[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE NEXT FARM BILL
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON CONSERVATION AND FORESTRY;
AND THE
SUBCOMMITTEE ON LIVESTOCK AND FOREIGN AGRICULTURE;
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 GENERAL FARM COMMODITIES
AND RISK MANAGEMENT;
AND THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
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FEBRUARY, 28; MARCH, 9, 16, 21, 22, 28; APRIL 4; JUNE 7, 8, 22; JULY
12, 18, 2017
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Serial No. 115-3
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Part 1
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[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
GLENN THOMPSON, Pennsylvania 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
BOB GIBBS, Ohio JAMES P. McGOVERN, Massachusetts
AUSTIN SCOTT, Georgia FILEMON VELA, Texas, Vice Ranking
ERIC A. ``RICK'' CRAWFORD, Arkansas Minority Member
SCOTT DesJARLAIS, Tennessee MICHELLE LUJAN GRISHAM, New Mexico
VICKY HARTZLER, Missouri ANN M. KUSTER, New Hampshire
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
DOUG LaMALFA, California CHERI BUSTOS, Illinois
RODNEY DAVIS, Illinois SEAN PATRICK MALONEY, New York
TED S. YOHO, Florida STACEY E. PLASKETT, Virgin Islands
RICK W. ALLEN, Georgia ALMA S. ADAMS, North Carolina
MIKE BOST, Illinois DWIGHT EVANS, Pennsylvania
DAVID ROUZER, North Carolina AL LAWSON, Jr., Florida
RALPH LEE ABRAHAM, Louisiana TOM O'HALLERAN, Arizona
TRENT KELLY, Mississippi JIMMY PANETTA, California
JAMES COMER, Kentucky DARREN SOTO, Florida
ROGER W. MARSHALL, Kansas LISA BLUNT ROCHESTER, Delaware
DON BACON, Nebraska
JOHN J. FASO, New York
NEAL P. DUNN, Florida
JODEY C. ARRINGTON, Texas
______
Matthew S. Schertz, Staff Director
Anne Simmons, Minority Staff Director
______
Subcommittee on Conservation and Forestry
FRANK D. LUCAS, Oklahoma, Chairman
GLENN THOMPSON, Pennsylvania MARCIA L. FUDGE, Ohio, Ranking
JEFF DENHAM, California Minority Member
DOUG LaMALFA, California TIMOTHY J. WALZ, Minnesota
RICK W. ALLEN, Georgia ANN M. KUSTER, New Hampshire
MIKE BOST, Illinois RICHARD M. NOLAN, Minnesota
RALPH LEE ABRAHAM, Louisiana TOM O'HALLERAN, Arizona
TRENT KELLY, Mississippi FILEMON VELA, Texas
______
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 FILEMON VELA, Texas
VICKY HARTZLER, Missouri CHERI BUSTOS, Illinois
TED S. YOHO, Florida STACEY E. PLASKETT, Virgin Islands
TRENT KELLY, Mississippi DWIGHT EVANS, Pennsylvania
ROGER W. MARSHALL, Kansas ----
(ii)
Subcommittee on Commodity Exchanges, Energy, and Credit
AUSTIN SCOTT, Georgia, Chairman
BOB GOODLATTE, Virginia DAVID SCOTT, Georgia, Ranking
MIKE ROGERS, Alabama Minority Member
DOUG LaMALFA, California SEAN PATRICK MALONEY, New York
RODNEY DAVIS, Illinois ANN M. KUSTER, New Hampshire
JAMES COMER, Kentucky STACEY E. PLASKETT, Virgin Islands
ROGER W. MARSHALL, Kansas TOM O'HALLERAN, Arizona
JOHN J. FASO, New York DARREN SOTO, Florida
______
Subcommittee on Biotechnology, Horticulture, and Research
RODNEY DAVIS, Illinois, Chairman
BOB GIBBS, Ohio MICHELLE LUJAN GRISHAM, New
JEFF DENHAM, California Mexico, Ranking Minority Member
TED S. YOHO, Florida AL LAWSON, Jr., Florida
DAVID ROUZER, North Carolina JIMMY PANETTA, California
DON BACON, Nebraska JIM COSTA, California
NEAL P. DUNN, Florida JAMES P. McGOVERN, Massachusetts
JODEY C. ARRINGTON, Texas LISA BLUNT ROCHESTER, Delaware
______
Subcommittee on Nutrition
GLENN THOMPSON, Pennsylvania, Chairman
STEVE KING, Iowa JAMES P. McGOVERN, Massachusetts,
ERIC A. ``RICK'' CRAWFORD, Arkansas Ranking Minority Member
SCOTT DesJARLAIS, Tennessee ALMA S. ADAMS, North Carolina
VICKY HARTZLER, Missouri DWIGHT EVANS, Pennsylvania
RODNEY DAVIS, Illinois MARCIA L. FUDGE, Ohio
TED S. YOHO, Florida MICHELLE LUJAN GRISHAM, New Mexico
DAVID ROUZER, North Carolina AL LAWSON, Jr., Florida
JAMES COMER, Kentucky JIMMY PANETTA, California
ROGER W. MARSHALL, Kansas DARREN SOTO, Florida
JOHN J. FASO, New York SEAN PATRICK MALONEY, New York
JODEY C. ARRINGTON, Texas
______
Subcommittee on General Farm Commodities and Risk Management
ERIC A. ``RICK'' CRAWFORD, Arkansas, Chairman
FRANK D. LUCAS, Oklahoma RICHARD M. NOLAN, Minnesota,
MIKE ROGERS, Alabama Ranking Minority Member
BOB GIBBS, Ohio TIMOTHY J. WALZ, Minnesota
AUSTIN SCOTT, Georgia CHERI BUSTOS, Illinois
SCOTT DesJARLAIS, Tennessee LISA BLUNT ROCHESTER, Delaware
RICK W. ALLEN, Georgia DAVID SCOTT, Georgia
MIKE BOST, Illinois SEAN PATRICK MALONEY, New York
RALPH LEE ABRAHAM, Louisiana STACEY E. PLASKETT, Virgin Islands
DON BACON, Nebraska AL LAWSON, Jr., Florida
NEAL P. DUNN, Florida TOM O'HALLERAN, Arizona
JODEY C. ARRINGTON, Texas
(iii)
C O N T E N T S
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Page
Tuesday, February 28, 2017--Subcommittee on Conservation and Forestry
Bost, Hon. Mike, a Representative in Congress from Illinois,
submitted statement on behalf of National Grain and Feed
Association.................................................... 47
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 4
Fudge, Hon. Marcia L., a Representative in Congress from Ohio,
opening statement.............................................. 3
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 1
Prepared statement........................................... 2
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 5
Witnesses
Coffey, Chuck, Owner/Manager, Double C Cattle Company; Member,
National Cattlemen's Beef Association, Davis, OK............... 6
Prepared statement........................................... 7
Submitted question........................................... 54
Gertson, Timothy, Co-Owner/Co-Operator, G5 Farms; Member, Board
of Directors, USA Rice Federation, Lissie, TX.................. 10
Prepared statement........................................... 11
Submitted questions.......................................... 54
Peters, Jeremy, Chief Executive Officer, National Association of
Conservation Districts, Darlington, MD; on behalf of Lee
McDaniel, Immediate Past President, National Association of
Conservation Districts......................................... 15
Prepared statement of Mr. McDaniel........................... 17
Submitted question........................................... 55
Nomsen, David E., Vice President of Governmental Affairs,
Pheasants Forever, Inc., Garfield, MN.......................... 21
Prepared statement........................................... 23
Submitted question........................................... 56
Supplementary material....................................... 49
Piotti, Hon. John F., President, American Farmland Trust,
Washington, D.C................................................ 26
Prepared statement........................................... 28
Submitted question........................................... 56
Supplementary material....................................... 51
Tuesday, February 28, 2017--Subcommittee on Livestock and Foreign
Agriculture
Costa, Hon. Jim, a Representative in Congress from California,
opening statement.............................................. 61
Rouzer, Hon. David, a Representative in Congress from North
Carolina, opening statement.................................... 59
Prepared statement........................................... 60
Witnesses
Williams, Ph.D., Gary W., Professor of Agricultural Economics and
Co-Director, Agribusiness, Food, and Consumer Economics
Research Center, Department of Agricultural Economics, Texas
A&M University, College Station, TX............................ 63
Prepared statement........................................... 65
Supplementary information.................................... 107
Submitted question........................................... 115
Steinkamp, Hon. Joseph E., Member, Board of Directors, American
Soybean Association, Evansville, IN; on behalf of Coalition to
Promote U.S. Agriculture Exports, Agribusiness Coalition for
Foreign Market Development..................................... 70
Prepared statement........................................... 71
Hamilton, Tim, Executive Director, Food Export Association of the
Midwest USA and Food Export USA--Northeast, Chicago, IL........ 76
Prepared statement........................................... 78
Supplementary information.................................... 113
Seng, Philip, President and Chief Executive Officer, U.S. Meat
Export Federation, Denver, CO.................................. 80
Prepared statement........................................... 82
Alanko, Dean, Vice President of Sales and Marketing, Allegheny
Wood Products, Petersburg, WV; on behalf of Hardwood Federation 84
Prepared statement........................................... 86
Wenger, Paul J., almond producer, Wood Colony Nut Co.;
President,; California Farm Bureau Federation, Sacramento, CA.. 88
Prepared statement........................................... 90
Thursday, March 9, 2017--Subcommittee on Commodity Exchanges, Energy,
and Credit
Scott, Hon. Austin, a Representative in Congress from Georgia,
opening statement.............................................. 117
Joint submitted letter....................................... 169
Prepared statement........................................... 119
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 120
Witnesses
Fox, Hon. Bob, Chair, Board of Commissioners, Renville County,
MN; Member, Board of Directors, National Association of
Counties, Franklin, MN......................................... 121
Prepared statement........................................... 123
Submitted question........................................... 408
Chastain, Dennis L., President and Chief Executive Officer,
Georgia Electric Membership Corporation, Tucker, GA; on behalf
of National Rural Electric Cooperative Association............. 127
Prepared statement........................................... 129
Submitted question........................................... 408
Fletcher, Steve, Manager and Operator, Washington County Water
Company, IL; President, National Rural Water Association,
Nashville, IL.................................................. 131
Prepared statement........................................... 133
Submitted question........................................... 408
Cook, R. Craig, Chief Operations Officer, Hill Country Telephone
Cooperative, Inc., Ingram, TX; on behalf of NTCA--The Rural
Broadband Association.......................................... 135
Prepared statement........................................... 137
Submitted question........................................... 412
Duff, John, Strategic Business Director, National Sorghum
Producers, Lubbock, TX......................................... 143
Prepared statement........................................... 145
Greenwood, Hon. James C., President and Chief Executive Officer,
Biotechnology Innovation Organization, Washington, D.C......... 146
Prepared statement........................................... 148
Supplementary material....................................... 170
Submitted questions.......................................... 415
Submitted Material
Moore, Ron, President, American Soybean Association, submitted
statement...................................................... 400
CoBank ACB, submitted statement.................................. 402
National Biodiesel Board, submitted statement.................... 404
Rural Community Assistance Partnership, submitted statement...... 406
Thursday, March 9, 2017--Subcommittee on Biotechnology, Horticulture,
and Research
Davis, Hon. Rodney, a Representative in Congress from Illinois,
opening statement.............................................. 417
Prepared statement........................................... 418
Lujan Grisham, Hon. Michelle, a Representative in Congress from
New Mexico, opening statement.................................. 419
Submitted article............................................ 459
Witnesses
Field, Jr., James, Director of Business Development, Frey Farms,
LLC, Keenes, IL................................................ 420
Prepared statement........................................... 422
Supplementary material....................................... 464
Black, Jr., N. Larry, General Manager, Peace River Packing
Company, Ft. Meade, FL......................................... 425
Prepared statement........................................... 426
Gilbert, Sean, General Manager, Gilbert Orchards, Inc. and
Sundquist Fruit, Yakima, WA.................................... 428
Prepared statement........................................... 430
Hill, Jay, Owner-Operator, Hill Farms and Wholesome Valley Farms,
Mesilla Park, NM............................................... 434
Prepared statement........................................... 435
Davis, Laura, Co-Owner/Co-Operator, Long Life Farm; President,
Board of Directors, Northeast Organic Farming Association--
Massachusetts Chapter, Hopkinton, MA........................... 439
Prepared statement........................................... 441
Submitted Material
Wingard, Charles, Director of Field Operations, Walter P. Rawl &
Son, Inc., submitted statement................................. 466
Thursday, March 16, 2017--Subcommittee on Biotechnology, Horticulture,
and Research
Davis, Hon. Rodney, a Representative in Congress from Illinois,
opening statement.............................................. 471
Prepared statement........................................... 472
Lujan Grisham, Hon. Michelle, a Representative in Congress from
New Mexico, opening statement.................................. 473
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 503
Witnesses
Akridge, Ph.D., Jay T., Glenn W. Sample Dean of Agriculture,
Purdue University; Chairman, Policy Board of Directors, Board
of Agriculture Assembly, Association of Public and Land-grant
Universities, West Lafayette, IN............................... 474
Prepared statement........................................... 476
Wilkins, Richard, Chairman, American Soybean Association; Vice
President, National Coalition for Food and Agricultural
Research, Greenwood, DE........................................ 485
Prepared statement........................................... 486
Carrington, Ph.D., James C., President, Donald Danforth Plant
Science Center, St. Louis, MO.................................. 498
Prepared statement........................................... 500
Submitted Material
Johnson, Roger, President, National Farmers Union, submitted
letter......................................................... 525
American Veterinary Medical Association, submitted statement..... 526
Thursday, March 16, 2017--Subcommittee on Conservation and Forestry
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 531
Prepared statement........................................... 532
Walz, Hon. Timothy J., a Representative in Congress from
Minnesota, opening statement................................... 533
Witnesses
Geissler, C.F., George L., Forester and Director, Forestry
Services Division, State of Oklahoma; Vice President, National
Association of State Foresters, Oklahoma City, OK.............. 534
Prepared statement........................................... 536
Benedict, Susan S., Managing Partner, Beartown Family LP; Member,
Tax Policy Subcommittee, National Public Affairs Committee,
American Forest Foundation, State College, PA.................. 540
Prepared statement........................................... 541
Neiman, Jim D., President and Chief Executive Officer, Neiman
Enterprises, Inc.; President, Federal Forest Resource
Coalition, Hulett, WY.......................................... 548
Prepared statement........................................... 550
Humphries, Rebecca A., Chief Conservation and Operations Officer,
National Wild Turkey Federation, Edgefield, SC................. 553
Prepared statement........................................... 555
Harbour, Tom, National Director (Ret.), Fire and Aviation
Management, U.S. Forest Service, USDA; Founder, Harbour Fire
Consulting, Falls Church, VA................................... 558
Prepared statement........................................... 559
Submitted Material
Browning, Kathryn C., Boulder, CO, submitted letter.............. 579
Tuesday, March 21, 2017--Subcommittee on Nutrition
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, opening statement............................... 583
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 581
Prepared statement........................................... 582
Witnesses
Calvert, Carrie T., Director, Tax and Commodity Policy, Feeding
America, Washington, D.C....................................... 585
Prepared statement........................................... 586
Supplementary material....................................... 629
Kubik, Frank, Director, Commodity Supplemental Food Program,
Focus: HOPE, Detroit, MI....................................... 590
Prepared statement........................................... 592
Tonubbee, Jerry, Director--Food Distribution Program, Choctaw
Nation of Oklahoma, Durant, OK................................. 595
Prepared statement........................................... 596
Kriviski, Diane, Deputy Administrator, Supplemental Nutrition and
Safety Programs, Food and Nutrition Service, U.S. Department of
Agriculture, Alexandria, VA.................................... 600
Prepared statement........................................... 602
Tuesday, March 21, 2017--Subcommittee on Livestock and Foreign
Agriculture
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 678
Costa, Hon. Jim, a Representative in Congress from California,
opening statement.............................................. 677
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 703
Rouzer, Hon. David, a Representative in Congress from North
Carolina, opening statement.................................... 675
Prepared statement........................................... 676
Witnesses
Uden, Craig, President, National Cattlemen's Beef Association;
Partner, Darr Feedlot, Inc., Johnson Lake, NE.................. 679
Prepared statement........................................... 680
Wittenburg, Carl, Chairman, National Turkey Federation,
Alexandria, MN................................................. 683
Prepared statement........................................... 685
Buchholz, Bob, Representative, Executive Board for Region V,
American Sheep Industry Association, Eldorado, TX.............. 687
Prepared statement........................................... 688
Herring, David D., Vice President and Board Member, National Pork
Producers Council; Vice President, TDM Farms/Hog Slat, Inc.,
Newton Grove, NC............................................... 692
Prepared statement........................................... 693
Submitted Material
Glenn, Ph.D., Barb P., Chief Executive Officer, National
Association of State Departments of Agriculture, submitted
statement...................................................... 711
Johnson, Roger, President, National Farmers Union, submitted
statement...................................................... 713
Livestock Marketing Association, submitted statement............. 715
Wednesday, March 22, 2017--Full Committee
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 717
Prepared statement........................................... 721
Goodlatte, Hon. Bob, a Representative in Congress from Virginia,
opening statement.............................................. 719
Lujan Grisham, Hon. Michelle, a Representative in Congress from
New Mexico, prepared statement................................. 723
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 719
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, submitted letter on behalf of Ben Burkett, Board
President; Lisa Griffith, Acting Executive Director, National
Family Farm Coalition.......................................... 775
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 718
Submitted chart.............................................. 773
Witnesses
Mulhern, James, President and Chief Executive Officer, National
Milk Producers Federation, Arlington, VA....................... 724
Prepared statement........................................... 726
Submitted questions.......................................... 786
Dykes, D.V.M., Michael D., President and Chief Executive Officer,
International Dairy Foods Association, Washington, D.C......... 735
Prepared statement........................................... 737
Supplementary material....................................... 777
Submitted Material
Johnson, Roger, President, National Farmers Union, submitted
letter......................................................... 785
Tuesday, March 28, 2017--Subcommittee on General Farm Commodities and
Risk Management
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 834
Crawford, Hon. Eric A. ``Rick'', a Representative in Congress
from Arkansas, opening statement............................... 787
Prepared statement........................................... 788
Nolan, Hon. Richard M., a Representative in Congress from
Minnesota, opening statement................................... 789
Prepared statement........................................... 790
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 809
Witnesses
Spurlock, Wesley, President, National Corn Growers Association,
Stratford, TX.................................................. 790
Prepared statement........................................... 791
Moore, Ron, President, American Soybean Association, Roseville,
IL............................................................. 796
Prepared statement........................................... 798
Schemm, David K., President, National Association of Wheat
Growers, Sharon Springs, KS.................................... 801
Prepared statement........................................... 802
Friederichs, Peter, President, National Barley Growers
Association, Foxhome, MN....................................... 809
Prepared statement........................................... 811
Atkisson, Dan, Vice Chairman, National Sorghum Producers,
Stockton, KS................................................... 812
Prepared statement........................................... 814
Tuesday, March 28, 2017--Subcommittee on Nutrition
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, submitted letter and report............................. 919
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, opening statement............................... 845
Submitted letter............................................. 964
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 896
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 843
Prepared statement........................................... 844
Witnesses
Dean, Stacy, Vice President for Food Assistance Policy, Center on
Budget and Policy Priorities, Washington, D.C.................. 846
Prepared statement........................................... 848
Sykes, Russell, Director, Center for Employment and Economic
Well-Being, American Public Human Services Association,
Washington, D.C................................................ 859
Prepared statement........................................... 861
Arthur, Joseph ``Joe'', Executive Director, Central Pennsylvania
Food Bank, Harrisburg, PA...................................... 865
Prepared statement........................................... 867
Protas, Josh, Vice President of Public Policy, MAZON--A Jewish
Response to Hunger, Washington, D.C............................ 874
Prepared statement........................................... 876
Hatcher, Jennifer, Chief Public Policy Officer and Senior Vice
President, Government and Public Affairs, Food Marketing
Institute, Arlington, VA....................................... 884
Prepared statement........................................... 885
Tuesday, April 4, 2017--Subcommittee on General Farm Commodities and
Risk Management
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 972
Crawford, Hon. Eric A. ``Rick'', a Representative in Congress
from Arkansas, opening statement............................... 969
Prepared statement........................................... 970
Nolan, Hon. Richard M., a Representative in Congress from
Minnesota, opening statement................................... 971
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 972
Witnesses
Lee, Ronnie, Chairman, National Cotton Council, Bronwood, GA..... 973
Prepared statement........................................... 974
Submitted question........................................... 1026
Gerard, Blake, Chairman, Board of Directors, USA Rice Farmers,
Cape Giarardeau, MO; on behalf of USA Rice Federation.......... 978
Prepared statement........................................... 980
Submitted questions.......................................... 1026
McMillan, Hon. Timothy E., Co-Founder and Co-Owner, Southern
Grace Farms, Enigma, GA; on behalf of Southern Peanut Farmers
Federation..................................................... 986
Prepared statement........................................... 988
Rynning, Robert, President, U.S. Canola Association, Kennedy, MN;
on behalf of National Sunflower Association.................... 991
Prepared statement........................................... 993
Submitted question........................................... 1027
Roney, Jack, Director of Economics and Policy Analysis, American
Sugar Alliance, Arlington, VA.................................. 995
Prepared statement........................................... 996
Submitted Material
Stansel, Dwight, President, Florida Peanut Federation, submitted
letter......................................................... 1025
Tuesday, April 4, 2017--Subcommittee on Commodity Exchanges, Energy,
and Credit
Scott, Hon. Austin, a Representative in Congress from Georgia,
opening statement.............................................. 1029
Prepared statement........................................... 1030
Scott, Hon. David, a Representative in Congress from Georgia,
opening statement.............................................. 1031
Witnesses
Thiessen, Douglas, Chief Executive Officer, Alabama Ag Credit,
Montgomery, AL; on behalf of Farm Credit System................ 1032
Prepared statement........................................... 1034
Buzby, Timothy L., President and Chief Executive Officer, Federal
Agricultural Mortgage Corporation, Washington, D.C............. 1040
Prepared statement........................................... 1041
Franzen, Nathan E., President, Ag Division, First Dakota National
Bank, Yankton, SD; on behalf of American Bankers Association... 1046
Prepared statement........................................... 1047
Handke, Steven J., President and Chief Executive Officer, Union
State Bank of Everest; At-Large Director, Independent Community
Bankers of America, Everest, KS................................ 1054
Prepared statement........................................... 1055
Marlow, W. Scott, Executive Director, Rural Advancement
Foundation International--USA, Pittsboro, NC; on behalf of
National Sustainable Agriculture Coalition..................... 1061
Prepared statement........................................... 1063
Submitted Material
Johnson, Roger, President, National Farmers Union, submitted
letter......................................................... 1081
Matheson, Hon. Jim, Chief Executive Officer, National Rural
Electric Cooperative Association, submitted letter............. 1082
Coalition of Agricultural Mediation Programs, submitted statement 1083
Wednesday, June 7, 2017--Full Committee
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1091
Prepared statement........................................... 1093
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, submitted press release......................... 1173
Panetta, Hon. Jimmy, a Representative in Congress from
California, submitted letters.................................. 1174
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 1093
Witnesses
Suppes, Ronald J., dryland wheat and sorghum producer, Dighton,
KS; on behalf of U.S. Wheat Associates......................... 1095
Prepared statement........................................... 1096
Schuler, Margaret, Senior Vice President, International Programs
Group, World Vision, Inc.--U.S., Washington, D.C............... 1099
Prepared statement........................................... 1101
Submitted questions.......................................... 1189
Salem, Navyn, Founder and Chief Executive Officer, Edesia Inc.,
Kingstown, RI.................................................. 1113
Prepared statement........................................... 1114
Supplementary material....................................... 1179
Schoeneman, J.D., Brian W., Political and Legislative Director,
Seafarers International Union (AFL-CIO), Washington, D.C.; on
behalf of USA Maritime......................................... 1121
Prepared statement........................................... 1123
Submitted questions.......................................... 1190
Jayne, Ph.D., Thomas S., Foundation Professor of Agricultural,
Food, and Resource Economics and Co-Director, Alliance for
African Partnership, Michigan State University, Kalamazoo, MI;
on behalf of Farm Journal Foundation........................... 1129
Prepared statement........................................... 1130
Supplementary material....................................... 1181
Submitted Material
Action Against Hunger, et al., joint submitted statement......... 1186
Thursday, June 8, 2017--Subcommittee on Nutrition
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, opening statement............................... 1193
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania, opening statement................................ 1191
Prepared statement........................................... 1192
Witnesses
Boswell, Jason, Vice President for Programs, Conduent, State and
Local Solutions, Inc., Florham Park, NJ........................ 1195
Prepared statement........................................... 1196
Mathison, Steve, Senior Vice President of Network Relations,
First Data Corporation, Omaha, NE.............................. 1198
Prepared statement........................................... 1200
Glisson, J.D., Vickie Yates Brown, Secretary, Kentucky Cabinet
for Health and Family Services, Frankfort, KY.................. 1204
Prepared statement........................................... 1206
Aaronson, Lauren, Assistant Deputy Commissioner, Office of
Business Process Innovation, New York City Human Resources
Administration, New York, NY................................... 1210
Prepared statement........................................... 1212
Supplementary material....................................... 1237
Thursday, June 22, 2017--Full Committee
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1239
Prepared statement........................................... 1240
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 1241
Witnesses
Duncan, J.D., Hon. Robert L., Chancellor, Texas Tech University
System, Lubbock, TX............................................ 1243
Prepared statement........................................... 1244
Submitted questions.......................................... 1316
Burns, Ph.D., Jacqueline K., Dean for Research and Director,
Florida Agricultural Experiment Station; Professor of
Horticulture, Institute of Food and Agricultural Sciences,
University of Florida, Gainesville, FL......................... 1249
Prepared statement........................................... 1251
Submitted questions.......................................... 1316
Humiston, Ph.D., Hon. Glenda, Vice President, Agriculture and
Natural Resources; Director, Agricultural Experiment Station
and Cooperative Extension Service, University of California,
Oakland, CA.................................................... 1253
Prepared statement........................................... 1254
Submitted questions.......................................... 1317
Hill, Ph.D., Walter H., Dean, College of Agriculture, Environment
and Nutrition Sciences; Vice Provost for Land-Grant University
Affairs; Research Director, USDA Evans-Allen Research and
Director, George W. Carver Agricultural Experiment Station;
Administrator, Tuskegee University Cooperative Extension,
Tuskegee University, Tuskegee, AL.............................. 1259
Prepared statement........................................... 1261
Submitted questions.......................................... 1318
Tallant, Ph.D., Steven H., President, Texas A&M University-
Kingsville, Kingsville, TX..................................... 1268
Prepared statement........................................... 1270
Submitted questions.......................................... 1318
Billy, J.D., Carrie L., President and Chief Executive Officer,
American Indian Higher Education Consortium, Alexandria, VA.... 1273
Prepared statement........................................... 1275
Submitted questions.......................................... 1319
Submitted Material
American Society for Horticultural Science, submitted statement.. 1311
National Coalition for Food and Agricultural Research, submitted
statement...................................................... 1311
National Turfgrass Federation, submitted statement............... 1315
Wednesday, July 12, 2017--Full Committee
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1321
Prepared statement........................................... 1322
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 1323
Witnesses
Wenger, Paul J., President, California Farm Bureau Federation,
Sacramento, CA................................................. 1325
Prepared statement........................................... 1327
Submitted question........................................... 1393
Heller, Paul, Vice President, Wonderful Citrus, Texas Division,
Mission, TX.................................................... 1331
Prepared statement........................................... 1333
Submitted question........................................... 1393
Wishnatzki, Gary E., Owner and Chief Executive Officer, Wish
Farms, Plant City, FL.......................................... 1335
Prepared statement........................................... 1336
Submitted question........................................... 1395
Murphy, Kevin, Chief Executive Officer, Driscoll's, Inc.,
Watsonville, CA................................................ 1339
Prepared statement........................................... 1341
Submitted questions.......................................... 1395
LaVigne, Andrew W. ``Andy'', President and Chief Executive
Officer, American Seed Trade Association, Alexandria, VA....... 1343
Prepared statement........................................... 1345
Submitted question........................................... 1396
Submitted Material
Glenn, Ph.D., Barbara P., Chief Executive Officer, National
Association of State Departments of Agriculture, submitted
statement...................................................... 1379
Griffin, Jack, Chief Executive Officer, Metropolis Farms,
submitted statement............................................ 1390
Tuesday, July 18, 2017--Subcommittee on Nutrition
McGovern, Hon. James P., a Representative in Congress from
Massachusetts.................................................. 1398
Submitted article............................................ 1435
Thompson, Hon. Glenn, a Representative in Congress from
Pennsylvania................................................... 1397
Prepared statement........................................... 1398
Witnesses
Holzer, Ph.D., Harry J., John LaFarge, Jr., SJ Professor of
Public Policy, McCourt School of Public Policy, Georgetown
University, Washington, D.C.................................... 1400
Prepared statement........................................... 1402
Lotzar, M.S.W., Eliyahu, Student Success Coordinator, Department
of Economic & Workforce Development, Onondaga Community
College, Syracuse, NY.......................................... 1404
Prepared statement........................................... 1406
Reynolds, Heather, President and Chief Executive Officer,
Catholic Charities Fort Worth, Fort Worth, TX.................. 1409
Prepared statement........................................... 1410
THE NEXT FARM BILL
(CONSERVATION POLICY)
----------
TUESDAY, FEBRUARY 28, 2017
House of Representatives,
Subcommittee on Conservation and Forestry,
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. Frank D.
Lucas [Chairman of the Subcommittee] presiding.
Members present: Representatives Lucas, Thompson, LaMalfa,
Allen, Bost, Abraham, Kelly, Conaway (ex officio), Fudge, Walz,
Kuster, Nolan, O'Halleran, Vela, and Peterson (ex officio).
Staff present: John Weber, Josh Maxwell, Patricia Straughn,
Stephanie Addison, Anne Simmons, Evan Jurkovich, and Nicole
Scott.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
CONGRESS FROM OKLAHOMA
The Chairman. This hearing of the Subcommittee on
Conservation and Forestry entitled, The Next Farm Bill:
Conservation Policy, will come to order. I almost want to say I
am back, but that is beside the point. Let me turn myself to
myself for an opening statement.
Good morning, and welcome to today's hearing. For some of
us, it is hard to believe it is already farm bill time again,
and to some degree, it feels like we just finished hashing out
the details of the last farm bill. But it is true that we are
already entering the 4th year of the Agricultural Act of 2014,
and that means we must now set about the hard work of preparing
for the next farm bill.
As Chairman Conaway noted at the rural economic outlook
hearing 2 weeks ago, we are entering this farm bill
reauthorization against a much different backdrop. Net farm
income has been cut in half over the past 4 years, the steepest
4 year percentage decline since the start of the Great
Depression. As I have noted before, we write farm bills for the
bad times, not the good times, and our nation's farmers and
ranchers currently are struggling with that as we speak.
While the 2014 Farm Bill has been vital in responding to
the needs of the countryside, we revisit the farm bill and all
farm bills roughly every 5 years to make sure that they are
tuned to the current conditions in the countryside. To that
end, we are starting our important aspect of this work this
morning. Over the course of the next month, each Subcommittee
will hold hearings focusing on the portions of the farm bill
that fall under their respective jurisdictions. Each
Subcommittee is going to ask stakeholders to give us their farm
bill ideas sooner, rather than later. And as an Oklahoma State
graduate, it is difficult for me to say that. Nonetheless, that
is an inside joke.
Today, we are focusing on the nation's voluntary
conservation initiatives. These initiatives have undergone many
changes over the past 2 decades, during which time I served as
Chairman and Ranking Member respectfully of the Subcommittee
with jurisdiction over the conservation title, and then as
Chairman of the full Committee. Once again, I have the pleasure
to serve in a familiar role as we begin this process. I take
conservation policy very seriously. My dedication to
conservation comes from being raised by folks who lived through
the drought and the Dust Bowl of the 1930s, and the drought of
the 1950s, both of which caused some of the hardest times rural
America has ever experienced.
As a western Oklahoma farmer, I have also seen firsthand
the important role conservation plays in making sure that a
Dust Bowl never happens again. While this Committee cannot
control the weather, we can provide our farmers and ranchers
the tools necessary to protect and conserve not only the land,
but also their way of life.
Congress has acknowledged this over the past 20 years by
making significant investments in conservation policy. We
expanded our commitment to important issues like CRP and EQIP,
while also creating new tools like CSP to expand the use of on-
farm conservation practices. The conservation title of the 2014
Farm Bill answered the call for meaningful deficit reduction,
saving taxpayers $6 billion by consolidating 23 programs into
13, further streamlining and targeting delivery to farmers,
ranchers, and foresters.
I am proud of the work that we have accomplished over the
years, and I am proud of the work of the farmers, ranchers, and
forest owners who implement these important conservation
practices. I think the results speak for themselves. Voluntary
conservation works.
That said, I understand that no policy is perfect, and I
look forward to hearing from our witnesses today about how
these critical tools can be improved to address new natural
resource challenges.
Thanks to all of our witnesses who have taken time from
their work and families to join us today. We appreciate your
efforts and your willingness to share your thoughts on the
future of conservation policy. I would be remiss if I didn't
note that I am delighted to be partnered with my Ranking Member
in this endeavor on this Committee, and Ms. Fudge, we had quite
the set of adventures in the 2012, 2013, and 2014 Farm Bill
process, and I look forward to working with her in every way.
[The prepared statement of Mr. Lucas follows:]
Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
from Oklahoma
Good morning and welcome to today's hearing.
For some of us, it's hard to believe that it's already farm bill
time again. To some degree, it feels like we just finished hashing out
the details of the last farm bill. But, it's true that we are already
entering the 4th year of the Agricultural Act of 2014, and that means
we must now set about the hard work of preparing for the next farm
bill.
As Chairman Conaway noted at the rural economic outlook hearing 2
weeks ago, we are entering this farm bill reauthorization against a
much different backdrop. Net farm income has been cut in half over the
past 4 years, the steepest 4 year percentage decline since the start of
the Great Depression.
As I've noted before, we write farm bills for the bad times--not
the good times--and our nation's farmers and ranchers are certainly
struggling right now. While the 2014 Farm Bill has been vital in
responding to needs in the countryside, we revisit farm bills roughly
every 5 years to make sure they are attuned to current conditions in
the countryside.
To that end, we are starting an important aspect of that work this
morning. Over the course of the next month, each Subcommittee will hold
hearings focused on the portions of the farm bill that fall under their
respective jurisdictions. Each Subcommittee is going to be asking
stakeholders to give us their farm bill ideas--sooner rather than
later.
Today we are focusing on the nation's voluntary conservation
initiatives. These initiatives have undergone many changes over the
past 2 decades, during which time I served as the Chairman and Ranking
Member, respectively, of the Subcommittee of jurisdiction for the
conservation title and then as Chairman of the full Committee.
Once again, I have the pleasure to serve in a familiar role to
begin this process. I take conservation policy very seriously. My
dedication to conservation comes from being raised by folks who lived
through the drought and Dust Bowl of the 1930s and the drought of the
1950s, both of which caused some of the hardest times rural America has
ever experienced.
As a western Oklahoma farmer, I have also seen firsthand the
important role conservation plays in making sure that a Dust Bowl never
happens again. While this Committee cannot control the weather, we can
provide our farmers and ranchers the tools necessary to protect and
conserve not only the land, but also their way of life.
Congress has acknowledged this over the past 20 years by making
significant investments in conservation policy. We expanded our
commitment to important initiatives like CRP and EQIP, while also
creating new tools like CSP to expand the use of on-farm conservation
practices.
The conservation title of the 2014 Farm Bill answered the call for
meaningful deficit reduction, saving taxpayers $6 billion by
consolidating 23 programs into 13, further streamlining and targeting
delivery to farmers, ranchers, and foresters.
I'm proud of the work we have accomplished over the years, and I'm
proud of the work of the farmers, ranchers and forest owners who
implement these important conservation practices. I think the results
speak for themselves--voluntary conservation works.
That said, I understand that no policy is perfect, and I look
forward to hearing from our witnesses today about how these critical
tools can be improved to address new natural resource challenges.
Thanks to all of our witnesses who have taken time from your work
and families to join us today. We appreciate your efforts and your
willingness to share your thoughts on the future of conservation
policy.
I must also mention how delighted I am to be partnered with our
Ranking Member, Ms. Fudge.
With that, I yield to the Ranking Member for any opening remarks
she would like to make.
The Chairman. With that, I would like to yield to the
Ranking Member for any opening remarks that she would like to
make.
OPENING STATEMENT OF HON. MARCIA L. FUDGE, A REPRESENTATIVE IN
CONGRESS FROM OHIO
Ms. Fudge. Thank you very much, Mr. Chairman, and thank you
all for being here this morning.
I am really excited to be here today for our first
Conservation and Forestry Subcommittee hearing, and for the
opportunity to work with my good friend, Chairman Lucas, as we
get to work on the next farm bill.
Conservation programs are a staple of the farm bill, and
play an invaluable role in preserving our agricultural
landscapes across the country. Farmers are the original
conservationists. Their livelihood is tied to the land, and it
is in their best interest that their land be the healthiest,
most productive, and most resilient it can be. Farm bill
conservation programs help our producers accomplish just that,
while compounding benefit after benefit to deliver cleaner air,
cleaner water, and helping address some of our nation's most
pressing natural resource concerns.
The last farm bill consolidated some conservation programs
with a goal of making the programs easier for producers to use
and easier for NRCS to manage. I am interested to hear today
how those changes are working, and if, indeed, they have made
the programs easier to use and administer.
The 2014 Farm Bill's conservation title also saved almost
$4 billion over 10 years. This was a substantial cut initiated
by the Committee as part of the overall farm bill savings.
Further cuts to these programs as part of the upcoming farm
bill would significantly hamstring the efforts to achieve our
conservation goals.
I am also looking forward to hearing how our tried and true
conservation programs like EQIP, CSP, CRP, and easement
programs are working, and how they can work better for
producers on the ground.
Finally, and I know some of our witnesses will touch on
this today, I am interested to hear how the new Regional
Conservation Partnership Program is working. This program was
an effort to give more flexibility on the ground and leverage
our Federal dollars to bring more non-Federal resources to our
conservation needs.
I want to thank the witnesses, and I especially want to
thank my good friend, Chairman Lucas. I yield back.
The Chairman. The gentlelady yields back. The chair notes
that the Subcommittee is privileged and pleased that we have
both the Chairman of the full Committee and the Ranking Member
in attendance today.
Mr. Chairman, Mr. Conaway, would you have any opening
comments to make?
OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS
Mr. Conaway. Just that I want to thank both yourself and
the Ranking Member for kicking off this series of Subcommittee
hearings. You all are the first ones to start. All the
Subcommittees will have a series of hearings over the next
couple months, covering their areas of jurisdiction, and I am
looking forward to both of y'all's able leadership in this
endeavor, and look forward to the hearing.
With that, I yield back.
The Chairman. The gentleman yields back. The chair
recognizes the Ranking Member of the full Committee for any
comments he might make.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
Mr. Peterson. Well thank you, Chairman Lucas and Ranking
Member Fudge, for holding today's hearing to review
conservation policy. We will be hearing from a great panel of
witnesses today, and so I welcome to them to the Committee.
At the Committee's recent hearing on farm economy, I
expressed my intent to take a good look at the CRP program, and
try to see if we can simplify and reform and increase the acres
in that program. We lowered the cap on CRP in the 2014 Farm
Bill, even though I really didn't want to do that, but we were
loosing the acreage anyway, and if we wouldn't have lowered the
cap, the money would disappear. We used that money to protect
the conservation baseline, and it has helped offset some cuts
in other programs in title II.
But now, given what is going on around the country, it is
time for us to figure out how to get back to 40 million CRP
acres in this farm bill. This increase will help improve water
quality and address the declining wildlife populations that we
have experienced in my region of the country: big tract CRP
worked. We boomed with pheasants, ducks, and deer and other
wildlife because of it, but it has been diminished because of
economics. Because of an over-emphasis on some of these carve
outs that have been put in there to satisfy everybody's idea,
and you know, the general sign-up has become a step-child in
the program. That is the opposite of what needs to be done. I
would like to see us increase the acres, but if we don't reform
this program, I am not going to support increasing the acres.
That is how strongly I feel about it.
I am going to be looking for ways to make CRP less
complicated, to make the rental rates more affordable for the
budget, and also more competitive so that farmers aren't losing
their land to CRP. I am also interested in steps that we can
take to bring the program up to date by getting rid of the
requirement that was originally put in, because the program
originally was to get land out of production to raise prices.
We still have in place the fact that you have to have base
acres and program acres in order to get into the program. I
don't think that is necessary anymore, or right. I would like
to see us get rid of that.
By and large, the farm bill conservation programs are
working. As was said, we simplified some of these other
programs in the last bill. Now, it is time for us, in my
opinion, to take a good look at CRP and simplify that program
as well.
I am looking forward to today's witnesses, and thank the
chair for allowing me to spout off, and I yield back.
The Chairman. The gentleman is timid as always. I thank the
Ranking Member.
I would like to welcome our witnesses to the table. First,
Mr. Chuck Coffey, Owner/Manager Double C Cattle Company, Davis,
Oklahoma, on behalf of the National Cattlemen's Beef
Association. Also, Mr. Tim Gertson, a member of the USA Rice
Federation Board of Directors, Lissie, Texas. Mr. Jeremy
Peters, Chief Executive Officer, National Association of
Conservation Districts, Washington, D.C., on behalf of Mr. Lee
McDaniel, who may be under the weather, correct, Mr. Peters?
Mr. David Nomsen, Vice President of Governmental Affairs,
Pheasants Forever, Garfield, Minnesota; and the Honorable John
Piotti, President, American Farmland Trust, Washington, D.C.
And with that, Mr. Coffey, you are recognized for 5
minutes. We have these wondrous lights, green, yellow, red.
Proceed, sir.
STATEMENT OF CHUCK COFFEY, OWNER/MANAGER, DOUBLE C CATTLE
COMPANY; MEMBER, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, DAVIS,
OK
Mr. Coffey. Thank you very much, Chairman Lucas, Ranking
Member Fudge. We sincerely appreciate your recognition of
agriculture's important contribution to our nation's lands.
Good morning. My name is Chuck Coffey. Ruth, my wife of 30
years, and I operate a fifth generation cattle ranch in south
central Oklahoma, where we own and operate over 30,000 acres of
grassland, rangeland. I am testifying before you today
representing the many cattle producers who each have a stake in
protecting the environment.
U.S. cattlemen own and manage considerably more land than
any other segment of agriculture. In fact, we manage the net
sum of \1/3\ of the nation's total land mass. Since our
livelihood is made on the land, the utilization of our natural
resources and being good stewards of the land not only makes
good environmental sense, it is fundamental for our industry to
remain strong. We strive to operate as environmentally friendly
as possible, and it is through voluntary conservation programs
that ranchers will continue to be proud partners with the
government to reach our environmental conservation goals.
Ranching in south central Oklahoma comes with its fair
share of difficulties, as it does for many fellow cattlemen
across the country. However, we have been able to keep our
operation sustainable during those hard times by utilizing
voluntary conservation programs and applying management
practices that enhance our operation.
Drought is a common problem in south central Oklahoma, and
requires adaptability and forward thinking to maintain the
resources we have on the ranch. In 2011 and 2012, we were
challenged with one of the worst droughts in a generation. It
was similar to the droughts of the 1950s and the droughts of
the 1930s, but praise the Lord, Mr. Lucas, we didn't have a
Dust Bowl situation due to the conservation practices that we
have on the ground. However, we survived and remained
sustainable because of our grazing management practices, and
the opportunity to work with NRCS' voluntary conservation
programs. One way we made our ranch drought resistant is by
installing solar wells and above ground water storage systems,
and even piping water to some critical areas, this water
serving both the needs of livestock and wildlife that inhabit
our lands.
We graze our cattle with a carefully managed grazing plan,
developed with the assistance of the NRCS. Through cooperation
with state and local agencies, in addition to the development
of innovative grazing strategies, we have increased perennial
grasses on our ranch, improved ground cover, greatly reduced
soil erosion, and ensured adequate forage for livestock and
wildlife.
Another key to improving the grasses on our ranch is brush
control, which we often do in partnership with NRCS when funds
are available. We use a variety of ways to reduce brush,
including prescribed burns and mechanical treatment.
Conservation programs that keep land in production and do
not limit its use are best for both ranchers and conserving our
nation's resources. That is why the working lands programs, in
my opinion, works best for ranchers. One such program, CSP, the
Conservation Stewardship Program, rewards those of us that have
been conservationists and have spent both time and money
improving our land, water, and wildlife habitats. CSP offers
cattlemen the opportunity to earn payments for actively
managing, maintaining, and expanding conservation practices.
NRCS personnel are a tremendous resource for ranchers. In
recent years, local NRCS personnel have been prevented from
going to training sessions provided by the Society for Range
Management, the Grassland Conservation Initiative meetings, and
it has also become more difficult, in my opinion, for them to
find time to get out of the office due to the tremendous
amounts of paperwork that they are required to keep up with. We
as ranchers must have well-informed NRCS personnel on the
ground with us to move forward with these innovative
conservation practices.
As Congress begins to process the next farm bill, I have a
few recommendations on how to make these programs work even
better for producers. NRCS needs to work on streamlining the
application process to be able to garner more participation in
the program. CSP, for example, needs to be simplified and based
on outcomes and adaptive management, rather than a prescribed
set of management practices.
The biggest point I would like you to take away from this
hearing is that the voluntary part of the conservation program
is what really makes it work for ranchers. If they were to
become mandatory, the rules and regs that farmers and ranchers
would be subjected to would make it harder for them to utilize
the unique conservation practices that help their individual
operations thrive.
USDA's conservation programs have been a great asset to
cattle producers, and it is important that these programs be
implemented in a practical, producer-friendly, and voluntary
manner to ensure that cattlemen can continue to responsibly
produce the world's safest, most nutritious, and affordable
source of protein. I appreciate the opportunity to visit with
you today, and thank you for your time. I would welcome any
questions moving forward. Thank you, Chairman Lucas.
[The prepared statement of Mr. Coffey follows:]
Prepared Statement of Chuck Coffey, Owner/Manager, Double C Cattle
Company; Member, National Cattlemen's Beef Association, Davis, OK
Good morning, my name is Chuck Coffey. Ruth, my wife of 30 years,
and I operate a fifth-generation cattle ranch in south central Oklahoma
where we own and operate over 30,000 acres of grassland. I am a
graduate of Texas A&M where I studied Rangeland Ecology, and proudly
have three children who have graduated from Oklahoma State University
with degrees in Agribusiness and Natural Resource Management and are
now the sixth generation on the Ranch. I taught agriculture at Murray
State College, chairing the department, until I joined the Noble
Foundation as a Pasture and Range Consultant in 1993. I am a member of
the National Cattlemen's Beef Association and am testifying before you
today representing the many cattle producers and family ranchers, who
each have a stake in protecting the environment. Thank you Chairman
Lucas and Ranking Member Fudge for allowing me to testify today on
voluntary conservation programs.
U.S. cattlemen own and manage considerably more land than any other
segment of agriculture--or any other industry for that matter.
Cattlemen graze cattle on approximately 666.4 million acres of the
approximately 2 billion acres of the U.S. land mass. In addition, the
acreage used to grow hay, feed grains, and food grains add millions
more acres of land under cattlemen's stewardship and private ownership.
Some of the biggest challenges and threats to our industry come from
the loss of our natural resources. The livestock industry is threatened
daily by urban encroachment, natural disasters, and government
overreach. 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 strive to operate as environmentally
friendly as possible, and it is through voluntary conservation programs
that ranchers will continue to be a proud partner with the government
to reach our environmental conservation goals.
I represent the fifth-generation of ranching within the Coffey
family. As I stated earlier, we ranch on 30,000 acres of grassland
spanning across Carter and Murray counties in south central Oklahoma.
Our goals are very similar to many other ranchers around the country,
be profitable, and leave the land in better condition for future
generations. The primary way we are able to preserve the land, as well
as our ranching heritage for future generations, is through innovative
practices, diversification and voluntary conservation programs.
Ranching in south central Oklahoma comes with its fair share of
difficult times, as it does for my fellow cattlemen across the country.
However, we have been able to keep our operation sustainable during
those hard times, by utilizing voluntary conservation programs and
applying management practices that enhance the operation. Drought is a
common problem in south central Oklahoma, and it requires adaptability
and forward thinking to maintain the resources on the ranch. In 2011
and 2012, we were challenged with one of the worst droughts in a
generation. Water was virtually nonexistent and wildfires were
prevalent. But we were able to survive, and remain sustainable, because
of our grazing management practices and the opportunity to work with
the NRCS's voluntary conservation programs to improve our ranch and
make our grasslands more resilient. Also key to our survival has been
the voluntary insurance programs such as FSA's NAPP Insurance and the
private insurance known as PRF-RI insurance provided through USDA-RMA.
These voluntary programs were a great benefit to many producers who,
quite frankly, would not have survived without them.
One way we made our ranch drought-resistant is by installing solar
wells and above ground water storage systems, and even piping water to
some critical areas. This ensures our livestock and wildlife have
adequate and reliable water throughout the year.
We graze our cattle with a carefully managed grazing plan that we
developed with the assistance of the Natural Resources Conservation
Service (NRCS) and the National Grazing Lands Coalition (NGLC)
utilizing their conservation planning capabilities. We have learned
that when you utilize a flexible, planned grazing program at a
conservative stocking rate, leave grass cover after you move out of a
pasture, and give the rangeland adequate recovery time, you will grow
more grass with limited rainfall. Through cooperation with state and
local agencies, in addition to the development of innovative grazing
strategies, we have increased perennial grasses on the ranch, improved
ground cover, greatly reduced soil erosion due to both wind and water,
reduced labor inputs, and ensured adequate forage for livestock and
wildlife populations on the ranch. Our grazing strategy is a big part
of why we've been able to keep the ranch resilient and sustainable.
Furthermore, by implementing these programs we are able to keep
expenses down by lowering feed, fuel, labor and equipment costs, thus
improving the profitability of our operation.
Another key to improving the grasses on our ranch is brush control,
which we often do in partnership with NRCS when funds are available. We
use a variety of ways to reduce brush including prescribed burns and
mechanical treatment. We leave the bigger trees in to give the
grasslands a savannah effect which also provides shade for the cattle,
improving their welfare.
We are strong advocates of prescribed fire on the rangeland. We try
to mimic the fire conditions that nature historically provided the land
prior to settlement. It is a very good tool within our tool box of land
improvement measures. NRCS and the GLCI have provided valuable
assistance in our burning endeavors.
The Environmental Quality Incentive Program, or EQIP, is a cost-
share program that rewards and provides incentives to producers for
implementing conservation practices. When wildfire came through our
ranch in 2011, we had to rebuild miles of fencing. EQIP helped us do
it. One of the reasons EQIP has become popular among ranchers is
because it is a working-lands program. Conservation programs that keep
land in production and do not limit its use are best for both the
ranchers and conserving our resources.
Another working lands program is the Conservation Stewardship
Program. CSP rewards those of us that have been conservationists and
have spent the time and money in the improving of our land, water, and
wildlife habitats. CSP offers cattlemen the opportunity to earn
payments for actively managing, maintaining, and expanding conservation
activities like cover crops, rotational grazing, ecologically-based
pest management, and buffer strips.
NRCS personnel are a tremendous resource for ranchers. In recent
years local NRCS personnel have been prevented from going to training
sessions provided by the Society for Range Management and Grasslands
Conservation Initiative meetings. It is also becoming more difficult
for them to find time to get out of the office due to the tremendous
amounts of paperwork they are required to keep up with. We as ranchers
must have well informed NRCS personnel to move forward with innovative
conservation practices. They are our first go to source of knowledge.
It is critical we have ``boots-on-the-ground'' in conjunction with the
voluntary programs offered.
As Congress begins the process of developing the next farm bill, I
have some recommendations on how to make these programs work even
better for producers.
First and foremost--NRCS needs to make it as simple as
possible for farmers and ranchers to participate in these
programs. Streamlining the application process will garner more
producer participation.
Farmers and ranchers need greater access to programs like
CSP, where there is a great demand for these programs but
limited funding. I, and cattle ranchers around the country,
would like to see CSP simplified and based on outcomes and
adaptive management rather than a prescribed set of management
practices.
The EQIP program should disclose penalty cancellation costs
before producers sign on the dotted line. And producers who
enter into an EQIP contract should have the ability to
periodically revise the terms of a multiple-year contract to
adjust for rising costs over time.
NRCS should maintain and enhance EQIP at 60% or greater
allocation for livestock related applications for all
operations, regardless of their size.
Reinvigorate the focus at the local ``grassroots'' level by
increasing the NRCS staff that work with producers and provide
technical assistance at the local level.
Increase research in soil, water, plant, and wildlife
science so that we have an accurate and growing pool of data to
inform policy decisions.
The biggest point I'd like you to take away from this hearing is
that the ``voluntary'' part of the conservation programs is what really
makes it work for ranchers. We've had success using some of these
conservation programs, but just because this system works for us does
not mean it's right for everybody. It's important that we keep these
programs funded to safeguard their continued success, and above all
else--these programs must stay voluntary. A one-size-fits-all approach
that accompanies top-down regulation does not work in my industry. If
these programs were to become mandatory, the rules and regulations that
farmers and ranchers would be subjected to would make it harder for
them to utilize the unique conservation practices that help their
individual operations thrive.
I believe that economic activity and conservation go hand in hand
and we are always looking for new, innovative conservation programs
that will have tangible benefits for the environment, and help to
improve our ranching lands. USDA's conservation programs have been a
great asset to cattle producers and it is important that these programs
continue to be implemented in the same practical, producer friendly,
and voluntary manner for years to come to ensure that cattlemen will
continue to have the ability to do what we do best--produce the world's
safest, most nutritious, abundant and affordable protein while
operating in the most environmentally friendly way possible. Together
we can sustain our country's natural resources and economic prosperity,
ensuring the viability of our way of life for future generations. I
appreciate the opportunity to visit with you today. Thank you for your
time, and I welcome any questions you may have.
The Chairman. Thank you, Mr. Coffey.
Mr. Gertson, you are recognized for 5 minutes.
STATEMENT OF TIMOTHY GERTSON, CO-OWNER/CO-
OPERATOR, G5 FARMS; MEMBER, BOARD OF DIRECTORS, USA RICE
FEDERATION, LISSIE, TX
Mr. Gertson. Chairman Lucas, Ranking Member Fudge, and
Members of the Subcommittee, thank you for holding this hearing
today. I appreciate the opportunity to offer testimony on
behalf of the USA Rice Federation. My name is Timothy Gertson,
and I own and operate G5 Farms along with my cousin. We are
fifth generation rice farmers, and first began farming
independently of our parents in 2009. We farm in and around
Lissie, Texas, a small community about an hour outside of
Houston.
On our farm, we normally begin planting rice March 1, and
if you take a look at the calendar, you will see that is
tomorrow. But here I am in a suit and tie in D.C., 1,500 miles
from home. That is because the issue of conservation is
critically important to me and my family.
With my testimony today, I would like to focus on the
importance of investments in working lands programs,
specifically, EQIP, CSP, and the RCPP. Rice is the only
commodity that is 100 percent irrigated, with many growers
dependent on ground water. It is necessary to flood our fields
during the growing season, and we have the option and
opportunity to maintain those floods throughout the winter to
benefit the millions of migratory water fowl passing through.
Winter flooded rice fields provide many of the same functions
for migrating water fowl as natural wetlands.
The close relationship between rice and water fowl led to
an historic partnership between USA Rice and Ducks Unlimited.
The Rice Stewardship Partnership has unified us around our
common goals and working lands conservation programs, and the
theme ``What's good for rice is good for ducks.''
Since the partnership was formed, we have worked together
to secure $25 million through three different RCPP projects
from NRCS to implement EQIP and CSP projects across all six
rice growing states, and to construct a small reservoir near my
hometown, Anita Lake, to benefit water fowl and rice farmers
when we experience drought. USA Rice would like to see the
continuation of RCPP as part of the next farm bill.
CSP, and especially EQIP, are referred to by farmers as the
workhorses of NRCS conservation programs. They are valuable
cost-share programs that incentivize implementation of
conservation practices that have proven benefits to the
environment. My father and his brothers can attest, as some of
the earliest adopters of both programs on our family operation.
Many rice farmers operate on rented cropland. These cost-
share programs allow land renters to install conservation
measures while footing only a portion of the costs.
Improvements in efficiencies benefit the farmer, while the
environmental perks benefit the landowner, simultaneously
raising the land value.
We heard there was a huge demand for the EQIP program when
we got our first contract in 2010, and we soon learned why as
the results came quickly and our input costs dropped
significantly. We cost-shared the installation of more than 4
miles of pipeline to replace the irrigation canals, resulting
in up to 20 percent less water used, providing both instant
savings and environmental benefits. What previously took 24
hours of pumping to start just a trickle of water into my
fields is now on demand and immediate.
After we implemented our initial EQIP contracts, we saw the
returns and we decided to do more of it. Due to backlogs, we
paid for it out of pocket. NRCS conservation programs not only
incentivize conservation, but they help farmers develop an
appetite to continue the environmental stewardship, making
their full value truly incalculable.
Throughout rural America, working lands programs serve as
economic drivers. It takes more than just a single farmer to
complete the work needed to implement an EQIP or CSP contract,
not to mention, the land is still in production, keeping small
communities like mine thriving, unlike some programs like CRP
that pay farmers not to grow a crop. More than 75 percent of
rice farming operations in the South operate in what USDA calls
StrikeForce counties, rural counties with more than 20 percent
of the population below the poverty line. Small towns like mine
rely on the agriculture industry for jobs. My operation alone
provides jobs to the folks in my town, and the revenue
generated from my farm is reinvested in inputs for the
following year, and ends up in the hands of small local
businesses. A new study by Texas A&M's Agriculture and Food
Policy Center drives this home, showing every U.S. farmer on
average is generating $1 million annually for their local
economy.
I have talked a lot about what the industry is doing, the
benefits working lands conservation brings to local economies,
and why these investments pay off for our taxpayers, but now I
want to talk about the real reason I am here. I have three boys
at home, ages 5, 3, and 1, and they all want to be farmers just
like Dad. They want to work the same ground that my family has
worked for the last 108 years. But without being able to
maintain the natural resources and keep my land in production,
there won't be anything left to hand to the sixth generation.
That is why I am here, is to ask this Subcommittee and the full
Agriculture Committee membership to support robust funding for
the conservation title, and to focus that support on important
working land investments so that my children can play a part in
feeding this great nation.
Thank you for your leadership, and the opportunity to offer
testimony. I look forward to working with you and your staff,
and to respond to any questions you may have. Thank you.
[The prepared statement of Mr. Gertson follows:]
Prepared Statement of Timothy Gertson, Co-Owner/Co-Operator, G5 Farms;
Member, Board of Directors, USA Rice Federation, Lissie, TX
Introduction
Chairman Lucas, Ranking Member Fudge, and Members of the
Subcommittee, thank you for holding this hearing to gather input on how
the conservation title of the Agricultural Act of 2014 is working and
hopefully how we can improve it as we start the process of writing a
new farm bill. I appreciate the opportunity to offer testimony on
behalf of the USA Rice Federation.
My name is Timothy Gertson. I own and operate G5 Farms along with
my cousin, Daniel Gertson. We are fifth generation rice farmers and
usually grow some corn and sorghum on the side. We first began farming
independently from our parents in 2009 and manage land primarily in and
around Lissie, a small community in Wharton County, Texas, about an
hour outside of Houston.
In Texas, we normally begin planting rice on March 1st; if you take
a look at the calendar you will see that is tomorrow. Planting and
harvesting are among the most stressful parts of a farmer's year. But
here I am, sitting in a suit and tie in Washington, D.C. 1,500 miles
from home. That is because the issue of voluntary, locally-led
agricultural conservation is all too important for me to hand off to
someone else.
USA Rice-Ducks Unlimited Stewardship Partnership
Conserving our natural resources is not something we take lightly
and for rice farmers our livelihoods depend on it. Rice is the only
major commodity that is 100 percent irrigated with most growers still
heavily dependent on ground water for irrigating their rice crop.
Because of the necessity to flood our fields during the growing season,
we have the option to maintain those floods throughout the fall and
winter to benefit the millions of migratory waterfowl that get 40
percent of their food source directly from our rice fields. Ducks
dabble in the shallow water for waste grain, weed seeds, and other
forms of food and the fields provide resting areas for migratory birds
on the move. Winter-flooded rice fields provide many of the same
functions for migrating waterfowl as natural wetlands.
Without the voluntary contribution of rice farmers, these birds
would lose all of that critical habitat which is exceedingly important
for the survival of many species. An industry study in 2012 found that
the estimated restoration costs of replacing flooded rice habitats with
managed seasonal wetlands would exceed $2,200 per acre. In total, the
replacement cost for wetlands nationwide would exceed $3.5 billion
without domestic rice production to replicate the effects of natural
wetlands.
This symbiotic relationship with the waterfowl industry led into a
historic partnership with Ducks Unlimited, called the Rice Stewardship
Partnership. I would even go as far as to say that we could be used as
the model for commodity and wildlife groups working together going
forward. While we both have separate missions and methods, we have
managed to collaborate and find common ground and develop goals for our
Partnership, including work on the Regional Conservation Partnership
Program (RCPP).
Regional Conservation Partnership Program Is a Success
Our Partnership was awarded $10 million in 2015 by the USDA's
Natural Resources Conservation Service (NRCS) to implement an RCPP
project across the six major rice-growing states. The project directly
funds Environmental Quality Incentives Program (EQIP) and Conservation
Stewardship Program (CSP) contracts with rice growers. While the CSP
portion of our project is still underway, the Partnership has been able
to facilitate more than 200 EQIP contracts with growers throughout the
country to further improve rice's environmental footprint.
This year, the same Partnership was able to secure an additional
$15 million through two new RCPP projects, further stretching the reach
of the cost-share programs throughout the South and constructing a
small reservoir near my hometown in Eagle Lake, Texas to benefit
waterfowl and rice farmers when we experience the all too often
droughts.
It is important to us that this fiscally responsible program is
reauthorized when you are writing the next conservation title. Our
three projects alone have pulled together nearly 100 diverse partners
to help implement their goals, communicate successes, and ultimately
share the cost of investment in working lands conservation programs to
ensure NRCS gets the most bang for their buck.
The Importance of Working Lands Programs
CSP, and especially EQIP, are referred to by farmers as the
``workhorses'' of NRCS conservation programs. They are valuable cost-
share programs that incentivize farmers to implement any number of
conservation practices on our operations that have proven benefits to
the environment. The relatively small investment made by the program
has no doubt made our land more resilient to extreme weather events by
reducing erosion and runoff and improving soil health. My father and
his brothers were some of the earliest adopters of both programs. Their
first EQIP contract was signed in 2002 and they secured a CSP contract
through the old Conservation Security Program following its inception
in the 2002 Farm Bill.
EQIP is vital because it is such a straightforward program with an
extensive list of practices that NRCS is able to assist farmers with
implementing. EQIP's structural practices can help establish the
equipment needed to better manage water resources, help with irrigation
efficiency, fencing, and erosion control.
CSP has been revised to become more like EQIP but operates with 5
year contracts to provide more time for the extensive work to be
completed. This program helps to target specific resources using a
number of complimentary practices, and has been a great tool for rice
farmers to have in our toolbox to pay for expensive long-term
management practices.
In the South it is not uncommon for most farmers to rent the
majority of their cropland, we have a system that works well for us,
usually. Many farmers do not have certainty of whether they will hold
the lease on a piece of ground from one year to the next so it is often
not worth the risk to invest a lot of capital into someone else's land.
These cost-share programs are the only thing that help to bridge that
gap, allowing land-renters to install conservation measures while
footing only a portion of the cost. Improvements in efficiencies
benefit the farmer while the environmental perks benefit the landowner
by simultaneously raising the land value. Across the country, a great
deal of EQIP and CSP contracts are carried out on rented land that
would otherwise probably be left untouched by conservation
improvements.
My father taught me to be a conservationist as just a kid, and I
was so passionate about it that I nearly took a job with NRCS on two
separate occasions. Therefore, it came as no surprise to anyone when my
operation secured its first EQIP contract in 2010, just a year into
farming. We always heard there was a huge demand for the program across
the country and we soon learned why, as the results came quickly and
our bottom line could feel the difference. We cost-shared the
installation of more than 4 miles of 16" underground pipeline to
replace irrigation canals, resulting in up to 20 percent less
irrigation water needed to grow our crop, providing both instant
savings and environmental benefits. It previously took nearly 24 hours
of pumping at a rate of 3,000 gallons per minute to build up in my old
canals to start just a trickle of water into my fields. Now, with
underground pipeline, my water supply is on demand and immediate.
Soon after our first EQIP venture, we were able to secure an
additional EQIP contract to begin cost-sharing irrigation land-leveling
portions of our operation. Level land results in less water losses when
a rice crop is flooded and that was able to provide us with an
additional ten to twenty percent irrigation water savings. As beginning
farmers, we were also fortunate enough to qualify for prioritized
applications and higher cost-sharing percentages to help incentivize
our participation.
These programs obviously provide farmers with the resources to
implement a lot of effective practices and there is clearly data to
back that up. Surprisingly, their true benefits are not so visible on
the surface. After we implemented our initial EQIP contracts, we saw
the financial returns and the obvious preservation of natural resources
and we decided to do more of it, this time on our own dime. I think
these NRCS financial assistance programs not only incentivize locally
led conservation, but they help farmers develop an appetite to continue
the environmental stewardship, making their full value truly
incalculable.
Working Lands Programs Are Economic Drivers
Throughout rural America, working lands programs serve as economic
drivers. It takes more than just one farmer to complete the work needed
to implement an EQIP or CSP contract. Think about the outside
technicians, engineers, and local soil and water conservation districts
needed to help oversee the conservation planning; the scientists, the
land movers, the equipment that needs to be purchased to implement
these conservation practices.
Not to mention, with working lands programs the land is still in
production, so the economic drivers of small communities are still
working, unlike some programs like the Conservation Reserve Program
(CRP) that pay farmers not to grow a crop. For example, my small town
has less than 75 residents and my operation's size ensures that at I'll
provide jobs for at least several of those residents. The revenue
generated from my farm is then reinvested in inputs for the following
year and ends up in the hands of other small, local businesses. Small
towns like mine rely on the agriculture industry for jobs and
investment or they would disappear; when my business prospers, everyone
around me benefits in one way or another.
My town, however, is not unique. More than 75 percent of rice
farming operations in the South operate in what USDA considers
``StrikeForce counties''--rural counties with more than 20 percent of
the population below the poverty line. These communities all rely on
vibrant farming operations to stay alive and NRCS working lands
programs help to shoulder the burden of high operating expenses. The
practices I have put into place over the years have helped make my land
more resilient to the multi-year drought we experienced a few years
ago. These conservation practices have helped me stay in business over
the course of this depressed farm economy having increased my
efficiency by increasing my yields and decreasing my input costs to
boost my margins.
When we are not in the growing season and purchasing inputs, we are
still growing the local economy. Like I mentioned, rice has this
intrinsic relationship with waterfowl and the waterfowl habitats in our
fields also serve as a perfect habitat for waterfowl hunters. The
waterfowl hunting business brings millions of dollars to the South's
local economies during the fall and winter months when work elsewhere
is short. Visitors travel from all over the world to hunt in the rice
fields and they all need lodging, food, equipment, etc.
Again, I feel like we are doing more than our part to contribute to
our local economies and the EQIP and CSP projects we are implementing
help to make that all possible. A study released earlier this month by
Texas A&M's Agricultural and Food Policy Center drives this point home,
showing that every U.S. rice farmer is generating more than $1 million
for their local economies on an annual basis.
As an industry, we see these two programs targeted every year
during the appropriations process. Their mandatory funding is cut,
reducing the amount of work NRCS can provide in each of your Districts
throughout the country and creating a backlog that will take years to
catch-up to the demand that is out there. It is important to us that
these are not only preserved but codified in a way that they are not
always seen as low-hanging fruit when it's time to find savings.
EQIP Provision Limits Long-Term Effectiveness
Current EQIP rules place an arbitrary 3 year limit on funding
annual management practices. As strong stewards of the land and staunch
advocates for migratory waterfowl, we support a change in this
limitation for projects implemented ``purely for the benefit of
wildlife''. This is necessary in order to sustain these beneficial
practices and demonstrate long-term benefits. While these annual
management practices benefit water birds, some of them ultimately
reduce farm profitability because of their expense to the farmer.
Therefore, producers will most likely stop implementing them if cost-
share assistance for these proven, effective annual management
practices is terminated after 3 years.
SAM/DUNS Is a Barrier to Conservation Adoption
Currently, farmers who want to participate in farm bill
conservation programs have to wade through an annual registry process
called the System for Award Management (SAM) and Data Universal
Numbering System (DUNS), designed for transparency for multi-billion
dollar Federal defense contractors. This complicated process to comply
with SAM and DUNS typically ties up hours of my time and that of our
local soil and water conservation district or NRCS office. It is
disincentive for many us to sign-up for these important conservation
programs. Immediately following a successful registration using SAM, my
inbox, mailbox, and phone are flooded with solicitors who have just
been provided my information, a serious breach of my privacy. The rice
industry is supportive of efforts to exempt NRCS programs from
complying with this burdensome reporting process.
Sustainability Is Necessary for Future Generations
I have talked a lot about what the industry is doing, the benefits
working lands conservation bring to our local economies, and why the
investment really pays off for taxpayers, but now I want to talk about
the real reason I am here. I have three sons under the age of 10. My
boys want to be farmers just like dad and someday farm the same land we
have been working for the last 108 years. But without being able to
make a living for my family and maintain the natural resources to keep
my land in production, there won't be anything left to hand to the
sixth generation. That is why I am here: to ensure that this
Subcommittee fights to maintain conservation title funding and
important working lands program investments so that my children can
play a part in feeding this great nation.
I thank this Subcommittee for holding this important hearing on the
farm bill's conservation title. And I appreciate, as a farmer, as a
conservationist, and on behalf of the USA Rice Federation, the work you
have done to ensure that farmers have the tools they need to implement
conservation practices on the landscape and feed our growing
population. While conservation may not necessarily be the most
controversial issue in the farm bill, it is a vital part of our
industry and a necessary investment if we want to leave our land and
operations as a legacy for our children.
Again, thank you for your leadership and for the opportunity to
offer my testimony this morning. I look forward to working with you and
your staff and will be happy to respond to any questions you might
have.
Attachment
Sustaining the Future of Rice RCPP Project Financial Breakdown July 1,
2015-June 30, 2016
Financial Support Where the Money Goes
(July 1, 2015-June 30, 2016)
$8.3 Million
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: 2016 Rice Stewardship Partnership Annual Report.
The Chairman. Thank you, Mr. Gertson.
Mr. Peters, you are recognized for 5 minutes.
STATEMENT OF JEREMY PETERS, CHIEF EXECUTIVE
OFFICER, NATIONAL ASSOCIATION OF CONSERVATION
DISTRICTS, DARLINGTON, MD; ON BEHALF OF LEE McDANIEL, IMMEDIATE
PAST PRESIDENT, NATIONAL
ASSOCIATION OF CONSERVATION DISTRICTS
Mr. Peters. Good morning, Chairman Lucas, Ranking Member
Fudge, and Members of the Subcommittee. Thank you for the
opportunity to testify this morning. I am Jeremy Peters, Chief
Executive Officer for the National Association of Conservation
Districts, standing in for our immediate past President, Lee
McDaniel, who is unable to attend today's hearing. We
appreciate your flexibility in allowing me to testify this
morning.
I have been involved with NACD since 2006, and became the
Association's Chief Executive Officer in April of 2015. But my
roots are in agriculture and in my family's farm in rural
southwestern Virginia, where we continue raising cattle today.
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 50
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.
Conservation districts are vital to conservation in this
country. Working with partners at USDA, they provide on-the-
ground conservation planning, technical expertise, and
scientific assistance to implement conservation practices
tailored to the landowner's management goals. Conservation
districts are also unique since they are directly involved in
the local working group process which informs NRCS about what
the greatest resource concerns are at the local level.
As NACD began its farm bill evaluation process last year,
we created a Farm Bill Task Force to guide our policy
priorities. We first created a farm bill survey to seek input
and opinions from our members on the last farm bill, what
programs were working or needed improvements and where they
wanted NACD to focus. Based upon the over 500 responses we
received, the Task Force developed a set of principles that was
officially adopted by NACD's Board of Directors at our annual
meeting earlier this month, and those principles are attached
to the written testimony that was submitted to the Committee.
These principles focus on items like local input and the need
for investments in farm bill conservation programs. While not
directly authorized under the farm bill, all of the programs
discussed in my testimony would not be as successful without
the technical and scientific expertise provided through
Conservation Technical Assistance, or CTA. Through the CTA
program, landowners work with local conservation professionals,
including conservation district employees, to develop
individual conservation plans, ensuring producers know that
they are implementing the best conservation practices to meet
their individual land's resource needs, and that taxpayers are
getting the most out of their investment.
Successful implementation of on-the-ground conservation is
also dependent on proper investment through the farm bill
conservation title. The financial and technical assistance that
farm bill dollars provide are the lifeblood of the voluntary
conservation model. Without this funding, we would see less
adoption of conservation practices and in turn, we would see
fewer conservation benefits. The last farm bill reduced
conservation spending by almost $6 billion over 10 years when
including sequestration. While NACD and the larger agriculture
and conservation community understood the budgetary constraints
that Congress had to deal with when writing the last farm bill,
the cuts to the conservation title were significant. These
funding reductions in EQIP, CSP, CRP, and ACEP have
dramatically limited the ability to put conservation on the
ground. We recommend that Congress seriously look at not only
maintaining funding for the conservation title, but we strongly
recommend increasing it.
Demands on the landscape and our natural resources are
greater than ever, and in these difficult financial times for
farmers and ranchers, it is unrealistic to think that
landowners will take on costly conservation practices with
fewer financial incentives and less technical assistance. That
is why it is even more important to double down on farm bill
conservation funding.
While there are several programs worth discussing during my
testimony, one I would like to focus on is the new Regional
Conservation Partnership Program. RCPP was created to bring
together new partners and help leverage non-Federal dollars to
achieve greater conservation outcomes. Conservation districts
and their close working relationships with landowners, have
been natural partners in many of these projects. In fact, 25
out of the 88 projects funded in the most recent round of
awards were led by conservation districts or their state
associations.
As with all programs, RCPP needs to be thoroughly evaluated
while writing the next farm bill. Even in new programs, the
locally led aspect of the conservation delivery system is
crucial to ensuring that conservation programs are focused on
the greatest resource concerns in a particular area.
Unfortunately, RCPP does not always fully take that into
account, and the local conservation practices established by
the local working groups. Greater emphasis on state and local
coordination and consultation with local conservation districts
is needed to ensure that these programs are indeed addressing
the greatest resource concerns.
An additional obstacle is the SAM and DUNS reporting
requirements. Current law requires landowners who participate
in NRCS cost-share programs to follow time consuming Federal
reporting requirements. These requirements can act as a barrier
to implementing conservation practices on the ground. The NACD
does not believe farmers and ranchers were the intended
recipient of this regulation, and thankfully, Congresswoman
Kuster and Congressman Crawford introduced H.R. 1163, Improving
Access to Conservation Act to fix this problem. The NACD
encourages the Committee to ensure its passage or its inclusion
in the farm bill.
