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REGIONAL FARM BILL FIELD HEARING: ANKENY,

IOWA

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

Monday, July 24, 2006

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

SAXBY CHAMBLISS, Georgia, Chairman 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

JAMES M. TALENT, Missouri 

CRAIG THOMAS, Wyoming 

RICK SANTORUM, Pennsylvania 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota 

KEN SALAZAR, Colorado

MARTHA SCOTT POINDEXTER, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

VERNIE HUBERT, Majority Deputy Chief Counsel 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Regional Farm Bill Field Hearing: Ankeny, Iowa ................................................. 01

Monday, July 24, 2006

STATEMENTS PRESENTED BY SENATORS 

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 01

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 03

Boswell, Hon. Leornard, Congressman, Third Congressional District of Iowa .. 06

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 08

Judge, Hon. Patty, Secretary of Agriculture, State of Iowa ................................. 05

WITNESSES 

Panel I 

Brockshus, Bruce, Representing Assiciated Milk Producers, Inc ........................ 13

Heck, Ron, Representing the Iowa Sotbean Association ...................................... 10

Ousley, Charlotte, Representing the Canned and Frozen Food Growers Coalition ........................................................................................................................ 12

Sexton, Keith, Representing the Iowa Corn Growers Association ....................... 09

Panel II 

Hill, Craig, Representing the Iowa Farm Bureau Federation ............................. 23

Johnson, Paul ........................................................................................................... 26

Peterson, Chris, Representing the Iowa Farmers Unoin and the National 

Farmers Union ..................................................................................................... 24

Rosmann, Ron, Representing the Sustainable Ag Coalition ................................ 25

Panel III 

Dean, Jim, Representing United Egg Producers ................................................... 39

Kerns, Steve, Representing the Iowa Pork Producers Association ...................... 40

Nelson, Eric, Representing R-CALF, USA ............................................................. 37

Scheitler, Bill, Representing the Iowa Cattlemen’s Association .......................... 36

APPENDIX 

PREPARED STATEMENTS: 

Grassley, Hon. Chuck ....................................................................................... 50

Brockshus, Bruce .............................................................................................. 74

Dean, Jim .......................................................................................................... 121

Heck, Ron .......................................................................................................... 60

Hill, Craig ......................................................................................................... 79

Johnson, Paul .................................................................................................... 98

Kerns, Steve ...................................................................................................... 127

Page

IV

PREPARED STATEMENTS—Continued

Nelson, Eric ....................................................................................................... 111

Ousley, Charlotte .............................................................................................. 63

Peterson, Chris ................................................................................................. 81

Rosmann, Ron ................................................................................................... 86

Scheitler, Bill .................................................................................................... 101

Sexton, Keith .................................................................................................... 56

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Statement of Cathlic Charities ........................................................................ 134

Statement of Corn Refiners Association ......................................................... 136

Statement of George Naylor, President, National Family Farm Coalition . 138

Statement of Hon. Thomas Valsack ................................................................ 140

Statement of Hunger and Environmental Nutrition ..................................... 144

Statement of Iowa Dietetic Association .......................................................... 150

Statement of Society of American Foresters .................................................. 154

Statement of Michael R. Rosmann, Ph.D ....................................................... 156

Statement of Pennington Forestry Service ..................................................... 159

Leter from Shawn Larison in responce to the 2007 Farm Bill ..................... 161

Letter from William J. Smith in responce to the 2007 Farm Bill ................ 162

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REGIONAL FARM BILL FIELD HEARING: 

ANKENY, IOWA 

MONDAY, JULY 24, 2006

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Ankeny, IA 

The Committee met, pursuant to notice, at 9:10 a.m. on the campus of Des Moines Area Community College in Ankeny, 

Iowa, Hon. Saxby Chambliss, chairman of the committee, presiding. 

Present: Senators Chambliss, Harkin, and Grassley. 

OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A U.S.

SENATOR FROM GEORGIA, CHAIRMAN, COMMITTEE ON

AGRICULTURE, NUTRITION, AND FORESTRY 

The CHAIRMAN. Good morning. First I would like to thank our 

panel members who in a lot of instances have traveled great distances to be here. We appreciate very much you taking time to 

come share some thoughts with us, as we look forward to moving 

ahead with writing the next Farm Bill. I, first of all, want to say 

to Greg Martin, the Vice President of Des Moines Area Community 

College, how much we appreciate your hospitality here. I understand that your President, Mr. Denson, is away because he’s having a grandchild and that’s the best reason for him not to be here. 

And I say that as a grandparent myself. So we do thank you on 

behalf of the Senate Ag Committee for your great hospitality. What 

a great facility to have this in—beautiful campus as we came in, 

too. 

And I’m pleased to be back in Iowa. I’ve been here on a number 

of occasions, primarily to go pheasant hunting with my good friend, 

Tom Latham from up in Alexander. And I just want you to know 

as a member of the Senate, I’m traveling to Iowa to request of Senator Harkin and Senator Grassley. I am not running for President. 

[Laughter.] 

The CHAIRMAN. I may be the only member of the Senate not running. But I am here, because we’re going to talk about agriculture, 

this morning. I am particularly pleased to be here with my two 

good friends, Tom Harkin and Chuck Grassley. 

You know, the Ag Committee has always been a very bipartisan 

committee. And Tom and I have had a great working relationship. 

We have different interests, obviously from an Ag perspective, but 

he has been very supportive of me, and my interests, and likewise, 

I have of him. But the most important thing is that we both believe 

in a strong agricultural America. It’s the number one industry in 

2

our country. It’s the heart and soul of the economy of our country, 

and as we move into the writing of the next Farm Bill, you’re going 

to hear us talk a lot about agriculture now becoming a National Security issue. 

So to Tom and to Chuck, both of whom have been my great 

friends, I say thank you for letting me come to Iowa. You know, 

Chuck and I have gotten to be very good friends over the years and 

I know him just like the folks in Iowa know him. He’s prone not 

to spend a lot of money wherever he goes. He reads used newspapers. He’s so cheap. 

[Laughter.] 

The CHAIRMAN. And when I was coming in from the airport last 

night, I asked Keith, I said now, where are we staying? Please tell 

me that Harkin picked out the hotel and not Grassley. 

[Laughter.] 

The CHAIRMAN. Otherwise, I would have been in a camper on the 

lake somewhere. Chuck is a great American and thank goodness he 

is as fiscally responsible as he is. Being Chairman of the Finance 

Committee, that’s where we need him. 

We are holding today our fourth field hearing. We have previously held hearings in Georgia, Missouri, and Pennsylvania. We 

leave here to hold four more hearings in Oregon, Nebraska, Montana, and Texas. These hearings are intended to provide farmers, 

ranchers, and family foresters an opportunity to directly share 

their thoughts with the committee on the direction of the next 

Farm Bill. By the time we have finished the field hearings the committee will have a thorough record to guide us, as we write the legislation that ultimately sets our farm policy for the next several 

years. 

Iowa is part of the Bread Basket of America. Your state is well 

known for it’s more than 20 million corn and soybean acres in production, 16 million hogs, and a multitude of ethanol plants. Yet, 

Iowa is not blessed with the ability to produce cotton and peanuts, 

like we are in Georgia and I thank the Lord for that. 

However, even though you may not know it, cotton actually plays 

a very important role right here in Iowa. At the John Deere Plant 

not too far from here, the plant’s 1,400 employees recently celebrated the 1 millionth engine that rolled off the assembly line. This 

engine was put into a brand new cotton picker. Forty-five percent 

of this plant’s production is cotton pickers and most of that heads 

to the Southeast. 

Another bit of good news from Iowa, just last week the Senate 

passed the Water Resources Development Act that will authorize 

the construction of seven new locks on the Upper Mississippi River. 

This will keep American agriculture products competitive in the 

world market and provide jobs for thousands throughout the region. 

I know that the corn and soybean grower associations and the 

Iowa Farm Bureau have worked to see this legislation passed for 

6 years. It’s taken a long time, but we ended up with a good bipartisan bill that addresses water infrastructure and environmental 

restoration needs. 

I’d like to thank the witnesses here today for taking time to provide testimony and answer our questions. And again, to my colVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
3

leagues and my friends from Iowa, Senator Grassley and Senator 

Harkin, thank you for hosting us in your wonderful state and for 

your work of the Senate Agriculture Committee on behalf of all agriculture. 

Again, I want to thank President Rob Denson for the use of this 

facility. And last, I want to recognize Ellen Huntoon with Senator 

Harkin’s Iowa stay. Without Ellen, this hearing would not have 

been possible. So to Ellen, we thank you very much for all of your 

hard work in putting this together. Now, let me turn to Senators 

Harkin and Grassley for any opening statements they would like 

to make. Senator Harkin? 

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

IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

Senator HARKIN. Well, thank you very much, Mr. Chairman for 

coming to Iowa to hold this hearing here. In the interest of full disclosure I do want you to know that I reciprocated. You’ve come 

here to Iowa to hunt pheasants. I’ve gone to Georgia to hunt quail. 

So your quail’s pretty good eating, but so is our pheasants and 

come back again this fall. We’ll have plenty of corn fed pheasants. 

Just don’t go to South Dakota to hunt pheasants. They got sand 

fed pheasants out there. We have corn fed pheasants here. 

But, I’m also pleased that we’re joined by Senator Grassley. It’s 

nice having two Iowans on the Agriculture Committee, like Congressman Boswell from the House, and Iowa Secretary of Agriculture Patty Judge, and many others in the audience, and on the 

panels. 

Farmers in all of rural America face some real challenges ahead. 

Primarily, because of stronger competition and increasingly global 

economy, or the world is flat as Tom Friedman said. And I think 

the future holds tremendous opportunities for agriculture in rural 

communities. That’s why I’m optimistic about the future of rural 

America. We continue to lead the world in productivity, Ag productivity across the board. We’re now just at the beginning of a whole 

new world of biotechnology, bio fuels, bio-based products, farm 

based renewable energy. 

I think our biggest challenge for the next Farm Bill is a bold and 

creative vision for U.S. agriculture. One that promotes diversity, 

enhances profitability, protects the environment, encourages rural 

economic development, and a quality of life in rural America. The 

Farm Bill is called upon, both to deal with the immediate challenges that we face and look farther ahead to build and respond to 

this vision. It’s critical to our children and our grandchildren. 

The Farm Bill needs to promote a better and broader based farm 

income, rural economic growth and jobs, conservation of natural resources, Ag productivity, trade. And as I said, it needs to help preserve and in fact, improve the unique quality of our rural way of 

life. 

Overall, I think the 2002 Farm Bill has worked well for farmers 

in rural America. I’m proud of what we accomplished in that legislation. Yet, we are continually called upon to deal with changing 

circumstances, new information, new perspectives. Our farm in 

rural policy has evolved over time and it will undoubtedly continue 

4

to do so. So farm commodity programs will continue to change. We 

may or may not have a Global Trade Agreement within the next 

few months. I hope we do. However, it’s clear our international 

commitments and responsibilities make change inevitable. 

Also here at home, the commodity programs are being more 

closely scrutinized and reexamined. So, there will be changes. Now, 

that doesn’t mean we can’t provide Federal Assistance. We can still 

have a good system of income protection with counter- cyclical functions. Support to conservation, farmer owned value ad adventures, 

rural development, farm based renewable energy in agriculture research are all allowed under our Trade Agreements, present ones, 

or anything on the horizon. 

So we made some progress in those areas in the 2002 Farm Bill. 

Unfortunately we’ve lost much of the funding we dedicated to 

them, because of the Federal Budget situation. The Conservation 

Security Program, for example, has been cut way back and we simply have to regain some of the ground that we’ve lost since 2002. 

As the Chairman has noted, we will also examine in the future 

the nutrition program’s part of the Farm Bill in a future hearing. 

And we’re going to hold some more hearings on rural economic development. We should address in the next Farm Bill the dramatically changing economic structure of agriculture and agricultural 

markets. We have to make sure that USDA has adequate authority 

and that it’s enforcing the law to keep those Ag markets fair and 

honest. 

So again, I want to thank all of you who are here, especially 

those of you who have come a great distance and for your excellent 

testimony. I spent a lot of time yesterday on airplanes and sitting 

in airports, because of weather. So I had the chance to read all of 

your testimonies. I want you—I made enough notes on your testimonies to keep my staff busy for a long time getting the information. 

Let me again thank Greg Martin, the Vice President of DMACC 

and for hosting us here. Jack Payne, Vice Pro-host of extension representing ISU. Where’s Mr. Payne? I know he was supposed to be 

here. Well, maybe not here yet. I also want to introduce the first 

person I’d ever worked for in Congress, and the author in 1968 of 

the Wholesome Meat Act, which really did so much to make sure 

that knowing we had wholesome meat, that the consumers of 

America knew that they could rely upon clean wholesome meat 

when they went to the store to buy it. I think it has done wonders 

for our whole economy, and he’s been a farmer all his life, and he’s 

still with us, and that’s our former Congressman Neil Smith right 

up here. Congressman Smith. 

[Applause.] 

Congressman HARKIN. Thank you. I want to thank the Iowa corn 

growers, the Iowa Soybean Association, Associated Milk Producers 

for the food and beverages outside. I want to mention that after 

this hearing, the three of us, or four of us, well, anyone that wants 

to go. We’re going to go to the Kum and Go Station right up the 

street here for a little bit of filling up the Iowa Corn Growers vehicle with E–85 and talk a little bit about the future of E–85 before 

we have to get to the airport to take off. That will be right after 

the hearing. We’ll be down there. You’re all welcome to that. 

5

Let me ask one other question. We have a deaf interpreter here 

and I’m going to ask her to ask, does anyone need interpreting 

services? Is there anyone here who needs to have an interpreter? 

If not, I will thank the interpreter for being here and excuse her 

at this point in time then. 

And last let me introduce for brief comments and a welcome, our 

Iowa Secretary of Agriculture, Patty Judge. 

[Applause.] 

STATEMENT OF HON. PATTY JUDGE, SECRETARY OF 

AGRICULTURE, STATE OF IOWA 

Ms. JUDGE. Thank you, Senator. And this is very extemporaneous; because when I came this morning I was not aware that 

I was going to speak to you. But it is very nice to be able to be 

here this morning to see so much interest in the formation of the 

next Farm Bill, to see so many people in the audience that are 

known in Iowa as leaders, people that have opinions and ideas and 

are here to share those with you. 

We believe, of course, that agriculture not only is today’s leading 

industry in Iowa, but it will be the leading industry in Iowa in the 

future. We have a big stake in making certain that the next Farm 

Bill is done correctly. We understand the challenges. We understand the pressures and those are issues that have to be worked 

through. 

Agriculture is not one size fits all and we are very much aware 

that what works in Iowa may not work in the Senator’s area of the 

country. So, you gentlemen have a lot of work ahead of you. We did 

a pretty good job last time and I hope that we’ll do that again. 

I would like to say that if I were here and able to give testimony 

today that I would say let’s be sure that we don’t forget the needs 

of the environment. We really must take in consideration working 

to make certain that we are protecting the water, we’re protecting 

the soil, and that farmers have some help doing that. That costs 

money. That digs into the bottom line and we have to make certain 

that those resources are there for them to do the job that they want 

to do. Because I want to say very clearly, farmers are good stewards and they want to be good stewards in the future. 

And finally, I’m glad you’re going to fill those vehicles up, Senator, before you take off. We believe very firmly here in Iowa that 

we have a great opportunity in the arena of renewable energy: ethanol, soy diesel, wind energy. Those are things that are just now 

taking their place in our state economy and we need to be certain 

that we continue to nurture those farmer-based industries. 

I wish I could stay all day. I can’t. I’ve also got to make a trip 

to Washington today. I sit on a Homeland Security Commission 

that is meeting and of course, that is vitally important to us, and 

I hope that also is part of your Farm Bill discussions, because the 

protection of agriculture and agricultural interest needs to be taken 

into account. 

So, you’ve got a big task. I think you’re up to it. And good luck 

and I’m sure you’ll have a good session today. 

The CHAIRMAN. Thank you very much. 

Ms. JUDGE. Thank you. 

The CHAIRMAN. Have a safe travel. 

6

Ms. JUDGE. Thank you. 

The CHAIRMAN. Thank you very much. 

[Applause.] 

The CHAIRMAN. And I’d like to recognize and ask to make a few 

comments, the Congressman who represents this district in which 

we now sit, Congressman Leonard Boswell. Leonard? 

