U.S. GOVERNMENT PRINTING OFFICE

65–507 WASHINGTON : 2001

HELPING AGRICULTURAL PRODUCERS ‘‘RE-GROW’’

RURAL AMERICA: PROVIDING THE TOOLS

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC, MARCH 15, 2000

Serial No. 106–47

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBE ́ N HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 15, 2000 ............................................................................ 1

WITNESSES

Kruse, Charles, President, Missouri Farm Bureau Federation ........................... 3

McDavid, J. Gary, Chair, Legal, Tax & Accounting Subcommittee on Tax

Legislation, National Council of Farmer Cooperatives ..................................... 5

Vallery, Rick, Executive Director, South Dakota Wheat, Inc .............................. 8

Hurst, Brooks, Vice President, Missouri Soybean Association ............................ 9

Haverhals, John, Former President, South Dakota Cattlemen’s Association .... 11

Tumbleson, Gerald, Past-President, Minnesota Corn Growers Association ....... 12

APPENDIX

Opening statements:

Talent, Hon. James .......................................................................................... 21

Prepared statements:

Kruse, Charles .................................................................................................. 24

McDavid, J. Gary .............................................................................................. 27

Vallery, Rick ..................................................................................................... 30

Hurst, Brooks .................................................................................................... 32

Haverhals, John ................................................................................................ 35

Tumbleson, Gerald ........................................................................................... 39

(1)

HELPING AGRICULTURAL PRODUCERS ‘‘REGROW’’ RURAL AMERICA: PROVIDING THE

TOOLS

WEDNESDAY, MARCH 15, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Committee met, pursuant to call, at 2:20 p.m., in room 2360,

Rayburn House Office Building, Hon. Jim Talent [chair of the Committee] presiding.

Chairman TALENT. Well, I want to open the hearing and apologize to everybody for the delay. I was over in the House handling

a bill, and then we had this vote. The Ranking Member told me

that she needed to stop at her office very briefly, and then she

would be here. I am going to go ahead and open up the hearing.

I want to welcome the participants here today for the House

Committee on Small Business hearing on helping agricultural producers regrow rural America, providing the tools.

Last September, the Small Business Committee held the first

‘‘helping agricultural producers regrow rural America’’ hearing

which focused on the current crisis in the agricultural community,

what could be done to lift rural America out of recession, and how

agriculture could prepare itself to weather any future downturn in

prices and production and conditions. The agricultural leaders at

that hearing painted a clear picture of the need and desire of producers to become the vertical integrators, capturing more of the

consumer dollar by adding value to their commodities.

I continue to be impressed by those in the agricultural community who during these darker times for producers are still optimistic for the future. I am pleased their entrepreneurial fire continues to burn.

Agricultural leaders at September’s hearing described the current value added movement in agriculture and described various

policy recommendations to the committee that could be accomplished to help the hardworking visionary producers in their efforts

to build a stronger agricultural economy as well as a stronger rural

economic base.

Charlie Kruse who is back with us today suggested one-stop

shops be established to provide the necessary business, marketing,

engineering, and legal expertise to assist producers as they move

to establish their own processing and manufacturing facilities.

Every agricultural organization presented at the hearing echoed

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Charlie’s recommendations. I assure you, Charlie, your voice was

heard.

Mr. Thune and I with the help and expertise of the agricultural

community introduced the Value Added Agriculture Development

Act for American agriculture. This legislation would create agriculture innovation centers that would provide the business, marketing, engineering, and legal assistance needed to begin a producer-driven value added revolution in agriculture.

The Committee heard additional recommendations for specific

policy tools that could be provided to assist this movement. Dale

Ludwig, the executive director of the Missouri Soybean Association,

which Brooks Hurst is representing today—well, we have a lot of

great agricultural leaders from Missouri. Have you ever noticed

that coincidence, how many we have here. Mr. Hurst advocated the

creation of a producer-investment tax credit for up to 50 percent of

the producer investment. The tax credit would help level the playing field for producers as they compete in markets that have been

traditionally consolidated into a handful of multinational corporations. In my meetings with agricultural leaders, I have shared this

concept and the idea has been received with great interest and support. Of course, any attempt to work with tax code is always a complicated process, and understanding on the ground effectiveness of

any tax incentive is crucial as legislation is developed.

I encourage the witnesses to provide the committee with their

views on these and other legislative initiatives.

Over the last few months, I have had the opportunity to see firsthand the innovative entrepreneurial spirit that America’s farmers

and ranchers share. Their enthusiasm about the concept of valueadded agriculture is overwhelming. I have become more convinced

than ever that the future of rural America in our agricultural system is bright.

Missouri Soybean Merchandising Council research committee

and soybean utilization researchers at the University of Missouri

at Rolla, the MSMC, the sister organization to Brooks’ group is the

soybean checkoff board in Missouri. On behalf of soybean producers, the MSMC has made a major commitment to developing

soy-based products to help increase the demand for soybeans. The

researchers at UMR demonstrated numerous innovative technologies from which such products as plastics, composites, lubricants, and solvents have been synthesized from raw soybean materials.

Tom Green explained the vision of Missouri soybean farmers and

the MSMC and how these new technologies could be best utilized

by the producers of Missouri. You know, we are living through a

crisis right now which could have been substantially alleviated had

we been further along with these value-added soybean products because we have the opportunity through that kind of research, if applied properly, to create new kinds of products that will enable us

to move away from our dependence on petroleum, which of course

is hurting the country right now.

The opportunity I have had to work with the agricultural community on this issue of value-added agriculture has reaffirmed a

core observation I made many years ago as I began working with

farm organizations at the State level. There is great sense of pride

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and satisfaction shared by the hardworking men and women who

have chosen to provide the food and fiber for our Nation. Often, especially in years such as the past 2, these men and women work

for the equivalent of less than $3 per hour in wages. Yet they remain engaged by the fact that they produce the safest, most abundant, and cheapest food supply our world has ever known.

I am glad the group such as the Farm Bureau who have been

gracious enough to attend this hearing as part of the annual president’s D.C. Trip take the time to come to Washington to remind me

and my colleagues that the future of agriculture in rural America

is safely in the hands of the family farmers who shed their blood,

sweat, and tears in the pursuit of feeding the world. I believe these

family farmers who are often second, third, fourth and even fifth

generation on their farms deserve the opportunity to build a

stronger tomorrow for themselves.

