[Senate Hearing 115-594]
[From the U.S. Government Publishing Office]
S. Hrg. 115-594
COMMODITIES, CREDIT,
AND CROP INSURANCE:
PERSPECTIVES ON RISK
MANAGEMENT TOOLS AND
TRENDS FOR THE 2018 FARM BILL
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JULY 25, 2017
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov/
__________
U.S.GOVERNMENT PUBLISHING OFFICE
29-640 PDF WASHINGTON : 2019
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
PAT ROBERTS, Kansas, Chairman
THAD COCHRAN, Mississippi DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota AMY KLOBUCHAR, Minnesota
JONI ERNST, Iowa MICHAEL BENNET, Colorado
CHARLES GRASSLEY, Iowa KIRSTEN GILLIBRAND, New York
JOHN THUNE, South Dakota JOE DONNELLY, Indiana
STEVE DAINES, Montana HEIDI HEITKAMP, North Dakota
DAVID PERDUE, Georgia ROBERT P. CASEY, Jr., Pennsylvania
LUTHER STRANGE, Alabama CHRIS VAN HOLLEN, Maryland
James A. Glueck, Jr., Majority Staff Director
DaNita M. Murray, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Joseph A. Shultz, Minority Staff Director
Mary Beth Schultz, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Commodities, Credit, and Crop Insurance: Perspectives on Risk
Management Tools and Trends for the 2018 Farm Bill............. 1
----------
Tuesday, July 25, 2017
STATEMENTS PRESENTED BY SENATORS
Roberts, Hon. Pat, U.S. Senator from the State of Kansas,
Chairman, Committee on Agriculture, Nutrition, and Forestry.... 1
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan... 3
Panel I
Rohwer, Bruce, Farmer, Rohwer Farms, Paullina, IA................ 6
Scott, Kevin, Owner/Operator, Evergreen Stock Farm, Valley
Springs, SD.................................................... 7
Schemm, David, Farmer, Arrow S Farms, Sharon Springs, KS......... 9
McMichen, Nick, Owner/Operator, McMichen Farms, Centre, AL....... 10
James, Jennifer, Owner/Operator, H & J Land Company, Newport, AR. 12
Panel II
Atkisson, Dan, Owner/Operator, Atkisson Land & Cattle, Stockton,
KS............................................................. 35
Rogers, Meredith, Farmer, Family Farm Partners, Camilla, GA...... 37
Rynning, Robert, Owner/Operator, Robert Rynning Farms, Kennedy,
MN............................................................. 38
Schlemmer, Ervin, Owner/Operator, Schlemmer Farms, Joliet, MT.... 40
Nobis, Ken, Owner/Operator, Nobis Dairy Farm, Novi, MI........... 41
Panel III
Haney, Mark, President, Kentucky Farm Bureau Federation,
Louisville, KY................................................. 52
Johnson, Roger, President, National Farmers Union, Washington, DC 54
Shute, Lindsey Lusher, Hearty Roots Community Farm and Co-Founder
& Executive Director, National Young Farmers Coalition, Hudson,
NY............................................................. 55
Cole, William, Stone Corner Farms and Chairman, Crop Insurance
Professionals Association, Batesville, MS...................... 57
Rutledge, Ron, President & CEO, Farmers Mutual Hail Insurance
Company of Iowa, West Des Moines, IA........................... 59
Minick, Mandy, Washington State President, Northwest Farm Credit
Services, Pasco, WA............................................ 60
Kluesner, Brenda, Loan Officer & Crop Insurance Manager, Royal
Bank, Cassville, WI............................................ 62
----------
APPENDIX
Prepared Statements:
Gillibrand, Hon. Kirsten..................................... 72
Atkisson, Dan................................................ 73
Cole, William................................................ 85
Haney, Mark.................................................. 97
James, Jennifer.............................................. 110
Johnson, Roger............................................... 125
Kluesner, Brenda............................................. 131
McMichen, Nick............................................... 141
Minick, Mandy................................................ 151
Nobis, Ken................................................... 161
Rogers, Meredith............................................. 170
Rohwer, Bruce................................................ 179
Rutledge, Ron................................................ 180
Rynning, Robert.............................................. 191
Schemm, David................................................ 194
Schlemmer, Ervin............................................. 205
Scott, Kevin................................................. 221
Shute, Lindsey Lusher........................................ 224
Document(s) Submitted for the Record:
Roberts, Hon. Pat:
Independent Insurance Agents & Brokers of America (IIABA),
prepared statement for the Record.......................... 232
International Dairy Foods Association (IDFA), prepared
statement for the Record................................... 243
American Bankers Association (ABA), prepared statement for
the Record................................................. 252
M&W Farm & Ranch, prepared statement for the Record.......... 265
Question and Answer:
Atkisson, Dan:
Written response to questions from Hon. Pat Roberts.......... 270
Written response to questions from Hon. Debbie Stabenow...... 271
Cole, William:
Written response to questions from Hon. Pat Roberts.......... 273
Haney, Mark:
Written response to questions from Hon. Debbie Stabenow...... 274
Written response to questions from Hon. Amy Klobuchar........ 275
James, Jennifer:
Written response to questions from Hon. Pat Roberts.......... 276
Written response to questions from Hon. Debbie Stabenow...... 277
Johnson, Roger:
Written response to questions from Hon. Pat Roberts.......... 280
Written response to questions from Hon. Debbie Stabenow...... 281
Written response to questions from Hon. Amy Klobuchar........ 282
Kluesner, Brenda:
Written response to questions from Hon. Pat Roberts.......... 283
McMichen, Nick:
Written response to questions from Hon. Pat Roberts.......... 285
Written response to questions from Hon. Debbie Stabenow...... 285
Minick, Mandy:
Written response to questions from Hon. Debbie Stabenow...... 288
Written response to questions from Hon. Sherrod Brown........ 289
Nobis, Ken:
Written response to questions from Hon. Pat Roberts.......... 291
Written response to questions from Hon. Debbie Stabenow...... 292
Written response to questions from Hon. Sherrod Brown........ 294
Written response to questions from Hon. Amy Klobuchar........ 295
Rogers, Meredith:
Written response to questions from Hon. Pat Roberts.......... 297
Written response to questions from Hon. Debbie Stabenow...... 297
Rohwer, Bruce:
Written response to questions from Hon. Pat Roberts.......... 299
Written response to questions from Hon. Debbie Stabenow...... 299
Written response to questions from Hon. Sherrod Brown........ 303
Rutledge, Ron:
Written response to questions from Hon. Pat Roberts.......... 305
Rynning, Robert:
Written response to questions from Hon. Pat Roberts.......... 306
Written response to questions from Hon. Debbie Stabenow...... 306
Schemm, David:
Written response to questions from Hon. Pat Roberts.......... 309
Written response to questions from Hon. Debbie Stabenow...... 310
Schlemmer, Ervin:
Written response to questions from Hon. Pat Roberts.......... 314
Written response to questions from Hon. Debbie Stabenow...... 315
Written response to questions from Hon. Steve Daines......... 316
Written response to questions from Hon. Amy Klobuchar........ 317
Scott, Kevin:
Written response to questions from Hon. Pat Roberts.......... 318
Written response to questions from Hon. Debbie Stabenow...... 318
Shute, Lindsey Lusher:
Written response to questions from Hon. Debbie Stabenow...... 321
Written response to questions from Hon. Sherrod Brown........ 327
Written response to questions from Hon. Amy Klobuchar........ 330
COMMODITIES, CREDIT,
AND CROP INSURANCE:
PERSPECTIVES ON RISK
MANAGEMENT TOOLS AND
TRENDS FOR THE 2018 FARM BILL
----------
Tuesday, July 25, 2017
United States Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC
The committee met, pursuant to notice, at 8:31 a.m., in
room 106, Dirksen Senate Office Building, Hon. Pat Roberts,
Chairman of the committee, presiding.
Present or submitting a statement: Senators Roberts,
McConnell, Boozman, Hoeven, Ernst, Grassley, Thune, Daines,
Stabenow, Brown, Klobuchar, Bennet, Gillibrand, Donnelly,
Heitkamp, Casey, and Van Hollen.
STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF
KANSAS, CHAIRMAN, U.S. COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
Chairman Roberts. Good morning. I call this meeting of the
Senate Committee on Agriculture, Nutrition, and Forestry to
order.
I want to thank all the witnesses for coming. There is dead
silence in the audience. Whispering is permitted but not for
very long.
I have repeatedly said we must listen to our farmers and
ranchers first before writing any kind of a farm bill, and that
is exactly what this Committee is continuing to do as of today.
Whether Stabenow and I were wearing purple or green at the farm
bill hearings in our home states, we have been listening to key
stakeholders, including producers and those who make their
livelihoods and live in our rural communities.
By the end of this morning this Committee will have held
hearings on eight of the farm bill titles. I know that several
Senators, both on and off Committee, have also been gathering
input and ideas from their states for the farm bill.
So far this year I have joined agriculture roundtables and
farm visits with Senator Daines in Montana--about 700 folks
with cowboy hats--and Senator Strange in Alabama. The
conversations at these visits have demonstrated that all of
agriculture is struggling with low prices, not just one or two
commodities or regions.
This morning we are focusing our attention on risk
management tools and the needs of producers from all across the
country.
Welcome, John. It is a good thing you showed up, because
Grassley has an Iowa-Kansas plan. We were going to ram that
through first.
[Laughter.]
Senator Boozman. I am here in force.
Chairman Roberts. First, our two panels of men and women
have participated in the Department programs administered by
the Farm Service Agency and Risk Management agency. These
producers have given up valuable time to provide real examples
of why the farm bill is important to their operations and to so
many others. They will provide updates from their perspective
on what is working with the current farm bill and what can be
improved in the commodity, credit, and crop insurance programs
at the Department. Our third panel includes general farm
organizations, crop insurance professionals, and the lending
community who work to provide producers with the tools
necessary to finance their agriculture operations.
I know I speak for all members of this Committee by saying
a heart-felt thank-you for being here today and your continued
commitment on behalf of our farmers, our ranchers, and our
growers. These are the folks who are feeding a troubled and
hungry world. I am truly humbled by the work you do for our
country and for our rural communities.
While they work very hard every day to feed and to clothe
us, America's farmers and ranchers are at the mercy of Mother
Nature, when it comes to the weather on their farms. The High
Plains are in the middle of a very damaging drought, while
areas in the South are still drying out from flooding and
tropical storms. When producers put their seeds in the ground,
they do not expect a hailstorm to hit right as they are ready
to harvest their crops. They would much rather reap the
benefits of their hard work in the marketplace rather than
receive an indemnity.
The last farm bill made significant changes, and unlike
previous policies, today's commodity programs, like crop
insurance, are triggered only when there is a loss. Now given
the current state of the farm economy and credit challenges
facing many producers, especially young and beginning farmers,
it is essential we also examine the FSA direct and guaranteed
loan programs to determine if improvements can be made.
As we review the risk management and credit programs and
consider changes, the reality is we face budget constraints and
limited resources for the farm bill. While much of our focus
has been on the economic conditions in rural America and
reduced farm income, we cannot ignore the cost side of our
producers' balance sheets, and we should look for ways to ease
those burdens.
But during these tough economic times, I would remind my
colleagues that we can promote stability and economic growth in
our rural states through a farm bill. Adequate risk management
tools and regulatory reform provide much-needed certainty to
our producers.
So the Committee must do our work in a timely and
transparent manner, and today is an important step in that
process. We need to continue working together to get a farm
bill done. Our farmers, ranchers, growers, rural communities,
and others that enjoy safe and affordable food are depending on
us.
Our witnesses have traveled from their farms and businesses
as far away as Montana and the state of Washington. They
represent a broad cross-section of production agriculture. I
look forward to hearing from our witnesses and I now recognize
the distinguished member from Michigan for any remarks she may
have.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN
Senator Stabenow. Well, thank you very much, Mr. Chairman
and welcome to all of you. This is a very important hearing
and, as you said, we have been moving through the titles on the
farm bill, and it is my pleasure to work with you and I am
confident we are going to be able to come together and be able
to do what our farmers and ranchers and families need, which is
to pass another farm bill.
I have always said that agriculture is the riskiest
business there is. From floods to droughts, a sudden turn in
the weather can change everything for a farmer. Even on perfect
sunny days in Michigan, commodity prices can drop unexpectedly
due to global events, and bring sudden uncertainty to a
farmer's bottom line.
Despite the risks they face day to day, our producers
persevere, through all odds, to grow food for our families, and
drive our economy forward. Still, farmers sometimes need a leg
up on the unknown to help them recover from losses outside of
their control. The old subsidy program did not meet the needs
of our farmers and either paid too much or too little,
regardless of actual losses. That is why, in the 2014 Farm
Bill, we came together and made historic reforms to end direct
payments and create new tools for our farmers to better manage
their risk and protect their farms and families from
devastating losses.
By transitioning to common-sense risk management, we now
provide support for those who need it most, when they need it.
Over 90 percent of Michigan farmers selected the Agricultural
Risk Coverage program that has protected against both price and
yield declines.
By and large--and we are certainly open to suggestions on
improvements--but this approach seems to be working. However,
the one big exception has been the dairy safety net. I have
heard from dairy farmers throughout Michigan and other states
who have paid into the Margin Protection Program and received
nothing in return during their time of need.
Last week, I am happy to say that we took the first step
towards closing the gap in the dairy safety net, through the
Appropriations Committee, and I want to thank our colleague,
Senator Cochran, Senator Leahy, both on this Committee, both
leaders who led the Appropriations Committee, for their work on
the appropriations bill which includes help both for dairy and
cotton farmers. Not only does this give dairy farmers an
interim improvement to their safety net but it also sets the
stage for the next farm bill.
Looking ahead, we need to make sure the farm safety net is
responsive to the needs of all farmers, without creating the
old system of indefensible subsidies that paid farmers even
when times were good. When it is available, crop insurance is
one of, if not the most important risk management tools for our
producers, but historically it has not been available to some
of the farmers who need it most. That is why I am so pleased,
and fought so hard to expand and strengthen crop insurance for
all farmers from expanding coverage to specialty crop growers,
organic producers, and beginning farmers, to providing a whole
farm option for diversified farms.
I am committed, working with the Chairman, to continuing to
build on this progress. I am committed to working with the USDA
to expand and improve the insurance options as well for our
dairy farms. Along with tools to help farmers manage risk, it
is also critical we create opportunities to help farmers start
and expand their operations. The farm bill provides many
resources like access to credit, microloans, conservation
programs, and training to help new farmers get their start in
agriculture, and we need them. We need to ensure the USDA has
producer-facing technology that opens the door for young and
beginning farmers to carry on the legacy of American
agriculture.
There are also many returning veterans who are looking for
post-service careers on the farm, and I am very excited about
what I have heard in Michigan, and the people I have talked to
at our farm field hearing in Michigan. We heard from an Army
veteran who shared how outreach programs in the 2014 Farm Bill
have helped veterans access loans to kickstart their farms.
The farm bill is all about expanding opportunities. The
farm bill policy we craft together should ensure that every
farmer can start, expand, and protect their farm and
livelihood.
Thank you, Mr. Chairman, and I do want to apologize in
advance. In a little bit I have to step out for about 30
minutes and come back, because I am trying to be in two places
at once, and until we get beam-me-up-Scotty technology I am
going to have to run back and forth, so I do apologize for
that. But I am so pleased we are doing this hearing. This is
very, very important. Thank you.
Chairman Roberts. Well, I thank the distinguished Senator
for her remarks and we have arranged for a hologram to be right
here----
Senator Stabenow. Good.
Chairman Roberts. --to listen to all of the testimony.
Senator Stabenow. That is good.
Chairman Roberts. Now I would like to welcome our first
panel of witnesses before the Committee, and Bruce, you not
only have one but you have two outstanding Senators to
introduce you, Senator Ernst and Senator Grassley. I do not
know who would like to go first, but I have----
Senator Ernst. I will go first.
Senator Grassley. She is going to do it all by herself.
Chairman Roberts. You won the debate, or the coin toss.
Senator Ernst. I won the coin toss.
Chairman Roberts. Senator Ernst.
Senator Ernst. Thank you. This morning I have the privilege
of introducing Bruce Rohwer, who raises corn and soybeans near
Paullina, Iowa, with his son and daughter. Additionally, he
owns a drainage tiling business and runs a sow farrow-to-finish
operation with his neighbor.
Rohwer is a board member of the National Corn Growers
Association, a farmer-led trade association with offices in St.
Louis and Washington. Founded in 1957, this organization
represents more than 40,000 dues-paying corn growers and the
interests of more than 300,000 farmers. The NCGA and its 48
affiliated state associations work together to help protect and
advance corn growers' interests. Rohwer has also served as Past
President and Chair of the Iowa Corn Growers Association.
Thanks, Bruce, for being here this morning, and we look
forward to your testimony. I think, Chuck, you wanted to say
good morning.
Senator Grassley. Good morning.
Senator Ernst. There you go. Thank you very much for being
here today, Bruce. Thank you, Mr. Chairman.
Chairman Roberts. That sets a record for the distinguished
Senator from Iowa, Senator Grassley. Only two words. It is
rather amazing.
I now turn to Senator Thune, who is not here, to introduce
our next witness. John is busy with leadership on another
entire matter, and is meeting Grace Kelly down by the train
station at high noon. That is an inside joke. I compare him to
Gary Cooper, but then both of us realize that most of you out
there do not know who Gary Cooper is.
[Laughter.]
Chairman Roberts. From Valley Springs, South Dakota, I want
to welcome Mr. Kevin Scott. Mr. Scott and his wife operate a
soybean and corn farm that was originally settled in 1885. Mr.
Scott is a member of the Board of Directors and Governing
Committee of the American Soybean Association. So, Kevin, thank
you so much for coming today.
Mr. David Schemm, joining us from Sharon Springs, Kansas,
is Mr. David Schemm. You will recall that farmers know that
mother nature may be doing something for them and to them, but
you certainly do not expect that right in the middle of
harvest. He has experienced that wonderful chance, or kind of
operation, with regards to his wheat crop. They did one half in
one field, did not do the rest, decided they would wait until
the next day. The weather forecast in Sharon Springs, Kansas,
America, was clear, and in the middle of the night they had a
hailstorm. So David, I am sorry about that but, as he said to
me, ``Well, that is just what you do when you are a farmer. You
hope you have a better crop next year.''
Mr. Schemm and his wife live and work on their farm where
they raise wheat, corn, and grain sorghum. He is the President
of the National Association of Wheat Growers and is an active
member of his local community. David, welcome. I look forward
to your testimony.
Luther Strange was going to introduce our next witness but
I do not see him here. So Nick McMichen--I have got it--a
fifth-generation cotton producer, joins us today from Centre,
Alabama. He is the Alabama State Chairman for the American
Cotton Producers and a delegate to the National Cotton Council.
It is good to see you again, Nick. Thank you.
Senator Boozman to introduce our final witness.
Senator Boozman. Thank you, Mr. Chairman. It is a real
honor to introduce to you this morning Mrs. Jennifer James, a
fourth-generation rice and soybean farmer from Newport,
Arkansas. Jennifer farms with her father and brother on their
recognized Arkansas Century Farm. The family takes great pride
in their operation's commitment to providing over-winter
habitat for water fowl and instituting practices to conserve
water.
Over the course of her career, Jennifer has held many roles
as an active member of the rice industry at both the state and
national levels. Jennifer is currently serving as the Chair of
the USA Rice Sustainability Committee, a member of the USA Rice
Farmers Board of Directors, Vice Chairman of the Arkansas Rice
Farmers Board of Directors, member of the Arkansas Agriculture
Board, and many other positions. The list goes on and on.
Jennifer and her husband, Greg, have one 16-year-old son,
Dylan, who hopes to follow in the footsteps of his parents and
grandfather to work on the family farm.
I yield back, Mr. Chairman.
Chairman Roberts. Thank you, Senator. We will now turn to
the witnesses for their testimony.
Mr. Bruce Rohwer. Bruce?
STATEMENT OF BRUCE ROHWER, FARMER, ROHWER FARMS, PAULLINA, IOWA
Mr. Rohwer. Thank you, Chairman Roberts, Ranking Member
Stabenow, and members of the Committee. Thank you for the
opportunity to share National Corn Growers Association views on
today's risk management tools. My name is Bruce Rohwer. I farm
near Paullina, Iowa. We raise corn, soybeans, and have a
farrow-to-finish hog operation.
With ending stocks exceeding 2.4 billion bushels, it is
more important than ever to build demand for U.S. corn. We need
a robust livestock industry, more exports, and a strong and
growing renewable fuels industry to make farming profitable.
From 2006 to 2013, corn prices averaged $4.70 per bushel.
Since then, prices have fallen below $4.00 and are projected to
average $3.35 this marketing year. If prices remain below
$4.00, incomes will be very low or negative. Input expenses
have started to decline but not fast enough to make up for
falling revenues.
One key factor driving input expenses is a substantial
increase in cost to register crop protection products, due
largely to a rise in environmental safety data required by
regulatory bodies. This is a serious concern given the
importance of crop protection to risk management and
profitability.
According to USDA, corn production costs reached a high of
$690 per acre in 2014. Revenues fell $190 per acre from 2012 to
2015, but production costs have only decreased about $15. You
can understand the serious drain on working capital and equity
farmers are experiencing. In neighboring Illinois, the Farm
Business Farm Management estimates net farm income declining to
an average of $500 in 2015, the lowest amount since the service
began keeping records. Without the ARC program, 2015 incomes on
these farms would have been more than $30,000 less.
ARC-County has performed well, but NCGA asks you to
consider several administrative concerns and changes in the
market to ensure it remains an effective management tool.
First, to ensure equitable payments we need the most accurate
and consistent data sources. Second, program parameters at
these lower prices will differ from when prices were falling
from high levels.
NCGA is evaluating many changes including yields to address
county anomalies, longer production history for appropriate
guarantees, reducing deductible to 10 percent, a floor price
adjustment to better reflect the average cost of production.
Commodity programs are essential but corn farmers' most
important risk management tool is the Federal Crop Insurance
program. Corn farmers predominantly insure with federal Revenue
Protection, RP. More than 90 percent of the acres in the heart
of the corn belt are insured at the 80-to-85 percent level.
Coverage levels tend to fall in areas where risk yield
increases and premiums rise. In January of 2016, in our risk
management survey of farmers, the top concern was the potential
cuts to premium discounts, coverage levels, and revenue
policies price component.
To sum up, crop insurance provides well-targeted within-
year protection against yield loss and declining prices while
ARC and PLC protect against multiple years of depressed
markets. As the farm economy deteriorates, access to credit
remains a critical part of farm safety net. The NCGA has joined
other groups to support additional funding for FSA direct and
guaranteed loans.
