
management rather than knowledge of the land and the creatures that 
live there.
    Farmers are intimately involved with the land they farm. They have 
a culture of stewardship to protect and maintain the most significant 
asset they have, the land. They know what lives on their land and why. 
For many of us, it is matter of pride that we coexist with these 
animals and have the luxury of observing them. And yet, frequently this 
approach leads to even greater regulatory pressure. For example, when 
we construct a surface water management impoundment to manage water 
quality in accordance with Section 401 of the Clean Water Act, we may 
be creating an area that will subject us to additional regulation and 
the threat of enforcement by the U.S. Fish and Wildlife Service when a 
listed species uses that area. The rules prohibiting habitat 
modification can prevent farmers from effectively using the impoundment 
or changing the system to accommodate future needs and changing 
regulatory requirements.
Recognition/Lack of Partnership
Slow Progress on the Comprehensive Everglades Restoration Plan
    South Florida has been the recipient of heavy rainfall events in 
the past year, leading to local and regional flooding. Winter vegetable 
crops that feed much of the nation were destroyed this past winter due 
to flooded fields.
    Lake Okeechobee is over 700 miles\2\. It receives the water that 
falls on a 4,600 mile\2\ basin stretching from Orlando south to the 
lake. The outfalls of the lake flow south into the remnant Everglades, 
east to the St. Lucie Canal and west to the Caloosahatchee River. The 
towns and farmlands around Lake Okeechobee received flooding rains this 
past winter. The flood control efforts to protect those farms and 
communities, as well as the discharges from the lake into the 
Caloosahatchee and Saint Lucie to prevent a breach to the aging dike 
surrounding the lake, resulted in outcries from people living on both 
the east and west coasts of Florida regarding impacts to their 
estuaries.
    Environmental activists claim that agriculture is ultimately to 
blame for degradation in the Indian River Lagoon and the Caloosahatchee 
Estuary after the U.S. Army Corps of Engineers authorized releases from 
Lake Okeechobee to lower lake levels and protect those living around 
the lake. False claims abound that water was not moved south because 
the sugar industry did not want the water. Water from the lake was 
moved south to the extent possible but this year's rains had left the 
water conservation areas full and the amount of water that could be 
drained through that system was very limited. With Lake Okeechobee 
continuing to rise, alternative actions had to be taken by the Corps to 
protect lives and property.
    Just as Hurricane Katrina devastated New Orleans, Florida was swept 
by two category 4 hurricanes, one striking Broward and Dade Counties in 
1926 and the second bringing destruction to the people, livestock and 
lands around Lake Okeechobee in 1928. The 1928 hurricane pushed water 
out of Lake Okeechobee and destroyed the towns of Belle Glade, Canal 
Point, Chosen, Pahokee and South Bay. The loss of life for humans and 
animals was unimaginable. My grandfather told the story of going to the 
area after the hurricane to help bury the dead, afraid of the disease 
that the Caloosahatchee River could transport to our family farm. My 
grandmother told the story of being left to shovel the mud from the 
ground floor of their flooded home while taking care of her husband's 
aged and infirmed parents. While the exact number of people killed will 
never be known, the death toll ranges from 1,836 to more than 2,500. 
When we discuss the need to protect the integrity of the dike around 
Lake Okeechobee by controlling the lake's water elevation, we can never 
forget what prompted the decision to build the dike.
    These losses along with the impacts of the Fort Lauderdale 
Hurricane of 1947 that caused flooding and significant crops in Fort 
Lauderdale and threatened to breach the dike around Lake Okeechobee 
again prompted Congress to pass the Flood Control Act of 1948, 
authorizing the first phase of the Central and South Florida Project 
which completely replumbed south Florida.
    Remember that our culture at that time supported the concept that 
nature should be controlled and lands should be converted to human use. 
The extensive levee, canal and gate system of the Central and Southern 
Florida Flood Control Project is very efficient at moving water and 
protecting life and property, just as it was designed. The project's 
environmental impacts, while extensive, were not considered until the 
project was very near completion in the late 1960s. Environmental 
awareness and scientific research has driven us to reconsider the 
Central and Southern Florida Flood Control Project and develop plans to 
restore portions of the system to reduce the environmental impact and 
protect precious natural resources. Florida has worked hard to develop 
a restoration plan that balances the needs of the environment with 
society's needs to protect a population of 8.1 million people and an 
agricultural industry that generates billions dollars of economic 
activity each year by feeding our citizens throughout the winter 
months.
    Those demanding immediate restoration of the system refuse to take 
into account that it took decades to implement the original plan and it 
will take a significant investment in time and money to implement the 
works needed to improve the environmental health of the system, 
including improving water quality.
    We can take actions to implement this plan more quickly, including 
moving more water south toward the Everglades, if the Comprehensive 
Everglades Restoration Plan (CERP) was sufficiently funded. CERP 
includes a suite of projects needed to restore South Florida's 
ecosystem and we can accelerate the construction of a number of key 
projects that address those needs. The state of Florida and the Federal 
Government agreed to a 50/50 joint effort to fund CERP, but we have 
struggled to obtain appropriations from our Federal partner even as the 
state has allocated more funds for project construction.
    We need our Federal partner to meet its fiscal commitment to 
support these vital restoration efforts, while also understanding the 
need for the measures alleviating flooding and protecting human lives 
in the interim.
County Alliance for Responsible Environmental Stewardship
    The County Alliance for Responsible Environmental Stewardship 
(CARES) is an award and recognition program that was established in 
2001 by Florida Farm Bureau Federation to recognize farmers who have 
voluntarily implemented best management practices on their farms and 
promoted environmentally sound and economically viable farming 
practices. The CARES program also serves as a tool to educate and 
demonstrate to the public that Florida agriculture is actively involved 
in protecting our resources by implementing sound environmental 
management and nutrient stewardship practices.
    The CARES program is a cooperative effort between Florida Farm 
Bureau Federation, Federal agencies, county governments, businesses, 
other organizations and state officials. Independent experts review the 
farming practices and approve the farms to be recognized. Starting in 
the Suwannee basin of north Florida, the U.S. Environmental Protection 
Agency was an early participant with the Suwannee River Partnership to 
promote best management practices in the region. Not long after the 
creation of the CARES program and the partnership, EPA discontinued 
their participation, even though the programs promote a joint vision of 
environmental improvement.
    Florida Farm Bureau Federation invited Ms. Allison Wiedeman, then 
EPA Agricultural Counselor to the Administrator, to attend a CARES 
recognition event in the summer of 2014. Ms. Wiedeman was quite 
impressed and noted that this is the type of proactive work that the 
EPA should support.
    EPA and other Federal agencies struggle to partner with the 
private-sector. The agencies focus on using regulatory action to 
address its concerns with small and medium farming operations, rather 
than working to address compliance issues in an effective way. 
Voluminous paperwork and unattainable compliance goals make it hard for 
the farming community to work with Federal agencies. Further, the 
limited options for challenging the decision of a Federal agency in an 
enforcement action drive many farmers to settle rather than face the 
prospect of litigation with an entity that pays its lawyers an annual 
salary rather than a billable hour. The threat of mounting fines and 
the expense of litigation drive decisions to settle, and sometimes 
agree to impossible standards simply to avoid the threat of 
astronomical fines and attorney fees.
Closing
    Our society has grave misunderstandings about conventional 
agriculture and as farmers we have not effectively countered the 
campaign to paint us as abusers, rather than stewards, of the land we 
farm, the resources we need, and the creatures we care for. I have 
heard agriculture described as a form of ``violence on the landscape.'' 
Most people in the United States are several generations removed from 
the farm and have no functional understanding of agriculture as the 
provider of their food and fiber. Without personal knowledge, they have 
great difficulty finding reliable sources of information and even 
greater difficulty resisting emotionally charged words and downright 
horrifying misrepresentations. Even for those of us who farm, it is 
difficult to avoid the lure of social media and the 24/7 news cycle. We 
must support the development of, and encourage the effective use of, 
peer-reviewed science. As farmers, we must do a better job of telling 
our story.
    An outgrowth of this misunderstanding is the abuse of litigation by 
particular interest groups to drive the development of unworkable 
regulatory programs at the Federal level. The pressure for ever-lower 
compliance numbers that are elusive at best and unattainable at worst 
is never ending. Further, this approach to developing regulation 
exacerbates the difficulty for state agencies required to comply with 
Federal regulations. Only the largest and most sophisticated farmers 
can afford to retain the services of engineers and lawyers to help them 
navigate this challenging landscape. Those who do have one or both on 
staff or retainer can only do so by vastly increasing in size, despite 
the interminable cry of the same special interest groups against 
``industrial agriculture.''
    To my family, growing citrus is not a hobby or a game. It is who we 
are. We define ourselves by our connection to the land we have farmed 
for more than 130 years. This is what sustainable agriculture means to 
me. I am charged with a stewardship to farm the land in a responsible 
way and hand it down intact so that my children, my nephew and my 
cousins' children can enjoy this legacy.
    We have faced the challenges of farming for more than a century. We 
have faced uncertainty and existential threats brought about by 
economic collapse, social change and pestilence in our time on this 
farm. We continue to grow citrus in an uncertain environment and 
challenging conditions. We do not control the inputs of sunlight, 
rainfall and temperature. We do not control the price of the goods we 
produce to sell. We do not control the pests and diseases that find 
their way to our farm. We face the challenges of a deadly disease which 
is, as yet, without a cure, and race to find ways to continue to 
produce citrus until one can be found. We live in a state which is 
ground zero for imported pests and diseases.
    I am here today to ask that you keep these things in mind as you 
work to develop programs in support of conservation of our landscape 
and recognize that agriculture is working hard to do the same thing 
while we feed and clothe you. I ask that you recognize that clear and 
predictable regulations can be met, but regulations based on 
unreasonable demands, emotion or litigation put our ability to do our 
job in jeopardy.
    Without the support of Congress to rein in the actions of Federal 
agencies, much of Florida agriculture is at a crossroads where the next 
step may be the growth of a terminal crop of residential, commercial or 
industrial developments. Disease pressure, increasing regulations, 
stagnant prices and a weary farmer are a recipe for disaster when it 
comes to the food security for the people of the United States.

    The Chairman. Thank you, Ms. English.
    Mr. O'Toole, go ahead and proceed with your 5 minutes of 
testimony when you are ready.

STATEMENT OF PATRICK O'TOOLE, PRESIDENT, FAMILY FARM ALLIANCE, 
                           SAVERY, WY

    Mr. O'Toole. Good morning, Mr. Thompson, Ranking Member 
Lujan Grisham, and the Members of the Committee.
    I really appreciate the opportunity to be here. I am 
thinking about this testimony and how inadequate I will be to 
plumb the depths of the issue.
    Our family started ranching in 1881. We are cattle and 
sheep ranchers, and raise hay on the Colorado-Wyoming border. I 
am also President of the Family Farm Alliance. And the mission 
of the Family Farm Alliance is to provide adequate, affordable 
water for irrigators. We represent irrigators that raise every 
crop, every type of livestock in the country, in the 17 western 
states.
    And I have a schizophrenic, I guess, testimony. My written 
testimony goes into quite a lot of detail that I obviously 
can't go into today. But I have a great story to tell. My 
family has been very fortunate. We live in a watershed that has 
been celebrated at the White House in the last couple of 
months, about how you do a watershed. My family has won several 
environmental awards for stewardship. We are a pilot for how 
you integrate irrigation and fishery. That is all good stuff. 
And I have partnerships that I have formed with people in this 
Administration, or any Administration. But as you all know, 
agriculture is bipartisan, and we have to figure a way to work 
together. And when I see the panoply of rules and regulations 
that have been coming out on everything, it is overwhelming, 
and it is overwhelming to my neighbors.
    We have a tradition of livestock grazing in our community. 
Three century-old sheep ranches are going out of business this 
year because they can't get labor. The H-2A process, which is 
for legal labor, is broken. It is broken in a way that is 
terrifying for us to figure out. And I have had the opportunity 
to come back here occasionally and meet with various people in 
the Administration and on the committees, and with my best 
efforts, I only have \1/3\ of them in.
    This year, I can tell you stories about $750,000 worth of 
blueberries plowed under, $1 million of the strawberries plowed 
under, livestock dead, my livestock. I shouldn't be here, I 
should be at home tending my livestock, but we can't get any 
people. It is a nationwide program, and problem, and we have to 
address is.
    I attended all of the Western Governors Endangered Species 
meetings, except for the one in Hawaii, which I couldn't 
afford, but there was a great message that came out of those 
meetings. And they were a real cross-section of people from 
conservation groups to oil and gas, to agriculture. The message 
is local, local, local. The answers are going to be done at the 
local level. My community is one of the ones showing the way 
that we do that, but the overwhelming regulatory stuff that is 
coming out, particularly from the EPA. When this Administration 
decided that the EPA would replace Department of Agriculture, 
Department of the Interior, it is a whole new world. And one of 
the things you learn from the Family Farm Alliance is, if you 
understand what is going on in the West, in my ranch, at the 
head waters of the Colorado River, the water is going off so 
fast we know that we have to have storage. I guarantee you that 
the regulatory systems that are being implemented right now 
will eliminate the ability to permit. It is difficult now. It 
will be virtually impossible. That is why your role is so 
critically important right now.
    You have probably all heard this. I spent this weekend with 
the American Farmland Trust. My son is on that Board, and they 
allowed me to sit in. One of the most chilling descriptions of 
American agriculture right now is the fastest growing category 
of farmers in America is 70 and above. The fastest losing 
category is 35 and below. And if you ask me, I have spent a 
year on a thing called AGree in this town. Probably some of you 
are aware of it. How do we feed ten billion people sustainably. 
And so I have had access to all of the information that is 
being presented. We have to double the food supply, and yet we 
have now--Federal agencies are looking at paying farmers not to 
irrigate. Federal agencies that are coming up with criteria on 
the sage-grouse that are impossible, impossible to fulfill.
    And what we have to do is get our arms around--I say the 
revolution has already happened. People are doing wonderful 
things on the land, but what we are doing now is we are 
implementing so quickly, pages and pages and pages of 
regulatory gibberish.
    I have shared some things on the mitigation strategy of the 
Fish and Wildlife Service. Both people on the left and the 
right read them and they can't understand them because it is 
not quality, it is not interconnectedness of the committees and 
the parties, it is an agenda being driven. And I would just ask 
you with all my heart to think about how important it is to 
keep this American agricultural structure together.
    Thank you very much.
    [The prepared statement of Mr. O'Toole follows:]

Prepared Statement of Patrick O'Toole, President, Family Farm Alliance, 
                               Savery, WY
    Good morning, Chairman Thompson, Ranking Member Lujan Grisham, and 
Members of the Subcommittee.
    My name is Patrick O'Toole, and on behalf of the Family Farm 
Alliance (Alliance), I thank you for this opportunity to present this 
testimony on the impacts to western irrigated agriculture of Federal 
environmental regulations and the potential for voluntary conservation 
solutions. The Alliance is a grassroots organization of family farmers, 
ranchers, irrigation districts, and allied industries in 16 western 
states. The Alliance is focused on one mission: To ensure the 
availability of reliable, affordable irrigation water supplies to 
western farmers and ranchers. We are also committed to the fundamental 
proposition that western irrigated agriculture must be preserved and 
protected for a host of economic, sociological, environmental, and 
national security reasons--many of which are often overlooked in the 
context of other national policy decisions.
    Our family prides itself on incorporating conservation practices 
within our ranching operation. Our ranch, the Ladder Ranch, was the 
2014 Wyoming Stock Growers/Sand County Foundation Leopold Award winner 
in recognition of the importance we place upon maintaining and 
improving natural resources, all the while operating a viable ranching 
business. Our family, like many, are descendants of folks who headed 
West in response to President Lincoln's charge and the Homestead Act.
    There are many critical issues that the western family farmers and 
ranchers we represent are confronted with at this time. At the top of 
the list is the daunting number of Federal regulatory policy 
initiatives that are facing western agricultural producers. These types 
of Federal water resources actions and regulatory practices could 
potentially undermine the economic foundations of rural communities in 
the arid West by making farming and ranching increasingly more 
difficult. American family farmers and ranchers for generations have 
grown food and fiber for the world, and we will have to muster even 
more innovation to meet this critical challenge. That innovation must 
be encouraged rather than stifled with new Federal regulations and 
uncertainty over the water supplies and basic operations for irrigated 
farms and ranches in the rural West.
    My testimony will provide some background describing the unique 
nature of western agriculture and water, and will summarize key 
concerns we have with just a small sampling of the administrative 
regulatory proposals we are grappling with. Since the mission of the 
Family Farm Alliance is water-focused, our emphasis in this testimony 
will similarly place more attention on those regulations that can 
impact water use for western farmers and ranchers. However, this 
testimony is also intended to demonstrate the conservation and open-
space benefits provided by western farms and ranches, and also to 
investigate the unique opportunities to advance further voluntary, 
grassroots-driven conservation efforts in those areas.
I. The Unique Nature of Western Agriculture
    It is critical to understand the wide variety of types of western 
agriculture (defined as those activities occurring west of the 100th 
meridian \1\ where rainfall is generally below 20" per year) and the 
unique nature of western agricultural challenges. Vast differences 
exist between the circumstances faced by western producers and their 
counterparts in the eastern, southern and midwestern regions. These 
primarily derive from three drivers that have tremendous impacts on 
western farmers and ranchers: (1) the large amount of federally-owned 
lands in the West; (2) explosive population growth in recent decades 
(expected to continue into the future); and (3) the recent rapid and 
proposed development of energy resources.
---------------------------------------------------------------------------
    \1\ Source: Intermountain West Joint Venture. 2013 Implementation 
Plan--Strengthening Science and Partnerships. Intermountain West Joint 
Venture, Missoula, MT
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    The unique nature of the West presents challenges and opportunities 
to find creative solutions. western food and fiber producers face many 
core challenges today, including:

   Attempting to align agricultural and food production with 
        improved environmental outcomes;

   Seeking ways to find common ground with the urban public; 
        and

   Water scarcity and competition with other demands, including 
        growing water needs for expanding energy development. 
        Regulatory challenges, climate change and an aging water 
        infrastructure complicate efforts to find meaningful long-term 
        solutions.

    This testimony seeks to provide perspective on these matters and 
offers specific recommendations in several areas important to western 
agriculture: water supply, conservation of biological diversity and 
nature resources, and immigration policy. It also offers reflections on 
the future role of the Federal Government. One of the defining 
principles underscored in this testimony is that policymakers need to 
change the model from ``top-down'' Federal management to an emphasis on 
partnerships among private, public and non-governmental interests in 
order to take care of landscapes and produce food.
    The recommendations proposed here can help keep western agriculture 
productive and profitable, which promotes sound communities, viable 
economies and healthy landscapes in the West. Good policies will drive 
the programs and activities that lead to great public investments. 
These will pay for themselves over and over and demonstrate positive 
long-term impacts.
II. Western Water Regulatory Concerns
A. Overview
    Water is the key to economic, social and environmental prosperity 
in the American West. Food security is as vital to our homeland 
security as other national security concerns, and the certainty and 
stability of the production of food and fiber on western irrigated 
lands is critical to our nation's and the world's ability to feed a 
growing human population. As the West's population has grown, water 
issues have become increasingly important--and polarized. Growing 
urbanization has led to increased public demand for available water 
supplies to provide recreational and environmental benefits. This 
places heavy demands on western water supplies, which were historically 
developed and continue to be relied upon for the production of 
agricultural goods.
    Contributing to the loss of productive agricultural land in the 
western United States is growing competition to secure agricultural 
water rights--some of the most senior water rights in the West--to meet 
growing municipal, energy and environmental demands. In essence, 
agricultural water has become the default water supply for meeting 
other demands in the modern West. Unfortunately, the only large 
potential for moving agricultural water to other uses will come from 
fallowing great swaths of farmland and transferring that water to meet 
other demands, which has grave implications for our country's ability 
to produce food for a growing world population. This factor alone could 
significantly threaten the luxury Americans currently enjoy--spending a 
very low percentage of their disposable income on food. These issues 
and other growing domestic and global food security and scarcity 
concerns must be considered as Federal water policies are developed and 
implemented.
B. Regulatory Challenges and Recommended Solutions
    The very significant Federal presence in the West presents unique 
challenges that producers may not face in other parts of the United 
States, particularly with respect to the reach of the Endangered 
Species Act (ESA). Federal agency implementation of this law can have 
very significant impacts on how producers manage land and water. 
Importantly, once-certain Federal water supplies that were originally 
developed by the Bureau of Reclamation (Reclamation) primarily to 
support new irrigation projects in recent years have been targeted and 
redirected to other uses. So, in the West, once certain water 
supplies--one of the few certainties in western irrigated agriculture--
have now been added to the long list of existing ``uncertainties.'' The 
ESA and Clean Water Act (CWA) are not working in the West. 
Environmental pioneers dealt well with the issues of their day, but the 
water supply and delivery ``tools'' they built only got us so far. We 
need to develop the next generation of tools that build on our 
successes but also recognize our limitations. Today, more than a third 
of the 3.6 million stream miles in this country are designated as 
impaired under the CWA. Under the ESA, 28 types of salmon have been 
listed and none have recovered. Though listing of waters as impaired 
and species as endangered might be perceived by some as victories, they 
have by and large not translated to real improvements to the species on 
the ground.
    It is very clear to those who work the land that the ESA and CWA 
need to be addressed using a performance-based approach. We need to 
empower those who can actually implement substantive benefits to their 
environment; and we believe private landowners are the key here. Of 
course, these improvements cannot be done mostly out of their own 
pockets and without appropriate assurances (these activities provide 
societal benefits and thus should be societal expenses). Second, there 
needs to be regulatory and statutory changes made to these major acts 
to empower environmental markets and to establish proven approaches and 
data considerations for decision making. The constructive scientists 
working for Federal and state fish and wildlife agencies are becoming 
increasingly hamstrung with paperwork and legal deadlines driven by 
lawsuits from a handful of activist groups. For example, a legal 
settlement reached between these groups and the Obama Administration 
could potentially add hundreds more western species to the ESA list.
    A prime factor concerning western irrigators is the employment of 
the ESA by Federal agencies as a means of protecting single endangered 
or threatened aquatic species under the ESA by focusing on one narrow 
stressor to fish: water diversions. For the second time in a decade, 
Congress in 2010 directed that the National Academy of Sciences (NAS) 
convene a high-level, independent scientific review of Federal 
restrictions on water deliveries affecting thousands of western farmers 
and ranchers. In 2009, those restrictions--based in large part on ESA 
biological opinions in California's Sacramento-San Joaquin River Delta 
(Delta)--were a primary cause for the water cutbacks and rationing 
afflicting hundreds of communities throughout the state and the 
resulting economic devastation in the San Joaquin Valley. The NAS 
report stated, in part, that the large number of stressors, their 
effects and interactions in the Delta lead to the conclusion that 
efforts to eliminate any one stressor (such as water diversions) are 
unlikely to reverse declines in listed species. Opportunities exist to 
mitigate or reverse the effects of many stressors. Continued effects 
analyses, modeling and monitoring are necessary to ensure actions taken 
to rehabilitate the ecosystem are cost-effective.\2\
---------------------------------------------------------------------------
    \2\ Sustainable Water and Environmental Management in the 
California Bay-Delta (2012), NAS Water Science and Technology Board 
(http://dels.nas.edu/Report/Sustainable-Water-Environmental-Management/
13394).
---------------------------------------------------------------------------
    A similar decision to focus exclusively on one stressor--a Federal 
irrigation project--was made by Federal agencies in the Klamath Basin 
in 2001, and that decision and the science used by Federal fish 
agencies to support the decision, was criticized later in a review 
conducted by the NAS.
    The California and Klamath stories are very similar. The NAS 
stepped in after Klamath Irrigation Project supplies from Upper Klamath 
Lake were cut off by Federal biological opinions under the ESA in 2001. 
The NAS' objective scientific review \3\ concluded that there was 
insufficient evidence to support these biological opinions in 
restricting agricultural diversions from the Klamath system, which had 
led to the near collapse of the local agricultural community. In 
Klamath, the Federal regulators looked at only one of the stressors 
contributing to the fisheries' decline and they focused on only one 
solution--cutting off water supplies to agriculture.
---------------------------------------------------------------------------
    \3\ Scientific Evaluation of Biological Opinions on Endangered and 
Threatened Fishes in the Klamath River Basin: Interim Report (2002), 
NAS Board on Environmental Studies and Toxicology (http://dels.nas.edu/
Report/Scientific-Evaluation-Biological-Opinions/10296).
---------------------------------------------------------------------------
    Not surprisingly, the listed species apparently are no better off 
today than they were in 2001, yet the agricultural community struggles 
with operating capital, input suppliers and sales contracts for 
agricultural products, due to the lack of a reliable water supply that 
has been redirected with uncertain benefits to ESA-listed fish. 
Likewise, in California today, the same Federal agencies have refused 
to assess the impacts of the many stressors affecting the health of the 
Delta. And, for more than 15 years they have been restricting or 
cutting off water deliveries, even though their experience during those 
15 years have conclusively demonstrated that long-term agricultural 
water restrictions have not prevented fisheries from declining in the 
Delta.
    As in California, the effects of the Klamath restrictions were 
immediate and far-reaching, creating losses not just to the economy, 
but also to wildlife resources as water was diverted away from farms 
and ranches (and two Federal wildlife refuges). And yet, the Federal 
regulators failed to perform any environmental impact analysis before 
they ordered irrigation water cutbacks in California and Klamath. 
Clearly, ESA implementation by several biased scientists within Federal 
agencies must also be addressed, primarily with improved peer review 
and adherence to laws like the Information Quality Act. Best available 
science is not simply a slogan for Federal agencies to trumpet; such 
science must truly be used in natural resource decision-making.
    Boots-on-the-ground efforts and actual recovery of species should 
define success under the ESA, not endless litigation and what appears 
to be the opportunistic pursuit of attorney's fees by certain 
environmental groups. According to a recent Government Accountability 
Office (GAO) report,\4\ in just 4 years, litigating environmental 
groups raked in more than $15 million from taxpayers, with some of 
these groups' attorneys being paid as much as $500 per hour from the 
public treasury. These environmentalist lawsuits are the poster child 
for what has become an environmental litigation industry. While others 
are busy fixing the problems outside the courtroom, including 
implementation of the historic Nez Perce Water Rights Agreement (IDAHO) 
and collaborative efforts by ranchers to prevent listing of the western 
sage-grouse, litigious groups continue to drain resources and time, 
distracting everyone from the real goals of the ESA.
---------------------------------------------------------------------------
    \4\ Information on Cases against EPA and FWS and on Deadline Suits 
on EPA Rulemaking. GAO-15-803T: Published: Aug. 4, 2015. Publicly 
Released: Aug. 4, 2015.
---------------------------------------------------------------------------
    The goals of the ESA, CWA, National Environmental Protection Act 
(NEPA) and other Federal environmental laws are laudable. However, 
these decades-old laws are in need of some targeted reforms, including 
commonsense changes to make them work better, encourage incentive-
driven recovery efforts, and discourage litigation:

   Agencies should focus on applying the ESA in a way that 
        fosters collaboration and efficiency of program delivery and is 
        incentive-driven.

   Standards for scientific and commercial data that are used 
        to make decisions under the ESA must be established.

   Peer review of ESA listing decisions and ESA Section 7 
        consultations should be provided by a disinterested panel. 
        Administrative guidelines and/or legislation can be crafted to 
        create procedures for that process.

   For ESA litigation settlements involving Federal 
        environmental agencies, the Federal Government can provide 
        better oversight on how (and how much) attorney fees are 
        distributed.

   Incorporate ideas for improved ``Safe Harbor'' for 
        landowners, neighboring landowners and water districts. 
        Programmatic safe harbor (ESA Sec. 9 ``take'' protections) 
        should be provided for anyone conducting normal operations 
        within a certain radius (probably species dependent) of 
        proposed projects.

   Implement recommendations of the NEPA Task Force \5\ (Report 
        to the Council on Environmental Quality on Modernizing NEPA 
        Implementation 2003).
---------------------------------------------------------------------------
    \5\ https://ceq.doe.gov/ntf/report/finalreport.pdf.

   Implement the recommendations of the 2014 ESA Congressional 
        Working Group.\6\ These are incremental measures that help 
        change the paradigm in western resource management so that we 
        end up limiting dollars spent on litigation instead of habitat 
        protection and food production.
---------------------------------------------------------------------------
    \6\ http://lummis.house.gov/uploadedfiles/
esaworkinggroupreportandrecommendations.pdf.
---------------------------------------------------------------------------
C. Concerns with Recent Federal Agency Administrative Actions
    For generations, American family farmers and ranchers have grown 
food and fiber for the world, and these farmers will have to muster 
more innovation to meet the critical challenge of producing even more 
to meet projected future increases in world (and U.S.) demand for these 
commodities. Such innovation in agriculture must be encouraged by the 
Federal Government, rather than stifled with new, top-down Federal 
policies and regulations that create uncertainty over the very water 
supplies originally developed for irrigated farms and ranches in the 
rural West. A handful of some of the more troubling administrative 
developments is further described below.
1. Principles and Requirements for Federal Investments in Water 
        Resources
    Western farmers and ranchers in the past 7 years throughout the 
western U.S. have feared that new guidelines intended to clarify 
Environmental Protection Agency (EPA) and Corps of Engineers (Corps) 
administration of the CWA and the White House Council on Environmental 
Quality (CEQ) efforts to create new criteria to guide planning efforts 
for Federal water investments could, in fact, actually bring water 
project development to a halt. Those fears remain. The process 
originally proposed by CEQ to implement Principles and Requirements for 
Federal Investments in Water Resources is daunting, subjective and 
uncertain, and the costs and delays it would impose could preclude many 
planning and development efforts. We do not want to see a program that 
becomes mired in a process that ultimately delays implementation of 
critical projects. Those projects--especially those that enhance water 
supplies--already are very time-intensive and costly, and any 
additional delay for planning and studies will only add to the time 
frame for providing water supply relief.
2. Waters of the U.S.
    I have similar concerns regarding the new ``Waters of the U.S.'' 
(WOTUS) rule adopted by EPA and the Corps. The WOTUS rule was intended 
to clarify administration of the CWA jurisdictional issues, but is very 
uncertain, particularly in areas where western farmers and ranchers 
store, move and apply water for irrigation. This uncertainty brings 
with it the risk of additional regulations, time-consuming and 
potentially expensive procedures, expanded opportunities for litigation 
and a shift from local and state water management towards increased 
Federal agency regulation and oversight. I do appreciate that the new 
CWA rule would theoretically preserve current CWA exemptions enjoyed by 
the agricultural community such as the agricultural return flow 
exemption and the agricultural ditch and drain operations exemption. 
However, I fear that the new rule's approach to defining other water 
features is so expansive and vague that it will be used by opponents of 
new storage projects to halt further water development in the West. Our 
farmers and ranchers simply do not need another layer of difficulty 
added to a profession that is already saddled with significant 
challenges.
3. EPA's Aquatic Life Hydrologic Alteration Report
    Earlier this year, EPA and the U.S. Geological Survey (USGS) issued 
a draft aquatic life hydrologic alteration report that was developed to 
serve as a source of information for states, tribes and territories on 
(1) the natural flow regime and potential effects of flow alteration on 
aquatic life; (2) CWA programs that can be used to support the natural 
flow regime and maintain the health of aquatic biota; and (3) a 
flexible, nonprescriptive framework to quantify targets for flow regime 
components that are protective of aquatic life.
    From the day of its public release, Family Farm Alliance members 
have raised concerns with this report. For example, the report notes 
that ``Clean Water Act programs can incorporate strategies to protect 
water quality and aquatic life from the potentially harmful effects of 
flow alteration . . .'' and ``efforts to implement strategies to 
protect aquatic life from flow alteration will be most effective if 
numeric targets are identified for flow-regime components that equate 
to intact and healthy aquatic communities''. It appears that EPA is 
stating that any that results in altering the ``natural'' landscape is 
``bad'' and shouldn't be done. This is an area that has always been 
left to the purview of the individual states based upon state 
constitutional mandates. Because a state-based water right is a private 
property right, this amounts to a serious threat to state sovereignty 
and private property rights and is a direct affront to state water 
laws. Our initial suspicions have been confirmed by others in the 
agricultural community; please see the commentary prepared by Budd-
Falen law firm, of Cheyenne, WY, which I've included as an attachment 
to this testimony.
D. Concluding Remarks on Western Water Challenges
    Western water users face continued challenges on the ground. The 
destructive tactics of the environmental litigation industry, which 
drives and legitimizes the biased implementation of Federal 
environmental laws by agencies, have eroded once-certain water 
deliveries to western producers. However, western taxpayers strongly 
support \7\ water for farmers, and elected officials should be 
bolstered by that fact as they stand up and provide the strong 
leadership that is needed to protect family farms and ranches.
---------------------------------------------------------------------------
    \7\ A 2009 survey released by Colorado State University (Bright 
Pritchett, et al., ``Public Perceptions, Preferences, and Values for 
Water in the West--A Survey of Western and Colorado Residents,'' 
Colorado State University Water Institute Special Report No. 17, 
February 2009) is remarkable for the strong support average citizens 
from the American West give agriculture, especially in times of 
drought. The report provides very interesting findings that underscore 
western householders support for water storage projects and irrigation 
over environmental and recreational water needs in times of shortage. 
Respondents were keenly aware of the potential for long-term water 
scarcity and how that could impact farmers and ranchers. For example, 
among western respondents to the CSU poll, the most popular strategies 
for meeting long-term needs were to build reservoirs and reuse water, 
whether it is on private lawns or public landscapes. The least popular 
alternative was to buy water from farmers. The survey demonstrated 
broad support in the western United States for keeping water in 
agriculture.
---------------------------------------------------------------------------
    Our goal is to find solutions to western water conflicts that 
protect our ability to feed ourselves, export food to others and 
continue to lead the world in agricultural production while finding 
ways to accommodate the water supply needs of growing urban areas, 
energy development, recreation, and environmental preservation. Fair, 
balanced and long-lasting solutions will not come easily. They will 
require visionary leadership and a firm commitment to sensible, 
workable policies.
III. Conservation Opportunities in Western Irrigation Agriculture
A. Importance of Irrigated Agriculture to Western Waterfowl Habitat
    When something is devalued--or worse, demonized--it becomes easy, 
even desirable to cast it aside. We believe that the current regulatory 
regime under-values western agriculture, and some, not all, 
environmentalists would have the public and policy-makers believe that 
growing food is scourge upon the land that should be minimized if not 
eliminated altogether. Part of the Alliance's mission is to emphasize 
the economic, cultural and environmental value of farming and ranching 
in the West, and to have those values recognized by Federal laws, 
regulations and policies. Such an approach to policy making would be 
in-step with the public appreciation for open space, land trusts, 
farmer's markets, and the rapidly growing interest in local, 
sustainable, organic foods.
    Rather than focus exclusively on the alleged depredations of 
western agriculture, Federal regulators need to recognize that many of 
our wetlands are sustained by irrigated agriculture, and that much of 
the private farm and ranch lands adjacent to public lands a provide 
important buffers from developed areas. We run the risk of losing those 
wetlands, buffer areas and open spaces when agriculture is devalued and 
demonized by regulatory policies reflecting the agendas of single-
purpose interests groups. Instead, Congress and the Federal agencies 
that it oversees should support and advance payment for ecosystem 
services (PES) programs that create opportunities for partnerships with 
landowners, businesses, non-governmental organizations (NGO), and 
agencies that can significantly improve the environment, business 
climate and quality of life within western watersheds. I will expand on 
the PES program a bit further on in my testimony.
    Irrigation has increased agricultural productivity in the arid 
American West, but media coverage often focuses only on how it has 
altered the natural landscape. However, irrigation projects also 
provide important benefits to wetlands. In California's Sacramento 
Valley, rice production provides vitally important surrogate habitat 
and food for waterfowl and other species. In northern Colorado, a study 
\8\ by Colorado State University (CSU) researchers found that 92 
percent of wetlands were visually connected to the irrigation 
infrastructure. Though land conversion and water diversions have led to 
dramatic reductions in historic wetland acreage in some places, it is 
clear from the CSU study that current agricultural landscapes create 
wetlands that rely on irrigation water.
---------------------------------------------------------------------------
    \8\ Sueltenfuss, Cooper, Knight, and Waskom, ``The creation and 
maintenance of wetland ecosystems from irrigation canal and reservoir 
seepage in a semi-arid landscape,'' Colorado State University, 2012.
---------------------------------------------------------------------------
    The Intermountain West Joint Venture (IWJV), a public-private 
partnership with a mission to conserve priority bird habitats through 
partnership-driven, science-based projects and programs, has determined 
that agricultural producers that flood-irrigate working wet meadows in 
certain landscapes play a key role in sustaining Pacific Flyway 
waterfowl populations during spring migration.
    For example, the Southern Oregon and Northeastern California 
(SONEC) region is one of the most important spring migration stopover 
areas in North America, supporting more than 4.9 million dabbling ducks 
at North American Waterfowl Management Plan (NAWMP) goal levels. The 
IWJV's 2013 Implementation Plan states:

          ``Most spring-flooded wetland habitat in the SONEC Region 
        occurs on working ranches where flood irrigation of wet meadows 
        is used for hay production and grazing. The timing of flooding 
        and the annual vegetation management practices conducted on 
        these privately managed ranchlands fits well with the needs of 
        spring-migrating waterfowl. These wet meadows are typically 
        flood irrigated from March through July, hayed in late summer, 
        and grazed during the winter. This productive form of wetland 
        habitat management capitalizes on the snowmelt-driven hydrology 
        of the largely closed-basin SONEC landscape. Used in this way, 
        the wet meadows provide spring migrating waterfowl with 
        abundant food resources and desired shallow, open-water wetland 
        conditions.'' \9\
---------------------------------------------------------------------------
    \9\ Source: Intermountain West Joint Venture. 2013 Implementation 
Plan--Strengthening Science and Partnerships. Intermountain West Joint 
Venture, Missoula, MT. http://iwjv.org/2013-implementation-plan.

    The IWJV's bioenergetics modeling revealed that 64,700 acres of 
flood-irrigated wetland habitat must be provided annually on private 
working wet meadows in SONEC during spring migration to support 
waterfowl populations at NAWMP goal levels. Clearly, agricultural 
irrigators play an integral role in sustaining migratory bird 
populations in the intermountain West. This example, which plays out to 
varying extents for waterfowl and other wetland-dependent birds each 
spring in other intermountain valleys, is a win-win for achieving 
wildlife conservation and agricultural production objectives on the 
same land with the same water.\10\
---------------------------------------------------------------------------
    \10\ Ibid.
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B. Open Space Values Provided by Western Farming and Ranching
    Americans should appreciate the fact that western farming and 
ranching operations provide valuable open space. In the Southern 
Rockies, for example, 43 percent of the private land that is located 
adjacent to public lands is associated with a Federal grazing 
lease.\11\ The approximately 31,000 grazing permits on BLM and Forest 
Service lands are connected to more than 100 million acres of private 
land that ranchers utilize for sheep and cattle grazing during the rest 
of the year.\12\ What would happen to wildlife and open space if public 
land grazing were to end and the private lands were developed? Private 
lands provide most winter and riparian habitat for many wildlife 
species. Public lands, being less productive, cannot sustain healthy 
wildlife populations once the interspersed private lands are developed 
and reappear as housing subdivisions.
---------------------------------------------------------------------------
    \11\ Richard L. Knight, ``The Public-Land Grazing Debate is Over 
(and we won!),'' Working Ranch Magazine, Spring 2009.
    \12\ Ibid.
---------------------------------------------------------------------------
    Conservation that works is conservation that works not only for 
natural communities, but for human communities as well. Actions that 
benefit one at the expense of the other are not truly conservation. 
City people want rural landowners to protect wildlife habitat, open 
space and provide ecosystem services, yet many landowners feel that 
city people take for granted these societal benefits, without so much 
as a thankful nod. Meanwhile, the economic reality is that our efforts 
to produce food and fiber are increasingly placed at risk by our global 
economy, by increasing regulation, and by cheap--and questionably 
safe--food from offshore. The rift between the West's rural and urban 
societies can be overcome only when we appreciate what each contributes 
to our collective quality of life and the natural interdependencies 
that bind us.
C. Working Landscapes and the Protection of Biodiversity
    Alongside water, and in many cases directly related to it, western 
agriculture also confronts the challenges of increased pressure to 
maintain biodiversity in working landscapes. Recent analyses and 
regional case studies \13\ suggest that formally-designated protected 
areas are not sufficient in size, heterogeneity or location to capture 
the bulk of North America's wild biodiversity within their boundaries. 
In the West, many elements of this biodiversity are better represented 
and safeguarded on private and tribal lands than on the highly-
protected, specially designated public lands managed by Federal 
agencies. A mosaic of private and public forests and rangelands that 
include protected areas, but are not limited to them, contributes more 
to maintaining biodiversity than protected areas alone. Ranch lands 
already serve as a buffer for public lands against invasive plants, 
domestic cats and dogs, and the danger of wildfires. We can encourage 
all appropriate land uses, but importantly, only to the degree that the 
land can sustainably accommodate those uses.
---------------------------------------------------------------------------
    \13\ Gary P. Nabhan, Richard L. Knight, and Susan Charnley, ``The 
Biodiversity that Nature Reserves Can't Capture: How Western Ranches, 
Tribal Grazing Lands and Private Forests Sustain Ecosystems and Their 
Diverse Species'' in Saving the Wide Open Spaces, 2011.
---------------------------------------------------------------------------
    We do not have to sacrifice production for conservation--we can 
achieve both objectives. However, we need time to make this happen, and 
a critical step that could be taken to help would be to place a 10 year 
moratorium on the loss of grazing Animal Unit Months (AUMs) in order to 
come up with a long-term balanced plan to integrate food production 
with conservation practices. We cannot afford to lose any more 
producers while this process takes place, through which we can:

   Work across administrative boundaries rather than staying 
        within them;

   Integrate social capital with ecological and economic 
        dimensions;

   Encourage bottom-up participation rather than top down 
        initiatives;

   Increase success, reduce expense and eliminate working at 
        cross-purposes through improved interagency cooperation, which 
        would, for example, complement the role of the Natural 
        Resources Conservation Service (NRCS) in regards to water 
        quality. The Interior Department Partners for Fish and Wildlife 
        Program demonstrates a workable process to reconcile inherent 
        conflicts brought about by multiple demands and;

   Explore the nexus where the Federal Government owns the land 
        and the states control the water.

