S. Hrg. 110–30

DISCUSSION OF THE

U.S. DEPARTMENT OF AGRICULTURE

FARM BILL PROPOSAL

HEARING

øBEFORE THE¿

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 7, 2007

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

DISCUSSION OF THE U.S. DEPARTMENT OF AGRICULTURE FARM BILL PROPOSAL

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S. HRG. 110–30

DISCUSSION OF THE

U.S. DEPARTMENT OF AGRICULTURE

FARM BILL PROPOSAL

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 7, 2007

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa

MARK HALVERSON, Majority Staff Director 

ROBERT E. STURM, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Discussion of the U.S. Department of Agriculture Farm Bill Proposal .............. 1

Wednesday, February 7, 2007

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee on 

Agriculture, Nutrition and Forestry ................................................................... 1

Chambliss, Hon. Saxby, a U.S. Senator from Georgia ......................................... 2

Panel I 

Johanns, Hon. Michael, Secretary of Agriculture, U.S. Department of Agriculture, Washington, DC; accompanied by Keith Collins, Chief Economist, 

U.S. Department of Agriculture, Washington, DC; and Charles Conner, 

Deputy Secretary of Agriculture, U.S. Department of Agriculture, Washington, DC ............................................................................................................. 4

APPENDIX 

PREPARED STATEMENTS: 

Cochran, Hon. Thad ......................................................................................... 62

Crapo, Hon. Micheal D. .................................................................................... 65

Salazar, Hon. Ken ............................................................................................ 67

Johanns, Hon. Michael ..................................................................................... 69

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Johanns, Hon. Michael: 

Written response to questions from Hon. Tom Harkin ................................. 86

‘‘2007 Farm Bill Proposals’’, U.S. Department of Agriculture ............................. 90

QUESTION AND ANSWER: 

Harkin, Hon. Tom: 

Written questions for Hon. Michael Johanns ................................................. 276

Baucus, Hon. Max: 

Written questions for Hon. Michael Johanns ................................................. 287

Chambliss, Hon. Saxby: 

Written questions for Hon. Michael Johanns ................................................. 289

Crapo, Hon. Mike: 

Written questions for Hon. Michael Johanns ................................................. 299

Grassley, Hon. Charles: 

Written questions for Hon. Michael Johanns ................................................. 300

Lincoln, Hon. Blanche L.: 

Written questions for Hon. Michael Johanns ................................................. 302

Lugar, Hon. Richard G.: 

Written questions for Hon. Michael Johanns ................................................. 303

Nelson, Hon. E. Benjamin: 

Written questions for Hon. Michael Johanns ................................................. 305

Roberts, Hon. Pat: 

Written questions for Hon. Michael Johanns ................................................. 307

Salazar, Hon. Ken: 

Written questions for Hon. Michael Johanns ................................................. 308

Page

IV

Thune, Hon. John: 

Written questions for Hon. Michael Johanns ................................................. 311

Johanns, Hon. Michael: 

Written response to questions from Hon. Mike Crapo .................................. 313

Written response to questions from Hon. Patrick J. Leahy .......................... 314

Written response to questions from Hon. Ken Salazar ................................. 316

Written response to questions from various Senators ................................... 318

(1)

DISCUSSION OF THE 

U.S. DEPARTMENT OF AGRICULTURE 

FARM BILL PROPOSAL 

Wednesday, February 7, 2007

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 9:20 a.m., in room 

SD–106, Dirksen Senate Office Building, Hon. Tom Harkin, Chairman of the committee, presiding. 

Present or submitting a statement: Senators Harkin, Leahy, Lincoln, Stabenow, Nelson, Salazar, Brown, Casey, Klobuchar, 

Chambliss, Lugar, Cochran, Roberts, Coleman, Crapo, Thune, and 

Grassley. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairman Harkin. Good morning. The Senate Committee on Agriculture, Nutrition and Forestry will come to order. 

This morning, we are pleased to welcome the Secretary of Agriculture, Mike Johanns, to explain and answer questions about the 

Administration’s proposals for the 2007 farm bill. We again welcome Deputy Secretary Chuck Conner and Chief Economist Keith 

Collins, accompanying the Secretary. 

You know, we commonly refer to the, quote, ‘‘farm bill,’’ when in 

fact that term captures only a fraction of what the legislation is 

called upon to address. All Americans have a stake in the farm bill. 

Its scope extends from helping agricultural producers to conserving 

our natural resources, promoting rural growth and jobs, alleviating 

hunger and improving nutrition, investing in food and agricultural 

research, and increasingly to securing our Nation’s energy future. 

I want to thank you, Secretary Johanns, and your team for making proposals that challenge us to take a new look at issues and 

problems and to consider new approaches. We have a responsibility 

to write a farm bill which looks to the future, not one that clings 

to the status quo of the past. 

Now, we made a good deal of progress, I think, in the Farm Security and Rural Investment Act of 2002. But farm bills are written 

for a limited number of years for a good reason. Agriculture is 

among the most rapidly changing sectors of our economy. Policies 

that worked at one time may not be well suited to a new era filled 

2

with critical new challenges and opportunities for farm families, 

rural communities, and our entire Nation. 

A core mission of the farm bill, of course, is promoting profitability and income potential in agriculture and a degree of stability 

and predictability in our Nation’s food and agricultural system. 

Americans have come to take for granted a plentiful, wholesome, 

and affordable food supply, and it is in our Nation’s best interest 

to construct programs to help agricultural producers survive the 

vagaries of weather and markets. 

But we also need a farm bill that looks much further ahead. It 

must be bold enough and creative enough to prepare for and master challenges and opportunities on the horizon. We are, as you 

have said many times, Mr. Secretary, in the midst of revolutionary 

changes in food and agriculture, most notably in farm-based renewable energy. We put an energy title in the 2002 farm bill, and there 

is broad agreement that energy is perhaps the key driving force in 

this farm bill. I commend President Bush for his ambitious renewable energy objectives, although I have some concerns that the 

budget lacks the resources necessary to achieve those goals. 

I also welcome your proposals, Mr. Secretary, to increase our investment in agricultural conservation, rural development and research, to help beginning farmers and ranchers, and to improve 

USDA’s efforts in promoting nutrition and health and fighting hunger. We must do more in those areas. 

So I guess my main question at the beginning is whether the Administration’s proposals, your proposals, are strong enough and 

will we be able to back them up and strengthen them with the 

budget that we have and the resources that we have. 

Again, Mr. Secretary, I want to compliment you and your team 

on a really good proposal. I think there is a lot of stuff in there that 

we can work together with you on. I think it does chart a new bold 

challenge to us here to work together to achieve those goals. So 

again, the committee welcomes you and the valuable contribution 

of your proposals to our work in writing this new bill. I look forward to a good bipartisan working relationship with you and the 

administration and with my colleagues here in Congress in drafting 

and enacting this vitally important legislation. 

With that, I will turn to our distinguished former Chairman and 

our Ranking Member, my good friend from Georgia, Senator 

Chambliss. 

STATEMENT OF SENATOR CHAMBLISS, A U.S. SENATOR FROM 

GEORGIA 

Senator CHAMBLISS. Mr. Chairman, thank you for holding this 

hearing today. 

As Chairman, as you know, I dedicated much of 2006 to preparing for the reauthorization of the farm bill and this committee 

spent many hours in field hearings listening to producers about 

their farm bill needs. Secretary Johanns held his own listening sessions around the country and points to those sessions in his development of the Administration’s farm bill proposals. This hearing 

today is an important step toward the farm bill reauthorization in 

that it will allow us to explore the justifications for the Secretary’s 

specific proposals and engage in a dialog about impacts the proVerDate 0ct 09 2002 09:22 May 24, 2007 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\34741.TXT SAG2 PsN: SAG2
3

posal could have on this Nation’s farmers, ranchers, rural communities, and the agricultural economy. 

Mr. Secretary, welcome. We are always glad to have you back before the Agriculture Committee. Dr. Collins, Chuck, we are always 

pleased to see you here. Thank you for your efforts, and we appreciate you bringing new ideas to the table as Congress begins to debate the new farm bill. 

My goal always has been to make certain that America’s farmers’ 

voice is heard and their concerns are addressed in this process. 

There are a lot of farmers, a number of ideas, and a variety of ways 

in which concerns can be addressed. Each Senator on this committee represents an important part of agriculture country and we 

will each have an important role in crafting the new farm bill. 

When the 2002 farm bill was passed, the Congressional Budget 

Office estimated that we would spend $110.6 billion on commodity 

programs during fiscal years 2002 to 2008. I am proud to say that 

because of the market-oriented direction in which that farm bill 

took us, that we have spent much less than originally estimated. 

Farm program spending under the 2002 farm bill is now expected 

to cost approximately $25.3 billion less than originally projected for 

fiscal years 2002 to 2008. And even if we take into account recently 

enacted disaster assistance packages, the 2002 farm bill has spent 

$19.2 billion less than expected. These are impressive figures that 

we need to consider in constructing the next farm bill. 

One thing that the 2002 farm bill did provide to our farmers and 

ranchers around America was a true safety net, and frankly, Mr. 

Secretary, with your proposals, I see a tendency toward guaranteeing farmers payments versus providing that safety net. I am not 

sure what direction the committee is going to decide to go, but it 

does steer us away from providing a helping hand in the years 

when the farmers really have low yields, low prices, and it moves 

us in a direction of making sure that farmers get money from the 

Federal Government every year irrespective of whether or not they 

plant crops. 

Certainly, there are a lot of challenges ahead of us as we work 

to complete the farm bill before portions of it expire. But I trust 

that we can, Mr. Chairman, work in a bipartisan manner to reach 

a consensus that will prove beneficial for each of our States and 

our constituencies. 

I thank you and look forward to the witnesses’ testimony today. 

Chairman HARKIN. Thank you very much, Senator Chambliss. 

Secretary Johanns, again, welcome to the committee. Your statement will be made a part of the record in its entirety. Please proceed as you so desire. They put 10 minutes on there, but do not 

worry too much about that. We want to hear your full explanation 

and, of course, I then will open it up for questions and different 

rounds at that time. So, Mr. Secretary, welcome. 

4

STATEMENT OF HON. MICHAEL JOHANNS, SECRETARY OF AGRICULTURE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC; ACCOMPANIED BY KEITH COLLINS, CHIEF 

ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC; AND CHARLES CONNER, DEPUTY SECRETARY 

OF AGRICULTURE, U.S. DEPARTMENT OF AGRICULTURE, 

WASHINGTON, DC 

Secretary JOHANNS. Thank you, Mr. Chairman. I have to tell 

you, it is an honor for me to be back in front of the committee. 

Members of the committee, I appreciate the opportunity to visit 

with you. This is the first time I am appearing before the 110th 

Congress and I feel, like I said, very honored to be able to be here 

and speak about the farm bill. 

Our Department has worked very hard on these proposals, but 

for that matter, farmers across the country did because of our listening sessions. I am submitting for the record a very extensive 

written statement, so I am going to speak from an outline today 

and try to keep it to the point but fairly brief. 

I would also mention that, for the record, Mr. Chairman, we are 

submitting the book that contains our farm bill proposals, so that 

will be a part of the record. 

Thanks for acknowledging two people that were very key in developing our proposals. I could not have a better Deputy than 

Chuck Conner. I will tell you, Chuck has really led this effort in 

the Department. 

Chairman HARKIN. Be careful what you say. We all know him. 

[Laughter.] 

Secretary JOHANNS. Yes, I know. I know. I will be careful. 

And then, of course, every time we had a question about analysis 

or background, we turned to Dr. Collins. My respect for Dr. Collins 

grows daily. He does a great job for us. 

We also have with us a whole host of people, but I would mention one of our newest Under Secretaries, Mark Keenum, who I 

think is very familiar to the committee. He works in this area with 

our farm programs and also with our Foreign Agricultural Service. 

And then Scott Steele, if there are budget issues, Scott is here to 

address those. 

This journey to the farm bill proposal started pretty soon after 

I arrived a couple of years ago. We held 52 Farm Bill Forums 

across the United States, really on a nationwide basis. We received 

4,000 comments. Our approach was always the same. It was an 

open microphone, no prearranged testimony. We just said we will 

be in a given location. Farmers showed up. They would oftentimes 

drive hours to come to these forums and talk to us. 

I do appreciate, Mr. Chairman, you were at a forum that I conducted in Iowa and that was pretty typical of the forums we had 

across the country. 

We received 4,000 comments. We did a summary of those comments that is actually contained in this binder, but we put it on 

the website, 41 summary papers, and then I turned to our Chief 

Economist Keith Collins and I said, identify themes, and we 

worked together and tried to identify themes out of the comments. 

These were published in five theme papers that have now been on 

5

our website for some period of time, filled with excellent information, and again, led by the folks in Keith’s shop. 

We then ended up with our farm bill proposals, which is contained in this booklet, and as I said, we made that a part of the 

record. 

Let me just be very clear, and I mentioned this when I was going 

through the confirmation process. I have a history with the 2002 

bill. I was the lead Governor for the Western Governors and the 

Midwest Governors. In fact, Tom Vilsak and I were co-lead Governors for the Midwest Governors in the reauthorization of the 

2002 bill. I have said many times, I think it was the right policy 

for the times. Commodity prices were low. Exports had declined for 

several years in a row. The debt-to-asset ratio was at about 15 percent. That was not the highest in history, but it was certainly a 

number that caught probably everybody’s attention. It was the first 

ever farm bill with an energy title and it increased conservation 

spending by about 80 percent. 

But times do change, and farm bills reflect the changing times. 

As the Chairman indicated, that is why we pass them for a limited 

number of years and then reenact them, so we can calibrate the 

changes that have occurred. 

Today, as we prepare for a new farm bill, commodity prices are 

strong for most program crops, and in some areas, historically 

strong. Exports have increased every year to a record $68 billion. 

We think in 2007 that number will actually get to $77 billion. That 

will be yet another record. 

In all of the recordkeeping the USDA has ever done, I can tell 

you that we have the lowest debt-to-asset ratio in recorded history. 

It is now about 11 percent as of 2006, and the trend very definitely 

is in the right direction. 

And renewable energy is a significant contributor to the agricultural economy. 

As we went around the country, we listened to stakeholders and 

we built proposals based upon principles of reform and also recognizing that fiscal responsibility was important. We knew at some 

point we would have a baseline number we would have to work 

with. The proposals we submit, I would respectfully suggest to the 

committee, are more predictable. These proposals are more marketoriented. They provide support when revenue is low. 

Senator Chambliss, I am very anxious to engage in a dialog with 

you on some of the comments you have made because actually, we 

believe the proposals we are making provide a more predictable 

safety net for producers out there. But again, I will save that for 

our discussion. 

We believe these proposals are more equitable. They distribute 

resources more equitably than previous farm bills have done. And 

we support growers of specialty crops, for example, who have had 

a small place in previous farm bills, but very small. We also would 

respectfully suggest that these proposals are better able to withstand challenge. 

Again, many of you have an interest in, of course, all commodities. Some have a very special interest because of state production 

in cotton. Well, we have a WTO cotton case. We cannot ignore it. 

We are now—the case is final in terms of the ruling. Now they are 

6

trying to figure out whether we have complied with the ruling. 

That is what the most recent case is. And we believe it wisely and 

effectively spends tax dollars. 

Let me just touch with a tad bit of detail on some of the proposals. We are proposing to revise downward marketing loan rates. 

I mentioned that when we released this almost—well, it was a 

week ago. Here is how they were set. They were set based upon 

the market. We did not go out there to try to just pick a number. 

We set them based upon market experience over the last 5 years 

of the 2002 farm bill, the Olympic average, taking out the high 

year, taking out the low year, and basing it on the average of those 

5 years. 

The House approved a version of the 2002 farm bill before it was 

sent over here to the Senate and loan rates were established in 

that House-approved bill. We have proposed to cap loan rates based 

upon that number that had been through that process. 

We now post about 8,000 daily prices, county prices, and you can 

do the math. Eight-thousand times 365, I do not know if we post 

them on holidays or not, Chuck, but if you do the math, roughly 

around three million posted county prices. It is no wonder you go 

out into the country and farmers are saying, our county prices do 

not make sense. They do not compare with what is happening in 

the next county. Quite honestly, it just invites problems. We are 

changing that from a daily posted price in our proposal to a monthly posted price. We also increase direct payments by $5.5 billion. I can tell you 

without a doubt, to the producer out there, this is more predictable. 

It is not tied to price or production, and although I am not the 

trade lawyer, I can tell you that generally, payments not tied to 

price or production do not run into the WTO challenges that you 

have in programs that are tied to price or production. And for the 

young producer out there, if this proposal is adopted, you take it 

to the bank. 

Now, lowering loan rates for four of the major commodities—

corn, wheat, rice, and soybeans—the net effect really is not financial. But notwithstanding, we went out there and said, you know, 

in the third, fourth, and fifth year, we should improve the safety 

net, so we identified a billion dollars to raise those direct payments. If the projections are accurate, the loan rate impact here 

really is not going to make any change in terms of the financial aspect. It is about a wash, and Keith may talk about that at some 

point. 

We heard something very interesting out there relative to the 

countercyclical, and Senator Chambliss, this might get to a part of 

your comments. This seemed counterintuitive to me, but we heard 

it in Kansas, we heard it in Nebraska, we heard it in other places. 

Farmers showed up and said, you know, the interesting thing 

about the 2002 bill, I am over-compensated when I do not need it 

and I am under-compensated when I do. And like I said, it sounded 

terribly counterintuitive to me. Let me explain what those farmers 

were telling us. 

In years of high production, the price goes down typically and the 

countercyclical kicks in. And if they have raised a crop, in fact, a 

big crop, they were able to pick a day to lock in their LDP. And 

7

in 1 year, it happened at a time where we had a 2–month decline 

in price because of Hurricane Katrina and prices came back, so 

they locked in very high LDPs. 

Now, let me take the other side of that. What about that statement that says, in years where I need the safety net, the 2002 bill 

isn’t there? Some of you will really relate to this. What farmers 

were telling us there, and again, we have studied this and it bore 

out, in years where their production has been hit by drought or 

other circumstances, what tends to happen to the price? The price 

goes up. It is a simple supply and demand phenomena. The countercyclical does not kick in. They do not get the countercyclical payment at a time when they are experiencing drought, their neighbors are experiencing drought, for example. 

And I was told a thousand times out there—it is etched in my 

memory—‘‘Mike, you can’t LDP a crop you can’t raise.’’ There are 

no loan deficiency payments on a crop you did not raise. So at a 

time when the farmer needs us most, they have no safety net. Is 

it any wonder that groups are here almost on an annual basis saying, we need a disaster program, and there is this annual debate, 

should it be $2 billion? Should it be $6 billion? Should it be $4 billion? 

Our approach to this addresses a very important part of that 

issue, and again, it came from farmers. We provide a conservationenhanced payment option. Let us say a farmer of a program crop 

out there looks at the farm bill and says, you know, prices are 

strong. I do not think I am going to get a countercyclical or loan 

deficiency payment over the next 5 years. I will get my direct, but 

I will not get these other programs. However, there are some conservation things that I have been interested in getting done. Is 

there a program that fits for me? 

Under the proposal we are making, the answer to that question 

is yes. Farm just the way you are. Raise your corn, your wheat, 

your cotton, whatever you are raising. Work with us on conservation ideas for your farm. We will raise your direct payment 10 percent under our proposal. And so we get a benefit. We assure that 

farmer an additional payment to assist in doing those conservation 

efforts, totally voluntary. The farmer may look at it and say, that 

is a good program for somebody, it is not a good program for me. 

