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**United States Department of Agriculture---2007 Farm Bill Theme Paper**

**Strengthening the Foundation for**

**Future Growth in U.S. Agriculture**

**September 2006**

**I. Introduction**

This paper is the fifth and final in a series of briefing papers that
assess general themes advanced at the 2007 Farm Bill Forums held during
2005 by Secretary Mike Johanns as well as related issues that have
emerged in recent months. The first four papers focused on production
agriculture and its links to risk management, conservation, rural
development, and energy. This final paper provides an overview of the
changing agricultural marketplace and the key forces that underlie the
competitiveness of American farmers.

The first section provides an overview of the major trends in the food
marketplace and the strategies that farmers have employed to remain
competitive in this changing environment. The next three sections
provide a discussion of issues related to international trade, the
research and development that leads to new technologies, and the
protection of agriculture from pests and diseases---three of the key
driving forces shaping the agricultural marketplace. The final section
of the paper discusses challenges and issues in preparing new farmers
for this competitive marketplace, especially the next generation of
farmers. Each section concludes with a discussion of some key issues and
challenges for the 2007 Farm Bill debate.

**II. The Changing Agricultural Marketplace**

Farmers in the United States benefit from a rich natural resource base,
a long history of investments in research and infrastructure, and a
large consumer market for their products. They have long been considered
among the world's most competitive. Rising exports from competitors and
ongoing structural change across the entire food and agricultural system
have raised questions about future prosperity in agriculture.

**Markets and the Competitiveness of American Farmers**

A farmer in the 21^st^ century produces for an increasingly complex and
competitive marketplace driven by today's varied consumer demands and
supplied by highly competitive producers from around the globe.
Consumers seek tasty food that is convenient, nutritious, and
inexpensive. American farmers have responded to these opportunities
through changes in the types of crops and animals produced, closer links
with food manufacturers, and by adopting new technology and management
practices to meet the market's cost and quality dictates.

**Consumer-driven agriculture.** American consumers have high
expectations for the food they eat: variety, taste, nutrition, and
safety represent just the basics. In addition, consumers increasingly
purchase food for other attributes such as convenience or organic
production practices. Against this backdrop of varied demands for food,
price still matters. With low food prices and increasing affluence,
American consumers spend on average only 10 percent of their disposable
income on food, the lowest percentage in the world.

Consumers' high expectations for their food have driven change across
the entire food system. Their varied preferences for price and quality
support multiple business models in food retailing, manufacturing, and
farming. One strategy is to develop tighter supply chains so that
signals from consumers are directed quickly to farmers. For example, the
pork industry has become highly integrated and delivers an ever evolving
array of convenience products such as marinated tenderloins and ribs.
Another strategy is to focus on niche markets including providing
environmental services. Producing crops for energy markets represents
yet another opportunity for farmers. Farmers also engage increasingly in
other farm-related businesses such as custom work and tourism.

**Farmers respond to market opportunities.** To remain competitive
farmers have followed diverse paths that include changes in the crops
and livestock produced, size of operation, types of business
arrangements, and increased participation in off-farm jobs. The mix of
crops and livestock has evolved in line with consumer demands as seen by
the growing share of broilers in livestock receipts and similarly the
growth in specialty crops in crop receipts (Figure 1). For the first
time, revenues in 2006 from specialty crops are forecast to slightly
exceed those from

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farm program crops (grains, oilseeds, cotton). Specialty crops include
fruits and vegetables, but also the rapidly growing category of nursery
products where farmers have taken advantage of the booming housing
market.

In the past 100 years, getting bigger has been a widely adopted strategy
to remain competitive. Technological advances such as mechanization,
hybrid seeds, and chemicals for weed and pest control have all permitted
a single farmer to produce more. The pressures to increase the size of
operations remain today because on average, larger farms (as defined by
sales) are more profitable (Figure 2). Economies of size enable these
large commercial farms to have low unit costs. By contrast, most
intermediate and rural-residence farms do not cover production costs
from farm income.

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While higher sales appear to explain farm profitability, the actual
story is much more complex. As shown in Figure 3, the percent of both
profitable farms and those who lose money is broken out into the groups
defined by the Economic Research Service (ERS) Farm Typology. At all
sizes---including the generally small rural residential farms where
farming is a secondary occupation---some farms are profitable.

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What explains the competitiveness of small- and medium-size farms
against a long-term trend towards increasing size? The varied consumer
marketplace provides one part of the answer where niche and local
markets provide opportunities for small farms. In addition, a farmer's
varied business strategies also explain the pattern of profitability.

**Diversity of U.S. Agriculture**

Farming today consists of enormously different farms growing numerous
crop and livestock products for sale in markets that range from their
immediate neighbors to consumers worldwide. Farms differ in size, type,
and value of commodities produced, technology used, resource endowment,
financial status, and other attributes. Farmers differ in time
commitment, management abilities, business goals, and financial
resources. Grouping farms into three types---commercial, intermediate
and rural residence---based on both their size of sales and primary
occupation reveals key differences in terms of their numbers, shares of
production, land holdings and reliance on off-farm income (Figure 4).

In 2004, there were 205,000 commercial farms. This group consists of
large family farms with sales above \$250,000 and nonfamily farms. This
small proportion of farms, just under 10 percent of all farms, accounted
for about 75 percent of total output. These farms have business goals
that include containing costs and increasing sales and they are
generally profitable. Despite their large share of farm production, they
only own about 29 percent of farmland.

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A second group of farms, nearly 1.4 million rural-residence farms,
represent about two-thirds of all farms but only 8 percent of total
output. They own nearly one-third of all farmland. These farm operators
combine nonfarm jobs with farming. They include retired individuals and
those who view farming as an investment and/or a way to enjoy rural
amenities. For most of these farms there is little dependence on the
farm economy for their income. Even though most of these farms are not
profitable as stand-alone farm businesses, these rural-residence farm
households typically have incomes comparable to or exceeding those of
nonfarm households.

A third group of about 528,000 farmers consider farming their primary
occupation and share goals with both commercial farms and
rural-residence farms. These intermediate farms account for about 16
percent of total production and own about 31 percent of all farmland.
Some emphasize economic and financial objectives much like the larger,
more commercial farms and compete with their commercial competitors.
Others have goals that align them more closely with smaller, less
commercial operations. Those without substantial off-farm earnings often
rely on alternative uses of agricultural resources to generate income.
Many use farm equipment to provide custom work to other farms, some rent
land to other farmers, and some provide hunting and other outdoor
recreation as a way of generating additional income.

**Role of Off-farm Income**

In 1970, only about 52 percent of farms had off-farm income. Today,
virtually all farms report some off-farm income as fewer farmers are
full time with many choosing to merge both farm and nonfarm employment.

Off-farm income is increasingly important to the economic well-being of
most farm operator households. In 2004, average farm operator household
income for all farm operators was \$81,500. While income from farming,
as measured by net farm income averaged only \$14,200, off-farm sources
contributed on average \$67,300 (Figure 5). As might be expected, the
data show that the importance of off-farm income decreases as farm size
increases.

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Off-farm income is especially important for rural-residence farms, which
on average regularly generate little or no income from the farm, with
many actually reporting negative net farm incomes. Not surprisingly,
most rural-residence farms subsidize their farming activities as part of
a rural lifestyle. Off-farm income is also critical for many
intermediate farms, especially for those with sales under \$100,000 (low
sales), but contributes only a small share of total income to commercial
farm households. On many larger commercial farms, family members work
off-farm. Even on very large farms, income from off-farm sources in 2004
averaged \$47,400. The widespread importance of off-farm income and
related benefits, such as health insurance, illustrates that for the
majority of farm households, the economic state of the general economy
may be more important to their economic well-being than the level of
commodity prices or the overall conditions in the farm economy.

**Farm Management Strategies and Business Arrangements**

Farmers use a variety of business arrangements to link themselves to
other firms and individuals. These links vary by farm type and include
arrangements to access the control of productive resources and to market
the commodities they produce.

The key to agricultural production is the control of land and other
assets. This control can be accomplished through renting or leasing
rather than purchasing. Farms can also use hired labor, contract labor
or custom work rather than family labor. Today, almost one-half of the
acreage in production is rented. Three-fourths of all commercial family
farms and intermediate farms with sales over \$100,000 rent land as part
of their farm production strategy.

A growing management strategy is the use of marketing or production
contracts which are used by all sizes of farms, although more
extensively by large farms. Farmer use of contracts depends partly on
the type of product produced (Figure 6). Contracting remains at a
relatively low rate for grains, which remains a bulk commodity business.
In contrast, contracting is the dominant marketing method for
horticultural products and has grown for hogs at the same time
integration has increased across the marketing chain.

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**Issues and Challenges for the 2007 Farm Bill**

The complexity and diversity of the farm sector suggests a wide
divergence in the realities of farming across the country. The issues,
concerns, and opportunities of larger, commercially oriented farms
differ substantially from those of smaller rural-residence and most
intermediate farms, regardless of location. Moreover, the challenges of
commercial farms in one region may be vastly different from those in
another. Farms in the Corn Belt, for example, may be most concerned
about eroding competitiveness from rising land prices and rental rates
and gaining greater access to global grain markets. Increasing
competition for farmland both from neighbors looking to expand and from
relocating farmers that are looking to reinvest proceeds from the sale
of higher valued land near urban areas have contributed to significant
increases in farmland values. Rising rental rates are also a concern as
these farmers increasingly look to rent land as a means to farm
additional acreage and spread fixed costs over a larger scale of
operation.

In contrast, the more diversified farms in the western and southern
coastal areas that primarily produce fruit, vegetable, nursery, and
other high-value crops may be most concerned about increasing
competition from imports and the cost and availability of farm labor.
These labor intensive farms hire a majority of the farm workers and
accounted for over half of the \$20.6 billion in farm labor expenses for
all farms in 2004. These farmers, along with many farm-related
industries, have increasingly relied upon foreign born workers,
especially for entry level jobs. The outcome of the ongoing immigration
reform debate could have significant implications for the cost and
availability of farm labor that will affect the ability of farm
operators to maintain or expand planted acreage of these labor-intensive
crops.

Farmers of all types are faced with multiple sources of risk.
Traditionally farmers have proven resilient to a host of natural and
market challenges, including weather-caused production losses, diseases
and pests, and variable prices. The "Risk Management" paper
characterized these risks. Some of these risks can be addressed through
innovative management strategies and research and development (R&D). For
example, R&D can lead to new varieties that are resistant to diseases or
innovative biological control methods for pests. This type of R&D is
important as the U.S. agricultural sector faces increasing pressures
from plant and animal pest introductions, many of which pose significant
economic, environmental, and societal threats.

**II. The Role and Contribution of International Trade**

Major changes in the world's population and economy in coming decades
will offer the prospect for greatly expanded agricultural trade. More
people, with greater disposable income, will get their food and fiber
from a constantly changing global production, processing, and marketing
system. For many nations, the best way to meet increasing demand for
agricultural products will be through trade, because agricultural
resources are not always located in the same areas where populations and
food markets are the largest or growing the most rapidly.

The world's population is projected to increase from 6.3 billion in 2003
to 7.5 billion in 2020, or by 1.2 billion people. More than 95 percent
of this increase will be in developing countries. Consumer incomes also
will grow in the next two decades. Incomes in developing countries are
projected to grow at twice the rate of wealthier countries. Stronger
income growth will raise the amount that households in many poorer
countries spend on food. Food consumption in developed countries will
also continue to change as consumers shift the composition of their food
spending to realize greater dietary variety, health benefits, and
convenience.

Supplying food requires more than just agricultural production.
Transportation is essential for farm goods to reach markets and
consumers. A sound legal system, finance for commodity transactions,
food quality and safety, and a physical infrastructure for processing,
packaging, and storing are all parts of the supply chain that brings
food to consumers.

USDA recently projected that, assuming countries' agricultural policies
remain as they were in 2005, population and income changes over just the
next 10 years would lead to increases of 15 to 20 percent in the global
import volume of coarse grains, wheat, and almost 40 percent for
soybeans. Global increases in imports of meats will also be robust,
ranging from almost 20 percent for beef to almost 40 percent for pork.
This increased trade will be very important to the livelihoods of
farmers in exporting countries, including the United States.

**The Role of Agricultural Trade in the U.S. Farm Economy**

International trade is a key part of the U.S. agricultural and food
economy. U.S. consumers are only a small part of the world's population,
and expanding foreign demand has boosted U.S. food and agricultural
exports from \$7 billion in 1970 to a projected \$68 billion in fiscal
year (FY) 2006. At the same time, U.S. consumer demand for variety and
year-round product availability has led to increased food imports,
projected at \$64.5 billion in FY 2006 (Figure 7).