These tools for the future of value-added agriculture I am convinced are a positive step towards helping the family farmer regrow rural America.

When the Ranking Member comes, we will defer to her for any

comments she may wish to put in the record, and I will without

objection keep the record open for any opening statements that

other Members may wish to submit. We will, however, go right to

the witness panel and Members will be coming in as you all are

testifying.

First, I would like to recognize for his testimony Charles Kruse,

the President of the Missouri Farm Bureau Federation, and I am

grateful to all the witnesses for being here today. Charlie, please

give us your testimony.

STATEMENT OF CHARLES KRUSE, PRESIDENT, MISSOURI

FARM BUREAU FEDERATION

Mr. KRUSE. Thank you, Mr. Chairman. As you mentioned in your

comments, we have a large number of Missouri Farm Bureau people here this week, about 115, and several of them are here for the

hearing today; and on behalf of all our Missouri Farm Bureau people, I want to thank you for having this hearing. And I also want

to thank you for the emphasis you have placed as chairman of the

Small Business Committee on agriculture.

My name is Charles Kruse, and I am a fourth generation farmer

from Stoddard County. My wife Pam and I raise corn, soybeans,

and cotton on our farm. I also serve as President of Missouri Farm

Bureau, the State’s largest general farm organization.

It is indeed a pleasure to appear before this committee and share

the views of Missouri Farm Bureau members on opportunities for

adding value to U.S. agricultural products. I commend you, Mr.

Chairman, for your continued interest in this issue and determination to address the hurdles farmers face as they attempt to capture

a larger percentage of the consumer’s food dollar. We appreciate

your leadership and stand ready to assist this committee in whatever way possible.

Last September, as you mentioned, I was invited to share some

general thoughts relative to value-added agriculture and the outlook for new generation cooperatives. Today almost 6 months later,

I am pleased to report both growing interest and knowledge in

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value-added opportunities. Yet the problems plaguing U.S. farmers

and ranchers have changed very little.

In Missouri, spring crops have not even been planted, but many

economists project another year of commodity prices that are far

below the cost of production. Agricultural exports are expected to

grow only marginally this year, and now farmers have to deal with

skyrocketing fuel costs and rising interest rates. These factors coupled with the growing regulatory burden and continued consolidation pose serious threats to the future of many family farms. According to the U.S. Department of Agriculture, 14 percent of our

Nation’s farmers are expected to experience debt repayment problems this year.

Enhanced demand for agricultural products is the key to our future success. Overseas, it is important that Congress approve permanent normal trade relations status for China and pave the way

for implementation of the U.S.-China bilateral trade agreement.

Also, we remain hopeful that agricultural negotiations within the

World Trade Organization will move forward in upcoming months.

Domestically, while rising fuel costs are a tremendous problem,

they have also generated renewed interest in alternative fuel

sources. We welcome the interest in renewable fuels such as ethanol and bio-diesel. Farmers and consumers alike will benefit from

a national commitment to expand the research of development of

bio-based fuel technologies. We are pleased that the administration

recognized the potential benefits of bio-based fuels in its proposed

FY 2001 budget. Many farmers believe strongly in the concept of

value-added products but are unsure how to turn their interest into

action. The learning curve is steep but climbable.

It is the financial requirements that can be insurmountable. For

this reason, we support legislation developed by Chairman Talent

and Congressman Thune that would authorize a Federal tax credit

for producers investing in value-added endeavors. A Federal tax

credit would be an important tool for farmers and their lenders.

Given the weakness of the U.S. farm economy, we have heard all

too often that a producer lacks the capital to join a cooperative and

the family’s lender is wary of additional exposure. State and/or

Federal tax credits can help bridge this gap.

In addition, we support legislation introduced by you, Mr. Chairman and Congressman Thune, that authorizes centers to provide

producers with much needed technical assistance related to valueadded ventures. Access to information relative to engineering, legal

services, business planning, and market development via these onestop shops is absolutely critical if these cooperative ventures are to

succeed. We applaud the bill’s focus on competitively awarded

State projects and believe the grants could be extremely helpful to

farmers throughout the United States.

Finally, we commend the sponsors for including a provision authorizing $300,000 per year to develop the quantitative tools necessary to evaluate the impact of these centers on local economies.

Last year, Missouri Farm Bureau conducted a series of regional

meetings to ask our members what we should be doing to help restore long-term profitability. More farm program assistance was

not the sole answer. We learned that farmers want to learn more

about forming cooperatives, becoming price makers rather than

5

price takers. Today, farmers are looking beyond market trends and

focusing instead on the creation of entirely new markets for their

processed products.

During the meetings, we surfaced a number of ideas that warrant further consideration, including: The development of educational programs for producers interested in forming new generation cooperatives and directors of new generation cooperatives; the

ability for new generation cooperatives to solicit outside equity

from investors who are not required to commit agricultural products and do not have voting privileges; and also access to additional

State or Federal funds for initial marketing assistance; and finally

reducing the regulatory burden and expense associated with forming new generation cooperatives, especially those that include more

than one State. For example, and Mr. Chairman, I think you are

aware of this, a newly formed pork processing cooperative in Missouri has already spent $15,000 to comply with Securities and Exchange Commission requirements.

In closing, let me just say it is important that you know that

Farm Bureau does not blame the woes of the U.S. farm economy

on the 1996 farm bill or any other single factor. Likewise there is

no simple solution to our problems. We now have freedom to farm.

We must focus on improving our ability to have freedom to market.

Thank you, Mr. Chairman. I appreciate the opportunity to testify.

Chairman TALENT. Thank you, Charlie. I have a list of valueadded start-ups in Missouri, some of which have already broken

ground, others of which are in the exploratory stage, and without

objection I will have that put into the record.

[Mr. Kruse’s statement may be found in appendix:]

Chairman TALENT. Our next witness is J. Gary McDavid, and

Gary McDavid joins us today representing the National Council of

Farmer Cooperatives. Gary is the chair of the legal, tax and accounting subcommittee on tax legislation of the NCFC.

STATEMENT OF J. GARY McDAVID, ESQ., CHAIR, LEGAL, TAX &

ACCOUNTING SUBCOMMITTEE ON TAX LEGISLATION, NATIONAL COUNCIL OF FARMER COOPERATIVES

Mr. MCDAVID. Thank you, Mr. Chairman, other Members of the

Committee. On behalf of America’s farmer cooperatives and their

nearly two million farmer owners, we want to take this opportunity

to express our appreciation for the steps you are taking in bringing

to the forefront the needs of rural America, especially with regard

to the availability of technical assistance and tax incentives that

will help farmers help themselves and the communities in which

they live.