I will stay with where I am at. That is fine. No problem with that 

at all. We give farmers another option to look at. 

We are also proposing to eliminate commodity program payments 

on land acquired through 1031 exchange. This does follow the land. 

Boy, I will tell you what, you go out there, all I needed to do to 

start a farm bill forum debate was to start talking about 1031, and 

I will tell you what, you got a debate. 

Farmers see this as raising their cash rents and their land 

prices, and what we are saying is we are not proposing to impact 

the tax code. You will still be free to do the 1031 exchange. We appreciate the jurisdictional issue here. What we are saying is if you 

do that, then the cash commodity payments under Title I would not 

apply to that land. You would not receive those payments. 

Now, if I might make a few comments about some of the other 

changes we are proposing. I could spend hours on the commodity 

8

title. It is complex. We know that. I will let that come out in questions. 

Let me talk about conservation. We are proposing an increase of $7.8 billion in our conservation programs. We heard from farmers,‘‘we like conservation’’. ‘‘Your programs are so complicated, they 

confuse us’’. They are right. They confuse us, to be very blunt about 

it. We are proposing simplification and consolidation. We are proposing to create a new Environmental Quality Incentives Program, 

which would include a regional water program. 

Senator Harkin, you have led the debate on the Conservation Security Program. We are proposing more than doubling the funding 

in this area, from about $300 million annually to $800 million. 

Most of the money for CSP under the current plan is way out there 

in the ninth and tenth year. It spikes up like this. We are proposing to level that out and increase the funding by $500 million. 

If our proposals are accepted, we would be able to offer CSP on 

a nationwide basis—on a nationwide basis. It would not be limited 

to watersheds like it is today. We believe over the time of our—

over 10 years, that we would increase acres from 15 million to 96 

million, a substantial increase in what is proposed, and I have to 

tell you, it just works better for us. Trying to get out there nine 

or 10 years and then ramp that program up that dramatically, it 

would just work better, I think, for stakeholders and everyone if we 

could level that funding out over the next decade. We are providing $1.6 billion in new funding in our proposal for 

renewable energy research, development, and production, targeted 

at cellulosic ethanol. I am confident in telling you, I think corn will 

always be a part of our ethanol industry. It has got a tremendous 

footing in the market. It has been around a long time, really successful in the last couple of years. But if we are to meet our goals, 

if we are to meet that goal that the President talked about in his 

State of the Union of reducing gasoline consumption by 20 percent 

in 10 years, we need to move toward cellulosic. 

But here is the positive thing about that. All of a sudden, ethanol 

goes from a corn belt-based program to a national program. If you 

have biomass in your State, you have forest ground where literally 

you want to clean up what is laying on the floor of that forest, you 

could have a biomass program. If you grow grass in your State. 

The other thing I would mention, we have made a proposal on 

a conservation program where literally we would say you have to 

meet your conservation goals. You have to deal with the nesting 

season. You have to do everything you said you would do to meet 

the environmental nesting requirements, but let us think about a 

program that would allow a harvest, if you will, of something from 

that conservation ground, and again, I emphasize in an environmentally sensitive way, complying with all of the needs of the nesting birds out there, but again, it gives farmers another option. 

We are providing $1 billion in loans and $500 million in grants 

for rural communities. We have a list we could provide, but across 

the United States, we have 1,280–some hospitals, if I remember 

the number correctly—1,283 hospitals that have been designated 

Rural Critical Access Hospitals. These hospitals need to be rehabilitated. They need to be up to today’s standards. These are in 

very rural areas. Senator Nelson, we would see these in our State, 

9

but you would see these across the country. Senator Roberts, you 

would see these in Kansas. These are hospitals that if that hospital 

closes, health care disappears for miles and miles. We are proposing—we have not had the money to finish these hospitals. We 

are proposing the financing for this loan program—it is a loan program that would do them all—during the life of this farm bill, we 

would do all 1,283 hospitals, and again, a very important program 

for health care. 

We propose additional funding to deal with the backlog of infrastructure programs, and we are proposing some consolidation. 

We are also targeting about $5 billion in funding to support our 

specialty crop farmers across the country. As I said, we did Farm 

Bill Forums across the United States. Our specialty crop farmers 

made it clear, they did not want to be a subsidized crop. They are 

not looking to be in Title I in terms of a cash subsidy. What they 

were looking for was increase in funding for research in 

phytosanitary and sanitary issues, market promotion, those kinds 

of things, and so we have identified funding here. 

We have a number of proposals. We started every farm bill forum 

with somebody from FFA, somebody from 4H. I was in both programs growing up. They are great programs. They talked about the 

challenges of starting out, beginning farmers. We are proposing in 

the program crop area to enhance the direct payment for beginning 

farmers by 20 percent. We are also targeting part of our conservation programs and substantially improving our loan programs for 

beginning farmers. The improvements in the loan programs, the 

targeted enhancement and conservation, would also apply to socially disadvantaged farmers. 

Now, we have not defined beginning farmers in our proposal, although there is a definition in our loan programs, but that would 

be one where we say to the committee, Chairman, we want to work 

through this and try to figure out how this program applies. But 

we proposed these ideas because I think they make sense for the 

next generation of farmers. 

And then I would also mention, and there is a lot of detail that 

I will not go into here that we can certainly provide in response 

to questions, we are doing a number of things in our food assistance programs that are very beneficial. For example, college savings, we are proposing that would not be computed as a part of 

your assets. Your retirement account, we are proposing that that 

would not be figured in as a part of your assets. So again, it should 

improve access. 

We are improving—we focused on this disaster assistance area. 

A couple of things I would mention. One is the revenue-based plan 

will simply work better. We are also proposing gap coverage. We 

went out to farmers and they said, ‘‘Mike, I can buy crop insurance 

to cover 70 percent of my crop,’’ or whatever the number is. ‘‘What 

do I do?’’ Some farmers cannot afford to lose that 30 percent and 

survive. Some can. Some can manage that risk, not a good deal, 

but they can manage it. We are proposing to cover that gap in our 

crop insurance proposal. We are linking crop insurance participation to farm program participation and we are consolidating ECP 

and EWP in one emergency landscape program in our proposal. 

10

A final thing I will mention, overall, I believe these proposals 

achieve a funding balance. If you look at the spending in the 2002 

farm bill, from 2002-2007, this proposal spends about $10 billion 

less. If you add into that the disaster relief, it would be about $17 

or $18 billion less. But apples to apples, $10 billion less. However, 

if you just walked in and said, ‘‘I like the 2002 bill. Let us just reauthorize it,’’ some have said that, maybe less and less now, but 

some have said that, and so if you just walked out on the Senate 

floor and got those votes and the House floor and just simply reauthorized it, this proposal actually spends $5 billion more over the 

baseline. But most importantly, it fits within the President’s plan 

to balance the budget within the next 5 years, and I would argue 

to you, it is a more predictable safety net in terms of what farmers 

are trying to deal with, and that is especially true in those areas 

that have struggled through drought and those kinds of issues. 

Let me just wrap up my comments and say, Mr. Chairman, I 

thought your comments were right on target. We do a farm bill 

every 5 years because it gives us an opportunity to ask ourselves 

what has worked, what has not worked. We decided the best way 

of approaching that was to simply ask farmers that question and 

to try to fit our proposals and tailor them with that as our base. 

So with that, again, I am pleased to be here. If I took a few more 

minutes than I thought I was going to, I apologize. As you can tell, 

I feel passionately about what we are doing, and I say finally, I 

look forward to working with you and the committee on all of these 

important issues. 

Chairman HARKIN. Mr. Secretary, thank you very much. That 

was a very comprehensive and well-presented, I think, analysis of 

your farm bill proposal. It is a comprehensive bill. There are a lot 

of good things in there that I think we should take a look at. I 

think it is one on which we can work together as a committee and 

work with you on as we move ahead. 

[The prepared statement of Hon. Michael Johanns can be found 

on page 69 in the appendix.] 

Chairman HARKIN. Just a couple of comments on what you said 

there. I think you are right on target on doing something about 

monthly posted prices rather than the daily. 

I have a concern about the direct payments. It is going to get 

harder and harder to explain to our colleagues here, and I think 

the American people, why we should give a government check to 

someone who is doing very well, who is making a lot of money, but 

we are going to give you a check anyway. That is why I, quite 

frankly, I had some questions about this Revenue Assurance Program as it was brought up in the past. The more I look at it, I 

think the more I like it, and I think it has a lot of promise. Again, 

I just say, to my way of thinking, I think that rather than bumping 

up direct payments, maybe we ought to put more in the Revenue 

Assurance. Again, that is a true countercyclical-type program. 

Now, how that runs into WTO problems, I am not certain. We 

have to work that one out, I think. But I think that is more saleable than just a direct payment, again, to a farmer who is doing 

very well. 

The 1031 exchanges, right on target. I hear about that a lot. In 

fact, I just want to say as an aside, I compliment you on all the 

11

hearings you had around the country. I went to the one in Iowa. 

You were right. It was wide open, no preset agenda. Anybody could 

say what they wanted to say, and I thought it was really a good 

exchange. But the 1031 exchanges, you are right on target on that. 

On conservation, I know that there is an urge to simplify and we 

do have to simplify, but there are a lot of specific things that we 

have tried to address in the past, whether it is WHIP or WRP or 

EQIP or CRP. All of these address different aspects of conservation, 

and I am not certain that sort of one-size-fits-all. Within that 

framework, whatever we can do to simplify, we should. 

I again congratulate you and thank you for your proposal on getting rid of the watershed basis on the CSP Program. I have heard 

a lot of not good comments on that one in the past, simply because 

of the anomalies which it brings up and the inequities on that. So 

we can go to a true national basis on that. We had some testimony 

in our hearings earlier on and we are getting more information on 

proposals on how you do that and we welcome any suggestions that 

you might have on that basis, also. 

I will say, however, I think that as much as I applaud your willingness to move ahead on CSP, I think if you are going to use CSP 

for renewable energy and cellulose crops where they can harvest it 

in an environmentally sensitive manner, I think CSP fits into that 

and I am not certain that that amount of money that we have 

there will move farmers into that transition where they can grow 

those kinds of crops, but that is for a later discussion. 

On rural development, I applaud your proposal on the hospitals. 

I think that is long overdue, something I wish we would have paid 

attention to in the past and we did not. 

The Specialty Crop Program, while I think you are going down 

the right track on that, I might have a question and concern about 

how you want to do that. We have started a program, a little pilot 

program in the 2002 farm bill that was called the Fruit and Vegetable Snack Program. We started with four States and 100 schools, 

25 schools in each State, where kids were given free fresh fruits 

and vegetables and it was just to see what would happen. Well, 

what happened is every single one of those 100 schools that started, not one has asked to drop out of the program. We are now up 

to 14 States, if I am not mistaken, and, I do not know, somewhere 

between 500 and 700 schools. I cannot get a quite good grip on exactly how many schools. 

But every State in which they have adopted this, the schools that 

are not getting it are asking why they cannot get it. It is a way 

to get fresh fruits and vegetables to kids in elementary school. I 

have said before, my goal has been that in 10 years, that every elementary school kid in America gets free fresh fruits and vegetables 

at snack time in their schools. I hope that we can work on that as 

part of your program in looking at specialty crops. 

The enhanced direct payments to beginning farmers, I think we 

should look at that. I have a little bit of concern about that in 

terms of the definition and who gets that and whether or not that 

ought to be balanced with long-term lower rate interest rates, in 

other words, spreading things out over a longer period of time and 

that rather than just an up-front direct payment as such, but a balance between the two. 

12

On food stamps, again, I congratulate you for looking at the retirement assets. Senator Chambliss has a bill which pretty soon—

have you introduced it yet or not? I want to get on it, but——

Senator CHAMBLISS. It is ready to be dropped. 

Chairman HARKIN. It is ready to be dropped, working on the 

asset limit and stuff. I looked it over and I told my staff to put me 

on that bill right away. But it tracks a lot of what you are saying. 

And the crop insurance, we are going to have to take a look at 

that gap coverage, group coverage that you are talking about and 

see how workable that is. I do believe that crop insurance should 

be strengthened. I think it provides, again, that safety net when 

you are talking about farmers may not get something when they 

do not have a crop. Well, that is what crop insurance is for and we 

need to design it so that we do cover that gap you are talking 

about, that 20 percent, 30 percent gap in there. 

So all in all, I thank you very much for your presentation and 

for your recommendations. We look forward to working with you on 

it. 

I have one question that basically has to do with funding and energy. I think there is a consensus, Mr. Secretary, and you have said 

it in your statement, to move this farm bill aggressively in the energy area, in renewable energy. But right now, USDA is proposing 

about $160 million per year in funding for energy programs. Correct me if I am wrong on that. Current authorizations for essentially the same programs total over $200 million per year, and appropriations from fiscal year 2003 through 2006 averaged about 

$175 million a year. 

So again, if I am right on those numbers, then why are you proposing less than recent appropriations or current authorizations 

while at the same time the President is calling for a very aggressive and expanded research and development program on renewable fuels and bioenergy? So that is my question. I am looking at 

the figures and it looks like we are spending more now and authorizing more now than what you are proposing. 

Secretary JOHANNS. You are right in terms of spending authorization, but let me, if I might, just run through some numbers here 

that I have in front of me. The 2002 farm bill provided mandatory 

funding of $14 million per year. It authorized an additional appropriation of $49 million annually through 2007. However, none of 

the additional $49 million of authority was ever appropriated. It 

never came to be. 

A couple of other things to think about before I talk about our 

proposal. The 2005 Energy Policy Act extended the authorization 

for appropriations to fiscal year 2015 and increased discretionary 

funding by $200 million. We are not proposing any change to that. 

So that is still there. We are not proposing that that go away. 

In addition, the USDA proposes an increase in mandatory fund- ing from $14 million to $15 million a year, so actually a little bit 

better than what was in the 2002 bill. 

Chairman HARKIN. Fourteen to fifty? 

Secretary JOHANNS. Fourteen to fifteen, one-five. Fourteen to 

one-five, 15. 

Additionally, the USDA’s research title proposal also includes a major investment for bioenergy. It provides $50 million annually 

13

for bioenergy and bio-based products research initiative. This initiative was designed to be complementary to the biomass research 

and development initiative. 

Then finally, our proposal would accelerate the development of 

technologies to better utilize low-value woody biomass by authorizing $15 million in annual mandatory funding for Forest Service 

research. Now, that is a pretty aggressive program. I would also 

mention that we are also proposing a $2.1 billion loan guarantee 

program to assist in building cellulosic ethanol plants, and I would 

mention this funding is targeted at the cellulosic area. But again, 

not to take away from anything we might be doing out there now 

in corn. We will continue to do those things, too. 

The other thing I would mention, and this is an area I only want 

to mention because I am not as familiar with the Energy Department budget as much as I would like be, but there is an energy 

initiative there that we work with the Energy Department on, so 

when you put the whole initiative together, Chairman, I think you 

will see that we have a very aggressive effort here. You add into 

it the loan guarantee program and I think we can do some very, 

very exciting things with what we are proposing. 

Chairman HARKIN. Mr. Secretary, I am sure my staff and others will absorb that and look at that. You are right on the $2.1 billion 

loan guarantee program. DOE has that. They cannot administer 

anything. I mean, DOE, this is not what they have done in the 

past. They have no history of doing this. They have tried to do it. 

They cannot seem to get it done. 

Well, we know how to do it, we being the Department of Agriculture know how to do this. We have a long history in doing this 

and it is time that we step up to the plate and I am glad you did 

with the $2.1 billion. I think we ought to be out there. As you 

know, we have got to break this chicken-and-egg thing. 

You can get investors in corn ethanol plants now. That is no 

problem. You can raise a lot of equity on those. But cellulose, that 

is pretty difficult right now. If there is no supply, then you have 

got to put some loan guarantees out there for cellulose plants and 

for farmers to raise the crops. They say, well, why should we raise 

it? Where are the incentives? Where is the market for it? So we 

have got to do both together and I think that is sort of what you 

are doing. 

But let me move ahead. I just want to ask one more question. 

On the Conservation Security Program, your plan would provide an 

increase of $500 million over the next 10 years, spread the baseline 

funding from the two uncapped years in the baseline back to raise 

the existing multi-year funding cap. Chuck, I am finally understanding what you were doing here. Well, you are going in the 

right direction. It is just not enough, OK? 

But the President’s budget released Monday would reduce spending for the Conservation Security Program in 2008 by $135 million 

and reduce the cap on CSP by $80 million between now and 2015. 

So there is kind of an inconsistency there. 

And the second part of my question has to do with regulation. 

You are planning to take a whole year to redo the CSP regulations. 

I do not know why. Between that and the funding situation, this 

could mean the program might not enroll any new farmers or 

14

ranchers for 2 years, and yet farmers and ranchers like the program. They want to participate. We want to do better conservation 

on working lands. We want to move into bioenergy crops. This fits 

that perfectly. It seems to me it is an existing program. It should 

not take you 2 years to get this done. 

So that is two. How about the inconsistency in the President’s 

budget, what you want to do, and why does it take 2 years and can 

you collapse that down? 

Secretary JOHANNS. Let me address the 2 years and I will ask 

Dr. Collins to visit with you about budget. 

It is going to take us some time to do some regulations here. 

Chairman, I would say this. If we can do it in a shorter period of 

time, I will absolutely be committed to that. 

Chairman HARKIN. Well, you can. 

Secretary JOHANNS. You are right. Farmers told us they liked 

this program. You referenced their consternation about this being 

limited to wetlands and they would say, well my neighbor can get 

in it. I cannot get in it. They felt some unfairness there—or watershed. It is not wetlands. 

Chairman HARKIN. Yes. 

Secretary JOHANNS. And so whatever we can do to get those regulations done and do this program, and I think at the end of it, 

there may be some things here that you want to talk to us about, 

but I think at the end of it, we are going to have a better program, 

a more reasonably financed program, a program that we can build 

upon year after year after year instead of somebody worrying about 

the ninth year and the tenth year where this program skyrockets 

in terms of the funding available. 

I would sincerely argue to you, I think some of the things, maybe 

not all, but some of the things you would like to accomplish are 

necessary. We have to get through that rulemaking process. If we 

can do it more expeditiously, I am all for moving government along 

and we will take a look at that. But we built something in and that 

is where you are running into this issue about 2008. 

Chairman HARKIN. On the budget stuff, I will defer until later. 

I have taken too much time as it is right now and I will defer to 

that later. After everybody has had their rounds, we will get back 

to that budget on that. 

Secretary JOHANNS. OK. 

Chairman HARKIN. I will now yield to my colleague, Senator 

Chambliss. 

Senator CHAMBLISS. Thank you, Mr. Chairman. 

Mr. Secretary, let me make clear that our obligation as an oversight committee dictates that we direct criticism where we think it 

needs to go and we commend where we think we need to commend. 

As you and I have discussed privately, I commend you for thinking 

outside the box. We have got to make significant changes in the 

way we approach agriculture in this country and particularly government participation. 

My criticism, though, is really directed in a number of areas. I 

am going to try to focus on a couple of them relative to your proposals, because at the end of the day, we both have the same goal 

in mind and that is to make sure that we continue to provide the 

most abundant, the highest quality, and the safest food supply of 

15

anybody in the world. We cannot let agriculture become a national 

security issue. And the way we make sure that does not happen is 

that we continue to have farmers all across America that produce 

that high quality of food product. 