NCGA appreciates the immense effort required to craft a new
farm bill, and we look forward to working with you and your
staff.
[The prepared statement of Mr. Rohwer can be found on page
179 in the appendix.]
Chairman Roberts. Thank you for your statement.
Kevin, you are next. Thank you very much, sir.
STATEMENT OF KEVIN SCOTT, OWNER/OPERATOR, EVERGREEN STOCK FARM,
VALLEY SPRINGS, SOUTH DAKOTA
Mr. Scott. Good morning, Chairman Roberts, Ranking Member
Stabenow, and members of the Committee. I am Kevin Scott, a
soybean and corn farmer from Valley Springs, South Dakota, and
a member of the Board of Directors of the Governing Committee
of the American Soybean Association. ASA represents U.S.
soybean producers on domestic and international policies. We
commend you for holding this hearing on ag risk management
programs in advancement of development of the 2018 Farm Bill.
ASA's policies on current Title 1 programs and crop
insurance are approved by our voting delegates at Commodity
Classic in February, and presented by the presidents of the
Kansas and Michigan Associations at the listening sessions your
Committee held earlier this year. I would like to briefly
summarize those positions, and look forward to any questions
you may have.
ASA believes Title 1 programs have worked as intended, and
supports reauthorizing ARC and PLC as choices on a farm-by-farm
and crop-by-crop basis. We also support offering an option to
reallocate crop acreage bases or to update bases to reflect
recent planting history, and to update program payment yields
if funding is available to do so. Payments under these programs
should continue to be based on average planting of covered
commodities in recent years, rather than on current-year
plantings. Decoupling encourages farmers to follow market
signals rather than prospects for receiving government
payments.
With regard to the county ARC program, yield data from RMA
should be used, where available, rather than the current policy
of using NASS data. For counties that lack RMA data, RMA yields
from similar or adjacent counties should be used or averages to
reduce discrepancies in yields and payments in neighboring
counties.
Du to the steep decline in farm prices since 2013, the
revenue protection provided under the ARC program has also
declined. While 4 percent of soybean producers signed up for
county ARC under the 2014 Farm Bill, CBO projects that only 25
to 30 percent will choose ARC if it is reauthorized in its
current form next year.
ASA believes the Committee should look at ways to
strengthen county ARC in order to make it a more attractive
program option, without increasing the combined cost of ARC and
PLC. Adjusting the ARC benchmark revenue guarantee or
lengthening the year span for the Olympic average price could
improve the choice given producers between the two programs.
Regarding crop insurance, ASA strongly supports the current
program as an essential tool for managing risk. Crop insurance
is now widely acknowledge as the most valuable part of the farm
safety net. However, farmers in some regions choose not to
purchase policies, showing us all that there is still work to
be done.
The cost of crop insurance is paramount for Congress. It is
also top of mind for farmers. For most of us, the cost of crop
insurance is among the top expenses in growing a crop, along
with land, seed, and fertilizer. The idea of capping insurance
subsidies is perennial.
I want to draw your attention to recent work by Kansas
State University, showing that in Kansas last year farms would
have hit the $40,000 payment limit at just 1,166 acres. If such
a payment limit were imposed, farmers would pay 100 percent of
the premium for any covered acres above that level. It is
important for the Committee to recognize the high cost of crop
insurance premiums to farmers, and that many family farm
operations would easily hit such payment limits.
That concludes my statement, Mr. Chairman. I will be
pleased to respond to any questions you or the members of the
Committee may have. Thank you.
[The prepared statement of Mr. Scott can be found on page
221 in the appendix.]
Chairman Roberts. Kevin, I was just reading a report that
came across my desk this morning that farmers in South and
North Dakota say the drought is the worst they have ever seen.
Would you say that is the case?
Mr. Scott. It is serious. I live on the eastern edge of the
state and my situation is not as serious, but the central parts
of both states are in critical shape right now.
Chairman Roberts. Thank you. David, please proceed.
STATEMENT OF DAVID SCHEMM, FARMER, ARROW FARMS, SHARON SPRINGS,
KANSAS
Mr. Schemm. Chairman Roberts, Ranking Member Stabenow, and
members of the Committee, thank you for the opportunity to
testify today.
The past couple of years have been challenging for wheat
farmers across the country, particularly because of
historically low prices. Producers of hard red winter wheat
even became eligible for market assistance loans and loan
deficiency payments for the first time in several years because
prices dropped below loan rates. We have also been hit with big
weather and disease events. I have personally experienced
freeze, blizzard, wheat streak mosaic virus, and hail in my
area, and now a devastating drought is gripping the Upper Great
Plains wheat region. It is events like these which have such a
widespread impact that make farm bill program so important.
The low prices have led to farmers needing to take out new
loans to continue operating. As such, producers' debt-to-asset
ratios have grown rapidly. I have included a chart in my
written testimony with data from USDA's Economic Research
Service, showing that over 8 percent of wheat producers are
considered to be highly leveraged and 16 percent are extremely
leveraged, showing the extent of economic stress.
Additionally, the recent dip in planted wheat acres
reflects the economic conditions in wheat country. Planting for
this crop year is down 9 percent from the previous year and is
the lowest planted acres since records began in 1919.
The farm bill's Title 1 programs like ARC and PLC have
served as key safety net programs that kick in for losses not
covered by crop insurance. ARC has worked well but there are
some tweaks that can be made, given the low-price environment,
to improve it. We urge Congress to ensure that a mechanism is
in place to maintain an appropriate benchmark revenue guarantee
to help farmers through these difficult times.
Included in my written statement are several options for
both price and yield components of the ARC formula. We believe
one of the tweaks is utilizing a reference price in the ARC
formula that remains consistent with whatever the final PLC
reference price, in order to set a floor for the benchmark
guarantee. We also recommend prioritizing RMA yield data, where
available.
With regards to PLC, the current reference price for wheat
of $5.50 per bushel is far below what it costs to produce the
crop. We urge you to increase the wheat reference price so it
more closely reflects the modern cost of producing the crop. It
should be set at a level that is closer to $7.00 a bushel to
try to truly enable PLC to function as a safety net for farmers
when times are tough, like they are today.
We think loan rates for Marketing Assistance Loans and LDPs
should be increased as well.
Ultimately, the next farm bill should maintain a choice
between ARC and PLC so farmers can use the program that best
fits their needs.
The federal crop insurance program has been, and continues
to be, farmers' most important risk management tool. A farmer
might go many years paying premiums for a policy and rarely get
an indemnity, and they would much rather get a return from the
market than become eligible for an indemnity. Crop insurance is
critically important to enable a producer to farm another year
when events outside of their control impact them. The federal
crop insurance program has also performed incredibly well, with
an improper payment rate of just 2.2 percent, which is about
half of the government-wide average of 4.39 percent.
We also believe we need to continue a voluntary, incentive-
based conservation program in the next farm bill. Our farmers
have prioritized working lands conservation programs in our
policies. We believe these policies should work with farmers to
integrate conservation practices and techniques into the
farming operations and should recognize the different needs in
different parts of the country for different crop rotations.
Wheat farmers across the nation are experiencing the
toughest economic conditions they have faced since the 1980s.
This next farm bill will be critically important to farmers.
The political and policy dynamics facing Congress this year are
much different than the process to write the last farm bill.
A strong safety net and risk management system is needed
now more than ever. Each year farmers face unpredictable risks
when they plant crops in the ground and they rely on an
effective risk management system and safety net to offset the
inevitable weather disaster or price drop. Crop insurance and
Title 1 programs have proven to be effective and good policy in
general.
With that I will happily answer any questions.
[The prepared statement of Mr. Schemm can be found on page
194 in the appendix.]
Chairman Roberts. David, right on time.
Mr. McMichen, please, sir.
STATEMENT OF NICK McMICHEN, OWNER/OPERATOR, McMICHEN FARMS,
CENTRE, ALABAMA
Mr. McMichen. Good morning, Chairman Roberts, Ranking
Member Stabenow, and members of the Committee. My family and I
operate a fifth-generation farm in Centre, Alabama, and we are
partners in a cotton gin. Our crop mix consists of cotton,
corn, peanuts, soybeans, and wheat.
The passage of the current farm bill coincided with
significant changes in the global cotton market. Shortly after
the bill was approved, cotton prices began a significant
decline, the result of a build-up of global cotton stocks,
decreased demand, and reduced exports. I highlight these issues
because of the strong influence of international markets and
man-made fiber on the financial conditions of U.S. cotton
farmers. In 2015, this led to the lowest U.S. cotton acreage in
more than 30 years. Since 2014, market returns from cotton and
cotton seed have fallen short of the total cost of production,
and based on current market conditions, financial pressures
will continue through 2018.
Cotton is the only program crop that does not have long-
term price protection in the farm bill. This situation is a
result of policy changes forced by the WTO trade challenge by
Brazil. As a result, Congress provided the STAX insurance
policy for cotton. Unfortunately, given the changes in market
conditions, STAX has proven inadequate.
Our industry will continue to pursue the best policy to
provide growers with adequate protection that is consistent
with the needs of our industry, while taking into account the
full value of the cotton crop from both fiber and seed.
We are continuing our policy development work with the goal
of providing agricultural committees with policy
recommendations by early fall. Our industry can attest an
effective safety net for producers must consist of two key
components: a commodity policy that provides price or revenue
protection to address prolonged periods of low prices, and a
suite of crop insurance products producers can tailor to their
risk management needs to address yield and price volatility
within the growing season.
Crop insurance remains a critical component of the overall
safety net for cotton. Nearly all cotton acres are covered by
some level of individual crop insurance. Our industry relies
heavily on a properly functioning marketing loan program that
helps ensure orderly marketing and the flow of cotton to the
market. Maintaining the marketing loan policy, with some minor
adjustments, is a priority.
We are strongly opposed to any further tightening of
payment limits and eligibility requirements. These policies are
already too restrictive, given the scale of farming necessary
to be competitive. The current definition of ``family member''
that is used for actively engaged should be broadened to ensure
extended family members are not forced out of the farm simply
because they do not fit the overly restrictive definition.
The recent years of stability in the textile industry can
be attributed to the benefits of the Economic Adjustment
Assistance program. The program supports a manufacturing base
that creates jobs in the U.S. We strongly support the
continuation of this program.
U.S. cotton is also heavily reliant on exports so it is
essential to have well-funded programs to help leverage private
sector resources to expand export markets and grow demand. A
central part of this effort is the USDA MAP and FMD programs.
In summary, for the past three years cotton producers have
struggled with low prices, high production costs, and the
resulting financial hardships. While cotton futures increased
for a brief period earlier this year, markets have now
retreated, meaning most cotton producers continue to face
economic pressures and declining credit conditions. It is
imperative that the next farm bill include cotton in the Title
1 programs to access the same complement of risk management
tools as other crops.
The National Cotton Council looks forward to working with
the Committee and other agricultural organizations to pass a
new farm bill that effectively addresses the needs of all
commodities and all producers.
Thank you, and I would be pleased to answer any questions
you might have.
[The prepared statement of Mr. McMichen can be found on
page 141 in the appendix.]
Chairman Roberts. Thank you, Nick.
Mrs. James, please.
STATEMENT JENNIFER JAMES, OWNER/OPERATOR, H&J LAND COMPANY,
NEWPORT, ARKANSAS
Mrs. James. Chairman Roberts, Ranking Member Stabenow, and
members of the Committee, thank you for holding this important
hearing.
My name is Jennifer James. I am a fourth-generation rice
farmer from Arkansas, and I am honored to offer this testimony
on behalf of the USA Rice Federation.
Rice is grown on three to four million acres across eight
states. Arkansas counts for half of the annual production. The
industry provides jobs and income for more than 128,000 people,
so while a small commodity by acreage, we pack a punch,
contributing $34 billion annually to the economy.
Rice farms are economic drivers, generating, on average, $1
million per farm each year in our local economies.
Unfortunately, rice growers have been forced to operate at or
below their cost of production for the last three years. For
young farmers, there has been little opportunity to build
equity. The USDA's most recent price forecast for 2017 shows a
36 percent decline since the 2014 Farm Bill passed.
U.S. rice farmers rely heavily on exports, with 50 percent
of our production being sold to over 120 countries around the
world. We account for 8 percent of global rice trade. This
creates a volatile market which is compounded by the fact that
the U.S. is the highest-cost producer globally. Many of our
competitors are from developing countries with governments that
heavily subsidize rice production, in many cases at levels well
beyond their WTO commitments.
The 2018 crop year is forecast to have some of the highest
rice production costs on record, nearly $1,000 per acre.
Because of specialized infrastructure, field equipment, soil
types, and weather needed for rice, our operating costs exceed
every other crop covered by the commodity title. Due to these
factors, rice farming is a long-term commitment. We intend to
ride out the storm but we could not do so without the safety
net that the Price Loss Coverage program provides.
One of the reasons I am still in business, along with the
majority of rice farming families, is because of the 2014 Farm
Bill's safety net, specifically PLC. Ninety-nine percent of
long-grain rice farms and 94 percent of medium-grain farms
selected PLC, and it has provided critical counter-cyclical
assistance.
While PLC has generally worked well, we believe it needs to
be updated to reflect rising production costs and inflation. In
my written testimony, I have laid out preliminary
recommendations to make Title 1 assistance more effective for
rice farmers, like moving up the timing of
payments. We look forward to working with this Committee on
these important details.
The current actively engaged rules are problematic. The
strict definitions impact farms not solely comprised of lineal
family members and impose an arbitrary cap of three managers
per operation. USDA's final rule also does not protect entities
from maintaining family farm status following the death of a
lineal family member. I urge this Committee to provide an
exemption to protect farm families against unforeseen linkage
breaks in operating structure, and while also protecting
independent farm enterprises.
USA Rice also supports the repeal of AGI tests. The farm
bill should not punish growers for farming larger tracts or
being profitable by disqualifying their operations from farm
safety net programs.
Finally, a $125,000 payment limit seemed like a far-fetched
problem when prices were high in 2013-2014. Unfortunately, many
rice farmers are hitting that pay limit today. It seems
counter-intuitive to maintain policy that provides full
assistance to producers when they experience some losses, but
only partial assistance to those that are hit the hardest. If
farm policy is meant to stand by the farmer when needed most,
this problem should be addressed.
My written statement contains some facts relative to crop
insurance. In short, we need to make it work better for rice. I
am also personally very committed to the conservation programs
that do, in fact, mitigate risk for many rice farmers while
providing benefits for our water, soil, and wildlife.
There is so much more I could say but let me end with this.
Farm families take an incredible risk each year in the face of
often-distorted global markets, unpredictable weather, disease,
and any other number of factors. We do this because we love it,
and because a hungry world needs our product. But there are
times when we need your help.
I am here to ask that this Committee not only maintain our
commodity title programs but also strengthen them, using our
recommendation. USA Rice stands ready to work with you in your
efforts to reauthorize this important legislation, and I look
forward to your questions.
[The prepared statement of Mrs. James can be found on page
110 in the appendix.]
Chairman Roberts. Thank you, Mrs. James. We have 17
witnesses to provide testimony. I want to thank this panel very
much. All of you mentioned crop insurance. I have a particular
and keen interest in that program. We have all heard about the
hail, the droughts, the floods, other risks that you have to
face.
Are there particular risks--and this is for the entire
panel--are there particular risks that are not currently
addressed under this program, and if you could, what
improvements should we consider in the crop insurance title in
the farm bill? We will start with Mr. Rohwer.
Mr. Rohwer. For corn, I would say that the crop insurance
program is situated well. The largest concern is that we not
fix something that is not broken.
Chairman Roberts. Thank you with that, Mr. Rohwer. Mr.
Scott.
Mr. Scott. For soybeans, also, the program fits fairly well
on the crop insurance side. There are some specific areas that
the program does not work as well, and so producers oftentimes
will--sometimes choose not to participate in the program, based
on it just does not fit their situation, and some of those
things can be discussed later but they are kind of particular
to certain regions of the country that the crop insurance is
not quite as equitable as it could be in those areas.
Chairman Roberts. In those areas, do those producers have
any trouble getting a loan from their lender, since they do not
have crop insurance?
Mr. Scott. Well, I would say that some of the acres are
insured and some are not. The farmer that I am particularly
aware of----
Chairman Roberts. So there is one.
Mr. Scott. Well, he is on our board and so we visit quite a
little, and he just said that for a certain part of his acres
the crop insurance does not work. It has to do with flood plain
and other things that I do not deal with in South Dakota, and
so I am not as familiar.
Chairman Roberts. So it is a regulatory problem.
Mr. Scott. Yes.
Chairman Roberts. Okay.
Mr. Scott. I would get back to you on some of the specifics
of that later, if you want more information.
Chairman Roberts. Okay. Thank you. David?
Mr. Schemm. Thank you, Mr. Chairman. As you have mentioned,
and I have heard repeatedly, crop insurance is a number one
priority for our producers, in order for them to be able to
farm the next year. It has functioned well. The one area that
we are discovering where we believe there could be room for
improvement is in regards to quality, in particular when we get
into our northern states when they have a quality issue called
falling numbers affect them on their crop insurance side of it,
where producers are actually losing value to their crop from a
quality standpoint, but RMA is actually utilizing that against
their yield component.
So there are tweaks that need to be made in that area, when
it comes to the quality side of it, but overall the program is
functioning well, and throughout the country I hear from our
producers that it is vitally important that we protect it and
maintain it where it is at.
Chairman Roberts. Thank you, David. Nick?
Mr. McMichen. Thank you, Chairman Roberts. Crop insurance
in the cotton industry is a vital tool in our toolbox, and
although everyone chooses to use crop insurance in some form or
another it is much more of a regional product. From California
to Virginia, the needs of cotton producers are much different
than they are, say, in the high plains of Texas than they are
to my friends in the Carolinas and Virginia that have suffered
from quality losses.
Although we need crop insurance, it identifies a much
broader need of needing cotton back in Title 1. As that being
in the toolbox crop insurance is for year-to-year losses in
yield and revenue, and that would work and coincide with cotton
being back in Title 1, I think would best improve our needs.
Chairman Roberts. Mrs. James?
Mrs. James. Thank you, Chairman Roberts. Thank you. For
rice, as I mentioned, crop insurance does not work quite as
well as the other crops. Because of our controlled environment,
our yields are normally fairly stable, although we can have
disasters from weather and disease at times. So we need to
protect against revenue. The Chicago Board of Trade, for rough
rice futures, is very thinly traded, and actually, in 2015,
there were not even enough trades to even set the expected
price in the spring, so we did not have a revenue policy that
year.
It is actually not as affordable for rice, and so we need
to work on trying to make coverage more affordable for rice as
well.
Chairman Roberts. Real quickly, everybody has mentioned
regulatory reform in one sense or another, and I can remember
someone from Sharon Springs telling me--it was not you, David,
but it was somebody a little senior to you--who talked to me
some time ago, said, ``Pat, I have just about given up. I feel
ruled, not governed,'' and, unfortunately, that has been a
feeling in farm country for some time.
If you had any regulation that has been bothering you,
which one would you recommend that we take on? Let us go down
the panel again. Mr. Rohwer?
Mr. Rohwer. Specific regulation? I would guess that the----
Chairman Roberts. I know you want to use your shotgun, but
use a rifle right now.
Mr. Rohwer. Yes, sir. I would guess that it would have to
do with the increased data that has to be done in the risk
protection, or crop protection registration process. That extra
that is being required to get these in is problematic because
we need new crop protection approved by EPA.
Chairman Roberts. Mr. Scott?
Mr. Scott. Well, in South Dakota and North Dakota, we live
in kind of the prairie pothole region, which is a code word for
wetlands, basically, and we have incredible wetland
determination problems in our area because of the backlog that
has been created there. Farmers would like to drain and farm
areas that they have that may be wet in the spring and dry out
in mid summer, and become not a wetland anymore. It is just a
spot in the field that has weeds. We would like to be able to
drain those things.
Our NRCS regulations are pretty interesting and not very
compliant with other states. We have issues where our
regulations seem to differ, and they it would be nice if they
were all--you knew what you were getting into when you wanted a
wetlands determination. But in South Dakota we have an issue
there that we are not always sure that those things get done
the way they should be done.
Chairman Roberts. Okay. Move quickly, people. Mr. Schemm,
please. David.
Mr. Schemm. Thank you, Mr. Chairman. Well, you have been to
Sharon Springs and you know that we do not have a lot of
navigable waters out our way, and so that is obviously a big
concern that I have heard many times from our farmers out
there. But it also, as Mr. Rohwer mentioned as well, is
pesticide regulations, access to effective chemicals and crop
protection products that have them very concerned as well.
Chairman Roberts. So you are talking about WOTUS. I think
the President has something to say about that.
Mr. McMichen?
Mr. McMichen. Thank you, Chairman Roberts. The Waters of
the U.S. rule is a major concern to cotton farmers as well as
Endangered Species Act, and having to consult with U.S. Fish
and Wildlife as far as bringing products to the producer. The
task that is coming forth, the consultation is far too
cumbersome and takes too long to get products back to the
farmers. So we would like to see that streamlined and think
that process could be improved much upon, as well as repealing
the Waters of the U.S. rule.
Chairman Roberts. Thank you, sir. Mrs. James.
Mrs. James. Conservation programs are extremely important
to the rice industry and the registration for the SAMs and DUNS
number to be eligible for those programs is extremely complex
and cumbersome, so exempting us from those registrations would
be quite helpful.
Chairman Roberts. Thank you for that. Senator Gillibrand.
Senator Gillibrand. Thank you, Mr. Chairman. Would this be
the appropriate time to introduce my witness for the third
panel, or should I submit it for the record?
Chairman Roberts. Well, you could hopefully come back to
introduce that person or I could introduce that person on your
behalf, or you could submit it for the record now.
Senator Gillibrand. That would be fine. Then I would submit
my introduction for Lindsey Shute, who will be on the third
panel.
Chairman Roberts. Without objection.
Senator Gillibrand. Thank you.
[The following information can be found on page 72 in the
appendix.]
Senator Gillibrand. Thank you. For this panel I do have
some questions. On crop insurance, for Mr. Rohwer, on the end,
in 2015, the corn growers in 51 of the 55 New York counties for
corn that received an ARC payment. Given the extraordinary
drought in western New York in 2016, and projected prices it is
likely that many farmers will again receive payments, even as
the average reference price slips. However, I suspect that a
few counties will be left out because of how yields are
calculated.
I know that you have concerns about the data USDA has used
in some counties to calculate yields. Can you expand on how the
quality of this data could be improved and made more
consistent?