[Applause.] 

STATEMENT OF HON. LEONARD BOSWELL, CONGRESSMAN, 

THIRD CONGRESSIONAL DISTRICT OF IOWA 

Congressman BOSWELL. Well, thank you Senator Saxby, I appreciate having you here and Senator Grassley. We work together in 

the House. I’ve noticed we have—where did these peanuts come 

from? 

The CHAIRMAN. Display those prominently there, Leonard. 

Congressman BOSWELL. George peanuts. 

The CHAIRMAN. We need some of those Iowa. 

Congressman BOSWELL. We have a supply of those in the cloakroom in Iowa, in the House of Representatives. So thank you for 

keeping those—that supply there. 

I look around the audience for the first time I guess, since I’ve 

come in, the great turn out. I appreciate that. Last Saturday, John 

Hall who I think is in the audience, works for me and our State 

Director, we went up to Marshall, Minnesota for a hearing. I’ll be 

very interested to see how we pick up on matters here, as we did 

there. It’s a very, very important time. So, I appreciate being here 

and having a chance to say a couple remarks. 

I know from my own hands-on experience as a farmer and et 

cetera as many of you that I recognize in the audience feel the 

same thing, we have to make a profit. We have to cash-flow. Those 

of us who went through the farm crisis not too many years ago, 

know how—what it means to go to the bank, and sit down, and 

work out your cash-flow statement. We understand that. And so, 

we have to keep that mind. And the Chairman mentioned Ellen for 

doing her good job of setting this meeting up. She and I stood—

she was representing Senator Harkin—he was there a number of 

times too. But we stood in some communities where the bank 

closed during the Agriculture Crisis and it’s like having a death in 

the family. And some of you understand that. You were there, too. 

And I’m not here to discuss that. I just want to make the point that 

agriculture has to cash-flow. We have to have a profit. 

Now, in the world economy, it’s very important. We’re a great 

producer. We all know that, so I won’t speak to that, but it’s important that we be productive and do it in a reasonable way. It’s also 

very important to our security. I just think about that. I could talk 

on that for quite a little while. It’s extremely important to our security in our state or country that we have available, and reliable, 

and safe food. And so, that’s all-important. 

We’re into an energy time of energy crisis. I was just telling Senator Harkin I filled up my little puddle jumper airplane yesterday, 

and it doesn’t hold a lot of gasoline, but it cost me $283 dollars and 

I thought wow. And the farm truck, I filled it up over the weekend 

and I think it cost me $75 dollars to fill it up. So there’s—this is—

it’s a concern out there for the farmers going to the field, or under 

7

combines to put the crop in, to take care of it, and take it out. It’s 

a very big part of it. So—but, we’re in a positive time with that and 

so I hope there will be an energy title that will address that. Because we, in this state, have lead out in alternatives and we know 

how to grow it out of the ground and then we know how, also to 

process it, and make it work, and provide the energy we need. Not 

only in the farm machinery and vehicles around the farm, but also 

for everybody else, include heating homes. So it’s a big thing. 

So, I’ll close with this. I know that it’s my opinion the current 

Farm Bill is working. I would be interested how the discussion 

might go, that maybe we need to keep it going until these trade 

talks get settled, so we don’t get caught in the crossfire on that situation. So it’ll be interesting what we say here today. 

Our Chairman Goodlatte from the House raised a question in 

Marshall on Saturday. With the situation with budget and so on, 

what if we had to make a choice, farmers, between Direct Payment 

LDP, or counter-cyclical? And it was a quite interesting discussion. 

They seemed to hold up direct payment there, in that meeting, as 

most desirable. But I’ll also give credit to the corn growers and soybean growers, at least and a couple others. No, we want to keep 

all three. And I understand that too. But that might be something 

worth thinking about, because we have a terrible deficit situation. 

So with that, I, again, thank you for being here. I see many of 

you in the audience that have a lot of appreciation for farming is 

important. I guess I’d say this in closing, Mr. Chairman We could 

stand—we could use a few more farmers in the Congress, as we try 

to keep this bit that’s going called agriculture. I appreciate your 

being here and I’m going to take one package of peanuts and take 

my place. 

Senator HARKIN. Again, I just want to thank you, Mr. Chairman 

for being here today. And really for being an outstanding Chairman 

and I say that in all candor and all truthfulness. I couldn’t ask for 

a better Chairman of the Agriculture Committee. Well, unless I 

was the Chair. 

[Laughter.] 

Senator HARKIN. I’m just kidding. Couldn’t ask for a better 

Chairman. You’ve been extremely fair and open in all of our dealings. It’s just been a great relationship. Your staff has been wonderful to work with and our staff. And I just think it’s a mark of 

Saxby’s real interest in agriculture that he’s taking these hearings 

all over America. Believe me, I think Chuck and I both know the 

demands on our time as Senators. It’s incredible and to go to Pennsylvania, to Iowa, to Missouri, Oregon, all the places he’s taken the 

Ag Committee, I think it really speaks very highly to the fact that 

he is focused on this Farm Bill. And Mr. Chairman, I just want to 

thank you for that. Having served as Chairman during the last 

Farm Bill, myself, all I can ask is may God grant you patience. It’s 

going to—it takes a lot of patience to get through this, but I know 

you’re going to do it and I just offer you whatever help and support 

that we can give you from this side. Thank you very much. 

The CHAIRMAN. Well, thank you, Tom. You’ve been a great shotgun rider and we look forward to moving ahead with this over the 

next several weeks and months. 

8

Now, my good friend Chuck Grassley, Chuck, again, I’m pleased 

to be in Iowa. 

STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR 

FROM IOWA 

Senator GRASSLEY. Yes, and we’re glad to have you here and 

thank you for coming. As Tom has said, and thanks for all the witnesses, these and the ones on the second and third panel, I’m not 

going to read my long statement, because it is long. But I want to 

highlight some things. Number 1, is to highlight the fact that as 

we consider the next Farm Bill, as has been the case with most 

Farm Bills, we have to think about having an environment so that 

the next generation of young people will be able to farm, as well. 

And with a son and a grandson in our family farming operations, 

I appreciate how difficult that is. But I also appreciate how important the farm program is to making that happen. 

We traditionally look at the Farm Bill as farm safety net, but 

connected with it are issues about—that I’m interested in and 

other people as well, opportunities that a Farm Bill brings up to 

make sure that we have more competition in agriculture and to 

limit concentration and consolidation within agriculture. And one 

of these issues is, not only the issue of whether or not 10 percent 

of the largest farmers ought to get 72 percent of the benefits out 

of the farm program, which I think is ridiculous, but also to make 

sure that we keep a political environment in Washington where the 

public at large, meaning those in New York City, as well as Iowa 

are going to support a Farm Program or we’re not going to have 

any Farm Program. And farm programs are really under scrutiny 

now in Washington, D.C. not just because of the 10 percent of the 

farmers getting 72 percent of the benefits. But just recently in 

three different programs that are in the Farm Bill, I would hold 

up the Washington Post, July the 18th: No Drought Required for 

Federal Drought Aid. An article about abuse of the Farm Program, 

from July the 19th: Aid to Ranchers was diverted for big profits, 

tons of powdered milk ended up on the market. And then, Farm—

on July the 2nd: Farm Program Pay one and three tenths Billion 

Dollars to People Who Don’t Farm. So, we’re under scrutiny and 

the point is to make sure that we’re able to keep the Farm Program for the benefit of farmers and the good of America. 

Another one from July the 3rd: Growers Reap Benefits Even in 

Good Years. So it’s very much an issue that we have to be cognizant of, as we write the next Farm Bill to make sure that the 

Farm Bill is for farmers and for farmers that need the safety net, 

and not for just a few. So the next Farm Bill, will obviously entail 

a look at all of these abuses and a look to make sure that the Farm 

Program is directed toward those who need the help. 

And also of interest to me, on a second point, and also an interest 

to the Agriculture Committee, but secondary to my committee, because the Finance Committee has jurisdiction over all international 

trade and that is something that Congressman Boswell and others 

have alluded to, to make sure that we have a trading environment 

where we have market access. And one of the major issues in Geneva right now is to make sure that we do not give up anything on 

our Farm Program without having market access. And that market 

9

access is basically the figure of the United States having an average of 12 percent tariffs. The world average on agriculture tariffs 

of 62 percent, hence, foreclosing of markets, opportunities for our 

farmers, they having market opportunities in the United States, 

and getting that 62 percent down closer to our 12 percent, and 

making sure that we have a level playing field for farmers. 

Of Chairman of the Senate Finance Committee, I have told our 

negotiators don’t bring an agreement to my committee that is not 

going to have market access, because we’re not going to even bother to look at it. We’re not going to give up any of our safety net, 

until we get a level playing field for American farmers. 

And then last, I would just emphasize a couple things that have 

already been said and there’s no sense of my saying it twice, or 

three times. But the point of value added agriculture, rural economic development, so that we broaden opportunities for farmers 

here. Not only for the benefit of American agriculture, but for the 

benefit of the entire economy that’s very closely tied to agriculture 

as the foundation of our State’s economy. Thank you. 

[The prepared statement of Senator Grassley can be found in the 

appendix on page 50.] 

[Applause.] 

The CHAIRMAN. Thank you, Senator Grassley. We will now move 

to our first panel: Mr. Keith Sexton from Rockwell City, Iowa, representing the Iowa Corn Growers Association; Mr. Ron Heck from 

Perry, Iowa, representing the Iowa Soybean Association; Ms. Charlotte Ousley of Alexandria, Indiana, representing the Canned and 

Frozen Food Growers Coalition, accompanied by Mr. Steve Smith; 

and Mr. Bruce Brockshus of Ocheyedan. I hope I got that right. 

Representing the Associated Milk Producers, Inc. 

Ladies and gentlemen, we are pleased to have you all here. We 

are happy to submit your entire statement for the record. I would 

ask that you keep any opening comments to 3 minutes. Thank you 

and we’ll start with you Keith. 

STATEMENT OF MR. KEITH SEXTON, REPRESENTING THE 

IOWA CORN GROWERS ASSOCIATION, PRESIDENT AND 

FARMER, ROCKWELL CITY, IOWA 

Mr. SEXTON. Thank you, Senators, for this opportunity to present 

input on the 2007 Farm Bill from the Iowa Corn Growers Association and our 6,000 farmer members. 

ICGA started nearly 2 years ago, looking at the 1902 Farm Bill 

for modifications to enhance long term profitability for producers. 

This morning, I will mention four of the issues we wish to see debated: First, the commodity title. We believe that a safety net 

based on revenue rather than price has significant advantages especially for new entrants into farming. We are aware that talk of 

a revenue program immediately brings visions of unilateral cuts 

and support that would remove bargaining chips from our negotiators at WTO talks. 

Idaho Corn Growers support a revenue program that can provide 

the same, or a higher, level of support as we currently have. Yet, 

the slight modifications could provide a WTO compliant, but still 

very effective safety net. This type of program can work with nearly any crop and should eliminate the need for disaster payments. 

10

At our corn grower—National Corn Grower Policy session, a couple weeks ago, the vote to focus on such a revenue based program 

passed with an overwhelming 75 percent majority. This illustration 

graphically depicts when producers receive payments under both, 

a revenue base and a price-based system. 

The advantage of a revenue based system over the current LPD 

and counter-cyclical program is simple. Benefits are received when 

they are most needed—years of reduced crop income. Farmers’ support for retaining the current programs likely come from those producers with substantial equity who feel that sticking with the current program is just plain easier. Given our organizations long 

terms vision and desire to see beginning farmer coming into our 

production industry, we come down firmly on the side of a revenue 

program. 

Item 2, we think the direct, decoupled payment program should 

be continued pretty much as is, with the delivery of these payments modified, so at least part of them could be targeted towards 

activities that will help improve the farm, it’s management or rural 

communities. 

Item 3, the Farm Bill must contain a strong conservation title. 

The current title includes a number of programs and I will mention 

two of them. The CSP Program has a worthy intent of rewarding 

the best and incenting the rest. However, funding cuts have drastically changed the program. 

We realize there is insufficient funding to provide acceptable payments to all target producers, but the program is now implemented 

in such a manner that it is not as useful as envisioned. If CSP 

could be revised to adequately fund more farmers on a more consistent less restrictive basis, this program should be continued in 

the next Farm Bill. 

Also, we believe the EQIP program provides an essential service 

of assisting producers, especially livestock producers, with installing the structures necessary to help meet clean water guidelines 

and it should be continued. 

Item 4, we think there’s an overwhelming need to discuss capital 

gains issues during the Farm Bill debate even if there is no tax 

title. There are two reasons: First, 1031 exchanges artificially increase the value of farmland and consequently farm costs to farmers. Second, there should be a viable alternative for farmers to 

transfer control of assets to the next generation of producers during 

their lifetime rather than through their estate by which time that 

next generation is nearing retirement age. 

Other topics are addressed in my written text. And thank you for 

this opportunity to comment on behalf of the Iowa Corn Growers 

Association. 

[The prepared statement of Mr. Sexton can be found in the appendix on page 56.] 

The CHAIRMAN. Thank you. Mr. Heck? 

[Applause.] 

STATEMENT OF MR. RON HECK, IOWA SOYBEAN ASSOCIATION 

Mr. HECK. Good morning, Mr. Chairman, and Members of the 

Committee. I am Ron Heck, a soybean and corn farmer from Perry, 

Iowa and at current Iowa Soybean Association Director. I am a 

11

Past President of the American Soybean Association and served on 

their Board of Directors, until last week. 

I must say I don’t deserve your praise for traveling a great distance. I ate breakfast at home, got in my car, and arrived early. 

I appreciate you traveling to Iowa to be here for the hearing today 

and it’s always a pleasure to see Iowa’s two Senators on the Ag 

Committee. Thank you. 

Mr. Chairman, soybean producers in the Midwest, as well as 

other regions of the country, support the safety net we now have 

under the 2002 Farm Bill and would support extending current 

programs. 

Unfortunately, the current budget baseline may not accommodate expected outlays based on current support levels. Budget factors alone are likely to force Congress to look at changing the current farm program in the next year’s Farm Bill. 

A second reason to look farm programs is the potential for additional WTO challenges of the current program. We are watching 

the current WTO negotiations which I understand, did not go well 

in yesterday’s talks. Last October, the Administration offered to 

make a 60 percent reduction in outlays permitted under the most 

production and trade-distorting programs, including the Marketing 

Loan and dairy and sugar price supports. ASA and other farm organizations are insisting that importing countries make equally aggressive reductions in their tariffs, and that world class exporting 

developing companies be subject to similar production subsidy disciplines. 

To explore alternatives, ASA organized a Farm Bill Task Force 

last year, which has been working with other farm organizations 

to look at so-called Green Box programs that would be considered 

non-trade distorting under the WTO. 

The draft results of this analysis indicate a variety of options 

that would guarantee 70 percent of historical income and still be 

WTO-compliant. Neither ASA nor any other organization participating in this analysis has endorsed the revenue guarantee concept. We are working to have recommendations to put forward to 

the Committee sometime this fall. 

Mr. Chairman, ASA is also very supportive of proposals to 

strengthen the conservation, energy, research, and trade titles in 

the 2002 Farm Bill. ASA urges Congress to authorize and fund a 

bio diesel energy program in order to compete with imports of already subsidized bio diesel that will undermine the U.S. industry 

since the imports are eligible for our tax incentives. 

We are concerned by recent actions that have depleted funding 

for conservation and research programs in order to pay for disaster 

assistance, or to cover budget reduction commitments. ASA supports increased funding for conservation payments to producers on 

working lands such as through the Conservation Security Program. 

We also believe that a significant number of acres currently locked 

up in the Conservation Reserve Program could now be farmed in 

an environmentally sustainable manner. Finally, we strongly support maintaining funding for trade promotion activities under the 

Foreign Market Development and Market Access Programs, and for 

international food aid. 

12

Thank you again Mr. Chairman, for the opportunity to appear 

today. 

[The prepared statement of Mr. Heck can be found in the appendix on page 60.] 

The CHAIRMAN. Ron, thank you very much. Ms. Ousley? 

STATEMENT OF MS. CHARLOTTE OUSELY, CANNED AND FROZEN FOOD GROWERS COALITION; ACCOMPANIED BY: MR. 

STEVE SMITH 

Ms. OUSLEY. Mr. Chairman, Member of the Committee, my name 

is Charlotte Ousley. Together with my son, Jay, we farm 270 acres 

of processing tomatoes in Elwood, Indiana. We rent nearly all the 

land we farm. 