While there are many issues that we will discuss today, the
bottom line is that our nation's conservation districts and the
locally led conservation delivery system continue to be
effective in communities all across the nation. For this to
continue, Congress must provide robust funding and continue the
tradition of a locally led conservation system. We cannot let
our nation's investment in farm bill conservation programs
continue to erode, and as this Committee begins reauthorizing
the next farm bill, we appreciate the opportunity to provide
our insights and expertise. We look forward to a farm bill that
will continue to provide the ability for landowners to conserve
our nation's soil, water, and wildlife for future generations.
Thank you.
[The prepared statement of Mr. McDaniel follows:]
Prepared Statement of Lee McDaniel, Immediate Past President, National
Association of Conservation Districts
Good morning, Chairman Lucas, Ranking Member Fudge, and Members of
the Subcommittee. Thank you for the opportunity to testify this morning
as you gather input from stakeholders on how conservation policy in the
Agricultural Act of 2014 is performing and what improvements Congress
should make in the next farm bill.
I am Lee McDaniel, Past-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.
The origins of agricultural conservation date back to the Dust Bowl
and even before with the efforts of Hugh Hammond Bennett, the father of
U.S. soil conservation. Sadly, it took the devastating effects of the
Dust Bowl to spur a real change in policy. As a part of this policy
landscape shift, the Standard State Soil Conservation Districts Law was
signed in 1937, authorizing farmers to organize local soil and water
conservation districts. These new districts gave local farmers a voice
in Federal programs and is widely acknowledged as one of the key
reasons for the success of private lands conservation.
Today, our nation's conservation delivery system reaches into
virtually every community with technical and financial assistance that
is targeted to local resource concerns. The voluntary-incentive based
model that this local input supports has and continues to work to
ensure our nation's natural resources are protected. Part of the
voluntary conservation model's purpose is to help producers comply with
local, state, and national regulatory requirements. However, voluntary
conservation can take this purpose one step further by helping avoid
the need for these regulations altogether. The general public expects
clean air and water, healthy soils and abundant wildlife habitat. The
Federal Government has a better chance at achieving these goals, not by
adding additional requirements and regulations, but by encouraging
landowners to implement good conservation practices on their land.
Conservation districts are vital to conservation in this country.
Working with partners at USDA, they provide on-the-ground conservation
planning along with technical and scientific assistance to implement
conservation practices tailored to the landowner's management goals.
Conservation districts are also unique since they are directly involved
in the Local Working Group process which informs NRCS about what the
greatest resource concerns are at the local level. Local working groups
are required to ``provide recommendations to USDA on local and state
natural resource priorities and criteria for conservation activities
and program.'' It also is the responsibility of the local conservation
district to assemble the Local Working Groups, chair the group's
meetings, identify the conservation needs of the area and ensure that
NRCS is notified of the group's recommendations. Keeping the Local
Working Groups as a critical component of conservation decisions at
NRCS is an important priority for NACD.
As NACD began its farm bill evaluation process last year, we
created a Farm Bill Task Force to guide our policy priorities. We first
created a farm bill survey to seek input and opinion from our members
on the last farm bill, what programs were working or needed
improvements and where they wanted NACD to focus. Based upon the over
500 responses we received, the Task Force developed a set of principles
that was officially adopted by NACD's Board of Directors at our annual
meeting earlier this month.
These principles focus on items like local input and the need for
investments in farm bill conservation programs. While not directly
authorized under the farm bill, all of the programs discussed in my
testimony would not be as successful without the technical and
scientific expertise provided through Conservation Technical Assistance
(CTA). Through the CTA program, landowners work with local conservation
professionals, including conservation district employees, to develop
individual conservation plans ensuring producers know that they are
implementing the best conservation practices to meet their individual
land's resource needs and that taxpayers are getting the most out of
their investment.
An additional principle is to simplify the delivery of conservation
programs. Landowners who are interested in participating in NRCS cost-
share programs face Federal reporting requirements that can be time
consuming and hard to navigate which ultimately acts as a barrier to
implementing conservation practices on the ground. Current law requires
them to obtain a Data Universal Numbering System (DUNS) number and
annually register with the Federal Government's System for Award
Management (SAM). NACD does not believe farmers and ranchers attempting
to do the right thing by putting conservation practices on the ground
were the intended recipient of this regulation and thankfully
Congresswoman Kuster and Congressman Crawford introduced legislation 2
weeks ago to fix this problem and would encourage the Committee to
ensure its passage or inclusion in the farm bill.
Successful implementation of on-the-ground conservation is
dependent on proper investment through the farm bill conservation
title. The financial and technical assistance that farm bill dollars
provide are the lifeblood of the voluntary conservation model. Without
this valuable funding, we would see less uptake of conservation
practices and in turn we would see fewer conservation benefits. In
these difficult financial times for farmers and ranchers, it is
unrealistic to think they will take on costly conservation practices
with fewer financial incentives and less technical assistance.
The Agricultural Act of 2014 consolidated conservation programs
from 23 to 13 and reduced conservation spending by almost $6 billion
over 10 years, including sequestration. Let's examine that number on a
programmatic level. Funding for the Environmental Quality Incentives
Program (EQIP), by far the most popular conservation program, had its
authorized funding level reduced by an average of $250 million for the
first 4 years of this farm bill, a devastating cut when added to the
yearly reductions in the appropriations process. The Conservation
Reserve Program (CRP), a program which was first authorized in its
current form in 1985, had its acreage cap reduced to 24 million acres,
a reduction of 25%. The Agricultural Conservation Easement Program
(ACEP) will only have an annual baseline of $250 million in Fiscal Year
18 (FY18) and beyond, a cut over 60% from pre-2013 levels. The
Conservation Stewardship Program (CSP), the largest conservation
program by acreage, was reduced by over 2 million acres per year.
While regulatory reform is something many farmers and ranchers want
to see, the general public's desire for clean air and water, healthy
soils and abundant wildlife will not wane. That is why it is even more
important to ``double down'' on farm bill conservation funding since
one of the purposes of these programs is not only to comply with
regulations but help avoid the need for them altogether. While NACD and
the larger conservation community understood the budgetary constraints
that Congress had to deal with while writing the last farm bill, the
cuts to the conservation title were significant.
Since reauthorization, conservation programs like CSP and EQIP are
regularly cut further through the appropriations process known as
Changes in Mandatory Program Spending (CHIMPs). In FY14-16, mandatory
farm bill conservation spending was reduced by nearly $1 billion
through the appropriations process alone. The bottom line is farm bill
conservation title funding was cut in the last farm bill by 10% and it
continues to be cut annually in the appropriations process. Demands on
the landscape and our natural resources are greater than ever, so we
recommend that Congress seriously look at not only maintaining funding
for the conservation title but we strongly recommend increasing it.
One of the new programs created in the Agricultural Act of 2014,
was the Regional Conservation Partnership Program (RCPP). This new
program, which combined four regionally-based programs into one larger
program, was created to further the conservation, restoration, and
sustainable use of soil, water, and wildlife and was designed to help
producers meet, or even avoid the need for, natural resource
regulations. This program helps bring together new partners and
leverage Federal funds for large-scale conservation projects.
Conservation districts, and their close working relationships with
landowners, have been natural partners in many of these projects. In
fact, in December when NRCS announced the list of 88 projects which
were receiving funding through their third funding round, conservation
districts and their state associations were the lead on 25 funded
projects and were supporting partners in many more. Altogether, the
$225 million in funding that was available during the most recent
funding round will be leveraged with an additional $500 million from
the private-sector successfully proving that this public-private
partnership can work.
As with all new programs, RCPP, needs to be thoroughly evaluated
during this process. As previously mentioned, the locally-led aspect of
the conservation delivery system is crucial to ensuring that farm bill
conservation programs, including the four programs which contribute
funding to RCPP, are being focused to meet the greatest resource
concerns in that area. Unfortunately, RCPP does not always fully take
into account the local conservation priorities established by the
locally-led process and these priorities may not be considered in the
development or funding of RCPP projects. Greater emphasis on state and
local coordination and consultation local conservation districts is
needed to ensure that these programs are indeed addressing the greatest
resource concerns.
Another program I wanted to mention during my testimony is the
Small Watershed Rehabilitation Program. In the 1940's and 1950's,
Congress passed laws which led to the construction of almost 12,000
small watershed dams, many times led by the local conservation district
in the area. These dams represent critical infrastructure in many
communities and provide approximately $2 billion in benefits from
improved water quality and erosion control. Yet with the original dams
approaching 70 years old, these aging dams now also present public
health, safety, and environmental concerns. Under Chairman Lucas'
leadership, the Agricultural Act of 2014 provided mandatory funding of
$250 million to ensure necessary investments in these infrastructure
projects. The Watershed Rehab program, and the underlying Watershed
Protection and Flood Prevention Act, continue to be a priority for the
many conservation districts who stepped up to lead these projects.
While there are a multitude of other issues which will undoubtedly
be discussed during this hearing, the bottom line is that our nation's
conservation districts and the locally-led conservation delivery system
continue to be effective in communities all across the nation. However,
for it continue to thrive, Congress must provide robust funding and
continue the tradition of a locally-led conservation system. We cannot
let our nation's investment in farm bill conservation programs continue
to erode. As this Committee begins reauthorizing the next farm bill,
NACD along with our nation's 3,000 conservation districts and the
17,000 supervisors on their local boards stand ready to provide our
insights and expertise in crafting legislation that will continue to
provide the ability for landowners to conserve our nation's soil,
water, wildlife and air.
Attachment
NACD Principles for the 2018 Farm Bill
Principle 1--The Locally-Led, Voluntary Incentive-Based Conservation
Model Works
NACD strongly believes in the locally-led, voluntary, incentive-
based model for addressing natural resource concerns; not a one-size-
fits-all regulatory scheme. Farm bill conservation programs should be
locally-led and resource driven with sufficient flexibility to direct
funding to local priorities and concerns. Program priorities should be
tailored to the natural resource needs of the states and local areas.
Local Conservation District Boards, Local Working Groups, and State
Technical Committees should help identify local needs to maximize
conservation benefits.
Principle 2--No Further Cuts to Conservation Title Funding in the Farm
Bill
Strong mandatory funding levels authorized in the farm bill are
fundamental to not only putting conservation on the ground, but for
dealing with, and ultimately avoiding, the need for environmental
regulations. The conservation title (title II) took a 10% cut in
funding in the Agricultural Act of 2014, and continues to be cut
annually during the appropriations process. Every dollar cut from
mandatory conservation programs leads directly to less conservation on
the ground and only increases the natural resources concerns and the
probability of regulatory hassles. Each farm bill conservation program
plays a significant role in addressing natural resource concerns. From
the importance of the Environmental Quality Incentives Program (EQIP),
to the Small Watershed Rehabilitation Program, robust mandatory funding
is critical. NACD believes, at a minimum, no further cuts should occur
in the next farm bill to the conservation title, and if funds are
available, to increase its funding.
Principle 3--Commitment to Working Lands
Landscapes across the nation vary in their resource concerns, and
farm bill conservation programs must continue to meet the specialized
needs of the agricultural producers who work these lands. Given the
projected increase in the world's population, programs must provide
assistance to implement or maintain conservation practices on working
lands that produce much needed food, fiber, and fuel while at the same
time protecting our natural resources.
Principle 4--Technical Assistance and Conservation Planning Are the
Bedrock of the Conservation Model
Technical Assistance and conservation planning is a critical tool
and first step in evaluating a producer's resource needs. NRCS, along
with conservation districts, helps agricultural producers plan and
apply conservation practices on the land. They develop conservation
plans; plan, design, lay out, and install conservation practices; and
inspect completed practices for certification. Conservation Technical
Assistance is vital to ensuring producers know that they are putting
the best conservation practices on their ground to meet their
individual land's resource needs.
Principle 5--Agricultural Operations Need To Be Economically Viable
In order for the locally led, voluntary, incentive-based model to
be successful, NACD believes agricultural operations need to have a
strong safety net, robust marketing opportunities, and supportive farm
policy. Without viable agricultural operations, districts will not be
able to help install conservation practices on the ground. The farm
bill must work for each facet of the nation's diverse agriculture
industry.
Principle 6--Farm Bill Education and Outreach Is Necessary
NACD believes conservation education is a necessary tool to drive
more conservation adoption. If producers are not aware of the tools
available to them, then the adoption of conservation practices will
suffer. This is especially the case with beginning, socially
disadvantaged, and limited resource farmers. NACD supports a dedicated
funding stream within title II to advance conservation adoption and
outreach.
Principle 7--Streamline and Simplify Conservation Programs/Application
Process While Reducing Administrative Burdens
Conservation programs and the application process should both be
simple and easy to understand. Administrative burdens that
disincentivize program participation should be eliminated. Just one
example of this is the SAM/DUNS reporting requirements that NRCS
program participants must comply with. This only complicates the
conservation delivery system by taking time away from NRCS staff and
producers, but can actually prevent producers with the greatest
resource needs from applying.
Principle 8--Forestry
NACD supports a forestry title that addresses the unique
complexities of forestry on non-industrial, private forest land and the
effective management of Federal and state forest lands. NACD encourages
an expansion in the ability to provide technical assistance and
outreach to non-industrial private forest owners, especially landowners
not currently engaged in conservation or managing their lands. NACD
supports addressing issues identified by state forest resource
assessments and strategies as well as state wildlife action plans and
continue to provide the ability to make regular updates to these state-
level efforts.
Principle 9--New Approaches and New Technologies
Working lands conservation is not a static term, but is constantly
changing and adapting as the introduction of new technologies and
partners occur. The farm bill should reflect this and ensure they are
addressed. This includes addressing the natural resource concerns
presented by urban agriculture as well as the recent increase in drone
technologies and the adoption of precision agriculture.
The Chairman. The gentleman's time has expired.
The chair now recognizes for 5 minutes Mr. Nomsen.
STATEMENT OF DAVID E. NOMSEN, VICE PRESIDENT OF
GOVERNMENTAL AFFAIRS, PHEASANTS FOREVER, INC.,
GARFIELD, MN
Mr. Nomsen. Chairman Lucas, Ranking Member Fudge, Members
of the Subcommittee, my name is Dave Nomsen with Pheasants
Forever. Mr. Chairman, I had the same thought when I sat down
here this morning too as you sat down. I thought, ``I am back,
and I am here once again to talk primarily about the
Conservation Reserve Program this morning.'' But I do want to
start by pointing out, there is an incredible entire suite of
conservation programs that we work with across the country. But
frankly, CRP has been this nation's most successful
conservation program at USDA.
Let's look back a little bit and start by looking at the
period from 1990 to 2010. During that period, the CRP averaged
about 32 or 33 million acres enrolled in the program. During
that time period, we had an authorization for basically a 40
million acre program. It was dinged a little bit here and
there, it was 39.2, it was 36.4, but basically a 40 million
acre program. And quite frankly, the program worked quite well
at that time. We had some good old days for pheasant hunting.
We had record pheasant harvest in a number of states, and
frankly, we would like to return to those days, and that is why
we are calling once again for an authorization for a 40 million
acre program.
We hit a bit of a train wreck starting after the 2010
period, and actually right now, if you look at the northern
Great Plains States, perhaps Montana, the Dakotas, Nebraska,
Iowa, Minnesota, and Kansas, if you look at those states, they
had 16.4 million acres of CRP in 2007. Today, they have 9.3.
Forty-three percent of those acres are gone. That grassland has
left the landscape, and for pheasants and other ground-nesting
birds; obviously, grassland habitats are critical. Between that
and then what happened with the 49th general signup results, we
are actually saying we are at a grassland conservation crisis
in much of this country, and we really need to establish CRP as
the flagship program with a 40 million acre authorization.
During that signup period, some 26,000 offers were made,
and unfortunately because of the severely reduced cap, 21,000
offers were rejected. Landowners from all across the country
that wanted to do good things for soil, water, and wildlife
conservation, they weren't allowed entrance into the program.
Mr. Chairman, in your State of Oklahoma, you came out right at
the national average, about 600 offers, 22 percent acceptance
rate. Basically four out of five people were denied entrance
into the program.
In the flagship State of South Dakota, about 42,000 acres
were offered. During the process, USDA accepted two offers on
101 acres. Frankly, that just can't continue into the future,
and it threatens the integrity and the future of the program.
That is why one of the things I am calling for is a
complete reevaluation, revamping of both the signup process,
signup period. We simply have to find ways to put those larger
tracts of grass back on that landscape that are important to
wildlife production and for hunting. We also need to take a
look at the other end of the process. During the last farm
bill, we had some really, really strong report language that
encouraged expiring CRP to be redirected into many of the other
conservation programs. It didn't happen. We have to find a way
to make that happen. The program will only continue if it does
evolve and it becomes the robust, dynamic program as acres flow
through the program, we maintain the benefits, and we go out
and capture new acres and new involvement in the program as
well.
One of the ways to do that, too, is we are going to have to
take a look at looking at the historic distribution of acres as
part of the signup process. It just simply can't keep bouncing
around the country here and there with a number of different
factors. We would like to see, for example, South Dakota go
back to about 1\1/2\ million acres in the program. That is not
going to happen with the current system that we have in place,
and the same thoughts apply to many of those other states that
I spoke about earlier.
We have a number of other priorities at Pheasants Forever
and Quail Forever, and we are going to be looking forward to
working with you and Members of the Committee on the easement
programs, on working lands programs, especially the EQIP
program where we do good things in the West. We are going to
continue to support strong conservation policies like
conservation compliance linked to crop insurance, like the
SodSaver provisions to help protect native prairies. Our
nation's sportsmen and sportswomen are really interested in
continuing the VPA-HIP Open Fields Program to help landowners
provide voluntary access for hunters and fishers.
Thank you very much for the opportunity to testify this
morning. I would be happy to take your questions.
[The prepared statement of Mr. Nomsen follows:]
Prepared Statement of David E. Nomsen, Vice President of Governmental
Affairs, Pheasants Forever, Inc., Garfield, MN
Chairman Lucas, Ranking Member Fudge, and Members of the
Subcommittee, my name is Dave Nomsen and I am the Vice President of
Governmental Affairs with Pheasants Forever and Quail Forever based out
of St. Paul, Minnesota. I am a wildlife biologist by education, served
on the Wildlife Department faculty at South Dakota State University,
and have since then worked on conservation policy and programs for
nonprofit wildlife conservation organizations, growing up in north-
central Iowa and currently living in west-central Minnesota.
I am here today representing our 735 community based Pheasants
Forever and Quail Forever chapters; and 142,000 members and volunteers
that work every day to promote and implement conservation programs.
Each year our chapters complete more than 30,000 individual projects
with farmers, ranchers and forest owners. To complement the work of our
dedicated volunteers, we have a team of 125 Farm Bill Biologists that
work as natural resource professionals with expertise in fields such as
wildlife biology, forestry, range management and precision agriculture.
They work with landowners every day to find the best voluntary based,
conservation solutions that fit producers' needs as part of their
agriculture operations and personal goals.
Since 2003, these Farm Bill Biologists have worked on over 148,000
projects with landowners covering over 5.1 million acres. These
projects involve the establishment of quality habitat that meet the
life cycle needs of a wide variety of wildlife, not only pheasants and
quail, but other species such as Golden-winged warbler in Pennsylvania,
Lesser Prairie Chickens in the Southern Great Plains and the iconic Elk
and Sage Grouse in the West, and enhancing habitat for pollinators,
like honey bees and Monarch butterflies throughout the country. In
addition to wildlife benefits, all Americans benefit from improved soil
health and water quality improvements related to wildlife conservation
projects.
Thank you for the opportunity to speak to you today about important
conservation policies and program need as part of the next farm bill.
My comments will focus on the program that is routinely referred to as
the U.S. Department of Agriculture's most successful conservation
program--The Conservation Reserve Program and I will briefly address
other important priorities that we have for the next farm bill.
Conservation Reserve Program
Originally established in 1985, the U.S. Department of
Agriculture's (USDA) Conservation Reserve program (CRP) enables farmers
and landowners to voluntarily enroll environmentally sensitive
croplands and grasslands and plant it to grasses, shrubs, and trees in
return for 10 to 15 year contracts with annual rental payments.
Originally designed for both soil erosion and commodity supply control,
the original CRP proved a great boon for wildlife. In fact, CRP's
wildlife benefits were instrumental in the programs reauthorization in
1996. That year, the CRP was reconfigured as a true resource
conservation program benefitting soil, water, and wildlife resources
while continuing to provide economic security to farmers and
landowners, and supporting rural economies and communities. Other
significant changes in 1996 strengthened CRP by allowing for mandatory
funding and creating the CRP buffer initiative. Today's generations of
sportsmen and sportswomen will view CRP's wildlife legacy as the ``good
old days'' just as previous generations thought of the ``Soil Bank
era'' of the late 1950s and 1960s. No other private lands conservation
program has benefitted hunters more than the successful CRP.
During the 20 year period from 1990-2010 CRP enrollment averaged
approximately 32-33 million acres per year with an historical peak of
36.7 million acres in 2007. During this period hunters experienced
strong levels of bird hunting across many states. Below is the lead
paragraph from our 2007 forecast that turned out to be an accurate
prediction of times to come.
Pheasants Forever's 2007 Pheasant Hunting Forecast
With potential habitat losses . . . is 2007 the boom before the bust?
Overview: All across the Midwest and Upper Midwest, signs are
pointing to an excellent pheasant hunting season. The typical pheasant
powerhouses--South and North Dakota, Iowa, Kansas, Minnesota, and
Nebraska--will again top the list. Unfortunately, because of the
potential for massive habitat losses this year and next, namely
Conservation Reserve Program (CRP) acres under soon-to-expire
contracts, we may soon be referring to 2007 as ``the good old days.''
Fig 1. Historical CRP Acreage Enrollment 1986-2016
CRP Acres By Year
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Landscape level forces after 2010 including record high commodity
and land prices coupled with budget reductions led to a 2014 Farm Bill
CRP authorization of 24 million acres and today's total enrollments
hover just below the 24 million acre cap. Unfortunately, very dramatic
changes resulting in loss of grasslands habitats have occurred over
much of the country a problem that has been exacerbated by significant
increases in cropland acreages. Additionally, the results of the 49th
general CRP signup conducted from Dec. 1st, 2015-Feb. 26th, 2016 have
led to what we characterize as a current ``grassland conservation
crisis''.
Fig [2]. Acres of Grassland/Wetlands/Shrub Land Converted Crop
Production By County, 2008-2011
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
http://static.ewg.org/pdf/plowed_under.pdf.
Calculated using the NASS-USDA Cropland Data Layer for crop
years 2008 (56m), 2009 (56m), 2010 (30m), & 2011 (30m).
In 2007, seven key upland bird hunting states (MT, ND, SD, NE, KS,
MN and IA) had 16.4 million acres of CRP. By the end of 2016, this
region contained 9.3 million acres of CRP--a loss 7.1 million acres or
43%.
49th General Signup
During CRP Signup No. 49 1.8 million acres in 26,000+ offers were
submitted. Of these 4,857 offers (18%) for 410,773 acres (22%) were
accepted nationwide. In the core northern and central plains states
renowned for upland bird hunting (MT, ND, SD, NE, KS, MN, and IA)
701,060 acres in 10,983 offers were submitted. Of these 1545 offers
(14%) for 105,745 acres (15%) were accepted. In South Dakota, the
pheasant capitol of the world, only two offers on 101 acres were
accepted (.0275%). These acceptance rates are by far the lowest ever
throughout the entire history of CRP. As a result, more than 21,000
individual offers for enrollment in CRP were denied enrollment
nationwide with nearly 9,500 of these offers from the above key upland
bird hunting states.
During the first Grassland CRP sign up that took place during the
same timeframe as CRP signup No. 49, farmers and ranchers offered over
1 million acres, and USDA only allowed 101,000 acres to enter the
program (10%). During the latest sign up, 986,000 acres were offered
and 316,000 acres were accepted (32%). Currently there are about
800,000 acres of enrollment, with most of those contracts having
delayed start date of Oct 1st, 2017 due to current CRP cap of 24M
acres.
We have seen strong demand from landowners when acres are put out
there on a more target approach. For example just last month, IA State
Acres For Wildlife (SAFE) 50,000 acres were allocated in a little more
than a week due to high landowner demand. In SD, allocations for
pheasant focused SAFE projects typically last for short times as demand
remains high.
Changing Times
Today we're at substantially reduced commodity prices, near or
record level commodity stocks, diminishing land values, cash rents, and
growing concerns about low farm incomes. Some of these reasons have
contributed to the substantial demand that we've seen for both
continuous CRP (CCRP) and general CRP signup 49. As of the end of
December 2016 CRP enrollment is at 23.49 million acres with a 24
million acre cap. Upcoming expirations are minimal with 2.5 million
acres expiring this coming September 30, 2017 and another 1.49 million
acres on September 30, 2018.
In our view, we're at a tipping point once again for CRP. Clearly,
we have strong demand to call for a substantial increase in the acreage
authorization and we recommend returning CRP to at least 40 million
acres as part of the 2018 Farm Bill. We need CRP now to address the
substantial demand to complete voluntary soil, water, and wildlife
habitat improvement projects. In addition, CRP does offer substantial
economic and income stability benefits while providing commodity price
support benefits.
Additionally, we recommend a complete review and overall of the CRP
application/signup processes. The program needs to continue to evolve
to continue as a robust and dynamic landscape level program on working
farms and ranches. Future signups should target larger blocks of
habitat important for wildlife production and hunting. It is the
combination of both the general signups larger tracts of CRP and the
corridors/buffers and targeted specialty tracts that are available
through the CCRP that result in the ``habitat mosaic'' most beneficial
to soil, water, and wildlife resources AND supports outdoor
recreational opportunities including hunting. Small, rural communities
benefit as do all residents that enjoy a high quality of life in rural
areas.
Future CRP should contain additional provisions to maximize
benefits to quail. Encouraging use of early successional native covers
in shorter-term rotations within contracts could be very beneficial.
We need to address provisions for soon to expire CRP as well. As
CRP contracts near expiration, we should support provisions encouraging
longer term resource protection including permanent options for
selected tracts. Congress should support pathways to ``move'' CRP lands
into working farms and ranching that continue CRP's resource benefits.
CRP can support grazing programs and wildlife with through
comprehensive conservation management plans that provide high quality
forage, and quality wildlife habitats.
We also believe USDA should utilize CCRP initiatives to cover areas
with high contract expiration rates. As these acres come out of a
general contract and are not extended/re-enrolled, we would ask USDA to
promote keeping field borders and environmentally sensitive/important
lands in CCRP practices. The trend has been that when a general CRP
contract expires, the entire field is brought back into production.
Other Conservation Program Priorities
In addition to maintaining a strong and robust CRP as the flagship
conservation program we support a strong Agricultural Conservation
Easement Program (ACEP) as well as the successful Environmental Quality
Incentives Program (EQIP). EQIP in particular has played an important
role in our western states where we work with ranchers and other
partners to enhance rangelands for both livestock operations and to
benefit wildlife species like sage grouse and mule deer.
Through EQIP and Partnerships, we are addressing some of the
resource concerns in forested ecosystems; however another priority is
providing wildlife benefits in CRP tree plantings, especially managing
pine stands for quality timber production in the Southeast while
benefiting Bobwhite Quail. We are encouraged that USDA implemented the
$10M in cost share assistance that was introduced in the 2014 Farm
Bill. We hope that these successes demonstrate additional resources for
management. We also continue to support the linkage between
conservation compliance and crop insurance. Sodsaver provisions play an
important role in addressing native prairie conversion and should be
continued as well.
Last, The Voluntary Public Access and Habitat Incentive Program
(VPA-HIP) plays a vital role in supporting recreational access for
hunters while supporting enhancement of wildlife habitats. We support
reauthorization of VPA-HIP at $150 million over 5 years.
Mr. Chairman, we look forward to providing more detailed program by
program recommendations to the Committee in the near future. We look
forward to participating in upcoming dialogues focused on reviewing
existing programs and procedures and to look for new efficiencies and
saving wherever possible. We pride ourselves as part of incredible
partnerships that work day to day to deliver important voluntary
incentive-based conservation programs to America's farmers and
ranchers. Thank you for the opportunity to comment and I would be
pleased to take your questions.
Additional Resources
2013 Multi-State Land Use Study: Prepared by Decision Innovation
for MN, SD, IA, IL, NE, IN, and MI Farm Bureau. July, 2013. http://
www.decision-innovation.com/webres/File/docs/130715%20Multi-
State%20Land%20Use%20Report.pdf.
Conversion of 398,223 acres if non-cropland to cropland during 2012
crop year[.] USDA-FSA. June 26, 2013 www.fsa.usda.gov/Internet/
FSA_File/cropland_noncropland.pdf.
The Chairman. Thank you, sir.
The chair now recognizes Mr. Piotti for 5 minutes.
STATEMENT OF HON. JOHN F. PIOTTI, PRESIDENT, AMERICAN FARMLAND
TRUST, WASHINGTON, D.C.
Mr. Piotti. Thank you. Chairman Lucas, Ranking Member
Fudge, Members of the Committee, my name is John Piotti and I
am the President and CEO of American Farmland Trust, AFT.
Though I am new to AFT, I have worked on farming issues in my
home State of Maine for the last 25 years, much of that time as
part of an organization that worked to protect farmland and
support farmers. And that is how I have firsthand, on the
ground experience with many of the programs within the farm
bill.
I want to thank the Committee for seeking input from
stakeholders on the priorities for the next farm bill at this
time.
For 36 years, AFT has been dedicated to protecting
America's farmland and ranchland, promoting sound farming
practices, and keeping farmers on the land. In the United
States, we lose the equivalent of 40 acres of farmland to
development every hour. Replacing our farmland with homes or
shopping centers has ripple effects for our society, from
eroding rural towns and their traditions, to decreasing our
ability to provide our citizens with healthy food, to losing
wildlife populations, to habitat destruction. AFT recognizes
that farmers and ranchers hold the solutions to many of our
most pressing environmental problems when they implement
voluntary conservation practices on their land. Finally, AFT is
concerned with the decreasing number of farmers and their
increasing age. In the time since AFT's founding, the average
age of farmers has increased from 50 to 58 years. While the
number of beginning farmers decreased by 20 percent in the last
Census of Agriculture.
The farm bill's conservation title should, and at its best,
does address all these issues. AFT used the conservation title
as a set of tools to address the complex needs of America's
farmers and ranchers, while at the same time addressing public
interest. One of AFT's goals for the upcoming farm bill is to
ensure that we retain a full set of tools, and that we fund
each program adequately.
My written testimony provides detail about how the 2014
Farm Bill voluntarily reduced spending in an effort to reduce
future deficits. The conservation title saw a ten percent
decrease in funding levels, or nearly $6 billion in cuts. A
recent CBO study shows that the entire farm bill will result in
nearly $100 billion in deficit reduction.
My point on all this is that the farm and food community
has already done its part, and should not be the target of
additional cuts with the next farm bill.
Although AFT sees great value in all of the programs in the
conservation title, my remarks today offered here early in the
farm bill process focus on two programs that benefit working
lands and that AFT has strongly been involved with, and that is
ACEP and RCPP. I will start with ACEP, the Agricultural
Conservation Easement Program, which is the farm bill's program
for protecting farmland, a necessary part of our nation's
infrastructure.
Protecting farmlands from development protects the
foundation of our agriculture and our agriculture-related
industries. Protecting farmland means protecting wildlife
habitat, water tables, and carbon that is stored in our soils.
Protecting farmland means protecting our supply of healthy
food, and protecting farmland means protecting the way of life
in rural America, and ensuring the next generation of farmers
can enter the profession. Simply put, Federal investment in
farmland protection through ACEP provides vital benefits for
Americans today and into the future.
Allow me to take just a minute to further explain one of
the many benefits of ACEP, which some people may not be
familiar with. We don't always talk about farmland protection
playing a critical role in making land more affordable for
farmers, both existing farmers who are looking to expand, and
beginning farmers who are trying to enter the profession. And
yet, in any part of this country where there are significant
development pressures, protected farmland is often the only
farmland that farmers can afford.
I earlier mentioned that the number of beginning farmers
dropped by 20 percent in the last Census of Agriculture. That
is a national statistic. It doesn't play out in every region.
In my home State of Maine, for instance, our story could not be
more different. Between 2007 and 2012, the number of beginning
farmers in Maine grew by an impressive 39 percent, and one of
the key reasons is that Maine during this period significantly
increased its farmland protection efforts, creating affordable
options for entering farmers to acquire land.
Despite the many benefits of protecting working
agricultural lands, the funding for ACEP saw a huge decrease in
the 2014 Farm Bill. The three components that were created in
that farm bill to create ACEP, Wetlands Reserve, FFRP, and the
Grassland Reserve Programs, these were funded at an average of
$732 million a year from 2009 to 2012. Yet the average for ACEP
for 2014 through 2018 is $405 million. Even more alarming is
that ACEP funding drops to $250 million annually in 2018 and
going forward.
So listen to what I just said. We are talking about going
from $732 million to $250 million, a huge drop. And already
without that step, NRCS is only funding about 30 percent of the
applicants. Think what it is going to be with the next drop in
2018.
Now in addition to ensuring adequate funding for ACEP, AFT
believes there is a need to streamline the program to ease
administrative burdens, going forward. This would save the
Federal Government significant time and money, while making the
process easier and more timely for a broad variety of farmers
and ranchers.
AFT is discussing with advocacy organizations, land
trusts----
The Chairman. Please summarize, Mr. Piotti.
Mr. Piotti. Yes?
The Chairman. Can you summarize, please, so we can get to
questions?
Mr. Piotti. Yes, absolutely.
In conclusion, I just want to say the conservation title is
vitally important, not just for farmers and ranchers, but for
all Americans. It gives our farmers and ranchers a variety of
tools to achieve cleaner air and water, healthier soils, more
wildlife habitat, and to protect farmland and ranchland. While
we all acknowledge the budget realities that the nation faces,
we believe that adequate funding for the conservation title is
critical at this time. Beyond this, these voluntary
conservation programs help our nation's farmers and ranchers
advance environmental goals without burdensome regulatory
requirements, something that is needed today more than ever.
I thank you for your time.
[The prepared statement of Mr. Piotti follows:]
Prepared Statement of Hon. John F. Piotti, President, American Farmland
Trust, Washington, D.C.
American Farmland Trust is the nation's leading conservation
organization dedicated to protecting America's farmland and
ranchland, promoting sound farming practices, and keeping
farmers on the land. Since its founding in 1980 by a group of
farmers and citizens concerned about the rapid loss of farmland
to development, AFT has helped save millions of acres of
farmland from development and led the way for the adoption of
conservation practices on millions more.
Introduction
Chairman Lucas, Ranking Member Fudge, and distinguished Members of
the Subcommittee,
My name is John Piotti and I am the President and CEO of American
Farmland Trust (AFT). Though I am new to AFT, I have worked on farming
issues in the state of Maine for 25 years, much of that time as part of
a statewide organization that has protected farmland and supported
farmers. I have first-hand, on-the-ground experience with many of the
programs within the farm bill.
I want to start by thanking Chairman Conaway and Ranking Member
Peterson, as well as Subcommittee Chairman Lucas and Ranking Member
Fudge, for seeking input from interested stakeholders on policy
priorities for the next farm bill.
For 36 years, AFT has been dedicated to protecting America's
farmland and ranchland, promoting sound farming practices, and keeping
farmers on the land. In the United States, we lose the equivalent of 40
acres of farmland to development every hour. Replacing our farmland
with homes or shopping centers has ripple effects for our society, from
eroding rural towns and their traditions, to decreasing our ability to
provide cities with fresh, local food, to losing wildlife populations
through habitat destruction. AFT also recognizes that farmers and
ranchers hold the solutions to many of our most pressing environmental
problems when they implement conservation practices on their land.
Finally, AFT is concerned with the decreasing number and increasing age
of farmers: in the time since AFT's founding, the average age of
farmers has risen from 50 to 58, while the number of beginning farmers
decreased 20% between 2007 and 2012.
The farm bill's conservation title should, and often does, address
all these issues. AFT views the conservation title programs as a set of
tools to address the complex needs of America's farmers and ranchers--
as well as public interests. Each program has demonstrated value to
producers and landowners to achieve specific outcomes tailored to their
needs. One of AFT's goals for the upcoming farm bill is to ensure that
we retain a full set of tools, and that we fund each program
adequately. More specifically, AFT believes the next farm bill should
adequately fund and streamline the Agricultural Conservation Easement
Program (ACEP) and strengthen the Regional Conservation Partnership
Program (RCPP).
The Need for Conservation Title Funding
First and foremost, AFT urges Committee Members to work with
colleagues on the Budget and Appropriations Committees to ensure that
conservation programs do not undergo additional funding cuts. The 2014
Farm Bill marked the first time a farm bill voluntarily reduced
spending, and it was the only reauthorization bill in that Congress
that voluntarily offered savings. As part of this effort to reduce
future deficits, the conservation title saw a 10% decrease in funding
levels, or nearly $6 billion in cuts. While the 2014 Farm Bill was
originally estimated to contribute $23 billion to deficit reduction
over 10 years, a recent analysis by the Congressional Budget Office
shows that the entire bill will result in nearly $100 billion in
deficit reduction. The cuts already endured, coupled with better-than-
expected spending outcomes for the 2014 bill, show that the farm and
food community has already done its part--and should not be the target
for additional cuts.
Cuts to the conservation title have many negative consequences.
Some programs, such as the Environmental Quality Incentives Program
(EQIP) and RCPP have expressly-stated purposes of providing
conservation assistance to avoid regulatory requirements for farmers;
inadequate funding stands in the way of this purpose. Further, funding
for voluntary, incentive-based conservation ensures both environmental
sustainability for our farms and economic sustainability for our
farmers and ranchers. For example, not only does ACEP provide funds for
farmers to enable them to protect their land, it also often allows them
to reinvest in their businesses. Recent cuts to ACEP mean that the
Natural Resources Conservation Service (NRCS) must turn away 70% of the
farmers and ranchers who apply for funds each year.
Although AFT sees great value in all the programs in the
conservation title, these remarks--offered early in the farm bill
process--focus on two programs that benefit working lands, and with
which AFT has been strongly involved: ACEP and RCPP.
The Importance of Federal Farmland Protection: Funding and Streamlining
ACEP
Farmland is a necessary part of our country's infrastructure.
Protecting farmland from development protects the foundation of our
agriculture and agriculture-related industries, which contribute $985
billion to the U.S. gross domestic product (GDP). Protecting farmland
means protecting wildlife habitat, water tables, and carbon stored in
our soils. Protecting farmland means protecting the supply of healthy
foods provided to our cities. Protecting farmland means protecting the
way of life in rural America and ensuring that the next generation of
farmers can enter the profession. Simply put, Federal investments in
farmland protection through ACEP provide vital benefits for Americans
today and into the future.
Allow me to take just a minute to further explain one of the many
benefits of ACEP, with which some people may not be familiar. We don't
always think of farmland protection playing a critical role in making
land more affordable for farmers, both for existing farmers who are
looking to expand, and for beginning farmers who are trying to enter
the profession. And yet, in any part of this nation with development
pressures, protected farmland is often the only farmland that farmers
can afford.
I earlier mentioned that the number of beginning farmers dropped by
20% in the last Census of Agriculture. But that's a national statistic;
that doesn't play out in every region. In my home state of Maine, for
instance, our story could not be more different: between 2007 and 2012,
the number of beginning farmers in Maine grew by an impressive 39%! And
one of the key reasons is that Maine during this period significantly
increased its farmland protection efforts, creating affordable options
for entering farmers to acquire land.
Despite the many benefits of protecting working agricultural lands,
the funding for ACEP saw a precipitous decrease in the 2014 Farm Bill.
The three component programs that were combined to create ACEP
(Wetlands Reserve Program, Farm and Ranch Lands Protection Program, and
Grassland Reserve Program) were funded at an average total of $732
million annually from 2009-2012. Yet the average for ACEP for 2014-2018
is $405 million, a 32% decrease from the previous average. Even more
alarming is that ACEP funding drops to $250 million annually in FY18
and in future years, which is a 66% decline from the previous average.
This decrease in funds makes it increasingly difficult for partners,
who rely on ACEP funds to leverage state and local funding for farmland
protection projects. AFT believes it is of utmost importance to return
ACEP funding to historic levels.
In addition to ensuring adequate funding for ACEP, AFT believes
there is a need to streamline the program to ease administrative
burdens for producers, land trusts and NRCS. This would save the
Federal Government significant time and money, while making the process
easier and more timely for a broad variety of farmers and ranchers,
from Vermont to Texas, Pennsylvania to Montana, California to Michigan,
and every state in between. AFT is discussing with other advocacy
organizations, land trusts, and state farmland protection programs how
ACEP might be refined to best serve the farmers and ranchers who need
it. We look forward to working on this important issue with Members of
this Committee and staff.
Quantifying Benefits through the Regional Conservation Partnership
Program
AFT has long championed a targeted, partnership-based project
approach to conservation to achieve landscape-scale environmental
outcomes. RCPP is an innovative program that brings together a diverse
array of partners with technical and scientific expertise and leverages
private-sector dollars. RCPP projects can focus on specific natural
resource concerns in specific geographies to magnify desired
conservation outcomes. By 2018, NRCS and its more than 2,000
conservation partners will have invested over $2.4 billion in high-
impact RCPP projects nationwide, with more than half of that funding
coming from non-Federal sources.
AFT is working with many partners to implement RCPP projects around
the country. In Washington State, AFT and partners have helped farmers
adopt conservation practices to improve water quality in Newaukum
Creek. Funding has gone towards stream-side plantings to improve
habitat, projects that help farmers better manage manure and nutrients,
and several other conservation practices. In Illinois, AFT and partners
are working to improve water quality in the Upper Macoupin Creek
Watershed, which feeds into the Mississippi River and eventually the
Gulf of Mexico. According to the Illinois Nutrient Loss Reduction
Strategy, the Macoupin Creek watershed is one of the three highest
phosphorus-yielding watersheds in Illinois. In addition to providing
technical and financial assistance for soil-saving and nutrient-saving
conservation practices, the AFT-led partnership will also address the
need for expensive new equipment that would otherwise be a significant
barrier to the adoption of water-quality practices. Included in this
watershed, and eligible for support by this project, are farmers in the
traditionally under-served African American community of Royal Lakes.
One of the goals of RCPP was to fund projects that elect to measure
environmental, social, and economic outcomes of the practices adopted
within a project area. However, AFT, like other groups, have struggled
to do so, due to the lack of guidance from NRCS on what such outcomes
mean or which measurement methods to use. AFT believes that
improvements to the farm bill could help NRCS and its conservation
partners quantify the different outcomes associated with conservation
practices, which will provide needed evidence to the public, Congress,
farmers, and the conservation community to show that voluntary
conservation works.
For these reasons, AFT believes that the farm bill should, first,
include definitions of these environmental, social, and economic
outcomes, and second, direct the Secretary of Agriculture to provide
guidance and reporting criteria to RCPP project partners. That would
enable data showing the progress that RCPP and its project partners are
having in achieving, quantifying, and reporting on these outcomes to be
regularly reported to Congress. Having information about the actual
outcomes of conservation practices, rather than simply reporting on the
dollars spent, will allow agricultural and conservation organizations
to make a stronger case for voluntary conservation going forward.
Concluding Remarks
The conservation title is vitally important not just for farmers
and ranchers, but for all Americans. It gives producers a variety of
programmatic tools to achieve cleaner air and water, healthier soils,
more wildlife habitat, and protected farmland and ranchland that
benefit us all. The importance of conservation title funding in
obtaining these public benefits cannot be underestimated. While we
acknowledge the budget realities that this nation faces, we believe
that adequate funding of the conservation title is critical to
protecting our valuable natural resources. Beyond this, these voluntary
conservation programs help our nation's farmers and ranchers advance
environmental goals without burdensome regulatory requirements. We feel
that such programs are needed now more than ever.
Thank you again, Mr. Chairman, for the opportunity to share our
views on these important issues. I would be happy to address any
questions you have.
Attachment
Funding for Agricultural Conservation Easements Under the 2008 and 2014
Farm Bills
The Agricultural Conservation Easement Program (ACEP) combined
funding from three programs in the 2008 Farm Bill: the Wetland Reserve
Program (WRP), the Farm and Ranch Lands Protection Program (FRPP), and
the Grassland Protection Program (GPP). Under the 2014 Farm Bill, the
funding level for ACEP reaches its peak in FY17 at $500 million,
compared to the peak of $882 million in FY10. In FY18, funding is
slated to drop precipitously to $250 million--a 66% decrease when
compared to the average funding level under the 2008 Farm Bill.
Funding for ACEP Under 2008 and 2014 Farm Bills
2008 Farm Bill 2014 Farm Bill
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Piotti.
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, and after that,
Members will be recognized in order of arrival. I appreciate
Members' understanding. With that, I would recognize myself for
5 minutes.
Mr. Coffey, clearly you are a very progressive sort of
fellow on your ranch, utilizing resources and programs that are
available to us. You have been in the process for a time. Could
you describe for me the availability of the technical
assistance that comes from NRCS, and the relevance that is to
how you implement your conservation practices on your ranch?
Mr. Coffey. Yes, sir. I appreciate that question.
I have been involved with both EQIP and CSP contracts. In
fact, I am currently under a CSP contract right now. I am into
a renewal program with CSP. Many of the practices that we have
used with the CSP program have including grazing management,
which requires us to leave residual forage at 12" to 14" on an
average of our pastures. We have added fencing for rotation
grazing. We have added solar wells for water management. We are
on a non-herbicide program, and so many of these conservation
practices have made us more aware of the importance of the
grasses that we have and leaving residual things behind for
future use.
The Chairman. How available is the technical assistance?
How much of a wait do you have when you need the good folks
from NRCS to work with you, those kind of questions? Even
though this Committee is focused on authorizing programs, and
our brethren on Appropriations actually fund positions at USDA,
nonetheless, it doesn't matter how good the programs are if you
can't implement them and you have to have people and technical
experts to help, correct?
Mr. Coffey. That is very true. Technical assistance is very
hard to come by. They are inundated with paperwork, and I am
good friends with them and have served on committees with them
through SRM and so forth, but it is very difficult to get them
to come out on the land to do surveys and to assist. It seems
like they are just inundated with the paperwork. If I had to
choose between payments for cost-share or these programs and
technical assistance, I would honestly choose the technical
assistance. We need more effort in that arena.
The Chairman. This is a question for the whole panel. This
summer, former Secretary Vilsack heard comments from young and
beginning farmers in Iowa about their concerns in competing
rental rates, whether the land would go to a CRP contract or be
available to rent. Part of this Committee's responsibility is
to preserve the soil, the water, and the air, but also to
preserve our productive capacity, and those young people and
beginning farmers who represent that.
Whoever on the panel, let's touch for a moment on this
issue about if we get CRP rates too high, do we choke off
farmers? By the same token, if we get CRP rates too low, which
benefits potential new farmers and expanding farmers, then we
lose the conservation benefits. Let's touch on that for just a
moment, that balance that I believe must be achieved. Whoever
would care to step in, in my remaining couple of minutes.
Mr. Nomsen. Mr. Chairman, perhaps I will start. Let me
offer the thought that first of all, I remind you that
initially put into the CRP program were county to county
limitations, being sensitive to that balance between
agriculture and CRP lands. We have struggled with many farm
bills on the CRP rental rate issue, and typically over its
history, the rates have typically lagged behind and we have had
more issues with getting them competitive and raising them.
Well, that turned a little bit with the skyrocketing land
values, cash rents that we have seen. All of a sudden, we have
probably got a bit of the opposite situation now. It is
something we do need to revisit clearly, and I think there are
ways that we can use kind of today's CRP, a little bit more of
the targeted CRP so that we can help beginning farmers and
ranchers out there a little bit more, just because of some of
the practices.
That said, I think there is a real opportunity to help
farmers and landowners right now. It is somewhat like the
situation in the early 1990s. It is not as dire; however, just
because CRP is now a true resource program, soil, water, and
wildlife, that doesn't mean that it also doesn't still have
income security and stability benefits to it, price support,
commodity supply control. Those are all elements of it, because
it is a true landscape level program, and those things are
important right now in the situation that we are in with the
agricultural economy.
The Chairman. Anyone else wish to touch on that? Mr.
Coffey?
Mr. Coffey. Thank you. Yes. I am of the opinion that I love
the working lands programs, and if we had more boots-on-the-
ground, we may not need to focus so much on set-aside land. I
mean, conservation involves livestock, wildlife, soil, water,
forages, on and on, and those can be blended together in a way
that what is good for the goose is good for the gander, so to
speak. In my opinion, putting more funding to set-asides, such
as CRP, may not be in the best interest of the taxpayer in this
country.
The Chairman. Seeing that my time has expired, I now
recognize the gentlelady, Ms. Fudge, for her 5 minutes.
Ms. Fudge. Thank you very much, Mr. Chairman. I would now
yield to the Ranking Member of the full Committee.
The Chairman. The gentlelady yields to the Ranking Member.
Mr. Peterson. I thank the gentlelady.
Mr. Peters and Mr. Gertson, you both mentioned the DUNS and
SAMS situation. A few years ago I bought a little farm, and in
a way we ought to really require every Member of this Committee
to own a farm, because I have been now subjected to all of the
different aspects of the farm programs, and I was in the CSP
program, and I have a partnership with my son. We had to get
one time the DUNS number. That was not a big deal, but then
because we are a partnership and whatever this law was that we
passed and guidance that was put out by OMB or whatever it was,
and we had to have a SAMS number.
What ended up happening, because this stuff is public
information, I get a call from somebody in Fort Lauderdale,
Florida, who tells me that I have to go through him and it is
going to cost me $600 to get this SAMS number. They are
scamming us, like they do with the IRS and so forth. Not only
is it bad enough you have to go through this, they are actually
scamming people because you don't need to pay anybody to get
this. But he basically told me I had to pay them to get this
number. Well I was only getting $700 a year out of the CSP in
the first place, we got through that and so forth. I can't see
any reason in the world why these farm programs are in this
system in the first place. We have the controls at the county
level and we know what is going on, would you agree with that,
that we should just get rid of these impediments?
Mr. Gertson. Absolutely, Congressman Peterson. Yes. I am
the guy on our farm who deals with NRCS, and yes, I am one who
has personally gotten a DUNS number and the SAM number. The
DUNS number, yes, that was no big deal, but I get solicitations
through my DUNS number as well. People come in and want me to
do stuff.
The SAM number was a complete disaster, I can tell you
that. That was a 100 percent disaster. Not only do I get tons
of solicitations because my information is out there, now, we
had millions of dollars of payments held up because the NRCS
offices weren't really even sure what to do or how to tell you
to do it right. I have a lot of farmers around me who did their
practices right, installed hundreds of thousands of dollars of
dirt work and pipelines and all of this stuff, paid it, right,
paid their bills. Now they are waiting on their cost-share and
couldn't get it, because they didn't sign up for the SAM number
because they didn't know or didn't know how or had to use the
confusing website. I can tell you from experience that the SAM
system has been a complete disaster.
Mr. Peterson. I dropped out of CSP because of it. My
contract came up. They changed the practices so it really
wasn't hardly worth anything for me to go back into it. And I
just wasn't going to go through it again, so I just dropped
out. I think there are a lot people who have done that, am I
right, Mr. Peters?
Mr. Peters. That is correct. We would agree with you, and
we, through our district, have heard countless stories similar
to your own and to Mr. Gertson's. We see this is an impediment
to getting good conservation on the ground for people that are
just seeking to do the right thing. And it is a system that was
never intended for cost-sharers----
Mr. Peterson. It is for defense contractors.
Mr. Peters. Correct.
Mr. Peterson. Mr. Nomsen, your organization supports 40
million acres, am I right?
Mr. Nomsen. That is correct.
Mr. Peterson. Who else supports it? I know the DNR guy in
Minnesota is organizing all of the DNR people in that part of
the world to support it. First, are there other folks out there
that are on board supporting the 40 million? And second, are
there people that are fighting you on that that you know of?
Mr. Nomsen. The latter part of your question is the easier
one to answer.
As we get started here in the process, I am hopeful that
many, many other groups will look to the CRP and the fact that
we need a strong increase in the program. I don't know where
the number is going to shake out for many, many groups. But to
the earlier part of your question when you mentioned the DNR,
one of the tools that we have available now that we have not
had in previous farm bill discussions is we now have a national
pheasant restoration plan that is put together by all of the
state agencies, and in that plan, one of their goals is to
support a 40 million acre CRP as one of the critical components
of the national plan as well. Thank you.
Mr. Peterson. Thank you.
I yield back, Mr. Chairman, and thank the gentlelady for
yielding.
The Chairman. The gentleman's time has expired. The chair
now recognizes the gentleman from Pennsylvania for 5 minutes.
Mr. Thompson. Thank you, Chairman, and thank you to the
members of the panel for your individual and your
organizations' leadership on conservation. It is greatly
appreciated.
Mr. Piotti, an issue that I hear about is that there are
some provisions in the easement program that make it more
difficult for states like Pennsylvania, who have established
state easement programs to participate. Can you elaborate
further on that?
Mr. Piotti. Sure. Thank you for that question.
The ACEP program is a great program, but it is very much a
one-size-fits-all program as it is currently crafted, and there
are a number of states like Pennsylvania who have developed
very robust state-based farmland protection programs, usually
these statewide programs utilize ACEP funds as matching. You
have to bring the requirements of the state program and the
requirements of the Federal program together and make the
project happen, and that can be daunting. And we really love to
see some refinements of the ACEP program so that states like
Pennsylvania who do a good job on their own might be able to
get access to the Federal funds without jumping through quite
so many hoops.
Mr. Thompson. Just to follow up on that: are there any
specific refinements that you could recommend at this point?
Mr. Piotti. Well, we have been talking to a number of other
groups, land trusts around the country and the like, to get
very specific as part of this farm bill.
I can say right now there are just issues around some of
the specific easement language that NRCS might dictate that
might be a little different from what a state is looking for.
There are frequently timing issues, as you can well imagine,
trying to get the funds from both sources to work at the right
time for a closing in an expeditious way. There are timing
issues. In some cases there are retirement issues. Some cases
there are monitoring or baseline issues. And as I said, we are
working with a group of ag land trusts around the nation to
bring some specific information to the use of the Committee.
Mr. Thompson. Great. I appreciate that very much.
This question is for whomever would like to respond. Often
environmental groups point to regulations as the only way to
achieve conservation results. And yet, the work of NRCS has
resulted in many, specifically through voluntary conservation.
It has resulted in a remarkable number of Endangered Species
Act delistings. It has cleaned up wetlands and streams and
conserved soil. In your opinion, why does voluntary
conservation have such a better track record, and why do
farmers rarely get credit?
Mr. Gertson. I guess voluntary is a big deal. You talk to
any farmer, or rancher, for that matter, and we are pretty
independent people, right. We don't like people intervening,
telling us what to do. I used to work for a company as an
engineer for a year before I farmed. I could probably never go
work for anybody again now. I have spoiled myself. I am the
boss, right? Voluntary conservation works well in our mindset.
You will find almost every farmer and rancher is working hard
to improve his land, and natural resource conservation just
comes naturally, because that is what is required for them to
even remain profitable. You can't farm or ranch and hand
anything down to the next generation unless you are doing some
sort of conservation. I don't think that will ever be an issue.
You will always be able to have people participate, because it
just comes natural to farmers and ranchers, their mantra is
doing more with less. That is how we have to survive.
Mr. Coffey. Many times, I think where the problem is, is
that when we start talking about mandatory, it ends up being
single species specific. It is a pheasant. It is a monarch
butterfly. It is a quail. It is a lesser prairie chicken. And
that becomes the focus, and we can't see the forest for the
trees at that point, because we are staring at that one tree.
We, as ranchers and farmers, understand the entire realm of
conservation. We understand the water, the soils, the forages,
the crops, whatever it might be, and that is where our focus
is. And it is interesting how we don't do anything for the
monarch butterfly, but seasonally every year I can ride my
horse along a creek and just be covered up in monarch
butterflies when they fly through. And, too often, the focus
becomes too narrow in conservation programs.
Mr. Thompson. It seems like voluntary conservation truly is
kind of a landscape approach.
Mr. Coffey. Or it could become too narrow. Yes, sir.
Mr. Thompson. Thank you, Mr. Chairman.
The Chairman. The gentleman's time has expired.
The chair now recognizes the gentlelady from Ohio, Ms.
Fudge, for 5 minutes.
Ms. Fudge. Thank you so much, Mr. Chairman, and thank you
all for being here. It is nice to be on a Committee where
people think that the Federal Government does something good,
that there are some good programs. Thank you for that. We may
think that they are too cumbersome, and they probably are, but
I am certainly hopeful that instead of just saying it is too
onerous, too much paperwork, help us streamline the process.
Because we do have some responsibility and accountability for
tax dollars. We just can't give you money and say have a great
day, we need for you to have some accountability. But we want
to make the program better for you as well, so please, do tell
us what that is.
To Mr. Piotti and to Mr. Peters, do you believe that the
current farm bill conservation title provides adequate funding,
and if it takes another hit in this farm bill, what do you
think the consequences might be?
Mr. Piotti. As my testimony indicated, I certainly do not
feel that there is adequate funding right now for the programs.
The last question about voluntary compliance, has an easy
answer because every farmer I have ever met wants to do what is
right by the land, but there are a lot of steps that
economically are hard to do without the support of some of
these Federal programs. We absolutely need more.
And what will happen if we don't get this support is we
will not see the results on the ground that we want to see. We
will not get the conservation impacts that we want. There will
be impacts on water. There will be impacts on soil, and there
will be impacts in the fairly near-term on the economic
viability of our farms. It would both be environmentally and
economically a bad move to not invest at the level that is
needed.
Ms. Fudge. Thank you. Mr. Peters?
Mr. Peters. Thank you, Congresswoman.
As I indicated in my testimony, we support maintaining or
increasing funding in this next reauthorization. The need for
that is several-fold. One, we know that across the country farm
and ranching is down, and it is increasingly difficult for the
cost-share investment to continue to flow forward with a low
economy. We have to continue the investment through the Federal
conservation programs.
We know the landowners continue to want to do the right
thing. We know that the pressure continues to be on the land in
terms of water, soil, wildlife. If you look at the last farm
bill, the conservation community, the agriculture community
already gave a significant amount of funding. If we continue to
cut into the programs, we are really going to be cutting into
the bone, and we just can't afford to continue to turn
landowners away when they are seeking tools to be able to do
right on their land.
Ms. Fudge. Thank you very much.
Mr. Coffey, you have talked a couple times about NRCS's
staff on the ground and the difficulty they have. Do you think
that some of it might be just a morale problem because of how
we fund it? We have continuing resolutions, we have
sequestration, we have hiring freezes. We have all of these
things that make it difficult. Do you think that that might be
part of the problem with the people on the ground?
Mr. Coffey. I certainly won't disagree with that, but those
that I tend to know have pretty good morale. But when I visit
with them, their lack of morale, it tends to be with the
paperwork and it just seems to prevent them from getting out.
They are highly educated people and they are motivated, but
they are struggling. I don't think it is a morale issue solely.
Ms. Fudge. Thank you.
Mr. Peters, of course, I am from Cleveland, Ohio, right, so
talk a little bit to me about urban farmers and what concerns
they are facing.
Mr. Peters. Absolutely. Thank you for the question.
One of the items that we understand from our districts that
urban conservationists are seeking right now is technical
assistance, and we have been working through our districts to
help identify those needs and to help meet those needs in the
communities where urban agriculture is a priority.
If you look at the landscape, the resource concerns are the
same. We want to make sure that soil is healthy and that it is
being prevented from erosion. We want to make sure that there
are not unintended consequences to the water. We want to make
sure that wildlife habitat is available. And all of those
outcomes are achieved through sound conservation planning.
One of the things that we have identified as a need in this
space of urban agriculture is strong technical assistance to
make sure that those folks that are, again, seeking to do the
right thing on their land have the resources available to do
so.
Ms. Fudge. Thank you very much, and Mr. Chairman, if you
want to sell me a part of your farm, I am in.
The Chairman. We will invite you out to work on it first.
With that, the gentlelady's time has expired.
The chair now turns to the gentleman from Georgia, Mr.
Allen, 5 minutes.
Mr. Allen. Thank you, Mr. Chairman, and I thank all of you
for being here today, and discussing the future of our
conservation programs. Many of you have stated in your
testimony, and I would have to agree that our farmers are
really the true stewards of our land. Each and every day, our
farmers spend their livelihoods caring for our lands and
preserving our natural resources for the generations to come,
and it is good to hear that we have fifth generation, and
hopefully sixth and seventh and eighth generation farmers out
there.
As the son of a farmer, I understand to a great extent what
we are talking about today, and the importance it is to the
success of our farmers and ranchers, particularly in my home
State of Georgia, which agriculture is the number one industry.
Of course, we are looking toward the next farm bill and we have
talked already today about the need to ensure that we have the
tools and programs that will help us to potentially expand
these programs and to make them successful.
The best way I know to do that, because I come from the
business world, is to look at every dollar invested and what is
the return on that dollar. We represent the taxpayers, and the
taxpayers expect us, and we should, use their money as an
investment return as far as conservation practices go.
Mr. Peters, are there any actual statistics on what for a
dollar invested what the dollar received is from this program,
which would help us to increase this in the next farm bill?
Mr. Peters. I am sure there are. I don't have those
statistics readily available with me this morning. One thing
that bears mentioning is that historically, for the Federal
investment through the farm bill conservation programs, there
are years upon years worth of cost-share that have come out of
the pockets of the farmers and ranchers and landowners that are
participating in those programs.
Mr. Allen. Right.
Mr. Peters. That is a tremendous private investment that
has leveraged those Federal funds.
Mr. Allen. And that is important, because everybody has
skin in the game.
Mr. Peters. Yes, sir.
Mr. Allen. And that is very important to our taxpayers.
Mr. Piotti, do you have any comments?
Mr. Piotti. Yes, I do. At the state level, and it was
mentioned earlier that a lot of states have farmland protection
programs that often work in companion with ACEP, and a number
of states have done these kind of analyses. And we can compile
some of that for you.
I also will point out, the NCPP program, that is one of our
better partnership programs. This has leveraged significant
dollars outside of Federal funding, and one of the requirements
of that program is to identify the economic benefits of what is
occurring, and that is happening. But to be honest, it is one
of those places where the next farm bill needs some tweaks
because, the quantification of those outcomes is not occurring
at a level that it could. But that program, which is working,
we think, very well, could be elevated to a level to not only
do great work on the ground, but begin to provide some of the
data that you are looking for.
[The information referred to is located on p. 51.]
Mr. Allen. And that is what we need in providing for these
programs.
The other thing is, as far as from the standpoint of the
Federal Government, is the Federal Government the best place to
do these programs, and of course, we talked about cost-sharing.
Everybody has skin in the game. Would we be better served to do
this in possibly another way? Any comments on that, Mr. Peters?
Mr. Peters. We feel like the conservation delivery system
that is in place is effective and it does work, and that
delivery system engages partners at the Federal, state, and the
local level. We feel like that has borne strong outcomes over
the years, and we feel like that is the way of the future.
Mr. Allen. Mr. Gertson, as far as flexibility of the
program, do you believe that the Federal Government is flexible
enough to deal with, I know that every day the farmer wakes up
is a different day. How are they working out?
Mr. Gertson. Yes, I enjoy working with NRCS. They have
worked as a good vehicle to administer programs. I share the
same concerns as Mr. Coffey. The people are great, but quite
often, I find that they are overwhelmed. That is the problem. I
love working with the NRCS employees are a lot of times a lot
like the farmers are, right, especially your field reps who
come out and do stuff, and get along with them great. Yes,
there are lot of times there is an information gap there. I
will know more about programs than they do, because the
information just hasn't disseminated down to them quick enough.
There is definitely a possible staffing or information problem
that could be there.
And I wanted to touch about how the money was being
returned?
Mr. Allen. Investment return, yes, sir.
Mr. Gertson. Right. Okay, our USA Rice and DU partnership,
the RCPP program we have been running there is an excellent
example of that. That was $25 million, and what I didn't
mention is that there has been $25 million additional private
dollars that have matched that for a total of $50 million, so
that is matching every dollar that had been given into that
program. And one other thing I would like to mention on that is
that when you are looking at stretching a taxpayer dollar, I
would point out, at least in my point of view, working lands
programs go a long way, because that money isn't going to just
the farmer. That money is going to me and then I am funneling
it right back into the economy to pay for these practices. In
my community, it is not uncommon to see, you have dirt moving
sponsoring T-ball teams or our pipeline guys are sponsoring
dinners. It is all integrated. Money that is spent in working
lands programs, and EQIP and CSP, it multiplies and goes right
back into the local economy.
Mr. Allen. Thank you. That is the kind of information we
need.
The Chairman. The gentleman's time has expired.
Mr. Allen. I yield back the time I don't have.
The Chairman. The chair readily accepts it.
The chair now recognizes the gentleman from Minnesota, Mr.
Walz, for 5 minutes.
Mr. Walz. Well I thank the Chairman, and I too would like
to thank the Chairman and the Ranking Member for starting out
this farm bill process with this hearing. For many of us in
this room, we should feel proud of the last farm bill and the
conservation title that was in it that was wildly heralded
across the spectrum as being in the right direction. And now we
come back and we improve upon those things, and being a very
literal Minnesotan, I know that the Chairman had a big presence
in that as he sits over this room with the big photo and will
be there again.
And so I would come back to this. My friends are making a
very good point of this return on the investment, trying to
understand the bigger picture, understanding how there are win-
win-wins involved in this and seeing a table like this, this is
exactly where it is at.
Over the last few years of having the privilege of being
the co-chairman of the Sportsmen's Caucus, we took it upon
ourselves to quantify outdoor activities, what they mean and
what they mean for this economy. The numbers we came to are
about $650 billion. When you take care of the environment and
you have places for people to be able to fish or to hunt or to
mountain bike or to take their Polaris out, where they are
doing the things they are doing, all of those peripheral issues
have a huge impact. To get a sense of that, that is bigger than
the pharmaceutical and auto industry combined. And couple that
with ag, that is the power of rural America, and it is working
with the coalitions that are here. And I agree, where we can do
working lands conservation, those are win-win. But we have a
broad suite of things that we can do that fill all of those
niches.
So again, and I have seen this with a $900,000 investment
in EQIP on a spring feedlot near a trout stream in southeast
Minnesota. That trout stream now generates over $4 million in
income to that local community from that investment, and that
cattleman is also running more cattle on that land in a more
responsible manner. That is a win-win-win for everybody
involved, so I do think we approach this from that perspective
that we can get this out of it, and we are doing things like
CRP. They are not just taking land out of production, which we
need to make sure that we are compensating people fairly. There
is also a return to the economy on that.
I wanted follow up, Mr. Nomsen. You mentioned the pheasant
plan. I know Minnesota's pheasant plans, and yes, in full
disclosure on this, I am very glad there are more pheasants,
because my odds increase of getting one when we are out there.
I had the pleasure, with Mr. Peterson, of seeing him get one as
we both got one. They are coming back. Tell me how the
Minnesota pheasant plan fits together with what we are doing
federally to make sure, as they set target numbers, what are we
going to have to do so they hit the targets?
Mr. Nomsen. Thank you for the question, and specifically to
the Minnesota State pheasant plan, there is a short-term goal
of a harvest of about 450,000 birds. We have a ways to go to
get to that. We are probably around 300,000 or so right now.
Our estimates are that would take probably another 600,000 or
700,000 acres of land in pheasant-friendly types of habitats.
Not all CRP, probably a combination of CRP plus perhaps grassy
habitats provided by small grains. If for some reason we saw an
increase in small grain plantings in Minnesota, these are very,
very wildlife friendly plantings. And so it is a combination of
all of those things.
And just to add to your discussion on economics that you
are all having, there is no question that conservation programs
have been incredibly successful, not only for that individual
farmer and landowner, but frankly for all Americans. If we are
doing CRP in Ohio or Minnesota and maybe the driver is some
quail or a few more pheasants or monarch butterflies, that
project is helping benefit hypoxia situations in the Gulf and
nutrient runoff and things that all Americans find important.
These conservation programs are vitally important to all of us.
Mr. Walz. Mr. Nomsen, is it possible like when we have
drought situation of the CRP, and I know we have this in
Minnesota with the hay shortage, and we are shipping hay up
from Texas and wherever we can get it. Is there a responsible
way that you can have CRP land and graze that for these folk?
Can we do that?
Mr. Nomsen. Absolutely, and I was chatting with my
colleague, Mr. Coffey, earlier and we were talking about what
is good for the herd is good for the bird.
Mr. Walz. Yes.
Mr. Nomsen. And yes, absolutely. CRP does have a managed
hay and grazing component to it. Frankly, the entire CRP
management issue is one that needs to be revisited. We need to
get the agriculture community and the producers, the
environmental groups, conservation groups at the table to
evaluate where it is at, how can we do a better job, and how
can we encourage the land management in a very, very farm and
ranch friendly way?
Mr. Walz. I would like to work with you on it, because I
think that is the key of making sure we have those people at
the table, and so when it gets tough, makes it easy for them to
get on there and graze.
I yield back.
The Chairman. The gentleman yields back.
The chair now recognizes a farmer from California, Mr.
LaMalfa, for 5 minutes.
Mr. LaMalfa. Thank you, Mr. Chairman. My apologies for the
multiple committee schedule today for my tardiness, but thank
you for your recognition.
I will jump right into it. As a rice farmer from
California, I wanted to speak with, well, good morning, Mr.
Gertson. Maybe I can talk to you for a moment here. As you
know, we are medium grain growers primarily out there, and
likewise, growers in my area have seen the program of EQIP as a
very important tool with water saving practices. We don't need
to save a lot of water right now in California, but it is
always either feast or famine. It is an ongoing issue with
water savings being a good tool, as well as shorebirds,
waterbirds.
And so in your statement which I am sure you made earlier,
that the EQIP 3 year limit provision does hamper the long-term
effectiveness of these practices for shore birds, for habitat,
for water savings, all the other benefits that the program has
shown for growers in my state and yours. Would you supply a
little more detail in what changes you would see regarding
maybe the 3 year limit provision or other areas?
Mr. Gertson. Sure, sure. Yes, we would support extending
the life of EQIP contracts. From a point of view from a farmer,
conservation is for life, for us. This isn't a 3 year deal. We
are in it for the long haul.
Mr. LaMalfa. How many years have you been on your place?
Mr. Gertson. I am sorry?
Mr. LaMalfa. You are a fifth generation. How many years----
Mr. Gertson. I am fifth generation, 108 years.
Mr. LaMalfa. One hundred and eight, okay. We are going on
86 years. We are raising the fifth.
Mr. Gertson. Yes, I have the sixth coming. I have three
boys who are coming behind me. And without conservation, we
definitely wouldn't have been there 108 years. These programs
are what are going to make farming and ranching available to
the next generation. Not only are they conserving the
environment, but it is a win-win as you guys are liking to say,
because they are also cutting our costs, right, and with
farming, we are always constantly having to cut back wherever
we can. We are always having to do more with less.
Mr. LaMalfa. Yes, sir. We are not price makers. We are
price takers.
Mr. Gertson. Right, exactly.
Mr. LaMalfa. What kind of term would you see instead of 3
years, open ended? What kind of number do you think you have
been hearing or would actually be practical?
Mr. Gertson. I don't know that I can answer that right off
the cuff.
Mr. LaMalfa. Well I am sure we will figure it out here.
Mr. Gertson. Yes.
Mr. LaMalfa. All right. Let me switch. Thank you, Mr.
Gertson.
Good morning, Mr. Coffey. I feel like Joe DiMaggio for a
second there, if you are over 40, you will get that. You see
from being a cattle rancher in Oklahoma, there are many
technical fixes that Congress needs to make to EQIP to make it
work better for farmers and ranchers. What technical problem do
you find you are running into in ranching in the Midwest there?
Mr. Coffey. Thank you. To begin with, the physical
technical problem I believe is not having enough boots-on-the-
ground, not having enough trained conservationists with NRCS
that have the time to come out and be on the ground. Now there
are other technical----
Mr. LaMalfa. What kind of timeline to get from maybe your
first request or first ask to boots-in-your-field?
Mr. Coffey. The only boot I have ever had on my place, they
were touring it and it was a training session and we were
training NRCS personnel. It has to have been to follow up on an
EQIP contract to make sure that we perform according to the
worksheet. Beyond that----
Mr. LaMalfa. Is this based more on trust? Do you go in and
do the forms at the NRCS office and more or less that is the
end of the verification?
Mr. Coffey. And then you go home, follow the worksheets,
and accomplish the goals, yes.
Mr. LaMalfa. And do they have a pretty big inbox that you
are at the bottom of sometimes on their work, do you think?
Mr. Coffey. Well I don't know how big their inbox is.
Mr. LaMalfa. Well, you know what I am saying. Does it feel
like it takes a while for you?
Mr. Coffey. I just know that they are, and it may be that
they trust me. They know me well enough so they don't feel bad
that I am not the biggest priority in the area. I don't know
what the answer is.
Mr. LaMalfa. Well that is good. It is nice to have an honor
system going.
There is one other thing that hadn't been talked about in
the Committee today on this topic. What would you put in there,
since my time is running out? What has been left out, do you
think?
Mr. Coffey. I would look at increasing the conservation
strategies. I would look to make them more adaptive and
flexible by region, and then increase the accountability, both
on the side of USDA and the producer.
Mr. LaMalfa. It is a little rigid by region? You might have
to one-size-fits-all amongst regions?
Mr. Coffey. Yes, sir. Worksheets are developed in
Washington, sent out to the State Conservationists, but if we
had more worksheets, more things by region, we could accomplish
more of our goals.
Mr. LaMalfa. It is coming from Washington. Maybe we should
put that office in like Tulsa.
Mr. Coffey. Yes, bring it over. Yes.
Mr. LaMalfa. I agree.
Mr. Coffey. Davis, Oklahoma is a nice place to live right
there in Murray County.
Mr. LaMalfa. Thank you, Mr. Coffey.
Mr. Coffey. Thank you.
The Chairman. The gentleman's time has expired.
Chair now turns to the gentlelady from New Hampshire, Ms.
Kuster, for 5 minutes.
Ms. Kuster. Thank you very much, Mr. Chairman, and to
Representative Fudge and yourself, thank you for hosting this
important discussion about conservation programs. I come from
the Northeast, New Hampshire, where we have smaller farms than
all of you, but the conservation programs are incredibly
important. I just want to echo my colleagues' comments about
the impact of the outdoor community. The conservation in New
Hampshire also leads to a great resurgence in ag returns, and
then our colleague from Maine spoke about this. We are very
proud to have a five percent increase in the number of new
farmers in New Hampshire, and we have a renewed interest in
healthy food and organics and farmers' markets, and really a
resurgence in being closer to our food. I appreciate all the
work you have done.
Our Ranking Member, Representative Peterson stole my
thunder. Thank you to both of our witnesses, Mr. McDaniel and
Mr. Gertson, for pointing out my legislation, H.R. 1163,
Improving Access to Farm Conservation Act, that talks about
this SAM-DUNS problem. I look forward to having my colleagues
on the Committee join. It is a bipartisan bill, and we can all
agree, the underlying law was not intended for farmers working
with their son or their brother or sister, as it may be, and so
we will move forward with that and try to at least alleviate
that burden of paperwork that you have been experiencing.