Mr. Rohwer. The corn growers feel that we could move to RMA
data for better coverage throughout the country as a whole, and
we are very supportive of Senator Hoeven's amendment to the
Senate Ag Appropriations bill that would require, on a pilot
basis, that state FSA offices and committees be able to
determine ARC payments in counties that do not have a NASS
published yield. But it is most important that whatever system
is used within a county be the system that is used throughout
the entire period of the program, we are not switching back
between one year NASS, one year RMA. That is apples to orange.
Senator Gillibrand. Right. Has the reluctance of some
growers to participate in NASS surveys affected ARC payments in
Iowa?
Mr. Rohwer. Iowa has pretty good coverage of NASS surveys.
There are areas where it comes close to not making the
statistical minimum number of responses, but for the most part
Iowa is pretty well covered with the NASS survey.
Senator Gillibrand. Thank you. For other witnesses, several
of you have cautioned the Committee against changing how USDA
determines whether an individual is actively engaged in
agriculture and therefore eligible for payments. The current
definition seems fairly expansive.
Did any of your farming operations have a major change in
structure or the number of actively engaged individuals after
the passage of the 2014 Farm Bill, or in 2016, with the change
in who is eligible to be a farm manager? Anybody who has an
answer. Mrs. James?
Mrs. James. I did not have that instance actually occur but
a concern of mine in my operation--I farm with my father and my
husband--and my son, he is only 16, but he would like to--he
dreams of coming back to the farm one day. So for the actively
engaged rule, if I, myself, were to pass away, the direct
lineage from grandfather to grandson has been broken and that
could change the payment limits in the actively engaged rule
for our family farm.
Senator Gillibrand. So do you think that needs a
legislative fix?
Mrs. James. I think it definitely needs to be broadened.
Senator Gillibrand. Yes. Without a doubt.
Mr. McMichen. Senator Gillibrand, I would echo Mrs. James'
statements. I have a daughter and a future son-in-law that are
involved in the farm and I have a son that plans to come back
to the farm also, and in the future, should one of those decide
to step away and they had children in that operation, a first
cousin would be ineligible to do that. So he would not be of
lineal descent and that is something that needs to be addressed
because they are family, as first cousins, so that needs to be
addressed, I think, legislatively, because, frankly, that is
incorrect and we think that should be looked at.
Senator Gillibrand. Anyone else?
[No audible response.]
Senator Gillibrand. Thank you, Mr. Chairman.
Chairman Roberts. I thank the Senator. Senator Ernst.
Senator Ernst. It is Senator Grassley.
Chairman Roberts. Oh, it is Senator Grassley. I am sorry.
Senator Grassley. Mr. Rohwer, I have one question for you
but before that I think I ought to thank the Chairman for
having this hearing, particularly on these most important parts
of the farm bill, the safety net for farmers, because I hope it
means that we are speeding along to get a bill brought up so we
get one passed before we get into the new year.
In your testimony, you discussed the ARC-County program and
mentioned that the corn growers is reviewing a few ways to
improve the program without undermining its market orientation.
I would like to have you expand on your point that it is
important to have market-oriented farm programs, and I would
guess that your statement comes a little bit because it is
connected to our trade policies, and to make sure that we are
not doing something that violates our ability to trade.
Mr. Rohwer. Thank you, Senator. We, as NCGA, have had our
voting delegate body reaffirm that the preference in government
program be revenue-based, that it is market oriented so that,
whenever possible, the market is what is rewarding farmers and
not the government. We feel that this is important to have it
decoupled, as it has been, and that we are able to avoid
complications that could arise from a program that might be
crossways of WTO rules. This is where we feel that the current
program is fitting well.
Senator Grassley. Yes. Well, I happen to agree with you
because I think markets provide clarity for when to plant more
or less of a particular crop, before more market-oriented--
being more market oriented is also critical from this trade
perspective that I referred to. We do not want another WTO
cotton case that ends up with the taxpayers giving Brazil
nearly $1 billion so that we can keep subsidies flowing to our
cotton farmers instead of making changes.
Mr. Chairman, I am going to take the rest of my time, and I
do not think I will go into the 2 minutes and 35 seconds. You
went over your time but I would like to finish a statement on
another issue.
I would like to address some comments that I have seen
about payment limits and eligibility for farm programs. First,
to groups that are complaining about the definition of family
members related to program eligibility, I agree. That was wrong
to include, at the last minute of the farm bill conference. My
original payment limit language was far superior and much
simpler. In fact, this family member gobbledygook was include
solely as an end around my payment limit amendment, which was
passed with bipartisan support on the floors of both bodies of
the Congress in exactly the same form, and should not have been
touched by conferees. The organizations who are now complaining
were part of the effort to thwart my common-sense bipartisan
payment limit reforms.
For those who do not remember my payment limit amendment
from the last farm bill, it was actually really quite simple.
Everyone who really farms maintains eligibility, and an
operation had the potential to name one additional manager.
Admittedly, a few people who do not farm yet were listed as
managers, for the sole purpose of getting subsidies, would have
been kicked off the farm program, like that was a--but that was
a very intent of my amendment, which I am sure everybody
understands.
Perhaps the most important thing that I can do is explain
why this issue is so important. Giving non-farmers subsidies is
completely indefensible, especially when we have a $20 trillion
debt. If bigger farmers are as efficient as they claim, they
should not need unlimited subsidies to make their business
model work. All they are doing is shifting risks to the
taxpayers.
The true impact of unlimited subsidies to the largest
farmers is that it keeps young farmers out. Mr. Schemm stated,
in his testimony, that the average age of U.S. farmers is 58.
That is not surprising considering the only ways to really get
into farming is to be born or marry into a farming operation.
Our rural communities have consolidated enough, when the
largest farmers continue to take land that reduces the customer
base in rural towns for restaurants and stores and small
businesses, generally, and decreases the number of children in
schools.
So, Mr. Chairman, for the life of me I do not understand
how $125,000 a year, which is usually $250,000 if the farmer is
married, and double those limits again, if they grow peanuts,
is not enough to get farmers through a year. I do not envy the
budget challenges that Chairman Roberts faces with the farm
bill one bit, but why do we leave loopholes in place that open
us up for ridicule? What is the harm of supporting a policy
that helps young and beginning farmers give us credibility
against our critics and save our money for the taxpayers?
So, Mr. Chairman, I am just trying to help you get by a
very tight budget situation as we try to help those farmers
that really are on the land, doing the work, and managing from
the standpoint of participating.
I yield the floor.
Chairman Roberts. Well, thank you, Senator, for that very
strong message. You are only over time by 1 minute and 45
seconds.
[Laughter.]
Senator Grassley. I reserve the rest of the 1 minute and 15
seconds.
Chairman Roberts. I see. Well, I was about at that time so
I think it is a fair shot. Message received.
Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman. Mrs. James, last
week I was encouraged that we might finally be able to export
rice to China with the completion of the phytosanitary
agreement. As the world's largest consumer of rice, that
represents a tremendous market and certainly we have to open
new markets for all of our commodities as we go forward. That
truly is key. We are working hard to try and open the market
with Cuba. They import 80 percent of their food and so that
would, again, be a tremendous market for all of us.
We operate on an international market. However, many
actions by foreign governments distort world markets, as we
have talked about, and again, this is a clear example of why we
need to have a safety net for our farmers at home.
Could you describe, in more detail, how Title 1 programs
have helped your farm as well as the local economy and
surrounding rural communities during this challenging economic
time for farming? Could you also describe the importance in
Title 1 programs of managing the risk from multi-year sustained
low prices?
Mrs. James. Yes. Thank you, Senator, and I look forward to
hopefully exporting some rice to China as well.
The Title 1 programs for rice have been lifesavers,
actually, business savers. They have kept us in business,
specifically the PLC program. Our main risk in rice production
is price volatility, and so this has helped us tremendously. We
are entirely irrigated and our yields do not fluctuate as much,
but just like you said, we are at the mercy of the marketplace.
I do not have many of the same risks as other row crops, or
especially dry land crops, so irrigation is my insurance policy
most years. PLC provides protection in multi-year price
declines and it is not a complex program, and I do have a floor
which is steady from year to year.
Agriculture is very important to my community as well as
other ag communities across this country. It is the driver of
all the economics, and we can certainly see a difference in my
community when agriculture is down and when it is up. So it
hurts our schools, it hurts our hospitals, it hurts many other
areas in our local economies when we have bad ag years.
Senator Boozman. Very good. I hear a lot of concerns from
producers about how further ratcheting down payment limitations
could impact family farmers. Can you briefly describe what
would happen to your family's farm if a payment limit of
$50,000 was adopted in this farm bill?
Mrs. James. If a payment limit of $50,000 were to be
adopted it would most likely put my family farm out of
business, and many others like mine. Just to give you a little
example, $50,000 in the current price situation would cover
around 250 acres of rice. With the cost of the tillage
equipment, the planting equipment, a combine, a grain cart,
semi trucks to haul that rice to market, it would not be
economically feasible to plant 250 acres of rice. So that
payment limit just is not economically feasible.
Senator Boozman. Very good. I want to ask the panel, and
quickly because we are running out of time and I do not want
the Chairman getting on to me, about farm credit. Can you
start, and perhaps talk a little bit about how the Title 1
programs and crop insurance, when you go to your banker to
secure a loan, how important they are. Then, also, if we are
having trouble with credit otherwise.
Mr. Rohwer. The crop insurance program, specifically, is
very important for securing loans, especially with young
farmers as well as established farmers. You need to have access
to credit, and this--by having a good, solid risk protection
program like federal crop insurance, it ensures the banker that
he will be able to have the loan serviced, so it is crucial.
Senator Boozman. In your experience, do the bankers
understand the farm programs? Do they understand the safety
nets that are out there? Is credit more difficult to obtain?
Mr. Rohwer. I use a small-town family banker and he is also
a farmer, so he understands.
Mr. Scott. If our bankers do not understand it, then you
better make sure they do, because if they have questions then
it is not a very good lending situation, and the crop insurance
does give them some security. We have such huge input costs in
farming right now that if you do not have some backing on that,
then the credit is pretty difficult to obtain.
Senator Boozman. Okay. Anybody else?
Mr. Schemm. Thank you, Senator. Bankers understand crop
insurance and it is a vital component that they are utilizing
there. I think the challenge on the ARC side is an
inconsistency in payments across counties, and so sometimes it
becomes difficult for them to factor that in and then the
delayed payments make it difficult, especially, again, for
those beginning young farmers trying to establish credit.
Senator Boozman. Very good.
Mr. McMichen. Thank you, Senator Boozman. Crop insurance is
a critical tool for us and with our bankers, in the cotton
industry, we are under a very serious credit crunch, and with
cotton not being a Title 1 commodity, bankers understand that
but are reluctant to give loans out because there is no safety
net. Crop insurance is just a tool for a temporary thing. So
that further exemplifies the need for cotton to be in Title 1,
because credit for cotton farmers is getting to be harder and
harder to get, and for a young person, with the cost of a new
John Deere harvester at $750,000, and he must farm 2,000 acres
of cotton to justify one, it is virtually impossible to get
that credit. So we need cotton back in Title 1 and we need that
to help our credit also.
Senator Boozman. Okay. Mrs. James?
Mrs. James. I would say that the crop insurance for rice
essentially is--it does not work quite as well, so bankers do
understand about the PLC program and Title 1, how important it
is for rice lending.
Senator Boozman. Good. Thank you, Mr. Chairman.
Chairman Roberts. Senator Ernst.
Senator Ernst. Thank you, Mr. Chair, and this has been a
great conversation today, and I want to go back. One of my
questions did deal with ARC and the payment discrepancies
between counties. I think a number of you have already touched
upon that. I am glad to hear that. That is something that we
can work on in the next farm bill, so I appreciate that.
But through the discussion we have also touched upon some
other things that are really important, all building off of
crop insurance. We have talked about loans. We have talked
about young farmers and how they can engage in farming
activities. We have also talked about trade.
Bruce, I am going to go back to you and let us talk a
little bit about where we are as a country in leading the
world. In your testimony you touched on the incredible yields
that we have been able to experience through improvements made
by corn farmers here in the United States, because those
farmers are embracing technology and conservation practices.
Our production capabilities really are the envy of the world. I
hear that from a number of different organizations in other
countries. We enjoy low food prices as a result of that, a
definite benefit for us.
But what, in your opinion, are the things that the Federal
Government should be doing or should not be doing to ensure
that we are maintaining our leadership role in agriculture?
Mr. Rohwer. We need to keep our agriculture community
strong and to do that we are going to need to figure out how to
increase demand for our products. We have a three-legged stool
of demand for corn, between livestock, exports, and the ethanol
industry, and we need to make sure that demand is ever-
increasing. The exports are the one area that has the most room
to increase, and so it is absolutely crucial that we have a
good trade climate worldwide so that we can find a home for
this great bounty that we are able to produce.
Senator Ernst. Thank you. I agree wholeheartedly, and we
have to work on that export situation, and I am glad that we
have Secretary Perdue pushing that as an initiative as well.
I would like to touch a little bit upon our young farmers
as well. Several of you have mentioned that you are engaged in
farming with other family members, you are getting your
children involved in that discussion as well. So from the
entire panel, just very briefly, I would like to know, what
were the biggest challenges that you faced when you entered
into farming, and what challenges do you think our young
farmers are facing now, as you are trying to bring them into
the farming operation as well? We hear this from constituents
all across the state of Iowa about how challenging it is, but
maybe the differences between when you engaged in farming and
maybe what you might see your children facing. Mr. Rohwer, if
we could start with you, Bruce.
Mr. Rohwer. I started in the late '70s, so I was ahead of
the farm crisis of the '80s, so those were the challenges I
faced as I started, and I hope that my children will not face
the similar economic downturn that we faced back at that time.
I think that is the quickest way to put it.
Senator Ernst. Great. Thank you.
Mr. Scott. I started in the '80s, and did not have anything
and did not know any better, and that was a good place to
start. Our kids nowadays, the hard part of that is we currently
have had pretty good farm economy in the past few years and so
our equipment and things are beautiful and wonderful, and we
have got our infrastructure in pretty good shape. I am afraid
that my son will not really know what hardship is, and this
downturn has not all been bad. We could do pretty much what we
wanted to in the past, for infrastructure and things, and not
being able to do that is not a bad thing for the young people.
So having them to go through that, I think, will improve
their ability to perform in the future.
Senator Ernst. Right. Very good. Thank you.
Mr. Schemm. Thank you, Senator. I returned to the farm in
the early '90s, and after having spent three months trying to
purchase a small piece of land back then, trying to utilize
USDA and beginning farmer loans, my banker threw his hands up
in the air and said, ``I will just loan you the money for it
because I know you and I know your family.'' So I hope, as my
son here plans on returning to the farm after he graduates out
of college, that he can have easier access to the programs,
without having situations like that occur to him in the future.
Senator Ernst. I hear that frequently. Thank you.
Mr. McMichen. Thank you, Senator Ernst. When I started
farming in the early 1990s, we are a fifth-generation farm
growing cotton, at the time we had a vibrant cotton industry as
well as a domestic textile industry. In return, that has
reversed, and now we export 75 percent of our raw cotton to
foreign countries.
As we look forward to moving our farm forward with the
sixth generation, and possibly forward after that, without an
effective safety net for cotton our future is uncertain. Cotton
is what has paid for our farms. It is what has done everything
for us. We are the best, we the most efficient farmers in the
world at what we do, and U.S. cotton is the envy of the rest of
the world. We look forward to working with Congress and
everyone else to make sure that we have excellent trade for our
cotton and that we can expand markets and that we have a place
for our cotton to go, and hope that our farm can continue. It
started in 1842, and we could continue well on into the next
century.
Senator Ernst. Yes. Congratulations. Thank you.
Mrs. James. I came back to the farm in the mid '90s, and
actually walked our rice fields and did a lot of the agronomy
at that time. So I think, moving forward to the financial area
was much more difficult to conquer. So I think as my son enters
into the operation, new farmers--the agronomy will come easy.
We are great at producing food in this country, and actually,
that may actually be the easy part. I think understanding the
financial, the governmental, the crop insurance, the regulatory
areas of farming in the future are going to be very important
to new farmers.
Senator Ernst. Yes. Great. Thank you very much. Thank you,
Mr. Chair.
Chairman Roberts. Senator Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman. All incredibly
important and optimistic. I always tell people the single most
important job for a North Dakota Senator is a farm bill that
works as an effective safety net, but also helping to build
other kinds of tools, like trade, like increased economic
opportunity, like value-added, what can we do to actually
produce fiber from the cotton that you grow. We look at all
this, and the other side of the coin, beyond a safety net, is a
good market.
I just would like your reaction to some of the concerns, or
no concerns that you have, in terms of U.S. trade policy and
how we can move forward to advanced increased market, and maybe
if you want to add a discussion about value-added agriculture
and where the opportunities are in value-added agriculture that
we are missing today.
So we will start with the corn growers.
Mr. Rohwer. Thank you, Senator. I think that as we see the
continued improvements in our ability to grow crops, and have
such prolific plants, that do so well under weather adversity
the need for free trade agreements and the ability to sell,
whether it is the corn, the livestock as meat, or the ethanol
or DDGs as value-added, all of these things are why we have to
find more and more markets, because we have the ability to
produce so much more.
Mr. Scott. Thank you, Senator. For soybean crop we export
60 percent of what we grow from the United States, and in South
Dakota and North Dakota it is probably a much higher percent
than that. As far as value-added, we would love to put it on a
hoof and expert it that way. So continuing expanding our
livestock industries in our states is critical.
Also, the FMD and MAP funding, we have had, in the U.S., a
pretty stagnant funding of that. It has been the same for many
years. It is a very effective program, a high rate of return,
and soybeans would love to have that expanded and utilized.
Senator Heitkamp. Thank you.
Mr. Schemm. Thank you, Senator. Yes, trade is vitally
important to wheat. Fifty percent of our crop is exported every
year nationwide. I think there are two components here. One is
enforcement of trade agreements we have now. We have some
countries out there now subsidizing their wheat farmers to the
point of almost $10 per bushel. So we need to enforce those
trade agreements that we do have.
The other component of that, though, is we do need those
trade agreements out there, and so that is vitally important.
With those trade agreements coming out there, as Mr. Scott
mentioned, we do need MAP and FMD funding increased. The return
is around 35-to-1 on our dollars, and according to a recent
Informa Economics study it has increased net farm income by
almost 15 percent in being able to have that MAP and FMD
funding out there to help establish those trade agreements and
those relationships with those other countries.
Senator Heitkamp. Thank you. Mr. McMichen?
Mr. McMichen. Thank you, Senator. I would echo the
statements of Mr. Schemm and Mr. Scott. The MAP and FMD funding
is critical, and as cotton, as I stated earlier, about 75
percent of our cotton, raw cotton, is exported and another 15
to 20 percent is exported that is cotton textile products. The
main export markets are China, Vietnam, Mexico, Turkey, and
Indonesia, and we also would like to explore other options, as
well as opening up the U.S. and China trade dialog to get
additional U.S. cotton exported over there.
We are also focused on working with Congress and the
administration to ensure that NAFTA renegotiation does not harm
the existing market for U.S. cotton and cotton textile
products. So we look forward to working with all of you on
that.
Senator Heitkamp. Thank you.
Mrs. James. First of all, I would like to thank you for
your work on Senate Bill 275 with Senator Boozman in helping to
open up some rice in Cuba, so we appreciate your work on that.
Fifty percent of the rice crop is also exported, although we
are only 8 percent of global trade. So we are privy to world
market prices, and like some of the other panelists said, high
subsidies in other countries. We have to compete against them.
Also the FMD and MAP funds are very important to the rice
industry as well.
Senator Heitkamp. I think when we look at this, we look at
component pieces of the farm bill and the safety net, but the
best safety net is a free enterprise system where we can sell
our products, and no one is more sophisticated in any industry
on trade than agriculture, and we really appreciate all your
support. Let us continue the dialog and let us make sure
farmers are not left behind as we renegotiate and as we look at
trade agreements.
Chairman Roberts. Thank you, Senator. Senator Hoeven.
Senator Hoeven. Thank you, Mr. Chairman. Thanks to all of
our witnesses for being here.
Starting with you, Mr. Rohwer, talk to me about the
importance of the FSA loan program, but also the guarantee
limit and the direct loan limit and the funding level. What do
we need to do?
Mr. Rohwer. The FSA program is one of the loan programs,
one of the best ways for farmers to facilitate their working
capital. It is--the competitive interest rates there for young
farmers is very, very helpful for them to be getting
established, and these programs need to be continued and their
funding fully supported, and be increased, if at all possible.
Senator Hoeven. Right. So I have got legislation, on a
bipartisan basis, that would increase the loan limit to about
$2.5 million--excuse me--the guarantee, the FSA guarantee to
about $2.5 million, and the direct loan to about $600,000. So,
specifically, I want comment on that because I am trying to
pass that legislation--unless you are not particularly
enthusiastic, then if you want to pass that is fine.
Mr. Rohwer. We need to make sure that the loan limits are
high enough to be able to cover these infrastructure costs,
because the costs of grain bins and related facilities like
that are expensive, and it takes money.
Senator Hoeven. Absolutely. I mean, look at the price of a
tractor or a combine or any kind of tillage equipment, the
price of land, your cost of inputs, right? I mean, is it not
just common sense that we have got to increase both the
guarantee limit and the loan limit, and actually the underlying
funding amount, particularly as our farmers go through this
challenging time with drought and with low prices.
Mr. Rohwer. Farming has always been capital intensive, and
as prices inflate on everything it only becomes more so.
Senator Hoeven. Okay. Let us go right down the line, and I
would love to have you express your enthusiasm, but if someone
has a concern I want to hear that too.
Mr. Scott. Increasing the amounts, of course, is just a
reflection of what we are dealing with today, in today's
markets. It is not impossible, or even improbable, that $1
million would be borrowed just for operating capital before you
harvest the crop, and so a $600,000 operating note is very
little for most family farms. Two-and-a-half million dollars,
if you are going towards buying real estate, yeah, that is
right in there. You can buy some real estate, and depending on
where you live, of course, but in certain areas that does not
last very long either.
Senator Hoeven. Right.
Mr. Schemm. So I am enthusiastic.
Senator Hoeven. Good.
Mr. Schemm. Yes, Senator. I would echo previous comments
that with the additional costs, input costs that we deal with
now, it is vitally important. It is unique, kind of, in my
area, in the aspect that I grow both winter wheat as well as
summer crops too, and so by utilizing those FSA loans what it
allows me to do is not be forced into selling that wheat crop
during the summer at a historically low period of time during
harvest time, but to delay that to market that grain at a
better time, so that I can help to pay input costs in my summer
crops there. So because of the timing of different harvests in
my area, the loan programs are vitally important.