Additionally, we recognize and appreciate the efforts over the

past 2 years by this Congress in approving much needed economic

and disaster assistance in response to low commodity prices and

adverse weather conditions in many parts of the country. For many

farmers and ranchers, the emergency assistance has been the difference between survival and going out of business. However, it appears that given the current economic outlook, similar assistance

may again be needed this year. Accordingly, we strongly support

such action as may be necessary.

6

At the same time, we believe that it is critical that action be

taken that will lead to a sustained long term economic recovery,

improved farm income and risk management, increased market opportunities and growth in exports for U.S. agriculture. It is within

this framework that current farm policies and related programs

should be reviewed and evaluated, as well as strengthened.

Furthermore, we strongly recommend a number of additional actions that can and should be taken to address not only the nearterm challenges facing U.S. agriculture, but also to achieve the

long-term objectives outlined above. Critically important is

strengthening the ability of farmers to join together in cooperative

self-help efforts to improve their income, manage their risk, and

compete more effectively in a rapidly changing global economy. A

high priority should be given to ensuring that public policies and

programs relating to agriculture are directed toward achieving this

goal.

Federal programs relating to farmer cooperatives should be revitalized and funding for research, education, and technical assistance similar to the legislation resubmitted yesterday by Chairman

Talent and Congressman John Thune from South Dakota. Other

actions are needed to help farmers through cooperative efforts become more involved in value-added production, processing and marketing activities beyond the farm gate and to capitalize on new

market opportunities. Not only would this help farmers capture a

larger share of the consumer dollar, thereby strengthening their income and providing greater economic stability in the communities

in which the farmers and cooperatives are located, it would also

promote needed competition.

To achieve this, farmers and their cooperatives must have in

place policies and programs, including adequate tax incentives, to

help attract needed capital and investment. Equally important is

the need to maintain access to a strong and competitive cooperative

farm credit system. Current loan guarantee programs should be expanded to provide financing for both new as well as existing farmer

cooperatives seeking to become more involved in value-added activities. Other initiatives also should be considered to further meet

capital requirements.

On the issue of tax incentives that are very important to us, the

National Council of Farmer Cooperatives supports and is working

for the inclusion of H.R. 1914 into an upcoming tax bill. H.R. 1914

was included last year in the Tax Refund and Relief Act of 1999

that was vetoed by the President. H.R. 1914 would allow farmer cooperatives to bypass the dividend allocation rule, a regulatory rule

which negatively impacts the amount of the patronage dividend deduction taken by a cooperative.

As cooperatives look to the 21st century, it is important for the

industry to have the appropriate tools so it can continue to give

value to its farmer owners. In today’s world, businesses need to be

adequately capitalized if they hope to remain competitive. Farmer

cooperatives have a difficult time raising capital. The reason is that

they generally only have two sources of capital, their farmer owners and borrowing from a lending institution. Farmer cooperatives

do not raise capital from financial markets by issuing voting common stock because their members hold this stock.

7

However, farmer cooperatives are allowed to issue a class of nonvoting preferred stock that can be used to raise equity from sources

other than farmer owners. When issuing a dividend-bearing class

of nonvoting preferred stock on which dividends payment is made,

a cooperative must now comply with the dividend allocation rule

which has adverse tax effects on the cooperative and has been one

reason why cooperatives today rely heavily on debt financing.

The effect of the dividend allocation rule is a third tax on this

portion of the cooperative’s income. The dividend allocation rule is

technical in nature and is explained in our written testimony.

NCFC has been working with Representative Bill Thomas in attempting to change this regulation. Congressman Thomas has introduced H.R. 1914 that, if enacted, would modify the dividend allocation rule.

The benefits of this legislation for cooperatives could be substantial. Among other things they could more easily raise capital from

outside investors without giving up any ownership or control by the

farmers who own the cooperative, could increase the amount of patronage earnings paid to farmer owners, create a class of nonvoting

preferred stock that could be traded on capital markets thereby

providing liquidity to cooperative interests, create a preferred-stock

program for management and employees that would improve incentive programs, allow a cooperative to repurchase a departing member’s interest for dividend paying stock rather than through debt.

In a nutshell, this proposal would give farmers a useful tool when

attempting to raise capital for their cooperatives.

For this reason, the National Council of Farmer Cooperatives

supports and is working for the inclusion of H.R. 1914 into an upcoming tax bill, and we look forward to working with this Subcommittee and the Ways and Means Committee on this issue.

Mr. Chairman, we appreciate this opportunity to testify and look

forward to taking your questions. Thank you very much.

Chairman TALENT. Thank you, Mr. McDavid. I guess that dividend allocation rule is a kind of triple taxation; isn’t it when you

work it all out?

Mr. MCDAVID. Yes, it is. It is very unfortunate.

[Mr. McDavid’s statement may be found in appendix:]

Chairman TALENT. I will recognize the gentleman from South

Dakota for the next introduction.

Mr. THUNE. Thank you, Mr. Chairman, for holding the hearing

in the first place because I think this is a very timely hearing and

for giving voice to this issue and shining a light on this issue because this is something that I believe really is about the future of

agriculture, and we have had a good amount of success already in

our State in the area of value-added enterprises. The legislation

which you have taken leadership on and helped move forward here

is critical in terms of what it can do to further bolster those efforts.

I am honored today to have a couple of gentlemen from my home

State, first of which I will introduce right now, to testify on this

issue. Rick Vallery is here today on behalf of South Dakota Wheat,

Inc. He has also formerly farmed with his family in western South

Dakota raising cattle and irrigated corn and alfalfa and wheat. In

1984 he went to work for the South Dakota Farm Bureau; and 3

years ago left the Farm Bureau to go to work for South Dakota Inc.

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Rick is very knowledgeable regarding value-added agriculture, and

I believe his testimony will be a great asset to the Committee as

we begin to consider how we might expand opportunities for valueadded endeavors.

So, Rick, thanks for coming; and with that we are happy to listen

to what you have to say to us.

STATEMENT OF RICK VALLERY, EXECUTIVE DIRECTOR,

SOUTH DAKOTA WHEAT, INC.