    Above all, we need to empower local watersheds to provide 
leadership, and problem-solve in a unique, locally-driven manner.
D. Support for the ``Partners'' Approach
    The Alliance supports the efforts of a group within the U.S. Fish 
and Wildlife Service (USFWS) called ``Partners for Fish and Wildlife'' 
that helps to fund habitat work on private lands. This program already 
has the infrastructure and relationships with landowners to get 
effective habitat work done for endangered species. They have projects 
on the ground all over the country and are doing yeoman's work to 
preserve habitat for toads in Nevada, Sage-Grouse in Wyoming, and the 
Mountain Plover in Colorado, to name just a few success stories.
    The Partners program is successful because it employs experts who 
are on the ground, working with landowners, instead of crafting 
mandates via biological opinions from far-removed government offices. 
These Federal officials recognize that if a species exists and thrives 
on a property--public or private--the practices that currently occur on 
that property will not harm and could possibly protect that species. 
So--they learn to recognize, for example, that sage-grouse are 
vulnerable to predators, and that areas where ranchers run sheep tend 
to have heavy predator control. They take the time to respect the 
observations of local landowners, who every day see thriving sage-
grouse populations on their lambing areas. Working with landowners, 
they gain an understanding and shared belief that the predator control 
that takes place on private lambing grounds has helped to keep the 
sage-grouse in those areas healthy.
    The Partners for Fish and Wildlife is uniquely positioned to 
fulfill the direction of the ESA for the USFWS to manage threatened and 
endangered species. The funding for USFWS should be fundamentally re-
prioritized to move dollars away from the ``regulatory hammer'' 
approach used by some ESA regulators within the agency and towards the 
Partners program.
E. Payment for Ecosystems Services (PES)
    Western farmers and ranchers can also play a key role in using 
their lands, water and management practices as tools to engage in 
payment for PES projects. A PES scheme creates opportunities for 
partnerships with landowners, business, NGOs, and agencies that can 
significantly improve the environment, business climate, and quality of 
life within western watersheds. A voluntary system of payments may be 
more socially acceptable and effective than extensive additional 
regulation. Critical discussion and reflection in the western farm and 
rangelands community about PES and market-based approaches more 
generally is essential. A well-designed PES program can make a ranching 
or farming operation even more viable.
    We need to determine the role for PES. As experimentation with PES 
expands in farming communities and rangeland systems across the United 
States, it will be important for ranchers, practitioners, researchers, 
companies, public agencies, and other stakeholders to investigate, 
collaborate and critically reflect upon PES design, implementation and 
evaluation. Existing programs can inform and expedite the development 
of new programs. Similarly, pilot tests of new approaches are likely to 
help existing programs become stronger and identify opportunities for 
expansion. The adjacent sidebar highlights some specific models.
    Alongside PES experimentation, it will be necessary to document and 
evaluate desirable and undesirable outcomes to determine whether the 
approach is advancing or compromising rangeland sustainability. For 
everyone involved, questions must be addressed. Will PES programs 
actually help society better manage ecosystem services that are 
integral to human well-being? Is it appropriate to ``commodify'' and 
price rangeland ecosystem services in the marketplace? What happens if 
technological substitutes for ecosystem services become cheaper, and 
therefore the economic argument for ecosystem service protection is 
removed? Is there a solid scientific basis justifying the ecosystem 
service benefits that are being paid for? Are landowners in a position 
to adopt new management practices that will deliver enhanced ecosystem 
services, and will PES payments lead to more diversified and robust 
ranch business models?
F. Concerns with U.S. Fish and Wildlife Service Mitigation Policy
    On November 3, 2015, the President issued a Memorandum entitled 
``Mitigating Impacts on Natural Resources from Development and 
Encouraging Related Private Investment.'' Within our membership, there 
have been growing concerns that the Memorandum's standards exceed 
statutory standards set in law by Congress and will result in further 
regulatory confusion and burdens. There are very polarizing views on 
the issue; reminiscent of the WOTUS rule. The Memorandum directed all 
Federal agencies that manage natural resources to avoid and minimize 
damage to natural resources and to effectively offset remaining 
impacts, consistent with the principles declared in the Memorandum and 
existing statutory authority. Under the Memorandum, all Federal 
mitigation policies are directed to clearly set a net benefit goal or, 
at minimum, a no net-loss goal for natural resources, wherever doing so 
is allowed by existing statutory authority and is consistent with 
agency mission and established natural resource objectives.
    In response to the Memorandum, on March 8, the USFWS announced 
proposed revisions to its Mitigation Policy that has guided USFWS 
recommendations on mitigating the adverse impacts of development on 
fish, wildlife, plants, and their habitats since 1981. The revised 
policy provides a framework for applying a landscape-scale approach to 
achieve, through application of the mitigation hierarchy, a net gain in 
conservation outcomes, or at a minimum, no net loss of resources and 
their values, services and functions resulting from proposed actions.
    The goal of providing a mitigation framework for conservation using 
the mitigation hierarchy is laudable. What is particularly noteworthy 
here is the new broad scope of public and private activities USFWS is 
seeking to reach through the policy. According to the proposal, ``the 
Service is authorized to recommend or require mitigation [for those 
resources] that contribute broadly to ecological functions that sustain 
species.'' For example, the Fish and Wildlife Coordination Act covers 
all classes of wild animals, and all types of aquatic and land 
vegetation upon which wildlife is dependent. The proposed policy also 
cites NEPA for authorizing protection of habitat and landscapes. Even 
though this broad assertion of authority ``may overlap with that of the 
States'', the USFWS proposes no mode of accommodation between these 
coordinate levels of Federal Government.
    Section 10 of the ESA authorizes USFWS to regulate private ``take'' 
of species, including the authority to mitigate the take. As discussed 
above, the current proposal reaches far beyond threatened and 
endangered species to authorize ``recommendations and/or requirements'' 
for all private actions affecting habitat. No comment is offered on how 
USFWS will discharge this large new workload when Congress has not 
provided the financial resources for executing the current portfolio of 
responsibilities. Nor is any comment offered on how USFWS will 
coordinate its new responsibilities with similar duties carried out by 
other Federal agencies. Additionally, the proposal suggests no 
mechanism for how USFWS will engage and encourage landowners to 
participate in this new, significant Federal requirement for land use. 
As the proposal explains: ``The Service will provide mitigation 
recommendations under an explicit expectation that the action proponent 
. . . is fully responsible for implementing or enforcing the 
recommendations.''
    We are currently working with other western resource interests to 
develop comments on this proposed policy, which I urge your Committee 
to monitor closely and engage on, as necessary.
G. Concerns with Other Administrative Proposals
    There are numerous other threatening non-water related regulations 
and actions that have demanded our attention recently.
    I will not discuss these in detail, but here are just a few of the 
more troubling examples:

   BLM/U.S. Forest Service (USFS) Plan Amendments addressing 
        sage-grouse impose unrealistic vegetative standards which 
        cannot be met. In most areas, these standards will lead to 
        reduced livestock grazing or changes in season of use.

   BLM Planning Rule 2.0. envisions planning on a broader scale 
        with reduced emphasis on analysis of local socioeconomic 
        impacts.

   Proposed Grizzly Bear de-listing for Wyoming expands grizzly 
        bear protections into areas previously determined to be 
        ``socially unacceptable''. This proposal is troubling to the 
        grazing industry because it emphasizes reduction of livestock 
        conflicts through ``voluntary'' permit relinquishments.

   USFS Big Horn Sheep Risk of Assessment evaluates the risk of 
        big horn/domestic sheep interaction based solely on a 
        questionable analysis of recorded forays of individual big horn 
        rams.

   Livestock grazing reductions to accommodate excessive wild 
        horse populations. This is happening today in Nevada.

    Other proposals that will impact western farming and ranching 
operations are Department of Transportation regulations impacting the 
transportation of livestock, the USFWS listing of the wolverine, and 
rules and regulations proposed by the Department of Labor on the H-2A 
program and the need for employees to tend sheep, bees and other 
livestock. I would be happy to provide further information on any of 
these troubling developments following today's hearing.
H. Future Role of the Government
    We are proud of our organization's track record and of the 
relationship we have with the Department of Interior, Reclamation, 
Congress, and other proactive NGOs. I believe we are seen as credible 
leaders in the western water arena on both sides of the aisle, as 
evidenced by more than 50 invitations to appear before Congressional 
committees since 2005.
    The Alliance worked hard to create the Western Agriculture and 
Conservation Coalition, a collaborative effort intended to find ways to 
improve the environment, protect western irrigated agriculture, and 
keep farmers and ranchers in business. Other members of our coalition 
include The Nature Conservancy, California Farm Bureau Federation, 
Environmental Defense, Wyoming Stockgrowers, Trout Unlimited, and the 
Irrigation Association, to name a few. I also represent the Alliance on 
the advisory committee of the AGree process, a long term, collaborative 
initiative that seeks to transform U.S. policy affecting the food and 
agriculture system at home and abroad.
    It is critical to assess what the future role of government will 
be. There is tremendous uncertainty as to the effects of Federal budget 
restraints. Right now, government programs and Federal laws are also 
creating winners and losers. For example, Federal ethanol policy works 
for midwestern corn growers, but hurts the livestock industry which 
relies on corn for feed. Laws and regulations like those imposed by the 
ESA are being implemented differently in different parts of the country 
depending on judicial circuit rulings. Producers in the eastern United 
States have not experienced the regulatory hammer approach employed by 
ESA administrators in the West. Also, opportunities are likely to arise 
for an expanded future role for NGO partners, since government can only 
afford to do less, at least in the near-term. This is one reason why 
the aforementioned Western Agriculture and Conservation Coalition was 
formed. Policymakers and resource managers need to assess those 
opportunities.
IV. Conclusions
    Western irrigated agriculture is a strategic and irreplaceable 
national resource. It must be protected by the Federal Government in 
the 21st Century. Properly managing Federal watersheds and encouraging 
Federal agencies to work with the agricultural community to solve local 
water challenges are imperative. Ranchers like me and others in the 
regulated community see increased Federal top-down regulations and 
controls being proposed and put in place, while proven, collaborative 
partnership-driven approaches to find lasting solutions to vexing water 
and natural resource problems appear to have been put on the back 
burner. I find it difficult to understand why agricultural production 
finds itself continually under attack when farmers and ranchers 
continue to provide the affordable food and fiber to feed and clothe 
the nation and the world. I am troubled why Federal agencies appear to 
be ``biting the hand'' that produces the food.
    I thank you for the opportunity to elevate our concerns regarding 
the USFWS mitigation policy and the draft EPA flow study. 
Unfortunately, these are just the latest examples in a sweeping range 
of processes and actions that can, individually or collectively, have 
very real negative impacts to western irrigated agriculture, including 
the potential for disruption in water supplies and increased production 
costs.
    We appreciate your support in seeking to compel Federal agencies to 
seriously reconsider the cumulative impacts of the resulting regulatory 
measures before adding additional chapters to what farmers and ranchers 
already see as a very large rulebook.

    The Chairman. Thank you Mr. O'Toole.
    We will proceed with questioning now by the Members. Each 
Member will have 5 minutes for questioning. I will take the 
liberty of going first.
    And since Mr. O'Toole, your remarks were the freshest, I am 
going to start with you. You had described your written 
testimony as being a bit schizophrenic, I connect well with 
that, because you really come from a different perspective with 
your testimony, and certainly with your oral testimony. And we 
are here really looking at the impact of existing regulations 
on the farm economy, but sometimes it is the inaction by 
Congress as well. So I would like to really address the point 
you made with at least three century old sheep farms, I believe 
you said that are out of business now, largely not because of 
market demand conditions, but available workforce. And we know 
on this Committee, we are very aware that making sure our 
farmers and ranchers have access to a reliable workforce is so 
important for us to be able to have food security and fiber 
security, food, fiber, energy, all those things.
    So just real briefly, what recommendations as it relates to 
workforce, what do you need and what recommendations would you 
make?
    Mr. O'Toole. Yes. Well, what is so curious about H-2A is it 
was a program that worked for our family and for our industry 
for 40 years. And it is not only the fact that we can't get the 
sheep herders and the workers, it is the shearers that come 
mostly from overseas, and they can't get their visas as well.
    And so what I understand, and I have been in communication 
with H-2A and, frankly, the State Department, because it is an 
international issue of how these men get allowed to come into 
the country in a very regulated way. They are overwhelmed by 
need.
    I spoke at the Farm Foundation recently, which is not the 
West, and talked about the fact that these lack of workers in 
every state of the Union. And when I mentioned blueberries and 
strawberries, those are East Coast events that have happened. 
The Family Farm Alliance represents the entire western United 
States and Central Valley, California, and we could be in the 
H-2A discussion business. We are doing water, but every single 
member is 22 people short, 100 people short, ten people short.
    So, some of it is budget. I absolutely do believe it is 
related to budget, because they are receiving a lot more 
applications for people, but I think that there is a real need 
to streamline, and I try not to be cynical, but the way that it 
has worked in the last year, something that worked for 40 
years, it feels like there is a contrived dissonance where it 
was designed to not work this year.
    So streamlining and some budget issues, I would say.
    The Chairman. Thank you.
    Mr. Ebert, in your written testimony you draw a clear 
picture of the challenges of increasing environmental 
regulations in a volatile agriculture economy. Can you give us 
a brief overview?
    Mr. Ebert. Yes. The challenges that we are facing is of 
more regulations and the uncertainty of those regulations, and 
also along with the economic challenges. Being a dairy farmer, 
this past year I have lost over \1/3\ of my income from milk. 
The biggest challenge is how do we comply with these 
regulations, or the requests from EPA to implement more 
practices and not have the funds available. There may be some 
Federal funding available as a cost-share, but, I don't have 
the funds to do the other half of it.
    So that is a great challenge, and it is the great unknown, 
it is tough times out there on the farm, of balancing, keeping 
the farm viable, controlling my costs and then trying to meet 
all these environmental regulations that we see coming down the 
road.
    The Chairman. Very good, thank you.
    Ms. English, you mentioned the success of the University of 
Florida's best management practices that were widely adopted by 
local producers. Why do you feel that the EPA felt the need to 
choose a burdensome regulatory route when the local solution 
was proven to be successful?
    Ms. English. That is a wonderful question.
    One of the challenges with water quality law in Florida, it 
is very much driven by litigation. We have very active 
environmental groups who are extremely sophisticated in the way 
that they use litigation to drive agency policy. One of the 
things that happened was that we had a group of environmental 
activists who sued EPA over water quality in the State of 
Florida. In order to resolve the litigation, EPA entered into 
negotiations with them, and came up with a solution without 
necessarily bringing all of the stakeholders to the table to 
resolve those issues.
    The environmental community strongly disagrees with the BMP 
Program, regardless of what we have evidenced. And in a further 
attempt to satisfy them, not only do we have a BMP Program that 
has been wonderfully successful, looking at the Everglades' 
agricultural area, they have far exceeded the goals for the 
reductions of phosphorus that they were required to meet, using 
best management practices, good soil practices, good water 
management practices.
    But this year, in addition to the carrot of the Best 
Management Practices Program, we now have the stick of the 
compliance manual that is being developed even now. And the 
gentleman who is developing it for the State of Florida 
actually comes from a regulatory program. And one of the 
challenges he has had in coming up with a compliance manual is 
we have discussed the history of the program and that it is a 
very cooperative one, and typically when we see a Department of 
Agriculture person at our farm gate, we are happy to have them 
come in and tell us what we are doing right, and, frankly, what 
we are not doing right. But once this manual is in place, it 
will be a matter of a compliance and a noncompliance, and a 
notice of violation, as opposed to a program where we are 
working hard to improve the water quality for the people of the 
State of Florida.
    The Chairman. Thank you very much.
    Now I am pleased to recognize the Ranking Member for 5 
minutes.
    Ms. Lujan Grisham. Thank you, Mr. Chairman.
    Actually, I don't think I have a question for you, Ms. 
English, but I certainly appreciated and can empathize with 
your remarks about the level of expertise it takes in your 
family to navigate and respond and work to comply with the 
regulatory burden. I am a lawyer, although I only practiced for 
10 minutes, so I don't have nearly your expertise, although I 
did win all my cases, so it is a better record than Perry 
Mason. I know, 10 minutes. Do what you can. But my background 
is in health care, and I feel the same way. You shouldn't have 
to have a healthcare legal background in order to read your 
explanation of benefits, or to try to navigate my bill, let 
alone deal with the decisions for consent in the healthcare 
system. We can create an environment where it is just too 
complicated. So people unwittingly, even if it is something 
that you would want to comply with, can't. And I really 
appreciate you highlighting those challenges.
    My question really is, again, for Mr. O'Toole. And I am 
looking for the right balances. I understand unequivocally that 
when we work too hard to create a regulatory environment that 
is just really focused on the rule of law, or the letter, that 
we don't encourage or incentivize or create innovation, or work 
to create partnerships that really do make a difference. And I 
was struck by your statement that USDA, now that their role has 
been minimized by EPA, particularly in water quality, but I 
understand how that happens. So in my state, and I have two 
issues; first, we are a drought-ridden state, and if we don't 
figure out different management practices, including 
irrigation, which I support as a water system. I mean it is a 
400+ year, probably older than that, system in New Mexico. But 
we are in one of the mega drought states, so we are going to 
have to figure out what we do about that. But in that context, 
you have local jurisdictions who do well permitting 
unilaterally, who do septic permitting unilaterally without 
testing, then you have the State Environmental Department 
trying to figure it out, we have all sorts of problems. I am 
struck by what is happening in Flint, Michigan, where we still 
have these issues. So I can see how you want to centralize, but 
not at the expense of best management practices and ideas.
    How do we get more stakeholders at the table, and how do we 
create the balances that you were starting to talk about, as 
this Committee really works to talk to our partners about 
making sure that we are investing in your expertise, not moving 
away from it?
    Mr. O'Toole. Ms. Lujan Grisham, I really appreciate the 
question because I happen to live in one of those places where 
it works. We have leadership, we have a conservation district 
that works, our NRCS works. I live on the state line, so we 
have BLM and Forest Service in two states. I have double the 
regulators of most people, what you have to do first is you 
build trust. It is all based on trust. And my leader says 
people support what they help create. That is the key to 
everything in the future because of the need to work on local 
watershed levels where you use the tools that we have.
    I was on two Congressionally mandated NRCS oversight 
groups. Only 17 percent of farmers are using NRCS. We have to 
figure a way to build that trust. And, frankly, when I ask my 
members of the Family Farm Alliance, or my neighbors that don't 
use it, they just feel like the system is just so disjointed 
from their lives and so much paperwork, and I can tell you I do 
it, I am 25 miles from town, I can't tell you how many times I 
have run back and forth to sign papers, that people in the 
office say please get me out of the office. And I have the 
greatest respect for Jason Weller, the head of NRCS. What he 
has done with the sage-grouse and integrating USDA and Interior 
is a model for the future. But somehow, we have to get these 
people that are on the ground, on the ground with ranchers and 
farmers to come up with solutions.
    What I learned in one interesting conversation, my leader 
and myself were asked to go to another place and talk about our 
successes in birds and fish and irrigation. And everything we 
do has a balance. We do both production and conservation. Our 
rule is we don't trade off one for the other. And we had 70 
people there at that meeting, and we thought, boy, it really 
went well. And we asked where were the private landowners and 
there were none. And 5 years later, they haven't done anything. 
And so you have to trust the private landowners, especially in 
the West where you have the mixed ownership.
    And one quick example. The Partners for Fish and Wildlife 
Service is a small part of the Fish and Wildlife Service that 
is incredibly successful. They will be at the Kissimmee River 
in Florida this year for Partners Day. The ecological service 
part of the Fish and Wildlife Service are listers, and they are 
looking to list. And unfortunately, there is too much attention 
paid to the litigators, and what I call the hatefuls. There are 
two kinds of conservation going on in America: the hopefuls and 
the hatefuls. And we have to find a way to empower the 
hopefuls. That is how we are going to be successful.
    Ms. Lujan Grisham. Mr. Chairman, I yield back. I really 
appreciate that. This Committee is really working hard to 
figure out a way to invoke more of that partnering, and to 
create a way that incentivizes it and/or mandates it inside the 
bureaucracies that exist.
    Thank you very much.
    The Chairman. I thank the gentlelady.
    Okay. I am pleased to recognize the gentleman from Oklahoma 
for 5 minutes of questioning.
    Mr. Lucas. Thank you, Mr. Chairman, and thank you, Mr. 
Chairman, both, for the opportunity to be here.
    I guess my first observation of the panel would be this. 
Not many months ago, at this very table, in one of the very 
chairs you are sitting in, we had the Administrator of the 
Environmental Protection Agency to visit with us, who stood and 
attempted to defend the Waters of the U.S. rule, a regulation 
basically designed to assert Federal jurisdiction, in my 
opinion, over all waters, including those dry creek beds that 
may flow only once a year. And thank goodness, the courts have 
slowed that process down for a time, but that is not certainty.
    Could you take a moment to discuss, in the context of what 
you have just described to us, if the Waters of the U.S. rule 
is fully implemented, what kind of an effect is that going to 
have on your operations, ladies and gentlemen, as you 
understand the rule in its present construction?
    Ms. English. If you gentlemen don't mind.
    Mr. Ebert. Go ahead.
    Ms. English. I have spent a fair amount of time on this 
issue, and in reading the rule, and It was with a great deal of 
relief that I saw that the Sixth Circuit imposed a stay. We 
have citrus groves that are all within the distance limitations 
outlined in the rule to existing water bodies. Those trees are 
going to have to be replaced once we have a citrus variety that 
is resistant to citrus greening. We are planning for it. We are 
investing for it. The one thing that we are discussing as a 
family is what we do with a core permitting process if, when we 
remove those trees, we have to go back and get a Section 404 
permit to replant citrus trees in that space.
    In southwest Florida, a core permit takes between 3 and 5 
years to obtain. We don't have the kind of money that will 
allow us not to produce citrus for 3 to 5 years while we wait 
for a Federal agency to make a decision. Our grove is where it 
has been since 1870. The fact that it has now magically become 
a matter for the Army Corps of Engineers, the United States 
Fish and Wildlife Service, and EPA to review is a little bit 
disconcerting.
    I am not sure how we would deal with that if the rule is 
approved as it is written, in my opinion, we may be unable to 
replant our groves.
    Mr. Lucas. Which ultimately means the consumer that has 
enjoyed the most consistent, awesome citrus products from the 
southern United States for generations, ultimately, the 
consumer will pay a price too, correct? But, with the 
availability of those products going away. So it is not just 
the effect on farmers, it is the consumer too who will 
ultimately pay a price.
    Ms. English. It is a terrible price to the consumer, and it 
is a terrible price to the industry that has always embraced a 
wide diversity of interests, from very small farmers to very 
large farmers. And in the Florida citrus industry, we have 
large corporations, but they are owned by families typically 
who are farming citrus. We are now the second largest producer 
of citrus in Lee County, Florida. I can remember when we were 
one of the smallest. The larger ones are gone. The smaller ones 
are gone. And it is because of these changes.
    Mr. Lucas. Mr. Ebert, Mr. O'Toole, any observations?
    Ms. English. Thank you.
    Mr. O'Toole. Yes, sir, I had mentioned in my testimony and 
in my written testimony the effect on storage. Our valley built 
a 23,000 acre foot reservoir within the last 10 years. I worked 
pretty darn hard on it. It took 14 years to permit. And when 
you look at the combination of Waters of the United States and 
the further use of the rule of EPA to use the Clean Water Act 
in a much broader fashion than it is being used now, it will be 
virtually impossible to do. And what I have learned in the 
attempt to get along with a whole lot of bureaucrats, we have, 
as I said, almost double the bureaucrats of most people because 
of the state line issue, it is so office-driven and it is 
personality-driven. The interpretation of the rule, as I read 
it, is so broad that there are an awful lot of good people, but 
there are some that aren't. And when those people have the 
opportunity to use those rules in the way that they are 
written, I can see that anybody would be vulnerable in the 
irrigation world to challenge.
    And you may have read the fellow in western Wyoming that 
just had a settlement. He built a little pond on his ranch, and 
they threatened millions and millions and millions of dollars 
in fines. It was finally settled because it was so ridiculous. 
But when you have the written language that gives those kind of 
people the ability to do that level of regulation, at a time 
when we need to be more flexible--and let me just say, the 
Family Farm Alliance wrote a paper in 2007 about climate in 
agriculture, and it is about adaptability. We are at a time 
when we need to be more adaptable, have more flexibility. This 
rule will do the exact opposite.
    Mr. Lucas. Mr. O'Toole, as an old farmer, we are all 
concerned about water quality. Ultimately, if you don't use 
that resource, no matter where you are at in the lower 48 
states, it is going to wind up in the Atlantic or the Pacific, 
correct?
    Mr. O'Toole. Yes, sir.
    Mr. Lucas. If it is not utilized.
    Mr. Ebert, any thoughts, sir?
    If the Chairman will indulge me for another few seconds.
    The Chairman. Please.
    Mr. Ebert. Yes, Congressman, I appreciate the question 
because, actually, I am going to give a little different 
perspective on that. I am a small farmer. I don't run thousands 
of acres or hundreds of head of cattle, and I certainly 
represent Pennsylvania agriculture. This rule would be 
devastating to the small farmer. I am along the Connemara 
River, so I have some river bottom in that, and if EPA would 
come in, I mean most of my farm would be, say, within the 
1,500 setback that they would regulate, that would pretty much 
take out my whole farm. I won't be able to use the crop 
production products for my crops, because none of them are 
labeled for use over water. So that is there, that is facing me 
and my family right now, that they could, if they ruled my 
whole farm as a Water of the U.S., I would be out of business. 
And that would put a lot of other small family farms in 
Pennsylvania out of business also.
    Mr. Lucas. Thank you, Mr. Ebert.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Just an interesting observation, talking about the same 
egregious impact of this regulation, but we are looking at 
impacts from Wyoming to Florida to Pennsylvania. Pretty much 
covers the span.
    I am pleased to recognize the gentlelady from Arizona, Mrs. 
Kirkpatrick, for 5 minutes.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman.
    Mr. O'Toole, I really appreciate your testimony. I 
represent a huge rural district in Arizona, half the state, and 
my mother's family were ranchers in my district. And water has 
always been an issue that we have had to deal with, and so many 
complexities, and something I have spent a lot of time thinking 
about. But I just have to tell you, a couple of years ago I was 
driving from Flagstaff, where I live, to the eastern edge of my 
district with my legislative director, and we crossed the 
Little Colorado River, and she said, what was that? And I said, 
that is the Little Colorado River. And she said, that is not 
navigable. And I am sure you have had that situation in Wyoming 
where waterways have been labeled as navigable, and they just 
aren't. And I just want your thoughts on where do we start with 
this issue? There seems to me to be a disconnect between what 
works maybe in Florida and the water you have in Pennsylvania, 
and what we don't have out West. You seem very commonsense and 
pragmatic, I would just like your thoughts about where do we 
start here?
    Mr. O'Toole. Well, the thing that I have a lot of trouble 
with is who defines interconnectedness. We are in a state that 
has 12", 14" of precipitation. And so when you look at how a 
wetland in a National Forest is connected to private land here, 
that is where we get ourselves into trouble. And it is where I 
go back, and I just can't say enough about how great it is to 
have leadership at the conservation district level, which we 
have. We have had a lot of young people involved from the 
beginning, so we have a mixture of old and young, and I think 
it is putting your finger on exactly what happens in that 
watershed. And we are going to come up with solutions, and we 
have those solutions now, and in my perfect world I would like 
to see a world where once a diverse watershed group comes up 
with a strategy on water, whether it be storage or irrigation 
or wetlands which we have developed, the largest wetland in 
Wyoming was in the Pacific, it is on the Continental Divide, so 
it is now part of the Atlantic and Pacific Flyway. It went from 
29 species to 140. That was done locally with people who 
actually fought EPA over doing it at the first part. Now it is 
3,600 acres that includes a tremendous amount of grazing land 
with it.
    So I just keep going back to, if we are going to do 
solutions, we have to have local people who will come up with 
how those watersheds work, with a vision for the future.
    Mrs. Kirkpatrick. Is the USDA helpful to you or not?
    Mr. O'Toole. When it works, it is great. When it works, it 
is great. Unfortunately, my testimony about experience with the 
numbers, that is what is challenging. Because Conservation 
Districts cross the entire United States, everybody is under a 
conservation district. When the system is working and 
empowering, and people feel comfortable with it, it really is 
great. But when it doesn't exist at all, and the frustration, 
like even the best ones of getting out of the office, I think 
that is something that we can focus on.
    Mrs. Kirkpatrick. That has been one of our pushes in 
Arizona to actually get the regulators out in those towns that 
are really having struggles with their water sources, and 
actually seeing, having conversations with the local people 
about what is going on, rather than just sitting in a remote 
office somewhere, conjuring up what they think is a solution, 
but really doesn't work.
    In Arizona, we are doing a lot of aquifer replenishment, 
which has been successful. In fact, I was just meeting with a 
Tribal leader this morning who said that they can actually see 
now the grass coming back in these areas, and it really gives 
the local people hope to know that that water is underground.
    Now, do you use that in Wyoming?
    Mr. O'Toole. No. In fact, the underground storage that we 
are looking at is some CO2-type stuff. But not so 
much, but in California where we have a lot of members, it is a 
huge tool, and it is a very appropriate the issue, as I keep 
saying, is that you go to the local area of Central Valley, 
California, or San Joaquin, in some places it is storage. And I 
just saw where 1 million acre feet went out to the ocean that 
would have been in the site's reservoir. A million acre feet 
this year that went out. Everybody has their own kinds of 
solutions, but the Family Farm Alliance is very familiar with 
and supportive of underground storage.
    Mrs. Kirkpatrick. Well, thank you. My time is running out 
but I really appreciate your thoughts about that. And you are 
right; one size doesn't fit all, and it is the local 
communities that know best what is going to work.
    Mr. O'Toole. Right.
    Mrs. Kirkpatrick. So thank you very much. I yield back, Mr. 
Chairman.
    The Chairman. The gentlelady yields back.
    Now I am pleased to recognize the gentleman from Tennessee, 
Mr. DesJarlais, for 5 minutes.
    Mr. DesJarlais. Thank you, Mr. Chairman. And I thank the 
panel for being here today.
    Approximately 2 years ago, the EPA sent a shockwave through 
the ag community and the business community when they 
introduced their Waters of the U.S. rule. It has been a major 
concern and a major topic of discussion whenever I reach out to 
our Farm Bureau, which I would like to announce is the largest 
Farm Bureau in the country, located in my district in Columbia. 
Where it was former President, Lacy Upchurch, or our current 
President, Jeff Aiken, rarely do I have a conversation when 
this doesn't come up as a major concern to the farmers and 
ranchers there in Tennessee, and obviously, across the country. 
The impact of this broad expansion of Federal jurisdiction, 
well beyond the limits approved by Congress, would have 
enormous impact, as you all know. The rule defines terms like 
tributary and adjacent in ways that make it nearly impossible 
for a typical farmer or rancher to know what a specific ditch 
is, ephemeral drains or low areas at his or her farm will be 
deemed Waters of the U.S. To date, 31 states and many 
agricultural organizations, including the American Farm Bureau 
Federation, have filed law suits against the WOTUS rule. And 
thankfully, in October, the Sixth Circuit Court of Appeals 
issued a temporary stay on this rule, citing that the burden of 
the WOTUS Rule outweighed any harm to the agencies in keeping 
the status quo. I, along with many of my colleagues on this 
Committee, have joined these groups in calling for the EPA 
Administrator McCarthy to scrap this regulation, and require 
any similar proposals to be developed only after significant 
consultation and input from states and local stakeholders, such 
as you who are here with us today.
    Before developing any such rule, what does EPA need to do 
better to reach out to farmers and to understand their 
practices? And I will just go down the panel, starting with Mr. 
Ebert.
    Mr. Ebert. Okay. Thank you for the question. EPA does have 
to sit down with the farmers, and instead of looking at 
enforcement, let's work together at solving the problems of 
water quality and water issues. I think that would be the main 
focus of what we would look at EPA to do, instead of coming out 
with a heavy-handed proposal with so much uncertainty of where 
we are going to farm, how we are going to farm, and the 
uncertainty of the heavy hammer coming down at the farm level, 
let's go back and rework and discuss the issues, and work 
forward from there.
    Mr. DesJarlais. Just before we move on, as the President of 
the Pennsylvania Farm Bureau, what steps are you taking to 
educate farmers and ranchers about the rule and how to prepare 
for its impacts?
    Mr. Ebert. We have put a lot of information out to our 
members. Luckily, the stay is in place right now, but there is 
so much uncertainty of how the rule is going to affect us. So 
as I stated before, if EPA came in and ruled my farm a Waters 
of the U.S., I would be left in the dark of what to do next.
    Mr. DesJarlais. Thank you, Mr. Ebert.
    Ms. English?
    Ms. English. Thank you for this question. It is helpful to 
hear what happened when my state President, John Hoblick, and I 
met with the EPA ag liaison a year and a half ago when we were 
in Washington for a Farm Bureau meeting, and we had 
specifically requested a meeting to discuss the Waters of the 
United States rule, which, at the time, was in development, and 
what it would mean for Florida agriculture. What specifically 
we were interested in understanding, what EPA wanted to protect 
and what they felt was not already being protected by the rule. 
We got into a room that had not just the ag liaison, but a 
virtual panoply of Agency people who demanded to know why we 
were there, and then explained to us that they had nothing to 
explain to us, and that we needed to just leave.
    Florida is a real challenge from a water perspective. We 
are a wet desert. We go through periods of time where we have 
40" of rain in 3 months, but we may also go through a period of 
time of 4 or 5 months where we get a negligible amount of rain. 
We have a tremendously managed system. Using the language that 
EPA had published, from our perspective, virtually all of the 
state became jurisdictional for purposes of Army Corps of 
Engineering's permitting under Section 404. And given the 
endangered species issues that the State of Florida also has, 
requires that every single Corps permit, even a nationwide 
permit, go to consultation with the Fish and Wildlife Service 
for the protection of these species. Case in point, the Florida 
Bonneted Bat, which is newly listed, we don't know what to do 
to protect it. We don't even know where it likes to live or 
breed or feed, but we are responsible for generating the data 
that will help them understand how to develop a mitigation 
program for it.
    Right now, if I send a file to the Corps and they put a 
public notice out, if that has a Florida Bonneted Bat issue, 
the earliest a staff person can get to opening the file, not 
reaching a decision, opening the file and looking at it and 
asking me if there is additional information, is 360 days.
    Mr. DesJarlais. Thank you.
    My time has expired. Mr. O'Toole, perhaps you will get a 
chance to respond in a later questioning.
    The Chairman. Sure. I now recognize the gentlelady from New 
Hampshire for 5 minutes of questioning.
    Ms. Kuster. Thank you very much.
    I have sympathy for the issue about the bats. In New 
Hampshire, it is called the Long-Eared Bat, and I am working 
with my loggers right now to protect the Long-Eared Bats. I am 
learning all kinds of new words about bat colonies, et cetera.
    I am actually going to yield to the chair, who has a little 
bit more testimony or questions. I will save my questions for 
the second panel, but thanks for being with us.
    I yield back.
    The Chairman. To me. Thank you. The gentlelady yields. I 
appreciate that.
    Mr. Ebert, we have heard, obviously, the universal issues 
with WOTUS, but I know from a Pennsylvania perspective, we have 
been dealing with water-related regulations long before the 
Corps of Engineers and the EPA imagined this single largest 
taking of private property rights with WOTUS, and that came in 
the form of the Chesapeake Bay regulations. And so my question 
for you is: you spoke about a few key challenges of the EPA's 
Chesapeake Bay regulations. Which do you think is the biggest 
problem for agriculture?
    Mr. Ebert. Well, it is both inflexibility and uncertainty, 
but the biggest problem lies with the model. There are so many 
false assumptions with the model. It doesn't deal with the real 
world. And it is such a moving target already. I think they may 
be on version 7 now with this model. So we may hit one target 
at one point in time, and then they do a revamp of the model, 
and we have missed that target but we might have hit something 
else. It has such uncertainty to it. And there again, with EPA 
withholding $3 million to the Department of Environmental 
Protection, and they really never gave us an answer why. So we 
had to do a reboot strategy to try to re-get those dollars. And 
even along with those lines of the major impacts, the bad 
numbers that they are using, NRCS, again, says we are doing 80 
percent no-till, where EPA's model is only saying we are only 
doing 50 percent conservation. So nothing adds up there.
    And also along those lines is EPA's model states that 
nearly 20 percent of farm ground needs to be fallowed to meet 
the requirements of a reduction in nutrients. Who is going to 
tell us what ground we can use or can't use? Sort of an example 
there is everyone owns a home or an apartment. How would you 
like a Federal agency to come in and say you can't use 20 
percent of your home anymore, but you still have to maintain it 
and pay taxes on it?
    So that is a huge problem for the Chesapeake Bay region 
right now for us.
    The Chairman. Given all the challenges, what you said up to 
model 7, that version, all the hoops, all the costs, all the 
compliance issues, has any of that made a difference in water 
quality?
    Mr. Ebert. Well, I think just the decades of us learning 
how to farm better with technology, conservation, new practices 
that we have put in, I am sure it has made a large difference 
in water quality. We see it in water quality monitoring and 
that, but the model hasn't accepted those changes. We are doing 
all the BMPs without Federal funding, and that is why we put 
that survey together through Penn State and the Department of 
Environmental Protection, is to try to capture a true picture 
of what farmers are doing without Federal funds, and hopefully 
EPA will put that in their model and show what agriculture is 
actually doing to improve water quality, instead of always 
being pointed to as the villain here.
    The Chairman. Very good. Thank you, sir.
    I thank the gentlelady for yielding. Now I am pleased to 
recognize the gentleman from the land of corn and soybeans and 
eggs, and much more in Iowa, Mr. King, for 5 minutes.
    Mr. King. Thank you, Mr. Chairman. I thank all the 
witnesses for your testimony.
    A number of questions come to mind. I turn first to Mr. 
Ebert.
    In Pennsylvania, do you have what you consider to be a 
water quality monitoring system out there that gives an idea on 
what is a point source, what isn't, and what you are getting 
leached into your streams?
    Mr. Ebert. Yes, DEP actually does do a lot of water quality 
monitoring. I can probably get you more information on that.
    Mr. King. Well, I would just ask you, are you confident 
that the records are good enough now that the science is there 
to make recommendations, let alone regulations on applications 
of safe fertilizer?
    Mr. Ebert. I think it is always evolving. As we become more 
attuned to how nutrients move, there is science there, but, it 
can always be improved upon. And some of that science can be 
plugged into that model.
    Mr. King. And typical soil in Pennsylvania, would you have 
a sense on about how long it would take for applied nitrogen to 
leach through and out of the soil?
    Mr. Ebert. I am not attuned to that knowledge. It is there. 
I can always find out that information.
    Mr. King. Yes. And I ask you this question because it seems 
to me that you have people in the EPA that are trying to 
regulate this without being able to answer that question. And 
if we don't have a sense on; let's just say, what is the 
baseline, do you have a sense of what the baseline is? Where I 
come from, we say what was the water quality when the buffalo 
were roaming someplace other than upstream.
    Mr. Ebert. That is it, how far back do you want to go until 
you consider the water quality that you want to achieve?
    Mr. King. But isn't that what the environmentalists are 
after? They want to get back to the time when the buffalo 
roamed, because they say that is when the ecology was as 
perfectly balanced as we can imagine? And so anything that you 
would apply that would result in a leaching into the water, 
into the stream, that would be in excess of that, they would 
consider should be regulated before you apply it? Am I close to 
what you are seeing?
    Mr. Ebert. Yes. I mean they want to control all aspects of 
the farming operation.
    Mr. King. Yes. And I am just submitting that they don't 
know what it was then. There was no water quality tests then. 
And they can only imagine, but they also imagine that your 
application is too much. We have a law suit going on in Iowa. 
It is the Des Moines Water Works. I am glad to see that nod, 
Ms. English. The Des Moines Water Works says, ``because they 
have nitrate records that show there has been an increase over 
the last 40 years, a 60 percent increase over the last 40 
years,'' and by the way, those records are a little bit dated. 
They went into my head and stuck there. That they know that it 
is coming out of our feedlots and off of our farmland because 
they are taking the tests right out in the river outside the 
Des Moines Water Works. So they are suing three counties, 
including mine, in an attempt to establish a precedent case so 
they can regulate crop inputs all across this nation. And I 
wanted to just put that into the record.
    And I ask Ms. English, you are faced with the acuteness of 
it in phosphorus down there in Florida. I hopefully can help 
you with that. And I am quite impressed that the family farm 
goes back that far, and that your family linkage goes back that 
far. I want to see that continue.
    Do you see solutions coming for the phosphorus problem?
    Ms. English. Yes, I do. I think that in the State of 
Florida, and to Mr. O'Toole's point, the local, local, local 
focus is absolutely key. We are working together, and Florida 
has numeric nutrient criteria which was imposed upon us through 
the litigation process, and ultimately when I asked a question 
of one of my counterparts with one of the environmental groups 
who filed the litigation, I said, ``Why Florida? We have more 
data than anybody else. We have more systems in place to try to 
improve water quality than anybody else. Why us?'' And he said, 
``Well, because I had the data.'' Okay. That was an interesting 
approach. But from this point, when we are using best 
management practices, when we see what has happened in the 
Everglades agricultural area, and they have so far exceeded the 
goals for phosphorus reduction, and the response from the 
environmental community was not, that is great, what terrific 
land management, the answer was, ``Well, we didn't reduce 
phosphorus enough.''
    Mr. King. Yes.
    Ms. English. What is enough? Is it enough when we can no 
longer biologically meet the reduction standard? And that 
appears to be the answer.
    Mr. King. And so we are chasing a mirage here with an 
environmentalist approach and an EPA approach that, well, they 
have a mission, and that mission is continuing to tighten down 
regulations. There is no goal for them. Would you agree that 
that is the sense of it, that they haven't articulated where 
this would ever stop? There will always be another level and 
that is the history, would you agree?
    Ms. English. That would be my experience in the last 22 
years of practicing law in the State of Florida. I have nothing 
that would indicate otherwise.
    Mr. King. They have gone through a lot. That was quite an 
impressive testimony. I thank you, Ms. English, and all the 
witnesses here this morning.
    Mr. Chairman, I yield back the balance of my time.
    The Chairman. The gentleman yields back.
    Now I am pleased to recognize the Chairman of the full 
Agriculture Committee, Mr. Conaway, for 5 minutes.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. Thank you, Mr. Chairman.
    There is always a next farm bill on the horizon, 
particularly for the current Chairman of the Agriculture 
Committee. Can you talk to us, any of you, about ways that we 
can prioritize in that farm bill things that would strengthen 
these locally-led volunteer conservation programs, or 
incentive-based programs, what can we do to put that in the 
farm bill that actually helps do what Mr. O'Toole, you, and 
others have talked about this morning of, like you said, the 
local folks have as much control about what is going on as 
possible?
    Mr. O'Toole. I have mentioned the Partners for 
Conservation, part of the Fish and Wildlife Service. That is an 
Interior issue. But, going back to Mr. Weller and his vision of 
combining USDA and the Interior on this, I think that is an 
important set of relationships that when you base them on 
agricultural production, and we all know we are supposed to 
double the food supply, we don't have enough young people 
coming in, you understand that the relationships of the cross-
section of agencies. What we have allowed ourselves to do, as I 
mentioned earlier with the EPA, is take the relationships that 
farmers trust and turn them into relationships that farmers 
don't trust. I know the NRCS refused to be the policemen for 
the EPA recently because it would undermine all that trust that 
we have built over all the years. So, make sure that we 
understand that establishing trust and realizing nothing 
happens tomorrow. It took 10 years in our valley, 30 years ago, 
to begin a process of trust. And I would say to that, how do 
you legislate trust? I don't know.
    Mr. Conaway. Anyone else?
    Mr. Ebert. No, you go ahead.
    Ms. English. Go ahead.
    Mr. Ebert. Just one point I would like to make is with the 
Conservation Districts. In Pennsylvania, they are actually 
being forced to become enforcers now. And there still needs to 
be a lot of conservation plans written, so they are trying to 
force the hand of the Conservation Districts.
    Mr. Conaway. Who is they?
    Mr. Ebert. Excuse me?
    Mr. Conaway. Who is they?
    Mr. Ebert. DEP and the EPA. Before, it used to be the 
Conservation Districts----
    Mr. Conaway. So how are they doing that? How is the EPA 
strong-arming the NRCS?
    Mr. Ebert. By withholding funding. Like I said, they 
withheld funding for Pennsylvania DEP because we weren't 
meeting the targets and goals. But we need the funding at the 
conservation district level to get these plans written and in 
place and on the ground. And some of the trust for the 
Conservation Districts are going to be lost because they are 
becoming enforcers now, instead of actually being boots-on-the-
ground to help the farmer.
    Mr. Conaway. Right. Talk to us a little bit real quickly, I 
am a CPA, and you guys need to make money to stay in business, 
and so how does conservation projects that fold into your 
bottom line, are there ways that you can do them so that it has 
a positive on your bottom line, or are these things just are 
costs on top of what you would otherwise do? In general.
    Mr. Ebert. Like the conservation plans help develop a plan 
for me to rotate crops from a no-till, do better with cover 
cropping in that. That does help my bottom line. It actually 
improves my soil quality so I have better yields.
    Mr. Conaway. Ms. English, are you doing anything from a 
conservation standpoint that actually helps your farm?
    Ms. English. The EQIP Program has been wonderful, 
particularly for farmers who are struggling to implement 
structural improvements that can aid water quality, the way 
that they hold water on their property, the term for which they 
hold it. The EQIP Program has been very helpful for that, 
especially for small farmers, who I work with. The other 
program that has been helpful is the Conservation Reserve 
Stewardship. It has kind of gotten into an interesting space in 
the new farm bill. But that program that provides funding to 
help them implement good management practices, and learn those 
management practices, has been hugely helpful to me 
particularly with my smaller farmers, and by those I mean 
people who are producing very small quantities, but very 
important to the diversity of our farming community.
    Mr. Conaway. Mr. O'Toole, anything quickly?
    Mr. O'Toole. Well, I would just say that the mill * levy 
capability that is used. We use it in our district. 
Conservation Districts have that authority. When that is used, 
and in my case, with a real good leadership, leveraging those 
funds 5 to 1, coming from different places, that has been one 
of the reasons we have been able to be effective.
---------------------------------------------------------------------------
    * Editor's note: A mill levy is the number of dollars in taxes that 
a property owner must pay for every $1,000 of assessed value. . . . one 
mill is $.001 (1/1,000 of a 
dollar). Source: Wyoming Taxpayers Association http://www.wyotax.org/
property_tax.aspx.
---------------------------------------------------------------------------
    Mr. Conaway. Okay. Mr. Chairman, I yield back. Thank you.
    The Chairman. The gentleman yields back.
    I would like to thank our first panel for all of your 
experience, your time, your expertise. All of us found your 
testimony very, very helpful.
    And so I will dismiss the first panel of witnesses today, 
and I would like to welcome to the table, and as they are 
getting set up, I will introduce our next panel of witnesses. 
Our next panel, we are going to be joined by Ms. Celia Gould, 
who is Director of the Idaho State Department of Agriculture, 
out of Boise, Idaho; Mr. Lee McDaniel who is President of the 
National Association of Conservation Districts, an organization 
whose members were referenced many times by the previous panel; 
Mr. Terry McClure, President of McClure Farms LLC, Grover Hill, 
Ohio; and Mr. Tom Buman, CEO of Agren, of Carroll, Iowa.
    Looks like the panel has been seated. Welcome everyone. 
Thank you so much for accepting our invitation, coming such 
long distances to be here today, to be able to share your 
thoughts, your experience, your testimony as regards to the 
impact of regulations, specifically on agriculture in the rural 
economy.
    And so, Ms. Gould, please being when you are ready.