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**Exports are critical for U.S. agriculture**. Over many decades, U.S.
agriculture has shown an ability to increase output while reducing cost
per output. Without any change in demand, this growth in productivity
would cause prices to fall. For many agricultural products, the main
opportunity for further growth in demand has been in export markets.
Continued growth in output will require maintaining and increasing
access to foreign markets.

Compared with the rest of the U.S. economy, the agricultural sector
depends much more heavily on global markets. For example, on average,
U.S. farmers export 49 percent of their wheat, 35 percent of their
soybeans, and 15 percent of their poultry (Table 1). For many
high-valued products, export dependency is even higher---over 70 percent
for almonds, over 60 percent for sunflower oil, almost 40 percent for
grapefruit, and over 40 percent for walnuts. The prices farmers receive
and income they earn from these products would be sharply reduced if
producers lost access to export markets.

**Measuring the Importance of Trade**

There are several ways to measure the importance of trade to
agriculture, none of which are perfect. A typical approach is to compare
the value of exports to the value of agricultural production or to farm
cash receipts, which use prices received by farmers. This figure is 23
percent for 2005. But a major shortcoming is that exports are valued at
the point of export, which includes the value of farm-to-port
transportation and other costs. It is also difficult to measure the
value of processed products at the farm gate, which account for a large
share of U.S. agricultural exports. Another factor affecting export
share that is not captured in this measure is the increasing amount of
corn, soybeans, and other feeds that are exported indirectly in the form
of meat rather than directly as bulk commodities.

**Table 1. U.S. Farm Exports**

  --------------- ------- -------- ------- ------- ---------- ---------- ------- -------
  **Share of U.S.                                                                
  Production                                                                     
  Exported**                                                                     

                  Wheat   Cotton   Rice    Corn    Soybeans   Broilers   Beef    Pork

  Average over                                                                    

  1961-69         53.8%   34.4%    51.0%   12.3%   37.9%      2.0%       0.2%    0.5%

  1970-79         57.8%   44.1%    58.9%   24.6%   38.0%      2.3%       0.4%    1.5%

  1980-89         58.9%   47.6%    52.5%   26.2%   38.8%      4.3%       1.8%    1.3%

  1990-99         48.7%   39.8%    46.0%   20.8%   34.4%      13.1%      6.9%    4.2%

  2000-05         49.2%   62.8%    49.7%   18.3%   35.3%      15.5%      7.0%    9.3%

                                                                                  

  **Share of                                                                     
  World                                                                          
  Production**                                                                   

                  Wheat   Cotton   Rice    Corn    Soybeans   Broilers   Beef    Pork

  Average over                                                                    

  1961-69         13.3%   23.9%    1.4%    44.4%   67.6%      28.5%      26.8%   18.1%

  1970-79         13.4%   19.4%    1.4%    44.6%   67.5%      23.6%      24.8%   15.0%

  1980-89         13.0%   16.4%    1.5%    41.4%   55.5%      22.2%      21.4%   11.6%

  1990-99         11.4%   19.4%    1.5%    40.3%   46.8%      24.3%      20.5%   10.1%

  2000-05         9.6%    19.9%    1.7%    40.8%   39.4%      22.8%      20.2%   9.3%

                                                                                  

  **Share of                                                                     
  World                                                                          
  Exports**                                                                      

  ** **           Wheat   Cotton   Rice    Corn    Soybeans   Broilers   Beef    Pork

  Average over                                                                    

  1961-69         42.3%   24.7%    19.0%   52.4%   87.6%      16.4%      1.0%    6.3%

  1970-79         43.2%   19.7%    21.5%   67.8%   87.8%      12.4%      1.2%    9.5%

  1980-89         37.4%   20.4%    20.1%   67.4%   74.7%      16.5%      4.1%    4.2%

  1990-99         30.1%   25.0%    13.8%   67.2%   62.8%      40.0%      11.6%   9.1%

  2000-05         25.5%   37.9%    12.2%   63.1%   46.1%      30.9%      10.6%   13.9%
  --------------- ------- -------- ------- ------- ---------- ---------- ------- -------

Agricultural exports also play an important role in the overall U.S.
economy. In 2004, every dollar of direct export sales generated another
\$1.48 in supporting economic activity, creating jobs not only on farms,
but also in processing, transportation, and supporting activities. Some
825,000 jobs were generated from agricultural exports in 2004---388,000
on farms and 437,000 in assembling, processing, and distributing
products for export. These export-related jobs and other
business-related gains benefited all regions and sectors of the U.S.
economy.

Throughout much of the 1970s and 1980s, U.S. agricultural export growth
was centered on bulk commodities to food- and feed-deficit markets such
as Japan, South Korea, Taiwan, and the former Soviet Union. But global
trade in consumer-oriented/high-value products also grew rapidly during
that period, as consumers in high-income countries demanded more foreign
food products. U.S. exports of high-value products---meats, fruits and
vegetables, dairy products, and processed foods---expanded rapidly.
Through the mid-1990s, these products accounted for an increasing share
of growth in U.S. agricultural exports. However, since the mid-1990s,
growth in both global and U.S. processed food trade has slowed, and bulk
agricultural commodities still account for almost 40 percent of U.S.
agricultural exports (Figure 8).

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Despite being the world's largest single country agricultural exporter,
and a leading exporter for many commodities and products, the U.S.
market share of export value has slipped over the past two decades
(Figure 9). This development reflects export growth of traditional
suppliers such as Canada, Australia, Argentina, and New Zealand, as well
as increasing competitiveness of newer actors, including Brazil,
Thailand, and Vietnam. Regional trading arrangements, such as EU
enlargement, have encouraged regional trade growth and cut into U.S.
export opportunities.

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**Agricultural imports also provide benefits.** Imports of goods and
services also benefit U.S. consumers and the economy. Despite its
agricultural bounty, the United States is the world's second-largest
importer of agricultural goods in value behind the EU. U.S. demand for
food imports is driven by strong purchasing power, low import barriers,
and tastes and preferences for food products not widely produced in the
United States. About 11 percent of the value of U.S food consumption is
imported.

Over the last 20 years, the mix of U.S. imports has broadened to include
a wider range of fruits, vegetables, beer, wine, and livestock products
in addition to tropical products, such as cocoa and bananas. More
reliable supplies from foreign sources, improved shipping and storage
technology, and wider ethnic diet preferences have contributed to these
increases. Imports, together with domestic output, make fresh produce
available year-round.

Given the fluctuation in exports and the rapid growth in imports, the
agricultural trade balance has shrunk since 1996. Although the
agricultural trade balance is a closely watched measure, it is not an
indicator of competitiveness or import dependence. Trade is a means of
providing for the needs and wants of consumers that are not satisfied
domestically (such as bananas and coffee) or are produced more cheaply
elsewhere (such as fresh cut flowers and pineapples). A lower U.S.
agricultural trade surplus does not signal reduced competitiveness of
the U.S. farm sector, but rather U.S. consumers' preference for a wide
variety of foods and beverages. In the future, such factors as U.S.
competitiveness, foreign economic growth, U.S. consumer demand, and
exchange rates will determine the shape and size of the U.S.
agricultural trade balance.

**Role and Importance of Trade Agreements**

The value and diversity of U.S. agricultural exports is tremendous, with
major export flows of grains, oilseeds, meats, fruits, vegetables,
fibers, and processed food products. On the import side, the large,
wealthy, and diverse U.S. population buys large quantities of a wide
range of products. U.S. exports and imports together give the United
States a significant interest in agricultural products produced and
traded around the world, and explain the long-held U.S. interest in the
rules governing world trade. The United States has a big stake in fair,
orderly, and open agricultural trade.

Current levels of trade, as well as future growth, depend not only on
commercial considerations but also on the rules that countries follow.
Over the past half century, the United States has worked with other
countries to reduce barriers to trade in various ways. The most
significant has been a series of multilateral negotiations, originally
under the auspices of the General Agreement on Tariffs and Trade (GATT,
1947-94), and more recently under the GATT's successor, the World Trade
Organization (WTO, 1995-present). The United States has also negotiated
a number of regional and bilateral trade agreements. The most prominent
of these is the North American Free Trade Agreement (NAFTA,
1994-present) with Canada and Mexico.

**U.S. agriculture benefits from multilateral and regional trade
agreements.** Multilateral trade negotiations have improved the
international trading system by lowering trade barriers, making the
system more transparent, and establishing rules for dispute settlement.
During the first seven rounds of GATT negotiations, however, the
agricultural sector was exempted from many of the agreements that
applied to industrial goods. The Uruguay Round (UR, 1986-94) represented
a major shift by lowering agricultural tariffs and establishing
disciplines on export subsidies and domestic support programs that
distort agricultural trade.

The United States has also negotiated agreements for freer trade with
regional and bilateral partners. While NAFTA is the most well-known, the
United States has implemented free trade agreements with Israel, Chile,
Jordan, Singapore, Australia, Morocco, and the Dominican Republic and
five Central American countries (although Costa Rica has not yet
implemented the agreement), and signed or completed agreements with
Bahrain, Oman, Peru, and Columbia. Similar agreements are being pursued
with Panama, Malaysia, South Korea, and other countries.

The importance to U.S. agricultural exports of trade agreements can be
seen in changes in the destinations of exports over the last 30 years
(Figure 10). In 1976, Europe was the destination for about one-third of
U.S. agricultural exports; by 2005, Europe accounted for less than 11
percent. Trade barriers and subsidies kept the EU market for many U.S.
farm products from growing, and U.S. exports have declined. The share of
Canada and Mexico rose from 8 percent in 1976 to 31 percent in 2005,
partly because of lower trade barriers resulting from NAFTA. China has
become a growing market, particularly following its accession to the WTO
in 2001.

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**Barriers to agricultural trade.** Despite the success of the UR, many
barriers to U.S. agricultural exports remain. High tariffs add to the
cost and decrease the competitiveness of many U.S. agricultural exports
both to wealthier, industrialized countries and to developing countries.
ERS has estimated average agricultural tariffs of WTO members at 62
percent, compared to a U.S. average of 12 percent. U.S. exports compete
against subsidized production of farm commodities in certain countries,
especially in the EU, Japan, and other developed countries. Some export
competitors---notably the EU---still provide substantial export
subsidies for key products.

Even though tariffs and other border measures have been reduced, foreign
governments increasingly rely on sanitary and phytosanitary (SPS)
measures and technical standards that do not have sound scientific
justification, such as food safety regulations and plant and animal
disease requirements, to block U.S. products.

**Benefits from trade reform.** Economic analysis from many sources
concludes that the costs of agricultural support and protection are high
and that reform would bring substantial gains to both developed and
developing countries (see suggested readings). An ERS study indicates
that present levels of global agricultural tariffs and subsidies depress
world agricultural prices by about 12 percent and lower the volume of
world agricultural trade by 15 percent. Full elimination of global
agricultural policy distortions would boost world welfare by \$56
billion, or 0.2 percent of world GDP. Most of the market distortions are
accounted for by tariffs (52 percent of the total), with additional
welfare losses from domestic subsidies (31 percent) and export subsidies
(13 percent).

**The outlook for trade reform.** The continuing importance of trade to
the U.S. agricultural economy, and the remaining restrictions and
protection in global agricultural markets, has made the United States a
strong proponent for continuing the multilateral reform process started
by the UR. To this end, the United States was instrumental in kicking
off the Doha Development Agenda in November 2001.

WTO members, under the auspices of the Doha Round, are seeking to
improve upon the gains made under the three pillars of the UR---market
access, export subsidies, and domestic support. Although reaching a
final agreement remains elusive and negotiations were suspended in
August, WTO members have preliminarily agreed to eliminate export
subsidies by 2013, make substantial cuts in tariffs through a tiered
process, and reduce and harmonize trade-distorting domestic support. In
addition, members have agreed to reach new disciplines on food aid,
government export credit programs, state-trading enterprises,
tariff-quota administration, and other measures that continue to limit
global trade.

**USDA International Programs**

USDA has a variety of international programs that support the expansion
of U.S. agricultural exports, provide technical assistance to developing
countries, and support international development objectives. The 2002
Farm Bill expanded funding for these programs and established several
new programs. The programs are primarily administered by the Foreign
Agricultural Service (FAS) and fall into five broad categories: market
development, export subsidies, commercial export financing,
international development, and food aid.

Market development programs include:

-   The Market Access Program assists cooperatives, small businesses,
    and non-profit trade organizations to finance promotional and
    marketing activities for U.S. agricultural products.

-   The Foreign Market Development Program supports technical
    assistance, trade servicing, and market research activities that are
    designed to remove long-term impediments to U.S. exports.

-   The Emerging Markets Program provides funding for technical
    assistance activities to address technical barriers to U.S. exports
    in emerging markets.