My husband, Herb, tragically was killed in a farming accident in 

September 2003. Since his death, Jay and I have made every effort 

to keep our traditional family farming operation viable, in spite of 

incredible obstacles we encountered as a result of the massive extension of the Fruit and Vegetable Planting prohibition contained 

in the 2002 Farm Bill when soybeans became a program crop. 

Operating as sole proprietor for over 40 years, my husband maintained all ASCS reporting under his name. Shortly after his death, 

I contacted FSA for clarification about the status of the producer 

history that my husband worked his whole life to accumulate. I 

had no reason to believe anything other than Herb’s history, as a 

tomato producer would transfer to my son and me. This producer 

history is essential under the 2002 Farm Bill for us to rent the 

land needed for annual production, since processing tomatoes and 

good management practices require rotations, unlike traditional 

cash grain crops grown on farms in our area. Our principal landlord possesses farm history so we could continue to produce on that 

land, but that farm alone is not enough and must be supplemented 

with other rental land to support the size of operation required to 

be financially viable. 

Because Herb possessed producer history, he was always allowed 

to rent the land he needed rental land from friends and neighbors 

to supplement our primary landlord’s acreage. 

Needless to say, I was shocked when FSA informed us that my 

husband’s producer history had been lost with his untimely death 

and cannot be transferred to his widow or his son. As a result, we 

have found it increasingly difficult or impossible to find enough 

land on our annual basis that will accommodate our contractor’s requirement of a minimum 3–year land rotation for production for 

processing tomatoes. 

The negative effects of the widely expanded reach of fruit and 

vegetable prohibitions are for the most part, limited to producers 

in the Midwest. This is because of double-cropping exclusions afforded to southern states and the fact that program acres are concentrated in the Midwest, and not so much in the West. 

Reliance upon producer history as a basis for continued fruit and 

vegetable production is simply inadequate. Not only for producers’ 

history not transferable between husbands and wives, it is not 

transferable to the next generation of farmers desiring to enter 

fruit and vegetable farming and maintain the traditions established by generations of family farms. Fruit and vegetable growers 

13

have safely fed this nation with an abundant supply of nutritious 

and affordable canned goods Family farmers presently are not free 

to run their businesses in the most efficient fashion because of the 

inability to transfer producer history. The next generation of farmers needs to be protected and preserved. 

The solution to these problems is simple: allow fruits and vegetables to be grown on program acres by taking an acre-for- acre reduction in program payments. I ask for NO subsidies on our production. I do not want to receive government payments; I simply 

want the opportunity to grow tomatoes. Even if my neighbor decides, they simply are restricted from renting land to me for fruit 

and vegetable production under current law and still maintain 

their program eligibilities. My husband could, but my son and I are 

prevented from doing that. 

Thank you for allowing me this opportunity to tell you my story. 

If you have technical questions beyond how this has affected my 

son and me, Steve Smith from Red Gold here with me, and can 

help shed a wider insight of the industry. Thank you for allowing 

me this opportunity to tell you. I appreciate Senator Harkin when 

this issue for submerged. And now, I respectfully request the Committee’s inclusion of the language in the next Farm Bill, which will 

correct these unfortunate inequities. Thank you kindly. 

[The prepared statement of Ms. Ousley can be found in the appendix on page 63.] 

The CHAIRMAN. Thank you very much. Mr. Brockshus? 

STATEMENT OF MR. BRUCE BROCKSHUS, MILK PRODUCERS, 

INC. 

Mr. BROCKSHUS. I appreciate the Committee’s invitation for me 

to come here today and present my views on dairy in regards to 

the 2007 Farm Bill. My name is Bruce Brockshus and I’m a dairy 

producer from Ocheyedan, Iowa, and a member of the Associated 

Milk Producers Board of Directors representing the more than 

4,000 dairy farmers in the Upper Midwest which collectively owns 

13 manufacturing plants, four of them here in the State of Iowa. 

My wife Sue and I, along with two sons have gradually expanded 

our dairy to its present size of 325 cows. Growing with us is AMPI, 

the manufacturing co-op in which we are stakeholders. 

But as members of this Committee, you understand the challenges faced by Upper Midwest dairy producers. There are fewer 

cows, fewer dairy producers, fewer manufacturing plants. 

To reverse this trend we must have a sound dairy policy that will 

encourage both producers and their co-ops to invest in infrastructure. Dairy producers need the price support system. In fact, that 

is AMPI’s top priority for the 2007 Farm Bill. 

Let me share four ways to strengthen the existing program. 

First, we need to increase the support price. The current $9.90 support price is inadequate and has not been changed since the 1980’s. 

Second, we must have a support price system that works as Congress intended. The USDA’s Commodity Credit Corporation must 

increase the milk price equivalent it is paying to remove products 

from the open market. Because of increased manufacturing costs, 

the manufacturing make allowance in the support program yields 

14

as much as $1 dollar less than the Congress intended when enacting the support program. 

Third, we must provide counter-cyclical payments. AMPI and the 

Midwest Dairy Coalition believe the Milk Income Loss Contract is 

needed to give producers a better chance of surviving for the market collapse, at least in the 2.4 million pounds as is presently allowed under the law. 

Finally, we must manage dairy import products to make support 

price effective. The CCC should not be buying the world’s milk surplus under our support price system. 

I ask you to consider these four points and know that a minimum price assurance is needed for a product that is perishable 

and demands a large, long-term investment to produce. In addition, 

the USDA, at the request of AMPI and several other co-ops, held 

hearings in January to review the make allowances in the Federal 

order Class III and IV formulas. Testimony at this hearing was 

overwhelmingly supported the need for emergency action on this 

issue. 

However, the USDA has not only not acted to announce—not 

acted on this, they have announced plans to reconvene public hearing sometime after September. Such a delay will have negative 

long-term impacts in the Midwest dairy industry. 

We ask you to urge the USDA to immediately adopt, on an interim basis, updated make allowances based on the January hearings. This is not an extraordinary request as the USDA has frequently implemented changes to the order system on an interim 

basis. 

The points I have raised today are tightly intertwined. Both involve the USDA—asking USDA to update manufacturing make allowances that will make the price support and the Federal Order 

System more realistic and effective. I hope this hearing will be a 

significant step in engaging policymakers and industry stakeholders in discussion focused on a strong dairy industry. 

Thank you for the opportunity. I’ll be happy to answer your questions. 

[The prepared statement of Mr. Brockshus can be found in the 

appendix on page 74.] 

The CHAIRMAN. Thank you very much, Mr. Brockshus and all of 

our witnesses. Mr. Brockshus, I’ll have to tell you that I got a call 

about 12:30 this morning, after I got here, from Secretary Johann’s 

who is over in Geneva right now. And I told him where I was and 

he said, well you know I grew up on a dairy farm in Iowa and I 

got a lot of kinfolks back there. So to all of his cousins who may 

be listening on our website, or be here today, your cousin, Secretary Johann’s is doing a heck of a job and ya’ll gave him very 

good training on a dairy farm right here in Iowa. 

I have a series of questions that I’m asking in every hearing as 

we get around the country, that I want to go to commodity folks, 

to Keith and to Ron. And we’ll direct these first few to you. And 

I would ask that you be as brief as possible in your answers, so 

we can make this record. 

First of all, how would you prioritize the Farm Bill programs 

generally and the commodity titles specifically? How would you 

rank the relative importance of the Direct Payment Program, the 

15

Marketing Loan Program, and the Counter-cyclical Payment Program? Keith? Mr. SEXTON. Well, Iowa Corn Growers would rank 

the commodity title as the most important. The second level of importance would be conservation, rural development, trade, and then 

research. Third level would be credit, energy, and miscellaneous, 

then followed by forestry probably bringing up the rear just because of where we’re located. 

Relative to the commodity title, because of the consequences of 

not being in WTO compliance, we would probably rank under the 

existing Farm Bill, the Direct Payment as most important and the 

Marketing Loan which is the most egregious, under WTO as the 

least important. And were cut should be make first. 

But more importantly, we support as I mentioned in my comments, a revenue program that would replace the marketing loan 

and counter-cyclical payments. 

The CHAIRMAN. Mr. Heck? 

Mr. HECK. Certainly the commodity payments that we have now 

are of extreme importance to us in the Farm Bill. We recognize the 

problems with the WTO. As it currently stands, if the current system would be allowed to continue the Direct Payments are most 

beneficial to landowners and those people who are paying for land. 

The Marketing Loan is the most important for the farmers who are 

on the land, but also causes the most trouble with the WTO. And 

the Counter-cyclical is somewhere in between those. 

I agree with Keith that moving to a revenue based program that 

solves the WTO problem might be the system we are forced to go 

into and it could be acceptable too. It might be a very good system. 

The CHAIRMAN. OK. We can expect an effort to further reduce 

payment limits in the next Farm Bill. Do payment limits need to 

be modified in the next Farm Bill and why? Keith? 

Mr. SEXTON. Well, this is one area that’s probably the most contentious of the whole Farm Bill within our association. We do come 

down when the dust clears on the side of meaningful payment limits. And when I say meaningful, I mean that having a payment 

limit on marketing loan gain is not meaningful if it can be circumvented with commodity certificates or loan forfeitures. 

I guess we feel that as operations grow there is a point that is 

reached when the operation should no longer need government support. 

Mr. HECK. Both of the Iowa Soybean Association and American 

Soybean Association support the payment limits that are currently 

in the 2000 Farm Bill. I personally, I have a problem with the payment limitations. When families want to work together it’s difficult 

to find business structures that will work when a group of relatives 

want to work together. I would like to see some more work on the 

definitions of what constitutes a person. Some of my relatives believe they are persons. They work full time on the farm, but yet 

don’t have a separate limit. 

The CHAIRMAN. OK. The DOHA round of negotiations seeks to 

provide additional market access for U.S. agriculture goods in exchange for reductions in domestic farm payments. How important 

are exports to the future of farmers? 

Mr. SEXTON. Iowa Corn Growers believe that exports are extremely important to Iowa producers, whether they realize it or 

16

not. Not only are corn and soybeans exported, and if fact right now, 

one reason why they think that maybe a lot of farmers see decreased value in exports, is because the ethanol industry is consuming more corn—as much or more corn than exports. 

However, we need to keep in mind that the value added crops 

are processed into meat and one of the bi-products of ethanol production is DDG’s, and both meat and DDG’s are exported. So from 

that respect they’re very essential. 

Mr. HECK. Exports are still vital for U.S. agriculture. Our productivity continues to increase faster than our population. Exports 

may very well become more important in the future than they are 

now. That’s why we’re so closely watching the WTO round and insisting on market assess. 

The CHAIRMAN. Should an increase in conservation or energy 

programs come at the expense of commodity programs? 

Mr. SEXTON. It—we think that the commodity—current commodity programs, if cuts are in fact imposed upon us, that conservation and energy programs should be the beneficiary of those 

cuts and pick up the slack—or the funding that was cut from those 

programs. 

We think that increased funding for energy programs; vital energy products will gain support of the American consumers. And in 

fact, it is a very important to all American consumers. And as was 

mentioned earlier, it’s important to our National Security. 

Mr. HECK. I would say that this is not necessarily a choice we 

have to make. And if we do have to make it the commodity title 

is still extremely important, particularly, if the WTO talks fall 

apart for some reason. We still face international trade restrictions 

in subsidized products. And the purpose of the commodity title is, 

at a large part, to address those disadvantages that we face. 

On the other hand, it is entirely possible that the energy part of 

the Farm Bill could be used as an offset with a larger domestic energy market. The commodity safety net may not be triggered as 

often. 

So I’m not sure it’s an either/or choice. I think we can work to 

find a way to maintain both a safety net, and increased conservation, and energy at the same time. 

The CHAIRMAN. Thank you. Ms. Ousely, in your testimony you 

mentioned the impact planting flexibility restrictions have had on 

your ability to grow tomatoes here in the Midwest. You mentioned 

S. 1038 as a proposed solution which allows fruits and vegetables 

for processing to be grown on program acres, in return for an acrefor-acre reduction in program payments. Do you believe the farm 

service agency has the expertise and the resources to adequately 

enforce such a proposal that applies to processed rather than fresh 

market fruits and vegetables? If this proposal is adopted and not 

enforced appropriately, how would this impact the market for fresh 

fruits and vegetables? 

Mr. SMITH. Mr. Chairman, we believe that the impact on fresh 

fruits and vegetables would be minimum as evidenced by the fact 

after the 1996 Farm Bill was put into place, that there was no 

problems with distortion between the fresh and process markets. 

Those markets are distinct and different. Under the 1996 Farm Bill 

when soybeans were not a program crop, the available acres were 

17

there for all fruit and vegetable growers to produce in basically, unlimited amounts; and yet no market distortion was observed. 

So we think that under the Senate Bill 1038, that those market 

distortions would not come about, and that the acre-for- acre reduction actually proposes a budgetary savings, according to the CBO. 

So we can actually help save a little bit of money in the way that 

it works. 

As far as the FSA is concerned, currently under the structure, 

the FSA has an enormous workload to keep track of producer histories and farm histories, and with extra recombinations in tearing 

apart of farms for no other reason than to try to be able to accumulate acres on a particular farm where fruits and vegetables can be 

grown. 

And so, we actually think that it would reduce the workload for 

the Farmer Service Agency. 

The CHAIRMAN. OK. As we think about this in the next Farm 

Bill, I know this is going to be a very contentious point. I just—

I want to give you the benefit of my thought in this, because I do, 

have a dog in this fight. We grow a lot of vegetables, as you know 

down our way. And what I hear from my fruit and vegetables growers is, that look, basically what you want—what we want you to 

do is to leave us alone. Don’t let the government come in looking 

over our shoulder. We’re not asking for any money, other than continue to do research from a fruit and vegetable standpoint. But we 

don’t want the price cabbage to go to $20 dollars a box and all of 

sudden everybody that was growing soybeans at home, puts that 

soybean acres into cabbage production for the next year and opts 

out of the soybean program. And then the next year, cabbage goes 

to $2 dollars a box and they opt back in to the soybean program. 

This is going to be a real dilemma for us as we talk about this 

during the preparation for the next Farm Bill. So we’re sure looking to ya’ll for some help there. 

Mr. SMITH. Could I comment on that? 

The CHAIRMAN. Absolutely. 

Mr. SMITH. One of the big differences between the fresh market, 

fruit and vegetable production, and processing which is the reason 

Senate Bill 1038 only refers to processing, is because these market 

distortions that you just spoke about, are limited from the processing side, because you only produced a processing crop when 

there is a market demand as for that contract. 

For example, a farmer in Indiana would not just go out and say 

soybeans are a little bit cheap this year, so I’m going to produce 

processing tomatoes. They would only produce processing tomatoes 

if they had a contract to do such a thing. Whereas in the fresh 

market world, it’s typically smaller acreage, someone will set up a 

fruit stand. There’s no organized limitations about what production 

would be. 

And so, we believe that the differences between the fresh market 

industry and the processing industry will self-take care of that situation, because you will not go produce extra cabbage for processing, unless a processor has contracted you to do that. 

The other thing on that is that the flow of product between the 

processing industry and the fresh marketing industry is—— effectively has a barrier, because of differences in varieties. For examVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
18

ple, the fresh market tomato industry would not even recognize 

what we do in the processing tomato industry, and so the varieties 

will not transfer back and forth. 

And there’s one other ironic benefit of the Senate Bill 1038, and 

that is, that it actually creates a barrier for the fresh market folks 

from a protection standpoint in the fact that if were—certified your 

land for processing production and then tried to sell it on the fresh 

market, since it was certified as processing, you would then be in 

violation. Because you sold it as a fresh market and not as a processed commodity, so there is an actual barrier being raised between 

the fresh market and I think it’s processing with Senate 1038. 

The CHAIRMAN. I look forward to telling Patrick Mabley you explained that well. 

Mr. SMITH. Thank you. 

The CHAIRMAN. Mr. Brockshus, currently, only dairy producer cooperatives have the ability to forward contract with their members. 

Does forward contracting provide producers with an additional risk 

management tool to manage price and income volatility in the marketplace? And should this option remain available only to dairy 

producer cooperatives, or should processors and non-cooperative 

dairy producers also be able to utilize this risk management tool? 