Mr. VALLERY. Thank you, Mr. Chairman and members of the

Committee. My name is Rick Vallery. I am the executive director

of the South Dakota Wheat, Incorporated which is a producer

group located in Pierre, South Dakota. Currently, South Dakota,

Incorporated is working on two valued-added projects, and we have

two value-added projects that are kind of waiting in the wings. One

project is a proposed flour mill that has a niche market. It is a very

specialty-type flour, and so we are working on that.

Another project that we are just putting together and we are not

sure how far we are going to get with it, but it is a Web site where

you buy and sell commodities. We think we have some potential for

that, and we are very interested in seeing how that may work out.

A year ago, the South Dakota legislature through the work of us and some others established a value-added subfund account of $3.4

million. This is a one-time fund. We only get it once. This account

is designed to handle feasibility studies and/or marketing plans for

value added, and that is all that it is to do. To date, there have

been five projects that have been funded and approved for these

moneys. Two of those studies are nearing completion. If either one

of these studies become feasible or are proven to be feasible, then

this legislation that Congressman Talent and Congressman Thune

have proposed becomes very important.

Also around a year ago, South Dakota commodity organizations

and interested businesses such as the association of co-ops and

rural electric and rural water systems established a nonprofit organization with a board of directors, and this is their mission statement verbatim: To foster creation of producer-owned, value-added

agriculture by offering technical and staff support and championing

value-added agriculture publicly by educating producers, lenders

and the public on value-added concepts.

So for the last couple of years, we have become very serious

about value-added agriculture in South Dakota. There are two keys

to a successful value-added project. One is organizational and the

second is financial, but the key that brings it together, it is the finances during the organizational phase of start up that is needed

most, and that is what the Talent-Thune bill does. It provides that

organizational assistance in the legal, in the research, in the consulting, in the engineering, all areas that are extremely important

once the feasibility marketing plan has been proven successful. It

is the next step. It is a perfect fit.

During that organizational phase, you will have questions or producers will have questions that are asked and answered concerning

about the legal structure of which entity should we be making,

should it be an association, should it be a corporation, should it be

a cooperative. If it is a cooperative, what kind of cooperative?

9

Should it be open, should it be closed, should it be a 521? All those

decisions need to be done, and this allows for some financial assistance in the legal side of that.

Another scenario is if it is a cooperative, is it going to be in one

more than one State. If it is in more than one State, then we have

the securities we need to go through which is additional legal entity work which is important. It is very, very important.

Questions will be asked concerning the markets. Questions will

be asked concerning the by-products of the entity that is being focused or the value-added product. Questions will be asked concerning real estate or building procedures or building structures.

Location, all those things are handled through the engineering,

through the infrastructure that is available in whatever State, and

those are things that are covered in the proposed legislation.

The Talent-Thune bill offers you a niche in starting and organizing value-added agriculture. It is an extremely important opportunity to provide assistance in legal engineering and consulting aspects of value-added projects wherever they may be.

The second part of that, which is the tax credit portion, is a concept that is needed in the agricultural industry and would be welcome. We just view that from a producer’s standpoint as just a

wonderful opportunity to take advantage to provide that incentive

to be a part of a value-added agriculture, and so we think both bills

have tremendous value.

With that, that closes my testimony. Thank you for the opportunity and the time for allowing me to share my beliefs.

Chairman TALENT. Thank you, Rick. When we complete the testimony, we will have an opportunity for questions. I don’t want our

witnesses to think we don’t have questions, but by and large, I restrain myself and wait until all the witnesses are done.

[Mr. Vallery’s statement may be found in appendix:]

Chairman TALENT. Our next witness is Brooks Hurst. Brooks

farms with his father and brothers in Missouri, in the far northwest corner of Missouri. So we have the southeast and the northwest of Missouri represented today. Brooks is vice president of the

Missouri Soybean Association which has taken a strong lead in

value-added agricultural development; and I should state, particularly given my comment before, that one of the reasons Mr. Thune

and I got into this is that our two States, South Dakota and Missouri, while certainly not the only States to be active in value

added, are two of the leaders and the ag leaders from our States

really have probably as much experience that exists in the country

in applying this concept. Mr. Hurst, please go ahead.

STATEMENT OF BROOKS HURST, VICE-PRESIDENT, MISSOURI

SOYBEAN ASSOCIATION

Mr. HURST. Thank you, Chairman Talent. I would like to thank

you and your fellow Committee Members for the opportunity to testify before you today. I would also like to thank you, Mr. Talent

and Mr. Thune, for the introduction of the Value-Added Development Act.

My name is Brooks Hurst. I serve as vice president for the Missouri Soybean Association and farm with my two brothers and father in northwest Missouri raising soybeans and corn. Mr. ChairVerDate 11-MAY-2000 14:34 Feb 15, 2001 Jkt 069957 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 E:\HEARINGS\65507 pfrm02 PsN: 65507
10

man, I have written testimony; but for the sake of time, I would

just submit it for the official record.

You are all familiar with the tough times in the farm economy

today; but as a farmer, I am inherently optimistic as I believe all

farmers are. I believe the future of farming holds great opportunities and the technical assistance provided for in this act will allow

farmers to capture these opportunities.

Some of the things, biotechnology will bring such as

nutraceuticals are truly exciting. Currently, Monsanto has betacarotene they can put into rice to provide vitamin A for third-world

countries, and this is just the first of many new technologies that

are going to allow niche marketing, and I believe that farmers will

be able to capture some of these markets.

One of the future trends is identity preservation, and a system

is needed to keep track of these different technologies and keep

them in a separate pipeline. Northwest Missouri is starting a soybean processing plant right now, and we have got a farmer board

that is just entering into discovery of business plans, and a technical assistance center such as proposed in this act would be very

beneficial to building marketing plans, help with legal assistance,

an engineering assistance.

Soybeans are processed into meal and oil. Soybean meal is primarily used for feed. The oil has many uses, such as bio-diesel that

has been mentioned several times here today. We believe we have

found a more efficient, smaller-scale process for separating the

meal from oil in this small added-value processing plant that we

are working on in northwest Missouri. If we can find an efficient,

environmentally-friendly way that is just as cheap as the mass production processing plants that the current processing corporations

use, then we have an opportunity to gain a huge market in identity-preserved soybeans. We can clean out this plant in less than

a day and switch to a different variety of soybeans with different

traits for different customers.

AGP has talked about identity-preserved soybeans and they said

it would take them 2 days to shut down the plant and totally clean

it out to run a different type of soybeans through. So we would

have a great advantage as a small processing plant in this market.