-   The Quality Samples Program helps U.S. agricultural trade
    organizations provide samples of their agricultural products to
    provide a better understanding of their characteristics and quality
    to potential markets.

-   The Technical Assistance for Specialty Crops program provides
    funding for projects that address phytosanitary and related
    technical barriers that restrict exports of U.S. specialty crops.

Export subsidy programs include the Dairy Export Incentive Program and
the Export Enhancement Program (EEP). The EEP has not been active for
many years and the DEIP has not been used for over two years.

Commercial export financing programs include the GSM-102 program and the
Supplier Credit Guarantee Program (SCGP), which provide federal
government guarantees of commercial lending for imports of U.S.
agricultural products, at varying rates of coverage and tenor. The SCGP
is not currently operational. The Facilities Guarantee Program (FGP)
provides payment guarantees to finance commercial exports of U.S.
manufactured goods and services that will be used to improve
agriculture-related facilities in emerging markets where inadequate
storage, processing, or handling capacity limit trade potential.

USDA international food aid programs include Public Law 480 Title I
credit sales, the McGovern-Dole International Food for Education and
Child Nutrition program, Section 416(b) donations, and Food for Progress
grants. In addition, USDA has administered commodity procurement for the
P.L. 480 Title II program, and manages the Bill Emerson Humanitarian
Trust. In recent years, the programming focus has increasingly shifted
to meeting emergency and humanitarian needs.

International development programs include a wide range of technical
assistance, education and outreach programs for emerging markets and
developing countries that are designed to support the development of
science-based regulatory policies and promote food security. USDA
international development programs are increasingly focused on trade
capacity-building, or trade-related technical assistance, to support
U.S. trade policy objectives by enhancing developing countries' ability
to trade.

For many years the United States has had programs to assist firms and
workers in adjusting to import competition. A new program aimed at
farmers, [Trade Adjustment Assistance (TAA) for
Farmers](http://www.fas.usda.gov/itp/taa/taaindex.htm), was established
by the Trade Act of 2002 for FYs 2003 to 2007. Under the program, the
USDA provides technical assistance and cash benefits to eligible farmers
and fishermen if increased imports have contributed importantly to a
price decline of at least 20 percent.

**Issues and Challenges for the 2007 Farm Bill**

International trade has been an important contributor to U.S.
agriculture's prosperity. Food imports have provided consumers with low
cost, diverse, and nutritious products. U.S. trade policies have focused
on removing barriers to U.S. exports, and USDA market development and
export promotion programs have helped U.S. exporters compete in existing
markets or tap into new ones. But as U.S. world export market share
shrinks, the volume of bulk commodity exports stagnates, and exports are
increasingly subject to unpredictable and often arbitrary SPS
restrictions and other technical barriers to trade, a discussion about
the future role of trade in the U.S. agricultural economy---and the
appropriate programs and policies with respect to export promotion or
import adjustment---is timely.

**Competing effectively with more open trade.** Many U.S. agricultural
products will continue to rely on global markets, even as trade barriers
and subsidies continue to characterize agricultural markets around the
globe. The ability of U.S. agriculture to access foreign markets remains
highly dependent on trade negotiations to remove these distortions,
which is beyond the specific purview of USDA policy. Substantial
reductions in global tariffs and subsidies will provide opportunities
for U.S. products to compete favorably in international markets, but
only if products are of high quality and reasonable cost. USDA policies
affecting risk management, research, technology, plant and animal
diseases, and infrastructure will continue to play a major role in
ensuring that U.S. products remain competitive in world markets.

**Facilitating transition to greater global competition.** Conversely,
substantial reductions in U.S. tariffs and domestic subsidies could
expose some U.S. products and sectors to greater global competition.
Policy reforms may be needed to ease the transition, such as changing
production-distorting farm payments to less distorting, decoupled forms,
strengthening the economic infrastructure and vital services for the
rural sector, and providing adjustment assistance to those who lose
income. TAA for Farmers, although not part of the 2002 Farm Act, will
expire at the end of FY 2007. To date, the program has made small
payments to agricultural producers, with most payments going to salmon
and shrimp. A review of whether this program is meeting its objectives
and providing effective import adjustment is timely.

**Enhancing market orientation.** Export subsidies, export credit
guarantee programs, and food aid are subject to the current WTO
disciplines, and depending on the outcome of the Doha Round
negotiations, could be subject to new disciplines. WTO members have
tentatively agreed to eliminate export subsidies. Since the EEP is not
currently active, and the DEIP has not been used for over two years,
eliminating export subsidies would not materially affect U.S. exports.
The United States recently changed the GSM-102 program, has discontinued
use of the GSM-103 program, and has legislative proposals before the
Congress to authorize additional changes. The Administration has
proposed no funding for FY2007 for long-term, concessional sales under
Title I of P.L. 480. All of these changes would enhance the market
orientation of U.S. exports and are consistent with the objectives of
trade reform in the Doha negotiations.

**Supporting market and international development.** USDA has five
market development programs and a host of international development
programs. A review of the effectiveness of these programs could be part
of the 2007 Farm Bill process. Among other things, this review could
consider whether the current structure and authorities for these
programs provide sufficient resources and flexibility to address
emerging issues related to trade competitiveness, particularly SPS
measures and technical barriers to trade. Because most of the demand for
food and agricultural products in the future will come from developing
countries, increasing trade-capacity building activities that strengthen
developing countries' agricultural institutions and regulatory systems,
encourage compliance with international norms, and foster adoption of
modern approaches to agricultural policy and regulatory procedures could
facilitate U.S. agricultural trade with these future markets. Given the
critical role of agriculture in the economies of developing countries,
the next farm bill process could consider the benefits of appropriations
for international development activities, which are currently undertaken
on a reimbursable basis at the request of outside agencies.

**III. Enhancing Competitiveness and Efficiency**

Title VII of the 2002 Farm Bill, Research and Related Matters, provides
the impetus and financial basis for supporting public agricultural
research and development (R&D). Funding for public research has been an
important role of USDA for over a hundred years. Research performed and
supported by USDA funding has played a fundamental role in enhancing
agricultural productivity, increasing agricultural output, and expanding
agricultural exports. Productivity and efficiency growth has made the
United States a strong competitor in agricultural markets. This section
looks at some of the benefits of R&D, highlights trends in agricultural
research funding, addresses questions regarding future trends in
agricultural research, and considers the direction of research.

**The Role of Science and Technology (S&T) in Economic Growth**

Historically, productivity growth has been one of the most important
determinants of economic growth in the U.S. economy (Figure 11).
Productivity measures the ability to achieve more output from a given
bundle of inputs. Technological advances that save scarce resources and
enable producers to produce more output with fewer inputs has been a
critical source of income growth, wealth creation, and international
competitiveness. In U.S. agriculture, virtually all the growth in
agricultural output over the last 50 years was derived by growth in
agricultural productivity. Despite growth in agricultural output, the
growth in the total amount of inputs used has been quite modest.

Technological change drives growth in agricultural output and results in
new products and new processes or ways of doing things. Investments in
science and technology (S&T) are what lead to these product and process
enhancements. New fundamental knowledge about cell structure and DNA is
what leads to advanced plant and animal breeding techniques producing
higher yielding crops and leaner safe meat. Investments by USDA and the
Land Grant University system result in advances in fundamental
knowledge. These kinds of investments require continued and sustained
support because the pay-off is uncertain and is not observed, except in
the long run. Public research institutions also undertake research
efforts that benefit farmers and consumers in the near term. For
example, new agricultural practices are developed by USDA supported
efforts that result in less soil erosion and better water quality.

USDA research efforts need to continue to be current and timely as well
as forward looking. Public sector support for both long-term and
near-term research efforts that work hand-in-hand work to increase
agricultural productivity, improve the well-being of farmers and
consumers, and enhance our international competitiveness. While a key
role of publicly supported research is to undertake scientific discovery
and the creation of new knowledge, public research also addresses key
issues facing the public on a national, rather than a local or region
basis. Homeland security, bioterrorism, and invasive species are prime
examples where USDA supported research addresses critical national
information needs.

**Benefits of S&T Investments**

Investments in science and technology have resulted in benefits to
farmers and consumers alike. Farmers benefit from improved seed like
hybrid corn varieties. Measures of the return on public investment in
agricultural research have varied widely but are always very high,
indicating additional investment is warranted. Conventional estimates of
the return on investment in agricultural research have ranged from 35 to
70 percent. Returns reflect the benefits to producers and consumers of
agricultural products. These benefits are shared widely---producers have
benefited from things like higher yielding seed varieties, improved
production technologies and cultivation practices, and resource-saving
methods like drip irrigation and more efficient delivery of plant
nutrients and pest control. Advances in livestock research and
veterinary medicine have enabled livestock producers to produce higher
yielding cattle, hogs, and poultry that are also leaner and grow more
rapidly.

Consumers are also key beneficiaries of agricultural research. Food in
the United States is abundant, safe, and affordable. All Americans
benefit from advances in agricultural productivity through increased
access to food. Given this abundance, what may be more important for
consumers is research that seeks to maintain the safety of food within
the supply chain and to provide information regarding food nutrition and
food choice. But public research efforts have increasingly recognized
the growing importance of addressing human health and nutrition issues.
Obesity has become a chronic public health problem in the United States
and the USDA is undertaking research to address this and other consumer
issues.

**Measuring the Benefits of Agricultural Research.**

Measuring agricultural research benefits involves solving a number of
conceptual and empirical problems, as benefits may appear in different
forms. Some research may tend to benefit society generally, and thus be
harder to measure, such as the informational benefits associated with
more basic research, the benefits resulting from the development of
research tools, the benefits from more risky research, and the benefits
from research with a longer time horizon. On the other hand, benefits
that relate to a particular commodity, area, or need may be somewhat
easier to define and measure. Direct benefits observable in a commodity
market may also be easier to measure than indirect benefits such as
environmental protection or increased food safety. Unlike many other
areas of scientific research, some agricultural research is
geoclimatically specific, and so benefits may at times be measured in a
geographically disaggregated manner. And, as the discussion in the main
text indicates, another important way of disaggregating the benefits of
agricultural research is to do so among producers, consumers, and
agricultural input firms.

**Recent Trends in S&T Investments and Productivity Growth**

Investments in public R&D, while continuing upward, have grown at a very
slow rate. Preliminary estimates of both public and private
inflation-adjusted investments in R&D suggest the private sector is
spending considerably more on R&D than the public sector (Figure 12).
The rapid growth in private sector investments has been attributed to
changes in patent law permitting patenting of biological inventions,
advances in biotechnology products, and a general growth in the
agri-chemical and pharmaceutical companies. The recent down-turn in
private investments is due in part to a retraction by the private sector
from biotech investment strategies.

While it is clear that investments in S&T lead to an increase in
productivity growth, output and competitiveness, the reverse is also
true---reductions in investments can lead to a slowdown in productivity
growth. The slowdown in the level of real S&T investments by the public
sector during the early 1980s may have contributed to the eventual
slowdown in productivity growth experienced during the late 1990s.
Through the later part of the 1990s productivity barely grew at all. The
decline in investment by the private sector since 2000 may also lead to
future productivity declines. Productivity growth has been shown to
occur long after investments are made because it takes time for research
discoveries arising from the investments to work their way into the
market place and become embodied in inputs that producers use.
Investments by the private sector tend to be for "near-market" research,
i.e., research that results in commercializable products not long after
the investments are made. That is a fundamentally different type of
research that relies ultimately on scientific discoveries often made in
public sector labs.

**Role of Publicly Funded Research**

The Federal government plays a unique and critical role in science.
Disease eradication, resource conservation, and environmental protection
are all results of national efforts from Federally funded and performed
research. The Federal government has the unique capacity to identify
national needs and coordinate research efforts to address these
needs---both for short-term and long-term goals.

While the Federal government is by far the single largest source of
public agricultural research funding, not all of the advances in
agricultural productivity are derived from the public sector. As figure
12 suggests, private firms produce and market most agricultural inputs,
from seeds to pesticides and farm machinery. Some of the underlying
research into producing those inputs is undertaken by the private
sector. The key difference between the public and private sectors
regarding their roles in research is the marketability of the research.
The private sector pursues research efforts in areas for which there is
a market---the production of goods for which there is commercial value.
The public sector, on the other hand, produces research that is valuable
to society but which may not have direct or obvious commercial value or
an existing market and therefore the private sector is unwilling to
undertake it. The best example of this is basic or fundamental
research---research on topics that expand human knowledge, solve
fundamental problems in, for example, soil chemistry or plant pathology,
that may eventually be embodied in some new production input or
technology. Other examples include research on means of protecting the
environment and production practices that conserve natural resources.
Because of the lack of markets for goods such as environmental quality,
there is little incentive for the private sector to invest in R&D that
will produce these non-market goods and services more efficiently. Also,
this research can be too costly and long-term for industry to undertake
without strong market-driven forces. Food safety and human nutrition are
also areas where there is often insufficient incentive for the private
sector to undertake this research.