Senator Hoeven. That is--I mean, we are seeing that right
now, for a farmer who was able to carry over some grain, and
not sell it when prices were real low over the last year. But
now with drought and so forth, you are seeing some of these
prices improve, right, and a lot of them are not going to have
a crop in our area this year. They would have that crop now to
sell and get some money and maybe a little bit better price.
So, I mean, you make a very important point there.
Mr. Schemm. It has been very key in our area, particularly
for the hard red winter wheat in quality, because quality is in
demand this year. However, elevators are not willing to pay for
that quality at harvest time. So it allows those producers to
store that crop, to capture anywhere from a 20 cent to almost a
dollar premium per bushel, so they are critically important to
our producers.
Senator Hoeven. Exactly.
Mr. McMichen. Thank you, Senator. The cotton industry is
heavily dependent on the loan also, because we are an export
market most of the way there, so the marketing loan allows us
to have our cotton and we can search for those markets to get
the full benefit of our crops. As far as the loans that we do
for beginning farmers, they are very important. I started out
with a guaranteed loan from Farmers Home Administration, and I
am a product of that, and it is very important.
But the expanded limits, I think, are very important.
Cotton is a unique crop because it requires specialized harvest
equipment, and a new John Deere harvester is $750,000. So as a
farmer begins, he has to have 2,000 acres of crop to justify
that cotton picker, and at $750,000, you can tie up a lot of
capital in a hurry. So the loans are very, very important to
the cotton industry, and we appreciate that, and we push for
expanded limits on that, and for a modified loan program for
the cotton industry.
Senator Hoeven. What is an average-sized farm for farmers
that raise cotton? I am not as familiar with cotton since it is
so incredible. What would be an average-sized farm down there?
Mr. McMichen. In the last five years, cotton farms have
consolidated a good bit, and a lot of it is due to the
harvesting equipment. They no longer make basket pickers, which
were less expensive. So now if you justify a new cotton picker,
which rolls round rolls of cotton, they are about $750,000. So
it would be in excess of 1,000, probably more like 1,500 to
2,000, and, in the process, a lot of farms can only justify
growing so much cotton on their farms because of the expense of
harvesting equipment. So if you make the jump from 2,000 acres
to 3,000 to 4,000, you have got that added cost to think in
there. So it is a very expensive cost and it is something that
you only use two months out of the year, so it really ties up a
lot of our capital.
Senator Hoeven. Right. Mrs. James?
Mrs. James. I do not personally use the FSA loans but USA
Rice is certainly behind your legislation and supports it.
Senator Hoeven. Thank you so much. I appreciate again all
of you being here. Thank you, Mr. Chairman.
Chairman Roberts. Senator Klobuchar.
Senator Klobuchar. Thank you. I want to thank Senator
Stabenow for letting me go ahead.
I first wanted to recognize back there, under the lights,
Mr. Rynning, Robert Rynning. He is going to be on the next
panel and I am headed to a judiciary hearing, and in case I
miss him, I wanted to welcome him. He serves as the President
of the U.S. Canola Association, and alongside his brother,
nephew, and his wife, Darlene, he raises, canola, barley,
wheat, and soybeans on his fifth-generation farm in Kennedy,
Minnesota. I want to thank him for being here today.
We are very proud of that crop, as well as so many others
that we have in Minnesota, and that is one of the reasons that
I am concerned about the proposed cuts to the crop insurance
program that are in the current proposed budget from the
administration. They put in place a cap on premium subsidies
and eliminate the harvest price option. The crop insurance
program is working for producers. We can always improve it. But
I believe that it should be strengthened and not made more
difficult.
Could one of you talk about, or a few of you talk about the
impact that these cuts would have on your operation,
specifically in a time of lower crop prices? Anyone?
Mr. Rohwer. Well, thank you, Senator. Every single farmer
who purchases crop insurance would be impacted with these cuts
because most of those types of proposals that you are talking
about are the type of thing that would discourage people from
participating in the crop insurance program, which means that
you would be shrinking the risk pool, and a shrunken risk pool
in insurance is not good for anybody. That would make crop
insurance less effective, which then would likewise make access
to credit more difficult, which would affect large, small
farmers, established, and even young farmers beginning.
Senator Klobuchar. Thank you. Mr. Rohwer, just a follow-up
because I know you also are interested in the renewable fuel
standard and how important this is to our policy. It is very
important in my state. Earlier this summer the EPA released its
proposed volume requirements for 2018 and 2019. What are your
thoughts on the proposed rule?
Mr. Rohwer. I am afraid you caught me off-guard there.
Could you just summarize it?
Senator Klobuchar. Well, the rule actually--there were some
good things about it, but in terms of consistency with past
policy a bunch of us up here fought really hard to get it
stronger after a different version of it a few years ago.
Mr. Rohwer. Oh, okay. Thank you.
Senator Klobuchar. Remember that?
Mr. Rohwer. Yes.
Senator Klobuchar. Now it has come back again but there are
still some concerns on some of the biodiesel issues and other
things with the rule.
Mr. Rohwer. We, as corn growers, do not follow real closely
the biodiesel portion of the renewable fuels.
Senator Klobuchar. Really?
Mr. Rohwer. But we feel that it needs to be a strong and
consistent requirement there, so that there is not a question
in the market, is the level going to be here one year, there
another year. It needs to follow the statute for all portions
there, because that will strengthen the market and the demand
for the grain inputs.
Senator Klobuchar. Good. Mr. Scott, could you look at it
from the perspective of soybean biodiesel producers, that we do
not went the blend target reduced for advanced biofuels?
Mr. Scott. Yes, absolutely, and, of course, about 50
percent of the fuel biodiesel produced is used--soybean oil is
used in that production, so it is critical for our industry.
But we were somewhat disappointed with the levels that were
proposed and came out. We are producing above that level
currently, and have the capability of doing even more. We need
the security of knowing year-to-year what is going to be the
volumes, so that infrastructure can be built. People who are
interested in putting money into that industry can know that it
will be there in the future for them. The dollar-a-gallon
biodiesel tax credit would be also very important to us.
Senator Klobuchar. All right. Thank you. One last question,
Mr. Schemm. If producers did not have access--I am back on the
crop insurance now--to the harvest price option, do you think
it would impact program participation?
Mr. Schemm. I definitely think it would. You had mentioned
earlier the proposed budget as well. In my area, that would hit
a cap of 1,800 acres of wheat in our area there, and our
average farm size in my area is 3,200 acres. So, obviously,
when it starts affecting that it starts then affecting the
whole pool that is there, and then it affects the premium rates
for the other producers that would remain in it.
As far as harvest price option, currently 70 percent of our
producers sign up for the harvest price option, and they pay a
premium for the harvest price option, and what that allows them
is the ability have a replacement value for their crop if it is
lost, and it especially aids us when we talk about marketing
that crop. If we do not have the bushels to fulfill contracts
that we forward contracted, we then have to go out and purchase
bushels to replace that forward contract, and without that HPO
it is much more expensive to do that.
Senator Klobuchar. Appreciate it. Thank you all.
Chairman Roberts. Senator Thune, and Senator Thune, before
you start your comments, I would like to point out, with regard
to the President's budget that has been mentioned, and crop
insurance, that I met with the President about three weeks ago,
along with a telephone conversation, rather short, with Mr.
Mulvaney, who is in charge of the budget, the Office of
Management and Budget. The upshot is we are not going to cut
crop insurance, period. The House budget reflects that. We have
yet to determine a budget here, but that would be the
Chairman's choice, and I am sure the distinguished Ranking
Member as well.
Senator Thune.
Senator Thune. Thank you, Mr. Chairman, and I want to thank
you and Senator Stabenow for holding the hearing today and for
a great panel, and multiple panels today, on a very important
subject, which is the next farm bill. I especially want to
thank Kevin Scott for being here, representing the American
Soybean Association, a multi-generation South Dakota farmer
going back to 1885. I think the family operation has roots and
he always provides great counsel and insight and advice to me
and my staff, and to all of South Dakota when it comes to the
issues that are important to agriculture, and to our country, I
might add. So welcome. It is good to have you here, Kevin.
Let me just ask a question that has to do with the
commodity title of the next farm bill, and the first question
has to do with something that the National Corn Grower said in
their testimony today. I think Mr. Rohwer indicated there
should be clear statutory language requiring financial
assistance to be determined by physical location of a farm.
So the question is--and I agree with that statement
completely and would point out that I have got a bill, a
Commodity Title Improvement Act bill, introduced earlier this
year, that does include specific language that requires
physical location of the farm to be used to calculate payments.
Does everyone here on the panel agree that the commodity title
payment should be calculated using a farm's physical location
instead of according to administrative county?
Mr. Rohwer. Yes, sir, we do.
Senator Thune. Does anybody disagree with that? Okay.
I have also introduced a bill that would create a short-
term, three-to five-year easement program, which I have named
the Soil Health and Income Protection Program, or SHIPP, and
the question is, do you think that in today's short-term--or I
should say in today's price environment that there is a need
for such a short-term easement program with very flexible hay
and grazing provisions that provide a reasonable alternative to
cropping and placing expensive inputs on the poorest land on a
farm?
Mr. Rohwer. Conservation is always very, very important,
and with the weather patterns that are becoming more and more
variable some flexibility probably has its place.
Senator Thune. Mr. Scott.
Mr. Scott. The current CRP, of course, is a 10-year
contract and that, for some people, is daunting. For me I may
not farm for 10 years. I may, but a short-term, short-year span
would probably fit in more situations than a long-term one.
Mr. Schemm. Thank you, Senator. Our board has very much
targeted working lands conservation as a priority with us, to
try to work with those types of programs there, but then also
targeted to areas with longer-term possibilities in those
areas, to try to put sensitive lands, highly erodible lands
into conservation programs. That is where we stand.
Mr. McMichen. Thank you, Senator. Conservation is always
one of the highest priorities and I think the short-term help
that you are talking about would be very helpful to take
sensitive land and less-productive land and allow it for better
use.
Senator Thune. Thanks.
Mrs. James. In relation to the rice industry, I believe
that we are only producing rice on the most highly productive
land for rice, but in the other areas that you speak of it
sounds like very important legislation.
Senator Thune. I also, as part of a recently introduced
bill, I included a provision that would require mandatory base
updates using the planted and considered or prevented planted
acres during the years 2014 to 2017. The bill also eliminates
generic base acres that were created in the 2014 Farm Bill but
leaves STAX in place. According to CBO, the mandatory base
update saves $466 million, and the elimination of generic base
acres saves $2.454 billion over 10 years. That, again,
according to CBO.
Although I believe that calculating any future farm bill
commodity title payments that use base acres in the calculation
should use a mandatory base update, I do not expect the
commodity organizations to support this. But I do want to ask
all of you the question about whether or not you think a change
like that would make sense. I mean, do you believe that
eliminating commodity title payments on land with base acres,
that has not been planted to a commodity crop in the years 2014
to 2017, would be good policy and should be pursued in the next
farm bill?
Mr. Rohwer. Corn growers heard about this proposal of
yours, sir, as our delegates were meeting here in Washington
last week, and having it as a new idea we had not looked at all
ramifications and this type thing, and so it was referred to
our risk management action team to be looked into, to study
just exactly how it would affect corn growers. We will be
working through so as to decide where our position should be.
Senator Thune. Okay. Thanks.
Mr. Scott. Senator, you are also ahead of us on the soybean
side. We have not also looked at the ramifications as closely
as we could. I know you are thinking about things and trying to
improve the program and we appreciate the effort. Keep it up.
Keep bringing new ideas.
Senator Thune. Okay. Well, we will take that for now until
you get to yes.
[Laughter.]
Mr. Schemm. Thank you, Senator. You know, it is something
that initially our board has come out for a voluntary update,
but the concern that we would have is obviously, being very
export sensitive as possible, implications it could have with
our export markets and what kind of litigation could be
possibly brought against us.
Senator Thune. Thank you.
Mr. McMichen. Thank you, Senator. In regard to generic base
acres, which is very sensitive to the cotton industry, they
were established in the current farm bill because cotton was no
longer a covered commodity, due to the Brazil WTO case. Cotton
base acres would have been of no value to producers and land
owners unless cotton base was reallocated to allow for support
on covered commodities on these planted acres. Generic base was
never intended to be a long-term policy and it should be dealt
with in the next farm bill, if not before.
There are various ways to convert generic base back to
cotton, or cottonseed base, and possibly other covered
commodity bases, and the cotton industry is evaluating these
options to help develop industry recommendations. We all agree,
though, that the crop bases should be decoupled in the next
farm bill.
Senator Thune. Thanks.
Mrs. James. Over the years that you speak of, the price of
rice declined, and so we should not be--farmers should not be
punished for following market signals and maybe not planting as
many acres of their base during that particular time.
Senator Thune. Thank you. Thank you, Mr. Chairman. I just
think that base acres ought to reflect more recent planting
history and that we should not be--we should not have base
acres that have not been farmed for years that still have bases
and receiving payments, and I think there are some examples
where that happens. I think this would be a real dollar saver,
it would be more efficient, and I think it would be a better
farm policy.
So I hope your organizations will take a look at it and
give us some feedback. Thank you.
Chairman Roberts. Thank you, Senator Thune. Senator Thune
is the foreman of our legislative efforts to do more with less,
and thank you for your suggestions on all three pieces of
legislation that you have introduced.
Senator Stabenow.
Senator Stabenow. Well, thank you, Mr. Chairman, and thank
you again to each of you.
Just an FYI. There is a broader discussion that Senator
Thune raised that is an important discussion, but as we look at
what was done in Appropriations for cotton and dairy, the
generic base essentially is being used to offset that, and so
that piece of it essentially will no longer be relevant,
assuming that appropriations bill goes through on generic base.
So we will have to talk about that more, but that is part of
the proposal to help cotton and to help dairy.
So I would like to start with just a general comment from
each of you on the budget. This spring we had over 500 groups,
including every major commodity group, that came together to
say--to write a letter to us opposing any cuts to funding in
the farm bill. We know the administration proposed major cuts
that would have made it impossible to write a farm bill.
Fortunately, that is not going to embrace my either
Appropriations Committee--although there is a small cut in the
House, as I understand it--but in the Senate we did the
opposite. The Appropriations Committee actually added $1
billion to the farm bill commodity programs to help cotton and
dairy.
So just for the record, I would like each of you just to
say yes or no if you continue to hold the position that there
should not be cuts in the farm bill funding. Mr. Rohwer?
Mr. Rohwer. We do not feel there should be cuts to the farm
bill funding.
Senator Stabenow. Thank you. Mr. Scott?
Mr. Scott. Yes. We also feel the same.
Senator Stabenow. Okay.
Mr. Scott. Thank you.
Senator Stabenow. Mr. Schemm?
Mr. Schemm. I would concur. We support not cutting any.
Senator Stabenow. Thank you. Mr. McMichen?
Mr. McMichen. The cotton industry is in the same position.
Senator Stabenow. Thank you.
Mrs. James. USA Rice supports not cutting any funding.
Senator Stabenow. Thank you very much. Well, it is going to
be important that we continue to all work together to make sure
that we have the resources that we need for agriculture, so
thank you.
A little bit more on crop insurance, and Bruce Rohwer, let
me ask you, and then anyone else from the panel as well. Again,
when we are debating and we know we will see, I am sure,
amendments on the floor as well, as we do every year, as we go
through this process on the farm bill, but in addition to the
administration proposing a $29 billion cut for crop insurance,
I am concerned that there are people, both in the Office of
Management and Budget--when I met with the Director and then
the Deputy Director nominee that supporting cuts to crop
insurance. But we now have also a nominee that will come before
us for a position at USDA who has actually questioned the
constitutionality of crop insurance, and on a separate occasion
suggested the entire crop insurance system be eliminated since
9 out of 10 farmers in Iowa do not want it.
Well, we have a farmer from Iowa here, if you would like to
speak, Mr. Rohwer, and respond to that kind of comment
regarding crop insurance or any proposed cuts. I wonder what
you would like to say on behalf of Iowa farmers.
Mr. Rohwer. Based on the surveys that Iowa Corn Growers and
National Corn Growers have done, crop insurance remains the
number one risk management tool in the tools available to us.
It is strongly supported by our membership and I am not sure
where that statistic comes from but it is not reflected in any
of the studies that we have conducted. We would look forward to
the strong support that we have here on the Hill from the House
and Senate to crop insurance, because it is absolutely crucial
to the future of farming and for bringing in the next
generation.
Senator Stabenow. Thank you very much. Does anyone else
want to respond as well, in terms of crop insurance and why it
is critical that we continue it and not see cuts? Does anyone
want to respond to the constitutionality of crop insurance? We
might have a debate here with any attorneys.
Chairman Roberts. I would like to respond, if I might.
Senator Stabenow. Yes. Excuse me, Mr. Chairman, you are on
the panel.
Chairman Roberts. I understand your concern with regards to
crop insurance. Everybody here has asked a question about crop
insurance. If there is some nominee coming before this
Committee who says crop insurance is constitutional----
Senator Stabenow. Unconstitutional.
Chairman Roberts. --they might as well not even show up.
Senator Stabenow. Okay. Well, I am with you, Mr. Chairman.
Chairman Roberts. All right.
Senator Stabenow. I am with you, actually.
Chairman Roberts. I mean, the President has assured me,
personally, that crop insurance will not be cut, and so I take
him at that word, as far as that budget is concerned.
Obviously, if the House budget is different then we do not know
what our budget will be until later. But that dog is not going
to hunt.
Senator Thune. Mr. Chairman----
Senator Stabenow. I am with you as well.
Senator Thune. --were you not here when they wrote the
Constitution?
Chairman Roberts. Pardon me?
Senator Thune. Were you not here when they wrote the
Constitution?
Chairman Roberts. Of course.
[Laughter.]
Senator Stabenow. He has given me blow by blow of the
debate that occurred at the time, and so--but I do think--and I
wanted to just ask one other question--I do think it is
important, though, to raise this in the context of comments
that have been made, because my fear is that those comments
will be pulled out by those not supporting crop insurance, and
we will hear those again. So I think it is important that we
continue to hear your voices about the importance of this risk
management tool.
One other just real quick, on the ARC program. I know you
have suggested some changes, Mr. Rohwer, Mr. Scott, Mr. Schemm,
as it relates to getting the right yield data and so on.
Assuming we can provide the tweaks and so on, does the ARC
program deserve to continue?
Mr. Rohwer. The surveys of our members have shown that the
preference in Title 1 programs is for a revenue-based program.
Any improvements that can be made will be greatly appreciated
and will merely make it a more effective program.
Senator Stabenow. Thank you. Mr. Scott?
Mr. Scott. Our members would reflect the same as Bruce has
said. We like ARC. Currently, with our low commodity prices, it
has not benefitted us on the soybean side in the last few
years, and it probably will not benefit us as much as it had in
the past. So we would like some tweaks there, but otherwise
very effective program.
Senator Stabenow. Thank you.
Mr. Schemm. Ranking Member, yeah, we have heard very
clearly from our members, with wheat grown in 42 states in very
diverse growing regions, that they want that choice. They want
an effective ARC program for the producers that are sensitive
to that yield component, but there are areas where they are
much more sensitive to the price component, and that works for
the PLC. So we have heard very loud and clear that they want
that choice in the future.
Senator Stabenow. Okay. Thank you. Thank you, Mr. Chairman.
Chairman Roberts. Senator Thune, I think I have to correct
the record. I did not work on the Constitution. I did do a lot
of advice and counsel on the Bill of Rights----
[Laughter.]
Chairman Roberts. --which affects all of these people here,
in terms of their testimony. Thank you.
Senator Donnelly.
Senator Donnelly. Thank you, Mr. Chairman. Mr. Schemm, I
have noticed you have a very notable goatee, and I was
wondering if our colleague from Kansas, if you could consult
with him and possibly he may start to grow a goatee as well.
Any help you could give in that effort we would really
appreciate it around here.
Mr. Schemm. I will work on that.
Senator Donnelly. Thank you.
Mrs. James, you testified about the importance of several
conservation programs--the Regional Conservation Partnership
Program, the Conservation Stewardship Program, and the
Environmental Quality Incentives Program. You also mentioned
how your farm has provided for four, and soon five generations.
I think those two points are important together. You are an
advocate for conservation because your farm has been handed
down for generations. Your family has been there. Nobody wants
to make sure that land is handled better, that water nearby is
cleaner than your family who has been given the stewardship of
that land for hundreds of years.
Can you talk about how USDA's conservation programs can
help farmers like you, who want to make sure you can offer the
next generation of your family a farm in even better shape than
was given to you?
Mrs. James. Thank you, Senator, and you are exactly right.
Raising my son on that farm, and of course I want the
environment to be clean and safe, the water that we drink safe,
and the food that we provide to U.S. consumers and the rest of
the word to be safe as well, and so it is extremely important,
and conservation is extremely important to the rice industry.
The programs that NRCS provides have allowed us to continue to
improve in our water conservation efforts, and soil
conservation efforts, and it has been a valuable tool to the
rice farmer.
In fact, when you speak of the waterfowl, migratory birds,
it is a very important habitat that the rice industry does
provide in this country. In fact, if you were to have to pay to
replace that habitat it would be about $3.5 billion, and to
maintain it year to year would be about $73 million a year to
maintain what we are already providing in that habitat. So they
are very important programs.
Senator Donnelly. Thank you, and this is just to the panel
and to all of us to follow up on the crop insurance comments.
Obviously, in Indiana, it is critically important. I just
wanted to say, at my first hearing as a member of the Ag
Committee, Angie Steinbarger, a Hoosier farmer, testified about
the critical nature of crop insurance, and essential to
maintaining her family farm through a devastating drought that
we had in 2012, with no rain, with 100-degree-plus days, day
after day. I was at the farm of a friend of mine in Columbus,
Indiana. It was 106 degrees the day I was there, all of this
extraordinarily abnormal for Indiana. We were sitting under the
only shade, a big oak tree, and the fields we were looking at,
the projected yield was going to be five bushels per acre for
corn that year--five bushels. So we are now in a position, of
course, with too much rain, and having to have replanted.
So I just want to say that regardless of the type of
disaster, crop insurance is a critical backstop for family
farms, and we will continue to fight to make sure that is
included in any farm bill, moving forward.
Thank you, Mr. Chairman.
Chairman Roberts. It would appear that we have no further
questions for the panel. Thank you so much for taking the time
to come and presenting excellent testimony. Thank you very
much. You are excused and the next panel is urged to quickly
come forward.
