**Testimony of**

**Rick L. Schwein**

**Senior Vice President**

**Grain Millers, Inc.**

**Eden Prairie, MN**

**On behalf of the**

**North American Millers' Association**

**Before the**

**House Agriculture Committee**

**Subcommittee on General Farm Commodities and**

**Risk Management**

***Crop Provisions of the***

***Farm Security and Rural Investment Act of 2002***

**April 26, 2007**

Thank you Chairman Etheridge, Congressman Moran and members of the
subcommittee. I am Rick Schwein, senior vice president of Grain Millers,
Inc. Grain Millers is a privately owned processor headquartered in Eden
Prairie, a suburb of Minneapolis, Minnesota.

Grain Millers owns and operates two mills in the US -- St. Ansgar, Iowa
and Eugene, Oregon as well as a mill in Canada. We are one of the
world's largest suppliers of milled oat products to the food industry.
We produce oat meal, oat bran and oat flour for use by most of the major
US food manufacturers. We pack private label and branded hot cereals and
process and blend wheat, barley and rye to meet the growing demand for
whole grain and organic products. Our products are used throughout North
America as well as exported to both Central and South America.

I have been in the grain and milling industry for more than 30 years and
am here today representing the North American Millers\' Association, of
which I am the current chairman. NAMA is the trade association
representing 48 companies that operate 170 wheat, oat and corn mills in
38 states. Their collective production capacity exceeds 160 million
pounds of product each day, more than 95 percent of the total industry
production.

**[Where we are today]{.underline}**

**Oats**

2006 oat production was a mere 107 million bushels, the lowest since
USDA began keeping records in 1866, shortly after President Lincoln
created the Department of Agriculture. There are just too many reasons
for growers to plant something else.

![](media/image1.pct)

To illustrate the decline, consider that the US produced 384 million
bushels of oats in 1986. That would fill a train stretching from Fargo
to St. Louis. A train filled with last year's production would stretch
from Fargo to 30 miles short of Minneapolis.

This dramatic production loss has led directly to the major relocation
of the oat milling industry over the past 15 years. Since the early
1990's, a number of millers have ceased operations in the US entirely.
Most of that processing capacity has moved to Canada, taking hundreds of
industry jobs with it.

**North American Oat Acreage, 1975**

![](media/image2.pct){width="3.2944444444444443in"
height="2.5430555555555556in"}

**North American Oat Acreage, 2006**

![](media/image3.pct){width="3.311111111111111in"
height="2.5902777777777777in"}

Source: Informa Economics

**Wheat**

US wheat production is headed in the same direction as oats. US wheat
plantings the last three years were the lowest since 1972. The area
planted to wheat has dropped by 18 million acres, or 24 percent, in just
10 years.

In Kansas, the decline in land planted to wheat is equivalent to the
entire production from its four largest producing counties. It's as if
farmers in those top four counties just stopped growing wheat. In North
Dakota, the decline is equal to the nine largest producing counties
getting out of wheat production completely.

![](media/image4.pct)

Not too many years ago the thought that the US would import cereal
grains was unthinkable. Now, however, food oats consumed in the US are
nearly 100 percent imported.

Likewise, in most years, US production of hard red spring wheat for
bread and durum wheat for pasta are insufficient to meet total usage
(aggregate of domestic consumption, exports, seed and reasonable
carryover) and millers must rely on imports to augment the US crop.

Those imports have caused regrettable friction between millers and
growers. As millers, our first choice is always to buy American grain
when possible. But I can tell you today, imports of wheat and oats into
the US will continue and, absent action by Congress, will likely
increase.

**[How did we get here?]{.underline}**

There are multiple reasons for the precipitous declines in wheat and oat
production, but I will focus this testimony on these three principal
factors: federal farm programs, the Conservation Reserve Program and the
agronomic advantages of competing crops.

[Federal farm programs]{.underline} -- Through the current programs,
Uncle Sam is loudly telling growers "Don't plant wheat or oats!" At the
same time the US government is encouraging them to grow other crops like
corn and soybeans, which hardly need encouragement given the President's
biofuels mandate.

At least with corn and soybeans it is obvious there are major markets
for those crops. We save particular disdain for program payments that
have provided huge incentives for growers to stop growing crops the US
consumes, principally wheat and oats, in favor of crops like field peas
and lentils, for which the domestic demand is insignificant relative to
our consumption of cereal grains. We assume this was an unintended
consequence of the last farm bill.

These programs are bad policy on so many levels, if one wants to
criticize them, it's hard to know where to start. They spend taxpayer
dollars to encourage the production of crops that the US does not
consume in any significant amount at the expense of crops we do. The
market price for them is so low (no surprise, since they are unwanted in
the US) they are mostly attractive as cheap protein sources for foreign
meat and poultry producers.

The combined US production of dry peas and lentils has increased by an
amazing 950,000 acres in just five years. To be clear, we oppose
programs that distort the market for any crop, but I say only half in
jest that, if the US government wants to pile crazy incentives on crops
perhaps the target ought to be food crops this country needs.