If we had one place to go for all the technical assistance, we would

have an advantage in marketing these soybeans and getting the

production process started.

We also need all kinds of technical assistance. For instance, we

can also make plastic out of soybeans and if we can find a way to

harden plastic in 2 hours instead of 3 days, it makes it a lot more

viable opportunity for us.

Continuing on in the identity-preserved focus of things, there are

several businesses in Missouri that sell directly to Japan. One of

the things that Japan is really interested in is knowledge of where

their food products come from. They like to know where it was

raised and who raised it, and if we have a system set up providing

information for these consumers, that will be a great benefit to

Missouri and American farmers.

You know, I feel I am an expert in farming, and I know how to

raise soybeans and corn, but I don’t know how to set up a business

structure. I don’t know how to engineer a soybean processing plant,

11

and this act would lend great benefit to myself and fellow farmers

when we start these value-added businesses. My father was on the

founding board of an ethanol plant in northwest Missouri. He came

home late many nights frustrated because he didn’t have the expertise to start a business plan, and he didn’t know where to go.

I don’t know how many oil wells there are in Missouri, but I

don’t think there are a whole lot. Processing corn into ethanol is

one way to get energy from a renewable, environmentally-friendly

source. Soy-diesel is another, and I feel farmers will benefit greatly

from these opportunities.

Touching on the tax credits, I think that that is a vital instrument. Other businesses have received them, and it is a vital interest and levels the playing field with large corporations so the small

farmer can capture these added values and maintain a viable business.

I would like to thank you for the opportunity to testify once

again, and if there are any questions afterwards, I would be happy

to answer them.

Chairman TALENT. Thank you, Brooks.

[Mr. Hurst’s statement may be found in appendix:]

Chairman TALENT. I will recognize again the gentleman from

South Dakota for another introduction.

Mr. THUNE. Thank you, Mr. Chairman. The other witness from

South Dakota, another friend of mine, is John Haverhals; and I

want to thank him for appearing before the committee today as

well. John is the past-president of the South Dakota Cattlemen’s

Association and is currently a director on the South Dakota Beef

Industry Council’s board. John and his family also run a cattle

feedlot there in Hudson, South Dakota; and as a cattle producer

and partner in a value-added agricultural business, John knows his

subject inside and out. I very much look forward to his testimony

here today. So John please share with us your thoughts on valueadded agriculture.

STATEMENT OF JOHN HAVERHALS, FORMER PRESIDENT,

SOUTH DAKOTA CATTLEMEN’S ASSOCIATION

Mr. HAVERHALS. Thank you, Mr. Chairman, and thanks to the

Members of the Committee for the opportunity to testify.

My name is John Haverhals. I am from Hudson, South Dakota,

and we do have a cattle feedlot. So the entire time that I have been

in beef production, I guess I have always been involved with value

added as we took feed stuffs and processed them through the live

animals and created protein meats. So from the day I started as

a young child feeding cattle, I think I have always been involved.

I want to relate a story that I have with starting our business

that we started 7 months ago. It is in Overland Park, Kansas. It

is a gourmet meat store where we sell some of our meat through

that process. The biggest opportunity that comes along with that,

instead of receiving a dollar eight or a dollar fourteen that I would

receive from a traditional harvesting facility, I am now selling

product at $19 a pound. With that dramatizes the value that can

be captured by creating these entities. That also is a stimulus for

others to want to enter into these things.

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As the testimony that was given prior to me, many things have

been said of what helps and doesn’t and what is needed so I am

not going to reiterate that; but I can truly say as a person who has

just started this process 7 months ago, there isn’t a single item in

your legislation that I couldn’t have used dramatically. And when

it comes to the tax credit, that is also a major part of not entering

into these things. We had several people that did not enter into our

joint agreement because of the capital outlay. Right now, the capital outlay I have in our store, it is on our balance sheet; but it is

a nonrenewable asset because we won’t receive a return on our investment for 3 or 4 years. I can’t use it as a tax break, and it is

not being used in my general business. So I have taken capital

from my general business and moved it over into this new venture,

which actually is a deterrent to my income in the short term. Long

term it will be of benefit.

In summary, these pieces of legislation are a win-win for those

involved. Farmers and ranchers will have the opportunity to become more profitable through the development of new and existing

products. The communities in which they live will benefit from

their success. The economy will see enhanced competition; and in

the end, the consumer will enjoy a larger variety of products from

which to choose. For these reasons, I ask you to continue to work

on the legislation, and I thank you for the opportunity to testify.

Chairman TALENT. Thank you, John.

[Mr. Haverhals’ statement may be found in appendix:]

Chairman TALENT. It is a pleasure now to introduce Gerald

Tumbleson, who is the past president of the Minnesota Corn Growers. And let me just say that I think we have on this panel three

States’ representatives who have been the lead in value-added enterprises. And not to spark a competition, but Minnesota may be

at the forefront. And I am a big believer that when you have a

working model some place you try and duplicate it rather than reinvent the wheel. So Gerald, please tell us how you are doing it in

Minnesota and thank you for coming.

STATEMENT OF GERALD TUMBLESON, PAST-PRESIDENT,

MINNESOTA CORN GROWERS ASSOCIATION

Mr. TUMBLESON. Thank you, Mr. Talent and also Mr. Thune for

inviting us here. It is quite an honor for us to come off the farm

out there and come in here and speak with you today. Not only

being with the Minnesota Corn Growers, I am on the board of the

National Corn Growers. And Minnesota does have a lot of ethanol

plants as we go through this; but as we see it happening, you

sometimes think of it as a farmer-owned thing and farmer controlled.

I am going to not follow my script—you will be able to read

that—because some of the things have been repeated, and we don’t

have to go through those again. But first of all, I want to thank

you for the foresight of coming along with this bill and the bill for

the tax credit at this time. It is so amazing that it happens to be

surfacing now.

I remember great grandfather who was a farmer, what he did is

he took horsepower which was four legged at that time. He put a

seed in the ground; he let it grow; he nourished it. And he harVerDate 11-MAY-2000 14:34 Feb 15, 2001 Jkt 069957 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 E:\HEARINGS\65507 pfrm02 PsN: 65507
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vested it, and he sold it. You know what I am doing today? I am

putting a seed in the ground with horsepower. It might be on rubber tires or something. I nourish it, and I sell it.