 STATEMENT OF CELIA R. GOULD, DIRECTOR, IDAHO STATE DEPARTMENT 
OF AGRICULTURE, BOISE, ID; ON BEHALF OF NATIONAL ASSOCIATION OF 
                      STATE DEPARTMENTS OF
                          AGRICULTURE

    Ms. Gould. Thank you, and good morning and thank you for 
the invitation to testify on the subject of the farm economy: 
impacts of environmental regulations and voluntary conservation 
solutions. I have submitted written testimony for the record.
    I am Celia Gould, Director of the Idaho State Department of 
Agriculture, and I also represent NASDA, the National 
Association of State Departments of Agriculture. My department 
is tasked with implementing the majority of regulatory programs 
affecting Idaho agriculture.
    Over 60 percent of Idaho land is managed by a Federal 
agency. That land ownership and divergent management strategies 
present unique challenges to our growers. This scenario often 
makes my department the middle ground between Federal land 
management and the needs of agriculture on the ground. We need 
to have officials who make sure that everyone plays by the 
rules, but just as importantly, we must support an environment 
where citizens can seize opportunities for voluntary 
conservation without bureaucratic roadblocks.
    I would like to highlight just a couple of examples. 
Idaho's ranchers are on the frontline when it comes to managing 
that careful balance. While grazing on Federal lands is a 
critical component to our strong livestock industry, just as 
important is what our producers are giving back to that 
equation. Consider this. Before 2012, ranchers legally were not 
allowed to fight a wildfire on public land. At stake wasn't 
simply a public resource, but also private land. A few years 
ago, Idaho ranchers were the first responders to a small 
lightning-ignited fire that broke out on public land. Local 
ranchers were told to leave the scene. That 5 acre fire later 
turned into a 40,000 acre fire. Ranchers throughout Idaho felt 
the BLM policy was unacceptable. So a coalition of producers 
began negotiating a public-private partnership, which became 
the genesis of the Rangeland Fire Protection Associations. Led 
primarily by Idaho ranchers, our RFPAs are often now the first 
to provide the initial attack on wildfires. Their efforts have 
resulted in fewer catastrophic, large-scale rangeland wildfires 
in Idaho. The ranching community set an example for us. We make 
a good team when Federal agencies see us as partners, not 
adversaries.
    I feel strongly that the states are best poised to 
coordinate and amplify the voice of stakeholders. To further 
voluntary conservation, states must serve a more prominent role 
in the early development and implementation of Federal 
programs. Take Idaho's lauded Sage-Grouse Plan which initially 
appeared to be on a good track. Idaho built a plan based on 
broad input from industry groups, conservation organizations, 
as well as county, state, and Federal agencies. The outcome was 
a locally derived, scientifically defensible management plan 
that was eventually selected as a co-preferred alternative in 
the BLM and Forest Service's EIS. Months of collaborating with 
the Idaho BLM Office and the key stakeholders led Idaho to 
genuinely believe the state-Federal collaboration was going to 
be a success. However, the plan was changed in the eleventh 
hour. What began as collaboration ended with the unilateral 
decision from a Federal agency that fundamentally changed the 
plan, and turned supporters to adversaries. Idaho is now 
embroiled in litigation with the Federal Government over its 
handling of the sage-grouse listing decision.
    I have voiced some of my concerns, now I would like to 
highlight some possible solutions.
    Increased productivity, stewardship, and conservation and 
agriculture are a result of voluntary efforts, as well as 
public and private investment in research and innovation. But 
who among us will take on these challenges if our hard work is 
met with intransigence or flat refusal by Federal agencies 
which seem to prefer top-down management directives contrived 
in offices instead of on the ground. This pattern has to 
change. We need Federal partners to consider doing more of the 
following. First, engage the states. Second, improve economic 
analyses to account for real costs. Third, incorporate 
flexibility and regulatory programs. And finally, renew focus 
on best available science. An example of this model is the NRCS 
Regional Conservation Partnership Program which unites partners 
toward targeted conservation goals.
    Federal agencies play an important role in the day-to-day 
lives of Idahoans, but they don't have the greatest stake in 
the future of Idaho. The people closest to the land do. Farmers 
and ranchers are thoughtful stewards. I will look to them and 
their love of the land as our best chance of meeting growers' 
demands for resources, while protecting the careful balance 
which makes Idaho one of the greatest natural landscapes in the 
world.
    Thank you today. I appreciate your attention.
    [The prepared statement of Ms. Gould follows:]

Prepared Statement of Celia R. Gould, Director, Idaho State Department 
 of Agriculture, Boise, ID; on Behalf of National Association of State
                       Departments of Agriculture
Introduction
    Chairman Glenn `G.T.' Thompson, Ranking Member Lujan Grisham, and 
distinguished Members of the Subcommittee on Conservation and Forestry: 
good morning and thank you for the invitation to testify on the subject 
of The Farm Economy: Impacts of Environmental Regulations and Voluntary 
Conservation Solutions.
    My name is Celia Gould, and I am the Director of the Idaho State 
Department of Agriculture and a lifelong cattle rancher. I also Chair 
the Natural Resources and Environment Committee for the National 
Association of State Departments of Agriculture (NASDA). NASDA 
represents the commissioners, secretaries, and directors of the state 
departments of agriculture in all fifty states and four territories. 
State departments of agriculture serve as the ``boots-on-the-ground'' 
for a wide variety of important agricultural programs including, animal 
disease and pest detection and prevention, environmental protection and 
conservation as well as promoting agricultural products locally, 
nationally and throughout the world. For many states agriculture is a 
key economic driver. Idaho is one of those states. In addition to the 
famous Idaho potato, our farmers and ranchers produce over 185 
different commodities, with over 27 of those commodities ranking in the 
top ten in the nation. We cannot grow or prosper without a thriving 
agricultural economy.
    In Idaho, over 60% of the land mass is managed by the Federal 
Government. In fact, Idaho has a greater percentage of land managed by 
the U.S. Forest Service than any other state in the union. Accordingly, 
the State of Idaho must interact with Federal land management agencies 
frequently. We are also co-regulators and partners to some degree with 
many other Federal agencies, not just those that manage land. As a 
result we have developed relationships with the Federal Government, 
some positive and productive, and others that need improvement. Today's 
hearing is timely for certain issues we are dealing with in Idaho and 
throughout the inter-mountain west. I appreciate the opportunity to 
testify in front of this Committee.
    The selection and subsequent management of endangered species, 
wildfire suppression and mitigation, and public lands grazing are a few 
important issues for western states. The programs that deal with these 
issues are primarily the responsibility of one or more Federal 
agencies. States have, or should have, a critical voice in the 
direction these Federal programs are headed. More often than not state 
leaders are left frustrated with the lack of meaningful participation 
and collaboration on these topics and others that impact, sometimes 
severely, our agricultural industries in the West. My goal here today 
is to showcase some of the examples representative of the vast efforts 
going into voluntary conservation in the West. These efforts are most 
effective and poignant when Federal regulations encourage the role of 
the states in land management, conservation, and regulatory decisions. 
I will be focusing on issues most relevant to the West; however, the 
basic principles contained within my remarks can be applied throughout 
the country.
Successes, Challenges & Solutions
    In my remarks below, I have highlighted some key conservation 
initiatives that have been developed at the state level in Idaho. 
Additionally, I discuss how those conservation initiatives correlate 
with Federal land management agency core missions and how Idaho has 
interacted with its Federal partners. Those interactions have not been 
entirely positive. I also discuss some challenging issues that have 
left me, my counterparts in other western states and other state level 
directors frustrated. From my perspective, the relationships between 
state and Federal agencies do not need to be strained and adversarial. 
More can and should be done collaboratively. Accordingly, I offer up a 
few observations for potential solutions going forward. Ultimately, the 
objective is to provide a regulatory and support structure for our 
farmers and ranchers to continue the tradition of supplying our nation 
and the world with an affordable, safe and abundant supply of food and 
fiber: a goal in which we all have a stake.
Successes
    Rangeland Fire Protection Associations (RFPAs) are a major asset in 
suppressing rangeland wildfires, especially in key sage-grouse habitat. 
However, local involvement on range fires has not always been accepted 
or welcomed. Federal policy prohibited ranchers from fighting fires on 
public lands. Recently that policy came to a head in Idaho when a BLM 
fire crew showed up on a fire that appeared to be under control and 
asked two local ranchers who responded to the lightning ignited blaze 
to leave the scene. A 5 acre fire later turned into a 40,000 acre fire. 
Ranchers throughout Idaho felt the BLM policy was unacceptable. During 
the winter of 2012, Idaho ranchers contacted the Idaho Department of 
Lands and the BLM to begin building a public-private partnership, which 
became the genesis for Rangeland Fire Protection Associations. See 
generally, Mountain Home Ranchers Form Idaho's First Rangeland Fire 
Protection Assoc. With Idaho Dept. of Lands, BLM, Steve Stuebner, 
www.lifeontherange.org. RFPAs are nonprofit organizations established 
to prevent or suppress range fires and keep them to more manageable 
sizes. Led by trained local volunteers, primarily Idaho ranchers, RFPAs 
are often the first to respond and provide initial attack on wildfires 
until Federal and state fire crews and resources arrive on the scene. 
Local ranchers are first responders to rangeland fires due in large 
part to their knowledge of the land and proximity to the fire when it 
starts. Before 2012, Idaho ranchers were not allowed to fight rangeland 
fires on public land because of safety concerns raised by Federal fire 
managers. However, the State of Idaho developed a training program and 
found equipment and resources to help address those safety concerns. 
Today our local ranchers are volunteering their time to become 
professionally trained and are utilizing interagency fire suppression 
resources to lead the attack on rangeland wildfires. Their efforts have 
resulted in fewer catastrophic, large-scale rangeland wildfires in 
Idaho.
    This past fire season local RFPAs in Idaho trained 230 members in 
six different regions protecting nearly 6 million acres of Idaho 
rangeland, with nearly 1 million of those acres are private rangelands 
that were previously unprotected. RFPAs often times use ranch equipment 
but are also acquiring equipment through the Federal Excess Personal 
Property program and other state programs. Training is provided by the 
BLM in cooperation with the Idaho Department of Lands. USDA NRCS is 
also valuable partner with wildfire recovery, especially their EQIP 
program. We appreciate NRCS's partnership model and the special EQIP 
dollars they made available for fire recovery last fall.
    RFPAs provide Federal and state land managers a quick first 
response by trained volunteers. With this new opportunity, ranchers are 
no longer required to watch from the sidelines as forage on private 
pasture, public grazing allotments and wildlife habitat burn up as a 
fire grows in size and intensity. Key sage-grouse habitat is better 
protected from large scale catastrophic wildfire, the number one threat 
to the survival of sage-grouse in Idaho. The cooperation between these 
private, nonprofit associations, the State of Idaho and the BLM have 
made important in-roads towards public-private partnerships that serve 
as a successful model for future projects. This grassroots initiative 
borne from a desire and motivation to protect the landscape came from 
ranchers taking the initiative to work with their Federal and state 
agency partners. The ISDA does not play a significant role in fire 
prevention programs. However, things can get extremely busy for our 
agency when a catastrophic fire has displaced multiple producers that 
need forage or pasture for their cattle. Producers are typically not 
allowed back on their allotment for at least 2 years following a fire. 
I am hopeful that this partnership leads to fewer producers being 
displaced as a result of wildfires.
    The Idaho Range Program was codified by the Idaho Legislature in 
2009, directing my department, the Idaho State Department of 
Agriculture (ISDA) to provide ``support, coordination and expertise'' 
to livestock producers and land and wildlife management agencies. See 
Idaho Code  22-103(23). This new legislative support provides a 
framework for the ISDA to build a robust and collaborative Range 
Program. The ISDA Range Program is modeled after our neighboring State 
of Wyoming's program. The Wyoming Department of Agriculture has been an 
invaluable partner in building the concept for our program in Idaho. 
Other western states are looking at the work and value these programs 
are providing and developing similar programs suited to the needs of 
their individual states. This is the best plan for building programs 
that have the most potential to serve local needs well. We are 
committed to sharing our knowledge and experience, much like our 
friends in Wyoming have done for us, to help build productive state-
based range programs throughout the West. Cross-border cooperation with 
neighboring states builds consistency and predictability in issues we 
have in common.
    The ISDA Range Program has a significant role to play in 
cooperating with and amplifying the voluntary conservation and 
stewardship of Idaho ranchers. With the help of partners from the 
University of Idaho, the Idaho Rangeland Resource Commission and the 
Idaho Cattle Association, range monitoring in Idaho is taking off. One 
important goal of the ISDA Range Program is to engage, advise and train 
permittees in monitoring their grazing allotments on an annual basis. 
Those objectives come to fruition in ISDA's Range Photo Monitoring 
Program, which relies heavily on the voluntary efforts of ranchers. The 
information collected as part of this program helps determine if 
progress is being made toward established rangeland health objectives 
and goals. The program emphasizes a more coordinated and cooperative 
monitoring process that increases the level of participation between 
Federal land managing agencies, state agencies and permittees when 
performing rangeland health assessments and other monitoring 
activities. Cooperative rangeland monitoring is an important tool to 
help manage livestock grazing on public lands administered by Federal 
and state agencies and to maintain or achieve desired range conditions. 
BLM has agreed to accept and consider the data submitted by permittees 
when making allotment level decisions. This important data is gathered 
pursuant to agreed upon photo monitoring protocols to ensure that it 
meets BLM standards for data collection. This effort is significant 
because the data represent current conditions on each allotment, 
whereas before the BLM was relying on old, out of date photo-point 
monitoring data or none at all.
    The Governor's Sage-Grouse Management Plan was developed by a task 
force convened by Governor Otter in March 2012. The stakeholders 
participating represented industry, sportsmen, conservation groups and 
elected officials charged with developing a state plan designed to 
protect the Greater sage-grouse and preclude its listing as an 
Endangered Species while maintaining working landscapes. This group 
developed a plan following eight different meetings and emphasized 
finding collaborative solutions to address the primary threats to the 
survival of the bird in Idaho, namely wildfire exacerbated by the 
spread of invasive species. The group's work culminated into an 
alternative for amending multiple Federal land-use plans in Idaho that 
balanced conservation of the species (through addressing the primary 
threats) with the continuation of traditional land use activities. The 
Governor's Alternative was later selected as a co-preferred alternative 
within the planning effort for Federal lands in Idaho. In September 
2015, the U.S. Fish and Wildlife Service determined that ongoing 
conservation efforts had significantly reduced the threats to the point 
where sage-grouse were no longer warranted for protection under the 
Endangered Species Act across its entire 11 western state range. 
Collaborative efforts from state and Federal agencies, private 
landowners, and conservation groups are credited for the decision to 
not list the species. The Idaho Statesman described the effort as an `` 
`all lands' conservation strategy across the West that officials 
describe as the biggest land-planning effort ever undertaken for a 
single species.'' See Unprecedented Collaboration Leads to Sage-Grouse 
Decision, Idaho Statesman, Rocky Barker, September 22, 2015.
    Subsequent to the work of the task force described above, Idaho 
continues to invest in sage-grouse conservation efforts on state and 
private lands with willing landowners. State agencies have been 
implementing the Governor's Sage-Grouse Conservation Strategy which 
demonstrates Idaho's commitment to preserving sage-grouse. In state 
Fiscal Year 2016, the State of Idaho was able to leverage $2 for every 
state dollar spent on conservation actions. To date, these efforts have 
resulted in almost $2 million for on-the-ground conservation projects 
and wildfire prevention and suppression actions. At the Idaho State 
Department of Agriculture, we focus on providing technical advice to 
decision makers on rangeland health issues, particularly on how 
correctly managed grazing can be used to reduce fine fuels.
    In May 2015, Idaho formed a Sage-Grouse Actions Team, which 
includes key state and Federal agency partners. This team is charged 
with identifying projects and funding sources for sage-grouse that can 
be implemented on the ground quickly. This group has placed a great 
emphasis on those projects that can aid in ameliorating the threats of 
wildfire and invasive species on sage-grouse. In fact, a large portion 
of the state funding available for sage-grouse in FY16 has been 
allocated towards those types of projects. This included equipping 
RFPAs, implementing strategic fuel breaks to slow the spread of 
wildfire, restoring key sage-grouse habitat areas, and monitoring sage-
grouse activity and conservation practices.
    Unfortunately, actions at the Federal level threaten much of the 
voluntary conservation and collaborative efforts being undertaken to 
protect Greater sage-grouse in Idaho. The details of some of those 
actions are laid out in the next section below.
Challenges
    I have highlighted a few success stories that Idaho has achieved by 
leveraging voluntary conservation strategies and the goodwill that 
Idaho citizens are willing to contribute to preserve our western 
heritage and the values that are important to all of us. However, in 
detailing these accomplishments I have foreshadowed a few frustrations 
as well. A consistent and pervasive policy within many Federal agencies 
that can only be described as an overly pejorative and draconian 
Federal bureaucracy is all too common. Oftentimes, Federal agencies do 
not view states and their respective agencies as co-managers or co-
regulators, but instead minimize the state's role and often ignore or 
overrule state plans, policies or priorities. If voluntary grassroots 
and on-the-ground efforts are to have success or continue to be 
negotiated, the states, which are closest to these efforts, should 
serve a more prominent role than they currently are in the development 
and implementation of Federal programs and their attendant regulations 
within the borders of their states.
    The BLM Planning Rule 2.0 is now out for public comment. The 
fundamental shift in the BLM's planning process is a good illustration 
of the problem outlined. The rule claims to enhance state and local 
government opportunity to participate in the process, however, a more 
detailed review of the rule does not support that conclusion. The 
development of the proposed rule itself presented a perfect opportunity 
for the BLM to engage its state and local partners to identify areas of 
needed improvement, craft a process that takes full advantage of the 
important perspectives and priorities that states can provide and roll 
out the proposal to the public in lock-step with the states. Instead, 
the rule was developed, like is all too common today, by Washington, 
D.C. officials, only engaging state partners in the same process it 
engages the general public. A process that is sure to ignore the 
important priorities or policies of the individual states and further 
erode the principles of federalism that are embedded within our history 
and national charter.
    This process of minimizing the states participation is 
inappropriate given the clear Congressional direction codified in BLM's 
organic statute. The Federal Land Policy and Management Act (FLPMA) 
directs BLM, to ``establish procedures . . . to give Federal, state, 
and local governments and the public, adequate notice and opportunity 
to comment upon and participate in the formulation of plans and 
programs relating to the management of the public lands.'' See 43 
U.S.C. 1712(f). It is evident from the language of the statute Congress 
perceived the role of state and local governments to be separate from 
and in addition to the general public's participation. In addition, 
Congress has stated that land use planning should

          consider[] the policies of approved state and Tribal land 
        resource management programs. In implementing this directive, 
        the Secretary shall, to the extent he finds practical, keep 
        apprised of state, local, and Tribal plans that are germane in 
        the development of land use plans for public lands; assist in 
        resolving, to the extent practical, inconsistencies between 
        Federal and non-Federal Government plans, and shall provide for 
        meaningful public involvement of state and local government 
        officials, both elected and appointed, in the development of 
        land use programs, land use regulations, and land use decisions 
        for public lands, including early public notice of proposed 
        decisions which may have a significant impact on non-Federal 
        lands.

43 U.S.C. 1712(a) sec. 202 (emphasis added). I am here today, in part, 
because the Congressional mandates contained throughout FLPMA with 
respect to engaging state and local governments in a meaningful and 
early way are not being followed adequately.
    The Intermountain Region Bighorn Sheep Risk Assessment currently 
being developed by the USFS is another area of concern for Idaho and 
other western states. In February 2014, the USFS released a briefing 
paper which outlined its plan to implement a bighorn sheep and domestic 
sheep management framework within USFS Region 4. Idaho responded by 
outlining its concerns with the proposed framework. Chief among the 
concerns described and communicated to the USFS is the lack of any role 
for the State of Idaho in the construction of the proposed management 
framework. This is a deeply concerning trend, especially given the 
state's responsibility to manage wildlife within its borders. Nowhere 
within the National Forest Management Act does it empower the USFS to 
supersede the state's role in managing bighorn sheep. It is hard to 
understand why the USFS would silo themselves into developing a 
unilateral management framework where it is clearly within the purview 
of the state to manage bighorn sheep populations. Idaho's stated policy 
is to maintain bighorn sheep populations without causing undue economic 
hardship on the domestic sheep industry or individual sheep producers. 
A viable bighorn sheep population and a viable domestic sheep industry 
are important components to the state's economy and history. The 
multiple-use mandate that governs the USFS cannot be fully understood 
or correctly implemented without the input and participation of state 
agencies and Idaho stakeholders. The proposed management framework as 
of today's hearing is yet to be completed for Idaho. We are working to 
improve state and stakeholder engagement at this time. It simply begs 
the question why the State of Idaho must fight for a seat at the table? 
This kind of inward-looking process by Federal agencies is yet another 
example of a trend which contradicts and disincentivizes stakeholder 
investment into voluntary initiatives, including those that promote 
conservation.
    The Idaho and Southwestern Montana Greater Sage-Grouse Final 
Approved Resource Management Plan Amendment was released in September 
2015, determining the Greater sage-grouse did not warrant endangered 
species protection. Coinciding with this release, the BLM added an 
additional regulatory layer described as Sage-Grouse Focal Areas. This 
new plan superseded and fundamentally changed Idaho's local, 
scientifically-based collaborative plan. Most incongruent and 
concerning to our ranch families in Idaho is the elevation of livestock 
grazing as a primary threat to greater sage-grouse. The decision to add 
an additional layer of regulation, including misclassifying livestock 
grazing, ignores the science, data and collaborative work that so many 
interest groups contributed to and agreed upon. Importantly, it 
prevents using proper grazing as a tool to remove fine fuels in and 
around greater sage-grouse habitat. Moreover, it is an affront to the 
notion that local collaboration, local ideas, and local efforts garner 
the greatest results.
    In contrast to the Federal plan, Idaho focused the majority of its 
conservation planning efforts on addressing the primary threats to 
greater sage-grouse, wildfire and invasive species. The Idaho plan 
centers on an innovative approach to addressing primary threats through 
the application of a three-tiered habitat conservation system and an 
associated adaptive management strategy. This approach allows the state 
to elevate the level of conservation on certain sage-grouse habitat if 
an adaptive regulatory mechanism is triggered in Core habitat, 
regardless of land ownership. The Idaho plan also implements proactive 
actions that aim to protect key sage-grouse habitat through a greater 
emphasis on wildfire prevention, suppression and restoration. The 
creation of Rangeland Fire Protection Associations, for example, has 
already proven to be an effective tool in decreasing the response time 
to wildfires in remote areas of sage-grouse habitat and thus helping to 
prevent large scale wildfires.
    Months of collaborating with the local Idaho BLM Office and key 
stakeholders over the refinements of the co-preferred alternatives led 
Idaho to genuinely believe that the state-Federal collaboration was 
going to be a success. The type of collaboration employed for the 
development of the sage-grouse plan in Idaho mirrored that of the Idaho 
Roadless Rule collaborative, where industry groups, conservation 
organizations, counties, and state and Federal agencies came together 
to craft a locally-derived solution that is preferred to a top-down 
one-size-fits-all approach. However, the decision by the Washington BLM 
office to fundamentally change the sage-grouse plan for Idaho at the 
eleventh hour has undermined the fragile coalition built through the 
collaborative process. The outcome of all of the above described 
efforts is now uncertain as a result of litigation.
Solutions
    These few examples highlight the fundamental need to seriously re-
assess how Federal agencies work and cooperate with state agency 
partners. Federal agency personnel will never fully understand the 
unique socioeconomic, cultural and conservation needs unique to the 
individual states. The standard practice that has increasingly 
frustrated states, local governments and the regulated community is a 
top-down, one size fits all decision process. This undermines 
collaborative, local solutions and deflates enthusiasm for conservation 
initiatives. State and local leaders are closely connected to the 
citizens that are affected most by the regulatory framework we are 
discussing. A more meaningful engagement with state and local 
governments improves the regulated community's opportunity to interact 
with its government on all levels and provides a perspective that is 
otherwise missed. It must be remembered and emphasized, however, that 
this process should not replace the engagement of the general public, 
but should bolster and enhance it.
    There are several specific actions that officials at all Federal 
levels should consider, designed to improve collaboration, support 
voluntary conservation initiatives, develop strong inter-governmental 
relationships and minimize the threat of costly, protracted litigation. 
Those actions include:

  1.  Engage the States in a Meaningful Way: Federal agencies should 
            conduct robust federalism consultations early in the 
            regulatory process, and include participation of a wide 
            range of state regulatory agencies, including state 
            departments of agriculture. These consultations should 
            occur prior to publication of a proposed rule. Throughout 
            this process, it is important to emphasize state regulatory 
            agencies are not simply stakeholders, but are instead 
            partners with Federal agencies in the implementation of a 
            host of programs. States can--and should--be used more as 
            resources for Federal agencies. Often states have a wealth 
            of data, experience, and expertise that would help Federal 
            agencies better develop and implement regulatory programs.

  2.  Improve economic analyses that more realistically account for 
            economic costs to states: Federal agencies should engage 
            state regulatory agencies and stakeholders to evaluate 
            proposed regulations, availability of required resources, 
            and whether expected outcomes merit those expenditures.

  3.  Incorporate flexibility in regulatory programs: Federal agencies 
            should engage state regulatory partners in creating 
            programs that may provide local and state flexibility. We 
            continue to encourage our Federal partners to look for ways 
            to engage state agencies in creating programs to provide 
            additional flexibility--especially when the alternative may 
            be an undue regulatory burden on the regulated community. 
            Such consultation and robust outreach will facilitate 
            recognition of state equivalency regulatory programs and 
            prevent duplicative regulatory layers. Additionally, 
            Federal agencies should look to state and regional 
            directors within their own agencies to help craft local 
            solutions. States interact frequently with local Federal 
            leaders and have more confidence in their ability to 
            understand local issues.

  4.  Renew focus on utilization of best available science: Regulations 
            must be based on the best available, sound, validated, and 
            peer-reviewed science and rely on science-based risk 
            assessments. Moreover, regulatory agencies must ensure 
            policymakers do not misuse or inappropriately apply 
            invalidated or unrelated scientific findings to policy 
            determinations. We especially appreciate the work the 
            Office of Pest Management Policy (OPMP) executes to ensure 
            policy or regulatory initiatives are based on 
            scientifically sound positions. OPMP is an invaluable 
            resource and advocate for including sound science in the 
            development of regulatory actions impacting agriculture, 
            and we encourage increased support for OPMP's activities, 
            as well as ensuring OPMP's perspectives are advanced in the 
            interagency review process.

  5.  Congress Should Hold Federal Agencies Accountable: Federal 
            statutes commonly provide clear direction to Federal 
            agencies to engage stakeholders, especially states, under 
            the partnership model. For example, the National Forest 
            Management Act provides:

                  inasmuch as the majority of the nation's forests and 
                rangeland is under private, state, and local 
                governmental management and the nation's major capacity 
                to produce goods and services is based on these non-
                federally managed renewable resources, the Federal 
                Government should be a catalyst to encourage and assist 
                these owners in the efficient long-term use and 
                improvement of these lands and their renewable 
                resources consistent with the principles of sustained 
                yield and multiple use;

    National Forest Management Act of 1976, 16 U.S.C. 1600, Sec. 2(5).
Conclusion
    Federal agencies play a significant role in the day to day lives of 
Idaho citizens, especially those engaged in agriculture. These 
agencies, in order to achieve a higher level of success and public 
acceptance, must not ignore an important responsibility to engage state 
agencies in a meaningful and productive way. This is not a trivial 
matter. The examples of success I have included in my testimony have 
the common denominator of being inclusive and collaborative. There is 
no reason this model cannot be successfully implemented at the Federal 
level.

    The Chairman. Ms. Gould, thank you so much.
    Mr. McDaniel, go ahead and proceed with your 5 minutes of 
testimony when you are ready.

         STATEMENT OF LEE McDANIEL, PRESIDENT, NATIONAL
    ASSOCIATION OF CONSERVATION DISTRICTS, WASHINGTON, D.C.

    Mr. McDaniel. Good morning. Good morning, Chairman 
Thompson, Ranking Member Lujan Grisham, and Members of the 
Subcommittee. Thank you for the opportunity to testify this 
morning on the impacts of environmental regulations and 
voluntary conservation solutions.
    I am Lee McDaniel, President of the National Association of 
Conservation Districts, and I currently operate a corn, 
soybean, and alfalfa farm in Darlington, Maryland, where I 
implement a variety of conservation practices, including grass 
and wooded buffers, grass waterways, strip cropping, and no-
till farming. I have been involved with Conservation Districts 
since 1997, when I first served on my local district board.
    NACD represents America's 3,000 Conservation Districts, and 
the 17,000 men and women who serve on their governing boards, 
as well as their respective state and territory associations. 
Conservation Districts work with cooperating landowners and 
operators in all 50 states to help manage and protect land and 
water resources on private and public working lands.
    NACD passionately believes in the locally-led voluntary, 
incentive-based conservation model. We believe a collaborative 
approach focused on sound conservation planning and technical 
assistance for landowners at the local level, coupled with farm 
bill conservation financial assistance is critical for long-
term environmental and economic stability. We believe this 
approach can help producers avoid the need for unnecessary and 
burdensome regulations.
    If voluntary, incentive-based conservation is going to be 
the first line of defense against the need for regulations, 
then we need to prioritize funding for it. While the 
conservation community agreed to cuts in the last farm bill, we 
must admit that every conservation dollar taken from the hands 
of farmers makes regulation more of a possibility. We must see 
the conservation titles are tooled to mitigate risk of 
environmental concerns and costly regulatory approaches.
    Environmental regulations many times do not take into the 
account that every acre of land needs its own prescriptive 
conservation plan to meet that land's needs. Under a locally-
driven, voluntary conservation system, landowners can work with 
conservation professionals to tailor a conservation plan to the 
specific needs of their land. Under a regulatory approach, the 
most critical resource concerns on a particular operation may 
be ignored or may not pertain to that piece of land.
    Time and again, the collaborative, locally-led conservation 
approach has shown to work well, addressing a variety of 
resource concerns. A great example of this can be found in 
Conservation Districts' works on addressing water bodies that 
are on a state's section 303(d) list of impaired watersheds. 
Whether it is using EPA Section 319 grants or farm bill 
programs, districts in partnership with other local, state, and 
Federal stakeholders work together to improve quality and 
remove these rivers and streams from the impaired list.
    In Delaware, the Sussex County Conservation District 
improved the water quality of the Gravelly Branch sub-watershed 
by working with NRCS to create conservation plans, provide 
technical assistance, and develop EQIP contracts for local 
producers. Additionally, section 319 funds were used to assist 
in developing and implementing the Conservation Reserve 
Enhancement Program in the area.
    The Huntingdon County Conservation District, located in 
Chairman Thompson's district, partnered with local stakeholders 
and the EPA's Section 319 Grant Program to restore Miller Run 
after it was added to the state's section 303(d) list. This 
Conservation District worked to implement abatement and 
treatment systems that resulted in a significant improvement in 
water quality, and can now support a healthy Brook Trout 
population.
    Local management of habitat and species preservation, 
rather than top-down approaches have also shown success with 
the Endangered Species Act. In 2006, the New England Cottontail 
was identified as a candidate species for ESA protection. Since 
then, Conservation Districts as well as a host of other 
partners have worked collaboratively to rebuild its habitat. As 
a result of these efforts, the population of the New England 
Cottontail increased dramatically, and in 2015 it was removed 
as a candidate species.
    A new addition to the last farm bill is the Regional 
Conservation Partnership Program, which provides a unique way 
to promote coordination between NRCS and regional partners to 
address resource concerns. In Minnesota, the State's Department 
of Agriculture received funding through RCPP to implement a 
statewide agriculture water quality certification plan, 
utilizing Conservation Districts to provide site-specific 
solutions. By becoming certified, producers can receive 
regulatory certainty that their operation meets all state 
regulatory requirements for the next 10 years. Working with the 
districts has provided landowners a level of trust and 
familiarity that has allowed this program to be successful in a 
short period of time, and proof of this success can be seen in 
the reduced sediment load, nutrient runoff, and soil erosion.
    None of these examples would have been successful without 
consistent funding for technical and financial assistance to 
landowners. Sound conservation plans developed on the local 
level, and coordination with landowners and Conservation 
Districts, coupled with strong financial assistance has proven 
to provide longer-lasting solutions to our nation's 
environmental problems.
    I am proud of the continued successes achieved by the men 
and women involved in our nation's Conservation Districts, and 
I look forward to answering any questions that you may have.
    [The prepared statement of Mr. McDaniel follows:]

Prepared Statement of Lee McDaniel, President, National Association of 
                Conservation Districts, Washington, D.C.
    Good morning, Chairman Thompson, Ranking Member Lujan Grisham, and 
Members of the Subcommittee. Thank you for the opportunity to testify 
this morning on the impacts of environmental regulations and voluntary 
conservation solutions.
    I am Lee McDaniel, President of the National Association of 
Conservation Districts (NACD), and I currently operate a corn, soybean, 
and alfalfa hay farm in Darlington, Maryland. I have been involved with 
conservation districts since 1997 when I first served on my local 
district board. On my own land, I implement a variety of conservation 
practices, including grassed and wooded buffers, grassed waterways, 
strip cropping, and no-till farming.
    NACD represents America's 3,000 conservation districts and the 
17,000 men and women who serve on their governing boards, as well as 
their respective state and territory associations. Conservation 
districts are local units of government established under state law to 
carry out natural resource management programs at the local level. 
Conservation districts work with cooperating landowners and operators 
in all fifty states as well as the territories to help manage and 
protect land and water resources on private working lands and many 
public lands in the United States.
    NACD passionately believes in the locally-led, voluntary, 
incentive-based conservation model. We believe a collaborative approach 
focused on sound conservation planning and technical assistance for 
landowners at the local level coupled with farm bill conservation 
financial assistance is critical for long-term environmental and 
economic stability. Federal programs aimed at supporting these efforts, 
including many in the 2014 Farm Bill, have a vital role in supporting 
clean air, clean water and productive soils. They also help producers 
avoid the need for unnecessary and burdensome regulations.
    Part of the voluntary conservation model's purpose, just like the 
farm bill's Environmental Quality Incentives Program's (EQIP) purpose, 
is to help producers comply with local, state, and national regulatory 
requirements and even more importantly, avoid the need for those 
regulations in the first place. Chairman Conaway put it best in a 
recent op-ed when he stated that a better alternative to regulation is 
the Federal Government ``sharing in the cost of both time-tested and 
cutting edge conservation practices.''
    If voluntary, incentive-based conservation is going to be the first 
line of defense against the need for regulation, then we need to 
prioritize funding for it. While the conservation community agreed to 
cuts in the Agricultural Act of 2014, we must admit that every 
conservation dollar taken from the hands of farmers makes regulation 
more of a possibility. Similar to how commodity and crop insurance 
programs provide a safety net and mitigate against yield and revenue 
loss, we must see conservation as mitigating risk of environmental 
concerns and more costly regulatory approaches.
    Environmental regulations many times do not take into account that 
every acre of land is different and single, uniform regulatory 
requirements often do not solve resource concerns. Each piece of land 
needs its own prescriptive conservation plan to meet that land's needs. 
Under a locally-driven voluntary conservation system, landowners can 
work with conservation professionals to tailor a conservation plan to 
the specific needs of their land. Under a regulatory approach, the most 
critical resource concerns on a particular operation may be ignored or 
may not pertain to that specific piece of land.
    Conservation districts throughout the country, in cooperation with 
the Natural Resources Conservation Service (NRCS), are instrumental in 
supporting quality soil health through technical assistance for 
different production techniques from no-till farming to the inclusion 
of cover crops into a producer's operation. These practices not only 
help with a host of environmental issues, such as soil erosion, root 
depth, and moisture control, but in the end can improve yields for 
producers and help limit input costs, which helps with an operation's 
bottom line. Unfortunately, many producers, especially beginning and 
under-served producers, are not aware that such assistance is available 
to them. Conservation districts take great responsibility with outreach 
to landowners to ensure that they can take advantage of the 
opportunities that are available.
    Time and time again, the collaborative, locally-led conservation 
approach is shown to work well addressing a variety of resource 
concerns, including water quality, air quality, and wildlife habitat 
protection. NACD has many success stories where regulations were 
mitigated or avoided because of the work of voluntary conservation 
efforts.
    A great example of success stories can be found in local 
conservation districts' work on addressing water bodies that are on a 
state's [section] 303(d) list of impaired watersheds. Whether it is 
using Environmental Protection Agency (EPA) section 319 grants or farm 
bill programs like EQIP and the Conservation Reserve Enhancement 
Program (CREP), districts in partnership with other local, state, and 
Federal stakeholders worked together to improve water quality.
    In Delaware, the Sussex County Conservation District improved the 
water quality of the Gravelly Branch sub-watershed by working with NRCS 
to create conservation plans, provide technical assistance, and develop 
EQIP contracts for local producers. [Section] 319 grant funding was 
also used to hire a full time CREP coordinator to assist in developing 
and implementing CREP in the area.
    The Peter Francisco Soil and Water Conservation District in 
Virginia also leveraged [section] 319 dollars with EQIP and CREP to 
install best management practices on agricultural land in the Willis 
River watershed which significantly reduced nonpoint source pollution 
loads reaching the river.
    The Huntingdon County Conservation District in Chairman Thompson's 
district partnered with local stakeholders and the EPA's section 319 
grant program to restore Miller Run after it was added to the state's 
[section] 303(d) list. This conservation district used section 319 
grant funding to implement abatement and treatment systems that 
resulted in a significant improvement in water quality and can now 
support a healthy brook trout population. All of these success stories 
prove that working together in a collaborative manner while using 
incentive-based conservation programs we can solve natural resource 
concerns.
    Local management of habitat and species preservation, rather than 
top-down approaches, have also shown success with the Endangered 
Species Act (ESA). Through voluntary locally-led conservation 
practices, stakeholders have collaborated to enhance both the health of 
the land and the recovery of species. In 2006, the New England 
Cottontail was identified as a candidate species for ESA protection due 
to habitat loss, increased human development, and competition from 
nonnative species that threatened the cottontail's existence. Since 
then, conservation districts, as well as a host of other state and 
Federal agencies, wildlife organizations, and private land owners, have 
worked collaboratively to rebuild its habitat. As a result of these 
efforts, the population of the New England Cottontail increased 
dramatically and in 2015, it was removed as a candidate species by the 
U.S. Fish and Wildlife Service (FWS).
    For the Lesser Prairie-Chicken, successful efforts by conservation 
districts and other regional stakeholders increased the bird's 
population by 25% from 2014 to 2015. These efforts were so successful 
that a U.S. District Court overturned the FWS's listing as threatened, 
directly crediting this locally-led effort in the decision. This 
innovative plan proves that locally-driven conservation solutions can 
succeed and should be used as a model for future wildlife habitat 
protections.
    A new addition to the last farm bill is the Regional Conservation 
Partnership Program (RCPP), which provides a unique way to promote 
coordination between the Natural Resources Conservation Service and 
regional partners to improve soil quality, water quality, water 
quantity, and wildlife habitat. Conservation districts, whether taking 
the lead on the application or participating in delivery, have been 
instrumental in the successes that have already been achieved.
    In Minnesota, the state's Department of Agriculture received 
funding through RCPP to implement a statewide agriculture water quality 
certification plan utilizing local conservation districts to provide 
site-specific solutions and technical assistance to producers in order 
to reduce risks to water quality. By becoming certified, producers can 
receive regulatory certainty that their operation meets all state 
regulatory requirements for the next 10 years, helping them better plan 
their for their own operation's needs without worrying about future 
regulatory actions. Working with the local conservation districts has 
provided landowners a level of trust and familiarity that has allowed 
this program to be successful in a short period of time and proof of 
this success can be seen in the estimated 8.5 million pounds of soil 
saved, over 6 million pounds of sediment reduced, and the prevention of 
almost 4 million pounds of phosphorus from entering the state's waters.
    While each of the abovementioned programs have far more success 
stories than have been noted here, none would have been as successful 
as they were without consistent funding for technical and financial 
assistance to landowners. Sound conservation plans developed on the 
local level in coordination with landowners and conservation districts, 
coupled with strong financial assistance, has proven time and again to 
provide longer-lasting solutions to our nation's environmental 
problems. I am proud of the continued successes achieved by the men and 
women involved in our nation's conservation districts and I look 
forward to answering any questions you may have.