**Publicly Supported Data Collection**

A necessary component of the research system, and important to
decision-making, is the continual need for public sector provision of
objective and consistent data. Data are critical to undertaking all
kinds of research, and the lessons learned from data analysis inform
decision-making and policy development. The data, information, and
scientific collections that the public research system maintains and
provides are critical for both researchers and policymakers. Freely
available data and information is vital to all kinds of research whether
bio-physical or socio-economic. Scientists throughout the world rely on
the wealth of data and scientific information and materials maintained
by USDA and other public science sources. This includes the resources
available through the National Agricultural Library, USDA's systematics
collections, and the National Germplasm System, as well as the
socio-economic analyses, and the statistical data USDA makes publicly
available to researchers.

**USDA Research and USDA-Supported Research**

The public agricultural research system in the United States comprises a
Federal-State partnership. The Federal government funds both intramural
research through USDA agencies---the Agricultural Research Service
(ARS), Forest Service (FS), and ERS---and extramural research at State
institutions. The State institutions---the State Agricultural Experiment
Stations (SAES) that are housed at Land-Grant Universities, 1890s
Institutions, Forestry Schools, and Veterinary Colleges---are funded by
a combination of Federal, State, and private sources.

This decentralized State-led structure has tended to result in
successful geographically-specific applied research, but Federal
research funding is intended at least in part to promote more basic
research and interstate research spillovers. For this reason, the
Federal government maintains a strong intramural research program
focused on research problems that are important nationally and that may
receive too little attention from SAES. USDA also helps provide regional
and interregional research coordination with the State-led system to
avoid duplication of efforts and facilitate sharing of results.

In inflation-adjusted dollars, USDA research funding declined until
about 1999, when total spending fell to about \$1.4 billion (Figure 13).
Since that time, inflation-adjusted spending increased to about \$1.7
billion in 2004.

Funding of ARS programs, the largest USDA intramural research agency,
has followed a similar pattern. Inflation-adjusted funding declined
until about 1999, when spending began to increase from about \$750
million to just over \$900 million by 2002. Spending has been
essentially level in real terms since then.

Extramural funding---funds administered by the Cooperative State
Research, Education, and Extension Service (CSREES) for the Land-Grant
and SAES system---also declined in real terms from the mid-1990s up to
2002 and increased after that. Funds awarded competitively through the
National Research Initiative (NRI) also saw modest growth in 2003.

**Public Agricultural Research as a Federal-State Partnership**

Public funding of agricultural research (not adjusted for inflation)
grew modestly in each of the last 25 years, but in real terms, funding
remained basically level. Public research funding increased in real
terms starting in the late 1990s, partly from increases in non-USDA
Federal sources and industry funding to SAES continued to increase. The
SAES performs the majority of public agricultural research. Total real
expenditures by the SAES have trended upward since 1980. Even with the
recent increase in intramural spending in 2004, SAES invested more than
twice as much in research (\$2.9 billion vs. \$1.2 billion) as did the
Federal intramural agencies. While State appropriations are still the
largest source of SAES expenditures, they have fallen in real terms by
10 percent since 2000 and are now lower than in 1980. Part of the
explanation for this could be that a portion of the State appropriation
is a match with Federal formula funds that are administered by CSREES.
CSREES formula funds, the largest source of USDA support for the SAES,
declined from \$270 million in 1991 to \$197 million by 2003 (2001
dollars).

**Issues and Challenges for the 2007 Farm Bill**

The key roles of public investments in S&T remain that of scientific
discovery and problem solving for the benefit of society. The Federal
government has played a unique and critical role in S&T and will remain
a key player. USDA plays a part in overall Federal research goals and
priorities. Therefore, it is of critical importance that USDA research
be coordinated with other Federal agencies in areas of shared
responsibility, such as bioenergy. Within this relationship, the
specific direction of research needs to be evaluated in light of the
issues faced by producers and consumers now and in the future. Are we
adequately anticipating and addressing the issues society will face in
the future? Several issues emerge as especially important for
prioritizing research to benefit agricultural producers and consumers in
the near and distant future. Key priorities for consideration for 2007
Farm Bill funding include:

**Consumers, food safety, and biosecurity.** Agriculture continues to be
consumer driven. Consumers want safe, high quality food. Biosecurity
threats from plant and animal pests and diseases and invasive species,
whether intentionally or accidentally introduced, heighten our awareness
of a new kind of food safety concern and challenge our research to
ensure these threats are countered with good science. Important efforts
are underway in this area but continued and enhanced efforts are needed
as well as an ability to respond quickly to rapidly changing concerns.

**Bioenergy and biobased products from agriculture.** Agriculture is
both a consumer and producer of energy. Our national energy security
requires that we look for alternative and sustainable sources of energy.
Agriculture has the potential to be an important source of bioenergy. In
addition, there is potential to use agricultural materials that may
currently be wasted or not used effectively in order to develop new
products. More research is needed to explore and develop these
biological possibilities as well as to understand the nature of the
markets, both domestic and international, for energy sources.

**Genomics and informatics.** The tremendous growth in information
technology during the last fifteen years or so has created an explosion
of S&T possibilities. Mapping genomes provides enormous potential for
enhancing crop and livestock production and creating more safe and
nutritious food. The growth in informatics enhances the potential to
take advantage of research in genomics.

**Agriculture and the environment.** Agriculture's relation to the
environment continues to be an important area for research. Mitigating
agriculture's impact on the environment and as well agriculture's role
in lessening the impact of climate change on society are areas where
social returns from investments in agricultural S&T could be high.
Linking bio-physical and economic data from farms will greatly enhance
our understanding of not only the effectiveness of conservation programs
but will also give us better insight into why producers participate in
conservation and other types of programs. Linking this information will
aid in addressing issues such as the impact agriculture has on the
environment and how conservation programs can help farmers enhance their
relation to the environment.

**Human Nutrition.** Improvements in the nutritional well being of the
population can lead to significant improvements in life style and
savings to the economy, both directly and through cost avoidance.
Research can provide information on how to improve diets as well as how
to encourage changes in consumption patterns.

**Public research system.** The advances in science and technology in
U.S. agriculture are due in part to the USDA and partnership with the
Land Grant Universities. This partnership provides the scientific
foundation and knowledge base for improving our food, fiber, and energy
foundation. Continued success of this research system requires that we
should seek ways to improve the efficiency and effectiveness of our
research programs, strengthen linkages, communication, and coordination
among USDA and Land Grant Universities, and enhance the quality of
USDA-conducted and supported science. It is therefore critical that
Federal funding should emphasize high quality research through
peer-reviewed competitive awards that seek an appropriate balance
between National priorities and regional and local needs.

**IV. Protecting Agriculture**

U.S. agriculture is complex, diverse, open, and affected by both local
and global events, making it vulnerable to natural, unintentional, or
intentional attacks from diseases, pests, and other agents that can
result in significant production and economic consequences. Farm policy
plays an essential role in strengthening and safeguarding America's
agriculture and in doing so protects the health and well-being of
domestic and global consumers. Policies designed to protect U.S.
agriculture and markets work together with other policies aimed at
reducing vulnerabilities and promoting the development of capabilities
to detect and respond to agricultural threats, mitigate events, enhance
response and recovery procedures, and apply the lessons learned from
previous experiences with pest and disease threats and events both here
and abroad.

U.S. agriculture faces two general types of threats: those limited to
production effects (e.g., soybean rust) and those that affect consumer
confidence and, potentially, human health (e.g., avian influenza).
Concerns surrounding the impacts on human health are clear. However, the
consequences of changes in consumer confidence on crop and livestock
production due to events or mitigation efforts are spread along multiple
paths, most of which are financial or economic in nature. Crop or
livestock losses and related mitigation efforts can reduce
competitiveness of parts or all U.S. agriculture by raising the cost of
production or distribution. For example, in an effort to assess the
possible economic impacts of soybean rust in the United States, ERS
published a report on the economic implications of soybean rust in the
United States. The study concluded that during the first year of soybean
rust introduction, the expected value of the economic losses ranges from
\$640 million to \$1.3 billion, depending on the geographic extent and
severity of initial entry. As farmers adjust to the presence of soybean
rust, annual expected economic losses range from \$240 million to \$2
billion, again, depending on the severity and extent of subsequent
outbreaks.

The effect on markets of pest or disease outbreaks would depend upon the
proximity of the outbreak to major production areas and whether foreign
country bans on trade were regionalized or covered the entire United
States. For example, the most significant recent U.S. outbreak of high
path avian influenza (HPAI) occurred in 1983 and 1984 in Pennsylvania,
Maryland, New Jersey, and Virginia. That outbreak affected mainly layer
flocks and resulted in the depopulation of 17 million birds and loss of
1.2 million dozen eggs between November 1983 and August 1984. While the
amount of eggs and birds destroyed were small relative to annual U.S.
production, the impacts of the loss of the breeder and laying flock had
a greater impact than implied by the destruction of the birds and eggs
since they represent future production. In contrast, the 2004 outbreak
of HPAI in Gonzales County, Texas was quickly found and eradicated,
lasting only five weeks. This outbreak was confined to one flock of
6,600 birds that were depopulated and another 12,000 birds tested.

Even confined events, such as the U.S. experience with BSE, can cause
dramatic reductions in international trade opportunities because of
trading partners' phytosanitary regulations or related consumer
concerns. For example, after the U.S. discovery of BSE in a
Canadian-born cow in Washington State in December 2003, more than 50
countries suspended imports of U.S. ruminant and ruminant products. The
discovery of BSE caused beef and veal exports to drop dramatically and
retail prices to fall slightly but remain above earlier levels (Figure
14).

**Figure 14. Effect of the December 2003 Finding of BSE on U.S. Beef
Exports and Prices**

![](media/image12.wmf)

While the remedies for financial and economic consequences may be
costly, they can be much less difficult to address than the consequences
associated with a loss in consumer confidence. Consumers and producers
are joint beneficiaries of activities in agricultural markets. The loss
of trust in safety and integrity of agricultural markets leads to
constraints and additional costs that are felt, if not borne, by both
parties and the affected communities. Changes in consumer confidence can
have a much larger and possibly more lasting impact on agricultural
markets than supply shocks. As a result, critical policy issues include
determining how information affects consumer confidence, who should
supply the information, and under what conditions consumers are more apt
to respond rationally and act based on actual risks given the
uncertainty that so often initially surrounds events or disease
outbreaks.

**USDA Efforts to Protect Agriculture**

USDA plays a major role in protecting U.S. agriculture and consumers.
Two key objectives of USDA's FY 2007 Budget Summary and Annual
Performance Plan include: (1) reducing the incidence of foodborne
illnesses related to meat, poultry, and egg products in the United
States and (2) reducing the number and severity of agricultural pests
and disease outbreaks. To advance these objectives, total USDA program
level funding is estimated to be \$2.7 billion in FY 2006, with \$1.2
billion directed toward reducing the incidence of foodborne illness and
\$1.5 billion directed toward reducing the number and severity of
agricultural and pest and disease outbreaks. This section focuses on
protecting agriculture from pest and disease outbreaks. To improve
program planning, APHIS is developing performance measures that will
demonstrate the impact of its pest and diseases programs on the economy,
e.g. on losses due to plant and animal diseases.

While USDA has always endeavored to ensure a safe and plentiful food
supply, events since the last farm bill have expanded the Department's
mission to include addressing broader security concerns in concert with
both public and private partners. USDA works with the Department of
Homeland Security (DHS) and the Department of Health and Human Services'
Food and Drug Administration (FDA) to ensure that Homeland Security
Presidential Directives related to protecting US agriculture are
effectively implemented. In particular, USDA works through and closely
with the White House Homeland Security Council and DHS on agriculture
and food threat issues. The Department has developed dedicated
mechanisms for addressing security and emergency response policy matters
through the formation of its Homeland Security Council and the Food and
Agriculture Government Coordinating Council that is jointly supported by
DHS, USDA, and HHS/FDA, and State, and local officials and reports to
the Office of the Secretary.