I have a bigger concern and will know more tonight, but I
am worried about the cuts in the budget across the board. The
President has talked about $1 trillion in infrastructure
funding, an $800 million wall. Today and yesterday, a ten
percent increase in defense budgets. I am concerned that these
are the kinds of programs that are just going to get wiped off
the map, and I am glad this is such a congenial bipartisan
hearing, because I hope as we move forward with the farm bill,
we will be able to keep this funding, because it is important
both for the agriculture community, for our outdoor economy,
for our environment, and I just wondered if any of you have any
comments on how we can come together in a bipartisan way to
make sure that we keep the funding for conservation programs.
Mr. Piotti. I will offer one thought and plant the seed if
it hasn't already been planted with you, and that is that I
view farming and farmland as being critical infrastructure, and
there is value in thinking about it that way. And the
conservation programs that undergird those activities are also
part of that infrastructure. Maybe there is an opportunity to
turn the debate around a little, and as we are thinking about
rural infrastructure, focusing more attention on agriculture.
Ms. Kuster. That is creative. I like that. Thank you very
much. That is a great idea. Any others? That is brilliant, by
the way. If they are going to spend $1 trillion, let's make
sure we are included.
Mr. Nomsen. Exactly. I would like to add to that just
briefly, in that we do need to take a hard look at return on
investment and the discussion that we had. From my chair, the
starting point is what are the resource needs out there? What
do we need on the landscape, and that should be the starting
point for the discussion. And yes, I recognize it likely is
going to get much more challenging as we start to talk about
money available and making sure that we prioritize and fund the
best of the best. That is why we need to look internally at
even all of our programs and find efficiencies and savings so
that we can put more acres out there on the ground for farmers
and landowners and for everyone.
Ms. Kuster. And can you show that return-on-investment? Do
you have that kind of analysis of the programs?
Mr. Nomsen. We do, and I actually made a note when you had
a discussion earlier, and one of the things that we will add to
our testimony are some of the studies that have looked at
individual conservation programs in terms of their efficiencies
and what are they providing to taxpayers.
[The information referred to is located on p. 49.]
Ms. Kuster. I think that information would be very helpful
for the Committee, because in a bipartisan way, we will need to
sell this to our colleagues that this is important spending,
and that is not going to be popular this cycle. I appreciate
that.
Anybody else?
Mr. Peters. Congresswoman, I want to thank you for the
question. I would say we have also talked a lot this morning
about capacity at the local level, and one of the things that
we need to make sure that we address is that as we are looking
at the delivery of financial assistance, that there is strong
conservation planning at the beginning of that process. Having
a strong plan in place, making sure that the appropriate
resource concerns are being addressed, and that the landowner
is in the management seat in the development of that
conservation plan will help us achieve the greatest outcomes
with the Federal investment, both in financial assistance and
technical assistance.
Ms. Kuster. Thank you. My time is up, but if anybody has
any other suggestions, we are going to need them to get this
done and to sell it to our colleagues on the floor.
Thanks very much.
The Chairman. The gentlelady's time has expired. She has
yielded back.
Before we adjourn, I invite the Ranking Member to make any
closing remarks that she would care to.
Ms. Fudge. Thank you so much, Mr. Chairman, and thank you
all for being here today. We appreciate your testimony, and
certainly we will take it under advisement. I think that we are
going to have a tough battle, but we are ready for the fight.
Thank you so much.
The Chairman. The Ranking Member yields back.
I would just simply note to my colleagues on the Committee,
and for that matter, the witnesses, many very important topics
have come up today. We do face a struggle as we march forward.
We have a great deal of uncertainty on what the funding issues
will be, the lay of the land, but I am confident in the full
Committee Chairman and the full Ranking Member, and I would
note for the record, the process of trying to evaluate
conservation takes many things into consideration. Whether it
is issues as simple as other programs within our jurisdiction,
like the upstream flood control dams, where you can calculate
the amount of property and lives protected, or as in the case
with CRP, how many tons of soil remain in place that don't
enter the water stream, don't move downstream, don't affect
dams and structures? There is the value of enhanced wildlife,
whether you are a sportsman, a bird lover, with a hook or a
bullet or a camera, so to speak, there is value in that. All of
these things factor in. But ultimately, we have to remember in
so many of these programs, we are talking about making
investments that are not financially practical for an
individual producer to make and achieve a return in a 3 to 5 to
7 to 10 year period. We are making investments that are for a
generation or generations or hundreds of years, and we need to
assess that in our calculations. We are investing in the future
forever.
And with that, I look forward to the work of this
Subcommittee and the work of the full Committee, and under the
Rules of the Committee, the record for today's hearing will
remain open for 10 calendar days to receive additional
information and supplementary written responses from witnesses
to any question posed by a Member.
This hearing of the Subcommittee on Conservation and
Forestry is adjourned.
[Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Statement by Hon. Mike Bost, a Representative in Congress
from Illinois; on Behalf of National Grain and Feed Association
Chairman Lucas, Ranking Member Fudge, and Members of the
Subcommittee, thank you for having conducted this hearing to receive
input on how the conservation title of the Agricultural Act of 2014 has
operated and gather ideas for the next farm bill's conservation title.
This statement for the record is respectfully submitted by the
National Grain and Feed Association (NGFA). NGFA, established in 1896,
consists of more than 1,050 grain, feed, processing, exporting and
other grain-related companies that operate more than 7,000 facilities.
Its membership includes grain elevators; feed and feed ingredient
manufacturers; biofuels companies; grain and oilseed processors and
millers; exporters; livestock and poultry integrators; and associated
firms that provide goods and services to the nation's grain, feed and
processing industry. NGFA also has 34 State and Regional Affiliated
Grain, Feed and Agribusiness Associations.
Since enactment of the last farm bill in 2014, NGFA-member
companies have increasingly heard from consumers of their preference
for food raised in a sustainable and environmentally sensitive manner.
Fortunately, Congress had the foresight to create two working-land
programs, the Conservation Stewardship Program (CSP) and the
Environmental Quality Incentives Program (EQIP), that assist producers
in further enhancing conservation practices to produce grain-based
crops in an even more sustainable fashion. CSP and EQIP allow
agricultural producers to maintain active agricultural production on
their land while managing conservation activities. Examples of
conservation activities that participants can choose under CSP and EQIP
include fertilizer optimization practices and cover crops to reduce
erosion, improve soil organic matter, promote efficient nutrient
cycling, fix nitrogen in the soil, suppress weeds, increase
biodiversity and improve overall soil health. These conservation
activities often result in more conservation practices taking hold for
the long-term in the community and across the nation--there are 362.7
million acres of cropland and 526.9 million acres of pastureland and
rangeland for these programs to impact either directly or indirectly.
The NGFA strongly believes CSP, EQIP and other working lands
conservation programs will become increasingly important to maintaining
the long-term health of soils and in attaining the goal of
environmentally and sustainably producing food for a growing world
population.
By contrast, investing scarce conservation dollars in dramatically
increasing the size of land-idling programs like the Conservation
Reserve Program (CRP)--as advocated by some--risk short-changing
working land conservation programs.
Since 1985 when CRP was created, millions of acres of America's
best and most productive farmland have been idled under 10 to 15 year
CRP contracts, siphoning the economic lifeblood that emanates from
production agriculture out of hundreds of rural communities. Many
landowners used general CRP signups and its whole-farm enrollments as a
retirement program. Rural businesses, including farm equipment dealers,
input suppliers and banks, closed. So did schools. Rural populations
plummeted.
As can be seen in Table 1, U.S. cropland has plunged from 420.6
million acres in 1982 to 362.7 million in 2012. The long-term economic
well-being and competitiveness of U.S. agriculture depends upon
retaining production on cropland that can be farmed in an
environmentally sustainable way. The National Resources Inventory,
which is a report published by USDA's Natural Resources Conservation
Service (NRCS), found that only 60 percent of expired CRP land in 2007
returned to cropland by 2012. Thus, long-term CRP contracts contribute
to the reduction in the availability of U.S. cropland.
Table 1: U.S. Land Use
(in million acres)\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Other Rural
Year Cropland CRP Land\2\ Developed Pastureland Rangeland Forest Land Land Federal Land Water Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
1982 420.6 -- 71.9 131.3 419.4 410.3 42.8 398.2 49.8 1,944.1
1987 406.4 13.8 77.9 127.4 413.9 412.3 42.9 398.7 50.8 1,944.1
1992 382.0 34.0 85.2 125.8 410.2 412.2 43.2 401.0 50.5 1,944.1
1997 376.4 32.7 95.9 120.7 408.1 413.3 43.5 402.6 51.1 1,944.1
2002 367.7 31.8 104.9 119.3 407.8 413.7 43.4 404.1 51.5 1,944.1
2007 358.9 32.5 111.1 119.7 407.2 413.1 44.9 404.8 51.9 1,944.1
2012 362.7 24.2 114.1 121.1 405.8 413.3 45.4 405.3 52.1 1,944.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Source: U.S. Department of Agriculture. 2015. Summary Report: 2012 National Resources Inventory, Natural Resources Conservation Service, Washington,
DC, and Center for Survey Statistics and Methodology, Iowa.
\2\CRP land is only CRP general sign-ups and does not include CRP continuous sign-ups.
History has shown that South American countries and other foreign
competitors respond to U.S. land-idling schemes by plowing up virgin
land on more than an acre-for-acre basis, capturing export market share
previously held by U.S. farmers and depriving rural America of the
economic ripple effects that resonate from U.S. agricultural
production.
Fortunately, over the years, Congress has right-sized the CRP,
while the U.S. Department of Agriculture has refined its Environmental
Benefits Index to better target CRP on reducing soil erosion and
improving water quality, although wildlife benefits were added as a
criterion and have a disproportionately heavy weighting when USDA
determines the scoring of acres eligible for enrollment.
Even now as can be viewed in Table 2, NGFA has determined that 26
percent of the 24.2 million acres that were enrolled in the CRP general
signup as of 2012 were classified as ``prime farmland.'' Here's how
USDA's NRCS defines ``prime farmland'': ``Land that has the best
combination of physical and chemical characteristics for producing
food, feed, forage, fiber and oilseed crops . . . It has the soil
quality, growing season and moisture supply needed to produce
economically sustained high yields of crops when treated and managed to
acceptable farming methods.''
Table 2: U.S. Prime Farmland on Non-Federal Land
(in million acres)\1\
----------------------------------------------------------------------------------------------------------------
Other Rural Total Prime
Year Cropland CRP Land\2\ Pastureland Rangeland Forest Land Land Farmland
----------------------------------------------------------------------------------------------------------------
1982 228.2 -- 35.1 18.2 42.9 5.6 330.0
1987 223.4 3.3 34.7 17.6 43.3 5.7 328.1
1992 214.4 9.6 35.0 17.2 43.6 5.9 325.6
1997 210.9 9.2 34.2 17.5 44.5 6.0 322.3
2002 206.5 8.5 34.7 17.8 45.7 6.0 319.3
2007 202.0 8.7 35.5 17.9 46.3 6.4 316.8
2012 202.1 6.4 36.1 17.8 46.8 6.5 315.7
----------------------------------------------------------------------------------------------------------------
\1\Source: U.S. Department of Agriculture. 2015. Summary Report: 2012 National Resources Inventory, Natural
Resources Conservation Service, Washington, D.C., and Center for Survey Statistics and Methodology, Iowa State
University, Ames, Iowa.
\2\CRP land is only CRP general sign-ups and does not include CRP continuous sign-ups.
In addition, Table 3 shows that as of 2012, CRP had enrolled 15.3
million acres of cropland within land capability classes I, II or III,
which are the three best classes of U.S. land. The land capability
classification is a system of grouping soils primarily based on their
capability to produce common cultivated crops and pasture plants
without deteriorating over a long period. Class codes I to VIII
indicate progressively greater limitations and narrower choices for
agriculture.
Table 3: U.S. Land Capability Class I through Class III (Good Land) on non-Federal Land
(in million acres)\1\
----------------------------------------------------------------------------------------------------------------
Total Class
Year Cropland CRP Land\2\ Pastureland Rangeland Forest Land Other Rural I thru Class
Land III Land
----------------------------------------------------------------------------------------------------------------
1982 345.1 -- 73.3 66.0 111.7 12.3 608.4
1987 335.7 8.3 71.6 64.0 112.6 12.5 604.7
1992 318.7 21.8 71.3 62.5 113.0 12.8 600.0
1997 314.6 21.0 69.0 62.4 113.8 13.0 593.8
2002 307.5 20.3 68.9 63.0 115.5 13.0 588.2
2007 300.6 20.8 69.6 63.1 116.1 13.9 584.3
2012 303.0 15.3 70.5 62.8 116.6 14.2 582.5
----------------------------------------------------------------------------------------------------------------
\1\Source: U.S. Department of Agriculture. 2015. Summary Report: 2012 National Resources Inventory, Natural
Resources Conservation Service, Washington, D.C., and Center for Survey Statistics and Methodology, Iowa State
University, Ames, Iowa.
\2\CRP land is only CRP general sign-ups and does not include CRP continuous sign-ups.
Table 4 displays U.S. land capability classes IV through VIII,
which have lower capability to produce crops. NGFA believes less harm
would be inflicted on U.S. agriculture if CRP enrollments were focused
on land that had both an erodibility index score of 8 or higher and was
classified within capability classes IV through VIII. NGFA also
believes whole farms or large tracts of land within farms should not be
enrolled in CRP. Instead enrollments should be targeted at the most
environmentally sensitive portions of farms, such as critical fragments
of tracts prone to erosion, serving as drainage, frequently drowning
out or located next to streams. CRP under this new NGFA-advocated
approach would be operated in a manner that would allow farmers to work
in tandem with USDA to identify and enroll the portions of their farms
that best complement environmentally sustainable agriculture. This
surgical approach to CRP would substantially elevate the environmental
benefits (soil health and water quality).
Table 4: U.S. Land Capability Class IV through VIII on non-Federal Land
(in million acres)\1\
----------------------------------------------------------------------------------------------------------------
Total Class
Other Rural IV thru
Year Cropland CRP Land\2\ Pastureland Rangeland Forest Land Land Class VIII
Land
----------------------------------------------------------------------------------------------------------------
1982 75.5 -- 58.0 353.3 298.6 30.5 815.8
1987 70.7 5.5 55.8 349.9 299.6 30.4 811.9
1992 63.3 12.2 54.5 347.7 299.2 30.5 807.5
1997 61.7 11.7 51.7 345.7 299.5 30.5 800.8
2002 60.1 11.4 50.4 344.8 298.2 30.4 795.4
2007 58.2 11.6 50.1 344.1 297.0 31.0 792.1
2012 59.8 8.9 50.6 342.9 296.7 31.3 790.2
----------------------------------------------------------------------------------------------------------------
\1\Source: U.S. Department of Agriculture. 2015. Summary Report: 2012 National Resources Inventory, Natural
Resources Conservation Service, Washington, D.C., and Center for Survey Statistics and Methodology, Iowa State
University, Ames, Iowa.
\2\CRP land is only CRP general sign-ups and does not include CRP continuous sign-ups.
In addition to currently targeting the wrong land for CRP
enrollment, there also are indications that rental rates paid by USDA
to enroll CRP acres in several regions of the country continue to be
considerably higher than local farmland cash rental rates, thereby
pitting the U.S. Government as a competitor against young and beginning
farmers trying to enter production agriculture and remain in rural
communities.
Conclusion
As noted previously, NGFA strongly believes CSP, EQIP and other
working land conservation programs are crucial for helping U.S.
agriculture meet the challenge of preserving healthy soils and meeting
the long-term demand for producing food in an environmentally
sustainable manner. Conservation activities incentivized by CSP and
EQIP often result in more conservation taking hold in communities and
the nation. There are 362.7 million acres of cropland and 526.9 million
acres of pastureland and rangeland for CSP and EQIP to impact either
directly or indirectly.
On the other hand, idling of large tracts of productive farmland in
the Conservation Reserve Program has harmed rural economies and
contributed to the reduction in the availability of cropland upon which
U.S. agriculture depends.
As it considers the next farm bill, the NGFA urges Congress to
retain the current CRP acreage cap of 24 million acres and avoid
repeating the mistakes of the past when CRP was used as a supply
control program, which only encouraged greater production by America's
foreign competitors. To achieve greater conservation, NGFA recommends
criteria be placed on future CRP enrollments to target land that has
both an erodibility index score of 8 or above and is classified within
capability classes IV through VIII. NGFA also believes whole farms or
large tracts should not be enrolled in CRP. Instead CRP enrollments
should be targeted at the most environmentally sensitive portions of
farms, such as critical fragments of tracts prone to erosion, serving
as drainage, frequently drowning out or located next to streams.
NGFA believes scarce Federal funding should be targeted at working
land conservation programs, such as CSP and EQIP, which promote
agricultural sustainability. Finally, NGFA requests that Congress
carefully examine the issue of CRP rental rates, which in some cases
are considerably higher than local farmland cash rental rates and serve
as an economic barrier for the next generation of American farmers to
get into production agriculture.
The NGFA appreciates the opportunity to submit this statement for
the hearing record, and would be pleased to respond to any questions
Members of the Subcommittee may have.
______
Supplementary Material Submitted by David E. Nomsen, Vice President of
Governmental Affairs, Pheasants Forever, Inc.
Insert
Mr. Nomsen. Exactly. I would like to add to that just
briefly, in that we do need to take a hard look at return on
investment and the discussion that we had. From my chair, the
starting point is what are the resource needs out there? What
do we need on the landscape, and that should be the starting
point for the discussion. And yes, I recognize it likely is
going to get much more challenging as we start to talk about
money available and making sure that we prioritize and fund the
best of the best. That is why we need to look internally at
even all of our programs and find efficiencies and savings so
that we can put more acres out there on the ground for farmers
and landowners and for everyone.
Ms. Kuster. And can you show that return-on-investment? Do
you have that kind of analysis of the programs?
Mr. Nomsen. We do, and I actually made a note when you had a
discussion earlier, and one of the things that we will add to
our testimony are some of the studies that have looked at
individual conservation programs in terms of their efficiencies
and what are they providing to taxpayers.
Date: March 24, 2017
To: House Committee on Agriculture, Subcommittee on Conservation and
Forestry
From: Dave Nomsen, Pheasants Forever, Inc.
Re: February 28, 2017 Hearing Addendum to Testimony
Below is additional information submitted as an addendum to my
testimony of February 28, 2017 including a response to Representative
Bost regarding pollinators.* Thank you for including this in the record
with my testimony and please feel free to contact me with any
additional comments or questions.
---------------------------------------------------------------------------
*The response to Hon. Mike Bost's submitted question is located on
p. 56.
---------------------------------------------------------------------------
Additional Statement on the Environmental Quality Incentives
Program--We urge policymakers to expand funding for the Environmental
Quality Incentives Program (EQIP) and to increase to 10% funds used for
wildlife conservation practices. For example, we strongly support the
Working lands for wildlife initiatives that we work in partnership with
NRCS on implementing. Specifically the Sage Grouse Initiative in the
West, Lesser Prairie Chicken Initiative in the Southern Great Plains,
and even working on young forest initiatives to benefit the Golden
Winged Warbler in the East. Just a few months ago, Quail were added as
one of the priorities.
USDA--NRCS and FSA Conservation Programs
Since the inception of various conservation programs in farm bill's
since 1985, PF has worked with respective agencies to leverage funding
through financial and in-kind contributions. Some of the best examples
we have of these partnerships are with NRCS and the EQIP program,
especially as it relates to delivery wildlife related practices. This
includes the initiatives under the Working Lands for Wildlife. We are
partnership with NRCS to fully leverage the Federal funding, with
state, local and private sources. This is most evident with Three of
NRCS WLFW initiatives Sage Grouse, Golden-winged Warbler, Lesser
Prairie Chicken, and we will certainly be engaged range wide with the
addition of Bobwhite Quail. Not only do our community led chapters and
volunteers assist in implementing USDA conservation programs, our
organization, with assistance from NRCS, have supported our Farm Bill
Biologist program. In partnership with state/county agencies, and other
non-government organizations, we have a team of Farm Bill Biologists
that work as natural resource professionals with expertise in fields
such as wildlife biology, forestry, and range management. Every day,
they work with landowners that encompass farms, ranches and forestland
thought out the Country, to find the best voluntary based, conservation
solutions that fit producers' needs as part of their agriculture
operations and personal goals.
One of our organizations top priorities, along with many of our
partners, are to maximize the wildlife benefits, soil health, and water
quality through voluntary Federal, state and local conservation
programs on as many acres of fields, farms, ranches and forestlands as
possible.
Additional Sources of information About the Economics of Conservation
Programs
Economic Impacts of CRP on Rural Economies, and Wildlife Benefits of
Farm Bill Conservation Programs on Fish and Wildlife
Shortly after CRP was implemented in the 1985 Farm Bill, there were
regional concerns that the CRP negatively impacted local economies. No
question, this is a very complex issue and we would like to highlight
some literature for reference that suggests that, over the 30 year
history, CRP has had little or no impact on most rural economies. In
fact, several analyses suggest that CRP stimulated local economies
through, keeping fa[r]mers on the land (i.e., they were not forced to
relocate to more urban areas) increased recreational opportunities
through hunting, improving fisheries through reducing soil erosion and
water quality improvement, and overall providing natural resource
benefits for all Americans. We also contend that CRP has always been a
working lands program through the fact that most acres can be hayed
and/or grazed through the managed haying and grazing provisions, and
even expanded to other conservation practices/programs if the USDA
Secretary deems necessary in an emergency situation. We offer the view
that by keeping a robust CRP on the landscape, we can maximize crop,
forage and fiber production, while reducing soil erosion, improving
water/air quality and providing wildlife benefits.
The Conservation Reserve Program--Economic Implications for Rural
America. USDA-ERS Report: https://www.ers.usda.gov/webdocs/
publications/aer834/19569_aer834_researchbrief_1_.pdf.
The Conservation Reserve Program--An Economic Assessment: https://
www.ers.usda.gov/webdocs/publications/aer626/50870_aer626fm.pdf.
Bibliography--Effects of Agricultural Conservation practices on
fish and wildlife. USDA-ARS: https://www.nal.usda.gov/waic/effects-
agricultural-conservation-practices-fish-and-wildlife.
It is estimated that pheasant hunting alone, provides $500 million
annually: http://nationalpheasantplan.org/national-plan/.
Implications of a Reduced Conservation Reserve Program--The Council
on Food, Agriculture, and Resource Economics: http://www.cfare.org/
UserFiles/file/publications/Wu-Weber_8.21%5B1%5D.pdf.
Assessing Cost-Effectiveness of the Conservation Reserve Program
and its Interaction with Crop Insurance: http://www.card.iastate.edu/
products/publications/synopsis/?p=1232.
2014 Farm Bill Field Guide to Fish and Wildlife Conservation:
https://www.fws.gov/greatersagegrouse/documents/Landowners/
2014_Farm_Bill_Guide
%20to%20Fish%20and%20Wildlife%20Conservation.pdf.
______
Supplementary Material Submitted by Hon. John F. Piotti, President,
American Farmland Trust
Insert
Mr. Allen. . . .
The best way I know to do that, because I come from the
business world, is to look at every dollar invested and what is
the return on that dollar. We represent the taxpayers, and the
taxpayers expect us, and we should, use their money as an
investment return as far as conservation practices go.
Mr. Peters, are there any actual statistics on what for a
dollar invested what dollar received from this program, which
would help us to increase this in the next farm bill?
Mr. Peters. I am sure there are. I don't have those
statistics readily available with me this morning. One thing
that bears mentioning is that historically, for the Federal
investment through the farm bill conservation programs, there
is years upon years worth of cost-share that have come out of
the pockets of the farmers and ranchers and landowners that are
participating in those programs.
Mr. Allen. Right.
Mr. Peters. That is a tremendous private investment that has
leveraged those Federal funds.
Mr. Allen. And that is important, because everybody has skin
in the game.
Mr. Peters. Yes, sir.
Mr. Allen. And that is very important to our taxpayers.
Mr. Piotti, do you have any comments?
Mr. Piotti. Yes, I do. At the state level, and it was
mentioned earlier that a lot of states have farmland protection
programs that often work in companion with ACEP, and a number
of states have done these kind of analyses. And we can compile
some of that for you.
I. Benefit-Cost Analyses of Farmland Protection
The Public Benefits of Farmland Protection
Farmland protection easements are well known for the private
benefits that they offer to farmers, who commonly use the funds from
selling their development rights to reinvest in their businesses, pay
off debt, or retire. In addition, farmland protection offers many
public benefits, including:
Avoided taxpayer expenditures on municipal community
services and infrastructure given less sprawl.
Preserved economic makeup of the community, as protected
farms maintain agriculture support industries and remain
affordable to farmers.
Avoided urban runoff, supporting water quality.
Protected permeable surfaces in watersheds, supporting water
quantity, flood control, and water purification.
Reduced landscape fragmentation, supporting biodiversity and
wildlife habitat.
There are many methods for estimating a dollar value of these
benefits of farmland protection. The following examples, though using
differing methodologies, both show a positive benefit-to-cost ratio for
protected farmland.
Environmental Return on Federal Farmland Protection Funds
A study from Lancaster County, Pennsylvania, evaluated 13 ecosystem
service benefits on protected cropland and pastureland. These ecosystem
services included aesthetic quality, pollination, recreation, water
regulation, and animal habitat, among others. The dollar values were
drawn from peer-reviewed research that used multiple methodologies
including market pricing, cost avoidance, replacement cost, travel
cost, hedonic values, and contingent valuation.
The report showed the value of these services to be between $27
million and $219 million annually, depending on the ecosystem service
valuation used. These lands were preserved in perpetuity at a combined
total of roughly $100 million in state and Federal funding and $13
million in private funds from the Lancaster Farmland Trust (Schwartz &
Kocian, 2014). Assuming the Federal input was $50 million (\1/2\ of the
total public investment), it would take only 2 years at the very lowest
estimate to pay back the benefits environmentally--to say nothing of
the public economic benefits from the protection of agricultural jobs
and businesses, the taxes paid by the farmers, the sale of farm
products, and the agriculture-related industries supported.
Federal Farmland Protection Cost-Benefit Analysis
On the Federal level, the Natural Resources Conservation Service
(NRCS) (2014) produced a benefit-cost analysis of the Farm and Ranch
Lands Protection Program (FRPP), a precursor to the present
Agricultural Conservation Easement--Agricultural Land Easement (ACEP-
ALE) program. Instead of placing a dollar value on the ecosystem
services provided, NRCS used a ``willingness-to-pay'' (WTP) model,
which in effect uses survey data to calculate a value for protected
farmland based on what urban dwellers are willing to pay to have their
local farmland protected. The NRCS calculated the average annual WTP
per thousand acres per household to be $1.54.
In FY 2007, FRPP protected 54,490 acres at a cost of almost $73
million, for an average cost of about $1,300 per acre. The benefits
from these lands based on WTP was about $11 million in that year.
However, the estimates of total net benefits for the FY 2007 FRPP
baseline, taking into account the fact that these are perpetual
easements, range from $81 million to $285 million (for a seven percent
and three percent discount rate, respectively). These estimates both
constitute a positive net return on the investment of Federal funds.
References
Natural Resources Conservation Service. 2014. Final Benefit-Cost
Analysis for the Farm and Ranch Lands Protection Program (FRPP).
Schwartz, A., and Kocian, M. 2014. Beyond Food: The Environmental
Benefits of Agriculture in Lancaster County, Pennsylvania. Earth
Economics, Tacoma, WA.
II. Quantifying Conservation Benefits in the Regional Conservation
Partnership Program
Two interconnected points were made by several Members during the
Subcommittee on Conservation and Forestry hearing, The Next Farm Bill:
Conservation Policy; first, that farmers do not often receive credit
for their implementation of voluntary conservation methods, and second,
that it is important to wisely invest taxpayer dollars in conservation
programs that show measurable results and provide evidence to the
American public that conservation programs offer a good return on
investment.
American Farmland Trust (AFT) believes that the new Regional
Conservation Partnership Program (RCPP) provides a unique opportunity
to satisfy both those points. One of the stated goals of RCPP has been
to fund projects that elect to measure environmental, social, and
economic outcomes of the practices adopted within a project area. These
specific, on-the-ground outcomes would make the case that voluntary
conservation is working and would allow farmers to receive credit for
the public benefits they provide.
While some studies have attempted to quantify the environmental or
economic benefits associated with conservation, more needs to be done
to empower RCPP partners to gather this data. Congress should encourage
the United States Department of Agriculture Natural Resources
Conservation Service (USDA NRCS) to define those desired outcomes,
provide methods to measure the outcomes, and establish reporting
criteria so success stories can make it back to NRCS and to the
Congress.
Efforts To Quantify Environmental and Economic Benefits of Federal
Conservation Programs
There are a variety of studies that attempt to quantify
environmental or economic benefits associated with conservation
activities such as water quality improvements in specific watersheds
and the increases in spending on outdoor recreation and sportsmen's
activities. However, no definitive studies exist that quantify the
environmental and economic benefits of specific conservation programs,
or of total Federal conservation spending.
Until about a decade ago, Federal agricultural conservation
programs were solely quantifying their success by counting the dollars
spent, conservation contracts signed, and acres or units of practices
implemented rather than on-the-ground outcomes. In 2003, the NRCS
Conservation Effects Assessment Project (CEAP) began modeling
simulations to estimate the environmental effects of conservation
practices on cropland in 12 very large river basins. The latest CEAP
report for the Western Lake Erie Basin identified $277 million in
annual investment in conservation practices by the area farmers
(without specificity to spending by Federal, state, or local programs)
that are estimated to reduce annual sediment losses by 81 percent,
nitrogen losses by 36 percent, and phosphorus losses by 75 percent.
The United States Fish and Wildlife Service estimates that the
Conservation Reserve Program (CRP) has helped achieve a net increase of
two million additional ducks per year (a 30 percent increase in duck
production) in North Dakota, South Dakota, and northeastern Montana
since 1992 (FSA, 2013). Modeling simulation by the Food and
Agricultural Policy Research Institute (FAPRI) estimates that CRP
reduces nutrient losses by 565 million pounds of nitrogen and 113
million pounds of phosphorus, compared to land that is cropped (FSA,
2013).
From the economic perspective, a University of Virginia study found
that every $1 of state or Federal funding invested in agricultural best
management practices would generate $1.56 in economic activity in that
state (Rephann, 2010). The Chesapeake Bay Foundation (2014) estimated
that having a clean Chesapeake Bay would provide $130 billion in
economic benefits annually to watershed residents, in the form of air
and water filtering, agricultural and seafood production, enhancement
of property values, and protection from floods and hurricanes. The cost
of implementing such a plan has been valued at $5-$6 billion dollars
annually.
Still other studies attempt to quantify the economic impact of
activities related to public recreation lands, clean, healthy waters,
and healthy wildlife populations, all of which are supported by
agricultural conservation funding. During the hearing, Representative
Walz of Minnesota noted the example of a $900,000 Environmental Quality
Incentives Program (EQIP) grant on a feedlot that led to cleaner water
in a nearby trout stream that generates $4 million for the local
economy through recreational activities. The Congressional Sportsmen's
Foundation (2013) estimated the country's ``sportsmen and women are an
economic force, fueling the American economy,'' spending $90 billion in
2011 and specifically $3 billion on the American system of conservation
funding.
All of these studies are important efforts to quantify
environmental and economic benefits associated with public and private
investments in the environment and agriculture. We need more of them.
Farmers Want To Know What Their Voluntary Conservation Efforts Are
Accomplishing in Their Own Backyards
In order to more fully understand the benefits of RCPP and other
conservation programs, we need to quantify the environmental, economic,
and social outcomes of the conservation programs. RCPP, as an
innovative program that brings together a diverse array of partners and
leverages private-sector dollars to implement targeted best management
practices, is an ideal place to start. By 2018, NRCS and its more than
2,000 conservation partners will have invested over $2.4 billion in
high-impact RCPP projects nationwide, with more than half of that
funding coming from non-Federal sources.
Other than counting the dollars spent and the practices adopted,
farmers and the RCPP project partners want to know what environmental
benefits their conservation activities are achieving in their project
area. To address this issue, AFT believes that the farm bill should,
first, include definitions of these environmental, social, and economic
outcomes, and second, direct the Secretary of Agriculture to provide
guidance and reporting criteria to RCPP project partners to measure
those outcomes. AFT would be happy to visit with Members and staff of
the House Subcommittee on Conservation to provide examples of various
outcome definitions and measurement methods.
References
Chesapeake Bay Foundation. 2014. Cleaning Up the Chesapeake: A
Valuation of the Natural Benefits Gained by Implementing the Chesapeake
Clean Water Blueprint. http://www.cbf.org/document.doc?id=2258.
Congressional Sportsmen's Foundation. 2013. ``America's Sporting
Heritage: Fueling the American Economy.'' http://sportsmenslink.org/
uploads/page/EIR_full_12_feb_low_res.pdf.
Farm Services Agency (FSA). 2013. Environmental Benefits of the
Conservation Reserve Program: United States. https://www.fsa.usda.gov/
Internet/FSA_File/us_benefits_2013.pdf.
NRCS Conservation Effects Assessment Project (CEAP). 2016. Effects
of Conservation Practice Adoption on Cultivated Cropland Acres in
Western Lake Erie Basin, 2003-06 and 2012. https://www.nrcs.usda.gov/
wps/portal/nrcs/detail/national/technical/nra/ceap/pub/
?cid=nrcseprd949606.
Rephann, T. 2010. Economic Impacts of Implementing Agricultural
Best Management Practices to Achieve Goals Outlined in Virginia's
Tributary Strategy. http://cbf.org/document.doc?id=467.
______
Submitted Questions
Response from Chuck Coffey, Owner/Manager, Double C Cattle Company;
Member, National Cattlemen's Beef Association
Question Submitted by Hon. Mike Bost, a Representative in Congress from
Illinois
Question. As of November 2016, there have been little over 340,000
acres enrolled in pollinator habitat since the program was established
in 2012. In your opinion, has this program and the investments made my
outside organizations made a meaningful difference in increasing the
population and health of the pollinator population and are there any
changes that you would like to see to make this program more effective?
Answer. While it's still premature to determine the cumulative
impact of the pollinator habitat efforts, we do know that agriculture,
and grazing in particular, plays a critical role in conserving the
pollinator habitat we have and establishing new habitat where we can.
We also know that these efforts are most effective and appeal to the
widest audience when they are truly voluntary and incentive-based. It's
also critical to recognize the benefit of these voluntary conservation
efforts by offering assurances to participating producers when making
ESA listing determinations.
Response from Timothy Gertson, Co-Owner/Co-Operator, G5 Farms; Member,
Board of Directors, USA Rice Federation
Questions Submitted by Hon. Mike Bost, a Representative in Congress
from Illinois
Question 1. You said in your testimony that when you participate in
the EQIP program you saw immediate benefits to your bottom line. This
return on investment then led you to implement the same conservation
practices on more of you acres. What benefits did you see that were
worth putting you own skin in the game and did you look at utilizing
the Conservation Guaranteed Loan Program offered my FSA? Finally, do
you know of any other producers who take this same approach to
conservation efforts?
Answer. We cost-shared the installation of more than 4 miles of 16"
underground pipeline to replace irrigation canals, resulting in up to
20 percent less irrigation water needed to grow our crop, providing
both instant savings and environmental benefits. A quick calculation
shows that since installation our new pipeline alone has saved
somewhere between 1,000 and 2,000 ac-ft of water. This is enough water
to fill between 500 and 1,000 Olympic-sized swimming pools. Not only
are we saving the water, we are saving the cost of pumping it, and that
has a big impact on my bottom line. It previously took nearly 24 hours
of pumping at a rate of 3,000 gallons/minute to build up in my old
canals to start just a trickle of water into my fields. Now, with
underground pipeline, my water supply is on demand and immediate. This
added precision to my irrigation scheduling lends itself to increased
yields by minimizing crop stress, again helping my bottom line.
Almost every single rice producer I know in my county and the
surrounding counties has applied for EQIP or CSP funding.
Unfortunately, not all of them have received it. Many farmers apply
year after year for EQIP to help get started with their conservation
practices only to be turned down because of lack of funding. EQIP is
extremely competitive in our region because everyone has seen the
benefits that these conservation practices bring to our land, water,
wildlife, and economy.
We have looked at FSA loan programs before, but not the
Conservation Guaranteed Loan Program in particular. We wrote off
talking to FSA about any loan programs several years ago because their
process was too time consuming and it takes too long for approval. In
my area, conservation practices have to be installed between crop
rotations. This means there is a limited timeframe to get the practice
installed. The weather can be hard enough to work around, I can't
imagine having to wait on a loan approval as well.
Question 2. Your testimony should be required reading when it comes
to the positive impact working lands conservation programs has on local
economies. As you point out, with working lands programs, the land is
still in production and as a result you are able to provide jobs for
several of the residents in your town. Generally, how would your
ability to contribute to the local economy be impacted if there were a
dramatic shift in policy that allowed for millions of more acres to be
retired/idled through CRP?
Also, with you being a young farmer, do you feel that beginning
farmers and ranchers are competing for rental acres with CRP contracts
that are too high? As an example, in Illinois, CRP rates in some areas
of the state are over $300 an acre. What do you believe could be done
to reform the rental rate?
Answer. If millions of additional acres were to be enrolled in CRP
I'd really be wondering where the money came from to pay for those
contracts. Is that money that could have been spent on working lands
programs? Something that really frustrates me is that CRP is a
`conservation' program, but it feels like it should fit under the
commodity title. I understand that the intent of the program is to
provide conservation benefits, but I feel like the same goal could be
accomplished on that land by using EQIP or CSP and keeping the land in
production. Producers enrolled could be required to do things like
strip till, min till, or no-till, or cover cropping to reduce erosion
and improve water quality. I know those types of practices don't work
perfectly in every region and for every crop. We can't no-till rice (we
tried it when I was in high school) because you run the risk of the
ground never drying out in the spring to be able to plant.
Since a lot of rice seems to be grown on rented land and most
beginning farmers rely on rented land, it's got to be an issue if
you're surrounded by lots of open land but it's tied up in 10 year CRP
contracts. If my landlord is considering enrolling the land I rent into
CRP, that does not give me any certainty about the future and it's
going to deter me from implementing any conservation whether cost-share
or out of pocket on that land if I may not farm it next year.
Question 3. As of November 2016, there have been little over
340,000 acres enrolled in pollinator habitat since the program was
established in 2012. In your opinion, has this program and the
investments made my outside organizations made a meaningful difference
in increasing the population and health of the pollinator population
and are there any changes that you would like to see to make this
program more effective?
Answer.
Question Submitted by Hon. Ralph Lee Abraham, a Representative in
Congress from Louisiana
Question. Mr. Gertson, it's great to see such a young, and positive
rice farmer in here, I've got quite a few rice farmers in my own
District and it's promising to see you undeterred from farming after
the way the market's been. You say a lot of rice farmers rely on rented
land and that's a deterrent from forking over the money to implement
conservation practices, can you tell us a little bit more about how
NRCS incentivizes farmers to implement practices on rented land?
Response from Jeremy Peters, Chief Executive Officer, National
Association of Conservation Districts; on Behalf of Lee
McDaniel, Immediate Past President, National Association of
Conservation Districts
Question Submitted by Hon. Mike Bost, a Representative in Congress from
Illinois
Question. As of November 2016, there have been little over 340,000
acres enrolled in pollinator habitat since the program was established
in 2012. In your opinion, has this program and the investments made my
outside organizations made a meaningful difference in increasing the
population and health of the pollinator population and are there any
changes that you would like to see to make this program more effective?
Answer.
Response from David E. Nomsen, Vice President of Governmental Affairs,
Pheasants Forever, Inc.
Question Submitted by Hon. Mike Bost, a Representative in Congress from
Illinois
Question. As of November 2016, there have been little over 340,000
acres enrolled in pollinator habitat since the program was established
in 2012. In your opinion, has this program and the investments made my
outside organizations made a meaningful difference in increasing the
population and health of the pollinator population and are there any
changes that you would like to see to make this program more effective?
Answer. While the leadership demonstrated by USDA in creating and
delivering a pollinator habitat incentive is to be applauded, many of
the pollinator benefits and national goals are well short of
achievement. Two important national pollinator goals are striving to
lower annual honey bee hive losses to 15% and to increase the area
occupied by monarch butterfly on overwintering sites in Mexico to 6
hectares. National Hive losses remain at 40 to 50% and 2017 monarch
wintering area was estimated at 2.91 hectares. Much work remains to be
done.
The Conservation Reserve Program (CRP) and the suite of NRCS
Working Lands for Wildlife Programs offers perhaps the single greatest
opportunities to impact these national pollinator goals and subsequent
pollinator populations. Unfortunately, too often the habitats created
through these programs falls short of providing the high quality
pollinator habitat needed. Examples of improvements that would
significantly benefit pollinators and CRP program results include:
(1) Design seeding mixtures using more updated and appropriate
planting rates and design.
(2) Allow the use of a broader range of pollinator-friendly species
adapted to a geographic area.
(3) Increase the minimum requirements for pollinator plantings to 15
pollinator-friendly forb species and encourage the use of
highly diverse seeding mixtures.
(4) Implement seed establishment practices that allow a broader
range of establishment and management options.
(5) Adjustment to the current EBI to include pollinator value as a
criteria and placing those projects in the geography that
will most benefit pollinator species (honey bees, monarch
butterflies, etc.).
Recommendations regarding these and other opportunities to increase
and improve forage, CRP outcomes and habitat for pollinators through
USDA conservation programs have been submitted by a broad coalition of
conservation, commodity and agriculture groups through the Honey Bee
Health Coalition.
NRCS site with pollinator and monarch butterfly information:
https://www.nrcs.usda.gov/wps/portal/nrcs/detail/national/
plantsanimals/pollinate/?cid=nrcseprd402207.
Response from Hon. John F. Piotti, President, American Farmland Trust
Question Submitted by Hon. Mike Bost, a Representative in Congress from
Illinois
Question. As of November 2016, there have been little over 340,000
acres enrolled in pollinator habitat since the program was established
in 2012. In your opinion, has this program and the investments made my
outside organizations made a meaningful difference in increasing the
population and health of the pollinator population and are there any
changes that you would like to see to make this program more effective?
Answer. American Farmland Trust (AFT) has long been involved in
efforts to improve the health and increase the population of
pollinators through the use of integrated pest management (IPM) and
other conservation practices, and in efforts to incorporate more
pollinator habitat into farming operations. Wild bees and honeybees
provide a critical service to agriculture and to natural ecosystems by
ensuring pollination of crops and wild plants. Both types of bees
contributed to an estimated total of 11 percent of the agricultural
gross domestic product of the United States in 2009, equivalent to
$14.6 billion (Koh, et al., 2016).
Therefore, AFT applauds the efforts to enroll hundreds of thousands
of acres in pollinator habitat through the Conservation Reserve Program
(CRP) CP-42 Pollinator Habitat practice, although this particular
program has not historically been an area of involvement for AFT.
According to a recently published study, wild bee populations declined
across 23 percent of the United States between 2008 and 2013. The study
also identified 139 counties where low bee abundance corresponds to
large areas of pollinator-dependent crops, accounting for nearly 40
percent of the pollinator-dependent crop area in the country (Koh, et
al., 2016). Additional study would be necessary to determine whether
practices defined under CP 42 have had a broad-reaching impact in
changing these trends since 2013. However, promoting pollinator-
friendly practices in regions where native bee population declines have
been measured should be a priority.
Outside of CRP, there are several USDA programs that also offer the
opportunity to protect pollinators and their habitats. AFT is currently
involved in a Conservation Innovation Grant (CIG) in Michigan that is
piloting the use of Pollinator Habitat Credits on protected farms. This
innovative approach seeks to draw in corporations and businesses that
have established corporate sustainability programs and are searching
for projects in which to invest corporate sustainability funds, thereby
leveraging Federal funds with private funds. By focusing on developing
pollinator habitat on protected farmland, this project ensures that its
gains will not be under threat from development.
Reference
Koh, I., Lonsdorf, E.V., Williams, N.M., Brittain, C., Isaacs, R.,
Gibbs, J., & Ricketts, T. (2016). Modeling the status, trends, and
impacts of wild bee abundance in the United States. Proceedings of the
National Academy of Sciences, 113(1), 140-145.
THE NEXT FARM BILL
(INTERNATIONAL MARKET DEVELOPMENT)
----------
TUESDAY, FEBRUARY 28, 2017
House of Representatives,
Subcommittee on Livestock and Foreign Agriculture,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:25 p.m., in
Room 1300 of the Longworth House Office Building, Hon. David
Rouzer [Chairman of the Subcommittee] presiding.
Members present: Representatives Rouzer, DesJarlais, Kelly,
Marshall, Costa, and Evans.
Staff present: Bart Fischer, Caleb Crosswhite, Callie
McAdams, Darryl Blakey, Mollie Wilken, Stephanie Addison, Liz
Friedlander, Matthew MacKenzie, Mike Stranz, Troy Phillips, and
Carly Reedholm.
OPENING STATEMENT OF HON. DAVID ROUZER, A REPRESENTATIVE IN
CONGRESS FROM NORTH CAROLINA
The Chairman. This hearing of the Subcommittee on Livestock
and Foreign Agriculture entitled, The Next Farm Bill:
International Market Development, will come to order. Let me
apologize for our delay in getting started, but votes take
precedent around here, and we just arrived back from a series
of votes.
Before I go into my opening statement, I want to recognize
a new Member that I see here on the Republican side, Mr.
Marshall. Welcome to the Subcommittee. As you all know, Mr.
Marshall is a new Member from Kansas, and it is great to have
you here on the Subcommittee with us.
Well, thank you all for gathering here this afternoon as
the Committee continues its work to reauthorize the farm bill
in advance of its expiration next fall.
As was explained in this morning's Conservation and
Forestry Subcommittee hearing, the plan is for each
Subcommittee to hold at least two hearings exploring the farm
bill programs and issues under its respective jurisdiction.
This afternoon, we will focus on a slate of programs that,
unfortunately, do not get much attention until they become
targets for cuts during consideration of farm bills and various
appropriations measures. Those are the trade promotion and
market development programs administered by the USDA. A number
of you here, myself included, have been through a lot of those
fights.
The goal today is to change that narrative, by giving a
wide variety of organizations who receive funding from those
programs a platform to discuss the continued need for the
programs, and the innovative ways in which they use them to
establish and enhance markets for U.S. products overseas.
I also look forward to hearing from a distinguished
economist on today's panel about the economic benefits that the
two programs; MAP and FMD, in particular, generate within our
own borders.
Given the uncertainty of the future of our existing trade
agreements, and the blatant disregard of WTO commitments by a
handful of our global competitors, I see tremendous value in
these effective and proven methods of gaining new access for
U.S. goods abroad and developing those market relationships.
These programs truly embody an America first policy.
From improving customer trust in U.S. beef in South Korea,
to developing export markets for ice cream in China, to putting
our cotton exports on a more level playing field with our
global competitors, I am impressed with the overarching
benefits that market development funding brings to the U.S.
agricultural industry as a whole.
I look forward to learning more today about the success of
the USDA programs that provide such opportunities, but I am
certainly open to suggestions as to how to improve them, moving
forward.
Again, thank you all for being here.
[The prepared statement of Mr. Rouzer follows:]
Prepared Statement of Hon. David Rouzer, a Representative in Congress
from North Carolina
Good afternoon, and thank you all for gathering here this afternoon
as the Committee continues its work to reauthorize the farm bill in
advance of its expiration next fall.
As was explained in this morning's Conservation and Forestry
Subcommittee hearing, the plan is for each Subcommittee to hold at
least two hearings exploring the farm bill programs and issues under
its respective jurisdiction.
This afternoon, we will focus on a slate of programs that,
unfortunately, do not get much attention until they become targets for
cuts during consideration of farm bills and appropriations measures--
the trade promotion and market development programs administered by
USDA.
The goal today is to change that narrative, by giving a wide
variety of organizations who receive funding from those programs a
platform to discuss the continued need for the programs and the
innovative ways in which they use them to establish and enhance markets
for U.S. products overseas.
I also look forward to hearing from a distinguished economist on
today's panel about the economic benefits the two largest programs--MAP
and FMD--generate within our own borders.
Given the uncertainty of the future of our existing trade
agreements, and the blatant disregard of WTO commitments by a handful
of our global competitors, I see tremendous value in these effective
and proven methods of gaining new access for U.S. goods abroad and
developing those market relationships. In my opinion, these programs
truly embody an ``America first'' policy.
From improving customer trust in U.S. beef in Korea, to developing
export markets for ice cream in China, to putting our cotton exports on
a more level playing field with our global competitors, I am impressed
with the overarching benefits that market development funding brings to
the U.S. agricultural industry as a whole.
I look forward to learning more today about the success of the USDA
programs that provide such opportunities, but I am certainly open to
suggestions as to how to improve them moving forward.
Again, thank you all for being here, and with that, I yield to the
Ranking Member for his opening remarks.
The Chairman. I yield to the Ranking Member, Mr. Costa, for
his opening remarks.
OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
CONGRESS FROM CALIFORNIA
Mr. Costa. Thank you very much, Mr. Chairman. And I want to
thank the Members of the Subcommittee and our panel in advance.
This hearing of the Livestock and Foreign Agriculture
Subcommittee, entitled, The Next Farm Bill: International
Market Development, is critical for so many reasons, and I will
explain in my comments. But the fact of the matter, in my most
sincere view, is that too often American agriculture gets taken
for granted because we do it so well. With 2\1/2\ percent of
our nation's population directly involved in the production and
the processing of the food and fiber that is grown in America,
we have allowed the rest of our population to pursue other
goals in their life. And American farmers, ranchers, and dairy
people are among the best producers in the world; the finest
quality, the highest yields, the safest food that is grown
anywhere. And we do it so well that we are able to not only
feed our entire country, but large parts of the world.
This context for the Subcommittee, Mr. Chairman, and as we
begin setting the table for the next farm bill that we will all
be actively engaged in, it is important that we not take this
for granted; that we recognize it as a food security issue as
we formulate the policies, and we recognize trade is an
important part of that component. We can't consume all the
products we produce. And so, unfortunately, trade in the last
year or so, on both sides, has become a bit of a political
football, some might say a pariah. It is important for the
agriculture community to stand strong in its support for
international market development, global trade, and the
programs that we are going to talk about here today.
I was proud to be one of the 28 Democrats in the House who
voted for Trade Promotion Authority. I received a lot of grief
for it. That is fine, because this Administration, like the
last Administration, needs strong negotiating directions and
parameters that they must be able to work with. The farm bill
authorizes a few international market development programs we
will talk about this afternoon for America's farmers, ranchers,
dairy producers, and their products abroad. The Market Access
Program, the Foreign Market Development Program, and the
Technical Assistance for Specialty Crops Program all provide
vital funding for their roles in America's agricultural
industry.
It makes it easier for American farmers and ranchers and
dairy producers to market their products in foreign markets
where it is not always a level playing field, as we know. And,
of course, everybody seeks, wherever I go around the world,
American products. They really like California products, and I
market them all equally.
I disagree though with the new Administration's
shortsighted approach to trade. Its withdrawal from the Trans-
Pacific Partnership is going to be looked upon in the next
several years as something we need to recognize that China is
going to enter into that market, and I hope that we are not the
losers as a result of that choice.
These programs play a critical role, not only in TPP, but
T-TIP and other negotiations. Let me give you some examples. In
my home State of California, agricultural export values were
$20 billion for a third consecutive year; 2015 it was $20.6
billion. Furthermore, California's share of the total U.S.
agricultural exports was 15.6 percent. My family and other
families have been doing this for two, three, four generations.
Whether you believe it or not, the fact is, nobody does it
better. Nobody does it better than American agriculture, and
that is the bottom line.
In closing, I believe Ambassador Froman said it best. The
question about trade agreements, and let's be clear about this,
we can be critical and that is fine, and I get the politics,
but a trade agreement only works when you have cooperation on
both sides. It has to be a win-win. If it is a win-lose, the
other country is not going to agree. Why would they? Why should
they? So as Ambassador Froman said, ``The question is not
whether we roll back the tide of globalization, but it is
whether or not we are going to shape it or be shaped by it.
Whether we are going to do everything we can to ensure that it
reflects our values, or let others define the values.'' We face
a choice: raise the bar or stay on the sidelines as other
countries write the rules of the game. That is my view. The
United States must lead, not be led. These programs that we
will talk about this afternoon provide American agriculture and
the 2.2 million farmers in the country with markets, access to
customers all over the world who enjoy the fruits of these
agriculturalists' labor. And it is not always a level playing
field, and that is why these programs are so important.
The funding ought to be maintained, and in some areas
increased, and we will talk about that during the farm bill
process.
Finally, Mr. Chairman, you have been very kind with the
time, and I would be remiss if I didn't make one other comment.
All of us around here benefit from the wonderful people who we
work with; our staff. We get a chance to ask the tough
questions, and have the interaction and solve problems for our
constituents, but if it wasn't for our staff we would be in a
world of hurt, at least I would. And one, Mr. Donald Grady, has
worked for over 5 years on my staff, and has done a terrific
job on two farm bills, and I guess it was because he looked at
a third farm bill that he was taking that admonition by, Mr.
Greeley or someone who said, ``Go West, young man, go West,''
and this Georgian wants to move to California. I don't
understand why. But I want to thank you, Donald Grady, on
behalf of our entire staff and our entire team for the work you
have done for myself and for the Agriculture Committee. Thank
you very much.
The Chairman. 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 recognize our witnesses at the table, and
let me introduce them very briefly.
Dr. Gary Williams is Professor of Agricultural Economics
and Co-Director of the Food, Agribusiness, and Consumer
Economic Research Center at Texas A&M University. The Honorable
Joseph Steinkamp, Director of the American Soybean Association,
and here on behalf of the Coalition to Promote U.S.
Agricultural Exports and the Agribusiness Coalition for Foreign
Market Development. Mr. Tim Hamilton, Executive Director of the
Food Export--Midwest and Food Export--Northeast, Chicago,
Illinois. Mr. Philip Seng, President and CEO, U.S. Meat Export
Federation in Denver, Colorado. And Mr. Dean Alanko, Vice
President of Sales and Marketing, Allegheny Wood Products,
Petersburg, West Virginia, here on behalf of the Hardwood
Federation.
And now I would like to recognize Mr. Costa to introduce
the witness from California.
Mr. Costa. Well, thank you again, Mr. Chairman.
We have a distinguished panel here, and we are looking
forward to their testimony. One of those individuals is a
gentleman who I have known for many years. He is a leader in
American agriculture and he is the Chair and President of the
California State Farm Bureau, my dear friend, Mr. Paul Wenger.
He and his family have farmed in the great San Joaquin Valley
for generations. He is serving his fourth term as the
California Farm Bureau President; the largest state Farm
Bureau, I believe, in the nation, and he has served in that
capacity with distinction. We have a lot of diversity in
California, and sometimes Paul's job is like herding squirrels,
but he brings a great deal of knowledge and expertise as a
third generation almond and walnut farmer in the great
California Central Valley, and we thank you, Paul, for being
here.
The Chairman. Dr. Williams, please begin when you are
ready.
STATEMENT OF GARY W. WILLIAMS, Ph.D., PROFESSOR OF
AGRICULTURAL ECONOMICS AND CO-DIRECTOR,
AGRIBUSINESS, FOOD, AND CONSUMER ECONOMICS
RESEARCH CENTER, DEPARTMENT OF AGRICULTURAL
ECONOMICS, TEXAS A&M UNIVERSITY, COLLEGE STATION, TX
Dr. Williams. Well, Chairman Rouzer, Ranking Member Costa,
Members of the Subcommittee, thank you for the opportunity to
be here today to testify to you as you consider the next farm
bill and international market development programs.
Recently, we have all heard a great deal about the
difficulties and uncertainties currently facing U.S.
agriculture, policies that haven't worked as planned and new
policies to consider. I am pleased to be here today to talk
briefly about the USDA export market development programs
which, according to recent research by my colleagues and I at
Texas A&M University, Oregon State University, Cornell
University, and Informa Economics, have worked consistently and
effectively for over 50 years to bolster the profitability of
not only production agriculture, but the broader U.S. economy
as well.
Total annual spending of the two primary USDA export market
development programs; the Market Access Program, or MAP, and
the Foreign Market Development Program, or FMD, has risen
sharply in recent years, but only because of the growing
contributions from the private-sector which now account for
over 70 percent of the total. The growth in contributions from
industry demonstrates there is strong recognition of the
effectiveness of the MAP and FMD programs in opening,
expanding, and maintaining export markets.
In the recent study I mentioned, my colleagues and I
subjected the USDA export market development programs to a
rigorous economic analysis. Our research team devised a
completely different and highly rigorous methodology to test
whether the USDA export promotion programs were as effective in
promoting U.S. agricultural exports, and as impactful on the
U.S. economy as reported by previous studies. Frankly, I was
skeptical of those studies, but then surprised by our own study
results. We found that the programs, indeed, have been highly
effective in boosting U.S. agricultural exports and export
revenues. The study found that over their history, these
programs have added an annual average of 15 percent to the
value of U.S. agricultural exports, eight percent to the volume
of U.S. agricultural exports, and nearly seven percent to the
price of U.S. agricultural exports.
The study also concluded that over their history, the
programs have generated a return of $28.30 in additional export
revenue for every dollar invested in the programs. We also
found that the programs have contributed importantly to the
profitability of the U.S. farm sector, benefitted the entire
U.S. economy, and created employment up to nearly 240,000 full-
and part-time jobs across the entire economy.
And after we finished with that study, our team was asked
to simulate two alternative scenarios of increased funding for
MAP and FMD programs. In the first scenario, we doubled the MAP
and FMD funding in each year by $46.9 million, to a total of
$469 million over 5 years, with essentially no increase in
cooperator contributions. In the second scenario, we again
doubled MAP and FMD funding over 5 years, as in the first
scenario, but this time we increased cooperative contributions
by 50 percent, with increases of $46.9 million each year, to a
total of $703.6 million by the end of the 5 year period.
Under both scenarios, we found that the additional
investments would generate high returns in additional
agricultural export revenue, about $18 of returns per
additional dollar invested under the first scenario, and $16 in
the second scenario. Export gains would also be substantial
under both scenarios; a total of $17 billion of additional
exports under the first scenario, and $22.5 billion of
additional exports in the second. Now, what this means is that
an increase in investment in these two programs would pay for
itself many times over. Gains across the farm economy would be
equally as substantial under both scenarios.
Importantly, the analysis demonstrated convincingly that
the positive impacts of the programs on the farm sector would
generate multiplier effects across the entire economy. For
example, we found that U.S. output, or sales, would increase by
a total of up to $53 billion in the first scenario, and $70
billion in the second. U.S. GDP would be higher by a total of
up to $23 billion under the first scenario, and $30 billion
under the second. U.S. employment would increase by up to
64,000 new jobs under that first scenario, nearly 85,000 jobs
under the second scenario.
Now, in conclusion, our analysis demonstrated clearly that
the investment in the FMD and MAP programs has been, and
continues to be, a highly successful and cost-effective means
of strengthening the profitability and maintaining the
viability of the U.S. farm economy. In addition, the programs
are clearly pro-growth for the entire U.S. economy.
I would be hard-pressed to name any other U.S. farm program
that has been as consistently effective over such a long period
of time in working to support our farm sector, while supporting
the growth of the entire U.S. economy, and at the same time
generating a high return on the investment of farmer and
taxpayer funds.
Thank you, Mr. Chairman. I would be glad to try to answer
any questions.
[The prepared statement of Dr. Williams follows:]
Prepared Statement of Gary W. Williams, Ph.D., Professor of
Agricultural Economics and Co-Director, Agribusiness, Food, and
Consumer Economics Research Center, Department of Agricultural
Economics, Texas A&M
University, College Station, TX
Chairman Rouzer, Ranking Member Costa, and Members of the
Subcommittee, thank you for the opportunity to testify today as you
focus on the next farm bill and international market development
programs. I am professor of Agricultural Economics and Co-Director of
the Food, Agribusiness and Consumer Economics Research Center at Texas
A&M University. Recently, we have all heard a great deal about the
difficulties and uncertainties currently facing U.S. agriculture,
policies that have not worked as planned, and new policies that need to
be considered. I am pleased to be here today to talk briefly about the
USDA Export Market Development Programs which have worked consistently
and effectively over fifty years to bolster the profitability and
viability of not only production agriculture but the broader U.S.
economy as well, according to recent research by several of my
colleagues at Texas A&M University, Oregon State University, Cornell
University, Informa Economics and I (``Economic Impact of USDA Market
Development Programs,'' available on-line at: https://www.fas.usda.gov/
sites/default/files/2016-10/2016econimpactsstudy.pdf).
The primary components of USDA Export Promotion Programs are the
Market Access Program (MAP) and the Foreign Market Development program
(FMD). These two programs are public-private partnerships between USDA
and nonprofit U.S. agricultural trade associations, farmer
cooperatives, nonprofit state-regional trade groups and small
businesses to conduct overseas marketing and promotional activities.
The Foreign Agricultural Service (FAS) administers these programs
within the USDA.
The total annual spending under the USDA Export Market Development
Programs has risen sharply in recent years but not because of growing
government spending on these programs. Rather, contributions from the
private-sector, the program cooperators, have continued to rise from
about 50% of the total spending in the late 1990s to currently over 70%
(Figure 1). In terms of the cost share of the funds for export market
promotion, the private-sector contributed a record average of 240%
percent in 2014. The growth in industry contributions demonstrates the
strong industry recognition of the effectiveness of the MAP and FMD
programs in opening, expanding, and maintaining export markets.
In a recent study, my colleagues and I subjected the USDA Export
Market Development Programs to a rigorous economic analysis to answer
three critical questions. First, have the USDA Export Market
Development Programs achieved their avowed objective of increasing the
foreign demand for U.S. agricultural products and, as a result,
supported the U.S. agricultural sector? Second, has any increase
achieved in exports been sufficient to contribute more to the
profitability of the agricultural sector than the cost of the programs?
Third, have the programs contributed to the growth of the overall U.S.
economy?
Two previous studies concluded that the USDA Export Market
Development Programs have been highly effective in promoting exports
with substantial benefits to the U.S. economy. I must say that I was
skeptical of those results. So our research team devised a completely
different and highly rigorous methodology to test whether those export
promotion programs were as effective in promoting U.S. agricultural
exports and as impactful on the U.S. economy as the previous studies
purported.
I was personally surprised by the results of our study. In answer
to the first two critical questions we posed at the beginning of our
research, the study concluded that:
USDA Export Market Development Programs have been highly
effective in boosting U.S. agricultural exports and export
revenues.
The study found that over their history (1977-2014), USDA Export
Market Development Programs have added an annual average of
15.3% ($8.15 billion) to the value of U.S. agricultural
exports, 8.0% (11.5 million mt) to the volume of aggregate U.S.
agricultural exports, and about 6.7% ($25.07/mt) to the
aggregate price of U.S. agricultural exports.
USDA Export Market Development Programs generated a high
benefit-to-cost ratio (BCRs) over history in line with what
previous studies have found.
We calculated the undiscounted net export revenue BCR of the USDA
Export Market Development Programs (including both USDA
expenditures and cooperator contributions) to be 28.3. In other
words, over their history, the programs have generated a net
return of $28.30 in additional export revenue for every dollar
invested in export promotion
In answer to the third critical question, the study concluded that
the USDA Export Market Development Programs:
Contribute substantially to the profitability of the U.S.
farm economy.
The study concluded that the USDA export promotion programs
boosted annual average farm cash receipts by up to $8.7 billion
(2.8%), net farm income by up to $2.1 billion (3.7%), farm
asset value by up to $1.1 billion (0.1%), and employment in the
agrifood sector by up to 93,900 jobs (2.4%).
Benefit the entire U.S. economy.
The study also concluded that the positive impact of the USDA
Export Market Development Program on the agricultural sector
has generated multiplier effects across the entire economy like
the ripples you make in water after an initial splash. The
results show that on average over the 2002-2014 period, the
programs have added up to $39.3 billion in economic output, up
to $16.9 billion in GDP, and up to $9.8 billion in labor income
to the U.S. economy.
Create jobs.
Finally, the study also concluded that the USDA Export Market
Development Programs have added up to an annual average of
239,800 full and part-time jobs across the entire economy,
reducing unemployment by up to 3%.
After concluding that study, my colleagues and I were asked to use
the models and analytical procedures we developed to provide guidance
on the impacts of alternative increased funding scenarios for USDA's
Foreign Market Development Program (FMD) and Market Access Program
(MAP) and industry export market promotion contributions on export
revenues, the farm economy, and the overall macro economy. Two future
funding scenarios were simulated with our models:
Scenario 1: Government expenditures for MAP and FMD were
doubled over 5 years through annual increments of $46.9 million
to a total of $469 million (double the base year) with
cooperator contributions increasing approximately 10% in the
first year to $515.6 million and then remaining flat at that
level for the following 4 years.
Scenario 2: Government expenditures for MAP and FMD were
again doubled over 5 years as in the first scenario but
cooperator contributions were increased by 50% over that period
through annual increases of $46.9 million for a total of $703.6
million by the end of the 5 year period.
The analysis of these two future funding scenarios use the base
starting point for MAP and FMD combined funding of $234.5 million and
cooperator contributions of $468.7 million. The 50% increase in
cooperator contributions in the second scenario is reasonable based on
interviews that we conducted with MAP and FMD participants in the
original study. All of those we interviewed indicated that they would
expand their market promotion activities if funding for FMD and MAP
programs was increased because of the effectiveness of their current
activities. Some also responded that they would expand their market
promotion offices overseas in that case.
The analysis concluded that the additional investments under both
scenarios would generate high benefit-cost ratios (BCRs) of $18.2 for
every additional dollar invested in export market development under
Scenario 1 and $16 for every additional dollar invested under Scenario
2. In addition, as illustrated in Figure 2 and shown in Tables 1 and 2,
the future funding analysis concluded that:
Export gains would be substantial under both scenarios.
The value of U.S. agricultural exports would increase by an
annual average of $3.4 billion and $4.5 billion under Scenarios
1 and 2, respectively (Figure 2). That would add up to an
export value gain of $17.1 billion and $22.5 billion,
respectively, under the two scenarios over the entire 5 year
period.
Gains to the farm economy would be equally substantial under
both scenarios.
Farm cash receipts would increase by an annual average
of up to $2.2 billion under Scenario 1 and up to $2.9
billion under Scenario 2. Over the entire 5 year period,
the farm cash receipt gain would be up to $11.1 billion
under Scenario 1 and $14.6 billion under Scenario 2.
Net cash farm income would increase by an annual
average of up to $0.5 billion and $0.7 billion,
respectively under the two scenarios for a 5 year gain of
up to $2.7 billion and $3.5 billion under Scenarios 1 and
2, respectively.
Farm asset values would increase by an annual average
of up to $0.29 billion and $0.4 billion and up to $1.5
billion (less) and $1.9 billion over the entire 5 year
period.
Up to 24,200 new jobs would be added in the agrifood
sector under [S]cenario 1 and up to 31,900 new jobs under
Scenario 2.
The overall U.S. economy would experience a substantial
multiplier effect from the farm economy boost under both
scenarios.
U.S. output (sales) would increase by an average
annual of up to $10.6 billion and $14.0 billion under the
Scenarios 1 and 2, respectively and by a total of up to
$53.1 billion and $70.0 billion over the entire 5 year
period of analysis.
U.S. GDP would be higher by up to $4.5 billion and
$6.0 billion each year on average under Scenarios 1 and 2
for a total of up to $22.7 billion and $30.0 billion,
respectively, over the entire 5 year period under the two
scenarios.
U.S. labor income would be higher by up to $2.6
billion and $3.5 billion on average each year under
Scenarios 1 and 2 and by up to $13.1 billion and $17.5
billion over the entire 5 year period.
U.S. employment would increase by up to 64,000 new
jobs under Scenario 1 and up to 84,600 new jobs under
Scenario 2.
In conclusion, our critical analysis of the USDA Export Market
Development Programs demonstrated clearly that the public-private
partnership to promote U.S. agricultural exports under the FMD and MAP
programs has been and continues to be a highly successful and cost-
effective means of strengthening the profitability and maintaining the
viability of the U.S. farm economy. In addition, the USDA Export Market
Development Programs are clearly pro-growth for the entire U.S.
economy. The benefits of export promotion to the farm economy multiply
through the economy adding importantly to our national output, GDP,
labor income, and level of employment. An incremental increase of $46.5
million annually over the next 5 years to these historically successful
programs along with an expected 50% increase in contributions to the
program by private-sector cooperators would return $16 dollars in
additional export revenue for every dollar invested and generate up to
an additional $3.5 billion in net cash farm income, $30 billion in
additional U.S. GDP, and up to 84,600 new jobs. I would be hard-pressed
to name any other U.S. farm program that has been as consistently
effective over such a long period of time in working to support our
farm economy while supporting the growth of the entire U.S. economy and
at the same time generating a high return on the investment of farmer
and taxpayer funds.
Thank you, Mr. Chairman. I would be glad to try and answer any
questions.
Figure 1: USDA Export Market Development Programs Funding,\1\ 1977-2014
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: FAS/USDA.
---------------------------------------------------------------------------
\1\Includes government expenditures on market promotion through the
FMD and MAP Programs and industry contributions. All data converted to
a calendar year basis.
---------------------------------------------------------------------------
Figure 2: Simulated Annual Changes in U.S. Export Revenue Achieved
Under Agricultural Export Funding Scenarios 1 and 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
*10% increase in first year over baseline and then flat for
next 4 years.
Table 1: General Economy Impacts of the Funding Scenario 1 Relative to the Baseline Funding Scenario, Years 1-5
----------------------------------------------------------------------------------------------------------------
Less than Full Employment Full Employment
Variable Flat Funding ----------------------------------------------------------------------
Base Valuea Change Percent Change Change Percent Change
----------------------------------------------------------------------------------------------------------------
Agriculture Sector $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
Farm cash receipts 321.2 2.2 0.7 1.8 0.6
Net cash farm income 63.9 0.5 0.8 0.5 0.9
Farm assets 2,161.4 0.29 0.01 0.19 0.01
1,000 jobs 1,000 jobs 1,000 jobs
Employment in agrifood 3,900.4 24.2 0.6 17.2 0.4
sectorb
----------------------------------------------------------------------------------------------------------------
U.S. Economy $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
U.S. Output (Gross 25,070.0 10.6 0.04 1.3 0.005
Sales)
U.S. GDP 14,522.5 4.5 0.03 0.8 0.006
U.S. Labor Income9,017.0 2.6 0.03 0.3 0.004
1,000 jobs 1,000 jobs c1,000 jobs
U.S. Employment 173,414 64.0 0.04 -- --
----------------------------------------------------------------------------------------------------------------
Note: -- = Not available as an output from this analysis.
aThe base value is for the year 2010. The ``base value'' is the average annual level of a variable in the
absence of the promotion program. Some variables such as U.S. economic welfare and labor wage do not have a
base value because the models only calculate the change in those variables and not a base value.
bThe base employment value is measured as actual 2010 jobs as reported in IMPLAN. In the full employment
analysis, total U.S. employment is held fixed but labor is mobile across sectors of the economy.
cThe assumption of full employment by definition means that all labor is fully employed so that any change in
the economy cannot impact the level of employment.
Table 2: General Economy Impacts of the Increased Funding Scenario 2 Relative to the Baseline Funding Scenario,
Years 1-5
----------------------------------------------------------------------------------------------------------------
Less than Full Employment Full Employment
Variable Flat Funding ----------------------------------------------------------------------
Base Valuea Change Percent Change Change Percent Change
----------------------------------------------------------------------------------------------------------------
Agriculture Sector $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
Farm cash receipts 321.2 2.9 0.9 2.3 0.7
Net cash farm income 63.9 0.7 1.1 0.7 1.1
Farm assets 2,161.4 0.4 0.02 0.3 0.01
1,000 jobs 1,000 jobs 1,000 jobs
Employment in agrifood 3,900.4 31.9 0.8 22.7 0.6
sectorb
----------------------------------------------------------------------------------------------------------------
U.S. Economy $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
U.S. Output (Gross 25,070.0 14.0 0.06 1.7 0.007
Sales)
U.S. GDP 14,522.5 6.0 0.04 1.1 0.007
U.S. Labor Income9,017.0 3.5 0.04 0.4 0.005
1,000 jobs 1,000 jobs c1,000 jobs
U.S. Employment 173,414 84.6 0.05 -- --
----------------------------------------------------------------------------------------------------------------
Note: -- = Not available as an output from this analysis.
aThe base value is for the year 2010. The ``base value'' is the average annual level of a variable in the
absence of the promotion program. Some variables such as U.S. economic welfare and labor wage do not have a
base value because the models only calculate the change in those variables and not a base value.
bThe base employment value is measured as actual 2010 jobs as reported in IMPLAN. In the full employment
analysis, total U.S. employment is held fixed but labor is mobile across sectors of the economy.
cThe assumption of full employment by definition means that all labor is fully employed so that any change in
the economy cannot impact the level of employment.
The Chairman. Thank you, Dr. Williams. That was impressive
testimony, but even more impressive that you fit it in within 5
minutes.
Dr. Williams. I practiced it.
The Chairman. Mr. Steinkamp.
STATEMENT OF HON. JOSEPH E. STEINKAMP, MEMBER, BOARD OF
DIRECTORS, AMERICAN SOYBEAN ASSOCIATION, EVANSVILLE, IN; ON
BEHALF OF COALITION TO PROMOTE U.S. AGRICULTURAL EXPORTS,
AGRIBUSINESS COALITION FOR FOREIGN MARKET DEVELOPMENT
Mr. Steinkamp. Good afternoon, Chairman Rouzer, Ranking
Member Costa, and Members of the Subcommittee.
I am Joe Steinkamp, a soybean farmer from Indiana, and
member of the Board of Directors of the American Soybean
Association. ASA is a trade association that represents U.S.
soybean farmers on policy and international issues. I am
testifying today on behalf of the Coalition to Promote U.S.
Agricultural Exports and the Agribusiness Coalition for Foreign
Market Development. These coalitions comprise over 75
organizations representing farmers, ranchers, fishermen, forest
product producers, cooperatives, small businesses, regional
trade organizations, and State Departments of Agriculture.
We commend you for holding this hearing to review the
effectiveness of export promotion programs, and expanding
exports for U.S. agricultural products.
Agricultural export market development depends on
longstanding, successful partnerships between not-for-profit
U.S. agricultural trade organizations, farmer cooperatives, and
not-for-profit state-regional trade groups, small businesses,
and with the use of the Foreign Agricultural Service of the
USDA. These partnerships share the cost of overseas marketing,
promotional activity such as market research, trade shows,
trade servicing, and retail and education programs.
Under the Market Access Program and the Foreign Market
Development Program, our private-sector groups contribute an
estimated $469 million annually for international market
development. These contributions, which are leveraged by FAS
funding of $234.5 million, represent \2/3\ of the combined
buying power of the two programs. My written statement provides
numerous examples of how the export promotion efforts under MAP
and FMD have contributed to the phenomenal growth of exports of
soybeans and soy products. Last year we exported a record $28
billion in soybeans, soybean oil, and soybean meal,
representing an outstanding 62 percent of all soybean
production.