And as I look across the United States and in the world, I see

every business has made a drastic change. And here I am farming

similar to what my great grandfather did. And I am thinking, why

are we doing that? Why hasn’t agriculture today taken the technology and the things and moved into a different direction? If you

think about the technology in agriculture over the last 10 years,

starting 10 years ago and where it is today, we have started that.

There is IP grains, the identity-preserved grains. There is other

forms of things that we are putting together.

And as we do that in Minnesota, we have some 30 farmer-owned

cooperatives or venture-together cooperatives up there, and we are

working very hard on that. But it is amazing as you get farmers

together the way you have to do it; you need to join in an alliance.

Now there is a 21st century alliance that many of you are familiar

with from down in Kansas. There is an alliance in Illinois. Minnesota has not had an organized alliance in the past. We had farmers get together. Now we are organizing an alliance called Farm

Connect in Minnesota. We are going in there where farmers can

put in $500 to join this alliance, and every year they add another

hundred dollars for membership.

What it does, it puts farmers together. If you get 1,000 farmers

together and now you want to do some processing or something, or

value-added thing, you send a letter out to all of them and say

would you like to invest into this or would you like to get more information. The ones that want it write back. Now, you might only

have a hundred of them or 200 of them, but you have the organization that puts it together.

From then on what your bill does—and I commend you wholeheartedly for this bill, like I say it is prime time, it is perfect. What

we can do is now we can get money to go out and find out where

we have to go. The feasibility studies, as farmers, as was mentioned before, we don’t have the expertise. So why do we have to

be stubborn farmers like we have been all our life? Why can’t we

say let us hire that expertise? Let us join together and do this, and

that we can do in these organizations that get together.

We have corn-processing plants in Minnesota. Somebody said,

well, why do you need more if you have the processing plant. The

processing plants today are basically working with starch. We have

protein; we have oil; we have fiber. We are going to take that all

out of the kernel before it goes into the starch processing. Okay.

Now, look at where we can go, where we can go with those processing plants in the next step if we have the Farm Connect working together so that we can go out and do that.

And what happened is agriculture is really in a pretty tough

time. As you know, the prices are down; and we don’t have a lot

of money. But there is other things going on here in Congress, and

I appreciate what you are doing. And like crop insurance, income

protection, it is not a profit thing out there, but it is a protection.

What that does is frees up a little money. I don’t have a reserve

in a back pocket in a savings account in case I have a bad year

to keep farming. That frees that up. Now, look at what the farmer

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can do with that money. Now it opens up. He has a little cash. He

joins—if he has 50,000 or a hundred thousand, joins with a hundred other farmers, then you are talking millions. Then you go to

the banker with three or four million and you leverage that three

to one, you are six to eight. Now we can move and with your bill

so that we can get the expertise and work in that direction—besides your tax bill, that is gravy on top of this. If you can get that

done, invite me back; I will fight for you on that one, too.

As you do this, think of where we can go out there. This is not

just farmers. I have implement dealers, I have hardware store owners, I have grain builders in my area that are really hurting because we don’t make enough money. This opens it up and makes

rural United States prosperous. Now we are not here just as farmers. I am not here just as farmers because those friends go to

church with me. They have kids in school with my kids. That is

very important, and what you are doing under this thing is you are

opening up rural development even though it looks like it is farmer-owned value added. It is rural development when you think

about what it does, and I am going to quit now because I think we

have everything wide open for us, but I am so excited that you

have come with these pills at this time. If you need help, call.

Thank you for this opportunity.

[Mr. Tumbleson’s statement may be found in appendix:]

Chairman TALENT. I appreciate that, Mr. Tumbleson, and you

said, I think, better than John and I have said it so far. And I am

grateful for your passion on behalf of this.

In fact, it leads into my first question because I was going to ask

Charlie, you were talking about the impact even beyond producers.

Charlie, I know that there are three value-added enterprises under

consideration just in southeast Missouri, and maybe you would talk

a little bit about them. And I wanted to ask you the impact they

would have on the economy in general, in Stoddard County and in

southeast Missouri if we can get these up and running. Maybe you

can follow up on what Mr. Tumbleson was saying.

Mr. KRUSE. Yes, sir. I think Brooks Hurst made a good point a

while ago when he said we know how to farm, but we don’t necessarily know all the things we need to know in order to get involved in some of these value-added enterprises. I think one of the

most exciting things we have going on in southeast Missouri is we

have a group of rice farmers that have joined together and they

have found that there is a real demand from the country of Turkey

for a medium-grained rice.

We had never grown this rice. In fact, it has never been grown

anywhere in the United States until this past year. And they sold

every bit of the rice they produced, and the government or the company in Turkey that they worked with has come back to them and

told them that they want to buy a whole lot more rice next year

than they had this year. And I think this is exactly the kind of

thing we are talking about. Farmers coming together, finding a

new market or finding a new niche, if you will, for something that

we produce, adding value to it, and whether we are talking about

livestock, whether we are talking about any of the other issues that

have been talked about here today, I think it is absolutely essential

that we do this.

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And then I think, Mr. Chairman, as you pointed out, not only are

we going to help farmers, we are going to help the agricultural

economy and we are going to help everybody from implement dealers to automobile dealers to everybody on main street in all the

communities in rural America. When agriculture is thriving, our

economy thrives in rural America.

Chairman TALENT. Thank you, Charlie. You talked about niche

marketing, and one of the reasons I wanted to do this and do this

in this committee is we have seen in this committee in other contexts how this kind of technical assistance helps people, entrepreneurs in particular get going. And for a very, very small amount

of money up front, you produce an awful lot of economic activity.

Now you mentioned niche marketing, we have something in the

St. Louis area called produce row, which is a row of fruit distributors, and I go down and talk to them. They are very in touch with

where consumers are coming from. People in terms of the domestic

market are more and more interested in certain kinds, I don’t want

to call them exotics, but food-specialty items; and it is the small

producers who are in a position to understand that market and

react quickly to it and get way out ahead.

John, you were mentioning the beef, what you are doing in terms of gourmet beef, and you get $19 a pound for that as opposed to

a dollar a pound, right? It is really out there to do and it is the

small value-added enterprises who can react quickly and create

IPB products. It is a classic example of that.

Let me see if I had any other questions. Okay. Rick, you men- tioned a $3 million program that South Dakota has for feasibility

studies. Is that a grant program?

Mr. VALLERY. It can be a grant, or it can be a loan program. It

is based on the profitability of the project. If the project goes

through, it can be called in as a loan. If the project does not go

through, then it will be considered a grant.