Now, in your testimony, you have noted as a criticism of the 2002 

farm bill that only 9 percent of farms collected 54 percent of all 

government commodity payments, and that is true. But what you 

have not noted in that testimony is that 9 percent of U.S. farmers 

represent 70 percent of farm output. Now, this 9 percent that 

USDA considers commercial farms combined with the next tier, 

representing 25 percent of all farms, which are known as intermediate farms, consists of farm operators who report farming as 

their major occupation. 

The remaining farms, which are dubbed rural residence farms by 

USDA, represent 65 percent of all farms and receive only 16.9 percent of government payments under the current farm bill. But 

those farm operators list their major occupation as something other 

than farmers. They are not the people who get dirt under their fingernails and drive the tractors every day. And while these rural 

residents’ farms contribute in a positive and significant way to our 

Nation’s agricultural diversity, it is fair to say that they do not 

incur the level of agricultural risk of those intermediate or commercial farmers who provide the bulk of the Nation’s commodities. Now, in the current farm bill, we have a $2.5 million threshold 

for farmers to be able to participate in farm programs. Now, that 

$2.5 million is gross income only, from farming operations, significantly different from the adjusted gross income and the level of 

$200,000 that you have proposed. In addition, the current farm bill 

says that will be a 3–year average and that 75 percent of that $2.5 

million has to come from farming operations, a major change from 

what you are now proposing. 

I called up—and under your proposal, a farmer who exceeds that $200,000 limit gets no payments whatsoever in the subsequent 

year. I called an equipment dealer and I said, tell me what a piece 

of equipment costs. For example, what does a big tractor cost that 

somebody who has got 500 acres or more needs. A John Deere 8330 

is $130,000. A small tractor is $80,000. A 4 row cotton picker is 

$230,000. A corn combine with a grain head is $260,000. With 

those numbers, in Georgia, it was not that long ago you could buy 

a farm for that amount of money, and these folks are now having 

to pay that for equipment. 

I point that out because under your limit of $200,000 of adjusted 

gross income, a farmer would still have to make all of his equipment payments. He would have to make all of his land payments 

on any farm that he was purchasing. And yet if he had a pretty 

good year 1 year, by the time he got to the next year, he would not 

be able to participate in government programs, and that is why I 

say that your proposal concentrates more on direct payments to 

folks as to whether or not they farm or not, as the Chairman referred to, and does not provide that safety net, and I am going to 

give you an example. 

Let us say that we pass this farm bill this year. It goes into effect 

October 1, when the fiscal year begins. And let us say you have a 

farmer in my part of the world who has a pretty good year this 

16

year. He participates in government programs under the cap that 

is set in place. He has an adjusted gross income in excess of 

$200,000 from which, as I have already said, he has got to make 

all these payments. But all of a sudden, he has exceeded your cap. 

So that means that next year, he does not participate in government programs. He gets no payments under your proposal. 

Now, let us say next year, when he needs those payments, he has 

that drought that you referred to or he has extreme wet conditions 

that you referred to and he does need those payments. All of a sudden, because of this cap that you have set, he gets no income. He 

gets no help from the government. He has still got to make those 

farm payments. He has still got to make those equipment payments. He has still got to reimburse his banker. And granted, he 

has got the crop insurance program to work with, but what am I 

missing here? Where is that safety net that we want to give to our 

folks under your proposal with that scenario? 

Secretary JOHANNS. Very respectfully, here is what you are missing. Our proposal is a 3–year average, so what you have laid out 

there in terms of 1 year, another year, is actually going to be substantially mitigated by a 3–year average. You know, I grew up on 

a farm. I appreciate there can be spectacular years followed by bad 

years. We understand that. 

The other thing I would tell you is this. If you take a look at adjusted gross income, the current law is $2.5 million. It is also based 

on AGI. It is an AGI limit just like what we are proposing. 

I will tell you, at $2.5 million, and Keith always remembers numbers better than I do, but I think if I remember the numbers correctly, at $2.5 million, you are really not impacting anybody to 

speak of. I think it is 0.0007 percent of the tax filers in the United 

States who would be impacted by that. It is—even under the proposal we are making, we are impacting 2.3 percent of the tax filers 

in the United States, 2.3 percent, and it is actually, when you figure out who actually is receiving payments, it is probably a much 

smaller number than even that. 

But getting beyond that, Senator, I certainly appreciate also the 

cost of equipment. You are right, equipment is expensive. If you are 

a major commercial farmer as we describe it and as you have referenced, you go out and buy a new combine, you could pay 

$250,000, $300,000. If you put bells and whistles on it and it does 

the things that we can do with current technology, these are very 

pricey operations. 

However, if you go to Schedule F on the tax return, which is entitled ‘‘Profit or Loss from Farming’’ or also it is just basically the 

form where you consolidate your profit and loss, in part one, you 

list all of your income, and then the Internal Revenue Service 

through action by Congress allows you to start deducting what you 

would deduct off of that income. 

I could spend the next 10 minutes describing what you can deduct. It is a long, long list. It is items 12 through 34, everything 

from pension and profit sharing plans to rent, lease, repairs, seeds, 

employee benefit programs other than what is under pension and 

profit sharing. I mean, like I said, I could tie up a lot of the committee’s time telling you what is computed in that, and I am talking about AGI. I am not talking about the gross income. So you get 

17

to take all that away before you have to worry a bit about the proposal we are making. 

And then you get to line 34, and tell me where else you find this 

on anybody’s tax return. The Internal Revenue Service has five or 

six more spaces where you list other expenses. Everything else that 

was not listed somewhere else, you get to list other expenses, including machinery. 

Now, the other thing I want to devote a moment to was your 

question about the high cost of machinery. I do not deny it. Whether you are a farmer in Iowa or a farmer in Georgia, there is a cost 

of machinery. I asked for an example. I said, assume for the purposes of discussion, when I spoke to somebody in our economist division, I said, assume that a farmer spent $400,000 on equipment. 

How will that farmer’s expense impact his AGI? 

Now, here is what would happen. You can do Section 179 expens- ing. That will save you $108,000. Then on the balance, the 

$292,000 balance, you can take depreciation, and based upon 2006 

numbers, that would total $31,273. So now the farmer can plug in, 

offsetting his income, $139,273 for that $400,000 equipment purchase. 

Now, the other thing I would tell you is that farmer, let us say he bought $400,000 worth of equipment. He probably did not part 

with $400,000 in cash. There is probably some trade-in value in the 

old equipment. I mean, there are a number of things going on here. 

But the only point I will make to you is that when you really slice 

and dice this, we project, and Keith can explain how we do this, 

that we will probably impact a billion-and-a-half over 10 years. But 

with the recognition that we are basing this on AGI, that the farmer gets to take all of these expenses off, again, here is what I would 

respectfully suggest. 

By any definition in any part of the country, these folks are 

doing very well. My deputy said, these tend to be the wealthiest 

folks in the county. I do not know if that is the case or not. I do 

not live in every county. But I will tell you, based on AGI, these 

folks are in the top 2.3 percent of tax filers in the United States, 

and then slicing it even finer, those folks who receive farm programs, it is even a smaller number of that. 

Now, there is probably some concern because we have people 

from all over the country here about, well, Mike, I hear you, but 

this impacts my part of the country more than other parts of the 

country. 

I have asked Keith to look into that and Keith is going to offer 

a thought or two, and if you do not mind, I would like to have 

Keith offer a thought. Keith? 

Mr. COLLINS. Sure, Mr. Secretary. I can amplify your comments 

by perhaps providing a couple of numbers. 

I would say, first of all, the universe of people that we are focused on here with this proposal is Schedule F filers, people who 

file a 1040 return and have a Schedule F. In 2004, there were a 

little over two million of those. Out of those two million, 85,000—

and that is a little bit different number than our book because we 

have got some more recent data from the Internal Revenue Service—about 85,000 of those farm proprietors had adjusted gross income over $200,000. But now out of those 85,000, many of them did 

18

not get farm program payments at all. So out of those 85,000, 

25,000 received farm program payments. 

So that means 25,000, or 1.3 percent of Schedule F filers, received farm program payments, and they received 4.7 percent of all 

farm program payments made. Mr. Chambliss, you mentioned that 

commercial farms received 55 percent of all farm program payments. Well, this group receives 4.7 percent of all farm program 

payments. 

I also should mention that there are other filers, those who do 

not participate in a material way in the operation of the farm. They 

file a 1040. They may not have a Schedule F, usually do not. They 

file a Form 4835. They are landlords. There is another 638,000 of 

those filers, and out of that, there are 12,000 of them, or 13,000 

of them that receive farm program payments. That is about 2 percent of all the Form 4835 filers in the United States. 

In total, when you add the Schedule F filers and the Form 4835 

filers together, you have got about 2.7 million tax returns and 

about 38,000 of those, or 1.4 percent, have adjusted gross incomes 

above $200,000. 

Now, we had a little bit of difficulty getting complete State data, 

but as the Secretary mentioned, we do have some idea of how this 

cuts regionally, but primarily just from the Schedule F filing data. 

And if you look across the country at where the most or the highest 

proportion of Schedule F filers having adjusted gross income over 

$200,000 reside, it tends to be the Northeastern States, States like 

New Jersey, Connecticut, Massachusetts. In fact, the State with 

the highest proportion of returns, Schedule F returns over $200,000 

AGI is the District of Columbia. Twenty-nine percent of tax returns 

with Schedule F are over $200,000 in AGI. 

In most of the States, particularly in the Southern States, it is 

lower. Alabama, 4 percent of Schedule F filers have AGI over 

$200,000. Mississippi, 4.4 percent. Georgia is a little higher, 6.8 

percent. But generally, that is the way it works out. The coasts 

tend to be higher. The heavily populated States tend to be higher. 

When you get into the plains States, Kansas is 2.3 percent of 

Schedule F filers have AGI over $200,000. And then again, out of 

that 2.3 percent, not all of those are getting farm program payments. 

So I think while there has been a lot of alarm about this proposal 

and perhaps the heavy incidence of this proposal on commercial 

farmers, when we look at the data, I think it turns out to be less 

than what probably most people expect. Thank you. 

Senator CHAMBLISS. Just very quickly as a follow-up, if the 

$200,000 is a 3–year average, Mr. Secretary, then you need to be 

clear in your book, because I am sitting here reading at page 21. 

It says, $200,000 annually. It does not say anything about average. 

So you need to make that clear, and that helps some. It does say 

that you can have a couple of good years and throw in a bad year 

and you are still going to be eligible. 

However, I am also sitting here looking at Schedule F. Irrespec- tive of whether you have the average of $200,000 or $2.5 million, 

you are still going to have to make these payments. Now, you referred to Schedule F and here it is, and Chuck, you are shaking 

your head. Show me on here where it says you can deduct your 

19

farm land payments, that you can deduct your equipment payments. These payments go on, and $200,000 is a lot of money, but 

when you are talking about somebody having to conduct a farming 

operation or that is a corporation, whether it is an individual or 

whether it is a trust. If he has $200,000 and has a million dollars’ 

worth of equipment, plus the land, the farm, there is no way he 

can do it. 

But even irrespective of that, irrespective of whether it is somebody that has a million dollars’ worth of payments, or if he has a 

small amount of payments, he has still got to take it out of whatever that adjusted gross income is. Keith, your numbers bear out 

the fact that farmers do a pretty good job of taking a lot of expenses off of there, and I do not doubt that. But the fact is, a 

$200,000 limit, even if it is over a 3–year average period of time, 

is not going to allow your small farmer, your farmer who farms 500 

acres, the ability to participate. 

Keith, I think you hit it on the head better than anything else. 

We are going to eliminate 85,000 farmers across America with that 

limit from being able to get a helping hand when times are tough, 

not in the good years, but when times are tough, they are going 

to be eliminated. 

My time is up. I have taken way more than I should. I may have 

a chance to come back, Mr. Secretary. I do have, Mr. Chairman, 

a list of questions that I will submit for the record. 

Chairman HARKIN. Without objection, we will include those, and 

we will include any questions that members were not able to ask 

to send to the Secretary. 

In order of arrival, we have Senator Nelson, Senator Crapo, Senator Roberts, Senator Lugar, Senator Salazar, Senator Klobuchar, 

Senator Cochran, Senator Brown, Senator Coleman, Senator Lincoln, Senator Stabenow. I am told that Senator Nelson will yield 

his first position to Senator Crapo, who needs to make another appointment, so I recognize Senator Crapo. We will try to do 6–

minute rounds. I ask, Mr. Secretary, if you can help condense the 

answers a little bit and we will try to get through at least a first 

round and get into a second round, but I am committed to be here 

as long as we need to flesh out all the concerns that Senators have 

on your proposal. Senator Crapo? 

Senator CRAPO. Thank you, Mr. Chairman, and thank you, Senator Nelson. I am one of those who, I am sure like most of us, have 

four hearings going on at this point and need to get moving to another. 

Mr. Secretary, I want to join with the comments of others who 

already today have commended you for thinking outside the box 

and submitting a very solid, good proposal to us for consideration. 

By the nature of the way this works, though, I am going to focus 

on some areas where I do have disagreement in the few moments 

that I have. In fact, I am going to probably spend my entire time 

on just one of those, and that is the dairy program aspects of the 

proposal. 

As you know, I have been a longtime opponent of the MILC program, which I believe is regionally divisive and does not really provide an effective, fair, or non-market-distorting safety net for our 

dairy farmers, and I am disappointed that the administration has 

20

embraced this program in its proposal. In fact, the USDA itself has 

identified a number of flaws in the past with the MILC program, 

and in a report issued in 2004, the USDA found that the MILC 

program conflicts with the dairy price support program and actually causes milk prices to stay lower longer for all dairy producers. 

According to that report, without the MILC program, the remaining dairy programs raise the milk price by 4 percent compared to 

about 1 percent with the MILC, on average over 5 years. 

So I guess my question is, why, given this understanding by the 

USDA of the problems we have with the MILC program, has the 

administration endorsed it as a part of its proposal? 

Secretary JOHANNS. As you know, to date, we have supported the 

money for the MILC program. The President indicated he would 

and we have, and we have honored that commitment. For many 

dairy farmers in the Northeast, this is a safety net program. You 

can argue about whether it is effective, whether it is getting the 

job done, but it was put there. It has been financed over the past 

5 years. 

We propose some changes, much like we have proposed changes 

to a number of programs. We say it needs to be based upon the historical average. We propose that the rate be cut down from, I 

think, 34 percent the last year of the farm bill. It would be at 20 

percent. But we have made those kinds of proposals all across our 

programs to try to make programs more market-oriented. 

Here is what I would say when I thought about this. I certainly 

appreciate what you are saying and what you quoted from some of 

our findings. Once a safety net is put in place for people, however, 

it is very difficult to just snap your fingers and say it goes away. 

That is going to cause some real pain out there. 

So we took an approach that basically says, we think we can put 

enough change into this, enough reform into this, that for the life 

of this next farm bill, it will step down and be a more market-oriented approach. 

The final thing I would say on it, I have had a number of conversations with farmers in the milk area. I do think, Senator, there 

is a growing discussion about how best to approach milk programs 

in the future. I do not think it is ready for this farm bill, but I do 

believe as we head into the next 5 years with this in place, I do 

think that this discussion will continue and my hope is that good 

things will come out of it and we can take yet another step in the 

next farm bill. 

Senator CRAPO. Well, thank you for your answer. I disagree with 

your conclusions there. In fact, I think that we would have a better 

safety net if we were to eliminate the MILC program, but I understand what you are saying. 

I wanted to get two other quick questions in here, so if I could 

ask you to respond quickly to them, I would appreciate it because 

I am running out of time already. 

The first is you describe some changes that you are proposing to 

the MILC program and my question is, do you anticipate that this 

revised MILC program will be classified as blue box or amber box 

under WTO rules? 

21

Secretary JOHANNS. I am not the trade person and I would feel 

a lot more comfortable if I could pass that question to Susan 

Schwab. But I do think there is a chance this is blue box. 

Senator CRAPO. OK. I will certainly ask her, as well, if she could 

elaborate on that, maybe when you get a chance to give me a fuller 

answer. I would appreciate it. 

Secretary JOHANNS. Yes. 

Senator CRAPO. The last question—I want to stick with dairy but 

shift subjects quickly—is on forward contracting. It is not clear to 

me what the current position of the Department is on forward contracting. In the past, the administration has supported it, as I do. 

In fact, there was a letter by Secretary Venneman to this committee stating the desire of the Department to have Congress extend that program. 

Do you continue to support the program? Does the Department 

continue to support it, and if so, would you be willing to send us 

another letter indicating that support? 

Secretary JOHANNS. I absolutely would. We support that. We 

have in the past. I do not know that we spent any time on that 

issue in the farm bill proposal——

Senator CRAPO. Right. 

Secretary JOHANNS [continuing]. But we are so on the record 

there, but I would be happy to do it again and——

Senator CRAPO. I would appreciate that. 

Secretary JOHANNS. I would be glad to do it. I will send that and 

copy the committee. 

Senator CRAPO. Thank you. Mr. Chairman, we did it with 15 seconds to spare. 

Chairman HARKIN. Great example. Thank you very much, Senator. 

Now, we will go to Senator Nelson, and then Senator Roberts, 

then Senator Lugar, and on. 

Senator NELSON. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for being here today and a special 

thank you to the former Chairman and Ranking Member Senator 

Chambliss for conducting a field hearing out in Nebraska and for 

listening very carefully to those who grow their crops in rows and 

those who are engaged in agriculture with ranching and cow-calf 

operations. We appreciate it very much. 

Mr. Secretary, I have been watching the crop insurance program 

for some time as it relates to a continuing drought. The crop insurance program was never designed to try to have a loss for 7 years 

in a row, and so the effect of that is that the base continues to 

shrink each year so that if you have a drought going long enough, 

in effect you are out of business for crop insurance. I hope that you 

will take a very close look at the crop insurance program to see 

what we can do to avoid having that result. Averaging over years 

might make somewhat of a difference, but there are some things 

that I think ought to be considered and our staff would like to visit 

with you about that. 

I have a series of questions which I will submit to you, as well, 

but one of the things that is important, I think, in this farm bill 

is to stress what the purpose of it is. The purpose is obviously to 

get payments to agriculture in a fair and equitable way and one 

22

that complies with all the new requirements. But it is also to protect our agricultural production sources in the United States so 

that we do not have to rely on other countries for production of our 

food because we want to produce it here at home. If we like relying 

on other countries and other parts of the world for 65 percent of 

our oil, we will love importing 65 percent of our food and relying 

on other countries to provide it for us. We do not want to give away 

that. 

So, really, this farm bill is about protecting and the security of 

our food production here, not just safety but security of being able 

to produce it here at home so that we do not end up as a result 

of unfair trade practices, as a result of other imports, that we are 

not in the position where we have to rely on others for our food. 

The second part of this is moving toward our own fuel security 

with the biofuels, with cellulosic, with ethanol, and you and I know 

what the ethanol industry started in Nebraska. When I was Governor, we had one plant. When I left, we had seven and you inherited that and we have continued to progress along the way and it 

is very encouraging that we are looking at switchgrass and other 

kinds of products that we can turn into our own fuel. But it is 

about developing our fuel security, as well. 

