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30–734 PDF 2006

REVIEW OF FEDERAL FARM POLICY

HEARINGS

BEFORE THE

SUBCOMMITTEE ON CONSERVATION, CREDIT,

RURAL DEVELOPMENT, AND RESEARCH

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MAY 1, 2006, HARRISBURG, PA

JULY 27, 2006

SEPTEMBER 18, 2006, EL RENO, OK

Serial No. 109–31

(

Printed for the use of the Committee on Agriculture

www.agriculture.house.gov
COMMITTEE ON AGRICULTURE

BOB GOODLATTE, Virginia, Chairman

RICHARD W. POMBO, California

Vice Chairman

TERRY EVERETT, Alabama

FRANK D. LUCAS, Oklahoma

JERRY MORAN, Kansas

WILLIAM L. JENKINS, Tennessee

GIL GUTKNECHT, Minnesota

ROBIN HAYES, North Carolina

TIMOTHY V. JOHNSON, Illinois

TOM OSBORNE, Nebraska

MIKE PENCE, Indiana

SAM GRAVES, Missouri

JO BONNER, Alabama

MIKE ROGERS, Alabama

STEVE KING, Iowa

MARILYN N. MUSGRAVE, Colorado

RANDY NEUGEBAUER, Texas

CHARLES W. BOUSTANY, JR., Louisiana

JOHN J.H. ‘‘JOE’’ SCHWARZ, Michigan

JOHN R. ‘‘RANDY’’ KUHL, JR., New York

VIRGINIA FOXX, North Carolina

K. MICHAEL CONAWAY, Texas

JEFF FORTENBERRY, Nebraska

JEAN SCHMIDT, Ohio

MICHAEL E. SODREL, Indiana

COLLIN C. PETERSON, Minnesota,

Ranking Minority Member

TIM HOLDEN, Pennsylvania

MIKE MCINTYRE, North Carolina

BOB ETHERIDGE, North Carolina

JOE BACA, California

ED CASE, Hawaii

DENNIS A. CARDOZA, California

DAVID SCOTT, Georgia

JIM MARSHALL, Georgia

STEPHANIE HERSETH, South Dakota

G.K. BUTTERFIELD, North Carolina

HENRY CUELLAR, Texas

CHARLIE MELANCON, Louisiana

JIM COSTA, California

JOHN T. SALAZAR, Colorado

JOHN BARROW, Georgia

EARL POMEROY, North Dakota

LEONARD L. BOSWELL, Iowa

RICK LARSEN, Washington

LINCOLN DAVIS, Tennessee

BEN CHANDLER, Kentucky

PROFESSIONAL STAFF

WILLIAM E. O’CONNER, JR., Staff Director

KEVIN J. KRAMP, Chief Counsel

JOHN HAUGEN, Communications Director

ROBERT L. LAREW, Minority Staff Director

SUBCOMMITTEE ON CONSERVATION, CREDIT, RURAL DEVELOPMENT, AND RESEARCH

FRANK D. LUCAS, Oklahoma, Chairman

JERRY MORAN, Kansas

TOM OSBORNE, Nebraska,

Vice Chairman

SAM GRAVES, Missouri

MIKE ROGERS, Alabama

STEVE KING, Iowa

CHARLES W. BOUSTANY, JR., Louisiana

JOHN J.H. ‘‘JOE’’ SCHWARZ, Michigan

JEFF FORTENBERRY, Nebraska

TIM HOLDEN, Pennsylvania,

Ranking Minority Member

HENRY CUELLAR, Texas

MIKE MCINTYRE, North Carolina

BOB ETHERIDGE, North Carolina

ED CASE, Hawaii

LINCOLN DAVIS, Tennessee

STEPHANIE HERSETH, South Dakota

G.K. BUTTERFIELD, North Carolina

JOSHUA A. MAXWELL, Subcommittee Staff Director

(II)
(III)

C O N T E N T S

MAY 1, 2006, HARRISBURG, PA

Page

Holden, Hon. Tim, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 2

Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement .................................................................................... 1

WITNESSES

Coccia, Donald A., founder and chairman, Agra Biofuels LLC, Middletown,

PA .......................................................................................................................... 6

Prepared statement .......................................................................................... 32

Hostetter, Gregory E., dairy producer, Jonestown, PA ........................................ 8

Prepared statement .......................................................................................... 28

Laudenslager, Karl, dairy producer, Halifax, PA ................................................. 18

Prepared statement .......................................................................................... 29

Masser, Keith, president, Sterman Masser Potato Farms, Sacramento, PA ...... 21

Seidel, Glenn, livestock producer, Womelsdorf, PA .............................................. 20

Prepared statement .......................................................................................... 32

Shafer, John K., specialty crop producer, Tamaqua, PA ...................................... 7

Prepared statement .......................................................................................... 30

SUBMITTED MATERIAL

Gilbert, Thomas A., the Wilderness Society, statement ....................................... 36

JULY 27, 2006

Cuellar, Hon. Henry, a Representative in Congress from the State of Texas,

prepared statement .............................................................................................. 42

Holden, Hon. Tim, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 41

Lucas, Hon. Frank D., a Representative in Congress from the State of

Okalhoma, opening statement ............................................................................ 39

WITNESSES

Lasseter, Teresa C., Administrator, Farm Service Agency, U.S. Department

of Agriculture ........................................................................................................ 44

Prepared statement .......................................................................................... 95

Nomsen, David E., vice president, government affairs, Pheasants Forever,

Inc., Garfield, MN ................................................................................................ 62

Prepared statement .......................................................................................... 88

O’Keefe, John, cattle producer, National Cattlemens Beef Association, Adel,

OR .......................................................................................................................... 65

Prepared statement .......................................................................................... 85

Rey, Mark E., Under Secretary, Natural Resources and Environment, U.S.

Department of Agriculture .................................................................................. 42

Prepared statement .......................................................................................... 107

Schuler, Dale, president, National Association of Wheat Growers, Carter,

MT ......................................................................................................................... 64

Prepared statement .......................................................................................... 92

Schwank, Judith L., county commissioner, County of Berks, Reading, PA ........ 67

Prepared statement .......................................................................................... 90
Page

IV

Wilson, Bill, president, National Association of Conservation Districts, Kinta,

OK ......................................................................................................................... 60

Prepared statement .......................................................................................... 78

SEPTEMBER 18, 2006, EL RENO, OK

Goodlatte, Hon. Bob, a Representative in Congress from the Commonwealth

of Virginia, opening statement ............................................................................ 135

Holden, Hon. Tim, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 134

Lucas, Hon. Frank D., a Representative in Congress from the State of Oklahoma, opening statement .................................................................................... 133

WITNESSES

Blubaugh, Scott, producer, Tonkawa, OK ............................................................. 138

Prepared statement .......................................................................................... 171

Crall, Les, peanut producer, Weatherford, OK ..................................................... 142

Prepared statement .......................................................................................... 180

Herriman, Scotty, producer, South Coffeyville, OK .............................................. 156

Prepared statement .......................................................................................... 176

Kouplen, Steve, cow-calf producer, Beggs, OK ...................................................... 136

Prepared statement .......................................................................................... 209

Krehbeil, Jeff, producer, Hydro, OK ...................................................................... 139

Prepared statement .......................................................................................... 203

Lafferty, Ladd, producer, Watonga, OK ................................................................. 161

Prepared statement .......................................................................................... 206

Lam, Try, producer, Pauls Valley, OK ................................................................... 158

Prepared statement .......................................................................................... 213

Popplewell, Joe, pork producer, Hennessey, OK ................................................... 159

Prepared statement .......................................................................................... 190

Robbins, Danny, cotton producer, Altus, OK ......................................................... 141

Prepared statement .......................................................................................... 219

Rose, Kenneth, producer, Keyes, OK ..................................................................... 144

Prepared statement .......................................................................................... 182

SUBMITTED MATERIAL

Pjesky, Hope, producer, Goltry, OK, statement .................................................... 216
(1)

REVIEW OF FEDERAL FARM POLICY

MONDAY, MAY 1, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONSERVATION, CREDIT, RURAL DEVELOPMENT, AND RESEARCH, COMMITTEE ON AGRICULTURE,

Harrisburg, PA.

The subcommittee met, pursuant to call, at 11:30 a.m., at the

Farm Show Complex, Harrisburg, PA, Hon. Frank D. Lucas (chairman of the subcommittee) presiding.

Member present: Representative Holden.

Staff present: Josh Maxwell, subcommittee staff director.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA

Mr. LUCAS. This hearing of the committee on Conservation, Credit, Rural Development and Research will come to order. Good

morning and welcome. I would like to thank everyone for joining

us today at the Farm Show Complex. I find it fitting that we hold

today’s hearing at this marvelous 25-acre facility that is dedicated

to promoting Pennsylvania’s diverse agricultural production. The

Agriculture Committee is devoted to reaching out to all regions of

this Nation, to listen to comments and concerns of producers that

are affected by farm policy. The full committee has begun this process earlier this year and has already traveled to North Carolina,

Alabama, Georgia, Nebraska and will be heading to Colorado and

Texas, among other States, in the near future.

Mr. Holden and I have traveled here today so that Pennsylvania

producers may voice their concerns on conservation, credit, rural

development issues, as well as other important issues that must be

addressed. The testimony we hear today and the information we

gather over the remainder of this year will be used by the committee to draft legislation for the next farm bill. The shape of the next

farm bill will be unclear until we receive a budget number next

year. I would anticipate that the next farm bill will be written

under much tighter budget constraints than the previous bill. This

makes hearings such as this one today even more important as producers can make record of their priorities and improvements for

the 2007 farm bill.

Many producers have also called for an extension of the current

farm bill. While I agree that the 2002 farm bill is very successful

and popular with the agricultural sector, many of my urban colleagues, perhaps, would not agree. With rising deficits and the goal
2

to reduce Federal spending, opening up the current farm bill would

very well be a bulls eye to cutting funding, not to mention making

it vulnerable to amendments on much more stringent environmental regulation. I will work with my colleagues in the Agriculture Committee to develop sound policy that provides producers

with a safety net in the face of rising energy costs, unfair trade

barriers and government regulation.

I ask that you inform your representatives of the importance of

having a farm bill that provides you, the producer, with the ability

to continue to provide food and fiber security to this Nation.

Before I begin, I would like to thank Mr. Holden for hosting the

subcommittee here in Harrisburg, for the staff of the Farm Complex and the Pennsylvania Department of Agriculture for their

hard work in making the arrangements for today’s hearing. And I

would also like to thank our witnesses, who have taken time away

from their farming operations to testify before the subcommittee.

With that, I most assuredly look forward to our testimony and I

turn to my ranking member, the gentleman from Pennsylvania,

Mr. Holden, for any comments he may offer.

OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN CONGRESS FROM THE COMONWEALTH OF PENNSYLVANIA

Mr. HOLDEN. Well, thank you, Mr. Chairman, and thank you for

bringing the subcommittee here to Pennsylvania so we have a

chance to, as you mentioned in your opening statement, look at

what we were able to do in the last farm bill and what we need

to do in the next farm bill as we look at all regions of the country

and Mr. Chairman, I appreciate your leadership. We have been at

this for some time now and it has been a great privilege and honor

to serve with you as your ranking member, and I also want to

thank you for your indulgence, as I mentioned last week, my opening statement might be a little longer than usual, so I appreciate

that.

But Mr. Chairman, I look forward to hearing from our witnesses.

Besides our well-qualified panel of witnesses, I would like to recognize Pennsylvania’s secretary of agriculture, Dennis Wolff, who just

had to leave for another meeting; the executive deputy secretary,

Russell Redding; deputy secretary for agriculture and consumer

protection, Bill Wehry; and deputy secretary for marketing and economic development, Cheryl Cook—Mr. Chairman, you might remember Secretary Cook testified at our rural development hearing

a few weeks ago in Washington—who are here in attendance with

us.

Mr. Chairman, agriculture is a vital component of the economic

health of Pennsylvania and the northeastern States. The region’s

agriculture base is highly diverse; dairy, specialty crops, forest

products and some traditional program crops form all the major

part of the farm economy. The Northeast is home to more than

135,000 small and mid-size farms and has a total population of

more than 60 million people. The livelihood of 4 million people in

the region relies on agriculture, yet Northeastern farmers receive

less than 1 percent of Federal agriculture subsidies.
3

The current farm bill has some successes we can point to; the

dairy safety net, through the Milk Income Loss Contract Program

and the largest investment in conservation in the history of recent

farm bills. When we consider the next farm bill, I think we need

to examine whether current conservation programs are working for

all regions and the rising cost of energy and its effect on our farm

families. Further, we should include specialty crops on our agenda.

Pennsylvania is representative of the importance of specialty crops

to the entire Northeast region. Specialty crops are taking on increased importance in Pennsylvania as more growers are producing

for local and metropolitan markets in order to survive.

Specialty crops in Pennsylvania include everything from mushrooms to potatoes, from pumpkins to tomatoes. Jack Shafer is here

today to talk about the variety of specialty crops that he grows.

Specialty crops represent 32 percent of Northeastern agriculture,

but only 21 percent in all of the United States. Generally, the industry has competed well with little Government intervention.

However, our growers share problems with the rest of the Nation,

including high energy prices and natural disasters. Production and

sale of higher value specialty crops also offers a critical means of

compensating for the Northeast high agriculture land values, which

are 150 percent above the national average.

The Federal Government spends only about 3 percent of program

crop dollars on specialty crops. Specialty crop producers across the

Nation would benefit from the advancement of specialty crop programs to enhance production and marketing for this important industry. Specialty crop growers do benefit from conservation programs authored by USDA. Conservation programs assist our farmers and ranchers in strengthening their environmental stewardship, which is so important for looking after land and water that

we will pass on to future generations. I look forward to hearing

from Glenn Seidel about his experience with Federal conservation

programs.

By investing in environmental protection of land and water, the

public benefits from an overall improved quality of life. Our Nation’s farmers and ranchers produce more than traditional food and

fiber; well-managed agricultural land also produces healthy soil,

clean air and water, wildlife habitat and pleasing landscapes, all

of which are increasingly valued by rural and urban citizens, alike.

The conservation title of the current farm bill has dedicated over

$17 billion for conservation, an increase of 80 percent.

During the farm bill debate, one of the major issues discussed

was the original inequity of farm bill programs. Most farmers in

the Northeast region do not benefit from traditional agriculture

programs; they simply do not grow traditional crops in the numbers other regions do. Conservation programs offer them a way to

continue in farming. The Farm and Ranch Lands Protection Program is a Federal farmland preservation program that reimburses

agencies up to 50 percent of the easement purchase price. Pennsylvania lost 134,900 acres of prime farmland from 1992 to 1997.

Since 1996, the program, in partnership with State and local governments and non-governmental organizations, has kept over

440,000 acres of productive farmland in agriculture uses across the

Nation.
4

Farmland preservation is an excellent way of preserving farmland for many years to come and helps provide a means for maintaining a viable rural economy. Conservation programs such as the

Environmental Quality Incentives Program are very important to

dairy farmers in the Northeast region. The structure of dairy farms

has taken a dramatic shift over the past decade. As a representative from a traditional dairy State in the Northeast, my biggest

concern has been how to stabilize and keep small dairy operations

in business. Pennsylvania is the Nation’s fourth largest dairy producer. Dairy is the No. 1 agriculture industry in the State, representing 40 percent of revenue; and I am pleased to have dairy

farmer Greg Hostetter here today to tell us about his dairy operation.

By some means, we must maintain opportunities for farmers like

Greg to obtain credit. Congress created the Farm Credit System

with the statutory mandate to serve agriculture as a permanent,

reliable source of credit even in difficult times. There is inherent

risk involving agricultural lending and the Farm Credit System

plays an important role in agriculture risk management. I think we

can improve the Farm Credit System to allow agri-businesses to

better manage their risk and continue to provide food and fiber security to our Nation.

I look forward to considering any suggestions that the witnesses,

especially Karl Laudenslager, may have to what Congress can do

to ensure the Farm Credit System continues to be successful for

farmers. In the way of encouraging success for our farmers, I am

excited to be from the State that is leading efforts to lessen our Nation’s dependence on imported oil. Pennsylvania is at the forefront

of promoting renewable energy such as ethanol, biodiesel made

from agriculture products like corn and soybeans. Biodiesel offers

advantages to the United States since it is a cleaner burning alternative to petroleum based diesel. It is made from renewable resources like soybeans, reduces certain air emissions and it works

in any diesel engine with few or no modifications.

Independence Biofuels has opened a biodiesel injection facility in

Highspire in my congressional district, not too far from here. This

fuel blending facility is the first in the Nation that can combine

biodiesel with petroleum based diesel or other fuels before they are

put into tanker trucks. I am also pleased to be able to attend the

recent ribbon cutting ceremony for a new biodiesel plant here in

my district in Middletown, also just up the road. AGRA Biofuels

has the ability to process and produce 3 million gallons a year

when operating at full capacity. The plant will employ approximately 50 people and Don Coccia, from AGRA Biofuels is here to

offer his testimony today.

The new renewable standard in the 2005 energy bill, gasoline

will be required to contain 7.5 billion gallons of renewable fuel annually by 2012, but I think we can do more to increase our use of

these renewable fuels and become energy independent. Increasing

use of biofuels will stimulate economic development in our rural

communities. Rural development programs are vital to ensuring

that our traditionally agriculture-based communities do not simply

vanish because of farm and job loss. Rural development initiatives
5

help to advance our rural communities, develop new markets and

provide for economic growth.

Keith Masser is here with us today to talk about his experience

with the USDA value-added grant, which helped him to start a potato dehydration facility in Schuylkill County. Keith’s terrific

project was recently featured in USDA’s Rural Cooperatives magazine. Value-added grants help producers add value to their products before marketing them, for example, by dehydrating fresh potatoes and increase the price paid to the farmer. USDA rural development importantly promotes economic development, helps communities undertake community empowerment programs and supports

essential public facilities and services.

USDA’s Community Facilities Program is vital for sound community development. It is probably the most successful USDA program in Pennsylvania. Increasing grant funds as well as direct

loans available under Community Facilities Programs is a No. 1

funding need. The multi-year backlog is real and significant, currently with a waiting list of over 2 years. This program is essential

for providing rural communities with the resources to prosper.

When rural communities expand and improve drinking water and

wastewater treatment facilities, they can provide cleaner water,

protect the environment and attract industry to provide off-farm income.

Mr. Chairman, we have an obligation to enhance the quality of

life in the Nation’s farmers who are dependent on rural economies

for their employment and economic support. We also have an obligation to the people of America to ensure a safe, affordable and

abundant food supply. One major question we need to ask ourselves during the next farm bill is how do we structure and protect

crucial assistance to our rural and farming communities and to our

consumers. Mr. Chairman, again, thank you for coming here today

and we look forward to the testimony from our witnesses.

Mr. LUCAS. Thank you, Mr. Holden.

A little background for our witnesses here; while Congress tends

to be a place full of all sorts of partisan rancor, you will note, if

you have ever been an insomniac and stayed up late at night and

watched C-SPAN, that the House Agriculture Committee is one of

the most bipartisan groups. We tend to work very closely together

without regard to party or region; since we represent such a small

part of America, we have to pull together. Isn’t that right, Tim?

Mr. HOLDEN. Absolutely, Mr. Chairman.

Mr. LUCAS. And with that, I would like to invite our first panel

who are seated at the table; Mr. Donald Coccia, founder and chairman of the AGRA Biofuels LLC, Middletown, Pennsylvania; Mr.

John Shafer, specialty crop producer from Tamaqua; you would

think with 39 Indian tribes in Oklahoma, I could pronounce that.

Sixteen in my district and a few of yours, by the way, from generations gone by. And Mr. Gregory Hostetter, dairy producer from

Jonestown, Pennsylvania. Mr. Coccia, start when you are ready,

sir.
6

STATEMENT OF DONALD COCCIA, FOUNDER AND CHAIRMAN,

AGRA BIOFUELS LLC

Mr. COCCIA. Thank you very much. Good morning, Mr. Chairman, Ranking Member Holden and members of the subcommittee.

It is a great pleasure to be here today.

It is a great pleasure to be here today to discuss the issue of agriculturally based alternative fuels and biodiesel production, in particular, with you. By way of introduction, my name is Don Coccia

and I am the founder and CEO of AGRA Biofuels, where AGRA

stands for America’s Greatest Renewable Alternatives. I appear

here today not long after accomplishing the surprisingly challenging task of building Pennsylvania’s first commercial biodiesel production facility. The facility was dedicated in January of this year

with the distinct honor of Representative Holden’s presence at that

event. Today my testimony is meant to support Representative

Holden’s leadership and to share ideas and concerns earned

through my recent real-world experiences.

If I could leave just one thought with you here today, it is this:

opportunity. There is just an unbelievable opportunity in developing this industry, both for the Nation and also for farmers. There

are also a lot of challenges, though, that I want to talk about and

specifically talk about in the production area that we are in. Without a doubt, my testimony really should say that it was just too

hard; it was too hard to build a biodiesel facility. In an industry

and a facility that the country desperately needs, it was too difficult, it was too uncertain, it was too expensive, it was too time

consuming to build our facility, it really was.

I thought that we would be embraced with open arms by regulators, by communities, by financing institutions, by insurance institutions and in fact, we found just the opposite. Every step of the

way was an absolute burden. In building what we thought was to

be something that was to benefit the United States, was to benefit

something that is very important and really the foundation, I

think, of our economy, the energy situation. So why should that be

important? Why should it be important that it was so burdensome

for us to actually build this facility?

And on the one hand, there really is a lot of good that we can

say about that because it is an extremely growing, fast-growing industry that provides a lot of opportunity, but the problem is that

so many times when we confront anyone involved in the industry,

it is an issue of first impression, whether it is a local regulator,

State regulators, Federal regulators or anyone in-between in the

private industry, it is always an industry of first impression and

that is a result, really, of our growth.

So we began by building this facility in the hope that we could

prove that alternative energy really served as an answer to the energy needs and the energy concerns that we have here in the

United States today. We specifically researched all the alternative

energies and came up with biodiesel; biodiesel because it provides

opportunities immediately to actually help farmers, to create domestic production and has very few problems in actually introducing either alone, all by itself or in combination with regular petrol

diesel in producing a fuel that we can use immediately.
7

We went about building the facility quickly so that we could

prove that and in fact, we observed exactly what I talked about;

uncertainty, problems at every turn that we still experience today.