Mr. BROCKSHUS. I believe it does provide some benefit. But it 

kind of goes back also to the Class III prices that are set on the 

Board of Trade, are effected to buy our make allowances. Which if 

the make allowances are understated, those Class III prices are 

overstated. It disadvantages the manufacturing co-ops in that market. And it’s difficult to determine what that actual market is, but 

yes obviously forward contracting is a way of stabilizing the market 

somewhat. 

The CHAIRMAN. All right. Well, how about the part of it that I 

asked, relative to co-ops being the only entity able to utilize that 

now? Should we extend that to every dairy producer, whether he’s 

a member of cooperative or not? 

Mr. BROCKSHUS. Well, I guess I don’t see a problem with anybody forward contracting. Many of the forward—many of the contracts—well, there are two ways that we do—that we can contract. 

As a member of a co-op we can contract through our co- op who 

has arranges for us, that has done a contract. Or, as far as I know, 

that anyone would be able to go on the Board of Trades to do that. 

The CHAIRMAN. OK. Senator Harkin? 

Senator HARKIN. Thank you very much, Mr. Chairman and I 

thank you, those questions, I know you asked it of all the panels. 

This is a good basis for us on which to proceed. I just have a couple 

of questions that I’m going to ask every panel. Just a little bit—

I’m sorry. Am I on now? I also have a question I’d like to ask every 

panel. So those that are coming up can think about it. 

In this testimony, we’ll have a witness coming up later on one 

of the panels—Ron Rosmann. I read his testimony yesterday and 

one of the things that struck me is that he said that we now have 

twice as many farmers over age 65, as under 35. And half of all 

our farmers are over age 55. So my question for you and the next 

panelists, do our present Federal Agriculture Policies help, or 

hinder young people who want to get a start in the business whethVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
19

er it’s in crops, livestock, dairy, poultry, vegetables, fruits, whatever? That’s one. 

And second, what are the most important things that we should 

do in the next Farm Bill, if we want to foster opportunity for the 

next generation in agriculture? Just your—whatever thoughts you 

have and if you think of more later on, send them into me, but 

Keith? 

Mr. SEXTON. We think that by being able to have a revenue 

based commodity title that it would help bring young people into 

production agriculture. Because they would be assured and their 

bankers would be assured that there would be some additional revenue support in years of low crop revenue, which is not necessarily 

the case with the current program. 

We also think that by being able to target some of the direct payments to a variety of programs, such as value added investments 

that it may help young producers who are—actually, they would already be in production agriculture. But it may help them participate a little bit more in value added aspects of farming. 

And I think probably the greatest thing we could do to help new 

entrants would be review the capital gain structure. As I mentioned earlier, we think the 1031 exchanges artificially inflate the 

value of farmland, which consequently raises the cash rents. And 

also, by—if we have some mechanism where older farmers could 

transfer their control of the operation to the next generation rather 

than going through an estate without a large capital gains penalty, 

that it would help facilitate young farmers having an interest in 

coming in to agriculture. 

Senator HARKIN. Very good. Ron? 

Mr. HECK. Yeah, absolutely. On the last point for example, my 

grandmother is willing to sell to me, but she can’t. I want to buy 

her land. She wants to sell it to me, but we can’t do it. That’s an 

excellent point. 

The CHAIRMAN. Why is that? 

Mr. HECK. Capital gains tax. 

The CHAIRMAN. Oh. 

Mr. HECK. And then second, my son-in-law is home working 

today, so I could be here. I can’t help him start farming, because 

we are thrown together with one payment limit when we do that. 

So all I can do is give my operation to him. I can’t help him go out 

and get established on his own. As soon as we share equipment or 

money, we run into person definition problems. So that is an impediment. 

Another impediment is that the overall return for assets in agriculture is generally smaller than the interest payments. So if a 

young man can’t borrow money and make it pay, because the return is lower than the interest payments, and his family can’t help 

him because of person definition problems, how would he get started then? 

Senator HARKIN. In your area of vegetables. 

Mr. SMITH. Senator Harkin, we appreciate that question, because 

it speaks at the very heart of Ms. Ousley testimony was concerning 

the role of the FSA rules about fruit and vegetable production. 

While the other panelists have talked about hindrances to transfer 

to the next generation, it’s mainly a tax situation where portions 

20

of the family farm would be removed, because of estate taxes. In 

the situation with the fruit and vegetable restrictions, this is actually a barrier to young people becoming producers in a diverse agriculture. And I noticed that both yourself and Senator Grassley 

mentioned diversity a better and broader agriculture base critical 

to our children and grandchildren. And Senator Grassley, the next 

generation of farmers and we want to broaden opportunities. The 

restriction of fruit and vegetables production actually eliminates 

the possibility of another generation taking over a fruit and vegetable operation. 

It’s that way, not only in our particular industry of processing tomatoes, but the sweet corn people in all the Midwestern states—

green beans, peas, pumpkin, they all suffer the same problems. 

When the ability to actually rent ground is limited, unless you 

have your own personal producer history. And so, for that reason, 

that’s a—you’re question speaks to the very heart of our issue, and 

as what Charlotte has tried to describe upon the death of her husband. 

Senator HARKIN. The dairy side. 

Mr. BROCKSHUS. It’s interesting that you would pose that question. It’s one of the things that some of the organizations I belong 

to struggle with a lot. Now in our area, there are a number of 

young people that would like to get into dairy. The problem is they 

can’t afford a new facility and the old facilities have been basically, 

allowed to depreciate out by the present owner. If there was some 

way to incent that producer, if he doesn’t have a son that’s willing 

to come up, they depreciate it out. If we could incent that producer 

to keep that facility viable, so it’s salable at the time of his retirement instead of junk, we would have much better opportunity to 

bring young people in at a size of operation that they could afford 

to operate. 

The other—you know major expansions are done by the—— by 

larger operators that are well funded and you know on maybe the 

mid-sized farm, which I guess I consider myself, then you run into 

some of the capital gains issues, also. 

Senator HARKIN. Uh-huh (Affirmative). 

Mr. BROCKSHUS. But I don’t have the silver bullet for that, but 

it’s a major problem for getting young dairy farmers started. 

Senator HARKIN. Well, I think that’s the only question I’ll ask of 

this panel in the interest of time, but I hope others think about it. 

Some of the responses obviously are areas that are outside our jurisdiction. You know, capital gains and state taxes and things that 

are outside the Farm Bill jurisdiction. 

I want to look at things that what do we need to do in other 

areas? I mean, as you know, more into alternative crops for energy 

production. Is there some avenue there for young people that might 

be able to get in? What do we need to do in terms of beginning 

farmer programs that we’ve tried to have in the past? I think 

they’ve worked somewhat. Maybe somewhat they haven’t. Longer 

term, lower interest rates, as you point out, return on investments 

lower than the—the return is lower than the interest rates. Are 

there areas of specialty crops and things like that—bio-based, we’re 

going to see more demand for bio-based products in the future? So 

is there—are there niche areas there where a young person could 

21

get started and perhaps start small and still expand and grow in 

the future, like many of our older farmers have done in the past? 

These are the kind of things that I’d like to get answers to from 

all of you, and the rest of you here in the audience, and the panels 

that have come up. 

While I appreciate what we got to do on capital gains, and the 

state taxes, and things, that’s just not something we can deal with. 

But what else can we do within the jurisdiction that we have? I 

thank you very much. Thank you, Mr. Chairman. 

The CHAIRMAN. Well, we got the man that can handle capital 

gains, and state tax. He’s right here, Tom. Senator Grassley? 

Senator GRASSLEY. I’ve got some answers, and then I don’t have 

answers, too. But since so much of this discussion, particularly the 

last series of questions have involved S. 1031, estate tax, capital 

gains, and stuff like that, maybe I ought to take advantage of this 

opportunity, instead of asking questions, to encourage greater participation by the panelists and organizations in this effort with my 

committee. 

I would point out and I hope this isn’t just a Grassley approach 

to young people getting started farming, but it’s something that 

I’ve seen over three generations in our family. Or, I guess if you 

consider my dad, it’d be four generations. It may not have been 

true when my dad started farming, but at least when I started 

farming, it seemed like you needed three things. One, obviously a 

banker. Number 2, maybe the previous generation leaving some 

money in the family farming operation, maybe in the way of land 

and cash granting, things of that nature. And thirdly, not all farm 

income. I remember spending 10 years on an assembly line while 

I started farming, in order to get a family farming operation going. 

When my son started farming 22 years after I did, he worked for 

another farmer, so non-farm income. I left my investment in the 

farming operation. And number 3, he had a banker. And when my 

grandson is in a very low level now, starting into that farming operation, you know he’s got some non- farm income. In fact, his new 

wife’s is working off the farm. He has—obviously, has to have a 

banker. And there are some generations of capital left in the farming operation before. So I don’t know whether things have changed 

much in the last 40 years or not, or are any tougher. They probably 

are tougher, because of the price of farmland and all that. But 

maybe on a proportionate basis, they might not be a lot tougher. 

But—so that’s the way I look at it. Now, maybe you’d say Grassley, 

you’d be a better farmer if you spent all your time farming. But if 

I spent all my time farming, I wouldn’t be farming. 

[Laughter.] 

Senator GRASSLEY. So with that thought in mind, this—— we’ve 

looked into 1031s in our committee. You know originally you think; 

well you just ought to repeal it. But then you look at the history 

of it; it’s been on the books since the 1920’s. It serves some purpose. It’s only been within the last few years we’ve been hearing 

something about it. It’s been connected mostly with agriculture. 

So we’re looking at where there are abuses of it. And maybe 

that’s not the only place to zero in, but we have found some places 

where the light kind of changes, really haven’t and then the light 

kind of changes and tightening that down to some extent. And if 

22

you have any thoughts on that, I’d invite you to contact Elizabeth 

Paris of the Finance Committee Staff. 

On a state tax we’re within one vote of getting a bill through the 

Senate on a state tax, that would have a $5 million dollar exemption stepped up basis, 15 percent of rate between there and $30 

million dollars, 30 percent rate above $30 million dollars. That 

would take care of 99.7 percent of the estates. And I think that 

would take care of the situation for most family farmers, not all of 

them, but most of them. One vote short in the U.S. Senate getting 

that passed. 

The repeal of it, we couldn’t get passed. That was—we were four 

votes short. I guess, three votes short of accomplishing that. I have 

great deal of sympathy for the capital gains issues that you 

brought up to start young people into farming. The problem is 

when you change the capital gains tax; you don’t do it just for agriculture. You do it, to some extent, with—and it’s very difficult. We 

were trying to make just a small farmer and small business exemption from all estate tax with—still maintain the estate tax. Senator 

Lincoln worked hard on that. And it was just very difficult to find 

a description that would work. That wouldn’t be a statutory nightmare to enforce. But we’re still looking at some things we can do 

in that area. 

I think all my questions have been asked. So I think, just make 

that comment. I thank my colleagues for covering all the areas of 

questioning that I was going to cover. 

The CHAIRMAN. Thank you and let me thank our panelists. And 

Senator Harkin raises a very good question there. The average age 

of a farmer in my state is about 58 years of age now. And my sonin-law is the exception; Joe has come back to their family farm and 

is enjoying working with his dad on that farm. But we sure don’t 

have a lot of incentives to bring young folks back to the farm. I go 

back to this engine that was made here, that was put in this John 

Deere Cotton Picker, it was manufactured right down the road by 

Deere, right here in Ankeny. In the article in the Des Moines Register, on June the 7th, it says that the cotton farmer who purchased this machine paid $340,000 dollars for it. Now, that’s one 

cotton picker and that’s all that machine can do is pick cotton. You 

can’t afford that kind of machine without payment limits. You 

can’t, as a young farmer, jump in, buy land, buy tractors, and buy 

a $340,000 dollar cotton picker. 

And I’m not sure what the answer to it is, but I look forward 

with working with Senator Harkin and Senator Grassley to make 

sure that we establish some policy that will be long term policy, so 

that when Chuck’s grandchildren and my grandchildren decide 

they want to come back to the farm, at least they’ll have the option 

of doing that. And it’s going to be very difficult. 

But again, to this panel, thank you very much for being here. We 

appreciate your attention and the great testimony you have provided to us. 

We’ll move now to our next panel, which—we’re, going to take a 

little break right now though, aren’t we? Yeah, we’re going to take 

about a 10–minute break and then we’ll come back. 

[Recess]. 

23

The CHAIRMAN. We’re pleased to welcome our second panel here 

today. First of all, Mr. Craig Hill of Milo, Iowa, representing the 

Iowa Farm Bureau Federation; Mr. Chris Petersen of Clear Lake, 

Iowa, representing the Iowa Farmers Union and the National 

Farmers Union; Mr. Ron Rosmann from Harlan, Iowa, representing 

the Sustainable Ag Coalition; and Mr. Paul Johnson from Decorah, 

Iowa. 

Gentlemen, we are pleased to have you all hear, this morning, 

and we look forward to your comments. And we’ll start with you, 

Mr. Hill. 

STATEMENT OF MR. CRAIG HILL, IOWA FARM BUREAU 

FEDERATION, MILO, IOWA 

Mr. HILL. All right. Thank you. My name is Craig Hill. I’m a 

family farmer from Milo, Iowa. I farm about 1,200 acres in corn, 

soybean rotation. We have a few pheasants, too many deer, and I 

also have a farrow-to-finish hog operation with about a 200 sow 

herd. On behalf of the Iowa Farm Bureau Federation, my Farm 

Bureau members, myself, my family, I want to thank you for this 

opportunity to talk about the 2007 Farm Bill. 

Our farmers are interested in earning a fair wage for their labor 

and an adequate return on their capital investment. Iowa farmers 

would likely agree that the perfect vision of agriculture would include a level playing field, a chance to compete in open markets 

where there are no such things as tariff barriers, export subsidies, 

currency manipulations and perhaps, even without domestic supports. This seems like the perfect goal for the 21st century. However, the reality is, this concept is just beginning to materialize. 

Trade Ambassadors representing the United States recently laid 

a bold proposal before our partners in the WTO. To date, our WTO 

counterparts deny their own Ag policy shortcomings and insist that 

the only path to freer trade is one that requires the United States 

to unilaterally disarm. This concept is flawed. As a farmer, it troubles me greatly to imagine implementation of such a one-sided policy. 

Until WTO negotiations yield real market access and material 

gains in net farm income we need to continue with an effective 

safety net that provides support in times of low income. Iowa farmers firmly believe that this safety net should be consistent with our 

international trade obligations that are spelled out in the current 

WTO agreement. But to be clear, I feel that the next Farm Bill 

should be extended and extend to the concepts of the Food Security—or Farm Security and Rural Investment Act of 2002 until a 

new WTO agreement is reached. Our negotiating position in the 

WTO can only be weakened by moving away from farm policy that 

has largely worked. 

Farmers will be willing to move away from amber box policies 

when WTO negotiations yield economically proportionate increases 

in market access and reductions in foreign export subsidies. I will 

repeat that. When the negotiations yield economically proportionate increases in market access and reductions in foreign export 

subsidies. If this occurs, amber box reductions should be replaced 

with an equal increase in green and blue box eligible programs. 

Greater emphasis could be placed on working lands conservation, 

24

direct payments or enhanced crop insurance as we’ve heard about 

revenue assurance today. Iowa farmers are optimistic about the future of agriculture in this great State of Iowa. We’d rather rely less 

on government and increasingly more on the strong markets. Recent growth in renewable energy markets is strengthening rural 

Iowa one community at a time. Perhaps it will help us take us 

more toward a vision of agriculture where markets provide ample 

opportunities. Until that occurs, the safety net provided by the 

Farm Bill of 2002 remains a necessity. 

On behalf of myself, Farm Bureau members, I want to thank you 

for this opportunity to address the panel. I look forward to working 

with you as we consider the next Farm Bill. 

[The prepared statement of Mr. Hill can be found in the appendix on page 79.] 

The CHAIRMAN. Thank you very much. Mr. Petersen? 

STATEMENT OF MR. CHRIS PETERSEN, IOWA FARMERS UNION 

AND THE NATIONAL FARMERS UNION 

Mr. PETERSEN. Thank you, Chairman Chambliss and Senator 

Harkin, for bringing this hearing to Iowa. Thank you, Senator 

Grassley, for being present. And Representative Boswell and all the 

people out in the audience, greatly appreciated by Iowa Farmers 

Union. I am an independent family farmer. I have been in Farm 

Bills. I don’t know how many of them—a lot of them and we need 

to change some things. That’s for sure. And basically, I am part of 

a shrinking pool of independent family farmers across America and 

I speak with the best interest of all these producers from the heart. 