So my challenge, I guess, and I tell you, I have no pride of authorship, but you probably would not believe that, but turning it 

into the Food and Fuel Security Act of 2007, because that is what 

it is about. Now, there will be some that will want to offer another 

word, ‘‘fiber,’’ too, so I will be tripartisan, whatever it takes, but I 

think the emphasis has to be on producing and having the security 

of our food here at home. That is what these payments are about, 

keeping people in agriculture, bringing new people into agriculture. 

Someone said today that the average age of farmers in Nebraska 

went up from 55 to 56. It still seems pretty young to me, but I 

know that the trend is not necessarily the way we want to go, or 

the number of farms that continue to decrease. 

So that is what this is all about, and I applaud your efforts to 

try to build a program that will really work toward fuel and food, 

the security of both, because that is really what this is all about, 

and I wondered if you might have any comments you might make 

on that suggestion. 

Secretary JOHANNS. I like the suggestion and I think it does 

focus on reality. You know, if you think about how much we are 

involved in the fuel issues, and I believe there is a great opportunity to expand that on a nationwide basis. As I said in my opening comments, I really look forward to the day and envision the 

day when production of ethanol is a nationwide phenomena, where 

it does move out of the corn belt and we move into cellulosic ethanol. That is when every citizen can look at that and say, we are 

benefiting from that investment that was made by that Congress 

some years ago. I think it is exactly where we need to be headed. 

We did not try to name the bill. We only wanted to put our proposals out. But I do agree with your thought that it reflects reality. 

Twenty percent of our corn crop now is essentially devoted to ethanol. That number is likely to continue growing. I hope a future 

Secretary can come here and start giving you statistics as to how 

much of our biomass in the country is now being devoted to ethanol 

23

production, because we have got a lot of it and it is an untapped 

source of energy for this country. 

Senator NELSON. Thank you. Thank you, Mr. Chairman. I outdid 

Senator Crapo. I left 20 seconds. 

Chairman HARKIN. You sure did. Thank you very much, Senator 

Nelson. 

Now we go to Senator Roberts. 

Senator ROBERTS. Thank you. Thank you, Mr. Chairman, and 

thank you for holding this hearing, and thank you, Mr. Secretary, 

for coming before us. As I said, the best way to write a farm bill 

or any bill is to sit on the wagon tongue and listen to farmers and 

you certainly followed that advice. My word, you went to 52 listening sessions, including one at the Kansas State Fair in Hutchison 

and handled that very well. 

We are running the numbers and we are going to be with you 

next week and so I am not going to be too pesky with you. I want 

to thank you for your health care efforts. I think you said 1,200, 

I think, Critical Access Hospitals. We have 84 in Kansas, the most 

in any State, and I want to thank you for that initiative. 

I did not vote for this last farm bill. I checked with staff. I 

checked the numbers out of Kansas State University and seven out 

of the 10 years previous to that bill, the 2002 bill, we would not 

have received a payment. Those were some of the roughest years 

that we have had. And we have continued that. Why on earth 

would I support a farm bill that seven out of 10 years when you 

really need the money you are not going to get the money? 

You said that, basically, in your testimony, but I want to repeat 

it. It is on page six of 12 in the Wiesemeyer report. I am not getting any payment for this, Mr. Chairman, or at least I do not think 

I am, and if I am, I sure as hell do not want to talk about it. 

[Laughter.] 

Senator ROBERTS. But at any rate, Jim Wiesemeyer, if James 

Brown was the Godfather of Soul, he is the Godfather of Agriculture Program Policy. On page six of 12, you say, well, if you look 

at the current CCP, and farmers told us this, and when they told 

us this, it seemed counterintuitive. I could not figure out what they 

were telling us. But when we looked at it, they were right. It is no 

wonder they were showing up asking for disaster aid. You cannot 

LDP something you have not grown, and they are right about that. 

But what tends to happen is that prices go up and the CCP is not 

triggered and they are out. They are flat out. If they have not 

raised a crop because of drought, they have literally lost on their 

LDP and literally lost on their CCP. Where is the safety net? 

And that is what a lot of people were asking at the end of the 

2002 bill. Lord knows I do not want to extend that. And so we had 

to rely on crop insurance and that is about all we had, and that 

is why you are going to be facing on the supplemental an emergency disaster bill for the 3 years of drought that we went through 

out on the plains and your home State, my home State, and other 

areas out there. So I want to thank you for really figuring out what 

is wrong with the current program and how to fix it. 

We have to remember the lessons we have learned. I know you 

have heard in the forums that the target price for wheat was too 

low. We would get four cents of an increase. I am not going to get 

24

into comparing the commodities. I do not want to do that. I could, 

but do not want to. But the four cents comes in the out years. 

Wheat growers are not very happy about this, and so we are going 

to have to work on that. 

I want to know, how does this formula help the wheat producers 

who were essentially left out of the countercyclical program under 

the 2002 bill? You do not have to answer that right now because 

I do not have enough time to get into it, but you could answer it 

for the record, and besides, you are coming up to talk to me next 

week anyway. 

Do you have any projections—and this would be for the number 

cruncher of all time and the flyspecker over here, Dr. Collins—do 

you have any projections that you could provide us as to how the 

countercyclical payments would have looked over the last 5 years 

compared to the current farm bill? We need to know that. 

You have traditionally opposed ad hoc disaster payments, encouraging the producer to buy crop insurance. As somebody who 

worked very hard in 2000 with Senator Bob Kerrey from Nebraska 

to create a program that provides the necessary risk management 

tools to producers, I am very concerned about the effects of your 

proposal on crop insurance. The last farm bill already robbed to use 

us as a bank, $2 billion from crop insurance. How does taking additional money out of this risk management program help producers? 

I do not understand that. 

As the $200,000 adjusted gross income cap plays out in reality, 

let us say that there are three brothers in Dodge City, Kansas, operating jointly as Three Brothers, Inc. That company has an AGI 

of $205,000. That means each brother receives about $68,333 as 

their share. Does your proposal really preclude any of the brothers 

from receiving Title I payments? Does the $200,000 limit apply to 

the AGI of the corporation or to each brother individually? 

You also have a conservation enhancement payment under Title 

I, that is the one where you say you will increase the producer’s 

direct payment by 10 percent if they forego a marketing assistance 

loan countercyclical payment. I understand that the conservation 

payments under Title II are not subject to the new AGI limit in 

your proposal. So my question is, is this proposal a commodity program or a conservation program and which AGI limit would you 

propose applying to it? 

Now, that is the laundry list of questions that I had for you. We 

have got about 32 seconds. Obviously, you cannot answer that, so 

why do not we just reserve all that until you come up and talk to 

me next week. We will have a good talk about it. 

Keith, you said 85,000 farmers were eligible but only 35,000 actually got payments, is that right? 

Mr. COLLINS. Mr. Roberts, I said out of all of the Schedule F filers, the what we call farm proprietors——

Senator ROBERTS. Sure, sure, sure. 

Mr. COLLINS.—85,000 had AGI above $200,000, and out of that 

85,000, 25,000 actually got farm program payments. 

Senator ROBERTS. Yes, but the other 60,000, with the way the 

farm program was set up, we did not have a crop. So how can you 

file on Schedule F if you did not have a crop and you are not going 

to get a payment? 

25

Mr. COLLINS. This was 2004 data, Mr. Roberts. 

Senator ROBERTS. Two-thousand-and-four? 

Mr. COLLINS. Correct. That is the latest IRS data we had. 

Senator ROBERTS. Yes. Well, that is right in the middle of our 

drought. We had 2003, 2004, 2005, 2006, and a blizzard. 

[Laughter.] 

Mr. COLLINS. It was also——

Senator ROBERTS. I mean, the reason they did not put it down 

on Schedule F is with the way this farm bill is written, if you do 

not have a crop, you do not get a payment, except for crop insurance. I guess that is my answer to it. The other thing is that 29 

percent came from the District of Columbia. What is that all about? 

Mr. COLLINS. Apparently there are a lot of high AGI farm proprietors in the District of Columbia. 

Senator ROBERTS. Yes, there are a lot of absentee landlords or 

something. By the way, Members of Congress make about $170,000 

and if all farm income counts, there are not going to be many Members of Congress getting any farm program payments. I do not have 

a farm. 

[Laughter.] 

Senator ROBERTS. Thank you, sir, and Mr. Secretary, thank you. 

Chuck, it is good to see you and that guy with the glasses on his 

nose behind you. I appreciate his work, too. Thank you, Mr. Secretary. 

Chairman HARKIN. Thank you, Senator Roberts. 

Now we turn to the person who really alerted us and the whole 

country, I think, to the promise of cellulose ethanol, who really 

kind of charted the course and led the way, and that is Senator 

Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. 

Let me just join you and Senator Chambliss in commending the 

Secretary, to begin with, for this book. This is really a substantial 

contribution. Now, I do not want to be derogatory to other Secretaries of Agriculture, but frequently, we have had a suggestion of 

pamphlets and then disappearance. I appreciate the fact that you 

are here, you have a book, you have Chuck Conner, who came with 

me to Washington 30 years ago and whose ministry in this thing 

I really respect so much, and Keith Collins, who has done superb 

work really throughout this period of time in amassing statistics 

that are impressive. So this is important. 

Now, I make that point because some of the agricultural press 

have commented that commendation has come here or there, but 

I think it ought to be very concerted. I am one person that supports 

what you are doing, and even though we may argue over specifics 

of this situation, this is a vast contribution. 

Second, I wanted to commend you for sticking up for the fact 

that farmers throughout the last three decades have gained much 

of their growth through foreign trade. We have expanded our markets. We need to continue to do that. I appreciate all the disputes 

that are going on surrounding the WTO—loss of jobs, outsourcing, 

all sorts of particular protections even of American agricultural 

commodities, but this really has to be something that is a mission 

for agriculture in the same way that, second, you have commended 

energy. 

26

The explosive possibilities of this are evident to any of us who 

are in farm country now. I am amazed at the changes even in a 

short time in rural counties in our State—tax revenues, deposits in 

the bank, hope for the local Chamber of Commerce. This is an extraordinary sociological phenomenon, quite apart from whatever we 

are discussing with regard to individual farmers. And it is just beginning. 

This is so significant, the world trade business and the energy 

revolution as it intersects agriculture, that if we did nothing else 

but foster those two things, we will do a great deal for most farmers in our country as well as most of our citizens. 

Now, let me just add with regard to the energy situation, I am 

hopeful that specifically USDA can work in this bill or elsewhere 

with those who are going to try to get higher yields for corn or for 

beans or for whatever. We have all these static estimates, only so 

many acres, only so many bushels. Now, granted, the weather 

plays a big role, but the fact is that there has not been much of 

an incentive to get corn to 200 bushels to the acre on an average 

and 250 in a good year, or ditto to move ahead with beans. In all 

of our lifetimes, we have seen those kinds of adjustments, but not 

for a while. I think that is very, very important. 

Likewise, with regard to corn ethanol, distillers’ dry grain, DDG. 

Some people are working out markets for that, new deal, huge opportunity for income, and likewise a way of meeting some of the 

needs of people who are feeding livestock, who need to try to think 

through how those proteins can come to their livestock. 

A third thing I want to mention is the safety net item, I think 

very important. Last farm bill, I proposed a safety net situation 

and got 30 votes. It was an alternate farm bill. I have no grief for 

that particular situation, but others have thought through that and 

improved upon it a great deal. 

Our payments, I believe, ought to be to keep farmers in business 

and that, I think, can be done in part through what you are suggesting. I hope we will be able to perfect that. There are a lot of 

groups outside of agriculture deeply interested in the equities of 

that. 

And speaking of equities, I commend your attempt to try to meet 

the criticism, not in agriculture, not in this committee, but the ordinary people in life who say, why should a millionaire get subsidies from me, a modest taxpayer? There isn’t any good reason for 

that. 

And we have got to think about some degree of social equity 

while we are thinking about subsidies. Some would say subsidy is 

not a good idea at all. I am not going to go down that route, but 

I would just simply say that, clearly, there are limits to both the 

patience and the common sense of most people when it comes to 

subsidies and taxpayers and transfers of monies in America. And 

I commend you and Keith for trying to get into that problem. 

Now, let me just add that the conservation that Senator Harkin 

has talked about is very important because that is our heritage. 

The land that I farm or that I hope that my sons will continue to 

farm will someday be farmed by other people. Hopefully, it will be 

in better shape, we will have done better with the water resources, 

improved the land resources, kept White River from flooding more 

27

often, all the sorts of things that are very important for our heritage, the assets of our Nation. So we want to support those programs. 

And finally, I would hope at the end of the day that all of this 

bill costs the taxpayers of the country much less money. I appreciate each of our committees would say, well, after all, we are advocates for particular people. We are advocates for farmers. I am a 

farmer in the sense that I own land, 604 acres. We have got corn 

and soybeans and trees out there. I take these programs very seriously. Someone is suggesting about recipients of payments, I am a 

recipient of payments. The Environmental Working Group and so 

forth lists me and our farm so everybody can read how much is 

coming into our farm. So we understand these issues. 

But I would just say simply that it is very, very important that 

we preserve the opportunity to farm for people, not just family 

members. My sons are going to have that opportunity. But there 

are very few sons, reportedly, in our State who are going to have 

those opportunities. And just getting down to the payments issue, 

the dilemma is that the talented young farmers right now farming 

in Indiana, 2,000, 3,000, 4,000 acres, may only own 50 or 100 of 

that. That is where the machinery is being utilized, and they are 

doing a pretty good job. But the equity of this is uncertain, I would 

say, and farmers are still getting owner and the ownership situation. You cannot tackle all of that, but the fact that you have tried 

to get into those issues is tremendously important in terms of the 

continuity of agriculture. 

So I will submit my questions for the record, but I wanted to 

take this time to make these comments. Thank you very much. 

Secretary JOHANNS. Thanks for the comments. We appreciate it. 

Chairman HARKIN. Thank you very much, Senator. Again, thank 

you for your great leadership in this whole area. I look forward to 

working with you on this whole area of bioenergy and how we move 

ahead and couple that with conservation at the same time. I think 

it is doable. I do not know exactly how to do it right now, but I 

hope we can accomplish that. 

Let me see, now, going down the list here, Salazar, Klobuchar. 

Senator Klobuchar? 

Senator KLOBUCHAR. Thank you, Mr. Chairman. 

Thank you, Secretary Johanns. And thank you for the visits you 

have made to our State. I know that Congressman Collin Peterson 

and I met with you when you were there at Farm Fest and appreciate the work you have done in our State. I also appreciate the 

focus that you have on energy. Like Senator Harkin, I am concerned about the investment that we want to make sure that when 

you look at the money we have put into oil companies, that if we 

are really going to develop our own home-grown energy, that we 

have to make a better investment than this. 

I also appreciate that you are talking about continuing the MILC 

program. We would like to see it at the levels at least that it is 

currently and not a cut. But it is very important that we continue 

the MILC program as well as the sugar program. 

But I thought I would focus today on disaster assistance. You 

know, Minnesota farmers have been hit with heavy losses for two 

consecutive years. We were hit with excess rain and flooding in 

28

2005 and again with drought in 2006, and in some cases, the same 

farms in both years. The combined costs of the disasters to Minnesota’s farm economy was more than $700 million over both years. 

I have cosponsored the Emergency Farm Relief Act of 2007 that 

was introduced by Senator Conrad to compensate farmers for a 

portion of these losses. As we look at the emergency supplemental 

funding for the war in Iraq, which of course to support our troops, 

I understand, but emergency funding for farmers is also important 

for rural America. 

Given the fact that the 2002 farm bill commodity programs have 

cost something like $25 billion less than originally anticipated, why 

don’t we see that kind of support for the $5 billion in disaster assistance for those farmers who suffered losses over the last 2 years? 

Secretary JOHANNS. In the farm bill proposal we have, I would 

respectfully suggest to you that we have what I consider some excellent ideas in terms of how to deal with disaster. For example, 

Senator, there is just no question in my mind that the revenuebased countercyclical is going to work better for those individuals 

who have experienced disaster problems in a program crop than 

just, without a doubt, than what we have now, because what tends 

to happen in a disaster, price goes up. The current program is triggered by price and they are out, and if they do not raise a crop, 

they do not get the loan deficiency payment under any circumstances, so they really lose on a couple of accounts. 

The second thing I would say is that one of the things we heard 

from farmers was that the gap they could insure, whatever the 

number is, 70 percent of their crop or whatever, but that 30 percent was the real problem for some farmers. For others, it was not. 

They did not want to lose that, needless to say, but they were at 

a point in their farming career where that would be a part of the 

risk that they could manage if they had to. 

So our gap coverage says for those farmers who want to buy that 

gap coverage, let us make it available. Let us put that in our proposal. We have also proposed consolidating a couple of programs 

that we use a lot in disaster, ECP and EWP, which again, I think 

we confuse everybody about when these programs apply and when 

they do not. We are proposing a different approach. 

Now, in terms of the disasters that we have been dealing with, 

here is what I would say to you from our standpoint at the Department. We have reached out in so many ways. I was Governor of 

a State just north of Senator Roberts’ State and in the same vicinity of your State. Out of the 6 years I was Governor, I think we 

had drought all 6 years. We had a couple of years a little bit better 

than the others, but a very, very difficult situation. I will tell you 

that when the Department stepped up with the non-fat milk program, it was a huge help to our farmers. It has been criticized and 

we have tried to be mindful of the criticism directed at that, but 

it really was a helpful program. 

This last year, we went out. We identified additional funding 

where literally we could block grant it into the States and they 

could distribute it to dig wells deeper, buy feed for the animals, buy 

hay. It was a very, very flexible program, and again, a program 

well received. 

29

I feel strongly we need to somehow solve this disaster issue because it is an annual event here. How big, should it happen, should 

it not happen, et cetera—how does a farmer ever plan on that? I 

mean, that is no safety net. And farmers told me that was no safety net. 

I really believe that working with the proposals we have, and 

maybe there are some other ideas, there are some things that really will be a safety net for farmers in disaster relief situations. 

Senator KLOBUCHAR. And I appreciate that. I would just also appreciate, though, support for the supplemental, for Senator 

Conrad’s bill. 

The other piece of this with the crop insurance, my concern with 

this is based on a county-wide basis of loss, and we have some big 

counties in Minnesota where you might have a part of a county 

where a farm was totally wiped out and the rest of the county is 

fine. Have you looked at that again and refiguring that for that situation? 

Secretary JOHANNS. I will ask Dr. Collins, who works this area, 

to offer some thoughts on that. 

Mr. COLLINS. Senator, we have looked at that and we decided to 

go with the county basis because we already have in place county 

area crop insurance programs. We have GRP, Group Risk Protection, and GRIP, Group Risk Income Protection. If you look at the 

national enrollment in crop insurance, farmers who buy crop insurance policies today have about $20 billion of their crop value that 

is not covered. That is the value of the deductible part of their policy. We have county area policies in place already today that would 

cover about $13 billion out of that $20 billion deductible. So we already have on the ground a county area-based policy that could be 

adopted to cover the deductible portion of existing multiple peril 

crop insurance policies. 

So that is the reason we went to the county basis, because it 

takes years to develop a crop insurance program, to determine the 

appropriate actuarial rating, and we already have done that over 

the last several years for the county-based areas. 