[Pause.]
Chairman Roberts. I would now like to welcome the second
panel of witnesses. First we have Mr. Dan Atkisson, a graduate
of Kansas State University, home of the ever-optimistic and
fighting Wildcats, hailing from Stockton, Kansas. He and his
family grow grain and forage sorghum, wheat, and other forage
crops. They also raise commercial and registered Angus cattle.
He serves as Vice Chairman of the National Sorghum Producers
and Chair of their Legislative Committee. Dan, thank you so
much for coming today. I look forward to your testimony.
Senator Perdue was to introduce our next witness. I do not
see Senator Perdue, so Ms. Meredith Rogers is with us this
morning from Camilla, Georgia. Ms. Rogers farms in partnership
with her husband, parents, and siblings--something Senator
Grassley ought to take note of in his payment limitation
lecture. They grow peanuts, wheat corn, cotton, and field corn.
Their family also runs two peanut-buying points that handle
around 30,000 tons of peanuts a year. Meredith, we look forward
to your testimony.
Mr. Robert Rynning joins us today from Kennedy, Minnesota,
where he resides with his wife and two sons, a fifth-generation
farmer. He works with his brother and nephew to produce canola,
barley, wheat, and soybeans. Mr. Rynning is President of the
U.S. Canola Association. Robert, we are certainly glad that you
are here today.
I now turn to Senator Daines to introduce our next witness.
Senator Daines. Thank you, Mr. Chairman. It is my honor to
take this opportunity to introduce a fellow
Montanan, and welcome to Washington, DC, Ervin Schlemmer,
his wife, Julie, who is just behind him. Thanks for making the
trip out here for this important hearing. Ervin is a third-
generation farmer, partners with his son, Greg, to run his
operation in Joliet, Montana. He produces sugar beets, malt
barley, alfalfa, hay, and corn, as well as operates a 20,000-
head cattle feed yard. That is a lot of cows.
Ervin has also been active within the American Sugar Beet
Growers Association and the Southern Montana Sugar Beet Growers
Association for decades, and I want to thank him for taking
time out of his very busy schedule, at a very dry time of year
in Montana, to come out to D.C., and I look forward to his
testimony.
Chairman Roberts. Thank you, Senator. We now turn to
Senator Stabenow to introduce Mr. Nobis.
Senator Stabenow. Well, thank you so much. I am very
pleased to introduce my friend, Ken Nobis, who is President of
the Michigan Milk Producers Association and a dairy farmer from
St. Johns, Michigan. Mr. Nobis operates a 1,000-cow dairy farm
with his brother in St. Johns, and farms 3,000 acres. Mr. Nobis
has been an active leader in the dairy industry for many years,
and serves as First Vice-Chairman of the National Milk
Producers Federation. In 2015, his farm received an Outstanding
Dairy Farm Sustainability Award, and earlier this year Ken
became an honorary alumnus of Michigan State University's
College of Agriculture for his dedication to Michigan
Agriculture and his work with MSU researchers on his farm.
Welcome.
Chairman Roberts. Dan, why don't you start this off.
STATEMENT OF DAN ATKISSON, OWNER/OPERATOR, ATKISSON LAND &
CATTLE, STOCKTON, KANSAS
Mr. Atkisson. Thank you, Chairman. Chairman Roberts,
Ranking Member Stabenow, and members of the Committee, thank
you for this opportunity to come before you and present the
views of the National Sorghum Producers regarding Title 1 crop
insurance in our next farm bill.
My name is Dan Atkisson and I farm near Stockton, Kansas. I
am a true family farmer, working alongside my father, my wife,
Amanda, and my four-year-old son, Eli. We grow wheat, sorghum,
and forages to support our herds of Angus cattle. I am honored
to serve as the Chairman of the National Sorghum Producers
Legislative Committee.
Mr. Chairman, I would also like to say how honored I am to
be here on a personal level. As a Kansas farmer, I was raised
to admire and respect the tremendous work of our champion in
our nation's capital, the Honorable Pat Roberts. We know that
it is often difficult to relate the unique challenges that the
farm and ranch communities face to more urban constituencies. I
want to say how appreciative we are to all members of the
Committee who work so hard to understand our issues and to do
this difficult work where it matters most.
I give an overview of several positive trends within the
sorghum industry in my written testimony, from increasing
productivity to expanding markets within the food sector. These
are exciting, big-picture developments for sorghum, but any
positive developments for the long term are completely
overshadowed by the current state of our ag economy. Since
passage of the 2014 Farm Bill, prices for sorghum have
plummeted from a benchmark of $5.10 to just $2.69 per bushel of
for the 2016 crop, 53 percent of the benchmark.
Today in farming, it is not a question of how to make a
profit but simply minimize our losses to survive. Virtually all
commodity crops have faced similar decline in prices but unique
to sorghum is an emerging pest, the sugarcane aphid, which is
driving up cost of production and adding a burden of $430
million to the 2016 growing season alone.
The National Sorghum Producers believe in the need for a
strong and reliable Title 1 safety net that is balanced and
provides assistance when needed. One very real problem with the
current policy is the timing of the payments and its impact on
cash flow. The National Sorghum Producers asks, do you consider
moving up farm bill timing assistance or even making marketing
loan rates more relevant to help with these cash flows?
Regarding ARC and PLC, clearly, with the 20/20 vision that
hindsight offers, PLC has been the better safety net for our
sorghum farmers. PLC was very conservative up front when prices
were still above $4.00 per bushel. In contrast, ARC assistance
was a virtual certainty when farmer elections were being made.
With a target county revenue generated at $5.10 per bushel, the
logic was to take a bird in the hand and put it to use.
Unfortunately for farmers, markets have not rebounded as
hoped. Going forward, we are open to the idea that the ARC
model could be improved. We believe that PLC could also be
improved and we generally favor this model, coupled with a
strong crop insurance program. However, NSP pledges to work
with you in a constructive manner to ensure that a proper
balance is struck and an adequate safety net is crafted.
Before moving to crop insurance, I would like to urge
caution in thinking about how policies affect plantings of
commodities and urge more thoughtful approaches to CRP going
forward.
Crop insurance is indispensable for sorghum farmers, but
that does not mean it cannot also be improved. For sorghum,
particularly, participation rates and coverage levels are low
when compared to other crops. A full 19 percent of sorghum
acres are left uninsured, and this lower participation rate
owes primarily to the cost of sorghum insurance. Despite a 10-
year loss ratio of 0.88, sorghum rates remain high and need to
be lowered.
Another area of concern is the regularity at which new and
innovative tools, which even EPA deems safe, are challenged in
our courts. In recent years, it seems that each time a product
is improved by the EPA under Federal Insecticide, Fungicide,
and Rodencide Act, or FIFRA, it is challenged by the Endangered
Species Act. Only the attorneys win in this situation while
farmers face a smaller and smaller toolbox.
Mr. Chairman, in closing, I want to say again how much we
as farmer members of the National Sorghum Producers appreciate
the task that you have before you and for being such a champion
for agriculture. We consider the farm bill to be critical, but
tough economic times cause us to focus, and Title 1 and crop
insurance rightly take center stage. NSP appreciate your
attention to these important policies and we stand ready to
work with you to make this policies work even better.
[The prepared statement of Mr. Atkisson can be found on
page 73 in the appendix.]
Chairman Roberts. Dan, thank you so much for your very kind
comments, and I only wish Senator Thune could have been here to
hear them.
Ms. Rogers.
STATEMENT OF MEREDITH ROGERS, FARMER, FAMILY FARM PARTNERS,
CAMILLA, GEORGIA
Ms. Rogers. Good morning, Chairman Roberts, Ranking Member
Stabenow, and members of the Committee. My name is Meredith
McNair Rogers. I have been farming with my family in Southwest
Georgia for over 20 years. This year we are farming peanuts,
fresh sweet corn, cotton, and corn. I am the first woman to be
included in the Peanut Leadership Academy, which is a program
for young leaders involved in the peanut industry.
I am testifying today on behalf of the Southern Peanut
Farmers Federation, the largest peanut grower organization in
the United States. I want to be clear today that the peanut
provisions of the 2014 Farm Bill have worked as a safety net
for peanut producers. If the Price Loss Coverage, the PLC,
program had not been in place, I am afraid many farms in the
Southeast would no longer exist because of the downturn in the
farm economy, which has plagued us for the past three years.
The Federation supports maintaining the current PLC program
in the 2014 Farm Bill, including these key provisions: the
current reference price for peanuts; a separate peanut payment
limit, as established in the 2002 Farm Bill; and storage and
handling provisions.
The PLC program has worked but peanuts are not sufficient
to carry an entire farming operation. Corn and cotton prices
have been depressed and with the lack of a cotton PLC program
more pressure has been placed on growers to plant peanuts, by
lenders and others.
Peanut growers know that crop rotation is critical for
their cropping systems. However, during this period of a
severely depressed farm economy, many farmers modified their
crop rotations in order to survive. Although the increased
peanut acreage has impacted yields and cost of production,
peanut acreage during the life of the 2014 Farm Bill is not out
of line. During the life of the 2014 Farm Bill, average planted
acres were only 16 percent more than average acres planted
during the 2002 to 2013 years.
What about the demand for peanuts? It is very important for
this discussion to note that demand has kept pace with the
supply of peanuts. Domestic demand and export demand have grown
significantly in the past few years. The number of peanuts used
for peanut butter has grown 64.4 percent since 2002, and 10
percent since 2014. When we take a closer look at USDA's
Foreign Agricultural Services export data, comparing the
average exports of peanuts and peanut butter during the 2008
Farm Bill relative to the 2014 Farm Bill, we see strong growth.
Peanut exports increased approximately 71 percent.
What about the supply of peanuts in the U.S.? In the
current market, demand exceeds supply. Given this economic
situation, early contract prices for the 2017 crop have been
reported in the $475 to $550 per ton range.
In addition, peanuts have not seen significant forfeitures
at the USDA. From the evidence we see in the marketplace, there
is not an oversupply of peanuts. According to the University of
Georgia, the peanut program in the 2014 Farm Bill has not led
to excessive peanut acreage.
In conclusion, the Federation supports the peanut
provisions in the 2014 Farm Bill and appreciates the
opportunity to work with you as we move forward with the next
farm bill.
Thank you for allowing me to testify today.
[The prepared statement of Ms. Rogers can be found on page
170 in the appendix.]
Chairman Roberts. Thank you for your testimony. The
distinguished Ranking Member has told me that she certainly
enjoys peanut butter, and I join her in that respect. I also
learned that exports to China seem to be on the move, and that
is certainly a good indication for a lot of other crops as
well.
Mr. Rynning, you have already been introduced by Senator
Klobuchar, but why don't you go ahead, sir.
STATEMENT OF ROBERT RYNNING, OWNER/OPERATOR, ROBERT RYNNING
FARMS, KENNEDY, MINNESOTA
Mr. Rynning. All right. Thank you very much. On behalf of
the U.S. Canola Association I want to thank Chairman Roberts,
Ranking Member Stabenow, and the members of the Committee for
inviting me to testify today.
I am Robert Rynning, President of the U.S. Canola
Association, and I am also a Board Member for the National
Barley Growers Association. While not a large crop acreage-
wise, canola is grown in diverse regions of the country, and
although the Northern Plans account for the major of the U.S.
canola production, winter canola varieties have been
successfully introduced in the Southern Great Plains, and it
has the potential to become another major U.S. production area.
Winter canola production can also be found in the mid-south
states, with much of this acreage supporting double cropping of
soybeans or other spring-seeded crops. A fourth production area
is in the Pacific Northwest, which produces both winter and
spring canola varieties. In 2016, the U.S. produced a record 3
billion pounds of canola seed, but for the coming year the U.S.
will still need to import 68 percent of our expected canola oil
consumption, and 75 percent of our expected canola meal
consumption. For 2017, growers increased canola acreage in all
regions, planting over two million acres, up from the previous
five-year average of 1.7 million acres. However, the drought in
western North Dakota and eastern Montana will keep actual
production from expanding this.
Commodity title--for us, the canola growers, it is
generally--we are generally pleased with the performance of
Title 1. Although at 97 percent of the canola base acres were
entered into the PLC program, USCA supports the continuation of
both the PLC and the ARC-County programs as well as the ARC
individual coverage option, allowing producers a one-time
choice among the three options at the start of the next farm
bill. Canola is grown as a rotational crop with other crops and
many producers chose the ARC program for those other crops they
produce on their farms.
With regards to the problems of wide-ranging ARC-County
yields between adjoining counties, USCA suggests requiring the
use of RMA yields as the first option in the cascade rather
than the NASS yields. USCA also believes all support payments
for PLC and ARC should be paid on historic bases rather than
planted acres, to ensure the farmers' decision is based on
their actual growing--crops that they are growing. USCA also
supports providing an option to reallocate or update crop
acreage bases as well as program yields, as was the case in the
last farm bill.
When it comes to crop insurance, the USCA strongly supports
the program as currently authorized. Without the risk
management tool, many producers would have difficulty in
obtaining operating loans. The proposed cuts in the
administration's '18 budget would completely undermine the
actual soundness of the program and would lead to its failure.
While premium discounts producers receive are a major cost of
the program, the net premiums paid by producers are still
substantial. The proposed $40,000 limit would hit numerous
family-sized farms across the country.
In the conservation title, USCA supports providing an
incentive to include canola and/or sunflowers in a cropping
rotation to provide habitat for honeybees and other
pollinators. Honeybees support $15 billion of agricultural
production in the U.S. through pollinator services, but a major
decline in honeybee health in recent years has put these
benefits at risk. This decline in bee health has been linked to
a variety of factors, including the lack of suitable habitat
due to increased agricultural monocultures and declining wild
spaces. Canola and sunflowers provide an ideal habitat for
honeybees. Canola fields bloom for a very long period of time,
up to a month or even longer under perfect conditions.
Maintaining the acreage of cropland planted annually to these
two crops is essential.
Thank you very much for your time and attention. I would be
happy to answer any questions the Committee may have.
[The prepared statement of Mr. Rynning can be found on page
191 in the appendix.]
Chairman Roberts. Thank you, sir.
Ervin, thank you so much for coming all the way from Big
Sky Country, and you are invited to give your testimony, sir.
STATEMENT OF ERVIN SCHLEMMER, OWNER/OPERATOR, SCHLEMMER FARMS,
JOLIET, MONTANA
Mr. Schlemmer. Thank you, Mr. Chairman.
American sugar farmers are facing a very difficult time.
For the past five years, refined sugar prices have been
depressed as a result of Mexico dumping subsidized sugar into
the U.S. market. These unfair trade practices have cost our
farmers more than $4 billion in lost revenues and cost
taxpayers $259 million.
The U.S. government found Mexico guilty of subsidizing,
dumping, and harming the American sugar industry. Rather than
imposing huge duties, the U.S. and Mexican governments
negotiated agreements to suspend the duties and allow continued
duty-free sugar trade. But those agreements did not work and
the industry continued to be harmed.
We thank Commerce Secretary Ross and Agricultural Secretary
Perdue for negotiating recent amendments to the suspension
agreements, and we thank members of this Committee who
supported this difficult process. We are optimistic that the
amended agreements will be effective, but only with strict
monitoring and enforcement. We will work closely with the
administration on implementation and we will keep this
Committee informed of any problems.
Mexico's subsidies and dumping are not the anomaly in the
world of sugar. They are the norm. Foreign governments around
the world subsidize overproduction that drives world market
prices well below average production costs. These distorted low
prices threaten efficient U.S. producers. Senators from states
that produce steel, aluminum, and lumber fully understand harm
from predatory foreign dumping. We must respond to these
damaging trade practices through our farm and trade policies or
we will die.
American sugar farmers are among the most efficient in the
world. We would gladly compete against foreign producers if
their governments did not intervene in their markets. We can
compete against foreign farmers but not against foreign
treasuries. It is important to note that the U.S. is the
world's third-largest sugar importer, providing duty-free
access to 41 countries.
Sugar farmers derive all of our revenue from the
marketplace. There is no government checks, no payments, or
revenue insurance products to manage our risk. We must have
full access to CCC loans on the sugar that we store for our
customers throughout the year. Crop insurance, too, is
essential for risk management. It must be both affordable and
effective for farmers to meet the requirements of our bankers.
Sugar and sugarcane farmers are working with RMA to make
program improvements. The multi-year nature of cane cropping
cycles poses a particular challenge.
Research is the future of American agriculture. We implore
this committee to make research funding a priority--I repeat, a
priority--so that we can reduce costs and improve yields and do
so in sustainable ways.
So, in conclusion, U.S. policy is a success. It enables our
industry to survive in a world of sugar subsidies and predatory
dumping. It defends 142,000 good American jobs in 22 states. It
provides American food manufacturers and consumers with high-
quality, responsibly produced sugar at prices among the lowest
in the world, and U.S. sugar prices achieve all of these goals
at zero cost to American taxpayers.
We look forward to working with you on the 2018 Farm Bill.
Thank you.
[The prepared statement of Mr. Schlemmer can be found on
page 205 in the appendix.]
Senator Stabenow. [Presiding.] Thank you very much. The
Chairman will return in just a moment.
We will go on to Mr. Nobis. Welcome.
STATEMENT OF KEN NOBIS, OWNER/OPERATOR, NOBIS DAIRY FARM, NOVI,
MICHIGAN
Mr. Nobis. Thank you, Ranking Member Stabenow. Members of
the Committee, my name is Ken Nobis, as the Senator introduced
me. In my role as the President of Michigan Milk Producers
Association--it is an association that covers the states of
Michigan, Indiana, Ohio, Wisconsin--we represent about 1,700
dairy farmers.
Over the last decade, the U.S. dairy industry has endured a
tremendous amount of volatility in milk prices. National milk
producers and other dairy leaders have spent years working with
members of Congress to develop a program to ensure dairy
farmers had a more stable safety net.
However, during the legislative process, Congress made
changes to that proposed dairy program, fundamentally altering
the version National Milk Producers Federation and other dairy
leaders had spent years developing. As a direct result of these
changes, the margin protection program, or MPP, safety net has
failed to deliver the appropriate protection for dairy farmers
like me.
Many dairy farmers, including MMPA members, originally
supported the MPP because they felt it would finally give their
farm a risk management tool to deal with the daily
unpredictability of milk prices and feed costs. However, we
have found the program simply has not done anything to help
farms during the last two years of sub-par margins. The changes
Congress made to the MPP as the 2014 Farm Bill was finalized
rendered it ineffective when dairy farmers needed it most.
I still believe the MPP is the right program for the future
of our industry, but changes must be made to prevent more dairy
farms from shutting down entirely. Among the concerns we have
with the program, the proposed feed formula, though deemed
accurate, was cut by 10 percent to address other broader budget
concerns. Based on the over $100 million government profit made
from the program, concerns about the budget that led to the 10
percent cut were misplaced.
Also due to congressional mandated restrictions in the MPP,
a producer had to decide, at the beginning of the farm bill, to
cover their milk under either Livestock Gross Margin program or
the MPP. Almost every other commodity can utilize both risk
management agency and Title 1 programs without restrictions.
This leaves dairy farmers without the tools that other
commodity producers have in their arsenal when it comes to
federal support for their operations. I want to stress that
dairy farmers are not asking for a program that guarantees a
profit or incentivizes excess production. All we are asking for
is a program that provides a meaningful safety net for dairy
farmers when they need it most.
As you are aware, the Senate Appropriations Committee
recently marked up a bill for fiscal year 2018 that included
important changes to the MPP. We appreciate the leadership of
Senators Cochran and Leahy, Chairman and Vice Chairman of the
Appropriations Committee, to address some of the problems with
the current safety net. We also greatly appreciate the efforts
of Ranking Member Stabenow for urging all farmers to be
considered when making significant changes to farm bill
programs and ensuring interim improvements are made to
strengthen the dairy safety net.
The changes made through the Appropriations Bill are a step
in the right direction and we are open to other ways the MPP
program can be improved. More work is needed and the only way
to accomplish that is through a new farm bill. Making the MPP
program more attractive for dairy farmers is vital to ensuring
participation in the program and the safety of America's dairy
industry.
In addition to the challenges we face with the MPP, we are
greatly concerned over challenges to our export markets and a
need for immigration reform. Child nutrition also is an
important key issue for our industry. Reintroducing one percent
flavored milk back into the schools will help ensure that
children have access to the nine essential nutrients and
vitamins that milk provides.
Milk also played a big role last year to help the residents
of Flint, Michigan, during a crisis in which they were
susceptible to lead poisoning from contaminated water. MMPA
partnered with the Kroger Company to donate approximately
590,000 servings of milk to the Flint residents after we
learned that calcium and iron found in dairy products can help
mitigate health risks of lead contamination.
Mr. Chairman, Ranking Member Stabenow, and Committee
members, the U.S. dairy industry looks forward to working with
you to improve federal policies that impact those that produce
our country's food. I appreciate the opportunity to speak with
you today and I thank you for your support of agriculture. I
would be happy to try to answer any questions you might have.
[The prepared statement of Mr. Nobis can be found on page
161 in the appendix.]
Senator Stabenow. Well, thank you to all of you, and Mr.
Nobis, let me also reiterate thanks on behalf of the families
of Flint, because Michigan Milk Producers stepped up right away
to help, and it was terrific to see, and we have had other
commodity groups and farmers in Michigan do the same, but
Michigan Milk Producers really took the lead on that, so it was
great.
Let me ask just a brief yes or no for each of you, just to
get on the record again as I did with our first panel. We have
had over 500 organizations go on the record saying they do not
support cuts to the farm bill. I think it is important to just
ask each of you again if you still hold that position, if your
organization still holds the position of no cuts in the farm
bill. Mr. Atkisson?
Mr. Atkisson. The National Sorghum Producers does not
support cuts to the farm bill.
Senator Stabenow. Thank you.
Ms. Rogers. We do not support cuts to the farm bill.
Senator Stabenow. Thank you.
Mr. Rynning. Yes. U.S. Canola Association very strongly
feels that there should be no cuts.
Senator Stabenow. Thank you.
Mr. Schlemmer. No cuts.
Senator Stabenow. Thank you.
Mr. Nobis. No cuts for dairy.
Senator Stabenow. Thank you. Well, and let me ask, Mr.
Nobis, you have talked about the, of course, dairy farmers are
interested in the handout. You are not interested in anything
that causes oversupply, but you need an effective safety net.
So I wondered the other witnesses we are hearing from can have
both federal crop insurance and Farm Service Agency safety
nets. Dairy farmers, as you said, cannot, which has put you at
a real disadvantage, and I wondered if you might discuss the
efforts to improve both parts of the safety net and the
proposal that the Farm Bureau and National Farmers Union and
National Milk have come forward with as it relates to having
the opportunity to have crop insurance for milk producers.