Similar success stories can be cited from how MAP and FMD
have been cost-effective in helping U.S. exports of other
agricultural commodities, including corn, wheat, rice, cotton,
livestock, meat products, dairy, forest products, peanuts,
seafood, and a host of horticultural products. Agricultural
exports are one of the brightest lights in the U.S. economy,
with a strong multiplier effect that is especially pronounced
in rural communities. According to the USDA Economic Research
Service, $150 billion in U.S. agricultural exports that
occurred in 2014 produced $190 billion in economic activity,
for a total of $340 billion of economic output. Those
agricultural exports supported 1.1 million full-time U.S.
civilian jobs, and importantly, 800,000 non-farm sector that
were required to assemble and process, distribute the
agricultural products for export. That represents 7,550 jobs
for every $1 billion of agricultural export revenue.
Despite the growth in U.S. agricultural exports, the
effective level of Federal funding that reaches agricultural
cooperators carrying out market development has steadily
eroded. Since the 2002 Farm Bill, inflation and depreciation of
the U.S. dollar have reduced the promotional part of MAP and
FMD by almost 30 percent. USDA administrative expenses for
Fiscal Year 2016 further reduced available MAP and FMD funds by
$6.6 million. In addition, sequestration in Fiscal Year 2016
reduced MAP funding by $13.6 million and FMD funding by $2.4
million. The result is fewer dollars of actual programs, even
while the benefits that these programs provide keep increasing.
In order to bolster the U.S. international market
development efforts, boost U.S. agricultural exports, and help
U.S. agriculture and related businesses in rural America
prosper, the Coalition to promote U.S. Agricultural Exports and
the Agribusiness Coalition for Foreign Market Development
strongly urge Congress to increase the funding of the Market
Access Program to $400 million, and the Foreign Market
Development Program to $69 million, with the increases phased-
in, in the next farm bill.
Agricultural exports, for years, have been the strongest
positive contributor to our nation's trade balance. I think
that is worth repeating. Agricultural exports have been the
strongest positive contributor to our nation's trade balance.
Increasing exports is a significant tool to improve lives for
American farmers and ranchers, while creating jobs and
expanding the farm economy, and the larger economy as a whole,
increasing revenues to the Treasury.
Finally, the FMD and MAP programs have been critically
important to that success. ASA, along with the MAP and FMD
Coalitions, hope this hearing will strengthen our support in
Congress to not only maintain, but to increase funding for
agricultural export programs as well as support for the Foreign
Agricultural Service of the USDA.
Again, I would like to open myself up and say I would be
glad to answer any questions the Committee may have.
[The prepared statement of Mr. Steinkamp follows:]
Prepared Statement of Hon. Joseph E. Steinkamp, Member, Board of
Directors, American Soybean Association, Evansville, IN; on Behalf of
Coalition to Promote U.S. Agricultural Exports, Agribusiness Coalition
for Foreign Market Development
Opening Remarks
Good morning, Chairman Rouzer, Ranking Member Costa, and Members of
the Subcommittee. My name is Joe Steinkamp, I am a soybean farmer from
Evansville, Indiana. Since 2013 I have served as a Director for the
American Soybean Association (ASA). Thank you for inviting me to
testify before the Subcommittee today on the importance of export
promotion programs including the Market Access Program (MAP) and the
Foreign Market Development Program (FMD). My testimony today is on
behalf of both the American Soybean Association as well as the
Coalition to Promote U.S. Agricultural Exports (MAP coalition) and the
Agribusiness Coalition for Foreign Market Development (FMD coalition).
ASA is the national, not-for-profit organization that represents
U.S. soybean farmers on policy and international issues. The MAP and
FMD coalitions embody over 75 organizations representing farmers and
ranchers, fishermen and forest product producers, cooperatives, small
businesses, regional trade organizations and the state Departments of
Agriculture. We appreciate the opportunity to appear before you today,
and commend you for holding this hearing to review export promotion
programs and their effectiveness in expanding exports of U.S.
agricultural products.
Importance of MAP/FMD
In order to bolster U.S. international market development efforts,
further boost U.S. agricultural exports, and help U.S. agriculture and
related businesses in rural America prosper, the Coalition to Promote
U.S. Agricultural Exports and the Agribusiness Coalition for Foreign
Market Development strongly believe that Market Access Program (MAP)
funding should be increased to $400 million annually and Foreign Market
Development (FMD) program funding to $69 million annually, with the
increases phased in as part of the next farm bill.
Agricultural exports are one of the brightest lights in the U.S.
economy, with a strong multiplier effect that is especially pronounced
in rural communities. According to USDA's Economic Research Service
(ERS):
The $150 billion in U.S. agricultural exports that occurred
in 2014 produced an additional $190 billion in economic
activity for a total of $340 billion of economic output;
Those agricultural exports supported 1.1 million full time
U.S. civilian jobs, including 800,000 in the non-farm sector
(73 percent of the total employment effect) required to
assemble, process and distribute agricultural products for
export; [and]
This represents 7,550 jobs for every $1 billion of
agricultural export revenue.
Agricultural export market development depends on long-standing,
successful partnerships between nonprofit U.S. agricultural trade
associations, farmer cooperatives, nonprofit state-regional trade
groups, small businesses, and USDA to share the costs of overseas
marketing and promotional activities such as market research, trade
shows, trade servicing, and retail and educational promotions.
Under the MAP and the FMD program, administered by USDA's Foreign
Agricultural Service (FAS), these private-sector groups contribute an
estimated $468.7 million annually, primarily from farmer-funded check-
off programs, into international market development and promotion. In
fact, these ``industry'' contributions, which are leveraged by public
funds, represent more than 70 percent of the buying power of the
programs.
Nowhere is the importance of export promotion more evident than in
the U.S. soybean industry. Soybeans and soybean products are our
country's number one export commodity. Last year, we exported a
whopping $28 billion in soybeans, soybean oil and soybean meal. This
amount represents \1/5\ of all U.S. agricultural exports and over 62
percent of U.S. soybean production.
A 2016 study commissioned by the U.S. Soybean Export Council showed
that international marketing activities conducted on behalf of U.S.
soybean growers increased soybean exports each year by an average of
993,600 metric tons (MT), or nearly five percent. For soybean meal and
soybean oil, the average annual growth over that period was estimated
to be somewhat larger at 15 percent (808,600 MT) and 24 percent
(149,600 MT), respectively.
This translates to $29.6 of additional export revenue per dollar
spent on international promotion. At the producer level, that
additional export revenue translates into a cost benefit ratio of $10.1
in additional profit to grower per dollar spent on international
promotion.
This impressive export growth could not have been achieved without
the unique government-industry partnership that characterizes the
market development and export promotion programs administered by the
Foreign Agricultural Service (FAS) and carried out by organizations
representing U.S. farmers and ranchers. By any measure, the Foreign
Market Development ``Cooperator'' Program and the Market Access Program
have been tremendously successful and extremely cost-effective in
helping expand U.S. exports of soybeans and other agricultural
commodities such as corn, wheat, rice, cotton, livestock and meat
products, dairy, forest products, peanuts, seafood, and a host of
horticultural products. I have been asked by the Subcommittee to
concentrate my testimony on the Foreign Market Development Cooperator
Program and its role in expanding U.S. agricultural exports.
The Foreign Market Development (Cooperator) Program
The Foreign Market Development (FMD) Program is a public-private
partnership program dedicated to long-term market development of
foreign markets for U.S. agricultural exports.
Under the FMD program, U.S. Government funding is leveraged with
contributions by U.S. farmers, ranchers, and agri-industry to carry out
targeted market development activities. Activities implemented under
the FMD program are most often focused on opening and maintaining
foreign markets, while working on long-term changes to key constraints
affecting a market to allow for increased U.S. exports. FMD allows U.S.
market development organizations that represent U.S. farmers and
ranchers (referred to as ``Cooperators'' due to the cooperative
private-public partnership they have with FAS) to establish an on-
ground country or regional presence, identify new markets and address
long-term foreign import constraints and export growth opportunities.
The FMD Program provides cost-share assistance to allow market
development cooperators to:
1. Conduct market research. This includes: investigating the volume
of in-country product to meet demand in a market; the
suitability/viability of in-country product; the
compatibility of U.S. product; variables to market success;
importance of exports from other competing countries;
history of product domestically/internationally;
competitiveness of U.S. product; infrastructure
capabilities to import U.S. products; and access to
importers/processors/retailers.
2. Carry out market analysis. This includes: determining the size of
a current market; potential size of the market in the
future if structural changes were made to allow for an
improved market environment; the opportunity for U.S.
exports and likely U.S. share; impediments to trade;
political situation, demographics, and economic stability
of the market; long-term viability of in-country demand;
and government accessibility and regulatory environment for
market access.
3. Implement long-term market development activities following up on
favorable market research and analysis. Implementation of
market development activities constitutes the bulk of
funding and activities under the FMD program. Market
development activities include: supporting the long-term
presence of people and office facilities in key markets to
develop sound and expanding trade relationships; providing
technical assistance to buyers and users of the product;
capacity building and education through seminars and one-
on-one work that ensure market growth for participating
commodities and products; facilitating trade teams to U.S.
to see U.S. production standards and supply infrastructure;
facilitating U.S. farmer, rancher, and industry visits to
current and prospective markets to develop import networks
and product specifications to meet local market needs.
Under the FMD program, private-sector Cooperators such as ASA, U.S.
Wheat Associates, U.S. Grains Council, USA Rice Federation, Cotton
Council International, National Peanut Council and others work with
U.S. producers, exporters, and others in the industry to develop
strategic marketing plans detailing market characteristics, constraints
limiting U.S. exports, and proposed activities to overcome those
constraints. These detailed marketing plans are submitted to FAS as a
``Unified Export Strategy'' for the U.S. commodity in question. FAS
reviews all submitted Unified Export Strategies and makes FMD funding
allocations based on criteria included in FMD program regulations that
include cost-share contributions by U.S. industry, capabilities and
experience of the Cooperator in successfully developing markets and
increasing U.S. exports, importance of the commodity in overall U.S.
agricultural trade, and anticipated increases in U.S. exports resulting
from the FMD funding.
Examples of How ASA Has Utilized FMD Program Cost-Share Funding To
Develop Foreign Markets for U.S. Soybeans and Products
ASA became the first USDA-funded Cooperator under the FMD program
in 1956, when we opened a foreign market development program in Tokyo,
Japan. At that time, Japan was importing only small quantities of U.S.
soybeans, and the Japanese had expressed concerns about the quality of
U.S. soybeans. During our first year, ASA participated in a series of
trade fairs and partnered with a coalition of Japanese business
interests in conducting market development activities. Our in-country
staff worked closely with Japanese industry leaders at all stages, from
buyer to retailer, as well as with university and research technicians,
and the technical and popular news media.
Japan proved to be an ideal country to begin export promotion,
becoming our largest foreign market in the 1970s, 1980s, and 1990s.
Over the years ASA worked with feed millers and the Japanese swine,
dairy, and poultry industries to educate and demonstrate the value of
putting high-quality soybean meal made from U.S. soybeans in feed
rations. ASA collaborated with Japanese soybean processors and
importers to develop close and outstanding trade relations and to
increase the quality and demand for soybean oil made from U.S.
soybeans, both in the human utilization market as well as in the
industrial and printing ink markets. Additionally, ASA partnered with
the Japanese tofu, natto, and miso industries to demonstrate the
quality of U.S. food grade soybeans and to link Japanese importers with
U.S. exporters. Our office in Tokyo continues to service this critical
market today, and Japan remains a top market for U.S. soybean products,
surpassed only by China and Mexico. U.S. exports of soybeans to Japan
today are valued at $1.3 billion.
ASA went on to open other foreign offices and to conduct market
development activities in other markets. From regional and country
offices located in strategic areas, ASA International Marketing staff
and consultants continue to implement market development activities
with customers around the world that are increasing demand for U.S.
soybeans and soy products today.
But while Japan represents our first success story, China is
perhaps our most impressive. ASA opened an office in Beijing in 1982.
At that time China did not have a vertically-integrated animal feed
industry, and livestock production lacked health and nutritional
standards. China has the largest swine herd on the planet, but much of
it was backyard-based and did not include soybean meal in diets.
Similarly, while China produces more fresh water aquaculture fish than
the rest of the world combined, 20 years ago none of the fish feed
included soybean meal. Through a long-term and comprehensive program to
demonstrate the value of soy-based feeds, ASA helped build demand for
soybeans to the level China imports today. Since 1995, while feed use
in China grew 140 percent, soybean meal used in animal feed rose an
astronomical 839 percent. And we've seen the amount of soybean meal
used in aquaculture feeds grow from zero just 20 years ago to 7 million
metric tons this year. The value of U.S. soybean exports to China has
grown 26 fold, from $414 million in 1996 to over $14 billion in 2016.
Mexico is another example. With technical assistance and education
and nutrition seminars sponsored by ASA International Marketing, Mexico
has gained an appreciation of the benefits of soy for human
consumption. Mexico's retailers now sell millions of liters of soy-
fruit beverages, among other products. And U.S. soy exports have grown
over the years from virtually zero in the late 1970's to the current
value of $2.5 billion in 2016.
The FMD program provides cost-share assistance to ASA and our
export arm, the U.S. Soybean Export Council, to implement activities
that have set the stage for the growth of U.S. soybean exports. With
the assistance of the FMD program, we have launched a large number of
feeding and demonstration trials in key international markets. Through
capacity-building activities such as training and on-farm consultations
to promote improved swine and poultry practices, as well as education
on the benefits of soy protein for human consumption, the FMD program
has been extremely successful in helping us develop product
specifications and the supply networks to build demand for our products
and meet local market needs. More recently, we have engaged in market
development activities to promote the use of soy for industrial
products such soy ink, solvents, lubricants, and engine oils, to name
just a few.
These FMD funds have been leveraged with contributions by U.S.
soybean farmers themselves through the soybean check-off, as well as
with contributions by U.S. exporters. Today, the FMD funds ASA receives
are leveraged with soybean farmer and industry funding on a 2-to-1
basis--meaning that for every $1 invested in market development by the
FMD program, U.S. soybean farmers and industry are investing $2 to more
than match FMD funding.
Four Important Points about the FMD ``Cooperator'' Program
1. FMD is cost-effective. Funds are awarded on a competitive basis
via a comprehensive industry strategy evaluated by FAS
using a formula that takes into consideration export
potential, experience with managing export programs as well
as industry contributions. The process helps ensure that
U.S. taxpayer's money is being invested in the agricultural
sector and organization with the highest chance of success.
Every organization that participates in the FMD program
must contribute its industry's resources to the program.
Thus, U.S. Government expenditures actually leverage more
resources for foreign market development than American
agriculture would be able to accomplish with only private-
sector funds.
2. The FMD program increases export of U.S. agricultural products.
I've highlighted just a few examples of how U.S. soybean
farmers have successfully utilized cost-share assistance
provided under the FMD program to develop long-term markets
and increase exports. Similar success stories can be told
by the U.S. corn, rice, wheat, cotton, livestock, forestry,
and horticultural product industries.
3. The FMD program helps U.S. agriculture overcome the effects of
foreign trade practices. U.S. agricultural exports often
face subsidized or otherwise unfair competition from
foreign products. U.S. agricultural organizations utilize
FMD resources to combat the multitude of challenges in the
international marketplace.
4. The FMD program helps keep U.S. agricultural exports strong,
which in turn supports 1.1 million American jobs. These
jobs were on the farm, ranch, in the forest and on the
water, as well as in banking, transportation, processing
and other related industries. Every state and local economy
in the U.S. has jobs that are dependent upon healthy
exports of U.S. agricultural products.
Need for Funding Increase
A 2016 econometric study of export demand by Informa Economics IEG,
working with Texas A&M University and Oregon State University
economists, showed that between 2002 and 2014:
a return on investment by MAP and FMD of a remarkable $24 in
export gains for every additional $1 spent on foreign market
development, consistent with results from several previous
studies;
a dramatic average annual increase in farm income of $2.1
billion because of program activities; [and]
creation of 239,000 new full and part-time jobs related to
the programs.
Federal funding for MAP was last increased in the 2002 Farm Bill,
reaching $200 million annually in 2006. Federal funding for the FMD
program was last increased in the 2002 Farm Bill to $34.5 million
annually. Since the last increases were approved, the size of the
foreign agricultural market that those funds are meant to develop has
more than tripled to more than $800 billion a year.
Despite a tremendous growth in U.S. agricultural exports and
opportunities for farmers and small businesses abroad, the real,
effective Federal funding that reaches the agricultural cooperators
carrying out market development work has steadily eroded even while
international competitors continue to greatly outspend us.
Looking just at the FY16 FAS allocation of MAP and FMD funding, the
factors that have caused the erosion include:
Sequestration in FY16 reduced annual available MAP funding
by $13.6 million and FMD funding by $2.4 million.
USDA administrative expenses in FY16 reduced available MAP
and FMD program funds by $6.6 million.
Since the 2002 Farm Bill was enacted, inflation and a
depreciated U.S. dollar have reduced the real, effective
promotional power of U.S. agricultural market development
programs by almost 30 percent.
The result is fewer dollars for actual programs, even while demand
for the benefits these programs provide increases.
In FY17, just $173.5 of the $200 million MAP appropriation was
allocated to the 68 nonprofit commodity organizations participating in
the program. Just $26.6 million of the FMD appropriation was allocated
to the 23 nonprofit commodity organizations participating in that
program. Taking inflation into account, this means the $200.1 million
total that FAS awarded for MAP and FMD in FY17 had an actual
promotional power of only $140.1 million.
Other Important Considerations
With growing global food demand, MAP and FMD participants
have the opportunity to service more customers who seek to buy
an increasing volume and variety of products. In fact, since
the 2002 Farm Bill, overall agricultural imports of the
overseas markets that U.S. exports are competing for rose by
more than 330 percent, from $247 billion in 2002 to $834
billion. This significant increase in market size, combined
with the diminished purchasing power of MAP and FMD funding
since 2002, means that our producers are not well equipped to
take on more aggressive foreign competition.
New demands on MAP and FMD funding related to work on non-
tariff trade barriers, while reflecting the collaborative work
that cooperators often do to supplement efforts of FAS and
other regulatory agencies, put greater strain on funding that
in the past went exclusively to market development and
promotion activities.
A 2015 survey of the cooperators showed that they could
readily make effective use of a considerable increase in MAP
and FMD funding. In addition, more nonprofit producer groups
are establishing national organizations and are anxious to
apply for program funding. Greater demand will be placed on the
fixed program funds as more organizations become eligible to
apply for MAP and FMD.
Competitors in foreign countries receive substantially more
public support than is provided to U.S. agricultural exporters.
A 2013 study showed that in 2011, competing government support
for agricultural exports from just 12 countries and the EU
Central Government (not including individual member states) was
$700 million per year. For comparison, the U.S. budgets
approximately $235 million annually in public funds through MAP
and FMD for agricultural export promotion and market
development. A 2016 study of competitive agricultural export
market development investments showed that the EU allocates
$255 million annually just to promote wine.
Conclusion
The FMD and MAP programs are among the few tools that help American
agriculture and American farmers remain competitive in the global
marketplace. They are considered to be non-trade distorting or ``Green
Box'' programs under World Trade Organization (WTO) rules.
These cost-share market development and export promotion programs
help keep U.S. agricultural exports strong, which in turn support over
one million American jobs. These jobs are on U.S. farm and ranches, but
also are in processing, transportation, financing, and other related
industries. Every state and local economy in the U.S. has jobs that are
dependent upon healthy exports of U.S. agricultural products.
Agricultural exports have for years been the strongest positive
contributor to our nation's balance of trade. Increasing exports is a
significant tool to improve the lives of America's farmers and ranchers
while creating jobs, improving our balance of trade, expanding the farm
economy and larger U.S. economy, and increasing receipts to the
Treasury. The FMD and MAP programs have been critically important to
this success. ASA and the MAP and FMD Coalitions hope this hearing will
strengthen the resolve of Congress to not only maintain but to increase
the support for agricultural export promotion programs, as well as
strong support for the Foreign Agricultural Service of USDA. I would be
happy to answer any questions the Subcommittee may have.
The Chairman. Thank you very much.
Mr. Hamilton.
STATEMENT OF TIM HAMILTON, EXECUTIVE DIRECTOR, FOOD
EXPORT ASSOCIATION OF THE MIDWEST USA AND FOOD
EXPORT USA--NORTHEAST, CHICAGO, IL
Mr. Hamilton. Good afternoon, Mr. Chairman, and thank you,
Members of the Subcommittee.
I am Tim Hamilton. I am the Executive Director of Food
Export--Midwest and Food Export--Northeast. These are two of
the state regional trade groups that some of the prior
witnesses have mentioned. We help small and medium-sized
companies to export their products to foreign markets.
Like our counterparts in the West and the South, we work
with State Departments of Agriculture, using MAP funds to
increase the number of food companies and agricultural
companies that export, and to help those exporters increase
their sales.
We focus almost exclusively on helping small companies.
Many of these firms are family-owned. They are located in both
rural and urban locations. What they all have in common is that
they are exporting U.S. agricultural products.
Food and agricultural producers are challenged to find
growth opportunities here at home. At the same time, emerging
markets overseas offer huge growth potential. Even among the
firms who want to export, they are uncertain how to proceed.
Small firms are often reluctant, unsure of how do business in
another country. With support from MAP, we provide education
and training to help them target their best markets, and
overcome whatever hurdles they face.
Once export-ready, their first challenge is to find
customers. We arrange meetings with qualified international
buyers. We offer technical support at international trade
shows, making sure companies are prepared with appropriate
pricing, translations, market research, and competitor data. By
preparing them ahead of time, we greatly improve their chances
for success.
During 2015, with support from the MAP, Food Export--
Midwest and Food Export--Northeast have assisted more than
1,400 different firms. They collectively reported more than
$1.5 billion in new export sales, and project nearly double
that in additional sales over the next year. These companies
reported 563 new hires over that period of time, and we
estimate that their total overall export sales supported nearly
12,000 jobs.
The American Popcorn Company was founded in 1914 in Sioux
City, Iowa, and is still a family-owned and operated company
today. Many of their competitors have been acquired by large
food conglomerates. The company counts their 170 employees as
part of their extended family, some dating back to the 1930s.
Their growers are based in Iowa, Nebraska, and South Dakota, so
their economic impact extends across the region. A main factor
of the company's success has been exporting. With the support
from the Market Access Program, their Jolly Time brand popcorn
is now sold in 35 countries around the world, and their export
sales have grown from $2 million to $11 million, and comprise
over ten percent of their total revenue. That growth has led to
a ten percent increase in their number of employees, and helped
to support the construction of a new production facility.
In Philadelphia, the Bassetts Ice Cream Company is a fifth
generation family business, dating back to 1861. In 2008,
Bassetts was selling around $12,000 worth of ice cream in
China. With help from MAP, Bassetts now generates nearly $2
million per year annually in export sales that accounts for 25
percent of their revenue. This export growth has led to hiring
new staff and expansion of their production line. Purchases of
milk and cream have grown by 25 percent, benefitting many
Pennsylvania dairy farms. The first container of Bassetts Ice
Cream just arrived in Korea this month, and they are having
talks currently with buyers from the Middle East.
In our work with international customers, we are constantly
reminded of the extensive and increasing support that our
competitor nations offer. A 2013 study showed that government
support for agricultural exports from just 12 European
countries and the EU Central Government was $700 million per
year. For comparison, the U.S. spends $235 million on MAP and
FMD. An additional study in 2016 showed that the EU allocates
$255 million per year just to promote their wine exports.
What we are doing is not enough. More than 95 percent of
U.S. companies do not export. As our competitors ramp up their
efforts, we need additional support. We are proposing that
funding for MAP be increased to $400 million over the life of
the next farm bill. I have a statement from the Coalition to
Promote Exports that I would like to introduce for the record
that supports that request.
The rhetoric around trade has become complex and highly
charged, but the simple fact is that export trade remains
critically important to American agriculture. We need to market
our farm products aggressively against broad foreign
competition, and programs like MAP and the FMD are tools that
we need to remain competitive.
Mr. Chairman, and Members of the Subcommittee, I encourage
you to support efforts, including MAP and FMD, that continue to
boost America's food and ag exports, that support our farmers,
our small businesses, and the Americans that produce these
outstanding products.
Thank you.
[The prepared statement of Mr. Hamilton follows:]
Prepared Statement of Tim Hamilton, Executive Director, Food Export
Association of the Midwest USA and Food Export USA--Northeast,
Chicago, IL
Good afternoon, Mr. Chairman. My name is Tim Hamilton, and I am
Executive Director of Food Export--Midwest, and Food Export--Northeast.
These are State Regional Trade Groups that offer services to help small
and medium U.S. food and agricultural companies promote their products
in foreign markets. We commend you, Mr. Chairman, and Members of the
Committee, for holding this hearing and appreciate this opportunity to
share our work.
The organizations I represent are associations of the 22 midwestern
and northeastern state departments of agriculture. Like our
counterparts in the West and South, we work with our member states
using MAP Funds to increase the number of food and agricultural
companies that export, and to help current exporters increase the
volume and value of their sales.
We focus almost exclusively on helping small companies. Many of
these firms are family owned. Most of them are food processors that use
ag commodities as inputs which they turn into finished goods for
export. They are located in both rural and urban locations. What they
all have in common is that they are made from U.S. agricultural
products.
Food and agricultural producers are challenged to find growth
opportunities here at home. At the same time, emerging markets overseas
offer tremendous growth potential for these U.S. producers, if only
companies know about these markets and how to take advantage of them.
Even among firms who want to export, they are uncertain how to
proceed. Small firms are often reluctant, unsure of how to do business
in another language, another currency, another culture. With support
from MAP, we provide education and training to help them target their
best markets, and overcome whatever hurdles they face.
Once export ready, their first challenge is to find customers: We
arrange meetings with qualified international buyers. We offer
technical support at international trade shows, making sure companies
are prepared with appropriate pricing, translations, market research,
competitor data, and introductions to the right foreign customers. By
preparing them ahead of time, we significantly improve their chances
for success.
Like in the U.S., it is essential that exporters promote their
products in these competitive markets. Our promotional support can help
these firms get their products established and increase their market
share. This support includes advertising, demonstrations, trade show
costs, label modifications, and others. It is all made possible through
MAP funding, and is done on a cost-share basis, with companies
investing at least 50% of the costs.
During 2015, with support from MAP, Food Export--Midwest and
Northeast have assisted 1,406 different firms, most of them small
businesses. They reported more than $1.5 billion in new export sales,
and project nearly double that in additional sales over the next year.
These companies reported 563 new jobs because of this program, and we
estimate that their overall export sales support nearly 12,000 new or
existing jobs.
American Popcorn, Sioux City, Iowa
American Popcorn Company was founded in 1914 in Sioux Falls, IA and
is still family owned and operated today. Many of their competitors
have been acquired by large food conglomerates. The company counts
their 170 employees and many multi-generational growers throughout the
region as part of their extended family, some dating back to the 1930s.
Their growers are based in Iowa, Nebraska and South Dakota so their
economic impact extends across the region.
A main factor of their success has been exporting. With support
from the MAP, their Jolly Time brand popcorn is now sold in 35
countries, and their export sales have grown from $2 million to $11
million, and comprises over 10% of their total revenue.
That growth had led to a 10% increase in their number of employees
and helped support a new production facility. Their economic impact in
western Iowa is significant, and they attribute their export success to
support from the Market Access Program.
Bassetts Ice Cream, Philadelphia, PA
Bassetts Ice Cream is a fifth-generation family business and a
Philadelphia tradition since 1861. In 2008 Bassets was selling around
$12,000 of their ice cream in China. With help from Food Export--
Northeast supported by MAP, Bassetts now generates $2 Million annually
in export sales, accounting for 25% of their revenues.
This export growth has led to hiring new staff and expansion of
their production line. Purchases of milk and cream have grown by 25%,
benefitting many Pennsylvania dairy farms. The first container of
Bassetts ice cream just arrived in Korea this month and they have talks
taking place with buyers in the UAE and other [Middle Eastern]
countries.
This is a prime example of the Market Access Program providing
economic benefit for both rural and urban communities. As a small
regional ice cream manufacturer, international sales would not be
possible without the Market Access Program.
Schafer Fisheries, Thomson, Illinois
Schafer Fisheries, Inc., located in Northwestern Illinois' 17th
Congressional District, is a wholesale/retail distributor of fresh fish
and frozen seafood. This family owned business, established in 1954,
purchases and processes fresh fish caught by over 100 commercial
fishermen within a 1,000 mile radius. They have broad U.S. distribution
and now sell internationally. Schafer has used services offered through
Food Export--Midwest and funded by MAP to grow their export sales from
$85,000 to $2,000,000 over the past decade.
Since they started exporting they have added six new employees and
they are currently selling to 16 countries and considering expansion
with a new plant. They attribute their export success to the Market
Access Program.
U.S. Greens, Larned, KS
U.S. Greens is a family-owned and operated manufacturing company
that has been producing and processing greens since 1946 in Larned, KS
in the state's 1st Congressional District. They provide premier
nutritional powdered greens for commercial resale and production
included alfalfa, barley grass and wheat grasses. Four years ago with
support from the Market Access Program they began to explore
international markets and in a short time they have gained over
$200,000 in export sales. This growth contributed to their need for a
new milling center Bonner Springs, KS.
Many of the jobs that are supported by agricultural exports are
intrinsically U.S. jobs. They cannot be outsourced overseas. They are
tied to farm production in the U.S. The products are grown here, and
they are processed here. If we are able to maintain our overseas
markets, then these jobs will be held by Americans. If we lose these
overseas markets, then we risk losing these jobs to our competitors in
China, Europe and elsewhere.
In our work with international customers, we are constantly
reminded of the extensive and increasing support that our competitor
nations offer. Our competitors receive substantially more public
support than do U.S. farmers. A 2013 study showed that in 2011,
competing government support for agricultural exports from just 12
European countries and the EU Central Government was $700 million per
year. For comparison, the U.S. budgets approximately $235 million
annually in public funds through MAP and FMD for agricultural export
development. A 2016 study of our competitors showed that the EU
allocates $255 million annually just to promote wine.
But what we are doing is not enough. More than 95% of U.S.
companies do not export. As our competitors ramp up their efforts, we
need additional support. U.S. food and agricultural products are
recognized around the world for being safe, high quality and
innovative. This is a real opportunity for our country.
Every day, we see small U.S. companies successfully entering that
global marketplace that they were previously unaware of, or fearful of.
And we hear from them day after day, that most of them could not have
done it without the support made possible from the MAP program.
The rhetoric around trade has become complex and highly charged.
But the simple fact is that Export trade remains critically important
to American agriculture. We need to market our farm products
aggressively against broad foreign competition, and export programs
like the MAP are the tools that agriculture needs to remain
competitive. Additional MAP resources can help us reach more firms,
increase jobs in the U.S., become competitive overseas and maintain our
market share.
U.S. agriculture must be aggressive in competing overseas in order
to maintain our industry at home. Our nation's exports of food and
agricultural products can continue to be a major success story. This is
not the time to cut back on these efforts. It is a chance to take
advantage of these global opportunities, and provide the support and
incentive that companies, including small companies, need to pursue
these markets, build sales, and put Americans to work.
Mr. Chairman and Members of the Committee, I encourage you to
support efforts that continue to boost America's food and agricultural
exports, including MAP, that support our farmers, our small businesses,
and the Americans that produce these outstanding products. Thank you.
The Chairman. Thank you.
Mr. Seng.
STATEMENT OF PHILIP SENG, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, U.S. MEAT EXPORT FEDERATION,
DENVER, CO
Mr. Seng. Yes. Good afternoon. My name is Philip Seng,
President and CEO at the U.S. Meat Export Federation (USMEF). I
am here today to speak on behalf of the interests of the U.S.
red meat industry.
I would like to talk about the fact that the Market Access
Program and the Foreign Market Development Program have worked
very well for the U.S. Meat Export Federation to develop new
markets, displace our worldwide competition, and defend
American meat products' market share from aggressive
competition throughout the world.
The Market Access Program and its predecessor, the Target
Export Assistance Program and the Market Promotion Program,
have been extremely strategic and successful export tools for
the U.S. meat industry over the last 30 years. During this
time, the U.S. has made great advancements in market access,
but while market access played a part in our export growth,
market access alone does not guarantee exports. Many times we
have seen markets open, only to be confronted by consumers who
are skeptical about our products, or simply unaware of the
product's safety and quality. We must dignify trade access with
sound marketing programs, and Market Access Program's funds
have allowed us to address these challenges. Together, access
and marketing are a proven recipe for success in the
international marketplace.
Starting in Japan in the late 1980s, we have deployed
Market Access Program funds to demonstrate the profitability
and the quality of U.S. beef, pork, and lamb in supermarket
shelves and restaurants throughout Japan. But, today's growing
trade challenges are raising important new questions about how
we maintain our export momentum, and continue to derive the
benefits from growing exports that have accrued to farmers,
ranchers, and allied industries.
To provide the Committee with tangible examples of market
development work, the U.S. Meat Export Federation has carried
out using Market Access Program funds, I would like to quickly
review some of these success stories. The Market Access Program
was very significant to us as far as opening up the Japanese
market back in 1987. That is when we first received our first
tranche of funding. And at that time, the U.S. was a net
importer both of beef and pork, and within 10 years we had
basically successfully transitioned to become a net exporter of
both beef and pork in that market.
As the U.S. red meat industry's first American
representative stationed overseas, I was tasked with initiating
the commercial links between beef and pork producers and
processors in the United States and potential Japanese buyers.
Utilizing the Market Access Program funds, we were able to
build these sales channels and basically dignify the
negotiations with sound marketing programs in Japan. These
tactics included meat cutting seminars, sometimes offering
samples to consumers, conducting cooking classes, not really
rocket science, but these were collectively successful in
generating visibility for American beef and pork in that
market. And from 1995 through 2000, approximately $32 million
in market promotion funding was basically utilized to build
demand for U.S. beef and pork in Japan.
Another example of where this has been very successful is
in South Korea. You only have to go back about 8 years to
recognize when we were doing the KORUS negotiations for the
free trade agreement with Korea, we had 100,000 people for 100
days in the streets in Seoul, and the chart in my testimony
will show that we had consumer confidence in our product that
was less than three percent. Today it is well over 50 percent.
And just this last year, we exceeded our good friends from
Australia in that market as the number one supplier, as we did
last year, as well as Japan. Really, when we take a look at
these programs, they have been very significant for us in what
we are trying to do.
On a daily basis, they assess the opportunities and threats
in the marketplace. I mean when we take a look at what we are
trying to do in defending our market, we have to defend our
methodology of production agriculture. Our presence in the
markets, our offices in the markets, the people on the ground,
the boots-on-the-ground, if you will, have been very effective
as far as demonstrating our commitment from the U.S. meat
industry as being a reliable supplier in the international
marketplace.
While the benefits of the Market Access Program and Foreign
Market Development Program are viewed in our industry as being
well-established, the path forward is opaque and somewhat
ominous. Challenges have never been so plentiful, ranging from
growing protectionism and anti-trade sentiment, to animal
disease threats and new export competition. The U.S. industry
has to be ever vigilant as we address these, and the only way
we can address these issues and these challenges is through the
Market Access Program and the FMD program.
The other thing that we are trying to do constantly, and
this has been 50 years, 60 years of U.S. efforts in the
international marketplace, is to underscore our reliability as
a U.S. supplier, that countries that are not food self-
sufficient can be food-secure through imports and depending on
U.S. agriculture. This is something that we have to continue to
extol because right now, some of our markets that we are
dealing in, I was just in Mexico last week, that is being
called into question. The fact that the United States is a
dependable supplier of product is one of the key cornerstones
of our trade policy.
Also, I would be remiss if I didn't indicate the
appreciation that I have for the Foreign Agricultural Service
of the United States. They play a critical role around the
world, and our communication with the cooperator program and
with the Foreign Agricultural Service has been really a recipe
for success for us.
So I say make America great, like U.S. agriculture. If you
take a look at U.S. agriculture, we have 30 years of trade
surpluses. One farmer feeds 155 people in the world, and we are
made up of small holders as well as large holders, it is the
best diplomatic tool that we have. And I really support
increases to the MAP program as well as to the FMD program, as
my colleagues have indicated.
Thank you.
[The prepared statement of Mr. Seng follows:]
Prepared Statement of Philip Seng, President and Chief Executive
Officer, U.S. Meat Export Federation, Denver, CO
Good afternoon. My name is Philip Seng, President and CEO at the
U.S. Meat Export Federation (USMEF). I am here today to speak on behalf
of the interests of the U.S. red meat industry and to explain how we
utilize funding from the USDA Market Access Program and the Foreign
Market Development Program to develop new markets, displace our
formidable, worldwide competition, and defend American meat products'
market share from aggressive competitors.
For our industry, the Market Access Program and its predecessors,
the Targeted Export Assistance Program and the Market Promotion
Program, have been extremely strategic and successful export tools over
the last 30 years. During this time, the U.S. has entered a number of
free trade agreements and made great advancements in market access. But
while market access played a part in our export growth, market access
alone does not guarantee exports. How many times have we been elated
about newly opened markets, only to be confronted by consumers who are
skeptical or simply unaware of our products' safety and quality? We
must dignify trade access with sound marketing programs, and Market
Access Program funds have allowed us to address these challenges.
Together, access and marketing are a proven recipe for success.
In market after market, starting in Japan in the late 1980s, we
have deployed Market Access Program funds to demonstrate the
profitability of featuring U.S. beef, pork and lamb on supermarket
shelves and restaurant menus, while simultaneously building consumer
demand and sales. But we are not alone in these efforts, and the
international marketplace is increasingly crowded with competitors.
Ironically, many are mimicking our strategies and tactics initiated
under the Market Access Program. But the growing trade challenges are
raising important new questions about how we maintain our export
momentum and continue to derive the benefits from growing exports that
have accrued to farmers, ranchers and the allied industries associated
with producing and exporting red meat.
To provide the Committee with tangible examples of market
development work the U.S. Meat Export Federation has carried out using
Market Access Program funds, I would like to quickly review some
success stories before discussing my vision for the future. When Market
Access Program funding first became available in 1987, the export side
of our industry was in start-up mode. Exports were largely an
afterthought, and there was little understanding in the industry of the
meat consumption habits of any foreign market or of the growth
potential of these markets. The U.S. was a net importer of both beef
and pork, with pork imports nearly double our export volumes. But just
8 years later, the U.S. had successfully transitioned to a net exporter
of both pork and beef.
As the U.S. red meat industry's first American representative
stationed overseas, I was tasked with initiating commercial links
between beef and pork producers and processors in the U.S. and
potential Japanese buyers. Utilizing Market Access Program funds, the
U.S. industry began to build sales channels. First, these were with
importers, distributors, processors and food service representatives,
then we began working with supermarket chains, such as Aeon, and
restaurants, such as Ito Yokado. The tactics, which included meat-
cutting seminars, offering meat samples to consumers and conducting
cooking classes, were straightforward--not rocket science--but they
were collectively successful in generating visibility and sales of
American beef and pork. Like the launch of any new brand, resource
needs were substantial, and individual companies--especially the
smaller ones that were a major part of the early marketing efforts--
were justifiably reticent to invest in what was then a risky
undertaking. From 1995 through 2000, approximately $32.5 million in
Market Promotion Program and Market Access Program funding was utilized
to build demand for U.S. beef and pork in Japan. During this period,
U.S. beef and pork exports increased by approximately $1 billion, a 30-
to-1 return.
Another success story is the rebuilding of consumer confidence in
U.S. beef in South Korea, which last year became a $1 billion market
for U.S. beef exports for the very first time. At the beginning of this
decade, only five percent of Korean consumers were confident in the
safety of U.S. beef. Although a free trade agreement between the U.S.
and Korea was about to be finalized, how could we possibly capitalize
without addressing this situation? Market Access Program funding played
a critical role in restoring faith in the safety of our product, and
exports grew accordingly--as evidenced by this graphic:
Consumer Confidence on U.S. Beef Safety and Korea's Imports of U.S.
Beef
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Source: USMEF-Gallup and GTA import data. www.USMEF.org.
The basic market development template that was developed and
utilized in Japan has been successfully utilized in other markets,
including Korea (as noted above), Mexico, Taiwan, Hong Kong, the
European Union and the Middle East. In addition to supporting our
marketing work, Market Access Program and Foreign Market Development
Program funding has also allowed us to maintain a network of foreign
offices staffed by technical and marketing experts who serve as boots-
on-the-ground representatives of the U.S. red meat industry. On a daily
basis, they assess the opportunities and threats in the marketplace,
while building relationships that are vital to our ability to provide
accurate and timely intelligence on developments in the markets. The
U.S. Meat Export Federation's presence in the markets also has proven
to be an extremely effective means of demonstrating the U.S. red meat
industry's long-term commitment as a reliable supplier of beef, pork
and lamb.
It is important to also highlight the role the Market Access
Program has played in jump-starting the interest and resource
participation by our industry in the effort to expand exports. As
success stories started to impact the bottom line of our industry--from
ranchers to exporters and all the allied industries in between--
stakeholders began to invest. We estimate that for every dollar the
Market Access Program invested with the U.S. Meat Export Federation, we
are now able to generate at least $3 to $4 more from U.S. industry
contributions and from in-market partners and customers.
While the benefits of the Market Access Program and the Foreign
Market Development Program are viewed in our industry as being well
established, the path forward is opaque and some argue, ominous.
Challenges have never been so plentiful, ranging from growing
protectionism and anti-trade sentiment, to animal disease threats and
the rise of new export competitors. On the latter, the U.S. industry,
which spent the past few decades developing and displacing our
competition, now has to devote more resources to defending our market
position. A tremendous amount of effort has been expended by the U.S.
Government and Market Access Program participants to build
international confidence in our ability to be a reliable exporter of
U.S. agriculture products, but fresh doubts are arising about our
commitment to free and unencumbered trade.
This comes at an inauspicious time, because in many ways,
opportunities have never been greater. From a supply perspective,
exports have room to grow. For U.S. beef and pork, we export just 15
percent and 26 percent, respectively, of our annual production. On the
demand side, new import markets are emerging that hold great potential.
A generation ago, China was a major meat exporter, but now it has
become the world's largest importer of both beef and pork. However,
developing a loyal customer and consumer base for U.S. red meat in
China will still be extremely complex and command substantial
resources. Starting at the border, import conditions are strict; for
example, U.S. beef is still banned from importation. Distribution
infrastructure is still developing, and the sheer size of the potential
consumer base is daunting. With major regional differences in eating
habits and cuisines, marketing approaches need to be tailored to each
particular geographical area. Most importantly, our major competitors
in Europe, South America and Oceania are all spending heavily to build
their own presence in the market. In some cases, they are being aided
by favorable import conditions and low duty rates gained through free
trade agreements. If one considers China a frontier marketplace, the
U.S. is one of many homesteaders.
Other emerging markets beckon, such as Indonesia, where huge
opportunities exist for increased beef consumption. Potential also
exists in markets that were traditionally viewed only as competitors.
There is unfilled demand in Brazil that can be met by U.S. beef exports
now that that market is open, and our comparative advantage in pork
production allows us to export to countries like Australia, Guatemala
and--possibly in the future--to African markets. And despite claims
that markets like Japan are developed, they continue to evolve and hold
great growth potential. For example, U.S. pork captures only a 20
percent share of Japan's total consumption, and purchases by Japanese
consumers of U.S. fresh chilled product reached record levels last
year.
Holding our own in traditional markets while also exploring new
ones requires an increase of resources. But perhaps even more
importantly, the Market Access Program and the Foreign Market
Development Program funding signal the commitment of the U.S. red meat
industry--and U.S. agriculture overall--to being a consistent and
reliable global supplier of high-quality, safe and affordable
foodstuffs. This Committee understands that U.S. agriculture and the
U.S. red meat export industry have worked diligently to demonstrate to
countries that are not 100 percent self-sufficient in food production
that they can still be 100 percent ``food-secure'' with dependable
import sources, especially the United States. We take very seriously
our responsibility, not only to the hundreds of thousands of farmers
and ranchers who are now producing ever-larger quantities of products
for foreign customers, but also to those foreign customers themselves,
who benefit and rely on our ability to supply them.
Thank you for the opportunity to provide a red meat industry
perspective on exports and to discuss the critical importance of the
Market Access Program and the Foreign Market Development Program to our
success in international markets.
The Chairman. Thank you.
Mr. Alanko.
STATEMENT OF DEAN ALANKO, VICE PRESIDENT OF SALES AND
MARKETING, ALLEGHENY WOOD PRODUCTS,
PETERSBURG, WV; ON BEHALF OF HARDWOOD FEDERATION
Mr. Alanko. Yes, good afternoon. Thank you, Chairman
Rouzer, Ranking Member Costa, and Members of the Subcommittee
for inviting me to testify before you today.
My name is Dean Alanko and I am the Vice President of Sales
and Marketing for Allegheny Wood Products, headquartered in
Petersburg, West Virginia.
Allegheny Wood Products was formed in 1973, and continues
to be a family-owned and operated company, directly employing
over 900 people at nine sawmills, five drying facilities, one
hardwood pellet mill, and a dimension plant. There are also
hundreds of additional jobs created in support industries for
our manufacturing operations, such as loggers and truckers, to
name a few. We sell products worldwide, with export sales in
excess of $63 million in 2016. We have shipped products to over
28 countries.
My focus today is on the hardwood lumber and veneer
industries, and while not an edible, agricultural product, it
is an important agricultural product to rural America just the
same. The U.S. hardwood lumber industry produced more than 8.3
billion board-feet in 2016. For some perspective, 8.3 billion
board-feet is equivalent to about one million truckloads of
hardwood lumber.
The U.S. hardwood industry is not made up of large Fortune
500 companies. It is very much a rural-based industry made up
mostly of small and medium-sized family-owned operations. A
great example of this highly fragmented industry is my own
company. While we are one of the three largest manufacturers
volume-wise of hardwood lumber, we represent less than two
percent of total production.
In addition to sawmillers such as myself, this industry
also represents millions of private, non-industrial forest
owners. Strong markets for hardwood lumber products help
maintain strong ties between the hardwood industry and these
private forest owners. The revenue stream resulting from
harvesting of mature trees creates the economic incentive to
maintain forestland as forestland.
Many hardwood companies are heavily reliant on exports for
their livelihood. Approximately 40 percent of all hardwood
lumber production, and nearly 60 percent of the highest value-
added grades of hardwood are now exported, totaling $2.4
billion in 2016. Exports of hardwood veneer totaled $280
million in 2016, which is more than 55 percent of domestic
production. The U.S. also enjoys a healthy trade surplus of
$1.3 billion in hardwood lumber, up from $1.1 billion in 2015.
It is vital that the markets remain open and continue to
expand for these businesses and the men and women they employ.
This is where the work of the American Hardwood Export Council,
or AHEC, jointly funded by the Market Access Program, Foreign
Market Development Program, and industry dues, play such an
important role. AHEC has laid out a four-part strategy designed
to grow overseas markets. Adequate funding from the MAP and FMD
programs is essential to our success. With continued and
hopefully increased funding, AHEC will do the following to
promote U.S. hardwoods overseas. First, seek out new markets
for hardwood products. In areas of the world where there is
limited understanding of U.S. hardwoods, most notably inland
China, India, and the Middle East, AHEC will continue to
increase demand by providing technical information, trade
servicing, and technical seminars to the importing and
manufacturing industries overseas. Second, promote new uses and
applications for hardwood within existing markets. In 2017,
AHEC will continue to be actively involved in identifying and
growing potential new market segments, such as hardwood use and
structural applications found in high-rise building
construction. Third, continue to extol the environmental
credentials of U.S. hardwoods. With the introduction of illegal
logging and trade policies across the globe, and the
development of policies to reduce CO2 emissions,
especially in the building sector, the need to promote the
strong environmental benefits of U.S. hardwoods is more
important than ever. Fourth, create networking opportunities
for U.S. exporters. In 2017, AHEC will create a number of
opportunities for U.S. exporters to engage with overseas
buyers, manufacturers, and specifiers in more than 20 building,
furniture, and design trade shows around the globe.
Let me say again how critical exports and export markets
are to my company, to rural communities, and to the hardwood
industry as a whole. This industry benefits significantly from
the MAP and FMD programs every day. It is vital MAP and FMD
continue to be available, and that funding increase to meet the
expanding needs of this industry. I can say without hesitation
that without these programs, our businesses would be smaller,
produce fewer goods, and employ less people.
Thank you for allowing me to address the Committee. I am
happy to respond to questions either today or in writing.
[The prepared statement of Mr. Alanko follows:]
Prepared Statement of Dean Alanko, Vice President of Sales and
Marketing, Allegheny Wood Products, Petersburg, WV; on Behalf of
Hardwood Federation
Good afternoon. Thank you Chairman Rouzer, Ranking Member Costa,
and Members of the Subcommittee for inviting me to testify before you
today. My name is Dean Alanko and I am the Vice President of Sales &
Marketing of Allegheny Wood Products Headquartered in Petersburg, WV.
Allegheny Wood Products was founded in 1973 by John and Patricia Crites
and continues to be a family owned and operated company, directly
employing over 900 people at nine sawmills, five drying facilities one
hardwood pellet mill, and a dimension plant. There are additional jobs
created in support industries for our manufacturing operations . . .
loggers, truckers, and construction workers to name a few. We sell
products worldwide, with export sales in excess of $63 million in 2016.
We have shipped products to over 28 countries.
The U.S. wood products industry, including hardwood, softwood and
paper products is an important contributor to the U.S. economy,
accounting for approximately four percent of the total U.S.
manufacturing GDP. Wood products companies are among the top ten
manufacturing sector employers in 47 states, producing $210 billion in
products annually. The industry as a whole employs nearly 900,000
people; more than the automotive, chemicals and plastics industries.
And most of them are in rural areas where employment opportunities can
be limited.
My focus today is on the hardwood lumber and veneer industries. The
U.S. hardwood lumber industry produced more than 8.3 billion board-feet
in 2016, a solid number for this industry, but still well below our
1999 peak of 12.6 billion. For some perspective, that is approximately
one million truckloads of hardwood lumber.
The U.S. hardwood industry is not made up of big Fortune 500
companies. It is very much a rural based industry made up of small and
medium sized family-owned operations, on both the resources and
manufacturing sides of the business. A great example of this highly
fragmented industry is my own company . . . while we are one of the top
three volume producers of U.S. hardwoods, we represent Less Than 2% of
the total market.
In addition to the saw-millers such as myself, this industry also
represents millions of private, non-industrial forest owners. Strong
markets for hardwood lumber products help maintain strong ties between
the hardwood industry and these private forest owners. The revenue
stream resulting from limited, selective harvesting of mature trees
creates the economic incentive to maintain forestland as forestland.
Many hardwood companies are heavily reliant on exports for their
livelihood. Approximately 40% of all hardwood lumber production and
nearly 60% of the highest value-added grades of hardwood are now
exported, totaling $2.4 billion in 2016. Exports of hardwood veneer
totaled $280 million in 2016, which is more than 55% of domestic
production. The U.S. also enjoys a healthy trade surplus of $1.3
billion in hardwood lumber, up from $1.1 billion in 2015.
With the migration of the U.S. domestic furniture and wood products
manufacturing industries, and less than robust new housing demand,
international promotion has never been more important to the U.S.
hardwood industry. The U.S. is by far the world's largest exporter of
hardwoods, accounting for nearly \1/4\ of all global trade. U.S.
hardwood exports have more than doubled in the past 5 years.
For the U.S. hardwood industry, ``globalization'' is much more than
just an abstract concept; it is a concrete reality that influences
business decisions on a daily basis. However, globalization has meant
not only the migration of manufacturing, but has also led to
unprecedented growth in global purchasing power. Indeed, it has now
become clear that much of the increased demand for hardwood products--
including finished products--is coming from outside the U.S.,
especially in the rapidly growing economies of Asia. In terms of
promotion, therefore, it is very important that our industry recognize
and target not only the high-volume re-export manufacturing sectors of
today and tomorrow, but we must also identify new market opportunities
and niches within well-established, so-called ``mature'' markets such
as the EU. With the help of MAP and FMD, the American Hardwood Export
Council (AHEC) programs are designed to do both, by providing a wide
array of information to overseas importers, distributors, specifiers
and end users of wood products.
It is vital that markets remain open for these businesses and the
men and women they employ. This is where the work of the American
Hardwood Export Council, or AHEC, jointly funded by the Market Access
Program (MAP), Foreign Market Development (FMD) program and industry
dues plays such an important role.
AHEC has laid out a four-part strategy designed to ``grow the pie''
in overseas markets for U.S. hardwood exporters. Adequate funding from
the MAP and FMD programs is essential to our success. With continued
and hopefully increased funding, AHEC will do the following to promote
U.S. hardwood products to the world:
(1) Seek out new markets for hardwood products:
In areas of the world where there is limited understanding of
U.S. hardwoods, most notably inland China, India and the
Middle East, AHEC will continue to increase demand by
providing technical information, trade servicing and
technical seminars to the importing and manufacturing
industries overseas. In more mature markets, the focus will
be on demonstration projects, design/architectural
seminars, and a targeted PR campaign.
(2) Promote new uses and applications for hardwood within existing
markets:
In 2017 AHEC will continue to be actively involved in
identifying and growing potential new market segments, such
as hardwood use in structural applications found in high
rise building construction--most notably Cross-Laminated
Timber (CLT) engineering, or the potential for thermally-
modified or treated hardwoods to gain a foothold in the
exterior applications market.
(3) Continue to exto[l] environmental credentials:
With the introduction of illegal logging and trade policies
across the globe and the development of policies to reduce
CO2 emissions, especially in the building
sector, the need to promote the strong environmental
benefits of American hardwoods is more important than ever.
2017 marked the official launch of the American Hardwood
Environmental Profile (AHEP), an environmental profiling
tool that will combine legality information, sustainability
data from the U.S. Forest Service and LCA impacts from MAP-
funded research.
(4) Create Networking Opportunities for U.S. Exporters:
In 2017 AHEC will create a number of opportunities for U.S.
exporters to engage with overseas buyers, manufacturers and
specifiers in more than 20 building, furniture and design
trade shows around the globe. USDA funds help to offset the
booth costs but each U.S. company is responsible for their
own travel expenses creating direct industry contributions
to the programs. AHEC will also sponsor Conventions in
China and Mexico and host dozens of seminars and strategic
networking opportunities tied to major target market
industry events.
Let me reiterate, how critical exports and export markets are to my
company, to rural communities and to the hardwood industry as a whole.
Companies like Allegheny Wood Products benefit significantly from the
MAP and FMD program every day. I can say without hesitation that
without these programs our business would be smaller, produce fewer
goods and employ less people.
One important concrete example of where MAP funding has proven
absolutely critical to my company as well as the rest of our industry
was the U.S. Illegal Logging Risk Assessment study commissioned by
AHEC. Recent legislation to combat illegal logging in the EU, Japan and
Australia require wood suppliers to show that that their raw material
was legally sourced--a difficult task for a fragmented industry that
purchases logs from millions of private landowners. The peer-reviewed
study showed that on a national level the risk of U.S. hardwood being
illegally harvested was negligible. This has provided reassurance to
foreign governments and has kept open many of the world's highest-value
markets to U.S. exporters. As a private company, it would have been
next to impossible to produce such credible reassurance.
Thank you for allowing me to address the Subcommittee. I am happy
to respond to questions either today or in writing.
The Chairman. Mr. Wenger.
STATEMENT OF PAUL J. WENGER, ALMOND PRODUCER, WOOD COLONY NUT
CO.; PRESIDENT, CALIFORNIA FARM BUREAU FEDERATION, SACRAMENTO,
CA
Mr. Wenger. Good afternoon. Thank you, Mr. Chairman,
Ranking Member Costa, and Members of the Committee. I really
appreciate the opportunity to testify on the trade title for
the farm bill.
I am Paul Wenger, President of the California Farm Bureau,
third generation, and I will tell you now that I am bilingual
and I will use the term amond and almond interchangeably. And I
am a member of the Blue Diamond Growers.
As the largest agricultural organization in California, the
California Farm Bureau is a statewide, nonprofit, membership
organization representing 53 counties that include over 28,000
producers of more than 400 commodities. For nearly a century,
Farm Bureau has worked to preserve, protect, and promote family
farms and ranches.
Like the California Farm Bureau, Blue Diamond Growers has a
more than 100 year history of serving California almond
farmers. Blue Diamond is a nonprofit, farmer-owned, marketing
cooperative owned by over \1/2\ of the almond growers in
California. It is also the world's largest processor and
marketer of almonds.
The almond industry is particularly relevant for today's
hearing as over 80 percent of the world's almonds are grown in
California, and almonds are the largest agricultural export for
our state. Blue Diamond exports almonds and almond ingredients
to more than 90 countries. Overall, the almond industry
contributes $11 billion to California's economy, creating over
100,000 jobs in the state, as well as more than 37,000 export-
related jobs.
As discussion of the new farm bill begins, I will share the
positive impact three of the programs in the bill's trade title
have on California farmers and ranchers.
I would like to begin with the Market Access Program. Its
purpose is to expand agricultural export markets overseas.
Agricultural exports are critical to the American economy.
According to the USDA's Economic Research Service, in 2014 ag
exports produced a total of $340 billion in economic output.
Those exports supported 1.1 million full-time U.S. civilian
jobs; approximately 800,000 of which were jobs to the non-farm
sector. Consequently, for every $1 billion of agricultural
export revenue, it would create 7,550 jobs.
Many commodities in California benefit from the Market
Access Program, including, but not limited to, dairy,
pistachios, cherries, peaches, table grapes, pears, prunes,
strawberries, cotton, rice, wine, citrus, and walnuts. The
program ensures that these and other participating commodities
can, on a cost-share basis, achieve maximum opportunity when
developing markets overseas.
While I could share details of each California commodity
benefitting from the Market Access Program, as an almond
grower, I comment today on how my cooperative, Blue Diamond,
utilizes Market Access Program funds provided by the 2014 Farm
Bill to improve international demand for domestically produced
almonds. These efforts continue to offer a destination for the
almonds I and my fellow California growers produce. They
support U.S. jobs by improving export markets around the world.
In my written testimony, I have included as an exhibit six
specific success stories documenting recent examples of where
the MAP program has been used effectively to build consumer
demand for Blue Diamond almonds. Let me briefly highlight one
of those to just give you a sense of how these funds are being
utilized.
In Canada last year, Blue Diamond used Market Access
Program funds to partner with a large retailer to stock for the
first time North American-labeled almond product at six of the
chain's large supermarket locations in the greater Vancouver
region. A 2 day in-store sampling program was conducted which
focused on Blue Diamond's superior taste consistency, high
quality, and nutritious attributes. During the demo week alone,
the supermarket sold 60 percent of the initial product cases
purchased. As sampling programs continue at this new account,
Blue Diamond anticipates even greater purchase quantities and
sales figures.
As you can see, the efforts of just one Market Access
Program participant are generating solid results. Blue Diamond
has a successful track record of launching new and innovative
almond products in markets around the world, leading the
development of new sources of revenue for thousands of U.S.
almond growers, as well as thousands of non-farm employees who
help process and deliver our various products. MAP funds remain
essential. Part of this strategy is for Blue Diamond to
establish critical footholds in new markets.
The 21st century global market remains an extremely
challenging one. Markets do not just open, build and sustain
themselves. Consumer awareness, acceptance, and preferences do
not just happen. The target is a continually moving one.
Success in establishing and growing markets for U.S.
agricultural products is best achieved through focused and
coordinated efforts by all parties involved to have a stake in
achieving success. This most certainly includes the critically
important partnership of U.S. Government and agricultural
stakeholders.
You can be assured that America's competitors are also
approaching this challenge in a similar manner. One quick
example, in 2016, the European Union allocated $255 million
annually for the promotion of wine alone. This is more than the
total amount that we allocate for all agricultural commodities.
The Market Access Program is a model of innovative and
effective government-industry relationship. The synergies
produced through the program are compelling and well-
documented.
In today's increasing challenging environment for America's
farmers and ranchers, the need for expanding the program has
never been greater. We would encourage you to look to expanding
not only this, but sustaining the TASC, the Technical
Assistance for Specialty Crops, at its current levels, and also
increase FMD funding from its current levels.
I would be more than willing to answer any questions you
might have.
[The prepared statement of Mr. Wenger follows:]
Prepared Statement of Paul J. Wenger, Almond Producer, Wood Colony Nut
Co.; President, California Farm Bureau Federation, Sacramento, CA
Good afternoon, Mr. Chairman and Members of the Committee. Thank
you for the opportunity to testify on the trade title of the farm bill.
I am Paul Wenger, the President of California Farm Bureau
Federation. I am also a third-generation almond farmer and a member of
Blue Diamond Growers.
The California Farm Bureau Federation is a state-wide nonprofit
organization representing 53 counties that include over 28,000
producers of more than 400 commodities. For nearly a century, Farm
Bureau has worked to preserve, protect and promote family farms and
ranches.
Like the California Farm Bureau Federation, Blue Diamond Growers
has a more than 100 year history of serving California almond farmers.
Blue Diamond is a nonprofit, farmer-owned marketing cooperative owned
by over \1/2\ of the almond growers in California. It is also the
world's largest processor and marketer of almonds.
The almond industry is particularly relevant for today's hearing as
over eighty percent of the world's almonds are grown in California, and
almonds are the largest agricultural export from the state. Blue
Diamond exports almonds and almond ingredients to more than 90
countries. Overall, the almond industry contributes $11 billion to
California's economy creating over 100,000 jobs in the state, as well
as more than 37,000 export related jobs.
As discussion of the new farm bill begins, I will share the
positive impact three of the programs in the bill's trade title have on
California farmers and ranchers.
Market Access Program (MAP)
I would like to begin with the Market Access Program. This program
is overseen by USDA's Foreign Agricultural Service, (FAS). Its purpose
is to expand agricultural export markets overseas. Agricultural exports
are critical to the American economy. According to USDA's Economic
Research Service (ERS), in 2014 agricultural exports produced a total
of $340 billion in economic output. Those exports supported 1.1 million
full time U.S. civilian jobs. Approximately 800,000 of the jobs were
non-farm sector. Consequently, for every $1 billion of agricultural
export revenue there are 7,550 jobs (https://www.ers.usda.gov/data-
products/agricultural-trade-multipliers/2014-data-overview.aspx).
Over the years, we have seen extremely successful results from the
Market Access Program. A recent study by Informa Economics IEG, working
with Texas A&M University and Oregon State University economists,
showed a return of $28 in export gains for every $1 spent on export
promotion programs. The study also showed an average annual increase in
farm income of $2.1 billion resulting from the Market Access Program
activities. In addition to the high return rate and the increase in
farm income, the program resulted in the creation of 239,000 new full
and part-time jobs (http://www.uswheat.org/newsMeetings/emd-1a)
[Attachment].
Many commodities in California benefit from the Market Access
Program, including but not limited to dairy, pistachios, cherries,
peaches, table grapes, pears, prunes, strawberries, cotton, rice, wine,
citrus, and walnuts. The program ensures that these and other
participating commodities can, on a cost-share basis, achieve maximum
opportunity when marketed overseas.
While I could share details of each California commodity benefiting
from the Market Access Program, as an almond grower, I will comment
today on how Blue Diamond utilizes Market Access Program funds provided
by the 2014 Farm Bill to improve international demand for domestically
produced almonds. These efforts continue to offer a destination for the
almonds I produce. They support U.S. jobs by improving U.S. economic
output. (Please see Exhibit A for Blue Diamond Growers Market Access
Program success stories).
In my written testimony submission, I have included as an exhibit
six specific success stories documenting recent examples of where the
Market Access Program has been used effectively to build consumer
demand and preference for Blue Diamond almonds. Let me briefly
highlight a couple of these just to give you a sense of how these funds
are being utilized.
In Canada last year, Blue Diamond used Market Access Program funds
to partner with a large retailer to stock for the first time North
American labeled almond product at six of the chain's large supermarket
locations in the greater Vancouver region. A 2 day in-store sampling
program was conducted which focused on Blue Diamond's superior taste
consistency, high quality, and nutritious attributes. During the demo
week alone, the supermarket sold 60 percent of the initial product
cases purchased. As sampling programs continue at this new account,
Blue Diamond anticipates even greater purchase quantities and sales
figures.
In another case, during the period May-June 2016, Blue Diamond
conducted an in-store marketing campaign for snack almonds at 960 7-
Eleven outlets in Hong Kong. This promotion targeted health conscious
consumers seeking a nutritious and convenient snack that is ideal for
active kids and families. Using Market Access Program funds, Blue
Diamond supported development of creative advertising materials and
off-shelf product positioning with acrylic racks. The promotions also
highlighted that Blue Diamond snack almonds are a great accompaniment
for watching summer soccer games and other popular sporting events. By
locating Blue Diamond products off-shelf, the promotion reached new
consumers and generated additional brand awareness and interest. This
effort generated a significant increase in sales, achieving twice the
average sales per month compared to the prior period.
As you can see, the efforts of just one Market Access Program
participant are generating solid results. Blue Diamond has a successful
track record of launching new and innovative almond products in markets
around the world, leading the development of new sources of revenue for
thousands of U.S. almond growers. These funds remain an essential part
of this strategy, supporting Blue Diamond to establish critical
footholds in new markets. Blue Diamond will continue to rely on the
Market Access Program funds to support successful product launches
through strategic product campaigns.
The 21st century global market remains an extremely challenging
one. Markets do not open, build and sustain themselves. Consumer
awareness, acceptance and preferences do not just happen. The target is
a continually moving one. Success in establishing and growing markets
for U.S. agricultural products is best achieved through focused and
coordinated efforts by all involved parties with a stake in achieving
success. This most certainly includes the critically important
partnership of the U.S. Government and U.S. agricultural stakeholders.
You can be assured that America's competitors in the global market
place are approaching the challenge in a similar manner. For example, a
2016 study showed that the European Union allocates $255 million
annually for the promotion of wine alone. This is more than the total
amount we allocate for all U.S. agricultural commodities.
The Market Access Program is a model of innovative and effective
government-industry partnership. The synergies produced through the
program are compelling and well-documented. In today's increasingly
challenging environment for America's farmers and ranchers, the need
for expanding the program has never been greater. Currently, the
program receives $200 million in funding. Blue Diamond is asking for an
increase to $400 million in funding and Farm Bureau also supports an
increase. The last increase in Market Access Program funds occurred in
the 2002 Farm Bill reaching the current level of funding in 2006. (For
additional success stories please see: http://www.agexportscount.com/
value-of-ag-exports/).
The Technical Assistance for Specialty Crops (TASC) Program
Another USDA program that has significantly benefitted U.S.
specialty crop producers, including almond growers, is the Technical
Assistance for Specialty Crops program, or TASC. Currently funded at $9
million annually, TASC provides grants to eligible U.S. organizations
to address sanitary, phytosanitary, and technical barriers in targeted
foreign countries that prohibit, constrain, or threaten market access
for U.S. specialty crops.
USDA's Foreign Agricultural Service reviews TASC proposals on a
competitive basis, approving those that both meet the program's
requirements and clearly demonstrate how the activity will address and
resolve the identified barrier or constraint. Awards are for a maximum
of $500,000 per year and for projects of up to 5 years. These funds
help support such critical activities as pest and disease research,
technical exchanges, field trials and pre-clearance programs, all with
a view to resolve trade barriers and expand U.S. exports of specialty
crops.
Blue Diamond used this program for the almond industry to obtain
technical assistance to obtain reinstatement of the Indian Government's
previous approval of the use of Phosphine as an acceptable fumigant for
almonds. $80,000 was approved for this and a successful result was
obtained. This is our industry's second largest market, after Spain.
The U.S. Census Bureau data reports that U.S. almond exports to India
were valued at over $490 million in 2016. Last year, the California
almond industry again utilized TASC to support exchanges with key
Government of India officials aimed at raising awareness and
understanding of supply channel practices, and labeling, certification,
and export procedures.
TASC is yet another example of how the industry-government
partnership can be effectively leveraged to the benefit of America's
farmers, and the U.S. economy.
Foreign Market Development Program (FMD)
The third program is the Foreign Market Development Program (FMD).
FMD benefits the U.S. economy and creates jobs by assisting U.S.
farmers, processors, and exporters in developing new foreign markets
and increasing market share in existing markets. The program focuses on
generic U.S. commodities and lays the groundwork for commercial sales
by establishing long-term relationships.
These efforts under FMD might include such activities as addressing
infrastructure constraints, modifying codes or standards, and
identifying new end-uses for the commodity or product.
The partnership between USDA and industry participants under the
FMD program has proven to be an effective component in the overall
trade development toolbox.
In closing, agricultural exports are vital to preserving,
protecting, and promoting California agriculture, accounting for over
$20 billion in value out of the state's $47 billion in production. The
trade title of the farm bill should continue to provide these essential
trade-promoting programs.
Thank you very much for allowing me to testify today on this very
important subject. I will be pleased to answer any questions that you
may have.
Respectfully Submitted,
Paul Wenger.
Exhibit A
1. Blue Diamond Growers Gain Retail Distribution for Flavored Snack
Nuts in Canada
In 2016, Blue Diamond used Market Access Program funds to support
in-store sampling demonstrations at grocery retailers throughout
Canada. As a core part of Blue Diamond's strategy in Canada, in-store
sampling allows shoppers at major retail chains to taste Blue Diamond's
flavored snack nut products while receiving literature and information
about the Blue Diamond brand, as well as the premium, value-added
almond products. This has a significant impact on convincing consumers
to become regular almond consumers, and provides strong sales to major
retail partners. Furthermore, Market Access Program activities in 2016
continue to be an essential support for Blue Diamond in Canada where
difficult price increases and limited expansion due to rising commodity
prices proved challenging during the prior year. In-store sampling
programs are a cost-effective activity that positively impact
distribution and consumer awareness. In this way, Market Access Program
funds remain vital to Blue Diamond's efforts in Canada to increase
visibility, generate consumer trial and purchase for snack nuts, and
maintain and expand key retail account listings.
Blue Diamond's in-store sampling demonstrations have already
generated good returns this year. T&T Supermarkets in Western Canada is
a new retail account listing for Blue Diamond in 2016, where Blue
Diamond flavored snack nuts are the first North American labeled almond
product stocked at six of their large supermarket locations in the
greater Vancouver region. T&T Supermarkets caters to a predominantly
Asian customer base, representing a new opportunity for Blue Diamond to
expand. During the last week of May, Blue Diamond conducted a 2 day in-
store sampling program at all six T&T Supermarket locations featuring
three different flavors of Blue Diamond's signature snack almonds.
Point of Sale (POS) materials were visible at each store, and brand
literature highlighting Blue Diamond's superior taste consistency, high
quality, and nutritious attributes were distributed to shoppers. During
the demo week alone, T&T sold 60% of the initial product cases
purchased. Since the promotion, T&T Supermarkets have purchased an
additional 55% of product for regular sales. As sampling programs
continue at this new account, Blue Diamond anticipates even greater
purchase quantities and sales figures. Market Access Program funds
remain an essential foothold for Blue Diamond in this market, where
Blue Diamond is consistently seeking to expand market opportunities and
reach new customer demographics. Furthermore, these activities support
increased product recognition, ensuring good returns for all U.S.
almond growers.
2. MAP Funds Support Blue Diamond Promotion at 7-Eleven Stores in Hong
Kong
To encourage increased consumption of snack almonds during the pre-
summer period in Hong Kong, Blue Diamond conducted an in-store
marketing campaign at 960 7-Eleven outlets from mid-May through June
2016. The widespread convenience store promotion targeted health
conscious consumers seeking a nutritious and convenient snack that is
ideal for active kids and families. Using Market Access Program funds,
Blue Diamond supported development of creative advertising materials
and off-shelf product positioning with acrylic racks. The promotions
also highlighted that Blue Diamond snack almonds are a great
accompaniment for watching summer soccer games and other popular
sporting events. By locating Blue Diamond products off-shelf, the
promotion was able to reach new consumers and generate additional brand
awareness and interest.
Blue Diamond's aggressive advertising and eye-catching Point of
Purchase materials allowed for a successful increase in sales,
achieving twice the average sales per month compared to the prior
period. This was despite an overall weak sales environment seen
throughout the rest of the retail sector in Hong Kong. Market Access
Program funds played a critical part in supporting the success of this
promotion, ultimately enabling a key C-store retailer in the market, 7-
Eleven, to remain confident in the profitability of the Blue Diamond
brand and products. Through Market Access Program funds, Blue Diamond
is able to conduct targeted promotions with important retailers,
supporting continued distribution and consumption in the market.
3. MAP Funds Support Blue Diamond Social Media Campaign in Japan
In 2016, Blue Diamond utilized Market Access Program funds to
support targeted social media promotions for the beverage Almond Breeze
in Japan. Blue Diamond launched Original and Unsweetened Almond Breeze
in Japan in 2013. In years since, Blue Diamond has conducted aggressive
product and brand promotions necessary to establish and grow this new
category. Moreover, Japan represents a challenging market for Almond
Breeze to penetrate given the significant annual influx of new products
in the beverage sector. A strong and active social media presence for
Blue Diamond Almond Breeze in Japan is a key component of the marketing
strategy. Social media sites including Facebook and Instagram are
widely used by Blue Diamond's target consumers and act as a hub for
raising brand awareness, educating on product use in recipes, directing
users to the Blue Diamond website, and allowing consumers to interact
and provide feedback to posted content. Blue Diamond Japan posts weekly
updates of recipes and photos, along with messaging around healthy and
active lifestyles to target key consumer groups.
So far in 2016, Blue Diamond has achieved 42% aided awareness among
social media users through this platform, with a target goal of
achieving 50% awareness by the end of the year. Heightened awareness on
social media continues to support strong sales. Overall, Blue Diamond
Almond Breeze now holds around 45% market share in Japan; sales in 2015
were up 102% for Almond Breeze over 2014; and projected sales for
Almond Breeze over the next 5 year period are anticipated to average
40% growth annually. Given that the brand was only introduced 3 years
prior, Blue Diamond is making positive gains in a difficult market.
Future promotions and social media activity that build on this momentum
are critical to ensure long-term market success. Furthermore, Blue
Diamond is leading the development and growth of an entire new product
category--Almond Breeze--and providing a new source of sales and
revenue for the U.S. almond industry. As such, the support of Market
Access Program funding remains an important foothold for Blue Diamond
and U.S. almonds in Japan.
4. Blue Diamond Growers Sees Increased Sales for Almond Breeze in the
United Kingdom
Blue Diamond utilizes Market Access Program funds to support key
product launches in new markets around the globe. In 2012, the United
Kingdom (UK) was one of the first international markets where Blue
Diamond launched their Almond Breeze product. In the few years since
launching, Almond Breeze has achieved success as both sales and
distribution continue to expand. In order to differentiate product,
Blue Diamond's marketing and promotions in 2016 prominently emphasize
that Blue Diamond is based in the U.S. and grows all their own almonds
used to make Almond Breeze products. This message highlights Blue
Diamond as the ``almond experts,'' and allows consumers to connect with
the popular ``farm-to-table'' trend. This marketing message is
communicated through a comprehensive, multimedia marketing campaign in
the UK that includes print and online advertising, active social media
(Instagram and Facebook), blogger partnerships, in-store
demonstrations, and trade show participation.