Our budget is actually 500 percent. We are 500 percent over budget

as of today to build the facility and still waiting on some certain

permits to get to full production. So my testimony today is to say

this, there is a wonderful, almost unbelievable economic opportunity for us. And there have been programs that have been very

helpful in getting the industry to its exponential growth in the last

few years.

But what we need to now is to commit ourselves 100 percent, as

the president, I think, has in the unbelievable, to me, even 2 years

ago that I would see him in front of the Renewable Energy Association billboard, just last week. But to commit ourselves to developing the infrastructure, the administrative infrastructure that very

much like we have in the State now, we have the Governor’s Action

Team and we have PennTech, that provides technical assistance.

The Governor’s Action Team has the ability to bring together,

with responsibility and authority, all of the regulatory bodies that

are necessary to get something done and that is what we need to

do at the Federal level. We need to create almost a new energy action team to provide one place, whether it is the authority, the responsibility and the information to actually get so that we are in

a template position of building one new facility after another. This

will lead to a number of different initial alternatives from financing, insurance ability, crop development and just a whole host of

real benefits to the farming community and to our Nation, as a

whole.

So in conclusion, I would just like to say it is an exciting time

for alternative energy development. What we need to do now is to

actually develop the infrastructure so that farmers can come and

they can build these facilities and actually, we can take a large

step forward towards American energy independence. Thank you

very much.

[The prepared statement of Mr. Coccia appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you. Mr. Shafer.

STATEMENT OF JOHN SHAFER, SPECIALTY CROP PRODUCER,

TAMAQUA,PA

Mr. SHAFER. Good morning, Chairman Lucas, Congressman

Holden, members of the subcommittee. Thank you for the opportunity to testify here today on the topic of specialty crops. My name

is Jack Shafer and I am a semi-retired farmer from Tamaqua,

Schuylkill County, Pennsylvania. I say semi-retired, as I am very

fortunate to be transitioning the farm over to my son, who will continue the family tradition. Forty years ago I joined the farm in a

partnership with my father. Our farm raises pumpkins, as well as

corn, soybeans and beef cattle. Our pumpkins are mostly retail,

sold at a roadside stand during the months of August, September

and October, targeting the autumn and Halloween markets. In our

not-too-distant history, the farm also grew cabbage and other fresh

market vegetables.
8

I take pride in my professional affiliations and in my agricultural

accomplishments. I am involved in numerous agricultural organizations, one of which is the Pennsylvania Farm Bureau, and I am a

member of the Board of Directors of the Schuylkill/Carbon Farm

Bureau and in 1995 I was honored as the Soil and Water Conservationist of Schuylkill County. I have also served as an agriculture

ambassador to China on a tour. The testimony I offer here today

reflects my personal opinions, as well as features to be included in

the farm bill legislation. But I would note that nearly all of my

views are the same as the policy positions of the Pennsylvania

Farm Bureau.

The 2002 farm bill, as a whole, wasn’t too bad for farmers. It set

a floor under prices and the larger farms had a really good safety

net there. Unfortunately, in the Northeast, we do not have extensive farmland. A lot of the acreage is divided among many farmers

and farmers that grow and raise vegetable and fruit crops, mainly

the vegetable crops, have to rotate several years, 2 to 3 years, to

produce their crops and this is where a mix of commodity crops fall

into the scenario.

The idea of having limited crop or vegetables into large acreage

is a great idea that was pursued many years ago. The main problem I see with agriculture today is in 1963, I could have brought

a brand new Chevy car for $2,300 and 2003 I bought a brand new

Chevy car and it cost me $23,000. It really leaves us in a limbo.

It really affects our bottom line and we have to grow more crops

in order to stay in the mix of things. A recent study I read about

the other week that the farmer only gets 18 percent of the consumer’s dollar; the average person consumes approximately $3,500

worth of food, which comes to about $10 a day; it is either prepared

food or unprepared food. The 2002 farm bill, as it relates to the average consumer cost in agricultural USDA terms, $70 for the year,

which is very small.

CRP and CREP programs have a negative effect to producers and

growers. The lands which are signed up in these programs are

mainly under-funded, funded to the landowner, not to the producer.

The producer is left hanging out there. In my area, we have a lot

of smaller farms that other farmers took over and use them as an

economic base and several of these farms have eroded and left us

out there in limbo.

Regarding fruits and vegetables as a specialty crop, there is a lot

of labor needed to plant these crops and harvest these crops; it is

not mechanized, or to the point it should it be. Here is where immigration, which has been a hot topic the last several months in

Washington. Agriculture has been good to me over the years and

if I ever had the chance to go around again, I would be a farmer

all over again. The rest of my comments can be found in my submitted report and I thank you for the time allotted to me.

[The prepared statement of Mr. Shafer appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you, Mr. Shafer. Mr. Hostetter.

STATEMENT OF GREGORY HOSTETTER, DAIRY PRODUCER

Mr. HOSTETTER. Good morning, Chairman Lucas, and my congressman, Tim Holden. It is an honor and privilege to address this
9

committee on the issues that affect my livelihood, farming. My

name is Greg Hostetter and I am in the dairy business with my

father. We have 90 head of dairy cattle and crop 150 acres of alfalfa, corn and soybeans. My wife and I have a 5-year-old son and

we will be taking over the dairy farm in the next few years when

my father retires. Presently, I serve on the Board of Directors of

the Lebanon County Farm Bureau. My work on many proactive agricultural campaigns has led me to become chairman of the PA

Farm Bureau Promotion and Education Committee, a member of

the PA Department of Agriculture Agriculture Education Advisory

Board, and the Lebanon County Farm Safety Committee.

I was asked to testify, as a dairy farmer, about the issues concerning my family. I will also speak about how we use these programs in the farm bill and their importance to farmers like me. I

will start with MILC, M-I-L-C and currently, MILC-X. This is the

most important program to me and all the dairy farmers I know.

The current cost of production in Pennsylvania is $18.11 per cubic

weight. When the market price of class 1 falls below $16.94, the

MILC program kicks in and helps farmers like me to cover part of

my expenses to produce milk without going into debt, but I still

need to use my cash reserves during these low market periods. But

it is because of programs like MILC and MILC-X, that my farm has

been able to stay in business. Without the MILC program, it would

be hard to ride out the low market, so yes, I strongly support continuation of the dairy price support program at the current level.

Many farmers are concerned about the National ID program. I

share some of their concerns. Let me be clear; I know that providing safe, affordable food supplied to America’s families is top priority, but my concern is that the National ID program needs to be

easy to use and confidential with cost sharing from Government,

industry and producers.

Johnes’ Disease is still present in dairy herds today, according to

my veterinarian. Our herd has never seen any suspicious animals,

probably because we have had a closed herd since 1991, but you

never know when things change. So I support some type of funding

to help farmers who voluntarily want to test or think they should

test for Johnes’ Disease.

Direct Counter Cyclical and Loan Deficiency Program: in 2000 I

started using these programs and have found them very helpful,

especially LDP for when grain prices fall below the loan rate. I find

being able to fax my request for LDP very farmer friendly because

I don’t have to make a trip to the office when we are busy; it is

easy to sign the paper and send it in. I also like using DCP. The

only negative comment I have is that we are paid on old history.

For instance, I receive a wheat payment when I no longer plant

wheat anymore. Instead, I plant more corn. It does not reflect my

current crop information. And my local FSA office is very easy to

work with and they do a good job helping us with the paperwork

and everything else that needs to be done.

National Farm Policy must be balanced. Congress must take into

consideration the regional differences that exist. The Northeast

producers are the closest and most able to meet the agricultural demand of 25 percent of Americans who live in the mid-Atlantic and

Northeastern States. Farm policy must reflect the unique needs
10

and limitations of the Northeast farmers. Congress must look into

the green box and blue box programs that would protect the Northeast dairy farmers and ensure the availability of fresh, nutritious

dairy products.

Mr. Chairman, thank you for holding these regional field hearings here in central Pennsylvania and allowing me to share with

you and the committee how my family uses and needs these programs. Again, it is an honor to be part of this process for the next

farm bill.

[The prepared statement of Mr. Hostetter appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you. Mr. Coccia, you talked about how tough

it was to get in the biofuel industry. You mentioned everything

from State and Federal regulations and just for my perspective,

which was the most challenging part, explaining to your finance

sources what you were going to do or dealing with State and Federal regulations or adopting technology that would cash flow well,

it seems? What part of the process was particularly difficult, from

your perspective, in making this happen?

Mr. COCCIA. The most difficult was, without a doubt, the regulatory concerns that we had. When you come into a new industry,

which this really is, for the United States; we are actually 10 years

behind Europe in implementing and producing biodiesel. Germany,

for example, I think has almost 6,000 retail pumps and I was fortunate enough to travel throughout Europe, Mexico and Central

America and see what the biodiesel industries are doing there. And

what is happening is, and what I am very concerned about, is that

we will be a distinct competitive disadvantage to these countries

because of the regulatory concerns. It came at us from all directions, from Federal, which we still have a problem getting our

hands around, to the State and now even, to this day, the local

code enforcement.

You can’t actually hold these people to what they tell you up

front; they don’t know what the industry is; don’t worry about it,

we are behind you 100 percent, the President is behind you, the

Governor is behind you; go, go, go. We build, build, build and they

come in with cease and desist letters, which we have received four

of, to date. And I have actually had conversations with consultants

who have talked with regulators and come to me in person because

they didn’t want to call or write to create a trail, to say I am not

sure I gave you the right advice and they are taking a different

track now.

And I don’t know what you want to do about these issues of first

impression to everyone, and it is not just regulators. It turned out

that I actually, trying to find insurance, stopped us dead in our

tracks. We actually had a verbal promise to have insurance and an

insurer said I didn’t realize you were doing that; the term is biodiesel, there is diesel there; unfortunately, we have to put you in a

refinery category. I said it is vegetable oil processing; that is all we

are doing. They pulled it and we actually had to stop the construction company, the laborers at the gate because we did not have insurance as required by our lease.

So it is a continuous educational process with everyone that we

confront, and it is a great thing from the sense that the industry,
11

there is a lot of interest; people are really excited about it, but we

have to build the, I call it the administrative infrastructure, when

every step of this is not so painful, so that when a farmer says boy,

I would really like to look into this, who do I contact, he doesn’t

have to recreate the will to find out who I contact or how do I figure out the economics of this; whether it works or whether it

should be ethanol or whether it should be methanol digesters, what

should I do?

He has a source to go to and find out all of this information and

right now, it is just not there and we can attribute that to growing

pains, which I would like to do, but we have to confront it head

on to develop what I call a new energy action team, whether it is

in DOE, at Department of Energy, or whether it is somewhere else,

somewhere where all the resources are marshaled and anyone that

wants to get in it, whether it is a farmer, a farmers’ cooperative,

private industry, they can go to it and they can go to this source

and have all the information they need to do this.

I will give you one other example. We put on our website and on

our brochure that we would be happy to give tours of the facility.

If we had, I think, three full-time people, we could not keep up

with the requests; from universities, from private industry, from investors, from farmers, from farmers’ cooperatives. I can’t understand why the Federal Government somehow is not helping to roll

out this technology, even if it is with a partnership with potential

producers, so that you say OK, we will give you a certain amount

of money, but the quid pro quo is, what you give us in return is

that you will let, because everyone is so secretive about their technology, you will let people come in and actually see it. We will have

regional facilities to come and see how this is done and that is not

being done, and we really don’t have the wherewithal or the resources to commit three full-time people to just giving tours. That

is how excited, I think, the American people are and industry is,

to get involved in this.

Mr. LUCAS. Fair enough. Mr. Shafer, you mentioned the fact that

the 2002 farm bill wasn’t too bad. I appreciate that comment because all of my life as a farmer, by the time we made it to the end

of a farm bill, it was ‘‘who were the dirty scallywags that wrote

that dastardly document?’’ This is kind of an unusual set of circumstances, but within that farm bill there are a lot of policy questions to be discussed as we move forward, and you touched briefly

on CRP and CREP and a number of other programs that are generating a lot of discussion across the country; CRP, in particular, because there are some in the committee who talk about adjusting or

modifying the definition of what should qualify for the Conservation Reserve Program, which could, in effect, wind up moving acres

around to different parts of the country.

That said, CRP, in areas where there have been substantial enrollments now for 20-some years, there are a number of feedbacks

about how it has reduced the number of farmers, made it more difficult for young farmers to get into; it had an affect on small towns.

Could you touch, for a moment, your opinion about how we balance

the good that programs like CRP do with what they can do on the

other side of the coin, too? Because you are talking about switch-
12

ing, moving your farm to the next generation. And then we will

have a follow-up right behind you there on that topic, too.

Mr. SHAFER. Well, the way I see it, in our area it is the second,

third generation off the farm that inherited the farm; their parents

or their grandparents passed it down and so forth, and they are the

ones that are participating in these programs. The active farmers

want nothing to do with it. In fact, when this program came up,

I looked into it myself, or during my own operation, I own 400

acres and it would have been a substantial amount given the going

rate in our county, between $90 and $100 an acre.

And after I took off taxes and other mentionables, unmentionables, why I felt there wasn’t enough there for me to even stay on

the land. And if I wanted to pass it on to my son, who was interested at the time in farming and still is, there was no set plan on

doing this, I couldn’t see no end sight. Plus the machinery I had

invested, close to $150–200,000; in 10 years, when it came out of

the program, it would be virtually worthless and if I sold it in the

meantime, how would I replace it down the road 10 years hence?

So this was my big disagreement. The people that went into it,

it is sort of marginal acres, sort of non-marginal acres; some of

them, the whole farm went into it; others just picked out portions,

and it was land I had farmed. This one farm, in particular, where

there was a pasture; we used to mow it two times a year for the

original owner; it was handed down two generations and now they

got money for planting trees on this pasture and everything and in

my way of thinking, it was growing up in trees, anyhow. Why did

we have to have a program and pay these people who are just the

landowners to come in and do it, so this is where I am coming

from.

I am not against conservation at all, but I am for the producer;

the producer has to be the end one to continue our viable situation.

Mr. LUCAS. So you are implying that money like this might be

better spent on farmland protection programs, a slightly different

way of going about it than CRP?

Mr. SHAFER. OK, yes. Is that satisfactory? OK.

Mr. LUCAS. Mr. Hostetter, you talked about the challenges of

flexibility and if you had an acreage built up or history built up on

one particular crop, shifting to another, that has been one of the

challenges the 1996 farm bill and the 2002 farm bill, with its main

focus on flexibility and ability to use those resources in whatever

way, I don’t think we have a good answer yet for how to address

what you are talking about, but if you could, for just a moment,

you are a dairyman, touch on the National ID program. How difficult is something like that going to be for you to implement on

your farm?

Mr. HOSTETTER. It is probably not the difficulty of it. It would

be a lot of the unanswered questions like our cattle stay on our

farm until we are done with dairy production; they go to the livestock market, so do we just tag them just to go to slaughter house

for a few days? Or we market calves that we don’t need or send

to the slaughter market, do we tag them and then some of those

go for slaughter or do they go and somebody raises them, what

would be the current cost of that system just for a few days or a

few weeks versus one that would go on through their whole
13

lifehood and then maybe as far as how long is that animal going

to be tracked, then, if we send it from our farm and somebody

raises it and sells it to another farm, would it be their offspring

that would come down with something? Is it going to get tracked

back to our farm? And who would be controlling the records? Who

would be keeping control of the information and just all the recordkeeping of how you keep everything together?

Mr. LUCAS. Very good point. Mr. Holden?

Mr. HOLDEN. Thank you, Mr. Chairman. Mr. Coccia, you talked

about the energy action team. How would that differ from the National Biodiesel Board that is already in place?

Mr. COCCIA. The National Biodiesel Board right now has done a

fantastic job in taking an industry that basically did not exist and

making it aware, making the country aware, now, of a product that

has a real viable possibility of creating significant sources of fuel

that are grown and produced domestically. So what the National

Biodiesel Board has done is they have actually have been a consumer awareness; they have done a lot of lobbying and actually,

through this committee, created some really successful programs;

the CCC Bioenergy Program that produced additional production

capacity; there is a blender’s credit and a small producer’s credit

and then educational assistance. Those have been fantastic programs.

If you just look at the track record of the growth of the industry,

which has been exponential, since just the first National Biodiesel

Board Conference 2 years ago that I was in in Palm Springs, to see

this industry grow up in 2 years has been unbelievable and the National Biodiesel Board really takes a lot of credit for doing that.

But what is happening now is that we go from consumer awareness

and the ability to make it economically feasible, to actually getting

into the technical development of getting producers, three levels;

feed stock research, which means that soybeans are bred to actually create more oil because right now soybeans will generate about

50 gallons of oil to an acre. I actually had a good year last year

with 62 gallons. On the horizon, as foreign competition of crops

that are exponentially more productive than soybeans, and I am

talking specifically about palm oil and detropha, that grow very

easily and instead of 50 gallons an acre, it is a thousand or more

gallons per acre.

We have production, so you have the feedstock development, the

oil that we need, we have the production and the technology, the

real issues about how the equipment works and technical things

like do we use ethanol instead of methanol in creating the biodiesel

and centrifuges instead of gravity; all the technical issues. And the

third thing is appliance development. Imagine homes that we could

actually have that would be running off the grid and running on

biodiesel so that the biodiesel, clean burning biodiesel domestically

produced, off the grid, could actually be run in appliances developed for the home. It is possible and it is there.

The National Biodiesel Board does lobbying, it does consumer

awareness and education. It does not take the commercial producer

and give them that technical development and research backbone

that the industry really needs now to go into the next development

phase, which is across the board, across the country, thousands of
14

facilities to really make a dent on our foreign imports of liquid

fuels.

Mr. HOLDEN. Do you see biodiesel catching up to ethanol?

Mr. COCCIA. I have actually had some very interesting conversations with the USDA and their trade policy folks about this competition between ethanol and diesel and the thing that I want to

continue to stress is that ethanol replaces gasoline; diesel replaces

diesel, which includes home heating oil. Home heating oil is just

diesel fuel. The two are not substitutes for each other. And you get

a situation I hear all the time and I have seen in a lot of these

testimony where legislators are trying to find the winning horse.

We don’t want to invest in this technology or that technology because it may not be the technology that completely replaces oil.

And the way that I look at it instead is that energy is a mosaic

and the more balanced we can make that mosaic; right now there

is one piece in the mosaic and it is crude oil, and around the edges

is a little bit of wind, there is a little bit of solar, there is a little

bit hydroelectric. As we begin to develop each of these industries,

each of these new energy forms, we begin to develop new industries. Biodiesel will be an industry; ethanol will be an industry; hydrogen will be an industry and what happens is in the mosaic,

crude oil will shrink; all of these other energy sources will begin

to build and we will have a nice balance so when you have a

Katrina and it wipes out gas and oil production in the Gulf, there

are other energy sources that takes its place. We are not so dependent on one energy source.

So the competition between ethanol and biodiesel, I don’t see unless legislators and regulatory bodies artificially introduce it because it is two industries, it is two products and both of them can

stand on their own and really contribute to our energy independence.

Mr. HOLDEN. Well, you are right on target. We are too much dependent upon foreign energy, 56 percent dependent upon foreign

energy. I know the chairman is too young to remember, but I remember the Carter administration when we were having gas lines

and we were only 32 percent dependent on foreign energy, so we

certainly are going in the wrong direction and we need to turn that

around and really appreciate your testimony. Just one final question for you, Mr. Coccia. Any reason farmers should be concerned

with increased demand would drive up the cost for feed?

Mr. COCCIA. No. There are some questions about how the economics will actually play out because if you understand the way oil

works now, soybean oil works now, you start with the bean; the

bean is crushed and you get two products, meal and oil out of it.

Right now the beans are crushed to get primarily meal and basically, on a contractual basis for chicken feed, because the chickens

actually cannot tolerate well the oil content of the bean. The oil is

actually a byproduct that adds icing on the profit cake. Now, what

may actually happen, as we develop higher oil content in the

beans, is that the market may actually change. If you could actually, and there is research that I read just recently as last week,

that the oil bean, they can actually now genetically alter it or just

selectively breed to increase the oil content by up to three times,

from 50 gallons to 150 to 200 gallons.
15

And what you may see is that the market may actually be moved

now, instead of by chicken production, which is what the price of

our soybean oil most often is based on, you may actually see soybean markets moved by the oil content, which is very, very interesting, dynamic and really a source, I think, of some real profit opportunities for farmers. But I should also tell you and warn you

about these competitive crops overseas that I studied extensively,

and we will really have to be aggressive to keep American farmers

and American industry on the cusp of new technology in developing

feedstocks to supply the oil we need.

The real Achilles’ heel to this whole system that we have enough

oil. Farmers in the United States could not possibly produce

enough and where will it come from? Well, it is either going to

come from offshore sources or it is going to come from better crops,

whether those crops are soybean, better soybeans, the dream of

soybeans about the size of pumpkins all with oil in them or the

really exciting research that I have seen is actually in aquaculture

based feedstocks and that is a fancy word for micro-algae, that has

an almost unlimited supply. You mentioned President Carter and

unfortunately, I am old enough to remember the lines, too, but 20

years ago, he actually funded, or his administration funded, a

micro-algae aquaculture based feedstock project that ended right

before 2000 that proved now, with technology that has been developed since, that there is almost an unlimited supply of vegetable

oil in aquaculture based feedstock.

So I am really not trying to oversell it, but there is a real significant opportunity here, between these agriculturally based crops, to

supply a significant portion of our energy needs and we are either

going to do it because it is going to be the large, and energy production now is the largest industry in the world; this is going to

be the biggest job creator, the biggest economic driver for the foreseeable future and if we don’t do it, China, India, Europe, Central

America, Mexico and every other place I have seen research going

on, facilities going up, is going to do it.

Mr. HOLDEN. Thank you. Mr. Shafer, the chairman and I were

talking to Deputy Secretary Redding earlier about crop insurance

in Pennsylvania, how we are pretty proud of what we have been

able to get from 22 percent participation up to around 50 percent

participation, but I know you know that it is not perfect and I just

wondered if you could tell us some of the successes and some of the

challenges particularly these specialty crops face in trying to obtain

crop insurance here in Pennsylvania?