    The Chairman. Thank you, Mr. McDaniel.
    Mr. McClure, go ahead and proceed with your 5 minutes of 
testimony.

 STATEMENT OF TERRY W. McCLURE, PRESIDENT, McCLURE FARMS LLC, 
                        GROVER HILL, OH

    Mr. McClure. Good morning, Chairman Thompson, Ranking 
Member Grisham, and Members of the Subcommittee. I appreciate 
the opportunity to come before you today and discuss the 
important issue of voluntary conservation practices in Ohio.
    My name is Terry McClure. I am a fifth generation farmer, 
and along with my son and my father, I operate McClure Farms, a 
corn, soybean, wheat, cattle, and swine operation in Paulding 
County, Ohio.
    Our farm and our residence is located on the Maumee River 
watershed of the Western Lake Erie Basin. I am very proud to 
say that along with multiple other farmers, I have voluntarily 
allowed edge-of-field water quality testing equipment on my 
farm for 3 years, providing research on both surface and 
subsurface drainage. The Ohio Farm Bureau, the Corn Checkoff, 
Wheat Checkoff, and the Ohio Soybean Council, Ohio Agribusiness 
Association, and others, joined together to fund this project 
at a cost of over $2 million, and it is providing baseline 
settings, measures, practices, and results.
    The information being collected is invaluable, and will be 
used to modify Ohio's phosphorus risk index, as well as help 
identify good management practices. In the past, we had to 
depend on modeling, and even though our universities and our 
professionals did their best, the only thing even they could 
tell you for sure is that modeling wasn't accurate. And we know 
in the future, if we are going to make changes and do a better 
job farming, we need to know exactly what comes off our farms. 
So now we know 24/7, 365, with real tests.
    While these findings are still being finalized, preliminary 
results indicate that controlling erosion continues to be 
important. Particulate-bound phosphate makes up over 73 percent 
of the total phosphorus in surface runoff. Timing and placement 
of fertilizer application is important, and, in fact, 
paramount. Incorporation of fertilizer during and after 
application can result in more than a 90 percent reduction in 
phosphorus runoff.
    Using this data, the Farm Bureau and NRCS Demonstration 
Farms Project is located in the Blanchard River. There are 
three farms researching voluntary models for new innovations 
that reduce and prevent agricultural runoff. With me today, 
Anthony Statler from Statler Family Farms, who is one of the 
farm owner-operators. He operates 243 acres of corn, soybeans, 
and wheat, and 7,200 head wean-to-finish swine operation, and 
is further studying conservation practices. They share the 
results with farmers across the watershed region, land 
management agencies, policymakers, the media, and the public.
    There are numerous other conservation measures by 
individual farmers and farm organizations, and a much more 
extensive list is in my testimony, but farmers have invested 
tens of millions of dollars of their own money in establishing 
conservation practices on their farm. In 2012, 20 of Ohio's ag 
commodity organizations wrote a letter to their membership 
saying we must be proactive to address water quality, and we 
must embrace the 4R Nutrient Stewardship. The right fertilizer 
source, at the right time, at the right rate, and the right way 
of placement.
    We started the Healthy Water Ohio to deliver a diverse and 
voluntary partnership to address water holistically. The 4R 
Nutrient Stewardship Certification Program was created. Ohio 
agriculture and conservation organizations committed resources 
to partner with the Farm Bill Regional Conservation Partner 
Program. We have provided grants from local initiatives like 
Knox County and the creation of ONMRK, the Ohio Nutrient 
Management Record Keeping smartphone app.
    Voluntary conservation is making significant headway in 
reducing nutrient and sediment loss from our farms. The USDA 
NRCS recently released report on the Western Lake Erie Basin 
finds between 2006 and 2012, farmers voluntarily reduced 
phosphorus applications in the Western Lake Erie Basin by more 
than 13 million pounds. Ninety-nine percent of the cropland 
acres are managed with at least one conservation practice. 
Seventy percent of the nitrogen applied is removed by crop 
harvest. The cost of conservation practices in place represents 
$277 million, or $56.98 per acre.
    As a farmer in the Western Lake Erie Basin, I know these 
important findings reflect the sentiment of those who work 
every day to make sure that our land and our water are the 
healthiest they can be. We have taken extensive measures to 
become aware of soil health, and we take great pride in being 
good stewards of both Ohio's land and water. We are committed 
to implementing voluntary measures that are science-based and 
will yield results.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. McClure follows:]

 Prepared Statement of Terry W. McClure, President, McClure Farms LLC, 
                            Grover Hill, OH
    Chairman Thompson, Ranking Member Grisham, and Members of the 
Subcommittee, I appreciate the opportunity to come before you today to 
discuss the important issue of voluntary conservation practices in 
Ohio. My name is Terry McClure and along with my family, I operate 
McClure Farms--a corn, soybean, wheat and swine and cattle operation--
in Paulding County, in Northwest Ohio. Our farm and our residence is in 
the Western Lake Erie Basin (WLEB) watershed. We are a fifth generation 
farm.
    I am proud of the measures that my fellow farmers have been taking 
to address nutrient run-off and I appreciate the opportunity to share 
with you the studies and practices that have been taking place on my 
farm. From what I share with you today, I hope that one key component 
you take away is that Ohio is unique and successful because our 
conservation efforts have been an amazing demonstration of all sectors 
and entities working together as one for the collective good. The 
measures taken have been no less than an ``all hands on deck'' 
approach.
    So, while I could provide you with a history of how farmers have 
responded to environmental challenges, starting with the Dust Bowl of 
the 1930s or soil erosion in the 1980s and 1990s, instead, I will begin 
with a letter written in 2012 that was signed onto by 20 agricultural 
groups that was a commitment to lawmakers and the public that 
agriculture would do its part to create healthy water in Ohio.
    In a demonstration of unprecedented collaboration, Ohio's 
traditional and organic commodity organizations, the Federation of Soil 
& Water Conservation Districts, and The Ohio State University sent a 
joint letter to all of our organizations' members stating that farmers 
must proactively solve the issue of nutrient run-off. The letter 
launched the agriculture community's immediate ``4R'' effort while we 
supported and sought out further research for long-term solutions. 
Education, training and advice began in earnest on ``4R'' nutrient 
stewardship--using the right fertilizer source, at the right time, at 
the right rate and with the right placement.
    Farmers began implementing these voluntary 4R measures on their 
farms as a win-win proposition of reducing fertilizer costs while 
continuing to be good stewards of the environment.
    Soon thereafter was the launch of Healthy Water Ohio. An initiative 
led by the agricultural community that included a voluntary and diverse 
partnership of stakeholders charged with developing a 20 to 30 year 
water resource management strategy for Ohio. I had the privilege of 
serving on the steering committee of this partnership along with 
representatives from business and industry, conservation and 
environment, finance, food and farming, lawn and horticulture, 
municipal water systems, public health, recreation and tourism and 
research, education and outreach.
    The group conducted multiple information gathering sessions 
throughout the state and conducted meetings with water quality experts 
and public officials. The final report from Healthy Water Ohio provides 
a roadmap of innovative research, policy, education and infrastructure 
proposals along with an implementation schedule. Voluntary 
implementation of components of the report has begun including the 
pursuit of a Water Trust that can fund a variety of water-related needs 
such as research, monitoring and improvement of gray and green 
infrastructure.
    The agricultural community has committed to address water quality 
through numerous combined and individual measures. Beyond the study on 
my farm, there is extensive research being conducted both in the lab 
and in the field. Farmers have invested tens of millions of dollars of 
their own money in establishing conservation practices on their farms. 
Between 2006 and 2012, they have voluntarily reduced phosphorous 
applications in the Western Lake Erie Basin by more than 13 million 
pounds.* As farmers are stepping up to implement conservation practices 
now, they are committed to finding additional solutions in the future.
---------------------------------------------------------------------------
    * USDA-NRCS Special Study Report titled ``Effects of Conservation 
Practice Adoption on Cultivated Cropland Acres in Western Lake Erie 
Basin, 2003-06 and 2012''. (March 2016).
---------------------------------------------------------------------------
    Ohio Farm Bureau, Ohio Corn and Wheat Growers Association, Ohio 
Soybean Association, Ohio Agribusiness Association and others joined 
together with United States Department of Agriculture (USDA) Natural 
Resources Conservation Service (NRCS) to fund a project of over $2 
million to conduct edge of field research throughout the state to 
better learn how to prevent nutrients from escaping from fields. I am 
proud to say that edge-of-field water quality testing research, on both 
surface and subsurface drainage, has been conducted on my farm for 3 
years. The combined efforts of Ohio's agriculture community with the 
Ohio State University and USDA researchers now have important baseline 
data, measures, practices and results. The information being collected 
is invaluable and will be used to modify Ohio's Phosphorus Risk Index 
as well as help identify good management practices.
    While the findings are still being finalized, preliminary results 
about how phosphorous leaves the field include:

   Controlling erosion continues to be important. Particulate 
        bound phosphorus makes up over 73% of the total phosphorus in 
        surface runoff and over 52% of the total phosphorus in tile 
        flow.

   There is a strong relationship between soil test phosphorus 
        levels and the amount of particulate bound phosphorus 
        transported off site in surface runoff.

   Fertilizer application is a high risk practice--timing and 
        placement is important.

   Incorporation of fertilizer during or after application can 
        result in more than a 90% reduction in phosphorus runoff.

    Building upon the foundation of these findings will be a critical 
component to our continued success in reducing run-off. To that end, 
Ohio Farm Bureau is collaborating with USDA National Resources 
Conservation Service along with other partners in creating only the 
second in the nation Demonstration Farms project. This project is 
located in the heart of the WLEB along the Blanchard River. The farm 
organizations involved with this endeavor have voluntarily taken on 
this project as have the three farmers--two row crop and one swine--
whose acreage will be used. Here with me today is Anthony Statelier 
from Statelier Family Farms who is one of the farm owner/operators. We 
appreciate that Anthony's family is allowing the use of their 243 acres 
of corn, soybeans, and wheat and 7,200 head wean to finish swine 
operation to further study conservation practices.
    These demonstration farms will serve as models for new innovations 
that reduce and prevent agricultural runoff and those discoveries will 
be shared with farmers across the watershed and the region, land 
management agencies, policymakers, the media and the public. It is my 
hope that some of the conservation measures deemed successful due to 
the research on my farm will be put into practice on these 
demonstration farms.
    In addition to the Edge of Field Study, farmers are also committed 
to coordinating water research and programming through our land grant's 
``Field to Faucet'' initiative as well as through increased educational 
opportunities. Ohio Farm Bureau, Ohio Soybean Council and other 
agricultural organizations have funded three new OSU staff to work with 
farmers to develop Nutrient Management Plans in the WLEB and one new 
staff to work with retailer 4R certification.
    I would be remiss if I did not note that advisors to farmers are 
also contributing significantly to conservation efforts. Over 1.5 
million acres in the WLEB are now under guidance of Agriculture 
Retailers and Nutrient Service Providers that have voluntarily earned 
certification from the 4R Nutrient Stewardship Certification Program.
    Ohio's agriculture and conservation organizations also took an 
active role in supporting the Farm Bill's Regional Conservation 
Partnership Program and committed resources to this public-private 
partnership. Farmers have been eager to participate in this voluntary 
program that allows them to implement on-ground conservation practices 
for sediment and nutrient management. The Environmental Quality 
Incentive Program is the perfect marriage of allowing farmers to keep 
land in production while practicing effective conservation programs. 
The projects being funded with RCPP dollars are making a significant 
difference with over $17.5 million committed to the Great Lakes Region. 
We appreciate that Congress, and this Committee specifically, saw the 
importance of these programs. In Ohio in 2015 alone, there were 81 
contracts signed totaling over $3.5 million. These dollars were used 
for critical on-farm needs including animal waste systems and storages, 
lot covers and roofs, controlled drainage structures, cover crop 
contracts, drainage water management, nutrient management plans, 
waterways, crop rotations and multi-year cover crops.
    Ohio farmers and our membership organizations have been diligent in 
pursuing unique grassroots opportunities for connecting with all 
Ohioans and making them aware of our efforts to protect Ohio's waters. 
Through educational displays at fairs, radio and print outlets, in our 
classrooms and local water grant projects, we have spread the word that 
farmers want to be part of the solution. Farmers recognize their role 
and are working hard to be proactive for water quality. We appreciate 
the recognition that we are not the only cause of phosphorus loading. 
We are also committed to work with those who are addressing municipal 
water and sewer systems, septic systems, and urban run-off as well as 
other contributors.
    In addition to the voluntary measures being taken by farmers across 
Ohio, two important pieces of legislation have also been passed and are 
being implemented. Ohio Senate Bill 150 was fully supported by the 
agricultural community and requires farmers to obtain a commercial 
fertilizer certification. The materials in the course provide the 
latest information on the 4Rs I discussed earlier and provide an 
understanding of how a nutrient management plan can be used on the 
farm. Ohio was the first state in the nation to require certification 
for commercial fertilizer application. Farmers have worked hard to be 
compliant and though certification was not required until 3 years after 
passage, farmers immediately began filling classrooms and to date over 
10,000 farmers have already received their certification.
    The second bill, Senate Bill 1, places restrictions in the WLEB on 
the application of manure and commercial fertilizer on frozen or snow 
covered ground or under certain weather conditions. This bill was also 
supported by agriculture because it had a scientific foundation and was 
based on conservation methods that had been proven effective in 
reducing run-off. While farmers overwhelmingly prefer voluntary 
measures, they are not adverse to policies that have been fully 
researched and allow for input from scientific experts as well as 
farmers that are working the ground every day.
    Farmers also have begun to think creatively on how to best comply 
with the nutrient application laws with the Knox County Farm Bureau and 
Soil and Water Conservation District teaming together to create ONMRK 
(Ohio Nutrient Management Record Keeping), a record keeping smartphone 
and tablet app that allows farmers to easily record their manure and 
nutrient applications while they are in the field. The app is a great 
tool for farmers to comply with both record keeping requirements and 
weather and soil condition guidelines on when nutrients can be applied 
in the WLEB.
    With nearly 1,000 downloads and nearly 800 nutrient applications 
logged in the first several months of use, ONMRK is off to a great 
start in providing a useful tool for not only compliance with laws but 
improving farming's impact on water quality. ONMRK is currently an Ohio 
based app with plans to expand nationally by the end of 2016. While 
ONMRK is one great example, there have also been multiple county Farm 
Bureau grants leading to local projects such as much needed farm 
equipment purchases, soil analysis courses and demonstrations, 
watershed education, rain garden installations and the Ohio Manure 
Science Review.
    With any issue, funding is always a concern. As such, Ohio 
agriculture has supported state funding that continues water quality 
research and conservation efforts by lobbying for and obtaining budget 
increases for OARDC, OSU Extension and the Sea Grant program. 
Agriculture also won support for additional dollars for the Healthy 
Lake Erie Program and for dollars to be set aside for Soil and Water 
Conservation Districts in the WLEB, specifically to provide technical 
assistance to farmers for S.B. 1 compliance. Ohio agriculture also 
worked with lawmakers and Ohio's State Treasurer, Josh Mandel, to 
establish a loan interest rate reduction program to serve farmers 
making capital improvements needed to comply with S.B. 1. Our efforts 
also prevented a reduction in funding for the Heidelberg University 
Water Quality Lab.
    For many Ohioans, the Toledo water crisis brought our state's water 
quality issues home. In its aftermath, Ohio Farm Bureau and the Ohio 
Soybean Council organized and sponsored a special ``Food Dialogues'' 
through a grant from the U.S. Farmers and Ranchers Alliance. The Food 
Dialogues was a media and community event that brought together 
farmers, environmentalists, researchers and officials in charge of 
Toledo's drinking water system to focus on water quality.
    Our state's farmers were interested in learning more about the 
algae blooms in Lake Erie and so Ohio Farm Bureau organized a ``Farmer 
Road Trip'' taking 100 farmers from across the state to Lake Erie. Once 
there, they headed out in research boats to pull water samples and see 
first hand the challenges facing our Great Lake.
    While the results of the edge of field study conducted on my farm 
are beginning to show us solutions, we also know that the measures 
farmers are taking to reduce run-off voluntarily are also showing 
success. USDA-NRCS recently released (end of March 2016) a Special 
Study Report titled ``Effects of Conservation Practice Adoption on 
Cultivated Cropland Acres in Western Lake Erie Basin, 2003-06 and 
2012''. This study was designed to quantify the environmental benefits 
that farmers and conservation programs in the WLEB provide to society. 
The report, based on farmer survey data in the Basin, shows that 
voluntary conservation is making significant headway in reducing 
nutrient and sediment loss from farms. Even so, there is opportunity to 
improve conservation management across the basin and no single 
conservation solution will meet the needs of each field and farm. Let 
me emphasize that there are no silver bullets or no single conservation 
practice or solution that will meet the needs of each field or farm.
    Key findings of the survey on conservation practices in the WLEB 
include:

   99% of the cropland acres are managed with at least one 
        conservation practice.

   96% of the cropland acres are managed to prevent average 
        annual sediment losses of more than 2 tons per acre.

   70% of the nitrogen applied is removed by crop harvest.

   58% of the cropland acres are managed with phosphorus 
        application rates at or below crop removal rates.

   The cost of conservation practices in place represents a 
        significant annual investment. Regardless of funding source 
        (Federal, state, local or private) the annual regional 
        investment in conservation is $277 million or $56.98 per acre.

   No single conservation solution will meet the needs of each 
        field and farm. WLEB croplands are diverse in terms of soils, 
        farm fields, farming operations, and management, which creates 
        differences in conservation needs and potential solutions. 
        Field-scale conservation planning and conservation systems are 
        needed to accommodate different treatment needs within and 
        across farm fields, while maintaining productivity.

   Additional progress in nutrient and erosion control will 
        depend on advanced precision technologies directed to unique 
        zones or soils within field boundaries.

    As a farmer in the Western Lake Erie Basin, I know these important 
findings reflect the sentiment of those that work every day to make 
sure that our land and our water are the healthiest they can be. I have 
been a farmer my entire life and I have seen many changes in the way we 
grow our country's food. We have become more efficient, increasing 
yields while decreasing inputs. We have taken extensive measures to 
become aware of soil health and we take great pride in being good 
stewards of both Ohio's land and water. We are committed to 
implementing voluntary measures that are science-based and that will 
yield results. No-till farming is a widely adopted practice across 
Ohio. The same is true of growing cover crops, creating filter strips 
and windbreaks and conducting variable rate application of nutrients. 
Farmers stand ready and willing to implement voluntary measures that 
address water quality and food production simultaneously.
    I appreciate the opportunity to address you today and provide just 
a brief overview of the efforts Ohio's farmers are making to ensure a 
long future of clean water in our state. If you want to learn more 
about our numerous efforts go to www.farmersforwater.com.

    The Chairman. Thank you, Mr. McClure.
    Mr. Buman, did I pronounce that correct?
    Mr. Buman. That is right.
    The Chairman. All right. Well, Mr. Buman, please proceed 
with your 5 minutes of testimony when you are ready.

    STATEMENT OF TOM BUMAN, CHIEF EXECUTIVE OFFICER, AGREN, 
                          CARROLL, IA

    Mr. Buman. Mr. Chairman, Ranking Member, and Members of the 
Subcommittee, thank you for this opportunity.
    I have worked 34 years in soil and water conservation. My 
first 14 years, I worked with the Natural Resources 
Conservation Service, and the last 20 years I have been the CEO 
of Agren, a small consulting firm in western Iowa.
    In that time, farming has become much more complicated. 
First there was the Chesapeake Bay, then hypoxia in the Gulf of 
Mexico, then the algae blooms in Lake Erie, and now the law 
suit from the Des Moines Water Works. All sides agree that we 
in agriculture are responsible for a portion of this water 
quality issue and we need to do more, but doing more isn't good 
enough. We need to do more of the right thing.
    For farmers to make a significant impact on soil erosion 
and water quality, conservation practices need to be targeted. 
And that is the challenge facing today's farmers: putting the 
right practice in the right place. To do this, farmers need 
access to two things. First, they need significantly more 
technical assistance, and second, they need better technology.
    If we look at the technical assistance trend, I don't think 
help is coming from conservation agencies. In the past 30 
years, NRCS has lost 30 percent of their FTEs. Even if this 
downward trend could be reversed, it simply is not enough.
    In analyzing the situation, I have come to the conclusion 
that technical assistance must come from the private-sector. 
Specifically, the ag retailer. So why the ag retailer? Because 
farmers trust them. In a 2012 survey, 5,000 farmers in the Corn 
Belt were asked who influences their decisions about 
agricultural practices and strategies the most. The survey 
results were crystal clear: not the government, not NGOs, not 
extension service. By a strong margin, ag retailers were at the 
top of the list. Yes, farmers trust their ag retailers. 
Further, in a 2015 study, Iowa State found that 60 percent of 
all farmers agree that their ag retailer should do more to help 
them address nutrient losses.
    Technical assistance through ag retailers is step one, and 
I am happy to say that several ag retailers, specifically, 
United Suppliers of Ames, Iowa, and Land O'Lakes of Minnesota, 
are getting involved, but they need more encouragement and they 
need more financial assistance.
    Step two in providing farmers with better technology for 
decision making. At Agren, we are developing state-of-the-art 
software technology. Using a CIG from NRCS, we got our start by 
developing two programs; one originally designed to design 
ponds, and the other to design sediment basins. This technology 
is quite amazing. What used to take me 6 to 20 hours, I can now 
do in 15 to 20 minutes.
    We have also developed a software tool with our own money 
for designing wetlands and grassed waterways, and we have 
developed one tool for writing proscribed fire plans. Most 
recently, Agren has worked with the Agricultural Research 
Service in Oxford, Mississippi, to commercialize some of their 
research. Most people would refer to this as technology 
transfer. I call it unlocking Pandora's Box.
    Our software calculates soil erosion at 72,000 points in 
160 acres. It identifies the erosion hotspots in a field, and 
it models sediment transport and delivery. Armed with 
SoilCalculator, ag retailers can now correlate erosion with 
yields, and recommend appropriate precision conservation 
methods.
    I wish I had 5 minutes just to tell you about the value of 
this program for precision conservation. This is powerful 
technology. When you can look at a field and determine those 
areas that are delivering the most sediment to our waters, 
decision-making evolves quickly.
    At Agren, it is just not about our technology; we are 
integrating other emerging technology into our precision 
software, including machine control, auto-steer, and collection 
of survey by drones, which is very exciting.
    Public pressure on agriculture is at an all-time high. We 
in the ag community need to up our game. We need to help 
farmers speed the adoption of conservation. We know that 
farmers want to receive conservation information from their ag 
retailers. We know ag retailers are interested in offering this 
service. However, to integrate precision conservation into 
their sales cycles, retailers need motivating incentives. The 
conservation effort can be accelerated by ag retailers who are 
equipped with state-of-the-art precision conservation 
technology.
    Thank you for your time.
    [The prepared statement of Mr. Buman follows:]

   Prepared Statement of Tom Buman, Chief Executive Officer, Agren, 
                              Carroll, IA
Solutions through Voluntary and/or Locally-Led Conservation Efforts
    Chairman Thompson, Ranking Member Lujan Grisham, and Members of the 
Subcommittee, thank you for the opportunity to appear before the 
Subcommittee on Conservation and Forestry and to provide testimony 
regarding innovative solutions for conservation.
    My name is Tom Buman. I was raised on a farm in western Iowa, where 
my parents instilled in me a deep conviction for agriculture and the 
environment. Today, I am still connected to my family farm, which my 
brother operates.
    For the past 20 years, I have been the CEO of Agren, where I have 
married my love of agriculture and the environment to my passion for 
pioneering innovative solutions to environmental problems. At Agren, I 
drive concept development and continuously challenge scientists, 
programmers and subject matter experts to achieve a higher level of 
innovation. I am also responsible for leading business development and 
strategic partnerships.
    Prior to founding Agren in 1996, I spent 14 years with the Natural 
Resources Conservation Service in Iowa, first as a Soil Conservationist 
and later as a District Conservationist. I have a Bachelor of Science 
degree in Agronomy (1982) and a Masters in Business Administration 
(1995), both from Iowa State University.
    I am proud to say that Agren's suite of precision conservation 
software is revolutionizing soil and water management. Our online 
conservation planning tools enable users to get done in minutes what 
farmers have traditionally waited on for weeks and months. Our 
customers can now offer practical, value-added soil and water 
management solutions, empowering farmers and land managers to make 
profitable decisions that ultimately enhance agricultural productivity 
and sustainability.
    Let's just get it out there. We, in the farming community need to 
do more conservation. We need to up our game. What we are doing is 
simply not enough. But just as importantly as doing more, is doing more 
of the right thing. Yes, doing more and doing more of the right thing 
are completely different. It's no longer good enough for farmers to 
place a terrace or waterway, wherever they think it's needed. For 
farmers to make a significant impact on soil erosion and water quality, 
the conservation practice needs to be targeted for a specific purpose. 
And that is the challenge facing today's farmers; putting the right 
practice in the right place.
    I'd like to use a simple health analogy to demonstrate my point. 
What if your doctor tells you that you have a high risk--1 in 5 
chances--of having a heart attack in the next 10 years? What would you 
do? You're now challenged with making some critical decisions. The 
research tells you that modifying certain risk factors can improve your 
odds. You probably have an idea what those risk factors are. Some are 
simple strategies, while others are more complex. You could exercise. 
You could cut saturated fat from your diet. You could lose weight. You 
could take daily baby aspirin or medication to lower cholesterol. You 
might even envision the need for surgery. A combination of life style 
change strategies might make a bigger difference, but you want to be 
sure. You want the best course of action for the best outcome, based on 
your current health and lifestyle. So you turn to an expert, your 
doctor, to distill the information and help you develop an 
individualized plan.
    Farmers also want what works best for the health of their soil and 
the cleanliness of their water, as well as for their pocketbook. But 
they lack critical decision-making tools. Just as health decisions are 
driven by individual health information, today's conservation decisions 
should be based on individualized, site-specific resource concerns; an 
individualized plan to put the right practice, in the right place, for 
the right purpose. This precision conservation, like the practice of 
medicine, is an art and a science. With recent advances in innovative 
technology, combined with site-specific information and accessible 
technical assistance, farmers can do more to achieve the most 
environmental protection, for the lowest cost, while meeting the goals 
of their operation.
    Let's examine the current status of accessible technical 
assistance. If we agree that farmers need technical assistance to 
interpret information, implement conservation and do more of the 
``right thing,'' we should ask ourselves, where do farmers get this 
help? Government? Probably not. Conservation agencies are tapped out. 
Funding for staff resources at both state and Federal conservation 
planning agencies has been on a steady decline over the past 30 years. 
An astonishing 5000 full-time employees, approximately 33% of the total 
workforce, were cut from the NRCS budget between 1980 and 2016 (Helms, 
2010) (Lawrence, 2015). But even if these numbers were restored, it 
will not make an appreciable difference to reaching enough farmers.
    In the spring of 1981, I was a junior at Iowa State University 
studying agronomy. My dad had one of the first outbreaks of black 
cutworm in the neighborhood. What did he do? He did what every farmer 
did at that time. He called the Extension Service. The County Extension 
Agent came out to the farm, diagnosed the problem, held a field day for 
Dad and his neighbors, and helped Dad solve the problem. Today, unlike 
1981, farmers take their agronomy questions straight to their ag 
retailer because farmers trust their ag retailer to give them sound 
advice.
    The scale of solving the soil conservation and water quality issue 
is enormous and farmers should have the option to seek technical advice 
from professionals, whom they most trust. Given the magnitude of the 
need for technical assistance, the private-sector is the only resource 
that can scale to the challenge.
Conservation Through the Private-Sector
    Because the traditional stream of information and technical 
assistance has been constrained and because the private-sector has 
improved their capacity, farmers turn to the private-sector more often 
for information and advice. In their trusted role, ag retailers are 
positioned to be a farmer's first line of information on conservation 
issues. Furthermore, ag retailers are the only entity with the 
opportunity to deliver field scale agronomy, including conservation 
planning, to U.S. farmers.
    Several studies demonstrate that farmers implicitly trust their ag 
retailer and have an appetite for their retailers to do more to protect 
natural resources. For example, a 2012 survey of 5,000 Midwestern corn 
producers reported their most trusted advisor, when making decisions 
about agricultural practices and strategies, was their chemical or seed 
dealer. As depicted in Figure 1, crop advisors came in a distant 
second, with conservation agencies, university extension, and non-
governmental organizations trailing even further (Arbuckle J., 2013). 
Further, a 2015 study of over 1,000 Iowa farmers found 60% agreeing 
that their fertilizer or ag chemical dealer ``should do more to help 
farmers address nutrient losses into waterways.'' Only 9% of the 
farmers reported they did not think their ag retailer should provide 
conservation services (Arbuckle & Bates, 2015).
Figure 1
Influence of Selected Entities on Ag Decisions (Percent Moderate or 
        Strong Influence)
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          Chemical dealers top the list of ag's most trusted advisors.

    Throughout the past 2 years, my colleagues and I have communicated 
with several of the largest precision agriculture providers. They have 
expressed an interest in, and in some cases excitement about, 
delivering conservation technical assistance.
An Example of a Private-Sector Offering
    In an effort to get more conservation on the ground, United 
Suppliers, a customer-owned wholesale supplier of crop nutrients, crop 
protection inputs and seed, with headquarters in Ames, Iowa has stepped 
forward. United Suppliers is making a significant investment into 
developing a conservation planning service through the private-sector. 
They have named their conservation platform SUSTAINTM. To my 
knowledge, this offering by United Suppliers is the single largest, 
private-sector investment in soil conservation planning services 
offered to farmers.
    The SUSTAINTM service platform includes soil loss 
estimates and initial planning of conservation structures, including 
grassed waterways, water and sediment control basins, ponds, and 
wetlands. ``The new conservation planning service will provide growers 
assistance in exploring conservation alternatives that best meet their 
needs,'' said United Suppliers President & CEO Brad Oelmann.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    What a change. Even 5 years ago, it was difficult to imagine a 
major ag fertilizer/chemical dealer developing a platform with such a 
bold Vision Statement, ``improve the capabilities and competitiveness 
of United Suppliers' Owners by positioning them as leaders of the 
environmentally sustainable agriculture movement, both in the 
agriculture industry and in the communities they serve.'' And following 
up with a Mission Statement of ``offering a leading-edge, economically 
sound and forward-thinking pathway through which Owners can deliver 
significant benefits for growers, and do so in ways that are good for 
the environment and meet the demands of the supply chain for fertilizer 
optimization and soil health.''
    To add to this excitement, in October of 2015, United Suppliers 
entered into a joint venture with WinField Solutions, the crop input 
business unit of Land O'Lakes, creating WinField U.S. A full merger of 
the two organizations will be completed in October of 2017. Precision 
soil and water management has emerged as a high-priority and best fit 
for the WinField U.S. sustainability platform. WinField U.S. believes 
that helping their growers conserve soil resources is essential for 
their productivity and profitability, as well as for the expanding 
global population. As a major first step, the organization's leadership 
is working to partner with the Minnesota Department of Agriculture to 
support farmer participation in the Minnesota Agricultural Water 
Quality Certification Program via the WinField U.S. cooperative retail 
network.
Technology and Precision Conservation
    Just like technology revolutionized precision agriculture, 
precision conservation will be accelerated with new, innovative 
technologies and approaches.
    In 2006, Agren entered into the world of high tech software. With a 
Conservation Innovation Grant from NRCS we developed two software 
programs; one to design ponds and one to design sediment basins. The 
technology is amazing. What used to take me 6 to 20 hours, I could now 
do in 15 to 20 minutes.
    However, we didn't stop there. We developed more software. We 
developed tools for wetlands, prescribed fire, and then one for grassed 
waterways.
    Most recently, Agren worked with USDA's Agricultural Research 
Service (ARS) to commercialize some of their science and technology. 
Most people would refer to this as technology transfer; I call it 
unlocking Pandora's Box.
    ARS is the lead agency for developing the RUSLE2 (Revised Universal 
Soil Loss Equation version2), a computer model that predicts rill and 
inter-rill erosion caused by rainfall and runoff. Since its inception, 
this model has been used by conservation agencies to model soil erosion 
at one point in a field. Through a team effort, Agren developed the 
same modeling engine (RUSLE2) to calculate soil erosion at 72,000 
points in 160 acres with Agren' SoilCalculator. Armed with 
the outputs of SoilCalculator, ag retailers can help farmers correlate 
soil erosion (Figure 3) to yields (Figure 4). Furthermore, ag retailers 
can begin to help farmers understand if soil erosion is causing a yield 
drag and recommend appropriate conservation practices.
Figure 2 
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          Pond design generated by Agren' PondBuilder.
Figure 3 
' SoilCalculator.
Figure 4
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          Farmer yield map.

    The outputs of SoilCalculator are powerful and can be used to drive 
several other important environmental models. Agren has collaborated 
with researchers at the ARS Sedimentation Laboratory and the University 
of Tennessee to develop two GIS-based soil loss modeling tools, 
referred to as the Revised Universal Soil Loss Equation 2-Raster 
(RUSLER) and the Ephemeral Gully Erosion Estimator (EphGEE).
    Once sheet and rill erosion could be modeled in a distributed 
fashion, Agren worked with ARS researchers Dr. Seth Dabney and Dr. 
Dalmo Vieira, to also develop a physically-based ephemeral gully model. 
Conceptually, the new model is based on the assumptions and methods 
similar to those used in the Chemicals, Runoff and Erosion model from 
Agricultural Management Systems (CREAMS) (Knisel, 1980) and the Water 
Erosion Prediction Project model (WEPP) (Ascough, Baffaut, Nearing, & 
Liu, 1997), but with a number of modifications to remove technical 
limitations of those older models.
    By integrating with RUSLER, the integrated application provides a 
mechanism for the estimation of runoff and sediment loads that control 
the development of ephemeral gullies. EphGEE simulates ephemeral gully 
erosion on complex in-field dendritic channel networks, with outputs 
for channel erosion and sediment transport, deposition, and delivery to 
a watershed outlet (Vieira, 2014).
    This ability to determine the transport and deposition of soil will 
allow ag retailer to target practices, such as water and sediment 
control basins, to sensitive areas resulting in significant, positive, 
environmental impact. With technology like SoilCalculator, ag retailers 
can effectively and efficiently implement precision conservation.
Figure 5
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          Using SoilCalculator in combination with EphGEE, conservation 
        planners can model the sediment that is transported and 
        delivered to waterways. The number in the oval represents the 
        annual delivery of sediment from a sub-watershed (measured in 
        tons).
Agren's Sustainability Solution Platform
    Agren developed the Sustainability Solution platform to allow ag 
retailers to introduce soil and water management solutions alongside 
their precision ag offering. The three-tiered platform supports 
delivery, sales, and documentation of soil and water management 
services through field agronomists. As farmer response and the market 
for these services grow over time, the Sustainability Solution allows 
retailers to provide a full-suite of precision conservation planning 
services.
Figure 6
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          Agren's 3-tiered Sustainability Solution.

    Agren's three-step model leverages the farm-gate relationship and 
service-orientation of the agronomy network. It minimizes both the 
level of effort and specialized skillset required for the retail 
agronomist to engage with farmers on soil and water management. By 
utilizing ag retailers' precision ag platform, the delivery process is 
streamlined into a consultative sales process familiar to the 
agronomist. Using these tools, the retail agronomist is not 
overburdened by ``one more thing'' to sell. Incorporating an 
experienced and well-trained conservation agronomist into the process 
ensures quality conservation planning assistance that builds on core 
conservation principles and engineering standards. Also, because the 
retail agronomist is generating and qualifying leads, the conservation 
agronomist is able to service farmers across many locations.
Other Technologies for Conservation
    The use of new technology in agriculture should extend well beyond 
biofuels, crop protection, automated machine control, and seed 
varieties. Advancements in agriculture technology should be applied to 
soil and water conservation, as well. Soil and water conservationists 
must harness existing technology to reduce the cost of precision 
conservation and encourage more effective technology and knowledge 
transfer. Agren is integrating existing technologies, such as auto-
steer, machine control, LiDAR and UAVs (un-manned aerial vehicles), 
into its conservation platform, to improve efficiencies and farmer/ag 
retailer adoption.
    Auto-steer is a computerized guidance system used on tractors. 
Auto-steer automatically steers the tractor on a specific path with 
high precision. If the vehicle moves offline, auto-steer adjusts the 
tractor position to follow the prescribed path.
    Conservation application of auto-steer: In years past, field 
contour lines were flagged manually; farmers would follow the staked 
line when planting. Today, very few contour lines are staked for 
farmers. Contouring is still effective, but other priorities have moved 
contour assistance to the bottom of the priority list. However, the 
newest precision technology allows ag retailers to draw contour lines 
on a aerial map and electronically feed that information into a 
tractor's auto-steer system. Likewise, auto-steer could be used to 
layout and design contour grass strips for the Conservation Reserve 
Program (CRP).
Figure 7
Contouring Made Simple
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          Automated system to design and layout contour and contour 
        grass strip systems.