Chairman TALENT. We may want to talk with you more about

that because we are pushing this tax credit legislation, and the

problem is complicated when you create tax credits. I mean, can

they be sold? Who exactly can qualify for them? You know, all that

sort of stuff and I think we will figure all that out, but we have

to be open to all different kinds of ways of getting extra financing

because the tax credit is complicated. And believe me the Ways and

Means people can come up with all kinds of questions when you

take a bill over to them.

Here is another example, if any of you want to comment on this,

in terms of applied research, as we develop for example new valueadded soybean products. I saw at University of Missouri at Rolla,

the kinds of products that are being developed and a small-value

added enterprise can take that and market it much more quickly

than a larger, huge corporate outfit can.

Any of you want to comment on that? Brooks, you want to make

a comment on that?

Mr. HURST. Sure. Yes, they can move into the market a lot

quicker; and I would just like to go back and address the economic

impact on the communities a little bit, too. The town that the ethanol plant is going into is small. The plant is going to hire 22 people and that is a 15 percent increase in the population of the town,

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which is a big impact on the economy. And the surrounding communities will be greatly impacted, too; and so any of these small

value-added processing plants increase the tax base and the population—around the turn of the century the population in our county

was about twice what it is now which is 7,000 people. So we need

jobs in rural America. The farm economy is the only economy in

our county, and so any value-added processing plant that we can

bring into that town would be a great benefit.

Dr. Virgil Flanagan in the University of Missouri at Rolla has

done a tremendous amount of work with soybean products and

processes. And the possibilities are limitless. Some of them are, as

you mentioned getting brought to market quicker, and some of

them are going to be very hot commodities and will be produced

rapidly and have a huge market in a short time.

Chairman TALENT. The only other comment I want to make before I recognize Mr. Thune is dealing with the issue of costs, and

we are talking about legislation which will cost in the millions of

dollars. Certainly our VETA bill costs that much. We are fixing out

the tax credit right now.

Well this year, we are considering another safety net bill which

I will fully support on the order of six or seven billion dollars or

more. When you consider that for an up-front investment in the

order of tens of millions of dollars, we may empower producers to

diversify and get into value added so the next cycle of low-commodity prices—I mean if that cuts in half, which is probably conservative, the amount of the safety net bills we are going to have

to pass then, you see the difference in terms of savings for the tax

payers. You all can comment on this if you want to, but not doing

this now would be a classic case of being pennywise and pound

foolish and we are emphasizing that. And I would encourage you

all and the other commodity groups to emphasize that as you talk

to your congressmen about the bill.

I am happy now to recognize my friend and cosponsor of the legislation Mr. Thune.

Mr. THUNE. Thank you, Mr. Chairman. And if I might just note

a couple of observations. One being which I think some of the panelists noted and that is a—I have a tendency and this is kind of

the crossroads of agriculture and small business, and I appreciate

again the leadership that you have taken. I hope we can generate

interest on the ag committee in this because I have a tendency to

look at a lot of these issues in terms of the impact it will have on

individual producers and what a great benefit that will be. But the

bigger picture is as well is how do we preserve the rural economy.

In my State we are talking about a lot of small businesses, a lot

of small main streets and downtown areas that are dying slowly

and don’t know what to do. And this is a perfect opportunity not

only to improve the bottom line for our producers but also to provide some improvements in downtown main streets, and like all the

ancillary businesses that you mentioned that also benefit from this.

And I think that is really important when we talk about it, that

is—you know, I think that is an aspect we need to keep in mind.

And the second observation would be as you just noted, it is really important, I think, for the producer organizations who are represented here today as well as others to get out and do the grassVerDate 11-MAY-2000 14:34 Feb 15, 2001 Jkt 069957 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HEARINGS\65507 pfrm02 PsN: 65507
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roots and start, I think, raising this issue, raising the awareness

level, the education level that is out there because it is going to be

critical for us to move this forward.

The Chairman mentioned, we are dealing with Ways and Means

on tax issues. There is no easy feat. We have got our work cut out

for us. I think this is the right approach in my opinion, and I credit

everybody at the table today for efforts that have already been

made that are underway and want to encourage you to continue

that, but I think we need to be looking at ways we can partner and

provide the incentives to take this further down the track.

It seems to me that the operative state of agriculture today, if

you look at it at least in the last couple of years is we lose a little

bit on each sale, but we make up for it in volume. You can only

do that for so long before you end up in the red, and part of the

problem is—is again we have become very efficient on the production side of it. We are producing wonderfully. We have got great

efficiencies and great technology that is serving us extremely well,

but the other side of the issue is we have got to open markets.

I think part of the solution to the whole crisis we are facing in

agriculture today is markets, and it is trade. It is risk management. It is crop insurance, and other things that we are working

on here. And as you mentioned, Mr. Chairman, the House budget

which we will adopt, hopefully, sometime next week will include

emergency provisions to provide again assistance this year to address the ongoing cycle of low prices.

But this is such an important, I think, component part of the solution; and I appreciate again those who have testified today and

think that it is important that we continue to highlight not just the

impact on individual producers as important as that is but also

how important this is to rural economies. And our State is a perfect

case in point.

A couple of questions I might ask, I guess; and Rick, you had

mentioned that South Dakota Wheat is working on two valueadded projects today and has two more in the wings. Could you

elaborate a little bit briefly on what those projects entail?

Mr. VALLERY. Certainly. Project one is a $50,000 feasibility study

for a specialty flour mill. We are also—I call it specialty. Identitypreserved, it is the same type of thing. Major problems that we are

facing are infrastructure, transportation to the markets. When you

are working with value added from South Dakota—and this is a

South Dakota issue, we know that, it has usually been told to the

producers that it is cheaper to ship the commodity than to ship the

finished product.

Well, how do we know that? We are being told that. How do we know that? Part of the $50,000 was a $10,000 transportation study

which has not been completed but has found a couple of switches,

which is railway terms, where we basically can ship the finished

product cheaper than the raw product. But without the $10,000, we

would have never known that; and we still might not be successful.

But at least we have an opportunity to continue to look into that

area and maybe be successful.