Now, I understand your concern. It is a legitimate concern, and 

what you will find is that producers whose yields tend to correlate 

with the county, this will be a great benefit to them. For those producers whose yields do not correlate with the county, they are 

going to have to buy up higher levels of coverage with their individual crop policies. So it is true that there are some tradeoffs 

there and I think we went with the county basis because that was 

where we were best equipped to deal with it. 

Senator KLOBUCHAR. Well, thank you, and we look forward to 

working with you and I will submit some additional questions in 

writing. 

Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you very much. 

Senator Cochran? 

Senator COCHRAN. Mr. Chairman, thank you. 

Mr. Secretary, thank you and your staff for cooperating with our 

committee and being here to describe the proposal the administration is making for changes in the farm programs. We know this is 

a complicated and wide-ranging effort and we appreciate the hard 

30

work personally you have devoted to the process and your openness 

in terms of going around and talking and asking questions of people out in the country about what their thoughts are and what 

their impressions are of these proposals. 

What I am hearing from some of my friends in my State of Mississippi is that in cases of cotton and rice programs, the changes 

that are proposed in the farm bill may very well end up causing 

people to go out of farming, sell the land, and I wonder, in that 

connection, has there been any effort to do an economic income 

analysis or economic impact analysis of the program in terms of job 

losses, economic consequences, practical consequences as a result of 

these proposals, if they are approved and enacted into law. 

Secretary JOHANNS. I will ask Dr. Collins to talk more extensively about the economic analysis. Let me, if I might, though, offer 

a thought. I was in your State recently. In fact, our first stop when 

we unveiled this was in Mississippi and we had a great opportunity 

to talk to producers. It was a packed house. They were very, very 

interested in what we were doing. 

But let me, if I might, just zero in on cotton because we were 

right there in the Delta. If you look at the adjustments that we 

have made to the loan rate for cotton, for example, and then look 

at the increase that we have made in the direct payment, the increase in the direct payment is 65 percent. And again, it is hard 

to figure out the micro level, the impact on each farmer in each 

State, but I can tell you in an overall picture the numbers are absolutely very close to each other. 

But here are a couple of things, Senator, that I think are really 

important. The first thing is cotton is plagued like any other crop 

with weather issues. It may be especially true for cotton. If you are 

irrigating cotton, you can withstand drought and that sort of thing, 

but if you are not, you are just praying that Mother Nature is 

going to be on your side this year. The one thing about the direct 

payment I can tell you, that is the one thing you are not going to 

have to pray about. Maybe you should pray anyway, but I can tell 

you it is going to be there. It is a mandatory provision, approved. 

That young cotton farmer out there who is just getting started who 

has a mortgage payment, an equipment payments, et cetera, can 

take that to the bank. Under the current program, if they lose a 

part of that crop, again, they cannot LDP a crop that they did not 

raise, and if they have any uptick in the price, they are not going 

to get the countercyclical kicking in and so they are really, really 

out. They are really on the losing side of what was supposed to be 

a safety net. 

The second point I would mention, and again, I am not the trade 

person so I even hesitate to bring this up other than it is real. We 

aggressively defended our cotton program. We lost in the first 

stage. We aggressively defended it again. We lost in the second 

stage. Now there is a WTO panel and the purpose of them being 

impaneled is to decide whether we have done what is necessary to 

comply with the ruling. That is the only purpose of the panel. 

Somewhere in your deliberation time here, between now and the 

time the farm bill will be passed, my expectation is you will get a 

WTO ruling there and then we will know what that ruling is. 

31

But as I said to cotton producers, folks, it is no safety net to go 

out there and suggest something that puts a bullseye on your back. 

It is no safety net at all. As a general proposition, if your payments, your direct payments are not linked to price or production, 

they are green box. They are WTO compliant. 

Now, I will tell you, Senator, we did not sit down to write a farm 

bill for the WTO. We sat down to write a farm bill that we thought 

was good policy, but again, getting back to the case of cotton, I cannot ignore it and none of us can because 80 percent of the cotton 

produced is exported. Like it, dislike it, pro-trade, anti-trade, I 

know all the debate, but the reality is that on any given day, we 

have got to be paying attention to selling 80 percent of our cotton 

production into that export market. We just are in a position where 

we have got to pay attention to how best to do this. 

And I can tell you, I think when you sort it all out, with that 

increase in direct payment, with some of the things we are doing, 

I will promise you I cannot tell you what happens to the individual 

farm out there. I can tell you in terms of the overall picture I believe this is a more secure, a more predictable safety net, and I am 

not being critical of the 2002 bill. I supported the 2002 bill. If you 

turned the clock back, I would do it again. But times do change 

and one of the changes here is we have got to pay attention. We 

need that export market for your cotton people. 

So that is a long answer, probably more than you wanted——

Senator COCHRAN. I think you are absolutely right. The export 

market is critical for agriculture generally, but specifically for cotton. We understand that and we appreciate your looking into it and 

trying to figure out what the consequences are going to be. I think, 

to be fair with our constituents, though, it would be a mistake to 

over-promise that we are going to fix this in a farm bill. I do not 

know that the votes are here to do that or the support from the 

administration is available to help us do that. And so I am trying 

to figure out what do we do now? How do we try to make a transition if a transition is needed from some traditional land use practices to something that could take the place of what we have seen 

in the past. 

I grew up in an era, as some of the others did, both my grandparents had farms. Those days are so different from where we are 

today, though. My recollections as a young boy of picking cotton 

and chopping cotton, that just—nobody does that anymore. You 

have got cotton pickers and mechanical—what you have is a labor 

force that has built up and a culture of people involved in providing 

the inputs, those fertilizers, seeds, and on and on and on, businesses depend on this. If this crop just disappears, it is going to 

have an enormous adverse economic consequence on the South and 

particularly on my State of Mississippi. 

I just wonder if anybody has thought about that and thought 

about, well, what are we going to do now? Just tell everybody, good 

luck? Is there going to be any kind of effort to help with a transition if that occurs in some of these areas? I am worried about that. 

There used to be economists, and this is not talking about Keith 

or anybody in particular, but they would talk about, well, there are 

going to be some financial dislocations. I have heard that. I heard 

that when I got to Washington. What that means is people are 

32

going to go broke. Some people are going to go broke and it is going 

to be devastating. 

I just am curious to know if you have thought through that and 

what are we going to do about it. 

Secretary JOHANNS. I come from a different part of the country, 

admittedly, but financial dislocation language does not impress me, 

either. I was very, very involved with farmers during the 1980 crisis. In my lifetime, and hopefully in no one’s lifetime, do we see 

that again. We thought long and hard about it. 

I suppose, Senator, we could have walked into this committee 

and said, well, we have done this because we have to comply with 

the WTO. We wish you the very best. Not impacted direct payments, taken that money, sent it to the bottom line and had a big 

savings and touted that all over the country that we have got this 

big savings. We did not do that. We tried to figure out how best 

to approach this. And so that is why cotton is getting—you know, 

the other four major program crops starting in the third year going 

through the fifth year, they get a 7 percent increase. We are proposing 65 percent for cotton. 

So you add all of that up, and again, I will suggest to you that 

I think we have got some great ideas here. I have immense respect 

for you, like everybody on the committee. I know that you are trying to figure this out, too, just like we have been trying to figure 

it out because we have to somehow decide how best to approach 

this because that export market is important. I would love to sit 

down with you or your staff or whoever you want me to sit down 

with, walk through the numbers, try to show you what we think 

these numbers mean, and, you know, just make the case, because 

I think some of the very same things you are debating in your 

mind today, we have debated. We have tried to figure out how best 

to approach this. 

I would again respectfully suggest, I think we have got a really 

good idea here and a good approach and we are anxious to try to 

make the case. So I offer that to you. I would be happy to do it. 

Your concerns are certainly our concerns. 

Senator COCHRAN. Well, we appreciate your response and your 

interest in working to try to find some answers to our questions. 

I complement you on the conservation incentives. I like the idea 

that you are expanding the Wetlands Reserve Program, the Conservation Reserve Program. The Cellulosic Bioenergy Program is 

something that I think we will be very interested in. These are all 

options for land use, as well, and we just need to take advantage 

of the opportunities we have to help make ends meet, as they say. 

Thank you very much. 

Chairman HARKIN. Thank you very much, Senator Cochran. 

Senator Coleman? 

Senator COLEMAN. Thank you, Mr. Chairman. It is kind of like 

a blink of an eye here. I look to my right, and if you count Roberts 

as a Chair on the House side, I think there is an array of one, two, 

three, four, five Chairmen, former Chairmen of this committee. I 

have not been here that long. 

But I do have to say, Mr. Secretary, I do want to start off by 

thanking you. And I have some concerns and kind of the nature of 

this is that I will kind of target in on those, and I do not even know 

33

if in the time we have that I will even get the responses. We will 

have a further conversation. But I want to thank you and your 

staff for your effort in this, for the work you have done on the 

ground, for your commitment to listen to the folks who this impacts, our farmers. 

I have said I have some questions. I am going back home and 

talk to the folks who have got the dirt under their fingernails and 

let them tell me what is the impact of some of these changes. But 

clearly, you have done the groundwork. You have thought outside 

of the box. You are trying to deal with that situation that says if 

you do not plant the crop, where is the safety net? I understand 

that. 

I have particular appreciation—I disagree with my colleague 

from Idaho about the MILC program, and yet I will join him on forward contracting. We should work together on that. I share the 

concerns of many of us on sugar. I think you have done a good job 

maintaining a program that is no cost to the taxpayer. 

I think we face some challenges in the future over some trade 

issues and I think energy may be a solution and I applaud the 

strong commitment to energy. I think a lot of it has come out of 

this committee, by the way, and I think that is important. On Foreign Relations, we had Alan Greenspan come before the committee 

and he indicated that we could be doing 60 billion gallons of—about 

60 billion. A lot of us thought it was bold when we did 7.5 billion 

gallons of renewable fuel, RFS, for this country. We are going to 

do 11 billion gallons if we do nothing in the next couple of years. 

What we can get out of corn may be 15 to 17 billion. We have got 

60 billion, but we have got to get there, and you have that commitment. 

I share the commitment that is close to the heart of the Chairman in conservation. Rural development, I have a particular concern about Critical Access Hospitals, and you touched this. I 

thought we had the most in the Nation. Kansas may have, but we 

are pretty close and I visited almost half of them. That is a difference. That is life and death. It is life and death, those 25–bed 

hospitals, and so I applaud the work that goes on there. 

Let me at least phrase a few areas of concern, and one is there 

is a—we have a farm policy to protect the farmers when prices are 

low, not when prices are high. We cut marketing loans by $4.7 billion. I think countercyclical cuts is $3.7 billion. I think these are 

two of the programs that help farmers on the down side. And then 

we have slight and temporary increases on direct payments. 

My concern is what if predictions are wrong and prices drop? I 

start with that concern. Do you need to pass unbudgeted emergency relief like we did in the 1990’s? So I have that concern. Let 

me lay that out there. If there is time, you can respond now or respond later. 

I got a—and by the way, it is a big axe. If you look at the cuts, 

the overall cuts, kind of if you weigh it in totality, $3.7 billion from 

the current baseline below 2008, 2010, that is a lot of money to cut 

from the safety net. It is a heavy axe that we are doing there. 

I have a particular concern, if I can, just about wheat. I want to 

put it on the table. Senator Roberts kind of mentioned that. You 

stated publicly that wheat growers did not get a fair shake in the 

34

last farm bill and so I am wondering if you see a four-cent increase 

in direct payment that only comes in the out years as equitable, 

especially in light of the fact that I am hearing from a lot of folks 

in the wheat industry that the countercyclicals do not do much for 

wheat. 

And the particular concern I have is on your countercyclical program, you make it revenue-based rather than price-based, but what 

if—I have got folks in the Red River Valley, if they lose their entire 

crop under their program and cannot get a payment if prices are 

high for farmers in other States that make their crop. 

So my question would be are we covering—one of the strengths 

of this proposal is we are saying, hey, we are going to provide a 

safety net for folks who do not reduce the crop. On the other end, 

if I have got folks who get wiped out and in the rest of the country 

they are making theirs, then my folks get left out, and I presume 

that applies for others. So help me understand how your proposal 

would help farmers who suffer complete crop loss, especially if the 

rest of the country has a good year. 

I could go on and on. If you can deal with the general proposition 

that a lot of this is based on a sense that we think prices are going 

forward, and God bless, they are. I mean, energy has made a difference. Energy is the future. Energy is the future. I do hope—I 

just have to say this—that we look at sugar. 

If we turned everything that is green into energy down the road 

but exclude sugar, I think this could be a problem for our sugar 

growers, and especially, by the way, as we look at NAFTA and 

some other things where we have the prospect of a lot of sugar 

coming in this country. I would hope that we would look at energy, 

at ethanol as a way possibly to deal with the sugar that is coming 

in so we do not upset our program. That may be the safety valve 

and I hope that we kind of look to the future in spite of some of 

the challenges of price now. 

I have only got 24 seconds left. I will make this statement. Let 

us continue the conversation, but I am very, very concerned about 

if we are wrong on the price bet that our farmers could face some 

big problems under this. But with that, let me say this is a forward-thinking proposal. You have done the hard work. I am very 

appreciative and I look forward to working with you on this farm 

bill. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Coleman. 

Now, Senator Lincoln. 

Senator LINCOLN. Thank you, Mr. Chairman. 

Mr. Secretary, welcome to the committee and thank you so much 

for joining us today with Dr. Collins and Mr. Conner. 

Before I begin my round of questions, I would like to start by acknowledging what is certainly a very detailed proposal and one 

which is obvious you have put a great deal of passion into and 

time, as well, in your listening tours. We want to thank you for 

your work. I am certainly glad to know that you have listened to 

a lot of farmers across the country who support the current farm 

bill, and I presume as a result you propose maintaining some of the 

basic structures here as we have seen in the commodity title, the 

marketing loan, the countercyclical, the direct payment. You have 

35

mentioned some of your reasons for why you have dealt with them 

as you have. 

But I do have some serious questions and concerns and I look 

forward to working with you in the months ahead to try and face 

those challenges that we all face across this country in terms of the 

diversity of our States and the diversity of this country and the 

products and commodities that we grow. So that is important. 

I would just like to point out that from the questioning, Senator 

Nelson brings up the issues of markets and, you know, how we 

meet those demands, and coupling that with Senator Chambliss’s 

remarks and the possibility of losing those 85,000 farmers as a result of the means testing that you have placed in here, that production probably will shift overseas and as it does, we will never see 

it again, more than likely. So I am hoping that Dr. Collins, perhaps, or somebody might respond to us with an answer in writing 

where you anticipate the foreign countries that will compensate for 

any expected decline in our production of those commodities as you 

talk about those export markets, and if so, which countries those 

might be. So if you all could provide that. 

Then in reference, really, to your AGI proposal, this recommendation kind of strikes me as somewhat inconsistent with the 

Administration’s approach to so many other policy initiatives in 

terms of their ideas, I suppose. I serve on the Finance Committee 

and I find it interesting that when we passed legislation a few 

years back to stem the loss of manufacturing jobs in this country, 

to my knowledge, no one in the administration raised any question 

about the size of the income of the manufacturer receiving the tax 

benefit. In fact, I think we wished that all the manufacturers were 

doing better economically than they were. We had just lost about 

some three million manufacturing jobs. But in any event, Congress 

and the administration thought it was important enough to step in 

and help manufacturers compete in the global marketplace. That 

is not always free and it is not always fair, as we know, and we 

did so regardless of the manufacturer’s size or income. 

I think the same is also true of the Administration’s approach to 

energy policy. I also sit on the Energy Committee and I have been 

spending a lot of time lately reviewing our Nation’s energy policy 

and, of course, see a lot of press about record profits from the Nation’s oil companies. As you are certainly likely to be aware, the 

government provides a considerable amount of assistance via the 

tax code and other incentives for the energy sector, and yet to my 

knowledge, the administration has not proposed a means test for 

oil companies, either. 

I hear most often that this is due to our need for energy security 

and the necessity or the really necessary commitment to the pursuit of energy independence, and yet we have not extended those 

tax credits for the renewable fuels in a way that is—it was not in 

the President’s budget, anyway. 

I guess, Mr. Secretary, just an explanation or your comments in 

terms of to the committee why the administration supports means 

testing for farmers but not for oil companies, or why we should 

support means testing for our farmers when they face the same, if 

not more, unlevel playing field in the global marketplace. Now, I 

know you have made the comment several times that you are not 

36

the trade person, and we are certainly aware of that, nor was the 

farm bill written for trade purposes. And yet we cannot operate in 

a vacuum and we know that. 

When we look at what it means to this country to not only working farm families but all families to have a safe, and more importantly, affordable food supply, secure food and fiber supply produced here at home, it seems to me that it would be as equally as 

high a priority in terms of the Administration’s policies and ideas 

of how they approach those things. So maybe, I do not know, you 

have got an idea of how that——

Secretary JOHANNS. I will offer a thought or two, if I could. 

Senator LINCOLN. Sure. 

Secretary JOHANNS. Let me, if I might, just start out. You use 

the terminology ‘‘means testing.’’ Keep in mind that the 2002 farm 

bill embraced that approach. It is in the 2002 farm bill. It is a 

much higher level, like $2.5 million, and it impacts really a sliver 

of the tax filers in the United States because $2.5 million in adjusted gross income really is the wealthiest of the wealthy. But 

$200,000 of adjusted gross income, again, is, if you examine what 

we are saying they can deduct under our tax code, they are getting 

a substantial benefit, if you will, because of tax policy adopted by 

Congress. 

But then we go a step further in this area and we say, we are 

going to not only recognize that, we are going to send cash. We are 

going to send a subsidy. We are going to say to hard-working families around the country that the money that you pay in taxes will 

be distributed into a formula that sends out a check to people who 

are raising these commodities. 

Now, personally, I have said all along, I think it is a wise Federal policy to invest in agriculture. Not everybody agrees with me 

when I make that statement, but I believe it is a wise Federal policy. 

But when you look at the decision, is there a point at which you 

become successful enough that you graduate from the cash subsidy 

that we are sending, I think Congress has answered that question 

repeatedly. Since 1970, payment limits have been a fact of life. 

Payment limits have been a part of farm policy now for over 35 

years, dating back, I believe, to the 1970 farm bill, and I will just 

be very candid with you, and maybe there is somebody in this room 

who would disagree with me. You know what? They haven’t worked 

certainly not very well. Certainly not very well. I think the common 

belief is that there is a payment limit, but quite honestly, there are 

so many opportunities to restructure, to redesign, to do this, that, 

and the next thing. 

This is vastly different approach than saying, there is a tax credit contained in a farm tax return, or if you get oil you get a tax 

credit or whatever, than literally distributing cash out of the Treasury. I believe it is just a vastly different approach. Thank you very 

much. 

Senator LINCOLN. Well, it seems to be also that you are picking 

winners and losers and I just do not think that is our business 

here, but hopefully we will have an opportunity to work with you 

a little more and see what we can do to be a little bit more diverse 

37

in terms of our approach, I will wait for the second round, Mr. 

Chairman. 

Chairman HARKIN. Thank you, Senator Lincoln, Senator 

Stabenow? 

Senator STABENOW. Thank you, Mr. Chairman, and welcome, Mr. 

Secretary and Dr. Collins and Mr. Conner. Welcome. We appreciate 

all the hard work, and I would echo the sentiments about the way 

in which you presented information to us in the farm bill. I appreciate it very much. 