We as family farmers, when we own the land and the animals, 

we are by far better stewards of the earth and the animals. We can 

do a better job than anybody raising food. And stirring from this 

proven structure of family farms spread all out across the United 

States, independent family farm agriculture jeopardizes national 

strategic security, Homeland Security, Antiterrorism Protection, 

the environment, and rural economic development, food safety, food 

quality, and now energy independents. The family farm structure 

has worked for decades. Actually, since this country came into 

being. It’s a very good structure. We have never went hungry in 

this country. 

So as a hog producer and in relationship to family farm agriculture, I was very disappointed that the final version of the 2002 

Farm Bill did not include a full a competition title. I believe addressing anti-trust, restoring competitive markets, and including a 

competition title in the next Farm Bill is a must to addressing 

what I see as the big problem in agriculture and the resulting 

symptoms. 

Without competitive markets, independent producers like me will 

continue to be pushed off the land or turned into low wage employees by—as an example, corporate industrialized animal agriculture. 

I encourage the Committee to include a strong competition title in 

the next Farm Bill. 

And you guys, I won’t go through all of that. It’s in my written 

testimony. But as a—you know, I just want to reinforce—the enforcing the Sherman Antitrust Act, Packer Stockyards Act. All 

these issues are very, very important, and another one in addition 

25

to competitive—anti-competitive markets. Most contract producers 

are bound by clauses in their contracts that prevent them from 

pursuing legal redress. I’m talking about the contract growers of 

livestock. And I could go on and on here, but I want to emphasize 

family farm agriculture. We’ve had some good things in Farm Bills, 

but it’s not quite working what we want out of it. Thank you. 

[The prepared statement of Mr. Petersen can be found in the appendix on page 81.] 

The CHAIRMAN. Thank you. Mr. Rosmann? 

STATEMENT OF MR. RON ROSMANN, THE SUSTAINABLE AG 

COALITION 

Mr. ROSMANN. Good morning. My name is Ron Rosmann. Along 

with my wife Maria and our three sons, we operate a 600–acre certified organic crop and livestock farm near Harlan, Iowa. We have 

a stock cowherd of 90 cows and 50 sows in a farrow-to-finish operation. Maria operates our private label organic meat business 

under the label of Rosmann Family Farms. 

I testify today on behalf of the Sustainable Agriculture Coalition, 

a network of farm, rural, and conservation organizations. I am also 

associated with the Organic Farming Research Foundation, the 

Practical Farmers of Iowa, and the newly formed Iowa Organic Association. 

I will speak this morning about the areas of the Farm Bill that 

I have worked the most closely with: research, plant and animal 

breeding programs, beginning farmer programs, conservation, and 

payment limitations. 

I last testified about a Farm Bill in the 1990’s. A lot of good outcomes have emerged since then for both sustainable Ag and organic 

Ag. Thank you, Senators, for your efforts to make that happen. So 

much more needs to be done, however. 

Organic Ag markets have grown at a remarkable rate of 20 percent annually over the last 10 years. Consumer demand is far outpacing supply. We are beginning to lose organic markets to foreign 

competition because of our failure to fully endorse organic Ag. We 

should set an ambitious goal—to supply 10 percent of our Nation’s 

food supply from organic farms within 10 years and then develop 

the good policy to help achieve it. 

In that context, then, I would like to comment on the Research 

Title. Federal Ag research dollars dedicated to organdies is disproportionately low in relation to the organic industry. Only since 

1998 has it been funded at all. A framework of fair share funding 

of organic research calls for at least a 5–fold increase, to at least 

$25 million or more dollars annually. 

Since 2003, I have been in a part of a national steering committee for Seeds and Breeds for the 21st Century, which is an initiative to re-invigorate public plant and animal breeding capacity. 

We are encouraged by the Senate language that directs the Department to establish a specific category of grant application requests 

for classical plant and animal breeding. 

The most needed but often ignored question related to the Farm 

Bill is asking where the next generation of farmers is going to come 

from. Will they come from family farmers, or will mega farms and 

corporations be in control? Our second oldest son graduated from 

26

Iowa State this past winter and has chosen to join the farming operation with us. We are delighted, but also realize farm succession 

and farm entry has become increasingly difficult. 

We desperately need the Beginning Farmer and Rancher Development Program that was passed in the last Farm Bill. Sadly, your 

House counterparts stripped the funding. I urge you to right this 

wrong and to launch this program. 

It is worth noting that the Organic Valley Cooperative to which 

we belong, the average age of the farmer is 45 years of age. One 

of the best ways to create opportunities for beginning farmers is 

through the Conservation Security Program. CSP should be fully 

funded and available to everyone who qualifies. CSP should provide 

the foundation for an overhaul of our agricultural entitlement programs. 

You are probably thinking how are we going to pay for these proposed programs and the ones that have not been fully implemented 

or funded? Well, I believe there should be strict farm program payment limitations with the savings going to help support the programs that I have mentioned. 

Current farm programs reinforce declining rural communities. It 

is no wonder that rural decline in commodity program payment 

concentrations go hand in hand. Farm programs help mega farms 

drive family farms out of business by bidding land away from. As 

long as these farms are promised more government money for 

every acre they add, virtually all farm payments will be bid into 

higher cash rents and land purchase prices. 

It’s interesting to note that 81 percent of farmers nationwide in 

the last Farm Bill, including 70 percent of southern farmers, support effective targeting of payments to small and mid-size farms. 

While I would hate to see something other than a strong national 

payment limit standard, if it takes a dual standard to save family 

agriculture in the heartland, than perhaps that must be done. Any 

dual standard would need to include comprehensive across the 

board closing of loopholes to ensure that meaningful limits apply 

at some level to all commodities. And it would have to achieve proportionate savings across commodities. 

In closing, I would like to say please say no to extend the 2000 

Farm Bill beyond its 2007 expiration. It provides money, but no solutions, short-term survival, but little vision for the future. It is 

continuing to destroy family farming and sapping the lifeblood out 

of rural America. We can certainly do better than that. Thank you. 

[The prepared statement of Mr. Rosmann can be found in the appendix on page 86.] 

The CHAIRMAN. Thank you. Mr. Johnson? 

STATEMENT OF MR. PAUL JOHNSON, DECORAH, IOWA 

PRODUCER 

Mr. JOHNSON. Thank you, Senator Chambliss, and Senator Harkin, Senator Grassley. It’s good to have you here with us today. 

Last night I went on line and Googled a air photo of my home place 

and your home place in Southern Georgia just to see how we compared. And I—the maps I put in front of you and we look very similar. We look—we have land that is very, very similar. So as we 

travel around the country and as you look down over the country, 

27

I think you’ll realize that we probably have as much in common 

as—or even more in common when it comes to land and the care 

of land, than we have peanuts and corn, perhaps or something to 

argue about. But we have a lot in common. 

All water that falls in Georgia, just about all of it falls through 

farms. All the water that falls in Iowa falls through farms and it’s 

going to be clean if farmers make it so, it won’t be otherwise. Conservation programs are so very important for this. 

When I looked at the maps and I saw your home place and mine, 

I realized that—or I thought what if in the 1930’s we had not put 

together our conservation programs? I have a feeling we wouldn’t 

be farming in my home place nor in yours today, without that. 

So I guess the one point I really want to stress, is the importance 

of conservation on private lands. Eighty-eight percent of the precipitation in this country falls on private lands and we’ve got to 

take good care of it. 

We often look at the commodity programs and we forget that 

good water and the quail and pheasants are commodities as well. 

They’re not on the Chicago Board of Trade, but nonetheless, we 

and the American public need them and want them, and so do our 

children. And so, as you deal with this Farm Bill I would urge to 

put that No. 1 and other good things will follow. There isn’t a person in this room that doesn’t believe that conservation is extremely 

important on our farmlands. And yet, it always seems to be No. 2 

or No. 3 and I would urge you to rank it up there as No. 1. 

The second thing I’d like to mention is that fact that over the 

years, we’ve had a lot of good programs to help fix problems that 

we’ve caused on land, whether it be soil erosion, or loss of bio-diversity, or things like that. We’ve had very few programs, almost none 

that reward farmers for good stewardship right up front. The Conservation Security Program is the very first real strong program to 

do that. And I want to really urge you to support it as much as 

we possibly can. Keep working on it. Make it simpler. It tends to 

be somewhat complex, but every farmer that I’ve talked to that has 

had any knowledge of it, really wants that program. And as we 

look to the future, I think it is a very, very important part of our 

toolbox. 

We have a number of other programs and I don’t think we need 

to invent a lot of new ones. I think that whether it be the Wetland 

Reserve, or the Conservation Reserve, or buffers, or you could go 

down the list, we have a good set of tools. The Conservation Security Program gives us the opportunity to take that toolbox to the 

farmer or to the rancher and utilize it. 

Very quickly, a third issue that I’d like to mention is the issue 

of energy and the importance of agriculture in energy. We in Iowa 

today are moving very, very rapidly into bio-fuels and I think that’s 

great. But I would urge us to look at where we are today as a first 

generation and start looking to the future. And that means putting 

a lot more money into research, into looking at ways in which we 

can produce ethanol, for example from perennial poly cultures rather than from strictly an annual row crop. 

So I would urge you to take this seriously. This will be a very 

important part of our future; one that I think that American agriculture could really help us with. 

28

[The prepared statement of Mr. Johnson can be found in the appendix on page 98.] 

The CHAIRMAN. OK. Gentlemen, thank you very much. Mr. Hill, 

how would Iowa farmers in your opinion, prioritize Farm Bill programs generally in the commodity title—same question I asked 

earlier, how would you rank the relative importance of the direct 

program, marketing loan program, counter-cyclical payment program? 

Mr. HILL. Well, I think that—you know considering what we’re 

talked about with the WTO or we can think about those other titles 

of the Farm Bill, not just commodity title—Title I. There’s a lot of 

opportunities to take advantage of in those other titles. 

In the Commodity I Title, specific to your question, I think the 

direct payments are needed to be kept. I think the direct payments—Ben Greenbox for one. Also, they could be tied to risk management. Now, there’s a lot of private tools. There’s RMA reinsured 

tools through the USDA that farmers can purchase. And that direct 

payment can go a long ways toward risk management solving some 

of those concerns. 

The CC payment, I would be probably the one that I would first 

discard. It’s difficult and cumbersome to calculate what the benefits 

will be as the year progresses. The marketing loan is pretty precise. It gives a marketing plan some precision in knowing what 

harvest prices could be expected. It makes it easy for lenders to anticipate. So that’s how I would rank them, direct first to be saved 

and then of course, the marketing loan gains, and third being CC 

payments. 

The CHAIRMAN. We heard from the soybean and the corn folks 

from this part of the world relative to exports, but from an overall 

Ag perspective and coming Farm Bureau, how important are exports to agriculture here in Iowa? 

Mr. HILL. Well, tremendous. The last 15 years, I think 30 percent of our net farm receipts have been derived from an export. 

Iowa’s the second most export dependent state in the country. I’m 

a producer of pork. An illustration on my own farm in 1994, I recall 

the time when we did not have any exports of pork. In 1994 we 

passed that threshold and we began exporting pork. And I think 

today we’re about 12 percent of our production is exported which 

amounts to about $22 dollars on every pig. Now, that’s more than 

the profit margin. So exports are critically important to Iowa. 

The CHAIRMAN. OK. Mr. Petersen, should an increase in conservation in our energy programs come at the expense of commodity programs? 

Mr. PETERSEN. In certain instances, yes. Energy independent is 

very important. So yes, commodity programs are also important, 

but we need to look at ways to reward the farmer for taking care 

of the land, passing it down to the next generation. I believe it’s 

an investment in this country by the taxpayers when you tie environmental issues like keeping the land—you know, up to par for 

production for the next generation to feed ourselves. And so, yes, 

that’s very important. 

And as I said, commodity programs are important, but we have 

to get a price, and I mean a price out of the marketplace here. As 

what’s going in Congress, Senator Grassley holding up those newsVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
29

papers, we’re under the microscope and we need to clean up the 

Farm Bill, and the waste in it, and get some money to the family 

farm producers that need it while we hopefully, get competition 

and break down these monopolies. So the farmer can get a price 

out of the marketplace with some assistance from the Federal Government tied to conservation, taking care of the land. I think it’s 

the only way we have to go in this country if we want to keep localized family farm agriculture alive and thriving. 

The CHAIRMAN. Mr. Rosmann, I’m curious. What all crops do you 

produce on your farm? 

Mr. ROSMANN. Somewhat very typical. You know I was a conventional farmer the first 10 years, from 1973 to 1983, until we started 

pursuing this kind of agriculture. So we raise corn and soybeans, 

but mostly for human consumption, soybeans for soymilk and soy 

tofu. We also grow flax for flax oil production, barley and oats as 

a soil—you know, with legumes for soil conserving crops, because 

crop rotations are very important to help with our soil fertility and 

minimize soil loss. So you know, we really are looking at the longterm sustainability. And we also have 90 Red Angus cows and 50 

Berkshire Cross sows, and I think that—those are the main crops. 

You might be interested in noting that some of our white corn 

goes to make organic vodka down in Kentucky. If you’re interested, 

I could arrange to get a bottle to you sometime. 

The CHAIRMAN. You—yeah, Chuck makes me drink ethanol in 

Washington. 

[Laughter.] 

The CHAIRMAN. Maybe we could mix them. I spent a week at 

Ron’s——

Mr. ROSMANN. Well, that’s sort of the same thing you know, only 

a little more concentrated. 

The CHAIRMAN. Should Congress shift funding from land retirement programs to working lands programs or visa versa to achieve 

a better balance among them? 

Mr. ROSMANN. Oh, I’m sorry. Could you repeat that question 

please? 

The CHAIRMAN. Should Congress shift funding form land retirement programs to working lands programs or vice versa to achieve 

a better balance among them? 

Mr. ROSMANN. I believe there’s some merit to that in terms of 

working with changing the whole structure to reward the good 

stewardship of the land and farming the land. You know, we desperately need production because of the world increase in population. But we need to do a better job of taking care of the land 

that we have had in production and that we’ve taken out of production to put into CRP. 

You know, a lot of that CRP land should never have been in row 

crops, for instance. It should be livestock grazing of some kind, or 

in bio fuels now. So, there needs to be a balance I think. But you 

know, until we look at this whole commodity structure of who gets 

subsidized for what, and replace that with some sort of conservation green payment, I don’t know. I think we’re only working 

around the edges you know and not doing enough. 

The CHAIRMAN. Let me ask that same question to you, Mr. JOHNSON. 

30

Mr. JOHNSON. I was hoping you would. I think we need to look 

at land retirement programs a little differently than we have. They 

came into existence primarily as supply control programs if you go 

back to 1985 in the Farm Bill then. And so, we expected of farmers 

that they set aside this land. Not farm it. It’s always bothered me 

that that means—or that’s the major program we’ve had. We’ve 

told farmers that if you don’t farm, you’re a good farmer—or a good 

conservation farmer essentially. And if fact, it’s put whole communities out of business in some cases. 

We need to look at land retirement as one of the tools. And it 

should go all the way; it seems to me, from setting aside completely 

to some partial use perhaps and not just in disasters. I don’t think 

we’ve used our imaginations very well in that regard. 

But we should also look at land retirement programs as producing things, as well. I can’t stress enough the importance of looking at good conservation and the results of good conservation producing commodities, as well. Whether it be clean water, or wildlife, 

pheasants, and quail if you will, or bio- diversity in general. There 

are so many things that could come off of that land and if we enter 

a contract with a farmer to set aside for 10 years or 5 years, it 

shouldn’t be just OK, leave it alone. Plant it in grown grass and 

walk away. But rather, produce conservation commodities from it. 

I think we have the knowledge or we could certainly gain the 

knowledge to get a much greater abundance of good off of retirement—land that we retire if we start looking at the results of good 

conservation as commodities, as well. 

And remember it’s—there’s no world marketplace for that. That’s 

why the world trade talks allow us to do it. But yet, there are terrific markets here at home. I think the average American would 

much rather—would look much more favorably on farm programs 

if he or she realize that we’re getting better water because of the 

way we’re doing it, or we’re getting better air quality, or we’re getting more pleasing landscapes, things like that. 

The CHAIRMAN. Given the budget restraints that we are now 

working under, where should we in this next Farm Bill focus our 

resources from a conservation standpoint? 