As of May 2016, sales for Almond Breeze in the UK are tracking at
44% higher than the same month in 2015. Similarly, overall category
growth in the UK has expanded by 47% over the last 52 weeks, indicating
further opportunity for additional sales growth going forward. In light
of the trending success with Original and Unsweetened Almond Breeze,
Blue Diamond utilized Market Access Program funds to support the launch
of the new product, Almond Breeze Barista Blend, an almond beverage
formulated specifically for use in coffee beverages. Barista Blend
premiered at the London Trade Show for Foodservice, a key event for the
cafe and foodservice sector in the market. Barista Blend will continue
to be targeted towards both the foodservice and consumer sectors. By
launching new and innovative products in international markets, Blue
Diamond remains committed to opening and developing new sources of
product revenue for the entire U.S. almond industry.
5. Blue Diamond Growers Sees Early Success for Almond Breeze in Finland
with Support from Advertising and Blog Campaigns
Blue Diamond launched Almond Breeze in Finland during 2015. To
ensure a successful first year, in 2016 Blue Diamond continued to
utilize Market Access Program funds to support print and online
advertising, as well as important blogger partnerships. These outlets
continue to be extremely effective in promoting Almond Breeze products
available in the market--Original, Unsweetened, and Barista Blend. Blue
Diamond's marketing program for Almond Breeze in Finland targets and
appeals to female consumers aged 20+ as a nutritious, flavorful, and
versatile almond beverage, ideal for use in coffee beverages,
smoothies, cooking recipes, and on its own. By securing consistent
almond product awareness and coverage through advertising and blogger
features on popular fashion and lifestyle platforms, Blue Diamond is
successfully reaching their target market.
During 2016, Market Access Program funds supported the development
and placement of half-page, color print advertisements with nine
different Finnish fashion, fitness, and lifestyle magazines. Ads
highlighted the health benefits of Almond Breeze Unsweetened--a
naturally light almond beverage containing calcium, while also
naturally free of gluten, dairy, lactose, and soy. Additionally, two of
Finland's leading online fashion and lifestyle blog sites--Lily.fi and
Mona's Daily Style--have each featured the newest product, Almond
Breeze Barista Blend, in their blog content with various recipes.
Almond Breeze Barista Blend photos and blogger reviews remain active on
both sites. Finland has witnessed a surge in home-barista trends, so
the timing of Blue Diamond's Almond Breeze Barista Blend launch,
supported through coordinated print and online promotions, has provided
Blue Diamond with ample opportunity to capture additional market share.
In fact, Barista Blend has already expanded distribution significantly,
covering both foodservice and the traditional grocery aisle. Sales for
Barista Blend are now on-par with Blue Diamond's second-leading
product, Almond Breeze Original, which is up 67% in sales and 24% in
distribution over the year prior. Almond Breeze Unsweetened remains the
leading Blue Diamond product in the Finnish market, with sales up 80%
and distribution up 59% over the year prior.
6. MAP Funds Support Blue Diamond Branded Caravan Promoting Almond
Breeze Throughout Japan
In June 2016, Blue Diamond utilized Market Access Program funds to
support the Almond Breeze caravan tour promoting Almond Breeze
throughout Japan. This marks the third year that Almond Breeze has
utilized a branded caravan in Japan to conduct outreach to consumers.
The branded caravan strategically visits Blue Diamond listed account
retailer parking spaces, farmers markets, and other consumer events to
distribute samples of Almond Breeze in smoothies, lattes, and on its
own. Supplementary communication tools distributed include recipes,
almond information fact sheets, and directives to visit the Almond
Breeze Japan website and social media sites (Facebook and Instagram).
By positioning the caravan outside of retailer and consumer food or
shopping locations, and by demonstrating the use of Almond Breeze in
various recipes, Blue Diamond is generating both increased awareness
and consumer product trial. Additionally, the activity reinforces
distribution at both listed and targeted accounts by demonstrating the
success of Blue Diamond products at key retailers. Japan continues to
be a large and dynamic market to penetrate, so Blue Diamond's
consistent marketing efforts over the first 3 years there are both
necessary and effective.
Blue Diamond launched Original and Unsweetened Almond Breeze in
Japan in 2013 as the first such nationally supported product in the
market. In years since, Blue Diamond has conducted aggressive product
and brand promotions to establish and grow this new category. The
Japanese market is one of the most dynamic and difficult markets to
penetrate with new beverage products, and Blue Diamond has achieved
early success in its first 3 years: Blue Diamond Almond Breeze holds
around 45% market share in Japan; sales for Almond Breeze during 2015
were up 102% over 2014; and sales for Almond Breeze are projected to
hit an average of 40% growth annually over the next 5 year period. Part
of Blue Diamond's early success with Almond Breeze can be attributed to
favorable consumer trends around health and wellness, particularly
among Japan's large aging population and working-age consumers who
continually seek nutritional or niche dietary products to fit modern
tastes and lifestyles.
Market Access Program funding remains critical to establishing
Almond Breeze and expanding awareness of U.S. almond products
throughout Japan. Through the support of these promotional activities,
Japanese consumers are now consuming Almond Breeze on a daily basis,
driving exports of U.S. almonds.
Attachment
USDA Export Promotion Programs Boost U.S. Farm Export Value by 15
Percent, Create Thousands of Jobs
Revised 10/11/16
Agricultural export market development programs funded through the
farm bill have contributed an average of $8.2 billion per year, a total
of more than $309 billion, to farm export revenue between 1977 and 2014
according to a new study conducted by noted land grant university
economists.
``In other words, these programs have accounted for 15 percent of
all the revenue generated by exports for U.S. agriculture over that
time. To me, such a positive result is just stunning,'' said Dr. Gary
Williams, Professor of Agricultural Economics and Co-Director of the
Agribusiness, Food, and Consumer Economics Research Center at Texas A&M
University, who led the study.
The study examined the effectiveness of the Market Access Program
(MAP) and the Foreign Market Development (FMD) program. They are part
of a public-private partnership that provides competitive grants for
export development and promotion activities to nonprofit farm and ranch
organizations that contribute funds from check-off programs and
industry support.
As a result of MAP and FMD funding, average annual farm cash income
was $2.1 billion higher, and annual average farm asset value was $1.1
billion higher over 2002 through 2014. The programs increased total
average annual U.S. economic output by $39.3 billion, GDP by $16.9
billion and labor income by $9.8 billion over the same time. The study
results also showed that the economic lift created by these programs
directly created 239,000 new jobs, including 90,000 farm sector jobs.
By testing what would happen if Federal MAP and FMD funding were
eliminated, the study showed that average annual agricultural export
revenue would be lower by $14.7 billion, with corresponding annual
average declines in farm cash income of $2.5 billion and significant
drops in GDP and jobs.
``I would say these are very successful economic development
programs based on their impact to the farm and general U.S. economy,''
Dr. Williams concluded.
The nonprofit agricultural organizations that participate in MAP
and FMD contributed about $470 million dollars per year to the programs
in 2014. That was more than 70 percent of total funding. The Federal
budget for MAP has been fixed at $200 million per year since 2006 and
FMD's $34.5 million annual budget has not changed since 2002. The
Commodity Credit Corporation programs are administered by USDA's
Foreign Agricultural Service (FAS), which is required to report to
Congress periodically on program effectiveness.
This is the third study of FAS export promotion programs since 2007
but the first to use an export demand analysis to measure their
effectiveness. MAP and FMD participating organizations U.S. Wheat
Associates, USA Poultry & Egg Export Council and Pear Bureau Northwest
sponsored the new study, which was funded by USDA FAS. Informa
Economics assembled data to support the study, recruited the team of
five agricultural economists from Texas A&M, Oregon State University
and Cornell University, interviewed dozens of MAP and FMD participants
and reported on results.
The new study identified a return on investment from these programs
between 1977 and 2014 of 28-to-1, which Dr. Williams considers quite
strong and showing consistent results with the two other MAP and FMD
studies.
``The average return on investment, or benefit to cost ratio, for
27 previous industry specific export promotion studies is just under
11-to-1,'' Dr. Williams said. ``So I was, frankly, quite surprised that
the return was this high. The previous MAP and FMD studies showed
returns of 25-to-1 in 2007 and 35-to-1 in 2010.''
Informa's report concluded that no matter what type of analysis is
used or what time period is considered, ``the results of this study and
previous studies all demonstrate the importance and effectiveness of
market promotion funding on exports, the farm economy and the overall
macro economy.''
USDA Cost-Benefit Study Contributors:
Dr. Gary Williams is Professor of Agricultural Economics and Co-
Director of the Agribusiness, Food, and Consumer Economics Research
Center (AFCERC) at Texas A&M University, College Station, Tex. He is
the AFCERC chief operations officer responsible for managing the
research program of the Center and leads AFCERC research and outreach
projects relating to commodity and agribusiness markets and policy and
international trade and policy. He is also an Associate Faculty Member
of the Department of International Affairs in the Bush School of
Government and Public Service at Texas A&M University. His areas of
teaching and research emphases include commodity promotion programs,
international agricultural trade and development, agricultural policy,
and marketing and price analysis. Dr. Williams was raised in Lubbock,
Texas and holds a Ph.D. and an M.S. degree in Agricultural Economics
from Purdue University and a B.S. in Economics from Brigham Young
University. Prior to joining the faculty at Texas A&M University in
1988, he gained experience as a professor and Assistant Coordinator of
the Meat Export Research Center at Iowa State University, Senior
Economist at Chase Econometrics, agricultural economist for the USDA,
and Special Assistant to the U.S. Deputy Under Secretary of Agriculture
for International Affairs and Commodity Programs at USDA. In recent
years, he has become particularly well known for his research on the
economic effectiveness of commodity check-off programs, including those
for soybeans, cotton, lamb, dairy, Florida orange juice, Texas citrus,
Texas pecans, and others. He is also well known for his research on
U.S. and world oilseed and oilseed product markets and the U.S.
livestock industry including issues related to sheep and lamb markets
and the effects of concentration in the beef packing industry. He
recently served as Chair of a National Academy of Science Committee on
the Status and Economic Performance of the U.S. Sheep and Lamb
Industry. He also recently served as a member of a National Academy of
Science Committee on the Future of Animal Science Research.
Dr. Jeff Reimer, Associate Professor, College of Agricultural
Sciences, Oregon State University, Corvallis, Ore. Dr. Reimer has been
with Oregon State University since 2005. His research program concerns
topics in international trade, the economics of food and agriculture,
and general equilibrium modeling. Dr. Reimer teaches courses in
agricultural price and market analysis, micro-economic theory, and
international trade. Dr. Reimer grew up on a farm in Illinois before
receiving a bachelor's degree from the University of Illinois and
spending 3 years working in agricultural development in rural
Bangladesh. After completing his doctorate in Agricultural Economics
from Purdue University in 2003, he spent 2 years as a research
associate at the University of Wisconsin-Madison. At Oregon State
University he has been major advisor for ten graduate students and been
the recipient of more than a dozen grants and contracts. He has
published more than 30 journal articles and book chapters, including in
the Journal of International Economics, Economic Inquiry, and the
American Journal of Agricultural Economics.
Dr. Rebekka M. Dudensing, Assistant Professor and Extension
Specialist, Department of Agricultural Economics, Texas A&M University.
Dr. Dudensing's responsibilities include the analysis of economic and
fiscal impacts. She also studies economic responses to natural
disasters and the roles of business and social structures in community
economic development. She has done extensive economic impact modeling
including IMPLAN I-O approaches. Much of her research is driven by the
concerns of Extension clientele with objectives to find solutions to
those local concerns and to project these issues to a wider audience
though applied research and methodological improvements. Dr. Dudensing
is particularly interested in the sustainability of agriculture- and
natural resource-dependent rural communities.
Dr. Bruce A. McCarl, University Distinguished Professor and Regents
Professor of Agricultural Economics at Texas A&M University. He
received his B.S. in Business Statistics at the University of Colorado
and Ph.D. in Management Science from Pennsylvania State University. His
recent research efforts have largely involved policy analysis (mainly
in climate change, climate change mitigation, water economics, and
biosecurity) as well as the proper application of quantitative methods
to such analyses. He teaches graduate courses in applied mathematical
programming and applied risk analysis. He was part of the 2007 Nobel
Peace Prize winning Intergovernmental Panel on Climate Change.
Dr. Harry M. Kaiser, Gellert Family Professor of Applied Economics
and Management, Cornell University, Ithaca, N.Y. Dr. Kaiser teaches and
conducts research in the areas of price analysis, marketing, and
quantitative methods. Professor Kaiser has written 114 refereed journal
articles, four books, 17 book chapters, over 150 research bulletins,
and received $8 million in research grants in these areas. Since 1994,
Professor Kaiser has been the director of the Cornell Commodity
Promotion Research Program. Much of his research focuses on the market-
wide economic effects of commodity advertising and promotion programs.
Currently, Professor Kaiser and his staff annually conduct the economic
analysis required by the U.S. Congress for the national dairy and fluid
milk processor advertising programs.
Joe Somers, Vice President, Informa IEG, Washington, D.C. Somers is
responsible for economic analyses and agricultural policy consultancy
work. He brought to Informa more than 25 years of experience with
USDA's Foreign Agricultural Service (FAS) as a Foreign Service officer
and has been a member of Informa's staff since 2002. While at FAS, he
served in Brazil and Argentina and traveled on official USDA fact-
finding trips. In Washington, D.C., he supervised and conducted world
supply/demand and trade policy analyses for a wide range of commodities
and managed publication of several analytic circulars. He also was
director of research and marketing for the GIC Group, Alexandria,
Virginia, where he was responsible for business development and
economic and market analyses. He received his bachelor's degree in
political science from Northeastern University, Boston and master's in
agricultural economics from the University of Massachusetts, Amherst.
http://www.fas.usda.gov/programs/market-access-program-map
http://www.fas.usda.gov/programs/foreign-market-development-program-
fmd
The Chairman. Thank you, Mr. Wenger. I am glad that you
clarified that almond can be pronounced almond or amond.
Mr. Wenger. Yes.
The Chairman. All this time I thought my friend and
colleague, Jeff Denham, was just talking funny. And you can
tell him I said that.
Mr. Wenger. Well, they are almonds on the tree. You have to
knock the L out of them to get them on the ground, and then
they become amonds.
The Chairman. I appreciate that clarification.
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.
I now recognize myself for 5 minutes.
Thank you all. That was very, very informative testimony
from each of you. There was a common theme throughout,
obviously, and I want to drill-down on that just a little bit
and maybe frame the question this way.
When you have declining Federal investment in these
programs, or let's just say, for example, these programs get
zeroed-out, obviously we are all going to fight against that,
but should that be the case, talk about the impact that that
would have. What is it about the Federal investment that
leverages these private dollars to the degree that it does? And
I might add, I have been very, very impressed with the amount
of increase in the private-sector dollars put towards these
promotion efforts. But obviously, there is a catalyst there.
That seed money on the Federal side is so critically important.
Drill-down on that just a little bit for us if you can, any one
of you.
Mr. Wenger. Maybe I will start. It is your responsibility
to utilize wisely taxpayer dollars. It comes from a broad
section of American taxpayers, not just in agriculture, as we
look at the farm bill, and certainly safety net-type programs
are very important. The uniqueness of MAP funding and FMD
funding is well beyond the farm. Whether I as a producer am
profitable at the end of the year, as a grower all those people
who are on the upside side for the suppliers of my inputs, they
have a place that I can utilize monies to pay for them, but
more the downside, the marketing side. You think whether it is
Blue Diamond and others, all the people from the janitors to
the clerks, and everybody else that made the packaging, the
shipping to the ports, the longshoremen, everybody is put to
work. It creates an awful lot of economic activity and wealth
for other people far beyond. I can't think of a better
investment that isn't targeted just to one individual part of
our social fabric, but it goes everywhere.
And I will just give you a quick example. Port of Oakland,
58 percent of the products, the containers going out of the
Port of Oakland, are agriculturally generated. Of that, 70
percent comes out of the farms and the fields in California.
When you think about the truckers and the longshoremen, they
are put to work because of things that you are doing with MAP
and FMD.
Mr. Alanko. I would like to follow up on that next.
The Chairman. Yes, sir.
Mr. Alanko. There are two areas that quickly come to mind
with me in the hardwood industry. One is the technical support
that we are given by AHEC. The American hardwood grading system
is very technical, and it is only used on American hardwoods.
People around the world that would utilize our hardwoods need
to be educated not only on the grades of hardwoods and how they
can be utilized, but on the various species that we have. We
have over 12 species that are commercially used around the
world.
The other is access. As I had stated earlier, with so many
new policies around the world, trade policies and regulations
on illegal logging and timber being imported into places, the
American Hardwood Export Council, the use of these funds, has
put in place some programs that allow our wood access into
areas that we could not come up with these programs without
that funding.
Mr. Seng. The area that concerns me probably the most would
be the role of the competition in the markets. There are 25
countries supplying pork to Japan today. There was a time where
we were primarily the only supplier, and maybe one from Denmark
or Canada. There are 72 countries supplying pork and beef to
China today. The European COFFERS (Combating Fiscal Fraud and
Empowering Regulators), you heard about wine here, but if you
look at their subsidy equivalence for exports, it is close to
$1.8 billion. We cannot compete if we don't have these programs
in these markets. It is as simple as that. And they compete
with us not only on quality of the product, et cetera, but we
deal with the Europeans with animal welfare issues, when it
comes to sustainability issues. There are all these other
issues that we are dealing with as far as trying to sell our
product, and our way of producing our agriculture.
To me, the role of competition, the unlevel playing field,
that is getting more unlevel as we speak, these are probably
some of the key areas that the MAP program and the FMD program
work. It gives us a chance.
The other thing, if I look at just the U.S. Meat Export
Federation, the composition of the exporting companies in our
organization, there are maybe eight companies that are over $1
billion as far as total size. This is a program for the small
holders. And we have so many companies that are just family
companies that are exporting and doing very well at it.
This is an enabling program for us to get into new markets,
not just the existing markets but new markets, and it has been
very successful. So the competition is intense. Both
competition from the private-sector and competition from
governments who are very, and more than willing to subsidize
their exporters in these endeavors.
The Chairman. Pardon me. If you had to list two countries
that are our top two competitors, those who have really amped
up their game on this front, who would that be?
Mr. Seng. Well, I would say right now, the European Union,
as a result of the closure of the Russian market, has taken new
steps as far as their entree into Asia. They have displaced the
United States, they have displaced other competitors, the
Canadians, et cetera, Japan, Korea, Philippines, Vietnam. They
have 80 percent market share in Vietnam as far as pork. I would
say also Australia has been a very formidable competitor to us
as well. They are not open to U.S. beef at this point in time,
after 13 years, but they compete very handsomely with us in a
lot of these markets.
So I would say those two countries; Australia and probably
the European Union, are two very formidable competitors right
now.
The Chairman. Thank you. My time has expired.
Mr. Costa.
Mr. Costa. Thank you very much, Mr. Chairman. I want to
make note that I concur with the comments you made earlier in
terms of the challenge that we have before us as we write the
new farm bill.
I want to, Mr. Seng, underline the comment you just made
because some of this debate here doesn't square with the facts.
The European Union is doing precisely what you said, and they
negotiate as a common market as the Union. They are not allowed
to do bilateral agreements. And by the way, our trade with the
European Union constitutes almost \1/2\ of the world's trade.
We will see what happens with the UK and what terms they end up
breaking away, if, in fact, they do, there is some debate about
that. But the fact of the matter is that we have to recognize
that different blocks around the world negotiate treaties on
that basis.
Let me just be frank with all of you. You are preaching to
the choir here with this Subcommittee and the Agriculture
Committee. We are going to need your efforts, your
organizations' efforts, and all the folks you represent out
there as we try to put this farm bill together. That is just
the bottom line. And your testimony, obviously, substantiates
the large degree of economic benefits that accrue, not just to
American agriculture, but to America's entire economy. We have
to be able to make that statement much more succinctly and
clearer.
Mr. Wenger, you did a good job in talking about some
examples in California, and we have talked many times about
this, but how do we explain in that sense to urban dwellers in
America, when we are looking at our budget this year and we are
looking at the farm bill, who might wonder what are the
benefits from using taxpayer dollars to fund these programs?
Mr. Wenger. Thank you, Mr. Costa. Just to reiterate what I
said before, as we talk about the farm bill in general, and I
say I am from agriculture, and they talk about subsidies and
other things, and this has come up from time to time to folks,
but----
Mr. Costa. It is called a subsidy by many.
Mr. Wenger. Pardon me?
Mr. Costa. It is called a subsidy by many.
Mr. Wenger. Yes, it is. And I say, well, it is interesting
that, as I said earlier, once the almonds and the walnuts leave
my farm, there are a lot of people put to work; people that are
trucking, that are processing, and the folks that work in the
different processing plants. And certainly, Blue Diamond is a
major contributor and component of our almond industry, but
there is a lot more, and those put an awful lot of people to
work every single day. And so they come to work for a salary,
and so their tax dollars, what little bit of it would go into
this type of a program for MAP funding or to help develop under
FMD, those are coming back to them, because if we take those
products and market them around the world, we are helping the
rest of the world grow richer by imports that we bring into
here. But as we see the growing middle class around the world,
the one thing that they want is agricultural products from the
United States, especially the Pacific Rim, California.
Mr. Costa. They want better nutrition, higher protein, and
we do that well.
In this highly competitive global marketplace that we live
in today, where I stated in my opening comments that the trade
is not always fair, what would be the consequences do you think
if, in the farm bill, these programs were further reduced or
eliminated? And you can all comment, Paul, but please, anyone.
Dr. Williams. I can answer some of that, at least with
numbers. We actually did that particular analysis in our study.
We simulated what would happen, what would the world look like
if these programs did not exist. And the answer is that we
would lose 240,000 jobs in any particular year, we would lose
about $39.3 billion in output in this country, $16, $17 billion
in GDP, and labor income would drop by about $10 billion. So
just on the economy side, it would be fairly devastating.
Mr. Costa. Mr. Williams, would you provide that information
to all the Members of the Subcommittee and full Committee? We
can use that to substantiate our case and enter it into the
record.
Dr. Williams. Yes, sir, I would be happy to, Mr. Costa.
[The information referred to is located on p. 107.]
Mr. Costa. Yes. The final comment or question, I don't know
who would like to take it on, but we can talk about the
European Union and how they exceed our levels in terms of
changing the level of competition, unfairly I might add. I mean
really, what a lot of these agreements are all about is trying
to level the playing field. Right? Level the playing field. So
what would you suggest as we look upon the farm bill and future
trade agreements?
Mr. Wenger. Try to be more specific. I guess we are having
a little trouble understanding. As far as this funding?
Mr. Costa. Well, as far as the funding, we are going to
have to have future trade agreements, right? I mean without
them it becomes a leverage game, and we get retaliatory tariffs
and then we get into a trade war, and that is my greatest fear.
Mr. Wenger. Well, certainly, it is a fear of all of us, in
particular in California with the various commodities we have.
Again, we have been very supportive of TPP. NAFTA, while it has
had its issues, it has still been a good trade agreement.
Certainly, TPP even fixed a few of the things that needed to be
fixed from agriculture's perspective, had TPP passed. It is
great to be able to do bilaterals, but we all know that once
you get two people together and now you try to bring in a
third, how are you are going to be able to settle that, because
everybody wants the better deal with the other one. And so in
our view, multilateral trade agreements are better. No matter
what, we have seen that because of some of the phytosanitary
issues, and nontariff trade barriers that we have been able to
use some of the TASC funds for the specialty crops to be able
to get around some of those.
So that is why, no matter what happens here in the next few
months or next couple of years on trade agreements, these kind
of funds are very, very important.
Mr. Costa. Well, and my time has expired, Mr. Chairman, but
you point out something that we all ought to keep in mind; the
nontariff trade barriers are a big, big part of facilitating
trade agreements. And that is part of the handicap that
American agriculture too often has.
The Chairman. The gentleman from Tennessee, Mr. DesJarlais.
Mr. DesJarlais. Thank you, Mr. Chairman. I appreciate all
you gentlemen being here today and giving your testimony.
Mr. Seng, I had a few questions for you. The U.S.'s ability
to work its way into the beef market in South Korea is
certainly a success story about our capabilities in becoming a
key player in foreign markets that were initially reluctant to
importing U.S. products. Following the 2008 protest in Seoul,
South Korea, against the importation of U.S. beef, we became
the top supplier by 2016. These sales even exceeded $1 billion
in 2016, which is a substantial increase over the pre-Korea
Free Trade Agreement sales levels. How are you investing in
market development in Korea, and how has that investment helped
build consumer confidence in U.S. beef?
Mr. Seng. Yes. In Korea, we work it basically from the left
to the right, if you will. There are importers, and then we
work through the whole food service establishments, and as far
as Korea, we work it to the retail, and we work it right down
to the consumers. Our programs basically are pretty profound at
the fact that they reach from the border all the way to the
consumer. And we recognize consumers vote every day, and that
was one of the issues that we had in Korea, as you know, back
in 2008. But initially in 2008, we couldn't even get an
advertising agency to say we would want to promote U.S. beef in
the market. They thought that was such a negative.
And so there has been a tremendous amount of work that was
done, and all this was done through working through the
channels, working through very judiciously developed supply
chains, which was done with the MAP program and FMD program and
industry dollars that were attracted because of those programs.
And after about 10 years of this steady persistence in the
market, that is how we did achieve this, but it is a long pull.
But, trade access, and this goes back to the earlier
question, is very important, but trade access does not
guarantee, for example, market share. Trade access does not
help remove some of the SPS barriers that we deal with that
surface when we are working in these markets. It doesn't
qualify customers, it doesn't build supply chains. All these
types of things that we are doing, you can call it soft
marketing, if you will, but these things are really what
dignify trade negotiations. And that was proven to us in Korea,
we proved the same thing in Japan, and this is really the
importance of the MAP and the FMD program is that it is that
constant commitment to the market that is unwavering, and that
is very important in the international marketplace.
Mr. DesJarlais. Okay, thank you. And most U.S. beef though
is consumed domestically. It is my understanding that Japan and
other countries in Asia have proven to be growing premium
markets for beef cuts that Americans find less desirable. What
are these cuts and what are we doing to promote them in Japan
and other Asian markets?
Mr. Seng. Well, that is what we call the fifth quarter.
There is a lot of work that has been done, for example, like
beef tongue in the United States sells for three times more
than it will in the United States. I think that is the beauty
of the export market; every pound of meat that we export is
sold for more in the international marketplace than it would be
sold here. And so what we have taken as an example is Mountain
Chain Tripe; tripe that we don't eat much in this country. It
is valued in Japan, and we will get, again, a premium of two to
three times what it costs in the United States.
So we take a look at a market, and we look at the
international marketplace like it is a mosaic, and as we look
at different countries, what kinds of products will apply to
these different countries. And this is the export success that
we have is, we have a diversified portfolio, going to almost
100 countries and maximizing the value of each cut of each item
that goes into these various markets. And that has really been
the success.
So today, the average producer in the United States that is
producing beef receives about a $275 export dividend. That is
the premium you get from the export market. It is $60 on a
market hog.
Mr. DesJarlais. Okay. And finally, in our last minute here,
China is the fastest growing beef market in the world, and we
are missing out on a crucial market share with the current ban.
Aside from market share programs, what are some other means
available so that we can continue to restore international
confidence in our beef exports to increase the likelihood China
reopens its market to U.S. beef?
Mr. Seng. That is a very tough question, because for 13
years now we have been denied access to the Chinese market. I
think that we are always trying to figure out how we can work
with the Chinese. We are working--let's say there is the closed
market of China, but the USMEF with our industry partners, are
working behind the wall, if you will. We are trying to build
clientele, we are trying to develop supply chains, we are
trying to create a demand pool from within the market, so once
that market does open up we are ensconced already in the
market. That is the same kind of example we did in Japan 30
years ago, but we think that is going to be the recipe for
success. We have to have some demand pool from the Chinese
themselves. And you are right, it is the fastest growing market
in the last 10 years; last year over $1.2 billion, 1.2 million
metric tons were exported to China.
Mr. DesJarlais. Thank you, Mr. Seng.
Mr. Seng. You bet.
Mr. DesJarlais. I yield back.
The Chairman. Thank you. I now want to move to Dwight
Evans, a new Member from Pennsylvania. Welcome to the
Subcommittee.
Mr. Evans. Thank you, Mr. Chairman. Mr. Chairman, I would
like to pick up a little bit on the question around the jobs. I
heard that you mentioned over 240,000 jobs could be effected.
When you say the 240,000 jobs, is that the jobs beyond the
agricultural sector too?
Dr. Williams. Yes. Mr. Evans, in the ag sector, and this is
agriculture and agrifood, it is 94,000 jobs, but overall
through the entire economy we are talking up to 240,000. Yes,
sir.
Mr. Evans. I also heard a question, can you speak to the
current technical assistance provided by the Technical
Assistance for Specialty Crops program that is being provided,
and the benefits of an increase in this program, can you speak
to that issue, Mr. Wenger?
Mr. Wenger. Yes, most consider that as far as the Technical
Assistance for Specialty Crops, probably if we could maintain
funding there, there is not as big of a need to increase that
funding as what we would like to see increase in MAP funding
and FMD funding.
Usually, when you take care of a sanitary/phytosanitary,
nontariff trade barrier, usually it is around inspections,
pests, and things like that, then you have solved that problem.
It is not an ongoing issue. So from our standpoint, when you
are looking at the challenged financial situation where you get
the best bang for the buck, we would say MAP funding and FMD
funding.
Mr. Evans. I would like to go back again about the jobs.
When you talk about the jobs, you talked about the aspect of
terms of the dollar impact, and repeat that again in terms of
the impact, in terms of cost aspect of what it can mean in
loss.
Dr. Williams. Jobs as well as the other impacts? Across the
entire economy, this is a multiplier effect that happens.
First, you have the impact in the ag community because there
are more exports, right, and that generates revenue within the
ag community. And then there is spending on input suppliers as
well as household spending, as well as up and down the supply
chain there is additional spending. We have more
transportation, more transportation needs more fuel, more fuel
means others working. So all the way along the supply chain
that additional revenue coming in generates jobs up and down
the supply chain. And so when I tell you there are 240,000 more
jobs, I am talking not just in agriculture, and not only up and
down the supply chain, but across the economy as that
multiplies out from agriculture through everything from
transportation to even consumer goods, because the people that
earn money as a result of that go out and spend money for
Christmas for toys and other things. So there is a whole
multiplier effect throughout the whole economy. So that is
where those jobs come from, and that is where the additional
sales output number I told you of $39.3 billion in additional
gross sales or output, because of that, all those additional
sales that happen both sort of backward linkages from
agriculture into the input industry, and forward linkages into
the rest of the economy. And GDP, that is an additional $16.9
billion in additional gross domestic product being generated as
a result of that.
So this is a phenomenon that happens not just in
agriculture, but radiates out from agriculture through the
economy as a result of spending, and additional spending, and
re-spending as those dollars multiply through and generate jobs
through the economy.
Mr. Evans. Mr. Chairman, I yield back the balance of my
time.
The Chairman. Thank you.
Mr. Marshall.
Mr. Marshall. Yes, thank you, Mr. Chairman.
I was invited last week to go back to the first farm bill
ag hearing in my home state with Senator Roberts. I was
expecting to talk about the farm bill. Probably the biggest
feverish issue was trade though. I mean it reached a fever
pitch that my ag producers are just, I hate to say panicked,
but were very, very concerned.
So I guess my first question to Dr. Williams, those finite
resources, I am trying to figure out how much money to allocate
towards Title I, towards crop insurance versus these programs.
How would you help me prioritize a little bit where to place
those monies?
Dr. Williams. Mr. Marshall, I wouldn't presume to tell you
how to spend my money----
Mr. Marshall. Yes, sir.
Dr. Williams.--but I can tell you that these particular
programs are different in the sense that not only did they help
support the ag economy and the rest of the economy, they also
return money back, so there is a return on the investment. So
these other programs, they spend and you generate some incomes
there, but this is actually a sort of investment. I think about
this as being an investment kind of program.
I believe in crop insurance. It is a critical program for
our country. I believe in the safety net programs. They are
critical for the country. But, as an important component of all
of that, you also have to have the trade aspect of our programs
working, and FMD and MAP are a critical component, according to
our research, of maintaining a viable agricultural community.
So I wouldn't say that you need to shift money out of FMD.
In fact, in my view, from my research and my background, we are
spending too little. Let me tell you why. That $28 per $1 spent
that we return back, that tells you actually that we are
spending too little. What that says is that we are leaving $28
out there that we are not getting for every $1 we are not
spending. For every $1 additional we spend, we are going to get
another $28.
Mr. Marshall. Yes. Okay. I think there is obviously some
saturation there eventually.
My next question is for Mr. Seng. Mr. Seng, we don't have a
Secretary of Agriculture confirmed, we don't have a Trade
Ambassador confirmed, and our President says we have good trade
agreements, he wants better, that he wants bilateral trade
agreements. The people that are out there in the trenches that
are in these foreign countries working for us, doing this, how
much are they being impacted by the lack of these people in
position, and how do you feel going to these bilateral trade
agreements will impact agriculture and what your people do out
there in the field?
Mr. Seng. Right. Well, it is really hard at this point in
time to understand exactly what direction the President is
leading us as far as these bilateral agreements. A lot of us
spend a lot of time, and we work with some very fine people who
worked very hard on TPP, and we could see that there was one
chapter on market access but there were 27 other chapters in
TPP.
What we are concerned about is this: And I was just in
Mexico a week ago, and what I am picking up in Mexico both from
the trade, from organizations, and from the government, is this
big area of uncertainty. People don't know what is coming.
Mr. Marshall. Right.
Mr. Seng. And without a Secretary of Agriculture, without
leadership on agriculture at this point in time, and I say that
very carefully, our buyers around the world are becoming
insecure. The hallmark of U.S. trade policy and of U.S.
diplomatic policy has always been that we look at agriculture
as probably the most important diplomatic tool that we have.
And we have said for years, going back to Kika de la Garza and
way back even before him, we have said for years that even
though you are not self-sufficient, you can be food-secure
because you can depend on the United States as a supplier. What
is being called into question now is with this uncertainty,
with what is going on especially south of the border, where
Mexico at one point in time looked north for all the sources of
their corn, soybeans, wheat, you name it, beef, pork, now they
are starting to look south. And that is the government policy
of diversification, but we are seeing the same thing when it
comes to the private-sector. And from their standpoint, it is a
food security issue.
And so all of a sudden, issues that become a question of--
it is not so much whether we sell more product here or there,
but it is a food security issue for a lot of these countries.
Mr. Marshall. Okay.
Mr. Seng. And this is something that we need to really take
into consideration.
Mr. Marshall. Okay. Border adjustment tax, is that
impacting anybody out in the field, that conversation. Does
anyone want to grab that one real quick? The concept of a
border adjustment tax, is that scaring people out in the
fields?
Mr. Wenger. Well, it is a double-edged sword, but
certainly, for a lot of folks, some of the criteria we have to
produce under, I don't think they are quite so worried about
that because with the regulations, especially in California,
that we have to deal with today when we see that we now have an
8 hour workday, 40 hour workweek in agriculture coming up, it
is mindboggling. Weather doesn't dictate an 8 hour workday, 40
hour workweek. But we see a lot of producers going to Mexico,
and so we would be competing with that product. So I would
think some people would probably relish the idea that there
would be some leveling playing field for producers who go to
Mexico, and want to bring that product in here and compete with
domestic producers.
The Chairman. Thank you, Mr. Marshall.
We are going to have votes coming up here before long, so
we are going to wrap it up here. But I want to offer an
opportunity for Mr. Costa to make any closing remarks he may
have, and then I have a few remarks myself.
Mr. Costa. Well, thank you again, Mr. Chairman, Members of
the Subcommittee. I am looking forward to this year as we
reauthorize the farm bill. And as I said to you a moment ago,
today's hearings begin to draw a line in the sand, but we
certainly cannot do this by ourselves. There is going to be
heavy lifting and a lot of these programs we understand the
validity and the importance of, but a lot of other folks do
not. And, therefore, we are going to insist in your help big
time if we are going to be successful. And I will work, in a
bipartisan way, every day I can with the Chairman of this
Subcommittee and with my colleagues on both sides of the aisle
to produce a farm bill in this Congress, because that is the
goal line.
The Chairman. Thank you, Mr. Costa.
I want to thank all the witnesses for your testimony today.
It has really, really been great. You have certainly helped to
beef-up the record on this particular issue.
And in closing, I want to share a little example. As some
of you may know, I served in the state legislature, in the
State Senate specifically, for two terms. I was in the Minority
my first term, in the Majority my second term. And the second
term in the Majority, I co-chaired what was known as the NAR
Subcommittee, which those of you up here would know as
Agriculture Appropriations in Washington, D.C., here on Capitol
Hill. When I was Chairman, we included $300,000 of seed money
for market promotion for sweet potatoes, specifically in
Europe. And we went from roughly, I believe, $42 million
exported to Europe, to now today with that recurring funding of
$300,000 to $500,000, I believe the total exports are about
$124 million or so. That is a substantial return on investment
that is really just a microcosm or small example of the much
bigger picture here. And so we need to do everything we can to
ensure that these programs remain funded, and hopefully
increase the amount of mandatory funding that we can get to
them, because we are going to reap the results and the benefits
many times over the investment. And so anything and everything
that you all can do, outside groups and farmers and ranchers
all across the country, even those who pronounce almond amond,
we need everybody's help. And I implore you to do everything
possible to maximize our leverage on that front.
With that, under the Rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplementary written responses
from the witness to any question posed by a Member.
This hearing of the Subcommittee on Livestock and Foreign
Agriculture is adjourned.
[Whereupon, at 3:41 p.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Supplelmentary Information Submitted by Gary W. Williams, Ph.D.,
Professor of Agricultural Economics and Co-Director, Agribusiness,
Food, and Consumer Economics Research Center, Department of
Agricultural Economics, Texas A&M University
In the hearing of the Subcommittee on Livestock and Foreign
Agriculture on February 28 (The Next Farm Bill: International Market
Development), Ranking Member Costa requested additional information on
the likely consequences of eliminating or substantially reducing the
funding for the USDA MAP and FMD programs. In response, I have attached
the results of our analysis of the consequences of eliminating those
programs for U.S. agricultural exports, the U.S. farm economy, and the
overall general U.S. economy entitled: ``Economic Consequences of
Eliminating Funding for USDA Export Market Development Programs''.
To help respond to questions by other Subcommittee Members, I have
attached two more files summarizing other key results from our study of
the USDA Export Market Development Programs:
``Economic Consequences of Increased Funding for the USDA
Export Market Development Programs''[; and]
``Historical Benefits of USDA Export Market Development
Programs''.
Please let me know if I can be of further service to the
Subcommittee.
Dr. Williams.
Insert 1
Dr. Williams. I can answer some of that, at least with
numbers. We actually did that particular analysis in our study.
We simulated what would happen, what would the world look like
if these programs did not exist. And the answer is that we
would lose 240,000 jobs in any particular year, we would lose
about $39.3 billion in output in this country, $16, $17 billion
in GDP, and labor income would drop by about $10 billion. So
just on the economy side, it would be fairly devastating.
Mr. Costa. Mr. Williams, would you provide that information
to all the Members of the Subcommittee and full Committee? We
can use that to substantiate our case and enter it into the
record.
Dr. Williams. Yes, sir, I would be happy to, Mr. Costa.
Economic Consequences of Eliminating Funding for the USDA Export Market
Development Programs
U.S. economic losses that would occur from completely eliminating
USDA Market Development Programs (FMD/MAP funding) with cooperators
responding by cutting their funding of export promotion by 50% (see
Tables 1 and 2)\1\ based on recent research study:\2\
---------------------------------------------------------------------------
\1\All changes relative to flat funding over 5 years (continued
current levels of authorized funding over 5 years).
\2\Williams G.W., J.J. Reimer, R.M. Dudensing, B.A. McCarl, H.M.
Kaiser, J. Somers, ``Economic Impact of USDA Market Development
Programs,'' Informa Economics, IEG, Prepared for U.S. Wheat Associates,
USA Poultry & Egg Export Council, Pear Bureau Northwest, and the USDA
Foreign Agriculture Service, June 2016. Available on-line at: http://
www.agexportscount.com/developing-markets/.
---------------------------------------------------------------------------
U.S. Agricultural Export Losses
Annual average loss of $14.7 billion (7.9%) in U.S.
agricultural export value.
Loss of $235.2 billion in export value over a 15 year
period.
U.S. Agricultural Sector Losses\3\
---------------------------------------------------------------------------
\3\The range of losses refers to the results from conducting the
analysis under two alternative assumptions--full employment and less
than full employment. The smaller losses are generally associated with
the full employment assumption.
---------------------------------------------------------------------------
Annual average losses:
U.S. farm cash receipts: Between $7.0 billion (2.2%)-
$9.9 billion (3.1%)
U.S. net cash farm income: Between $2.4 billion
(3.7%)-$2.5 billion (3.8)
U.S. farm asset value: Between $0.7 billion (0.03%)-
$1.3 billion (0.1%).
Losses in employment (full and part-time jobs) in the
agrifood sector (food product processing as well as production
agriculture):
64,400 jobs (1.7%)--102,800 jobs (2.6%)
U.S. Economy Losses
Average annual losses:
U.S. economic output (sales): Between $3.6 billion
(0.01%)-$45.3 billion (0.2%)
U.S. GDP: Between $2.6 billion (0.02%)-$19.5 billion
(0.1%)
U.S. labor income: Between $0.9 billion (0.01%)-$11.3
billion (0.1%).
Losses in U.S. employment (full and part-time jobs):
Up to 278,600 full- and part-time jobs across the
entire economy (0.2%).
U.S. regional annual average losses (see Table 2):
Northeast: $2.02 billion in sales, $841.5 million in
GDP, and $483.1 million in labor income
South: $8.85 billion in sales, $3.48 billion in GDP,
and $2.05 billion in labor income
Midwest: $15.93 billion in sales, $6.43 billion in
GDP, and $3.68 billion in labor income
West: $6.97 billion in sales, $3.25 billion in GDP,
and $1.97 billion in labor income
U.S. regional average employment losses (see Table 2):
Northeast: 10,800 jobs
South: 64,500 jobs
Midwest: 94,100 jobs
West: 44,700 jobs
Table 1: Average Annual Losses by the U.S. Farm Sector and General
Economy from Eliminating USDA Export Market Development Fundinga
------------------------------------------------------------------------
Less than Full Employment Full Employment
----------------------------------------------------
Sector Average Percent Average Percent
Annual Loss Loss Annual Loss Loss
------------------------------------------------------------------------
Agriculture Sector $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
Farm cash receipts 9.9 3.1 7.0 2.2
Net cash farm 2.5 3.8 2.4 3.7
income
Farm assets 1.3 0.1 0.7 0.03
1,000 jobs 1,000 jobs
Employment in 102.8 2.6 64.4 1.7
agrifood sectorb
------------------------------------------------------------------------
U.S. Economy $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
U.S. Output (Gross 45.3 0.2 3.6 0.01
Sales)
U.S. GDP 19.5 0.1 2.6 0.02
U.S. Labor Incom11.3 0.1 0.9 0.01
1,000 jobs 1,000 jobs
U.S. Employmentb 278.6 0.20 -- --
------------------------------------------------------------------------
Note: -- = No change since labor is always fully employed. See Note b.
aAssumes that cooperator groups respond by cutting back their funding of
export promotion by 50%. All changes shown are averages over a 5 year
period relative to the flat funding base value (2010) which is the
average annual level of a variable in the absence of the promotion
program.
bIn the full employment analysis, by definition all labor is always
fully employed so while labor can be shifted from one industry to
another, the total employment is not allowed to change. In the less-
than-full-employment scenario, employment can increase as labor shifts
among industries but also because labor can be hired from the ranks of
the unemployed.
Table 2: Average Annual Losses by the U.S. Farm Sector and General
Economy from Eliminating USDA Export Market Development Funding by
Census Regiona
------------------------------------------------------------------------
Northeast South Midwest West
------------------------------------------------------------------------
millions of $U.S. (2010)
------------------------------------------------------------------------
Output (Gross 2,022.8 8,845.5 15,931.6 6,969.1
Sales)
GDP 841.5 3,480.7 6,432.2 3,248.0
Labor Inco483.1 2,051.6 3,679.0 1,965.0
------------------------------------------------------------------------
thousands of jobs
------------------------------------------------------------------------
Employment 10.8 64.5 94.1 44.7
(thousands of
jobs)
------------------------------------------------------------------------
aAssumes that cooperator groups respond by cutting back their funding of
export promotion by 50%. Analysis assumes less than full employment.
Full employment is not necessarily a useful concept in a regional
context since labor can flow from one region to another easily given a
change in demand in some region.
Insert 2
Economic Consequences of Increased Funding for the USDA Export Market
Development Programs
U.S. economic benefits that would occur from increasing funding for
the USDA Market Development Programs (FMD/MAP funding) over a 5 year
period under two alternative increased funding scenarios as reported in
a recent research report\1\ are listed below.
---------------------------------------------------------------------------
\1\Williams G.W., J.J. Reimer, R.M. Dudensing, B.A. McCarl, H.M.
Kaiser, J. Somers, ``Economic Impact of USDA Market Development
Programs,'' Informa Economics, IEG, Prepared for U.S. Wheat Associates,
USA Poultry & Egg Export Council, Pear Bureau Northwest, and the USDA
Foreign Agriculture Service, June 2016. Available on-line at: http://
www.agexportscount.com/developing-markets/.
---------------------------------------------------------------------------
The two future funding scenarios simulated:
Scenario 1: Government expenditures for MAP and FMD doubled
over 5 years through annual increments of $46.9 million to a
total of $469 million (double the base year) with cooperator
contributions increasing approximately 10% in the first year to
$515.6 million and then remaining flat at that level for the
following 4 years.
Scenario 2: Government expenditures for MAP and FMD again
doubled over 5 years as in the first scenario but cooperator
contributions increased by 50% over that period through annual
increases of $46.9 million for a total of $703.6 million by the
end of the 5 year period.
Economic benefits that would accrue under the two scenarios as
illustrated in Figure 1 and shown in Tables 1 and 2:\2\
---------------------------------------------------------------------------
\2\All changes are relative to flat funding over 5 years (continued
current levels of authorized funding). Also, changes in text refer to
an assumption of less than full employment. Tables 1 and 2 show the
changes under the assumptions of both full and less-than-full
employment.
---------------------------------------------------------------------------
Export gains would be substantial under both scenarios.
Average annual gain in U.S. agricultural exports: $3.4
billion and $4.5 billion under Scenarios 1 and 2,
respectively (Figure 1). Five year gain of $17.1 billion
and $22.5 billion, respectively, under the two scenarios.
Returns to farmer and taxpayer dollars invested would be
high:
Scenario 1: Benefit-cost ratio (BCR) of $18.2 for
every additional dollar invested in export market
development.
Scenario 2: BCR of $16 for every additional dollar
invested in export market development.
Gains to the farm economy would be equally substantial under
both scenarios.
U.S. farm cash receipts: Average annual gains of up to
$2.2 billion under Scenario 1 and up to $2.9 billion under
Scenario 2. Total contribution over 5 years of up to $11.1
billion under Scenario 1 and $14.6 billion under Scenario
2.
U.S. net cash farm income: Average annual gains of up
to $0.5 billion and $0.7 billion, respectively, under the
two scenarios. Five year gains of up to $2.7 billion and
$3.5 billion under the two scenarios, respectively.
U.S. farm asset values: Average annual gains of up to
$0.29 billion and $0.4 billion, respectively, under the two
scenarios, Five year gains of up to $1.5 billion and $1.9
billion, respectively.
Agrifood Sector Employment: A contribution of up to
24,200 new jobs under Scenario 1 and up to 31,900 new jobs
under Scenario 2.
The overall U.S. economy would experience a substantial
multiplier effect from the farm economy boost under both
scenarios.
U.S. economic output (sales): Average annual gains of
up to $10.6 billion and $14.0 billion under the two
scenarios, respectively. Five year gains of up to $53.1
billion and $70.0 billion under the two scenarios,
respectively.
U.S. GDP: Average annual gains of up to $4.5 billion
and $6.0 billion under the two scenarios, respectively.
Five year gains of up to $22.7 billion and $30.0 billion,
respectively, under the two scenarios.
U.S. labor income: Average annual gains of up to $2.6
billion and $3.5 billion under the two scenarios,
respectively. Five year gains of up to $13.1 billion and
$17.5 billion under the two scenarios, respectively.
U.S. employment (full and part-time jobs):
Contribution of up to 64,000 new jobs under Scenario 1 and
up to 84,600 new jobs under Scenario 2.
Figure 1: Simulated Annual Gains in U.S. Export Revenue Achieved Under
USDA Export Market Development Funding Scenarios 1 and
2a
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
*10% increase in first year over baseline and then flat for
next 4 years.
aChanges relative to flat funding over 5 years
(continued current levels of authorized funding).
Table 1: Scenario 1--Average Annual Gains by the U.S. Farm Sector and
General Economy from Increased USDA Export Market Development Fundinga
------------------------------------------------------------------------
Less than Full Employment Full Employment
----------------------------------------------------
Variable Average Percent Average Percent
Annual Gain Gain Annual Gain Gain
------------------------------------------------------------------------
Agriculture Sector $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
Farm cash receipts 2.2 0.7 1.8 0.6
Net cash farm 0.5 0.8 0.5 0.9
income
Farm assets 0.29 0.01 0.19 0.01
1,000 jobs 1,000 jobs
Employment in 24.2 0.6 17.2 0.4
agrifood sectorb
------------------------------------------------------------------------
U.S. Economy $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
U.S. Output (Gross 10.6 0.04 1.3 0.005
Sales)
U.S. GDP 4.5 0.03 0.8 0.006
U.S. Labor Income2.6 0.03 0.3 0.004
1,000 jobs 1,000 jobs
U.S. Employmentb 64.0 0.04 -- --
------------------------------------------------------------------------
Note: -- = No change since labor is always fully employed. See Note b.
aAll changes shown are averages over a 5 year period relative to the
flat funding base value (2010) which is the average annual level of a
variable in the absence of the promotion program.
bIn the full employment analysis, by definition all labor is always
fully employed so while labor can be shifted from one industry to
another, the total employment is not allowed to change. In the less-
than-full-employment scenario, employment can increase as labor shifts
among industries but also because labor can be hired from the ranks of
the unemployed.
Table 2: Scenario 2--Average Annual Gains by the U.S. Farm Sector and
General Economy from Increased USDA Export Market Development Fundinga
------------------------------------------------------------------------
Less than Full Employment Full Employment
----------------------------------------------------
Variable Average Percent Average Percent
Annual Gain Gain Annual Gain Gain
------------------------------------------------------------------------
Agriculture Sector $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
Farm cash receipts 2.9 0.9 2.3 0.7
Net cash farm 0.7 1.1 0.7 1.1
income
Farm assets 0.4 0.02 0.3 0.01
1,000 jobs 1,000 jobs
Employment in 31.9 0.8 22.7 0.6
agrifood sectorb
------------------------------------------------------------------------
U.S. Economy $U.S. % $U.S. %
billions billions
------------------------------------------------------------------------
U.S. Output (Gross 14.0 0.06 1.7 0.007
Sales)
U.S. GDP 6.0 0.04 1.1 0.007
U.S. Labor Income3.5 0.04 0.4 0.005
1,000 jobs 1,000 jobs
U.S. Employmentb 84.6 0.05 -- --
------------------------------------------------------------------------
Note: -- = No change since labor is always fully employed. See Note b.
aAll changes shown are averages over a 5 year period relative to the
flat funding base value (2010) which is the average annual level of a
variable in the absence of the promotion program.
bIn the full employment analysis, by definition all labor is always
fully employed so while labor can be shifted from one industry to
another, the total employment is not allowed to change. In the less-
than-full-employment scenario, employment can increase as labor shifts
among industries but also because labor can be hired from the ranks of
the unemployed.
Insert 3
Historical Benefits of USDA Export Market Development Programs
The benefits of the USDA Export Market Development Programs (FMD/
MAP) over history on U.S. agricultural exports, the U.S. agricultural
sector, and the broader U.S. economy according to a recent study\1\ are
listed below and summarized in Tables 1 and 2:
---------------------------------------------------------------------------
\1\Williams G.W., J.J. Reimer, R.M. Dudensing, B.A. McCarl, H.M.
Kaiser, J. Somers, ``Economic Impact of USDA Market Development
Programs,'' Informa Economics, IEG, Prepared for U.S. Wheat Associates,
USA Poultry & Egg Export Council, Pear Bureau Northwest, and the USDA
Foreign Agriculture Service, June 2016. Available on-line at: http://
www.agexportscount.com/developing-markets/.
---------------------------------------------------------------------------
U.S. Agricultural Export Benefits (1977-2014)
Annual average addition of 15.3% ($8.15 billion) to the
value of U.S. agricultural exports, 8.0% (11.5 million mt) to
the volume of aggregate U.S. agricultural exports, and about
6.7% ($25.07/mt) to the aggregate price of U.S. agricultural
exports.
A total of $309.7 billion in additional export revenues and
437 million metric tons of additional export volume over the
entire period.
Net export revenue benefit-cost ratio (BCR) of 28.3. That
is, over their history, the programs have generated a net
return of $28.30 in additional export revenue for every dollar
invested in export promotion.
U.S. Agricultural Sector Benefits (2002-2014)
Two scenarios were considered: (1) full employment (full) and (2)
less than full employment (less). Benefits of the USDA Export Market
Development Programs under the two scenarios:
Annual average additions:
U.S. farm cash receipts: $8.4 billion (2.7%) (full)
and $8.7 billion (2.8%) (less).
U.S. net cash farm income: $1.1 billion (1.8%) (full)
and $2.1 billion (3.7%) (less).
U.S. farm asset value: $1.0 billion (0.05%) (full) and
$1.1 billion (0.1%) (less).
Total additions over the entire 2002-14 period:
U.S. farm cash receipts: $109.2 billion (full) to
$113.1 billion (less)
U.S. net cash farm income: $14.3 billion (full) and
$27.3 billion (full)
U.S. farm asset value: $13.0 billion (full) and $14.3
billion (less).
Contribution to employment (full and part-time jobs) in the
agrifood sector (food product processing as well as production
agriculture):
93,900 (2.4%) jobs (less) and 90,000 (2.3%) jobs
(full)
U.S. Economy Benefits (2002-2014)
The full employment (full) and less than full employment (less)
scenarios considered here as well. Benefits of the USDA International
market Development Programs under the two scenarios:
Average annual additions of U.S. economic activity:
U.S. economic output (sales): $7.1 billion (full) and
$39.3 billion (less)
U.S. GDP: $4.4 billion (full) and $16.9 billion (less)
U.S. labor income: $1.7 billion (full) and $9.8
billion (less).
Total additions to the U.S. economy over the entire 2002-14
period:
U.S. economic output (sales): $510.9 billion (full)
and $92.3 billion (less)
U.S. GDP: $219.7 billion (full) and $92.3 billion
(full)
U.S. labor income: $22.1 billion (full) and $127.4
billion (less)
Contributions to U.S. employment (full and part-time jobs):
Up to 239,800 full- and part-time jobs across the
entire economy.
Reduction in U.S. unemployment by up to 3.0%.
GDP contribution (average annual) by industry (Table 2):
Service industry: $1.89 billion (full) and $7.20
billion (less)
Agriculture and agribusiness: $1.47 billion (full) and
$5.62 billion (less)
Wholesale and Retail trade: $0.37 billion (full) and
$1.40 billion (less)
Other: $0.70 billion (full) and $2.68 billion (less)
Table 1[a]: Average Annual Historical Gains by U.S. Agriculture Sector and General U.S. Economy from the USDA
Export Market Development Programs, 2002-2014
----------------------------------------------------------------------------------------------------------------
Less than Full Employment Full Employment
-------------------------------------------------------------------------------
Sector Average Annual Average Annual
Gain Percent Change Gain Percent Change
----------------------------------------------------------------------------------------------------------------
Agriculture Sector $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
Farm cash receipts 8.4 2.7 8.7 2.8
Net cash farm income 2.1 3.7 1.1 1.8
Farm assets 1.1 0.1 1.0 0.05
1,000 jobs 1,000 jobs
Employment in agrifood sectorb 93.9 2.4 90.0 2.3
----------------------------------------------------------------------------------------------------------------
U.S. Economy $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
U.S. Output (Gross Sales) 39.3 0.2 7.1 0.03
U.S. GDP 16.9 0.1 4.4 0.03
U.S. Labor Income 9.8 0.1 1.7 0.02
1,000 jobs 1,000 jobs
U.S. Employmentb 239.8 0.14 -- --
----------------------------------------------------------------------------------------------------------------
Note: -- = No change since labor is always fully employed. See Note b.
aAll changes shown are annual average contributions to the historical average value over the period of 2002-
2014.
bIn the full employment analysis, by definition all labor is always fully employed so while labor can be shifted
from one industry to another, the total employment is not allowed to change. In the less-than-full-employment
scenario, employment can increase as labor shifts among industries but also because labor can be hired from
the ranks of the unemployed.
Table 1[b]: Average Annual Historical Contributions of USDA Export Market Development Programs to the U.S.
Agriculture Sector and General U.S. Economy, 2002-2014
----------------------------------------------------------------------------------------------------------------
Base average Less than Full Employment Full Employment
Variable valuea (2002- ------------------------------------------------------------------
2014) Change Percent Change Change Percent Change
----------------------------------------------------------------------------------------------------------------
Agriculture Sector $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
Farm cash receipts 310.2 8.4 2.7 8.7 2.8
Net cash farm income 58.0 2.1 3.7 1.1 1.8
Farm assets 2,081.2 1.1 0.1 1.0 0.05
1,000 jobs 1,000 jobs 1,000 jobs
Employment in agrifood 3,900.4 93.9 2.4 90.0 2.3
sectorb
----------------------------------------------------------------------------------------------------------------
U.S. Economy $U.S. billions $U.S. billions % $U.S. billions %
----------------------------------------------------------------------------------------------------------------
U.S. Output (Gross Sales) 25,070.0 39.3 0.2 7.1 0.03
U.S. GDP 14,785.6 16.9 0.1 4.4 0.03
U.S. Labor Incom9,017.0 9.8 0.1 1.7 0.02
1,000 jobs 1,000 jobs 1,000 jobs
U.S. Employmentb 173,414.20 239.8 c0.14 -- --
----------------------------------------------------------------------------------------------------------------
Note: -- = Not available as an output from this analysis. See Note a.
aThe ``base value'' for a variable is the average annual level of that variable in the absence of the promotion
program.
bIn the full employment analysis, by definition all labor is always fully employed so while labor can be shifted
from one industry to another, the total employment is not allowed to change. In the less-than-full-employment
scenario, employment can increase as labor shifts among industries but also because labor can be hired from
the ranks of the unemployed.
Table 2: Average Annual Historical GDP Contribution of USDA Export
Market Development Programs by Sector, 2002-2014a
------------------------------------------------------------------------
Less than full
Sector employment Full employment
------------------------------------------------------------------------
$U.S. billions (2010)
------------------------------------------------------------------------
Production Agriculture and $4.10 $1.07
Support Industries
Food Processing $1.50 $0.39
Other Agriculture Product $0.02 $0.01
Processing
Mining, Energy, and $0.80 $0.21
Utilities
Construction and Maintenance $0.10 $0.03
Other Manufacturing $1.10 $0.29
Wholesale and Retail Trade $1.40 $0.37
Transportation and $0.60 $0.16
Warehousing
Services $7.20 $1.89
-------------------------------------------
Total..................... $16.90 $4.43
------------------------------------------------------------------------
aIn the full employment analysis, by definition all labor is always
fully employed so while labor can be shifted from one industry to
another, the total employment is not allowed to change. In the less-
than-full-employment scenario, employment can increase as labor shifts
among industries but also because labor can be hired from the ranks of
the unemployed.
______
Supplelmentary Information Submitted by Tim Hamilton, Executive
Director, Food Export Association of the Midwest USA and Food Export
USA--Northeast
The Case for Increased Funding for USDA Foreign Agricultural Service
(FAS) Export Market Development Programs
January 2017
In order to bolster U.S. international market development efforts,
further boost U.S. agricultural exports, and help U.S. agriculture and
related businesses in rural America prosper, the Coalition to Promote
U.S. Agricultural Exports and the Agribusiness Coalition for Foreign
Market Development strongly believe that Market Access Program (MAP)
funding should be increased to $400 million annually and Foreign Market
Development (FMD) program funding to $69 million annually, with the
increases phased in as part of the next farm bill.
Agricultural exports are one of the brightest lights in the U.S.
economy, with a strong multiplier effect that is especially pronounced
in rural communities. According to USDA's Economic Research Service
(ERS):
The $150 billion in U.S. agricultural exports that occurred
in 2014 produced an additional $190 billion in economic
activity for a total of $340 billion of economic output;
Those agricultural exports supported 1.1 million full time
U.S. civilian jobs, including 800,000 in the non-farm sector
(73% of the total employment effect) required to assemble,
process and distribute agricultural products for exports; [and]
This represents 7,550 jobs for every $1 billion of
agricultural export revenue.
Agricultural export market development depends on long-standing,
successful partnerships between nonprofit U.S. agricultural trade
associations, farmer cooperatives, nonprofit state-regional trade
groups, small businesses, and USDA to share the costs of overseas
marketing and promotional activities such as market research, trade
shows, trade servicing, and retail and educational promotions.
Under the MAP and the FMD program, administered by USDA's Foreign
Agricultural Service (FAS), these private-sector groups contribute an
estimated $468.7 million annually, primarily from check-off programs,
into international market development and promotion. In fact, industry
contributions, which are leveraged by public funds, represent more than
70% of the buying power of the programs.
Highly Successful Investments
A 2016 econometric study of export demand by Informa Economics IEG,
working with Texas A&M University and Oregon State University
economists, showed that between 2002 and 2014:
A return on investment by MAP and FMD of a remarkable $24 in
export gains for every additional $1 spent on foreign market
development, consistent with results from several previous
studies;
A dramatic average annual increase in farm income of $2.1
billion because of program activities; [and]
Creation of 239,000 new full and part-time jobs related to
the programs.
Federal funding for MAP was last increased in the 2002 Farm Bill,
reaching $200 million annually in 2006. Federal funding for the FMD
program was last increased in the 2002 Farm Bill to $34.5 million
annually. Since the last increases were approved, the size of the
foreign agricultural market that those funds are meant to develop has
more than tripled to more than $800 billion a year.
Diminished Buying Power at a Crucial Time for Agriculture
Despite a tremendous growth in U.S. agricultural exports and
opportunities for farmers and small businesses abroad, the real,
effective Federal funding that reaches the agricultural cooperators
carrying out market development work has steadily eroded even while
international competitors continue to greatly outspend us.
Looking just at the FY16 FAS allocation of MAP and FMD funding, the
factors that have caused the erosion include:
Sequestration in FY16 reduced annual, available MAP funding
by $13.6 million and FMD funding by $2.4 million.
USDA administrative expenses in FY16 reduced available MAP
and FMD program funds by $6.6 million.
Since the 2002 Farm Bill was enacted, inflation and a
depreciated U.S. dollar have reduced the real, effective
promotional power of U.S. agricultural market development
programs by almost 30 percent.
FAS reserves $3.5 million for Global Broad-based Initiatives
(GBIs) involving multiple cooperators. While extremely valuable
and strongly supported by cooperators, GBIs nonetheless reduce
the total available MAP funding for individual cooperator
programs.
The result is fewer dollars for actual programs, even while demand
for the benefits these programs provide increases.
In FY17, just $173.5 of the $200 million MAP appropriation was
allocated to the 68 nonprofit commodity organizations participating in
the program. Just $26.6 million of the FMD appropriation was allocated
to the 23 nonprofit commodity organizations participating in the
program. Taking inflation into account, that means the $200.1 million
total that FAS awarded for MAP and FMD in FY17 had an actual
promotional power of only $140.1 million.
Other Important Considerations
With growing global food demand, MAP and FMD participants
have the opportunity to service more customers who seek to buy
an increasing volume and variety of products. In fact, since
the 2002 Farm Bill, overall agricultural imports of the
overseas markets that U.S. exports are competing for rose by
more than 330 percent, from $247 billion in 2002 to $834
billion. This significant increase in market size, combined
with the diminished purchasing power of MAP and FMD funding
since 2002, means that our producers are not well equipped to
take on more aggressive foreign competition.
New demands on MAP and FMD funding related to work on non-
tariff trade barriers, while reflecting the collaborative work
that cooperators often do to supplement efforts of FAS and
other regulatory agencies, puts greater strain on funding that
in the past went exclusively to market development and
promotion activities.
A 2015 survey of the cooperators showed that they could
readily make effective use of a considerable increase in MAP
and FMD funding. In addition, more nonprofit producer groups
are establishing national organizations and are anxious to
apply for program funding. Greater demand will be placed on the
fixed program funds as more organizations become eligible to
apply for MAP and FMD.
Competitors in foreign countries receive substantially more
public support than is provided to U.S. agricultural exporters.
A 2013 study showed that in 2011, competing government support
for agricultural exports from just 12 countries and the EU
Central Government (not including individual member states) was
$700 million per year. For comparison, the U.S. budgets
approximately $235 million annually in public funds through MAP
and FMD for agricultural export promotion and market
development. A 2016 study of competitive agricultural export
market development investments showed that the EU allocates
$255 million annually just to promote wine.
Greater Investment Is Needed
Dr. Gary Williams of Texas A&M University, the lead economist of
the 2016 study measuring the effectiveness of MAP and FMD, said the
data indicated that additional funding for these programs would
generate incremental positive gains. As cooperators look at how best to
leverage limited funds, MAP and FMD are considered an excellent match
to their industry dollars and, if increased, would likely lead to
increased investment from industry, thus further enhancing the overall
reach and impact of the program.
______
Submitted Question
Response from Gary W. Williams, Ph.D., Professor of Agricultural
Economics and Co-Director, Agribusiness, Food, and Consumer
Economics Research Center, Department of Agricultural
Economics, Texas A&M University*
---------------------------------------------------------------------------
*There was no response from the witness by the time this hearing
was published.
---------------------------------------------------------------------------
Question Submitted by Hon. Stacey E. Plaskett, a Delegate in Congress
from Virgin Islands
Question. Last year, the Department of Agriculture requested a $1.5
million appropriation for Foreign Agricultural Service staffing at the
United States Embassy in Havana, Cuba. This was approved by the Senate
Appropriations Committee in their bill to fund Agriculture Department
activities over this fiscal year.
To the knowledge of your research center, what restrictions
currently apply to the Market Access Program and the Foreign Market
Development Program regarding use of their funding to promote
agricultural exports to Cuba?
Answer.
THE NEXT FARM BILL
(RURAL DEVELOPMENT AND ENERGY PROGRAMS)
----------
THURSDAY, MARCH 9, 2017
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,
Goodlatte, Davis, Comer, Marshal, Faso, David Scott of Georgia,
Kuster, Plaskett, O'Halleran, Soto, and Peterson (ex officio).
Staff present: Darryl Blakey, Emily Wong, Haley Graves,
John Weber, Josh Maxwell, Paul Balzano, Stephanie Addison, Evan
Jurkovich, Liz Friedlander, Troy Phillips, Faisal Siddiqui,
John Konya, and Carly Reedholm.
OPENING STATEMENT OF HON. AUSTIN SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
The Chairman. Well, good morning everyone. Welcome to the
Commodity Exchanges, Energy, and Credit Subcommittee's first
hearing of the new Congress. Today's hearing is part of an
ongoing series where each Subcommittee is holding at least two
hearings to discuss the farm bill programs and issues under its
respective jurisdiction.
Before I go any further, I would like welcome Mr. Comer to
his first meeting of the Subcommittee, and to the Subcommittee.
David, were all of your people on the Subcommittee last year?
Mr. David Scott of Georgia. No, we have two new Members,
Mr. Chairman. And I would like to welcome our new Members who
are on their way to our hearing. First, Tom O'Halleran from
Arizona. He serves in Arizona's First Congressional District.
It is good to know a little about his background. He is a
former homicide detective, small business owner, what a
combination, and served three terms in the Arizona House of
Representatives and one in the Senate.
We also have Mr. Darren Soto from Florida, District Nine.
Serves Florida's Ninth Congressional District, which is a
prominent citrus and cattle district. He served in the Florida
Legislature for a decade before coming to Congress.
And so we welcome all our new Members, and look forward to
working with each and every one of them.
The Chairman. I want to thank you, Ranking Member Scott,
for again agreeing to serve in the leadership of this
Subcommittee. I look forward to working with you again. We have
had a good relationship for many years, long before I came to
Congress, going back to our time together in the state
legislature.
Mr. David Scott of Georgia. Absolutely.
The Chairman. We have a couple of other Members that will
be joining us later. I know we have Representative Roger
Marshal from Kansas' First District, and Representative John
Faso from New York's 19th District on the Republican side.
Today, we are going to be reviewing the rural development
and energy programs in the 2014 Farm Bill. These programs
support infrastructure construction, encourage capital
formation, and help to promote economic development across
rural America.
It is appropriate that this is the topic of the first
hearing in support of the next farm bill. So much of what rural
America will be able to accomplish over the next decade will be
tied to how well these programs work.
Every day our young rural citizens look around them, assess
their lives, and try to make the best choices they can about
their future. Unfortunately, too many feel that they have more
opportunities somewhere else, and when they leave, they leave
behind hollowed-out communities that grow older, that become
less adaptable, and that are unable to maintain their quality
of life that so many of us has enjoyed.
With today's hearing, we will begin to examine ways we can
reverse that cycle.
For many rural communities, rural development initiatives
help to offset the high fixed costs of providing basic services
like clean water, reliable electricity, and universal phone
service. Residents of these communities simply would not be
able to afford to live there without these key investments.
Federal support for infrastructure remains a key part of our
commitment to rural America. But, our commitment to rural
America is not just about new pipes and wires. While we often
think of progress as a new powerline, a new water treatment
plant, or a new broadband connection, real progress is about
expanding opportunities. We must use these programs to narrow
the divide between rural and urban America.
Upgrading water and energy infrastructure can improve
quality of life, while bringing new employment opportunities.
Building a new health center can bring new care for families.
Installing broadband can bring new ideas to students and
innovation to farmers and ranchers. Renewable energy
development can create valuable markets and income
opportunities for farmers, keeping them on the land, and viable
domestic energy policies can create new job opportunities in
rural communities. Providing investment capital can further
link agricultural producers with the global economy. The jobs,
the health care, the ideas, and the market access are the real
measures of progress for rural America.
For almost 90 years, USDA's Rural Development office and
its predecessors have been working to bring opportunities to
rural residents. As we begin work on the next farm bill, I am
looking forward to hearing from our witnesses about how
Congress can improve the initiatives we have in place. Rural
development and energy programs in the farm bill will need to
find ways to do more with less due to budget constraints. I
look forward to the creative ideas from our witnesses about how
we can grow opportunities and rebuild rural communities.
[The prepared statement of Mr. Austin Scott follows:]
Prepared Statement of Hon. Austin Scott, a Representative in Congress
from Georgia
Good morning everyone. Welcome to the Commodity Exchanges, Energy,
and Credit Subcommittee's first hearing of the new Congress. Today's
hearing is part of an ongoing series where each Subcommittee is holding
at least two hearings to discuss the farm bill programs and issues
under its respective jurisdiction.
Before I begin, I'd like to thank Ranking Member Scott for again
agreeing to serve with me in the leadership of this Subcommittee. I am
looking forward to working with you again this Congress.
In addition I want to welcome our new Members to the Subcommittee.
On the Republican side we have: Representative James Comer from
Kentucky's First District, Representative Roger Marshal from Kansas'
First District, and Representative John Faso from New York's Nineteenth
District.
I yield to Ranking Member David Scott to introduce his new Members.
Today, we're going to be reviewing the rural development and energy
programs in the 2014 Farm Bill. These programs support infrastructure
construction, encourage capital formation, and help to promote economic
development across rural America.
It is appropriate that this is the topic of our first hearing in
support of the next farm bill. So much of what rural America will be
able to accomplish over the next decade will be tied to how well these
programs work.
Every day our young rural citizens look around them, assess their
lives, and try to make the best choices they can about their futures.
Unfortunately too many feel they have more opportunities somewhere
else, and when they leave, they leave behind hollowed-out communities
that grow older, that become less adaptable, and that are unable to
maintain their quality of life.
With today's hearing, we will begin to examine ways we can reverse
that cycle.
For many rural communities, rural development initiatives help to
offset the high fixed costs of providing basic services like clean
water, reliable electricity, and universal phone service. Residents of
these communities simply would not be able to afford to live there
without these key investments. Federal support for infrastructure
remains a key part of our commitment to rural America.
But, our commitment to rural America is not just about new pipes
and wires. While we often think of progress as a new powerline, a new
water treatment plant, or a new broadband connection, real progress is
about expanding opportunities. We must use these programs to narrow the
divide between rural and urban America.
Upgrading water and energy infrastructure can improve quality of
life while bringing new employment opportunities. Building a new health
center can bring new care for families. Installing broadband can bring
new ideas to students and innovation to farmers and ranchers. Renewable
energy development can create valuable markets and income opportunities
for farmers, keeping them on the land, and viable domestic energy
policies create new job opportunities in rural communities. Providing
investment capital can further link agricultural producers with the
global economy. The jobs, the healthcare, the ideas, and the market
access are the real measures of progress for rural America.
For almost 90 years, USDA's Rural Development office and its
predecessors have been working to bring opportunities to rural
residents. As we begin work on the next farm bill, I am looking forward
to hearing from our witnesses about how Congress can improve on the
initiatives we have in place.
Rural development and energy programs in the farm bill will need to
find ways to do more with less. I look forward to creative ideas from
our witnesses about how we can grow opportunities and rebuild rural
communities.
With that, I will turn it over to our Ranking Member, Mr. David
Scott, for any comments he would like to make.
The Chairman. With that, I will turn it over to our Ranking
Member, Mr. David Scott, for any comments he would like to
make.
OPENING STATEMENT OF HON. DAVID SCOTT, A REPRESENTATIVE IN
CONGRESS FROM GEORGIA
Mr. David Scott of Georgia. Thank you, Mr. Chairman, and
thank you for holding this important hearing today. It is a
very, very important topic for so many of our American
citizens.
And I would like to extend a warm welcome to all of our
witnesses. They are very distinguished and knowledgeable. We
look forward to hearing from them. And I especially want to
send a very warm greeting to Mr. Dennis Chastain. Mr. Dennis
Chastain is the President and the CEO of Georgia EMC, from
Tucker, Georgia. We are delighted to have you. Welcome, and I
look forward to your testimony.
Mr. Chairman, rural development and energy programs that we
are going to take a look at today are, in many respects, what I
call the unsung heroes of the farm bill. While all of our farm
bill programs are good and very much needed for rural America,
these programs in rural development and energy specifically aim
to help keep our rural economies' engines running by providing
new opportunities, continued progress, and assisting our most
vulnerable populations.
And I am always amazed at the breadth of our rural
development programs, when I look at them or hear about them
from my constituents in Georgia. These programs; rural
development and energy, help keep the lights on for our rural
residents by doing four, four, very important things. First,
they provide broadband access; second, they give our rural
businesses and entrepreneurs access to hard-to-find capital;
third, they help our farmers' bottom lines; and fourth, they
help provide the essential community facilities that keep a
community going and viable, like emergency response, schools,
hospitals, roads, and long-term care housing. It is really
remarkable when you think about all that we ask the Department
of Agriculture to do, and the vision needed to make these very
important programs work.