[Conservation Reserve Program]{.underline} -- Since 1986 the CRP has
idled as much as 36 million acres, concentrated in traditional wheat and
oat growing regions. Some of that land is highly erodible, never should
have been planted to crops in the first place, and should remain in some
conservation program. However, a major share of the CRP could be farmed
in environmentally sustainable ways, especially with modern low or no
till practices.

[Agronomic advantages of competing crop]{.underline} -- Traditionally,
wheat was the best crop option for growers on the Great Plains. Corn and
soybeans that generated higher returns in the Corn Belt were not suited
to the arid climate of the Plains, nor were they suited for the shorter
growing season of the northern plains.

In recent years, however, genetic advances in corn and soybeans have
changed that equation. Corn varieties flourish in the Plains growing
regions, as do short season soybeans that mature before the early frosts
of the northern Plains.

In short, now that producers CAN grow corn and soybeans in those
regions, they ARE growing them. Government policies have made it
desirable, but agronomics have made it possible.

Table 1: Crop Yield Growth Compared, 1930-06

![](media/image5.pct){width="5.372916666666667in"
height="2.9243055555555557in"}

Source: Informa Economics

![](media/image6.png){width="5.477083333333334in"
height="4.231944444444444in"}

Ironically, demand for oat and other whole grain products is rising.
Many companies are continuing to invest in processing capacity in the
US. My employer, for example, is investing \$20 million to expand the
capacity of its mill in Iowa. Regrettably, the oats for that Iowa mill
will be grown in Canada.

**[Recommendations]{.underline}**

[Farm program]{.underline} -- As Congress writes the next farm bill, it
has an opportunity to breathe life into these vital strategic
industries. For whatever amount of money Congress decides is necessary
for a safety net for growers, we implore you to find mechanisms for
distributing that money in ways that do not distort their planting
decisions. We must end up with a farm bill that allows the market to
determine what crops are planted.

Wheat and oat millers are willing to compete with processors of
competing crops to encourage farmers to plant more of the cereal grains
we need. But we cannot compete with the treasury of the US Government.

[Conservation Reserve Program]{.underline} -- NAMA supports retaining
environmentally sensitive land in a conservation program. However,
probably two-thirds of the 36 million acres currently enrolled in the
CRP could be farmed without sacrificing environmental goals, especially
through low and no tillage farming practices that have evolved since the
CRP's inception in 1986.

At the same time, the US' environmental goals can be best met by
focusing conservation dollars on waterway filter strips and similar
areas which provide the best return on investment. Also, CRP rules must
be changed to add flexibility so that growers can respond to market
signals without extreme penalties, as is currently the case. Failure to
significantly reform CRP will mean that reducing our dependence on
foreign oil may result in increased dependence on foreign grain.

For decades we have known that growing corn after corn after corn is not
desirable for either environmental or disease and insect management
reasons. Yet that's exactly what is being encouraged.

Another benefit of releasing a substantial portion of the CRP is that it
would be an excellent way to respond to the need for land to produce
organic grains, which on a percentage basis is the fastest growing
segment of the industry.

[Research]{.underline} -- Wheat and oat yields lag behind other crop
options, especially corn and soybeans. And, with each passing year, the
lag for wheat and oats gets more pronounced.

Wheat and oat research is nearly all federally funded, at a combined
total of about \$50 million annually. Compare that with private corn
research efforts where multiple companies [each]{.underline} invest more
than one million dollars every day. No surprise then that wheat and oat
yields lag behind, and that disadvantage widens each year.

**[Summary]{.underline}**

It is the height of irony that the US government, through the 2005 US
Dietary Guidelines, encourages consumers to eat more grains but at the
same time is very directly discouraging growers from producing those
same grains.

NAMA believes Congress has a major opportunity to improve conditions for
the wheat and oat industry, from grower through end consumer. This can
be achieved by reforming the CRP to allow sustainable acres back into
production, reforming the farm program to reduce government-caused
distortions of production decisions and investing in research to give
growers better crop options.

Thank you very much for this chance to share our views. If you have any
questions I am happy to answer them.

For additional information contact:

Jim Bair

Vice President

North American Millers' Association

2200. Ext. 14

<jbair@namamillers.org>

**Rick L. Schwein**

**Senior Vice President**

**Grain Millers, Inc.**

Rick L. Schwein is Senior Vice President for Grain Millers, Inc.
headquartered in Eden Prairie, Minnesota. He is also the President of
Grain Millers Canada Corp.

Grain Millers operates three mills throughout North America providing
both conventional and organic oat, wheat, corn and barley products to
food processors throughout the continent.

Prior to joining Grain Millers, Rick was President of La Crosse Milling
Company for 10 years after enjoying a 16-year career with General Mills,
Inc. in purchasing and grain merchandising functions.  Rick is an honors
graduate of Michigan State University and has more than 30 years of
grain and milling experience.

He has been active in the industry having served on the Executive
Committee, and as current chairman, of the North American Millers'
Association. He is a former member of the Chicago Board of Trade as well
as the Minneapolis Grain Exchange.

![](media/image7.png){width="6.093055555555556in"
height="7.885416666666667in"}