Mr. SHAFER. I guess it was about 4 or 5 years ago Schuylkill

County was one of the three or four counties in the United States

picked out to do insurance research, per se, on cabbage. I participated in the program, went along with it for 3 years. I gave them

all the information that they wanted or needed to set down the

rules and regulations for the insurance industry. By the third year

we had a fairly good drought. In our vegetable operation I had

enough irrigation to protect half of my crop and the other half of

the crop was in limbo. I had insurance on what I thought, in the

insurance industry, that would be, the insurance was for every

farm that I rented or plot of land. And I had a loss on one farm,

but I had very good successes on the other and when I applied for
16

an adjustment or whatever, they said no, these aren’t the rules and

regulations you have to go under and I was caught in the middle.

And at that time, the program that Pennsylvania had, I was over

the limit for my gross income. I had to hook up with a major insurance supplier like Rain and Hail out of North Carolina. And anyway, until it all boiled down, my gross income for cabbage that year

was still over $300,000 and what they wanted to pay me was a

merely $14,000 for my crop loss. Well, I was way over and just by

losing one farm to this crop, why it really turned them off, but or

turned me off. The difference was, I figured, they should have at

least boned up for this one farm, but they didn’t want to hear

about it. They threw everything into the mix and I went back and

forth with the agent, went back and forth with the company and

went back and forth with the adjustor to no avail, so that really

turned me off against it.

Now, saying that, I was at a county board meeting the other

night and I polled all the people that were there, and everybody

had crop insurance and was well-satisfied. They weren’t specialty

crop farmers, they were mainly grain farmers, so I guess I am outnumbered on this situation, but I got——

Mr. HOLDEN. I knew how they felt about it.

Mr. SHAFER. Yes.

Mr. HOLDEN. So I wanted to give you the opportunity to get it

on the record.

Mr. SHAFER. I advised my son, I said don’t take the ignorance

from your father and just separate yourself from it at all, because

you are starting out and you do need a safety net someplace, so

maybe I am just one in a thousand, maybe I am 1 in 5, I don’t

know, but I had a bad experience and I lived through it.

Mr. HOLDEN. Well, we are going to keep trying to work with you.

We are pretty proud that we have got that participation up 30-

some point, so we will——

Mr. SHAFER. Well, you have to work with my son now.

Mr. HOLDEN. OK.

Mr. SHAFER. But I support him. I turned the business over to

him, but I still didn’t turn the land over to him. He needs to the

land to farm, so that is the one good or bad asset with agriculture;

you still need the land to produce. Thank you.

Mr. HOLDEN. Mr. Hostetter, you mentioned the most important

program you believe is the MILC program, the M-I-L-C program.

How user friendly is it? How much of a bureaucracy is it? Was it

a bureaucratic problem trying to resign up or was it a smooth transition or just give me your feelings about the whole program. I

know in your testimony you said how important it is, but just give

the committee a feel for how it works.

Mr. HOSTETTER. No, it is very user friendly and easy to do. You

take in your milk receipts for the months that you want to collect

and the county has it posted it what the payment rates are. You

go in and you show them that and you sign and you get your check

later on.

Mr. HOLDEN. And when we had the lots, there is no problem?

Mr. HOSTETTER. No, you just had to go in and resign up for the

MILC-X.
17

Mr. HOLDEN. As we gather information across the country, and

you alluded to some of this in your testimony and so did Mr.

Shafer, anything besides the MILC program, as we write the next

farm bill, that will be important to Pennsylvania, Lebanon County

producers, that we need to look at?

Mr. HOSTETTER. No, none. Only the ones that I mentioned because in Lebanon County, I would say out of all my neighbors, they

are all dairy farmers except for one hog operation, which I rent his

land, and a chicken farmer, so the MILC program is pretty important to most of Lebanon County.

Mr. HOLDEN. I want to thank you, Mr. Chairman.

Mr. LUCAS. Indulge me, Mr. Holden, of the opportunity of one

last question to Mr. Hostetter and Mr. Shafer. Tell me about land

prices in your area, how they have gone over the last 10 years and

of that, up, down, sideways, what is reflected in development versus one farmer, two farmers bidding at a public sale when those

do occur? Thumbnail sketch. Nothing scientific, just a thumbnail

sketch, gentlemen.

Mr. HOSTETTER. OK. Well, my grandpa paid $17,000 for the farm

we are at and then my father was in the $200,000 range when he

purchased it from his father.

Mr. LUCAS. How many acres?

Mr. HOSTETTER. That is 102 acres. And now we just had a neighboring farm that sold for $1.2 something million. And that was to

another farmer paid that; it wasn’t for development, either.

Mr. SHAFER. In our area, thanks to rural development, should I

say, why, we were blessed with a sewage system. That sewage system took 4,000 feet frontage of my farmlands. All my neighbors

said boy, your farms are really valuable now. The acreage went

from about $3,000–3,500 up to $20–25,000 for a half acre for a

building lot because now they could go on sewage and they didn’t

need as much land to do it, so I guess it is a thorn in one side and

a blessing on another, it all depends who you are. Anyway, right

across from the farm there is a couple small developments. These

entrepreneurs, why, put out or drew up land plots for half an acre

and put them on 10 acres or so and they are right across the street

from my main operation.

It is going slow at the present time and but about 10 years ago,

I guess, there was a neighbor farmer had sold out across the other

road from me and he has a whole line of houses going right up the

main highway. And I know most of the new people now and I am

the kind of person that can mingle with other people and they told

me please, Mr. Shafer, do not sell that land behind our house for

another development? It is really an irony that they want the good

open spaces and so forth and so on. But getting back to the rural

development act, why, it was a help for our smaller communities

that have been established 80 to 100 years, sewage was running

down the street and so forth and so on and it probably improved

our quality of life in that area quite a bit.

Mr. HOLDEN. Mr. Chairman, I just want to take this opportunity

to get on the record that we did at the rural development hearing,

how important those projects are at rural America. Air Products is

able to expand as a result of that, too, Jack; you know that.

Mr. SHAFER. Yes, I know.
18

Mr. HOLDEN. But we do have a serious budget problem that we

need to look at, particularly with the grant end of the funding of

it.

Mr. LUCAS. Very true.

With that, the subcommittee wishes to thank the panel for your

insight, your testimony and all of your written testimony, also, will

be part of the record.

I now call forward our second panel.

Mr. Karl Laudenslager, dairy producer, Halifax, PA; Mr. Glenn

Seidel, livestock producer, Wolemsdorf, PA. Are you sure these are

the same Indian names we have in Oklahoma? Mr. Keith Masser,

president of Sterman Masser Potato Farms, Sacramento, PA. And

whenever you are ready to go, Mr. Laudenslager, you may begin.

STATEMENT OF KARL LAUDENSLAGER, DAIRY PRODUCER,

HALIFAX, PA

Mr. LAUDENSLAGER. Mr. Chairman and members of the committee, my name is Karl Laudenslager and I have a 700 cow dairy in

Halifax, Dauphin County, Pennsylvania. I am a customer and

owner of the MidAtlantic Farm Credit. I became a member and

owner of the Farm Credit about a year ago. At that time, I was

working with a commercial bank for my financing. I was also in the

midst of dissolving a partnership with my brother because of some

management issue. We were having performance issues with our

operation. At the same time, my lender decided that it no longer

wanted to support agriculture in my area. I called Farm Credit and

talked to one of the loan officers. He was very knowledgeable about

farming and he understood the performance issue that my operation was having. He created a financial package that allowed me

to refinance my debt and dissolve the partnership with my brother.

I was very, very glad that Farm Credit was there to help me when

I needed it.

MidAtlantic Credit is a farmer-owned cooperative and is a member institution of Farm Credit System. They have a portfolio of

more than $1.6 billion, with more than 15,500 loans. This year my

association returned $28 million of patronage to its members. I

picked up my patronage check 3 weeks ago at the annual stockholder meeting and I can tell you that it was icing on the cake of

a strong relationship with Farm Credit. At the annual stockholders

meeting, one of the MidAtlantic board members gave us a presentation on the System’s HORIZONS Project. As you know, Farm

Credit worked hard to meet the mission that Congress gave them

90 years ago to help ensure the quality of life in rural America and

on the farm.

Since Congress created the Farm Credit System, remarkable

changes have taken place in agriculture. At that time 35 percent

of the Nation’s population lived on farms and about 60 percent

lived in rural communities. Today, only 2 percent live on farms and

the rural population represents less than 25 percent of the total

U.S. population. Average farm sizes have nearly tripled during the

same period from 150 acres in 1916 to about 440 acres today. Obviously, my own farm is a good example of this change. Ninety years

ago no one would have dreamed about milking 700 cows. While my

operation has changed because I have needed it to grow, it has also
19

been a challenge to continue to farm in an area that is more and

more urban. That is why the HORIZONS Project is important to

me, personally.

The HORIZONS Project was designed to help identify the

changes that agriculture has faced and then looked at ways that

Farm Credit needed to change so that they will continue to meet

its mission and serve rural Americans like myself. Part of the HORIZONS Project included a great amount of research on agriculture

and changes in rural America. Farm Credit recently released a report entitled 21st Century Rural America: New Horizons for U.S.

Agriculture. With your permission, Mr. Chairman, I would ask that

this report be made part of the official hearing record.

Mr. LUCAS. So ordered.

Mr. LAUDENSLAGER. The HORIZONS Project has eight key findings that I hope the Agriculture Committee will take into account

as you consider approaches the 2007 farm bill. Those findings are

explained in detail in the HORIZONS final report. One of the most

revealing facts found during the analysis of the project was that

less than 10 percent of all farms remain farming-only businesses

today. The overwhelming majority of all farmers, especially small

operations, rely on off-farm employment to stay in agriculture.

Over and over, we have heard knowledgeable people from both inside and outside of Farm Credit tell us that rural America has

changed dramatically. Where before, rural communities depended

upon agriculture to survive, agricultural producers today depend on

economic opportunities in rural communities to stay on the farm.

Mr. Drabenstott, an economist at the Kansas City Federal Reserve Bank, summed it up by saying, ‘‘The rural economy has been

through tremendous change. It will undergo even greater change in

the future. The old rural economy is fueled by commodities; agricultural, industrial, mineral, timber. Globalization creates a new imperative. The most successful regions will grow entrepreneurs, lots

of them.’’ To succeed in this new environment, agriculture and

rural communities need reliable access to capital, financial services

and the expertise necessary to sustain a strong economic future.

Farm Credit can help ensure that access.

With small changes, Farm Credit can play an even more vital

role in helping strengthen agriculture and rural America. As a

farmer who relies on Farm Credit, I believe that the Farm Credit

System should be able to serve the evolving financial needs of

farmers. A year ago, I was grateful that Farm Credit could help me

continue to farm in Dauphin County. I hope that you will work

closely with Farm Credit in the coming months to explore policy solutions that will enable agricultural producers, rural businesses

and rural communities to more fully access the financial resources

of the Farm Credit System. I think rural Americans deserve a financial partner like Farm Credit. Thank you again, Mr. Chairman,

for allowing me to testify here today.

[The prepared statement of Mr. Laudenslager appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you. Mr. Seidel.
20

STATEMENT OF GLENN SEIDEL, LIVESTOCK PRODUCER,

HEIDELBERG TOWNSHIP, PA

Mr. SEIDEL. Good morning. My name is Glenn Seidel. My wife,

Jane, and I own and operate a 118-acre farm along the

Tulpehocken Creek in Heidelberg Township, Berks County, Pennsylvania. We live there with my mother, Grace. You committee

members already know the farm bill and what is wrong and right

concerning agriculture. I could give you statistics from now until

the cows come home, which if milked twice a day, is about 10

hours. But I will be brief and discuss only two of my concerns.

First is farmland preservation, particularly in the Northeast

United States. Unless something is done and done soon, a lot of our

prime farmland will be lost. We talk about national security; we

toss the term security about in a cavalier way, but I am here to

tell you that if the preservation of prime farmland is not done now,

it is right now an urgent national security issue. The following is

a list of reasons why we need agricultural land preservation. (1)

For food production so we can eat. (2) Biomass for fuel. (3) Carbon

sequestration to combat global warming. (4) Water quality and

quantity so we can drink and industry can thrive. (5) Nutrient reutilization/pollution control/recycling since our agricultural lands

provide a natural recycling medium for all kinds of organic materials, including our own biosolids. (6) Oxygen regeneration so we

can breathe. (7) Commerce so we have commodity products to pay

for our trade imbalance. (8) Risk management in the event of a

natural or a manmade catastrophe, productive agricultural land

disbursed throughout the United States only makes good sense. (9)

Fiber for clothes and (10) for open space to promote aesthetics and

for sanity. Congress must prepare and implement a plan to preserve our farmland and now.

My second concern for Congress to address is conservation and

technical assistance to promote the conservation practices. In the

list mentioned above, for agricultural land preservation, every item

requires conservation planning and technical assistance to conduct

that planning. As increased demands are placed on every acre of

farmland, the need for conservation and technical assistance only

increases. Conservation is not a one-time capital occurrence. It is

an annual necessity. As agriculture becomes more intense, the need

for best management practices to be implemented for soil, nutrient,

air quality and water resource management only becomes more demanding.

Congress should ensure that the best management practices

strategies are developed and that these strategies are properly

funded and deployed. Our Government agencies should review conservation plans and assist conservation plan implementation. Also,

Government agencies function as a historical repository of information concerning the implemented farm conservation practices on agricultural land. Without NRCS, FSA and Conservation Districts,

continuity would be lost as our farmland passes from one generation to another or from one landowner to another.

In summarizing, (1) Congress needs to urgently promote prime

agricultural land preservation and (2) Congress needs to continue

and to increase funding not only for conservation practices, but also
21

for the technical assistance to implement these practices. Thank

you.

[The prepared statement of Mr. Seidel appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you. Mr. Masser.

STATEMENT OF KEITH MASSER, PRESIDENT, STERMAN

MASSER POTATO FARMS

Mr. MASSER. Good afternoon, Mr. Chairman, and Ranking Member Holden.

Thank you for the opportunity to share my experiences working

with the USDA Rural Development Programs and to provide input

into the development of the next farm bill. I am an eighth generation in my family to own and operate a farming operation in western Schuylkill County, Pennsylvania. After receiving an agricultural engineering degree from Penn State, I worked for Proctor &

Gamble as a project engineer at a nearby plant in Mehoopany, PA

that converts hardwood trees into personal care paper products. In

1976 I joined and eventually purchased my family’s farming operation, Sterman Masser, Incorporated. Today this company farms

3,600 acres of potatoes, hay and small grain crops. It also packages

and distributes over 5,000 truckloads of potatoes, onions, sweet potatoes and sweet corn to supermarket chains annually. In 2004 I developed and built a $12 million potato processing facility, Keystone Potato Products. This company converts raw potatoes into dehydrated potato products using landfill gas as its energy source for the steam used in the dehydration process. I will

talk more about this project through our rural development experiences.

The third company I operate as president is the Pennsylvania

Cooperative Potato Growers located in Harrisburg here; organized

in 1922, this cooperative is a non-profit organization helping growers market their potatoes. Nationally, I recently was the president

of the National Potato Council, an organization that provides a

voice for 6,000 growers making up the U.S. potato industry on

trade, environmental and legislative issues. I also served as chairman of the U.S. Potato Board, a national promotional organization

funded by all U.S. potato growers to create demand for potatoes

and potato products.

Regionally, I share the agricultural advisory committee to the

Susquehanna River Basin Commission. This committee provides

input on agricultural issues related to the mission of the SRBC.

Statewide, I serve on the board of directors of the Pennsylvania

Vegetable Growers Association and the Pennsylvania Potato Research Program. Locally, I chair the Hubley Township Board of Supervisors since 1977. I chair the Schuylkill County Preservation

Board and serve on the Schuylkill-Carbon County Pennsylvania

Farm Bureau board of directors for the last 30 years.

When developing Keystone Potato Products, an application from

the Pennsylvania Potato Cooperative was submitted to the USDA

Rural Development Program. The Pennsylvania Potato Growers

Co-op is part of this company and there were 90 percent of the

funds were available to cooperatives versus 10 percent to private

individuals; that is the way we went, in that direction. However,
22

we had to submit this application three times before a grant was

finally approved. We started in, the first application was in 1999;

it was not approved. The next application was in 2000; it wasn’t

approved and finally, in 2001, we had a $450,000 grant application

that was approved. We needed this seed money to initiate the development of this project.

After the third application, we got this grant and we eventually

built this project and we created 25 full-time jobs in rural western

Schuylkill County. It helped create a market for potatoes that otherwise could not have been used. Most of those potatoes are going

for cattle feed which had a good use and we were competing, the

mid-Atlantic growers were competing with western potato growers

who had processing plants available to them to utilize their offgrade part of their crop. The value-added grant helped propel the

utilization of methane gas from a nearby landfill to fuel a boiler to

provide steam for this process which was previously flared to the

atmosphere. This is the only monies we got granted to us for this

portion of the project and this, truthfully, was the most technical

and expensive part of our project, trying to convert this landfill gas

into usable energy to generate our steam.

The project could have been implemented 3 years earlier, saving us construction costs. The project was initially estimated at $6 million; by the time we got this grant and got the project going, it cost

us $12 million. And I only mention this, had the funds not been

available or had they been delayed even one more year, this project

wouldn’t exist today and so it is crucial that these funds stay in

place for this type of project. It would be very helpful if these monies were allocated to different States, so when we got this grant in

2001, we were, and you probably heard this from your previous

rural development hearings, but Pennsylvania got 4 grants that

year and since then we haven’t been very successful in getting

grants from that time.

So we need to continue this funding and we need to continue it

at levels of the past so that these types of projects can continue.

And we also got a USDA loan guarantee for our bank loan in this

project and truthfully, it was a tradeoff whether we will consider

it because it is a 2 percent, we got a $5 million loan from the bank,

2 percent is, that is $100,000 we had to pay for a guarantee and

it is difficult to evaluate that as a good source, but we did it because of our investment portfolio the way we put this project together and we wanted to have a loan guarantee that was outside

of our existing investors so that we wouldn’t have to have any of

our investors personally guarantee the project for that portion of

the loan.

I want to talk a little bit about the Conservation Reserve Program and the Conservation Reserve Enhancement Program which

have been useful in protecting sensitive farmland. However, we

need to ensure that these programs do not have the Government

compete with farm operators for productive farmland. In the past,

farmland in Pennsylvania with good production potential and minimal environmental risk was accepted into these programs. With

the ever-increasing energy costs, producing crops close to the markets will become more economical and we need to have this productive farmland available to do that.
23

The last article in Reader’s Digest came out and there was an

article in there saying that, discussing organic foods, fruits and

vegetables and saying that if you have a preference between

organics and locally produced fruits and vegetables, buy locally produced fruits and vegetables because the detriment to the environment is more harmful to buy organic produce grown in California

shipped to the east coast because the hydrocarbon offset to the environment, so I thought that was very intriguing, as well as the

ever increasing costs of our energy costs and the transportation

costs going up, it is becoming ever more beneficial to be growing

fruits and vegetables close to the markets. Here in Pennsylvania,

we are on top of, well, we sent out within 3 hours 30 percent of

the potato consumption in the United States here.

So as a member of the National Potato Council we have developed 2007 farm bill policy recommendations. These recommendations I have in my written statement; I won’t go over those recommendations now, but those recommendations basically are developed for specialty crop producers and we support those, so thank

you for allowing me to testify and I will be glad to answer any

questions.

[The prepared statement of Mr. Masser is on file with the committee.]

Mr. LUCAS. Thank you. On the CRP topic, Keith, as we discussed

earlier, and this is something that I have a great personal interest

by the nature of the way the acres are scattered out; how would

you propose doing a better job of allocating at the present time? No

county can have more than 25 percent of its cultivatable acres in

CRP. There is the index on environmental quality; there is a number of factors. Any suggestions on how you would tweak the program to do——

Mr. MASSER. I would—yes. We need to make sure that farmland

that shouldn’t be farmed would be put into that program. The buffer strips are on the streams, sensitive areas, I don’t have a problem

with that. But when nice level 50 acre strips that could be easily

farmed are put into wildlife preserves and paid $100 an acre when

we were paying $80 an acre for farmland, when that type of ground

is put into the program, that is not very good use of our funds. And

it puts us in competition with the Federal Government.

Like it was said previously, a lot of this farmland is owned by

people who aren’t farming anymore; they are owned by members

of families who have jobs elsewhere and they are looking for the

highest dollar volume, the highest return on their dollar for their

farmland and if they are getting more money from the Government

and the Government allows them to put fields that aren’t highly

rotable or otherwise environmentally sensitive in the program, we

need to rectify that.

Mr. LUCAS. Obviously, Glenn, you have a strong interest in a

wide ranging number of these conservation programs. The 2002

farm bill with its 10 percent, basically, being set aside of the $168

billion available to us over the life of the farm bill for conservation

programs was the best funded farm bill on the conservation side

in a long time, but if anything, as the new bill went into place and

people realized that there was a potential opportunity to actually
24

sign up for the programs, the potential enrollment numbers exploded and once again, we are behind the curve.

As we go into a tough budget year next year to write this farm

bill, from your perspective, can you give me a thumbnail sketch of

where you would prioritize, if we have so many dollars and some

people would say, in the true Federal spirit, we would just cut everybody a percentage to match up, but that is not always the most

efficient use of resources. Are there particular areas, is farmland

protection more of a priority than CRP or whatever? Just a thumbnail.

Mr. SEIDEL. With everybody who has testified here so far, if we

don’t have the farmland, nobody else is going to be able to function.

And so I think the No. 1 thing that we have to do is some way get

more public empathy for, and not that it is not there already, for

maintaining our farmland. It is an ethical issue, really. We have

to have the realization that we need this land. It is already developed its best potential. It took 200 years in this area to get the

farmland to where it is; all the rocks that were picked and all the

trees and the leveling. I am sure it is the same thing in your area.

The prairies were not flat. And all at once we go in and develop

it in a way that is not agricultural.

And in some ways, when the strip mall goes in, we need the

same legislation with strip mining, that it has to be reclaimed

eventually. There is a lot of land that is out there that has been

used by development and it is just sitting there anymore and I

think that is a real shame. Along with that, it does us no good to

just have farmland if we don’t do the conservation practices on it.

We tried that before. We plowed everything up but didn’t have conservation. The two go hand in hand. I don’t know how you can separate the two out and that is why I chose those two things to talk

about. There are lots of things you could talk about in agriculture,

but if we don’t have the land and the ethics and the conservation

practices to go with that land, no one can have fuel or fiber or any

of the things we talked about. A specific thing that you should concentrate on? I don’t know if there is one thing because it is a diverse problem.