Mr. JOHNSON. Well, I’d like to—I hate to see that dilemma that 

you’re in, you know we are giving in American tax dollars about 

$13 to $14 dollars per acre on public lands to care for those lands. 

That’s our parks, and our forests, and so on. And I am in no way 

saying we should take from that. We probably should give more to 

that. And yet when it comes to our private lands which are 75 percent of our land in this country and the richest part of it at that, 

we’re putting less than $2 dollars an acre it when you look at all 

of our conservation programs. 

So I—then we’re faced with the dilemma. Do we take it from out 

traditional food and fiber commodity programs? And I think we 

need to make a very strong case for the fact that, America cannot 

be healthy unless private lands are healthy, and that that is every 

bit as important as public lands. 

Again, I do not want to be quoted as saying we should take from 

our public lands. I just came from the boundary orders in Minnesota and I can tell you it was good. But we need to get the American public to understand that it’s the American farmer that we 

31

use the conservation carpet on which we stand. And we are not 

going to have clean water, or good air, or bio-diversity in this country unless it’s the American farmer who produces it. And that can’t 

just happen. We need to reward them for it. 

So I would strongly resist this argument that it has to be one or 

the other. If you look to the future, it seems to me that our one 

hope for maintaining strong taxpayer support for rural America is 

to produce more and more conservation commodities. 

The CHAIRMAN. Senator Harkin? 

Senator HARKIN. Thank you, Mr. Chairman. I want to get back 

to the question I asked the other panel about beginning farmers. 

But as long as we’re on conservation, and it has some connection 

also with maybe beginning farmers too, in this way. Obviously entering a whole new era of bio-fuels and bio-based economy. Not just 

fuels—ethanol and bio-diesel, but bio-based products. Making 

things from starches, for example, that replace everything from—

a lot of things from plastic plates and stuff, to solvents, to all kinds 

of different things—hydraulic fluids made from soil oil, grease. 

So I’m wondering about this in terms of also connecting with conservation. You said a lot of land shouldn’t have been put away on 

CRP because it should’ve been farmed in the first place. But there’s 

a lot—because we base CRP that every county had to have some, 

there’s some land in CRP that’s good producing land. But what if 

we were to—and we know that we can take CRP land and we can 

grow conserving crops on it, the most popular being switch grass 

right now. 

We had a project down in Southeast Iowa. Leonard Boswell and 

I were involved in back when you represented that area down there 

and we had that switch grass operation down there and John 

Deere made equipment for it. And we proved that you could raise 

switch grass on CRP land. It’s a perennial crop. You cut it once a 

year. You don’t have to fertilize it very much and you can keep the 

CRP land, but you can get crop off of it for energy production. 

So what I’m thinking about, is you’re thinking about commodities, Paul Johnson, you said about thinking of conservation as producing commodities. Well, how about thinking of conserving lands 

where you might be able to produce certain bio-based—certain 

crops that are convertible into bio-based products and yet, still 

keep the land conserving. Is that another way of which we might 

be able to focus some of our scarce dollars in that kind of an area? 

And I’d just ask all of you to think about that? Craig? 

Mr. HILL. OK. Well, I think you’re right. And in Iowa that CRP 

totals about 5 percent of our land. And if we targeted those specific 

areas that were erosive or needing of retirement, it may only be 

one or 2 percent of that land. And so much of that could be brought 

back into production and still adhere to some of our environmental 

standards that we have. 

Right now, with this explosion in bio-energy we’re harvesting embryos. You know, like the corn seed and the soybean seed, and 

we’re processing it and extracting oil energy. But the future will be 

biomass, cellulosic materials, whether that’s five years or a 10–year 

transition, I don’t know. But we can only grow so much energy harvesting embryos and maybe that’s 10 or 12 billion gallons. But we 

could go to 50 or 60 billion gallons if we use biomass—switch grass. 

32

Senator HARKIN. That’s right. 

Mr. HALL. Other products. So that really is the future and some 

of those commodities that we grow, the biomass commodities are 

very sustainable for soil, erosion soil control, and et cetera. 

Senator HARKIN. Chris? 

Mr. PETERSEN. Thank you, Senator Harkin. Yes, I agree with 

that as long as it doesn’t affect our pheasant population too much. 

Having said that, this land can be utilized again, in energy independents. We need to do things like this. And it’s going to put 

money into the farmers’ pockets, number 1. You know in corn and 

all of these products going into ethanol, switch grass, some of these 

other types of crops you get so much more energy out of them. So 

you know, the name of the game here is achieving energy independence as much as we can. So, I totally agree with that. 

And again, this would tie into what I believe is a lot of the problems in Iowa of getting beginning farmers started farming. You 

know this should give them more money, you know to work with. 

And you know, this is still only one of the very few occupations I 

know that, gee, go to town and get a job. You know, if you can’t 

get price out of the marketplace your product and that don’t work 

send your wife to town and get the health insurance. 

And you know we have to get away from that. And the last thing 

I want to see with beginning farmers is them turned into contract 

growers who basically get a wage for raising somebody else’s livestock. The family farm is all about independence. That’s what’s 

working this country. Also, low interest loans for beginning farmers. That’s crucial. True value adding where a rightful share of the 

value added money gets back to the family farmer, whether he’s a 

beginning family farmer or an established farmer. 

Again, competition title—money—a price. We need a price. We’ve 

got to get a price. 

Senator HARKIN. By the way, you know we had to have a competition title in the Senate Bill. 

Mr. PETERSEN. Exactly. 

Senator HARKIN. Senator Grassley supported that, we supported 

that. We lost it in the House, that’s the problem. Ron? 

Mr. ROSMANN. I’ve got two thoughts on this. First, you know we 

have to have the infrastructure be willing to work with some of the 

bio-fuels. You know we’ve got all this interest now with this first 

generation of ethanol plants. But I think, you know they need to 

recognize that there are some inefficiencies with using just corn. 

They need to look at the whole corn plant and you know—or some 

crop residues. And then what Paul was saying, you know looking 

at switch grass and other more efficient bio-fuels. But you know 

the present oil industry negotiates with the ethanol folks——

Senator HARKIN. Uh-huh (Affirmative). 

Mr. ROSMANN. – to decide how many gallons become 10 percent 

ethanol. 

Senator HARKIN. Yeah. I guess what I’m reaching at in this question Paul, is that—is there an opportunity—we’ve put the first energy title in the Farm Bill last time, so we can build on that. Is 

there an opportunity to use that energy title as the basis for more 

bio-based products, coupled with conservation, and the Conservation Security Program that also answers another part of the probVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
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lem that I wanted to ask you about; and that is getting funds to 

young beginning farmers to get them going. Can you kind of pull 

all that together? Do you see a synergism to use 50–cent word I 

guess on that, yes? 

Mr. ROSMANN. Well, I think there’s terrific opportunities there. 

Imagine a—of Iowa, in the future, where a part of our land and 

we’re always, I think, going to be producing some of the traditional 

commodities, but a part of it, at least, is now in a complex of 

plants, what’s called a perennial poly culture. Perennial meaning 

we don’t have to plow the land every year. And if fact, if we don’t, 

then the soil is completely occupied with roots. You can add your 

animal manures to that land and it does not leach through, and 

out, and into the Gulf of Mexico. So that has certainly a benefit. 

And you could do that with a simple plant such as switch grass. 

But you could also do it with a complex. 

Iowa was once a tall grass prairie state. Today it’s the most endangered ecosystem in our country. We have almost no tall grass 

prairie left today. There were 100’s and 100’s of species occupying 

an acre of land when we first started plowing this ground. I’m not 

suggesting we’ll get back there, but we certainly can have a complex. 

We farmers have a tendency to want to simplify the earth and 

simplify the land. And one crop we can handle that or one plant, 

for example. And we are really good at it. Take a look at the average cornfield out there today. You won’t see a more proud crop. 

On the other hand I think if we set our minds to it, we could 

add a lot more diversity to the landscape. That brings back bio-diversity. It brings back wildlife. It brings back better water quality. 

And if we put that into the mix of our national system of fuels and 

of plastics, and things like that, I think for the first time, we really 

do have an alternative crop. And we’ve been talking about that forever, haven’t we? All we need is an alternative crop. It used to be 

Belgian endive. Remember that? 

Well, here’s one that will really work. But we’re going to have 

to really focus on it I think. 

Senator HARKIN. Well again, a bottom line is profitability. I 

mean, as long as you can do it and still maintain a profit. 

Mr. ROSMANN. But once the American public realizes all the benefits that are coming off of that land, I think of course, it’s up to 

us to convince them that it’s worthwhile doing. But I think it’d be 

a lot easier than the course that we’re now on. 

Senator HARKIN. I used up all my time. So I won’t go on to the 

second—did—Ron, did you have one last——

Mr. ROSMANN. Well, I was just going to say I could envision 

where farmers have a whole farm plan in the CSP and a portion 

of that could be devoted on their steeper slopes highly erodible land 

devoted to what you’re talking about. That you know, as part of 

their whole farm plan, part of it would be bio- fuels. 

Senator HARKIN. Well, we’re going to move ahead aggressively in 

cellulosic conversion. That’s kind—that’s your next generation. I 

just talked to a scientist last week, who told me that they’re making great breakthroughs in cellulosic conversion into ethanol. 

Switch grass, as you know, about an acre of switch grass has about 

as much protein as an acre of soybeans, twice as much energy as 

34

an acre of corn. Now, we’re going to use corn as ethanol, because 

we have the—and it’s getting more efficient too, by the way. It’s 

getting very much more efficient. But the cellulosic conversion of 

that could lead to again, utilizing some of this land that, as I’ve 

said, every county has got to have CRP. Well, I don’t know that 

that’s really necessary. I mean, some of the highly erodible land 

you need it, but some of this other could be used for some of this 

other production perhaps. 

Thank you. I—again, keep in mind my other question, so if you 

want to write me or something like that about getting young people 

in. How do we get young people going in agriculture? I’ve used up 

my time, Mr. Chairman, on other things. 

The CHAIRMAN. Senator Grassley? 

Senator GRASSLEY. I’d like to ask Mr. Hill and Mr. Petersen if 

their organization supports the revision of the caps, so we have a 

hard cap, so that there can’t be legal subterfuge of those caps? And 

right now, the figure floating around Washington is $250,000 dollars, which probably most Iowan’s think is too much. But regardless of the figure, you know the approach that we’re using whether 

it’s a $250,000 or some other figure in that neighborhood, do the 

Farm Bureau and do the Farmers Union, and NFO support that? 

And anybody else that wants to answer, but I think it’s more the 

general farm organization? 

Mr. HILL. Senator Grassley, you know my difficulty in answering 

that question. The American Farm Bureau does not subscribe to 

payment limitations. It’s not been a policy of the American Farm 

Bureau to support payment limitations. However, the American 

Farm Bureau did support the 2002 Farm Bill and the $360,000 dollar limits that are there. So, we do have support for that measure. 

Iowa Farmers however, and we’ve taken this policy from Iowa to 

the American convention year after year, do believe there should 

be further constraints on the limitations—or on the payments to 

farmers. And what that number should be, maybe it’s $250,000, I 

don’t know. You won’t accomplish much though; by just setting a 

limitation without enforcing and making certain that it’s done that 

way. And that’s probably more important than setting the limit, is 

making sure that there is a true limit. 

Senator GRASSLEY. That point—the latter point is well taken and 

I agree with you. Mr. Petersen? 

Mr. PETERSEN. Yes, Senator Grassley. Yeah, we support caps. We 

believe they should be a lot lower than $250,000. We believe a good 

component of good farm policy is to have more farmers on the land, 

not less. You know this kind of reflects on the concentration issues. 

And as I spoke earlier of all the competition stuff in this Farm Bill 

and our State Board, we voted on a $100,000 dollar cap. It’s what 

we felt was the best for rural Iowa. And personally, I have no problem with big farmers farming a lot of land. But what’s in the best 

interest of this country number 1, and rural communities. If these 

guys want to farm all this land, welcome to capitalism. Go talk to 

your bank. 

Senator GRASSLEY. Go ahead. 

Mr. HILL. I’d just like to comment briefly. If we take the savings 

from having strict caps and put them into beginning farmer initiatives as the tradeoff, well then we are addressing two problems 

35

with one solution. Because if we continue to go down this same 

road, there are not—there’s not going to be a next generation of 

family farmers. There just plain isn’t. The entry rate is so small 

and because of this, we’re seeing all these complicated corporate 

farms entities move in right into Shelby County, for instance. So, 

it’s very real. It’s happening and you know, unless we do something 

quickly, you know time is—— you know, been running out for quite 

some time to reverse these things. These 30–year trends really, 

since I came back and started farming in 1973, and Earl Butts 

said, farm fence roll to fence roll. You know, it’s been happening. 

Senator GRASSLEY. Uh-huh (Affirmative). The next issue I bring 

up and this will be my last one, is—it was going to be what if the 

WTO trade talks fell through. But I see from our email that they 

announced this morning that they were going to be suspended. So 

the question is now, if they—and I guess according to what I’m 

reading, it’s very pessimistic about whether or not they’ll come up 

and particularly, with the President’s authority, to negotiate trade 

running out next July. And if we’re going to do something, we have 

to do it well before July. 

Then, what would suggest, Mr. Hill or Mr. Petersen, would be 

our attitude toward reducing barriers to trade now if the DOHA 

Round is not going to be successful? 

Mr. HILL. Well, with a lack of a DOHA agreement, I think we 

do have to maintain the Farm Act that we’re working with currently. I would like to think prospectively about a day when we did 

have market access and we’ve talked about that. I think there’s 

grand options for us in the other titles of the Farm Bill, to work 

for farmers. But until the concessions are made by the Europeans 

and that’s what it boils down to. I mean, you’ve mentioned it yourself, Senator. Sixty-two percent of the tariffs posed on U.S. goods 

and 12 percent that we impose on others is quite a difference. 

There’s great opportunities for Iowa with regards to bio- energy, 

and with livestock, and the crops that we grow. But 95 percent of 

the world’s customers are outside of our boarders. And until we can 

accomplish that problem, I don’t know that we can look forward to 

new policy positions. 

Senator GRASSLEY. Mr. Petersen? 

Mr. PETERSEN. Thank you, Senator. National Farmers Union, 

we’re a strong position of fair trade. And yeah, you know we have 

to reduce barriers, and this, and that, and grow trade. But I think 

it’s very clear now that trade and exporting are a way to prosperity 

is not quite working the way we envisioned it. 

And the WTO, who’s benefiting off all this so-called free trade or 

trade? You know I make the comment that the WTO is not part 

of the U.S. Congress. I believe it’s Congress’s charge regardless of 

the outcome of the WTO to take care of our form of agriculture and 

our producers first. And I believe the wrong—— one of the things 

about market barriers and market access in other countries, the 

last thing I want to see is massive—goes to the food sovereignty 

issues, that massive amounts of family farm producers in other 

countries being forced off the land. 

Look what’s going on in Mexico, with NAFTA. You know, and 

then you know it ties into the immigration problems and all that. 

All these people that were sustainable in their own countries proVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
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ducing food, they were doing something. They were busy. They 

were contributing to their country’s better health. And so, trade’s 

a very tricky issue. The WTO’s a very tricky issue. And bottom 

line, we have got to take care of ourselves first. 

Senator GRASSLEY. Unless somebody else wants to comment, I’ll 

yield now. 

The CHAIRMAN. OK. Well gentlemen, again, thank you very much 

for being here. Thanks for your very splendid testimony. We look 

forward to staying in touch. We’ll take one more 10–minute break 

as our next panel comes forward. 

[Recess]. 

Senator CHAMBLISS. We’re very pleased to have on our third 

panel; Mr. Bill Scheitler from LaMars, Iowa representing the Iowa 

Cattlemen’s Association, Mr. Eric Nelson from Moville, Iowa representing R-CALF, USA, Mr. Jim Dean from Oskaloosa, Iowa representing the United Egg Producers and Mr. Steve Kerns 

Clearfield, Iowa representing the Iowa Pork Producers Association. 

Gentlemen, welcome, we look forward to your testimony and Mr. 

Scheitler, we’ll start with you. 

STATEMENT OF MR. BILL SCHEITLER, PRESIDENT, IOWA 

CATTLEMEN’S ASSOCIATION, LAMARS, IOWA 

Mr. SCHEITLER. Thank you, Mr. Chairman. Mr. Chairman and 

members of the Committee, thank you for the opportunity to 

present our ideas on the 2007 Farm Bill from the perspective of the 

members of the Iowa Cattlemen’s Association and many other Iowa 

cattle producers. My name, as you said, is Bill Scheitler, I’m a cattle producer from northwest Iowa and I’m currently President of 

the Iowa Cattlemen’s Association. 