Mr. Nobis. Well, we think it is a great move forward. The
Senate Appropriations bill, it is a step forward, definitely.
But the inclusion of crop insurance type program for dairy is
very important to us all. So it is something we do not have
available to us today.
In my association, we are doing member meetings. We started
doing that a year ago. We are in our third iteration right now.
Because of the turmoil in the dairy economy today we find it
important to meet with our members face to face, to help
explain what is going on and for them to get their questions
answered. At every one of those meetings, the safety net issue
comes up, and we have been with our members and they have been
asking about the possibility of a crop insurance type program.
It would find a great deal of support in the countryside.
Senator Stabenow. Thank you. I would like to ask each of
you about how we continue to support beginning farmers, which
we know is so important, in each of our commodity areas and
each region of the country. We know there are barriers, and
particularly if someone wants to go into farming without a
family history of farming, that is a particular challenge.
But I wondered if each of you would talk about the
challenges for beginning farmers, or describe a challenge that
faces producers in your industry, and ways that you and your
organizations are working to support our beginning farmers.
What should we be aware of?
Mr. Atkisson?
Mr. Atkisson. In today's farm economy, it takes a
tremendous amount of capital and a tremendous amount of
overhead to operate and to have a farm of any scale, especially
within the sorghum industry and in my part of Kansas. My own
personal experience, through USDA loans, I have never taken one
out. It had a bad reputation within our community, there were
too many hoops to jump through, and there were too many red-
tape items to follow through with to get that loan. So when I
came out of college and moved home, I did not use those
programs, just because there was so much red tape involved.
So I would like to see more young farmers take advantage of
those. I think the low interest rates make them a very
attractive option. However, when I moved home from college as a
young farmer I did not access those.
Senator Stabenow. Thank you. Ms. Rogers.
Ms. Rogers. I think it is very important to look at all--
like you are doing, all the farm programs and keep the ones
that work. The PLC program has worked for the peanut farmer,
and we would like to maintain that. I think that helps give the
lenders some security, a safety net, when it comes to young
farmers and helps them feel more comfortable lending to them
because they have that safety net. I think crop insurance does
the same thing. It gives them a safety net so that they feel
better loaning to the young farmer.
Senator Stabenow. Thank you.
Mr. Rynning. Yes, I would reiterate much of what has just
been said. I have a nephew that just started farming within
this last year, with my brother and I, and in the same type of
thing the USDA loan system is very good. It is highly used. But
he decided not to go that route because of the complications
and the red tape and the things involved.
But supporting him even more, I think, because of that, is
the crop insurance system and the PLC and ARC. They become
extremely important at that point.
Senator Stabenow. Thank you.
Mr. Schlemmer. Being a sugar farmer, we are a little more
unique than probably some of the other commodities, even though
we grow other commodities also. But we plant the sugar in the
spring; we harvest in the fall. We get all that money into our
crop, but it is a full year before we get our final payment on
our sugar. In the meantime, we borrow money from the CCC, and
that enables us to pay our bills as soon as we maybe harvest a
grain crop. We start preparing our ground next year, the next
year for beets, and we are already putting these dollars into
it. So come fall, we cannot just sell our crop. We put it in a
pile, it takes six months to process it, and then we have got
to sell it throughout the year.
Our customers are not going to pay us for that sugar until
it is delivered, so the CCC loans are just imperative to the
sugar farmer and to a younger farmer. There is no way that they
could ever get into it without. The bankers would just not loan
that much money that far out.
Senator Stabenow. Thank you.
Mr. Nobis?
Mr. Nobis. I just had conversations with two young couples
this past week. One of them was a first-generation dairy
farmer. The other one was taking over the family farm. Young
couples. In both cases they had everything figured out except
for the prolonged drought in dairy revenue, so the safety net
was what was--repairing the safety net, making it more
effective--was what they were most interested in having done.
Senator Stabenow. Thank you. Thank you, Mr. Chairman.
Chairman Roberts. [Presiding.] Thank you, Senator.
Let us see here. Dan, I heard a lot of concerns and
frustrations from sorghum growers about a new pest, the
sugarcane aphid. So from the prospective of the farm bill, and
pest management in general, what can we do to help fight this
pest that is already increasing cost and impacting so much, or
how much sorghum is planted across the country?
Mr. Atkisson. Well, as you may know, sorghum acres are down
over 35 percent since the introduction of the aphid, and we
have lost close to $430 million alone in the 2016 growing
season. So with the size of our industry, it is a very sizeable
pest and it has caused a very sizeable problem.
Specifically within the farm bill, I think that the
research title is where we can find the most good in helping
sorghum farmers combat the sugarcane aphid. If we can get
research dollars within the farm bill, it would greatly help.
We have already invested a great amount of producer dollars to
combat the problem, but within the farm bill anything that we
can get for research dollars is going to give us, as farmers, a
great advantage.
Chairman Roberts. Are you aware of any specific research
being conducted?
Mr. Atkisson. There is research at all the different ARS
stations----
Chairman Roberts. Right.
Mr. Atkisson. --and there is also good research going on at
great universities such as Kansas State University, that are
going to greatly benefit us very soon, as farmers in the field.
Chairman Roberts. I appreciate that. Senator Hoeven.
Oh, I am sorry. Senator Heitkamp.
Senator Heitkamp. Okay. I will go next. One of the things
that we have been concerned about in the downturn in commodity
prices and the additional challenge is access to credit. So far
it has been--I serve on the Banking Committee and so I
frequently have conversations with bankers in my state, and we
are very concerned about regulators becoming unaware of what it
is like to be in a cycle like we are in and whether, in fact,
we are going to see real challenges, both in terms of repayment
but also in terms of securing additional operating loans.
I want to hear from anyone or all of you in terms of what
you see right now in trends in your state and whether you share
that concern. Let us start with Mr. Atkisson.
Mr. Atkisson. Access to capital is extremely important, no
matter what commodity you raise or what sector of agriculture
you are in. Whether those are private lending institutions or
whether those are USDA loans, access to capital is just
crucially important.
Within the sorghum industry, we are in a much more arid
region and so generally when we have a downturn in, agriculture
economy, we are hit very hard, very early. Luckily, we have had
some very bumper crops in our area and we have not seen as much
of those problems yet. If we do not see a turnaround in some of
these commodity prices, we could see a very real crisis.
Senator Heitkamp. So as of yet you have not heard from any
of the producers that they are having trouble accessing credit.
Mr. Atkisson. In our direct area, no, I have not.
Senator Heitkamp. Okay.
Mr. Atkisson. Within other areas, I have.
Senator Heitkamp. Great.
Ms. Rogers. Yes, it is quite a challenge in this industry,
too. Most peanut producers are also cotton producers and corn
producers as well, and those prices have been very depressed.
It has made peanut producers--some lenders are requiring peanut
producers to grow more peanuts and messing up our rotations to
an extent, because that is the only crop with somewhat of a----
Senator Heitkamp. So now we have bankers farming.
Ms. Rogers. Right. Because it is very important the PLC,
the safety net that the PLC provides, as well as some of the
marketing loan programs become very important with your
relationship with your banker.
Senator Heitkamp. I think the other point that we all want
to make is that without a strong crop insurance program,
without a strong Title 1, access to credit is going to be very,
very difficult.
Ms. Rogers. Almost impossible.
Senator Heitkamp. Right. These are interlinked. Mr.
Rynning?
Mr. Rynning. Yes, I think in my region of the northwest
Minnesota there certainly has been an issue with obtaining
credit. Many farmers have gone on to a higher loan bracket, or
interest bracket in their loans, in the private loans. The USDA
money gets eaten up rather quickly. So there are big concerns.
There has even been some declining of loans to certain farmers,
with some terrible consequences, as bad as suicides, and a very
critical situation, actually. That is under good crops. That is
under good yields, but poor pricing. I cannot imagine what
would happen if pricing got worse.
Senator Heitkamp. Well, we are going to find out in North
Dakota with bad crops this year.
Mr. Rynning. Yes.
Senator Heitkamp. Any other comments? Yes, go ahead.
Mr. Schlemmer. Sugar farming takes a lot of money. We get
between $900 and $1,000 in a crop before it is harvested.
Younger growers are having a tough time. I know three bankers
personally, they are good friends of mine, and they are very
concerned about their younger growers, and I guess I cannot
reiterate enough of just about how important it is to keep this
younger generation in farming. They are the future of
agriculture.
Another thing, when you talk about credit, I mentioned
before about the CCC loans. Without that it just complicates
the problem, and we need to keep not only ourselves in business
but these younger growers coming up.
Senator Heitkamp. Mr. Nobis?
Mr. Nobis. After two years of sub-par margins, it is
starting to pinch seriously. Some people cannot get credit. I
have a neighbor who is milking 1,000 cows and farming 5,000
acres. There are no cows left there. He went through bankruptcy
because he could not get the credit. I am sure there are
extenuating circumstances.
I have talked to other people who they have traditionally
had a line of credit. They have maxed out their line of credit,
and because of the prices they just have not been able to repay
it so they have had to term out some loans. They were in a
strong position before it hit, but the deeper we get into this,
the more critical it becomes.
But the one thing we have noticed with the bank regulations
the way they are today, the bankers are requiring a lot more
information than they used to require. In our own case, they
are requiring annual----
Senator Heitkamp. Yes.
Mr. Nobis. --in some farmers' cases, annual appraisals,
which the farmer then has to pay, which is kind of double-edged
sword.
Senator Heitkamp. If you can find an appraiser.
I just wanted to make the point, Mr. Chairman, that we do
not stand alone in securing credit and providing a safety net.
We have got to work with the bankers and the bankers have to
know that we have a strong safety net, in order to keep these
producers in business during tough times.
Chairman Roberts. I appreciate that. Thank you, Senator,
and Mr. Nobis, thank you for those comments, more especially
with the regulatory reform that we need all throughout the
banking community as well, and all lenders.
Senator Ernst.
Senator Ernst. Thank you, Mr. Chair. Mr. Atkisson, in your
testimony you mentioned that by putting land out of production
for extended periods, CRP can cause communities and
infrastructure to suffer as a result of less economic activity.
Many of the counties in Iowa, with the highest poverty rates,
are also the counties with the most land enrolled in CRP.
Decatur County, for instance, has a 22 percent poverty rate and
has 26.6 percent of its cropland enrolled in CRP.
At a time in which rural population growth is stagnant and
unemployment and poverty rates are higher in rural areas than
urban areas, would it be better for us to focus more on
targeted working lands conservation programs instead of land
retirement programs like CRP?
Mr. Atkisson. I think we can all agree, as farmers, that
CRP does have a place and CRP is important to conservation. We
are no different in western Kansas. We have areas where a lot
of land went into CRP and much of what you said is very true.
When you take land out of production, people do not spend as
much money in town. They do not have to buy as much seed, as
much fertilizer, or as many groceries because they do not have
as many people working the land, so the community falls
backwards.
The National Sorghum Producers does greatly support working
lands programs. Programs such as EQIP and CSP have been highly
adopted by sorghum farmers, and there is something--those
programs we support a great deal to incentivize conservation
instead of just taking land out of production.
Senator Ernst. Yes. I think that is really important. We
hear that all the time from young farmers out there, as they
are concerned that land availability is not there, and so those
young farmers are not engaging in farmers. They are not raising
their families. They are not sending them to school in our
rural communities. So it is a problem that we do have to
address.
Also, in your testimony, you mentioned how greater
flexibility in CRP might help farming communities in times of
economic hardship. Can you elaborate a little bit more on what
we have been talking about as well as your stated concerns
about, especially, about over-regulation from the Federal
Government and how that is impacting farmers?
Mr. Atkisson. Absolutely. To go ahead and then talk a
little bit about the Endangered Species Act we feel that the
Endangered Species Act has really hamstrung a lot of the tools
that farmers can get into the field these days. Just like the
sugarcane aphid, there are all kinds of different problems that
pop up quickly for farmers, and whether that is insect
problems, fungus problems, or whatever those problems may be,
sometimes those pop up very quickly and it takes a long time to
work through a registration process to get the tool to the
farmers that they need desperately right now.
So a lot of times that Endangered Species Act can pop up. A
lot of times that can really hamstring farmers in using the
tools that even EPA has deemed safe. It will keep the farmer
from using that tool and then hurt farmers at the farm gate.
Senator Ernst. Yes, too true. We need to work through some
of that over-regulation and be a little bit more responsive for
our farmers.
Mr. Nobis, just in the last minute and a half that I have
here, I do appreciate you mentioning, in your testimony, the
challenges the dairy industry has in finding enough employees
to care for the cows every single day of the year. I regularly
hear this from livestock producers across Iowa, as we are
really suffering from those same decrease in numbers of the
farm kids, and I am sure you are seeing that in Michigan as
well.
What do you think we can do to help keep our young folks in
our farming communities and attract newcomers into our rural
areas?
Mr. Nobis. We have been trying to do that for many, many
years. Obviously, a viable dairy economy, a viable agricultural
economy is going to keep more people at home. We have seen, in
the last 10 years or so, in my state, anyway, an increase in
the number of young people that we see on the farm.
Going through the troubling times we are right now, with
the economy, they are starting to question why they came back
to the farm. I think it is the volatility in agriculture. If we
can remove more of the volatility, which means an adequate
safety net, I think that is going to help keep people involved
in agriculture. They love it. They come back because they like
it, but if you cannot provide an adequate income lifestyle for
your family, it does not last.
Senator Ernst. Certainly. I appreciate your input. Thanks
to all the panelists. Thank you, Mr. Chair.
Chairman Roberts. Thank you, Senator. Senator Casey, if you
could hold for a moment I am going to recognize the leader.
Leader McConnell is going to introduce this panel's first
witness, ``this panel'' meaning the next panel.
Senator, would you proceed please.
Senator McConnell. Thank you, Mr. Chairman. I appreciate
you taking me out of order here. One of my old and dearest
friends will be testifying on your next panel, and it is my
privilege to be here today to represent--to introduce the
President of the Kentucky Farm Bureau Federation, Mark Haney,
of Pulaski County, Kentucky. Mark is a proud Kentucky farmer.
It runs in the family. He and his brother, Don, grow apples and
peaches and raise cattle on their farm near Nancy.
First elected as President of the Kentucky Farm Bureau in
2008, Mark has proven--has a proven record of advocating on
behalf of our farmers, farm families, on both state and
national issues. As a member of the American Farm Bureau
Federation Board of Directors, Mark is here today not only
representing farmers from Kentucky but also as an advocate on
behalf of millions of farm families across our country.
Representing nearly every part of the agricultural economy,
the American Farm Bureau Federation can share important
information with us as we continue our work on the 2018 Farm
Bill.
I am thankful to have a fellow Kentuckian in a leadership
role at AFBF, ensuring that Kentucky's priorities are always a
part of the national agriculture conversation. Knowing Mark
personally for many years, he has shown himself to be a strong
leader in Kentucky's robust farming sector. Like most of the
home states of members of this Committee, Kentucky has a
vibrant farming community that deserves our support. We also
are a state that produces a diverse array of agricultural
commodities--horses, cattle, corn, soybeans, and tobacco, just
to name a few. Kentucky has a long history of supporting family
farmers who are impacted by an array of programs under the farm
bill.
When I first entered the Senate, I knew I wanted to sit on
this Committee, to be Kentucky's voice on our nation's
agricultural policies, a position that I am honored to still
hold today.
Through the years, Mark and the Kentucky Farm Bureau have
provided valuable insight, to me, as a member of this
Committee, and I want to thank Mark again for all of his
support over the years. This morning he will continue to aid
our work, highlighting the priorities for farmers in Kentucky
and across the nation. His testimony will provide useful
insights into the challenges facing American farm families and
how Congress can help.
So thank you, Mr. Chairman. I appreciate the opportunity to
introduce Mark this morning, and I look forward to working with
all of us together as we move toward writing a new farm bill in
2018.
Thank you so much.
Chairman Roberts. Leader, if I might suggest '17 might be a
better number. I know we are busy in the fall but as I have
said to you before, I think this Committee and the last effort
that Senator Stabenow and I had, we marked the bill up one
morning and took only two days on the floor. If we can do that
again and have an agreement, I will be knocking on your door.
Senator McConnell. The sooner the better. Thanks a lot.
Chairman Roberts. Senator Casey.
Senator Casey. Thank you, Mr. Chairman. I want to thank the
panel for your testimony, your presence here. I am going to
focus, I think, most of my questions to you, Mr. Nobis, just to
focus on dairy for a couple of minutes.
I come from a state where, like a lot of states, it has
been more difficult, and in some cases a lot worse, when it
comes to dairy farming than bright days. So it has been a
difficult number of years for these families, as you know.
I guess the first question I have is a concern about
perception. In your testimony you said that your members are
frustrated and have lost faith in the Margin Protection
Program, and I hear that same sentiment expressed across
Pennsylvania. So I guess the first question is that perception
question. Because that is the perception, if not the reality,
of the program, for those farmers and their families, do you
think that perception is so poisoned that farmers may be
reluctant to embrace the program in any fashion, even with
improvements?
Mr. Nobis. No, I do not think so. It is a hurdle, there is
no question about it, but if we can work together and present
something that will work, I think the producers will see that
and they will accept it. I do not think it is unfixable. I
think we can do it, we can work together.
Senator Casey. Yes. You also talk, in your testimony, about
the--both feed costs and feed formula calculations included in
the Margin Protection Program, and as we look to that set of
improvements that you are referring to, do you think feed
formula is where we ought to focus in the work that we do, in
terms of attention and funding, as opposed to reducing
premiums?
Mr. Nobis. I know there is always a money issue, but we
spent a lot of time, and I was on the committee at National
Milk that worked on that program prior to the 2014 Farm Bill,
and there was a lot of effort went into coming up with the
right formula to gauge the feed cost on the farm, because it is
one thing that producers see through. So if we do not fix that,
I am not sure but what we are going to have problems down the
road with perception again.
Senator Casey. Yes.
Mr. Nobis. I mean, you can do it either way. I get that.
But producers look at that feed cost and if it is not accurate
they are going to say, ``Well, that is not my feed cost,'' and
they are maybe not going to trust the program.
Senator Casey. I know that you and your members have been
working at this for a good while, and I just want to ask about,
in terms of your own discussions. Have you discussed any type
of either farmer-led or industry led inventory management
program?
Mr. Nobis. Ad nauseam, to be honest. But you know farmers
very well, and I think you know what the answer is. We are so
independent that we do not want to do anything like that, and
that is what we always end up with.
I have thought about it an awful lot. Maybe from the
pricing angle we send the wrong signals. We do not send the
right signal quick enough when we have got more milk than what
we need. But we look at it--in my co-op we look at just what
Michigan Milk could do, and we could do an inventory management
program. There is no question about it.
But within the state borders of Michigan, we produce--
market about 43 percent of the milk. Even if we do something
within our own co-op, it is not going to have an effect on milk
prices, and we go through a chart and explain it to our
members. The only thing that is going to change here is maybe
the out-of-state transportation cost. The price of milk is
still going to be basically the same.
So even if you do it on the state level, the state of
Michigan, for example, produces 5 percent of the nation's milk
supply. So even that is not going to have an effect, and
besides which we cannot get together as co-ops and have a
combined supply management program because that would be
collusion--we cannot do that.
It is really an international issue. I mean, we have gotten
so good in agriculture, everything we do, and it is not
isolated to one area of the globe. The information is there. It
can be used wherever weather conditions, the geography allows
it. So it is a bigger problem than what we can solve within the
United States. As far as supply management, it is an
international issue, but even then we have to deal with the
weather. So we do something and set a supply management program
and then one area of the globe has a huge weather impact issue
and now we are under the gun because we shorted the food
supply. If it were simple we would do it, I guess.
Senator Casey. Thanks very much. I appreciate your
testimony.
Chairman Roberts. I want to thank all the panel. You are
excused and we welcome the next panel to come forward. Thank
you so much.
[Pause.]
Chairman Roberts. We welcome the final panel.
Mr. Haney, you have already been introduced by the Majority
Leader of the United States Senate. I cannot top that, but we
welcome you to the panel.
Mr. Roger Johnson has served as the President of the
National Farmers Union since 2009. He is a third-generation
family farmer from Turtle Lake, North Dakota. Previously, he
served as the North Dakota Agricultural Commissioner and the
President of the National Association of State Departments of
Agriculture. Roger, thank you so much for joining us today.
I now turn to Senator Stabenow to introduce our next
witness.
Senator Stabenow. Well, thank you so much. I know that
Senator Gillibrand had hoped to be here. We are all,
unfortunately, trying to juggle many committees this morning,
so she may be able to join us. But I am very pleased to
introduce Ms. Lindsey Shute, the Executive Director and Co-
Founder of the National Young Farmers Coalition. Originally
from Ohio, Mrs. Shute and her husband, Ben, own and operate
Hearty Roots Community Farm, a 900-member CSA in the Hudson
Valley of New York. As her role as Executive Director, Ms.
Shute has grown the coalition from a few volunteer farmers to a
grassroots base of over 120,000 members from 26 different
states. Very impressive.
In 2014, Ms. Shute was recognized by President Obama as a
champion of change in agriculture. Ms. Shute is a graduate of
New York University and Bard College, where she recently
delivered the Distinguished Alumni Lecture. Welcome.
Chairman Roberts. Senator Cochran wanted to introduce you,
Mr. Cole, and so I am going to stand in for him in that he has
other duties that he has to perform at the present time.
Mr. William Cole, from Batesville, Mississippi, is a life-
long resident of the Delta. Mr. Cole has been serving farmers
as a crop insurance agent for 22 years. Thank you for that. He
also raises cattle and quarter horses with his family. He is
the current President of the Crop Insurance Professional
Association. Thank you for your dedication to crop insurance
and to producers. I look forward to your remarks.
Senator Ernst and Senator Grassley were going to introduce
our next witness. Ron Rutledge, from West Des Moines, Iowa,
where he currently serves as President and CEO of Farmers
Mutual Hail Insurance Company. Mr. Rutledge also serves on the
Board of Directors for the National Crop Insurance Services and
is Chairman of the Board of the Crop Insurance Research Bureau.
Thank you, sir, for your continued work to improve and defend
crop insurance. We look forward to your testimony.
I now turn to Senator Stabenow to introduce our next
witness.
Senator Stabenow. Thank you so much. With us today is Ms.