Mr. LUCAS. The reason I asked that question, of course, many

programs like EQIP, which provide farmers, ranchers, livestock

people, crop people with the ability to manage the challenges of

their land universally popular. But in some areas, such as for instance, CRP and farmland protection, one is an easement program

where, in effect, you are paying someone to commit to a certain

course of action, maintaining production, but a certain course of action versus a program where you are, in effect, paying people not

to utilize the property for a period of time. It just sometimes seems

as though that they have a different net effect and if you are trying

to achieve a little bit of what Keith was talking about, there may

be farmland protection that would be more productive in areas like

this, for instance, than perhaps CRP.

Mr. SEIDEL. I think the key word in the CRP is the letter R, it

is a reserve, which means it can come out of production, too, and

we sometimes forget that the land that goes to the CRP or CREP

already did meet some very strict criteria. Some of the people that

are opposed to the programs, I think do not fully appreciate the
25

stipulations that went into that for that land to go into the program to begin with. It is a matter of education, to a degree, why

that land has been chosen.

Mr. LUCAS. Karl, you mentioned the HORIZONS Project at Farm

Credit where they are looking at ways to improve, they say, the

ability to meet producers’ needs. Can you tell me how well Farm

Credit has met your needs and do you think there are things they

could be doing that would help you and other farmers like yourself

that they are not able to do now that come to mind?

Mr. LAUDENSLAGER. I am a full-time farmer, but a lot of farmers

now are part-time farmers and most of their income is coming off

of other stuff and they can get out of their criteria at that point

because a lot of farms are doing businesses on the side other

than——

Mr. LUCAS. So you think the flexibility on the criteria would help

part-time farmers greatly?

Mr. LAUDENSLAGER. Yes.

Mr. LUCAS. OK. Mr. Holden.

Mr. HOLDEN. Thank you, Mr. Chairman. Karl, you mentioned

how Farm Credit served you and how pleased and satisfied you are

with the job that they are doing. I am just curious. Are there any

banks doing any agricultural lending in your neck of the woods

now or mostly everybody just uses Farm Credit?

Mr. LAUDENSLAGER. Well, there are still some local banks doing

some, but some are local.

Mr. HOLDEN. Small portfolios?

Mr. LAUDENSLAGER. Yes, small portfolios and the small banks,

you can run out of money on them and they can’t handle your loan.

Mr. HOLDEN. No stability, no long-term commitment, then, and

therefore——

Mr. LAUDENSLAGER. Well, a bank can only loan 10 percent of

their cash reserves or whatever it is and if you borrow a lot of

money, they can’t loan you the money because they can’t do it. The

Federal Reserve doesn’t let them loan that much money to one individual.

Mr. HOLDEN. You told us your story how your farm has grown

over the generations and just curious, you are probably one of the

larger dairy operations in my congressional district. I am just curious, what are the most significant challenges you face in your operation?

Mr. LAUDENSLAGER. Houseing development.

Mr. HOLDEN. OK, developments. That is my next question for

Glenn.

Mr. LAUDENSLAGER. Yes, and that is going to be a big problem

where I am at because I am just 30 minutes from the north of town

here and migrant help is a problem because I do have migrant help

down on the farm, Mexicans milking, and we have to figure out

what to do with them in this country.

Mr. HOLDEN. Glenn, you pretty much answered this with the

chairman’s question, but I remember in the negotiations for the

last farm bill how we were trying to see that we get a significant

investment for farmland preservation. I remember, Mr. Chairman,

when you and I signed that conference report, we had a billion dollars in it. Going down Pennsylvania Avenue, we lost $15 million
26

and we ended up with $985 million, but it still was a very significant investment in farmland preservation and Glenn, as I mentioned in my opening remarks, Pennsylvania is the leader in farmland preservation in the country; a little argument between Berks

and Lancaster County, which county is the leader. I am going to

say Berks is the leader.

Maybe you could just, because it really does work, the program

does work and maybe I realize the chairman probably understands

this, does understand this, but for the record, maybe you could just

tell us how it works in Berks County and why they have been able

to be so successful. It is the third leading agriculture producing

county in the Commonwealth, I believe, and at the same time we

are doing such a great job at preservation.

Mr. SEIDEL. I think Berks County currently has the most land

preserved under a State program, almost 50,000 acres. The way it

works in Berks County, a certain amount is, there is a ranking system that is nonbiased as to who gets selected and then they pay

only a specific amount for that land, which is $2,500 now, up from

$2,000 last year. They have increased it a little bit. It is fixed, unlike some of the counties where the amount that they pay is very

variable and much higher. So I think part of the success of Berks

County’s program has been that they did not make the amount

very high, but they offered it to a lot of people and people have

taken it. I don’t know if that answers your question.

Mr. HOLDEN. Yes, it does. But there is still a significant, very

significant waiting list, am I correct?

Mr. SEIDEL. That is correct. I think there is something like

maybe 240 farms in Berks County which are——

Mr. LUCAS. Per farm, per acre?

Mr. SEIDEL. Yes, that is per acre. It is about $2,500 per acre in

Berks County.

Mr. LUCAS. And then that is a permanent easement?

Mr. SEIDEL. That is a permanent imperpetuity, yes, compared to maybe $12,000, $18,000 in some of the southeast counties; it is a

lot higher. I am talking about Montgomery, Chester, places like

that. It has been a very successful program.

Mr. HOLDEN. You say 240 farms waiting?

Mr. SEIDEL. I think there is something like 240 right now. It varies from year to year as they take farms in and out. The number

of the waiting list hasn’t particularly diminished over the years; it

seems to stay about the same. A lot of people want to get into the

program; the funds to do it just aren’t available. And I think the

other part of that is follow-up with this land that is going to be preserved some way. It is going to have to be monitored to make sure

that it isn’t developed on. When we make the big investment, there

is a smaller investment in farmland preservation, which is followup to make sure that that land, indeed, is being preserved.

But I think it is very critical to everything about agriculture and

this business about diversification throughout the country, I really

think that the Northeast, which is blessed with the right amount

of rainfall, the right type of soil, we shouldn’t sacrifice that just to

put all our eggs in one basket in the Midwest because, as I said,

if we have a natural disaster or a manmade disaster, our goose is

going to be cooked, just like it was with Russia and Chernobyl,
27

which its anniversary was just recently, where 40 percent of their

agricultural land was wiped out in one event. We shouldn’t be so

stupid to concentrate our agricultural production in only a few

areas.

Mr. HOLDEN. Keith, I want to get the statistic right. Within 3

hours 30 percent of the potato consumption in the country?

Mr. MASSER. Yes.

Mr. HOLDEN. Your 3-year process with USDA, was the delay, the

bureaucratic delay, primarily a funding problem for USDA or was

it——

Mr. MASSER. No, I think it was a selection problem, just not having the project selected and the third application round, I think the

Rural Development offices got regionalized and we were able to

present our project in a verbal format instead of electronic format

only and I think we were able to promote the project better on the

third application round.

Mr. HOLDEN. And you said the year you received the grant, three

other grants were awarded in Pennsylvania, correct?

Mr. MASSER. I think that is correct. The deputy secretary can

confirm that, but I am quite sure.

Mr. HOLDEN. OK. And to your knowledge, there hasn’t been any

since?

Mr. MASSER. Not to that level. There may have been some, but

I followed it fairly close, but it definitely hasn’t been 4 per year.

There may have been one or two since then, but I am not sure of

any.

Mr. HOLDEN. Well, Mr. Chairman, as you know, as we go

through our annual process with the appropriators, but we do have

a funding problem with a lot of the programs you and I care deeply

about, value-added and rural utilities, as I talked about before and

I know we will continue to address that. But I would just like to

mention on the loan guarantee program, I know, Keith, you had

some concerns about it, but that has been a very, very successful

USDA program. You and I remember the days when USDA

thought they could be direct lenders and we know what happened

there. We had a 40-some percent default ration and now in the

loan guarantee program it is less than 6 percent, so it has been

very successful all across rural America, so with that——

Mr. MASSER. Just make it cheaper to access, that is all.

Mr. HOLDEN. Cheaper to access. Mr. Chairman, thank you.

Mr. LUCAS. Thank you, Mr. Holden, and you are exactly right

and a brief comment about the challenges of funding; not only do

we need to secure a number this time next year and how many dollars we have to work with and not only do we then have to work

through our international trade agreements and craft a bill that all

regions and all commodity groups can support, but then we spend

the next 5 years, as Tim and I have spent the last 5 years, trying

to protect what we have done, as he referred to rural development.

The same could be said about agricultural research. We, in the last

farm bill, pushed as many things as we could over into the mandatory spending side along with the commodity title under the assumption that that would assure us a stream of resources well

after the farm bill. We discovered after that that our friends in the

Appropriations Committee could, amazingly, under the right set of
28

circumstances, reallocate some of our mandatory money. So now

Tim and I work on better ways to well off those important dollars

and we are able to secure those. You don’t have any additional

questions?

Mr. HOLDEN. No.

Mr. LUCAS. With that, without objection, the record of today’s

hearing will remain open for 30 days to receive additional material

and supplemental written responses from witnesses to any question posed by a member of the panel, and we wish to thank this

panel and the previous panel. This hearing of the Subcommittee on

Conservation, Credit, Rural Development and Research is adjourned.

[Whereupon, at 1:03 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF GREGORY E. HOSTETTER

Good morning Chairman Lucas, and my Congressman Tim Holden. It is an honor

and privilege to address this committee on the issues that affect my lively hood:

farming. My name is Greg Hostetter, I am in the Dairy business with my father.

We have 90 head of dairy cattle and crop 150 acres of alfalfa, corn, and soybeans

in the northern part of Lebanon County—just 25 minutes east, from where we are

today. My wife and I have a five year old son and we will be taking over the Dairy

farm in the next few years when my father retires. Presently, I serve on the Board

of Directors for the Lebanon County Farm Bureau. My work on many proactive Ag

campaigns has lead me to become Chairman of the PA Farm Bureau Promotion &

Education Committee; a member of the PA Department of Agriculture—Ag Education Advisory Board; and Lebanon County Farm Safety Committee.

I was asked to testify as a Dairy farmer about issues concerning my family. I will

also speak about how we use the programs in the farm bill and their importance

to farmers like me.

I will start with MILC and currently MILC-X—this is the most important program to me and all the Dairy farmers I know. The current cost of production in

Pennsylvania is $18.11 per cwt. When the market price of class I falls below $16.94,

the MILC program kicks in and helps farmers like me to cover part of my expenses

to produce milk without going into debt. I still need to use my cash reserves during

these low market periods, but it is because of programs like MILC and MILC-X that

my farm has been able to stay in business. Without the MILC program, it would

be hard to ride out the low market. So, yes, I strongly support continuation of the

Dairy price support program at the current level.

Many farmers are concerned about the National ID program and I share some of

their concern. Let me be clear, I know that providing a safe and affordable food supply to America’s families is a top priority, but my concern is that the National ID

program needs to be easy-to-use and confidential with cost sharing from government, industry, and producers.

Johnes’ Disease is still present in dairy herds today, according to my veterinarian.

Our herd has never had any suspicious animals, probably because our herd has

been a closed herd since 1991. But you never know when things change, so I support

some type of funding to help farmers who voluntarily want to test or suspect they

should test for Johnes’ Disease. Helping farmers to test their herds will help to ensure a continued disease free supply to the American market.

Direct counter Cyclical and Loan Deficiency Program: In 2000, I started using

these programs and have found them very helpful, especially LDP for when grain

prices fall. I find being able to fax my request for LDP very farmer friendly because

we don’t have to make a trip to the office. I also like using the DCP. The only negative comment I have is that we are paid on old history, for instance, I receive a

wheat payment when I no longer plant wheat—instead I plant more corn. It does

not reflect my current crop information. My local FSA office is very easy to work

with, they do a good job.

National Farm Policy must be balanced. Congress must take into consideration

the regional and commodity differences that exist. Northeast producers are closest

and most able to meet the agricultural demands of the 25 percent of Americans who

live in the Mid-Atlantic and Northeast states. Farm Policy must reflect the unique

needs and limitations of northeast farmers.
29

Congress must look into green box and blue box programs that would protect

northeast dairy farmers and ensure the availability of nutritious fresh dairy products.

Mr. Chairman, thank you for holding a regional field hearing here in central

Pennsylvania and allowing me to share with you and the committee how my family

uses and needs these programs. Again, it is an honor to be part of this process for

the next farm bill. I will be happy to try to answer any questions you and the committee might have.

STATEMENT OF CARL LAUDENSLAGER

Mr. Chairman and members of the committee, my name is Karl Laudenslager and

I have a 700 cow dairy in Halifax, Dauphin County, Pennsylvania. I am a customer/

owner of MidAtlantic Farm Credit.

I became a member/owner of Farm Credit about a year ago. At the time, I was

working with a commercial bank for my financing. I was also in the midst of dissolving a partnership with my brother. Because of some management issues, we were

having performance problems with our operation. At the same time, my lender decided that it no longer wanted to support agriculture in my area.

I called Farm Credit, and talked to one of their loan officers. He was very knowledgeable about farming, and he understood the performance issues that my operation was having. He created a financing package that allowed me to refinance my

debt, and dissolve the partnership with my brother. I was very glad that Farm

Credit was there to help me when I needed it.

MidAtlantic Farm Credit is a farmer-owned cooperative and a member institution of the Farm Credit System. They have a portfolio of more than $1.6 billion dollars,

with more than 15,500 loans. This year, my Association returned almost $28 million

dollars of patronage to its members. I picked up my patronage check three weeks

ago at our annual stockholder meeting, and I can tell you that it was the icing on

the cake of a strong relationship with Farm Credit.

At the annual stockholders meeting, one of MidAtlantic’s board members gave us

a presentation on the System’s HORIZONS project. As you know, Farm Credit has

worked hard to meet the mission that Congress gave them 90 years ago—to help

ensure the quality of life in rural America and on the farm.

Since Congress created the Farm Credit System, remarkable changes have taken

place in Agriculture. At that time, 35 percent of the Nation’s population lived on

farms and about 60 percent lived in rural communities. Today, only about two percent live on farms and the rural population represents less than 25 percent of the

total U.S. population.

Average farms sizes have nearly tripled during this same period—from 150 acres

in 1916 to about 440 acres today. Obviously, my own farm is a good example of this

change—90 years ago, no one would have dreamed about milking 700 cows. While

my operation has changed because I’ve needed it to grow, it has also been a challenge to continue to farm in an area that is more and more urban. That’s why the

HORIZONS Project is important to me personally.

The HORIZONS project was designed to help identify the changes that agriculture has faced and then look at ways that Farm Credit needs to change so that

it can continue to meet its mission, and serve rural Americans like myself.

Part of the HORIZONS Project included a great amount of research on agriculture

and changes in rural America. Farm Credit recently released a report, entitled ‘‘21st

Century Rural America: New Horizons for U.S. Agriculture.’’ With your permission,

Mr. Chairman, I would ask that this report be made part of the official hearing

record.

The HORIZONS project has eight key findings that I hope the Agriculture Committee members will take into account as you consider approaches for the 2007 farm

bill. Those findings are explained in detail in the HORIZONS final report.

One of the most revealing facts found during the analysis of the project was that

less than ten percent of all farms remain ‘‘farming-only’’ businesses today. The overwhelming majority of all farmers, especially small operations, rely on off-farm employment to stay in agriculture. Over and over, we have heard knowledgeable people—from both inside and outside of Farm Credit—tell us that rural America had

changed dramatically. Where before, rural communities depended on agriculture to

survive; agricultural producers today depend on the economic opportunities in rural

communities to stay on the farm.

Mark Drabenstott, an economist at the Kansas City Federal Reserve Bank,

summed it up by saying, ‘‘the rural economy has been through tremendous change.

It will undergo even greater change in the future. The old rural economy is fueled
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by commodities; agricultural, industrial, mineral, timber. Globalization creates a

new imperative. The most successful regions will grow entrepreneurs ‘‘lots of them.’’

To succeed in this new environment, agriculture and rural communities need reliable access to capital, financial services and the expertise necessary to sustain a

strong economic future. Farm Credit can help ensure that access.

With small changes, Farm Credit can play an even more vital role in helping

strengthen agriculture and rural America. As a farmer who relies on Farm Credit,

I believe that the Farm Credit System should be able to serve the evolving financial

needs of farmers.

A year ago, I was grateful that Farm Credit could help me continue to farm in

Dauphin County. I hope that you will work closely with Farm Credit in the coming

months to explore policy solutions that will enable agricultural producers, rural

businesses and rural communities to more fully access the financial resources of the

Farm Credit System. I think rural Americans deserve a financial partner like Farm

Credit.

Thank you again, Mr. Chairman, for allowing me to testify here today.

STATEMENT OF JOHN K. SHAFER

Good Morning Chairman Lucas, Congressman Holden, embers of the Subcommittee. Thank you for the opportunity to testify here today on the topic of specialty

crops. My name is Jack Shafer, and I am a semi-retired farmer from Tamaqua,

Schuykill County. I say semi-retired, as I am very fortunate to be transitioning the

farm over to my son, who will continue the family tradition. Forty years ago, I

joined the farm in a partnership with my father. Our farm raises pumpkins as well

as corn, soybeans, hay and beef cattle. Our pumpkins are mostly retail sold at our

roadside stand during the months of August, September and October, targeting the

autumn and Halloween markets. In our not too distant history, the farm also grew

cabbage and other fresh market vegetables.

I take pride in my professional affiliations and in my agricultural accomplishments. I am involved in numerous agricultural organizations one of which is the

Pennsylvania Farm Bureau—and I am a member of the Board of Directors of the

Schuykill/Carbon County Farm Bureau. In 1995, I was honored as the Soil and

Water Conservationist of Schuykill County. I have also served as an agricultural

ambassador on the China Tour. The testimony I offer today reflects my personal

opinions of what features should be included in farm bill legislation. But I would

note that nearly all of my views are the same as the policy positions taken by the

Pennsylvania Farm Bureau on the farm bill.

GLOBAL TRADE AGREEMENTS

First and foremost, American agricultural policy must reflect the fact that American farmers are competing in a global market. In order to effectively serve our agricultural producers, Congress must strongly consider an extension of the current

farm bill until the WTO comes to an agreement. Passage of a farm bill without a

WTO agreement is putting the cart before the horse, and disarms U.S. trade representatives in global trade negotiations. In order for American farmers to compete

in a global economy we need a level playing field. Formulating domestic policy prior

to world agreements on trade would be terribly damaging to the American farmer

and the U.S. economy.

REGIONAL AND COMMODITY DIFFERENCES CONSIDERATION

National Farm Policy must be balanced. Congress must take into consideration

the regional and commodity differences that exist. Northeast producers are closest

and most able to meet the agricultural demands of the 25 percent of Americans who

live in the mid-Atlantic and Northeast states. Farm Policy must reflect the unique

needs and limitations of northeast farmers.

IMPORTANCE OF SPECIALTY CROP PRODUCERS

It is important to note that specialty crop farmers produced nearly one half of the

monetary value of all crops produced in the Nation. Yet, our national farm policy

has long overlooked the needs of fresh fruit and vegetable producers. The farm bill

must develop and sustain specialty crop programs and align them with the agreements made at the WTO. The allocation of Federal resources must be aimed at addressing the issues of concern to specialty crop growers, given the impact we have
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on the agricultural economy. Specialty Crop growers do not want direct payments;

rather we seek opportunities to participate more fully in farm bill programs.

RESTRICTIONS OF PLANTING FLEXIBILITY

Growers of specialty crops need continued protection when competing against producers of ‘‘program crops’’ who receive a subsidy whether or not that program crop

is planted. The planting restriction for fruits and vegetables has acted as a safety

net for specialty crop producers who do not receive direct payments. Researchers

have predicted that even a one percent increase in fruit and vegetable planting

would result in no less than four percent decrease in prices. The profitability, and

ultimately—the survival, of fruit vegetable producers is put into jeopardy. Congress

must look into ‘‘green box’’ and ‘‘blue box’’ programs that would protect specialty

crop producers and ensure the availability of nutritious fruits and vegetables.

CROP INSURANCE

While there are about twenty different ways to obtain crop insurance for corn production through seven different crop insurance programs, very few specialty crops

are even eligible for crop insurance coverage. It is difficult for me to find fairness

in this situation. My personal experience with crop insurance has been anything but

positive. Years ago, I participated in a pilot program on coverage for my pumpkin

acreage, but was not pleased at all with the results. Since this experience I have

not purchased crop insurance on any of my eligible acreage. That said, I do see the

instances where it would be quite helpful, for specialty crop producers to be protected from natural disasters through affordable and effective crop insurance. I also

feel there is a definite need for increased explanation and education of RMA practices and rules so that all involved—the agent, the producer and the adjuster—understand in practical terms the extent and limitation of insurance provided. I am

aware of at least one instance where a fellow grower paid premiums for many years

on a crop that was not eligible for crop insurance in the first place.

CONSERVATION PROGRAMS

Many non-farm interests are trying to use the upcoming farm bill as a vehicle for

advancing their environmental views and interests. We as agricultural producers

bear a large burden of stewarding the land—the source of our livelihood. However,

we must remember that this is a farm bill and not a conservation bill. The conservation programs that are included in the farm bill must be directed toward production

agriculture, and must be compatible with farmers’ ability to use their lands in farm

production.. Too often funding for conservation programs is being directed in places

where agricultural producers are not benefiting. The number of agricultural conservation programs that go unfunded or without cost-sharing is extremely high.

Programs like CRP and CREP are well intentioned but are harming Pennsylvania

agriculture in two ways. First, much of the CREP land in the Commonwealth does

not fall in the category of ‘‘marginally productive’’ or ‘‘highly erodible.’’ Farmers

needing rented ground to remain viable and profitable are forced to compete with

the Federal Government for access to rental acreage that is quality farming ground,

but Uncle Sam is able to pay more in rent. What’s worse, many of the CREP lands

are not managed properly, particularly with noxious weeds control.

The Conservation Security Program (CSP) is quite effective, but is under-funded.

It provides an incentive for producers to engage in positive conservation practices

and is directed toward farmers. Conservation funding should promote active land

management rather than land retirement programs like CRP and CREP. CSP promotes active land management. CRP and CREP can lead, unfortunately, to land

degradation.