    Machine control is a 3D grade-control system integrated into 
construction equipment such as a motor grader (or bulldozer). The 
grader's antenna receives a GPS location signal. The internal GPS 
technology compares the grader blade position to a pre-defined three-
dimensional computerized model. The system automatically controls the 
hydraulics of the grader and raises or lowers the blade to achieve the 
grade design requirements. The automatic blade control allows the 
operator to reach grade in shorter time, translating to higher 
contractor productivity.
    Conservation application of machine control: Imagine a 
conservationist designing a structure like a grass waterway using LiDAR 
data. Once designed, the conservationist can easily create a 3D machine 
control file and e-mail it to the contractor. The contractor then 
uploads the file into the machine control unit and builds the 
structure. This could all happen within 1 day, with the elimination of 
field layout work.
Figure 8
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          Motor grader with machine control.

    In some locations and for some conservation practices, contractors 
already can obtain a 3D machine control. Given the increased accuracy 
and productivity, machine control files should be made available to all 
contractors who build conservation practices.
    Currently, Agren can output machine control files for waterways. By 
the end of this year, Agren intends to output machine control files for 
all structural practices. Developers (companies like Trimble, Topcon, 
and Leica) are poised and waiting to expand the use of machine control 
for soil and water conservation. Machine control technology will 
fundamentally change how conservation structures are designed, staked, 
and constructed.
    Testimonial from a contractor using machine control to build a 
grass waterway: https://www.agrentools.com/construction-marketplace/
testimonials/.
    LiDAR is an emerging technology that is changing conservation 
planning practices from coast to coast. An acronym for Light Detection 
and Ranging, this term is used in mapping to describe how location and 
elevation data is collected, using laser beams. To obtain the data, a 
small aircraft flies over a land mass and sends out thousands of light 
beams to define the surface of the earth and the heights of above 
ground features.
    The data initially gathered by a LiDAR system is raw X, Y and Z 
coordinates. Processing of the data points can result in a highly 
accurate GIS-based digital elevation model; essentially a plaster 
relief of the landform made from light. Field verification trials in 
Iowa, document 8" or better vertical accuracy under leaf-off 
conditions.
Figure 9
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          Collecting LiDAR data (Fancher, 2012).

    LiDAR has been used for road and culvert design, fire fuel mapping 
and to visualize the Grand Canyon.
    Conservation application of LiDAR: When LiDAR data is combined with 
tools like the Agren engineering tools, the information can be used to 
more quickly and accurately determine optimum locations for 
conservation solutions like ponds, waterways and basins. Additionally, 
the opportunity to almost instantaneously provide farmers with a visual 
representation of how their fields might look with different 
conservation practices applied is tremendous.
    While there is some consensus at a Federal level supporting a 
national database of LiDAR, this effort has encountered snags. While 
these snags are being sorted out, cities and states are moving ahead 
with their own statewide LIDAR collection. Significant regions of the 
Eastern United States now have LiDAR coverage. Although LiDAR is 
available in many areas, it unfortunately varies in quality. In some 
cases, LiDAR is accurate enough for actually engineering practices, but 
it is always good enough for planning conservation practices.
    NRCS is researching the use of LiDAR. According to USDA, NRCS, 
``LiDAR suitability for conservation engineering work is determined by 
data quality, such as the accuracy and precision of the LiDAR dataset. 
Data quality is impacted by aerial flight precision, type and execution 
of elevational ground control, the rate and density of sampling, and 
the level of post processing.'' (USDA, NRCS, 2015).
    Unmanned Aerial Vehicle (UAV): Where LiDAR data is accurate enough 
only for planning soil and water conservation practices, alternative 
collection methods can be used. Using UAVs is an emerging way to 
collect low cost topographic data.
Figure 10
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          UAV used to collect high quality topographic data.

    In the spring of 2016, Dr. Rob Wells, USDA Agricultural Research 
Service, compared photogrammetry measurements, of several data 
collection methods, to determine the accuracy of UAV-collected 
topographic data. Dr. Wells found that the UAV methodology provided a 
highly accurate substitute for more labor intensive ground collection 
of topographic data. Dr. Wells reported, using a UAV, topographic data 
with a vertical accuracy 1 cm to 2 cm can easily exceeds the survey 
quality specified by NRCS for engineering practices.
    Conservation application of Unmanned Aerial Vehicle (UAV): Using a 
UAV can vastly reduce the time spent collecting accurate topographic 
data for conservation practice design. Additionally, UAVs can collect 
survey data when soil conditions prevent traditional survey crews from 
working. In 2016, Agren contracted with Top Intelligence, a regional 
provider of drone related technology to fly seven different sites at 
two different times, for a total cost of $7,500, or an individual cost 
of $530/site which includes process and cleaning the data. The cost of 
collecting data with UAV in this case, is certainly less expensive than 
sending a crew to the field to collect survey data.
Conclusion
    Public pressure on agriculture is at an all-time high. The public 
want foods grown more sustainably and improved water quality. We, in 
the ag community, need to up our game. We need to speed up conservation 
practice adoption. We know farmers want to receive conservation 
information from their ag retailers. And, we know ag retailers are 
interested in providing this service, but they need encouragement and 
motivation to integrate precision conservation with their precision ag 
platform. The conservation effort can be accelerated by ag retailers 
who are equipped with state-of-the-art technology. It all starts with 
giving farmers the information they need to make a decision and 
providing fast and efficient technical assistance for implementation.
Works Cited
    Arbuckle, J. (2013, April 16). Staff: Arbuckle: Iowa State 
University. Retrieved May 6, 2016, from Iowa State University 
Department of Sociology website:
http://www.soc.iastate.edu/staff/arbuckle/Arbuckle%20PPT%202013%20
Climate%20change%20beliefs_concerns_atti-
tudes_toward_adaptation_mitigation.pdf.
    Arbuckle, J., & Bates, H. (2015). Iowa Farm and Rural Life Poll--
Farmer Perspectives on Iowa's Nutrient Reduction Strategy. Ames: Iowa 
State University.
    Ascough, J., Baffaut, C., Nearing, M., & Liu, B. (1997). The WEPP 
Watershed Model: I. Hydrology and Erosion. Transactions of the ASAE, 
404(4), 921-933.
    Fancher, Z. (2012, December 15). Using ArcGIS 10.0 to develop a 
LiDAR to Digital Elevation Model workflow for the U.S. Army Corps of 
Engineers, Sacramento District Regulatory Division. Retrieved May 13, 
2016, from American River College Los Rios: https://ic.arc.losrios.edu/
veiszep/28fall2012/Fancher/G350_ZFancher.html
    Helms, D. (2010, February 19). National Historian. (T. Buman, 
Interviewer).
    Knisel, W. (1980). CREAMS: A Field Scale Model for Chemicals, 
Runoff, and Erosion from Agricultural Management Systems. Washington, 
D.C.: U.S. Department of Agriculture.
    Lawrence, P. (2015, March 19). Chief of Staff, USDA NRCS. (T. 
Buman, Interviewer)
    USDA, NRCS. (2015, January). Using LiDAR for Planning and Designing 
Engineering Practices. Retrieved May 12, 2016, from USDA, NRCS 
eDirectives: http://directives.sc.egov.usda.gov/
OpenNonWebContent.aspx?content=36637.wba.
    Vieira, D.A. (2014, December 11-14). Distributed soil loss 
estimation system including ephemeral gully development and tillage 
erosion. (D.A. Vieira, Performer) Sediment Dynamics from the Summit to 
the Sea; ICCE/IAHS International Symposium, New Orleans, LA.
                              Presentation
Agren'
Revolutionizing Conservation Delivery
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PondBuilder
 55 percent of the 20 dairy farms are projected to end the 
        baseline period in marginal or poor condition.

   Nine of the 11 cattle ranches are projected to end the 
        period in marginal condition.

   While pressured by falling milk prices, the dairies are 
        aided by low feed costs. Milk prices have declined further 
        since the baseline was developed.

   Record calf prices boosted returns early in the baseline 
        period, but falling prices as national herd expansion occurs 
        quickly pressures their financial position using up any cash 
        balances. The ranches relying on public grazing face increasing 
        pressure from lost grazing access.
An Overall View of the Livestock Industry
   Cattle prices remain historically high, but well below the 
        record high levels of a year ago. For example, 500-600 pound 
        steer calves at Oklahoma City have averaged $188 per cwt to 
        date this year compared to $277 over the same period a year ago 
        (a decline of 32%). Fed cattle have averaged $134 per cwt this 
        year compared to $162 per cwt last year (down 18%).

   Farrow to Finish hog operation returns have remained largely 
        profitable over the last year following unprecedented returns 
        in 2014 (based on the data published by Iowa State University). 
        Barrow and gilt slaughter and pork production have remained 
        close to year ago levels so far through 2016.

   Chicken producers have been buoyed by recent increases in 
        wholesale cut prices, even though prices remain below a year 
        ago and the 5 year average. Even with less expensive feed, low 
        meat prices will likely constrain production growth.

   Dairy profitability continues to be pressured by falling 
        prices as production has not yet declined significantly as a 
        response to lower returns.

   The lamb market remains under pressure from record levels of 
        imports.

   Across the livestock sector of agriculture, producer returns 
        have been aided by dramatically lower feed costs. Even with 
        lower feed costs, producer margins will likely remain lower in 
        the next few years when compared to the rather good year of 
        2014.
The Farm Bill and Livestock
    While often focusing on Title I commodities, the farm bill has 
direct impacts on the livestock industry as well. In particular the 
Livestock Indemnity Program (LIP), Livestock Forage Disaster Program 
(LFP), and the Emergency Assistance for Livestock, Honeybees and Farm 
Raised Fish program (ELAP) have been important programs for livestock 
producers. These programs have been successful and popular with 
producers. These have provided financial assistance to producers trying 
to survive unique, catastrophic weather events like the 2010-2013 
Southern Plains Drought and Winter Storm ``Goliath.'' The drought's 
impact on Texas livestock producers was an estimated $3 billion in 2011 
alone.
    Crop Insurance is not just a crop product. There are livestock 
related products like Livestock Risk Protection (LRP) for feeder and 
fed cattle, hogs, and lamb. Livestock Gross Margin-Dairy (LGM) has also 
been available for dairy producers. Pasture, Rangeland, and Forage 
insurance products have been available for consideration in risk 
management for livestock producers. In many cases, these products use 
has been limited in part due to limited funding for the products, but 
also due to some lack of opportunity or practicality.
    Many of these farm bill and other policy issues are related. 
Insurance products often rely on futures market prices, for example 
LGM-Dairy and LRP for cattle and hogs. Questions about the efficacy of 
the futures market may have important impacts on other mainstays of the 
producer safety net.
    Price reporting and information is related, as well. Mandatory 
price reporting has gone a long way to maintain publicly reported 
prices aiding the function of competitive markets. The absence of 
reported prices can affect settlement of futures contracts and reduce 
information available to aid participants of futures markets. 
Interpretation and implementation of prices reporting has become a 
critical issue in some markets. Defining producer or packer ownership 
in the case of cooperatives may likely become a more important problem. 
Markets and products do change over time making flexibility in 
implementation on important consideration, including evaluating 
confidentiality rules.
Other Issues
Futures Market and Price Reporting
    The operation of the live cattle and feeder cattle futures 
contracts has been the subject of much concern in the cattle industry. 
Areas of concern include volatility, the speed of transactions, the 
role of high frequency trading, outright cheating, and whether or not 
the futures market is broken and no longer works as an effective price 
risk management tool. There is some needed research on these issues. In 
addition, some deferred futures contracts suffer from a lack of 
liquidity limiting their use.
Declining Cattle Prices
    Cattle prices have certainly declined from their record peak in 
late 2014 and early 2015. It's worth remembering that markets and 
incentives work. Record high prices (and drought recovery) have 
provided the profit incentive to increase production; of cows, calves, 
and beef. Increased production leads to lower prices. Fed cattle prices 
broke lower late in 2015 with falling fed cattle prices. Several 
important factors contributed to lower prices. Beef production 
increased, year over year, largely due to record high cattle weights. 
Increasing beef imports and reduced exports had the net effect of 
adding about 750 million pounds of beef to our market. Large financial 
losses by cattle feeders forced them to finally bid lower prices for 
feeder cattle.
    The decline in cattle numbers to multi-decade lows by 2014 (due to 
poor financial conditions and drought) meant that the industry had an 
over capacity problem in cattle feeding and meat packing. Packers and 
feeders bid higher prices to try to keep their operations running at 
their most efficient levels, but eventually the financial losses led to 
closing packing plants and feedlots. Beyond just closing packing plants 
the transition to more closely align capacity with cattle numbers led 
to changing shifts, changing employee hours, and fitting operations to 
fewer numbers. As cattle numbers increase there are more cattle chasing 
a smaller capacity and that also pressures cattle prices lower.
Importance of Trade
    Trade is of more importance to all of our livestock, poultry, and 
dairy sectors than ever. The beef, pork, poultry, and dairy industries 
export anywhere from about ten percent of our domestic production 
(beef) to over 20 percent of our domestic production (pork, chicken). 
Events that reduce exports, often out of the control of producers, like 
economic slowdowns in major markets, drought in our competitor 
countries, a strong dollar, and policy changes in other countries 
reduce our exports leaving us with lower prices. Imports are also 
important. The lamb industry is dealing with record imports of lamb 
from Australia and New Zealand. Australian beef played a major role in 
larger U.S. beef imports in 2015.
    Opening new markets and re-opening old markets are critically 
important to our livestock and dairy industries.
Livestock-Crop Interactions
    Our domestic livestock sector is the main customer for most of our 
crops. Difficult times in the crop side due to low prices means that 
livestock producers are paying low prices for feed. As meat production 
surges due to lower production costs (lower feed costs) meat and 
livestock prices are going to decline.
    The farm bill safety net that aids crop farmers is also aiding the 
suppliers of feed for all of our livestock. It was not long ago that 
record high feed costs created huge financial losses across livestock 
agriculture forcing bankruptcies and many to go out of business. The 
health of crop and livestock producers are intertwined. Low and falling 
prices for meat and dairy products have been cushioned by low feed 
costs. Many livestock producers are also crop farmers, whether it's a 
dairy producing feed for their herd or a farmer with cows on 
pastureland as part of the total farm operation. Many contract poultry 
producers also have a cow herd on pastures surrounding the farm 
buildings. The farm bill safety net also applies to those livestock 
producers.
Future Challenges
    Future challenges will surely abound in the livestock industry. 
Whether its trade related, animal diseases, low prices, or regulatory 
in nature. All of those mentioned above will be in play.
    I would echo past participants in this series of hearings by saying 
that some criticism of farm policies is often by parties with little 
idea and/or care about conditions in agriculture. Regardless of these 
challenges, even though some of the farm policies may differ for the 
livestock industry, these programs do matter for livestock producers.
    Mr. Chairman, that completes my statement.

    The Chairman. Thank you, Dr. Anderson.
    Dr. Brown.

STATEMENT OF SCOTT BROWN, Ph.D., EXTENSION ASSISTANT PROFESSOR, 
                 DEPARTMENT OF AGRICULTURAL AND
        APPLIED ECONOMICS, UNIVERSITY OF MISSOURI; STATE
          AGRICULTURAL ECONOMICS EXTENSION SPECIALIST,
         UNIVERSITY OF MISSOURI EXTENSION, COLUMBIA, MO

    Dr. Brown. Chairman Rouzer, Ranking Member Costa, and 
Members of the Subcommittee, thank you for the opportunity to 
testify regarding the current financial situation for livestock 
producers. I am an agricultural economist at the University of 
Missouri, and I have worked extensively on livestock and dairy 
policy issues.
    The previous decade has resulted in the best and worst of 
times for the livestock sector: 2006 livestock cash receipts 
totaled $118 billion and nearly doubled to over $212 billion in 
2014. Feed costs skyrocketed over the last decade, as weather 
and other factors drove tight feed supplies. Purchase feed 
expenses doubled from $31 billion in 2006 to $64 billion in 
2014. USDA currently estimates both will move lower this year.
    Feed costs, weather, and disease issues place meat 
availability at a 23 year low in 2014. Meat consumption peaked 
at 220 pounds in 2007, and fell below 200 pounds in 2014. CY 
2016 per capita meat consumption will show that \1/2\ of the 20 
pound decline has been recovered, which has led to lower 
livestock prices.
    The extremes of 2009 and 2014 have shown the highest to be 
breathtakingly high, while the lows have been desperately low, 
making risk management important. Droughts in major cow/calf 
regions contributed to record cattle prices in 2014 and 2015. 
Markets have fallen substantially from the records, yet 2016 
will still have positive returns for cow/calf producers. The 
one million head annual growth in cows this year was the 
largest in over 2 decades. Beef production expansion will 
likely lead to even lower cattle prices.
    CY 2014 hog returns hit record levels as feed costs eased 
and disease dramatically cut pigs per litter. As the sector 
recovered, production has grown and hog prices have declined by 
more than 30 percent.
    All-milk prices hit a record of $25.70 a hundredweight in 
2014, but recently fell to $15.30 with the March information, a 
level we haven't seen since 2010. Current price information 
shows further declines will occur. Two factors have driven 
those lower milk prices. Reduced U.S. dairy exports have meant 
increased dairy product supplies on domestic markets. Second, 
milk production expansion has continued despite lower returns. 
April milk production is up 1.2 percent over a year ago, and 
the cow herd has expanded by over 22,000 heads since the 
beginning of this year.
    Why has milk output grown when milk returns suggest 
contraction? During the 1980s and 1990s, there were more 
farmers with higher costs that exited during tough times. 
Today's operations have larger fixed costs, which makes their 
exit difficult. Since 2000, annual milk production has only 
declined twice, while it declined five times over the 1986 to 
1999 period.
    If true, the only way out of low returns is for demand 
growth. There has been much discussion that the Margin 
Protection Program is not providing a strong enough safety net. 
Before examining the MPP, it is important to understand that it 
is extremely difficult to construct a stronger safety net for 
dairy farmers while reducing Federal spending remains a 
priority. CBO estimates Fiscal Year 2016 Federal outlays at $42 
million, and USDA estimates 2016 dairy cash receipts will total 
$33.2 billion, a drop of over $16 billion from 2014.
    Identifying a safety net program that can moderate a $16 
billion drop in cash receipts, yet only costs the government 
$42 million is a large challenge. Lower feed costs have 
resulted in the MPP margin falling far less than the milk price 
decline. A comparison between the cost of corn production and 
the decline in corn prices is instructive. AMS reports 
Minneapolis corn prices fell from $7.15 to $3.23 per bushel 
over the March 2013 to March 2016 period. The large decline in 
corn prices is helpful to dairy producers, yet this direct 
comparison of corn prices may mask some effects. The Economic 
Research Service estimates that 63 percent of Wisconsin dairy 
feed costs are homegrown harvested feed, compared to 26 percent 
in California. ERS corn production costs have changed little 
over the 2013 to 2016 crop seasons. The difference in the cost 
of growing feed needs and the decline in crop prices may be one 
of the reasons why producers have struggled with MPP.
    The feed costs coefficients used in the formula were 
reduced by ten percent during the farm bill debate. Record crop 
prices and high crop price projections drove the change. This 
change lessened the effect of feed prices on the MPP formula 
and reduced Federal outlays. Without this adjustment, the feed 
cost decline would have offset more of the milk price decline.
    More work is needed to help producers think through the 
risk management versus program return maximization facets of 
policy. CY 2016 MPP participation has moved to lower levels of 
margin coverage when producers may be better served to 
participate at higher levels.
    Mr. Chairman, thanks for the opportunity to discuss the 
many issues facing the livestock and dairy industries today.
    [The prepared statement of Dr. Brown follows:]

     Prepared Statement of Scott Brown, Ph.D., Extension Assistant 
Professor, Department of Agricultural and Applied Economics, University 
                                   of
Missouri; State Agricultural Economics Extension Specialist, University 
                  of Missouri Extension, Columbia, MO
    Chairman Rouzer, Ranking Member Costa, and Members of the 
Subcommittee, thank you for the opportunity to testify regarding the 
current financial situation for livestock producers in this country. I 
am an agricultural extension economist at the University of Missouri 
and for the last 3 decades have worked extensively on livestock policy 
issues with a specific focus on dairy policy issues.
    The previous decade has resulted in some of the best and worst 
economic times the livestock sector has ever faced. In 2006, USDA 
reports that livestock cash receipts totaled $118 billion. By 2014, 
livestock cash receipts had soared to over $212 billion. USDA currently 
estimates that livestock cash receipts will decline to below $178 
billion in 2016.
U.S. Livestock Cash Receipts 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA-Economic Research Service.
          * 2016 USDA-ERS forecast.

    Feed costs, the major input for all livestock industries, 
skyrocketed over the last decade as weather and other factors drove 
tight feed supplies. In 2006, USDA reported purchased feed expenses at 
$31 billion. They rose to $64 billion by 2014. With larger crop 
supplies, purchased feed costs are currently estimated by USDA to total 
$56 billion in 2016.
U.S. Production Expenses, Purchased Feed
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA-Economic Research Service.
          * 2016 USDA-ERS forecast.

    The combination of high feed costs, weather and disease issues 
placed U.S. meat availability at a 23 year low in 2014. U.S. per capita 
beef, pork and poultry consumption peaked at nearly 220 pounds per 
person in 2007 before falling to slightly less than 200 pounds in 2014. 
2016 meat per capita consumption will show that at least \1/2\ of the 
20 pound decline has been recovered in just 2 years. This additional 
quantity of meat in the U.S. marketplace relative to 2014 has driven 
down prices for livestock products.
    One thing is clear when looking at the financial picture of the 
livestock sector, the highs have been breathtakingly high while the 
lows have been desperately low. While 2009, with its high feed costs 
and general global economic meltdown, can represent the lowest of lows, 
2014 surely will remain in the record books for many years to come for 
the record shattering high. Although either of these years could be 
duplicated again, the probability of either of these years occurring 
again soon is low.
    Extreme livestock market volatility has become expected by all. 
Long-term survival may depend critically on risk management plans 
adopted by individual operations. Marketing livestock or milk using a 
cash market strategy is a risk management strategy that works well in 
rising markets but provides little help in declining markets.
    Cattle markets have seen the droughts of 2011 and 2012 in major 
areas of cow/calf production in the United States contribute to the 
record cattle prices in late 2014 and early 2015. Although cattle 
markets have fallen substantially from the record highs, 2016 will 
still be another year of positive returns.
Oklahoma City, 600-700 lbs, Weekly, Feeder Steer Price
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Beef cow expansion that began during 2014 and accelerated during 
2015 continues in 2016. The decline in current economic incentives will 
likely slow future growth in beef cow inventory. The one million head 
annual growth in beef cows that was reported by USDA for January 1, 
2016 was the largest increase experienced in over 2 decades.
    As beef production continues to expand, cattle prices are likely to 
come under further pressure over the next few years. For Missouri 
combined auctions, 450 to 500 pound feeder steers which reached over $3 
per pound in early 2015 but have recently fallen to $1.80 per pound. 
However, that remains above the $1.25 per pound level seen in early 
2010.
    Hog producers saw farrow to finish returns hit record levels in 
2014 as feed costs eased and PEDv dramatically cut the number of pigs 
saved per litter. As the sector recovers from disease events, pork 
production has grown and hog prices have moved lower. Pork production 
grew by over seven percent in 2015 relative to 2014 and hog prices 
declined by more than 30 percent.
Hog Price, National Base
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The recent growth in barrow and gilt slaughter does highlight the 
need for additional processing capacity to come on board soon. Current 
pork processing expansion plans will help handle the flow of additional 
hogs that will come to market in late 2017. By the fourth quarter of 
2016, current processing capacity may be stretched to the limit.
    Farrow to finish returns have remained slightly above breakeven in 
the first quarter of 2016. The return picture for the remainder of this 
year will depend on the strength of domestic and international demand 
as well as the size of the U.S. crop currently being planted. If any of 
these factors raise feed costs or further erode hog prices, the last 
half of 2016 could be financially challenging.
    Dairy producers have seen a similar milk price picture unfold as 
has been experienced in the other livestock sectors. In September 2014, 
the U.S. all milk price hit an all-time record at $25.70 per 
hundredweight. The latest USDA Agricultural Prices report showed that 
the March 2016 U.S. all milk prices fell to $15.30 per hundredweight. 
Given current dairy product prices and advanced Federal Order prices, 
further declines will occur. This level of milk prices has not been 
experienced since early 2010.
    Two factors have been at play in the decline in milk prices seen by 
U.S. dairy producers. First, a decline in U.S. dairy product exports 
has meant increased milk and dairy product supplies on domestic 
markets. After annual U.S. dairy product exports reached a record of 
over $6.5 billion in 2014, they fell below $5 billion in 2015. U.S. 
dairy exports have declined another $0.3 billion in the first quarter 
of 2016 relative to a year ago. A stronger U.S. dollar and growing 
supplies in Europe have hindered U.S. dairy exports. Although many in 
the industry continue to call for a turnaround in U.S. dairy export 
demand, it has yet to occur. If U.S. dairy exports do not begin to 
increase in the remaining months of 2016, the financial strain on U.S. 
dairy producers is going to increase even further.
    Second, the expansion in U.S. milk supplies has continued despite 
the economic stress being felt in the dairy industry. The latest USDA 
milk production report shows that April milk production growth slowed 
but it was still 1.2 percent higher than a year ago. The report shows 
U.S. dairy cow inventories have expanded by 22 thousand head since the 
start of 2016. The growth in milk supplies is expected to continue into 
2017 highlighting the need for U.S. dairy export growth.
    The dairy industry needs to carefully consider the inability to 
turn the spigot off when milk returns suggest contraction is needed. 
During the 1980s and 1990s, there were more dairy farmers with 
relatively higher production costs to exit the industry during tough 
times. By the 2000s, the remaining operations tend to have larger fixed 
costs, which makes their exit more difficult.
    Historical data on U.S. milk production highlights past 
difficulties in reducing milk supplies when producer returns are low. 
Since 2000, annual milk production has only declined in 2001 and 2009. 
Milk production even expanded during the drought-induced record feed 
prices of 2012/2013. In comparison, annual milk production fell five 
times over the 1986 to 1999 period.
    If the assumption of less supply response to poor returns is 
correct, there are implications that dairy producers must prepare for. 
Most importantly, the only way out of low returns is for demand growth 
to catch up to excess milk supplies.
    With the current economic downturn in the dairy industry, there has 
been an abundance of discussion about the new dairy safety net program 
contained in the 2014 Farm Bill. There has been growing concern that 
the Margin Protection Program (MPP) is not providing a strong enough 
safety net for U.S. dairy producers.
    Before examining detailed MPP features, it is important to 
understand the large task of building a solid safety net program with a 
tight Federal budget. It is extremely difficult to construct a stronger 
safety net program for dairy farmers while reducing Federal spending 
remains a priority.
    The Congressional Budget Office estimates FY 2016 dairy CCC 
expenditures at $42 million and USDA estimates that dairy cash receipts 
will total $33.2 billion in 2016, a drop of over $16 billion from the 
2014 level. Identifying a safety net program for dairy producers that 
can moderate a $16 billion drop in cash receipts yet only cost $42 
million to the Federal Government is a large challenge.
    The MPP has come under scrutiny as milk prices and dairy farmer 
returns fall. One of criticisms of the MPP is that the current level of 
the MPP margin, which measures the U.S. all milk price less feed cost, 
is not representative of what dairy producers face today. For March, 
the MPP margin was measured at $7.47 per hundredweight which would only 
provide a payment to those producers that bought coverage at some of 
the highest levels.
    The reduction in feed costs as represented by national corn, 
soybean meal and alfalfa prices has resulted in the MPP margin falling 
far less than the decline in national milk prices. Many producers have 
reported their financial situation has eroded much faster than the MPP 
margin has declined. It has led to much speculation on the reasons why. 
A comparison between the costs of corn production and the decline in 
corn prices is instructive as to some of the issues that are at play 
for dairy producers.
    In late March 2013 the USDA Agricultural Marketing Service (AMS) 
reported single car unit Chino Valley California corn prices at $8.76 
per bushel. By the same period in 2016 they fell to $4.82 per bushel. 
AMS reported Minneapolis corn prices fell from $7.15 per bushel to 
$3.23. Larger corn supplies and cheaper transportation allowed for a 45 
percent decline in Chino Valley corn prices while Minneapolis corn 
prices fell by 55 percent. The large declines in corn prices are 
helpful to dairy producers, yet this direct comparison of corn prices 
may mask some of the regional effects of dairy feed costs.
    The USDA Economic Research Service (ERS) estimates that 63 percent 
of Wisconsin dairy farmers' feed costs come from homegrown harvested 
feed compared to 26 percent in California. Dairy producers that buy a 
majority of their dairy feed may be in a better financial position 
today than those that grow more of their feedstuffs, as the total corn 
production cost reported by ERS has changed little over the 2013 to 
2016 crop seasons. ERS reported 2013 total corn production costs at 
$676.66 per acre while they estimate 2016 at $679.72 per acre. The 
situation has changed rapidly relative to a few years ago when those 
growing their own feed were in a better position to manage historically 
high corn prices.
    The difference in the cost of growing feed needs for the dairy and 
the decline in crop prices may be one of the reasons dairy producers 
have struggled with the safety net provided by the MPP. There has also 
been discussion around the coefficients that derive the national feed 
cost used in the MPP formula. The National Milk Producers Federation 
(NMPF) had a taskforce of industry experts construct rations 
representative of the dairy industry back during their development of 
the Foundation for the Future program development. This work 
constructed rations made up of corn, corn silage, soybean meal and 
alfalfa. Corn silage was converted to a corn equivalent by valuing a 
ton of corn silage at 10.1 multiplied by the price of corn per bushel.
    These original coefficients were modified by reducing them by ten 
percent to reduce the MPP program cost during debate on the Farm Bill 
in 2013. This was a period of time with very high crop prices and many 
baselines kept crop prices at much higher levels than we are 
experiencing today. The effect of this change was to lessen the effect 
of feed prices on the overall MPP formula. If these coefficients had 
not been adjusted lower, the criticisms of the formula would only grow 
as feed would have a larger effect and the decline in feed costs would 
even offset a larger proportion of the milk price decline.
    The MPP was a major change in dairy policy relative to the past 
safety provided to the dairy industry. The move to policy focused on 
providing margin risk management from one that provided a floor on milk 
prices has required moving from an attitude of program return 
maximization to risk management. More work is needed to help producers 
think through the risk management aspect of the MPP. [CY] 2016 MPP 
participation has moved to the lower levels of margin coverage when 
producers may be better served to participate at higher levels.
Margin Protection Program Participation
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    There is a fine line that must be traversed in setting parameters 
of Federal dairy policy. We have had experience with programs that 
provided too much support to the industry and resulted in large milk 
surpluses and chronically low milk prices or large government 
expenditures. Everyone in the dairy industry did not like these 
periods. However, setting support too low means it may never trigger in 
those periods of times that it is most needed. This tradeoff will 
always require modifications as future farm bills are debated and 
passed.
    In summary, it remains clear that U.S. meat and milk supplies are 
going to continue to increase perhaps well into 2017. Global demand and 
strengthening U.S. meat and dairy exports will be needed to move 
livestock and dairy market prices higher. Strong domestic demand must 
continue as well. Federal livestock and dairy policies must address the 
added volatility that comes as a result of more emphasis on global 
markets. Weather will remain another big risk for livestock producers 
and the support provided by Federal programs like the Livestock Forage 
Program (LFP) are a much needed help against catastrophic weather 
events.
    Mr. Chairman, thanks for the opportunity to discuss the many issues 
facing the livestock and dairy industries today.

    The Chairman. Thank you, Dr. Brown.
    Mr. Zimmerman?

         STATEMENT OF JOHN ZIMMERMAN, MEMBER, BOARD OF
     DIRECTORS, NATIONAL TURKEY FEDERATION, NORTHFIELD, MN

    Mr. Zimmerman. Good morning, Chairman Rouzer, Ranking 
Member Costa, and Members of the Subcommittee. My name is John 
Zimmerman, and I am a turkey farmer from Northfield, Minnesota, 
raising approximately 4 million pounds per year. I am the past 
President of the Minnesota Turkey Growers Association, as well 
as a board member of the National Turkey Federation. I 
appreciate the opportunity to testify today on behalf of the 
63,000 men and women that put their boots on every day to keep 
the turkey industry working.
    Our industry raises approximately 238 million turkeys 
annually, and USDA's latest forecast puts 2016 turkey 
production at an all-time record of 6.4 billion pounds, 14 
percent above 2015.
    This year, the turkey industry has made significant strides 
and learned a lot in recovering from high path avian influenza, 
after suffering through the worst animal disease outbreak in 
U.S. history last year. However, our preparation was tested 
earlier this year in Indiana when a small outbreak occurred in 
a commercial turkey flock. This outbreak was small precisely 
because of the lessons we have learned, the most important of 
which is that immediate action needs to be taken at the local 
level to limit virus spread. No matter how good the intentions 
are at the state and Federal level, industry must be given 
clear permission to act within minutes, not hours or days, to 
protect other farms from becoming infected. I must emphasize 
the need for rapid stamping out procedures and methods that 
ensure humane treatment, while eliminating virus spread. 
Currently, there is no one method that achieves perfect results 
in all circumstances.
    NTF is deeply appreciative of the indemnification program 
implemented by USDA APHIS and strongly supported by Congress 
that helped us manage through this crisis. I would be remiss if 
I did not take a moment to personally thank my fellow 
Minnesotan, Congressman Collin Peterson, on behalf of myself, 
NTF, and the entire turkey industry for all you did for us last 
year. Thank you.
    Finally the billion dollars in losses are well-documented. 
In order to prevent future outbreaks, the U.S. needs to adopt a 
forward looking mandatory animal pest and disease prevention 
program designed to limit the impacts of foreign zoonotic 
diseases on livestock and poultry producers. We look forward to 
working with Congress to accomplish this.
    All poultry exports were severely damaged by the trade 
restrictions that resulted from the 2015 high-path outbreak. 
Specifically, last year turkey exports declined 34 percent and 
over 33 countries enacted some form of a ban on U.S. poultry. 
Without the hard work of APHIS, it could have been a lot worse. 
They reopened closed markets, as well as continued to establish 
protocols that will limit bans to regional levels in the 
future.
    We also continue to see high-path outbreaks in Europe, 
Asia, and South America, and now is the time to reengage with 
our trade partners to discuss how HPAI can be treated, moving 
forward. This is a global disease, and working with the 
government we can develop a plan that minimizes export 
disruptions now.
    With regards to non-scientific trade barriers, it is 
important that USDA's FAS continue to work with both APHIS and 
the turkey industry to fully understand how we differ from 
chicken and livestock production. For example, while never 
covered under the U.S. COOL regulations, turkey has now become 
subjected to COOL-like regulations by both Korea and South 
Africa, who banned U.S. turkey raised and processed in the U.S. 
just because it was hatched outside the U.S. This is not 
science-based and is a problem for many companies that hope to 
expand sales into these promising growth markets. Finally, we 
support TPP as an important step forward in reducing trade 
barriers and opening new markets to the turkey industry, and we 
encourage Congress to approve this agreement as soon as 
possible.
    Recently, USDA proposed a rule to amend the organic 
livestock and poultry production requirements based on 
recommendations by the National Organic Standards Board. NTF is 
concerned about the potential disruptions to existing organic 
producers and their supply chains, as well as the impacts this 
proposed rule may have in ensuring that animal health is fully 
protected. Before moving forward with the rule, the turkey 
industry feels that USDA should conduct a thorough assessment 
of the cost of compliance, increased animal health and welfare 
risks, and alternatives for existing organic growers, 
producers, and supply chains to ensure minimal impact. Six 
years ago, USDA proposed sweeping rule changes on farmer 
contracting. With the expiration of a Congressional prohibition 
on implementing these changes, USDA is once again threatening 
to fundamentally change the rules by which our members operate. 
We believe that the changes would increase costs, reduce 
productivity, and possibly lead to increased live production 
ownership by integrated poultry companies, to the detriment of 
independent farmers like myself. We support the continued 
prohibition of USDA's implementation of these proposed changes.
    A recent report by the National Academy of Sciences found 
that food made from genetically engineered crops are as safe to 
eat as those made from conventional crops. Regarding food 
labeling, NTF actively supports two critical components of any 
GMO bill that comes out of Congress. First, that the bill 
maintains Federal preemption for meat and poultry labeling, 
which is already regulated by USDA FSIS; and second, that it 
ensures that animals fed GE feed should not have to be labeled 
GE. We look forward to a bill that prevents a patchwork of 
state rules that create a labeling nightmare for food 
producers, but these two conditions must be met.
    Finally, we have a worker shortage all across this country, 
and meat and poultry producers are no different in feeling the 
pain of this shortage. The turkey industry supports immigration 
reform that addresses the needs of year round meat and poultry 
producers and processors. Our members need access to a pool of 
legal, general labor immigrant workers and a visa program that 
could address these needs. However politically difficult it 
seems, we must get this done.
    Once again, thank you for the opportunity to testify today 
on behalf of the U.S. turkey industry and the issues impacting 
our businesses, and I would be happy to answer any questions.
    [The prepared statement of Mr. Zimmerman follows:]

   Prepared Statement of John Zimmerman, Member, Board of Directors, 
               National Turkey Federation, Northfield, MN
    Good morning, Chairman Rouzer, Ranking Member Costa, and Members of 
the Subcommittee. My name is John Zimmerman, and I am a turkey farmer 
from Northfield, Minnesota and past President of the Minnesota Turkey 
Growers Association (MTGA). My family and I raise about 4 million 
pounds of turkeys annually on our farm as well as grow about 500 acres 
of corn and soybeans. I am also a board member of the National Turkey 
Federation, which represents the $32 billion U.S. turkey industry. I 
appreciate the opportunity to testify before you today on the state of 
the turkey industry. The turkey industry raises approximately 238 
million turkeys annually, and provides employment to over 63,000 people 
nationwide, directly associated with breeding, hatching, raising and 
processing turkeys. USDA's latest forecast puts 2017 turkey production 
at an all-time record of 6.4 billion pounds, 14% higher than 2015. As 
an industry, we continue to be challenged with a multitude of issues 
that impact those of us in the turkey business and we look forward to 
working with each of you to address these issues.
Avian Influenza
    In 2016, the turkey industry has made significant strides in 
recovering from highly pathogenic avian influenza (HPAI), after 
suffering through the worst animal disease outbreak in U.S. history in 
2015. The losses from HPAI were personal and weighed heavily upon the 
shoulders of farmers, rural communities, and companies from the West 
coast to the Midwest.
    As an industry, we continue to learn new lessons from the outbreak 
and guard against the potential return of the deadly virus. Our 
preparation was tested earlier this year in Indiana when a small 
outbreak occurred in a commercial turkey flock. This outbreak was so 
small precisely because of the lessons we've learned. The most 
important lesson is that immediate action needs to be taken at the 
local level to limit virus spread. No matter how good the intentions 
are at the state and Federal level, industry must be given clear 
permission to act within minutes, not hours or days, to protect other 
nearby farms from becoming infected. I must emphasize the need for 
rapid ``stamping out'' procedures and methods that ensure humane 
treatment while eliminating virus spread. Currently there is no one 
method that achieves perfect results in all circumstances.
    NTF is deeply appreciative of the indemnification program 
implemented by USDA and the Animal Plant Health Inspection Service 
(APHIS) along with the strong Congressional support for the turkey 
industry as we managed through the crisis. I would be remiss at this 
time if I did not take a moment to personally thank my fellow 
Minnesotan, Ranking Member Collin Peterson, on behalf of myself, NTF 
and the entire turkey industry for all you did to help last year.
    Our industry continues to work with Federal and state officials on 
key areas such as: biosecurity, depopulation strategy, disposal, 
repopulation, vaccine usage and future research. However, the road 
ahead remains long and as an industry we will need continued support 
from Congress to assist USDA-APHIS on the avian influenza front. The 
2016 Indiana incident is a stark reminder that HPAI is still out there 
looking for an opportunity to strike again. The 2015 damage to the 
poultry industry exceeded $1 billion, with much of that cost borne by 
consumers in the form of higher turkey and egg prices.
    In order to prevent future outbreaks, the U.S. needs to adopt a 
forward-looking, mandatory animal pest and disease prevention program 
designed to limit the impacts of foreign zoonotic diseases on livestock 
and poultry producers. We look forward to working with Congress to get 
this accomplished. As the saying goes, ``an ounce of prevention is 
worth a pound of cure''.
Exports
    All poultry exports--turkey, eggs and broilers--were severely 
damaged by the trade restrictions that resulted from the 2015 HPAI 
outbreak. Specifically, 2015 turkey exports declined to only 533 
million pounds, a 34% drop from 805 million in 2014. Over 33 countries 
enacted some form of ban on U.S. poultry during the height of the HPAI 
crisis, and I want to make sure to thank the staff of USDA's APHIS for 
their work in reopening closed markets as well as establishing 
protocols that will limit bans to regional levels in any future cases 
of avian influenza. We have seen this hard work pay off in the very 
limited bans enacted after the two cases in 2016.
    However, we continue to see HPAI outbreaks in Europe, Asia and 
South America. Now is the time, to re-engage with our trade partners to 
discuss how HPAI can be treated, moving forward. This is a global 
disease and working with the government we can develop a plan that 
minimizes export disruptions during future outbreaks.
    Additionally, as APHIS knows, there is much more work to be done on 
the international front to protect all sectors from non-scientific 
trade barriers enacted in the name of protecting animal health. It is 
important that USDA's Foreign Agriculture Service (FAS) continue its 
work with both APHIS and the turkey industry to fully understand how 
our industry differs from chicken and livestock production. For 
example, while never covered under the U.S. COOL regulations, turkey 
has unfortunately seen restrictions in response to COOL, with both 
Korea and South Africa banning U.S. turkey ``hatched'' outside the U.S. 
This causes significant problems for many companies that hope to expand 
sales in these promising, growth markets.
    Finally, we support the Trans-Pacific Partnership Agreement (TPP) 
as an important step forward in reducing trade barriers and opening new 
markets for the turkey industry. We encourage Congress to approve the 
agreement as soon as possible.
Organic Rule
    Recently, USDA proposed a rule to amend the organic livestock and 
poultry production requirements based on recommendations by the 
National Organic Standards Board. NTF is concerned about the potential 
disruption to existing organic producers and their supply chains, as 
well as the impacts this proposed rule may have on ensuring that animal 
health is fully protected. Before moving forward with the rule, the 
turkey industry feels that USDA should conduct a thorough assessment of 
the costs of compliance, increased animal health and welfare risks, and 
alternatives for existing organic growers so that producers and supply 
chains directly impacted by these changes will be minimally impacted.
USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA)
    Six years ago, USDA proposed sweeping rules changes on farmer 
contracting. With the expiration of a Congressional prohibition on 
implementing those changes, USDA is once again threatening to 
fundamentally change the rules by which our members operate. We 
continue to believe that the changes would increase costs, reduce 
productivity, and possibly lead to increased live production ownership 
by integrated poultry companies, to the detriment of independent 
farmers. We support the continued prohibition of USDA's implementation 
of the proposed changes for the simple fact that the unintended 
consequences would outweigh any purported benefits.
Food Labeling
    A recent report by the National Research Council--the working arm 
of the National Academy of Sciences, Engineering and Medicine--found 
that foods made from genetically engineered crops are as safe to eat as 
those made from conventional crops, and that GMOs generally improve 
farmers' yields by controlling pests and weeds. With regards to food 
labeling, NTF continues to actively support the two critical components 
of any GMO bill that comes out of Congress: (1) That the bill maintains 
Federal preemption for meat and poultry labeling, which is already 
regulated by USDA-FSIS and (2) that it ensures that animals fed GE feed 
should not have to be labeled GE. We look forward to having a bill that 
prevents a patchwork of state rules that create a labeling nightmare 
for food producers. The U.S. needs a single set of labeling rules that 
are common-sense and based on the most respected science known.
Immigration
    We have a worker shortage all across the country, and meat and 
poultry producers are no different in feeling the pain of this 
shortage. The turkey industry supports immigration reform that include 
policies and provisions that will maximize benefits to the turkey 
industry and ensure a strong and durable immigration system that meets 
the needs of the U.S. economy. Most turkey plants are located in rural, 
low-unemployment areas. To fully staff these plants, producers must 
recruit from outside of their local areas and in many instances must 
rely on first-generation Americans. There are very few permanent visas 
for less skilled workers and the existing temporary programs only apply 
to seasonal labor. This effectively leaves year-round meat and poultry 
manufacturers with no good options. Our members need access to a pool 
of legal, general labor immigrant workers, and we support a visa 
program that addresses the needs of the meat and poultry industry. 
There is currently no one bill that provides a ``silver bullet,'' but 
it is time to resolve the immigration debate for the good of the 
country.
    Once again, thank you for the opportunity to testify today on the 
state of the U.S. turkey industry and the issue impacting our 
businesses. I will be happy to answer any questions at this time.