Mandy Minick, the Washington State President for Northwest Farm
Credit Services. Ms. Minick grew up in Snohomish, Washington,
on a small farm, and attended Cal Poly Pomona, where she
studied agricultural business management. In her 24 years with
Northwest Farm Credit she has served as a credit officer and a
branch manager with a portfolio of mainly dairy and wine
grapes. Ms. Minick now oversees the lending and insurance
services team in Washington State as President, so thank you
for being here.
Chairman Roberts. Our next witness, wrapping up what
obviously is an excellent panel. Mrs. Brenda Kluesner is from
outside of Bloomington, Wisconsin. Mrs. Kluesner is a loan
officer and crop insurance manager with Royal Bank, a locally
owned and operated community bank serving central and
southwestern Wisconsin. She has over 20 years of experience
working with farm service agency programs, both as a lender and
also as the owner of a cow-calf operation along with her
husband.
Mrs. Kluesner, thank you so much for joining us today,
especially from your perspective as a producer and as a loan
officer. We have had a lot of talk about this and you can add
to this, I am sure.
Mr. Haney, please proceed.
STATEMENT OF MARK HANEY, PRESIDENT, KENTUCKY FARM BUREAU
FEDERATION, LOUISVILLE, KENTUCKY
Mr. Haney. Thank you, sir, and thank you, Mr. Chairman, and
Ranking Member Stabenow, and members of the Committee. Thank
you for allowing us to be here.
I represent a fifth generation on our family farm in Nancy,
Kentucky. My brother and I produce apples, peaches, and beef
cattle. We also have a Farm Bureau roadside farm market, where
we sell produce from our farm, as well as cider, jelly, jams,
all other baked products at the farm level.
The farm bill is one of the most important pieces of
legislation related to agriculture, and what is most important
to our farm families is the ability to stay on the farms in
Kentucky and across the country. But in doing so, we must face
down challenges, such as financing for our young farmers and
farm families, who want to continue the legacy of rural
America; regulations that threaten to make certain ag sectors
extinct; and conservation issues, such as adequate water
resources for agricultural uses.
I want to draw your attention to the two charts included in
my testimony, as they do highlight the realities of the
situation farmers and ranchers are facing in today's
agriculture economy. The farm sector debt-to-income ratio is at
a concerning level, and depending on what happens with the
crops this year it could be even higher as we begin 2018.
The second chart shows how quickly working capital has
fallen over the last five years, but if low prices persist, for
many commodities, farmers will have gone through their working
capital pretty soon.
I draw your attention to these two charts because they
provide a good visual of the need for a strong safety net in
the upcoming farm bill. The American Farm Bureau Board of
Directors met two weeks ago to discuss our recommendations for
the farm bill. Our recommendations are not set in stone.
Rather, they are designed to provide the necessary flexibility
to ensure that Farm Bureau is prepared to work with you in
achieving the best possible farm bill that meets our key farm
policy objectives while assisting you in meeting the challenges
this important legislature will endure.
Farm Bureau recommends the following provisions, in
particular, for your consideration.
Our farmers strongly support continuation of the Price Loss
Coverage program and the Agriculture Risk Coverage program.
They want a choice of which risk management program works best
for their operation. They want both programs to work so that
the decision is truly a choice. Our farmers support the
opportunity for all farmers to re-elect and/or re-enroll in
Title 1 programs and believe that all Title 1 payments should
be made on historic rather than planted acres.
We have all heard about the discrepancy in ARC payments
across county lines, and we believe that this can be remedied
by allowing farmers to select the higher of the five-year
Olympic Average or 10-year yield for the 10-year average yield.
In addition, the reference price used as the floor for the ARC-
County programs should be increased 5 percent for corn,
soybeans, wheat, sorghum, and other minor crops.
We support a cotton lint program and/or designated cotton
seed as another ``another oilseed'' to make cotton eligible for
Title 1 commodity support payments.
The Dairy Margin Protection Program must be improved and we
have a suggested package of reforms that continues a two-tiered
approach to providing a safety net for dairy, and that
increases the feed ration formula by 10 percent. The increase
in costs to do with this are offset by adjusting the premium
rates and by increasing the administrative fee for cap
coverage.
We want to increase the $20 million annual cap on livestock
insurance products to $75 million annually. This will allow
dairy, beef, swine, and sheep producers to have more
opportunity to insure their risk.
The Conservation Reserve Program has been a huge topic
within our membership. It is critical that USDA be required to
update rental rate data for the Conservation Reserve Program
every year rather than every other year. It is also important
that the pollinator rental rate be capped at the lower of $300
per acre or 90 percent of the average county cash rent for the
type of land that is entered into the pollinator program. We
will likely have more recommendations on rental rates in a few
weeks.
Suffice it to say, we have had many members express
concerns about CRP rental rates exceeding land rental rates and
making it exceeding difficult, especially for beginning
farmers, to be able to rent land. We do not support increasing
the cap on CRP above the current 24 million acre cap. We would
also like to make parcels of land that been enrolled in the
general CRP for two contracts being eligible for re-enrollment.
I want to thank you for allowing me to participate this
morning. I would be happy to respond to questions later. Thank
you very much.
[The prepared statement of Mr. Haney can be found on page
97 in the appendix.]
Chairman Roberts. Thank you, Mr. Haney. Roger, you are up
to bat.
STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION,
WASHINGTON, DC
Mr. Johnson. Thank you, Chairman Roberts and members of the
Committee. Thanks for the opportunity to testify today and the
work this Committee is doing to understand the challenges that
face agriculture.
I serve as the President of the National Farmers Union. We
represent about 200,000 family farmers, ranchers, and rural
members, and we work to improve the well-being and quality of
life for these folks by advocating for grassroots-driven policy
adopted annually by our membership.
Commodity programs, access to credit and crop insurance
will be key components of the 2017 farm bill, if it is
possible. This rings especially true as we continue to witness
pressure in the countryside as commodity prices remain low and
farmers and ranchers struggle to adjust.
We are three years into this downturn. Forecasts by USDA
point to a prolonged period of depressed prices. Given this
scenario, Farmers Union believes that the farm bill safety net
should provide meaningful assistance in two fundamental
circumstances--when disaster strikes and when prices are low
and remain below the cost of production for extended periods of
time. These two scenarios have separate solutions. The first is
crop insurance and the second is commodity programs.
Our current environment has negative implications for
producers' access to credit. During fiscal year 6, FSA set a
new record across its loan portfolio. Obligations of direct and
guaranteed operating and farm ownership loans reached $6.3
billion, highest in FSA's history. At the same time, servicing
metrics associated with the programs got worse, as
delinquencies rose and debt restructuring increased among
private sector lending. Confidence is down and stress on
portfolios are up, according to both public and private
reports. Nearly 90 percent of agricultural lenders report an
overall decline in farm profitability in the last 12 months.
To combat periods of prolonged low prices, our members
believe a strong safety net is required. Much discussion and
debate has centered on programs that fit the budget. Using the
budget as a starting and ending point for the nation's
agriculture safety net is problematic from our perspective.
Feeding the nation is a national security priority and should
be treated as such. As recently as April, the President
reaffirmed this belief--we must maintain farm programs that
help offset low prices until favorable prices return.
To that end, we urge this Committee to raise reference
prices under the PLC, improve operability of ARC, return cotton
as a covered commodity, and rework the dairy safety net. It is
important to note that last week the Senate Appropriations
Committee took important steps related to cotton and dairy, but
I would urge you to use this as a starting point, not a final
solution.
We must ensure that the next farm bill provides a
meaningful backstop for dairy and cotton operations. While we
encourage alterations to ARC, PLC, and MPP programs, our
members are concerned that the costs of improvements to one
program will come at the expense of another. NFU urges this
Committee to add money where needed in order to improve these
programs.
The assistance that Title 1 programs are providing is
complemented by the role of crop insurance, which provides an
essential risk management tool to farmers. Crop insurance
changes contained in the 2014 Farm Bill pertaining to policies
such as NAP and the Whole-Farm Revenue Protection program have
proven an important springboard for farmers, especially
beginning farmers, into crop insurance.
While both NAP and WFRP have a long way to go in the eyes
of these populations, they are an important introduction.
Farmers Union urges this Committee to look further at these
programs, specifically expanding beginning farmer discounts
from 5 to 10 years, reducing the record-keeping burdens that
have created a barrier to use, removing livestock operations
from being counted towards the livestock insurance cap, and
reworking the $1 million livestock liability limit on this
program.
Diversity on the farm leads to less risk. We should
encourage farmers to seek that additional diversity. Farmers
Union believes there are minor changes that can be made within
the federal crop insurance program that incentive rather than
punish producers seeking additional conservation benefits.
There are many challenges facing agriculture today. This
Committee faces a challenging task ahead as it begins to
grapple with these problems. Farm bill safety net needs to be
improved, crop insurance needs to be protected, and access to
credit needs to be increased, all for the benefit of family
farmers. Our collective is to continue working to provide help
when and where needed, and encourage the continued growth and
success of our most vital industry--agriculture.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Johnson can be found on page
125 in the appendix.]
Chairman Roberts. We thank you for your testimony. We turn
now to Ms. Shute.
STATEMENT OF LINDSEY LUSHER SHUTE, HEARTY ROOTS COMMUNITY FARM
AND CO-FOUNDER AND EXECUTIVE DIRECTOR, NATIONAL YOUNG FARMERS
COALITION, HUDSON, NEW YORK
Ms. Shute. Chairman Roberts, Ranking Member Stabenow--thank
you for the introduction--members of Committee, my name is
Lindsey Lusher Shute and it is a distinct honor to be here with
you today.
Our country needs farmers. The generation of men and women
who have stewarded our land, who have grown food for the nation
are aging, and there are simply not enough young people ready
to step up and take their place. Between 2007 and 2012, our
nation lost 90,000 principal operators. Farmers over the age of
65 now outnumber farmers under the age of 35 by a margin of 6-
to-1. Two-thirds of farmland is managed by someone aged 55 or
older. Then in the next five years, the span of the next farm
bill, we expect that 100 million acres of U.S. farmland will
need a new farmer.
The only way to bring young people back to agriculture is
to prove to them that it is a career worth pursuing. We must
prove to them that you can still start farming in your 20s,
when you have a good back, good knees, lots of energy. We must
prove to them that farming can support you through all stages
of life--through having children, through retirement, through
hardship. The only way that we are going to be able to prove
all of these things is to ensure that people who are young and
who are farming today, we have to make sure that they make it,
and that is why I am here.
Young Americans are farming, and many more are getting
trained. In the last Census of Agriculture, in fact, we saw the
first increase in the number of young people farming under 35
years old, the second time we have seen this in the last
century, so that is significant. If these farmers make it, I
believe more will follow. These millennials, multi-generational
farmers, first-generation farmers, veterans, former farm
workers, they are entrepreneurial and tough, but far too many
are finding that is just not enough.
Young farmers and ranchers struggle with finding farmland,
managing student debt, affording health care, as well as deep
biases that disadvantage women and people of color who are
farming. Land access is dire. Over the past 15 years, farmland
real estate prices have gone up by 150 percent, and as farmland
prices rise faster than farm incomes, farmland ownership, that
foundation of a successful family farm, grows further out of
reach.
Serving young farmers will require new ways of doing things
and working together to protect opportunity for all growers.
There are certainly changes that young farmers need in the next
farm bill and from USDA, but I want you to know that actions by
this Committee and USDA are making a difference, and we need to
build on this progress in the next farm bill.
FSA's microloans are essential. FSA's new beginning farmer
regional coordinators, and its cooperative agreements with
organizations like ours, are bringing these programs to more
farmers.
We urge FSA and USDA to finally modernize its services and
put them online. To address farmland prices, we need to address
the direct farm ownership loan limit up and pre-approve farmers
for loans so they can actually compete on the real estate
market with an FSA loan. Farmland conservation funding must
also be increased to keep prices in check and, of course, to
protect our land.
Farm safety net programs are critical and new products like
Whole-Farm Revenue Protection, NAP discounts for beginners, and
NAP buy-up are covering more growers and they should be fully
supported. But business models that young farmers are turning
to, like community-supported agriculture, CSA, like my farm,
they still do not fit these programs and many of them have no
insurance whatsoever.
We urge you to further strengthen the safety net and help
farmers to save for tough time through tax-deferred or tax-free
farmer savings accounts. These savings accounts could also help
young growers save for future farm needs.
We also encourage this Committee to address student debt.
Chairman Roberts, we are grateful for your efforts to expand GI
Bill benefits for veterans pursuing careers in agriculture.
That is tremendous. This is the right direction. We encourage
the Committee to explore ways that all young farmers pursuing
farm careers could manage student debt, because it is, frankly,
interfering with their ability to secure additional credit.
Farming is a career that is easy to love, but to recruit
the next generation of farmers it must also provide a decent
living. We look forward to working with the Committee to make
that possible.
On behalf of the National Young Farmers Coalition's 36
farmer-led chapters, thank you for this opportunity.
[The prepared statement of Ms. Shute can be found on page
224 in the appendix.]
Chairman Roberts. Ms. Shute, thank you so much for that
very excellent testimony regarding when and where the next
generation of farmers can come aboard.
Mr. Cole.
STATEMENT OF WILLIAM COLE, STONE CORNER FARMS AND CHAIRMAN,
CROP INSURANCE PROFESSIONALS ASSOCIATION, BATESVILLE,
MISSISSIPPI
Mr. Cole. Chairman Roberts, Ranking Member Stabenow, thank
you for the privilege to testify today. My name is William Cole
and I am a crop insurance agent from Batesville, Mississippi.
Speaking before this Committee is a little surreal. After
all, Chairman Roberts and many members of this Committee have
been the driving forces behind legislation that built the
framework for crop insurance to become what it is. Today,
farmers willingly pay $4 billion out of pocket each year and
insure more than 130 different crops on 90 percent of all U.S.
acres, 290 million acres in all, covering some $100 billion
worth of liability. Thank you, Mr. Chairman, and all the
members of this Committee for all you have done to ensure
American farmers and ranchers have something as basic as
insurance.
I am the Chairman of the Crop Insurance Professional
Association. CIPA agents sell in insurance just about every
state, serving the risk management needs of our producer
customers, so I greatly appreciate that mitigating risks is the
focus of today's hearing. Crop insurance helps farmers secure
credit, invest in better equipment and technology, and better
market their crops. It also stabilize the economies of our
rural communities, especially in natural disasters.
But it was not always this way. In my written testimony, I
spent considerable time on the 80-year history of crop
insurance, and especially the watershed laws of 1980, 1994, and
2000, that moved us to private delivery and laid the firm
foundation for the meteoric rise in both participation and
coverage levels over the last 20 years.
It is this growth that finally put an end to costly
unbudgeted, ad hoc crop loss disaster programs, and crop
insurance has served taxpayers and farmers well in other ways
too, consistently coming in under budget. Since the 2008 Farm
Bill, crop insurance has yielded some $17 billion in savings.
According to the June 2017 CBO update, we are now on target to
save taxpayers another $6.7 billion over the next 10 years.
Despite these great advances, there is still much room for
improvement. We believe it should be the goal of all crops and
regions to have access to high-quality, affordable options.
Certain changes made in the 2014 Farm Bill have helped. The
yield exclusion, expansion of enterprise units, whole-farm
insurance, and beginning farmer provisions have been very
successful.
But there are a few provisions that have not performed as
well. Linkage of conservation compliance to crop insurance is
an example of where we have gained little in exchange for a lot
of effort, and some tragic stories of lost coverage in the
wake.
Area plans of insurance, including SCO and STAX for cotton,
have also underperformed, we believe due to producer weariness
toward paying money for coverage that is not tailored to the
risk on their farm.
Looking forward to the 2018 Farm Bill, we believe that
Congress should consider the three following principles: that
the current farm bill is, in fact, below budget; that crop
insurance is critical and gives taxpayers a big bang for the
buck; and that farmers need a strong Title 1 for times of
depressed markets like these, and based on this, Congress
should proceed to enact a strong new farm bill.
We have to acknowledge that while crop insurance is
working, the critics have set it up as their big target.
Legislation backed by the Heritage Foundation and EWG would do
irreparable harm to farmers and ranchers. Dr. Art Barnaby of
Kansas State University sums it up this way: ``If all these
crop insurance changes were to pass, it would kill crop
insurance, and if just one of them were to pass, it would upset
the equilibrium and start the death spiral.''
What are they proposing and what would it impact? Well,
arbitrary limits on coverage and on premium discounts and an
AGI means test would damage the risk pool. Further cuts to A&O
and company rate of return would kill the private delivery, and
the publication of insurance contracts would be used to distort
information against farmers. At bottom, these proposals would
unravel the work Chairman Roberts did 17 years ago, and the
work of Senator Leahy 23 years ago, and return us to an annual
need for unbudgeted, ad hoc crop loss disaster programs. We
would strongly urge you to reject these proposals that are not
designed to reform but destroy.
Finally, I want to say a word about program integrity, the
reason CIPA was created 20 years ago. While any form of
insurance has its bad actors, the universe in crop insurance is
small. In most years, the farmer writes a check rather than the
insurance company. In 2016, only 19 percent of all policies
received an indemnity. Moreover, the improper payment rate was
just 2.02 percent, roughly half of the government-wide average.
So this is a good story but we can do even better, just as
working together we can enact a strong new farm bill, on time,
that fully protects federal crop insurance. CIPA stands ready
to help.
Thank you once again for the privilege of testifying today.
[The prepared statement of Mr. Cole can be found on page 85
in the appendix.]
Chairman Roberts. Mr. Cole, thank you for an excellent
statement.
Mr. Rutledge.
STATEMENT OF RON RUTLEDGE, PRESIDENT AND CEO, FARMERS MUTUAL
HAIL INSURANCE COMPANY OF IOWA, WEST DES MOINES, IOWA
Mr. Rutledge. Good morning, Chairman Roberts, Ranking
Member Stabenow, and distinguished members of the Senate Ag
Committee. I would like to thank you for having me here today
to testify about crop insurance and the vital role it plays in
providing risk management to farmers across the country. I
would also like to thank this Committee for all of the support
for crop insurance.
My name is Ron Rutledge and I am President and CEO of
Farmers Mutual Hail Insurance Company of Iowa, one of the 16
Approved Insurance Providers that sells crop insurance policies
to farmers and ranchers across the country. Farmers Mutual Hail
was founded by my great-grandfather in Iowa in 1893, and we
have been providing crop insurance to farmers for 125 years.
I am also Chairman of the Crop Insurance and Reinsurance
Bureau, and I am a Board member on the National Crop Insurance
Services.
As an Approved Insurance Provider, we underwrite crop
insurance policies, which means we share in bearing the risk of
policies so a taxpayer is not entirely on the hook for any
loss. We hire agents to sell policies and adjusters to assess
and confirm losses. We invest in technology, training, and
services to ensure the highest integrity of the program.
As an industry, we are proud to sell crop insurance in all
50 states and to all types of farmers. Our industry covers
farms of all sizes and covers more than 100 different
commodities, including a significant number of specialty crops.
For those crops without specific coverage, whole-farm revenue
insurance is available. Crop insurance is continuously evolving
and recent advances have included improvements in organic
policies and additional benefits for beginning ranchers and
farmers.
I cannot stress enough the breadth and depth of the
protection that is provided by crop insurance. Crop insurance
protects farmers and ranchers in every single state represented
in this room today. Crop insurance was purchased on almost 280
million acres of farmland in 2016, well over 90 percent of the
300 million acres available in the United States. Crop
insurance policies protected $95 billion worth of liabilities
in 2016. Crop insurance protected more than $18 billion in
liabilities for specialty crops alone, a number that has
increased significantly in recent years.
As you all know, crop insurance policies must be purchased
by farmers and only pay an indemnity when producers face a
verifiable loss above and beyond their deductible. Last year,
losses from drought were concentrated in the Northeast, with
New Hampshire and New York and Rhode Island all having losses
that exceeded the premiums for the year. Arkansas, Louisiana,
and North Carolina also had difficult years, with loss ratios
well over 100 percent.
This year, crop insurance will come to the assistance of
farmers in the Dakotas and Montana that are facing a
devastating drought; farmers in Alabama for losses from
Tropical Storm Cindy; farmers in Michigan for losses from the
double-whammy of a late spring freeze and flooding; and farmers
in Kansas who endured both prairie fires and late-season
snowstorms, and that is just so far. There is a lot of growing
season left.
Yet despite the critical role crop insurance plays in
providing fiscally responsible protection to farmers, we know
crop insurance will face attacks during the 2018 Farm Bill
process. I believe many of these attacks are fueled by
misinformation, which is covered in my written testimony but we
simply do not have time to cover it today.
I would like to point out, however, that on average, over
the last five years, 54 percent of Farmers Mutual Hail
customers paid premiums out of their own pockets and received
zero indemnity payments. That is not an investment looking to
earn a return; that is how insurance is supposed to work.
Today I would like to ask this Committee to continue your
support for the private sector delivery of crop insurance, as
well as for affordable and effective crop insurance for
producers of all sizes, crops, and regions. I ask that you
oppose efforts to harm crop insurance during the 2018 Farm
Bill, and specifically, I urge you to oppose the policies put
forward in the AFFIRM Act, or S. 1025. This bill includes
harmful policies such as cuts to the private sector delivery of
crop insurance, cuts to the premium discounts provided to
America's farmers and ranchers who purchase crop insurance, and
multiple forms of means testing.
Again, I thank you for having me here today and for your
continued support. I look forward to answering any questions
you have, and I am happy to be a continuous resource for you
during the farm bill process. Thank you.
[The prepared statement of Mr. Rutledge can be found on
page 180 in the appendix.]
Chairman Roberts. Well, thank you, Mr. Rutledge. I am going
to mark you and Mr. Cole down as being in favor of crop
insurance.
[Laughter.]
Chairman Roberts. Mrs. Minick.
STATEMENT OF MANDY MINICK, WASHINGTON STATE PRESIDENT,
NORTHWEST FARM CREDIT SERVICES, PASCO, WASHINGTON
Mrs. Minick. Mr. Chairman, Ranking Member Stabenow, and
members of the Committee, thank you for allowing me to testify
today on behalf of the farm credit system.
My name is Mandy Minick and I am the Washington President
of Northwest Farm Credit Services. We provide financing, crop
insurance, and related services to farmers, ranchers,
agribusinesses, commercial fisherman, timber producers, and
rural homeowners in Washington, Oregon, Idaho, Montana, and
Alaska. Northwest is part of the nationwide farm credit system.
Farm Credit's mission is to support rural communities and
agriculture with reliable, consistent credit and financial
services.
We are here today to talk and advocate for a strong farm
bill. Farm income has fallen, along with commodity prices, over
the past several years. Similar to the producers we serve, Farm
Credit built financial strength in anticipation of this
challenging economic cycle.