I want to thank the subcommittee for conducting this hearing and taking into account the issues that agricultural producers are facing. It is my sincere hope that

Congress takes a balanced approach to the farm bill, recognizing the regional differences and commodity differences that exist in American agriculture. It is so very

important to pass into law a farm bill that allows flexibility for state and local leaders to fund and implement conservation programs most beneficial and effective to

that specific location. Specialty crop producers cannot be ignored or overlooked. We

need viable risk management tools to ensure profitability and the survival of the

specialty crop farmer. Most importantly, however, is the need to align our farm policy with that of agreements made on our behalf at the international level, and the

need to delay in writing specific language of the next farm bill until we know the

parameters by which global trade will occur. Thank You.
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STATEMENT BY GLENN SEIDEL

My name is Glenn Seidel. My wife Jane and I own and operate a 118-acre farm

along the Tulpehocken Creek in Heidelberg Township, Berks County, Pennsylvania.

We live there with my mother Grace.

Committee members already know the farm bill and what’s wrong and right concerning agriculture. I could give you statistics from now until the cows come home,

which if milked twice a day, is about 10 hours. But I will be brief and discuss only

two of my concerns.

First is farmland preservation, particularly in the Northeast United States. Unless something is done, and done soon, a lot of our prime farmland will be lost. We

talk about national security. We toss term security around in a cavalier way. But

I’m here to tell you that the preservation of prime agricultural land is right now

an urgent national security issue.

The following is a list of issues and reasons why we need agricultural land preservation:

• Food production, so we can eat

• Biomass, for fuel

• Carbon sequestration, to combat global warming

• Water quality and quantity, so we can drink and industry can thrive

• Nutrient reutilization/pollution control/recycling, since our agricultural lands

provide a natural recycling medium for all kinds of organic materials including our

own biosolids.

• Oxygen regeneration, so we can breathe

• Commerce, so we have commodity products to pay our trade imbalance

• Risk management, in the event of a natural or manmade catastrophe, productive agricultural land disbursed throughout the country only makes good sense.

• Fiber, for cloths

• Open space to promote aesthetics, culture and sanity

My second concern for Congress to address is conservation and the technical assistance to promote those conservation practices. In the list mentioned above for agricultural land preservation, every item requires conservation planning and the

technical assistance to conduct that planning. As increased demands are placed on

every acre of land, the need for conservation and technical assistance only increases.

Conservation is not a one-time capital occurrence. It is an annual necessity. As agriculture becomes more intense, the need for best management practices to be implemented for soil, nutrient, air-quality, and water resource management only become

more demanding. Our current programs must not only continue, but must also expand. Congress should ensure that best management practice strategies are developed and that these strategies are properly funded and deployed.

Our Government farm agencies should review conservation plans and assist conservation plan implementation. Also governmental agencies function as a historical

repository of information concerning the implemented conservation practices on agricultural land. Without NRCS, FSA and Conservation Districts, continuity would

be lost as our farmland pass from one generation to another or from one landowner

to another.

In summarizing:

Congress needs to urgently promote prime agricultural land preservation; Congress needs to continue and to increase funding not only for conservation practices,

but also for the technical assistance to implement these practices.

STATEMENT OF DONALD A. COCCIA

Good morning Mr. Chairman, Ranking Member Holden and members of the subcommittee. It is a great pleasure to be here with you today to discuss the issue of

agriculturally based alternative fuels and biodiesel production in particular from a

truly grassroots perspective.

My name is Don Coccia, and I am the founder and CEO of AGRA Biofuels, LLC

(AGRA, America’s Greatest Renewable Alternatives). I appear here today not long

after accomplishing the surprisingly challenging but gratifying task of building

Pennsylvania’s first commercial biodiesel production facility. Our production facility,

named in memory of my father Joseph A. Coccia, and his now decades old dream

of a national foundation dedicated to ‘‘Peace Through Energy’’ is located ten miles

south of here in Middletown, Pennsylvania. The facility has an annual production

capacity of nearly 3 million gallons of biodiesel and was dedicated in January of this
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year with the distinct honor of Representative Holden’s presence at that event. On

behalf AGRA Biofuels and the entire biofuels industry I would like to thank Representative Holden for his leadership in first recognizing and now supporting the

opportunities presented for both the Nation as a whole and the agricultural community specifically by the biofuels industry. Today, my testimony is meant to support

his leadership and to share ideas and concerns earned through my recent real-world

experiences to improve, promote and advance the cause of alternative energy and

our nation’s energy independence through the advancement of the biofuel industry.

The Importance and Commitment to America’s Energy SupplyThere are two primary reasons that explain my dedication to participating in solving America’s energy needs. The first was strictly a family financial decision and an experience I’m

sure many Americans have or will have to unfortunately relive. I opened my heating

bill in 1999, realized that heating oil had more than doubled in less than a year,

and, I dedicated myself to finding something else. That quest soon led me to a 1-

paragraph article describing the USDA Beltsville Agricultural Center and their use

of vegetable oil based heating oil. My direct contact with them introduced me to biodiesel and began the journey, which led ultimately to the formation of AGRA

Biofuels. It’s fair to say, the USDA is directly responsible for introducing me to the

opportunity of biodiesel.

While investigating the opportunities biodiesel presented, I also learned of the

profound importance energy assumes in the United States. Energy, its availability,

affordability and consumption are vital if not the foundation to the American standard of living and economic well-being. In fact, a host of reasons now convince me

that energy related issues are perhaps the most important issues of my generation:

-First, the stability and strength of the U.S. dollar is closely tied to the oil market

because of the fact that all oil contracts worldwide are denominated in U.S. dollars

and because U.S. oil imports have a significant effect upon our balance of trade.

Second, while we are now importing nearly two-thirds of our oil requirements,

those providing the oil are most often located in the most politically unstable and

openly anti-American locales. To an increasingly larger extent we are effectively

leaving the control of a large portion of our economy to foreign unfriendly control

by relying upon foreign sources of energy.

Third, energy and its related activities underlie directly and disproportionately

the majority of our environmental and pollution concerns.

-Fourth, energy is the world’s largest market and new energy technologies being

developed today will most likely prove the largest economic and job creation opportunities for the future.

And finally, there is a direct link between a country’s standard of living and the

availability and use of energy. As standards of living grow throughout the world and

especially in large, extremely fast growing economies like China and India, the competition for limited crude oil reserves will grow with a resulting upward pressure

on prices. It’s no coincidence that President Hu Jintao of China left the United

States last week and proceeded directly to Saudi Arabia and oil producing countries

in Africa to sign oil development and supply agreements. We increasingly will be

faced with stiff competition from other interests and nations for the available

sources of foreign-based energy.

Based on these events and observations, and after years of industry related education, investigation and research I dedicated myself to participating in solving

America’s energy needs. America now, spurred on by currently historically high energy costs is likewise committing itself to the challenge of developing new domestic

energy supplies and breaking, as President Bush has said, our ‘‘addiction to oil’’

which increasingly is being supplied from foreign sources.

Alternative Energy and Biodiesel Alternative energy provides the most promising

opportunities for meeting or replacing a large percentage of our energy needs. However, it’s unlikely that any one magic bullet exists today that will completely solve

our energy supply concerns. The energy market itself is more akin to a mosaic with

many components. Unfortunately, that mosaic currently is dominated by one piece,

crude oil. The challenge now is to diversify that mosaic with new sources of alternative energy and to grow other currently available sources with the goal to significantly reducing that crude oil component and creating a balanced energy mosaic picture. The rationale of waiting until a ‘‘winning horse’’ can emerge to replace crude

oil should instead be replaced by the idea that many technologies, simultaneously

developed, can collectively diminish the primary role that crude oil now plays.

In our case, we investigated the most currently promising alternative energy technologies to determine which held the most promise for IMMEDIATE application and

effect. We were keenly aware that alternative energy had developed a reputation for

promising future benefits with little practical application now. After much research

and investigation we concluded that biodiesel presented the best opportunity now
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and went about educating ourselves on all aspects of the technology and an industry

that in the United States had just begun.

Our education into Biodiesel revealed a promising technology that could be easily

and quickly employed. In fact, the technology of making biodiesel was first discovered in 1865 and is theoretically very simple. To make biodiesel you simply remove

soap (glycerin) from vegetable oil or animal fats to make it thinner. That’s it. An

alcohol like methanol or ethanol replaces the soap and the resulting product, biodiesel, can be used either alone or in combination with petrol diesel anywhere petrol

diesel is currently used. The bottom line is, petrol diesel has the consistency of

water, diesel engines have over the last 100 years been optimized to run on fuel

of this consistency, biodiesel processing converts oils and fats into that same consistency so they can be used just like petrol diesel. Additionally, our research revealed

that biodiesel’s other benefits include:

- No additional infrastructure or equipment investment is required to use it, just

‘‘drop-in’’ or ‘‘fill and go’’, • It can be produced domestically utilizing American farm inputs,

• Biodiesel use provides significant environmental benefits,

• Diesel technology is as much as 20–40 percent more efficient than similarly

sized gasoline engines.

The only concern with biodiesel at that time was its pricing. This final hurdle was

addressed through two programs that the Federal Government then provided and

which we still strongly support today. The combination of the CCC bioenergy program to encourage additional production capacity and the blenders credit for the

first time made biodiesel economically feasible and price competitive with petrol diesel.

AGRA Biofuels and the Production of BiodieselIn June of 2005 we organized

AGRA Biofuels with the goal to construct a biodiesel processing facility in Central

Pennsylvania. At the outset, we purposely wanted to site and construct a processing

facility quickly so that we could demonstrate to consumers, investors, and, local,

state and Federal leaders like you that biodiesel production can be accomplished

quickly and contribute immediately to our crude oil supply concerns. Our message

and goal became our marketing slogan ‘‘Right Here, Right Now, Right for America’’.

Little did we know what we were in for.

We naively believed that a facility in an industry so desperately needed by the

Nation would be relatively readily embraced and encouraged. We were wrong. The

fact that the industry was so new made every activity one of first impression to

whomever we were dealing with and most often a challenge for them to neatly place

in an already established ‘‘protocol’’ or standard operating procedure. Every activity

from leasing a facility, to insuring it, to obtaining financing, to permitting at every

government level proved an unbelievablely difficult, frustrating and expensive task.

A few examples may explain our difficulties and why a six-month project continues

nearly a year later today with over a 500 percent cost overrun and new regulatory

surprises everyday:

-We initially envisioned utilizing used restaurant oils as a potential feedstock for

our facility. Unfortunately, Pennsylvania is the only state in the union that regulates the processing of used restaurant oil or ‘‘yellow grease’’ for processing into biodiesel. Although a permitting process existed initially to utilize yellow-grease, the

process was uncertain as to outcome, extremely expensive and likely to take years

to complete. After much time, effort and expense, however, I am proud to say, that

working closely with the administration of Governor Ed Rendell we have been able

to at least provide an interim solution. In concert with the staff of Pennsylvania’s

Department of Environmental Protection (DEP), headed by Secretary Kathleen

McGinty and the Department of Agriculture headed by Secretary Dennis Wolff, we

provided extensive comments on a new general permit that now allows the commercial production of biodiesel using yellow grease under a DEP initiated general permit. We are hopeful that under that general permit we will be permitted to process

yellow grease soon.

-In an effort to insure our facility we ran into serious roadblocks due primarily

to a misunderstanding of the facility and the industry. Insurers classified biodiesel

not as processed vegetable oil but rather as a hydrocarbon based fuel, especially

since the name included the word diesel as in bio-DIESEL. In fact, insurers classified us most often as a crude oil refinery, even though the raw materials used and

the environmental and processing risks are completely different and much less apparent. Our facility contains no crude oil and does not employ high temperatures

or pressure in our processing. In the end, I was forced to conduct nearly daily conference calls for months with dozens of insurance companies and become an insurance expert before we were lucky enough to identify a broker and an insurance company that would work with us.
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-Code enforcement officers and those responsible for applying and enforcing regulations are most often not familiar with the biodiesel industry nor have a procedure

to process and accept a facility involved in a new industry. The exercise of interpreting regulations and obtaining permits then becomes an expensive and drawn-out

procedure and I’m afraid an opportunity to open a never ending process where no

one is willing to make final decisions or establish precedents. In such a vacuum,

regulators regularly resort to the most restrictive interpretations to avoid repercussions thereby endangering the success of any project.

-Even though we now have millions of dollars of equipment in place in our facility,

traditional lenders still have no incentive or inclination to put forth the effort to determine a valuation for our equipment or inventory. In the end, financing is still

largely an exercise in obtaining private funding.

All of these roadblocks can be attributed to the growing pains of a rapidly expanding industry but to be effective quickly in establishing a vibrant alternative energy

industry I believe that all of these issues and dozens more like them will most effectively be addressed by a central organization. In my mind the terms that will describe success in building the alternative energy industry is responsiveness and predictability when undertaking an alternative fuels project. This is especially true in

the case of potential small producers that may not be able to absorb the cost and

time commitments of developing alternative energy projects. New fuels, new technologies and new ideas and improvements will continuously be introduced and I believe that to be successful, we must build the infrastructure that embraces them,

evaluates them, assists in developing them and gets them in production and to the

consumer in the least amount of time and with the least amount obstacles.

The Biodiesel Industry Beyond ProductionBeyond the actual making or production

of biodiesel which AGRA Biofuels now participates, the industry also consists of two

other segments, feedstock supply which provides the raw materials for our facility

and post production blending, distribution and marketing. The industry can be seen

as a continuous energy supply system that begins with feedstock, which in turn supplies production, which in turn supplies the distribution to consumers. Therefore to

build a successful biodiesel industry each of the three successive steps to biodiesel

utilization must be developed. The feedstock must be made available, the production

facilities must exist and the distribution infrastructure must be available to deliver

the fuel wanted by consumers, consumer demand which in turn is developed

through effective consumer awareness, marketing programs and state-of-the-art appliances, engines and vehicles.

BUILDING THE FUTURE

The future of America’s energy independence I believe will be rooted today in the

activities done now to create a foundation for implementing alternative energy technologies. We must continue the programs that have proven so successful to this

point in really just a few years to creating exponential growth within the biofuel

industry. These include the funding of the CCC bioenergy program and the small

producers tax credit and blenders credit programs.

In addition to these existing programs, I also believe that we must support each

of the industry’s three segments to keep biodiesel in particular competitive and importantly domestically produced. Traditional feedstock like soybean oil, for example,

which serves as the vast majority today of the biodiesel raw material is expected

to soon experience significant competition from foreign oils that are vastly more prolific and therefore less expensive. The Nation must invest in ensuring that domestically grown feedstocks can compete effectively against this challenge and that new

technology can be deployed quickly so as to encourage increasingly larger amounts

of production to expand feedstock supplies. This not only will include research into

developing more productive oil producing traditional crops, but also in encouraging

farmers to grow the crops. In the end, the Nation will also have to invest in developing new and novel forms of feedstock of which aquaculture based feedstocks such

a micro algae appear to offer nearly limitless potential. Additionally, although the

feedstock may be grown, we must also ensure that the infrastructure exists to process the crops into oil and into a form that can be used to produce the biofuel.

Therefore, there is a definite need for Congress in the next farm bill to expand

incentives for oil crop production and processing. For in addition to the obvious energy and environmental benefits provided by the production and use of biodiesel,

there are tremendous gains that can be made for the Agriculture sector of our economy. Using soybeans and other feedstock and oil crops for biodiesel production does

much more than use surplus agricultural commodities; it adds layer upon layer of

economic value. Various economic studies have shown that increased use of fats and

oils for biodiesel production increases the value that farmers receive for their crops,
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at the same time making protein meal cheaper for domestic livestock producers and

more competitive in the international protein markets for food and fuel. This could

lead to actually increasing agricultural processing here in the United States, while

at the same time making our farmers more profitable in the global food markets.

From a production prospective, I believe that the infrastructure must be developed to make the industry highly responsive. That is, organizations and stakeholder

partnerships must be created and funded to marshal the resources that enable everyone willing to participate to have access to the knowledge and procedures to easily, efficiently and quickly institute any alternative energy initiative. In effect, we

must create a reproducible template that family farms, cooperative or private entities can use to implement and sustain alternative energy projects. The template

must provide access to the finances, knowledge, regulatory procedures and technical

support necessary to make the industry viable, fast growing, responsive and competitive.

Finally, from a postproduction perspective, educational awareness, technical support and appliance development programs must be developed to ensure the adequate

supply and increasing demand for biofuels. For example, less expensive equipment

must be developed and additives researched that permit cold weather utilization of

biodiesel with and without blending with petrol diesel. Additionally, I firmly believe

that with the proper research and development funding, the technology exists and

can be easily developed to significantly expand the use of biodiesel in traditional

HVAC, and stand alone energy generation within the home. Imagine the positive

effect of a home in the near future burning clean biodiesel that is completely offgrid and generates all of its energy needs through biodiesel and the utilization of

highly efficient clean-burn diesel technology.

ConclusionTherefore, as a result of our experience, I am here today to ask for continued support of the biodiesel production industry as it relates to agriculture. As

you consider the 2007 farm bill, please consider the Federal policy measures that

have been successful in the progress made developing this industry. They include

extension of the biodiesel blender’s and small producers credits, extension of the bioenergy program for biodiesel and extension and expansion of the biodiesel fuel education program.

Beyond that, I would urge Congress to explore possible initiatives to increase soybean and other oil crop and feedstock production, deployment grants for new feedstocks, guaranteed loans for facility construction or expansion and greater incentives for end-use research development and deployment. Additionally, I would argue

that all of these goals could be accomplished through a newly created organization

that brings together government, research and industry participates in a partnership format and committed to the goal of technical development and technical support to each segment of the biodiesel industry.

Mr. Chairman, I appreciate the opportunity to appear before you here today to

discuss this important issue. We welcome the opportunity to continue working with

Rep. Holden and members of this committee as you move forward, and I’ll be happy

to answer any questions you might have. Energy independence is not beyond our

grasp. In fact, it is with a certain irony that we sit here this morning in the same

state that gave birth to the oil industry, discussing the potential of a re-birth of oil.

Right here. Right now, Right for America.

Thank you very much.

STATMENT OF THOMAS A. GILBERT

Thank you for the opportunity to submit comments regarding USDA farm bill conservation and rural development programs and their critical importance in Pennsylvania and throughout the Northeast. The Wilderness Society is a national non-profit

conservation organization working to protect America’s wildlands and wildlife. The

farm bill is an important tool to conserve and maintain family farms and private

forestlands, and to support rural resource-based economies, especially in the Northeast.

Productive farm and forest lands are essential to the economic vitality and quality

of life of Northeastern communities. They are vital sources of farm and forest products, clean air and water, carbon sequestration, wildlife habitat, scenic beauty and

opportunities for outdoor recreation. Unfortunately, private farm and forest lands

are facing tremendous development and economic pressures that threaten their future ability to provide these goods and services to the residents of this densely populated region. Pennsylvania alone loses more than 49,000 acres of farmland every

year, and the same phenomenon is occurring throughout the Northeast as development sprawl increasingly expands to suburban and rural areas.
37

While Pennsylvania leads the Nation in the number of farms and acres of farmland preserved, many of the state’s most pressing environmental challenges—such

as clean water—are left unmet because over 1,200 producers are annually rejected

when they seek stewardship incentives from USDA. The next farm bill should significantly increase funding to the Farm and Ranchland Protection Program, and to

USDA conservation programs, such as EQIP and WHIP, that provide technical and

financial assistance to farmers for improved stewardship of their lands and the environmental benefits they provide.

The same pressures are facing private forestlands throughout the Northeast and

mid-Atlantic, and many family farms are a mix of agricultural lands and woodlots.

A recent USDA Forest Service report, ‘‘Forests on the edge’’ projected that over 40

million acres of private forestlands, primarily in the East, will experience increased

housing density by 2030. The report warns that that these increases in housing density will result in ‘‘decreases in native wildlife populations, loss of biodiversity, increased opportunities for invasive species, reductions in water quality and aquatic

diversity, decreases in timber production, increased fire risk and greater loss of life

or property from wildfires, changes in scenic quality and recreational opportunities,

and fewer options for timber management, recreation and other uses whose economic benefits rely on large forested areas.’’

The Forest Legacy program, authorized through the 1990 farm bill, has been an

effective tool to assist states in conserving private forestlands through purchase of

lands or development rights from willing landowners. But demand for the program

far exceeds available funding, as participating states submitted over $200 million

in project requests for FY 2007. The proposed Suburban and Community Forestry

and Open Space Program (S941/HR3933) could provide an important complement to

the Forest Legacy Program to assist local governments and private land trusts in

conserving threatened suburban and community forests, including family farms that

are a mix of agricultural lands and woodlots.

The Wetlands Reserve Program should be expanded to 5 million acres to maintain

wetlands that are vital for wildlife, filtering pollutants from our water supplies, and

controlling floods. In general, easement and reserve programs should place greater

emphasis on permanent and long-term conservation agreements, since this is a more

effective use of public funds, and land values will only continue to rise resulting in

higher costs to conserve critical lands and resources in the future.

Throughout the nation, rural communities are struggling with economic transition. Changing technology has reduced the labor needed for agriculture, forestry,

and wood products production, and some resource-based rural economies are coping

with mass out-migration of young people who see few opportunities. At the same

time, rural places are attracting entrepreneurs and retirees seeking a high quality

of life, and an influx of new residents is stressing the services and the traditional

culture of some rural communities. Whether shrinking or booming, rural economies

need assistance that matches their unique needs. Both technical assistance and

funding offered by USDA’s rural development programs are critical to helping rural

towns diversify their economic base, provide critical infrastructure, and cope with

change.

Thank you again for considering my comments on the critical importance of USDA

farm bill conservation and rural development programs to the Northeast.

(39)

REVIEW OF FEDERAL FARM POLICY

THURSDAY, JULY 27, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONSERVATION, CREDIT, RURAL DEVELOPMENT, AND RESEARCH,

COMMITTEE ON AGRICULTURE,

Washington, DC.

The subcommittee met, pursuant to call, at 1:03 p.m., in room

1300 Longworth Building, Hon. Frank D. Lucas (chairman of the

subcommittee) presiding.

Present: Representatives Moran, Osborne, Goodlatte [ex officio],

Holden, Cuellar, McIntyre, Herseth and Peterson [ex officio].