    The Chairman. Thank you, Mr. Zimmerman.
    Mr. Mooney?

 STATEMENT OF RANDY MOONEY, CHAIRMAN, NATIONAL MILK PRODUCERS 
                FEDERATION AND DAIRY FARMERS OF
                    AMERICA, ROGERSVILLE, MO

    Mr. Mooney. Thank you, Chairman Rouzer, Ranking Member 
Costa, and distinguished Members. Thank you for the opportunity 
to testify before the Subcommittee, and I want to thank 
Congresswoman Hartzler for the kind introduction.
    To be clear, times are tough on America's dairy farms. For 
the second year in a row, USDA projections indicate that 
revenues from milk sales will drop this year to $31.5 billion, 
the second lowest level in the last decade, and more than a $20 
billion plunge from 2014's high. As U.S. milk production has 
grown and we have had to rely more heavily on world markets, 
our fortunes are now more closely tied to the extreme 
volatility that are a feature of global commodity markets.
    Because of volatility in both milk and feed, we must 
continue to reassess our risk management tools. For most of the 
8 years that I have been Chairman of the National Milk, I have 
worked with our member cooperatives and dairy producers to 
build a better safety net. Our request to Congress after the 
economic disaster our industry suffered in 2009 was to create a 
risk management tool that would provide protection against the 
prolonged and catastrophic cost price squeeze we had 
experienced. In the 2014 Farm Bill, Congress created the Margin 
Protection Program. Approximately 23,000 dairy producers are in 
the program, representing 80 percent of the milk supply. In 
2015, U.S. dairy producers paid $73 million in premiums and 
fees to USDA, while USDA only paid out $700,000 under the 
program. This year, dairy farmers have paid in another $23 
million. I firmly believe MPP is the right dairy program for 
the future. That said, our experience today is that MPP is not 
completely fulfilling its intended objective as an effective 
safety net, but we remain confident that the improvements can 
be made by the Congress for this still evolving program.
    For many farmers, the current program is simply not enough 
to protect them in this economic environment. Since the farm 
bill was signed into law, MPP margins have fallen 52 percent, 
with further declines expected. While MPP is similar to the 
initial proposal put forward with National Milk, the plan was 
altered during the farm bill process. One change reduced the 
feed cost component of the margin so the current formula no 
longer reflects the true cost of feeding the herd. Second, 
while the feed cost component was changed, farmers' premiums 
were not, when they should have been reduced to accommodate the 
reduced feed component. MPP has been less effective as a 
result. I have heard from many dairy farmers that their 
financial challenges will only increase if the prices do not 
improve before 2017. We continue to discuss ways forward with 
our member cooperatives, USDA, and the Congress.
    Clearly, adjustments to the feed cost calculation and the 
farmer paid premiums would improve MPP's effectiveness as a 
safety net for all dairy producers. The feasibility and timing 
of such adjustments are issues we want to explore with the 
Committee.
    Our industry is also impacted by numerous other policy 
issues that are described more fully in my submitted comments, 
but I want to highlight two of them today. First is the 
critical importance of Congress acting immediately to pass 
legislation to ensure that a single Federal standard is 
established on labeling of a genetically modified food. I 
cannot emphasize enough how important it is that Congress 
resolve this matter before July 1, when the Vermont law takes 
effect. Failure of Congress to address this issue threatens the 
viability not only of my farm, but also the 30,000 farmers I 
represent. It also threatens our ability to feed the world's 
growing population.
    Trade is another area of importance to dairy farmers. Our 
nation has gone from exporting less than $1 billion worth of 
products in 2000 to more than $5.2 billion of exports in 2015, 
an increase of 435 percent. This enormous growth can be largely 
attributed to the market opening free trade agreements 
negotiated by our government. We support the TPP agreement 
because it can help U.S. dairy exports continue to grow in key 
world markets, but in order for farmers to realize any benefit, 
important implementation and enforcement issues must be 
addressed as Congress prepares to consider TPP.
    Separately and finally, any trade agreement with the 
European Union must first prioritize how to tackle our trade 
deficit with Europe, while also addressing the non-tariff 
barriers, like geographic indicators and sanitary barriers the 
EU uses to limit our access. The EU has not demonstrated a good 
faith commitment to open agricultural trade. The U.S. must 
proceed cautiously by securing clear commitments from the EU to 
guard against the imposition of future trade barriers.
    Mr. Chairman, I want to thank you for holding this 
important hearing. America's dairy farm families stand ready to 
help this Committee as you review current policies and consider 
new legislation that impacts our industry. Thank you.
    [The prepared statement of Mr. Mooney follows:]

 Prepared Statement of Randy Mooney, Chairman, National Milk Producers 
        Federation and Dairy Farmers of America, Rogersville, MO
About Randy Mooney
    My wife, Jan, and I operate Mooney Dairy in Rogersville, Missouri. 
I serve as Chairman of the National Milk Producers Federation (NMPF) 
and Chairman of Dairy Farmers of America (DFA), the nation's largest 
dairy cooperative. In addition to my duties as chairman of NMPF and 
DFA, I serve on the boards of several dairy organizations, including 
Missouri State Milk Board, Dairy Management Inc., Hiland Dairy and the 
Innovation Center for U.S. Dairy.
About NMPF
    National Milk Producers Federation develops and carries out 
policies that advance the well-being of dairy producers and the 
cooperatives they own. The members of NMPF's cooperatives produce the 
majority of the U.S. milk supply, making NMPF the voice of more than 
30,000 dairy farmers on national issues.
Opening Statement
    Chairman Rouzer, Ranking Member Costa, and distinguished Members, 
thank you for this opportunity to testify before the Subcommittee.
    I am here today as Chairman of the National Milk Producers 
Federation, the voice of America's dairy cooperatives and their 30,000 
farmer-members. For 100 years, National Milk has advocated on behalf of 
our nation's dairy farmers. I also serve as Chairman of Dairy Farmers 
of America, the nation's largest dairy cooperative.
Dairy Market Situation
    To be clear, times are tough on America's dairy farms for the 
second year in a row. USDA's projections indicate that farm revenue 
from milk sales will drop this year to $31.5 billion--the second-lowest 
level in the last decade and. That's more than a $20 billion plunge 
from 2014 highs. Unfortunately, the value of the fresh milk I produce 
today is worth 22 percent less than it was 10 years ago, and nearly 40 
percent less than only a few years ago.
    The difficult economic conditions and tighter operating margins 
over the last 10 years have resulted in the loss of more than 18,000 
dairy farms in the United States. I fear the present environment of 
depressed market prices could result in even more farm closures. USDA 
projects the 2016 U.S. all-milk price to average $14.85 per 
hundredweight. If realized, this price would represent a milk price 
decline of nearly 40 percent from 2014 and is second only to 2009 in 
terms of low milk prices over the last decade. For a small family farm 
milking 100 cows, this price decline equates to a farm revenue decline 
of approximately $200,000.
    In my home State of Missouri, the situation is even worse. Over the 
last 10 years, I've seen more than 600 of my home state dairy farmers 
quit the business. We always knew dairy was a boom and bust industry, 
but the recent swing of the pendulum back toward low prices is taking a 
lot of farmers with it. Unlike other parts of the country where dairy 
cows are absorbed by other operations, in Missouri we are producing 
less milk year after year, and we are being paid less than the U.S. 
all-milk price for that milk. USDA's mailbox milk prices for northern 
and southern Missouri during 2015 indicated that the price Missouri 
dairy farmers actually received was 14 to 22 per hundredweight less 
than the U.S. average. The value of dairy to our state's economy has 
also been diminished. The value of milk produced on the farm, and paid 
to the farmer, has declined by more than $100 million over the past 18 
months. The upstream effect is that dairy farmers in Missouri have less 
money to reinvest in the local economy and less money to hire workers. 
But it doesn't end there; a weaker dairy economy results in fewer jobs 
supported by the industry in the processing and retail channels.
Milk Prices, Feed Costs, and MPP Margin
    I'd like to provide some economic context to the dramatic situation 
in the dairy industry I just described. The USDA monthly all-milk price 
reached a monthly record high of $25.70 in September 2014, and averaged 
a record high of $24 for the year. Following this record, the monthly 
all-milk price declined in 13 of the next 18 consecutive months. In 
2015, the average all-milk price was $17.10, down 30 percent from 
2014.Through the first 3 months of 2016, the all-milk price has 
averaged $15.70 per hundredweight. USDA currently projects the annual 
average 2016 price to range from $14.60 to $15.10 per hundredweight.
    The decline in milk prices can be traced directly back to sharp 
declines in the price of nonfat dry milk, dry whey, and cheese since 
late-2014. Nonfat dry milk prices reached a high of $2.09 per pound in 
March 2014, and for the year averaged $1.77 per pound. By 2015, the 
nonfat dry milk price average had dropped $0.90 per pound. As recently 
as April 2016, the nonfat dry milk price dropped to $0.73 per pound. 
This most recent price is the lowest nonfat dry milk price reported 
since Federal Order reform was instituted in 2000 and, importantly, is 
below the $0.80 per pound price previously supported under the dairy 
price support program. Similarly, in 2015 the average cheese price was 
down 51 percent to $1.65 per pound; and the dry whey price was down 27 
percent to $0.38 per pound.
    Butter prices have been the bright spot in terms of dairy commodity 
prices. The monthly USDA price reported for butter reached a record 
high in September 2014 of $2.85 per pound. For 2014, the average butter 
price was $2.14 per pound. During 2015 the annual average butter price 
declined only slightly to $2.07 per pound and was as high as $2.80 per 
pound in November 2015. This strength in the butter price resulted in 
the value of milkfat contributing as much as 52 percent to the value of 
Class III milk--up 13 percentage points from the 2000 to 2014 average. 
Without this support in butter prices, dairy farmer milk checks would 
have been substantially lower in 2015 and 2016.
    Average feed costs during 2014, based on USDA's MPP dairy ration, 
were $10.67 per hundredweight. This price dropped in 2015 to an annual 
average of $8.77 per hundredweight. While these prices are well below 
the $13 per hundredweight average during 2012 and 2013, they continue 
to pressure income-over-feed-costs as milk prices move lower. During 
2014 the MPP margin, defined as the all-milk price minus the MPP 
ration, averaged $13.29 per hundredweight and reached a record high of 
$15.62 in October 2014. Since this time, weaker milk prices and 
stronger feed prices pushed the MPP margin to a low of $7.50 per 
hundredweight in April 2015 before increasing to $10.01 by November 
2015. Since November 2015, MPP margins have deteriorated by $2.55 per 
hundredweight, approximately 25 percent, to $7.47 per hundredweight in 
March 2016. This March 2016 MPP margin is the lowest since the program 
was introduced in September 2014.
Supply of Milk and Dairy Products
    Following the record high prices and margins of 2014, the industry 
expanded by approximately 58,000 milking cows to accommodate the 
growing export demand for dairy products. The total number of milking 
cows in the U.S. now stands at 9.3 million head as of March 2016. In 
addition to an increase in the population of the milking herd, average 
milk per cow also increased from the 2014 total of 22,258 pounds per 
year, to 22,383 pounds per year in 2015--up 125 pounds per cow. USDA 
data on milk per cow through March 2016 indicates this pattern will 
continue. As a result of the additional milking cows and improved 
productivity, milk production in the U.S. grew by 2.6 billion pounds 
between 2014 and 2015, reaching 208.6 billion pounds last year. Current 
USDA projections call for 212.4 billion pounds of milk to be produced 
this year. This total would represent an increase of 3.8 billion pounds 
of milk over last year's levels.
    The additional milk that has come online flowed into additional 
cheese, butter, and milk powder production. During 2014, American-type 
cheese production totaled 4.59 billion pounds. Production increased by 
107 million pounds in 2015 to 4.7 billion pounds, an increase of two 
percent. This expansion is in line with recent growth rates of one to 
four percent per year. For other cheese categories, total production in 
2014 was 6.9 billion pounds, rising by nearly 220 million pounds in 
2015 to 7.1 billion pounds--an increase of three percent. Additional 
milk produced in 2015 also made it into butter churns, up only slightly 
from prior year levels. During 2014, butter production totaled 1.855 
billion pounds, increasing marginally by 2.7 million pounds in 2015 to 
1.858 billion pounds. Finally, similar to cheeses and butter, 
additional milk powders were also produced in 2015. Nonfat dry milk and 
skim milk powder production were 1.82 billion pounds in 2015, a bump up 
of 58 million pounds, or three percent, from 2014 levels. Similarly, 
dry whey production in 2015 totaled 975 million pounds and was up 105 
million pounds, or 12 percent, from 2014.
    With milk production in 2016 also expected to rise compared to last 
year, production of cheese and butter are also expected to increase. 
Non-leap year adjusted U.S. production of all cheese is up 1.8 percent 
year-to-date through March, and butter production is up 5.9 percent 
through March.
Domestic Demand and Dairy Trade
    Consumption of dairy products produced in the U.S. is broken down 
into the domestic market and the export market. Domestic consumption of 
cheese, butter, nonfat dry milk, and dry whey are all up in 2015 
compared to 2014 levels. Domestic consumption of cheese was up 385 
million pounds to 11.4 billion pounds during 2015. Domestic butter 
consumption in 2015 was up 54 million pounds to 1.8 billion pounds. 
Domestic consumption of nonfat dry milk in 2015 was up 65 million 
pounds to 1.1 billion pounds. Finally, domestic consumption of dry whey 
was up 216 million pounds to 579 million pounds.
    With respect to dairy trade, all products except for nonfat dry 
milk have seen their export volumes erode from the record high levels 
of 2013 and 2014. Butter product exports reached a high of 178 million 
pounds in 2013, before falling to a 7 year low of 37 million pounds in 
2015. Year-over-year, the decline in butter exports during 2015 was 
down 93 percent from 2014 levels. Total cheese exported reached a 
record high in 2014 at 812 million pounds. However, in 2015 total 
cheese exported from the U.S. declined 14 percent to 698 million 
pounds. Nonfat dry milk and skim milk powders were one of the few 
bright spots for dairy exports in 2015. Record low powder prices 
resulted in record high export volumes in 2015. In 2015, nonfat dry 
milk exports were up three percent over 2014 levels and totaled 1.2 
billion pounds. Combined, the value of dairy product exports in 2014 
was $7.1 billion. The decline in dairy product prices and the export 
volume resulted in the value of U.S. exports in 2015 totaling $5.2 
billion--a decline of $1.9 billion.
    As U.S. prices rose in 2014 to record highs, it created a pricing 
opportunity for dairy exporters around the world to access the U.S. 
market. Imports of dairy products, especially in the higher fat cheese 
and butter product categories, have contributed to weaker U.S. domestic 
prices. For example, in 2013 the U.S. imported approximately 36.5 
million pounds of butter and butter products. By 2014 that total had 
surged 28 percent to 47 million pounds, and then again in 2015 it 
increased another 22 percent to 57 million pounds. The net effect: over 
a period of 2 years, butter product imports into the U.S. have 
increased 229 percent. For cheese a similar pattern was observed. 
Cheese imports into the U.S. totaled 288 million pounds in 2013, and 
since then have grown by more than 90 million pounds, 32 percent, to 
reach 379 million pounds in 2015. On a value basis, dairy product 
imports into the U.S. have never been higher--reaching $3.4 billion in 
both 2014 and 2015.
Stock Levels
    The preceding set of numbers is manifesting itself in the real 
world as a logjam of dairy products, resulting from slower exports, 
increasing milk production, and imports displacing domestically 
produced products. These conditions create larger dairy product 
inventories. A variety of news sources including Bloomberg and the Wall 
Street Journal are now reporting on the record volumes of cheese in 
inventory. In addition to cheese, butter inventories are well above 
prior year levels.
    Stocks of cheese at the end of 2014 were slightly higher than 1 
billion pounds. By the end of 2015 this total had increased 13 percent 
to 1.15 billion pounds. Now, at the end of March 2016 total cheese in 
inventory reached 1.19 billion pounds. This is the highest level of 
cheese held in cold storage since the early 1980's, and is the second 
highest total in March going back to 1917.
    Stocks of butter at the end of 2014 were 105 million pounds--and 
were at the lowest levels for December since 2010. Tightness in the 
butter market provided support to domestic prices and also incentives 
to import butter or butter alternatives. As a result, by the end of 
2015 butter in cold storage increased 48 percent to 155 million pounds. 
Now, at the end of March 2016, a point in time when butter inventories 
reach a seasonal peak, butter in cold storage has reached 243.6 million 
pounds. This is far from a record, but remains well above butter 
storage levels of recent years.
Perspective on the Margin Protection Program
    Because of the volatility in both milk and feed prices, we must 
continue to reassess our risk management tools. And by we, I mean both 
farmers as well as the Congress. For most of the 8 years I've been 
Chairman of National Milk, I've worked with our member cooperatives, 
and dairy producers across the country, to build a better safety net. 
The previous elements of dairy policy had failed to evolve with the 
industry. Our request to Congress after the economic disaster our 
industry suffered in 2009 was to create a risk management tool that 
would offer protection against prolonged and catastrophic income-over-
feed-cost margin declines like we experienced in 2009. In the 2014 Farm 
Bill, Congress created the Margin Protection Program. Approximately 
23,000 dairy producers are in the program, representing 80 percent of 
our milk supply.
    MPP is a voluntary program to provide support when the difference 
between the milk price and feed costs falls below certain thresholds. 
Every fall, dairy farmers must decide on coverage options for the 
following year. In 2015, U.S. dairy producers paid $73 million dollars 
in premiums and fees to USDA, while USDA only paid out $700,000 under 
the program. This year, dairy farmers have paid in another $23 million.
    I firmly believe that MPP is the right program for our industry for 
the future. That said, our experience to date is that MPP is not 
completely fulfilling its intended objective as an effective safety 
net. We remain confident that improvements can be made by the Congress 
to this still-evolving program. Since the farm bill was signed into 
law, MPP margins have fallen 52 percent. The MPP margin is already at 
its lowest level since the program was enacted, with further declines 
expected. Specifically, USDA's MPP decision tool now projects the 
margin to drop below $6 per hundredweight by June. If realized, this 
would be the lowest margin since 2013, and already the MPP margin is at 
its lowest level since the program was introduced in 2014. In this 
environment, farmers naturally expect that the farm safety net would 
provide some minimum level of support.
    So why is the program not operating as expected? While MPP is 
similar to the initial proposal put forward by National Milk, the plan 
was altered as Congress finalized the Farm Bill in 2014. One change 
reduced the feed cost component of the margin so the current formula no 
longer reflects the true cost of feeding a herd. Second, while the feed 
cost component was changed, farmer premiums did not (and some were even 
adjusted upward), when they should have been changed to accommodate the 
reduced feed component. MPP has been less effective as a result.
    Let me describe this situation in greater detail. During the farm 
bill negotiations Congress reduced the MPP feed ration by ten percent. 
While this may not seem material, it had significant financial 
implications for those farms participating in MPP. During 2015, the 
average MPP margin was $8.30 and ranged from a low of $7.50 in the 
spring to $8.65 by the end of the year. These margins triggered MPP at 
only the highest coverage level of $8 per hundredweight and only 264 
farmers received payments. Had Congress not reduced the feed ration 
calculation, MPP margins would have been approximately $1 per 
hundredweight lower and more than 8,500 dairy farmers would have 
received a benefit from MPP. At a time when margins are depressed, 
missing out on these important safety net benefits due to budgetary 
concerns resulted in tens of million dollars of lost dairy farmer 
revenue.
    It is clear that while the effectiveness of the program was 
reduced, the premiums remain at the original level, which at this time 
should have been changed to accommodate forecasted risk environment. 
The ten percent reduction to the feed ration hurt program performance 
and also farmers' perception of the program. Many farmers saw that the 
MPP didn't pay out much, even at the highest levels, in 2015. So, in 
2016 they opted for the least expensive level of coverage required by 
law. Approximately 77 percent of the farmers and 88 percent of the milk 
enrolled in MPP during 2016 were are at only this $4 coverage only. Had 
Congress not reduced the feed ration, more farmers would have seen 
benefits in 2015 and participated at higher levels this year. More 
participation means protection in this current high risk environment. 
However, given the current feed ration, even with margins expected to 
reach the lowest levels in years, total program payments are not 
expected to exceed premiums for the second consecutive year.
    In addition, U.S. dairy farmers simply could not have anticipated 
the impact a highly-subsidized European dairy industry would have on 
U.S. dairy prices following the April 2015 expiration of the EU milk 
quota system. Since April 2015, EU dairy farmers have increased milk 
output by more than 12 billion pounds over prior year levels. The 
additional milk being produced by EU farmers is equivalent to 30 
percent of California's annual output, 42 percent of Wisconsin's annual 
output, and is 800 percent higher than production from dairy farmers in 
my home state of Missouri. This milk is not staying in the EU. Instead, 
it is being absorbed in the global market at extremely low prices. It 
is finding its way into EU public stockholding programs and delaying 
global price recovery. And, finally, this milk is displacing U.S.-
produced dairy products domestically and abroad through additional 
imports and increased market share in competitive export regions. 
Actions in the EU are having a very real impact in rural America. The 
net effect is larger inventories here at home, and U.S. producers 
enduring a longer period of depressed dairy market prices. MPP is not 
designed to provide support against highly subsidized EU dairy 
producers oversupplying and undercutting us in the global market.
    In my role as NMPF Chairman I've toured the country talking to 
dairy farmers about MPP. The overwhelming concern has been the feed 
ration and the premium rates. Congress also adjusted the premiums rates 
higher (the wrong way) due to budgetary concerns. During 2014 and 2015 
Congress did provide a 25 percent discount to the lower tier premiums 
under $8 per hundredweight. This made MPP more affordable to small 
family farms like my own, as we explored risk management for the very 
first time. However, this past year the premium discounts were removed 
and MPP premiums increased substantially. With balance sheets already 
thin due to the depressed price environment of 2015, and MPP under-
performing relative to expectations, many farmers could not justify 
buy-up MPP coverage in 2016, even though it was sorely needed. The 
expected benefits of MPP did not outweigh the costs and is likely to 
result in 2 consecutive years of premium payments without a measurable 
return. At the end of the day, dairy farmers just want consistent 
access to affordable risk management tools.
    We appreciate all of the recent improvements made by USDA, 
including monthly premium payments, decoupling $4 coverage from the 
buy-up provisions, and providing additional time to make coverage 
decisions. But the program remains a work in progress. For many 
farmers, the program is simply not enough to protect them in the 
current economic environment.
    I have heard from many dairy farmers that their financial 
challenges will only increase if prices do not improve before 2017. 
Lower commodity prices and slow-adjusting input costs are impacting the 
ability of dairy farmers repay loans and forcing many farmers to 
finance operating losses. These difficulties will have ramifications 
throughout the dairy economy, and unfortunately USDA economists and 
dairy industry experts all seem to be in agreement that dairy prices 
may be very slow to recover. That's why it is important, now more than 
ever, to ensure that problems with MPP are addressed head-on and the 
program is improved in such a way that makes it a valuable risk 
management tool to all dairy farmers in the U.S.
    We continue to discuss ways to improve MPP with our dairy farmer, 
USDA and the Congress. Clearly, adjustments to the feed cost 
calculations and the supplemental coverage costs would improve its 
effectiveness as a safety net for all dairy producers. The feasibility 
and timing of adjustments to the program are an issue we want to 
explore with the Agriculture Committee.
Biotechnology
    NMPF has long supported the right of consumers to know how their 
food is produced, and where it comes from. In fact, few industries have 
been more transparent than we in the dairy industry have. We are proud 
of the standards that guide our farmers and the care they put into 
their cows and the milk and dairy products that they produce. That is 
why we supported legislation introduced by Congressman Mike Pompeo of 
Kansas, known as the Safe and Accurate Food Labeling Act (H.R. 1599). 
On that note, I want to thank this Committee and those Members who 
helped advance this legislation last year.
    It is of critical importance that Congress act immediately to pass 
legislation to ensure that a single, Federal standard is established on 
the labeling of bioengineered foods. I cannot emphasize enough how 
important it is that Congress resolve this matter, before July 1st when 
the Vermont law takes effect. Failure by Congress to address this issue 
threatens the viability of not only my farm, but also 3,000 farmers I 
represent. It also threatens our ability to feed the world's growing 
population I than this Committee for its previous work on this issue 
and urge immediate action to bring this matter to final resolution.
Trade Policy
    Our nation has gone from exporting less than $1 billion in dairy 
products in 2000, to more than $5.2 billion of exports in 2015, an 
increase of 435 percent. (Sales in 2014 were even greater at over $7 
billion, before retrenching during a global dairy recession last year, 
as noted previously). This enormous growth can be largely attributed to 
the market-opening free trade agreements negotiated by our government, 
including the Uruguay Round which took steps to reduce export subsidies 
and implement the first SPS agreement. These agreements lowered and 
ultimately removed tariffs and in many cases they gave our products a 
preferential advantage over other supplying countries. They also helped 
remove technical and regulatory barriers to our trade. Over that 
period, our exports of dairy products to free trade agreement (FTA) 
partner nations grew by 489 percent as compared to 384 percent to non-
FTA countries.
    We must acknowledge that dairy exports last year dropped from the 
record $7.1 billion achieved in 2014. This was due in large part to a 
significant drop in global prices for milk powders and cheeses. In 
addition, the increased value of the dollar and the strong global milk 
supply have contributed to the decline in prices. But it is also worth 
noting that, while our exports to non-FTA countries contracted by 32 
percent, they fell by only 20 percent to our FTA partner countries.
    Our FTAs have created important new market access opportunities for 
us and we have worked very hard through our market development efforts 
to ensure that we are taking full advantage of them. It is not a 
foregone conclusion, however, that all trade agreements will be 
beneficial. Their terms matter extensively, as does the level of 
follow-through to ensure we secure the full scope of the benefits for 
which the U.S. negotiated.
    We support the Trans-Pacific Partnership agreement because it can 
help U.S. dairy exports continue to grow in key world markets. But, in 
order for farmers to realize any benefit, important implementation and 
enforcement issues must be address as Congress prepares to consider 
TPP.
    Diligent implementation of U.S. free trade agreements is a vital 
component to ensuring their effectiveness. Past experience in the dairy 
industry has demonstrated to us the clear value in strong engagement 
with our trading partners to foster compliance with their obligations 
to the U.S. It has also demonstrated just how important the terms of an 
agreement are. Past negotiations with the EU have led to trading terms 
and regulatory conditions that drive the current $1.4B dairy trade 
deficit with the EU.
    Any future agreement with the EU must first and foremost prioritize 
how to tackle this tremendous trade deficit and attack the non-tariff 
barriers, such as the Geographical Indicators as well as sanitary 
barriers that the EU uses to limit our access. Critically, fully 
addressing those barriers requires not just a focus on today's problems 
but a clear commitment through the trade agreement that new 
requirements will not be laid on top of any resolutions reached on the 
current range of issues. The EU has not demonstrated a good-faith 
commitment to open agricultural trade; the U.S. must proceed cautiously 
by securing specific and clear commitments from the EU to guard against 
the imposition of future trade barriers.
Immigration Reform
    Our current immigration system is failing America's dairy farmers. 
When dairy farmers seek employees, they often find that Americans are 
unwilling to do the difficult job of dairying. However, unlike other 
industries which have codified access to foreign workers, dairy does 
not. This is due to the year round nature of our industry which makes 
us ineligible to participate even in the deeply flawed, though well-
intentioned, H-2A program. As such, the current labor situation we are 
experiencing now threatens the livelihoods of dairy farmers in every 
region of this country.
    According to a University of Texas A&M report released in August 
2015 (and conducted in coordination with NMPF), 51% of all dairy farm 
workers are immigrants, and the farms that employ them account for 79% 
of the milk produced in the United States. Without access to a steady 
and reliable workforce, our industry will not be able to thrive, let 
alone survive, in the future. That is why NMPF has led the way to urge 
this Congress to pass immigration reform addressing the needs of 
American agriculture. While I recognize the delicate balance you must 
strike politically regarding this issue, America's dairy farmers cannot 
wait any longer for real reform.
Environmental Sustainability
    Dairy farmers are the original environmentalists, and care deeply 
about the land, air, and water that they manage on and around their 
farms. In recent years, however, Federal and state regulators have 
applied significant pressure on the dairy sector to reduce nutrient 
output to improve water quality in dairy producing regions from the 
Chesapeake Bay Watershed to northern Wisconsin all the way to central 
Washington.
    We as an industry have invested significant resources to 
proactively respond to this challenge, and we continue to work to 
embrace the best possible environmental practices. In 2008, the dairy 
industry voluntarily set a goal of reducing greenhouse gas (GHG) 
emissions from fluid milk by 25 percent by 2020, and has since 
undertaken several projects intended to help meet that goal. 
Importantly, since 1944, GHG emissions per pound of milk produced have 
decreased by 63 percent and total GHG emissions from dairy production 
have decreased by 41 percent.
    Like other sectors of the economy, dairy farmers are impacted by 
the current climate of political, legal, and regulatory uncertainty. To 
help us stand on a stronger footing, we have begun to advocate for 
proactive policy solutions that will help us turn an environmental 
liability such as manure into a valuable asset. The dairy industry is 
working with bipartisan Members of the tax-writing Ways and Means 
Committee to propose an Investment Tax Credit to cover the up-front 
capital costs of biogas systems and nutrient recovery technologies, 
which can play an important role in reducing the environmental impacts 
of dairy farming.
Closing Statement
    Mr. Chairman, I want to thank you for holding this important 
hearing today. America's dairy farm families stand ready to help this 
Committee as you review current policies and consider new legislation 
that impacts our industry.

    The Chairman. Thank you, Mr. Mooney.
    Mr. Herring?

          STATEMENT OF DAVID HERRING, MEMBER, BOARD OF
          DIRECTORS, NATIONAL PORK PRODUCERS COUNCIL,
                        NEWTON GROVE, NC

    Mr. Herring. Good morning, Mr. Chairman, Ranking Member 
Costa, and Members of the Subcommittee. I am David Herring, a 
Member of the Board of Directors at the National Pork Producers 
Council from North Carolina and Vice President of TDM Farms, a 
sow farrow-to-finish operation, incorporated out of North 
Carolina.
    The U.S. pork industry is in good economic shape after a 
couple years of dealing with disease issues and weather-related 
high feed grain prices. It now appears to be moving into a 
period of cautious, calculated expansion. Pork production is 
forecast by USDA to increase this year by two percent to almost 
25 billion pounds, and in 2017 by 2.6 percent, to more than 
25\1/2\ billion pounds. Of course, producers' fortunes can be 
affected for good or for ill by any number of factors, some 
controllable, some not so controllable such as disease and 
weather.
    I was going to first address an opportunity that would be 
very positive for hog farmers like me, and that Congress can 
control, the Trans-Pacific Partnership, or TPP. But another 
issue recently has come up that if not addressed would wipe out 
any benefits we gain from TPP. Pork producers are very 
concerned about the so-called GIPSA rules. As many of you know, 
the rule was born out of the 2008 Farm Bill, which included 
five specific issues, mostly related to the poultry industry, 
Congress wanted USDA to address. But the Grain Inspection, 
Packers and Stockyards Administration in 2010 proposed an 
expansive rule that would have had a significant negative 
effect on the livestock industry. A November 2010 Informa 
Economics study of the rule found it would have cost the pork 
industry more than $330 million annually. Tens of thousands of 
comments, including 16,000 from pork producers, were filed in 
opposition to the rule, and Congress several times included 
riders in USDA's annual appropriations bill to prevent it from 
finalizing the regulation. Such an amendment was not included 
in the USDA's Fiscal Year 2016 bill. Now the agency is moving 
forward with the rule, and we have grave concerns it will 
mirror the 2010 proposal. If it does, the livestock industry 
will be fundamentally and negatively changed and the increased 
exports and jobs created from TPP will or could be negated.
    Additionally, the fact that we have to deal with this GIPSA 
rule issue is diverting valuable resources away from the pork 
industry's top priority, approval of TPP.
    TPP, the benefits of which will exceed all past free trade 
agreements, represents a great opportunity for U.S. pork 
producers and for the entire U.S. economy. TPP includes the 
United States and 11 Pacific Rim countries. Those nations 
include nearly \1/2\ billion consumers and represent 40 percent 
of the world's GDP.
    The agreement has become the de facto global trade vehicle 
and other countries in the region are already lining up to get 
on it. Because other Asian Pacific trade agreements are being 
negotiated without the United States we can't afford either 
economically or geopolitically to walk away from the fastest 
growing region in the world.
    To give you an idea of the importance of free trade 
agreements to the U.S. pork producers, the United States now 
exports more pork to 20 countries with which it has FTAs than 
to the rest of the whole world. Congress must pass the TPP, and 
it must be done soon.
    Finally, a challenge that would be out of everyone's 
control but that could be tempered by preparedness is a foreign 
animal disease outbreak. Specifically, an outbreak of foot-and-
mouth disease. An FMD outbreak in this country would be 
economically devastating to U.S. pork producers and other food 
producers. USDA and the livestock industry have been working on 
a plan to combat an outbreak, but the only practical way is 
through vaccination. Unfortunately, we currently don't have the 
ability to produce the number of doses needed for an initial 
outbreak with the capacity to produce more. The U.S. pork 
industry believes consistent with Homeland Security 
Presidential Directive 9 that an adequate FMD vaccine bank must 
be established. This will require an offshore vendor-maintained 
bank that would have available antigen concentrate to protect 
against all of the 23 most common FMD types currently 
circulating in the world. A vendor-managed inventory of ten 
million doses, which is the estimated need for just the first 2 
weeks of an outbreak, and a contract with an international 
manufacturer or manufacturers with a reserve capacity to 
produce at least 40 million additional doses.
    Given the cost of dealing with an FMD outbreak and the 
economic impact on the livestock industry, and indeed on the 
entire U.S. economy, Congress should appropriate enough money 
to set up such a vaccine bank. Those are just a few of the 
opportunities and challenges that pork producers face. I thank 
you for your time and I would be happy to answer any questions.
    [The prepared statement of Mr. Herring follows:]

   Prepared Statement of David Herring, Member, Board of Directors, 
           National Pork Producers Council, Newton Grove, NC
A Review of the U.S. Livestock and Poultry Sectors: Marketplace 
        Opportunities and Challenges
Introduction
    The National Pork Producers Council (NPPC) is an association of 43 
state pork producer organizations that serves as the global voice for 
the nation's pork producers. The U.S. pork industry represents a 
significant value-added activity in the agricultural economy and the 
overall U.S. economy. Nationwide, more than 68,000 pork producers 
marketed more than 115 million hogs in 2015, and those animals provided 
total gross income of nearly $24 billion. Overall, an estimated $23 
billion of personal income and $39 billion of gross national product 
are supported by the U.S. pork industry.
    Economists Daniel Otto, Lee Schulz and Mark Imerman at Iowa State 
University estimate that the U.S. pork industry is directly responsible 
for the creation of more than 37,000 full-time equivalent pork 
producing jobs and generates about 128,000 jobs in the rest of 
agriculture. It is responsible for approximately 102,000 jobs in the 
manufacturing sector, mostly in the packing industry, and 65,000 jobs 
in professional services such as veterinarians, real estate agents and 
bankers. All told, the U.S. pork industry is responsible for nearly 
550,000 mostly rural jobs in the United States. The U.S. pork producers 
today provide 25 billion pounds of safe, wholesome and nutritious meat 
protein to consumers worldwide.
    Exports add significantly to the bottom line of each U.S. pork 
producer. U.S. exports of pork and pork products totaled 2.13 million 
metric tons in 2015, representing more than 24 percent of U.S. 
production, and those exports added more than $48 to the value of each 
hog marketed. Exports supported approximately 110,000 jobs in the U.S. 
pork and allied industries.
Cautious Expansion, Continued Focus on International Markets
    The state of the U.S. pork industry has been shaped in recent years 
by disease: recall the H1N1 flu in 2009 and the Porcine Epidemic 
Diarrhea virus (PEDv). The latter first was documented in the United 
States during the spring of 2013, and over the next 18+ months killed 
between eight million and ten million piglets. The dramatic reduction 
in the supply of available market hogs led to record hog prices 
throughout 2014 after 4 straight years of economic losses primarily 
because of record-high feed costs.
    Pig mortality since then has fallen dramatically, with the U.S. 
Department of Agriculture's Quarterly Hogs and Pigs report for the 
fourth quarter of 2015 showing the highest level of live births per 
litter in history at 10.53 pigs.
    Seemingly recovered from the worst of PEDv's catastrophic effect on 
production, the U.S. pork industry appears to be moving into a period 
of cautious, calculated expansion. Pork production in 2015 increased 
year-on-year by a whopping 7.3 percent, albeit from the PEDv-ravaged 
calendar year 2014. Pork production this year is forecast by USDA to 
increase by two percent to 24.99 billion pounds, and 2017 production is 
forecast to increase 2.6 percent to 25.64 billion pounds. The total hog 
herd in the United States today is 67.6 million head, up slightly from 
2015.
    The typical cycle of barrow and gilt prices peaking in the summer 
and bottoming out in the November-December timeframe was essentially 
abandoned in 2014 and 2015 but is expected to return this year. The 
annual average for barrow and gilt prices received by producers, at 
$50.23 per carcass weight hundred (cwt.), fell dramatically in 2015 
from its 2014 high of $76.03/cwt. Prices are expected to remain in the 
$46-$48/cwt. range for the remainder of the calendar year and lose 
another six percent throughout 2017. Estimated returns for farrow-to-
finish producers continue to be positive for the year as a whole, with 
fourth quarter 2016 forecast at or below breakeven price levels.
    There is currently a tremendous amount of red meat and poultry in 
the marketplace and coming down the pipeline. Per capita consumption of 
pork registered at just under 50 pounds in 2015, and pork retail prices 
have been historically low relative to beef retail prices over the past 
18 months. Moving into grilling season (roughly Memorial Day through 
Labor Day), it will be interesting to see what happens to consumer 
demand and how it plays out in the marketplace.
    Per capita consumption of pork is forecast to remain nearly even in 
2016 before increasing by 1.8 percent in 2017. That marginal increase, 
coupled with the growing production expected throughout this year and 
next, highlight the importance of being able to send pork products to 
consumers outside the U.S. borders.
    But economic growth in importing countries has been lackluster, and 
the value of the U.S. dollar has served as a headwind to growing 
exports of U.S. pork products, particularly in 2015. The Russian import 
ban on Western products and other global geopolitical events also have 
served as barriers to export growth. Total U.S. pork exports fell in 
2015 on a value basis by 16.4 percent and on a volume basis by 2.1 
percent. The top four markets for U.S. pork products on a value basis 
(Japan, Mexico, Canada and China/Hong Kong) all imported less in 2015 
than they did in 2014. U.S. pork producers lost a tremendous amount of 
market share in the Chinese market to European producers, particularly 
from Germany, Denmark and Spain.
    Through the first quarter of 2016, U.S. pork exports were down nine 
percent year-to-date on a value basis and up 2.5 percent on a volume 
basis. In particular, the volume of exports to China/Hong Kong were up 
83 percent year-on-year, marking the largest first quarter pork 
shipments the United States ever has made to that market.
    World economic conditions are expected to improve some, especially 
in Asian countries. The Chinese hog market, for example, currently is 
in flux, with red hot demand for imported pork and Chinese hog farming 
profits larger than ever. Rapid pork inflation potentially presents an 
opportunity for larger shipments of U.S. product into the Southeast 
Asian nation, but economics does not always drive reality in China.
    USDA forecasts pork export volume to grow 5.2 percent in 2016 and 
two percent in 2017, but geopolitical events, the strength of the 
dollar and removal of non-tariff trade barriers will play an important 
role in realizing those export gains.
    Looking forward, there is no shortage of both opportunities and 
challenges for the U.S. pork industry. As the world becomes more 
globalized, so too do grain and livestock markets. A flood in Argentina 
or a drought in Brazil are felt locally and have an impact on U.S. 
producers' bottom line. Since each finished hog consumes approximately 
150 pounds of soybean meal and 10-11 bushels of corn, feed price levels 
and volatility are of the utmost importance to pork producers. The 
recent run-up in soybean meal prices has caught many by surprise, as 
did the initial estimate of prospective corn plantings.
    Total U.S. red meat and poultry production is projected to be above 
2016 levels. Hog supplies will be adequate over the summer and will be 
plentiful in the fall. Strong competition for slaughter hogs by packers 
could support hog prices, and the prospect of at least four new packing 
plants coming on line in the next couple of years could help boost 
producers' bottom line, moving forward. The pace at which these new 
plants come on line and begin processing hogs will be an interesting 
storyline to watch and will have significant implications for both 
domestic pork supplies and the availability and competitiveness of 
exports overseas.
    While the vagaries of Mother Nature--diseases affecting production 
and weather affecting feed grains--are out of anyone's control, the 
pork industry's fortunes can be affected, for good or for ill, by what 
passes through the halls of Congress; government policies can and do 
offer opportunities or pose challenges for pork producers.
Trade and the TPP Benefit Agriculture
    One of the policies that could have a positive effect on the U.S. 
pork industry--and indeed on all of U.S. agriculture--is trade, 
specifically expanded trade.
    Through free trade agreements (FTAs) and bilateral and multilateral 
trade initiatives, the United States has been very successful in 
removing barriers to U.S. exports and increasing trade in U.S. goods 
and services.
    U.S. exports of pork, for example, have increased by 1,550 percent 
in value and nearly 1,300 percent in volume since 1989, the year the 
United States implemented the FTA with Canada and started opening 
international markets for value-added agricultural products. The 
importance of trade deals is evident given that the United States now 
exports more pork to the 20 countries with which it has FTAs than to 
all other nations combined.
    Exports add to the bottom line of producers, spur economic growth 
and create tens of thousands of U.S. jobs. Last year, U.S. pork 
producers shipped 2.13 million metric tons of pork worth $5.6 billion 
to foreign destinations. Those exports added more than $48 to the price 
producers received for each hog marketed, and they supported more than 
110,000 pork industry jobs. (USDA's Economic Research Service 
calculates that every $1 billion in U.S. agricultural exports generates 
more than 7,500 jobs across the U.S. economy.)
    The United States has been, on average, the top global exporter of 
pork over the past 10 years, and given continued economic growth in the 
world and rising per capita incomes, U.S. pork producers stand to 
benefit significantly from new FTAs that eliminate tariff and non-
tariff barriers to U.S. exports.
    The importance of FTAs is evident by the fact that the U.S. pork 
industry now exports more product to the 20 countries with which the 
United States has FTAs than to the rest of the world combined.
    That's why the U.S. pork industry has been among the most 
aggressive pro-trade voices in the U.S. private-sector and why it is a 
strong supporter of the Trans-Pacific Partnership Agreement (TPP).
    NPPC was among the biggest cheerleaders for the U.S.-lead Asia-
Pacific regional FTA negotiations from the beginning of the Obama 
Administration. It was instrumental in getting Japan included in the 
TPP talks, which were concluded last October after nearly 6 years of 
negotiations.
    The organization also led agriculture's efforts to gain 
Congressional approval for Trade Promotion Authority to permit the 
Administration to carry through with the TPP negotiations and conclude 
an agreement.
    The TPP, which includes the United States, Australia, Brunei, 
Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore 
and Vietnam, presents an opportunity to open and expand markets to U.S. 
pork that include \1/2\ billion consumers and nearly 40 percent of the 
world's GDP.
    The three key markets for U.S. pork producers in the TPP are 
Australia, Japan and Vietnam. Those countries account for the 
overwhelming majority of economic benefits that will accrue to the U.S. 
pork industry. While NPPC continues to have TPP implementation 
concerns, it is confident that the issues will be resolved. Here's a 
look at the benefits U.S. pork would gain from the TPP countries:

   Australia--Tariffs on pork were eliminated under the U.S.-
        Australia FTA. But while pork is the top U.S. agricultural 
        export to Australia, it is not eligible to be sold at retail in 
        that country because of non-science-based sanitary-
        phytosanitary barriers. NPPC is working with the U.S. 
        Government to facilitate a review of the matter in Australia. 
        While the issue is not technically part of the TPP 
        negotiations, NPPC is working closely with the U.S. Government 
        to facilitate a review of the matter in Australia. There is no 
        credible scientific reason to prohibit the sale of U.S. pork at 
        retail in Australia.