Programs that contribute to the protection of agriculture appear
throughout USDA mission areas. However, major responsibility for
directly protecting agriculture lies with the programs of the Animal and
Plant Health Inspection Service (APHIS). Total program level funding for
APHIS is estimated at \$1 billion for FY 2006. APHIS carries out its
mission to protect agriculture under provisions of the Plant Protection
Act, the Animal Health Protection Act, and the Agricultural Bioterrorism
Protection Act of 2002. APHIS is the key responder to plant and animal
health emergencies and works with other Federal agency partners and
foreign governments to exclude pests and diseases that could harm
American agriculture. The agency maintains surveillance systems for
early detection of animal and plant diseases, for example, avian
influenza and soybean rust. APHIS also seeks to facilitate safe trade
per the international Agreement on the Application of Sanitary and
Phytosanitary Measures and works in international forums such as the
Office International des Epizooties (OIE) and International Plant
Protection Convention (IPPC) to develop protocols to protect animal and
plant health. APHIS and cooperating partners have response plans and
surveillance programs with the goal of quick detection, containment, and
eradication of pests and diseases. Under the Agricultural Bioterrorism
Protection Act of 2002, APHIS restricts access to pathogens capable of
creating plant or animal diseases.

Research programs of ARS and CSREES also contribute to protection of
agriculture by providing knowledge and technology to prevent or reduce
damage to livestock, poultry, and plants. For example, ARS's livestock
protection program produces knowledge and technology to reduce economic
losses from infectious, genetic, and metabolic diseases of livestock and
poultry and to eliminate the losses to animal production and products.
 This research also reduces the risk to humans of zoonotic diseases and
enhances the safety of animal products. Program level funding for the
ARS livestock protection program is estimated at \$71 million for FY
2006. ARS's crop protection program provides the knowledge to reduce
losses caused by plant diseases by defining practices that are
effective, affordable, and maintain environmental quality. Research also
provides the technology to manage pest populations below economic damage
thresholds based on an increased understanding of the pest's biology and
ecology. Program level funding for the ARS crop protection program is
estimated at \$162 million for FY 2006.

The CSREES-supported programs include grants to support basic and
applied research in areas of direct applicability to protecting
agriculture. CSREES is creating a functional nationwide network of
public agricultural institutions. The network is designed to quickly
detect animal and plant diseases that are deliberately or
unintentionally introduced into our farmland, livestock, or natural
ecosystems. This network will allow land-grant university diagnosticians
and faculty, State regulatory personnel, and first detectors to
communicate information, images, and methods of detection throughout the
system in a timely and efficient manner. CSREES programs are helping to
monitor and prevent disease outbreaks, avoiding economic losses, and
preserving consumer confidence.

The Food Safety and Inspection Service (FSIS) is the public health
agency in USDA. FSIS protects consumers by ensuring meat, poultry, and
egg products are safe, wholesome, and correctly labeled, and packaged.
FSIS programs protect the food supply and preserve consumer confidence
by focusing on preventing food with microbial pathogens and other
contaminates from entering commerce. Within FSIS, the Office of Food
Defense and Emergency Response (OFDER) develops and coordinates all FSIS
activities to prevent, prepare for, respond to, and recover from
non-routine emergencies resulting from intentional and non-intentional
contamination affecting meat, poultry, and egg products.

Protecting agriculture is also critical from a homeland security
viewpoint. Homeland Security Presidential Directive-9 (HSPD-9)
established a national policy to defend agriculture and the food system
against terrorist attacks, major disasters, and other emergencies. APHIS
and other USDA agencies share responsibility with other Federal agencies
to develop awareness and early warning capabilities to recognize
threats, to mitigate vulnerabilities, enhance screening procedures for
domestic and imported products, and enhance response and recovery
capability. Among the specific charges falling to USDA under HSPD-9 are
development of a National Veterinary Stockpile of animal vaccine and
development of a National Plant Disease Recovery System. HSPD-9 directs
USDA to develop comprehensive and fully coordinated monitoring and
surveillance systems to provide early warning of disease, pests, and
poisonous agents by using information on animal, plant, and wildlife
disease.

Under HSPD-9, USDA is also directed to develop a system to track
individual plants and animals. The National Animal Identification System
is currently being implemented on a voluntary basis through a
cooperative State-Federal-industry partnership. This identification
system will enhance the speed and efficiency of disease trace backs by
standardizing animal movement recordkeeping and using newer
technologies. Upon full NAIS implementation, the goal is to be able
trace the movements of all exposed or infected animals entered in the
NAIS within 48 hours of a disease diagnosis.

In addition to these new responsibilities under HSPD-9, the Secretary
may declare an "extraordinary emergency" upon finding a new plant pest,
noxious weed, bio-control agent, animal disease, or animal pest in the
United States. This declaration triggers an increased degree of
inspection of articles in inter- and intrastate commerce as well as
federal assistance programs targeted at livestock producers, growers,
conservation activities, and assistance to rebuild agricultural
infrastructure.

As part of its effort to protect agriculture, USDA has identified five
objectives: intelligence and warning, border and transportation
security, protecting critical infrastructure and key assets, defending
against catastrophic threats, and emergency preparedness and response.
The allocation of USDA spending across each of those objectives is
presented in Table 2. Over half of USDA spending is directed toward
intelligence and warning and border and transportation security for pest
detection, animal health monitoring, and greater border inspection.

**Table 2. USDA Homeland Security Initiative**

  ----------------------------- ------------ ------------ ------------ -------------- ------------
  Item                          **Fiscal                                              
                                Year**                                                

                                **2003**     **2004**     **2005**     **2006**       **2007**

                                **Actual**   **Actual**   **Actual**   **Estimate**   **Budget**

                                Million                                               
                                dollars                                               

  **Objective**                                                                       

  Intelligence and Warning      139          148          199          209            287

  Border and Transportation     143          148          163          165            165
  Security                                                                            

  Protecting Critical           168          37           151          93             46
  Infrastructure 1/                                                                   

  Defending Against             16           21           30           36             78
  Catastrophic Threats                                                                

  Emergency Preparedness and    48           57           57           60             75
  Response                                                                            

  Total, by Objective           514          410          600          563            651

  **Agency**                                                                          

  FSIS                          9            13           19           23             39

  ARS                           166          31           151          94             81

  CSREES                        32           39           40           41             48

  ERS                           0            1            1            1              1

  APHIS                         289          303          368          381            453

  Other                         18           24           21           24             28

  Total, by Agency              514          410          600          563            651
  ----------------------------- ------------ ------------ ------------ -------------- ------------

1/ Variability is due to funding for the construction of the national
animal disease research and diagnostic facility at Ames, which was fully
funded as of FY 2006.

**Lessons Learned**

The lessons gained over many years of experience with animal and plant
disease outbreaks (e.g., Avian Influenza, BSE, Exotic Newcastle Disease,
Medfly, Soybean Rust, or Citrus Canker) both in the United States and
abroad provide an excellent foundation for strengthening existing
programs and designing programs to fill important gaps in our capacity
to prevent or recover from disease outbreaks or other disruptive events.

Recent experiences also highlight the limits of government intervention
and the need to foster the private sector's ability to adapt to new
pressures while facing competing demands for resources. These
experiences emphasize the need to continue to support research on
detection methods and the development of better outbreak management
strategies and tools that can be applied domestically and
internationally. A recurring theme of recent events is the increasing
recognition of the importance of economic factors on management and
control decisions.

One of the clearest lessons learned is the importance of maintaining
confidence in the safety of U.S. agriculture by both domestic and
international customers. Recent experiences highlight the importance of
potential gains that can be achieved by working with both foreign
governments and international organizations and institutions, such as
the OIE, to design the protocols used during disease events, especially
as they relate to the determination of risk status and resulting trade
conventions. Those processes must be supported by current, science-based
analysis that is accepted by both the international organizations
responsible for carrying out trade-affecting disease management and
recovery protocols and by our trading partners. Given the importance of
international trade to the United States and the interdependence that
trade relations engender, the U.S. agricultural sector cannot ignore
that it is part of an international system of agricultural systems.
Given the global nature of diseases and agricultural commerce,
continuing efforts to improve policies implemented by international
institutions and the use of scientifically sound protocols by our
trading partners represent important opportunities for reducing disease
risks and minimizing the subsequent consequences of disruptions in world
markets.

**Recognizing Public and Private Roles**

Underlying almost all security lessons is the U.S. agricultural sector's
reliance on private initiative and the importance of public/private
partnerships that are most successful when guided by producer,
processor, and consumer interests. Successful partnerships require
sustained commitment of both private (producers and consumers) and
governmental partners. Although public and private objectives are not
always compatible, acknowledging and addressing the differences enables
all parties to make better choices about where to allocate the resources
needed to improve the readiness and resilience of the sector.

Defining the appropriate roles for enhancing the security of U.S.
agriculture should reflect basic responsibilities and shared risks and
burdens. While private interests are largely responsible for protecting
property, proprietary information, and workers and customers through
measures that manage risk and help ensure more resilient operations,
public authorities are responsible for coordinating policies nationally
and internationally and for filling those security gaps that cannot be
effectively addressed by the private sector. Public/private partnerships
are valuable aspects of any protection plan. These partnerships require
the acceptance that successfully protecting agriculture from pests and
diseases is a common effort and a shared responsibility between the
Federal government and State, local, and private entities. These efforts
should be fostered to help coordinate and implement actions that will
enhance our ability to effectively detect and respond to threats to the
agricultural sector.

The foundation for the success of this approach is that market-directed
responses are typically more effective and lead to greater resilience of
individual firms and industries within the U.S. agricultural sector. A
key objective for developing effective policy efforts is to match the
economic incentives of producers and consumers to the extent possible.
Toward that end, market-driven incentives should be the preferred means
wherever possible so that the implementation of security enhancing
measures will dovetail with consumer and producer interests and
complement other privately-led security efforts.

In all cases, the provision of sound and accurate information is a
critical element for protecting the public's and sector's security
interests. The outcry arising from the use of incorrect, uncertain, or
emotionally-charged information unnecessarily amplifies the sense of
potential distress and hinders the development of effective responses.
Whether it is a more accurate appraisal about contracting a disease or
losing one's livelihood as a result of an event, consumers and producers
benefit from the provision of science-based information that minimizes
the sensationalism that wastes resources and impedes the execution of
sound public policy.

The delivery of accurate information also plays a critical role in the
formation of consumer confidence. As a result, answers to questions
about who is responsible for providing information and the best way to
provide that information to the public are critically important to
designing policies that best serve the public interest. The benefits of
information designed to better inform producers and consumers may go
beyond meeting the immediate needs of producers, owners, or even just
the consumers residing in a particular region. As a result, protecting
consumer confidence may warrant expanding investment in new information
technologies through partnerships that effectively use limited public
and private funding to improve information resources and foster the
provision of accurate and timely information needed by everyone affected
by an event.

**Improving Deterrence and Prevention**

Despite past successful efforts, U.S. agriculture faces increasing
pressures from plant and animal pest introductions, many of which pose
the threat of significant economic, environmental, and societal impacts.
Given that recent outbreaks of plant and animal diseases have cost
hundreds of millions of dollars to address, the public and private
payoff for policies aimed at avoiding introductions and significant
subsequent disruptions is substantial.

Since 2002, USDA has embarked on a number of efforts to improve
deterrence and prevention measures. One example of these efforts is the
development of the Food and Agriculture Biosecurity Information System
(FABIS), which combines information collected by FSIS and APHIS and
allows both agencies to more quickly identify naturally occurring or
intentional acts affecting agriculture and USDA-regulated food products.
This system benefits from the strength of USDA's laboratory networks
advances the Department's biosurveillance capacity and analysis of
global information streams on animal and plant health issues.
Information from this program will also feed into the Department of
Homeland Security's National Biosurveillance Integration System (NBIS).

As highlighted by the FABIS, dynamic deterrence and prevention measures
require significant investments in laboratory networks, and legitimate
partnerships between federal and state laboratories to share resources
and data. These efforts lead to the early detection of plant and animal
disease outbreaks and determine the disease origins, which are critical
to improved response efforts and reduced event impacts. Since the last
farm bill, USDA has invested in enhanced and established detection and
response capabilities using the national networks of Federal and State
laboratories and other laboratory networks.

[]{.mark}

Two examples of these networks are the National Animal Health Laboratory
Network (NAHLN) operated by APHIS, CSREES, and State collaborators, and
National Plant Diagnostic Network (NPDN), in which APHIS collaborates
with CSREES and supports five regional coordination laboratories and one
satellite lab. NAHLN currently consists of 49 state and university
veterinary laboratories across the country that with staff who are
trained to detect emerging foreign animal diseases. The NPDN network
provides a similar level of laboratory support to APHIS' Plant
Protection and Quarantine (PPQ) program, which also supports training
sessions and funds emergency programs, such as those leading the fight
against Sudden Oak Death.

[]{.mark}

USDA's Highly Pathogenic Avian Influenza (HPAI) H5N1 Preparedness and
Surveillance program, which is part of the U.S. National Strategy for
Avian and Pandemic Influenza, represents another example of the
Department's capacity to respond to disease threats and to work closely
with other Federal, State, and international partners to help prevent
the further spread of this dangerous disease abroad. This APHIS-led
effort includes a CSREES funded a project develop tests and vaccines for
detection and disease transmission and control, and provide educational
programs.