Staff present: Joshua Maxwell, Bryan Dierlam, Bill Imbergamo,

Pelham Straughn, Tyler Wegmeyer, Callista Gingrich, clerk; Jamie

Weyer, Nona Darrell, and Anne Simmons.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA

Mr. LUCAS. This hearing of the Subcommittee on Conservation,

Credit, Rural Development and Research to review conservation

issues will come to order. And I would note for all of our witnesses

and friends in the gallery that we had a rather exhaustive full committee hearing on the joys and wonders of horse slaughter-related

issues in a markup earlier this day, so don’t be surprised if it takes

a little bit for some of my colleagues to work back in after a 31⁄2

hour process.

With that, good afternoon and welcome to the subcommittee’s

hearing to review conservation issues.

Today’s hearing is the first of several that this subcommittee will

hold to review the conservation title in preparation for the next

farm bill that will be written by the House Committee on Agriculture.

The 2002 farm bill is the greenest one to date. This legislation

created new voluntary incentive programs and increased funding

for conservation programs by more than 80 percent. This historic

legislation increased the acreage allowed for sign-up under land retirement programs such as CRP, WRP; also dramatically increased

the annual funding for the Environmental Quality Incentives Program and other incentive and cost-share programs.

In addition, the 2002 farm bill created a new Conservation Security Program, further moving the trend of the conservation title towards more working lands programs. Farmers and ranchers,

through the assistance and incentives of these programs, have vol-
40

untarily worked to help reduce soil erosion, increase wetlands, improve water quality and preserve farmland and wildlife habitat.

The environmental gains produced are a testament to our producers who are truly the most dedicated conservationists.

However, as we have learned throughout the past 2 years, the

conservation title is not without its challenges. I have had my

doubts about CSP from the very beginning, and it comes as no surprise that this program has not been implemented as Congress intended it to be.

CSP was meant to be a flexible national program, but due to constraints, yes, imposed by Congress and the administration, this

program has been a very targeted and complex program. I intend

to take a very serious look at this program during this and future

hearings.

To ensure the future relevance of conservation programs, we

must make sure that they meet the ever-changing needs of producers. Contracts for over 28 million acres in CRP are set to expire

before 2010. The FSA has worked diligently, reenrolling much of

the acceptable land. This brings to mind a few questions. At what

acreage should we cap CRP? What will be done to the land that

comes out of retirement? And how do we ensure that our truly sensitive lands remain in the programs to meet our soil, water and

wildlife habitat conservation goals?

There are already many ideas floating around on how conservation programs can help solve our Nation’s energy crisis. I have even

heard members of the subcommittee state that they will advocate

the planting of switchgrass on CRP acres.

Let me be very clear. I am not advocating any change in the way

CRP or any other conservation programs work. Many of these ideas

will be put forth today, and I will be open to discussing the many

policy options that will be brought to the table in today’s hearings

and in future hearings.

I cannot speak about conservation without the issue of technical

assistance rearing its ugly head. I suspect we will hear much about

that today. Providing the participants of conservation programs

with the necessary financial and technical assistance is essential to

the success of conservation programs. I have worked hard to make

sure that each conservation program has adequate TA funds, and

I will continue to examine the progress of using technical assistance, technical service providers in lieu of NRCS and FSA staff, as

well as working to streamline the application process. The delivery

system is the lifeline to ensuring the success of conservation programs.

The final picture of the next conservation title is still very unclear. It comes as no surprise to anyone inside and outside the

Beltway what the budget situation is. It remains very tight. Writing a farm bill and a conservation title within our existing budget

constraints is a reality we must face. So before we start developing

new programs and looking for ways to spend additional dollars, we

must first look at—look within the current programs to make sure

they are producing the environmental benefits we intended.

Programs must be examined for common goals and, if necessary,

combined to prevent overlap and redundancy. Combining programs

does not mean that their activities conducted by the present pro-
41

grams will cease. It simply means we are streamlining the process,

the implementation, the administration of programs to make more

money available for on-the-ground activities.

Most importantly, it is imperative that we allow these programs

to be accessible to all qualified parties by reducing backlogs. Programs under Title II had a sizable reduction after budget reconciliation; however, proponents of these programs must do a better job

of making their priorities known—and I want to say that I use this

phrase loosely, but I will not say that—known to the appropriators.

Today Mark Rey, the Under Secretary for Natural Resources and

the Environment, and Teresa Lasseter, the Administrator for the

Farm Service Agency, will testify about the implementation and

management of the conservation programs. We will also hear from

conservation producers and wildlife groups that represent the very

constituents these programs affect.

When preparing for this hearing, I gave my witnesses a very

simple task: Tell us what in the 2002 farm bill is working, what

is not working, and what priorities you have for the conservation

title of the next farm bill. Today’s testimony will be broad, but extremely helpful as we continue to work to outline the next conservation title. And I most assuredly look forward to today’s testimony.

And with that I would like to turn to the gentleman from Pennsylvania for any opening comments he might have.

OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. HOLDEN. Thank you, Mr. Chairman. I would like to thank

you for holding this hearing today, and I look forward to hearing

from all of our witnesses, but especially Berks County Commissioner Judy Schwank. Commissioner Schwank is involved with

many conservation issues in my district and hails from the leading

county in Pennsylvania for farmland preservation.

Mr. Chairman, the current farm bill was the largest investment

in conservation in the history of recent farm bills. The conservation

title of the current farm bill dedicated over $17 billion for conservation, an increase of 80 percent. We funded the most significant programs in order to preserve farmland and to improve water quality

and soil conservation on working lands. We addressed environmental concerns and sought to make conservation a cornerstone of

agriculture for producers in all regions of the country.

We are also able to address some of the farm bill’s inequities for

regions that do not benefit from traditional agriculture programs,

such as the Northeast. Conservation programs offered farmers in

those areas a way to continue farming. Conservation programs assist our farmers and ranchers in strengthening their environmental

stewardship. That is important in looking over land and water that

we will pass on to future generations.

Our Nation’s farms and ranches produce far more than traditional food and fiber. Well-managed agricultural land also produces

healthy soil, clean air and water, wildlife habitat and pleasant

landscapes, all of which are valued by rural and urban citizens

alike.
42

So, Mr. Chairman, I commend you for having this hearing today,

and I look forward to hearing the testimony from our witnesses.

Mr. LUCAS. Thank you, Mr. Holden.

Any other statements for the record will be accpeted at theis

time.

[The prepared statement of Mr. Cueller follows:]

PREPARED STATEMENT OF HON. HENRY CUELLAR, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF TEXAS

• Chairman Goodlatte, Ranking Member Peterson, tank you for holding this hearing on USDA’s conservation programs.

• These programs are some of the most important administered by USDA because

they not only directly benefit individual farmers and ranchers but also protect our

shared natural resources.

• Through technical assistance from NRCS, farmers and ranchers in my district

have protected declining species on over 13,000 acres and established wildlife as a

primary resource concern on nearly 344,000 acres.

• NRCS technical assistance programs have also permitted district farmers to increase irrigation efficiency saving some 1,046 acre feet of water.

• But despite these achievements, I am concerned that without an adequate number of staff or technical service providers, delivering technical assistance will become

increasingly difficult.

• Because of their importance and size, conservation programs, whether administered by NRCS or FSA, deserve a close and careful examination to ensure they are

delivering expected results.

• I look forward to hearing from our distinguished witnesses.

• Thank you again, Mr. Chairman for holding this hearing.

Mr. LUCAS. We are pleased to have at the table our first panel,

the Honorable Mark Rey, Under Secretary for Natural Resources

and Environment, the U.S. Department of Agriculture here in

Washington, DC; and Ms. Teresa Lasseter, Administrator, Farm

Service Agency, USDA,

Dr. Rey, please begin when you are ready.

STATEMENT OF MARK E. REY, UNDER SECRETARY, NATURAL

RESOURCES AND ENVIRONMENT, U.S. DEPARTMENT OF AGRICULTURE

Mr. REY. Thank you, Mr. Chairman, and thank you for the opportunity to appear here today to discuss the conservation programs included in Title II of the farm bill. The 2002 farm bill committed more than $17 billion over 10 years for conservation and

emphatically demonstrates your commitment to working agricultural land.

Working lands conservation programs are unique among agricultural programs in that they are specifically designed to produce

multiple benefits. First, farmers or ranchers who install conservation practices improve their land and enhance their natural resources. Second, the public also receives many benefits through a

cleaner environment, increased biological diversity and a scenic

landscape. Conservation investments also lead to stronger rural

economies.

Since 2002, NRCS has provided assistance to 1 million farmers

and ranchers. Working with our partners we have applied conservation on more than 130 million acres of working farm and

ranchland under EQIP alone, plus 60 million acres enrolled in land

retirement and easement programs. We have also helped farmers

apply for more than 14,000 comprehensive nutrient management
43

plans, and over the past 4 years we have invested $6.6 billion directly with farmers and ranchers, matched by landowners and

partners who have added an additional $2.8 billion for a total investment of more than $9.4 billion through 2005.

The 2002 farm bill brought us new programs and new opportunities. NRCS has responded with new tools and streamlined agency

management to serve farmers and ranchers more effectively and efficiently. For example, from 2003 through 2006, we have worked

with over 2,100-plus technical service providers providing the

equivalent of over 1 million hours of assistance to supplement our

staff in serving our customers.

Let me briefly review our achievements in the major farm bill

programs.

Under the Conservation Security Program, we began with 18 pioneer watersheds in 2004, and now serve 280 watersheds nationwide, covering 14.6 million acres and rewarding nearly 19,000

stewards.

From the Wildlife Habitat Incentive Program we have invested more than $165 million in 9,500 agreements covering 1.4 million

acres of improved wildlife habitat.

Our portfolio of easement programs, designed to protect and preserve prairie grasses and wetland systems and preserve working

farms and ranches, has provided protection for nearly 380,000

acres through the Grassland Reserve Program, 750,000 under the

Wetland Reserve Program, 450,000 acres in the Farm and Ranch

Lands Protection Program; and, of course, our biggest program, the

Environmental Quality Incentive Program, where we have invested

nearly $3.1 billion, has benefited close to 185,000 participants from

fiscal years 2002 through 2006 alone.

NRCS has also worked to help livestock producers meet their environmental challenges, applying more than 14,000 comprehensive

nutrient management plans since 2002.

Undergirding all of these programs is our mainstay program that

provides planning assistance and conservation technical assistance

to a wide variety of landowners.

I want to touch also on some management reforms that have either increased our efficiency or helped us direct more dollars and

better service to our customers.

First and foremost, we have increased transparency, resulting in

greater accountability and a better understanding of our programs

by our customers and those who evaluate the efficiency of our programs.

We have streamlined payment processes and reduced paperwork

for customers, saving nearly 330 staff years alone.

We have established a process for rapid watershed assessments,

reducing that process from several years to 6 months. And in addition to the efficiencies of the new tools, we have developed the Web

Soil Survey. Our soil survey data are now available over 24/7 via

the Web. We have provided as much information in the last 10

months through the Web as we have done through the last 5 years

via printed copies.

We have also developed a trio of 3-click Web tools to help farmers save dollars and energy by determining how much they could

save by switching from no till, improving fertilizer management, or
44

increasing irrigation efficiency. Conservation programs on working

agricultural lands benefit both producers and the public, supporting sustainable agriculture and enhancing the environment.

As we move forward, NRCS will emphasize cooperative conservation, a watershed approach, and market-based approaches to helping people help the land, in addition to those that I have summarized and those efforts that are included in my statement for the

record.

Thank you, Mr. Chairman and the members of the subcommittee, for the opportunity to testify.

[The prepared statement of Mr. Rey appears at the conclusion of

the hearing.]

Mr. LUCAS. Thank you, Secretary.

Administrator Lasseter, whenever you are ready.

STATEMENT OF TERESA C. LASSETER, ADMINISTRATOR, FARM

SERVICE AGENCY, U.S. DEPARTMENT OF AGRICULTURE,

WASHINGTON

Ms. LASSETER. Thank you.

Mr. Chairman and members of the committee, I appreciate the

opportunity to review the operation of the farm bill’s conservation

programs as implemented by the Farm Service Agency.

I am pleased to report to the committee that there have been significant accomplishments under CRP since the 2002 farm bill. FSA

implemented the President’s directive to reenroll or extend contracts on more than 28 million acres of land. These are contracts

scheduled to expire between 2007 and 2010.

With regard to the contracts expiring in 2007, CRP participants

elected to reenroll or extend more than 88 percent of the acreage.

Almost 77 percent reenrolled or extended those acres expiring between 2008 and 2010.

Earlier this year the Department announced that it accepted 1

million acres in this spring’s general sign-up. This was added to

the 2.9 million acres accepted since 2002. Total enrollment now

stands at about 36 million acres, with annual rental payments totaling $1.8 billion.

The country clearly gains from CRP. CRP annually reduces soil

erosion by 454 million tons, stops the escape of nitrogen, phosphorus and sediment from fields by well over 85 percent, sequesters more than 48 million metric tons of carbon dioxide from the

air we breathe.

CRP also contributes to increased wildlife population. More than

2 million additional ducks survive annually in the northern prairie

because of CRP. Sage and sharp-tailed grouse populations are increasing in eastern Washington because of CRP, and ring-necked

pheasants are again abundant in many parts of the Midwest because of CRP.

CRP is building upon these successes with several initiatives, including enrollment of 100,000 acres in the Presidential Quail Initiative to create habitat for quail, upland birds and other species.

To foster further goodwill, we will have executed agreements with

Pheasants Forever, Ducks Unlimited, the National Wild Turkey

Federation and the Quality Deer Management Association.
45

Fourteen new Conservation Reserve Enhancement Program

agreements, better known as CREP agreements, were signed recently with State Governments. We are after mutually beneficial

results, such as improved water quality and quantity, better habitat for wildlife, and additional erosion controls on more than

800,000 acres.

Recent agreements with Colorado, Idaho and Nebraska should

create a combined enrollment of up to 235,000 acres. Our projected

water savings from these agreements is 360,000 acrefeet of water

annually.

Additionally, FSA is fully engaged in the sign-up and distribution

of $504 million in emergency forestry CRP funds. Our hope is to

restore more than 700,000 acres of private forestlands damaged by

the 2005 hurricanes. Likewise, the Emergency Conservation Program provides emergency funding to help farmers and ranchers rehabilitate farmland damaged by natural disasters, including

drought.

Since the 2002 farm bill, FSA has allocated more than $500 million in ECP assistance, including funds appropriated by Congress

for the 2005 hurricanes.

Overall, environmental indicators suggest that we are making

progress in resource conservation. Still there is plenty of work to

do, especially as new issues emerge. For instance, we have shown

that additional trees and CRP grasses help reduce greenhouse

gases through carbon sequestration.

Is there more that we should be doing? Can we produce environmental benefits and grow bio-based fuels on the same ground? Do

we pay farmers to do that?

Other broad policy considerations include identifying specific

goals for water quality, wetlands, wildlife habitat, air quality, soil

erosion, recovery of threatened and endangered species and increased flood control. Attention should also be given to resources

needed to accomplish these goals.

Other program considerations that could be examined are whether land expiring from a CRP contract should be considered eligible

for reenrollment even if that land is no longer capable of being

cropped due to an easement, conversion to trees or other factors.

Also, should certain conservation practices such as wetlands and

buffers be exempt from the 25 percent county cropland limitation?

Should the statutory standards for a waiver of the 25 percent county cropland limitation be modified? Should CRP be modified to support specific biofuels initiatives?

In concluding, as Congress debates the upcoming farm bill, we

hope consideration is given to improving existing programs, funding WTO-consistent green payments that enhance environmental

benefits, encouraging private sector markets to enter environmental services, and emphasizing voluntary tools for conservation

over a more regulatory approach.

We look forward to working with you on these critically important issues. Thank you.

[The prepared statement of Ms. Lasseter appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Administrator.
46

Mr. LUCAS. Let us begin with a discussion about CSP. Mr. Rey,

you said we were going to spend how much money this year on

CSP?

Mr. REY. We will spend, I believe, somewhere in the neighborhood of $239 million on CSP this year.

Mr. LUCAS. And that money goes to, you said, 200-some cooperators?

Mr. REY. It will be more than that; 19,000 cooperators.

Mr. LUCAS. What percentage would you say of the potential people who might be eligible for the program does that 19,000 represent if—what I am saying is if CSP were available to everyone

who would be eligible in the country, how many dollars would that

$239 million have to become, speculating, of course, from an educated guess position?

Mr. REY. If we are talking about the nationwide application of

it as opposed to everyone within the targeted watersheds being eligible, our estimates would be that CSP would cost us somewhere

in the neighborhood between 9- and $10 billion a year to administer.

Mr. LUCAS. OK. Because as you noted from my opening comments, I am always very sensitive about having programs that not

everyone, for budget restraints or whatever other reason, are not

able to participate. So probably an additional $9 billion, say, to

make it open to everybody else.

Mr. REY. That is about right.

Mr. LUCAS. Let us touch for a moment on that 25 percent crop

limitation. In the third district of Oklahoma, I have a number of

counties that long ago on CRP met that number, and enrollment

was stopped.

Based on your experiences, both of you, in working to administer

these programs, does that seem like a rational percentage number?

Should it be raised? Should it be lowered? From your observations.

Ms. LASSETER. From my observation, we have been able to accept

pretty much what is offered for CRP, and maybe perhaps our 25

percent is working. We certainly need to consider what influence

that has on the county and the economy.

Mr. LUCAS. Most assuredly.

Tell me, if you would, for a moment about how GRP has been

implemented. Initially in this committee, in 2002, when it was discussed as a part of the farm bill, it was viewed as a working lands

program perhaps either to transition CRP property out of—or

leases out of and over into, or as a way to provide opportunities to

expand conversation in the rangeland areas, and from some of the

numbers I have seen, it almost looks like a program now that has

been become more of a green zone farmland protection perspectivetype program. Is that a fair assessment of how the actual implementation has gone?

Mr. REY. I think there is some similarities in the results that

occur, but I don’t think that is necessarily an accurate assessment

of how the program has been administered.

I think the way the program has been administered is that it has

become one of the preeminent conservation programs in the grazing land or rangeland area, and it has been very popular, particu-
47

larly in some of the intermountain Western States that are facing

pressures right now from subdivision development.

Mr. LUCAS. Tell me a moment then from the perspective of the

programs that you implement, are there particular areas perhaps

of overlap where we have programs now that exist that seem to do

very similar, if not the same things in the conservation title?

Mr. REY. I don’t think that there is so much overlap in the

functionality of the programs. Where we see some opportunities

and will likely be making some recommendations as the subcommittee and then the committee considers the 2007 farm bill is

ways to coordinate these programs so that we are targeting their

net effect at a watershed level. But I don’t see them as necessarily

overlapping. I see them as programs that could be better coordinated to achieve larger conservation objectives.

Mr. LUCAS. Before I turn to my colleagues, Secretary, you and I

have had lots of discussions about technical assistance cost issues

around the country as a whole. And I have had various concerns

about that.

Do you believe we have made progress on addressing those

across the Nation, making sure the resources are there, able to deliver those programs?

Mr. REY. I believe we have. As the year has progressed and we

have realized some benefits through efficiencies, we have reallocated money back out to States to provide additional assistance for

technical assistance, to provide additional funding for technical assistance work.

In Oklahoma, for instance, those efficiencies allowed us to

produce additional—those efficiencies, I should say, allowed us to

produce an additional $4 million for Oklahoma over the last several

months.

Mr. LUCAS. Thank you.

I now turn to the gentleman from Pennsylvania.

Mr. HOLDEN. Thank you, Mr. Chairman.

I guess, Mr. Secretary, I should address this question to you. As

you well know, the Agriculture Committee has been traveling

throughout the country preparing for the next farm bill. And we

heard from numerous specialty crop producers that the current

conservation programs are just not flexible enough to meet their

needs.

I am just curious. Do we know who is applying and who is receiving conservation assistance? And what is your reaction to the allegations by specialty crops producers that the program is not really

meeting their needs?

Mr. REY. We do have data on who is providing, who is benefiting

from these programs. And there is a significant participation by

noncommodity crops in these programs, upwards of over 6 million

acres.

I think that part of the problem with specialty crop producers is

because they are not as used to some of our programs broadly as

some of the commodity producers are, that the—the learning curve

for sign-up to some of the conservation title programs is a little

higher.

Mr. HOLDEN. They are not familiar enough.
48

Mr. REY. Right. But they have been coming on line now with

some increasing rapidity, so we feel pretty good now about the fact

that we have got blueberry, citrus, coffee, cotton, grass seed, oilseed, just about every manner of specialty crop participating to one

degree or another in the conservation title programs.

Mr. HOLDEN. Thank you.

I guess this is also for you, Mr. Secretary. As I mentioned in my

opening statement, Commissioner Judy Schwank, who is from

Berks County—and I mentioned that she comes from a county that

leads Pennsylvania in farmland protection, and we like to say

Pennsylvania leads the country in farmland preservation. I learned

on my recent trip that Maryland does. But no one from Maryland

is on the committee. So I will still claim that——

Mr. REY. You are a close second.

Mr. HOLDEN. We are No. 1.

The question I have is I learned in a field hearing of the full committee in New York that farmland preservation in New York is not

working as well as we anticipated. And I also know that on the

Senate side, the junior Senator from Pennsylvania has introduced

a farmland preservation bill that is going to correct some problems

he see in the Commonwealth. And through staff I understand that

there was a change made in the decision about the appraisal and

title review of the Farmland Preservation Program.

I am just wondering, why do we make that decision, and who

made it, and is that affecting the areas that we anticipated was

going to benefit from farmland preservation?

Mr. REY. I don’t think it has had an effect in one State relative

to the other. It has had an effect in that it is a new provision or

a new requirement in the program, and so our partners and the

farmers who want to benefit from the program are going to have

some learning curve time associated with adapting to it.

Essentially the change was made as a consequence of audits of

the program that were done by both our own inspector general as

well as your general governmental accounting office, and the net effect of it was the view that we ought to be using standard yellow

book appraisal procedures in executing this program.

Mr. HOLDEN. Is there a problem getting certified appraisals in

some States? Is that it?

Mr. REY. No. I think the appraisal process outlined in the yellow

book is well enough known so that we are not having problems locating certified appraisers.

One of the problems we nay be experiencing in some areas, however, is that applying the yellow book standards, as both the GAO

and the OIG said we should, is decreasing the value of the easements that we are purchasing. So the amount that we are offering

to farmers is less than would otherwise have been the case had we

stayed with the previous system.