As the nation’s largest segment of agriculture, the cattle industry 

is focused on; continuing to work toward agriculture policy that 

minimizes direct Federal involvement, supports the reduction in 

the Federal deficit, preserves the right of individual choice in the 

management of land, water and other resources, provides an opportunity to compete in foreign markets and does not favor one producer or commodity over another. 

For the U.S. beef producer, we believe trade is the single most 

important issue affecting the cattle industry today. Iowa cattle producers are strong believers in international trade. We support aggressive negotiating positions to open markets and to remove unfair trade barriers to our products. We also support Congressional 

and regulatory action to address unfair international trade barriers 

that hinder the exportation of U.S. beef. 

The Iowa Cattlemen’s Association supports sanctions against 

Japan due to unreasonable hindrance of our U.S. beef exports. In 

trying to deal with and mitigate the effects of animal health emergencies in our business and trade, we believe in participating in a 

privately held animal identification system. That system now exists 

and is under the administration of the U.S. Animal Identification 

Organization. It is administering an animal movement data base 

that has the ability to work with animal identification service providers across the country to collect animal movement data and 

serve as the single point of contact in the event of an animal health 

emergency. 

37

The Iowa Cattlemen’s Association has provided an electronic 

identification program for mid-western producers for the past eight 

years. The ICA program was the first in the country to include EID 

as part of the states brand law as a legal form of identification. 

One concern we have about the USDA National Animal Identification System is that it is not moving at a pace it should be. Currently the NAIS system in this country is just treading water. We 

want it to progress faster. The NAIS program may need some impetus as to encourage more participation. 

Conservation and the environment are also an important issue. 

Our livelihood comes from the lands, so careful land stewardship 

not only makes good environmental sense, it is also fundamental 

to keep our industry strong. One program cattle producers value 

and participate in across the country is the EQIP program. A problem encountered with EQIP is that by arbitrarily setting numerical 

caps that render some producers eligible and others ineligible, the 

success of the program is somewhat limited. 

Other programs many cattle producers would like to enroll in to 

reach environmental goals includes the CSP and the CRP. However, to enroll, producers must stop productive economic activity on 

the land enrolled. We must support the addition of provisions in 

the next Farm Bill that would allow increased managed grazing on 

land enrolled in the CRP. 

In terms of energy, we believe the Farm Bill can help to provide 

research funding for integrated production systems and innovative 

business models to manage risk and attract new capital. Due to the 

construction of many new ethanol plants in Iowa and the coal products that are a high source of good protein livestock feed, the Iowa 

cattle industry is poised at a brink of major expansion. Energy policy that provides research funding and supports renewable fuels, 

such as ethanol, will help young people enter agriculture, improve 

our local economies and revitalize our rural communities. 

Thank you very much for your time today. 

[The prepared statement of Mr. Scheitler can be found in the appendix on page 101.] 

Senator CHAMBLISS. Thank you. Mr. Nelson. 

STATEMENT OF MR. ERIC NELSON, DISTRICT 7 DIRECTOR, RCALF USA, MOVILLE, IOWA 

Mr. NELSON. Good morning, Chairman Chambliss, Ranking 

Member Harkin and Senator Grassley. I’m Eric Nelson, District 7 

Director with R-CALF USA and along with my wife, Carol, and our 

five children; we own and operate a beef feedlot along with a cowcalf and farming operation near Moville, Iowa in Woodbury County. 

I appreciate the opportunity to provide comments on the development of the 2007 Farm Bill. 

We believe the Farm Bill should make progress in five key areas; 

honest competition in the domestic livestock market, animal health 

and safety, consumer information, international trade and the development of initiatives to sustain a more prosperous and competitive cattle and beef sector. 

As our sector faces many challenges, the Farm Bill should contain a separate beef and cattle chapter encompassing each of these 

issues. My entire testimony addressing these issues has been subVerDate 0ct 09 2002 15:04 Nov 06, 2006 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 C:\DOCS\JULY24.TXT TOSHD PsN: LAVERN
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mitted to the record and during my remaining time, I will present 

facts on competition in the marketplace. 

Consolidation in the meat packing industry has grown at an 

alarming rate over the past few decades, as have abusive contracting practices. Concentration among meat packers has more 

than tripled since the late 1970’s, and today just four packing companies control more than 83 percent of the beef industry. 

While the meat packing industry has seen dramatic consolidation, packers have also increasingly use non-traditional contracting 

and marketing methods that further erode the selling power of cattle producers. Such methods include; purchasing cattle more than 

14 days before slaughter or packer fed cattle, forward contracts and 

exclusive marketing and purchasing agreements. 

Together the four largest packing companies employed such 

forms of captive supply contracting methods for a full 44.4 percent 

of all cattle they slaughtered in 2002. That figure is for a whole 

year, but if packers acquire large amounts of supply in advance for 

one timeframe, damage can be done. As recent as this past February, there were nearly 4 weeks without a cash market in my part 

of the world. As the packers had acquired enough inventory in advance through forward and formula contracts with many of these 

cattle coming from Canada. And when trade did resume, the market had lost nearly $10 a hundredweight. 

The impact of packer concentration and abusive contracting practices is also evident in the declining share of each beef retail dollar 

that actually reaches producers. With the producers’ share of each 

retail dollar earned on beef being 47 cents in 2005, down from 56 

cents in 1993. Slaughter cattle I am selling now are bringing about 

$1,000 a head and take about 16 months of care and feed to get 

them to that point. After a packer buys that same animal for 

$1,000, roughly in the next week, the packer and the retailer resale 

that same animal for $2,100. The Farm Bill should ensure that 

anti-trust and competition laws are effectively and vigorously enforced. 

In closing, I would like to mention a few issues that are in dire 

need of being addressed before the 2007 Farm Bill due to potential 

delays. First, there was a precipitous drop in the U.S. fed cattle 

prices that began in late January of this year and continues 

through today despite widespread reports of tight supplies and 

strong beef demand, demonstrating the need to immediately 

preauthorize livestock Mandatory Price Reporting in accordance 

with recommendations recently made by the GAO. We support the 

recommendations proposed by Senators Grassley and Harkin and 

trust that transparency in the market can be improved by expanding and strengthening mandatory livestock price reporting as 

quickly as possible. 

Second, the current import and volatile market situation highlights the need to implement the 2002 mandatory country boards 

and labeling law as soon as possible. It breaks my heart that as 

a producer, we can produce the best product in the world and then 

have U.S. consumers buying Japanese or Argentine beef, all the 

while paying top dollar, thinking it’s U.S. beef. With importers 

pocketing huge profits. 

39

Next, we can immediately increase packer competition and limit 

concentration by passing S. 3519, the Agriculture Small Business 

Opportunity Enhancement Act, which would allow interstate sales 

of state inspected meat and poultry. 

Finally, as we push to reopen our export markets to U.S. beef, 

we must remember that the customer is king and allow individual 

packers to voluntarily test for BSE. The future of the cattle industry will be bright as long as the needs of independent producers are 

watched out for. Thanks for allowing me to provide input at this 

important hearing. 

[The prepared statement of Mr. Nelson can be found in the appendix on page 111.] 

Senator CHAMBLISS. Thank you. Mr. Dean. 

STATEMENT OF MR. JIM DEAN, FREMONT FARMS, 

OSKALOOSA, IOWA REPRESENTING UNITED EGG PRODUCERS 

Mr. DEAN. Thank you, Mr. Chairman. I am Jim Dean of Fremont 

Farms in Oskaloosa, Iowa. We are egg producers and we very much 

appreciate the chance to testify before the Committee on the—and 

offer some ideas on the 2007 Farm Bill. 

I am honored to testify on behalf of United Egg Producers. UEP 

is a cooperative whose members independently market about 90 

percent of the nation’s eggs. Since 1968, UEP has provided leadership in the U.S. egg industry, not only performing the functions of 

a trade association, but also providing a number of other services, 

including facilitating the trading of eggs, and arranging direct export sales and overseas—to overseas customers. 

The U.S. egg industry generates several billion dollars a year in 

cash farm receipts and creates jobs and economic opportunity in 

rural America. There is some egg production in nearly all states, 

but about half of all layers are in five states; Iowa, Ohio, Indiana, 

Pennsylvania and California. The next five largest states are 

Texas, Nebraska, Florida, Minnesota and Georgia. These top 10 

states account for nearly three- quarters of the laying hens in the 

country. Our industry is honored that six of the 10 states are represented by this Committee. 

U.S. table egg production for 2005 is 213 million cases, 70 percent were sold into retail stores, 31 percent destined for breaking 

and further processing as food ingredients for other value-added 

uses. A little more than 8 percent was sold to food- service outlets 

and other institutional users. Under 1 percent was exported, but 

the industry is somewhat more export-dependent than implied by 

this statistic, which does not include exports of further processed 

eggs. 

The egg industry neither receives nor seeks direct income or 

price supports. However, our industry has several concerns that we 

hope you will consider addressing in the 2007 Farm Bill. The remainder of my testimony will cover these specific points. 

Avian influenza—we ask to provide in the Farm Bill that indemnities for LPAI are to be paid at 100 percent of the properly assessed production value of any birds that must be destroyed and 

should also cover expenses involved in the vaccination, cleaning, 

disinfections and other measures that state or Federal officials may 

require to be taken by production of an outbreak. 

40

Controlling LPAI is directly relevant to our efforts to prevent 

high-path avian influenza. Low-path viruses can mutate and in the 

past have mutated into highly pathogenic forms. The largest previous outbreak of high-path avian influenza in the United States 

was in the northeast in 1983 and 1984 involved in a virus that 

started low-path and mutated into high-path. 

Also that we ask that in the—as far as the flock identification 

and National Animal Identification System, that we’d protect the 

identities as much as possible for the protection of information submitted by producers under the NAIS system. Also, we request that 

in the 2007 Farm Bill authorize a program to research on air emissions mitigation technologies, emphasizes on on-farm applications, 

with particular attention to the technologies’ efficacy in reducing 

emission rates, operational feasibility and affordability. 

And finally, UEP asks the members of the Committee to oppose 

the inclusion of any provisions in the Farm Bill that would harm 

our industry. For example, legislation has been introduced in the 

House of Representatives that would require all Federal food procurement to be conditioned on animal welfare standards, specified 

in the text of the legislation, not through any objective scientific 

procedure. 

In the case of egg—in the case of the egg industry, the legislation 

appears to require all Federal purchases to be limited to cage-free 

or free-range eggs and similar production systems. As an organization, we are not opposed to those systems, and indeed some of our 

members operate them. But eggs produced in this way are typically 

two to three times as expensive as conventional produced. The result of the legislation—not just for eggs, but for milk production. 

In conclusion, as an Iowan, I am proud to be part of U.S. agriculture in this new century. I am also honored that this Committee 

came to Iowa for this hearing. Coming from a variety of states, you 

are well aware of producers’ concerns about similar—are similar 

across the country. We look forward to working with the Committee on a sound—on a sound forward- looking farm policy for 

coming years. Thank you. 

[The prepared statement of Mr. Dean can be found in the appendix on page 121.] 

Senator CHAMBLISS. Thank you. Mr. Kerns. 

STATEMENT OF MR. STEVE KERNS, REPRESENTING IOWA 

PORK PRODUCERS ASSOCIATION, CLEARFIELD, IOWA 

Mr. KERNS. Chairman Chambliss, Senators Harkin and Grassley, 

welcome. Thank you for the invitation to this hearing. My name is 

Steve Kerns; I’m the immediate past President of the Iowa Pork 

Producers Association and a current Chairman of the Public Policy 

Committee. I’m a pork producer from southwest Iowa in Clearfield. 

As you know, pork producers are generally not the largest recipients of any of the Farm Bill provisions. However, we do have many 

policy implications which could be discussed and therefore, we 

would follow the Farm Bill discussions closely on behalf of our 

members. 

One issue that should not wait until next Farm Bill is MPR. Currently the Mandatory Price Reporting system for livestock has 

lapsed and negotiations are ongoing between the Senate and the 

41

House over the new language. The Iowa Pork Producers Association is on record favoring the Senate version over the House. I 

thank the Senate, and especially Senators Harkin and Grassley, for 

their work on this issue and urge the Congress to adopt the Senate 

version as soon as possible. This issue is too important to wait for 

the next Farm Bill consideration. 

What livestock producers need is more transparency in the marketing process. We don’t need to know the price each producer received for his livestock, but we do need to know how the prices are 

settled and negotiated, are compared to the rest of the market. 

Regardless of the discussions or timing of the new Farm Bill, 

Congress should extend TPA for the President. It is very important 

for the Agriculture trade that future administrations have the ability to negotiate the finer details of trade agreements. 

Packers and Stockyards is one area of that competition which 

needs attention. It needs to be revised. The OIG report on GIPSA 

noted that change is needed within the agency. Senate Bill 2307 

is a good start at this process. This bill would authorize USDA to 

establish an Office of Special Counsel whose sole responsibility will 

be to investigate and prosecute law violations. Based on the OIG 

report, Senate file 2307 adds important provisions and improvements to this current process. 

Packer feeding and contracting in agriculture is becoming more 

commonplace. In Iowa, our Attorney General has been negotiating 

with individual processors to resolve legal challenges to Iowa’ packer feeding laws. Many of the agreements between the AG and individual firms discuss contracting issues. One provision important to 

producers is the state in which the legal challenges are resolved, 

also known as venue. It makes sense to most producers that the 

state in which the production takes place should be the state where 

legal disputes are resolved. This is important for both production 

contracts and marketing agreements. In Iowa, most packers involved with negotiating with the AG, have this language in part of 

their agreement with the state of Iowa. 

Iowa is one of the pilot states for whole farm insurance coverage, 

which includes livestock. In most cases, livestock revenue assurance together with crop insurance can reduce the premiums compared to insuring enterprises separately. It has worked relatively 

well but the usage rate could be increased. 

Federal renewable fuels targets should result in putting more 

grain into ethanol production and this could impact the price of 

corn and or feed costs. We are hearing more and more from pork 

producers concerned about the price and availability of grain for 

livestock feed. Therefore, we continue to advocate safety values in 

the national policy, which allows for suspension of mandated programs when feedstock supplies are low. 

Furthermore, more research needs to be conducted to evaluate 

the consistency and nutritional value ethanol by- products in order 

to develop feeding recommendations for livestock. Under the Conservation title, Congress should modify the EQIP program to be 

more usable to pork producers. Second, unless done beforehand, 

Congress should clarify that animal manure was never intended to 

be a hazardous waste. 

42

Third, the 2002 Farm Bill included a new Conservation Security 

Program, which was a step in the right direction and needs further 

consideration and funding. And finally, various conservation programs have assisted farms in reducing soil erosion on farms, not 

much is known about a concentrated or coordinated effort to target 

and solve water quality issues within an entire watershed. We 

should begin to evaluate a watershed approach to agricultural 

water quality impacts. Several Federal agencies and their programs could be targeted to pilot watersheds, with cooperation of 

the area farmers and other landowners. 

We can envision combining the strengths of individual programs 

within on watershed called the solar and water quality. This could 

include programs like GRP, CRP, CSP, EQIP and WREP. While 

even these combined programs cannot be expected to solve all pollution events, coordinating and concentrating these programs could 

have a big impact on one watershed. 

Furthermore, it would be a new cooperative approach with potentially more success than the traditional carrot and stick approach. 

Thank you for considering our thoughts. 

[The prepared statement of Mr. Kerns can be found in the appendix on page 127.] 

Senator CHAMBLISS. Gentlemen, thank you all very much. You 

mentioned Mandatory Price Reporting and we have been working 

to get Mandatory Price Reporting reauthorized but frankly, we 

have run into some significant roadblocks, which actually arose 

from concerns right here in Iowa. 

Currently, the program’s working on a voluntary manner, as you 

know. However, many folks want to see this program reauthorized, 

and because it is a law that has expired, as Chairman of the Ag 

Committee, I think it’s incumbent upon me to push this forward to 

hopefully get it reauthorized. The House has reauthorized a package that had several changes in it that were recommended by several national livestock groups, and frankly, my two friends here—

and I don’t have dog in this fight, so I can talk about this—my two 

friends here decided that was not the way we needed to go and the 

Senate bill reauthorized the bill—the law as written for a 1–year 

period of time, the House is 5 years—the bill that we authorized—— reauthorized had no changes in it. 