When we look at agriculture in Michigan, it is our second largest 

industry, and in the farm bill, I find myself needing to be interested, as I have talked to the Chairman about before, in every single page because we have a great diversity of crops and everything 

from soybeans and corn and sugar beets to apples and cherries and 

milk and pork and beef, as well as Christmas trees. We have everything. 

But I want to focus—and I will be focused on every piece as a 

result of that, as well as rural development and premier land grant 

universities like Michigan State University, my alma mater, are in 

the State. So I care very much about all of the farm bill. 

But I want to focus on 50 percent of the crops that have not been 

included in a substantial way in this farm bill, which are specialty 

crops. I think it is important and I appreciate the new focus that 

you have given. Senator Craig and I will be reintroducing shortly 

our specialty crops bill that we hope—we talked to the Chairman 

about incorporating into a new title and are looking forward to 

working with the Chairman and Ranking Member and committee 

to do that. 

Let me speak to a couple of things related to specialty crops now, 

because I think it is important that you have added certain provisions. I do think, and I want to just emphasize in the area of increased purchases for fruits and vegetables for nutrition, which, as 

you know, is a win-win situation. We help our fruits and vegetable 

growers. We also help our children, we help seniors, we help others 

in terms of their nutrition. 

I appreciate the proposed increase in Section 32 and the dollars 

that you have proposed, an additional $200 million for 2008, $225 

million for 2009, et cetera. I just want to emphasize, though, that 

we attempted to do that. We put into the farm bill in 2002 what 

we thought was going to be an additional $200 million per year 

above current spending, which at that time was $180 to $200 million a year. Unfortunately, instead of seeing an additional $200 

million added, we see numbers like the 2005 purchase, according 

to CRS, which was $135 million total, not with $200 million added 

to it. 

So it is important to me, and I want to create language however 

we create it in the farm bill to make it clear that it is, in fact, additional money, not the difference between $135 and $200 million, 

and I am looking forward to working with you on that, because the 

language in here is very positive. I just want to make sure it gets 

translated because it is a critical program. It is a critical program 

for our farmers. 

I also want to ask, and I would welcome your comment on that, 

Mr. Secretary, but I also notice that you are not proposing to exVerDate 0ct 09 2002 09:22 May 24, 2007 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 C:\DOCS\34741.TXT SAG2 PsN: SAG2
38

pand the Specialty Crop Block Grant Program and I wonder if you 

might share why that would be the case as we look at expanding 

opportunities for specialty crops in the farm bill. 

Secretary JOHANNS. Actually, let me address that first issue. We 

agree with you. When I sat down with you, you pointed out to me 

that you felt like you had made a step forward only to find out that 

maybe you had not made any ground at all. 

Senator STABENOW. Right. 

Secretary JOHANNS. So at page 172 of our book, when we referenced this additional funding, we describe it as provide new mandatory funding for the purchase of fruits and vegetables. Senator 

Harkin mentioned the snack program. We are proposing to do this 

through the school lunch program. However, Senator, I can tell you 

that our attitude has been if schools are using this to benefit the 

children, maybe they do it through lunch, maybe they do it through 

breakfast, maybe they do it through a snack, we kind of view this, 

let the schools decide what program works best. So we will try to 

work with you on that, too. But yes, we heard you and we have 

included that. 

Chuck, on the pilot program, Senator, is that what you were referring to? 

Senator STABENOW. There is a Specialty Block Grant Program 

that we had in the past. 

Secretary JOHANNS. I guess what I would say is this. The addi- tional funding here is about $5 billion, as you know. 

Senator STABENOW. Yes. 

Secretary JOHANNS. It is a significant marker for specialty crop 

producers in the farm bill proposal. And what we are proposing is 

that money would be in the research area, which we have significantly boosted. So I think what you are referencing in the pilot program, I think we have addressed but through the research title, 

which specialty crop producers told us we really would like some 

assistance in funding for research, sanitary, phytosanitary, the 

purchases, and market promotion——

Senator STABENOW. Right. 

Secretary JOHANNS [continuing]. And I think we hit all of those 

areas pretty substantially. 

Mr. CONNER. And I think, Senator, if I could, I believe the Specialty Crops Block Grant Program, as well, was an authorization 

subject to appropriation. The programs Secretary Johanns has described would all involve mandatory funding taken directly out of 

the CCC, so we would not be subject to appropriations in that regard. 

Senator STABENOW. Thank you. This is certainly an important 

step forward for specialty crops. There is no question that research 

is a major piece of the commodity purchase. We have other assistance, as well, tree assistance program, other things that are very 

important for specialty crops. 

Let me just, if I might, just ask one more——

Chairman HARKIN. We have people that need to—can we go to 

the second round? We will have a second round. 

Senator STABENOW. Absolutely, Mr. Chairman. 

Chairman HARKIN. Now Senator Thune. Well, Senator Thune 

left. Senator Grassley? 

39

Senator GRASSLEY. Thank you, Senator Harkin, Mr. Chairman, 

and Mr. Secretary. First of all, I know you, as every other member 

said, you have put hard work into your suggestions and I think I 

ought to recognize that I am aware of that hard work because you 

spent a great deal of time at the State Fair of Iowa having a listening session and I imagine that was one of more than 100 listening 

sessions you or your staff had around the country, so you were diligently taking notes at that meeting and I presume this is a result 

of that, so thank you very much. 

One of the things that everybody knows I have been interested 

in and working hard with Senator Dorgan on is farm payment limitations. I am going to go through a series of questions, so if you 

could just make a note or a couple of words that would remind you 

of what I am asking about. I was wondering how you came to the number of $200,000 of adjusted gross income for someone not to receive farm payments 

down from the $2.5 million that is under current law. I am happy 

to see that a payment limit section is in the farm bill proposal. I 

do not know how it is going to work out. We will have a chance 

to study that before we work on legislation, but obviously, I am 

very much interested in payment limits, so one way or the other, 

your way or the Dorgan-Grassley way, we have to do something 

about payment limits so that 10 percent of the largest farmers do 

not get 72 percent of the benefits, not that that is the only problem. 

The problem is a greater problem of the public relations for farmers. There is only 2 percent of the population, when city people 

might question whether or not we ought to help big farmers get 

bigger so that they cut young people out from getting started farming or young people renting land, whatever the case might be, and 

it is all of the above. So that is one issue. 

Along the same line, though, I notice that you have increased the payment cap to $360,000 without eliminating generic certificates. 

I would be happy not to eliminate generic certificates, but I would 

just like to have everybody that gets a generic certificate get a 1099 

so that we know they are paying tax on it. We do not know that. 

Everybody else that gets a farm payment, gets benefit from a program, has a 1099. So that is a major issue. 

But the $360,000 and also increasing the direct payment to 

$110,000. Now, I was not here, but I was told that you made an 

answer to Senator Roberts that this was in order to be WTO compliant. Well, if you are WTO compliant at $110,000, you are surely 

WTO compliant at $40,000, it seems to me. 

Also, on another issue, I have been getting calls from farmers to 

see if they would be able to get out of their CRP contracts early. 

If you have not commented on that for some other member, I would 

like to hear that. 

I am concerned that through my discussions with farmers, that 

they are concerned as I am about the huge concentration that we 

have seeing the livestock industry, the vertical integration, trying 

to control all aspects of livestock production. I do not think the concentration is much different than it was 100 years ago—well, 90 

years ago when we passed the Packers and Stockyards Act, not we, 

but when Congress did. So I think it is fair that you ought to know 

that farmers get nervous when just four firms, and now we are 

40

talking about Swift being sold off, slaughter 71 percent of all the 

livestock or cattle, 63 percent of the farmers. Is that much different 

than where we were 100 years ago? 

Could you also comment on why there is no mention of consolidation in the farm bill proposal? Now, maybe administrations do not 

generally do that because you want the marketplace to take care 

of it, but we have the Packers and Stockyards Act. We have Congress acting when there was a problem of concentration at that 

time. Should we not be concerned about this if we are concerned 

about the institution of the family farm? Thank you. 

Chairman HARKIN. You have got about a minute to answer all 

those questions. 

Secretary JOHANNS. I will run through it very quickly. 

Senator I do appreciate your leadership in this really challenging 

area of payment limits. Here is what it came down to. If you look 

at the whole constellation of issues, the $360,000, which you point 

out that is what the limit would be, some would probably argue 

that is too much. Some would probably say, well, it should be more 

than that. But that was the number that was familiar from the 

2002 farm bill. 

But really what the debate came down to is this. The most effective way of approaching this and where you are going to have the 

most impact is as we have proposed. These things have—I mentioned maybe before you arrived, we have had payment limits since 

1970, and I will just be very blunt. None of them have been very 

effective. New ideas come up. We get new laws. We issue new regulations and all of a sudden everything just gets restructured and 

people are writing stories the next year saying, how are they getting around the payment limits? This is certain. It is straightforward to administer, and so that is how we arrived at that approach. 

The CRP contracts, I am looking at that. In the next 60 to 90 

days, we will have a lot better numbers as to what is going to happen out there in farm country, how much corn is going to be planted, and I can make an assessment as to whether we should release 

CRP acres early. I understand I can do that. The Secretary does 

have that power. I promise you, we are looking at it, and as those 

numbers come out, please continue the conversation with us. We 

should have a decision, I would say by early summer, maybe even 

a tad bit before that, but in that timeframe. 

The concentration area, again, a very complicated area. Our role, 

in my judgment, is administration of the Packers and Stockyards 

Act, and as a recent audit or investigation showed, not only is that 

our role, we need to be more forceful and do a better job there. 

I have to tell you, I came from a State that had a constitutional 

ban on corporate farming. Just respectfully, I would suggest we 

have to look at this area. That ban was thrown out recently by the 

Eighth Circuit Court of Appeals, lost at the District Court, lost at 

the Eighth Circuit. I think there is a petition for certiorari pending 

before the U.S. Supreme Court. Those efforts to try to regulate that 

kind of thing have fallen on disfavor. South Dakota lost their ban, 

et cetera. So bans in who can do this and who cannot do this, I 

think it is just an area we are looking at. I won’t offer any legal 

advice. I am a lawyer, but I do not practice anymore, but I just 

41

again respectfully suggest that is an area you have to pay attention 

to if there is some thinking about this as farm bill policy is developed. 

Generally we do take a position that market forces should regulate how things end up. That has just been my general view 

through the years. 

I think I hit everything. 

Chairman HARKIN. Pretty close. Thank you, Mr. Secretary. 

Senator Leahy? 

Senator LEAHY. Thank you, Mr. Chairman. Having spent a number of years as Chairman of this committee, I know how difficult 

it is sometimes to put one of these hearings together and to make 

it coherent and how difficult it is for the Secretary. There have 

been times, Mr. Secretary—this is going to come as a shock to you, 

but there have been times over the years that a tad bit of parochialism has come into the questioning here, and I hate to think—

you think that Bob Gates or somebody like that has trouble coming 

up here to explain the war, and you have to understand, look 

around the diversity of this committee and figure out what the parochial issue is for each of us. 

I was pleased with my talk with you last night and with Mr. 

Conner, who as I said is well known to this committee. I actually 

appreciate all you have done, Mr. Secretary. 

I think, as I said, on the MILC program, I am glad to see it in 

here. I think, though, that it has been cut too much. It is one of 

the best—it probably is the best targeted program USDA runs. It 

works with market forces to provide modest assistance when the 

prices are low. Now we have soaring feed costs and fuel costs and 

low milk prices. It is the worst possible time to cut it. It is the most 

targeted program you have in your Department. 

I think the increased funding for EQIP is a good idea. I do not 

agree with eliminating the regional equity provision. This, I authored in the 2002 farm bill. You have States that receive very little commodity program support, but having a $12 million base of 

conservation funding is a good public policy. I am also concerned 

about the Administration’s plan to consolidate the Farm and 

Ranchland Protection Program that was started in Vermont. 

I also wish the administration would reverse its position in opposition to emergency disaster assistance. My State of Vermont, 

Vermont is still trying to recover from first the devastating floods 

that wiped out much of the corn and hay crop last spring, then we 

had a drought on top of it. We had the worst possible thing, increased fuel prices. I know Chairman Peterson in the House indicated some willingness to move disaster assistance, but I remember 

last year when we did this on the Iraq supplemental, we were faced 

with a veto threat. We are spending billions of dollars a month in 

Iraq for reconstruction there. I wish we could take just a tiny bit 

of what we are wasting in Iraq and spend it on our American farmers. 

Now, given the USDA’s recommendation for a continuance of 

MILC as part of the 2007 farm bill, do you support a 1–month 

MILC extension from August 31 to September 30 in order to assure 

there is not a lapse in the program? 

42

Secretary JOHANNS. Senator, we do. In fact, I was just asking 

Keith Collins, but I think we have built that in as we tried to figure out where we ended up on the baseline. But let me study that 

before I commit to that last statement. Let me make sure——

Senator LEAHY. Will you get back to me——

Secretary JOHANNS. Yes. 

Senator LEAHY [continuing]. Because obviously this is of great 

significance not only in my State but several others, and if you 

could give me a definitive response on that, it would be very, very 

helpful. 

Do you agree that the MILC program is highly targeted to smalland medium-sized dairy farmers? 

Secretary JOHANNS. It definitely works for small- and mediumsized farmers. There are publications out there where we have 

raised questions about the MILC program. But having said that, in 

response to an earlier question from Senator Crapo, here is my 

read on it and here is why we ended up. We made changes pretty 

well across commodities equitably. It seemed fair to approach the 

MILC program the same. But probably the most important thing 

in terms of the decision to keep the program was it is a safety net 

that was put in place. Agriculture adjusts to that. I just—we heard 

over and over again from farmers out there, we like the structure. 

We would like to see you try to keep the structure in place. Here 

is where we think changes are necessary. 

And so that weighed on me and I decided to keep the structure 

pretty well across the farm bill and the proposals we have made, 

including MILC. I think it is very difficult for farmers that we just 

walk in, boom, the safety net is over, the MILC program is gone. 

So we proposed to keep it. 

Senator LEAHY. And in that regard, we touched this just briefly 

last night when we talked, but 30–some-odd years on this committee, I have supported a lot of commodity programs that do not 

affect my State at all. This is one of the very few that does. It is 

far more targeted than the others. I must admit that I have a little 

bit of difficulty going back home explaining why I am supporting 

things for Iowa, for any of these other States, and Vermont, a program that affects a State like mine, it is cut. 

And last, will you look at this question of disaster assistance? 

Again, just think of going to a farmer in my State who has just 

been clobbered. They know we passed this assistance in the past. 

We know the administration has cut it out because they said we 

have to concentrate first on disaster assistance to Iraq. Explain 

that to a farmer in my State, why it is far more important for reconstruction and emergency fuel assistance, everything else in Iraq 

than it is right here in our own country when it is our tax dollars 

going to it. So please, please look at this question of disaster assistance again, and you and I should chat further on that because I 

know my time is up. 

Thank you. And again, thank you very much for your call last 

night. I do appreciate that very much, and Mr. Conner, too. 

Secretary JOHANNS. Sure. 

Chairman HARKIN. Thank you very much. Let me see, now I will 

go to Senator Salazar. 

43

Senator SALAZAR. Thank you very much, Senator Harkin. I have 

an opening statement and some questions, but I will submit those 

for the record, and I assume that is without objection, and I would 

appreciate it, Mr. Secretary, if you would respond to my questions. 

Let me just first say to both you and the Chairman that I very 

much appreciate the work that you have done on the rewrite of the 

2007 farm bill. I think last year, through many of the conversations 

that we had here and probably ten or 12 farm bill listening sessions that I had in Colorado, there was a sense that we would not 

be dealing with this issue here today in 2007 and it is through the 

leadership of Chairman Harkin as well as through your leadership 

and all the work that you did last year that we are here today. 

Just as a general comment, I will tell you that I appreciate the 

substance of what you have put into the farm bill. I do think as 

one Senator from Colorado that it is something that we can work 

from. You obviously will have lots of input and back-and-forth as 

we go forward and we try to improve on the product that you have 

brought here to us today, but let me just say thank you to you and 

to Mr. Conner and Dr. Collins and all of the staff that have been 

involved in putting together this proposed farm bill. It gives us at 

least a framework from which to start on. 

I am going to ask a couple of questions. The first question has 

to do with energy. I think for all of us, Democrats and Republicans 

alike, this is one of the new great chapters of opportunity for rural 

America, to bring rural America back into a place of vibrancy and 

certainly in Nebraska with what you did in ethanol and some of 

the things there, you were leading the way. 

My question to you is this. I am concerned that we do not have 

the resources in here to be able to implement the vision that I 

think is a shared vision in America for how we can grow our way 

to energy independence. Senator Grassley and I, for example, are 

cosponsoring the resolution that says 25 by 25, we ought to be able 

to grow 25 percent of our energy from renewable energy sources by 

the year 2025. 

And I looked at the budget that you have presented here and it 

looks like it is $978 million for the energy title over the time period 

of 2008 to 2017. But when I take that amount and I say, well, what 

does that mean in terms of the 50 States and what they are going 

to get with respect to the grants and the other programs that are 

articulated here, it essentially comes out to about $1 million a year. 

A million dollars a year, Mr. Secretary, with all due respect, I do 

not think gets us to where we want to get. It does not get us to 

where the President said that we ought to be getting with the 35 

billion gallon renewable fuel standard, I think by the year 2017. 

And so I have this reaction without having studied this in great 

detail that this is highly insufficient if what we are going to do is 

to put an imperative on this energy opportunity that we have for 

rural America. So can you just respond to that. Is this adequate? 

Secretary JOHANNS. Yes. What I will do for you, I in earlier testimony walked down through all of the areas of the USDA budget 

where we have increased funding and then just reminded the committee that in addition to all of that, we had added a loan guarantee program of $2.1 billion targeted at cellulosic. But just suffice 

it to say, when you look at our total energy proposals, and also recVerDate 0ct 09 2002 09:22 May 24, 2007 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 C:\DOCS\34741.TXT SAG2 PsN: SAG2
44

ognizing we aren’t proposing to change anything that you have 

done already, that is in the bank, if you will, but if you look at everything we have targeted going forward, we have a very substantial energy package and I will detail and outline that for you in a 

letter to you, Senator, and a copy to the committee. 

But part of what gets really confusing here is if you look back, 

for example, and make comparisons, part of that money was discretionary. It never got funded. It never made it to the finish line, and 

so even though it was theoretically there, it was never appropriated 

and we never were able to work with it, so——

Senator SALAZAR. I would appreciate it, and I imagine that my 

colleagues on both sides of this committee would very much appreciate having a more robust explanation of what it is that we are 

doing with respect to investments on this title of the farm bill. 

Secretary JOHANNS. We will. 

Senator SALAZAR. Let me ask you one more quick question. Coordination with respect to other agencies, the Department of Energy. I just came from a hearing with Secretary Bodman, talking 

about what he is doing there. How are we coordinating what we 

are doing here with the Department of Energy? A quick example 

is cellulosic ethanol. We heard from the experts at a conference we 

had a week ago that it is almost a dream too far away, not commercially feasible right now. How are you and DOE coordinating 

to make sure that as a country we are having the maximum impact 

on trying to achieve these visions that we have? 

Secretary JOHANNS. Coordinated at every level. We have people—I not only coordinate with my colleague on the Cabinet, but 

we have staff people working——

Senator SALAZAR. Is there a specific renewable energy working 

team that coordinates on an ongoing basis? 