But that overpayment, as the OIG and GAO considered it, was

a bone of some contention. So it may be we are getting some farmers backing away because the incentive we are offering isn’t as big

as it once was.

Mr. HOLDEN. Finally, Mr. Chairman, before my time expires, Mr.

Secretary, as you well know, there has been flooding in the Mid-
49

Atlantic and Northeast in June. Is there any emergency conservation funding that has been on the way there to help out?

Mr. REY. There is nothing in the Emergency Watershed Protection Program at present. There is, however, money in the Senate

version of the fiscal year 2007 agricultural appropriations bill that

is devoted to that purpose. I think it is about $531⁄2 million earmarked for recent flooding in New England, New York and Pennsylvania. Assuming Congress enacts that legislation, we will put

that money to good use.

Mr. HOLDEN. Unfortunately it will probably be after the election.

I will yield back, Mr. Chairman.

Mr. LUCAS. The Chair turns to the gentleman from Texas, if he

has any questions.

Mr. CUELLAR. Thank you, Mr. Chairman.

Mr. Secretary, I was looking at your written testimony on page

2 where you talk about new programs, new rules. Basically if we

pass some legislation, then, of course, you have to develop the

rules, you have to publish those program rules, you have to complete the companion policy guidance documents, you have to develop the program manuals, you have to train and update your

workforce, and then, of course, you have to deliver that information

down to the consumer, the farmers and other folks down there.

My question is in order to make sure that when you look at all

the rules and all the regulations—I would like to have very efficient Government. Are you all doing anything to actively reduce,

eliminate, modify any unnecessary rules that we shouldn’t have out

there?

Mr. REY. The short answer is yes.

One of the challenges that was presented by the 2000 farm bill

was to get the regulatory framework out fast enough to get conservation work done on the ground, and I believe we succeeded in

doing that.

Now, what we are doing is going back and looking at some of

those rules to see where we can do streamlining and add some efficiencies. And some of those are indicated in my written statement

later on in the later pages. We just cleared yesterday a set of revisions to the Farm and Ranch Lands Protection Program not only

to deal with the appraisal issue that Mr. Holden asked about, but

also to add some additional efficiencies as well, so that we are gainfully involved in a second round of looking at these regulations to

see where we can simplify and streamline them.

Mr. CUELLAR. Could I ask you a follow-up on that? Let us say

you had a pie that had 100 percent of all the rules and regulations.

In your effort or your endeavor to reduce those unnecessary rules

and regulations, what would you say you have done already, 5, 10,

15 percent? A rough estimate.

Mr. REY. Probably somewhere in the neighborhood of 15 percent,

12 to 15 percent, would be my guess. It varies from program to program.

Mr. CUELLAR. What is your estimate to finish the rest of your

evaluation and elimination of any unnecessary rules and regulations? Because I want to see efficiency in Government. I want the

yellow book test, which is something I support, the yellow pages,

I am sorry; certainly want to get rid of any duplication, unneces-
50

sary rules. I certainly want to simplify paperwork. If you can put

it in one page instead of 10 pages, I would rather have that.

And certainly when you talk about grants, anybody that has

worked with grants will tell you it is one of the most challenging

jobs out there. And I have to understand that you have to have protection and checks and balances, but at the same time we have to

find that balance.

What would you tell me as to what sort of time frame you feel

that you can finish the other 85, 87 percent?

Mr. REY. Well, we are going to continue to work on that right

through your enactment of the next farm bill. So there are still efforts that are under way and are going to continue to be under way

through this year and well into next.

We may come forward in our recommendations to you for the

2007 farm bill with some recommendations for streamlining that

we can’t achieve administratively, that will require future legislative authority to be allowed to do that.

But I think with the efforts that we have under way in efficiency

measures, that we are probably going to reduce some of the paperwork by another 10 percent to—10 to 12 percent, between now and

the enactment of the next farm bill, and if the committee is disposed to accept some of our recommendations about other statutory

authorities for streamlining, we can buzz past that threshold and

hopefully continue on with the new authorities in the next farm

bill.

There are many areas, though, like consultation with Fish and

Wildlife Service where endangered species are at issue, or consultation with a State historic preservation officer where there are cultural resources involved, where we don’t have the authority to really streamline or simplify anything under existing law. So we will

have to make some recommendations to you about where we think

that might be modified.

Mr. CUELLAR. Mr. Chairman, I would ask for you and the committee and, of course, our staff to certainly work with the Secretary. I know it is a very difficult issue, but if you do the math,

12 to 15 percent, and then by the next time we do the farm bill

might be another 10 percent. It means we certainly do a lot of

work. So whenever you do that, I will be ready to work with the

committee, to work with the Secretary to reduce that paperwork reduction and give them any authorities that they need to get the job

done. Thank you very much for your work.

Mr. LUCAS. Gentleman’s request is meritorious.

We turn now to the gentlelady from South Dakota. Thank you.

Ms. HERSETH. Thank you, Mr. Chairman. Thank you for having

this hearing today. I think it is very beneficial for us to supplement

our field hearings across the country, one that will occur in South

Dakota on Monday with a focus on livestock producers and conservation programs. And I appreciate the testimony and leadership

of our witnesses today.

I was just in Miller, South Dakota, and some the folks that work

with you, both with FSA and NRCS, joined us for a tour of the very

severe and devastating drought conditions that are plaguing a good

part of South Dakota, really the whole State, but most severely, according to the drought monitor, the exceptional drought conditions
51

we have in north and central South Dakota. And I appreciate the

working relationship that we have had with both of you and with

our FSA folks in particular to work out some of the initial confusion that may have existed in opening up some of the CRP acres

and how that has been extended within 150 miles of those designated and eligible counties.

But let me direct my first question to Mr. Rey. What programs

within NRCS or under your purview as Under Secretary can you

identify that might be tapped to assist farmers and livestock producers to deal with severe weather events like drought, and what

additional authorities do you think might be helpful? And the question to both of you is have you started to engage in discussions

about the need for a permanent disaster program in the next farm

bill? And do you think that would be helpful to sort of have some

automatic triggers here, working with our State technical committees, of course, as we have done for the recommendations to FSA

in opening up CRP acres?

Just wondering again what might be available in addition to the

ECP funds that become available—however, there is a need for

more—dealing with some of the confusion that results when we

have to on an ad hoc basis, year to year, season to season deal with

drought conditions, and how we might be able to utilize and find

some flexibility within the CRP program to assist livestock producers.

Ms. LASSETER. Within FSA, of course, we have the ECP fund

when they are available; the Emergency Loan Program, the NAP

program, which is a Noninsurance Crop Disaster Program, Emergency Hay and Grazing Opportunities and the Managed Hay and

Grazing Opportunities. So those are the programs that are currently available when the circumstances warrant those come in, as

we have worked with you with the hay and grazing most recently.

In regard to disaster programs, certainly the Secretary has held

listening sessions, and those comments are being put together, and

we are willing to provide information and work with Congress on

the next farm bill development.

Mr. REY. With regard to NRCS, you have asked about extreme

weather, so that means both too much rain and too little. When it

is available, we use Emergency Watershed Protection funds to deal

with the aftereffects of flooding, and we use EQIP, the Environmental Quality Incentive Program, to provide some assistance to

farmers in drought situations.

Ms. HERSETH. Just to follow up, can you share with me and remind me what, if anything, the Secretary heard at some of these

listening sessions about proposals or ideas about a permanent disaster assistance program built into the next farm bill?

Mr. REY. To my recollection, that wasn’t a major issue of discussion, although it is something that we are reflecting on, and that

may have been in part because most of our listening sessions were

in the fall last year, and there were somewhat less areas effected

by drought at that moment in time than is probably presently the

case. But I don’t think that we got a lot of dialogue on more permanent disaster relief measures as compared to a number of other

things that we heard about in the rural development conservation

areas and also in the area of new entries into agriculture.
52

Ms. HERSETH. My time is almost up, so I will follow up with one

additional question for Ms. Lasseter. The NAP Program came up

in my conversations with the folks that I toured these drought

areas with on Sunday, and there was some sense of that it wasn’t

all that helpful; they didn’t find it to be the most effective program

in part because of the yields or the determinations of how much

coverage they could actually get for grass and pasture.

Can you give me some thoughts on how effectively you think the

NAP Program has worked for producers across the country and

whether or not we need to look at modifications or looking at how

we supplement that program through reforms to the Crop Insurance Program?

Ms. LASSETER. To be honest with you, I am not prepared to talk

the details of NAP with you, but I will be glad to get my staff to

put together any information you would like to have on the NAP

Program.

Ms. HERSETH. I would appreciate it, because I would like more

information from your perspective nationwide how it has worked

for producers, because, again, I got the sense, at least in these

counties that I visited recently, that wasn’t something people found

that they could utilize very effectively. And it would be nice to get

some more details from your perspective how it might be working

elsewhere, and what might be the reasons it might be utilized, and

how we might go about modifying that.

Thank you, Mr. Chairman.

Mr. LUCAS. Thank you. The subcommittee is extremely pleased

to have both the chairman and the ranking member from the full

committee here today. We are finishing our first round of questions

on the panel. Would the chairman have anything he would like to

state or question?

The CHAIRMAN. Thank you, Mr. Chairman. I appreciate you holding the hearing. If I may, I will defer to my colleague from Minnesota that just arrived.

Mr. LUCAS. Mr. Ranking Member.

Mr. PETERSON. I am glad to be here, and I won’t delay proceedings, because I don’t know what has been asked.

Mr. LUCAS. Fair enough, Mr. Ranking Member.

And with that, I think since we have a very elite and focused

group of committee members here today and such an outstanding

panel, I would like to ask a couple more questions, and if any of

my colleagues do, we certainly can pursue that.

But for a moment, Secretary Rey, back to the CSP question

about the cost. If we were to provide enough resources to make it

available to everyone, that $9 to $10 billion number you used,

would that be per year?

Mr. REY. Correct.

Mr. LUCAS. So over the course of a 5-year farm bill potentially,

if it was fully implemented, $45 to $50 billion for a 5-year cost

number—making sure I understand.

Mr. REY. Correct. That assumes we implement it in the fashion

of the current regulations.

Mr. LUCAS. In the fashion of the current regulations. And that

would include the TA cost of implementing the program?
53

Mr. REY. That is part of the estimate, although we would have

to remove the statutory cap on TA that exists in the current farm

bill, obviously, to deliver a program of that size.

Mr. LUCAS. Exactly. Administrator, for a moment, you mentioned, as we are all aware, of course, the initial enrollment in the

mid 1980’s, reenrolled in the mid 1990’s, now coming up, and instead of a giant enrollment, we are breaking this up into smaller

periods of time. Could you visit with me for a moment about the

criteria for determining what is 2-year and 3-year and 4-year? How

did we break up this substantial block of CRP into smaller units?

What was our decision about which should come out, or contract

for shorter periods and which would get longer? How do we determine that?

Ms. LASSETER. I am going to talk about the difference in reenrollment and extensions, and if I need support from my staff behind

me, I hope that will be OK.

The reenrollment is a new contract where it is a 10- to 15-year

period, and updated rental rates apply.

The difference between a reenrollment and extension, an extension is 2- to 5-year contract. It is the same contract with no update

to the provision.

Bob would you like to——

Mr. LUCAS. I would be most pleased if—yes. Tell us, Bob, how

did we decide what should be extended and what should be reenrolled or given the option to reenroll?

Mr. STEPHENSON. For each year that those contracts were expiring, we took the entire group, and when we initially enrolled them,

we collected a series of environmental data that we used to rank

them at the time. We used that same data, and we broke them up

into 5 equal groups, the top group——

Mr. LUCAS. Equal group in number of acres or——

Mr. STEPHENSON. Equal group in number of acres. We—the top

group——

Mr. LUCAS. And the reason I asked this, I am fixing to do town

meetings in western Oklahoma, and I promise you I will get to explain this.

Mr. STEPHENSON. And the top group on each sign-up or each

year of expiration got a new contract. The next group, the next 20

percent, got a 5-year extension; next group, 3-year extension; and

our next group, 4-year extension; then a 3-year extension; and then

the lowest 20th percentile got a 2-year extension.

Mr. LUCAS. So the lower environmental score, the shorter the

term and the extension or——

Mr. STEPHENSON. Correct.

Mr. LUCAS. And the extensions now for the 2 years will expire

when? Remind me.

Mr. STEPHENSON. They will begin to expire in 2009.

Mr. LUCAS. In summer 2009 probably.

Mr. STEPHENSON. September 30 of that year.

Mr. LUCAS. And when my constituents say to me, Congressman,

I wound up in that first 20 percent, my contract is going to expire

on the 30th of September 2009. Does this mean, Congressman, that

because of my score I will probably never get back in? I will look

them in the eye and say what?
54

Mr. STEPHENSON. You can tell them that depending upon what

the new farm bill says, they will probably have some opportunities

to make their offer more competitive.

In the past they have been able to do that by adopting wildlife

covers that have been more beneficial for wildlife. The more beneficial for wildlife, the more points you get. They also can make

their offer more competitive by only offering the most highly desirable land in the program rather than whole fields. And then the

other thing they can do is be willing to accept less than the amount

we are willing to pay, and they will get credit for that, too.

Mr. LUCAS. Thank you.

Any of the subcommittee members have any additional questions?

Mr. HOLDEN. In your opening statement you mentioned something about the CRP with biofuels, and the timing of that is pretty

good. The chairman and ranking member just had a hearing in the

ranking member’s district in Minnesota, and we had a very interesting hearing and a good working session the next day talking

about all the opportunities we have in agriculture, ethanol, and

soybeans, and switchgrass, and even alfalfa was brought to our attention. And as we tried to figure out how much money is going

to be on the table and what we can do for energy independence,

it was interesting to hear you mention on the conservation side. So

I wonder if you would elaborate to what you had in mind in there.

Ms. LASSETER. Well, my staff tells me that we have the authority

to harvest CRP acreage for biomass production under the Managed

Hay and Grazing provision, and switchgrass on CRP is used for

biomass.

Mr. HOLDEN. Mr. Chairman, I notice that is the ranking member’s cup of tea, so he might want to ask further questions about

that.

Mr. PETERSON. What is the current status—thank you, Mr.

Holden—the EBI—as I understand it, if you plant switchgrass, you

don’t get very many points. I was hunting in a place where they

had a beautiful stand of switchgrass, and the only way they could

get in was to plow up that switchgrass and plant some kind of native stuff with flowers that somebody wanted that they knew would

not grow, and that is what ended up happening. They plowed up

the switchgrass, planted other stuff. It didn’t grow, but ended up

being weeds, but they got into because it did that.

Is that still the same situation, or is the switchgrass—you probably get more points for planting this songbird mix than you do

switchgrass. Is that true?

Ms. LASSETER. My staff tells me that is true for switchgrass, that

you get less points, but they are looking to change that for the next

sign-up.

Mr. PETERSON. When you say they are looking to change it, what

is the process? What are you doing, and what would be the time

frame and so forth?

Mr. STEPHENSON. Here very soon we are going to be looking at

the environmental benefits index we used for the last sign-up to

see if we want to make any changes.

One of the changes that have already been identified that has

come to mind is looking at whether we could use the benefits index
55

to support biomass production. We haven’t started that review yet,

but it will occur this summer.

Mr. PETERSON. How long will that take?

Mr. STEPHENSON. From my little world, my perspective, I would

like for it to be finished by this fall, September, October, that time

frame.

Mr. PETERSON. So you would have some information for us before

we are into the next farm bill?

Mr. STEPHENSON. I am sure, well, we would announce it for the

next general sign-up, whether we——

Mr. PETERSON. You have the authority to make these changes?

Mr. STEPHENSON. Yes.

Mr. LUCAS. If the ranking member would yield, sounds like a

hearing all in itself on that one point.

Mr. PETERSON. When will the next sign-up be?

Mr. STEPHENSON. We have not announced that yet, but there is

one in the budget scheduled for the next fiscal year.

Mr. PETERSON. Thank you.

The CHAIRMAN. Thank you, Mr. Chairman. I think that is a excellent observation. I would encourage you to do just that. I think

we should use—we could use a whole hearing on this issue.

Just to follow up a little bit on Mr. Peterson’s question, is it your

intention, too, that this land would produce various types of biomass and remain in the conservation program or be taken out of

the conservation program for that purpose?

Mr. STEPHENSON. That is an interesting hypothetical. I suppose

for us to be able to support it, in some regards we—and I am not

an authority by any means, but from what I understand, they need

some additional financial support at the beginning to make a go

and to make it viable.

If there was no CRP contract there, we would not be in a position

to provide that support. So that suggests to me we would look at

ways under the contract to see how we could support biomass,

biofuels.

The CHAIRMAN. And you think that could be done to encourage

the use of that land and still participate in conservation?

Mr. STEPHENSON. I think we are prepared to take a look at it to

see how CRP can do that and if it can. It may not, but we want

to look at it to see.

The CHAIRMAN. Ms. Lasseter, has the Department done any

studies on the economic impact of significant cropland being put

into the CRP in a particular community?

Ms. LASSETER. Not that I know. I will have to ask Bob.

The CHAIRMAN. Do you have any—what impact it has in that

particular area?

Mr. STEPHENSON. In the 2002 farm bill there was a requirement

for the Department to prepare a report on the impacts of enrollment in CRP on local communities. The Economic Research Service

last year, I believe in the past few months, has published a report

that addresses that question.

Ms. LASSETER. We can make that available for the record.

The CHAIRMAN. Mr. Chairman, I do have one other question I

want to ask, but we are in the process of formulating it, so if other

Members have questions, it might allow me——
56

Mr. LUCAS. Mr. Peterson.

Mr. PETERSON. I spent a fair amount of time with these folks

that are experimenting on switchgrass. Some people are growing it,

and from my understanding, there is not a great supply of seed

available. And apparently it takes different kinds of seed depending on where you are in the country and what your soil is and so

forth.

Are you going to take that into account? Because I hopefully

wouldn’t get into a deal where we ended up driving up the price

of switchgrass seed 20 times what it is today because when we

switch to these native grasses, there was a shortage of seed, and

it got out of control.

And they are working on this stuff, but they tell me they don’t

have enough seed to plant a significant amount.

Mr. STEPHENSON. We do try to work with the seed trade, and you

are right, there is sometimes disruptions caused by some of our actions, at least temporarily.

I think we would be happy if there are people, experts that have

been talking to you, we would be happy and excited to talk to them

so we can learn and glean.

Mr. PETERSON. I know of four places that there are ARS scientists that are actually growing switch grass, a couple of places

they have been growing it for 5 or 6 years. They have got a fair

amount of information. But those same people were concerned that

if we did something to create any significant sized program it may

cause a problem. When I talk to them again, I will mention that

maybe they should try to connect up with you guys.

Mr. LUCAS. Mr. Chairman.

The CHAIRMAN. Thank you, Mr. Chairman.

Under Secretary Rey, this may come at you a little from left field

but when you saw Mr. Umbergamo come into the room you probably realized that I wanted to talk about another type of conservation issue and that is forestry. When we wrote the last farm bill

we intended the EQIP program to reach the Nation’s over 9 million

forestland owners. I wonder if you can tell me whether you feel

they are getting adequate attention and cost share in the EQIP

program.

Mr. REY. I think the rate of participation among forestland owners is increasing but it has been some time in the development.

Part of that is training our folks to look more broadly at the opportunities for cost-sharing practices on forestlands under EQIP. Part

of it is attracting the interest and the attention of the forestry community; and part of it is having the forestry community active and

involved and at the table with our State technical committees as

they have talked through what kinds of priorities they want to try

to recommend to us on a State by State basis should be.

So it is happening. It is not happening as fast as some forest interests would like, but there are some States—for instance, a State

like New Hampshire, where the forestry community has been pretty active and engaged and are acquitting themselves pretty well in

accounting for a substantial amount of EQIP spending.

The CHAIRMAN. Do you feel that forestland owners are aware of

the possibility of participating in the EQIP program, or do they
57

think that is simply something that is not available to them but

only available for agricultural——

Mr. REY. I think it varies from State to State and it is a function

of how active our State and area conservationists have been in promoting those opportunities; and it is also a function of whether

there is a vibrant and active State Forestry Association that has

identified that as an opportunity and pursued it. The one thing

about EQIP is that we have large backlogs, so to some extent we

do not have to go out and find problems. They find us. But we have

been making an effort to try to reach out to the forestry community

to explain to them that there are opportunities here.

The CHAIRMAN. The other question I have relates to the Hurri- cane Katrina disaster. As you know, we provided $550 million for

the Emergency Forestry Conservation Reserve Program in response

to the hurricanes last year. I know the most recent emergency supplemental included language instructing you to give equal weight

to pine and hardwood sites. And I am curious as to whether you

have issued additional guidelines to the field as a result of this language and whether this has delayed the sign-ups for the program.

Mr. STEPHENSON. We have implemented the language and it did

delay sign-up for 3 to 4 weeks. However, we have since started

sign-up. It began July 17.

The CHAIRMAN. And you feel that it is going well now?

Mr. STEPHENSON. Actually the very initial data is a little bit

slow. However, since this is land that not normally would have

been in FSA records, they have to go through a process of loading

all the basic farm records in the system before they can get to applying for EFCRP.

All indications are, beginning next week we will begin to see

some significant increases in interest.

The CHAIRMAN. Thank you, Mr. Chairman.

Mr. LUCAS. Thank you, Mr. Chairman. I believe the gentleman

from Kansas has a question now.

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

Administrator, I would like to compliment FSA in their efforts in

regard to haying and grazing. We are experiencing a significant

drought in Kansas and much of the high plains, and I am complimentary of FSA both at the county and State level but also here

in Washington, DC, and I appreciate your assistance in that regard. I think the timing was better than it has been in some years

in which we were able to provide this opportunity for initially a

grazing, and now haying, much earlier than previously we were

able to do, and the reduction in the penalty from 25 percent to 10

percent is a significant benefit. I just want to express that to you.

I had a conversation with members of your staff this morning in

regard to the 150 miles and a couple of pockets in which we have

one county that is surrounded on all four sides and it has not yet

been accepted. And I appreciate the potential flexibility that we

learned about today so my compliments to FSA and I thank you

for that.

Mr. Secretary, I want to talk to you just a minute about EQIP.