Surveillance and monitoring efforts are critical as trade and
environmental conditions can aid the spread of diseases across
international borders. Collaboration with international institutions and
agencies in the development of disease protocols, cooperation, and
partnerships is critical to improve our capacity to deter or prevent the
introduction of diseases and pests. Work with international partners and
other entities is best served when prevention measures are developed
that incorporate lessons learned from other countries' experiences,
share threat or risk information, and foster an environment that speeds
the exchange of information.

The Security and Prosperity Partnership of North America represents a
good example of collaboration with two of our most important trading
partners to help eradicate animal and plant pests and diseases, and to
improve security within the food and agriculture sector. This
partnership, established in 2005, by President Bush, Canadian Prime
Minister Paul Martin, and Mexican President Vicente Fox, recognizes
North America's common agricultural security interests and has led to
the creation of two multi-agency working groups led by DHS and the
Department of Commerce on which USDA's participation is key. In
coordination with DHS APHIS and FSIS work with Canadian and Mexican
counterparts to identify areas of mutual interest and concern.

One efficient way to improve U.S. agricultural protection is to support
efforts to manage and study locally endemic diseases and pests abroad.
USDA has invested in overseas facilities because of the conviction that
the best strategy for fighting potentially invasive species is to learn
about them before they arrive. Similarly, many agri-businesses have also
invested in foreign facilities that play critical roles in their
risk-mitigation strategies. As should be expected, the potential gain
from the use of these facilities relies heavily on cooperation with
foreign and private sector partners.

Continued collaboration across departments within the federal government
is also critical as the DHS is responsible for establishing and
maintaining a comprehensive deterrence and prevention system at our
ports. This effort is designed to prevent the accidental or intentional
introduction of pests and diseases through those points of entry. This
shared dependence and responsibility heightens the importance of sharing
sensitive information, developing the systems and mechanisms needed to
more effectively coordinate efforts to protect U.S. agriculture and
maintain an accurate assessment of the potential threats.

**Improving Detection and Response**

Protecting agriculture is a national priority. Historically, USDA has
raised awareness of vulnerabilities within U.S. agriculture and sought
to improve its ability to detect and respond to threats or disease
outbreaks. Most would probably agree that more can be done to promote an
agricultural sector that is more nimble in its ability to detect events
earlier and more resilient when events occur.

Advances in detection and response efforts are hallmarks of extension
and Land Grant systems and the public/private partnerships, including
professional associations that have formed in response to pest or
disease introductions. Integrating and exploiting the surveillance and
laboratory capabilities of these investments strengthens detection and
response capabilities. Monitoring potential plant and animal disease
threats is also strengthened by continued support of education and
training programs that ensure a steady supply of skilled professionals
and that partnerships and alliances are able to more quickly and
effectively undertake prevention efforts.

Continuing research on disease mechanisms and pathways is important.
More needs to be learned about how the establishment, spread, and
persistence of pathogens, diseases, and pests could affect production
and competitiveness of U.S. agriculture nationally and within regions
for specific production systems. The main Federal contribution is
ability to coordinate and support private efforts to enhance preparation
and response to animal and plant disease introductions.

Within USDA, CSREES, ARS, RMA, APHIS are working with the private sector
to develop new monitoring tools for crop-based agriculture. One day this
system will provide a critical real-time information mapping system that
will allow disease experts to monitor crop disease developments and
develop their own forecast tools. One achievement of this collaboration
was the development and implementation of crop disease and risk
management monitoring tools used to provide producers and their industry
partners with soybean rust information they could use to make more
informed decisions. This system saved soybean growers up to \$300
million dollars during the 2005 growing season by preventing unnecessary
pesticide applications, according to ERS estimates. This system can also
be used by farmers to document good farming practices for insurance
purposes.

Several universities are also working with ARS as part of the Regional
Dairy Quality Management Alliance. Programs in this alliance support
efforts to monitor pathogen presence and help dairy producers assure
product safety. This collaboration can be used to provide the data to
identify and implement best management practices for commercial dairy
cattle herds. Alliances such as these rely on trust between partners as
sharing data and business information is critical to the success of the
efforts to evaluate and mitigate bio-security concerns.

Many public/private partnerships, while still under development, provide
important lessons about future policy directions. This is especially
true when these programs are used to help determine and evaluate best
practices and identify critical research security needs. In those cases
the burdens and benefits of research efforts can be shared. As noted in
the soybean rust case, cooperation and information sharing reduced the
potential impact of the disease and allowed farmers to benefit from the
adoption of better farming practices. Additional gains can be achieved
by expanding these efforts to other crop and livestock production and
processing industries, if the new initiatives share burdens and benefits
of joint efforts and seek to identify improvements that provide the
greatest benefit throughout the food supply chain and not just to
limited aspects of the production system.

**Improving Recovery and Management**

The aim of recovery and mitigation policies should be to offer improved
management options that reflect sound biological and economic
considerations. The aim is not to return the affected industry to the
point it was before an event, as that may be impossible and costly.
Rather, the goal of recovery efforts should be to work within and around
new production and market constraints to use public and private
resources on actions that offer the most benefit for any given
expenditure and are market-driven.

Determining the expected benefits for any recovery effort begins with
understanding the recovery goals and trade-offs from sector, industry,
international, and consumer perspectives. The effect of recovery efforts
on consumer demand and confidence, crop and livestock production,
competitiveness, and international markets should be measured. It is
within this context that the tensions of divergent recovery goals or
even the attainability of those goals becomes apparent. It is also at
this stage that the uncertainty surrounding possible outcomes, including
the possibility that an event cannot be contained or fully mitigated
once introduced (e.g., karnal bunt), should weigh on recovery or relief
decisions. Uncertainty and blind spots, if overlooked, could seriously
affect future competitiveness and influence subsequent shifts in
production and reactions of trading partners.

Compensation historically has been used to "make right" those harmed by
disease outbreaks or natural disasters. Paragraph (e) of section 414 of
the Plant Protection Act (7 U.S.C. 7715\[e\]) provides that the
Secretary may pay compensation to any person for economic losses
incurred by the person as a result of action taken by the Secretary in
connection with the Secretary\'s determination that an extraordinary
emergency exists because of the presence of a plant pest or noxious weed
that is new to or not known to be widely prevalent in or distributed
within and throughout the United States and that the presence of the
plant pest or noxious weed threatens plants or plant products of the
United States.

Even if the Secretary does not declare an extraordinary emergency, APHIS
may provide payments for the recovery of lost production income if
appropriated funds are made available for that purpose. Such funds have
been made available in:

-   The Consolidated Appropriations Act for FY 2000 (Pub. L. 106-113)

-   The Agricultural Risk Protection Act of 2000 (Pub. L. 106-224) and

-   The Department\'s 2001, 2003, 2004, and 2005 appropriations (Pub. L.
    106-387, Pub. L. 108-7, Pub. L. 108-199, and Pub. L. 108-447)

From FY 2000 to May 2006, APHIS has provided \$428 million in indemnity
funding (Table 3). Funding for compensation from citrus canker
represents almost 80 percent of total APHIS indemnity funding. Citrus
canker is a bacterium that disfigures and weakens citrus trees. The
pathogen was initially detected in Florida near the Miami airport in
1995. Prior to the 2004 and 2005 hurricanes, citrus canker was nearly
eradicated. However, the 2004 and 2005 hurricanes spread citrus canker
so extensively that it was determined that the established eradication
program was no longer a scientifically feasible option to address citrus
canker. The existing program was modified to stop destroying healthy
trees and to eliminate the compensation provision. USDA has provided a
total of approximately \$374 million in compensation to producers and
nursery owners affected by citrus canker. In addition, on June 7, 2006,
USDA announced that an additional \$100 million in funding to compensate
commercial citrus growers in Florida for eligible losses resulting from
the citrus canker eradication program is available, making USDA's
contribution for indemnity payments for citrus canker in excess of \$536
million.

**Table 3. APHIS Indemnity Funding, FY 2000 - Present**

<table style="width:100%;">
<colgroup>
<col style="width: 16%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 12%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td rowspan="2"><strong>Programs</strong></td>
<td colspan="9"><strong>Fiscal Year</strong></td>
</tr>
<tr class="even">
<td><strong>2000</strong></td>
<td><strong>2001</strong></td>
<td><strong>2002</strong></td>
<td><strong>2003</strong></td>
<td colspan="2"><strong>2004</strong></td>
<td><strong>2005</strong></td>
<td><p><strong>2006</strong></p>
<p><strong>As of 5/02/06</strong></p></td>
<td><strong>Total</strong></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="9">Thousand dollars</td>
</tr>
<tr class="even">
<td><strong>Citrus Canker</strong></td>
<td>14,571</td>
<td>52,654</td>
<td>10,064</td>
<td>11,801</td>
<td>15,997</td>
<td colspan="2">29,224</td>
<td>239,874</td>
<td>374,185</td>
</tr>
<tr class="odd">
<td><strong>Karnal bunt</strong></td>
<td>0</td>
<td>122</td>
<td>39</td>
<td>2</td>
<td>0</td>
<td colspan="2">0</td>
<td>0</td>
<td>163</td>
</tr>
<tr class="even">
<td><strong>Brucellosis</strong></td>
<td>432</td>
<td>283</td>
<td>563</td>
<td>39</td>
<td>430</td>
<td colspan="2">585</td>
<td>50</td>
<td>2,382</td>
</tr>
<tr class="odd">
<td><strong>Tuberculosis</strong></td>
<td>158</td>
<td>16</td>
<td>2,846</td>
<td>21,299</td>
<td>9,002</td>
<td colspan="2">5,293</td>
<td>8,969</td>
<td>47,582</td>
</tr>
<tr class="even">
<td><strong>Scrapie</strong></td>
<td>8</td>
<td>70</td>
<td>1,081</td>
<td>1,010</td>
<td>545</td>
<td colspan="2">1,021</td>
<td>182</td>
<td>3,916</td>
</tr>
<tr class="odd">
<td><strong>Total</strong></td>
<td>15,169</td>
<td>53,145</td>
<td>14,592</td>
<td>34,151</td>
<td>25,974</td>
<td colspan="2">36,122</td>
<td>249,074</td>
<td>428,228</td>
</tr>
</tbody>
</table>

Compensation remains an important policy options and may include
insurance. Given the potential for significant economic losses, all
compensation approaches must be assessed on their ability to enhance
recovery while being cost-effective and actuarially sound. Whatever
approach is used, it should ensure that producers and consumers are
responsible for protecting their interests through measures that enable
them to most effectively manage the risks they face.

The availability and use of accurate information is essential to keep
costs under control and prevent the introduction of policies that
unintentionally reduce the long-term economic sustainability of sectors
within U.S. agriculture. Where appropriate, the use of incentive-based
programs should be implemented to encourage actions that speed recovery
or improve the management of disruptive events. In general, the role of
policy in this area is to promote the recognition of basic
responsibilities, best practices, and to share risks and burdens
equitably.

One difference between the risks associated with crop and animal
diseases and other risks faced by producers is that unlike
price/marketing risks, individual producer disease management practices
change the risks faced by all producers in their communities or even
industries. As a result, many standard approaches to government
involvement in production, such as insurance programs or disaster
payments that may ignore basic responsibilities may not be as effective
or necessarily lead to the improved bio-security in US agriculture. More
needs to be learned about differences between public and private
interests as market oriented approaches may mean that producers'
observance of best practices may be a condition for future compensation.

Similarly, the need for greater accountability applies to the
development and evaluation of programs designed to protect US
agriculture. These evaluations should include assessments of the impacts
of government intervention on surrounding communities, consumers,
producers, and related industries. Though difficult choices will have to
be made, these assessments will provide great perspective and
information about the factors that led to specific mitigation or
prevention actions. While views among stakeholders may vary, more
transparent assessments of policy actions are an important element in
the development of trust and serve to recognize that in national
security issues a broader range of stakeholders and interests exist.

**Issues and Challenges for the 2007 Farm Bill**

Farm policy and programs historically have played an essential role in
strengthening and safeguarding U.S. agriculture. The 2007 Farm Bill
discussion should consider ways to improve existing programs and
institutions, and new efforts that more effectively address the
challenges faced by U.S. agriculture.

**Emphasizing sound science and private action.** The most effective
policies are likely to be those that utilize public/private partnerships
and those crafted using the benefit of sound scientific information and
analysis. One clear policy lesson of recent years is that the underlying
economic incentives and pressures of private sector partners often place
them in the best position to address their own needs, which in turn
places them in a preeminent role of protecting U.S. agriculture. One way
to assure that policies use those incentives and address the pressures
faced across the sector is to ensure that protection programs provide
incentives that are market-based.