Our witnesses today are going to touch on some of the most
important rural development and energy programs that the USDA
is administering, and how these programs are working on the
ground. Even with the remarkable scope of these programs, it is
very critical, Mr. Chairman, that our Committee take a hard
look to make sure that they are working the way they are
intended to. And hopefully we can get some feedback from our
distinguished guests on how we can make sure the programs are
working as they are intended to, and if there is anything that
we can do to improve the situation, to do differently, to help
these programs work better for the folks who use them, and help
better accomplish priorities on the ground.
Rural development touches every state in our country, and
is absolutely critical to the health of our nation's economy.
Mr. Chairman, I look forward to hearing from our witnesses
today and delving into these challenges rural development is
facing, and the success that we have seen.
Thank you, Mr. Chairman.
The Chairman. Thank you, Ranking Member Scott.
I also have a letter from Farm Credit that I understand
that you would like to submit on behalf of both of us, and
without objection, we will accept that letter.
Mr. David Scott of Georgia. Yes, I do.
[The letter referred to is located on p. 169.]
Mr. David Scott of Georgia. Here it is.
The Chairman. Thank you.
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 witnesses for panel one, one, I would like to welcome
you to the table, the Honorable Bob Fox, Chair of Renville
County Board of Commissioners, Franklin, Minnesota, on behalf
of the National Association of Counties. Mr. Dennis Chastain,
President and CEO of Georgia EMC, Tucker, Georgia, on behalf of
the National Rural Electric Cooperative Association. Mr. Steve
Fletcher, Manager and Operator, Washington County Water
Company, Nashville, Illinois, on behalf of the National Rural
Water Association. Mr. Craig Cook, Chief Operating Officer,
Hill Country Telephone Cooperative, Inc., Ingram, Texas, on
behalf of NTCA--The Rural Broadband Association. Mr. John Duff,
Strategic Business Director, National Sorghum Producers,
Lubbock, Texas. The Honorable Jim Greenwood, CEO, Biotechnology
Innovation Organization, Washington, D.C.
Congressman Greenwood, welcome back to Washington.
Chairman Fox, please begin when you are ready.
STATEMENT OF HON. BOB FOX, CHAIR, BOARD OF
COMMISSIONERS, RENVILLE COUNTY, MN; MEMBER, BOARD OF DIRECTORS,
NATIONAL ASSOCIATION OF COUNTIES, FRANKLIN, MN
Mr. Fox. Chairman Scott, Ranking Member Scott, and Members
of the Subcommittee, thank you for the opportunity to join you
today.
My name is Bob Fox, and I serve on the Board of County
Commissioners for Renville County, Minnesota, and I am also
here today representing the National Association of Counties.
Renville County is located 90 miles west of Minneapolis,
with a population of almost 16,000. As a key member of
intergovernmental partnership, counties are responsible for
making significant investments in our nation's essential
infrastructure, maintaining our nation's justice and public
safety, and investing in community health systems.
Every day, county leaders make decisions to influence both
local and national prosperity, while shaping the quality of
life in America. Counties play a pivotal role in rural economic
development, but face increasing challenges to provide critical
programs and services to American families. Despite the
critical role our counties play in our nation's economy, too
many Americans in rural areas are not sharing in our nation's
economic growth. Rural America is still feeling the effects of
the Great Recession. Like many rural counties around the
country, our farm-based economy in Renville County has suffered
a long economic downturn. After 9 years of decline, we lost
close to ten percent of our jobs we had in 2002. Today, many
rural counties are experiencing a strain on local funding
options due to declining populations, stemming from aging, out-
migration, and job loss. Ongoing population losses reduce tax
base which has a direct effect on our ability to fund and
finance programs and services. Additionally, 42 states impose
some type of limitation on the counties to increase property
taxes, restricting our ability to raise revenue.
Rural counties are also experiencing a rising cost of
construction. In Renville County, our ag industry requires a 10
ton road system to allow five-axel semi-trailer trucks to move
crops to market. In 2004, it cost less than $300,000 to build a
1 mile, 10 ton road. Today, the cost for that same road is $1
million per road mile.
With these challenges in mind, we have specific
recommendations on how to use the next farm bill to ensure the
vitality of our under-served counties, while positioning rural
America to compete in an ever-expanding global market.
First, the entire Rural Development portfolio is critical
for ensuring long-term economic competitiveness of our rural
counties and nation at large. USDA's Rural Utilities Service
invests billions to help counties to provide safe water, high-
speed broadband Internet, while programs like Rural Business
Development Grant Program, and Intermediary Relending Program
under the Rural Business--Cooperative Service provides grants
and competitive direct loans to counties to help expand small
businesses and business facilities.
And under the Rural Housing Service, which brings me to my
second point, the Community Facilities Direct Loan and Grant
Program is an essential tool for counties to address the unique
needs of rural communities. The Community Facilities Program
provides counties with flexible, affordable funding, and
financing to help develop essential community facilities. We
use these funds to purchase, construct, improve essential
facilities like hospitals, childcare centers, assisted living
facilities. Additionally, these funds can be used to purchase
equipment and pay for project expenses.
In my county, our aging critical access hospital was unable
to meet the increasing demand for outpatient care. Through the
Community Facilities Program, in 2015, Renville County was able
to build the Renville County Medical Center, a 65,000\2\
facility, which includes 18 exam rooms, 16 inpatient suites,
outpatient and specialty clinics, and a telemedicine suite.
This investment through the Community Facilities Program helped
to change our overall outlook on the health of our community
and economy.
Last, the Strategic Economic and Community Development
Program incentivizes regional collaboration, and should remain
a priority in the new farm bill. This program allows USDA to
direct investments toward projects that support strategic,
economic development plans across multi-jurisdictional areas.
Thus, rural counties are now able to increase the likelihood of
funding key economic development projects through regional
collaboration. This program is a positive step for our nation's
rural counties and should continue to be a priority in our next
farm bill.
In closing, counties need a strong Federal,
intergovernmental partner, and a robust rural development title
in the next farm bill to help serve America's rural
communities. Your support for these programs will not only
ensure the vitality of under-served counties, but also position
rural America to compete in a global market.
Thank you, Mr. Chairman, and Members of the Committee for
the opportunity to testify today, and I look forward to your
questions.
[The prepared statement of Mr. Fox follows:]
Prepared Statement of Hon. Bob Fox, Chair, Board of Commissioners,
Renville County, MN; Member, Board of Directors, National Association
of Counties, Franklin, MN
Chairman Scott, Ranking Member Scott, and Members of the
Subcommittee, thank you for the opportunity to join you today to
discuss the challenges and opportunities counties face in delivering
critical programs and services to rural communities and the pivotal
role the next farm bill will play in helping to address development in
rural America.
My name is Bob Fox and I have served on the Board of County
Commissioners for Renville County, Minnesota since 2002. I am also here
today representing the National Association of Counties (NACo) where I
serve on the NACo Board of Directors, the Agriculture and Rural Affairs
Policy Steering Committee and Rural Action Caucus. I live on a fourth-
generation farm that has been in my family for over 100 years.
Renville County is a very rural county located 90 miles west of
Minneapolis with a population of almost 16,000 residents. Renville
County has a diverse agricultural economy--producing corn, soybeans,
edible beans, peas, sweet corn, and sugar beets. On our southern border
we also have the Minnesota River Valley and some of the oldest granite
deposits in North America.
Founded in 1935, NACo is the only national organization that
represents our nation's 3,069 counties. NACo brings together county
officials from across the country to advocate with a collective voice
on national policy, exchange ideas and build new leadership skills,
pursue transformational county solutions, enrich the public's
understanding of county government and exercise exemplary leadership in
public service.
About Counties
As key intergovernmental partners with the states and Federal
Government, counties are responsible for delivering a broad array of
programs and services that provide a foundation for prosperous
communities with strong and stable economies. To achieve this
foundation, counties make significant investments in our nation's
essential infrastructure; maintain our nation's justice and public
safety system; and invest in community health systems, including
hospitals, nursing homes, public health, mental health and substance
abuse programs.
Transportation and infrastructure are core public-sector
responsibilities and the driving force for connecting communities and
strengthening our economy. Counties are the single largest stakeholder
in our nation's transportation infrastructure system--owning and
maintaining over 45 percent of our nation's roads and 40 percent of our
nation's bridges. Collectively, counties annually invest over $550
billion in our nation's essential infrastructure including more than
$100 billion each year on roads, bridges, transit and water systems.
Counties are also responsible for the health and well-being of our
communities. We invest over $83 billion each year to support over 1,900
public health departments, nearly 1,000 county-owned hospitals, 900
nursing homes and 750 behavioral health authorities.
Additionally, counties play a major role in two main areas of
justice and public safety: emergency response and preparedness and the
criminal justice system. Each year, counties invest almost $93 billion
for justice and public safety services including the operation of 3,041
police and sheriff departments and 2,785 jails.\1\
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\1\http://www.naco.org/counties-matter.
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The decisions that county leaders make every day influence both
local and national prosperity while shaping how communities grow and
contribute to Americans' quality of life.
Today, I would like to discuss some of the primary challenges for
counties to fund and finance rural economic development projects and
highlight how Congress can help us tackle these challenges. Throughout
my testimony today, I will underscore two main points for the Committee
to consider as you begin work on the next farm bill. These points
include:
Counties play a pivotal role in rural economic development
but face increasing challenges to provide critical programs and
services to America's families.
The farm bill is imperative to ensuring the vitality of our
under-served communities, but also positioning rural America to
compete in an ever-expanding global economy.
The farm bill is a major priority for all our nation's counties--
rural and urban alike. As the governing authority over the U.S.
Department of Agriculture, the farm bill is critical for counties who
are responsible for delivering and administering vital services to many
of our nation's under-served families. From clean water and broadband
infrastructure to nutrition assistance and energy conservation--the
farm bill helps all of America's counties provide a strong foundation
for a better tomorrow.
While the farm bill has an impact on the daily lives of all
Americans, it is particularly important for our nation's rural
families. Roughly \2/3\ of the nation's 3,069 counties are considered
rural with a combined population of 60 million. Rural counties are
responsible for the vast majority of food, energy, and environmental
benefits for the rest of the country. Additionally, rural communities
are the source of nearly 90 percent of renewable water resources, and
home to important service sector and manufacturing hubs.
Counties Play a Pivotal Role in Rural Economic Development But Face
Increasing Challenges To Provide Critical Programs and Services
to America's Families
Despite the critical role rural counties play in our nation's
economy, too many Americans in rural areas are not sharing in our
nation's economic growth.
To help provide a national perspective on how county economies are
faring from year to year, NACo releases County Economies,\2\ an annual
report examining economic recovery and growth patterns across the
nation's 3,069 county economies. The report is developed from an
analysis of data from Woods and Poole Economics and focuses on the
annual changes in four economic performance indicators in each county:
economic output (GDP), employment, unemployment rates and home prices.
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\2\http://www.naco.org/resources/county-economies-2016-widespread-
recovery-slower-growth.
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According to our analysis, Rural America is still feeling the
effects of the Great Recession. After a decade, almost \1/2\ of small
county economies have yet to return to pre-recession jobs levels
compared to only 13 percent of large county economies. My own county
economy, Renville County, Minnesota, has yet to recover all the jobs
lost during the last recession. Like many rural counties around the
country, our farm-based economy has suffered a long economic downturn.
After 9 years of decline, we lost close to ten percent of the jobs we
had in 2002.
Economic growth is also slowing down across rural counties. The
overwhelming majority of rural county economies added jobs at a slower
pace in 2016 relative to 2015. In my home state of Minnesota, job
growth accelerated in only seven percent of county economies last year.
Last, Americans are feeling it in their pocketbooks as well. Wages
in most rural county economies are growing slower than last year.\3\
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\3\http://www.naco.org/resources/county-economies-2016-widespread-
recovery-slower-growth.
Rural counties also face numerous challenges that strain local
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funding options.
Today, many rural counties are experiencing declining populations
due both to aging and out-migration. Ongoing population losses reduce
our tax base, which has a direct effect on our ability to fund and
finance programs and services within our communities.
Local property taxes remain the major source of revenue for
counties. Thus, trends in property values can significantly impact
county revenues and expenditures.
Additionally, 42 states impose some type of limitation on counties'
ability to increase property taxes, further exacerbating the situation.
Only 12 states authorize counties to collect their own local gas taxes,
which are limited to a maximum rate in most cases and often require
additional citizen and/or state approvals for implementation.
These hurdles significantly impact counties' ability to effectively
raise additional revenue to pay for services and infrastructure. Due to
these state and focal funding constraints, rural counties depend on a
strong state and Federal partnership to deliver critical investments to
help bolster our local and national economy.
Rural counties are also experiencing rising costs of construction
projects.
In addition to numerous limitations on local revenue sources,
counties are facing rising costs for infrastructure projects. Based on
the American Road and Transportation Builders Association's highway
construction price index, the cost of construction, materials and labor
for highway and bridge projects increased 44 percent between 2000 and
2013, outpacing the 35 percent increase in general inflation.
In my county, we own and maintain 711 road miles and 218 bridges
which are critical to not only our local communities, but to our
overall economy and our shipment of goods to market. This critical
infrastructure has become more expensive to repair and upgrade. Over
the next 7 years, Renville County has over 50 bridges that will require
additional maintenance costing the county an estimated $12 million. Our
county requires a 10 ton road system to allow for the five-ax[le] semi-
trailer trucks to move crops to market. To support the necessary
investments in our ailing infrastructure, in 2012, we made the
difficult decision to raise property taxes and to bond for the needed
improvements.
Our greatest challenge is ensuring that we can build and maintain a
safe, robust and efficient infrastructure system that allows Renville
County and Minnesota to remain competitive in an increasingly global
marketplace.
The farm bill is imperative to ensuring the vitality of our under-
served counties, but also positioning rural America to compete in an
ever-expanding global economy.
Unfortunately, rural counties today face many challenges that
further diminish our ability to deliver critical infrastructure and
economic development projects. As we look ahead to the next farm bill,
it is imperative that we strengthen the U.S. Department of
Agriculture's (USDA) Rural Development programs and streamline the
application process while providing the flexibility for local
governments to leverage funding and financing to fit the unique needs
of our nation's rural communities. Therefore, there are three main
points I would like to make as the Committee develops a comprehensive
rural development title as part of the next farm bill.
First, the overall USDA Rural Development portfolio of programs
should continue to help to ensure the long-term economic
competitiveness of our rural counties and the nation at-large. The
continued commitment to our nation's rural communities through USDA's
Rural Development Programs help strengthen the intergovernmental
partnership and our shared goals of promoting economic prosperity and
opportunity across the country.
In 2016, USDA's Rural Utilities Service (RUS) invested more than
$13.9 billion to help counties provide safe water to over 19.5 million
residents and brought high-speed broadband Internet to over six million
new users.\4\
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\4\https://www.rd.usda.gov/files/USDARDProgressReport2016.pdf.
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Under the Rural Business--Cooperative Service (RBS), USDA created
more than 791,000 jobs through rural business grants and loans in 2016.
Since FY 2009, RBS has invested more than $11.5 billion--including $1.2
billion in Fiscal Year 2016 alone--to support rural businesses. The RBS
helps provide capital, technical support and educational opportunities
to spur growth in the rural workforce.\5\
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\5\https://www.rd.usda.gov/files/USDARDProgressReport2016.pdf.
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Programs like the Rural Business Development Grant Program and the
Intermediary Relending Program promote rural economic growth by
providing grants and competitive direct loans to counties to help start
or expand small businesses and business facilities.
USDA's Rural Housing Service (RHS) helps counties obtain grants,
loans and loan guarantees for multi-family housing, child care centers,
emergency and first-responders stations, schools and hospitals. Since
2009, RHS has helped approximately 1.2 million rural Americans buy,
refinance or repair their homes and invested more than $12 billion in
essential community projects.\6\
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\6\https://www.rd.usda.gov/files/USDARDProgressReport2016.pdf.
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Second, the Community Facilities Direct Loan and Grant Program--
under RHS--should continue to serve as an essential tool for counties
to fund and finance critical programs and services to fit the unique
needs of rural communities. Through the Community Facilities program,
rural counties are provided flexible and affordable funding and
financing to help develop essential community facilities. These funds
can be used to purchase, construct or improve essential facilities like
hospitals, child care, assisted living facilities, courthouses and
transitional housing. Additionally, these funds can be used to purchase
equipment and pay for related project expenses. This program is
relevant to rural communities with less than 20,000 residents per the
latest U.S. Census Data.
The Community Facilities Program uses a combination of grants,
direct loans and guaranteed loans to help fund and finance critical
infrastructure projects in rural counties. Applications for funds are
graded on a point system using a combination of population and median
household income levels.
For direct loans under the Community Facilities Program, the
interest rates are set by USDA Rural Development--typically around 2.3
percent--and remain fixed for the entire term of the loan.
Additionally, loan amortization terms must not exceed the ``useful life
of the facility,'' the applicant's authority, or 40 years--whichever is
less.
Additionally, applicants must be unable to finance the project from
their own resources or through commercial credit at reasonable rates
and terms. This is an important distinction to make as the Community
Facilities Program is oftentimes the only option for rural communities
in need of providing critical programs or services that are otherwise
out of the fiscal reach of the county.
In 2016 alone, the Community Facilities Program invested
approximately $2.5 billion in 1,354 community infrastructure projects
to help serve approximately 26.4 million rural residents including over
$875 million in 134 rural health care facilities, and over $862 million
for 257 rural education infrastructure projects.
Since 2008, the Community Facilities Program has invested over $648
million in Minnesota to support over 430 essential community facilities
serving 1.95 million residents.
In my county, increased demand for outpatient care required more
preventative and diagnostic care spaces. Unfortunately, our aging
critical access hospital was unable to meet the increasing demands of
our county's healthcare needs.
Through the Community Facilities program, in 2015 Renville County
was able to build the Renville County Hospital and Clinic Medial
Center--a 65,000\2\ facility which includes 18 exam rooms and a
procedure room in the ambulatory clinic; 16 inpatient suites; lab,
radiology, therapy, outpatient and specialty clinics; two operating
rooms and an educational center. The program provided a direct loan of
$18.9 million and a guaranteed loan of $4.7 million to help replace a
county-owned critical access hospital.
As a result of this funding, the new facility has driven our
physician recruitment efforts over the past 3 years at Renville County
Hospital and Clinic. New physicians are being drawn to work at a state-
of-the-art medical center which has been critical in meeting the
increasing demands on patient care services.
The USDA Community Facilities Program has helped change our overall
outlook on the health of our community and economy. USDA has long been
considered a trusted partner to Renville County. This familiarity and
willingness to work together served as a catalyst to launch the
development of our new Renville County Hospital and Clinics medical
center.
Third, the Strategic Economic and Community Development program
should remain a priority in the new farm bill for incentivizing
regional collaboration. Commonly referred to as the ``regional
language,'' Section 6025 of the 2014 Farm Bill created the Strategic
Economic and Community Development (SECD) program which allows USDA
Rural Development to direct investments towards projects that support
strategic economic and community development plans across multi-
jurisdictional areas.
Through the new provision, individual projects can receive
additional priority funding points by meeting a few criteria that
demonstrate its role as part of a larger regional economic development
plan. Thus, rural counties are now able to increase the likelihood of
funding key economic development projects through regional
collaboration.
The SECD Program created a ten percent set-aside under four Rural
Development programs across the entire agency to help support the new
provision. These programs included the Community Facilities Program
under RHS, the Water and Waste Disposal Program under RUS, and both the
Rural Business Development Grants Program, and the Business & Industry
Guaranteed Loans Program under RBS.
In 2016, 114 applicants were given the ``Regional Development
Priority'' consideration for a combined total of over $85 million in
funding and financing.\7\
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\7\https://www.rd.usda.gov/files/USDARDProgressReport2016.pdf.
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Rural counties can no longer plan inside a silo. We must look to
our regional partners to identify and leverage our collective assets to
ensure the long-term vitality and stability of our local economy.
Through the SECD Program, counties are able to invest in local economic
development efforts that serve as a foundation for future investments
to help better promote our regional assets. This program is a positive
step for our nation's rural counties and should continue to be part of
the rural development title as you begin developing our next farm bill.
In closing, counties need a strong Federal intergovernmental
partner--and a robust rural development title in the next farm bill--to
help deliver critical programs and services to America's rural
communities. USDA rural development programs--like Community Facilities
and the Strategic Economic and Community Development program--help
counties make essential investments in rural communities which
subsequently strengthen both the local and national economy. Your
support for these programs will not only ensure the vitality of our
under-served counties, but also position rural America to compete in an
ever-expanding global market.
Thank you, Mr. Chairman and Members of the Committee for the
opportunity to testify today and I look forward to your questions.
The Chairman. Mr. Fox, you did an exceptionally good job.
Four minutes and 19 second on that timer up there works just
right, if the rest of you can do the exact same thing, it would
be perfect.
Thank you, Mr. Fox. Mr. Chastain.
STATEMENT OF DENNIS L. CHASTAIN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, GEORGIA ELECTRIC MEMBERSHIP CORPORATION, TUCKER, GA;
ON BEHALF OF NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION
Mr. Chastain. Thank you, Chairman Scott, and Ranking Member
Scott, for inviting me to testify today. It is an honor to be
here to help lay the groundwork for the next farm bill. And I
am proud that two fellow Georgians are in leadership positions
that have influence over a bill that is vitally important to
the electric cooperatives in Georgia and across the nation.
I am the President and CEO of Georgia EMC. Georgia EMC is
the trade association that represents the 41 not-for-profit
electric distribution cooperatives in the State of Georgia, as
well as our state's power generation and transmission
cooperatives. Collectively, Georgia's 41 EMCs serve about \1/2\
the population of Georgia, over 75 percent of the land area of
Georgia, and we employ over 5,000 Georgians in our operations.
I am here today not only representing the electric
cooperatives in Georgia, but I am also here representing the
National Rural Electric Cooperative Association that represents
all of America's electric cooperatives.
While our first business priority is to deliver reliable,
affordable electricity to our members, our purpose is much
greater than that. We exist to benefit the communities we
serve. We are more than just poles, wires, transformers, and
electrons. Electric cooperatives are the engines that drive
economic opportunity across the heartland and rural areas of
America. That is why the farm bill is essential for electric
cooperatives, for Georgia, and for the nation. The farm bill
contains important rural development tools that support our
efforts to strengthen our communities, and I would like to talk
about just a few.
Since 1936, loans from the REA, now the Rural Utilities
Service at USDA, have helped build, expand, and improve the
infrastructure across rural America necessary to deliver power,
clean water, and other critical services. That public-private
partnership has been, in my opinion, the greatest single rural
economic development program of the 20th century. It made farms
more productive and rural life more desirable. Rural
electrification attracted new business to rural areas, brought
modern medicine where it couldn't reach before, and improved
the overall quality of life in rural America. That fundamental
task of improving the lives of our nation's rural citizens is
as important now as it has ever been.
The RUS depends on the yearly appropriations from the
Agriculture Appropriations bill. We are grateful that Chairman
Conaway and Ranking Member Peterson have consistently led a
bipartisan letter with several hundred other Congressional
signatures to appropriators advocating for robust RUS funding.
Part of our support comes from the fact that we are such a
good investment for the Federal Government. The President's
budget request for 2017 estimates that the Federal Government
could earn up to $300 million in net revenue from RUS loans in
this year alone. We thank you for your past support of RUS, and
ask that you please continue to provide that support.
In addition to investing in the electric cooperative
network, the fees paid on RUS loans are used to fund Rural
Economic Development Loans and Grants, known as the REDL&G
Program. In Georgia and around the country, this program has
helped expand businesses, renovate hospitals, and improve
essential infrastructure in rural communities. We believe the
REDL&G Program is a valuable tool in offsetting population
flight and job losses in rural Georgia and around the country.
For years, electric cooperatives across the country have
provided information and advice to consumers to help them use
electricity more efficiently and cost-effectively. The Rural
Energy Savings Program Act included in the last farm bill was
modeled in part on a program at Habersham EMC in northeast
Georgia. This unique program that allows co-op homeowners to
finance energy efficiency upgrades in their homes, and then pay
those loans back on their monthly power bills. The efficiency
gains resulted in a net savings to the consumer.
We encourage you to maintain the Rural Energy Savings
Program and the Energy Efficiency and Conservation Loan
Program. We believe these programs can help others around the
country replicate Georgia's successes in saving energy and
saving our member owners money.
Just as with other types of infrastructure, rural America
can't be competitive without access to high-speed broadband
service. Some electric co-ops around the country are interested
in helping connect rural customers to those services. While we
are not a silver bullet by any means, we understand these rural
communities, want to see them succeed, and know that adequate
broadband service is a key to their future competitiveness in
our modern global economy. As Congress contemplates
telecommunication and infrastructure policies in the farm bill
and other legislative packages, we believe that all potential
providers, including electric cooperatives, should be eligible
for programs designed to bridge the digital divide.
Electric cooperatives enjoy a productive partnership with
the Federal Government and with the communities we serve to
promote the health of rural America. We look forward to
continuing to work with you towards that important goal.
Thank you, and I am happy to answer any questions you may
have.
[The prepared statement of Mr. Chastain follows:]
Prepared Statement of Dennis L. Chastain, President and Chief Executive
Officer, Georgia Electric Membership Corporation, Tucker, GA; on Behalf
of National Rural Electric Cooperative Association
Thank you, Chairman Scott and Ranking Member Scott, for inviting me
to testify. It's an honor to be here today to help lay the groundwork
for the next farm bill. I'm proud that two fellow Georgians have such
influence over a bill that is so important to electric cooperatives.
My name is Dennis Chastain. I am the current President and CEO of
the Georgia Electric Membership Corporation, but I've worked for
electric co-ops for 30 years in a variety of economic development
roles. I am here today representing Georgia EMCs and the National Rural
Electric Cooperative Association.
Georgia EMC is a statewide trade association representing the
state's 41 EMCs, Oglethorpe Power Corporation, Georgia Transmission
Corporation, and Georgia System Operations Corporation. Altogether,
customer-owned EMCs provide electric power and related services to over
4.5 million people in Georgia--nearly \1/2\ the population--across 73
percent of the state's land area. And we employ over 5000 people.
While our first business priority is to deliver reliable,
affordable electricity to our members, our purpose is much greater than
that. We exist to benefit the communities we serve. We are more than
just a poles, wires, and electrons company. Our broader purpose is to
provide the power that empowers our communities to thrive. We are much
more than just small electric utilities--we are the engines that drive
economic opportunity across the heartland and rural areas everywhere.
Co-ops have been supporting rural America for almost 80 years, and
in many ways that job is more important now than it ever has been.
Rural areas still grow most of the food, generate most of the power,
and manufacture most of the goods that this country consumes. When
rural areas suffer, electric cooperatives suffer and, more importantly,
the country as a whole suffers. That is why the farm bill is essential
for co-ops, for Georgia, and for the country. The farm bill contains
important rural development tools that support our efforts to
strengthen our communities.
I'd like to start by asking you to think broadly about what rural
economic development is. There were few greater developments in our
country's history than the electrification of rural America. It made
farms more productive and rural life more desirable. It allowed kids to
go to school, attracted new business, and brought in modern medicine
where it couldn't reach before.
While the lights came on nearly 80 years ago, rural development is
just as essential in 2017. For example, in some areas of the country,
we are today with Internet access where we were with electricity at the
beginning of the last century. Without access to high speed Internet,
rural America won't be able to compete. I would also argue that efforts
to modernize the grid and improve energy efficiency are important for
rural development because they make life more affordable, secure and
convenient for the people who live there. In all these cases, electric
cooperatives will continue to play instrumental and innovative roles in
keeping rural America vibrant in the 21st century.
Rural Utilities Service (RUS)
In the early 1900's, as urban areas began to electrify, rural areas
lagged behind. Eventually, farmers and ranchers in remote areas took
the initiative to form electric cooperatives and did the work
themselves. As a Georgian, I have to note that it was at Warm Springs,
in my home state, that President Franklin Roosevelt saw firsthand the
access and cost challenges faced by rural electricity consumers and
recognized the important role of the electric cooperative. That's why,
on May 11, 1935, he signed an executive order creating the Rural
Electrification Administration and supported subsequent legislation to
formalize the partnership that allowed electric cooperatives to access
affordable credit from the Federal Government to finance that
infrastructure.
In the past 80 years, a lot has changed, but the same fundamental
challenge still exists--how to affordably connect those few customers
in high cost rural areas. What was then called the Rural
Electrification Administration is now the Rural Utilities Service and
it's as relevant today as it was back then. REA and RUS loans have
helped build, expand and improve the infrastructure across rural
America necessary to deliver power, clean water, and other necessities.
It has been the most successful public-private infrastructure
investment program in the history of the country.
RUS loans help electric co-ops reduce costs and improve reliability
for our members by financing basic maintenance like replacing poles and
wires. But it also helps us fund projects to make our systems more
modern, efficient, and secure.
RUS depends on a yearly appropriation from the Agriculture
Appropriations bill. We are grateful that Chairman Conaway and Ranking
Member Peterson have consistently led a bipartisan letter with several
hundred signatures to appropriators advocating for robust RUS funding.
Part of our support comes from the fact that we are such a good
investment for the Federal Government. The President's Budget request
for 2017 estimated that the Federal Government could earn up to $300
million in net revenue from RUS loans. We thank you for your past
support of RUS, and ask that you please continue to provide that
support.
We also ask that you support policies that allow us to use RUS
loans to address a broad set of co-op needs--whether for generation,
transmission and distribution of baseload power, for integration of
renewables, for making environmental upgrades to existing generation,
or for adopting new technologies that make the grid ``smarter.''
Just as the times have changed and the needs of rural America have
changed, so too has the RUS loan program. We have appreciated working
with the Committee over the years to help make the program more
streamlined and efficient, and we look forward to exploring new ways to
continue to improve the program. Modernizing the RUS loan program is
good for borrowers (electric co-ops) and taxpayers. The RUS annually
reviews and approves billions of dollars of loans, and finding ways to
more efficiently process those loans reduces burdens on taxpayers while
meeting borrowers' needs more quickly as well.
Guaranteed Underwriter Program
Another important financing option available to electric
cooperatives is loans from cooperative banks. Cooperative lenders add
healthy competition to the marketplace. The farm bill contains a
provision that allows those loans to be guaranteed by RUS for
cooperative business purposes. We encourage the Committee to continue
that policy.
In addition to investing in the electric cooperative network, the
fees paid on Guaranteed Underwriter Loans can be used to fund Rural
Economic Development Loans and Grants--known as the REDL&G program.
Rural Economic Development Loans and Grants (REDL&G)
Under the REDL&G program, USDA provides zero-interest loans to
utilities (including electric co-ops), which, in turn, pass the funds
through to local businesses and other groups that create jobs in rural
areas. This positive cycle of business development can strengthen both
the co-op and the local communities by helping stabilize populations
and the co-op's customer base.
Since 2011, Georgia co-ops have conducted around $6 million in
REDL&G projects. Included among those projects are the renovation of a
hospital and the construction of a new cattle feed operation to support
local agribusiness. We believe the REDL&G program is a valuable tool in
offsetting population flight and job losses in rural Georgia and around
the country.
Energy Efficiency
For years, electric co-ops across the country have provided
information and advice to consumers to help them use electricity more
efficiently and cost-effectively. The wide range of assistance includes
rebates for energy-efficient appliances, switching to more energy
efficient light bulbs and time of day rates to encourage off-peak
usage.
The Rural Energy Savings Program Act included in the last farm bill
was modeled in part on the How$mart program at Habersham EMC in
Georgia. This is a unique program that allows co-op homeowners to
finance energy efficiency upgrades in their homes then pay back those
loans on their monthly bills. The efficiency gains result in a net
savings for the customer.
We encourage you to maintain the Rural Energy Savings Program and
the Energy Efficiency and Conservation Loan Program. We believe these
programs can help others replicate Georgia's successes around the
country to save energy and save our owners money.
Broadband
Just as with other types of infrastructure, rural America cannot be
competitive without access to high speed broadband service. Many
comparisons are drawn between the lack of access to robust broadband
service today and the need for electrification in rural areas 80 years
ago--with the urban areas of the country well-served, and rural areas
being left behind. Some electric co-ops around the country are leading
the way in connecting rural customers to high speed broadband. While
we're not a silver bullet, we understand these communities and want to
see them succeed. As Congress contemplates telecommunication and
infrastructure policies in the farm bill and in other legislative
packages, we believe that all potential providers including electric
cooperatives should be eligible for programs designed to bridge the
digital divide.
Conclusion
We are a healthy nation because we have vibrant, bustling urban
cities and because we have verdant, productive rural areas.
Unfortunately, whether it's infrastructure or jobs or access to health
care, it seems that too often rural America gets the short end of the
stick. The farm bill is important legislation that helps to address
some of those disparities.
Electric Cooperatives enjoy a productive partnership with the
Federal Government and with the communities we serve to promote the
health of rural America. We look forward to continuing to work with you
toward that important goal. I'm happy to answer any of your questions.
The Chairman. Thank you.
Mr. Fletcher.
STATEMENT OF STEVE FLETCHER, MANAGER AND OPERATOR, WASHINGTON
COUNTY WATER COMPANY, IL; PRESIDENT; NATIONAL RURAL WATER
ASSOCIATION, NASHVILLE, IL
Mr. Fletcher. Chairman Scott, Ranking Member Scott,
Congressman Davis from my home state, and Members of the
Subcommittee, it is an honor to testify before you on the USDA
Water and Waste Water Programs, and the associated technical
assistance that directly benefits small and rural communities.
I am Steve Fletcher, and I have the honor to serve as
President of the National Rural Water Association. NRWA is a
water utility organization with over 31,000 members. Please
note, 94 percent of community water systems in the U.S. serve
rural communities under 10,000 in population.
I am also the manager and operator of the Washington County
Water Company. This water utility started with the Farmers Home
Administration loan and grant in 1979, with only 700 customers.
We have received additional financing from rural development to
expand and upgrade our utility 12 times. Currently, we serve
4,600 customers in parts of southern counties. We simply could
not afford to debt service a commercial credit loan with the
income of our customers.
We currently sell treated water to several small towns that
made the decision to discontinue operating their treatment
plants because they couldn't afford to staff, maintain, and
upgrade the utility.
We also operate and conduct all required testing for most
of these systems. We do this at our cost because they are our
neighbors.
I make these points to further highlight the fact that
without affordable financing and the direct assistance provided
by the Rural Development, and entities like NRWA, many small
and rural communities simply couldn't afford to provide basic
clean, safe, and affordable water and waste water services for
their residents. This story is not uncommon throughout rural
America.
People take it for granted that their water is always safe
and uninterrupted. This infrastructure, or what I call the
invisible infrastructure, is not just about digging holes and
putting pipes in the ground, these investments have many direct
and indirect benefits. They provide jobs, many times increase
the tax base for new business or housing development, they are
a catalyst for economic and community growth.
Mr. Chairman, as you draft the rural development title in
the new farm bill, we would like to focus on four issues.
First, the majority of rural communities in the nation have
relied on Rural Development for affordable financing and
technical assistance to provide essential water and waste water
services, and to overcome the lack of population density. As
previously mentioned, many rural areas lack the financial
capability and technical expertise to debt service commercial
credit. The grant portion makes assistance possible for lower-
income residents and communities. With the current backlog of
$2.5 billion, the demand for these Rural Development water and
waste water loans and grants is evident.
Second, the Rural Development Circuit Rider Program. Since
1980, circuit riders have provided on-site technical assistance
to small communities in all states to ensure that facilities
operate at the highest level possible for public health
protection. We currently have 117 full-time circuit riders in
the field in all 50 states, and 85 of these circuit riders have
over 25 years of experience. This assistance actually saves
money, and protects the community and the government's
investments by ensuring that efficient and sustainable
practices are followed. I must also emphasize the direct, on-
the-ground, 24/7 disaster assistance we provide. We are on the
frontline of responding to disasters in all 50 states. Chairman
Scott and Ranking Member Scott, a recent example of this is
when Georgia Rural Water Association worked with over 50
systems in southwest Georgia immediately after a tornado struck
south Georgia on Sunday, January 22, to help respond to the
devastation.
Third, the Waste Water Technical Assistance Program. This
initiative provides on-the-ground technical assistance directly
to communities for waste water treatment facilities. Assistance
includes design and upgrade recommendations, daily operation
and maintenance advice, permit renewals, and helping these
systems meet compliance requirements from state and Federal
programs.
Fourth, as President Trump has emphasized, a robust bill is
needed to address the aging infrastructure in our nation. NRWA
supports the President's goal to increase infrastructure
investments, and requests funding to be directed to our rural
communities, including providing resources to the existing
tried and true rural development programs.
We at the National Rural Water Association also share the
mission and vision of our rural development partner; a mission
to serve, regardless of income or location, every rural
community in need.
Thank you, Chairman Scott and Ranking Member Scott, for
allowing me to testify.
[The prepared statement of Mr. Fletcher follows:]
Prepared Statement of Steve Fletcher, Manager and Operator, Washington
County Water Company, IL; President; National Rural Water Association,
Nashville, IL
Chairman Scott, Ranking Member Scott, and Members of the
Subcommittee. It is an honor to testify before you on the Department of
Agriculture's (USDA) Water and Waste Water programs and the associated
technical assistance that directly benefit small and rural communities.
I am proud of the work of this Committee and specifically the Rural
Development programs that have lifted up the quality of life for so
many of the residents in my home State of Illinois and throughout this
nation. Thank you.
I am Steve Fletcher and I have the honor to serve as the President
of the National Rural Water Association. The National Rural Water
Association (NRWA) is a water utility organization with over 31,000
members. Our member communities have the very important public
responsibility of complying with all applicable regulations and for
supplying the public with safe drinking water and sanitation every
second of every day. Most all water supplies in the U.S. are small; 94%
of the country's 51,651 drinking water supplies serve communities with
fewer than 10,000 persons, and 80% of the country's 16,255 wastewater
supplies serve fewer than 10,000 persons.
I am also the Manager and Operator of the Washington County Water
Company. This water utility started with a Farmers Home Administration
loan and grant in 1979 with only 700 customers. This community worked
for years to bring running water to their residents. Since inception,
the Washington County Water Company has received additional financing
from Rural Development to expand and upgrade our utility. Currently, we
serve 4,600 customers in seven counties. This rural utility, like the
overwhelming majority in the Rural Utilities Service (RUS) portfolio,
have never been late on a payment. This would not have been possible
without the direct assistance from the Department of Agriculture's loan
and grant program. We simply could not afford to debt service a
commercial credit loan with the income of our customers.
We currently sell treated water to several small towns that made
the decision to discontinue operating their drinking water treatment
systems because they couldn't afford to staff, maintain and upgrade
their utility to meet U.S. Environmental Protection Agency (EPA)
standards. We currently provide staff to sewer treatment utilities for
two small towns that don't have the resources to properly operate and
maintain those facilities. We also send staff to several other small
towns to operate and conduct all required testing for their drinking
water systems. As previously mentioned, many of these small towns do
not possess the capacity to adequately operate their systems without
this direct on-site assistance. We provide these services at our cost
for a simple reason, they are our neighbors.
I make these points to further highlight the fact that without
affordable financing and the direct assistance provided by Rural
Development and entities like NRWA, many small and rural communities
simply couldn't afford to provide the basic service of clean, safe and
affordable water and waste water service for their residents.
As I travel around the nation in my current role as the President
of NRWA, I learn that my story is not uncommon throughout our rural
communities. The grant portion coupled with the direct on-site
technical assistance makes these systems affordable and sustainable for
their communities. These investments have paid dividends for 70 years
in the small and rural communities across this nation.
The Rural Development mission area has a wide and holistic approach
necessary to enhance and protect the health and vitality of Rural
America. We look at these USDA investments, especially in
infrastructure, and witness their impact on the quality of life for
these rural communities. People take it for granted that their water is
always safe and uninterrupted. This infrastructure or what I call the
``invisible infrastructure'' is not just about digging holes and
putting pipes in the ground. These investments have many direct and
indirect benefits; they provide jobs, many times increase the tax base
from new business or housing development; they are a catalyst for
economic and community growth while at the same time enhancing and
maintaining the health and environment for the residents. In many
cases, new businesses would not entertain locating in an area without
water and wastewater services. We all drink the water we produce and I
would offer that we are the first line of defense for the water quality
that our customers use in their daily lives, especially hospitals and
doctors' offices.
Mr. Chairman, as you draft the Rural Development title in the new
farm bill, we would like you to focus on six issues under the Rural
Development mission area.
First, the RUS Water and Waste Water Loan and Grant programs. The
majority of the rural communities in the nation have relied on Rural
Development (and the predecessor agency, Farmers Home Administration)
for affordable financing and technical assistance to provide these
essential services. As previously mentioned, many remote rural areas
lack the financial capability and technical expertise to debt-service
commercial credit. The grant portion makes this assistance possible for
lower-income residents and communities. The Water and Waste Water loan
and grant program work in unison. In FY 2016, the RUS average loan
grant ratio was 66% loan and 34% grant. Some will suggest that grant
money is not needed and the community should just finance the project
with 100% loan. This is simply not the case. My point is that the
grants are carefully administered by RUS as an investment in order to
make this vital service affordable and not over burden lower-income
communities and customers.
Rural Development is unique that all their customers are rural. In
FY 2016, 85% of the projects served populations of 5,000 or less and
70% of all projects served populations of 2,500 or less. The average
family income was $36,178 with an average monthly water bill of $47.72
and sewer bill of $48.05. In FY 2016, 582 projects were funded with
loans and grants that totaled $1.5 billion in direct RUS assistance.
With a current backlog of $2.5 billion derived from 995 applications,
the demand for these Rural Development programs is evident.
Many projects take years of personal investments from the local
leaders and community. Everyone on the system is paying the same amount
for their water or sewer bill, the retiree, the fireman, the local
Mayor, everyone is treated the same. The local ownership and operation
is another source of pride for the community.
Second, the Rural Development Circuit Rider Program. Since 1980,
Circuit Riders have provided on-site technical assistance to small
communities in all states for water infrastructure development,
environmental compliance, training, certification, operations,
management, rates, disaster response, training, energy audits,
financial management and governance; all necessary to ensure that
facilities operate at the highest level possible for public health
protection. We currently have 117 full-time Circuit Riders in the field
in all 50 states. Currently, over 85 or 72% have over 25 years'
experience in the industry. Many of these seasoned field employees
could find higher paying jobs and ones that did not require extensive
travel, but they are driven and receive great personal satisfaction
from their work.
This assistance actually saves money and protects the community and
government's investments by ensuring that efficient and sustainable
practices are followed. The low delinquency and default rate for this
program is directly linked to the technical assistance provided to
these utilities.
I must also emphasize the direct on-the-ground disaster assistance
we provide. The Circuit Riders are on call 24 hours a day, 365 days a
year. A disaster for our customers is anytime they turn on the faucet
and they have no water. That is a disaster for this customer and we are
sensitive to that issue and respond immediately. I am referring to
natural disasters like the floods in South Carolina, Hurricanes Hermine
and Matthew in Florida, the recent tornadoes in Georgia, Oklahoma,
Mississippi and Arkansas. We are on the front line when these events
occur. State associations provide equipment and personnel across state
lines to provide immediate disaster relief. NRWA, through our
experienced state affiliates, conducts annual emergency response
training to prepare for these events.
Chairman Scott, and Ranking Member Scott, the Georgia Rural Water
Association contacted and worked with over 50 systems in southwest
Georgia immediately after the tornados struck South Georgia on Sunday,
January 22nd, to respond to the devastation.
These seasoned employees have long standing relationships and trust
built within the communities they serve. The on-site or hands-on
assistance is required to address complex issues and build that trust.
Third, the Waste Water Technical Assistance program. This
initiative provides on-the- ground technical assistance directly to
communities for waste water treatment facilities. Assistance includes
design and upgrade recommendations, daily operation and maintenance
advice, assisting with permit renewals and helping these systems meet
compliance requirements from state and Federal regulations.
Fourth, the Rural Development field structure. Rural Development
offers a holistic approach for the economic vitality of a rural
community whether it is water or waste water infrastructure, broadband,
business loans or grants or essential community facilities; the field
structure is a vital tool to deliver these programs. I have witnessed
the restructuring and reduction of employees and offices in Rural
Development in 2011 and 2012 that reduced the field structure by over
1,000 staff. Unfortunately, Rural Development lost numerous senior
staff with expertise in water, business and housing. I would caution
reducing this field presence further. Rural Development is still
training and filling key positions to deliver these programs. Rural
Development has used technology to help bridge this gap. RD Apply, a
new easy to use online application has been employed and used by many
of our currents members. The Circuit Riders also use this application
to directly assist their customers. As you are aware, Rural Development
is also moving ahead on ePER, an electronic preliminary engineering
report that should save communities money and time. I know it is
difficult in this budget climate but any efforts to preserve or enhance
this field structure will make a difference in serving remote rural
areas, especially ones that experience pervasive poverty.
Fifth, future infrastructure funding. As President Trump has
emphasized, a robust bill is needed to address the aging infrastructure
in our nation. NRWA supports the President in this endeavor. We request
your assistance to ensure any national water infrastructure proposal
would include funding to address the specific needs for our rural
communities, including providing resources through the existing Rural
Development programs to adequately serve rural communities.
Sixth, the RUS eligible population limit. I close with an
additional suggestion for the Committee. The current underlying
statutory authority for the Rural Development Water and Waste Water
programs is set at the 10,000 population limit. The Secretary has
little flexibility or waiver authority to address communities that have
grown or slightly exceed that limit. In the past, Congress was able to
list these communities within a general provision contained in the
annual appropriations bills. With the changing demographics in Rural
America, we believe that providing the Secretary flexibility to assist
these communities would be beneficial. If a community can demonstrate
economic hardship, rural character and the need for RUS assistance,
that community should be considered. Funding priority could still
remain with the existing applicants from lower-income communities under
the existing 10,000 population ceiling.
Additionally, the Water and Waste Water Guaranteed Loan program is
vastly underutilized. For FY 2016, only four loans were made that
totaled $7,118,000. Increasing the population ceiling for this program
to 20,000 will help these larger rural communities, especially ones
with more resources and capacity necessary to debt service market rate
loans.
We at the National Rural Water Association also share the mission
and vision of our Rural Development partner; a mission to serve,
regardless of income or location, every rural community in need. Like
Rural Development, we want to ensure no community in Rural America is
left behind. No community can grow and improve without the sustaining
resources of water and wastewater services. With your continued support
and leadership, we will continue to prosper.
Thank you, Chairman Scott and Ranking Member Scott for allowing me
to testify and I would be happy to answers any questions that you may
have at this time.
The Chairman. Thank you, Mr. Fletcher.
Mr. Cook.
STATEMENT OF R. CRAIG COOK, CHIEF OPERATIONS
OFFICER, HILL COUNTRY TELEPHONE COOPERATIVE, INC., INGRAM, TX;
ON BEHALF OF NTCA--THE RURAL BROADBAND ASSOCIATION
Mr. Cook. Good morning, Chairman Scott, Ranking Member
Scott, and Members of the Subcommittee. Thank you for inviting
me to testify before you today on the farm bill and the
importance of advanced telecommunication services to rural
development.
My name is Craig Cook, I am here on behalf of Hill Country
Telephone Cooperative in Ingram, Texas, and NTCA--The Rural
Broadband Association, which represents about 850 of the 1,000
or so rural telecom providers in the U.S.
As many of Subcommittee Members are aware, because small
rural telcos serve your districts, we provide broadband and
other advanced telecom services to the most rural areas of the
U.S., including substantial agriculture and energy producing
regions.
The immense economic, health care, education, and public
safety benefits of high-speed broadband are well known by now.
A recent study revealed that rural telecom investment
contributed $24.1 billion to the U.S. economy in 2015, and
supported approximately 70,000 jobs.
Broadband helped solve the problem of distance by opening
up new education and job opportunities in rural America, and
connects rural veterans and others with healthcare
professionals, helping rural businesses tap into global
markets, and, of course, helps farmers and ranchers use the
Internet to analyze livestock and crop data with modern
precision agriculture tools.
Rural areas are unique. While they need broadband to
compete, and our nation needs rural broadband so everyone can
share in what rural America offers, the vast distances and low
density of rural areas undermine the business case for the
enormous capital and operational cost of deploying networks. A
small rural broadband provider can't walk into a typical bank
and expect financing for a network that measures payback over a
period of decades, not years.
USDA's RUS telecom loan portfolio provides up-front capital
for deploying rural telecom networks. RUS brings years of
experience and familiarity with the telecom industry, and rural
areas gain from financing networks through its telecom
infrastructure and broadband loan programs, both of which
provide loans paid back with interest to the benefit of the
U.S. taxpayer. Similarly, the Community Connect Grant Program
serves the most rural areas, where a loan may not make sense.
We urge the Subcommittee to continue its support for these
programs, and refrain from making extensive changes that might
lead to more uncertainty.
At Hill Country, we have appreciated having a dedicated and
experienced partner like RUS, and just last year finished
upgrading 20 percent of our network so that more of our
customers have access to 25 Mbps and higher broadband speeds.
And this is a project that wouldn't have been possible this
soon without capital from RUS.
As a compliment to up-front financing like that available
through RUS, the High-Cost Universal Service Fund Program, the
USF, is essential to enable the business case for delivering
broadband in rural areas. The USF helps keep consumer rates
affordable on networks once they are built, and sustains
operation of those networks.
Over the past 10 years, the USF High-Cost Fund has
undergone extensive reforms to orient the program towards
supporting broadband networks. As a result, small telcos now
receive support for offering broadband-only services, thanks to
help of dozens of Members of Congress, including Members of
this Subcommittee.
Though we have made progress on USF reform, the High-Cost
Program has been under the same effective cap since 2011, and
lacks sufficient resources to make the reforms actually
meaningful to consumers. This USF budget issue must be
addressed or rural consumers will pay much more for broadband
than urban Americans, and rural consumers will experience much
slower speeds.
This unfortunate reality violates the statutory mandate for
reasonably comparable rates and services in rural and urban
America. I raise this budget concern because USF justifies the
business case for rural broadband by keeping rates affordable.
More consumers are using more data-intensive broadband
applications with each passing year. This enormous consumer
demand cannot be met with short-term broadband solutions that
may soon need replacing due to insufficient capacity. The
resources of RUS and USDA are most efficiently and effectively
invested in future-proof networks that will be readily upgraded
over time to meet consumer demands. And we must take steps to
ensure that facilities financed by USDA or supported by USF are
not overbuilt by another carrier deploying a network financed
or supported by a different program.
The provision of rural broadband service is an important
job that the rural industry is committed to, and we appreciate
Congress taking time to understand how rural areas remain
served through the provision of necessary resources.
It is an honor to be with you today, and I welcome any
questions you may have from me. Thank you.
[The prepared statement of Mr. Cook follows]
Prepared Statement of R. Craig Cook, Chief Operations Officer, Hill
Country Telephone Cooperative, Inc., Ingram, TX; on Behalf of NTCA--The
Rural Broadband Association
Introduction
Chairman Scott, Ranking Member Scott, and Members of the
Subcommittee, thank you for this opportunity to testify about rural
development, broadband, and the 2018 Farm Bill. I am Craig Cook, Chief
Operations Officer at Hill Country Telephone Cooperative. My remarks
today are on behalf of Hill Country, as well as NTCA--The Rural
Broadband Association, which represents approximately 850 rural
community-based carriers in 45 states that offer advanced
communications services throughout the most sparsely-populated areas of
the nation.
Rural Telecom Industry Innovation
Small, rural telecom providers like Hill Country connect rural
Americans with the world--making every effort to deploy advanced
networks that respond to consumer and business demands for cutting-
edge, innovative services. Fixed and mobile broadband, video, and voice
are among the many services that rural Americans can access thanks to
our industry's commitment to serving sparsely populated areas. The
rural telecom industry has always been innovative--leading the way in
converting to digital switched systems, providing wireless options to
their hardest to reach customers, enabling distance learning and tele-
health applications, and where possible deploying future-proof all-
fiber systems.
Hill Country Telephone
I have been part of the industry for nearly 30 years, spending the
last 2 years at Hill Country. My experience has focused on telecom
regulation and public policy, technical operations, engineering
services, and business development. In addition to having worked for
consulting firms and smaller rural service providers, I've also had the
opportunity to work for larger service providers such as GTE. Hill
Country is a local telecommunications provider with 111 employees
serving a 2,900\2\ mile area--an area larger than the state of Delaware
with only 4.4 subscribers per square mile. But, 22 percent of our
customers reside in just 3\2\ miles, while the remaining 78 percent
reside in the other 2,897\2\ miles--so the population density of the
more rural areas is only 3.4 customers per square mile. We provide
12,700 total connections to wireline voice, high-speed broadband, and
video services over a network that employs a mix of fiber and copper
facilities. In actual network terms, we have deployed 3,842 copper
route miles and 1,699 fiber route miles.
Our sparsely-populated service territory does not make an
attractive business case for Wall Street and will not support multiple
providers making the substantial capital investments needed to serve
such a large area. For Hill Country, like many other NTCA members that
serve agricultural communities and other rural areas, the challenges of
distance and density hit close to home.
Rural Telecom and Economic Development
Broadband-capable networks are critical to helping rural
communities overcome these challenges. Our networks allow agricultural
producers and other rural businesses to communicate with suppliers and
sell to new markets, they enable education of our children on par with
opportunities in urban areas, and they make our communities attractive
destinations for people and businesses to relocate. In rural America,
that translates into economic development that produces jobs, not only
in agriculture, energy and other industries with a strong rural
presence, but in the healthcare sector, and just about any other retail
industry that requires broadband to operate.
Importance of USDA Financing
As this Committee deliberates the upcoming farm bill
reauthorization, please be mindful that access to capital for rural
broadband projects is limited. Smaller broadband providers like Hill
Country and other NTCA members have only a few options for financing
network construction. Small rural broadband providers cannot walk into
large commercial banks to obtain financing for a network that will
serve a small number of people over a large area, with the payback
measured in decades rather than years.
Cost-effective Rural Utilities Service (RUS) loans offered through
the U.S. Department of Agriculture (USDA) are therefore an essential
resource for small providers that serve rural America. Apart from RUS,
only a few committed, mission-driven lenders like CoBank and the Rural
Telecommunications Finance Cooperative (RTFC) typically provide
financing to enable small rural providers to build networks in their
communities. As a complement to financing, universal service funding
(USF) then helps to justify the business case for such construction.
The ongoing High Cost USF support ensures that consumers can afford the
services offered over the financed networks now and in the future.
The State of Rural Broadband Deployment Progress
Consumer Demand, Fiber, and Future-Proof Networks
Hill Country Telephone and other NTCA members have made remarkable
progress in deploying advanced networks in their communities. A survey
of NTCA members conducted last year found that 49 percent of
respondents' customers are served via fiber-to-the-home (FTTH), up 20
percent from 2013. Twenty-nine percent of customers are served via
copper loops, 15 percent cable modem, six percent fiber-to-the-node
(FTTN), 0.5 percent fixed wireless, and 0.1 percent satellite.\1\
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\1\NTCA 2015 Broadband/Internet Availability Survey Report (2016),
NTCA--The Rural Broadband Association, Arlington, VA.
---------------------------------------------------------------------------
The growth in fiber deployment is remarkable given the regulatory
instability of recent years, with USF reforms and budget shortfalls
having challenged the business case for many deployments or undermined
the sustainability of networks already in place. Nonetheless, policies
that encourage sustainable future-proof networks--such as fiber--will
be most efficient in responding to consumer demand over the lives of
those networks, particularly when compared to short-term strategies
that focus on getting lower-speed broadband deployed quickly only to
find that consumer demands outpace the capabilities of such low-speed
networks in a few short years.
Due in no small part to increased fiber deployment, rural customers
have access to faster broadband speeds. Per last year's survey, 85
percent of NTCA members' customers can purchase broadband at speeds of
10 Mbps or higher. Seventy-one percent can now access speeds above 25
Mbps.
Eighty-two percent of Hill Country's customers have access to 10
Mbps service. The remaining 18 percent of customers are served by long
local loops that provide 1 to 6 Mbps service. We work with those
customers on an individual basis to find solutions to their broadband
needs. We anticipate that twenty-five percent of our customers will
have access to FTTH in the next 2 years. Seven percent are currently
part of a fiber build and will have access to FTTH by the end of 2017.
We have deep fiber penetration throughout our service territory that
allows us to provide more than the 10 Mbps to much of our customer
base.
And our customers are demanding more and more speed. In 2016, we
saw nearly 1,000 customers move from the basic 10 Mbps speed to a
higher-tier package. Due to this demand, we continue to employ new
technology in our FTTN and copper networks to meet demand, but also
continue to deploy fiber. Our vision is to reach our entire territory
with FTTH. The speed and sustainability of deployment, however, will
depend on both reasonable access to capital to finance construction and
the availability of USF support to make sure consumer rates on these
rural networks, once upgraded, are not astronomical and unaffordable.
Unique Rural Challenges
Deploying networks across wide swaths of rural Texas is not easy.
We face the need to cross hundreds or thousands of miles where the
population is sparse, and to deal with all kinds of terrain. We must
also address environmental and historical permitting concerns that can
delay projects and increase their already high costs. Then, where fiber
has already been built, we must maintain it over those thousands of
miles and ensure customers can use it--that means technicians who
travel all over our territory and customer service representatives
trained to deal with questions about router and device configurations
in ways that were unimaginable when we were just a ``telephone
company.''
And even the best networks in rural markets are dependent upon
``middle mile'' or long-haul connections to Internet gateways dozens or
hundreds of miles away in large cities. Reaching those distant
locations is expensive as well, and as our customers' bandwidth demands
increase, so too does the cost of ensuring sufficient capacity on those
long-haul fiber routes that connect rural America to the rest of the
world.
More Work to Do
And many parts of rural America, including many locations in our
serving area, still need fiber or other robust facilities. Fifteen
percent of NTCA member customers don't have access to even 10/1
broadband. In a country where the Federal Communications Commission
(FCC) has indicated that 90 percent of Americans already have
affordable access to 25/3 Mbps service and many urban consumers and
businesses benefit from 100 Mbps or Gigabit speeds, broadband access in
rural America remains far behind urban areas despite the best efforts,
innovation, and entrepreneurial spirit of companies like Hill Country
and other NTCA members.
Particularly when one considers that even where networks are
available many rural Americans pay far more for broadband than urban
consumers due to insufficient USF funding, it becomes apparent that the
job of connecting rural America--and, just as importantly, sustaining
those connections--is far from complete. The rural broadband industry
has a great story of success but also much more work to do.
The Role of Rural Utilities Service Funding
The Strength of RUS Experience
Deploying a communications network in a rural area requires a large
capital outlay due to the challenges of distance and terrain. The
number of rural network users (as compared with more densely-populated
urban areas) is too small to pay the costs of deployment and ongoing
operations through customer charges. USDA's Rural Utilities Service
plays a crucial role in addressing these rural broadband challenges
through its telecommunications programs that finance network upgrades
and deployment in rural areas.
Since the early 1990s, the RUS telecom programs have financed
advanced network plant at a net profit for taxpayers and helped deploy
state-of-the-art networks to rural Americans left behind by providers
unable or unwilling to serve low-population-density markets. With rare
exception, RUS, CoBank and RTFC are the primary lenders that small
rural providers can turn to for outside financing. Not only does RUS
help rural America remain connected, its Broadband Loan & Guarantees
program and traditional Telecommunication Infrastructure Loan &
Guarantees program make loans that must be paid back with interest--
creating a win/win situation for rural broadband consumers and American
taxpayers.
Hill Country's Partnership with RUS
Hill Country is well aware of the benefits of working with an
experienced rural telecom lender like RUS, having received an RUS
Broadband Infrastructure Program (BIP) grant/loan that helped upgrade
20% of our network connections, enabling broadband deployment to a much
larger geographic area in a much more timely manner than otherwise
would have been possible in the face of typical capital constraints.
The RUS financing package facilitated deployment of a 148 mile fiber
backbone designed to dramatically reduce subscriber loop length,
enabling 25 Mbps broadband access for many unserved and under-served
subscribers. Hill Country met all original project objectives and even
added an additional 26 miles of fiber backbone while maintaining the
overall project budget--exceeding what we originally set out to
accomplish in some of our most rural and challenging service areas. RUS
was a key partner in this endeavor, building upon a history of helping
small providers meet similar challenges of distance and population
density across the country for decades.
Farm Bill Considerations
The Farm Bill Broadband Loans & Loan Guarantees program was first
authorized in the 2002 Farm Bill, and each subsequent farm bill has
made extensive reforms with the goal of greater program accountability,
efficiency, and effectiveness. Two rounds of program reforms in less
than 15 years--the first of which was significantly delayed by the ARRA
BIP program's use of the Broadband Loan Program mechanism--means that
the Broadband Loan Program has been almost continuously ``under
construction'' since its inception, rendering the program inaccessible
to borrowers for long periods of time. While the program isn't perfect,
it may be helpful to simply let borrowers use the Broadband Loan
Program in current form and become familiar with it for a few years
before undertaking another extensive reform effort.
The Community Connect grant program is a useful complement to the
other RUS telecom programs with its focus on the niche of supporting
deployment in some of the most difficult areas to reach and serve.
Community Connect rounds out the RUS telecom portfolio. Rural providers
would welcome more resources for the RUS telecom portfolio, but would
oppose cutting all funds for one program to increase the size of
another, as the last Administration proposed to zero out Broadband
Loans in favor of Community Connect in its FY17 budget.
NTCA urges the Committee to continue to support the RUS Broadband
Loan program that is subjected to the farm bill reauthorization process
at or above current funding levels as you formulate recommendations.
Furthermore, we urge the Committee to continue its long history of
support for the Telecommunications Infrastructure and Community Connect
programs that are also vital to the ongoing deployment and maintenance
of advanced communications infrastructure throughout rural America.
The Broadband Opportunity Council (BOC), which includes USDA as a
member, released a report in September 2015 that recommended
authorizing more USDA programs to make grants and loans for broadband
infrastructure. The BOC's January 2017 progress report affirmed this
recommendation. While more resources for rural broadband deployment are
needed, involving more government entities and programs in broadband
financing should be undertaken cautiously to avoid duplicating efforts
and undermining a coherent, cohesive approach to financing and then
sustaining rural broadband networks.
Along these lines, we understand that it is current RUS policy to
avoid duplication of effort when financing broadband-capable
infrastructure, and we encourage the Committee to consider enshrining
this principle in law--that is, Congress should codify a prohibition on
USDA financing new fiber or other broadband-capable infrastructure
through any RUS or other USDA program where an existing network
deployed by a different carrier was also financed through a RUS or
other USDA program. This non-duplication provision should apply to all
USDA programs, and should also extend to preclude overbuilding of other
carriers' networks that receive USF High-Cost support as administered
by the FCC. It would be an utter waste of public resources if any USDA
resources (regardless of the program) go to finance the construction of
fiber or other communications network facilities in areas where another
USDA program or the FCC's USF program has already enabled the
deployment and operation of a network by another operator.
Finally, various permitting regulations present significant
obstacles to broadband deployment--indeed, the project financed by the
RUS grant/loan to Hill Country was delayed for about a year as we
waited on completion of different reviews. While permits serve an
important public purpose, we'd encourage streamlining Federal approval
processes to the extent possible, and to the extent that RUS can help
in standardizing processes with land-managing and property-managing
agencies and in improving timelines for historical preservation
coordination, that would be a significant help in speeding and reducing
the costs of deployment. Better, more coordinated sequencing of
environmental reviews and approvals is also important, so that
companies that are applying for financing do not need to expend
substantial resources and staff time up-front in pursuit of loans that
might not even be approved (which is a real deterrent to applications)
or for environmental showings that might only need to be repeated in a
few years once later phases of construction begin. Along these lines
and as a related matter, we also support permitting reforms as proposed
in Sen[.] Thune's MOBILE NOW Act or as adopted and applied to larger
projects in the FAST Act.
The Complementary Role of the FCC'S Universal Service Fund Programs
RUS Financing and USF Support Work in Concert
RUS lending programs finance the substantial up-front costs of
network deployment. By contrast, the USF High Cost Fund helps make the
business case for construction and sustains ongoing operations at
affordable rates. More specifically, USF by law aims to ensure
``reasonably comparable'' services are available at ``reasonably
comparable'' rates. Not to be confused or conflated, RUS capital and
ongoing USF support serve distinctly important, but complementary
rather than redundant, purposes in furthering rural broadband
deployment. The availability of USF--the ability to make sure that
consumers can actually afford to buy services on the networks once
built--is so essential to the RUS telecom loan calculus that
uncertainty in the Federal USF program in recent years has hindered
some of the success, momentum, and economic development enabled by the
RUS telecommunications programs.
USF Reform and the Under-Funded High Cost Program
NTCA has made significant efforts to seek some restoration of
regulatory certainty to the USF programs in the wake of reform debates
that stretched nearly a decade. In March 2016, the FCC adopted reforms
to the USF mechanisms that defined options for telcos to elect either a
``model-based'' USF support mechanism that would provide carriers with
additional support in exchange for incremental broadband buildout
obligations or a reformed ``non-model'' USF support mechanism that
would provide support to enable more affordable broadband rates for
rural consumers and businesses.
Unfortunately, even as the March 2016 order resolved some long-
running debates and took several important steps to more directly
orient the high-cost USF program toward broadband, the order did not
address a fundamental concern--the lack of sufficient funding under a
budget that effectively provides telcos with less revenue today than
they had prior to reforms adopted in 2011. And in the wake of reforms,
it has become increasingly apparent that USF programs are
insufficiently funded as many rural consumers face the prospect of
paying hundreds of dollars per month for standalone broadband services.
The New A-CAM Cost Model Option
To be clear, the FCC thankfully did provide additional funding in
the March 2016 order--$200 million per year--to help facilitate the
``model option'' as part of the reforms described above. These funds
will certainly help enable the expansion of broadband in areas where it
is lacking today. But demand for model support far exceeded supply,
confirming the insufficiency of a USF High Cost budget that was
otherwise held constant at 2010 support levels. In fact, even with the
additional $200 million in support, USF funding for the model remains
approximately $110 million per year short of demand, meaning that tens
of thousands of rural consumers will see lower speeds or no broadband
at all--precisely what the reforms were intended to alleviate. NTCA and
many other stakeholders are urging the FCC to provide full funding to
enable the business case for greater expansion of broadband.
The Non-Model USF Support Option
A new cost model for distributing USF support that lacks sufficient
funding is only part of the story. The reforms to the ``non-model'' USF
mechanisms also did not address the underlying problem of insufficient
funding. Due to the USF High Cost budget that has been flat for years,
the non-model mechanisms look to be under-funded in the amount of at
least $140 million this year (and perhaps much more over time). As a
result, the budget control adopted to cap the High Cost Fund will cut
an estimated ten percent of USF support this year on average for
companies like Hill Country--cutting recovery of costs that we have
already incurred in deploying networks and delivering services to
consumers. Moreover, the budget control can and will vary from period
to period, undercutting the kind of predictability that is called for
by law and needed when evaluating future investments.
Providing rural broadband won't leave a company with a cash
surplus, so the unpredictability and impact of the budget control
mechanism hits close to home. Hill Country's USF support was reduced by
approximately five percent in the last few months of 2016 and some
estimates indicate that the budget control could increase to perhaps
ten percent this year. This will translate into higher broadband prices
for consumers, because the only place we can turn to recover those
costs are our consumers. RUS programs are impacted in turn, because the
unpredictable nature of the level of the budget control hinders our
ability to plan for future investments in broadband networks.
Thus, as NTCA summarized in a recent filing with the FCC, ``while
much effort may have gone into rebuilding `the engine' of non-model USF
reforms, the ongoing lack of `gasoline in that engine' (in the form of
sufficient budget resources) risks rendering its operation inefficient
at best and utterly ineffective at worst.'' This budget crisis--
captured in the form of the new budget control mechanism--will deter
customer purchases of standalone broadband and ultimately undermine
further deployment, as small telcos will need to factor estimated
support reductions into future planning efforts and scale back
investments.
Right-Sized USF Budget Key to RUS Success
Just as RUS will need sufficient resources to help rural America
remain competitive, remedying this USF budget concern will be key to
the sustained delivery of affordable, high-quality broadband to
consumers that this Committee and many other Members of Congress hope
to see in rural America. At a time when the focus is increasingly on
deploying better infrastructure faster, the imposition of this budget
cap at 2010 levels translates to a contrary result of lower-speed
broadband to fewer locations at higher rates. The FCC has taken steps
to finally adopt and implement reforms as discussed above, but there is
still much more work to be done to make sure the reforms and programs
work as intended and that these cornerstones of access to capital
(especially RUS financing) and USF can once again operate in concert.
Rural Broadband Benefits the Entire U.S. Economy
Investing in rural broadband has far-reaching effects for both
urban and rural America, creating efficiencies in health care,
education, agriculture, energy, and commerce, and enhancing quality of
life of citizens across the country. A report released in April 2016 by
the Hudson Institute in conjunction with the Foundation for Rural
Service found that investment by rural broadband companies contributed
$24.1 billion to the economies of the states in which they operated in
2015.\2\ Of this amount, $17.2 billion was the direct byproduct of the
rural broadband companies' own operations while $6.9 billion was
attributable to the follow-on impact of their operations. In Texas, the
direct economic impact of rural telecommunications was over $1.3
billion with indirect impacts of nearly $720 million.
---------------------------------------------------------------------------
\2\``The Economic Impact of Rural Broadband'' (2016), The Hudson
Institute, Washington, D.C.
---------------------------------------------------------------------------
Rural Telecom a Boon to Urban Economies
The Hudson study also confirmed that while small telcos like Hill
Country produce a range of telecommunications services in rural areas,
much of the benefit goes to the urban areas where the vendors,
suppliers, and construction firms that rural telcos use are based. Only
$8.2 billion, or 34 percent of the $24.1 billion final economic demand
generated by rural telecom companies accrues to rural areas--the other
66 percent or $15.9 billion accrues to the benefit of urban areas.
Additionally, the report found that the rural broadband industry
supported nearly 70,000 jobs nationwide in 2015, including more than
6,300 jobs in Texas, both through direct employment and indirect
employment from the purchases of goods and services generated. Jobs
supported by economic activity created by rural broadband companies are
shared between rural and urban areas, with 46 percent in rural areas
and 54 percent in urban areas.
Immense Benefits for Rural Consumers and Communities
The direct and indirect economic impact of the investments and
operations of rural telecom providers don't tell the whole story. The
broader socioeconomic benefits of broadband for users cannot be
ignored. A Cornell University study, for example, found that rural
counties with the highest levels of broadband adoption have the highest
levels of income and education, and lower levels of unemployment and
poverty.\3\ A recent Pew Study further finds that among those Americans
who have looked for work in the last 2 years, 79 percent used online
resources in their most recent job search and 34% say these online
resources were the most important tool available to them.\4\
---------------------------------------------------------------------------
\3\``Broadband's Contribution to Economic Health in Rural Areas''
(2015), Community & Regional Development Institute, Cornell University.
\4\``Searching for Work in the Digital Era'' (2015), Pew Research
Center, Washington, D.C.
---------------------------------------------------------------------------
Access to healthcare is a critical issue for rural areas as well,
where the lack of physicians, specialists, and diagnostic tools
normally found in urban medical centers creates challenges for both
patients and medical staff. Telemedicine applications help bridge the
divide in rural America, enabling real-time patient consultations and
remote monitoring, as well as specialized services such as tele-
psychiatry. One study found that doctors in rural emergency rooms are
more likely to alter their diagnosis and their patient's course of
treatment after consulting with a specialist via a live, interactive
videoconference.\5\
---------------------------------------------------------------------------
\5\``Telemedicine Consultations and Medication Errors in Rural
Emergency Departments'' (2013), Center for Healthcare Policy and
Research and Department of Pediatrics, University of California Davis.
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There is also a shortage of teachers in many areas of rural America
and those public school districts rely on high-speed connectivity to
deliver interactive-video instruction for foreign language, science and
music classes. For example, students in rural Minnesota can attend
online music classes offered through the MacPhail Center for Music in
Minneapolis.\6\ Broadband networks also enable farmers and ranchers to
use the Internet to analyze weather data, manage nutrient application,
map their crop yields, and adjust planting for the next season with
modern precision agriculture tools, and gain access to new markets.
Farmers are relying heavily on both wireless and wireline broadband
technologies, resulting in monthly data usage of 30 to 40 Gigabytes.\7\
---------------------------------------------------------------------------
\6\``Bringing Broadband to Rural Minnesota'' (2016), Center for
Rural Policy and Development, Mankato, MN.
\7\``Farmers Harvest Gigabytes with Broadband and Wireless
Technology'' (2016), CoBank Rural Infrastructure Briefings.
---------------------------------------------------------------------------
Retail e-commerce has benefited tremendously from sales in rural
America as well, where consumers may lack access to local retail
outlets, but through the availability of rural broadband networks, can
access a variety of shopping options. According to the Hudson
Institute, rural consumers generated $9.2 billion in online sales in
2015 and if all rural Americans had access to broadband networks, the
authors estimate that Internet sales would be $1 billion higher.\8\
---------------------------------------------------------------------------
\8\``The Economic Impact of Rural Broadband'' (2016), The Hudson
Institute, Washington, D.C.
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Conclusion
Robust broadband must be available, affordable, and sustainable for
rural America to realize the economic, healthcare, education, and
public safety benefits that advanced connectivity offers. Small, rural
telecom providers and lenders such as RUS must have regulatory
certainty before they can justify greater investments in the networks
of the future, and providers like Hill Country need sufficient ongoing
USF support to avoid the prospect of charging rural consumers tens or
hundreds of dollars more per month to recover the costs of operating in
such rural and remote locations. And deploying broadband is only \1/2\
the battle--rural areas must remain served at reasonable rates if they
are to remain competitive.
Thus, the broader mission of universal service--and the economic
benefits it delivers locally and to the nation as a whole--requires the
resourcefulness and entrepreneurship of small businesses like Hill
Country, access to capital from programs like those offered by RUS, and
the availability of sufficient and predictable ongoing cost recovery
mechanisms like the USF program so that rural consumers and businesses
can indeed obtain services that are reasonably comparable in price and
quality to those available in urban America.
The Chairman. Thank you, Mr. Cook.
Mr. Duff.
STATEMENT OF JOHN DUFF, STRATEGIC BUSINESS DIRECTOR, NATIONAL
SORGHUM PRODUCERS, LUBBOCK, TX
Mr. Duff. Chairman Scott, Ranking Member Scott, on behalf
of National Sorghum Producers, I would like to thank the
Committee on Agriculture and this Subcommittee for the
opportunity to submit testimony on the next U.S. farm bill, and
implications for sorghum in renewable energy.
My name is John Duff. I serve as Strategic Business
Director for NSP, where I focus primarily on farm policy
analysis, and work with sorghum-based renewable energy
producers on policy and regulatory issues.
NSP represents U.S. sorghum farmers nationwide, and our
mission is to increase their profitability by ensuring sound
approaches to legislation and regulation. NSP greatly
appreciates the work put forth by this Subcommittee in
preparation for the next farm bill, and looks forward to
working with its Members to craft this vital farm policy.
My testimony, in particular, will focus on implications for
sorghum in renewable energy.
The High Plains produces the largest volume of sorghum, but
the crop is also grown from Georgia to California, and south
Texas to South Dakota. In 2016, 480 million bushels of sorghum
were produced in the U.S., with Kansas and Texas contributing
approximately 80 percent of this total. Sorghum uses \1/3\ less
water than corn, and tolerates heat much better than comparable
crops. These characteristics make it particularly well suited
for the semiarid High Plains where ground water declines
threaten local economies, often underpinned by renewable energy
or ethanol producers. Ethanol producers typically consume about
\1/3\ of the U.S. sorghum crop, and are on track to use 125
million bushels in 2017.