Secretary JOHANNS. I will allow Keith, if you do not mind, to 

offer a few thoughts on that. 

Mr. COLLINS. Sure, Mr. Salazar. There are several, in fact. One 

is that USDA has created an Energy Council. It is chaired by one 

of our under secretaries——

Senator SALAZAR. And DOE participates——

Mr. COLLINS. DOE participates in the Energy Council. We also 

have a statutory group, the Biomass Research Development——

Senator SALAZAR. If you can get me an overview of that coordination, it is important because it is important that our government 

know what one hand is doing so we know how we are moving forward. 

Last question before my time runs out. Following up on Senator 

Leahy’s comments on agricultural disaster assistance, Colorado is 

now under lots and lots of snow. We have 10,000 dead cows out in 

the Eastern plains and it is a problem that is affecting Nebraska 

and other States. It has been a sore point, frankly, between us in 

the Senate and the administration. I would hope that you can get 

yourself, Secretary Johanns, and the administration to support the 

agricultural disaster emergency package so we can get that behind 

us and then concentrate on the good product that you have brought 

to us before and see how we can move forward and refine it and 

look forward. It is just a request. 

45

I thank you very much for being here today and thank you again. 

As I said earlier, Chairman Harkin, I think a year, even 6 months 

ago, people were saying there is not going to be a farm bill in 2007. 

I want to just say again, congratulations, because I think when you 

go through a program that is a $100 billion program the way that 

we have and you have 5 years of experience, no matter how good 

the program is, no matter how visionary those people were who 

wrote it, you learn a lot in that 5–year period and it would not be 

happening if it had not been for your leadership and I really appreciate it. 

Chairman HARKIN. You are overly generous. I appreciate that. 

But we worked hard on that. We got a good bipartisan agreement 

on that. And I commend the administration. I think the Secretary 

has come up with a good sound proposal. We will work on it, obviously. Not everybody agrees on different things in it, obviously. We 

have got a lot of work to do here. But I am convinced we can come 

up with a good progressive forward-looking farm bill. I think we 

are—I see certain things emerging. Obviously, there are things we 

are going to have to work out and there will be some contentious 

issues. I understand that. But I still think we are headed in a direction that we can all hopefully pull together on. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. I would also echo my 

colleague from Colorado about dealing with the disaster issue. If 

we could come to a resolution on that that deals with the last couple of years of disasters in the Midwest, then we could, I think, 

start with a clean slate, so to speak, as we tackle this next farm 

bill and contemplate how we deal with disasters going forward. 

But I do want, Mr. Secretary, to thank you, Deputy Secretary 

Conner, Dr. Collins, for what is a very good faith effort that required a lot of thought, a lot of time, and a lot of input from people 

all over the country, and I appreciate your willingness to listen. 

Fifty-two meetings around the country, many of which were attended by you, Mr. Secretary, I think speaks really well of your 

commitment to getting a good product that incorporates the input, 

the thoughts, the best ideas out there from our producers who ultimately have to live with and adhere to the policy that we enact 

here in the Congress. So thank you for what was a very time-intensive and laborious, I am sure, process, but one that is, when you 

look at all the work that went into it and the product that you produced, it was clear that you did—that there is a lot of work that 

did go into it, and again, one that ultimately hopefully will be of 

great benefit to our producers. 

Let me just make a couple of general observations about—and 

again, I won’t get into specific questions. We will have time to do 

that. I do want to interact with my producer groups in South Dakota as they react to this and get their direct input so that as we 

move forward, we can figure out what some of the regional impacts 

of the bill are and how we can put a bill together, assemble a bill, 

hopefully by the August recess, that is something that we can—everybody can be happy with and be able to vote out of the Congress 

and hopefully get signed and enacted into law. 

But there are a couple of questions that I have at the moment 

and you talked about. One has to do with the budget. You talked 

46

about a $10 billion reduction over the course of the bill, $18 billion 

if you include disaster payments of the past farm bill. And the 

question has to do with this, because it seems to me at least some 

of the assumptions you are making about prices going forward are 

maybe not optimistic, hopefully they are realistic in terms of where 

prices are going to be in the out years, but I recall going through 

when I was a member of the House of Representatives trying to get 

disaster relief enacted here, coming to the administration with a 

proposal that essentially would say that we are achieving great 

savings in LDP and countercyclical payments from not making payments today that as a result of higher prices, and I wanted to 

apply those savings toward disaster relief and the answer was, no 

way, you cannot do that because in the out years of this farm bill, 

we may not have these good prices and we have to have this reserve. 

It looks to me like that is what you are doing here. You are assuming that these prices are going to stay at this level and therefore there is going to be all this money that would have been available under the previous farm bill that you can call savings, and so 

you are cutting back on some of the safety net-type programs. 

I guess I would like to get you just to react to that because it 

seems to me that you are building assumptions in about prices in 

the out years here that could affect some of these programs if, in 

fact, we get into a time when prices drop precipitously. 

Secretary JOHANNS. Here is what I would offer. Pretty soon here, 

you will start exactly where we started. You will start with a baseline, and all decisions will be based upon what you do off of that 

baseline. Here is how you will get the baseline. You will just say, 

well, if we just did the 2002 bill, kept every ‘‘i’’ dotted and every 

‘‘t’’ crossed and changed nothing, what would that cost over the 

next 5 years? As the 2007 farm bill, that is where your assumption 

is going to begin. That is where our assumption begins. 

In computing into that, you are going to have to make some decisions, rational decisions, based upon price projections. We did not 

just pull these numbers out of the air to get the numbers to fit. 

That is the baseline you will start with. That is the baseline that 

we started with. 

Here is how it shapes up. If you compared the actual spending 

that occurred from 2002 to 2007 in the farm bill that we have 

today, this proposal will spend about $10 billion less. Why? Because during a lot of that time, you had very low prices. You paid 

out very large LDPs during the Katrina event and those kinds of 

things happened. It has only been in the last year or so that you 

started to see those prices go back up. When I came here 2 years 

ago, the discussion was, what will we possibly ever do with all this 

corn we have in reserve? Now, that is not the discussion anymore. 

Then if you did the 2002 farm bill again, let us just say you said 

to me, Mike, I want the 2002 farm bill again, I do not want any 

changes, no ‘‘i’’ undotted, no ‘‘t’’ uncrossed, this proposal spends $5 

billion more. It fits within the President’s plan, but it spends $5 

billion more than that baseline, and you will be finding that as you 

start to work through the numbers. 

You say we have cut the safety net. We really have not. Here is 

why we have not. If you look at cotton, the money that increases 

47

the direct payment is basically what we have done in terms of adjusting on loan rates. If you look at the other four major program 

crops, which you grow some of them in your State, wheat, corn, 

rice, and soybeans, an adjustment of the loan does not make any 

difference. It is basically a net wash financially. So we have not 

really impacted that safety net and you will find that you won’t impact it, either. 

On the other hand, if you say, you know what, I just want to 

keep all that the same and I am willing to take the money away 

from the enhanced direct payment for those crops, those four crops, 

which is an additional 7 percent in the third, fourth, and fifth year, 

you have just cost those producers a billion dollars, because we literally went out and found and identified that money, recognizing 

that somewhere out there, maybe ethanol is not quite as strong, et 

cetera, so let us buildup the direct payment. But the nice thing 

about it, if you approve that, your farmers can take it to the bank. 

It is done, it is mandatory, and they can plan on that money being 

there. You take that out, you just cost those producers across the 

country a billion dollars, and adjusting the loan rates, I think you 

are going to find, unless you make really radical adjustments, you 

are going to find that it is a net zero effect, or basically a wash. 

So it is not the reduction that maybe you think. 

And the last thing I would say, Senator, and I offer this to everybody and I am probably getting myself in trouble here, but I am 

happy to come out and explain this or sit down with producers or 

your staff or whoever because it is complicated. We would be happy 

to try to do some things to try to get people out there to walk folks 

through what we have done here. 

I think in a State like yours, because you are so similar to Nebraska, you are going to like what we did. 

Senator THUNE. Well, I hope you are right. I know the direct 

payment probably impacts differently across commodities. A corn 

grower in Western or the middle of South Dakota probably—I 

talked to one yesterday that said, ‘‘I get about $8 an acre on my 

direct payments.’’ So increasing it by 20 percent is not a big deal. 

But on the other hand, I think you have to weigh that versus the 

current program and what they would be with the current loan 

rates, what they would be receiving. 

So I guess the main thing is maintaining that, of course, safety 

net for those down years, hoping that in the future, if renewable 

energy continues to drive corn prices high—we have got good corn 

prices, although that gets the livestock guys upset. You do not 

want to go to a sale barn these days because you will get the other 

side of high corn prices, which I am sure you are hearing, as well. 

But just a couple of things I will say. I know my time has expired, but a couple other observations. One is there is a concern 

that has been raised, too, about when you do the national target 

revenue per acre, that going to a national does not take into consideration what I think you heard from Norm Coleman, some of the 

regional or local conditions that might impact that, if you had a 

really bad year in one area of the country. 

And second, and this has to do with this whole issue that was 

raised earlier by my colleague from Arkansas, ironically, I have always supported payment limits, and at the time, I do not think 

48

that the administration was in favor of it. Now the administration 

is coming out in favor of it and now my agricultural groups are 

saying they do not want them anymore. So I am not sure who is 

being progressive and who is digressing here, but there has been 

an evolution of thought on this, and I think even when you get out 

of some of the Southern commodities, you are going to hear from 

farm bureaus and corn grower organizations in my part of the 

country that may have some issues with that. 

But nevertheless, it is a good start. You jumpstart the process 

and we look forward to working with you, and Mr. Chairman, look 

forward to working with you as we get this process underway. 

Thank you. 

Chairman HARKIN. Thank you, Senator Thune. Senator Casey? 

Senator CASEY. Mr. Chairman, thank you for putting together 

this hearing and for your great leadership of this committee on 

very difficult issues, and I am going to thank you, Mr. Secretary, 

for your public service and for the work that goes into putting together the budget proposals that you and your team have announced. 

I have got a couple of questions. I do want to focus, as Senator 

Leahy reminded us, some of us once in a while get parochial. That 

is part of our job, to focus a lot of attention on our home State. I 

know you have spent a lot of time in the Commonwealth of Pennsylvania and I know some of these issues will be familiar to you. 

I want to speak in particular about dairy policy, and I know you 

have been asked about this today. In our State, we have got some 

8,600 dairy farmers, a big part of our farm economy, and if there 

was one resounding and consistent question that I heard from 

dairy farmers across the State over the last 2 years, it is a very 

simple question, but I know that dealing with it is particularly difficult. What a lot of them said to me very simply, and it is a question they have asked for many years, is why doesn’t Federal policy 

take into consideration or have a full understanding and a policy 

that reflects the true cost of production, what a dairy farmer and 

his or her family have to endure just to survive. 

And I know that it is a very broad question, and I also want to 

ask particular questions about the MILC income loss contract. But 

I just wanted to get your thoughts generally on that very specific 

but, I think, very important question for dairy farmers. 

Secretary JOHANNS. I grew up on a dairy farm in Senator Harkin’s State, so I have been around dairy as long as I can remember 

and I will share a story with you. I went to the village where my 

great-grandfather came from in Germany 2 years ago, and as we 

drove into this village, guess what was in the middle? Dairy cows. 

So I guess we have been milking cows in my family for a long, long 

time. I do have a familiarity here probably that is maybe even 

more than the average Secretary would have because my background is there. 

The proposals we have made in our current dairy policy are what 

I would describe as fairly modest. We keep the milk income loss 

contact (MILC) program, probably surprised a few people by deciding to do that because we have put out some information questioning the program, but we do keep it. 

49

We are making adjustments. It does go from a rate of 34 percent, 

stairsteps down to 20 percent, and it is based upon historical production under our proposal. But that is really it with MILC. We 

also keep the price support program at the current level, and that 

is really the main area where we have the ability to impact the 

dairy situation for farmers out there. 

I was questioned by Senator Crapo, why did you keep the MILC 

program, and I said, you know, it is a safety net that was put there 

and you just do not change that overnight. So my hope is that the 

dairy industry, because I do think there is conversation on what to 

do and I think they are going to have some proposals, I would encourage the dairy industry to keep that conversation going, because 

here is what you will find, Senator. There is a huge diversity of 

opinion in the dairy industry between your area of the country and 

as you move West. As you move West, bigger operations, a lot of 

cows, you know, it is just a different phenomena than what we 

would see in the Northeast. In my judgment, both are valuable and 

we need to develop dairy policy that is helpful. 

The last thing I will mention, we get criticized a lot on the milk 

marketing order system because it is slow and cumbersome, and 

you know what? It is slow and cumbersome. I wish I could figure 

out a solution to that problem. I would make most dairy farmers 

more happy with this. It is a very cumbersome process, not because 

I have got people dragging their feet at the USDA, it is just the 

process is so cumbersome. People are trying to get through these 

things, but by the time we get to a decision, the issue that drove 

that is sometimes a year or 2 years old. 

So, boy, I am really hoping the dairy industry can work with this 

committee and maybe have some ideas. I guess we would try to be 

open to ideas. Of course, we would. But what we have proposed 

here is fairly modest and I think most of the people who are involved in dairy would agree with me. 

Senator CASEY. Well, I appreciate that. One thing I would ask 

you to do, and certainly I would want to make myself available at 

getting our schedules together, is to spend some time in Pennsylvania listening to, as you have, I am sure, in the past, listening to 

our dairy farmers and I hope we can do that. 

Let me just ask you in particular about MILC, and I know we 

are—when I say the income loss contract. How did you determine 

the reductions that would take place between fiscal year 2009 and 

fiscal year 2013, when you go from that 34 down to 20? 

Secretary JOHANNS. Here is basically how we did it. Our approach was to try to be equitable as best we could across commodities. We had made adjustments in the marketing loan rates, again, 

pretty well across the commodities based upon historical market 

prices over the life of the last two farm bills. We have kind of put 

that in place. Then we looked at the MILC and said, how can we 

make the case that they were treated about the same? And so that 

is really how we headed out there to do it, and that is how we 

ended up with this stairstep process. 

The thought was originally, maybe we should just reduce it 

straight out of the box. I wanted a more rational approach in terms 

of adjusting it over time, so we did it over the 5 years of the farm 

bill. 

50

And actually, here is another interesting issue. I was talking to 

Senator Thune about the baseline. Here is your challenge with the 

MILC program. It is not in the baseline. It is not funded out there. 

So when you sit down and say, I want the MILC program, you are 

going to have to convince your colleagues to find money somewhere 

to fund this program at whatever level you want it funded at. It 

will be literally new money added to the baseline, and Senator 

Harkin has been through this. He is nodding his head. That is just 

the way it is, so——

Senator CASEY. I look forward to working with you and with the 

committee and especially our Chairman. 

Chairman HARKIN. As I said earlier, I think we have a lot of consensus on the committee to move ahead, but I said there are going 

to be some contentious issues. I think we just tapped one. 

[Laughter.] 

Chairman HARKIN. It just has to do with different parts of the 

country and what we are going to do. Well, we will just have to 

work. We will work something out some way. But with the budget 

constraints, Senator Casey, we really do have a problem here without it being in the baseline, and how we resolve it, I do not know 

quite yet. 

We will start a second round. I will keep myself to 6 minutes and 

then go around again. 

Just a couple, three things. CSP, just keep in mind—this is not 

a question—but incentives. Think about it as an incentive background for biomass and conservation together, for biomass and conservation together. Think about it as an incentive. 

Second, on the program that you and I talked about when you 

first came into my office, Section 9002, the bio-based purchasing requirement for the Federal Government, we put a provision in the 

last farm bill—it is in permanent law, by the way—that requires 

the Federal Government to purchase bio-based products as long as 

they are equivalent in price, performance, and availability. Last 

September, you were very gracious to come over to the Department 

of Defense where we had a 2–day fair or whatever you want to call 

it, exhibitors. Forty-some companies came there to demonstrate the 

goods they had that were bio-based that could be purchased by the 

Department of Defense. 

You moved aggressively on this. I congratulate you for it. At 

first. But we are still at only six products and what has happened? 

It seems to have, from your initial endeavor to really move this, it 

seems to have slowed down greatly and I do not know why. Second, I looked in your book. You have a proposal for $18 mil- lion over 10 years. That is $1.8 million. That is a small increase 

from what we had, and I just wonder if that is going to be adequate. 

So, just briefly, address yourself to Section 9002 and what you 

want to accomplish with that. 

Secretary JOHANNS. Keith really spearheaded the regulations, if 

I remember correctly, on this, and Keith, if you could—I do not 

know how much of this you can remember, but if you could help 

with this one. 

Mr. COLLINS. Mr. Secretary, Senator Harkin, I agree with you. 

It was a long time in getting the first proposed rule out. We had 

51

to get guidelines out first through a proposed and final rulemaking. 

As you indicated, we do have six items. Items are classes of biobased products with literally hundreds of branded products subsumed under an item. We have six items that have been designated for preferred procurement by final rule. That final rule requires us to give agencies, Federal agencies, a year after the promulgation of the final rule before the mandate takes effect. That 

mandate takes effect this March 2007, because the six items were 

designated by final rulemaking in March 2006. 

We have two other proposed rules. The comment periods have 

closed. We are preparing the final rules now. We are discussing the 

final rules with the Office of Management and Budget and we hope 

very soon to be able to issue final rules on two rules which will designate an additional 20 items. Again, 20 items being classes of biobased products. When we have those 20 items designated, together 

with the original six, we will have something in the order of 600 

manufacturers producing over 2,000 branded products that will 

then be designated by final rulemaking for preferred procurement 

under the program. 

In addition to that, we have expanded greatly our outreach efforts to other Federal agencies under our Assistant Secretary for 

Administration, who has taken a tremendously enthusiastic approach to reaching out to Federal agencies to ensure that their own 

procurement regulations in each Federal agency meet the requirements of the law and that they are up and ready to run in March 

of 2007. 

Chairman HARKIN. I appreciate that. I do intend to use my position as Chairman of this committee to call in the Secretaries of Defense, Interior, Commerce, and a few others and ask them why 

they are not implementing this part of the law. It applies to them. 

It does not apply to the Department of Agriculture, just for you for 

the rulemaking and coming up with the products. But we need to 

find out why the rest of the Federal Government is not focusing on 

this. Now, Gordon England, the Deputy Secretary of Defense, gets 

it and he was very promotive of this, but I just want you to know 

I will be calling up these other people, too. 

Mr. COLLINS. You are correct, though. We are required to have 

the Federal Acquisition Regulation modified, but then in addition 

to that, every Federal agency that has their own procurement regulations have to modify those. At Agriculture, we have a thing called 

AGAR, which is equivalent to the FAR, and we had to revise that, 

as well. Every Federal agency has that obligation. 

Chairman HARKIN. I know that, and I intend to ask them that, 

too, call them up and ask them what they know about it. 

Fruit and vegetable program, snack versus lunch, I notice you 

geared toward the school lunch program there, then later on you 

said schools should make the decision. But keep in mind that you 

can just keep putting more and more and more stuff in the school 

lunch program, Mr. Secretary, but as teachers told me and principals told me, kids come to school in the morning and they get the 

growlies right around about nine o’clock in the morning, or maybe 

they have had a sugar breakfast and then they crashed on that 

sugar and what do they get? They go to the vending machines or 

they eat cookies or something like that. 