**Strengthening international organizations and capacities in foreign
countries.** Protection policies must also recognize the importance of
cross-border and international vulnerabilities, and acknowledge the
importance of strengthening the international institutions that develop
and oversee the protocols that affect our trade opportunities.
International institutions and collaborative opportunities should be
fostered to protect U.S. agriculture by addressing risks and problems
before they have a chance to reach our shores. A key strategy would be
to focus sufficient resources to continue efforts to improve policies
implemented by international institutions, promote the use of
scientifically sound protocols by our trading partners, and assist
resource-constrained foreign nations in addressing disease risks to
minimize subsequent disruptions in world markets.

**Investing in research and education.** Another way to strengthen U.S.
agriculture is to integrate and exploit the continued government
investment in education and training programs. New investments should be
based on filling the greatest gaps in understanding pathogens, diseases
and pests that affect the competitiveness of U.S. agriculture. As
elsewhere, policies should be designed to coordinate and support, rather
than supersede, private efforts to enhance our ability to prepare for
and respond to animal and plant disease introductions.

**Providing accurate information.** Finally, given that consumers
largely drive the economic prospects of U.S. agriculture, consumer
confidence is a critical element of U.S. agriculture's current and
future success. Though it is impossible to prevent all disease and
supply disruptions, and simply providing "correct" information may not
be enough, the availability and delivery of accurate information to the
public should be a foremost consideration. New educational information
delivery technologies should be applied to advance the most effective
means for providing timely and accurate information.

**V. Preparing the Next Generation of Farmers and Ranchers**

Issues which have been raised about the adequacy of the future workforce
needed to farm the nation's agricultural lands include: (1) a potential
divergence between the level of younger, new farm entrants into
production agriculture and the exit of older retiring farmers, (2) the
potential barrier to entry for new farmers created by rising farmland
values and their effect on the capital costs of acquiring an efficient
farm operation, (3) the rising complexity of farm production caused by
changing markets, globalization, new technologies, economies of scale,
environmental concerns, and other factors, and (4) uncertainties about
the supply of future hired farm workers. This section examines the issue
of the adequacy of a sufficient number of capable farmers and other farm
workers for the future and the role of "beginning farmer" and related
programs in addressing concerns about the future farm workforce.

**Background**

# ![](media/image13.wmf)Fewer Young Farm Entrants and Aging Farmers. The average age of primary farm operators continues to rise, increasing by nearly 5 years from 50.5 in 1982 to 55.3 in 2002. For nearly one-fourth of all farms with over \$10,000 in annual sales, the primary operator was over 65 years of age in 2002. The rise in the average age of primary operators is both a reflection of a decline in the number of young farmers and a rise in the number of older farmers. From 1982 to 2002, the number of primary operators under 35 years old declined while the number of farmers 65 and older increased. Farms with over \$10,000 in annual sales and that were operated by those under 35 years of age accounted for less than 7 percent of all farms in 2002, as compared to 19 percent in 1982 (Figure 15). Meanwhile, the share of farms with over \$10,000 in sales operated by farmers over 65 increased from 14 to 25 percent. The sharp decline in young farmers has raised concerns that an insufficient pool of new entrants will be available to replace a large and growing pool of retiring farmers.

![](media/image14.wmf)

There is no evidence, however, that a shortage of farm operators and
farm workers has caused or will cause reduced production and higher
prices of U.S. farm commodities. An Economic Research Service study
released in 2006 on farm exits (farms going out of business) indicated
that while the total number of U.S. farms declines very little in the 5
years between each Census, about 9-10 percent of farms go out of
business each year, which was slightly greater than the entry rate.
Thus, the apparent stability in the number of U.S. farms masks a rather
dramatic turnover. Turnover rates are highest for smaller farms, but
even for farms with sales of \$250,000 or more, 6-7 percent go out of
business each year. Thus, U.S. agriculture has been facing a substantial
number of exits for many years, and as these farms have been sold to new
businesses or existing farms, farms have gradually increased in size.

There is also evidence that there are a substantial number of young
farmers present on farms, though not as the primary operator. Data
indicate that many commercial-sized farms with older operators also have
younger operators involved in their operations. These secondary
operators in many cases represent future primary operators. A high
percentage of these farms are operated as partnerships and as family
corporations. The 2002 Census indicated there were 194,000 farms that
have multiple operators with operators across different generations.

Finally, the rising average age of primary operators may also reflect
technology change that has enabled older farmers to more readily meet
the physical demands of farm labor. Technology has reduced the time
needed for field operations, allowing farm sizes to increase over time
and operators to spend more time on other farm management tasks.
Improving health, reflected in longer lives, also enables the workforce
in general to work to a much older age.

While there is no apparent crisis of farm production likely to result
from the advancing age of principal operators, there are concerns about
how upcoming intergenerational transfers may affect the future structure
of agriculture. Older farmers hold a large share of farm assets. Primary
operators over the age of 65 owned over one-fourth of farm assets in
2004. Collectively, landowners over age 65 owned over one-third of the
total acres of land in farms.

Ultimately, this pool of assets will either be sold or passed on to
heirs. To the extent these assets are sold or leased to existing
operators, this transfer raises concerns about consolidation and its
effects on the structure of agriculture, local economies, and rural
landscapes. Middle-sized family farms with annual sales of between
\$50,000 and \$500,000 fell from 526,000 farms in 1982 to 380,000 in
2002. Meanwhile the number of large farms with over \$500,000 in sales
increased form 43,000 to 71,000 farms. This decline in middle-sized
farms is one factor behind policies to encourage entry into agriculture
or assist in the intergenerational transfer of farm assets. The concern
about structure must be balanced against the economic effects of
technology advancement and economies of scale, which enable agricultural
demand to be met by larger, more efficient, and fewer farms.

**Barriers to Entry**. Another factor likely to affect the transfer of
farm assets is the cost of farm production assets. In 2002, the value of
land and buildings averaged \$710,000 for U.S. farms that were
principally engaged in agriculture. For farms where the principal
operator was less than 35 years old, the value of land and buildings
averaged \$595,000. Farmland values have been increasing rapidly for
many years, but surged ahead by 15 percent in 2005 after a 21 percent
increase in 2004, adding to the cost of entering farming (Table 4).
Thus, these figures represent a significant hurdle for many young
farmers. However, renting land is a key option for young farmers, as
nearly half of land in production is now rented. Moreover, while the
average value of farm real estate increased 57 percent between 2002 and
2006, the average rental rate on crop land rose 10 percent.

![](media/image15.wmf)

**Farm workers.** Although 1.2 million workers were employed on farms
and ranches during July 2006 (0.8 percent of the total U.S. employment),
U.S. agricultural production overall is not heavily reliant on hired
labor. Labor costs are only about 13 percent of total farm production
expenditures. However, some segments of the agricultural economy and
some regions of the country rely more heavily on hired labor. Labor
costs approach or exceed 30 percent of total production costs for many
horticultural crops, and labor costs exceed 20 percent of total farm
production expenses in Arizona, California, Florida, Oregon, Washington,
and many Northeastern States.

Farms that hire labor may use workers without proper documentation. The
U.S. Department of Labor (DOL) reported that, in 2001-02, 53 percent of
hired workers in the crop sector lacked work authorization. If that
percentage is applied to the total hired workforce in agriculture, as
many as 650,000 hired farm workers may lack proper documentation. As
concerns over homeland security and efforts to deter illegal immigration
have increased, some farmers, particularly in the West, have indicated
that hiring farm workers has become more difficult and costly. Farm
labor use in California, a state heavily reliant on immigrant workers,
has declined compared with the rest of the United States. Farm labor use
in California has fallen from about 380,000 workers in 2002 to less than
340,000 in 2005. In the rest of the United States, the amount of farm
labor has remained relatively stable at about 1 million hired workers.

**USDA programs and activities**

While farm succession does not represent a crisis to the production of
food and fiber, and legislative activity may address concerns over the
hired farm workforce, uncertainty over these outcomes has motivated a
number of programs to encourage Americans to take up careers as farmers
and ranchers and help them succeed. The Agricultural Credit Improvement
Act of 1992 was the first law that required USDA to provide special
assistance to beginning farmers and ranchers. The law required the
Secretary to establish: (1) beginning farmer loan programs; (2)
Federal-State Beginning Farmer Partnerships for the purpose of providing
joint financing to beginning farmers and ranchers; and (3) an Advisory
Committee on Beginning Farmers and Ranchers. The Act also required that
loan funds be targeted to beginning farmers and ranchers.

**Credit programs.** USDA implemented beginning farmer and rancher loan
programs in FY 1994. From then through June 2006, the Farm Service
Agency (FSA) has made more than 96,000 loans to beginning farmers and
ranchers, totaling \$8.5 billion. In FY 2006, 34 percent of all FSA
direct and guaranteed loans have gone to beginning farmers and ranchers.
FSA has also created Federal-State Partnerships by signing Memorandums
of Understanding with 20 State beginning farmer programs, agreeing to
provide joint financing to beginning farmers and ranchers. The Farm
Security and Rural Investment Act of 2002 (2002 Farm Bill) authorized
the Secretary to establish a Beginning Farmer and Rancher Land Contract
Guarantee Pilot Program in not fewer than five states during FYs
2003-2007. The program, implemented in September 2003, provides FSA
guarantees on loans made by private sellers of a farm or ranch on a
contract land sales basis to qualified beginning farmers and ranchers.
The program is available in nine states. Two guaranteed loans have been
made since implementation.

While not a USDA agency, the Farm Credit System (FCS) also makes loans
to young farmers and ranchers (35 years old and younger) and beginning
farmers and ranchers (operating for not more than 10 years). For
example, in 2005, FCS institutions made 55,000 loans with a total loan
dollar value of \$8 billion to beginning farmers and ranchers. This
lending represented 21 percent of the total number of new loans and 18
percent of total dollar volume of new loans made by FCS institutions in
2005. As of December 31, 2005, loans to beginning farmers and ranchers
accounted for almost 24 percent of the total number of loans outstanding
and 19 percent or almost \$22 billion of the dollar value of loans
outstanding in the FCS.

**Advisory Committee.** USDA established the Advisory Committee on
Beginning Farmers and Ranchers (Advisory Committee) in 1998. The
Advisory Committee provides advice to the Secretary on methods of
maximizing opportunities for beginning farmers and ranchers. Members
include representatives of FSA; CSREES; State beginning farmer programs;
commercial lenders; private nonprofit organizations with active
beginning farmer and rancher programs; community colleges or other
educational institutions with demonstrated experience in training
beginning farmers and ranchers; other entities or persons providing
lending or technical assistance to beginning farmers and ranchers; and
farmers and ranchers. The Advisory Committee meets annually, and USDA
has implemented numerous recommendations that the Advisory Committee has
submitted to the Secretary.

**Conservation programs.** The 2002 Farm Bill authorized the Secretary
to provide higher payments to beginning farmers and ranchers in some of
USDA's conservation programs. It also authorized the Secretary to
provide incentives to beginning farmers and ranchers to participate in
conservation programs to foster new farming and ranching opportunities
and enhance environmental stewardship over the long term. Since FY 2003,
the Natural Resources Conservation Service (NRCS) has approved \$183
million in Environmental Quality Incentives Program (EQIP) contracts for
beginning farmers and ranchers. In FY 2005 and 2006, NRCS invested \$6.8
million and \$10 million, respectively, in EQIP funds to assist limited
resource and beginning farmers and ranchers to implement conservation
practices on their land. NRCS has also encouraged their State offices to
give extra points in their Farm and Ranch Protection Program ranking
criteria for farms with succession plans.

**Education.** The 2002 Farm Bill also authorized the Secretary to
establish a Beginning Farmer and Rancher Development Program to provide
training, education, outreach, and technical assistance initiatives for
beginning farmers and ranchers. No funds have been allocated to
implement this program. However, CSREES provides grants to organizations
that assist beginning farmers and ranchers through the (1) Outreach and
Assistance for Socially Disadvantaged Farmers and Ranchers Program
(Section 2501) and (2) National Research Initiative Grants Program
(Agricultural Prosperity for Small and Medium-Sized Farms). The 2002
Farm Bill authorized \$25 million in annual appropriations for FY 2002
through 2007. Annual allocations have been approximately one-fourth of
that amount.