Since the 2008 Farm Bill was enacted, the U.S. renewable
energy industry has seen both incredible opportunities and
tremendous challenges. As with any new industry, many companies
have experienced only limited success, and setbacks have
sometimes seemed more common than growth. Through this decade
of change, sorghum has proven to be a constant for first-
generation and next-generation renewable energy producers. The
advantages are clear. Sorghum is a source of starch, sugar, and
cellulose all in a single crop. Its agronomic needs are well
known to U.S. farmers, and it is supported by a deeply
experienced seed industry, with roots in the 1950s upper Texas
Panhandle, where 85 percent of the world's sorghum seed is
still produced. Simply put, unlike other renewable energy
feedstocks, sorghum was built to last and is here to stay.
The 2008 Farm Bill recognized this potential and set up a
structure to reward ethanol producers for taking a risk on
feedstock such as sorghum. NSP firmly believes the resulting
incentives enabled ethanol producers to become the foundation
of the domestic sorghum market, with over $60 million being
used to bolster sorghum demand through the Advanced Biofuel
Payment Program. NSP strongly urges the Committee to continue
and strengthen this program through a more transparent payment
calculation process, and an addition of provisions that will
incentivize its new processes designed to increase overall
energy production.
As technology has evolved, so too have energy title needs.
While many programs authorized by the 2002 and 2008 Farm Bills
provided much-needed support during a time when little was
known about the commercial viability of many renewable energy
technologies, today's environment is significantly different.
Therefore, we strongly urge the Committee to consider combining
and updating programs to better suit the needs of the current
renewable energy industry. In summary, the next energy title
must focus more on incentivizing greater energy production by
proven market participants, than on de-risking unproven
technology development.
NSP believes sorghum will be a key part of our continuing
move toward greater energy independence. The Department of
Energy agrees, and has committed over $70 million to sorghum
research since 2015. The Department refers to sorghum as a
model feedstock, in large part because of the diverse nature of
the crop. Sorghum is a starch, sugar, and cellulose source all
in a single crop, and growth in the area of renewable energy
will benefit all U.S. sorghum farmers and ultimately all of
American agriculture.
Thank you, and I welcome any questions.
[The prepared statement of Mr. Duff follows:]
Prepared Statement of John Duff, Strategic Business Director, National
Sorghum Producers, Lubbock, TX
Introduction
On behalf of National Sorghum Producers, I would like to thank the
House Committee on Agriculture for the opportunity to submit testimony
on the next U.S. farm bill and implications for sorghum in renewable
energy.
My name is John Duff. I serve as Strategic Business Director for
NSP, where I focus primarily on farm policy analysis and work with
sorghum-based renewable energy producers on policy and regulatory
issues. NSP represents U.S. sorghum farmers nationwide, and our mission
is to increase their profitability by ensuring sound approaches to
legislation and regulation. NSP greatly appreciates the work put forth
by the Committee in preparation for the next farm bill and looks
forward to working with its Members to craft this vital farm policy. My
testimony, in particular, will focus on implications for sorghum in
renewable energy.
Industry Overview
The High Plains produces the largest volume of sorghum, but the
crop is also grown from Georgia to California and south Texas to South
Dakota. In 2016, 480 million bushels of sorghum were produced in the
U.S., with Kansas and Texas contributing approximately 80 percent of
this total. Sorghum uses \1/3\ less water than corn and tolerates heat
much better than comparable crops. These characteristics make it well-
suited for the semi-arid High Plains, where groundwater declines
threaten local economies often underpinned by renewable energy or
ethanol producers. Ethanol producers typically consume about \1/3\ of
U.S. sorghum production and are on track to use 125 million bushels in
2017.
Expand Opportunities for Renewable Energy Producers Using Sorghum
Since the 2008 Farm Bill was enacted, the U.S. renewable energy
industry has seen both incredible opportunities and tremendous
challenges. As with any new industry many companies have experienced
only limited success, and setbacks have sometimes seemed more common
than growth. Through this decade of change, sorghum has proven to be a
constant for first generation and next generation renewable energy
producers. The advantages are clear: Sorghum is a source of starch,
sugar and cellulose all in a single crop; its agronomic needs are well-
known to U.S. farmers; and it is supported by a seed industry with
roots in the 1950s upper Texas Panhandle, where 85 percent of the
world's sorghum seed is still produced. Simply put, unlike other
renewable energy feedstocks, sorghum was built to last and is here to
stay.
The 2008 Farm Bill recognized this potential and set up a structure
to reward ethanol producers for taking risks on feedstocks such as
sorghum. NSP firmly believes the resulting incentives enabled ethanol
producers to become the foundation of the domestic sorghum market with
over $60 million being used to bolster sorghum demand through the
advanced biofuel payment program. NSP strongly urges the Committee to
continue and strengthen the program through a more transparent payment
calculation process and an addition of provisions that will incentivize
new processes designed to increase overall energy production.
As technology has evolved so too have energy title needs. While
many programs authorized by the 2002 and 2008 Farm Bills provided much
needed support during a time when little was known about the commercial
viability of many renewable energy technologies, today's environment is
significantly different. Therefore, we strongly encourage the Committee
to consider combining and updating programs to better suit the needs of
the current renewable energy industry. In summary, the next energy
title must focus more on incentivizing greater energy production by
proven market participants than on de-risking unproven technology
development.
NSP believes sorghum will be a key part of our continuing move
toward greater energy independence. The Department of Energy agrees and
has committed over $70 million to sorghum research since 2015. The
Department refers to sorghum as a model feedstock in large part because
of the diverse nature of the crop: Sorghum is a starch, sugar and
cellulose source all in a single crop, and growth in the area of
renewable energy will benefit all U.S. sorghum farmers and ultimately
all of American Agriculture.
The Chairman. Mr. Greenwood.
STATEMENT OF HON. JAMES C. GREENWOOD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, BIOTECHNOLOGY INNOVATION ORGANIZATION,
WASHINGTON, D.C.
Mr. Greenwood. Chairman Scott, Ranking Member Scott, and
other distinguished Members of the Subcommittee, good morning.
Thank you for the invitation to testify today as we look ahead
to the next farm bill, and the strategies to support our
farmers and our local businesses.
Twelve years ago, after serving for 12 years in Congress, I
left a safe seat here in the House to lead the world's largest
trade association representing biotechnology companies. I would
like to note that I left undefeated and unindicted, by the way.
I did this because I believed deeply in the biotechnology
industry, and in our ability to affordably fuel, feed, and heal
this country and, indeed, the world.
Mr. Chairman, congratulations on your selection to lead
this Committee, and Mr. Ranking Member, welcome back.
I had the opportunity to be a Subcommittee Chairman during
my service on the Energy and Commerce Committee, under Speaker
Gingrich. These leadership posts don't always bring the
cameras, which isn't necessarily a bad thing these days, but
they do bring the opportunity to enact your ideas and to make a
real difference for the people who put you here.
I know Georgia's farmers are in good hands. I don't think
it is a coincidence that this Subcommittee and the USDA are now
led by public servants from a state that is on the cutting edge
of modern agriculture.
Georgia generates more than $8 billion a year in biobased
industrial activity. Only one state in the Union produces more,
and nationally, Georgia is ranked fourth in the number of
direct biobased industry jobs, with more than 80,000.
One of Georgia's most iconic companies, Coca-Cola, has
utilized the farm bill's energy title to become one of the
largest bioplastics end-users in the country. Their new bottle,
introduced in 2009, is made 30 percent from plants. To date,
Coca-Cola has produced more than 40 billion plant bottles. And
the PlantBottleTM technology is now being used in
polyester car interiors and souvenir cups, and Coca-Cola is
building new manufacturing facilities and creating made-in-the-
USA jobs through its plant PET technology collaborative.
That is just one example from one farm bill energy
initiative, USDA's BioPreferred Program, but actually, there
are 71 companies in Georgia benefitting from this program, from
biobased flooring companies in Dalton, to the world's leading
producer of pine chemicals in Savannah.
In my written statement, and in BIO's report that I have
submitted for the record, I highlight companies from every
state that are developing new technologies and products with
support from each of the farm bill energy title programs. We
should build on these programs and go forward, not backward.
If you would have asked me during my time in Congress what
is the only thing a Member can do for his constituents more
valuable than create jobs, I might have said create new
American industries full of high-paying jobs; jobs that will
help preserve our natural environment for our children and our
grandchildren. That is exactly the future we are building, and
the energy title of this farm bill is a big reason why.
According to USDA, the biobased industry contributes $393
billion to the U.S. economy annually, and supports 4.2 million
jobs, and the bioeconomy is adding hundreds of thousands more
jobs a year. The renewable fuel sector adds another 850,000
jobs, and $185 billion in annual economic output, and $46
billion in wages for our farmers, our workers, and our workers
according to an analysis from Fuels America. These numbers
would be a fraction of their current size without the energy
title. The programs, in toto, provide what all investors say
they need; a long-term, stable policy environment to help them
make investment decisions. That stability is especially
important in these tough times for our rural producers. We know
America's farmers today are facing severe economic pressures,
commodity prices are down, and so are net farm incomes. They
dropped 15 percent last year, and the USDA forecasts another
nine percent drop this year. The farm bill's energy programs
are an instrumental tool to help farmers weather this storm and
bounce back stronger. The demand for biomass gives farmers a
value-added product they can grow to offset low commodity
prices.
McKinsey and Company estimates $\1/4\ trillion in annual
global sales of biobased products. Here in the United States,
we have the people, the universities, the technology, and the
vision to lead the world in bio-processes and products.
Biofuels, renewable chemicals, and biobased products diversity
demand for crops and crop residues. Just as modern oil
refineries take a crude oil feedstock and produce many value-
added products, biorefineries take renewable feedstocks and do
the same. And the growing demand for employees to build and
operate these new biorefineries is another way we are
revitalizing rural communities.
This is the future. The choice we make in the farm bill is
whether or not we are going to lead it. In addition to boosting
farmer incomes, creating jobs, and revitalizing U.S.
manufacturing, the biobased economy is helping to offset the
impact OPEC has on our oil prices. In 2014, biobased products
replaced nearly 7 million barrels of oil. In 2015, renewable
fuels displaced an amount of gasoline equivalent to 527 million
barrels of crude. In other words, our industry saved us roughly
the volume of oil imported annually from Saudi Arabia and
Kuwait combined. BIO is proud to be a founding member of the Ag
Energy Coalition of trade groups, companies, and organizations
representing thousands of farmers and businesses across the
country. We are committed to developing all of the above
approach to supporting renewables, energy efficiency, and farm
and forest resources. To me, the economic case alone for these
new technologies is so strong and compelling that it warrants
the continuation and growth of this title, even if one did not
share my conviction that they are also critical to the health
of our planet.
Mr. Chairman, I look forward to working with this Committee
as we plot a course to capture and capitalize on this growing
market to harvest and manufacture sustainability. And thank you
for allowing me to use the time that the other witnesses left
on the table.
[The prepared statement of Mr. Greenwood follows:]
Prepared Statement of Hon. James C. Greenwood, President and Chief
Executive Officer, Biotechnology Innovation Organization, Washington,
D.C.
Introduction
The Biotechnology Innovation Organization (BIO) is the world's
largest trade association representing biotechnology 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
innovative healthcare, agricultural, industrial and environmental
biotechnology products. Our members are working every day to solve the
greatest challenges facing society--whether it is finding a cure for
cancer, protecting the public against bio-terror threats, feeding
hungry people nutritious food, or generating renewable fuels, renewable
chemicals and biobased products. We support public policies, including
government funding for key agencies and programs that unleash our
members' scientific innovation potential and grow the bioeconomy. BIO
also is one of the founding members of the Agriculture Energy (Ag
Energy) Coalition, a coalition of trade groups, companies, and
organizations representing thousands of farmers and businesses across
the United States who are developing an ``all-of-the-above'' approach
to renewable energy, energy efficiency, and farm and forest resources.
Within its broad membership, BIO's member companies are developing
new agricultural and low-carbon feedstocks, industrial enzymes, and
biological catalysts for the conversion of biomass into advanced
biofuels, alternative jet fuels, renewable chemicals, and biobased
products. Utilizing the power of industrial biotechnology, companies
across the country are creating a robust biobased economy. Biobased
production encompasses a complex value chain, from agriculture through
the manufacture of consumer goods, that provides an alternative to the
petroleum-based value chain and that brings environmental, economic and
other benefits. The biobased economy can generate new markets for
agricultural producers, boost innovation in domestic manufacturing, and
stimulate sustainable economic growth. These companies are developing
plant biotechnologies that improve crop insect resistance, enhance crop
herbicide tolerance, and facilitate the use of more environmentally
sustainable farming practices. In animal agriculture, biotechnology is
used to genetically engineer animals to improve their suitability for
pharmaceutical, agricultural, and industrial applications.
The biobased economy and industrial biotechnology already
contribute to millions of jobs and hundreds of millions of dollars in
annual economic activity. And we are poised for accelerated growth in
the 21st century. The farm bill energy title can unleash this potential
growth, creating tens of thousands of more jobs in rural America and
promoting billions of dollars of additional economic activity.
Revitalizing Rural Economies
Much has changed since Congress passed the current farm bill, the
Agricultural Act of 2014.\1\ As [T]he Wall Street Journal noted last
month, American farmers and rural communities are hurting economically.
A multiyear slump in prices for corn, wheat and other farm commodities
brought on by a world-wide glut of grain is pushing many farmers into
debt. Net farm income dropped 15 percent to about $68 billion last
year, the lowest since 2009,\2\ according to the Agriculture
Department. It is expected drop another nine percent in 2017,\3\
extending the steepest slide since the Great Depression into a fourth
year. As incomes drop, the number of farms continues to decline; there
are now fewer than two million farms in America.
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\1\H.R. 2642, 113th Cong., Pub. L. 113-79 https://www.congress.gov/
113/plaws/publ79/PLAW-113publ79.pdf (2014) (enacted).
\2\Dow Jones & Company, Inc. All Rights Reserved. (Feb. 10, 2017).
Trade Punishment for Trump Voters. The Wall Street Journal. https://
www.wsj.com/articles/trade-punishment-for-trump-voters-1486686758.
\3\Newman, J., & McGroarty, P. (Feb. 8, 2017). The Next American
Farm Bust Is Upon Us. The Wall Street Journal. https://www.wsj.com/
articles/the-next-american-farm-bust-is-upon-us-1486572488.
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Federal lawmakers have worked over many years to craft policies in
the farm bill that minimize farm household income fluctuations caused
by volatility associated with agricultural production.\4\ As Members of
the Committee begin their work on the development of the next farm
bill, they should keep in mind that policies supporting and growing the
21st century biobased economy can help reverse the economic trends
farmers and rural communities are currently facing. Chief among these
policies is the farm bill energy title, which creates high-value
careers and new income streams for American farmers, accelerates the
commercialization of new technologies and products derived from
agricultural products, and supports construction of biorefinery
manufacturing facilities in rural communities. Conventional and
advanced biofuels, renewable chemicals, and biobased products made with
industrial biotechnology are helping diversify demand for crops and
crop residues. Just as modern oil refineries take a crude oil feedstock
and produce many value-added products, biorefineries will take
renewable feedstocks and make multiple products in the not-too-distant
future.
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\4\Good, K. (Feb. 28, 2017). USDA Report Examines Farm Household
Income Volatility. Farm Policy News. https://
farmpolicynews.illinois.edu/2017/02/usda-report-examines-farm-
household-income-volatility/.
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The Value of the Biobased Economy
During the 3 years of deliberations that led to the 2014 Farm Bill,
BIO and the Ag Energy Coalition advocated for a robust energy title
with mandatory funding to incentivize development and growth of the
biobased economy. Within Title IX of the last farm bill, the energy
title received $881 million in mandatory funds in 2014, representing
less than one percent of the overall farm bill budget. This small
amount of funding yields big results for the overall economy. According
to the U.S. Department of Agriculture (USDA), the number of jobs
contributed to the U.S. economy by the biobased products industry in
2014 was 4.2 million, up from 4.0 million in 2013. In addition to the
direct jobs created by the industry, the biobased economy generates a
jobs multiplier of 2.76, meaning for every 1,000 biobased products
jobs, 1,760 more jobs are supported in the United States.\5\ This
industry contributed $393 billion to the U.S. economy in 2014, up from
$369 billion in 2013.
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\5\Golden, J., Handfield, R., Daystar, J., & McConnell, E. (Oct.
2016). USDA: An Economic Impact Analysis of the U.S. Biobased Product
Industry. https://www.biopreferred.gov/BPResources/files/
BiobasedProductsEconomicAnalysis2016.pdf .
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This broad economic impact comes from biorefineries that are
commercializing a range of technology solutions to produce commodity
and specialty renewable chemicals as well as advanced biofuels.
Industrial biotechnology companies are pursuing renewable chemicals and
biobased materials because they can be commercialized at smaller scale
and they promise environmental benefits, stable costs, and novel
properties in comparison to fossil fuel-derived chemicals. Competition
to produce platform renewable chemicals provides manufacturers
assurance of a steadily available, high-quality supply of renewable
chemicals for consumer product applications.
These facilities are being built in rural communities near biomass
resources. The demand for biomass helps agriculture producers by giving
them a value-added product they can grow to offset low commodity
prices. The demand for employees to build and operate these
biorefineries helps to revitalize rural communities.
Development of these biorefineries can bring long-term economic
development to rural communities through the predicted rapid expansion
of renewable chemical production in the near future. McKinsey & Co.
estimates that there were $252 billion in global sales of biobased
products in 2012, with biofuels and plant extracts comprising more than
\1/2\. Sales of renewable chemicals represented nine percent of the
$2.820 billion in worldwide chemical sales in 2012. By 2020, McKinsey
expects biobased products to make up 11 percent of the $3.401 billion
global chemical market. Sales of biobased products would reach $375 to
$441 billion by 2020, with a compound annual growth rate of eight
percent over the preceding decade.\6\
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\6\Biotechnology Innovation Organization (BIO). Advancing the
Biobased Economy: Renewable Chemical Biorefinery Commercialization,
Progress, and Market Opportunities, 2016 and Beyond. https://
www.bio.org/sites/default/files/
BIO_Advancing_the_Biobased_Economy_2016.pdf.
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Gains in productivity associated with biotech crops also 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. This is in part due to
biotechnology, which has contributed to a strong and steady growth in
the U.S. agricultural export market, particularly for corn and
soybeans. It is 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 have
generated good jobs all across our country.
In addition to boosting farmer incomes, creating jobs, and
revitalizing U.S. manufacturing, the biobased economy is lessening our
dependence on foreign sources of petroleum. While the U.S. has
benefited in recent years from increased production of domestic oil and
gas, we are still unnecessarily impacted by the global price of oil and
those who control it. One need look no further than OPEC's conscious
decision 2 years ago to try to squeeze U.S. producers out of the
market, followed by OPEC's cut in production last fall. OPEC's actions
caused a ten percent increase in oil prices in 1 day, and prices
continued to climb to an 18 month high within a month. Biobased
products and renewable fuels are helping to offset the impact OPEC has
on our energy prices. In 2014 biobased products replaced about 6.8
million barrels of oil, while in 2015, renewable fuels displaced an
amount of gasoline equivalent to 527 million barrels of crude oil.
That's roughly the volume of oil imported annually from Saudi Arabia
and Kuwait combined.\7\
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\7\Urbanchuk, J. (Feb. 2016). ABF Economics: Contribution of the
Ethanol Industry to the Economy of the United States in 2015. http://
ethanolrfa.org/wp-content/uploads/2016/02/Ethanol-Economic-Impact-for-
2015.pdf.
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Whether the growth and benefits from this industry occur in the
United States will depend on supportive policies to help grow the 21st
century biobased economy. The 2014 Farm Bill energy title programs
spurred the development of this industry. To ensure the biobased
industry continues to expand in the United States, Congress must
improve upon the existing Title IX programs and provide mandatory
funding. This will help innovative U.S. companies continue to
commercialize advanced biotech processes. Putting homegrown
technologies to work converting domestic crops and residues to value-
added products can create high-quality rural jobs, spur economic
growth, and improve environmental health.
What follows are the existing programs contained within Title IX of
the 2014 Farm Bill, how the programs work, the jobs, facilities, and
products these programs have helped develop, and how BIO believes these
programs can be improved in the next farm bill.
Farm Bill Energy Title Programs
Section 9002 Biobased Markets Program, known as the
BioPreferred' Program.
Section 9003 Biorefinery, Renewable Chemical, and Biobased
Product Assistance Program (BAP).
Section 9005 Bioenergy Program for Advanced Biofuels.
Section 9007 Rural Energy for America Program (REAP).
Section 9008 Biomass Research and Development (BRDI).
Section 9010 Biomass Crop Assistance Program (BCAP).
Section 9002, the Biobased Market Program, or the
BioPreferred' Program
Managed by USDA, the goal of the BioPreferred program is to
increase the purchase and use of biobased products from agricultural
feedstocks. The BioPreferred' Program was created by the
2002 Farm Bill and reauthorized and expanded as part of the
Agricultural Act of 2014 (the 2014 Farm Bill). The program's purpose is
to spur economic development, create new jobs and provide new markets
for farm commodities. The increased development, purchase, and use of
biobased products reduces our nation's reliance on petroleum, increases
the use of renewable agricultural resources, and mitigates adverse
environmental and health impacts.\8\
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\8\USDA. What Is Biopreferred? https://www.biopreferred.gov/
BioPreferred/faces/pages/AboutBioPreferred.xhtml.
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BioPreferred' Program is transforming the marketplace
for biobased products through two initiatives: purchasing requirements
for Federal agencies and their contractors; and voluntary product
certification and labeling. Federal law, the Federal Acquisition
Regulation, and Presidential Executive Orders direct all Federal
agencies and their contractors to purchase biobased products in
categories identified by USDA through the BioPreferred'
Program. To date, over 14,000 biobased products in 97 product
categories (e.g., cleaners, carpet, lubricants, paints) listed in the
BioPreferred' Catalog qualify for mandatory Federal
purchasing. In Fiscal Year 2017, Federal agencies have committed to
include biobased product purchasing requirements in 84,433 contracts
totaling $453,150,168.
The BioPreferred' Program also drives growth of the
bioeconomy by helping drive consumer recognition of biobased products.
USDA is making it easier for consumers to identify biobased products
with the USDA Certified Biobased Product label. There are currently
more than 2,700 voluntarily labeled products: 1,700 of them are
consumer goods, 400 are renewable chemicals, and 600 are industrial
products.
Brand owners such as Procter and Gamble (P&G) on their Tide bottle;
General Mills on their cereal boxes; Unilever on their detergents; and
The Coca-Cola Company on their PlantBottleTM packaging, all
use USDA's label to show consumers the biobased content in their
products. Eventually, P&G intends to use only recycled or renewable
materials to make and package its consumer products. Wal-Mart has set
goals to sell only products that use renewable energy and produce zero
wastes. The BioPreferred' Program helps create this market
pull for renewable chemicals and biobased products and creates a
uniform process for companies interested in these technologies.
Recommendations for the Next Farm Bill
USDA should establish within the BioPreferred' Program's
voluntary labeling and procurement system a campaign to increase public
awareness and acceptance of renewable chemicals and biobased products.
The BioPreferred program also should develop an annual report both
auditing and tracking USDA's voluntary Certified Renewable Chemicals
and Biobased Product labeling program and showing procurement and sales
of biobased products by Federal agencies and their contractor's.
Additionally, USDA could work with United States Department of
Commerce in developing North American Industry Classification System
(NAICS) codes that identify renewable chemical and biobased product
manufacturers. USDA should explore combining its certified renewable
chemicals and biobased products labeling program with the Environmental
Protection Agency's Safer Choice label, providing consumers the ability
to identify products that are both certified biobased and safer for
human health and the environment.
Finally, we ask Congress to consider increasing mandatory funding
for this program to $10 million annually.
Section 9003 Biorefinery, Renewable Chemical, and Biobased Product
Assistance Program
The Biorefinery, Renewable Chemical, and Biobased Product
Manufacturing Assistance Program (BAP), also known as the Section 9003
Program, provides loan guarantees to assist in the construction of
advanced biofuels biorefineries. Consistent with BIO's past advocacy,
it was expanded to include renewable chemicals and biobased products
manufacturing facilities in the 2014 Farm Bill.\9\
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\9\USDA. Biorefinery, Renewable Chemical, and Biobased Product
Manufacturing Assistance Program. https://www.rd.usda.gov/files/fact-
sheet/RD-FactSheet-RBS_Biorefinery.pdf.
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This loan guarantee program enables manufacturers to access capital
for large-scale projects in rural communities. Without the loan
guarantee program, new innovative companies might never be able to pool
sufficient capital to commence development of a project in a rural
community with a small population. Section 9003 has enabled companies
to put steel in the ground for first-of-a-kind biorefineries. These
biorefineries are proven job and economic growth drivers for rural
communities.
Sapphire--Columbus, New Mexico
In 2011, under this program, USDA provided Sapphire Energy a $54.5
million loan guarantee to build a refined algal oil commercial
facility. Sapphire's ``Green Crude Farm'' in Columbus, NM, is an
example of how USDA funding and partnerships with the private sector
are helping to support the development of biorefineries. About a 4 hour
drive south of Albuquerque, roughly 1,700 Columbus residents live at
the southern edge of New Mexico and the United States. In the desert
scrub outside of Columbus the plant opened in May 2012 to produce
renewable algal oil. According to the company, more than 600 jobs were
created during the first phase of construction at the facility and
during operations the plant employs approximately 30 people.\10\ After
Sapphire received additional equity from private investors, it repaid
the remaining balance on its USDA-backed loan in 2013. The plant is
current being brought fully online to produce algae for human and
animal nutritional products. It is a measured and effective approach to
becoming a permanent form of nutritional oils and protein for the
world.\11\
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\10\Bio-Based World News. (Aug. 10, 2016). $250m USDA funding pool
to help bio-based chemicals and products seeks applications. https://
www.biobasedworldnews.com/250m-usda-funding-pool-to-help-bio-based-
chemicals-and-products-seeks-applications.
\11\Sapphire Energy, Inc. Algae Farm. (2015). http://
www.sapphireenergy.com/locations/green-crude-farm.html.
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Fulcrum Sierra Biofuels--Storey County, Nevada
Section 9003 is supporting development of the exciting field of
alternative jet fuels. In 2014, USDA closed on a loan guarantee to
Fulcrum Sierra Biofuels, LLC, to build a biorefinery to produce jet
fuel from municipal solid waste in Storey County, Nevada, approximately
20 miles east of Reno. Fulcrum will produce synthesis gas from 147,000
tons of municipal solid waste and catalytically convert it to synthetic
paraffinic kerosene/jet fuel through a proprietary technology. The
plant will be the first of what the company expects to be several bio-
jet fuel plants throughout the country. At the same time as USDA made
its loan guarantee, Cathay Pacific Airways announced investment in
Fulcrum Bioenergy and negotiated a long-term supply agreement for 375
million gallons of sustainable aviation fuel over 10 years. This would
represent about two percent of the airline's annual fuel
consumption.\12\
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\12\USDA. Fletcher, J. (Press Release No. 0195.14). USDA Announces
Loan Guarantee to Help Innovative Company Turn Waste Into Renewable Jet
Fuel. https://www.usda.gov/wps/portal/usda/usdamediafb?contentid=2014/
09/0195.xml.
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Biosynthetic Technologies--Texas
With Section 9003 expanded in 2014 to make renewable chemicals and
biobased products manufacturing facilities eligible to participate in
the program, Irvine, California-based, Biosynthetic Technologies, LLC,
received conditional approval from USDA for its loan guarantee
application. Biosynthetic Technologies is working with a rural lender
to finance the construction of a full-scale commercial manufacturing
plant in Houston that will produce 20 million gallons a year of its
oil-based ingredient for high-performance motor oils, industrial
lubricant products, and cosmetic ingredients. These biobased oils have
higher viscosity, thermal stability, and flash point than traditional
petroleum motor oils as well as existing synthetics. This new project
will create manufacturing jobs in the United States, strengthen the
agricultural sector, and help create environmentally friendlier
products that perform better.\13\
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\13\Business Wire. (Feb. 01, 2016). USDA Reserves Over $100 Million
in Loan Guarantee Funding for Biosynthetic Technologies. http://
www.businesswire.com/news/home/20160201005258/en/USDA-Reserves-100-
Million-Loan-Guarantee-Funding.
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Recommendations for the Next Farm Bill
The 2014 Farm Bill extended loan guarantee eligibility to renewable
chemicals and biobased products makers. However, due to a drafting
error when reconciling the differences between the House and Senate
versions of the 2014 Farm Bill, language was inadvertently deleted that
would have allowed stand-alone renewable chemical facilities to fully
participate in the program. Under USDA's current regulations, all
biorefinery projects must produce an advanced biofuel, even if the main
purpose of the project is to create renewable chemicals. As a result, a
number of renewable chemical producers are ineligible because it is too
costly or impractical for them to retrofit their processes to produce a
biofuel, in addition to a renewable chemical.
BIO urges the Committee to amend the language in Section 9003 to
ensure stand-alone renewable chemical facilities are eligible in the
next farm bill. BIO also requests the Committee work with USDA to
ensure timely implementation of the new rules that will come as a
result of the next farm bill to ensure USDA makes funding available in
a timely manner. Maintaining mandatory funding for this program is
crucial for its success in enabling companies to secure the financing
they need to commercialize biorefinery projects.
Section 9005 Bioenergy Program for Advanced Biofuels
This program encourages production of advanced biofuels, other than
corn starch ethanol. The policy goal is to create long-term, sustained
increases in advanced biofuels production. Under the last farm bill,
awards totaling $8.8 million were made through Rural Development to
biofuels producers, based on the amount of advanced biofuels produced
from renewable biomass. Feedstocks incentivized by this program include
crop residue, food and yard waste, vegetable oil and animal fat. The
program has promoted the development of wood pellets, biodiesel,
advanced and cellulosic ethanol, and biogas.\14\
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\14\USDA. Advanced Biofuel Payment Program. https://
www.rd.usda.gov/files/RD_AdvBiofuelsChart_2016.pdf.
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The return on investment (ROI) for new technologies, including
advanced biofuels, are important to driving investor interest. Many
advanced biofuels are still utilizing brand new technologies and
plants, so there is much to learn and improve. Initial investment costs
for these technologies and plants will improve with time, practice,
learning, and ultimately additional plants. Efficiencies across the
value chain--including biomass harvest and storage, engineering
improvements, construction learnings and regulatory approvals--must be
made in order to improve the economic outlook and certainty for the
ROI. Section 9005 funding helps investors in these new technologies
with the requisite ROI needed to proceed with constructing a new plant
or expanding capacity at an existing facility. Without Section 9005
mandatory funding, companies working on advanced biofuel technologies
have one less tool to support innovation and commercialization of the
cleanest fuels in the world. Current USDA and DOE funding programs help
advanced biofuels succeed; the industry cannot afford to be without one
of these programs.
Recommendations for the Next Farm Bill
It is critical the Committee maintain robust mandatory funding for
Section 9005 to help grow and expand the advanced biofuels industry
nationwide.
Section 9007 Rural Energy for America Program (REAP)
REAP has been a remarkably popular, successful, and constructive
program that supports every state and region and renewable energy and
energy efficiency technology. REAP provides benefits to the full
agricultural value chain, from producers to coops, to biotechnology and
clean technology companies operating across rural America. Nearly
13,000 projects in all 50 states have received awards since the 2008
Farm Bill, leveraging more than $3 billion in private investment. REAP
is one of agriculture's best ways of improving the nation's energy
infrastructure and resiliency.
The program has been instrumental in helping deploy biogas systems
throughout the rural economy allowing agricultural producers, through
the use of digesters, to make products from waste streams--manure and
crop residues--that would otherwise be viewed as an environmental
challenge. Farmers can now take these wastes streams and make on-farm
energy, nutrient-rich soil amendments, fertilizers, a renewable
replacement for natural gas, and even feedstocks for renewable
chemicals and bioplastics. The sale of all these products helps protect
the agricultural producer from uneven commodity prices.
REAP improves profit margins for farmers, ranchers, and rural small
businesses by cutting energy costs with modern energy efficiency and
renewable energy technologies. With REAP, businesses become more
efficient, resilient to energy market changes, and more energy
independent. Growing economic opportunities with proven energy
technologies excites rural citizens and communities and helps keep
younger generations in rural areas and in farming.
Recommendations for the Next Farm Bill
The program has been oversubscribed year after year; it should be
expanded both in terms of funding and scope in the next farm bill. For
example, REAP should be modified to make clear that varying
biomaterials projects are fully eligible for funding. In addition, BIO
and the Ag Energy Coalition would like to see improvements so that
under-served technologies like small-scale wind generation and biogas
are better served.
Section 9008 Biomass Research and Development (BRDI)
The Biomass Research and Development Initiative (BRDI)\15\ seeks to
foster significant commercial production of biofuels, biobased energy
innovations, development of biobased feedstocks, and biobased products
and processes, including cost-competitive cellulosic ethanol. To this
end the program provides competitive funding in the form of grants,
contracts, and financial assistance for research, development, and
demonstration of technologies and processes. Eligibility is limited to
institutions of higher learning, national laboratories, Federal or
state research agencies, private-sector entities, and nonprofit
organizations.\16\
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\15\USDA. (Feb. 26, 2015). Biomass Research and Development
Initiative (BRDI) https://nifa.usda.gov/funding-opportunity/biomass-
research-and-development-initiative-brdi.
\16\USDA CRS Report. https://www.everycrsreport.com/reports/
R43416.html#fn31.
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This program has afforded researchers across the country
opportunities to explore new techniques and feedstocks that will enable
the biotech industry to build facilities nationwide and create a true
biobased economy. Whether it is examining on-farm biomass processing in
Kentucky or co-treatment for low-cost fermentation of cellulosic
biomass in New Hampshire, this program is key to unlocking the
technical challenges of deploying these technologies nationwide.\17\
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\17\USDA NIFA Current Research Information System. http://
cris.nifa.usda.gov/cgi-bin/starfinder/
0?path=fastlink1.txt&id=anon&pass=&search=(gc=BRDI%20OR%20GC=RDFD)&for
mat=WEBTITLESG.
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Recommendations for the Next Farm Bill
It is critical the Committee maintain robust funding for BRDI. Cuts
in the appropriations process have led to smaller grants, limiting the
diversity of projects.
Section 9010 Biomass Crop Assistance Program (BCAP)
The Biomass Crop Assistance Program (BCAP) provides financial
assistance to owners and operators of agricultural and non-industrial
private forest land who wish to establish, produce, and deliver biomass
feedstocks.\18\ BCAP provides two categories of assistance: matching
payments and establishment and annual payments.
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\18\USDA BCAP. https://www.fsa.usda.gov/programs-and-services/
energy-programs/BCAP/.
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In fashioning the 2014 Farm Bill, Congress made a number of changes
to BCAP. Standing out among the changes was a cap on the program's
mandatory authorization level. The 2014 Farm Bill imposed for the first
time a $25 million cap per year in mandatory funding for FY 2014
through FY 2018.
This cap was due at least in part to concerns that arose in the
early years after BCAP was authorized--for example, that it could
heighten competition over eligible woody biomass, thus raising the
price of that material to the detriment of traditional users, such as
nurseries and others, and that the byproduct of paper production,
``black liquor,'' could qualify for Collection, Harvest, Storage, and
Transportation (CHST) matching payments. Such concerns have been
addressed or have become less acute.\19\
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\19\CRS R41296 Biomass Crop Assistance Program (BCAP): Status and
Issues. Jan. 12, 2015. https://www.everycrsreport.com/reports/
R41296.html.
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Despite the initial challenges of developing and implementing BCAP,
this remains a crucial program for developing the feedstocks necessary
for the biobased economy. The program's regionally appropriate biomass
feedstocks are key to the development of sustainable systems for
biofuels, renewable chemicals, and biobased products.
BCAP has incentivized nearly 1,000 growers and landowners farming
nearly 49,000 acres to establish and produce dedicated, non-food energy
crops for delivery to energy conversion facilities.\20\ In 2014 and
2015, USDA approved 209 contracts for matching payments of $15.8
million toward the collection or harvest of approximately 300,000 dry
tons of forest residues from National Forest Service and Bureau of Land
Management public lands. Forest residues are removed for the reduction
or containment of disease or insect infestation and reduction of fire
threat.\21\
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\20\Biomass Crop Assistance Program (BCAP) Qualified Biomass
Conversion Facilities (BCF's) FY 2017. https://www.fsa.usda.gov/Assets/
USDA-FSA-Public/usdafiles/Energy/BCAP%20Fa
cility%20Listing%20FY2017.pdf.
\21\USDA Resumes Incentives to Grow the Bioeconomy and Improve
Forest Health. https://www.fsa.usda.gov/news-room/news-releases/2016/
nr_20161110_rel_185.
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In 2016, $1 million was allocated toward the sign-up of 1,000 acres
of Miscanthus in project area 5 in Ohio and Pennsylvania\22\ and of
shrub willow for project area 10 in New York.23-24
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\22\Biomass Crop Assistance Program--Project Areas Numbers 2
through 5 Implemented in Arkansas, Missouri, Ohio and Pennsylvania
County Locations for New Giant Miscanthus Biomass Producers. https://
www.fsa.usda.gov/Internet/FSA_File/bcap_areas2_5_2011.pdf.
\23\Biomass Crop Assistance Program--Project Area Number 10.
https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/Energy/BCAP/
bcap_proj10.pdf.
\24\USDA: Feedstocks and the AJF Supply Chain the Broad Pict[ur]e,
Harry Baumes, Sep. 14, 2016. https://energy.gov/sites/prod/files/2016/
09/f33/baumes_alternative_aviation_fuel_work
shop.pdf.
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In the Miscanthus project, BCAP was critical in helping Aloterra
establish 5,000 acres of a perennial grass on cropland that was sitting
idle and underutilized in Northeast Ohio and Northwest Pennsylvania.
BCAP enabled local farmers to wait 3 years before earning income from a
harvest of this new perennial grass. Aloterra then leveraged the
program to bring an additional $20 million in private funds to build
two manufacturing facilities in Ashtabula County, Ohio. This region has
been heavily impacted by the opioid epidemic and manufacturing job
losses and badly needs good paying manufacturing jobs. Because of BCAP,
Aloterra has now created over 60 full-time jobs in the region and
brought a new cash crop to poor farmland that was idle. BCAP drives a
very powerful economic combination of farming and rural manufacturing.
Aloterra is now operating the only facility in North America turning
grass into food service packaging, and it is looking to expand this
model to several more states.\25\
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\25\Miscanthus: Cultivating a Brighter Future. http://
www.aloterrallc.com/.
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In northern New York State, the BCAP project has led to the
commercialization of shrub willow grown for as a source of renewable
energy. Eight landowners are now taking part. All of the willow biomass
grown will be used to produce renewable energy at facilities owned by
ReEnergy Holdings LLC in northern New York. The purchase of willow to
generate renewable energy will inject about $3 million into the local
economy over the course of the project.\26\
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\26\Extension BCAP Helps Commercialize Shrub Willow for Bioenergy
in Northern New York. Apr. 20, 2016. http://articles.extension.org/
pages/71099/bcap-helps-commercialize-shrub-willow-for-bioenergy-in-
northern-new-york.
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Recommendations for the Next Farm Bill
BCAP has the potential to be a huge benefit to the development of
the biobased economy and to agricultural producers looking for
additional income streams. We would encourage the Committee to provide
the program robust funding in the next farm bill. The key impediment to
BCAP's success has been the continual reduction of mandatory funds by
appropriators and delays by USDA in implementing the program.
We also would encourage the Committee to explore how BCAP can be
better utilized to improve forest health through reductions of
hazardous fuels. BIO supports expanding the eligibility of BCAP to
include energy sorghums (sweet sorghum, biogas and biomass sorghums)
and eligibility of energy sorghum for all of the payments once they are
restructured. Introduction of a parallel payment structure for annual
crops that remunerates for annual planting and annual retrieval is also
necessary for annual crops like sorghum. Rather than dividing payments
into establishment, maintenance and retrieval, a structure appropriate
for forestry and perennial crops.
Conclusion
Farm Bill energy title programs have been incredibly successful in
incentivizing the biobased economy. Because of the research, loans, and
grants provided by these programs, industrial biotechnology companies
are developing new feedstocks, industrial enzymes, and biological
catalysts for the conversion of biomass for the production of advanced
biofuels, alternative jet fuels, renewable chemicals, and biobased
products.
The industry is on the cusp of creating a robust biobased economy
through U.S. biobased production. This encompasses a value chain from
agriculture through the manufacture of consumer goods that provides a
cost-competitive alternative to petroleum's value chain and brings
environmental, economic and other benefits. This generates new markets
for agricultural producers, boosts innovation in domestic manufacturing
and exports, and stimulates sustainable economic growth. In turn,
because the inputs and technologies are domestically developed, this
sector will boost the incomes of America's farmers, revitalize rural
communities, create high-skilled jobs in the manufacturing sector, and
provide sustainable employment.
BIO and the Ag Energy Coalition are ready to serve as a resource to
the Committee in developing the energy title and look forward to
working with you during reauthorization of the farm bill.
Appendices
Editor's note: Due to the size of the appendices referenced, they
have been relocated to the end of the published hearing for Thursday,
March 9, 2017 for the Subcommittee on Commodity Exchanges, Energy, and
Credit, and are located on p. 170.
The Chairman. Congressman Greenwood, like most Members, you
never understood what the red light was for. That holds true
today. Thank you for your testimony.
I 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.
I now recognize myself for 5 minutes.
Commissioner Fox, an increase in rural opportunities and
narrowing the rural-urban divide is an essential purpose of
rural development programs. What should this Committee consider
as metrics to judge if we have been successful or not on that
effort?
Mr. Fox. Well, the Committee has to look at the SECD
Program (Strategic Economic and Community Development), which
was part of the 2014 Farm Bill. I mean that program was the
first time that we could go through multi-jurisdictional areas,
where counties could work together on economic development, you
could leverage, I think that is very important as we move
forward.
I just think that in rural America we can't afford to build
silos, we need to partner. And as an intergovernmental partner,
we need to partner with the Federal and the state to make
things happen in rural America.
The Chairman. Thank you.
Mr. Cook, in your testimony, you proposed a non-duplication
rule. I understand the value of this rule, preventing the
government from supporting the same service twice, and ensuring
borrowers have revenue to pay back their loans, but your rule
raises questions for me about what we do for rural residents
who are being served by Internet services that are inadequate
by today's standard, but built with RUS loan dollars that are
still being paid back.
Mr. Cook. Well, thank you.
The Chairman. Can we allow a potential competitor to take
out a loan to build out technically better services, or are
those residents resigned to the slow lane for the duration of
the loans that underwrote the system?
Mr. Cook. Thank you, Mr. Chairman. I certainly understand
that issue, and believe that one of the things that NTCA
believes, first and foremost, and certainly its member
companies like Hill Country, is that our utmost concern is
serving our end-user customers in rural America. Certainly, in
cases where there is an existing provider who has an RUS loan,
from the standpoint of assuring that the money is used
efficiently and effectively, and that there is not duplication
of support, we certainly believe it is wise that we are
spending taxpayer dollars to the most efficient way possible.
At the same time, as I said, we believe that the consumer
should be our utmost concern.
I think that in cases where there is another provider
wishing to provide support or service in an area that is
currently served by an existing RUS borrower, there should be a
process in place whereby that existing borrower can at least
prove-up their ability to provide service. And if it becomes
apparent that they are not doing what they are supposed to be,
and not abiding by their loan covenants, then we would agree
with you that another provider should at least be considered in
those cases.
The Chairman. Yes. Thank you.
Mr. Chastain, I know that the National Rural Electric
Cooperative Association members have been grappling with these
concerns too. I would invite you to weigh on that issue as
well.
Mr. Chastain. Well, I think what Mr. Cook said makes a lot
of sense. There are cases out there where, unfortunately, there
are some incumbent providers who do have RUS loans, who are not
providing adequate service. We have examples of that in several
places in Georgia. As a matter of fact, as you and Ranking
Member Scott are aware, the state legislature put in a rural
broadband study committee, chaired by Senator Steve Gooch and
Representative Don Parsons, specifically to address that issue
in rural Georgia.
What he said is correct. Either the incumbent providers who
have taken the money either need to be given the chance to step
up to the plate and prove that they can provide the adequate
service, but if they are not, there should be opportunities for
others who can come in to be able to provide that service.
Our view in Georgia is that rural broadband is absolutely
quickly becoming a critical piece of infrastructure for rural
communities. Rural communities, as you well know, have a lot of
challenges already, and not having access to rural broadband is
just one further kind of brick on their wagon, so to speak.
The Chairman. Thank you.
Mr. Duff, as we evaluate energy programs, how have they
made meaningful impacts on our rural economies, and do you
believe that these investments build self-sufficient
infrastructure to drive long-term economic activity? And if you
could be brief, I am down to about 20 seconds.
Mr. Duff. Yes, I will. Thanks for the opportunity to
comment.
The best example of the rural development impacts with the
energy title from the 2008 and 2014 Farm Bills would be Section
9005, the Advanced Biofuel Payment Program. As I said, it has
been a $60 million impact to ethanol plants in Kansas and
Texas, in order to incentivize greater use of feedstocks, like
sorghum, and that really had a direct impact on the buying
power of those facilities in local economies, particular where
groundwater declines are really threatening the way of life and
the way of farming in the High Plains.
I think that the opportunity that that has created for
feedstocks like sorghum in areas where the need is there has
had a very significant impact.
The Chairman. Thank you for that.
I now recognize my colleague from Georgia, the Ranking
Member, Mr. David Scott, for 5 minutes.
Mr. David Scott of Georgia. Thank you very much.
Mr. Chastain, you in your testimony brought up an
interesting comparison between electricity and broadband. And
let me first ask you, to your knowledge, there is no American
home today that is not connected with electricity. Am I safe in
saying that?
Mr. Chastain. Yes, sir, that is correct.
Mr. David Scott of Georgia. And am I safe in saying it
nearly took us 80 years to accomplish that task?
Mr. Chastain. Yes, sir.
Mr. David Scott of Georgia. I can vouch for that. I was
born in a rural area, and you can't get much more rural than
Aynor, South Carolina, in Horry County. We didn't have
electricity or running water, any of that, so I can relate.
Now, how do we compare that to broadband in terms of, we
know how important electricity was, but as we move now into
this high technology area, how do you compare that with the
need for broadband? Are not both at the same level?
Mr. Chastain. Yes, it is hard to compare, it is almost in
many ways an apples and oranges comparison, but there are some
similarities. We are obviously a very technology-driven
society, especially the younger members of our society. We all
probably have a cell phone or smartphone in our pockets.
Mr. David Scott of Georgia. Yes.
Mr. Chastain. And not just for quality of life, but for
business applications in rural America, broadband is going to
be increasingly important.
I worked most of my career in economic development trying
to recruit industry into rural Georgia, and it is a challenge
when there is inadequate broadband to get companies who work on
a global platform to be able to locate in some of these
communities. Even mom-and-pop entrepreneurial operations,
sometimes it makes it hard for them to compete. That is where
the comparison is similar, and that I do believe it is
something that we are going to have to look at as a nation as a
priority for infrastructure improvement to rural broadband. The
challenges Mr. Cook outlined very well, it is a Herculean
effort when it comes to financing these programs. My opinion
is, it is going to take some massive Federal programs to help
provide people the opportunity to do that.
Mr. David Scott of Georgia. Good. Thank you very much.
Now, Mr. Cook, I want to go to you. You mentioned in your
testimony this comparison in speed between rural America and
urban America. Could you refine that a bit? Exactly what are
you talking about there, how serious it is, and how can we
address this?
Mr. Cook. Thank you for the question. Yes, the
Communications Act, going back to 1934 and then updated in the
Telecommunications Act of 1996, in Section 254 it talks about
universal service. It is very clear that we as
telecommunications companies have been given a mandate that we
are to provide reasonably comparable services at reasonably
comparable rates. In other words, trying to equalize what is
available in rural America, as compared to what is available in
urban America. And that is something that the small telecos
that are represented by NTCA work very hard at every day, is
trying to make sure that rural America has the same level of
service that is available in urban----
Mr. David Scott of Georgia. And how far are we from that?
Are we there now or what do we need to do more of to make sure
that rural America and urban America are on the same level of
broadband capacity?
Mr. Cook. That is a great question. I believe about 80
percent, maybe a little bit more than 80 percent of the NTCA
member companies have deployed broadband services, and most of
those are between 80 and 85 percent deployed 10/1. We are in
good shape. We are certainly not through. We are working very
hard.
One of the things that we are really dealing with is an
insufficient USF fund.
Mr. David Scott of Georgia. Yes.
Mr. Cook. While we have seen increases to the E-Rate
Program and Lifeline over the last 7 years, we have been capped
on the USF fund. So that has definitely been an obstacle.
Mr. David Scott of Georgia. Okay. Thank you very much. My
time is running out, but, Mr. Greenwood, I have to get to you
because you have served in and out. You have served here with
us, and now you are out dealing with the reality. Could you
share with us what exactly we in Congress can do better and
more of to help the rural communities in acquiring this equal
balance between urban America, and do you believe that we are
doing enough in adequate funding or do we need to do more?
Mr. Greenwood. Well, thank you for the question,
Congressman.
First off, I would say that the energy title in the last
farm bill was about $881 million, and I would certainly
encourage you to improve upon that if possible. I know that is
a tough prospective, given the many competing interests for the
budget this year, but these programs are working, and they are
working well.
The second suggestion I would make, when it comes to the
RFS, is to do exactly nothing, to leave it as it is.
Mr. David Scott of Georgia. Yes.
Mr. Greenwood. This program was created in 2007, and has
been serving the country very well. We have been able to use
renewable fuels that, as I have said in my testimony, replace
enough energy to substitute for all the oil we get from Saudi
Arabia and Kuwait, it is better for the environment, it creates
jobs in the rural economy. And what is necessary is stability.
The investors invested in this program and in these plants on
the basis of a promise that Congress made when it passed the
law originally. Now, there is a lot of controversy around the
RFS, but my admonition in answer to your question would be to
let that program complete its course as originally intended.
Mr. David Scott of Georgia. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. The chair now recognizes Mr. Comer, from
Kentucky, for 5 minutes.
Mr. Comer. Thank you, Mr. Chairman.
My first question is for Mr. Cook. Do you know exactly, or
roughly, what percentage of rural America does not have
broadband access?
Mr. Cook. Mr. Comer, I can certainly get back to you with
that specific information. As I mentioned a little bit earlier,
I can speak for the NTCA member companies and tell you that in
terms of 10/1 broadband availability we are about 85 percent
deployed. Now, certainly, some areas have much greater than
that. We have a lot of member companies that are providing gig
service. We have a number that are providing the new FCC goal
of 25 meg down-speeds and 3 meg up-speed. We are doing quite
well in terms of some of the price cap areas. Larger companies
that historically have not done as great a job as the small
companies. That figure I don't have for you today, but
definitely there is probably more of an issue in those areas
where they have historically been served by the larger
carriers.
Mr. Comer. Right. Is there something that could be done in
this Congress, aside from more funding, for example,
deregulation, is there something that can be done to provide
more broadband capabilities in the rural areas?
Mr. Cook. Yes. That is a great question. Certainly, our top
issue really is the insufficiency of the current USF fund,
where the small companies right now are capped at about $2
billion annually. And again, we have seen increases in other
funds that are part of USF; namely, the E-Rate Program and
Lifeline Program, and we are in support of that, but at the
same time we are the underpinning of supporting those services.
And so we really believe that is the main issue is addressing
the insufficiency of the fund.
Mr. Comer. When I was in the Kentucky Legislature, this was
an issue, and some of the big companies would come in and say
if we would deregulate, that would get things going and help
the development of broadband. It really, to my knowledge,
hasn't happened yet, and I was just wondering because if there
were ever a time to deregulate, the 115th Congress would be the
window of opportunity to do that, if that is an option. When I
was traveling the First Congressional District, which is a
very, very rural district, campaigning and talking to people,
obviously, about what can be done to improve the economy, every
rural community in my districts, like the rural communities
that you all represent, many of the best and brightest young
people, when they graduate from high school, go off to college
and for whatever reason don't come back, primarily because they
don't oftentimes have the same opportunities. And when asking
the local leaders and the job creators what can be done in
Congress, more broadband, and investing in that type of
infrastructure would help rural communities attract better
jobs, next-generation-type jobs that would attract people and
create badly needed jobs in these rural communities.
I am going to switch to Mr. Fox. What do you think are the
best things that can be done in these rural communities to
attract good-paying jobs that would retain our best and
brightest young people in these rural communities, like where I
am from, that often don't come back home when they go off to
college?
Mr. Fox. Chairman Scott, Representative, thank you for the
question. I think broadband is top on that list.
Mr. Comer. Yes.
Mr. Fox. You send a young son or daughter off to college,
and they are used to great speeds, and do 4 years of college,
they are not coming back to speeds of 5/5, or 5/2, and that is
what I have on my farm.
Economic development and jobs always comes down to
infrastructure. Every time that I have a business that looks to
expand, or a new business is looking to come into our area,
there are three questions. One is roads. Do you have roads able
to bring trucks in? The second one would be freight. What have
you got for railroads? And the third one, and those three
questions will interchange, but what is the speed of your
broadband.
Mr. Comer. Right.
Mr. Fox. And if you can't take care of those three issues,
they are not coming and there are going to be no jobs. A few
years ago where we had local people working on a broadband
project, one of the facts that just startled me was a nursing
home administrator, and their people could put someone in an
ambulance, take them to a hospital 25 miles away, and the
ambulance could beat the records over the Internet service
because their Internet service was that slow.
Mr. Comer. Yes.
Mr. Fox. Broadband, with the guaranteed loans, because if
you look at most of the projects, they have a problem in that
3, 4, 5 year time frame. Once they get past 4 or 5 years, they
are pretty good, but if they can have some way to get a
guaranteed loan to help them through that, that is amazing.
Mr. Comer. Okay.
Thank you, Mr. Chairman.
The Chairman. The chair now recognizes Ms. Kuster, for 5
minutes.
Ms. Kuster. Thank you, Chairman Scott. I appreciate this
hearing on rural development.
I am from New Hampshire, and we spend a lot of our time
working in this space, rural development, and I was
particularly pleased in the 2014 Farm Bill, I had the
opportunity to offer an amendment that would support our rural
community colleges. Previously, community colleges had not been
included under the USDA farm bill rural development programs.
And we were able to open a whole new college campus in Lebanon,
New Hampshire, that will provide up to 500 students with access
to education in a rural community. And we did that through a
$1.6 million loan awarded by USDA Rural Development. It is
critically important, and infrastructure, and I agree with all
the witnesses about trying to bring young people back, or keep
people. We have an expression in New Hampshire, stay, work,
play, and we are trying to convince our young people to be
there.
I want to direct my question to Mr. Cook, because I am
particularly focused in on telecommunications, which is a big
problem for us throughout the state. I actually recently had a
forum with realtors, and in the southern part of the state near
Massachusetts, it is not far from a pretty populated area, but
they are unable to sell homes, $200,000, $300,000, $400,000
homes, because there is no broadband connection to the home.
I wanted to ask you, Mr. Cook, talked about the Broadband
Loan Program as being largely inaccessible because of program
reforms. Can you expand on this, what do you mean by
inaccessible, is USDA turning down applications, and how can
the program be improved, and do we need to make any changes to
the Universal Service Fund, or how should we go about this?
Because in the next farm bill I want to make sure that we make
it very easy to expand and get over that maybe 3 to 4 year hump
that Mr. Fox has referred to.
Mr. Cook. Thank you for the question. Yes, USF and the RUS
Programs are really closely tied, and so the meaning behind
that statement was really meant to address the issue that,
since the national broadband plan was announced back in late
2009, we have had much uncertainty introduced into the rural
telecom industry. There has been a lot of uncertainty about
what recovery companies would be able to get from the USF fund,
concerns about interior designer-carrier compensation, frankly,
just a lot of unknowns about what the revenue streams would
look like for rural companies.
As a result of that, we have seen a number of companies
over, again, probably the last 7 years not take advantage of
RUS programs as they used to, just because of this uncertainty.
That is certainly something that we would appreciate your
assistance with, going forward, and making sure that the USF
fund is sufficient. Also in terms of helping us try to
streamline some of the regulatory hurdles that we face today,
especially with respect to permitting. We have an appreciation
for the rules that RUS employs when it is looking to give us
grants and loans. At the same time, there are some process
improvements that can probably take place. I know with our
particular loan grant program at Hill Country, that we were
fortunate enough to work with RUS on, we lost about a year
period of time in deploying our network because of environment
permits that we were able to conduct the environments, but at
the same time it took a very long time to get those approvals
from RUS. And at the same time, we had certain departments
within RUS saying that they were going to rescind our money
because we hadn't yet spent it, and other areas within RUS
saying that we couldn't spend the money because the
environmentals, we had done too many, or that that hadn't been
completely approved at that point. From a process standpoint
that is something that we would appreciate your assistance
with.
Ms. Kuster. Well, I hope I can ask all of the witnesses to
offer your practical suggestions to the Committee, and I know
the bipartisan nature of the Members of this Subcommittee, and
we will be working on this section of the farm bill, and we
want to make sure we get it right so that we can improve access
to broadband communication throughout rural America. So thanks
very much.
I yield back.
The Chairman. Thank you, ma'am.
The chair now recognizes one of our new Members, Mr. Faso,
from New York.
Mr. Faso. Thank you, Mr. Chairman. It is a pleasure to have
the witnesses here today, and I appreciate all of their coming.
And, Congressman Greenwood, welcome to the Committee here
today.
I wanted to focus on rural water. And, Mr. Fletcher, the
New York Rural Water Association, Patricia Scalera and folks
that have worked in rural water are people that I have worked
with for many years in my prior tenure in the New York State
Legislature. And I noticed in your testimony you suggest
raising the cap. I think that you said raising the cap on water
projects and waste water programs to $20,000. If we did that,
would that affect the backlog, and would it impermissibly
increase the difficulty that some very small communities have
in getting access to these programs, because rural water on the
Circuit Rider Program, from my experience, have been terrific?
Mr. Fletcher. Thank you for the question.
Funding priority should still be given to smaller rural and
lower-income communities. Every state is provided a specific
allotment for the loan and grant program. If any state would
have obligated their funds to small rural utilities and had a
balance left, at that point then we could look at helping
slightly higher-populated communities that demonstrate a need
for the financing, but also is still rural in character.
Taylorville, where Congressman Davis hails from, and that
is where our state rural water office is, their population is
about 11,000, and with the current cap they are not eligible
for that funding.
Mr. Faso. Yes.
Mr. Fletcher. I think that would help these slightly larger
communities have access to the loan and grant program if funds
are available.
Mr. Faso. Well, thank you very much. I appreciate that.
And I am also going to be giving some testimony to the
Appropriations Committee later today. There is one of their
subcommittees on the Circuit Rider Program and, for instance,
on how important that is to the rural areas in my district. I
know sometimes when you are from New York State, people think
Manhattan. Well, upstate New York is a very rural area, in need
of much economic assistance.
And I wanted to turn also to Commissioner Fox. I noted in
your testimony you mentioned the Community Facilities Program
that was used to help, through loan and grant, construct a
hospital in your county. And I was wondering if you could just
elaborate for the Committee a bit on the ease with which you
were able to secure that assistance through that program, and
any suggestions or recommendations you might have about it,
because I have a very similar situation in a portion of my
district as well.
Mr. Fox. Chairman Scott, Representative, thank you for the
question.
Our Administration would say that it went quite well. Yes,
there is a process, but there has to be a process when being
fiscally responsible. We used $18.9 million, I believe, and it
was all loans, we had no grants. We had local money that we put
in, and our hospital foundation raised over $1 million to go
into the project. But it is a process that goes through. It is
the staff, and Rural Development staff in Minnesota, they are
great people. They are great people to work with, they help
through different programs, whether it is that one or the
reprogram. But it is a process, and you have to meet, go to the
table and be a partner at the table, and they will help you
through it, and it is a great process.
Mr. Faso. Thank you.
And last for Mr. Cook, broadband has been discussed here.
It is a big issue. We have the Middleburgh Phone Company in
Schoharie County, which I don't know if they are a member of
your association, but they have been very active in providing
expanded broadband coverage. I am just wondering, from your
vantage point and from your experience, is there a
technological leapfrogging that will allow us, through wireless
technology, to be able to accommodate much of the need that we
have for broadband in rural communities? I just wondered about
your perspective on this, because I do see this now being
heavily advertised by some of the companies in suburban New
York City, just south of my district, and I was wondering about
your perspective on that.
Mr. Cook. Yes, that is a great question. It is something
that we are constantly looking at is new technologies, ways
that we can more efficiently deploy broadband services, provide
faster speeds. One of the things that was included in my
testimony was this term future-proof, and really what we are
talking about there is not only providing the best available
service for the consumer today, but also providing long-term
solutions. When you look at the growth of broadband, and now
nationally you are looking at a median broadband speed of about
41 meg that is generally available across the nation. When you
look at the potential growth of that year over year of about 28
percent, it is not long before you realize that we are going to
be at gig-level services that customers are going to be
demanding.
So in terms of technology, right now, it really appears
that fiber is the best solution in most cases. And in terms of
wireless technology, certainly, there are some fixed wireless
technologies that we are using, and that other companies are
deploying, satellite is another example, in very remote areas
where that could be a solution. But in terms of trying to make
sure that we are doing the best thing for the consumer today
and in the near-term, but also what is most economical, so that
we are not having to go back and re-engineer the network and
pay for the same deployment again in just a few short matter of
years in order to keep up with capacity, we are really kind of
leaning towards fiber at this point.
Mr. Faso. Thank you.
The Chairman. Thank you. The chair now recognizes Mr. Soto,
from Florida, for 5 minutes.
Mr. Soto. [Audio malfunction in hearing room.] funds--thank
you, haven't gotten their share of Federal funds and felt left
behind. And so I appreciate the Chairman and Ranking Member
focusing on this.
In Florida I have seen everything from cowboys use cell
phones to communicate with each other, to WiFi and sensors
being used to determine when to harvest a crop. Technology is
very integrated in our agriculture in Florida.
And so I was wondering, with the lack of adequate broadband
and other communication infrastructure, if Mr. Cook or Mr.
Chastain can discuss what the current potential production loss
we have would be from the lack of these sorts of resources.
Mr. Cook. Well, I will address it from the standpoint of
reasonable comparable rates and service that we talked about
before. That is something that comes up a lot in discussions
about deploying broadband in rural America and the cost of
doing that. One of the things too that we hear a lot at the
state level is this general thought about urban areas
subsidizing rural areas. And, in fact, I would argue that you
can make that same argument in reverse, that rural areas in
many ways are subsidizing urban areas. And we don't see a farm
in downtown Minneapolis, you don't have a dairy farm in
downtown Dallas. Rural areas are extremely important, and
providing them the same level of service that is available in
urban areas is critically important, not only for the success
of those rural areas, and enabling those rural areas to compete
in a global economy, but also ensuring that urban areas are
well served by the rural areas. So it is a symbiotic
relationship.
To address more specifically your question in terms of cost
and availability, economically that is a great question. I
don't know if we have any specific facts about what that means
to the economy, but, obviously, it is very critical, especially
when you look at food supplies and the growing population
globally. It is expected by 2050 to be a 9.6 billion
population, and it is estimated that food production, in order
to keep up with that growing population, would need to improve
by 50 percent. And so a lot of that additional food production
will be supported by broadband applications, enabling farmers
to work more efficiently using IoT (Internet of Things)-type
technologies.
Mr. Soto. And on to my second question, it is to Mr.
Greenwood. You had mentioned about renewable energy, in Florida
we use bagasse, which is a byproduct of sugar to provide energy
for several towns in Florida. What areas do you think are
succeeding in using biofuel or other renewables across our
country, and what areas have a lot of potential but really
could use additional help to get them over the top?
Mr. Greenwood. Well, thank you for the question. The
beautiful thing about renewable fuels is that the feedstocks
are multiple. You mentioned biogas, right now there are
projects that USDA is considering that use for feedstocks the
following: vegetable waste, manure, algal biomass, nonedible
distillers, corn oil, soy oil, canola oil, almond, walnut
shells, and woody biomass, waste oils, high oleic soybean oil,
switchgrass sorghum, macadamia nutshells, and woody biomass. It
is basically a question of the science of it, and I am not a
scientist, basically, plants have evolved: if you look at corn,
for instance, corn evolved so that the seeds are highly
soluble, so that is how they germinate. But the cornstalks and
the leaves, and all of the kinds of the materials I just cited,
are cellulosic, and they evolved for rigidity and structure.
And so the challenge has always been how chemically, and using
other products, can we extract the energy from that cellulosic
material that is otherwise frequently gone to waste and has no
economic value. And so the biotechnology industry develops
enzymes and other products that allow us to break that down,
and including solid waste materials, and turn it into usable
energy.
Does that respond to your question, sir?
Mr. Soto. Yes. And just to correct the record, I was
referring to bagasse, which is a byproduct of the sugar
industry and used, rather than biogas. But thank you for
answering my question. I appreciate it.
Mr. Greenwood. Right.
Thank you, Mr. Chairman.
The Chairman. The chair now recognizes Mr. Davis, for 5
minutes.
Mr. Davis. Thank you, Mr. Chairman.
The hard part about serving on two different committees
sometimes is you have hearings at the exact same time. Forgive
me if I am redundant on any of the issues that I bring up.
But I would like to continue what my colleague, Mr. Soto,
was briefly mentioning, and especially with your response, I
would like to welcome one of our former colleagues, Mr.
Greenwood, here, and my friend. Obviously, where I come from in
Illinois, ethanol RFS is a major issue. As we move forward, you
mentioned cellulosic opportunities, what is the status right
now of moving ahead on more cellulosic opportunities to make
our homegrown fuels more secure?
Mr. Greenwood. Sure. Well, cellulosic ethanol is in
production at a commercial scale in multiple locations around
the country. The problem is that the uncertainty caused by the
RFS renewable volume obligations in 2014, 2015, and 2016 during
the Obama Administration, cost advanced cellulosic biofuels
industry over $22 billion in lost investment, much of which has
gone overseas.
I did say earlier that the most important thing Congress
needs to do is nothing, to leave the RFS alone and fulfill the
promise that Congress made to investors originally in 2005, and
expanded in 2007, that if they brought private capital to the
table, Congress would leave a stable policy in place for more
than 15 years. Second would be to maintain the farm bill energy
title. In particular, Section 9003, the Bio-Refinery Assistance
Program, and the Biomass Crop Assistance Program, or BCAP, to
help advance biofuel producers to secure the capital necessary
to build a biorefinery and assist farmers to produce the
feedstocks necessary for these facilities.
The Administration needs to deny the petition to change the
point of obligation under the law, keeping the 2015 RVO in
place, and set the 2018 RVO according to the law. We need to
bring these dollars back to the U.S., and policy stability is
the only way to make that happen.
Mr. Davis. Well, I couldn't agree more, Jim. I appreciate
your comments there.
One other quick question. The USDA has operated the BIP
Program over the last few years, and they have worked with
states to deploy distribution infrastructure, and as a result
we now have over 600 locations in 28 states throughout the
U.S., offering more opportunities for homegrown fuels for sale.
Can you offer your opinion on that program and how successful
it has been so far?
Mr. Greenwood. Well, the Biofuel Infrastructure Program as
referred to, BIP, has been a critical aid to retailers moving
higher blends of biofuels to the market. This is creating
critical space in the transportation fuel market for advanced
and cellulosic biofuels. The program is succeeding in helping
gas stations put infrastructure in place to deliver higher
volumes of biofuels.
As you mentioned, there are now 650 stations selling E15 in
28 states, 409 of these are BIP participants. It is expected to
be over 1,200 locations by year-end, and a vast majority of
these pumps also are selling E85. Major retailers selling or
committed to selling E15 include Sheetz, Come and Go,
Thorntons, Racetrack, Mineco, Murphy, USA, Mapco, Family
Express, Senex, and Protect Fuels. And this is going beyond the
Corn Belt, Florida, Georgia, North Carolina, and Texas are in
the top six states of pumps being deployed.
These retailers are making these investments because E15
sells 3 to 10 below regular gasoline, helping to bring in
more consumers.
I would like to add that E10 is approved and recommended
for all small and off-road engines. The distribution and use of
E15 is not mandatory, and it is not approved for use in small
engines like boats or lawnmowers. With E15 for sale at over 600
locations in 28 states, there has not been a single verified
report of E15 misfueling and engine damage.
Infrastructure investments are critical as we continue to
deploy higher demands of ethanol across the country, which is
also why we have the funding for the farm bill energy title as
important as it is for building out this industry.
Mr. Davis. Thank you. Thank you.
And, Mr. Fletcher, welcome from the great State of
Illinois. I know I don't represent the Nashville area, but I
appreciate what you have done. Actually, in my previous
position, I had a chance to work with your water company. And I
hear right before I got here you mentioned my hometown of
Taylorville, so I can't not ask you, give us anything that you
might not have been asked yet that you want to make sure that
the Committee understands that is important to rural water
systems in Illinois, please go ahead.
Mr. Fletcher. Thank you, Congressman.
I think pressing rural needs in Illinois, and also the
other rural communities in all the states, is the funding
through the Rural Development Waste Water Loan and Grant
Program. Rural Development has been working for 7 years with
this program. And I am sure you are aware that the last two
farm bills were able to fund hundreds of projects in less than
90 days. At that point, after the RD projects were done, it
erased the backlog for water and waste water projects in the
United States. And at this time, we have a $2.5 billion backlog
just after a few years after the RD program. I would give
priority to aging and deteriorating systems that are determined
to be beyond their useful life, or ones with the greatest
public health needs.
Second, our Circuit Rider Program that the Congressman from
New York mentioned a few minutes ago, that assistance to small
rural communities is essential to make sure that the water is
safe for everybody to drink, and they comply with all the
Federal regulations. I appreciate everything that you all do
for rural water.
Mr. Davis. Thank you.
Mr. Fletcher. Thank you.
Mr. Davis. Thanks for being here.
The Chairman. Before we adjourn, I would invite my Ranking
Member, Mr. David Scott, from my home state, to make any
closing remarks that he may have.
Mr. David Scott of Georgia. Sure. Well, thank you, Mr.
Chairman. I appreciate that.
And first of all, let me commend you for pulling together
this very, very important and very informative cast of these
six persons to testify before us this morning. Their testimony
was very accurate, it was thorough, and very helpful to us. And
I just want you all to go away from this meeting knowing that
this Subcommittee stands with you shoulder to shoulder to make
sure we provide you with the adequate funding that you need,
and let the people of America know that they get a return
benefit. Mr. Chastain, you mentioned $300 million that has been
brought back, and the roles that you play.
Thank you, Mr. Chairman. And we look forward to taking care
of your interests in the upcoming farm bill.
The Chairman. Gentlemen, I want to thank you for taking
time to come up here on behalf of the people that you
represent; the same people that we represent. And I want to
commit to you that this Subcommittee, and on behalf of the big
Chairman of the full Committee, will be working hand-in-hand
with you to make sure that you have the resources that you need
in the next farm bill to help those that both of us represent
in America. Again, thank you for coming to Washington and
testifying on behalf of our constituents.
Under the Rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional materials and supplementary written responses from
the witnesses to any questions posed by a Member.
This hearing of the Subcommittee on Commodity Exchanges,
Energy, and Credit is adjourned.
[Whereupon, at 11:26 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Letter by Hon. Austin Scott, a Representative in Congress
from Georgia and Hon. David Scott, a Representative in Congress from
Georgia
February 22, 2017
Hon. Donald J. Trump,
President,
United States of America.
Dear Mr. President:
On behalf of our respective organizations, which collectively
represent U.S. agricultural producers, rural businesses, rural
communities, and rural families, we are writing to ask your support for
rebuilding infrastructure in rural America.
We were very pleased to hear your comments about the importance of
rebuilding U.S. infrastructure. Those of us in rural communities have
seen our infrastructure deteriorate, jeopardizing jobs, our
agricultural competitiveness, and the health of rural families. Past
infrastructure initiatives often focused on urban and suburban
infrastructure while not adequately addressing the unique needs of
rural communities. We ask that you address this as part of your
Administration's comprehensive infrastructure renewal efforts.
American agriculture truly feeds the world and creates millions of
jobs for U.S. workers. Our nation's ability to produce food and fiber
and transport it efficiently across the globe is a critical factor in
U.S. competitiveness internationally. Infrastructure that supports
rural communities and links them to global markets has helped make the
U.S. the unquestioned leader in agricultural production. Our
deteriorating infrastructure threatens that leadership position.
Transportation infrastructure improvement is the most obvious need
in rural communities, but not the only one. Highways, bridges,
railways, locks and dams, harbors and port facilities all need major
investment if we are to continue efficiently getting our agricultural
products to market. For example, \1/4\ of our road system's bridges
require significant repair, or cannot efficiently handle today's
traffic and many of the 240 locks and dams along the inland waterways
are in need of modernization. In addition, though, critical needs exist
in providing clean water for rural families, expanding broadband to
connect rural communities to the outside world, and enhancing the
ability to supply affordable, reliable and secure power for the rural
economy.
The scope of the investment needed is staggering. Clearly the
Federal Government must continue to play an important role in providing
funding and those Federal investments should increase. However, Federal
resources, likely cannot fill the need entirely. Creative solutions
that pair Federal investment with state/local government investment and
private sources of capital hold promise for raising a portion of the
funds necessary to do the job.
As you take office and begin addressing the nation's infrastructure
needs, we hope you will provide leadership to ensure that rural
America's needs are addressed. We stand ready to work with you and your
Administration to begin this important initiative.
Respectfully,
Agribusiness Michigan Bean Shippers Oklahoma Agribusiness
Association of Iowa Retailers Association
Agribusiness Council of Michigan Electric Oklahoma Agricultural
Indiana Cooperative Cooperative Council
Association
Agricultural and Food Michigan Soybean Oklahoma Association
Transporters Association of Electric
Conference Cooperatives
Agricultural Retailers Midwest Shippers Oklahoma Soybean
Association Association Association
Agriculture & Minnesota AgriGrowth Oklahoma Wheat Growers
Commodities Council Association
Transportation
Coalition
Alabama Rural Electric Minnesota Corn Growers Oregon Potato
Association of Association Commission
Cooperatives
Alaska Power Minnesota Farmers Union Oregon Wheat Growers
Association League
Alliance for I-69 Texas Minnesota Grain and Panhandle Peanut
Feed Association Growers Association
Almond Alliance of Minnesota Milk Pennsylvania Farm
California Producers Association Bureau
American Association of Minnesota Pork Pennsylvania Rural
Crop Insurers Producers Association Electric Association
American Cotton Mississippi Association Pennsylvania State
Shippers Association of Cooperatives Association of
American Dairy Mississippi Soybean Township Supervisors
Coalition Association
American Farm Bureau Missouri Corn Growers Rocky Mountain
Federation Association Agribusiness
Association
American Feed Industry Missouri Soybean Rural and Agriculture
Association Association Council of America
American Horse Council Montana Electric Rural Coalition/
Cooperatives' Coalicion Rural
Association
American Sheep Industry Montana Grain Growers Rural Development
Association Association Leadership Network
American Society of National Association of SE Minnesota Grain and
Farm Managers and Resource Conservation Feed Dealers
Rural Appraisers and Development Select Milk Producers,
Councils Inc.