   Chile--Tariffs on U.S. pork are zero under the U.S.-Chile 
        FTA.

   Japan--The largest value and second largest volume market in 
        the world for U.S. pork exports, Japan will eliminate tariffs 
        on all pork products, including its Gate Price--a complex 
        system of protection--on processed pork, in 6 to 11 years from 
        entry into force of the agreement. For processed products not 
        subject to the Gate Price such as seasoned ground pork and 
        sausages (the United States shipped more than $400 million of 
        these products in 2014), tariffs will be eliminated in year 6. 
        Japan also immediately will reduce the impact of the Gate Price 
        on chilled and frozen pork upon entry into force of TPP. The 
        Gate Price will remain at 524 Yen per kilogram indefinitely. 
        However, the specific duty that is assessed when products do 
        not meet the Gate Price will phase down to 50 Yen per kilogram 
        in year 10. There will be one safeguard on processed product 
        and two safeguards on chilled/frozen pork. These safeguards 
        disappear in year 11.

   Malaysia--Nearly all of Malaysia's tariffs on pork and pork 
        products will be eliminated upon entry into force of the 
        agreement. In addition, Malaysia dropped its non-tariff-
        barriers on U.S. pork in December 2014.

   New Zealand--Currently, pork exports from Australia, Canada 
        and China enter New Zealand duty-free, but the United States 
        must pay an import tariff. Under TPP, New Zealand will 
        eliminate all pork tariffs for the United States and other TPP 
        nations upon entry into force of the agreement except on hams 
        and shoulders, which will go to zero in year 3.

   Peru--Tariffs on U.S. pork either now are zero or will be 
        within 3 years under the U.S.-Peru FTA.

   Singapore--Tariffs already are zero on U.S. pork as a result 
        of the U.S.-Singapore FTA. Separately, NPPC is working with the 
        U.S. Government to facilitate a review of certain non-tariff 
        measures in Singapore.

   Vietnam--Despite being a larger consumer of pork than Mexico 
        (the largest volume destination for U.S. pork), pork imports 
        represent less than two percent of Vietnam's pork consumption. 
        U.S. pork exports have been limited by tariffs and a series of 
        non-tariff barriers. Under the TPP, Vietnam will eliminate 
        tariffs on pork and pork products, currently as high as 30 
        percent, in 5 to 10 years. It will eliminate tariffs on frozen 
        cuts and shoulders in 8 years and on preserved pork, fresh pork 
        cuts and shoulders in 10 years. Additionally, Vietnam's non-
        tariff barriers, which are being eliminated, are the subject of 
        a side letter.

    The TPP represents for the U.S. pork industry the biggest 
commercial opportunity ever negotiated. Economist Dermot Hayes, with 
Iowa State University, estimates that if the deal that was concluded 
last October is implemented--that is, if all tariff and non-tariff 
barriers are eliminated on pork in each TPP nation--U.S. pork exports 
to those countries will increase exponentially and more than 10,000 new 
U.S. jobs tied to those exports will be created.
    But the reality is that if Congress does not expeditiously pass 
TPP, there will be no implementation, and that means the U.S. pork 
industry and the rest of American agriculture not only won't get the 
benefits of expanded trade but will lose market share in the fastest 
growing economic region in the world. The European Union and other 
nations are negotiating FTAs with Japan and other TPP countries. Of 
even greater concern is that if TPP fails, a much bigger regional trade 
agreement is likely to fill the void. The Regional Comprehensive 
Economic Partnership (RCEP) is comprised of 16 countries, including 
Australia, China, India, Japan, Korea and New Zealand as well as the 
ten countries of the Association of Southeast Asian Nations (ASEAN). It 
does not include the United States. Make no mistake, U.S. exporters 
will be significantly prejudiced if TPP is not soon passed by the 
Congress.
    NPPC urges Congress to quickly pass the Trans-Pacific Partnership 
Agreement.
Vaccine Bank Needed To Address FMD
    On the disease front, while PEDv is still an issue for the pork 
industry, producers seem to have the disease in check. But other 
bacterial and viral diseases are lurking around the world. The pork 
industry has devoted significant resources to endemic and foreign 
animal diseases, funding more than 120 research projects and spending 
more than $5 million for studying, monitoring and addressing swine 
diseases over the past 10 years.
    And while there have been significant improvements in the systems 
for safeguarding U.S. agriculture and the nation's food supply, there 
are still significant vulnerabilities and challenges that must be 
addressed.
    The House Agriculture Committee Nov. 4, 2015, held a hearing on 
``American Agriculture and National Security'' that highlighted the 
vulnerability of the U.S. food supply to the potential for a foreign 
animal disease (FAD) to be introduced by terrorists or by accident.
    Additionally, the bipartisan Report of the Blue Ribbon Study Panel 
on Biodefense--the panel was co-chaired by former Department of 
Homeland Security Secretary Tom Ridge and former Sen. Joe Lieberman--
released Oct. 28, 2015, concluded that improvements are needed to the 
U.S. system for protecting the U.S. livestock herd and the nation's 
food supply from FADs.
    Foot-and-Mouth Disease (FMD) is one of the most economically 
devastating FADs affecting animal agriculture. It is highly contagious 
and spreads easily through livestock movement, by wind currents, on 
vehicles that have traveled to and from infected farms and even on 
inanimate objects that have come in contact with the virus. It affects 
all cloven hoofed species, including wildlife such as deer and elk.
    FMD is endemic in Africa, Asia, South America and the Middle East. 
The FMD virus has seven viral serotypes and more than 60 subtypes, with 
wide strain variability. Managing and ultimately eradicating FMD 
requires strain-specific vaccines, making vaccination challenging and 
very expensive. Sporadic outbreaks with different types continue to pop 
up in countries around the world.
    Because North America is free of FMD, an outbreak of the disease in 
the United States would immediately shut off all exports of U.S. 
livestock, meat and dairy products, creating a precipitous drop in 
livestock markets. Since U.S. consumers have little knowledge of the 
disease, there also likely would be serious disruptions in the domestic 
market because of decreased demand for those products. According to one 
recent study, prevention of FMD is estimated to be worth $137 million a 
year to the U.S. pork industry.
    With support from the livestock industry, USDA's Animal and Plant 
Health Inspection Service (APHIS) changed its policy on managing an FMD 
outbreak from culling all infected and exposed animals to one of 
vaccination in all but the smallest of outbreaks. Based on experience 
with outbreaks in the United Kingdom and South Korea, the United States 
simply cannot euthanize its way out of an outbreak; vaccination is the 
only realistic alternative. When discussing how this policy would be 
implemented, it became apparent that to deal with an outbreak there was 
not enough vaccine available nor could a sufficient quantity be 
obtained in time to implement an effective control program.
    The United States is the only country in the world that maintains 
its own vaccine antigen bank, and it serves all of North America. The 
bank is maintained at the Plum Island Animal Disease Center (PIADC) on 
Plum Island, N.Y., and has a limited number of antigens. Under the 
current manufacturer(s)' contract, antigen is shipped to Europe where 
it is made into finished vaccine that then is shipped back to the 
United States. After 3 weeks, this process would produce only 2.5 
million doses of vaccine. Dr. James Roth, professor and researcher at 
Iowa State University, estimates that at least ten million doses would 
be needed during the first 2 weeks of an outbreak. Currently, there is 
no surge capacity to produce additional doses of vaccine. All the 
vaccine production capacity in the world is currently in use by other 
countries.
    The Subcommittee on Livestock and Foreign Agriculture held a 
hearing Feb. 11, 2016, on the FMD vaccine shortage at which the 
livestock industry made clear that a solution to the shortage must 
include a contract for an offshore, vendor-maintained bank that 
includes antigen for all 23 FMD types that are currently circulating in 
the world and that a contract be awarded for surge capacity to produce 
sufficient quantities of vaccine for an outbreak in the U.S. livestock 
herd. But there are factors that make this difficult.
    The U.S. FMD vaccine bank is currently funded at just $1.9 million, 
and there have been no requests for a substantial increase in the 
President's budget despite the fact that Homeland Security Presidential 
Directive 9 (HSPD9) requires an adequate vaccine stockpile to be 
maintained.
    Another factor complicating upgrades to the vaccine bank is that it 
also serves as the North American Bank and thus includes Canada and 
Mexico. NPPC believes it is appropriate to include those neighboring 
countries, but the United States should not wait for negotiations with 
those countries to be completed before making necessary improvements, 
which are critical to the U.S. livestock industry.
    NPPC knows that fixing the vaccine shortage will require a 
significant increase in budget outlays. However, that cost pales in 
comparison to the cost of an FMD outbreak. Iowa State University 
economist Dermot Hayes estimates revenue losses to just the U.S. pork 
and beef industries from an FMD outbreak at nearly $13 billion per year 
over a 10 year period; the corn and soybean industries are estimated to 
lose $44 billion and almost $25 billion, respectively. A recent study 
by Kansas State University estimates cumulative losses to consumers and 
livestock producers at $188 billion, with an added cost to the 
government of $11 billion for eradication efforts if vaccination is not 
employed. If vaccination is employed, the study estimates--depending on 
the strategy used--the losses to consumers and producers could be cut 
by 48 percent.
    The history of government involvement in disasters like an FMD 
outbreak is that, once an outbreak occurs, unlimited resources are 
committed to getting control of the situation. In the case of FMD, 
there is a clear opportunity to invest in a robust vaccine bank that 
would limit the economic impact on producers, feed suppliers and 
consumers and reduce the government's cost for control and eradication 
of the disease.
    NPPC urges Congress to work with the Administration to address the 
alarming gap in the preparedness for an FMD outbreak. Whether the 
disease introduction is the result of terrorism, careless travelers or 
carried on traded commodities, the calamitous result is the same: 
devastation to the U.S. livestock industry and a significant hit to the 
U.S. economy.
Legislation and Regulation
    Finally, the U.S. pork industry is, or can be, greatly affected by 
Federal legislation and regulation.
    NPPC works on behalf of America's pork producers to ensure that 
laws and rules don't impose unnecessary costs on the U.S. pork 
industry, restrict it from meeting consumer demands in an economical 
manner or prevent market-based solutions to issues. The structure of 
the pork production and packing sectors should be allowed to change 
with the demands of the growing global marketplace. This includes 
allowing producers and packers to adopt new technologies and pricing 
and marketing mechanisms that enable the former to reduce their risks 
and the latter to capture economies of scale.
    The U.S. pork-packing sector is the envy of the world in terms of 
efficiency and food safety, and legislation and regulation should not 
take away or hamper that source of international advantage. Allowing 
producers and packers the freedom to develop new ways of doing business 
will only enhance the value of U.S. pork products, at home and abroad, 
and reduce costs and risks.
    Today, the U.S. pork industry has developed a variety of marketing 
and pricing methods, including contracts, to meet the changing needs of 
a diverse marketplace. U.S. pork producers will not be well served if 
certain contracting mechanisms are eliminated, a move that only would 
force livestock markets to revert to a system used more than half a 
century ago in which animals were traded in small lots and at prices 
determined in an open-market bid system. Such a system was inefficient 
and makes no economic sense in today's economy.
    That is why NPPC is very concerned about the revival of USDA 
regulations to amend the Packers and Stockyards Act, which is 
administered by the Grain Inspection, Packers and Stockyards 
Administration (GIPSA). The regulations, collectively known as the 
GIPSA rule and first proposed in 2010, would regulate the buying and 
selling of livestock and poultry. Congress in the 2008 Farm Bill asked 
USDA to address five specific issues related to production contracts:

   Criteria for determining whether an undue or unreasonable 
        preference or advantage has been given to any producer.

   Whether a poultry dealer or swine contractor has provided 
        sufficient time for a grower to remedy a breach of contract 
        that could result in contract termination.

   Whether a poultry dealer has given reasonable notice of any 
        suspension of delivery of birds to a grower under a contract.

   When a requirement of additional capital investment during 
        the life of a contract constitutes a violation of the Packers 
        and Stockyards Act as an unfair practice.

   The factors that comprise a fair usage of arbitration, 
        including notification and the option for producers to opt out 
        of automatic arbitration to resolve disputes.

    U.S. pork producers were stunned in June 2010 when USDA proposed a 
rule that not only went well beyond the five issues Congress asked it 
to address but included provisions considered and rejected by 
Congressional lawmakers during the 2008 Farm Bill debate.
    One provision included in the rule, for example, would have 
required meat packers to justify and document, including with revenue 
and cost analyses, price differences paid for livestock, making it 
difficult for producers to negotiate premiums based on certain 
production practices, or accept lower prices for livestock of lesser 
quality. Such a ``justification'' provision was considered and rejected 
by the Senate.
    The rule would have had a devastating impact on livestock 
producers. According to an analysis of the regulation conducted by 
Informa Economics, it would have cost the U.S. pork industry more than 
$350 million annually. Industry analysis of the rule concluded that it 
likely would have had a chilling effect on innovation and flexibility, 
leading to a race toward mediocrity. It would have created legal 
uncertainty, driving costs higher and causing an increase in vertical 
integration in the livestock sector, forcing producers out of business 
and possibly affecting meat supplies. All of those effects would have 
harmed the U.S. pork industry's international competitiveness, costing 
U.S. on-farm and pork-processing jobs as well as negatively affecting 
the U.S. balance of trade.
    While there was overwhelming opposition to the GIPSA rule, 
including more than 16,000 public comments from pork producers, it took 
yearly action by Congress to prevent its implementation. Unfortunately, 
no such action--in the form of language in USDA's annual 
appropriation--was forthcoming for fiscal 2016.
    In March, at a meeting of the National Farmers Union, which 
supported the 2010 GIPSA rule, Agriculture Sec. Vilsack indicated that 
his agency will move forward with implementing the regulation, and NPPC 
confirmed last week that several of the regulations are with the White 
House Office of Information and Regulatory Affairs, the last step 
before rules are proposed final or become final.
    Pork producers again are very concerned that USDA's GIPSA rule will 
be too expansive, limiting farmers' ability to sell animals, dictating 
the terms of private contracts, making it harder to get farm financing, 
raising consumer prices and reducing choices, stifling innovation and 
leading to more vertical integration in the livestock industry.
    The U.S. pork industry opposes any legislation or regulation that 
restricts marketing opportunities and interventions into hog markets 
unless such actions address a clear, unequivocal instance of market 
failure or abuse of market power. To date, USDA has not presented any 
evidence that either is taking place.
    NPPC urges Congress to ensure that any USDA rule to amend the 
Packers and Stockyards Act not restrict producers' ability to sell or 
packers' ability to buy animals and not limit their ability to use 
technologies and pricing and marketing mechanisms that work for their 
mutual benefit.
    Another regulation that could have a profound negative effect on 
U.S. pork producers is the Waters of the United States (WOTUS) rule 
issued last year by the U.S. Environmental Protection Agency and the 
U.S. Army Corps of Engineers.
    The rule was promulgated ostensibly to clarify the agencies' 
jurisdiction under the Clean Water Act (CWA) over various waters. 
Historically and based on several U.S. Supreme Court decisions, those 
waters were limited to navigable waters, their tributaries and adjacent 
water bodies that are hydrologically connected or that otherwise affect 
navigable waters.
    Certainly, pork producers are concerned about water quality, and 
they take a broad view of what it means to be environmentally 
responsible farmers and business people and have embraced the fact that 
their operations must protect and conserve the environment and the 
resources they use and effect. Producers have made major commitments to 
environmental conservation, including meeting EPA's stringent zero-
discharge standard that is part of the 2008 CAFO (Concentrated Animal 
Feeding Operation) rule and participating in a historic study of air 
emissions from farms.
    But the WOTUS rule issued by EPA--over some objections from the 
Corps of Engineers--is overbroad, vague and fails to let regulated 
parties know what conduct violates the law. It includes, among other 
water bodies, upstream waters and intermittent and ephemeral streams 
such as the kind farmers use for drainage and irrigation. It also 
encompasses lands adjacent to such waters.
    The rule, for example, would cover any discernable feature that 
possesses (or previously possessed) a bed, bank and high water mark. 
This would create uncertainty, confusion and significant legal 
liability for farmers. In short, the regulation as written could affect 
farmers' ability to use their land. Moreover, under the CWA, there is 
an absolute prohibition on discharging any pollutant--whether manure, a 
chemical pesticide or fertilizer or even a seed of corn--into a WOTUS 
without a Federal permit. Violations of the prohibition are subject to 
significant criminal penalties as well as civil fines of up to $37,500 
per day per discharge, with the power to enforce the penalties open to 
private citizens.
    It's not so much EPA enforcement but the threat of activist groups 
suing--using the CWA's private right of action--over alleged WOTUS 
violations that will have a chilling effect on farmers.
    A number of lawsuits brought at the U.S. District Court level were 
filed against the regulation, which took effect Aug. 28, 2015. (The 
North Dakota-based District Court in September 2015 issued a temporary 
injunction against EPA implementing the regulation in the 13 states 
that brought suit against the rule in that court.) The government wants 
the District Court cases to be consolidated in the U.S. Court of 
Appeals for the 6th Circuit in Cincinnati, which in October 2015 issued 
a stay of the rule until disposition of the cases before it.
    In reaching its decision to stay the rule, the 6th Circuit found 
that there's a substantial likelihood that the WOTUS regulation fails 
to comply with the U.S. Supreme Court's instructions in previous Clean 
Water Act cases and that the actions of EPA in the rulemaking process, 
to which NPPC objected at the outset, are ``facially suspect.''
    Despite its hints about the outcome of the consolidated cases, the 
possibility exists that the appeals court will find that the EPA and 
the Corps of Engineers were within their discretion in promulgating the 
WOTUS rule.
    So NPPC continues to urge the agencies to withdraw the rule and to 
work with all affected stakeholders, including the agricultural 
community, to develop a rule that clarifies what waters are and are not 
jurisdictional in a manner consistent with the Supreme Court's rulings 
and that is workable and cost effective for the regulated community.
Conclusion
    The U.S. pork industry is the lowest-cost producer and No. 1 
exporter of pork in the world, and U.S. pork producers continue to 
produce the most abundant, safest, most nutritious pork in the world. 
They have proved very resilient, weathering financial crises and 
diseases as well as the vagaries of a supposedly free-market economy 
pushed and pulled in various directions by government intervention and 
regulation while investing in and adopting new technologies that have 
promoted animal health, protected the environment and added thousands 
of jobs and billions in national income to the American economy.
    For America's pork producers to continue as leaders in the 
international and domestic economies, for them to take advantage of the 
opportunities and meet the challenges presented to them, Congress and 
the Administration must pursue Federal policies and regulations that 
support U.S. pork production rather than hinder its ability to continue 
to produce safe, lean and nutritious pork and pork products for the 
global marketplace.

    The Chairman. Thank you, Mr. Herring.
    Mr. Brunner?

  STATEMENT OF TRACY BRUNNER, PRESIDENT, NATIONAL CATTLEMEN'S 
      BEEF ASSOCIATION; COW CAMP FEEDYARD INC., RAMONA, KS

    Mr. Brunner. Thank you, Mr. Chairman, Members of the 
Committee. Good morning to everyone.
    Always at the mercy of Mother Nature, our industry is 
rapidly recovering from extensive drought. Herd rebuilding and 
expansion are taking place at a rate where U.S. cattle numbers 
will soon be equal to 2012. Additionally, American beef 
producers continue to be more efficient in producing beef. 
Today, we can produce the same amount of beef that we produced 
in 1977, with only \1/3\ of the land and cattle.
    The beef value supply chain is always focused on the 
consumer. Cow/calf ranchers tell their seedstock suppliers what 
they need, and also ask their stocker and feeder calf buyers 
what they will pay the most for. Cattle feeders likewise look 
to packer processors for signals of greatest value, who in turn 
have an ear for retail and food service needs.
    Cattle prices have been the topic of focus for NCBA and our 
members. In 2015, we saw record high cattle prices, but soon 
those started back down. One factor was the overall increase in 
overall protein supplies. In 2015, U.S. per capita red meat and 
poultry supplies increased by nearly 10 pounds per person. In 
addition, the strong U.S. dollar impacted our ability to ship 
beef to our international customers. All this additional supply 
puts downward pressure on the markets, but we are used to the 
ups and downs of the cattle cycle.
    In order to manage this cycle, we need risk management 
tools that work. We currently rely on market forums like CME 
Group's cattle futures contracts, and adding transparency to 
our price discovery process. Changing technologies and a 
transition to automated trading and commodity futures have 
increased market volatility, making interpretation of those 
price signals different than what we are accustomed to in the 
past. The integrity of our market forums is very important, for 
without futures contract integrity, our industry will abandon 
their use.
    We have recognized this volatility and are working directly 
with the CME Group to find ways to address it. We have a joint 
NCBA CME working group which is analyzing potential changes 
such as slowing down the market to help ensure a level playing 
field for producers who are using these tools to manage their 
price risks.
    Today, we ask for no direct action from our government in 
our cattle marketing systems and forums. In fact, I am 
concerned at some of the action that we have seen from USDA and 
the Senate.
    Secretary Vilsack has announced that he is going to dust 
off the proposed GIPSA marketing rule that resulted from 
language included in the 2008 Farm Bill. This is concerning to 
us because bipartisan efforts already resulted in 
appropriations language, which defunded any additional work or 
implementation of the ideas that were included in that draft 
rule. The proposed GIPSA rule would have made USDA the ultimate 
arbiter of how cattle are marketed. We urge USDA to enforce the 
Packers and Stockyards Act. We do not need them dictating how 
we can or cannot market our cattle.
    Our industry has worked for years in developing new and 
innovative ways to market cattle. Alternative marketing 
arrangements have been studied by USDA and independent groups, 
and the results show that these alternatives benefit producers 
and consumers alike. Any Congressional or Executive Branch 
action to interfere will only add to our price problems, not 
solve them.
    Solving our price problems relies on addressing the true 
issues of consequence in our industry. We have capitalized on 
the growing demand for U.S. beef overseas, and Japan has become 
our leading export market. But Australia now has a ten percent 
tariff advantage over us, resulting in a $300 million loss to 
our industry. The tariff advantage for Australia will continue 
to grow until we pass TPP.
    In closing, I would say you could also help our bottom like 
by easing the regulatory burden our industry is under, taking 
action to reform the Endangered Species Act, and helping us 
keep EPA at bay will go a long way in easing the pressures on 
our industry.
    Again, thank you very much for this opportunity to be with 
you today, and I will be happy to answer any questions.
    [The prepared statement of Mr. Brunner follows:]

 Prepared Statement of Tracy Brunner, President, National Cattlemen's 
          Beef Association; Cow Camp Feedyard Inc., Ramona, KS
    Mr. Chairman, Ranking Member Costa, and Members of the 
Subcommittee, my name is Tracy Brunner and I am the President of the 
National Cattlemen's Beef Association. I am a fourth generation rancher 
and cattle feeder from the Flint Hills area of Kansas, and our nearest 
Post Office is at Ramona. Our family operation includes three brothers 
and three sons. We are involved in cattle genetics, seed stock, 
grazing, and finishing cattle. I surely appreciate the Committee's 
interest in cattle marketing issues, and it is an honor for me to be 
asked to share our viewpoints.
    The National Cattlemen's Beef Association (NCBA) has for nearly 120 
years represented America's beef cattle industry. We have over 30,000 
direct and 170,000 affiliated members nationwide. America's cattle 
industry is extensive and constitutes the largest segment of American 
agriculture. Always at the mercy of Mother Nature, our industry is 
recovering rapidly from extensive drought. Herd rebuilding and 
expansion are taking place at a pace where U.S. cattle numbers will 
soon be equal to 2012. Additionally, American cattle producers continue 
to be more efficient in producing beef. We can produce the same amount 
of beef that we produced in 1977 with 30% fewer cattle, 18% less feed, 
12% less water, and 33% less land. However, we need to continue our 
efforts to be more efficient as we strive to do our part in providing 
70% more food to meet the expected population of nine billion people in 
2050.
    Our industry requires extensive tracts of land to run cattle 
allowing us to preserve the ability for family cattle farms and ranches 
to stay viable. The beef industry is diverse in structure, yet the 
drive to stay competitive with other proteins has shown us the need to 
coordinate among all the stakeholders from field to fork. Cow/calf 
ranchers tell their seed stock suppliers what they need, and also ask 
their stocker and feeder calf buyers what they will pay most for. 
Cattle feeders likewise look to packer-processors for signals of 
greatest value, who in turn have an ear for retail and foodservice 
needs. As a complete beef supply chain, we have learned that without 
ultimate consumer focus, we can soon blindly produce our way into 
irrelevancy.
    Due to the diverse and broad-based nature of the cattle industry 
operating in an environment of increasing need for coordination and 
cooperation, we have market needs more unique than other animal 
proteins and commodities. We rely on clear and accurate price signals 
to be passed up and down the beef value chain. A cow/calf producer must 
have not only precipitation, but also market confidence that his 
decision to mate a bull and heifer today will be rewarded beyond costs 
by the time it heads to market nearly 2 years later. Cattle grazers and 
feeders that purchase those calves need a clear view of future prices 
in order to determine if there is a return on their investment. In 
addition, packer-processors use price discovery and analysis in order 
to price beef in a way for consumers to be assured of a constant supply 
of the highest quality beef anywhere on Earth.
    Cattle prices have been a topic of focus for NCBA and our members. 
[CY] 2015 saw a record high for cattle prices, but those soon started 
back down due to several reasons. One factor was the increase in 
overall protein supplies. In 2015, U.S. per capita red meat and poultry 
supplies increased by nearly 10 pounds per person. In addition, the 
strong U.S. dollar impacted our ability to ship beef to our 
international customers. All of this additional supply puts downward 
pressure on the markets. This has been compounded by the break in the 
drought throughout most of the cattle producing areas of this country 
which has resulted in more abundant and cheaper feed, and the resulting 
decision by many producers to increase the size of their herds. Larger 
supplies always lead to lower prices, but we are used to the ups and 
downs of the cattle cycle. In order to manage this cycle, we need risk 
management tools that work.
    Price discovery is ultimately driven by supply and demand. The 
fundamentals of markets are universal. The cattle industry today relies 
on transparency of price discovery to send clear signals up and down 
the beef chain. Cattle and beef are a wonderful but perishable 
creation. We are not grain that can be stored for great lengths waiting 
on fundamentals to steady an uncertain market. We currently rely on 
market forums like CME Group's cattle futures contracts as solid 
information in our price discovery process. Changing technologies and a 
transition to automated trading in commodity futures trading have 
increased market volatility, making interpretation of those price 
signals different than what we were accustomed to in the past. The 
integrity of our market forums is very important, for without futures 
contract integrity our industry will abandon their use.
    We have recognized the volatility and are working directly with the 
CME Group to find ways to address it. We have a joint NCBA/CME working 
group which is analyzing potential changes which could slow the market 
down and ensure a level playing field for producers who are using these 
tools to manage their price risks. Today we ask for no direct action 
from our government in our cattle marketing systems and forums. In 
fact, I am concerned at some of the action we have seen from USDA and 
the Senate.
    Secretary Vilsack has announced that he is going to dust off the 
proposed GIPSA marketing rule that resulted from language included in 
the 2008 Farm Bill. This is concerning to us because bipartisan efforts 
resulted in appropriations language which defunded any additional work 
on, or implementation of, the ideas included in the draft rule. The 
provisions in the draft rule would have taken away our ability to 
market cattle the way we want to. The proposed GIPSA rule would have 
made USDA the ultimate arbiter of how cattle are marketed. We urge USDA 
to enforce the Packers and Stockyards Act as it exists now. We do not 
need them dictating how we can or can't market our cattle.
    I am also aware of the introduction of Senator Grassley's bill to 
ban packer ownership of cattle. This is another solution in search of a 
problem which has been tried, and defeated, many times before. Over the 
past decade, USDA's Mandatory Price Reporting has shown that only five 
to six percent of cattle are packer owned. This is not the source for 
the downward market. We only wish that same tenacity was used to help 
us address the real problems we have with our Federal Government.
    We have worked for years to find new and innovative ways to market 
cattle. Alternative marketing arrangements have been studied by USDA 
and independent groups, and the results show that these alternatives 
benefit producers and consumers alike. Any Congressional or Executive 
action to interfere will only add to our price problems, not solve 
them.
    Solving our price problems relies on addressing the true issues of 
consequence to our industry. Beef trade is one of those issues. 
Globalization is not feared by the American beef industry, but 
embraced. In fact we continue to export an increasing volume and value 
of American beef to destinations worldwide. Last year we exported over 
14% of all finished cattle value, that's worth over $300 extra for 
every calf in America. Many of you can likely attest that NCBA is 
always talking about more market access for the ability to sell more 
beef. Our beef does compete on the global market, however our industry 
is not easily replicated globally.
    If Congress passes TPP this year, the U.S. beef industry will be 
one of the biggest winners in agriculture. At the same time, if 
Congress fails to pass TPP or delays action on TPP, the U.S. beef 
industry will be one of the biggest losers in agriculture, and here's 
why that is the case.
    Roughly 80 to 85 percent of the beef we produce is for the American 
market. American consumers love the ribeyes, tenderloins, and briskets 
from our cattle, but not all cuts of the carcass can be sold 
domestically at a premium. The small percentage of beef that we export 
are cuts like tongues and short plates that are not desirable to the 
American consumer. Rather than send these cuts to a landfill or process 
them into pet food, we have found that Asia has proven to be a great 
destination for these cuts.
    As a result, we have capitalized on the growing demand for U.S. 
beef overseas and Japan has become our leading export market. In 2015 
the Japanese purchased $1.3 billion of U.S. beef and was one of the 
leading export markets for beef tongue. Even with a 38.5 percent tariff 
rate on our beef, we have seen a tremendous growth in export sales to 
Japan over the past 4 years and we have been able to gain significant 
market share because of the quality and price of our beef.
    Our leading competitor in the Japanese beef market is Australia. In 
January 2015 the Japan-Australia Economic Partnership Agreement took 
effect and gave our leading competitors a ten percent tariff advantage 
over us in our leading export market. In other words, the Japanese 
tariff on U.S. beef is 38.5 percent and the Japanese tariff on 
Australian beef is less than 28 percent. This disadvantage for U.S. 
beef in Japan resulted in nearly $300 million in lost sales to Japan in 
2015. The tariff rate advantage for Australia will continue to grow for 
the next decade unless something is done to level the playing field in 
Japan. The good news is TPP will level the playing field for U.S. beef 
in Japan by lowering the tariff rate on U.S. beef to match Australia's 
tariff rate upon implementation of TPP and will continue to decrease to 
nine percent over 16 years. This the greatest beef market access ever 
negotiated into Japan.
    Japan market access is not the only highlight of TPP. TPP 
eliminates tariffs on U.S. beef exports to other countries including 
Vietnam and Malaysia, and also includes a strong set of rules that 
prevent governments from putting in place non-science based barriers 
and technical barriers to trade. TPP also gives us leverage over 
countries like Indonesia, Taiwan, the Philippines--all countries who 
want to join TPP and all are countries where U.S. beef has outstanding 
issues with market access.
    The benefits of TPP are great, but so are the costs of inaction. If 
the United States fails to enact TPP, then we will send a strong 
message to our allies in the Pacific Rim that we are no longer willing 
to lead in the Pacific and the United States will simply resign our 
position of leadership to China regarding international trade and the 
geopolitical affairs of the Pacific Rim.
    Unfortunately China already has leverage over the United States in 
terms of beef market access and has exerted that leverage since it 
banned U.S. beef in 2003 following the classical BSE case involving a 
Canadian-born cow in the state of Washington. In 2006, China 
unilaterally re-opened its market to de-boned beef from cattle under 30 
months of age with the stipulation that U.S. beef imports meet 22 
requirements that included traceability of the animal to place of birth 
and the exclusion of meat from cattle that were of Mexican-origin. A 
year later, in 2007, China expanded access for U.S. beef to include 
bone-in beef from cattle under 30 months of age, subject to the same 22 
conditions they introduced in 2006. The U.S. beef industry did not 
agree to meet these non-science based and commercially restrictive 
terms and worked to educate the Chinese Government on how these 
unnecessary requirements did nothing to address food safety or animal 
health concerns. In 2012, the United States received negligible risk 
status for BSE from the World Organization for Animal Health (OIE); 
this is one of the highest levels of safety awarded by the OIE. Even 
with our negligible risk designation, China has not modified its BSE 
restrictions on U.S. beef and we are still prohibited from the Chinese 
market.
    Regaining market access to the large and growing Chinese beef 
market is essential to the future health of the U.S. beef industry. For 
several years the U.S. Government has been meeting with Chinese 
officials to discuss re-opening the Chinese market to U.S. beef. 
Unfortunately whatever progress has been made in these meetings has 
simply led to further questions and delays. Despite the frustrating 
process, NCBA remains strongly committed to working with the U.S. 
Government to address China's concerns. With the guidance and direction 
of our volunteer leaders we will continue to provide the necessary 
advice that our government needs to arrive at an agreement that will 
address China's concerns and help us regain access for beef. One of the 
points of concern for China is the U.S. capacity to identify at the 
slaughter plant the birth premise of every animal from which beef is 
certified for export to China. The U.S. beef industry and the U.S. 
Government have worked extensively to find a solution that does not 
place mandatory production requirements on producers regarding 
traceability. We believe there are existing voluntary marketing 
programs that address China's concerns and look forward to our 
negotiators being able to find a common-sense solution and restore 
access to China. Even if there is a consensus position to address 
China's concerns, China may bring up other potential roadblocks that 
will have to be addressed at that time. A healthy dose of caution is 
needed in working with China.
    Other actions can also be taken to help our industry recover from 
downward prices. We continue to be hit with over burdensome regulations 
which hamper our ability to be as efficient as possible. One such over 
burdensome regulation is the Endangered Species Act. Despite being 
essential to protecting habitat for wildlife everywhere, cattle 
producers throughout the country continue to suffer the brunt of 
regulatory and economic uncertainty as a result of the U.S. Fish & 
Wildlife's implementation of the Endangered Species Act.
    Simply put, the ESA is broken. Years of abusive litigation by 
radical environmental groups have taken a toll, and the result is a 
system badly in need of reform. Today more than two thousand species 
are listed as either Threatened or Endangered, with new petitions 
stacking up by the hundreds due to groups that have set up ``petition 
assembly lines'' to churn out new filings by the dozen. When the Fish 
and Wildlife Service fails to respond to this avalanche of procedural 
paperwork, the groups sue, tying up the court system and sapping the 
agency of money that should be used for species recovery and de-listing 
efforts.
    If we want to fix the Endangered Species Act we are going to have 
to get serious about ending this taxpayer-funded litigation abuse. The 
Equal Access to Justice Act and the ESA Judgement Fund were not created 
to serve as bank accounts for activist groups, yet that's how they are 
being used. Every time the FWS settles a lawsuit or enters a settlement 
agreement like the infamous 2011 ``mega-settlement'' with the Center 
for Biological Diversity and WildEarth Guardians, these ``factory 
litigants'' receive a windfall profit, which only reinforces their 
action and encourages more abuse.
    The result of this cycle of abuse is a dismal 1.4% recovery rate 
for listed species--a failure by any standard. Since all available 
resources are devoted to listing petitions and litigation, virtually 
nothing remains for recovery and de-listing efforts. Some species have 
been listed for 15 years or more without a valid recovery plan or 
recovery benchmarks in place. For cattle producers operating in the 
range of a listed species, that means playing a game we can't win using 
rules we're not allow to see.
    After 40 years, Congress must step in to reform this broken law. We 
need to restore balance to the ESA by making recovery plans and de-
listing benchmarks a requirement to list a new species. Certainly if 
the Service has enough information to determine that a species is 
threatened, it should also have enough information to determine what 
``recovered'' looks like. Congress must also ensure that effective 
conservation tools like Candidate Conservation Agreements with 
Assurances (CCAAs) aren't marginalized through the rulemaking process. 
The assurances provided to producers through such instruments are 
critical to effective preemptive conservation efforts on the ground. 
With clear guidance, realistic recovery goals, and a focus on truly 
threatened species, cattle producers stand ready to continue their work 
on the front lines of species conservation. It is my hope that Congress 
will act to provide the Fish and Wildlife Service that badly needed 
guidance.
    When we talk of over burdensome regulations, we always need to talk 
about the Environmental Protection Agency (EPA). Cattle producers rely 
on clean water, clean air, and clean land to run successful businesses. 
We pride ourselves on being good stewards of our country's natural 
resources. Since our livelihood is made on the land, through the 
utilization of our natural resources, being good stewards of the land 
not only makes good environmental sense; it is fundamental for our 
industry to remain strong. We maintain open spaces, healthy rangelands, 
provide wildlife habitat, and feed the world, but to provide all these 
important functions, we must be able to operate without excessive 
Federal burdens. Unfortunately, the livestock industry is threatened 
daily by urban encroachment and natural disasters, and the last thing 
we need is additional regulatory burden and government overreach.
    The Waters of the U.S. (or ``WOTUS'') rule continues to be a top 
concern for cattle producers, despite the temporary court-ordered stay. 
I am extremely concerned about the devastating impact this rule could 
have on me and other ranchers and farmers. As a livestock producer, I 
can tell you that the rule has the potential to impact every aspect of 
my operation and others like it by regulating every tributary, stream, 
pond, and dry streambed on my land. What's worse is the ambiguity in 
the rule that makes it difficult to determine just how much of my 
operation will be affected.
    WOTUS is just the tip of the iceberg for incoming environmental 
rules that impact beef producers. Another pending regulation is the 
Spill Prevention, Control, and Countermeasure (or ``SPCC'') rule for 
farms, which requires farmers to develop and certify a control plan and 
install secondary containment structures for oil storage. There's also 
the new ozone standard which can impact a rancher's ability to conduct 
a prescribed burn, which is an environmentally beneficial practice for 
burn-dependent ecosystems. I'll also mention the Resource, Conservation 
& Recovery Act--a law designed by Congress to regulate landfills--which 
for the first time ever was determined by a Federal court judge to 
apply to agricultural operations. Ironically, these regulatory and 
enforcement regimes ultimately disenfranchise agricultural producers 
instead of incentivizing conservation efforts.
    As I explained earlier, our industry is quite diverse and 
independent by nature, but by necessity we come together to solve our 
challenges. I sincerely appreciate your invitation and attention for 
these few minutes today. We want to work with you to ensure that 
legislation passed and regulations promulgated are ones which help 
producers, not hinder us.