So, we’re at loggerheads right now as to whether or not, No. 1, 

and changes ought to be made, second whether it ought to be for 

1 year or 5 years and we have not been able to make any headway 

whatsoever. So, Mr. Scheitler, Mr. Nelson, Mr. Kerns, let me ask 

you three gentlemen just to comment on this. What do we need to 

do, because I would like to get this done? You all tell these two 

guys what they need to do, so we can do. 

Mr. SCHEITLER. Mr. Chairman, we’re very fortunate to have 

these two gentlemen representing us. 

Senator CHAMBLISS. Boy, if that’s not a political answer——

Mr. SCHEITLER. We truly want do reauthorization of Mandatory 

Price Reporting. There’s no question about it and I really believe 

that we’ve got the two best-qualified individuals at this table to 

work that out if it needs to be some sort of compromise. Under no 

circumstances should it be put off. If anything it should be refined, 

43

implemented right away and hopefully more detailed and better 

price reporting. 

Senator CHAMBLISS. OK. Mr. Nelson. 

Mr. NELSON. I haven’t actually read the legislation and I’m not 

sure really where the holdups are, but I know we’re more than 

willing to do anything that we can behind the scenes to try to push 

this piece of legislation through, it is very critical. Giving the examples that I stated with some of the goings on in the marketplace 

today, we need to be able to have that transparency and follow the 

current state of the markets. 

Senator CHAMBLISS. Mr. Kerns? 

Mr. KERNS. Yes, I think you know our position. We fully support 

the Senate version. We’ve worked with Senators Harkin and Grassley and we appreciate what they’ve done to make the bill more 

transparent. But the House bill doesn’t—little to solve the transparency of problems that were existent and are existent with the 

current bill. Therefore, we feel provisions need to be made adopted 

fairly quickly. 

Senator CHAMBLISS. OK, and for 5 years? 

Mr. KERNS. I believe that we could—we need livestock price reporting forever. I mean, I think that we can have maybe for 1 year 

if that’s what’s necessary to get it implemented and reauthorized 

right away. Five years would be better. But, I think the fact that 

we need mandatory livestock price reporting in place——

Senator CHAMBLISS. But if we can get the bill right, I don’t think 

there’s a problem whether it’s 1 year or five years. One year basically was to try to get us to a point where we could get some input 

from a GAO report. So, that’s not really fair. 

Last, Mr. Dean, in your testimony, you mentioned some measures the egg industry is taking to address animal welfare standards, particularly United Egg Producers certified program. How 

does this program go above and beyond the animal welfare standards, which are already in place? 

Mr. DEAN. What we did was put a group from academia together, 

from the scientific community together, and had them do studies 

and research for us. We’ve taken our cage density to a different 

level. We’re using sound science in our program rather than other 

situations and right now, 90 percent of the industry is on that type 

of program where we use sound science to try and come up with 

the needed benefit—welfare benefits for the animals. 

We don’t necessarily agree with the free-range concept. It’s a 

practice that’s used but that then can lead into issues with avian 

influenza, where they can go and intermingle with migratory birds 

and ducks and so we don’t necessarily feel that’s a wise approach 

to take to in the industry. Europe has gone into certain countries 

have actually banned cages completely. The scientific community 

will tell you that banning cages is not the way to go and not in the 

best for the animals and the livestock. 

Senator CHAMBLISS. OK, Senator Harkin. 

Senator HARKIN. All right, thank you very much Mr. Chairman 

Let me first thank you all for being here. I’d get back to Mandatory 

Price Reporting thing that Senator Grassley and I have worked together on, in harmony on this thing. 

44

As you know, we ask for a GAO study of this. We’ve got the GAO 

study; we ask only that the findings of the GAO basically, be incorporated in what we propose. We are at a sticking point with the 

packers right now. One of the GAO findings was that we needed 

to have compliance reports and how they were complying with this. 

The packers are objecting to that and we’re trying to find some way 

to work that out now. Because we expressly put in our bill that it 

couldn’t include proprietary information. They were concerned 

about that, well, we agree, we don’t want proprietary information, 

what we do need to know, whether or not they are complying and 

what the patterns are and that type of thing so that we have some 

basis on which to know, whether they’re doing the thing right or 

not. 

Well, that’s just where we are. I don’t know where we go from 

here and what kind of compromise we can work out, but so far, 

we’re sort of at loggerheads on that. The bill isn’t worth anything 

unless we have compliance reports and compliance audits that we 

know to go in and check on them—on these packers and, well, I 

don’t know how we’re going to be able to work it out. But, we’re 

working on it. I didn’t mean to get off on all that, now. But it was 

a big issue there on that. 

Country of origin labeling. Now, are you in favor of country of origin labeling and I just want to ask Mr. Nelson that, too? I mean, 

you know, we had in our bill it was supposed to be implemented 

by 2004 we’re now 2006, we’re 2 years past that and we can’t seem 

to quite get it done yet. 

Mr. SCHEITLER. That’s correct, Senator. Actually the Iowa Cattlemen’s Association has policy supporting mandatory country of origin labeling. But, we currently have some problems with the bill 

at hand. We believe that it should include all species of animals 

and the meat derived from it and also it should include the meat 

at retail level in food service. The current bill probably would only 

cover 30 to 40 percent of the meat that’s sold in this country and 

I think that if we were to encompass all meat and actually the food 

and the meat at retail level and food service that is currently the 

policy of the Iowa Cattlemen’s Association. 

Senator HARKIN. You say the present bill would only cover 30 to 

40 percent of all the meat involved. 

Mr. SCHEITLER. Yes, it does not cover any meat that is handled 

through food service or the restaurant industry or anything like 

that. It basically—the only products that are covered are whole 

muscle meat in the meat case. If it’s been processed in any way 

shape or form, it does not pertain to that meat. 

Senator HARKIN. Mr. Nelson. 

Mr. NELSON. Yeah, R-CALF’s position is, you know, we’re definitely in favor of mandatory country of origin labeling and he does 

speak correctly there, that it’s mainly at the retail meat cases 

where the rule, as it’s written, would take effect. And we think 

that’s great; let’s get it enforced. If it needs to be enhanced and expanded, then maybe let’s do that down the road, but there’s been, 

obviously, numerous years of foot dragging in trying to get this 

bill—law implemented. 

Senator HARKIN. Pork Producer, Steve. 

45

Mr. KERNS. Well, Iowa Pork Producers Association delegates 

strongly endorse mandatory country of origin. 

Senator HARKIN. Country of origin labeling, yeah. And Mr. Dean, 

I don’t know if you have a dog in this fight. 

Mr. DEAN. No. 

Senator HARKIN. Really, you don’t have one on that. Concentration issues—avian flu, I did want to touch on that a little bit with 

you, Mr. Dean. The issue of low pathogenic avian influenza and the 

indemnity issue—I wear another hat in the Senate and that is on 

the Health Committee—Health Committee and we’re looking a lot 

at this whole avian flu and what we need to do to beef up our, no 

pun, what we need to strengthen our public health infrastructure 

to get ready for this. 

A lot of it is overlooking the animal side of this. And so it’s become apparent to us on the health side that we need to do something to protect in terms of the low pathogenic that can mutate 

into the high pathogenic, I’m getting really into the weeds here on 

this. But would you, again, for the record tell us what you believe 

we ought to do on the animal side in terms of indemnification for 

flocks with low pathogenic avian influenza. 

Mr. DEAN. Right now there is no provisions for indemnification 

of low-path avian influenza. 

Senator HARKIN. Why is that a problem? 

Mr. DEAN. Well, low-path can mutate into high-path. 

Senator HARKIN. If it’s low-path, it doesn’t harm anything, does 

it? I mean——

Mr. DEAN. You run the risk of—where you run the risk is you 

do not know when or that it’s going to mutate and low-path, there’s 

very few clinical signs when you have low-path avian influenza and 

we would be in favor of testing flocks for low-path and we feel that 

it’s—strongly that it’s a big enough issue that they could turn highpath at any point in time and then once they turn high-path, 

they’re so highly contagious that like, in the state of Iowa that’s got 

51 million chickens, you could virtually wipe out the entire industry before you could quarantine it and stop it. So, the only way, I 

feel, that we can at least get a handle on it, is eliminate it at the 

low-path level before it does mutate. 

Senator HARKIN. And if there are not indemnification fears, then 

people won’t report. 

Mr. DEAN. People aren’t going to be prepared to test their flocks 

and aren’t going to be prepared to eradicate and eliminate the 

birds. 

Senator HARKIN. I think that’s a very important point. Steve 

Kerns, just one last thing on pork production that you mentioned 

about your concern about ethanol and about the amount of corn 

that we’re taking for ethanol and the fact that the by- products are, 

of course that the dried grains are OK for cattle, but not too good 

for pork; two interesting things, as you know, we’re doing some research at Iowa state on that and we need to put more money into 

that research. 

But I ran into an individual last week who’s putting money into 

research and claims that they, and he’s a scientist that they’re 

going to be able to take hog manure and make it into ethanol. Now, 

46

you’ve probably have heard about that, but another cash crop for 

the State of Iowa. 

Well, thank you all very much, gentlemen, thank you for being 

here today and your testimony. 

Senator CHAMBLISS. Senator Grassley. 

Senator GRASSLEY. Yeah, on a couple of issues that some of the 

panelists brought up about concentration and animal i.d. We’re 

going to have an opportunity in this committee on Wednesday, we 

have the new Undersecretary for Marketing and Regulatory programs, Bruce Knight coming before our Committee and we’ll have 

a chance to press him on those issues and I intend to do that. 

In regard to, you know—it was kind of an if question—— if we 

had a DOHA round or where we were headed in a DOHA round, 

which we aren’t going to have now, but for Mr. Scheitler, what do 

you believe should be the highest trade priorities that we have 

since 10 percent of our beef is exported, it’s a very—I’m sure it’s 

a very big issue for your organization. 

Mr. SCHEITLER. It certainly is, Senator. To be honest about it, 

trade negotiations in getting our beef export market opened up had 

been quite frustrating and I don’t need to tell you that. At some 

point in time, we have to address this, probably I believe in a more 

forceful manner. We do need to—and we do support some sort of 

trades, sanctions or retaliation against the Japanese. 

Clearly that’s not a food safety issue, it’s a political issue and we 

need to address that as that. I mean, world trade especially in the 

beef industry’s extremely important. And, it seems the more we 

give, the less we get when it comes to negotiations especially with 

the Japanese. We can agree to about anything they want to at 

some point in time, but they always seem to come along with another factor or something to keep that market from opening. 

To be quite frank about it, we’re getting frustrated, that marked 

needs to be opened up and they need to realize that we’re not going 

to stand for it as a public and a cattle industry in this country. 

Senator GRASSLEY. And Mr. Nelson, you spoke some in your testimony about allowing voluntary BSE by U.S. packers, I presume 

that’s a Creekstone issue? 

Mr. NELSON. Correct. 

Senator GRASSLEY. Which I have written to the Department of 

Agriculture about it. Based on supporting that, what effect do you 

think that private testing would have on domestic and foreign beef 

meat markets, would it provide U.S. supplier with a greater ability 

to compete in the market. 

Mr. SCHEITLER. We believe that it would, when foreign countries 

have asked to, you know—as a condition of making beef purchases, 

if the beef was accompanied by a test, then they in fact would be 

purchasing beef and they’re not today, we think that it’s done great 

harm to our industry. In a normal year you mentioned that 10 percent level of exports of our beef, but in the last year it was down 

closer to 4 percent and at the same time we’re continuing to import 

at about 18 percent of what we consume in this country. 

So, when we lose, even just 1 percent of the export, it depresses 

our beef price here domestically by about 1 percent. So, the net 

swing is at about—we have about 10 percent lower market level for 

live cattle due to the reduction in beef exports. 

47

Senator GRASSLEY. I have no further questions. 

Senator HARKIN. I want to follow up on one thing in both your 

testimonies, Mr. Nelson, Mr. Scheitler. It seems that in your testimony, Mr. Nelson, you are capital but more, obviously, more concerned about the concentration issue. Seems to me that Mr. 

Scheitler then you were in your testimony, I could be misinterpreting that. 

Mr. Nelson pointed out something interesting in his written testimony, he said the share—the producer’s share of the beef market 

has gone from 56 cents a dollar in 1993 down to 47 cents last year. 

To me, that’s alarming, so if we continue on that path, we just 

can’t continue on that path, so I’m perhaps concerned about this 

concentration issue, too and this is a kind of a question I wanted 

to ask and I lost my point in your testimony. But the fact that if 

packers were so concentrated in packers bill that they can use imports then, you see, and they can use imports to keep down the 

price to our local producers. Then, it takes away more and more 

share of the consumer dollar from our producers. And I just wonder 

if you could address yourself to that, it’s a concern that I have on 

the whole concentration issue. 

Mr. SCHEITLER. Yes, Senator I’d like to. There’s no question 

about the fact that anything that would reduce the farmers share 

or the cattlemen’s share, concerns us greatly, there’s no question 

about that. On the same token, we need, and I think as you have 

proven with this packers and stockyards issue and stuff that we 

have, and I want to thank you, by the way, for your efforts in that. 

We need more enforcement, we need agencies and we need PNS 

to be effective in what they do. We would, obviously, prefer to have 

many more packers, many, many more packers. And, yet reality 

tells us that that’s difficult, but at the same time, it’s very important to see to it they are not abusing the system and that is partly 

what PNS was designed to do. 

Senator GRASSLEY. And we do need to enforce it, thank you for 

that. Mr. Nelson, anything else on that? 

Mr. NELSON. I would actually like to relate it to your question 

about, how do we bring young people back into agriculture? If we 

have a competitive beef industry—cattle industry in this country, 

it’s not an integrated industry to this—to date. Although, there are 

integrators that would like to vertically integrate the cattle production end of the business. 

You can go to counties in Iowa that have eight or 10 times more 

cattle than other counties and those counties are very prosperous 

and they have a large population of young people that are involved 

in agriculture. So, I don’t think we can have one without the other. 

You know, we’ve got tremendous opportunities with distillers, 

grains here in Iowa to enhance cattle production. But, if we don’t 

competitive markets, I think we’d just be kidding ourselves and 

kidding the young people to want to get them back involved in the 

cattle business without providing them competitive markets to be 

able to market their products. 

Senator GRASSLEY. Mandatory pressure point transparency, 

transparency, transparency. Thank you all, thank you Mr. Chairman 

48

Senator CHAMBLISS. Thank you, let me just make a quick comment relative to this issue of exported beef to Japan, there are not 

two stronger supporters of U.S. beef than Senator Grassley and 

Senator Harkin. We have had several different meetings within the 

Ag Committee with the Japanese Ambassador. We have strongly 

emphasized to him that we are not going to let this arbitrary decision on their part continue on. 

You’re exactly right, this is not a food safety issue. This is a 

health issue and if it were a food safety issue, the Japanese would 

not be eating their own beef, because they’ve had 26 cases of BSE 

that they’ve discovered in Japanese calves and we’ve got one, and 

that was a cow that came here from Canada. 

So, let me just say that these two guys, along with all members 

of the Committee are really working hard to make sure that we get 

that market reopened or we’re going to look very strongly at the 

imposition of sanctions against the Japanese. 

And last, let me just say country of origin labeling is an issue 

that has been very controversial for some time. It sounds like it 

ought to be a very easy provision to implement, but Mr. Scheitler, 

I’d go back to the example of a cow that came down through Canada for the last couple of months to Mr. Nelson’s feedlot. That cow 

was a product of a heifer that was born in Mexico that was sold 

to a producer in Canada and that heifer was artificially inseminated by a bull from Argentina. 

Now, where the heck is that beef coming from? So, it’s a—— it’s 

not an easy issue to deal with even at the retail level. But, we’re 

going to keep working at it and you all could not have two better 

people working for you on the Senate side than these two guys. 

I want to thank the witnesses—all the witnesses for their testimony today as it helps us prepare for the reauthorization of the 

Farm Bill. I encourage anyone, any of you who are interested in 

submitting a written statement for the record, to visit the Committee’s website, which is agriculture.senate.gov for details. We can accept written statements up to five business days after this hearing. 

Thank you for your interest in agriculture policy. This hearing is 

now adjourned. 

[Whereupon, at 12:21 p.m., the Committee adjourned.] 

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