American Soybean National Association of South Carolina
Association State Departments of Fertilizer and
Arkansas Electric Agriculture AgriChemical
Cooperatives Association
Arkansas Soybean National Association of South Carolina Peach
Association Towns and Townships Council
Association of National Association of South Dakota
Equipment Wheat Growers Association of
Manufacturers Cooperatives
Association of Illinois National Barley Growers South Dakota Corn
Electric Cooperatives Association Growers Association
Association of National Black Growers South Dakota Rural
Louisiana Electric Council Electric Association
Cooperatives
Association of Missouri National Cooperative South Dakota Soybean
Electric Cooperatives Business Association Association
Bongards Premium Cheese National Corn Growers Southern Peanut
Association Farmers Federation
California Association National Cotton Council Southwest Council of
of Winegrape Growers Agribusiness
Colorado Rural Electric National Council of Soy Transportation
Association Farmer Cooperatives Coalition
Cooperative Network National Family Farm State Agriculture and
Coalition Rural Leaders
Corn Refiners National Farmers Union Tennessee Electric
Association Cooperative
Association
Crop Insurance National Grain and Feed Tennessee Soybean
Professionals Association Association
Association
Empire State Potato National Grange Texas Ag Industries
Growers, Inc. Association
Empire State Water Well National Ground Water Texas Elective
Drillers' Association Association Cooperatives
Equipment Dealers National Latino Farmers Texas Grain and Feed
Association & Ranchers Trade Association
Farm Credit Council Association Texas Vegetation
Management
Association
Farmer Mac National Milk Producers The Electric
Federation Cooperatives of South
Carolina
Farmworker Association National Oilseed U.S. Canola
of Florida, Inc. Processors Association Association
Federation of Southern National Pork Producers U.S. Dry Bean Council
Cooperatives Rural Council U.S. Forage Export
Training and Research National Potato Council Council
Center
First District National Rural Economic U.S. Poultry and Egg
Association Developers Association Association
Florida Electric National Rural Electric United Egg Producers
Cooperatives Cooperative
Association Association
Georgia Electric National Rural Water United Fresh Produce
Membership Corporation Association Association
Golden State Power National Sorghum USA Dry Pea and Lentil
Cooperative Producers Council
Grain and Feed National Sunflower USA Rice
Association of Association
Illinois
Great Plains Canola Nebraska Corn Growers Utah Rural Electric
Association Association Association
I-14/Gulf Coast Nebraska Grain and Feed Virginia Agribusiness
Strategic Highway Association Council
Coalition
Idaho Consumer-Owned Nebraska Rural Electric Virginia Beef Industry
Utilities Association Association Council
Idaho Grain Producers Nebraska Soybean Virginia Cattlemen's
Association Association Association
Illinois Corn Growers Nevada Rural Electric Virginia Cooperative
Association Association Council
Illinois Fertilizer and New Mexico Rural Virginia Farm Bureau
Chemical Association Electric Cooperative
Association
Illinois Soybean New York Corn and Virginia FFA
Association Soybean Association Association
Indiana Corn Growers New York State Virginia Horse Council
Association Agribusiness
Associations
Indiana Electric New York State Virginia Poultry
Cooperatives Vegetable Growers Federation
Association
Indiana Soybean North American Millers' Virginia State
Alliance Association Dairymen's
Association
Institute for North Carolina Electric Virginia
Agriculture and Trade Cooperatives Telecommunications
Policy Industry Association
Iowa Association of North Carolina Ground Virginia Water Well
Electric Cooperatives Water Association Association
Iowa Corn Growers North Carolina Small Virginia, Maryland &
Association Grain Growers Delaware Association
Iowa Institute for Association of Electric
Cooperatives North Dakota Cooperatives
Iowa Soybean Association of Rural Washington Association
Association Electric Cooperatives of Wheat Growers
Kansas Association of North Dakota Corn Washington State
Wheat Growers Growers Association Potato Commission
Kansas Cooperative North Dakota Grain Water Systems Council
Council Dealers Association
Kansas Electric North Dakota Soybean Water Well Trust
Cooperatives Growers Association
Kansas Grain and Feed Northeast Agribusiness West Virginia Farm
Association and Feed Alliance Bureau
Kansas Soybean Northeast Association West Virginia FFA and
Association of Electric Agricultural
Cooperatives Education
Kentucky Association of Northeast Cooperative West Virginia Poultry
Electric Cooperatives Council Association
Kentucky Corn Growers NTCA--The Rural Western Peanut Growers
Association Broadband Association Association
Kentucky Soybean Ohio Agribusiness Wisconsin Agri-
Association Association business Association
Louisiana Association Ohio Corn and Wheat Wisconsin Corn Growers
of Cooperatives Growers Association
Louisiana Ground Water Ohio Dairy Producers Wisconsin Soybean
Association Association Association
Maryland Grain Ohio Farm Bureau Women Involved in Farm
Producers Association Federation Economics
Michigan Agri-Business Ohio Pork Council WTA--Advocates for
Association Rural Broadband
Ohio Rural Electric Ohio Soybean Wyoming Rural Electric
Cooperatives Association Association
CC:
Hon. Mitch McConnell,
Hon. Charles Schumer,
Hon. Paul Ryan,
Hon. Nancy Pelosi.
______
Supplementary Material Submitted by Hon. James C. Greenwood, President
and Chief Executive Officer, Biotechnology Innovation Organization
Appendices
Editor's note: Due to the size of the appendices submitted for the
Thursday, March 9, 2017 Subcommittee on Commodity Exchanges, Energy,
and Credit published hearing they have been relocated here.
appendix a
Advancing the Biobased Economy: Renewable Chemical Biorefinery
Commercialization Progress, and Market Opportunities, 2016 and
Beyond
2016 Biotechnology Innovation Organization
(BIO)
1201 Maryland Ave. SW
Suite 900
Washington, D.C. 20024
Introduction
A review of operating biorefineries displays a range of technology
solutions undergoing commercial development--beyond just advanced
biofuels--to produce commodity and specialty renewable chemicals.
Industrial biotechnology companies are pursuing renewable chemicals and
biobased materials because they can be commercialized at smaller scale,
as well as promise environmental benefits, stable costs and novel
properties in comparison to fossil fuel-derived chemicals. Competition
to produce platform renewable chemicals provides manufacturers
assurance of a steadily available, high-quality supply of renewable
chemicals for consumer product applications.
Analysts predict a rapid expansion of renewable chemical production
in the near future based on planned capacity expansion or new
construction. McKinsey & Co. estimates that there were $252 billion
(=204 billion) in sales of biobased products in 2012, with biofuels and
plant extracts comprising more than \1/2\. Sales of renewable chemicals
represented nine percent of the $2,820 billion (=2,281 billion) in
worldwide chemical sales in 2012. By 2020, McKinsey expects biobased
products to make up 11 percent of the $3,401 billion (=3,130 billion)
global chemical market. Sales of biobased products would reach $375-
$441 billion (=345-=406 billion) by 2020, with a compound annual growth
rate of eight percent over the preceding decade. Worldwide sales of
chemicals are expected to grow at four percent annually, overall. While
biofuels and plant extracts continue to comprise \1/2\ of the projected
sales of biobased products in 2020, McKinsey expects the highest growth
rates in sales of new biopolymers and renewable chemicals, biocatalysts
for industrial processes and biologic medicines, as well as biofuels.
Supportive polices will help grow the 21st century biobased
economy. The Renewable Fuel Standard (RFS), for instance, not only
helped stimulate innovation in biofuels, but also opened discussions
and policy development in renewable chemicals and biobased products.
The 2014 Farm Bill (The Agriculture Act of 2014) extended loan
guarantee eligibility to renewable chemicals and biobased products
producers, through Section 9003, the Biorefinery, Renewable Chemical,
and Biobased Manufacturing Assistance Program.
Other policy drivers include draft legislation, introduced in both
Federal chambers, creating tax incentives for production of or
investment in qualifying renewable chemicals. Spurred by the Federal
legislation, Iowa and Minnesota announced enactment of state-level
production tax credits for renewable chemicals that will speed capital
investment availability and commercialization. Additionally, draft
legislation introduced in the 114th Congress--the Master Limited
Partnerships Parity Act (MLP)--proposes to extend tax benefits
currently available only to the oil and gas industry to renewable
chemicals and biofuels producers. If enacted, the legislation will
provide renewable chemical producers access to low-cost capital and
attract investors and lower corporate stock tax liabilities.
Enactment of the Frank R. Lautenberg Chemical Safety for the 21st
Century Act, updating and revising the Toxic Substances Control Act
(TSCA), has favorable provisions for Class 2 renewable chemical
manufacturers who use renewable feedstocks. The new law could minimize
costly pre-commercial reviews, if the renewable chemical has already
been produced from fossil fuel feedstocks.
Background
The Economist magazine's Technology Quarterly edition for December
2015 heralded a ``golden age'' of material science, highlighting recent
developments in inorganic chemistry. The magazine utilized the
``materials genome'' as a metaphor for the pace of pre-commercial
innovation in the field. The industrial biotechnology sector should
welcome the analogy, especially as its list of commercial successes
grows. The industrial biotech sector has reached a stage where first-
of-a-kind biorefineries are paving the way for rapid commercialization
of new applications.
The National Science and Technology Council's Subcommittee on
Advanced Manufacturing, in an April 2016 report, titled Advanced
Manufacturing: A Snapshot of Priority Technology Areas Across the
Federal Government, identifies engineering biology and advanced
bioproducts manufacturing as technology areas of emerging priority. The
report estimates the size of the U.S. biobased economy at roughly $350
billion annually, citing a National Research Council roadmap to
accelerate advanced chemical manufacturing through industrial
biotechnology.
To document the progress and illustrate the growing potential for
biobased production of renewable chemicals, the Biotechnology
Innovation Organization's (BIO) Industrial and Environmental Section
has compiled a new body of data on established biorefineries. The data
includes descriptions of the technologies along with common
applications and measures of the market potential. And since the
renewable chemical sector seeks a level playing field in government
support and regulatory policies, the data includes the demographic and
economic impact of each biorefinery.
Biobased production holds many potential benefits for consumers,
including cleaner, more efficient manufacturing processes that
incorporate renewable ingredients in everyday products found in the
home. Delivering these benefits requires continued growth of the sector
to ensure that product manufacturers have a reliable, sustainable, and
scalable supply of renewable chemicals.
Renewable Chemical Processes at Demonstration and Pilot Scale
Coca-Cola, H.J. Heinz, Nike Inc., Ford Motors and Procter & Gamble
are cooperatively working to accelerate the development of 100 percent
renewable polyethylene terephthalate (PET), a common plastic used in
packaging materials such as bottles, footwear, apparels and automobile
fabrics. Coca-Cola currently markets PlantBottleTM with
renewable ethylene glycol, which makes up as much as 30 percent of the
plastic bottle. Coca-Cola Company has partnered with Virent, Gevo and
Avantium and, similarly, Suntory Holdings has partnered with Anellotech
to develop renewable para-xylene to replace petroleum terephthalic
acid. These strategic partnerships have demonstrated the feasibility of
a 100 percent renewable PET bottle.
A potential alternative to PET is polyethylene furanoate (PEF).
Avantium has commercialized 100 percent biobased PEF resin, which is
made from the company's patented biobased 2,5 furandicarboxylic acid
(FDCA) combined with plant-based monoethylene glycol (MEG). Avantium is
currently producing FDCA at a 40 metric ton per year pilot plant in
Geleen, Netherlands. Avantium plans to start commercial production of
FDCA and PEF at 50,000 ton per year plant in 2017 and announced its
intention to establish a joint venture with BASF in the production and
marketing of FDCA.
A few companies have focused efforts on producing C5 and C6 sugars
as a feedstock for other companies to produce biofuels and renewable
chemicals. Renmatix is operating a demonstration-scale Feedstock
Processing Facility in Rome, New York, to supply its Integrated
Plantrose Complex, based in Atlanta, where it converts the processed
woody biomass to cellulosic sugars. Sweetwater Energy is securing
financing to build a biorefinery at Mountain Iron, Minnesota, which
will convert 51,000 tons of timber to sugars and lignin. Sweetwater has
also leased space at Eastman Business Park in Rochester, New York, to
produce alcohols from cellulosic sugars. Similarly, American Process
has developed GreenPower+ process technology, which produces low-cost,
mixed cellulosic sugars from biomass.
Several companies are currently piloting production of adipic acid,
which is a precursor to nylon and can be used in coatings and
detergents. Rennovia is currently operating a pilot project at the
Johnson Matthey Process Technologies R&D Center in Stockton, England,
converting biobased glucaric acid to adipic acid. Verdezyne is
operating a pilot production facility in Carlsbad, California. And,
BioAmber has formed a partnership with Celexion to produce adipic acid
from succinic acid. Genomatica of Carlsbad, California, began efforts
in 2014 to commercialize biobased production of adipic acid and other
nylon intermediates.
At least one company has commercialized production of
polyhydroxyalkanoate (PHA), a polymer that can be blended into various
plastic applications. Metabolix's current range of Mirel PHA
copolymers are produced by fermentation, using specially engineered
microorganisms that bioaccumulate the inert polymer. The PHA is co-
polymerized with PVC to make a stronger and more flexible plastic.
Metabolix uses contract manufacturing to produce Mirel; the company's
partners are currently ramping up pilot production to run at nameplate
capacity for 2016.
Two companies, Cargill and Novozymes, have partnered since 2008 to
demonstrate biobased production of 3-hydroxypropionic acid (3-HPA),
which is a precursor to acrylic acid. Acrylic acid is polymerized and
used as an absorbent in diapers and hygiene products as well as in
coatings, adhesives, carpets, and fabrics. The traditional
petrochemical process for 3-HPA synthesis is achieved through the
oxidation of propylene, a product of crude oil refining. Under the
partnership, Cargill is operating a pilot scale production plant
fermenting 3-HPA and converting it to acrylic acid. Cargill acquired
Colorado based OPX Biotechnologies and its proprietary fermentation-
based process for 3-HPA.
Renewable Chemical Commercialization Successes
One of the earliest renewable chemicals to be successfully
commercialized is 1,3-propanediol (1,3-PDOTM), a chemical
building block for nylon and emollients used in cosmetics, coolant and
fibers for the production of high-end carpets. DuPont Tate & Lyle has
operated a 63,500 metric ton per year biorefinery in Loudon, Tennessee,
since late 2006. The company markets the diol for industrial uses as
Susterra' propanediol.
One biobased process has been commercialized and another process is
being scaled up to produce propylene glycol (1,2-propanediol), which
can be used as a building block for saturated and unsaturated
polyesters, a humectant or a food preservative. ADM began production of
propylene glycol in March 2011 at a 100,000 metric ton per year
facility in Decatur, Illinois, that uses glycerin as a feedstock in a
catalytic process. More recently, Metabolic Explorer and UPM have
formed a joint venture to demonstrate monopropylene glycol via
fermentation of sugar at a facility in Clermont-Ferrand, France.
Another of the earliest renewable chemicals to be commercialized is
polylactic acid (PLA), which was truly a tipping point for renewable
chemicals. PLA is commonly used in food wrap and utensils and can be
made into textile fibers. Since 2003 Nature-Works has produced PLA at a
facility in Blair, Nebraska, with name plate capacity of 300 million
pounds (140,000 metric tons). NatureWorks markets the product as Ingeor
biopolymer. Corbion more recently announced that it will build a
biobased PLA plant with an annual capacity of 75 kilotons and expand by
25 kilotons per year its existing lactide plant in Rayong Province,
Thailand.
Several companies have commercialized biobased routes to succinic
acid, a building block chemical that replaces petroleum-based maleic
anhydride in polyesters, alkyd resins, polyurethanes, plasticizers and
solvents. Companies that are currently producing succinic acid include
Myriant, which is operating a 13,600 metric ton per year facility in
Lake Providence, Louisiana. BioAmber piloted its biobased process for
succinic acid at a 3,000 metric ton facility in Pomacle, France, and is
now producing 17,000 metric tons per year in Sarnia, Ontario, Canada.
Reverdia, a joint venture between DSM and Roquette, has built a 10,000
metric ton per year facility in Cassano Spinola, Italy. And Succinity,
a joint venture between BASF and Corbion, is due to start up a 25,000
metric ton per year facility in Barcelona, Spain.
One company has commercialized a biobased route to 1,4-butanediol
(BDO), which is a building block in the production of tetrahydrofuran
(THF), which is an intermediate for spandex and other performance
polymers, and polybutylene terephthalate (PBT) resins, which are used
for engineering plastics. BASF has licensed direct fermentation
technology developed by Genomatica and secured rights to commercially
produce up to 75,000 metric tons per year of renewable 1,4-BDO. To
date, BASF reports producing volumes for its downstream customers to
test and at a purity comparable to petrochemical-based 1,4-BDO for use
in commercial applications. BASF is also producing and offering
polytetrahydrofuran (PolyTHF) made from renewable 1,4-BDO.
Multiple competitors are also commercializing biobased routes to
iso-butanol and n-butanol. Iso-butanol can be used as an oxygenate and
octane-enhancing fuel additive while n-butanol is used as a solvent and
intermediate in paints, coatings, printing inks, adhesives, sealants,
textiles and plastics. In addition, iso-butanol can be cyclized to
para-xylene, the precursor to terephthalic acid; Gevo is
commercializing a process based on this chemistry. Green Biologics,
which focuses on n-butanol for chemical markets, is currently refitting
a 21 million gallon ethanol plant in Little Falls, Minnesota, with
plans to begin commercial production of n-butanol and acetone during
2016. Butamax has completed phase 1 of its retrofit of a 50 million
gallon ethanol plant in Lamberton, Minnesota, and projects completion
of phase 2 for production of iso-butanol in 2016. The company in early
2016 petitioned the U.S. Environmental Protection Agency (EPA) to
approve its production and feedstock technology for iso-butanol as an
advanced renewable fuel. Gevo retrofitted an ethanol biorefinery in
Luverne, Minnesota, and is targeting production of up to 1 million
gallons of iso-butanol and 17 million gallons of ethanol in 2016. The
facility is registered with EPA as Agri-Energy LLC to produce renewable
fuels. Intrexon, located in the San Francisco Bay Area, began operation
of a pilot plant to produce iso-butanol in early 2016.
Multiple companies have researched and developed biobased
production routes for isoprene, which when polymerized is used in
synthetic rubber applications for footwear, mechanical instruments,
medical appliances, sporting goods, and most extensively as
polyisoprene in rubber tires. But only one company is currently
producing commercial quantities. Using its bacterial fermentation
platform, GlycosBio has built its first commercial facility in southern
Malaysia to supply the Southeast Asian region with up to 40,000 tons of
bioisoprene annually. DuPont Industrial Biosciences and Goodyear
developed a fermentation process for gas-phase capture of isoprene, and
have demonstrated a prototype tire using the bioisoprene monomer.
Ajinomoto has already successfully manufactured bioisoprene at a
laboratory scale using a fermentation process, and Bridgestone has
successfully produced polyisoprene rubber using the material. Michelin
is also working with Amyris Biotechnologies to develop liquid-phase
bio-isoprene using farnesene--a 15 carbon isoprenoid--as a building
block. Amyris has begun commercialization of this new, renewable
isoprene. Zeon, Yokohama Rubber, and RIKEN, Japan's national R&D
agency, expect to commercialize a process for synthesizing isoprene
from biomass in 2020. Aemetis now owns Zymetis' proprietary aerobic
marine organisms, (Saccharophagus degradans 2-40) that will enable the
company to produce bio-isoprene and other renewable chemicals.
One company, Itaconix Corporation, has commercialized fermentation
technology, using Aspergillus, to produce itaconic acid, a building
block for adhesives and sealants, finishing agents, paint and coating
additives, detergents and cleaners, absorbents and dispersants.
Itaconic acid can replace banned chemical phosphates in detergents.
Itaconix operates a large-scale production facility in Stratham, New
Hampshire, marketing a growing line of itaconic acid applications and
polyitaconic acid. Itaconix recently announced its acquisition through
merger by UK based Revolymer plc, a specialty chemical company.
Another company has commercialized a biobased process for aliphatic
diacids, a building block for polyurethanes and polyamides. Elevance
Renewable Sciences is producing InherentTM C18 diacid, also
known as octadecanedioic diacid (ODDA) at a biorefinery in Gresik,
Indonesia, using the company's proprietary olefin metathesis
technology.
And at least one company is producing commercial quantities of
levulinic acid, a renewable specialty chemical building block for
coatings, flavors/fragrances, polymers, detergents. Traditional
petrochemical process of producing levulinic acid is from maleic
anhydride; this process is expensive, limiting its use to low-volume
applications such as fragrances and food additives. At larger, lower-
cost production volumes, levulinic acid can replace bisphenol A (BPA)
as a plasticizer. GFBiochemicals is currently expanding levulinic acid
production capacity, from 2,000 to 8,000 metric tons by 2017, at a
facility in Caserta, Italy.
Market Potential for Renewable Chemicals
A number of recent studies provide estimates of the current value
of renewable chemical production, which overall represent a small
percentage of the worldwide chemical market. Production is expected to
grow most rapidly in Asia in response to the region's demand for
products, supply of biomass raw material and favorable policies. Future
value is dependent on the price of competing fossil-based chemicals,
the price of oil, and a somewhat unpredictable policy environment.
Robert Carlson, writing in Nature Biotechnology in 2016, estimates
that the U.S. industrial biotechnology industry revenues reached $105
billion at a growth annual rate of 12 percent, and renewable chemicals
contributed $66 billion.
A report by the U.S.-based Biomass Research and Development Board
estimates that the U.S. share of the biobased economy is approximately
$50 billion (=46.9 billion). More than \1/4\ million U.S. workers are
employed in the industry.
The nova-Institute of Germany more recently examined the biobased
polymer segment of the industry, which represented about $12.8 billion
(=10 billion) or five percent of biobased product sales in 2013.
Production capacity for biobased polymers is growing at a 20 percent
compound annual growth rate, with 3.5 million metric tons produced in
2011 and 5.1 million metric tons in 2013. The nova-Institute projects
production capacity to reach 17 million metric tons by 2020. Biobased
polymers currently represent a two percent share of the overall 256
million metric ton market for polymers (up from 1.5 percent of the 235
million metric ton market in 2011). By 2020, the 17 million metric tons
of biobased polymers are expected to represent four percent of a 400
million metric ton market. The strongest growth in market demand for
biobased polymers will be in food packaging and utensils, according to
the nova-Institute. Production capacity for biobased polyethylene
terephthalate (PET) is projected to grow from 600,000 metric tons in
2013 to 7 million metric tons in 2020, leading the group of polymers.
Based on planned capacity, nova-Institute projects similar expansion in
production of biobased polyhydroxyalkanoates (PHA), and strong growth
in production of polylactic acid (PLA) and biobased polyurethanes
(PUR).
Lux Research based in Boston has also projected growth in the
renewable chemical market through 2018. Their estimate includes the
biobased polymer sector as well as intermediates--such as biobased
succinic acid or adipic acid--and renewable specialty chemicals--such
as farnesene or terpenes. Based on announced capacity construction, Lux
expects biobased production capacity for intermediate chemicals to
reach 2.9 million metric tons in 2018, reflecting an 11 percent
compound annual growth rate; specialty chemical capacity is perhaps a
quarter the size of the intermediate market. Lux Research projects
leveling off of production capacity for polymers, due to the low prices
of oil and natural gas. But renewable specialty chemicals continue to
represent a profitable market opportunity.
Potential Advantages for Consumer Product Applications
Renewable chemicals have been recognized for more than a decade as
having environmental, economic, and performance advantages when
compared to fossil fuel-based chemicals. Biotech routes to chemical
production are inherently consistent with the principles of green
chemistry.
In 2004, the U.S. Department of Energy (DOE) published a report,
Top Value-Added Chemicals from Biomass, acknowledging that biobased
processes are often faster and more energy efficient production routes
than petrochemical processes. Reduction of time and energy inputs
potentially can be translated into cost reductions, providing
manufacturers an economic benefit. Further, renewable chemical
production processes use raw material resources more efficiently and
have less environmental impact overall than petrochemical production.
The improvement potentially can save manufacturers material handling
and regulatory compliance costs. Additionally, biomass is less volatile
in price than fossil resources, which have characteristic boom and bust
production cycles. Long-term stability in prices for renewable
chemicals provide product manufacturers the ability to plan production
well in advance and provides hedging.
A few years later, in 2007, the U.S. Environmental Protection
Agency (EPA) published a report, Bioengineering for Pollution
Prevention, recognizing that industrial biotechnology used in biobased
processes and in renewable chemical production can reduce carbon
emissions via many of the same attributes recognized by DOE--namely,
improved process efficiency, the displacement of fossil fuels and
petroleum-based materials, and the creation of closed loop industrial
systems that eliminate waste. EPA recognized that these innate
characteristics of biotech and biobased processes prevent waste and
reduce derivatives, which closely match the principles of green
chemistry. Since the introduction of EPA's Presidential Green Chemistry
Challenge in 1996, \1/3\ of all awards have gone to industrial
biotechnology or biobased processes. Consumer demand for
environmentally conscious products continues to rise.
More recently, in April 2016, the White House Office of Science and
Technology Policy released a report on Advanced Manufacturing: A
Snapshot of Priority Technology Areas Across the Federal Government.
This roadmap emphasizes that growth of the biobased economy is
dependent on advanced biobased manufacturing and engineering biology.
According to the roadmap, synthetic biology foundries hosted by Federal
Government efforts will promote the commercial development of new
renewable chemicals via faster and cheaper methodologies that use
appropriate design of microorganisms.
Most producers of renewable chemicals can demonstrate comparable
performance as drop-in replacements for petroleum-based chemicals. A
few applications demonstrate improved performance. To cite one example,
Avantium's PEF has superior properties to PET in drink bottle
applications, including a higher barrier to oxygen, carbon dioxide and
water. These properties can extend product shelf life and reduce
production costs for beverage producers. PEF's carbon footprint is 50-
70 percent lower compared to PET.
Conclusion
Consumer product manufacturers have indicated that they are eager
to use renewable chemicals in formulations in order to meet consumer
demand for environmentally preferable products. The main challenge
producers have cited for adoption of renewable chemicals is their
ability to secure reliable, competitive supplies for large-scale
product applications. Providing sufficiently large-scale supplies of
drop-in renewable chemicals for some applications may require multiple
manufacturers who adhere to common standards for chemical purity and
quality.
Some renewable chemicals--such as succinic acid and PLA--are
already being produced commercially by multiple, competing companies
and could potentially have commodity applications. A few additional
renewable chemicals--such as butanol and isoprene--are approaching the
same status. Several other renewable chemicals are being produced at
commercial levels by a single company--such as 1,3-propanediol,
propylene glycol and some diacids--with production tailored to niche
product markets.
Many additional companies are scaling up and demonstrating new
renewable chemical technologies. And in some cases, there are multiple
companies competing to reach commercial scale. Forming partnerships
with consumer product manufacturers or larger mid-market chemical
producers--who can provide off-take agreements or capital investment in
some form--is a common strategy for emerging companies commercializing
new renewable chemicals. Ensuring that consumers receive the
environmental, economic and performance benefits of renewable chemicals
requires an integrated effort across this entire production value
chain.
Agrivida
Medford, MA
Number of employees: 40
Agrivida, Inc. Is Delivering The Next Generation Of Enzyme Solutions.
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Above: Agrivida founder Michael Raab and U.S. Secretary of
Energy Steven Chu, Medford, MA.
Biorefinery Classification: Commercial Plant
Key Facts
Feedstock: Grain, lignocellulosic biomass and sugar
Agrivida's GraINzyme technology is an expression platform
for making recombinant or synthetic proteins in grain and other
plant tissues. Using GraINzyme' technology, Agrivida
is commercializing a series of enzyme and protein products that
are produced and delivered in grain. These initial products
target the animal nutrition industry and improve feed
conversion, yields, and the efficiency of food production.
Partnerships and Financing
In 2014, Agrivida entered a trait development collaboration with
Precision BioSciences to use Directed Nuclease EditorTM
(DNE) technology. In 2015, Agrivida completed a $23 million Series D
financing led by Cultivian Sandbox Ventures, joined by an affiliate of
Maschhoff Family Foods, ARCH Venture Partners, Middleland Capital and
existing investors Kleiner Perkins Caufield & Byers, DAG Ventures,
Bright Capital Partners, Gentry Venture Partners, Northgate Capital,
Prairie Gold and private investors.
About: Agrivida is developing and commercializing solutions that
are the next evolutionary step in animal nutrition, using the plant as
a factory to produce and deliver highly differentiated agricultural and
nutritional products.
Product applications: Animal health and nutrition; grain, food and
feed processing; first and second generation biofuels and biobased
chemicals; industrial enzymes for a variety of industries.
Potential market size: Animal nutrition enzymes represent an $850
million market. With increased food demand, sales of animal feed
enzymes are expected to exceed $1.8 billion by 2020.
Technology: Agrivida's INzyme' technology is a
biological ``off-on'' switch engineered into enzymes to control their
activity. Enzymes can be engineered with self-splicing peptides, called
inteins, and produced in grain, green plants, fermentation microbes, or
other hosts in a ``dormant'' form, where they accumulate in high
concentrations. The enzymes are reactivated ``on command'' using a
selected, controlled change in temperature or pH at a precise time,
maximizing their value in the process or application.
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American Process
Atlanta, GA
Number of employees: 100
American Process Is Commercializing GreenPower+ For Ethanol.
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Above: AVAP Demonstration Plant, Thomaston, GA.
Biorefinery Classification: Demonstration Plant
Key Facts
Thomaston, GA Integrated demonstration plant forGreenPower+,
AVAP and Bioplus
Alpena, MI Demonstration pre-commercial GreenPower+ plant--
succesfully completed demonstration--currently furloughed
Feedstock: Any woody or agricultural residue biomass
Partnerships and Financing
American Process is privately owned by a joint venture of GranBio
and TRLLC. API has formed partnerships with Green Tech America and
Valmet. American Process sponsors biorefinery research consortiums at
the Empire State Paper Research Institute, North Carolina State
University, and TEKES, Finnish Funding Agency for Technology and
Innovation. It directly commissions biorefinery research projects at
Georgia Institute of Technology, University of Maine, and Michigan
Technological University.
About: American Process Inc. (API) specializes in the development,
demonstration and commercialization of GreenPower+, AVAP and Bioplus
technologies for the commercial production of cellulosic ethanol,
cellulosic sugars and nanocellulose from biomass.
Product applications: Cellulosic ethanol, cellulosic sugars,
nanocellulose.
Potential market size: Transparency Market Research reports that
the global biofuels market was valued at $168.18 billion in 2016 and is
projected to reach $246.52 billion by 2024.
Technology: GreenPower+ is a patented technology suite for
producing low-cost mixed cellulosic sugars from biomass hemicelluloses
and cellulose in co-production mode. These sugars are fermented to
ethanol. AVAP technology produces low-cost clean cellulosic sugars
from biomass cellulose--and ethanol from the hemicelluloses--in a
stand-alone facility. Bioplus technology produces highly functional,
hydrophilic and hydrophobic nanocellulose fibrils or crystals, in gel
or dried form.
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Amyris
Emeryville, CA
Number of employees: 400
Amyris, Inc. Is Producing Farnesene.
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Above: Brotas, Sao Paulo, Brazil Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Brotas, Sao Paulo, Brazil
1.2 million liters
Feedstock: Sugarcane juice
Partnerships and Financing
With Total--Amyris launched in 2010 an ongoing research and
development collaboration to accelerate the deployment of farnesene for
the production of renewable jet fuel. In 2014, following regulatory
approvals, Amryis began to commercialize its renewable jet fuel.
With Firmenich--Amryis developed a technology to produce
sustainable, cost-effective ingredients for the flavors and fragrances
(F&F) industry and have successfully produced its first fragrance oil.
About: Amyris delivers high-performance renewable products across a
wide range of consumer and industry segments. Our products offer
customers a way to reduce environmental impact with No Compromise in
performance or availability.
Product applications: Flavors, fragrances, cosmetics, detergents,
fuels, lubricants, performance materials and biopharmaceuticals.
Potential market size: The personal care business represented $25
million of 2015 revenue and is expected to contribute $40 million of
2016 revenue. Amyris expects existing collaboration and supply
agreements to generate over $200 million in revenue through 2020 from
the company's flavors and fragrances partners.
Technology: Through synthetic biology, Amyris is able to engineer
the metabolic pathways of sugar, so that it can design microbes,
primarily yeast, and use them as living factories in fermentation
processes to convert plant-sourced sugars into target molecules. Amryis
uses proprietary high-throughput processes to create and test thousands
of yeast strains a day in order to choose those yeast strains that are
most efficient and scalable for industrial production.
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Anellotech
Pearl River, NY
Number of employees: 23
Anellotech, Inc. Is Producing Benzene, Toluene And Xylenes.
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Above: Anellotech's TCat-8TM development and
testing unit for converting biomass to BTX.
Biorefinery Classification: Pilot Plant
Key Facts
Pearl River, NY
Feedstock: Biomass (wood, corn stover, sugarcane bagasse)
and other non-food agricultural products
Anellotech's new, fully-integrated development and testing
facility (TCat-8TM) is currently under construction
and will be operational in 2016. This continuous unit will
confirm the viability and suitability of the process for scale-
up and generate data needed to design commercial Bio-TCat
plants. The TCat-8 unit was jointly designed by Anellotech and
its R&D partner IFP Energies nouvelles (IFPEN) and will use a
novel catalyst under joint development by Anellotech and
Johnson Matthey.
Partnerships and Financing
IFP Energies nouvelles (IFPEN) is our process development and
scale-up partner. Johnson Matthey is our catalyst development and
commercial catalyst supply partner. Axens is our partner for
industrialization, commercialization, global licensing and technical
support. In November 2015, Anellotech Inc. announced an equity
investment of $7 million from a new, strategic investor.
About: Anellotech is a green innovation and technology company
developing an efficient process for producing biobased aromatic
chemicals (BTX) from non-food biomass. We use proprietary thermal
catalytic biomass conversion (Bio-TCatTM) technology to
provide sustainable chemical building blocks as an alternative to
identical fossil-derived counterparts.
Product applications: Polyester, (polyethylene terephthalate or
PET), polystyrene, polyurethane, nylon, styrene butyl rubber (SBR),
acrylonitrile butadiene styrene (ABS) and other polymers, which are
used to produce beverage bottles, clothing, carpeting, automotive
components, and a broad range of other household and industrial
products.
Potential market size: The global market for benzene, toluene and
xylenes was approximately $130 billion in 2014.
Technology: Through Bio-TCatTM technology, non-food
biomass is rapidly heated in a fluid-bed reactor and the resulting
gases are immediately converted into hydrocarbons by a proprietary,
recirculating zeolite catalyst. Biobased BTX, which is identical to
petroleum-derived counterparts, can be further purified, separated and
converted into a broad range of plastics using existing commercial
technologies and industry infrastructure.
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BASF Corporation
Florham Park, NJ
Number of employees: 17,471 in North America
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Above: Grain processing facility.
Biorefinery Classification: Commercial Plant
Key Facts
In addition to its own manufacturing facilities, BASF
secures contract manufacturing relationships with qualified
third parties possessing sufficient fermentation capacity to
meet commercial production requirements.
For example, BASF has an important partnership with Fermic, which
operates a U.S. FDA cGMP approved fermentation and synthesis
facility and has a large fermentation plant in a suburb of
Mexico City.
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About: BASF Enzymes LLC is a wholly owned subsidiary of BASF
Corporation located in San Diego, CA. It is a recognized pioneer in the
development and commercialization of high-performance enzymes for use
in industrial processes.
Our interdisciplinary, international research and development teams
work at several BASF sites: Ludwigshafen (Germany), Tarrytown (New
York, United States) and San Diego (California, United States).
Product applications: BASF sells enzymes developed using its unique
patented R&D capabilities, harnessing the power of nature to satisfy
the needs of the global market. Key markets are: human and animal
health and nutrition, home care, grain processing, oilfield solutions,
and pulp and paper.
Technology: Genetic expression libraries are constructed and
quickly screened using automated and high-throu[gh]put robotic
technologies. BASF uses patented, state-of-the-art gene evolution
capabilities--suite of DirectEvolution' technologies--that
make possible rapid optimization of proteins at the DNA level.
White Biotechnology develops and refines methods to use
microorganisms, enzymes and cells to produce chemical and biochemical
products. For thousands of years, people have been harnessing natural
chemical processes to produce food, medicines and other products.
Today, rapid technological progress in the life sciences is leading to
innovative ways to use nature's variety for completely new
applications.
BASF White Biotechnology uses natural synthesis techniques to
develop products such as vitamins, food and feed supplements, chiral
compounds, and pharmaceutical and agricultural intermediates. These
techniques can increase efficiency and reduce raw materials, energy
requirements and carbon emissions as compared to conventional chemical
processes.
BioBased Technologies LLC
Rogers, AR
Number of employees: 15
BBT Strives To Reduce The Use Of Nonrenewable Ingredients By
Integrating Renewable Ingredients.
Biorefinery Classification: Commercial Plant
Key Facts
Fountain Inn, SC
Dalton, GA Laboratory
Feedstock: Soybean oil
100 percent Woman-owned small business.
Collaborates with customers to create sustainable products
that reduce costs while adding value.
Multiple U.S. and international patents.
Ample manufacturing capacity with room for growth.
Agrol is cost competitive compared to other traditional
polyols.
We enable sustainability . . . through partnerships.
Partnerships and Financing
Agrol and Agrol Diamond have been approved to use the U.S.
Department of Agriculture certified biobased product label. The label
indicates that the products have been independently certified to meet
USDA BioPreferredTM program standards for biobased content.
About: BioBased Technologies is an innovative leader in renewable
chemistry and the maker of Agrol, a line of USDA Certified Biobased
polyols. Agrol polyols are made from farm-grown plants and are
suitable for all polyurethane applications as a substitute for
petrochemicals in the making of products.
Product applications: Agrol, commercialized in 2005, is used in
lubricants, building products, furniture, bedding, automotive foams and
parts, adhesives, agricultural products, carpet backings, industrial
coatings and printing inks.
Technology: Agrol polyols have a high bio-content and are made
from plant-based ingredients, including soy and cashew nuts. Using a
patented oxidation process, Agrol' can be used in various
polyurethane applications with properties ranging from semi-flexible to
semi-rigid. Qualities such as low acid number, mild odor and light
color make Agrol' polyols ideal replacements for petroleum-
based polyols. Custom blends are also available.
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BIO-CAT/BIO-CAT Microbials
Troy, VA; Shakopee, MN
Number of employees: 15
BIO-CAT/BIO-CAT Microbials Is Producing Enzymes.
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Above: Shakopee, MN Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Shakopee, MN
Partnerships and Financing
BIO-CAT launched in 1988. BIO-CAT purchased AMS in 2004 and renamed
it BIO-CAT Microbials. Facilities were updated, new fermentation
equipment was purchased and larger blenders were added.
About: BIO-CAT offers a wide range of products, from single enzymes
to multi-enzyme blends. BIO-CAT Microbials is an innovator in the field
of biological solutions for a broad range of emerging and existing
markets and industries.
Product applications: Detergent and other cleaning products, animal
nutrition and aquaculture, food and beverage ingredients, dietary
supplements, septic and drain care, waste treatment.
Potential market size: The potential market for industrial enzymes
is 6.2 billion by 2020 according to Markets and Markets.
Technology: Enzymes can be produced from animal, bacterial, fungal,
yeast and plant sources. They can be Kosher, Halal, and GRAS or
industrial grade. They come in dry and liquid form.
Bacillus is a specific type (genus) of bacteria which grow
aerobically (with oxygen) and to some extent anaerobically (without
oxygen) and forms spores.
Bioresource International
Research Triangle Park, NC
Number of employees: 17
Bioresource International, Inc Is Producing Enzymes.
Biorefinery Classification: Pilot Plant
Key Facts
Research Triangle Park, NC
Feedstock: Poultry waste
Partnerships and Financing
BRI has signed a marketing agreement with Jubilant Life Sciences,
an integrated pharmaceutical and life sciences company, for marketing
and distribution of selected feed enzyme products in South Asia. BRI
has signed an agreement with ilender Corp. for the distribution and
marketing of selected feed enzyme products in Latin American countries.
About: A global biotechnology company specializing in the research,
development and manufacture of enzyme feed additives that help poultry
and swine producers optimize animal nutrition.
Product applications: Versazyme has become the leading protease in
the global animal nutrition market. Valkerase is an enzyme that
improves the processing of feathers and the quality of feather meal.
BRI's newest product, XylamaxTM, is an intrinsically thermo-
stable xylanase that delivers consistent all-around performance in
nutrient release and absorption, total energy availability, and feed
conversion rate. To quickly test animal feed on site to confirm the
presence of Xylamax, the company has developed XylaQuickTM,
a qualitative in-feed calorimetric kit.
Potential market size: Animal nutrition enzymes represent an $850
million market. With increased food demand, sales of animal feed
enzymes are expected to exceed $1.8 billion by 2020.
Technology: Dr. Shih's 1980s research and development of a
thermophillic digester to generate power from poultry waste led to his
discovery of keratinase, an enzyme that digests the keratin protein
found in feathers. Further research proved that keratinase could also
improve digestibility of animal feed.
Biosynthetic Technologies
Irvine, CA
Number of employees: 10
Biosynthetic Technologies Is Producing Biosynthetic Base Oil.
Above: Baton Rouge, LA Plant.
Biorefinery Classification: Demonstration Plant
Key Facts
Baton Rouge, LA
Feedstock: Organic fatty acids found in plant oils
Partnerships and Financing
Biosynthetic Technologies holds exclusive rights to patented USDA
technology that converts fatty acids found in plant and animal oils
into high-performance synthetic oils. Biosynthetic Technologies is
funded in part by multiple Financial Times Global 500 companies. For
more information, visit Biosynthetic.com.
About: Biosynthetic Technologies (BT) manufacturers a renewable
high-performance lubricant base oil that exceeds the toughest
performance standards, even in challenging applications like motor oil.
BT has received ILSAC GF-5 certification on both SAE 5W-20 and 5W-30
grade passenger car motor oil formulations using its Biosynthetic Base
Oil. These formulations have also been certified by the American
Petroleum Institute (API) to exceed the requirements of the most recent
service category issued by API's Lubricants Group, the API SN
``Resourcing Conserving'' designation.
Product applications: Passenger car motor oil (PCMO); Marine
lubricants; Small engine oil (2T/4T); Hydraulic fluid; Wind turbine;
Refrigeration/compressor oil; Food-grade lubricant grease; Dielectric
(transformer) fluid; Metalworking fluid; Gear oil; Bar and chain oil;
General purpose lubricant; Plastics.
Potential market size: 1 billion gallons per year.
Technology: Biosynthetic Technologies (BT) manufactures a
revolutionary new class of biobased synthetic molecules that are made
from organic fatty acids found in plant oils.
Blue Marble Biomaterials
Missoula, MT
Number of employees: 80
Blue Marble Biomaterials Is Producing Specialty Chemicals--Sulfur
Compounds, Thioesters, Esters, Specialty Offerings, Extract & Oils.
Above: Bitterroot Valley of Montana Plant.
Biorefinery Classification: Pilot Plant
Key Fact
Bitterroot Valley of Montana
Feedstock: Organic material (biomass): food co-products,
spent brewery grain, spent coffee and tea, algae, milfoil,
agricultural silage, wood chip
Partnerships and Financing
In the fall of 2010, Blue Marble was awarded the Regional Woody
Biomass Utilization Grant by Montana's Department of Natural Resources
and Conservation. Innovate Montana is a public-private partnership, led
by the Governor's Office of Economic Development working in
collaboration with Montana's business community. Their goal is to
highlight innovative businesses like Blue Marble Biomaterials that are
advancing the state's economy by creating quality jobs.
About: Our mission is to replace petroleum-based chemicals with
fully sustainable, zero carbon specialty chemicals.
Product applications: Natural flavours and fragrances.
Potential market size: In 2014, the world's ten largest specialty
chemicals segments accounted for 61 percent of the market, reported
IHS. Markets and Markets projects that specialty chemicals will reach
$470 billion by 2020.
Technology: Patented processes utilize plant material and managed
ecosystems of bacteria to produce complex chemical compounds. We refine
our compounds using green chemistry processes. Its proprietary AGATE
system uses cellulosic, lignin, and protein based biomass to produce
target products. Uses non-GMO polyculture fermentation and extraction.
Blue Marble is working with researchers at the University of
Montana to develop natural algal products using patent-pending algae
strains, growth systems, and extraction technologies.
Calysta
Menlo Park, CA
Number of employees: 50
Calysta Is Developing FeedKind Protein, Alcohols, Esters, Oxides And
Olefins.
Above: FeedKind.
Biorefinery Classification: Commercial Plant
Key Facts
Menlo Park, CA
Feedstock: Methane
In January 2016, Calysta received a conditional award of up
to 2.8 million Exceptional Regional Growth Fund
(eGRF) grant subject to due diligence from the UK Government to
develop a Market Introduction Facility in northern England to
develop a production process for FeedKind' protein.
FeedKind is approved for sale in the European Union. In June
2014, Calysta announced it has successfully fermented methane
into lactic acid, under a research collaboration with
NatureWorks. Lactic acid is the building block for NatureWorks
Ingeo lactide intermediates and polymers.
Partnerships and Financing
In February 2016, Calysta announced $30 million in Series C funding
with Cargill, the Municipal Employee Retirement System (MERS) of
Michigan and Old Westbury Global Real Assets Fund LLC. In January 2015,
Calysta completed of a Series B financing round totaling $10 million,
led by Walden Riverwood Ventures, a venture firm focused on investing
in core technology companies globally, and Aqua-Spark, a Netherlands-
based firm focused on sustainable aquaculture investments.
About: Calysta creates high-value nutrition products and industrial
materials by converting energy-rich methane into sustainable building
blocks for life.
Product applications: Fish and livestock nutrition products,
industrial materials and consumer products. FeedKind'
protein is a natural, safe, non-GMO, sustainable fish feed ingredient
to reduce the global aquaculture industry's use of fishmeal.
Potential market size: Specialty.
Technology: Calysta is converting novel feedstocks to high value
sustainable products using synthetic biology. Calysta is developing
Biological Gas-to-Chemicals' and Biological Gas-to-
Liquids' platforms and Biological Gas to FeedTM
and Biological Gas to FuelTM fermentation platforms. These
platforms create valuable cost and performance advantages over current
gas conversion processes without competing for food, land or water.
FeedKind' is produced using methanotrophs, natural organisms
that consume methane from multiple sources, including anaerobic
digestion and municipal solid waste, as their energy source.
Biobased products are made from renewable biomass, oils or other
carbon waste streams, including waste stack gases. Renewable chemicals
are the building blocks for biobased products.
Cellana, LLC
Kailia-Kona, HI
Number of employees: 20+
Cellana, LLC Is Producing Algae Oils, Proteins/Carbohydrates And
Biomass.
Above: Kailua-Kona, HI Plant.
Biorefinery Classification: Demonstration Plant
Key Facts
Kailua-Kona, HI
12+ tons per year, current capacity
Feedstock: Algae
Partnerships and Financing
Cellana has rec[ei]ved multiple large grants from the U.S.
Departments of Energy (DOE) and Agriculture (USDA). Cellana has entered
into a commercial-scale off-take agreement with Neste, the world's
leading supplier of renewable diesel and jet fuel, for Cellana's
ReNewTM Fuel biocrude oil for fuel applications.
About: Cellana is a leading developer of algae-based bioproducts
for sustainable nutrition and energy applications.
Product applications: Algae-based bioproducts such as Omega-3
nutritional oils, Aquaculture/animal feeds, human foods and fuels.
Potential market size: $4 billion Omega-3 oils, $9 billion
aquaculture feeds, $1 trillion fuels/chemicals, $100 million whole
algae products for aquaculture hatcheries, cosmetics, & functional
foods.
Technology: Cellana's patented production system, called
ALDUOTM, is unique in that it couples large-scale
photobioreactors (PBRs) with open ponds in a two-stage process. Open
ponds, which are very cost-effective, have historically been limited by
contamination from undesirable algae strains (weeds) or grazer
organisms (pests). PBRs are generally unable to produce algae at an
acceptable cost for commodity applications. ALDUOTM
minimizes the footprint of PBRs & maximizes the footprint of the open
ponds, in order to minimize overall cost & minimize risk of
contamination. By operating the PBRs in semi-continuous mode to provide
inoculum for the open ponds, which are operated in batch mode, Cellana
has successfully grown more than ten strains of algae at commercial
yields w[i]thout pesticides or herbicides.
The Coca-Cola Company
Atlanta, GA
Number of system employees: >700,000
The Coca-Cola Company Produces PlantBottleTM Packaging, The
First-Ever Fully Recyclable Pet Plastic Beverage Bottle Made Partially
From Plants.
Biorefinery Classification: Commercial Plant
Key Facts
Feedstock: Sugarcane
Partnerships and Financing
In June 2012, Coca-Cola, Ford, Heinz, Nike and Procter & Gamble
formed the Plant PET Technology Collaborative to accelerate development
of products made entirely from plants. The PlantBottleTM
technology has also been applied beyond beverage bottles. Coca-Cola now
has developed partnerships with the Ford Motor Company to use the
PlantBottleTM technology for polyester car interiors, and
SeaWorld' Parks & Entertainment (as well as other theme
parks and zoos), to introduce a refillable souvenir cup made with
PlantBottle technology.
About: The Coca-Cola Company is the world's largest beverage
company, refreshing consumers with more than 500 sparkling and still
brands and more than 3,800 beverage choices.
Product applications: PET packaging and materials.
Potential market size: PlantBottleTM packaging accounts
for 30 percent of the company's packaging volume in North America and
eight percent globally, some seven billion bottles annually, making The
Coca-Cola Company a large bioplastics end-user.
Technology: Coca-Cola introduced PlantBottleTM
Technology in 2009 as the first recyclable PET plastic bottle made
partially from plants. Since then, more than 40 billion
PlantBottleTM packages have reached the market in over 40
countries, saving more than 845,000 barrels of oil. The company's goal
is to adopt the PlantBottleTM packaging (which consists of
30 percent plant-based material) for all of its new PET plastic bottles
in the future. To achieve this objective, Coca-Cola is partnering with
other companies to expand technology and build manufacturing facilities
around the world.
Corbion
Amsterdam, Netherlands
Number of employees: 1,673
Corbion Is Producing Lactide Monomers And Polymers, 2,5-
Furandicarboxylic Acid, And Succinic Acid.
Above: Blair Manufacturing Facility, Blair, NE.
Biorefinery Classification: Commercial Plant
U.S. Production Facilities
Blair Manufacturing Facility, Blair, NE
Dolton Manufacturing Facility, Dolton, IL
East Rutherford Manufacturing Facility, East Rutherford, NJ
Grandview Manufacturing Facility, Grandview, MO
Totowa Manufacturing Facility, Totowa, NJ
Tucker Manufacturing Facility, Tucker, GA
Partnerships and Financing
In 2011, Corbion signed a partnership agreement with Perstorp; and
in 2015 jointly announced development of a new lactide
(PURALACT' B3) caprolactone co-polymer (CapaTM)
for use in hot melt adhesive applications.
In 2013, Corbion and BASF established the 50/50 joint venture,
Succinity GmbH, to produce high-quality succinic acid based on
renewable resources.
In 2015, Corbion and MedinCell established a 50/50 joint venture,
CM Biomaterials, to supply biobased copolymers for controlled-release
drug delivery. The joint venture will sell the co-polymers to MedinCell
partners who license the MedinCell technology (BEPOTM).
About: Corbion is the global market leader in lactic acid, lactic
acid derivatives, and lactides, and a leading company in emulsifiers,
functional enzyme blends, minerals, and vitamins.
Product applications: The company delivers high performance
biobased products made from renewable resources and applied in global
markets such as bakery, meat, home and personal care, packaging,
pharmaceuticals and medical devices, automotive, coatings and
adhesives. Its products have a differentiating functionality in all
kinds of consumer products worldwide.
Potential market size for bioplastics: Global bioplastics
production capacity is set to increase from around 1.7 million tonnes
in 2014 to approximately 7.8 million tonnes in 2019, according to
Institute for Bioplastics and Biocomposites.
Technology: Corbion has an established technology platform based on
over 80 years of fermentation experience. Corbion leads the way in
lactic acid as well as in cutting-edge emulsification technology and
functional blending capability. Drawing on the deep rooted application
and market knowledge that has been built up over decades, Corbion works
hand in hand with our customers to make our technology work for them.
With the construction of a 75 kiloton per year PLA plant in Rayong
Province, Thailand, Corbion is moving one step in the value chain.
The Dow Chemical Co.
Midland, MI
Number of employees: 49,495
The Dow Chemical Company Is Producing Ethanol, Plasticizers, Polyols.
Biorefinery Classification: Commercial Plant
Key Facts
U.S. Gulf Coast
Feedstock: Soy
DOW's Santa Vitoria, Minas Gerais, Brazil integrated
alcohol-chemical complex uses sugarcane as a renewable
feedstock for the production of ethanol. The mill has the
capacity to convert 2.7 million tons of sugarcane into 240,000
cubic meters of hydrous fuel ethanol per harvest year.
Partnerships and Financing
BioVinylTM flexible vinyl compounds incorporate
phthalate-free DOW ECOLIBRIUMTM Bio-Based Plasticizers,
which are manufactured using plant byproducts by Dow Electrical and
Telecommunications, a business unit of The Dow Chemical Company. Under
a Joint Collaboration Agreement, Teknor Apex has the exclusive right to
market in North America flexible vinyl compounds containing DOW
ECOLIBRIUMTM Bio-Based Plasticizers in consumer and
industrial products, automotive components, certain medical devices,
and certain wire and cable uses.
About: The Dow Chemical Company is a diversified, worldwide,
manufacturer and supplier of products, used primarily as raw materials
in the manufacture of customer products and services.
Product applications: Flexible packaging, hygiene and medical
markets, adhesives and sealants.
Potential market size: The global market for adhesives and sealants
is expected to reach $43,195.5 million by 2020, according to a 2014
study by Grand View Research, Inc.
Technology: RENUVATM Renewable Resource Technology
breaks down natural oil and functionalizes it, then uses a distinct
process to polymerize the molecules into designed polyols with control
of functionality and molecular weight for greater quality and
consistency.
DuPont
Wilmington, DE
DuPont Is Developing Platforms For Biofuels, Food Ingredients,
Materials And Chemicals.
Above: DuPont Cellulosic Ethanol, Nevada, IA.
Biorefinery Classification: Commercial Plant
Key Facts
DuPont Cellulosic Ethanol Nevada, IA
30 million gallons per year
Feedstock: Corn stover
Partnerships
In 2016, DuPont and Archer Daniels Midland announced a method for
producing furan dicarboxylic methyl ester (FDME) from fructose. One of
the first polymers under development utilizing FDME is polytrimethylene
furandicarboxylate (PTF).
About: DuPont has been bringing world-class science and engineering
to the global marketplace in the form of innovative products,
materials, and services since 1802.
Product applications: Animal nutrition, food, detergents, textiles,
carpets, personal care, biobased materials and biofuels.
Technology: DuPont integrates proven strengths in chemistry,
materials science and engineering with cutting-edge biology, augmenting
or replacing chemical transformations with biological ones. DuPont's
biobased materials reduce the use of petroleum while improving
performance. DuPont is leading the world in meeting growing biofuel
needs.
By adding modern science and knowledge to nature's own material,
DuPontTM Danisco' food enzymes bring added value
and previously unattainable functionalities to many food products. They
help extend shelf life, optimize production, add texture, ensure
quality consistency and reduce costs--gains that in turn enable
customers to reduce water use, energy consumption and waste.
POWERFlex', an enzyme solution developed for tortilla
baking, reduces the stickiness of dough and gives tortillas long-
lasting freshness and improved flexibility. Enzymes also support health
and wellness by promoting the digestion of milk lactose, starch,
proteins, fats and oils.
DuPont offers a wide range of liquefaction, saccharification and
isomerization products to customers in the wet milling industry, backed
by our applications laboratories in the U.S., China and Europe.
Experienced DuPont professionals provide technical support to optimize
the production of HFCS, high dextrose and high maltose syrups. This
enzyme technology also contributes to energy, water and chemical
reduction by increasing dry solids, reducing process temperatures and
pH adjustments and improving filtration efficiencies.
DuPOnt Tate & Lyle Bio PRODUCTS
Loudon, TN
DuPont Tate & Lyle Bio Products Is Producing 1,3 Propanediol.
Above: Loudon, TN plant.
Biorefinery Classification: Commercial Plant
Key Facts
The global headquarters and production facility for DuPont
Tate & Lyle Bio Products is located in Loudon, TN.
The plant started production in 2006 and has a current
capacity of 140 million pounds per year.
Feedstock: Glucose from corn wet milling operation.
Partnerships and Financing
DuPont Tate & Lyle Bio Products is a joint venture between DuPont,
a global science company, and Tate & Lyle, a world-leading renewable
food and industrial ingredients company. DuPont and Tate & Lyle jointly
funded the plant with total investment of $100 million.
Awards
2003 EPA Presidential Green Chemistry
2007 ACS Heroes of Chemistry
2009 ACS-BIOT Industrial Biotechnology
2010 State of Tennessee Governor's Award for Trade Excellence
About: DuPont Tate & Lyle Bio Products provides natural and
renewably sourced ingredients that enhance product performance.
Product applications: 100 percent biobased 1,3 propanediol is used
to produce fiber grade polyester polymer for residential and commercial
carpets, apparel and automotive mats and carpets. In addition the
Zemea' brand of 1,3 propanediol is found in cosmetics,
personal care, food, flavors, laundry, cleaning and pharmaceutical
products. The Susterra' brand is targeted for industrial
applications such as heat transfer fluids, deicing, polyurethanes,
paints, coatings and inks.
Technology: Under exact temperatures and conditions, a patented
microorganism functions as a bio-catalyst, converting sugar into 1,3
propanediol. The deactivated microorganism is separated from the broth,
along with unfermented sugars, salts and water. The material is then
refined to remove any trace quantities of water and other byproducts.
The resu[lt]ing product is highly purified 1,3 propanediol ready for
commer[ci]al use.
Copyright 2016 DuPont Tate & Lyle Bio
Products. All rights reserved. Zemea',
Susterra' and the Circle Logo are registered
trademarks of DuPont Tate & Lyle Bio Products Company, LLC.
EcoSynthetix
Burlington, ON, Canada
Number of employees: 50
EcoSynthetix Is Producing Ecosphere' Biopolymers And
Ecomer' Biomonomers.
Above: Eco[S]ynthetix, Burlington, Ontario.
Biorefinery Classification: Commercial Plant
Key Facts
Centre of Innovation, Burlington, Ontario, Canada.
Production sites in Tennessee and The Netherlands.
Partnerships and Financing
The company has established a number of academic and government
funding partnerships to support its research and development
activities. EcoSynthetix is a public company trading on the Toronto
Stock Exchange (TSX: ECO). For further details, visit us at
ecosynthetix.com.
About: EcoSynthetix is a renewable chemicals company specializing
in biobased materials used as inputs in a wide range of end products.
Our commercial biobased products exhibit similar performance
characteristics compared to non-renewable products that they replace,
often at reduced total systems cost.
Product applications: Binders and modifiers for key global markets,
including: paper & paperboard, building and construction, personal
care, and others.
Potential market size: $60 billion of synthetic polymers.
Technology: EcoMer' is the flagship product family of
functional engineered biopolymers that are patented and exclusively
available from EcoSynthetix. These products represent a class of highly
efficient binders derived from renewable materials which can cost-
effectively displace traditional synthetic binders in a number of
significant market applications, including coated paper and paperboard,
building products such as wood composites and insulation, and others.
Edeniq
Visalia, CA
Number of employees: 30
Edeniq Is Producing Cellulosic Sugars.
Above: Visalia, CA Plant.
Biorefinery Classification: Pilot Plant
Key Facts
Visalia, CA
Feedstock: Corn stover, sugarcane bagasse
The PATHWAY Platform has been licensed for commercial
production of cellulosic biofuel from corn kernel fiber. Edeniq
has announced commercial licenses for its PATHWAY Platform with
Pacific Ethanol, Flint Hills Resources, Siouxland Energy, and
Aemetis.
Edeniq is partnering with Usina Vale to build a
demonstration plant at Usina Vale's sugar mill in Brazil to
convert sugarcane bagasse to cellulosic ethanol
Partnerships and Financing
Department of Energy program funded $20 million of Edeniq's $25
million cellulosic ethanol pilot plant; with nearly $4 million from the
California Energy Commission (CEC).
Edeniq is a privately held company. Edeniq and Aemetis have
announced a planned merger to close in the third quarter 2016.
About: Edeniq is a biorefining and cellulosic technology company.
Edeniq delivers integrated process innovations that unlock sugars.
Product applications: Technology to produce cellulosic ethanol from
corn kernel fiber at existing ethanol plants using Edeniq's
CellunatorTM pretreatment and cellulases.
Technology: Edeniq combines a mechanical pretreatment (Cellunator)
process with enzymatic hydrolysis to efficiently and cost-effectively
break down structural plant materials into cellulosic sugars. Edeniq's
PATHWAY Platform integrates enzymes with the Cellunator and
SmartFlowTM Technology for water and lignin recovery to
allow for conversion of corn kernel fiber into cellulosic sugars and
ethanol. PATHWAY produces up to 2.5 percent cellulosic ethanol; a
15,000 gallon per year plant could produce 375 gallons per year of
cellulosic ethanol.
Elevance Renewable Sciences
Woodridge, IL
Number of employees: 100
Elevance Renewable Sciences, Inc Is Producing Ethylene.
Above: Woodridge, IL Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Woodridge, IL
Feedstock: Plant-based oils like soybean, canola, palm,
mustard and jatropha or algae
Partnerships and Financing
Elevance has a collaboration with Genting Plantations Berhad
through Genting Integrated Biorefinery Sdn Bhd (GIB). The collaboration
will build a 240,000 megaton (MT) biorefinery in the Palm Oil
Industrial Cluster (POIC) in Lahad Datu, Sabah, Malaysia. Versalis, the
chemical subsidiary of Eni, has licensed Elevance technology to build a
biorefinery at Porto Maghera, Italy.
Elevance and Wilmar International Limited formed a joint venture
that operates a world-scale biorefinery in Gresik, Indonesia, based on
Elevance's technology. The commercial-scale manufacturing facility
capacity is 180,000 MT per year.
About: Elevance is a high-growth company that creates novel
specialty chemicals from renewable feedstocks by using a proprietary,
Nobel Prize-winning technology called olefin metathesis. With olefin
metathesis, Elevance helps enable its customers to deliver everyday
products that exceed the performance of existing products while leaving
a smaller environmental footprint.
Product applications: Personal care, detergents, cleaners,
polymers, lubricants and oilfield chemicals.
Potential market size: The outputs from Elevance's production
process are relevant to markets valued well in excess of $200 billion.
The specialty chemicals market is estimated at $176 billion. The
oleochemical market was $38 billion in 2010. The intermediate olefin
market was $7 billion in 2008.
Technology: Olefin metathesis chemistry, a groundbreaking catalyst
technology, allows carbon atoms in natural oils to ``swap'' places,
enabling new chemical compounds and manufacturing processes.
Evolva
Reinach, Switzerland
Number of employees: 116
Evolva Is Producing High-Value Specialty Ingredients.
Above: Evolva fermenter.
Biorefinery Classification: Commercial Plant
Key Fact
Feedstock: Baker's yeast
Partnerships and Financing
The partners in the BioPreDyn project are developing software tools
to facilitate metabolic engineering by the use of computer-based cell
models. The PROMYS project has a duration of 4 years and a total EU
funding of =7.2 million (CHF 8.9 million), of which Evolva's share is
9.8 percent. The PROMYS project is part of the European Commission's
7th Framework Programme for Research (``FP7''). Evolva's role in the
project will be to construct a yeast that is able to produce high
yields of a taste modulating ingredient.
About: Evolva is a pioneer and global leader in sustainable,
fermentation-based approaches to ingredients for health, wellness and
nutrition.
Product applications: Evolva's products include stevia,
resveratrol, vanillin, nootkatone and saffron
Potential market size: $91.2 billion by 2020, according to Markets
and Markets.
Technology: We have an array of technologies that allow us to
rapidly insert and express tens to hundreds of genes in billions of
individual yeast cells in a highly combinatorial fashion. This allows
us to explore large numbers of gene combinations and hence find those
gene combinations that are necessary to biosynthesise a given
ingredient. Funded by the Innovative Medicines Initiative, The CHEM 21
project (Chemical Manufacturing Methods for the 21st Century
Pharmaceutical Industries) brings together six pharmaceutical
companies, five SMEs and research groups eight other universities from
the UK and Europe.
ForeLight
Chicago, IL
Number of employees: 6
ForeLight Is Producing Algae Biomass.
Above: Algae bioreactor with IllumesisTM lighting.
Biorefinery Classification: Pilot Plant
Key Facts
Chicago, IL
Feedstock: Algae
ForeLight's production facility is located in the University
Technology Park on the Chicago campus of the Illinois Institute
of Technology (IIT).
Partnerships and Financing
Privately held.
About: ForeLight's advanced artificial light bioreactor enables
unparalleled control over the growth of algae, cyanobacteria and other
photosynthetic organisms, offering a stable, cost-effective solution to
the biomass production needs of the life sciences, material sciences
and biological research & diagnostics fields.
Product applications: Fore[L]ight, Inc. provides fluorescent
biomarkers. ForeLight's patented IllumesisTM lighting and
growth platform is accelerating the potential application of indoor
agriculture/aquaculture for the food, beverage, nutraceutical, cosmetic
and other industries.
Technology: Allophycocyanin (APC) is a highly soluble fluorescent
phycobiliprotein isolated from the cyanobacteria Arthrospira platensis.
R-Phycoerythrin (R-PE).
Genomatica
San Diego, CA
Number of employees: 100
Genomatica, Inc. Is Producing 1,4-Butanediol, Butadiene,
Hexamethylenediamine, Caprolactam And Adipic Acid.
Above: Adria, Italy Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Adria, Italy
30 kilotons per year
Feedstock: Strategic relationships with Tate & Lyle for
dextrose sugar, M&G for sugars from cellulosic biomass, and
Waste Management for C1s.
Genomatica and DuPont Tate & Lyle Bio Products Company, LLC
(DT&L) produced more than 5 million pounds (over 2,000 metric
tons) of BDO by direct fermentation using conventional sugars
as feedstock in 2012.
Partnerships and Financing
Under a joint venture agreement, Novamont is converting an existing
facility in Adria, Italy to use Genomatica's BDO process to produce
approximately 40 million pounds of BDO per year. In April 2013,
Versalis and Genomatica announced an agreement to create a joint
venture for butadiene. In December 2013, Braskem and Genomatica
announced a joint development agreement for butadiene. Braskem
anticipates funding Genomatica's development work; will allocate
Braskem R&D resources; and fund the construction of pilot and
demonstration-scale plants.
About: Genomatica delivers new manufacturing processes that enable
its partners to produce the world's most widely-used chemicals from
alternative feedstocks, with better economics and greater
sustainability than petroleum-based processes.
Product applications: BDO is used in plastics, solvents, electronic
chemicals and elastic fibers for the packaging, automotive, textile,
and sports and leisure industries. Butadiene is a key raw material for
tires, engineering polymers and latex products.
Potential market size: The 1,4-Butanediol market will be worth
$8.96 billion by 2019. Hexamethylenediamine, caprolactam and adipic
acid have a total market of over $18 billion per year.
Technology: Guided by a genome-scale metabolic model, we engineered
the E. coli host to enhance anaerobic operation of the oxidative
tricarboxylic acid cycle. The organism produced BDO from glucose,
xylose, sucrose and biomass sugar streams.
Gevo
Englewood, CO
Number of employees: 91
Gevo Is Producing Isobutanol, Ethanol And High-Value Animal Feed.
Above: Luverne, MN Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Luverne, MN
20 billion gallons per year
Feedstock: Corn
Gevo currently operates a biorefinery in Silsbee, Texas, in
collaboration with South Hampton Resources Inc., to produce
renewable jet fuel, octane, and ingredients for plastics like
polyester.
Partnerships and Financing
Gevo has a marquee list of partners including The Coca-Cola
Company, Toray Industries Inc. and Total SA, among others.
About: Gevo' is a leading renewable chemicals and
advanced biofuels company. We are developing biobased alternatives to
petroleum-based products using a combination of synthetic biology and
chemistry.
Product applications: Isobutanol has broad market applications as a
solvent and a gasoline blendstock that can help refiners meet their
renewable fuel and clean air obligations.
Potential market size: The global isobutanol market is expected to
reach $1.18 billion by 2022. The feed additives is projected to reach
$21.8 billion by 2020.
Technology: Gevo's proprietary integrated fermentation technology
platform (GIFT'), which has been designed to produce low-
cost renewable isobutanol, consists of two elements: A proprietary
yeast biocatalyst, which converts sugars derived from multiple
renewable feedstocks into isobutanol, and a proprietary separation unit
which is designed to bolt onto existing ethanol facilities.
GFBiochemicals
Milan, Italy
Number of employees: 50
GFBiochemicals Americas Is Producing Levulinic Acid Derivatives, Like
Esters And Ketals.
Above: Golden Valley, MN Plant.
Biorefinery Classification: Demonstration Plant
Key Facts
Golden Valley, MN
Caserta, Italy
3 million lbs per year
Commercial under development, potentially at Laskin Energy
Park in Hoyt Lakes, MN.
Partnerships and Financing
GFBiochemicals is owned by private investors.
About: GFBiochemicals is the main producer of levulinic acid at
commercial scale directly from biomass.
Product applications: Pharma, personal care, flavors and
fragrances, resins and coatings, cleaners, plasticizers, nylon, fuel
additives.
Potential market size: $40 billion annually.
Technology: Thanks to its proprietary technology, levulinic acid is
produced through a one-step process directly from a wide range of
cellulosic feedstock and GFBiochemicals offers a combination of high
product yields, high productivity, concentrated process streams and
efficient recovery. Produced at an industrial scale levulinic acid is
cost competitive and can also successfully address many performance-
related issues attributed to petroleum-based chemicals and materials.
Levulinic acid was recognized by the U.S. Department of Energy as one
of the top biobased platform chemicals of the future.
Green Biologics
Ashland, VA.
Number of employees: 78 (in U.S. operations)
Green Biologics Is Producing 100 Percent Biobased, Renewable N-Butanol
And Acetone.
Above: Little Falls, MN P[la]nt.
Biorefinery Classification: Commercial Plant
Key Facts
Little Falls, MN 30,000 tonnes per yearFeedstock: Corn
Emmetsburg, IA. 40,000 liter demonstration
Partnerships and Financing
GBL was founded in Oxford, England in 2003 and moved to its current
location in Milton Park near Abingdon in 2005. On January 1, 2012, GBL
merged with ButylfuelTM Inc., a Gahanna, Ohio company
founded in 1991.
GBL has raised well over $100 million in equity financing from
investors and venture capital firms including Sofinnova Partners, Swire
Pacific Limited, Capricorn Venture Partners, Oxford Capital Partners,
ConVergInce Holdings, the Carbon Trust and Morningside Group.
Additional venture debt financing was provided by Tennenbaum
Capital Partners (TCP). In 2014, GBL received a $500,000 grant from the
Minnesota Agricultural Department to support the engineering for
repurpose of their advanced fermentation facility in Little Falls, MN.
www.greenbiologics.com.
About: Green Biologics Ltd (GBL) is developing and commercializing
technologies to produce renewable chemicals that reduce GHG emissions,
create rural jobs and deliver a sustainable value chain for a global
green economy.
Product applications: n-Butanol is used in paints and coatings, and
as an intermediate in the production of household, institutional, and
industrial products as well as plasticizers, esters and amines. Acetone
is used extensively as a solvent in paints, coatings, adhesives, inks,
plastics and polymers, personal care and food applications.
Potential market size: The global market for n-butanol was
estimated at 3,802.5 kilotons in 2012. According to Markets to Markets
consultancy, the global n-butanol market is expected to reach $9.4
billion by 2018, with year-over-year growth exceeding 4.4 percent.
Technology: We use microbial engineering and synthetic biology
tools to continually expand our robust library of Clostridium microbial
strains, which are used as biocatalysts as part of our Advanced
Fermentation Process (AFP)TM.
Heliae
Gilbert, AZ
Number of employees: 130
Heliae Is Currently Producing High-Value Products Derived From
Microalgae. Heliae Produces Supplement Grade Astaxanthin And A Number
Of Agricultural Products At Commercial Scale.
Above: Gilbert, AZ Plant.
Biorefinery Classification: Commercial Plant
Key Facts
Gilbert, AZ
1 billion gallon per year
Feedstock: Microalgae and other underdeveloped biological
platforms
Heliae offers technology and facility development services,
contract research and manufacture, and maintains a robust
pipeline of materials and human/animal health products.
In an effort to support the growth of algae as a sustainable
resource, Heliae provides a full range of facility development services
around the world. Such projects may range in scope, scale and
production potential.
Partnerships and Financing
Heliae led a joint venture--named Alvita Corp.--with Japan-based
Sincere Corporation, a waste management and recycling company, in the
development of a commercial algae production facility in Saga City,
Japan. Construction of the facility began in 2015 and Alvita's
astaxanthin product is targeted for market in Japan by the end of 2016.
Heliae continues research partnerships with Schott glass, Evodos
Separation Technology, and a number of universities and companies.
Heliae is privately held.
About: Heliae' is a platform technology company using
sunlight and low-cost carbon feedstocks to produce a wide range of
high-value products from microalgae and similar emerging biological
systems, with a long term vision of producing a sustainable source of
high-quality, low-cost protein, materials, and related products.
Product applications: Human and animal health, agriculture,
aquaculture, materials and technology services.
Potential market size: The current market value of commercially
used carotenoids (such as astaxanthin) is estimated at nearly $1.5
billion (2014) and is projected to reach $1.8 billion in 2019 at a CAGR
of 3.9 percent. The soil treatment market is valued at $24.1 billion
and is estimated to grow at a CAGR of 8.5 percent through 2020. The
biological products in agriculture market was estimated at $3 billion
in 2013 with a 3 year CAGR of 15 percent. Nutritional chemicals for the
animal health market are estimated to reach nearly $4 billion in 2016,
with a CAGR between 3.2 and 4 percent. By 2020, the aquaculture feed
market is expected to reach $381.9 million. The global biomaterials
market is forecast to grow to an estimated $130.57 billion by 2020 at a
CAGR of 16 percent.
Technology: While experts in phototrophic microalgae production,
Heliae's mixotrophic algae production platform sets it apart from the
industry. Mixotrophy is a hybrid of known phototrophic and
heterotrophic models, which decreases capital costs, improves
contamination control and increases productivity and product
optionality.
Itaconix
Stratham, NH
Number of employees: 15
Itaconix Corporation Produces A Growing Line Of Novel Polymers That
Ut[i]lize The Unique Functionality Of Itaconic Acid To Meet Customer
Needs For Safer Chemicals.
Biorefinery Classification: Commercial Plant
Key Facts
Stratham, NH
In 2009, we established a large-scale production facility.