    The Chairman. Thank you, Mr. Brunner. The chair would like 
to remind Members that they will be recognized for questioning 
in order of seniority for Members who were here at the start of 
the hearing. After that, Members will be recognized in order of 
arrival. I appreciate the Members' understanding.
    Understanding that Ranking Member Collin Peterson has 
another commitment he has got to get to, I would be happy to 
yield at this time.
    Mr. Peterson?
    Mr. Peterson. Well thank you, Mr. Chairman. I appreciate 
that.
    Mr. Zimmerman, you mentioned in your testimony that USDA 
proposed rules on organic poultry gives you concern. Could you 
talk a bit more about the risks associated with this rule, your 
concerns, and do you feel this rule will work counter to USDA's 
efforts to prevent another high-path outbreak?
    Mr. Zimmerman. Our primary concerns do have to deal with 
another high-path outbreak. Here we are working with APHIS 
trying to limit our exposure to water fowl, rodents, other 
possibilities of bringing HPAI into our farms, and then AMS 
comes up with these new proposals that want us to increase the 
outside space required for organic production. It just doesn't 
make any sense that one part of USDA is telling us to keep our 
birds as safe as possible, inside our barns and the other group 
is saying well one segment of the industry needs this much 
greater space outside. So that is the greatest concern.
    And they are also admitting that this will increase 
mortality, some of these organic rules, and that is 
counterintuitive to what we are tying to do.
    Mr. Peterson. Are they listening?
    Mr. Zimmerman. We hope so. I guess that is part of the 
reason we are here today.
    Mr. Peterson. All right.
    Dr. Brown, you have done a lot of analysis on milk and MPP. 
What would you say to some of the producers that think that 
they were better off under MILC, first. And second, in your 
analysis there has been talk about this feed cost adjuster 
issue. It just looks to me like there is a bigger discrepancy 
between whether somebody grows their feed and buys their feed 
versus what region of the country they are in.
    So would you agree with those two issues?
    Dr. Brown. Yes, first, when you look at the old MILC 
program versus MPP, I have said all along that for those 
producers that would have signed up at the $600 or $650 range 
for MPP, I believe the return to them is larger than what they 
would have experienced under MILC. Getting them to sign up for 
that level has been somewhat the challenge that we face. I 
looked, and in 2016, almost 130 billion pounds of our milk 
signed up at $4. That is a safety net about as firm as this 
table top. It doesn't provide much help. So we have done a poor 
job of educating on this idea of insurance versus program 
maximization, and it is an area we need to work on. But I also 
hear from producers who have felt like MILC was a better tool. 
Sometimes I will say it might have paid sooner, but it only 
offset 45 percent of the price decline. I don't know of any 
producer that would like to receive only a 45 percent offset 
once we get to the trigger.
    When you look at MPP, and there has been a lot of 
discussion about feed costs, and we all know from the debate on 
the farm bill we had feed costs discussion all the way back in 
the 2014 Farm Bill debate. It does seem like we have a lot of 
differences in terms of feed cost by operation. Those that are 
growing a lot of their own feed, frankly, did better in a high 
feed price environment because they were able to use their own 
harvested feed stuffs. However, those that were buying a lot of 
their feed saw more of the full impact of the record corn 
prices that we saw during the very dry weather of 2012 and 
2013. So perhaps there is some ability to think about ways to 
modify the formula, depending on whether you grow a lot of feed 
or you don't grow a lot of feed. I am not so certain that it is 
a regional issue as much as it is how that farm actually looks, 
in terms of the amount of feed it has grown versus what it buys 
from the marketplace.
    Mr. Peterson. Thank you.
    Mr. Mooney, why are bankers not requiring dairy farmers to 
buy up insurance? Crop farmers would never get by with that. Is 
that going to change now that we are going to a tighter margin 
situation, or do you know anything about that?
    Mr. Mooney. Well, I think it will change, and I haven't 
spoken to a banker directly, but coming off of 2014 when 
margins were really good, you went into 2015 with strong 
balance sheets, and then disaster hit in 2015 and the results 
of 2014 on our bottom line masked some of the problems we had 
in 2015. And if you go back and you look at the results of the 
Margin Protection Program, there were 263 farms that were paid 
out, and if the feed cost adjuster had been the way National 
Milk had presented it, there would have been 8,500 producers 
receiving a payment. And farmers look at those things when they 
look at whether to get involved next year. They see very few 
farmers received money in 2015, so they take that into 
consideration when they are looking.
    And I do think to your specific question, once it is more 
of a proven program and we go through some of these low down 
cycles like we are going through now, I think that will be 
required by banks.
    Mr. Peterson. Thank you. Thank you, Mr. Chairman. I 
appreciate your accommodating me.
    The Chairman. Thank you, Mr. Peterson. I will now yield 
myself 5 minutes.
    Mr. Brunner, my line of questioning is going to focus on 
this proposed GIPSA rule that we have on the table. The cattle 
industry has put into place the alternative marketing 
arrangements, or what is known as AMAs. Would the proposed 
GIPSA rules make AMAs obsolete? I would love to get your 
thoughts on that.
    Mr. Brunner. Well thank you, Mr. Chairman. The proposed 
GIPSA rule would extremely complicate and outlaw many of the 
alternative marketing arrangements. Our industry believes that 
these value-based marketing arrangements that we have, have 
done much to improve the overall quality and demand for beef 
over the years.
    I can relate personally from our family's operation that we 
rely on a value-based marketing arrangement with our packer 
processor that has helped us over time achieve premiums to the 
cash market of $30 to $50 a head consistently. We believe that 
is responding to consumer demand and we rely very much on this 
marketing arrangement. So the alternative marketing 
arrangements are very beneficial to our industry. The GIPSA 
marketing rule would threaten those.
    The Chairman. Mr. Herring, in your written testimony you 
mention the industry has plans to add four pork packing plants 
in the United States in the next couple years. Obviously, these 
are huge job creators and economic stimulators, and although we 
don't know exactly what the final GIPSA rule is going to look 
like, would the possible decrease in marketing agreements have 
an impact on whether or not the industry goes forth with 
building these plants?
    Mr. Herring. Congressman, there is no doubt that these 
proposed new GIPSA rules could delay or even stop some of these 
potential plants. There are three plants under construction 
today. There is one plant that is trying to get located. Maybe 
there are four under construction today.
    But, the better question is we need to ask why are new 
plants getting built? New plants are getting built because U.S. 
pork producers produce the safest, highest quality product in 
the world. We are the best at what we do in the world. We 
produce pork four times cheaper than Japan, 2\1/2\ times 
cheaper than China. It is a very innovative industry.
    These GIPSA rules are very concerning because they are so 
vague. It is almost a trial lawyer's playground.
    I work for a family business, Congressman, that designs and 
builds swine production facilities all over the world. 
Countries like Russia, China, Mexico, Poland, Chile, all these 
countries are striving to be like our industry, and through our 
current rules and regulations, our industry has been able to 
grow. So I don't see why we need to change anything we are 
doing today.
    Thank you, Mr. Chairman.
    The Chairman. I yield back my time.
    Let's see, Ms. Plaskett?
    Ms. Plaskett. Thank you, Mr. Chairman. Good morning, 
gentlemen.
    I have a general question that I am hoping that anyone in 
the group can answer, give us their thoughts on, and this is 
related to EPA regulations. As livestock producers, can you 
explain the regulatory challenges that you face within each 
part of the operations that you have? And with that, I am 
really trying to understand what EPA could be doing better to 
recognize the challenges that you have in your industry and in 
the operations, and understanding those practices in their own 
regulatory framework and how they put regulations forward that 
may make it more difficult and more challenging for you in your 
own industry.
    Mr. Brunner. Well, I will take the first try at that.
    Ms. Plaskett. Okay.
    Mr. Brunner. The Waters of the U.S. rules is foremost in 
mind as an initiative from EPA that would be very damaging to 
the cattle and beef industry. America's farmers and ranchers 
pride themselves as stewards of not only the land, but all of 
the resources on that land. We believe that the best way to 
manage and preserve that land is best managed at the ranch and 
the local level. The Waters of the U.S. rule would be a massive 
Federal overreach, and would be very damaging to our industry.
    Ms. Plaskett. My understanding is that it goes as far as to 
reaching into dry creek beds and others, and that that is 
really going to be detrimental to the work of some of the 
livestock owners.
    Mr. Brunner. Absolutely. It would go far beyond navigable 
waters of the U.S., and jurisdictionally include intermittent 
streams and even dry----
    Ms. Plaskett. Well how can EPA strike that balance? Are you 
meeting regularly with them? Are people from different 
associations having discussions with them? Do you feel that 
they are understanding and hearing what your concerns are in a 
market that is already very, very tight for you all?
    Mr. Brunner. We believe our organization is taking 
initiatives and outreach to work with EPA. To date, we don't 
believe they have been as receptive to our arguments and our 
information as we necessarily would like them to be.
    Ms. Plaskett. Mr. Mooney, did you have something to add on 
that?
    Mr. Mooney. Yes. We have sat down with EPA and we have what 
you call in the dairy industry innovation center where you 
bring together farmer organizations and processor 
organizations, and we have sat down with EPA to talk to them 
about things like Waters of the U.S. and what effect it would 
have on us. We have actually come up with a plan to reduce 
greenhouse gases by 25 percent by 2020. So we are trying to get 
ahead of some of this stuff and going in and having a 
conversation with EPA to see if what we are doing fits what 
they would--rather than work at it from a regulatory 
standpoint, work with them when they tell us what is coming 
down the road, how we can fit what we are doing into what they 
are going to recommend.
    We also have started a group, Nutrient is the name of the 
company, to where several co-ops have financed this new company 
to come together to try to find innovative ways to use animal 
waste and animal manure in ways that we haven't ever thought 
about before. So it is going to cost quite a bit of money to do 
it, but cooperatives and farmers are putting resources into 
this so we can find ways to get ahead of some of the EPA rules.
    Ms. Plaskett. Thank you. I have noticed, and I am very 
aware of the drought for the farmers and particularly livestock 
owners in the Virgin Islands where we have the--as well as our 
pork, there have been a huge, huge issues that they have had 
related to drought. And I know that when we talk about the TPP, 
that that as well is something that some of you all are really 
concerned about and if Congress doesn't act to pass it, will 
that be ceding marketshare that some of you may have in a 
market already dealing with disease and drought and some of the 
other areas.
    Do any of you have any thoughts about, particularly Mr. 
Herring, Mr. Mooney, about how passage of TPP or not passing 
that would affect your industry?
    Mr. Herring. Thank you. Currently today, there is about $48 
per head of value added to every hog marketed in the United 
States because of exports. If we are not able to pass the TPP, 
other countries are working with Asian countries, and our 
industry will start to decline and we will not be able to 
increase the value of the animals that we are producing today.
    The 20 countries we have free trade agreements today, we 
sell them more pork than we sell the rest of the world. So 
anywhere the U.S. pork industry has a free trade agreement, we 
have been super successful, and they have created a tremendous 
demand for our product.
    Ms. Plaskett. Okay, thank you. Thank you, Mr. Chairman.
    The Chairman. Mrs. Hartzler.
    Mrs. Hartzler. Thank you. I really enjoyed the testimony 
today. It seems like we have had a recurring theme of the TPP 
and GIPSA, and some of the regulations, GMO labeling. I have 
been a lifelong cattle producer, but I didn't know that we were 
producing \1/3\ more cattle or beef product than we are with 
\1/3\ less land and \1/3\ cattle, since 1977, so that was 
impressive there. I am concerned to hear that you project lower 
cattle prices, Dr. Brown. That doesn't look good for our cows 
at home.
    But my question today is about the Veterinary Feed 
Directive, and this final rule scheduled to take effect in 
December of this year. Producers in my district are concerned 
with how these new regulations will be effecting their 
operations and I have had several conversations with several 
cattlemen, specifically at home.
    So specifically, I have heard the regulatory burdens in the 
VFD will force farm supply stores to stop selling products like 
medicated milk replacer, which is used on calves during certain 
times to protect the baby animals against illnesses like 
pneumonia. So as I understand the VFD, a 1,000 cow dairy and 
little Johnny with one show steer will be regulated under the 
same rules, and the VFD will make it extremely costly and 
difficult for small farmers and young kids with FFA and 4-H 
projects to access critical feed products like medicated milk 
replacer. Randy, I would like to hear your thoughts on this 
rule first, and I would like to learn more about how the 
Veterinary Feed Directive will be applied to products like 
medicated milk replacer. And then I would like to open this up 
to the whole panel to talk about other concerns you may or may 
not have with the VFD, and any specific provisions or concern 
in the directive that can be tweaked to improve the 
implementation. Randy?
    Mr. Mooney. Well as you might expect, any extra regulations 
are very concerning for dairy producers, and probably all 
livestock producers. And this probably affects dairy less than 
it does maybe other livestock groups, because as you are well 
aware of, our feed that goes into the dairy cow doesn't have 
antibiotics in it anyway. We test our milk daily for 
antibiotics so there are no antibiotics in dairy feed. It will 
affect the milk replacer that we feed our calves if it has 
antibiotics in it, and what you will have to do then is work 
with a veterinarian to get a veterinarian prescription to use 
that.
    Now one of the things the dairy industry has done is we 
came up with what we call the FARM Program, Farmers are Sharing 
Responsible Management, and that is our new animal care program 
that has been in existence about the last 3 or 4 years. And in 
that program, you have to have a veterinary client/patient 
relationship, so that relationship through this program will 
actually be easier for dairy producers to deal with because we 
have that relationship ongoing, and it is something that we 
have to have resigned every year. But it is just another layer 
of regulations that we are going to have to deal with, but I 
don't see in the dairy industry it being as big a deal maybe as 
in the livestock or poultry industry.
    Mrs. Hartzler. Let me ask Mr. Brunner this. How often would 
a beef producer, or even Mr. Herring, pork producer, have to 
get that prescription from the veterinarian? Can you get a 
blanket one for 1 year, or is this every time you want to give 
the medicated feed you have to go back to your local 
veterinarian?
    Mr. Herring. The short answer to that would be I believe 6 
months is what is commonly being said today would be the length 
of a prescription.
    Our organization on behalf of our industry has been working 
with FDA and the development of the Veterinary Feed Directive. 
We want to be part of the solution. We understand the 
discussion on antimicrobial resistance that is taking place. We 
also understand the very great need that all livestock industry 
has in the availability of all the technologies in the tool 
chest, if you will, to ensure the safety and the availability 
of the global food supply. And all that said, there are 
specific technologies that come under scrutiny of the 
Veterinary Feed Directive that are ionophores. These are 
classified as antibiotics. They have no use in human medicine, 
but they are very important technologies in the efficiency of 
production of beef, and we are currently working with FDA to 
try and identify some ways to continue the use of them and 
availability of those technologies.
    Mrs. Hartzler. Ten seconds, Mr. Herring. Do you want to add 
anything?
    Mr. Herring. The pork industry is in concert with the 
guidance 209 and the guidance 213 rules that are coming in 
January. I am sure there will be some hiccups, just because 
there are employees, there are people working. Somebody will 
miss something. But first and foremost, we are trying to raise 
safe, healthy pork, and the antibiotics are a tool that we 
definitely need to be able to ensure that happens.
    Mrs. Hartzler. Okay, thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. Mr. Costa?
    Mr. Costa. thank you very much, Mr. Chairman. I have a 
couple questions.
    First to Mr. Mooney and Dr. Scott Brown. When we worked 
together on the farm bill on the MPP program, the economic 
analysis reflected an assumption that the so-called sweet spot 
as it has been discussed before where about $6 to $6.50 range, 
and the premiums were therefore optimized at that level. Of 
course, my friend and colleague Congressman Peterson said, ``. 
. . it is not a good idea to write farm programs when prices 
are high,'' but I would like to ask, in your view, is that 
still the case? Because our California situation, and it was 
noted about differences in regional production and the size of 
dairies. I looked it up and we have had 38 dairies out of 
almost 1,500 dairies in California that have purchased the 
additional protection. So 38 out of almost 1,500 dairies is a 
small number, I would argue. Mr. Mooney, Dr. Brown, would you 
care to comment?
    Mr. Mooney. Well, I will let Scott clean me up.
    The cost of a sweet spot, and I agree that I even said that 
up in front of talking with some groups, that was the sweet 
spot, but when I was talking about that, that was in relation 
to probably what National Milk at the time was talking about as 
the feed cost that was prior to the ten percent reduction in 
feed costs.
    Mr. Costa. Which has changed.
    Mr. Mooney. Yes, that is right. So, it probably should have 
changed the rates when you changed the feed costs, because the 
two are correlated. And I think when you----
    Mr. Costa. But some argue that that may not do much.
    Mr. Mooney. Yes, but when you get under $6.50 and you look 
at ten percent in feed costs, you look at $10 feed costs, it is 
$1 hundredweight. So if you are down at that level, it makes a 
big difference.
    Mr. Costa. Because of my time, Dr. Brown?
    Dr. Brown. Also, when we debated the farm bill we certainly 
didn't expect feed costs to go as low as they have today. So 
first, I think that probably has some effect relative to where 
we were in terms of the so-called sweet spot. I do think we 
have to be extremely careful about what level of protection we 
want to provide. Too high of protection creates a lot of excess 
supplies for us to deal with, and we have had programs like 
that in the past and we weren't very happy with those either. 
So finding that in between has been very difficult. The 
knowledge that we have today of how feed markets have moved 
might suggest slightly higher protection is needed than where 
we were when we debated this farm bill.
    Mr. Costa. And maybe take another look at it then
    Dr. Brown. Absolutely.
    Mr. Costa. Yes. I want to switch here, Mr. Zimmerman, to 
some of our issues dealing with the poultry industry. You 
mentioned in your testimony the result of last year's high-path 
avian influenza that created havoc in different parts of the 
country that several countries, South Korea, South Africa have 
placed new restrictions on poultry imported from this country 
that is not born, raised, and slaughtered in the United States. 
What is the impact of these adverse regulations?
    Mr. Zimmerman. Well, the South African one is the most--
forgive my bluntness--silly. We receive a lot of poults or baby 
turkeys that are hatched in Canada and transported across the 
border at a day of age, and then we raise them and grow them 
out and process them in the United States. Those birds cannot 
be sold to South Africa, whereas the same poult or baby turkey 
hatched in Canada and stays in Canada can be sold to South 
Africa. These poults that come across the border from Canada 
are a lot of times mixed in the processing plants and they 
can't be kept separate, so anything that has this tint of 
Canadian-ness in it can no longer be marketed to South Africa. 
So it is just a silly trade barrier that affects the whole 
industry because----
    Mr. Costa. This is a non-tariff trade barrier that and in 
effect is made for economic reasons as it relates to a 
particular country?
    Mr. Zimmerman. Correct. And it was thrown in at the last 
minute, and if NTF had been consulted heavier with the people 
negotiating the trade deal, we could have nipped this in the 
bud before it happened.
    Mr. Costa. So what remedy are you offering or suggesting 
that the Subcommittee look at to try address this issue?
    Mr. Zimmerman. Make sure NTF is involved and understanding 
the difference the turkey industry faces compared to the 
chicken and other livestock industries, and work with us to 
hopefully change that rule.
    Mr. Costa. All right. I want to thank you, Mr. Chairman. I 
have to go back to my other Subcommittee, and I will yield back 
the balance of my time.
    The Chairman. Mr. Newhouse.
    Mr. Newhouse. Thank you, Mr. Chairman. Gentlemen, I 
appreciate very much all your testimony this morning. It has 
been very informative and very important issues that impact 
agriculture and its ability to be successful, so thank you very 
much.
    I am really looking forward to this opportunity today, 
because I have a burning question that has been raised by some 
of my cattle producers, so I was hoping that a couple of you 
could address this issue, maybe Mr. Brunner and Dr. Anderson, 
or whoever would like to, maybe Dr. Brown.
    After the repeal of COOL, which as you know in the cattle 
industry, there are some people for and some against that. Some 
folks have brought the concern to me that now Canadian and 
Mexican cattle can come into the United States for a certain 
period of time, be slaughtered, and be sold as U.S. beef, and 
that any benefit from TPP would then be a more direct benefit 
to Canada and Mexico, not U.S. producers. And they have already 
seen a price decrease, they think, because of this situation. 
In your estimation, is this the right conclusion to come to? 
Was the cause and effect correct, when you get rid of COOL, 
then that automatically is not a benefit to U.S. producers? 
Does that make sense?
    Mr. Brunner. What I think you are asking is has the 
importation of cattle increased since Country-of-Origin 
Labeling is no longer the law of the land, and the North 
American beef industry is highly integrated. On the U.S. side 
of the border, we utilize feeder cattle from Mexico, it 
averages about one million head a year that come in from 
Mexico, and are part of our industry, that help with the feeder 
supply. From Canada, depending on seasonally and also, the 
situation of moisture, live cattle, feeder cattle, and also 
slaughter cattle can come down from Canada. The North American 
industry is highly integrated, and so we have not seen any 
increase since the dismissal of COOL, and I am not sure exactly 
how that would tie into TPP. TPP, although Canada and Mexico 
are signatories to that agreement, would be a far greater 
benefit for our industry in helping us level the playing field 
of the tariff rate duty that we are paying into Japan. 
Currently we are paying 38 percent. Australia, only 27 percent, 
and that disparity will continue to escalate until we sign TPP.
    Mr. Newhouse. Yes. Anybody else care to comment?
    Dr. Anderson. I will probably just make one comment too 
along with that. We have been importing fewer cattle, and it 
relates to drought, weather conditions, grazing conditions up 
there, and also changes in their own infrastructure within 
their own industries. As they build more packing plants in 
Mexico, we think that is going to continue to keep more cattle 
down there and reduce that supply that could come here of the 
live cattle.
    Mr. Newhouse. Well that helps. I appreciate that. There are 
a lot of moving pieces, a lot of things that can impact cattle 
prices, and certainly, it is an integrated industry in all of 
North America.
    Just real quickly, Mr. Mooney, you talked a little bit 
about the MPP. We talked a lot about the feed provisions in 
that, but you also had some other suggestions for improvement, 
and in the short time allotted, you mentioned farmer paid 
premiums as one thing. Are there any other ideas that you might 
have to improve the MPP?
    Mr. Mooney. Well I think those are the two major ones is 
making sure the feed cost adjustments, there is discussion out 
there on regional feed cost adjusters. I don't think that is 
the right way to go, personally, because you get into all kinds 
of regional differences. If you do go with a regional feed cost 
adjuster, you would almost have to go with regional milk 
prices, because milk prices are different all over the country.
    But, probably the other one is looking at the different 
size of producers. If you are talking about getting more people 
involved and Congressman Peterson said this, some of the 
smaller producers aren't involved in this. The rates have 
actually gone up on the smaller producers because there was a 
deduction the first year, and if there was a way of having 
lower rates for smaller producers to get them more incentivized 
to be part of it, that might help there.
    Mr. Newhouse. Thank you very much. Again, I appreciate all 
your testimony. It has been great, and thank you very much, Mr. 
Chairman.
    The Chairman. Mr. Yoho?
    Mr. Yoho. Thank you, Mr. Chairman. I appreciate everybody 
being here, and I have so many questions and so little time.
    TPP: I know we all need trade and we all want fair and 
balanced trade. We want good trade, and it is so important that 
we have that. Mr. Brunner, congratulations on your new post 
with the NCBA.
    Mr. Brunner. Thank you.
    Mr. Yoho. Is anybody in the cattle industry, or Mr. 
Herring, in the pork industry, or Mr. Zimmerman, in the turkey, 
and Mr. Mooney, in the dairy industry, while we are waiting for 
TPP to come across and get approved, as you brought up, 
Australia was ahead of the curve. They went ahead and 
negotiated with Japan. Is anybody in our industries doing that 
today while we are waiting on TPP, because I felt like we sat 
and just kind of watched the world go by, and Australia jumped 
the gun and they did good for their country. Is anybody doing 
that?
    Mr. Brunner. Well the Canadians are working to get a 
unilateral or bilateral agreement with Japan in our absence.
    Mr. Yoho. What about us with our trade negotiators?
    Mr. Brunner. Our trade negotiators negotiated the best 
trade access we have ever been able to achieve with TPP.
    Mr. Yoho. Right.
    Mr. Brunner. Our current tariff rate of 38 percent would 
level with Australia and all the other member nations, and it 
would decline to nine percent in the 16 years of phase in over 
that. So that is by far the----
    Mr. Yoho. But, instead of waiting for that to pass, was 
anybody being proactive and trying to get the trade agreement, 
just a bilateral one so that we could be--I don't want to say 
like Australia--benefitting our producers in this country 
instead of waiting on this big multi-national trade agreement?
    Mr. Brunner. We had a bilateral that was signed with Japan, 
I believe, back in the 1990s in the early part of my career. It 
was hard to get the Japanese market open, and when it did open, 
we had to pay that high tariff rate and have been paying it 
ever since.
    Mr. Yoho. Right. Okay. I just feel like we could have, our 
negotiators could have been a little bit more proactive, kind 
of like Australia did or like you are saying Canada is doing it 
now.
    In lieu of that, thinking about that, we heard about foot-
and-mouth disease as you guys brought up, and we know the 
threat of that. Is there any need to import beef from any 
country that might have FMD, because we know if that got into 
this country, it would shut down our export industry 100 
percent. Right now, tomorrow, it would shut it down. Is there 
any need to import it, and if you could, give me an economic 
impact on this country's ag sector when you look at pork, beef, 
sheep, goats, all the livestock sectors that would be impacted. 
Any idea, Mr. Brunner?
    Mr. Brunner. Well the Brazil/Argentina rule that is 
proposed by USDA raises great concerns within our industry. We 
don't believe an adequate risk assessment has been made of the 
ability of those countries to certify their product coming into 
this country as fresh or fresh frozen product. We believe that 
that risk assessment needs to be made. And in direct answer to 
your question of an economic analysis of the damage that that 
would create, we have not seen that study from USDA and are not 
sure that it has ever been made.
    Mr. Yoho. The reports I have read is between $100 and $150 
billion economic impact to this country.
    Mr. Herring, do you have any thoughts on that?
    Mr. Herring. Well, the ability or the devastation of a farm 
animal disease in this country is, without a doubt, the 800 
pound gorilla in the room, and it is the one thing that when I 
meet with the bankers every year I think I just need to get out 
of this business. It scares me to death. So we really need to 
keep pushing and get prepared.
    Mr. Yoho. All right, and bringing that up but going back to 
TPP, if we know that were to come into this country and we're 
struggling to get that trade negotiation, we need to stop any 
country that maybe has that in their country to come here.
    And we talked about GIPSA, the Food Modernization Safety 
Act, EPA, all the regulations that come from these different 
agencies and the FDA, and recently, the USDA noticed a grant to 
help address a shortage of large animal veterinarians in rural 
areas, and this continues to be a common problem from report 
after report evaluating the veterinary profession. With 
additional regulations like I mentioned from the FDA on the VFD 
coming into effect early next year, the shortage for rural 
areas could become more problematic. From your perspective as 
the President of the NCBA, do you hear this concern from your 
membership being concerned about current or future access to 
veterinarians in their rural areas?
    Mr. Brunner. Well our industry certainly relies on the 
services of veterinarians, and beyond that I can say that they 
are an integral part of the support service to our industry. We 
want to make sure that there is adequate numbers of educated 
and trained large animal veterinarians to support our industry.
    Mr. Yoho. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Yoho.
    I would like to thank all the members of the panel for your 
testimony today. This has been very, very helpful, great input 
for the record. I might add, to sum all this up, the Federal 
Government just needs to get out of your way and help open up 
your markets. Thank you again.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplementary written responses from 
the witnesses to any question posed by a Member. This hearing 
of the Subcommittee on Livestock and Foreign Agriculture is 
adjourned.
    [Whereupon, at 11:31 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
         Submitted Statement by Livestock Marketing Association
    Subcommittee Chairman Rouzer and Members of the House Committee on 
Agriculture Subcommittee on Livestock and Foreign Agriculture:

    These comments are provided on behalf of the Livestock Marketing 
Association (LMA), which is the leading national trade organization for 
more than 800 livestock marketing businesses located throughout the 
United States. LMA represents more than 75 percent of the regularly 
selling local livestock auction markets in the U.S. Livestock auction 
markets serve two important purposes: (1) they sell livestock for 
producers in a competitive bidding environment and (2) they stimulate 
the economies in local communities.
    According to U.S. Department of Agriculture Grain Inspection, 
Packers and Stockyards Administration (GIPSA) annual reports, livestock 
auction markets each year sell more than 33,000,000 cattle, 8,000,000 
hogs, and 2,800,000 sheep. This amounts to $30 billion in gross sales 
of livestock sold in auction markets each year. In talking about the 
opportunities and challenges for the livestock sector, we'll focus on 
auction market businesses but also touch on some important topics for 
the industry as a whole.

    Key points:

   The future holds both opportunities and challenges for 
        animal agriculture.

   The Packers and Stockyards Act needs to be changed.

     The structure of the livestock marketing industry has 
            changed; but the P&S Act has not. Some needed changes can 
            be made on a consensus basis in the short term. Other 
            changes will require more in depth analysis.

   Market volatility is a serious issue that needs to be 
        studied.
Opportunities and Challenges Exist for Animal Agriculture
    First, the good news is we see great opportunity for animal 
agriculture. The United States is the premier producer of livestock and 
livestock products, particularly grain-fed beef. We are excited about 
the opportunities to expand as an industry, especially as the middle 
class populations in many key countries grow. Factors such as lower 
feed costs and much needed moisture in many parts of the country have 
contributed positively to the livestock sector. This positive response 
is especially evident in the cattle sector by the decision of many 
cattle producers to take part in a rebuilding of numbers in the U.S. 
beef herd.
    From a marketing sector perspective, livestock auction markets see 
opportunities to continue our proud tradition of serving our customers. 
Markets help producers receive the highest price possible for their 
animals through competitive bidding, sorting, and offering livestock in 
volume. In addition, markets are often where producers receive the help 
and information they need to ensure they are complying with state and 
national requirements particularly those relating to animal health, 
such as health certificates or disease testing requirements.
    We also see growth opportunities that come with technology. Many 
markets have expanded their services to include online or video sales. 
Additionally, our members continue to look for innovative ways to help 
producers realize additional premiums for their livestock, such as 
desirable animal health programs.
    However, we have some challenges to overcome as well. One of the 
greatest challenges for the livestock marketing sector is figuring out 
how to operate under an outdated and cumbersome regulatory structure. 
Last summer, LMA hosted a nine stop listening tour to hear from market 
owners, managers, and professional livestock buyers. From Valdosta, 
Georgia to Modesto, California, and everywhere in between, the message 
we heard was consistent. First, the laws and regulations governing the 
livestock marketing industry have not kept up with the times. Second, 
the greatest concern for livestock markets is making sure they receive 
payment for livestock they sell.
The Livestock Marketing Industry Has Changed, But the P&S Act Has Not
    Our industry has changed greatly over the last 100 years. When the 
Packers and Stockyards (P&S) Act was passed in 1921, livestock were 
being transported by rail cars to a handful of large terminal 
stockyards in places such as Chicago, St. Louis, Kansas City, and Omaha 
where they were sold by commission firms housed at the stockyards. The 
stockyards often had close ties (or were controlled by) the packers 
that bought the livestock and the railroads on whose lines the 
livestock had to be shipped.
    Today, approximately 1,000 regularly selling local livestock 
auctions are spread out across the United States, and their connections 
to the railroad and packing industries are completely different from 
what existed 100 years ago. These auctions have greater transparency 
than the terminal stockyards of years gone by, due to both the nature 
of the auction environment and immediate information sharing. Today, in 
a community of buyers and sellers connected by computers and cell 
phones used by the markets and our customers, the flow of information 
is almost instantaneous. It is common today for livestock markets to 
broadcast their sales online. Finally, many livestock marketers have 
also added an Internet or video sale component to their businesses.
    While the marketing industry has adapted to structural changes in 
the industry, to changes in the banking industry, and to changes in the 
communications industry, the statutory authority of the Packers and 
Stockyards Act has remained stagnant. It has been decades since a 
wholesale review led to significant statutory or regulatory reform. For 
livestock market owners, this results in GIPSA interpreting and 
applying laws and regulations designed for the terminal stockyards to 
the business structure that we have today. The combination of 
antiquated statutory and regulatory authority coupled with a field 
staff spread out across the U.S. has lead to differing interpretations 
between regions and even individuals within a region. We heard on our 
listening tour that this leaves many market owners and operators 
feeling like GIPSA compliance is a moving target.
    We will readily admit that there has been, and continues to be, 
significant controversy surrounding proposed GIPSA regulations in 
recent years. We share the concerns of many in the livestock industry 
surrounding recent news that GIPSA is again considering regulatory 
changes similar to those proposed in their 2010 proposed competition 
rule. Any changes along these lines must be thoroughly vetted with 
industry input to ensure that changes intended to increase competition 
do not unintentionally reduce competition instead. This requires 
significant debate and analysis.
    However, at the same time, common sense, consensus-based changes 
should be made to begin the process of bringing the law into the 21st 
century. The regulated community needs action now in areas completely 
unrelated to the controversial topics.
Short-Term, Targeted Changes to the P&S Act Are Needed
    Language has been drafted and shared with legislative offices and 
industry stakeholders that would make two targeted changes.
    First, Section 301 should be revised to make it clear that online 
and video auctions fall under the Act. More and more livestock are 
being sold through online and video sales. As the Act is written, it is 
not entirely clear whether, or to what extent, those online and video 
sales are covered and must comply with the Act. Although LMA members 
who conduct business online already follow the law's requirements when 
doing so, the lack of clear authority of GIPSA to regulate these sales 
is concerning. Clarifying Section 301 would ensure that people selling 
through online and video markets receive the same protections as those 
who sell at fixed-facility livestock markets, including a custodial 
account, prompt payment, and bonding. Section 301 should be narrowly 
revised so that it only applies to those online and video businesses 
that are charging a commission or other fee and handling, or providing 
a means to handle, funds due to sellers.
    Second, Section 409 should be revised to make it clear that modern 
electronic payment methods are permissible under the Act. Currently, 
Section 409 refers to only two forms of payment to meet the prompt 
payment requirement of payment within the next business day of the 
sale: checks in the mail and wire transfers. Modern banking practices 
use many different forms of payment, such as Automated Clearing House 
(ACH) and credit and debit cards. Revising Section 409 to make it clear 
that modern electronic forms of payment are permissible will allow for 
quicker payment, which will reduce the risk of defaults. This is 
especially important because it is taking longer and longer to receive 
checks through the mail. Changing the P&S Act in this way would not 
exclude any current payment options; it would simply allow buyers and 
sellers flexibility by adding modern options.
    These changes should be addressed this year, both to make needed 
updates to the law and also to prove that, working together, Congress 
and industry can address problems in a consensus-based manner.
More Long-Term, In-Depth Changes to the P&S Act Should Be Considered
    A more in-depth review of the P&S Act is needed on two levels. 
First, Congress needs to determine if the Act is fulfilling its 
purpose. Second, there are specific changes that could provide much 
needed financial protection to sellers of livestock.
    Another issue often raised during LMA's listening sessions was the 
amount of devastating risk sellers of livestock and markets under the 
P&S Act are exposed to when a buyer fails to pay.
    In 2010, Eastern Livestock, the largest livestock dealer in the 
U.S., defaulted on payment to hundreds of livestock producers, markets, 
and other dealers. The Eastern Livestock default is not a one-time, 
isolated occurrence in the industry. Since 2010, there have been 
several instances of dealer defaults. As recent as this past Fall, a 
major dealer failed to pay two livestock markets (owing $980,000 to a 
market in Kansas and $2.9 million to a market in Nebraska), as well as 
several producers who sold to the dealer directly.
    Producers who sell through a livestock auction market are protected 
by both the market's surety bond and by the market's custodial account 
(trust account). Producers who sell directly to packers are protected 
by both the packer's surety bond and by the Packer Statutory Trust 
under 7 U.S.C. 196. Producers who sell directly to dealers are provided 
little protection. Under the current law, dealers do not have a 
custodial account or a trust.
    Markets are placed in a highly vulnerable position when it comes to 
payment. Pursuant to 7 U.S.C. 228b, markets are required to pay sellers 
of livestock by no later than the close of the next business day after 
the sale, even if the markets are not paid by the buyer of those 
livestock. When livestock markets are not paid, they are usually left 
with no feasible way to collect. If the dealer has resold the livestock 
to a good faith purchaser, that second purchaser has clear title to the 
livestock, even if the dealer has not paid for them. In addition, a 
dealer's bank usually will have a blanket security interest on all of 
the dealer's livestock inventory, which, under current law, will give 
the bank a perfected security interest in the livestock even though the 
dealer never paid for them and the bank never loaned the dealer any 
money for those specific livestock. A producer selling directly to a 
dealer is in a similar poor position when the dealer fails to pay.
    When a dealer mails a check, as the law allows, it may be several 
days before the seller (whether livestock market or producer) even gets 
the check or discovers that a check is not coming. In many parts of the 
country, mail has slowed down significantly, further stretching this 
critical time period. In some cases, a buyer may buy multiple times 
before a payment problem is discovered.
    Although the P&S law attempts to provide financial protection for 
sellers of livestock by requiring dealers to maintain surety bonds, 
bond claims rarely make up for any significant loss. P&S dealer bond 
claims return, on average, about 15 for every dollar claimed (1999-
2013 data). This does not include Eastern Livestock claims where payout 
was 4.37 on the dollar.
    Additional protection is needed for markets and producers selling 
to dealers. Financial protection already exists for those dealing with 
packers (Packer Statutory Trust) and markets (custodial account) and in 
other agriculture sectors (statutory trust under the Perishable 
Agricultural Commodities Act). Simply raising bond amounts is not an 
acceptable alternative because it would push legitimate buyers out of 
the marketplace due to the significant assets needed to obtain this 
type of bond, particularly young and beginning market participants. 
Instead, the Packers and Stockyards Act should be amended to establish 
a dealer statutory trust to provide livestock producers and markets 
financial protection in the event of a dealer default. This would give 
unpaid sellers of livestock first priority to receive livestock and 
accounts receivable.
    A dealer statutory trust could be modeled after the existing Packer 
Statutory Trust that Congress added in 1976 to address packer defaults. 
The trust requires packers to hold all livestock purchased from cash 
sellers, and all inventories of, or receivables or proceeds from meat, 
meat food products or livestock products derived from such livestock, 
in a trust fund for the benefit of unpaid sellers. No separate account 
would be needed. Instead this simply would give unpaid sellers priority 
in livestock and accounts receivable for livestock. The need for this 
protection is more important than ever with slowing mail service 
delivering checks, increased value of livestock at times, and 
volatility within the market.
Market Volatility Is a Serious Issue that Needs Attention
    The final concern we will raise is that of volatility within the 
futures and, subsequently, live cattle markets. Futures contracts 
offered by the Chicago Mercantile Exchange (CME) can be an important 
risk management tool for livestock producers to hedge against changes 
in the market. In fact, many lenders require farmers and ranchers they 
work with to hedge their livestock. However, in recent months, the 
amount of volatility in the CME has turned it from a risk management 
tool to a liability in some situations.
    We understand that due to seasonal supply and demand there will be 
ups and downs in the market; but what is difficult to understand is the 
amount of volatility within the futures market that does not correspond 
to the fundamentals of the cattle industry that traditionally drive 
market change. Numerous times in recent months news that should 
logically and historically move the market in one direction was met 
with a move by the futures in the opposite direction. This has raised 
some serious questions about high frequency trading of futures and 
other trading practices.
    For a market operator, it is devastating to watch our customers 
experience a significant drop in prices received for quality calves 
simply because the board is down the limit for the day or multiple days 
in a row, with no fundamental reason driving the drop, and cash market 
participants are reacting. It is important to remember that a trip to 
town to market their calves is a producer's main paycheck for the year 
and, with a perishable commodity like cattle, waiting a week to sell is 
not always a good alternative.
    While there is no specific Congressional ask on the topic of market 
volatility at this time, we appreciate the shared concern on this 
topic. LMA supports Congressional oversight as a support to industry 
discussions on this issue in the hope it is one that may be 
appropriately addressed in the near future.
Conclusion
    In closing, we appreciate this opportunity to provide written 
testimony and thank the Committee for its ongoing interest in helping 
the livestock industry succeed, whether this be through working 
together to address challenges such as nonpayment and market volatility 
or allowing businesses to thrive without unnecessary government 
intervention by modernizing antiquated requirements, such as those that 
exist under the Packers and Stockyards Act today.

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