Like most, we could not predict when this cycle would begin
or end, but experience told us it was coming and our
institutions prepared for it. We built capital, we loaned
conservatively. Today, Farm Credit is financially stronger than
it has ever been, and is prepared to use those strengths to
support our customer-owners and continue to fulfill our
mission.
Our philosophy on credit today is this: we know our
customers well, understand, and respond to their needs, and
work cooperatively with them to analyze and structure
transactions to provide them with the best chance to succeed.
The current cycle in agriculture makes this Committee's
work on the next farm bill crucial. We need a strong farm bill
to provide a safety net against sustained market downturns. We
strongly support maintaining and improving federal crop
insurance programs, along with agriculture risk coverage and
Price Loss Coverage programs. This is the heart of a strong
farm bill.
Whole-Farm Revenue Protection has expanded options for
specialty crop, organic, and diversified crop producers,
allowing them to insure all their crops at once instead of one
commodity at a time. A viable federal crop insurance program,
including WFRP, is vital to the flow of credit to farmers and
ranchers, particularly those that are young and beginning, who
typically have less collateral and equity.
Without the risk protections provided by crop insurance,
agricultural lenders would have to tighten underwriting
standards, making it more difficult for farmers to plant crops
and replace capital assets. Economic growth would slow and
rural communities would suffer.
As the farm economy continues to soften, Farm Service
Agency guaranteed and direct loans are even more important,
particularly for young and beginning producers. We are grateful
for the leadership of Senator Hoeven on this issue, as I
understand he is working to enhance the current FSA guarantee
limit. FSA guarantees provide Farm Credit institutions
additional flexibility to help customers survive a potentially
extended economic downturn.
Infrastructure that supports rural communities and links
them to global markets has helped make the U.S. the
unquestionable leader in agricultural production. However, our
deteriorating infrastructure threatens this leadership
position.
We hope that the Committee will urge the Farm Credit
Administration to re-establish a program that facilities
partnerships between Farm Credit, commercial banks, and USDA to
build community facilities in rural areas.
The lack of a reliable, stable, and legal workforce
threatens the economic health of our farmers. The labor
shortage negatively impacts our economic competitiveness, local
economies, and jobs. We need an appropriate reform to address
the agricultural labor shortage.
Thank you again for allowing me to testify, and we look
forward to working with the Committee to pass the farm bill.
[The prepared statement of Mrs. Minick can be found on page
151 in the appendix.]
Chairman Roberts. We thank you very much for your
testimony.
Mrs. Kluesner.
STATEMENT OF BRENDA KLUESNER, LOAN OFFICER AND CROP INSURANCE
MANAGER, ROYAL BANK, CASSVILLE, WISCONSIN.
Mrs. Kluesner. Thank you, Mr. Chairman. I am Brenda
Kluesner, Loan Officer and Crop Insurance Manager at Royal
Bank, Cassville, Wisconsin, testifying on behalf of ICBA.
Royal Bank is a $400 million community bank, serving 19
Wisconsin locations, with over $90 million in ag loans, and
providing crop insurance for over 20,000 acres. Our nation's
5,800 community banks are vital to agriculture. Passing the new
farm bill next fall will be helpful, and a five-year time frame
will provide certainty for farmers and their lenders making
business planning decisions.
My testimony suggests five principles for the next farm
bill: provide adequate funding to weather a potential farm
income or farm credit crisis; consider any program changes that
could help producers and the banks that serve them; require
agencies to reduce regulatory burdens; ensure no regulations be
adopted not based on specific statutes or which add regulatory
burdens; require agencies to treat program participants
equally; direct government loan programs should complement, not
subtract, from private sector lending.
Community banks have been lending at historically low
interest rates. After four years of declining farm income, USDA
projects net farm income at one half of the levels of 2013. The
decline in farm income has stressed the abilities of money
borrowers to cash flow. Many farmers have strong equity but not
enough working capital or positive cash flow. Demand for debt
restructuring will increase. Bankers are concerned regulators
may overreact, classifying loans with negative cash flows
despite strong land equity.
Following are recommendations from ICBA ag bankers.
Provide adequate funding. USDA guaranteed loan programs run
out of money in times like these. We need flexibility so USDA
can transfer unused surplus funds between programs or from CCC.
We suggest permanent legislative authority. Similar authority
could be in place for direct loans and the business and
industry loan program.
Raise loan volume caps. Loan limits on USDA farm loans are
too low. Higher loan limits are warranted given dramatic
increases in cost of inputs and farmland. The guaranteed
ownership program is self-funding, and the operating program is
very low cost, providing billions of dollars of credit to
farmers unable to obtain credit.
Minimize origination fees, which discourage use. Minimize
paperwork. Remove USDA's 12-to 24-month waiting period to
refinance from FSA guaranteed loans when there has been any
type of ground disturbance. Provide flexibility when financing
loans across state lines, as USDA requirements often differ
among states. Increase USDA staffing levels to quicken approval
times and update USDA software. Allow banks to choose which
USDA-FSA office to work with to ensure a timely loan approval
process. Support Farmer Mac's technical changes.
Regulators classify farm loans if farmers miss an
occasional payment, even if farmers have strong equity. With a
90 percent USDA guarantee, the loan amount of a classified loan
is reduced 90 percent. A $1 million loan would only have
$100,000 classified. This helps banks keep farmers in business
without the bank being under regulator-imposed enforcement
action.
We need a strong farm safety net with a strong farm bill
and crop insurance program, both vital to producers and
lenders. We also need a very robust USDA guarantee loan program
which can help thousand of farmers farming in the potentially
stressful times ahead.
We look forward to working with you.
[The prepared statement of Mrs. Kluesner can be found on
page 131 in the appendix.]
Chairman Roberts. Thank you very much for your testimony.
For Mr. Cole and Mr. Rutledge, thank you for the work that
you do to provide crop insurance to farmers and ranchers. We
had a change back in the 2014 Farm Bill, which I deem as
unneeded, costly, burdensome, and that was the addition of
conservation compliance to crop insurance. As the Department
implemented this additional requirement, what issues have
producers, agents, and companies encountered with conservation
compliance?
Mr. Cole. I will start, Mr. Chairman. As you well know, the
intention was to bring more farmers into compliance and not go
the other way, where they lose coverage. It is so punitive
especially for our friends that have specialty crops in the
Northwest where they might not have ever been in a program and
they do not really know that they are out of compliance, and
then they miss a date, and they receive harsh penalties. So if
conservation compliance stays in place then we have got to
simplify these rules without the punitive penalties where they
lose coverage.
Chairman Roberts. Mr. Rutledge, anything?
Mr. Rutledge. Certainly. We had our challenges too.
Obviously it is a lot of work any time those kinds of changes
are put in, in terms of updating IT, and getting the processes
in place.
There were some data issues and some unintended
consequences, I think, from it. I do have to acknowledge, if I
may, the AIPs and agents like Mr. Cole, who all worked very
hard together to get out and contact the producers who were not
in compliance and get them in compliance before the compliance
dates passed. There were some exceptions and hopefully we can
avoid those in the future.
Chairman Roberts. Mrs. Minick, on page 7 of your testimony,
paragraph 4, ``Farm Credit helped organize Rebuild Rural, a
coalition of more than 200 organizations representing ag
producers, rural businesses, rural communities, rural families
to advocate for aggressive efforts to meet the unique
infrastructure needs of rural communities and agriculture.''
You have apparently asked the President to specifically address
rural infrastructure needs as part of his administration's
comprehensive infrastructure renewal efforts, and you have been
encouraged, as you have indicated here.
Talk to us a little bit about Rebuild Rural.
Mrs. Minick. Sure. So as we talked before, the rural
communities need to be strong, for lots of reasons, to have a
strong farm economy, to attract young folks back and want to
join in on that. So a lot of that revolves around the services
that are provided there--medical, personal health, Internet--
all those kinds of things that attract folks that want--they
want the same services that they have there in urban areas to
be in rural areas. Very important for our young and beginning.
Also, that infrastructure is so important to make sure that
we maintain our leadership role in the long run in the world
markets, and being able to get products easily and efficiently
from where they are produced, from the farm gate to the ports,
is so important. So that is why we feel that we need to make
sure that as we go forward building infrastructure that it is
not only in the urban areas but in the rural areas as well.
Chairman Roberts. I appreciate that very much.
Mrs. Kluesner, I am looking through your entire statement
here, but you were mentioning the role of the regulator, and
obviously we have to have regulators. But I remember back in
the 2008 days, where regulators were coming in, and instead of
going mark to market they were going to mark to whatever they
determined, and in my view made the situation much worse.
What do you see out there right now, given the situation we
are in and the rough patch we are going through, on the part of
the regulators, and how--I am not trying to have you single
anybody out, but just where do you see this going right now?
Mrs. Kluesner. Well, right now we are not as dire as what I
believe it is going to be this fall, with commodity prices. You
know, with utilizing the USDA guaranteed loan programs, any
problem loans only count as 10 percent of the bank's capital if
the loan is classified, so it is just going to help us by
utilizing the USDA guaranteed loans. It will help satisfy
regulator. But regulators need to work with the banks and not
overreact.
Chairman Roberts. For anybody on the panel, if you can
mention one thing that we need to do, on the Committee, and for
that matter, with regards to our farm program policy, to see
some price recovery, what would it be? I will give you a hint--
I am aiming at exports. But, anyway, go ahead, Mr. Haney.
Mr. Haney. Yes, sir. We are certainly a free trade
organization and we understand exports is at the top of the
list. Certainly labor is going to be a big issue for our
industry as well, and how we deal with that labor issue.
Chairman Roberts. Roger?
Mr. Johnson. Well, sir, we agree that exports are very
important. We are in a challenging environment right now with
an administration that, while we agree with much of what he
says, in terms of trade philosophy, I think most of us would
disagree with some of the tactics. Words matter, and the
ability to lose export markets, they are pretty fragile. When
countries are offended they look elsewhere, and we are seeing
some of that. So certainly with respect to exports, I think
there are some different approaches we could take.
I do think it is really important that, to your base
question, we have a safety net that really works, and in our
view, you need a safety net really in two fundamental
circumstances--when market prices are bad, below cost of
production, and when disasters strike, and I talk about that
quite a bit in my testimony. I guess that is what I would urge
the Committee to really focus on. Thank you.
Chairman Roberts. Ms. Shute?
Ms. Shute. Our farmers are focused on the direct market,
selling direct to consumer, typically domestically, and their
foundation of profitability really depends on their land--how
much they are paying in rent and mortgage payment, if
applicable. So land access is the single most difficult issue
for young and beginning farmers. So if I were to say if there
was any issue you should focus on in the next farm bill it is
figuring out how we can make sure that land is transferred from
the existing generation of farmers to the next, in a way that
is affordable and really supports a family-scale farm.
Within that, we need to improve FSA services. As I said, we
need preapproval, we need to increase direct farm ownership
loan limits. We also need to consider tax incentives that would
actually encourage farmers, enable some farmers to pass their
land down to the next generation and also encourage farmers to
sell to the next generation of working farmers.
Chairman Roberts. We will mark you down on behalf of estate
tax reform, and I hope we get to tax reform. I will just leave
it at that.
Mr. Cole.
Mr. Cole. Yes, sir. At CIPA we are continuously working to
improve crop insurance protection, not only on the yield side
but we also keep working to expand it to other crops and also
to provide more support when prices fall, where farmers are not
just looking at PLC or ARC, but they also have crop insurance
to step in and help fill the gap as well.
Chairman Roberts. Mr. Rutledge.
Mr. Rutledge. I guess I would just say, do not throw the
baby out with the bath water. The 2014 Farm Bill was a very
solid bill--job well done--and a few tweaks to some of the
programs now will serve us just fine.
Chairman Roberts. I think I can speak on behalf of Senator
Stabenow and myself that this is no time for revolutionary
ideas. Stability and predictability, I think, are the two key
words.
Mrs. Minick.
Mrs. Minick. Yes, on that stability as far as keeping
families on the farms, being able to pass them on to the next
generation, so keeping the programs that give that safety net a
strong farm crop insurance program and then the ability for
private institutions to work with FSA to help out even in some
of these cycles are very important.
Chairman Roberts. Ms. Kluesner.
Mrs. Kluesner. A five-year time frame will allow long-term
business planning for farmers. A strong commodity safety net
allows us to make the long-term price projections and work with
the farmers. It is very important not only for today's farmers
but it also helps us prepare the way for the next generation.
Chairman Roberts. I thank you all for your testimony. That
will conclude our hearing today, with the exception of the
comments by the distinguished Ranking Member. Almost forgot
you.
Senator Stabenow. That is right. Thank you, Mr. Chairman,
and thank you to all of you. I think, Mrs. Kluesner, at the end
you were talking about, you mentioned five-year farm bill, and
I think it is so important that we stress that we are not
limping along year to year to year, that the fact that this is
a five-year economic development strategy is very important. It
should be at least five years. Actually, the stability the
Chairman talked about was so very important when you are trying
to plan, and our farmers are trying to do this. It is risky
enough without having us add to it.
So I do want to start with one thing, Mr. Cole, because you
were talking about conservation compliance, and I just want to
follow up on that, because conservation compliance actually is
not a new idea for the majority of farmers. It has been around
for 30 years. The USDA testified in front of our Committee just
last month that 99 percent of producers are meeting the new
conservation compliance requirements established in the 2000
Farm Bill. For those who are new, the Department provides
several exemptions to reduce the number of farmers who may lose
premium insurance.
So I wondered--I am just a little confused and I want to
clarify your statements, because--can you tell me if anyone
that you serve or personally know has actually lost the federal
premium support due to these provisions?
Mr. Cole. I do not personally, because most of our
producers in the South have produced program crops for years.
But now, the biggest problem is timing. We are not saying that
conservation compliance is not a very good thing. Our producers
need to be in compliance. But I think it is more of a
regulatory issue, including the timing aspect of it, such as
when farmers get the paperwork filed with their farm service
agency, if they miss something, or if they change their
operation, or have a death in the family. There needs to be
some exemptions. We have had to work with our customers and
help, through CIPA, to try and find a way that we can get them
back into compliance.
So it is a good thing. We have just got to simplify it,
where the producers do not have such a problem and possibly do
miss out on these benefits.
Senator Stabenow. Okay. Well, that is important
clarification. You are talking about specialty crops as well,
which I represent----
Mr. Cole. Yes, ma'am.
Senator Stabenow. --a lot of in Michigan. I have not heard
specific concerns at this point about that, when we did the
hearing in Michigan.
Mr. Rutledge, the same question. Do you know of anyone in
Iowa who has actually lost their federal premium support?
Mr. Rutledge. We had one situation where a beginning
producer missed the filing date, and it took some time to
straighten out. I think it was, in the end. But that is the
biggest problem we had, and is, I think, similar to some of the
problems Mr. Cole ran into. If you did not hit the right date
or had an entity change or land change past the date, there was
no way to get in compliance for the current year. I do believe
RMA has straightened that out with their latest bulletin.
Senator Stabenow. Okay. Good. Thank you. Mr. Johnson, Mr.
Haney, the Farm Bureau, the Farmers Union, the National Milk
Producers had proposed in the spring I think an innovative idea
to improve dairy insurance options administratively, and I know
that Mr. Nobis talked about that on the first panel, and it
makes sense to me. I wonder if you could each briefly expand on
that, and do you support expanding the benefits of crop
insurance for dairy?
Mr. Haney. Yes, ma'am. Thank you. We certainly--this gives
me an opportunity to talk about the work that our staff has
done at American Farm Bureau on working with industry and being
able to really help produce another tool in the toolbox, I
would say. Maybe not the answer to everything but certainly an
insurance product that would allow a producer to have skin in
the game and certainly purchase more coverage, we think, is
probably the right way to go.
Senator Stabenow. Thank you. Mr. Johnson.
Mr. Johnson. Well, yes, thank you, Senator Stabenow, for
the question. You know, fundamentally this is probably a
question about the money, and I know that is an issue that you
all struggle with mightily as you try to write a farm bill
within the confines of a budget. One of the, I think the
innovative ideas around this is if it can be funded through the
risk management, crop insurance angle, then the budgetary
implications are significantly different. So to the degree that
you can figure out how to finesse that, that would be a very
good thing.
The reason I think this idea emerged is because we had a
dairy task force that was put together a year or more ago from
among our membership, and reached out to others in the industry
as well. There was, as you know, an enormous amount of concern
about the economic problems facing the dairy sector, and there
just is not enough budget authority to do justice to a dairy
title, to try and fix this problem.
So one of the things that we learned in that process was
there are a lot of folks that talked about the LGM program,
which, of course, is this very restrictive limit on crop
insurance, dairy program, and so the argument was made, if you
can sort of define milk as something different than cattle then
maybe you can do this through RMA, and we would encourage you
to pursue that approach. It may be a way to get some more
resources into an industry that direly needs some support.
Senator Stabenow. Thank you. Well, we did give authority to
the Secretary to designate and to a crop insurance board to be
able to expand crop insurance. That is how we did it----
Mr. Johnson. Yes. We appreciate that.
Senator Stabenow. --within the 2014 Farm Bill. So it is
certainly something that can be done under existing authority.
Mr. Johnson. Yes.
Senator Stabenow. Just as a follow-up, Mr. Rutledge, Mr.
Cole, from a crop insurance perspective, would you support and
see benefits from expanding the crop insurance options
available to dairy farmers?
Mr. Rutledge. Certainly we would and we would like to see a
policy similar to what is in place now that is actuarially
sound. I am sure we could deliver one.
Senator Stabenow. Mr. Cole.
Mr. Cole. Milk and dairy are not my areas of expertise but
I do know that milk does not need to be classified as livestock
and should be taken out from under the cap so dairy farmers can
actually get a crop insurance policy.
Senator Stabenow. Thank you. Thank you very much, Mr.
Chairman.
Chairman Roberts. Senator Van Hollen, I am delighted to
recognize you now, sir. You have been waiting a long time. You
were first in the Committee room, so I am delighted to
recognize you.
Senator Van Hollen. Thank you, Mr. Chairman, and I am sorry
I was not able to make the entire hearing in and out, but I
understand that you have covered some of the questions I
intended to ask, so I will try and keep this brief.
But I did have a question, Mrs. Minick, especially with
respect to using farm credit to help expand and develop
infrastructure in rural areas, including energy infrastructure
but also specifically broadband. Is there a role for farm
credit in bringing greater access to broadband, and exactly
what have we done so far?
Mrs. Minick. I will speak to that a little bit and then our
banking partners, which are CoBank and AgriBank, they are
charted differently than some of the farm credit associations,
and so they have the ability to do some of that infrastructure
that the associations themselves do not.
Senator Van Hollen. Okay.
Mrs. Minick. So to answer your question, yes, we have a
very vested interest in making sure that rural infrastructure
is there, for lots of different reasons--for a strong farm
economy, for vital rural communities, for attracting folks and
making them want to live there, and to be able to have a viable
businesses. So all of those infrastructure points are very
important to us.
Senator Van Hollen. Anybody else care to comment on whether
or not we have been able to use access to this farm credit for
the kind of infrastructure I am referring to--broadband and
that kind of thing? Is there--so we have not been successful in
using farm credit to build out that kind of infrastructure so
far. Is that right?
[No audible response.]
Senator Van Hollen. Does anybody know? Okay.
Mr. Haney. I am sorry. There has certainly been an effort
to build up broadband, various means, but whether it was farm
credit----
Senator Van Hollen. I got it. Okay. Thank you.
Mr. Haney. --we do not know.
Senator Van Hollen. Can I--so in Maryland we have a great
rural agriculture sector. We also have a rising interest in
urban agriculture. Can you tell me whether any of the programs
you are talking about, especially farm credit programs, how
they are currently being applied, if they are being applied in
the area of urban agriculture? Obviously totally different
profiles and so I am just curious.
Mrs. Minick. Sure. Sure. I will talk a little bit, when you
are saying farm credit I think you are meaning the farm credit
system but also then credit available to farmers. Right? So
both of those.
Senator Van Hollen. Yes.
Mrs. Minick. So I will talk to the farm credit system piece
of that and then someone else can address the other part.
In Northwest Farm Credit we have a lot of folks that
participate in the CSAs and those kinds of things as well,
especially our urban areas around Seattle and that kind of
thing. We have some great young and beginning programs. We call
that Ag Vision. It really helps with the capital needed for
that. Not only is their interest rate rebates in there for
people that are just getting started but also that program is
really hinged on education, so we offer a lot of educational
programs for folks to come to, all the way from filling out
your basic financial statement to succession planning and a lot
of different things that go in there.
I think we heard earlier today that oftentimes, for young
and beginning farmers, they enjoy and they can understand the
farm side of things, but getting the financial and the business
side of it down is a little bit harder. At Northwest Farm
Credit, our Board, who are also farmers, they challenge us to
grow that Ag Vision program by 15 percent a year, so that is
really part of the initiative, and we are seeing that not only
in our very rural areas but help in the urban areas. I think it
is really important to make sure that consumer has a great tie
to where their food is coming from, and that is really
important for agriculture in the long run.
Mr. Haney. May I address, again, the broadband question
from a personal angle just a little bit? We are certainly, in
the fruit business, have a retail market on the farm. Broadband
build-out is more important now than ever. As we go through
this local food transition across the nation, we have to be
able to really conduct commerce at the farm, not at the
marketplace but at the farm level now, everything from being
able to swipe a credit card to being able to market the most
effective way we market from our products anymore, and that is
through social media and online advertising. So the importance
of being able to connect the United States certainly to us and
to farmers is more important now than ever.
Senator Van Hollen. I appreciate that. I think it would be
integral to people's efforts these days, and that is why I was
wondering if we sort of expanded the reach of some of these
programs to provide for broadband. But I look forward to
following up with all of you.
Thank you. Thank you, Mr. Chairman.
Chairman Roberts. Senator, thank you for an excellent
question.
This is going to conclude our hearing today. I want to
thank each of our witnesses for taking time to share your view
on risk management tools, including the commodities, credit,
and crop insurance programs. The testimonies and conversations
are invaluable for the committee to hear first-hand. They will
not collect dust.
While we have much more work ahead of us, we now have held
hearings and gathered support related to eight of the farm bill
titles. Please go to ag.senate.gov and click on the Farm Bill
Hearing box on the left-hand side of your screen, not the right
but the left. That link will be open for five business days
following today's hearing. To my fellow members, we would ask
that any additional questions you may have for the record be
submitted to the Committee Clerk five business days from today,
or by 5 p.m. next Tuesday, August 1st.
The Committee stands adjourned.
[Whereupon, at 12:23 p.m., the committee was adjourned.]
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