The second project we have is an interesting concept. It is basically putting together the commodity groups and selling commodities via the Web site. The idea is to post on a Web site a comVerDate 11-MAY-2000 14:34 Feb 15, 2001 Jkt 069957 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 E:\HEARINGS\65507 pfrm02 PsN: 65507
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modity that a farmer-producer has tested. For the soybeans, it will

be tested for certain oil; or for wheat, it will be tested for protein

or test weight of the wheat or possibly flour millability characteristics or dough characteristics for the bakers or ash content. For sunflower, it will be oil. For corn, it will be starch or whatever. Those

will be tested—and might be a white corn let us put that in there.

Those will be tested by the producer themselves and then will be

put on a Web site for purchasers to surf.

If they find something they like, they can then go to that purchaser. It is simply a clearinghouse idea. It is in the very conceptional stages. We are not exactly sure where this is going to go, but

it is a good idea. It is something that has not been done. I shouldn’t

say has not been done. I just read just the other day there is a Web

site that is trying to do very similar to us called CyberCrop, but

this is going to be tried to be producer owned and producer driven.

Those are the two we are working on right now. We have had

some discussions about wheat straw boards. That has been ongoing. We have had some things that haven’t quite worked, and so

those are kind of waiting in the wings.

I would like to add one thing that is so important with the assistance that this bill provides. For every co-op or project—value-added

project that fails, whether it is because of funding or legal or market or whatever, you create yourself a higher hill to sell the next

project. And it is so important to keep that hill low so that the next

project has a good opportunity as well, no matter what the commodity or what the crop.

Mr. THUNE. I guess I think the thing—you do have to keep in

mind is we are not going to hit pay dirt on every one of these deals,

but to me this is sort of—the legislation that we have proposed in

many respects is like a kind of R&D fund. You know, if you don’t

do research and development you are not going to find those little

gems out there that are really going to make it big, and I think

that providing the technical assistance and expertise that is necessary to at least get this process underway and develop a system

where you can gauge and measure whether or not a project is going

to be successful is really important. And so I think this again is

the right approach.

I also believe that, you know, ultimately long term some things

that we did last week on the bill that we passed, the tax relief deductibility of health insurance premiums, relief on the death tax,

expensing provisions increased. Farmers and ranchers are small

businesses. Those are things that are going to be critical, I think,

in terms of lessening the load that you all carry; but I am delighted

that we were able to at least begin the process here in hopefully

filling in the blanks in terms of the value-added concept because

the concept is one that needs to be fleshed out. I think the timing

is right.

And one of the other issues that I would say I know is a concern

in our State has to deal with the whole issue of concentration. In

fact, we are going to be introducing legislation here soon. We are

in the process of drafting a bill which will address concentration in

the ag industry, and I would just direct this question to John—Mr.

Haverhals.

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You indicated at the end of your testimony that value-added

projects can enhance competition. And with the, you know, stepped

up level of concentration mergers and large agri-business firms

within the ag sector being a serious concern to producers, do you

think that development of value-added endeavors can aid producers

as they try to compete in what has become an increasingly

vertically-integrated industry?

Mr. HAVERHALS. Absolutely. As you have the more opportunities

to select where you are going to sell your products, you can move

away from your traditional three or four markets as we have in

beef today. So as I produce animals, whether I buy them in South

Dakota or Missouri, as I buy those animals and feed them, I can

target them to the different markets. Some of them are now targeted to go to our own store. But with that comes great rewards,

and I wholeheartedly think it would defer concentration.

One comment I would like to make, if I may, Congressman, is

as we go and build all these value-added processing for corn and

soybeans and wheat, and et cetera, never forget to create co-companion products. And at our feedyard today, we feed—60 percent

of our ration is coproducts for food processing, ethanol plants, et

cetera. One of the greatest harvesters of those co-products is the

ruminate animal which is a beef animal or a sheep. So never forget

about the beef animal and its integral part of completing the cycle

as we reprocess and recycle those products back.

Mr. THUNE. I have a feeling if I ever forget you will let me know

about it, John. So, Mr. Chairman, I can keep asking questions but

I yield back.

Chairman TALENT. Your addressing the concentration issue

which was the only other point that I wanted to make; that this

was a way of dealing with the concentration of mergers of large

agri-business firms that I think concern all of us in the agricultural

sector and allows producers to participate and concentrate upwards

instead of having it always come back down to them.

Mr. Tumbleson, I thought your comments were maybe an appropriate way to conclude about how everything has changed and agriculture needs to change as well. It isn’t good enough anymore just

to be a better and better producer. You have to be a better and better businessperson at the same time. Do you want to comment on

that?

Mr. TUMBLESON. That is very true. Thank you, Chairman. The

thing I want to stress as we look into that is many people don’t

realize that if you have to have vision, and farmers sometimes get

caught without vision because they aren’t making enough money,

but we know the carbohydrate ion is going to overtake the hydrocarbon ion in the future. The hydrocarbon ion being the petroleum

ion and the carbohydrate ion being the renewable ion that is degradable. We know it is going to happen, and with your concentration issue here, if we can get ahead of that step in farmer owned,

not totally owned, maybe assisted owned into part of this, do you

realize what—I am going to die. You are going to die. Everybody

is going to die, but my love for agriculture is too great to have agriculture die.

If we can get this value added bringing some of that profit back

to our future generations through that carbohydrate ion which we

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can through value added, we will be in a position in time, as it replaces the hydrocarbon ion, to have a solid footing. And I am really

excited that we can do it, and these bills you have are going to

push us toward that. And we in Minnesota are working very hard

at that, and there are other States, you talk about Missourians and

South Dakota. I have a State right south of me in Iowa going

strong at it, and we will move across the country with this concept

with your help. And I want to thank you very much.

Mr. THUNE. Would you move across the country and move to

South Dakota? We would like that, too.

Chairman TALENT. I want to thank all the witnesses. Let me

close by saying that there is something here which I have heard

described as the 7-year rule which means that once a good idea is

introduced and floated, it takes 7 years for it to sink into the consciousness of Congress enough to pass. And John and I are hoping

to shorten that to 1 year and get it done this year; and in order

to do that, we really need the help of producer groups.

We have had very good conversations with some of John’s colleagues on the agriculture Committee, and we can catalyze this

whole process if when there are hearings there on the general situation, make sure that your witnesses testify in favor of these kinds

of value-added ag innovation centers and the tax credit and be sure

and talk to your Members of Congress about it. We are really

counting on you. We will do our share up here, but we need your

help.

With that without objection I will leave the records open for 5

days for any further questions that Members may wish to submit;

and with that, adjourn the hearing. Thank you all.

[Whereupon, at 3:25 p.m., the committee was adjourned.]

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