52

So what has happened is with this snack program is they are 

able to get fresh fruits and vegetables which get them through 

that, evens them out. We had all kinds of information about how 

they study better and everything. So I just want you to think about 

that in terms of how we move ahead on that. 

And the question I have—I am running out of time—is why do 

we not have a rule yet updating the school meal patterns to conform to the recent dietary guidelines if you are going to move into 

school lunch programs? We do not have a rule yet, and I am just 

wondering. If you do not have an answer, maybe you can submit 

it for the record. 

Secretary JOHANNS. I will submit that for the record, if I could. 

Chairman HARKIN. I appreciate that. I have 17 seconds. Technical problems. I agree with you on changing the food stamp name 

program. That is good. And you said about providing a bonus or 

something like that, up to 25 percent or something like that if they 

buy fruits and vegetables. I do not know if you have put that in 

or that is my own head work. But I need to know about technical 

problems. If you use your EBT card and you go through and let us 

say you give a bonus to someone to buy fresh fruits and vegetables, 

what are the technical problems? What if we wanted to say, OK, 

if you buy $10 worth of fruits and vegetables and you swiped your 

card, you will get a bonus of 25 percent on that. I just need to know 

what technical problems, and again, if you do not know that, you 

can submit that for the record. 

Secretary JOHANNS. We will answer—we will get a technician to 

answer that, but just so the record is clear, our proposal, we have 

not submitted a proposal to bonus people. What we do have is a 

pilot program working with States to try to find innovative solutions to obesity problems. Something like that could fit here. 

Chairman HARKIN. I hope we would look at that bonus problem. 

Senator Lincoln? 

Senator LINCOLN. Thank you, Mr. Chairman. I just have, I think, 

three more questions and one comment, and I apologize for taking 

up all your time. 

Your comment in closing on the payment limitations, you noted 

that it has a history, and certainly last year was prevalent in the 

2002 farm bill, or the last time, and that is true, but it was there 

as a compromise. I will just make sure that just to go one step further, if you noticed in that compromise, it was stated that 75 percent or more of the adjusted gross income had to be derived from 

farming. That has been eliminated in what you have proposed. The 

problem with that is when you look at AGIs, as indicated on the 

Federal tax forms, that means it would all be farm income and 

non-farm income. 

The purpose of what we were trying to do in that compromise 

was, as I remember, I think it was called the Scotty Pippin rule, 

to make sure that people, not to harm the farmers that were doing 

a good job in farming as they were supposed to, but to make sure 

that it was not directed to people who were non-farm income and 

non-farmers. 

So I would say that I hope that we can look at coming about at 

compromises and taking that into consideration and certainly not 

just assuming that all large farmers are old and greedy. The fact 

53

is, many of our large farmers are large because they have to be and 

they have to farm an economy of scale to be competitive in the 

global marketplace. 

Senator Grassley mentioned keeping farmers young. Many of our 

large farmers are young. They are the next generation. And the 

reason they farm large farms is because of the crops they grow in 

the areas that they live and those crops are what are suited to be 

grown there. And if they do not grow that economy of scale, they 

cannot be competitive. 

So I just hope that we will take that into consideration. I know 

there are a lot of greedy people, but I hope we do not just assume 

that. There are greedy CEOs, there are greedy people in all professions. But just assuming that they are trying to circumvent laws 

or circumvent rules, I think is the wrong approach. I hope that 

what we will do is look and see that diversity exists in all areas 

and that this is one where if we are looking particularly—and 

when I talk about marketplaces, that is where I go to my next 

question. 

Our own OMB Director Rob Portman has stated many times that 

there is no economic sector more distorted than the world agriculture market. The fact is that all of our farmers face the lopsided 

playing field, be they big, small, or in between, quite frankly. And 

I wonder oftentimes why our administration continues to criticize 

the support that we provide our farmers instead of focusing on foreign tariffs and subsidies that again are far, far higher and greater 

than anything we provide our producers. 

So we look at our farm families producing crops, Mr. Secretary, 

and I look through your proposal and note that there is $11 billion 

in cuts to the farm safety net and that number jumps to about 

$13.5 billion if we include the crop insurance cuts. So if you offset 

it by adding back the direct payments, which you indicate is a part 

of what you are trying to provide in terms of relief, the direct payment increases and some of the other items, we are still looking at 

nearly an $8 billion cut to our farm families. 

So I hope that—well, my question really is, in trying to accomplish what you are trying to accomplish in the context of this farm 

bill rewrite, I hope it is not to from a side door go back to ‘‘freedom 

to farm,’’ meaning unilaterally trying to disarm our farmers in an 

international global marketplace, particularly in the midst of a 

trade negotiation in terms of the WTO. I mean, I would like to see 

us encouraging our trading partners to step up to the negotiating 

table to reduce their tariffs and subsidies before giving away our 

farm, as it is sometimes said, or just throwing away the farm, perhaps, in those negotiations. I know you are not the trade man, but 

nonetheless, I think it is an important part of this equation. 

Secretary JOHANNS. I appreciate your comments. We do not 

make an assessment about greed or anything like that. I believe in 

all of agriculture. People sometimes ask me if we are for the big 

guy, or if we are for the little guy. I say, look, I am for farmers. 

I am for ranchers. I am for agriculture. You are right, some are of 

a size that is required by the economic circumstances that they are 

dealing with. Some are smaller. But I believe in supporting agriculture. 

54

I would also make the case, Senator, that if you really look at 

the proposal, very respectfully, I believe we have improved the 

safety net. Let me give you an example, and farmers told us about 

this. 

When Katrina hit, we had about a 2–month interruption of 

transportation down the Mississippi that was significant. It lasted 

longer than that, but it rippled across America and it affected the 

corn and soybean price. The corn price dropped from about $2 a 

bushel to $1.55, $1.60. At that point in time, farmers locked in 

their LDP and they got 40 to 45 cents a bushel to do that, and you 

can do the math, absolutely legal and appropriate under the 2002 

farm bill. But I do not think that is what Congress intended. I 

think Congress intended a true safety net where we would be there 

to help farmers when they needed the help. 

So when farmers are telling me this and then telling me, look, 

it was when I needed you most you were not there because the 

price went up and I did not get the countercyclical, I am going, 

something is not working very well here. Again, what we tried to 

do is keep the structure, try to figure out how to operate this system better, try to recognize that it was safety net that farmers 

were focused on, you know, and try to make proposals to Congress 

that were based upon that good policy. 

I was in Iowa—I was in Des Moines recently in the release of 

this and I talked about that LDP phenomena with Hurricane 

Katrina. You know what? Farmers were out in the audience nodding, and again, it was entirely appropriate. I am not suggesting 

anything other than I am not sure that in the end that is what 

Congress headed out to do here. I think what Congress headed out 

to do was provide a safety net. 

And so I think we have provided a more secure safety net, a 

more predictable safety net, a safety net that farmers can plan on, 

and it is more in accordance with what I think Congress was trying 

to do with the 2002 farm bill——

Senator LINCOLN. Well, I think you kind of make the point, too, 

here that there are variables that we deal with in agriculture, 

much of which we have no control over——

Secretary JOHANNS. Yes. 

Senator LINCOLN [continuing]. And you point out Katrina and 

the weather that existed. We suffered from that, but we did not get 

the disaster because we were not in the area, but it still comes up 

the river and it still comes across the—you know, the weather patterns still come straight up and blow down our rice and damage 

our cotton when it is getting ready to be harvested, along with the 

fact that the input costs, the energy costs were drastically high 

both starting then and through the following year. So there is a lot 

of that that occurs. 

I go back to something else Senator Grassley talked up. He 

talked about images being portrayed, and it seems like the Department of Agriculture is always concerned about the image of whether or not what you are doing is going to be portrayed in the press 

by certain groups as being something that it is not, quite frankly. 

But what I would say is that if you deeply cut the programs that 

have helped farmers when they need it, when you talk about the 

marketing loan rates, and then you increase the direct payment 

55

slightly and temporarily, which pays the farmer regardless of what 

happens, even when prices are good and production is good, do you 

not think that that is going to invite bad publicity? If prices and 

production turn out to be good in the future, as they are predicted 

but certainly not assured, or that absolute calamity comes about 

and you are billions and billions of dollars in emergency relief that 

we are all having to hassle about, if those predictions turn out 

wrong, it is kind of what Senator Thune was saying. If price and 

production are bad——

Secretary JOHANNS. Here is what I would say, Senator, and 

again, very respectfully, but your question does misstate our proposal and I just have to put it out there for you. 

Senator LINCOLN. Yes. 

Secretary JOHANNS. If you look at the adjustment in the loan 

rate for cotton and go over to the full life of the farm bill, all 5 

years, you will see that we increase their direct payment by 65 percent, 66, and there it is. It is more predictable for those cotton 

farmers. They know what they are going to get. They are not going 

to get cut out on that payment when their crop is short because 

they had dry conditions and are not on irrigated land. 

When you look at adjustment in the loan rates for the other four 

major commodities, it is basically a wash. It does not save any 

money. We are not getting those billions of dollars of savings that 

you are suggesting, not at all. 

But we went out there and we said, look, let us find a billion dollars that we can put out there for them to increase their direct payment. Again, they can take it to the bank through the third, fourth, 

and fifth year. During the first couple of years, we have got very 

high prices, very high prices, and I will study the same thing that 

you will be studying, because in the end, as I said to Senator 

Thune, you are going to start exactly where we did. What is in the 

baseline, what is out of the baseline? What does the 2002 bill look 

like if we passed it for the next 5 years and what baseline does 

that create? I will tell you it is not a reduction. Run the baseline 

on the 2002 bill, compare our proposals, we are $5 billion over. 

So if you say, Mike, you really made a nice presentation here but 

I like the 2002 bill, I am going to stick with it, I am going to fight 

to get it passed, somewhere out there, $5 billion has just been 

taken away from people because our proposal is $5 billion over the 

baseline. 

Senator LINCOLN. Well, I am not so stuck in the gumbo, as we 

call mud in the Delta, to say that I have to have the 2002 bill, but 

I do think—and I hope that you will be willing to work with us to 

come up with some compromises that may be more reflective of the 

diversity that exists, and we thank you, Mr. Secretary. Thank you, 

Mr. Chairman. 

Chairman HARKIN. I just have a few more, but I have to respond 

to Senator Lincoln. You cited Rob Portman as saying that the biggest distortions in trade were in agriculture, is that what he said? 

Senator LINCOLN. World agricultural markets. 

Chairman HARKIN. Well, I like Rob Portman a lot. He is a fine 

guy. I may have to call him up on that one. I happen to think the 

biggest distortions are in manufacturing, where people are paid basically slave wages, where they are provided no kinds of retirement 

56

benefits or anything else, where they use child labor in many cases. 

I think those provide some of the biggest distortions in terms of our 

world trading agreement. Where we at least try to pay our workers 

a living wage and provide different benefits and things, they do not 

get that same thing in other countries and they are just undercutting us, a lot of times using child labor, too. So I would say that 

that may be a bigger distortion than what we see in agricultural 

trade. 

Mr. Secretary, the fastest growing segment of the food industry 

is organics, 20 percent per year going up right now. In the 2002 

farm bill, we started to address some of this in a couple of ways. 

There is this sort of valley of death, as they say. If somebody wants 

to do organics and they have got program crops and program acres, 

to grow organics, you have to be certified for 3 years. I mean, you 

have to do 3 years before you get your USDA certification, but they 

cannot market it as organics. 

So we tried to provide some funds in that bill to get them 

through that and then to do some more research, and what we provided was $3 million a year for research and extension. Your proposal has only $1 million a year. So the way I see it, that is a twothirds cut in the fastest growing area and an area where, for a 

small amount of money, we can provide niche markets for a lot of 

farmers all over this country and people who want to grow 

organics. 

So I am just wondering why there is this back-off in your proposal. 

Secretary JOHANNS. Our proposal is at page 166 of the book we 

have submitted and it lists a whole bunch of initiatives under the 

organic title. I will not—the hour is getting late and I will not detail those, but these basically were built on suggestions that the organic industry had been touting or proposing. So I think we hit everything. 

The other thing I would mention is that if you look at our proposals, we have mandatory funding there, also. Again, because 

there is this issue, you can put a lot of discretionary money out 

there. It does not tend to get funded, and you look back 5 years 

later and say, well, that was a nice idea. It did not go anywhere 

because the money was not there. 

If you look at our proposals, I think they are comprehensive. I 

think it is along the lines of what the organic industry wanted plus 

there is mandatory money there that will help. 

Chairman HARKIN. I think the mandatory is just in the Market 

Access Program. That is the way I see it. 

Secretary JOHANNS. I would have to study that a little more. 

Chairman HARKIN. Well, we will have to get into this——

Secretary JOHANNS. Yes. 

Chairman HARKIN [continuing]. Because in your budget, in the 

budget, it is $18 million over 10 years—no, that is not right——

Secretary JOHANNS. Yes, it is 69——

Chairman HARKIN. It is $10 million over 10 years. 

Mr. CONNER. It is $61 million, Senator Harkin, I think, over 10 

years, and that is all mandatory funding in our bill, I believe. 

Secretary JOHANNS. I think the organic industry—I am not 

aware of whether they have weighed in on our proposal, but I am 

57

thinking this is pretty close, plus it is mandatory money and that, 

as you know, is always hard to come by. 

Chairman HARKIN. I will look at it. I thought it looked like you were cutting it from the $3 million, which I thought was a paltry 

sum anyway. 

I had a big meeting this weekend with a number of organic farmers in Iowa. We had a big gathering there. Their need is for regional processing facilities. They need small regional processing facilities to be able to take their goods there and have them regionally processed, packaged, whatever, and then put out. So I look forward to discussing that with you. 

But I have got to clear up the amount of money on organics. We 

have got to do more on organics. We have got to provide more 

money—Mark tells me that the organic research, what I am talking about, and extension is cut, but the overall organic does go up, 

so we will take a look at that. We will work on that. 

One last thing, and it is late and I appreciate your staying here 

so long. We will work on the Food and Nutrition Program, on the 

technical problems regarding how we give a bonus to food stamp 

recipients. We will work on that. 

My last question, again looping back to where I started, my favorite subject, CSP. 

Secretary JOHANNS. OK. 

Chairman HARKIN. Again, one more time, as I understand your plan to provide the increase of $500 million over the 10 years, we 

spread the baseline back. I understand all that. It is going in the 

right direction. But here is what I do not understand, Chuck. The 

President’s budget released Monday would reduce spending for the 

Conservation Security Program in 2008 by $135 million and reduce 

the cap on CSP by $80 million between now and 2015. So it seems 

to me there is an inconsistency here, and if you can clear it up a 

little bit now or provide a more detailed analysis later on, I would 

appreciate it. Or Mr. Secretary—I just said Chuck because we have 

beentalking about this. 

Mr. CONNER. Senator Harkin, I think to underscore what the 

Secretary had said earlier, the budget that we submitted earlier 

this week does reflect all of the current CSP contracts that we have 

already awarded and also provides some additional funding so that 

those same contract recipients can actually upgrade their contract, 

if you will, and receive additional assistance and exchange for additional conservation benefits. We have not—so that is built into the 

President’s budget, current contracts plus opportunities to upgrade 

those contracts with more conservation. 

Chairman HARKIN. OK. 

Mr. CONNER. Now, beyond that——

Chairman HARKIN. No new contracts? 

Mr. CONNER. That is right. As the Secretary has noted, we have 

in our book proposed, in addition to the additional funding, we 

have proposed changes to some aspects of CSP. For that reason, we 

do not believe that there is going to be new contracts awarded in 

this fiscal year and therefore——

Chairman HARKIN. Two-thousand-eight. 

Mr. CONNER. I am sorry, in fiscal year 2008, and for that reason 

have not included any of the additional increases to begin in that 

58

fiscal year. Obviously, they would begin then in 2009 and beyond 

with the adoption of a new farm bill proposal. But again, I think 

the important point, Senator, is we have covered the existing contracts plus their opportunity for additional conservation dollars 

within those contracts. 

Chairman HARKIN. Well, again, as you can imagine, I do not 

think that is acceptable. For 2 years, we are going to go 2 years 

without one new contract, and I just do not know why it would 

take so long to come up with rules and regulations. We have an 

existing program. We will get a good idea probably soon, by early 

summer, the direction we are going on this. I think when you did 

the EQIP funds after the 2002 farm bill, that happened pretty rapidly. So I just think we just cannot afford to have 2 years like that. Again, one more time, how does the $80 million reduction, the $80 million reduction in the President’s budget through 2015 

square with the purported $500 million additional over the 10 

years? 

Secretary JOHANNS. Chairman, if I might offer a thought, we 

have our budget person here and maybe if he can caucus with your 

folks to try to——

Chairman HARKIN. OK. 

Secretary JOHANNS. We can tie each other around the axle on 

these numbers and I think we are successfully doing that. 

Chairman HARKIN. All right. But go ahead, Keith. Maybe Keith 

can give us a——

Mr. COLLINS. I can try very quickly, Mr. Harkin. First of all, we 

are not proposing a decrease in CSP funding in our budget request 

for 2008. For 2007, our CSP funding is $259 million. Our budget 

request——

Chairman HARKIN. That is right. I am aware of that. 

Mr. COLLINS. Our budget request is $316 million. That is an increase. That is to do exactly what Deputy Secretary Conner said, 

to fund existing contracts plus enhancements. The $80 million you 

are talking about is a decrease from our baseline level and that decrease in the baseline level simply results from the fact that we are 

not holding additional enrollments in 2007 and 2008. So we are 

slightly below our baseline. But then we would make up for that 

in our farm bill proposal by adding the $500 million, pulling the 

out year funding forward, and enrolling in the order of ten to 11 

million acres a year and going from 15.5 million acres today to 96.5 

million acres in 2017. 

Chairman HARKIN. OK. 

Mr. COLLINS. And if I might say, the question of——

Chairman HARKIN. Then that seems to me, from where I have 

been, it seems to me then that is $420 million. We will just deduct 

the $80 million off of it. 

[Laughter.] 

Chairman HARKIN. You are right. We can get around the axle on 

this one. We will work it out. We will work it out. We will work 

it out. 

Let me see, did I have anything else here that I wanted to bring 

up? No, I think that really does it. You are very generous with your 

time, Mr. Secretary. Again, I thank you for a very, as I said in the 

beginning, a very challenging and, I think, forward-looking proVerDate 0ct 09 2002 09:22 May 24, 2007 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\DOCS\34741.TXT SAG2 PsN: SAG2
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posal. I hope we can get to work on it soon. My goal along, I hope, 

with Congressman Peterson on the House side is to get this thing 

put to bed and get it to the President sometime hopefully by September. I look forward to working with you on it. 

Secretary JOHANNS. I look forward to working with you, Chairman. We really appreciate your leadership in pulling this hearing 

together. I think this is what farm bill policy is all about. You get 

together and you start talking about the issues and try to figure 

out where to go. We are excited about our proposal. As you can tell, 

I probably answered longer than I should have. I get fired up about 

the things that we have got here, but we do appreciate the hearing 

and the opportunity to visit with you and your committee. 

Chairman HARKIN. Thank you very much, Mr. Secretary. 

The committee will stand adjourned subject to the call of the 

chair. 

[Whereupon, at 12:48 p.m., the committee was adjourned.] 

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(275)

QUESTIONS AND ANSWERS

FEBRUARY 7, 2007

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392

Æ