**Risk management.** New entrants into agriculture can participate in
price and income support programs and crop insurance on the same terms
as other producers. However, the Risk Management Agency (RMA) provides
grants to organizations to assist beginning farmers and ranchers in risk
management. Following recommendations of the Advisory Committee, RMA has
targeted grant applicants that were sensitive to the needs of beginning
farmers and ranchers and those that planned to partner with
organizations that assist beginning farmers and ranchers. Seven
organizations assisting beginning farmers and ranchers received grants
in the first solicitation in 2003. Since then, RMA has continued to
include beginning farmer and rancher language in their annual grant
solicitations, including the Community Outreach and Assistance
Partnership Program Announcement published March 1, 2006. On June 16,
2006, RMA also announced a rural initiative for new farmers, making
available \$500,000 to fund educational programs to teach refugees and
other low-income individuals who produce specialty crops about risk
management and good business practices.

**Departmental Policy.** In 1999, USDA implemented Departmental
Regulation (DR) 9700-1, "Small Farms Policy". The Advisory Committee
recommended USDA develop and implement a mission focus to heighten
awareness and coordinate beginning farmer and rancher opportunities,
similar to that established in DR 9700-1 for small farms. On August 3,
2006, DR 9700-1 was amended to become a "Small Farms and Beginning
Farmers and Ranchers Policy." This has resulted in a Small Farms and
Beginning Farmers and Ranchers Council, and requires beginning farmers
and ranchers policy to be reflected in all USDA mission area and agency
statements, strategic plans, performance plans, and performance goals.

**Farm workers.** The Department of Labor (DOL) administers, in
consultation with USDA, the Temporary Nonimmigrant Worker Program (H-2A)
that allows farmers to legally use workers from outside the United
States. Farmers must recruit domestic workers and demonstrate that
domestic workers are not available. Farmers must pay transportation
costs and provide housing and meals or cooking facilities for the
temporary workers. They must also pay a wage rate that is established by
the DOL so that it will not depress wages of similarly employed domestic
workers. The program is not widely used because of its complexity, cost,
and historical lack of enforcement against individuals without proper
documentation. In FY 2005, DOL certified requests for 48,000 workers
under the H-2A program.

The Administration has proposed a comprehensive immigration reform
program that includes securing U.S. borders, enforcing immigration laws
at the worksite, resolving the status of illegal immigrants currently in
the United States, and creating a temporary worker program. The program
would alleviate many of the concerns about the farm work force by
providing temporary legal residency for willing workers that are matched
with willing employers. The House and the Senate each passed immigration
reform legislation in 2006 that has yet to be reconciled.

USDA's Rural Development administers the Farm Labor Housing Loan and
Grant Program which provides financing for housing for domestic farm
workers. Loans are made to farmers, associations of farmers, family farm
corporations, Indian tribes, nonprofit organizations, public agencies,
and associations of farm workers.  Grants are made to farm worker
associations, nonprofit organizations, Indian tribes, and public
agencies.  Funds may be used in urban areas for nearby farm labor.  The
loans and grants may be used to buy, build, improve, or repair housing
for farm laborers and those engaged in on-farm processing.  Funds can be
used to purchase a site or a leasehold interest in a site; to construct
housing, day care facilities, or community rooms; to pay fees to
purchase durable household furnishings; and to pay construction loan
interest.

**Issues and Challenges for the 2007 Farm Bill**

The primary forces for assuring an adequate supply of farmers are market
incentives. If agricultural production provides a sufficient rate of
return, capital investment and people will enter farm production. Low
rates of return will discourage investment and cause farm failures.
Competition will drive successful producers to adopt technology and
achieve efficient operations, while inefficient producers will exit
agriculture. The operation of these market forces is critically
important for growth, productivity gains, and ensuring affordable food
for Americans. Nevertheless, the structural changes that have
accompanied the growth in agriculture have led policymakers in recent
years to support specific federal programs and policies that aid new
farm formation or the successful succession of farms from one generation
to the next. These specific policies are delivered directly through
government programs or indirectly through the tax code.

The 2007 Farm Bill could consider current or new programs to assist in
the transition of retiring and exiting farmers and the entry of
beginning farmers. Efforts to encourage farm transfers could be
considered, including working with and supporting state governments and
community organizations that would provide the front-line interaction
with producers to facilitate transition. Targeted financial assistance,
such as continued or expanded credit assistance, and other financial
incentives, such as in risk management and conservation programs,
represent options to assist in transition of farm assets. An initiative
in research, education and outreach to address the needs of farmers in
transition could also be beneficial. Such efforts can help production
assets pass from one generation of farmers to a new generation and
assist the new generation in getting started effectively.

However, assistance to targeted groups of producers must be balanced
against budget limits and not offset market incentives. Little good is
accomplished by helping someone enter agriculture that does not have the
capacity to succeed. Excessive support may also be inequitable to
producers who do not quite qualify for eligibility in the targeted
group. Some general alternative approaches follow.

**Facilitating the transfer of farms to new farmers.** Increasing the
USDA's statutory loan limits would enable direct programs to serve
broader clientele and meet beginning farmers' financing needs. Direct
operating loan (OL) caps were last increased in 1984 and direct farm
ownership (FO) loan caps were last increased in 1978. Consequently, the
credit needs of many full-time young farmers exceed the \$200,000
maximum direct loan. However, increases in statutory loan authority
would limit loan fund availability for smaller operations if budget
authority was not increased. Also, the increased debt load would result
in higher potential risk exposure. In addition to higher loan limits,
young or beginning farmers who buy land could be provided flexible
repayment schedules such as graduated payment, ballooned, or
interest-only mortgages. However, each of these options would increase
credit risk relative to current programs and thus require an increase in
budget authority.

**Reducing reliance on direct loans.** Young and beginning farmers rely
heavily on direct lending, which has high administrative and loan
subsidy costs. Incentives could be considered which encourage lenders to
make greater use of the guaranteed program in financing young or
beginning farmers, thus reducing the need for more costly direct loans.
In addition, interest rate subsidies could be provided to beginning
farmers receiving guaranteed loans. Another option would be to expand
the guarantee to include annual payments. For guaranteed loans made to
beginning farmers to purchase farmland, FSA could agree to advance one
annual payment during the first five years of the loan, should the
borrower's financial condition ever preclude them from meeting their
obligations. As this would increase risk exposure, higher subsidy rates
would result, requiring greater budget authority.

Another alternative would be to encourage State, community, or other
non-government organizations (NGOs) to become involved in programs to
assist new or beginning farmers. Matching loan funds could be provided
to State lending programs or NGOs making loans to qualified beginning
farmers. If these lenders also service the account, Federal government
delivery costs would be reduced.

Rather than direct loans, grants may be considered as a method of
delivering benefits to new or beginning farmers. With grants, there is
no continuing loan servicing costs and no risk of additional financial
losses occurring due to unexpected declines in incomes or asset values.
Beginning farmer grants could be used to purchase land, procure
financial or technical training, or buy down interest rates on
commercial loans. The grant could also be used to match a farmer's
savings in a Beginning Farmer and Rancher Individual Development Account
Program that would establish a pattern of savings to promote a new
generation of farmers and ranchers.

**Providing research, education, and outreach to address the needs of
farmers in transition.** Many socially disadvantaged, limited resource,
and small and beginning farmers may lack technical expertise to achieve
financially sound farming operations. There are many non-Federal groups
with the expertise to accomplish these objectives. Through continuation
of programs such as the Outreach and Technical Assistance for Socially
Disadvantaged Farmers & Ranchers (Section 2501), and the Beginning
Farmer Development Program, USDA can leverage resources with those
provided by States and NGOs to provide technical assistance to new farm
entrants.

**Enhancing benefits under USDA risk management programs.** Financial
enhancements have been suggested for beginning or young farmers
acquiring farmland with base acres and who meet pre-determined
requirements with respect to farm size or wealth. As examples, the
percentage of enrolled base acres that are ineligible for direct and
counter-cyclical payments may be reduced from the current 15 percent to
something less, certain beginning farmers could be made eligible for
higher farm program payment limitations, and enhancements could be
provided to certain young or beginning farmers purchasing crop
insurance. However, there are several important concerns with such farm
program enhancements that should be considered, including their
budgetary impacts, whether providing high farm program benefits per unit
of production to one group of producers over another is equitable, and
that such subsidization may be inconsistent with resource allocation
signals that market forces may be sending.

**VI. Suggestions for Further Reading**

The following is a list of USDA publications related to the issues
raised in this paper:

Ahearn**,** Mary**,**, Jet Yee, Eldon Ball, and Rich Nehring**.**
Agricultural Productivity in the United States Agriculture Information
Bulletin No. (AIB740) 32 pp, January 1998**.**

<http://www.ers.usda.gov/Publications/aib740/>

Anderson, Kym and Will Martin, ed. [Agricultural Trade Reform and the
Doha Development Agenda.]{.underline} The World Bank and Palgrave
Macmillan, Washington, D.C., 2005.

Blayney, D. P. "Disease-Related Trade Restrictions Shaped Animal Product
Markets in 2004 and Stamp Imprints on 2005 Forecasts." USDA Economic
Research Service Outlook Report No. (LDPM13301) 16 pp, August 2005.

<http://www.ers.usda.gov/Publications/LDP/Aug05/ldpm13301/>

Burfisher, Mary E., ed. 2001. [Agricultural Policy Reform in the WTO:
The Road Ahead.]{.underline} Economic Research Service, USDA.
Agricultural Economic Report 802.
<http://www.ers.usda.gov/publications/aer802/>

Fuglie, Keith, Nicole Ballenger, Kelly Day, Cassandra Klotz, Michael
Ollinger, John Reilly, Utpal Vasavada, and Jet Yee. Agricultural
Research and Development: Public and Private Investments Under
Alternative Markets and Institutions. Agricultural Economics Report No.
(AER735) 88 pp, May 1996.

<http://www.ers.usda.gov/Publications/aer735/>

Hahn, W. F. , M. Haley, D. Leuck, J. J. Miller, J. Perry, F. Taha, and
S. Zahniser, "Market Integration of the North American Animal Products
Complex" USDA Economic Research Service Outlook Report No. (LDPM13101)
21 pp, May 2005.

<http://www.ers.usda.gov/Publications/ldp/may05/ldpm13101/>

Hoppe, Robert A. and David Banker. [Structure and Finances of U.S.
Farms: 2005 Family Farm Report]{.underline}. Economic Research Service,
USDA. Economic Information Bulletin (EIB-12), May 2006.
<http://www.ers.usda.gov/publications/EIB12/>

Hoppe, Robert A. and Penni Korb. [Understanding U.S. Farm
Exits]{.underline}. Economic Research Service, USDA. Economic Research
Report No. (ERR-21), June 2006.

<http://www.ers.usda.gov/publications/ERR21/>

Huang, Sophia Wu *et al*. [Global Trade Patterns in Fruits and
Vegetables]{.underline}. Economic Research Service, USDA. Agriculture
and Trade Report No. WRS0406, June 2004.

<http://www.ers.usda.gov/Publications/WRS0406/>

Mathews, K.H . Jr., M. Vandeveer, and R. A. Gustafson, "An Economic
Chronology of Bovine Spongiform Encephalopathy in North America."  USDA
Economic Research Service Outlook Report No. (LDPM-14301) 18 pp, June
2006.

<http://www.ers.usda.gov/Publications/LDP/2006/06Jun/LDPM14301/>

Office of the Chief Economist, U.S. Department of Agriculture. 2006.
[USDA Agricultural Baseline Projections to 2015]{.underline}.
<http://www.ers.usda.gov/publications/oce061/>

Organization for Economic Cooperation and Development. [Agricultural
Policy and Trade Reform: Potential Effects at Global, National, and
Household Levels]{.underline}. Paris, France. June 2006.

# Regmi, Anita and Mark Gehlhar. [New Directions in Global Food Markets]{.underline}. Economic Research Service, USDA. Agriculture Information Bulletin No. (AIB794), February 2005. 

Regmi, Anita; Mark Gehlhar; John Wainio; Thomas Vollrath; Paul Johnston;
and Nitin Kathuria. [Market Access for High-Value Foods]{.underline}.
Economic Research Service, USDA. Agricultural Economic Report No.
(AER840), February 2005. <http://www.ers.usda.gov/publications/AER840/>

Roberts, M.J., D. Schimmelpfennig, E. Ashley, M. Livingston, M. Ash, and
U. Vasavada, "The Value of Plant Disease Early-Warning Systems: A Case
Study of USDA\'s Soybean Rust Coordinated Framework." Economic Research
Report No. (ERR-18) 46 pp, April 2006.
<http://www.ers.usda.gov/Publications/ERR18/>

Rubenstein**,** Kelly Day, Paul Heisey, Robbin Shoemaker, John Sullivan,
and George Frisvold. Crop Genetic Resources: An Economic Appraisal
Economic Information Bulletin No. (EIB2) 47 pp, May 2005**.**
<http://www.ers.usda.gov/Publications/eib2/>