I have a copy of a letter that my constituent sent me, and the basic

crux of the letter is that he is telling me that he applied for EQIP

program funding back in January 2006 for no-till farming. He was
58

denied his application because he had used no-till farming practices

in his farming operation previous to that. He then had a conversation with his neighbor, and his neighbor applied for EQIP funding

for no-till farming and his neighbor was accepted. So his point that

he raises to me is about the inequity of one neighboring farmer to

another in the enrollment process.

Is this a topic of conversation within the USDA, the Department,

and anything that we ought to be doing to help to accommodate a

level of fairness? And I have discovered this in both EQIP and

CSP, particularly where a farmer tells me my neighbor is in the

CSP program. He is getting benefits that I am not. We go to the

same land auction. We are competing for land. He has got a better

financial ability to succeed at that auction than I do, and now I am

hearing this in regard to EQIP. One neighbor in, one neighbor out.

Mr. REY. Well, the difference in CSP may well involve one neighbor being in one of the targeted watersheds.

Mr. MORAN. That is a watershed issue.

Mr. REY. Right. And one not. So that goes to the issue the chairman raised with us earlier.

Mr. MORAN. Which I assume you would tell us is a funding

issue?

Mr. REY. Correct.

Mr. LUCAS. For $9 million we can fix that.

Mr. MORAN. I want to give the chairman an opportunity to express his thoughts one more time.

Mr. REY. It is a funding issue and it is a priority issue. The watersheds that we picked, we picked because there are environmental priorities associated with installing the CSP program within those watersheds. The inequity in EQIP is one I would like to

look into a little bit more deeply, because I think the short answer

is probably neither of those owners should have gotten EQIP

money if they were previously involved in no-till farming.

Mr. MORAN. I do not have any names here.

Mr. REY. But you may have disadvantaged one constituent in

trying to help another. Because the way we look at it generally is

that EQIP is remedial and CSP is for ongoing work. So if these

were in CSP watersheds, they would have been eligible for CSP

funding for the continuation of no-till. But we would not normally

fund no-till if it is already being done.

Mr. MORAN. We may explore this a bit further with you with

blacked-out portions of the letter.

Mr. REY. We can redact the names to protect the innocent.

Mr. MORAN. Thank you, Mr. Chairman.

Mr. PETERSON. Mr. Chairman, can I follow up on that?

Mr. LUCAS. Yes, Mr. Ranking Member.

Mr. PETERSON. I am getting reports that there are people that

are taking grassland, spraying it with Round Up, planting no-till

soybeans and establishing base acres. Is that going on?

Mr. REY. I have not heard that but we can look into it.

Mr. PETERSON. You haven’t heard it. I mean, I have heard it for

3 or 4 years, and we had an issue with people doing this and then

establishing a base and then putting it into CRP once they got the

number of years. We changed that, and I think we largely stopped

that happening. But there is still a fair amount of land that is get-
59

ting broken and some people tell me that they are not really expecting a crop. They are getting payments and they are getting

crop insurance for one thing or another. I do not know for sure exactly what is going on there, but you might want to check into it.

Mr. REY. I have not heard that with respect to CSP but we can

check into it.

The CHAIRMAN. If the gentleman would yield. The gentleman’s

comments were a little redacted, too. You might want to share

afterwards the States that we have heard that information from.

I do not know whether there is truth to them or not, so I do not

want to cast any aspersions.

Mr. LUCAS. I am just sure it is not Oklahoma.

Mr. PETERSON. It could be.

Mr. LUCAS. The Chair now turns to the gentleman from North

Carolina for a more pleasant subject.

Mr. ETHERIDGE. Thank you, Mr. Chairman, I hope it is.

I will be very brief, Mr. Rey. I had a question related to EQIP

because obviously we know EQIP was about producing non-point

pollution and helping impaired watersheds and really eliminating

groundwater contamination where we can, and ground conservation, water resources, et cetera, et cetera.

But my question is a little broader and I am sure part of it has

to do with funding, but some of it we may need to explore a little

later in detail because in my State, in addition to being North

Carolina, we have an awful lot of land that would fit that. We also

have a large concentration of livestock, poultry, pork, some beef

and dairy.

My question is, as we look to the new technologies, and in a lot

of cases the new technologies are far better than the current technologies, but we are not currently recognizing that with the grants

that we make or the matching funds—which means if the producer

would move to the new technologies, it may cost a little more, the

benefit would be substantially greater. But our EQIP funding does

not yet recognize that.

We recognize the lower level of technology which means for the

farmer or the producer out there, what they are going to use, the

one they get the most money on for the product. And if we raise

that a little bit, all of us would benefit and we would save substantial money.

I recognize that is probably a funding issue, but I think that is

something I would like to explore further because I think it makes

a lot more sense to be able to move their new technologies, especially in some of these areas where there are blocks, and we may

need to find a way to help really advance the pollution issue in

quantum leaps.

Mr. REY. At present over 60 percent of EQIP goes to livestock

problems and we fund a lot of waste storage facilities and nutrient

management plans. We try to in EQIP deal with proven technologies so that we are spending the money as wisely as possible.

We do, however, have other programs through the Conservation

Innovation Grant Programs and a couple of others to facilitate new

technologies. We have given out $60 million over the last 3 years

in conservation innovation grants. We have funded new methane

digesters and technologies of that sort.
60

So sometimes it is a matter of matching the problem to the program. And I think as far as new technologies that are not yet

broadly established, the Conservation Innovation Grants Program

is the place where we have been steering producers, as opposed to

EQIP where we are trying to broaden as much as possible the use

of already proven technologies.

Mr. ETHERIDGE. I appreciate that and I look forward to meeting

with somebody from your staff to follow up with that, if we could,

and share that with our folks.

Thank you, Mr. Chairman. I yield back.

Mr. LUCAS. There is one additional question from the gentlewoman from South Dakota.

Ms. HERSETH. Thank you, just a quick question.

Ms. Lasseter, I have heard a few questions raised by a few cattle

producers in South Dakota targeted in just a few counties so far

about the generous incentives to entice landowners to enroll acres

in the CP–30 practices under the CRP program, and, because of

these incentives they claim that grazing land has become very

scarce in certain parts of eastern South Dakota. Have you heard

any similar concerns, and do you think the incentives in the program are too generous?

Ms. LASSETER. No, I have not heard the concerns. I would have

to ask my staff if they have, but our data does not show that South

Dakota rental rates are above the market rate. And certainly they

should not be. They should be at the market rate but not exceed

the market rate. So if you would like for us to work with you to

review these rates and get more information, that can certainly be

adjusted.

Ms. HERSETH. I appreciate that. Thank you.

Mr. LUCAS. Seeing no other questions, the Chair wishes to thank

the Secretary and the Administrator for their participation today

and to note that there is a very intense level of interest in this subcommittee, and obviously with both leadership, Ranking and the

chairman, we intend to help you do the good things that you are

attempting to do. Thank you.

With that I would like to invite our second and final panel to the

table. Mr. Bill Wilson, president of the National Association of Conservation Districts, from Kinta, Oklahoma; Mr. David Nomsen, vice

present of government affairs, Pheasants Forever, Incorporated,

Garfield, Minnesota; Mr. Dale Schuler, president, National Association of Wheat Growers, Carter, Montana; Mr. John O’Keeffe, cattle

producer, National Cattlemen’s Beef Association, from Oregon; and

Judy Schwank, county commissioner, county of Berks, Reading,

Pennsylvania.

Whenever all of are you ready and seated we can begin.

STATEMENT OF BILL WILSON, PRESIDENT, NATIONAL

ASSOCIATION OF CONSERVATION DISTRICTS, KINTA, OK

Mr. WILSON. Mr. Chairman, thank you for inviting the Conservation Districts to be able to present our view on the current conservation title of the farm bill and how it is working and where we

see some problems. Before I go any further, I want to congratulate

you, Mr. Chairman, on your successful election 2 days ago back

home in Oklahoma in the primary. It was good numbers.
61

Mr. LUCAS. I still have the general, but yes.

Mr. WILSON. I know you still have the general, but we got past

the primary. But let me get into the testimony, and you have my

written testimony, so I just want to kind of highlight that and

hopefully we can get into some discussion.

Certainly our members up here at NACD are not telling us that

there is any need for any broad expansion program-wise in another

farm bill. We are happy; and who would not be? It would be foolish

for us to say we are not happy with the outcome of the 2002 farm

bill with the unprecedented increases that we saw in that conservation title. So my members are very happy. That is not to say that

they do not recognize some problems in program delivery and some

areas where we perhaps could improve, but we are hoping that in

the next farm bill that we can hold something close to the authority that we have in the current farm bill, and we would like to see

those programs fully funded through the appropriations process

which we recognize this committee has little control over. But certainly the conservation title has grown a lot, and we appreciate the

efforts of this committee and you, Mr. Chairman, and you, Mr.

Ranking Member, in your leadership.

We have seen—and I might talk just a little bit about your State

and mine, Mr. Chairman, just as an example; but one of the good

results of the 2002 farm bill, in addition to the programs, was an

increase in technical assistance funding to our State. It rose from

a little over $24 million in 2001 to a high of almost $34.5 million

in 2004. And through July 13 of this year, Oklahoma has been allocated almost $31 million for technical assistance. And certainly we

appreciate your efforts, and my members in Oklahoma made sure

that I would thank you for working with Chairman Bonilla on the

Appropriations Committee with some problems that they had earlier in the year. And as Mr. Rey addressed, there have been improvements in that area. So I extend the thanks from back home

for your efforts in that.

Beyond that, my members really look at the working lands. We

are strong supporters of CRP, the Grasslands Program, but we

would like to see as much emphasis as possible put on the working

lands. We know that in fact there are more acres of wildlife habitat

on working lands than there are on the set-aside lands, and we

think that is an important part we should look at.

Since you talked about CSP in your opening remarks, Mr. Chairman, in my remaining minute and a half I would just like to say

that CSP, in our view, is a good program. The problem is the agency was slow in getting the rules out and the implementation has

been somewhat sporadic. And the watershed issue aside, in some

watersheds NRCS staff have done a good job, in our view, of implementing the program, and in some watersheds not so good of a job.

I would suggest to you in our home State this year, we have an

example that can be used all across this country for a successful

implementation of CSP in a watershed, and that is the Poteau

River watershed in eastern Oklahoma where we saw—I believe it

was 434 contracts came out of that effort, and it was really largely

because the NRCS staff at the grass-roots field office level, working

with the conservation districts, made the program work. They saw

that there were problems in some other areas. We have some ex-
62

amples in Oklahoma where it has not worked as well. But in that

particular watershed, I am proud to say there that we do have a

good example. And there are others in the country that we are

aware of, Missouri, Minnesota, and there are probably some we are

not aware of where successful implementation has actually occurred.

So we would like to encourage the committee to not abandon

CSP, but let’s take a very serious look at how we can improve implementation of that program, and obviously we will not be able to

come up with $9 million a year. I do not think we will support that

number, but I am not sure that has to be that number for it to

make a successful program.

So with that, Mr. Chairman, I thank you again for being here

and I hope we get into some discussion.

[The prepared statement of Mr. Wilson appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you, Bill.

David, whenever you are ready.

STATEMENT OF DAVID E. NOMSEN, VICE PRESIDENT, GOVERNMENT AFFAIRS, PHEASANTS FOREVER, INC., GARFIELD,

MN

Mr. NOMSEN. Thank you, Mr. Chairman. It is a pleasure to be

here this afternoon. My name is Dave Nomsen. I am the vice president for governmental affairs for Pheasants Forever.

Let me first say, Mr. Chairman, I want to thank you and the

many other members of the committee for coming to southwestern

Minnesota last weekend. I enjoyed the opportunity to visit with

many of you and I hope you got to see a part of the country where

it is my view that conservation programs are very much working

hand in hand in harmony with agriculture and farmers and landowners in that area.

I reside in Garfield, Minnesota, and I appreciate the opportunity

to be here today to offer these shared views on behalf of many of

our Nation’s leading wildlife conservation organizations. The

groups that I represent today include the Archery Trade Association, the Association of Fish and Wildlife Agencies, Bear Trust

International, Bowhunting Preservation Alliance, Campfire Club of

America, Congressional Sportsmen’s Foundation, Delta Water Foul

Foundation, Ducks Unlimited, Isaac Walton League of America,

North American Bear Foundation, North American Grouse Partnership, Pheasants Forever, Quail Forever, Quality Deer Management Association, Safari Club International, Texas Wildlife Association, Theodore Roosevelt Conservation Partnership, and

Whitetails Unlimited.

It is our view that the conservation title of the 2002 farm bill

represented the most comprehensive array of conservation programs ever enacted in conjunction with Federal farm legislation.

We recognize and appreciate the strong support from you, Mr.

Chairman, and your subcommittee in providing for this authorization.

Allow me to talk briefly about several of our favorite programs.

First is the Conservation Reserve Program. CRP is currently celebrating 20 years of success as this Nation’s and USDA’s most suc-
63

cessful conservation program. It has been a documented success for

wildlife, and the program is responsible for in excess of 15 million

pheasants and 2.2 million water foul produced annually. It is popular with farmers and landowners.

I have appreciated listening to the discussion we have had this

afternoon, and feel I should offer the view that since 1996 when

CRP was reauthorized, it became a much more targeted program.

And it is our view that CRP is very much a working lands program. The Conservation Reserve Program works for farmers and

landowners, it works for wildlife and the environment, and it works

for society as a whole. We support continuing the vast documented

benefits of CRP and urge reauthorization of 45 million acres.

The Wetlands Reserve Program has been a program that has

seen incredible demand and support since reauthorization in 2002,

and it is one of our favorite programs. It restores and protects wetland habitats, provides significant wildlife habitat. It has seen

strong demand by landowners, and we support enrollment of

250,000 acres per year.

The Wildlife Habitat Incentives Program authorized in the 1996

bill and funded in 1998, a program administered by NRCS, helps

landowners promote healthy wildlife populations by developing upland, wetland, riparian and aquatic habitats. We feel the program

is particularly valuable in States in the Northeast where land values and acreages in working lands render other conservation programs less applicable in those situations. We have supported WHIP

at $100 million annually during negotiations over the 2002 billion

bill.

We are also strong supporters of the new Grasslands Reserve

Program. We thank you for your leadership, Mr. Chairman, in putting that particular program in place. We see it as a real opportunity to work with ranchers toward our common interests of protecting wildlife and conservation on working farms and ranches,

and we urge that that program be continued and receive additional

funding.

Several other issues I would like to mention very briefly. The

first is the issue of land conversion. We are concerned about the

continuing conversion of lands, especially native prairies and noncropland that are brought into production for subsidized commodity

crops. It is an issue that we hope to work with the committee and

staff to resolve as part of the next farm bill.

We are also concerned about diminishing access to privately

owned lands for our Nation’s hunters. We support provisions similar to the open fields provisions that would provide financial assistance to States to develop and augment existing or developing new

programs to help landowners with wildlife management, habitat

development, and access for fishing and hunting.

Lastly, I would like to express our desire to work on program administration. There is a great deal of expertise in private nongovernmental organizations like Pheasants Forever and others.

Also, the State Fish Wildlife Agencies that we feel that we can

bring to the table and be part of a more effective and efficient delivery system for programs.

In the next few months many of our groups, Mr. Chairman, will

be developing detailed plans on each of these programs in other
64

areas, and we look forward to providing that to the committee.

Thank you for the opportunity to testify here today.

[The prepared statement of Mr. Nomsen appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you.

The Chair turns to Dale now. Whenever you are ready, sir.

STATEMENT OF DALE SCHULER, PRESIDENT, NATIONAL

ASSOCIATION OF WHEAT GROWERS, CARTER, MT

Mr. SCHULER. Good morning, Chairman Lucas, Ranking Member

Holden, and members of this committee. My name is Dale Schuler,

President of the National Association of Wheat Growers. I am a

wheat grower from Carter, Montana. I appreciate this opportunity

to appear before this subcommittee, and I want to thank you for

your attention to a critical part of our future farm programs, the

conservation title of the farm bill.

Before we take a look forward and discuss what the future might

hold, it may be helpful to take a look back and see from where we

have come. From our Nation’s earliest founding, agriculture and

wise stewardship were linked together in the minds of the leading

thinkers of the day. Our first President, George Washington, may

have been considered the first farmer as well. His botanical experimentation and technical innovations were matched with his keen

sense for the need for soil stewardship. He saw how continuous

planting of a single crop like tobacco was depleting his Piedmont

soils. And was an early advocate of crop rotations.

Of course, Thomas Jefferson is also well known for his lifelong

devotion to the scientific approach of agriculture and stewardship.

Jefferson’s ideas about government also are the philosophical

underpinnings of our country and were based closely on a relationship between the land and the people.

President Roosevelt was also widely believed to have been a

great conservationist. He delivered a speech in 1910 that captured

the attitude shared by many if not most of my fellow farmers:

I ask nothing of this Nation except that it so behave as each farmer here behaves

with reference to his own children. That farmer is a poor creature who skins the

land and leaves it in poorer condition and worthless to his children. The farmer is

a good farmer, who, having enabled the land to support himself and provide for the

education of his children, leaves it to them a little better than he found it himself.

I provide this review not as some tedious history lesson, but,

rather, to illustrate the principle that a strong conservation ethic

has always been rooted in American agriculture and has manifested itself in the promotion of such practices as no-till farming,

the use of filter strips and buffer zones to reduce sedimentation,

and the maintenance of wildlife habit.

The 2002 farm bill provided the most robust conservation title of

any previous legislation, both in terms of funding and also in programs. It also created the new Conservation Security Program

which helped create promise, but also has created some uncertainty

that accompanies any new program.

So what happens when the 2002 farm bill is reauthorized? The

National Association of Wheat Growers will not be pressing for any

radical restructuring of the program. We will be looking for opportunities to ensure that existing conservation programs are more ef-
65

ficiently coordinated, utilizing shared information and data. For example, we could ask the question of why should each program have

a separate sign-up. Why could producers not participate in a single

sign-up indicating which program or programs they are interested

in, submitting the necessary information, and then allow NRCS or

FSA to determine the program or programs for which they qualify?

Also, the baseline funding for certain conservation programs was

extended out through 2010 or 2011 in the budget reconciliation bill

enacted this year. Therefore, we will be working to see all conservation programs and particularly CSP adequately funded, and

work to remove the priority watershed barriers to participation.

I realize funding is always going to be an issue, but if we can

maintain the extended budget baseline it may be something that

we can accomplish.

Finally, in my written testimony I referred to utilizing CRP for

dedicated energy crop use. I should point out that his is not one

of the National Association of Wheat Growers’ official positions, but

we have had discussions with several groups and companies that

are working on this issue and think that there is potential in the

future.

Again, thank you for this opportunity to speak with you. We look

forward to working with this committee in reauthorizing the conservation title of the farm bill.

[The prepared statement of Dale Schuler appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you.

Mr. O’Keeffe.

STATEMENT OF JOHN O’KEEFFE, CATTLE PRODUCER,

NATIONAL CATTLEMEN’S BEEF ASSOCIATION, ADEL, OR

Mr. O’KEEFFE. Mr. Chairman, members of the committee, my

name is John O’Keeffe. I am a rancher from Adel, Oregon.

In 1961, my father signed a ranch conservation plan with the soil

conservation service. Today I benefit from the implementation of

that plan. In 1995, I received the first ever annual Lake County

Stock Growers Stewardship Award. In 2005, I signed a contract, a

CSP contract, with the NRCS. The day before I left to come here,

the final draft drawings came in for the O’Keeffe ranch sage

grouse, sage brush wildlife habitat incentive program, project.

I mention these things because I want you to know, I not only

talk the talk, I walk the walk. Conservation of our national resources is incredibly important. Our livelihood is made on the land,

so being good stewards of the land not only makes good environmental sense; it is fundamental for our industry to remain strong.

We strive to operate as environmentally friendly as possible, and

conservation programs are an important tool.

The goal of conservation and environmental programs is to

achieve the greatest environmental benefit with the limited resources available. USDA has numerous programs that are currently utilized by cattlemen, and we know that these programs will

be a highlight of the 2007 farm bill. A popular program among

cattlemen is the Environmental Quality Incentive Program or

EQIP.
66

Although popular, EQIP has a few problems. One small problem

which you might address is to direct USDA to grant more flexibility to NRCS to adjust the cost-share requirements because sometimes portions of these conservation plans may have significant

benefits for wildlife species but contribute little to the economic viability of the ranching operation, making it difficult for the landowner to justify the expense.

In addition, many ranchers have complained that the intense administrative paperwork and time allotment for receiving funds

make EQIP an unattractive and burdensome program. We understand that the verification of records in order to ensure that appropriate qualifications are met is very important, but achieving a

more efficient application method and accountability system would

result in more dollars that can be spent on actual conservation.

Also we feel the custom feeders should have access to the EQIP

program. They have the same environmental issues as feeders that

own cattle.

One of the reasons that EQIP is so popular among ranchers is

the fact that it is a working lands program. We believe that conservation programs that keep land in production and do not limit

its use is best for the ranchers and the actual goal of conserving

our resources. Other working land programs that we support include the Wildlife Habitat Incentives Program, Conservation Securities Program, and the Grassland Reserve Program. WHIPS costsharing and technical assistance provision provide assistance to

conservation-minded landowners who are unable to meet the specific eligibility requirements of other USDA conservation programs.

Likewise, the GRP has been very successful in helping landowners

restore and protect grasslands while maintaining the acres for

grazing and haying.

This is in huge contrast to programs such as the Conservation

Reserve Program or CRP. Considering the fact that 28 million CRP

acres will expire over the next 5 years and considering the fact that

the 2007 farm bill will be dealing with less funding than in 2002,

we believe that the CRP is one of the programs that should be considered for reevaluation and saving.

With the current program, NCBA is opposed to haying and grazing on lands enrolled in the CRP program except under a few limited conditions, such as the case of drought or other emergencies

including cattle being displaced by wildfire. We discuss these conditions further in our written comments. There has been discussion

within the agricultural industry of allowing a portion of producers’

enrolled acreage to be grazed annually. If this program were to

evolve in this direction, a number of issues must be addressed because the program was not designed to be a subsidized grazing program. One of these issues is this program could create herds that

were not in existence prior to the program. Introducing a potentially large number of animals into production with lower production costs would be problematic. How would this program be managed considering this factor and the overriding goals of the program?

The goals of conservation programs should be to maintain a balance between keeping good, well suited working lands in production and providing for conservation of species in natural resources.
67

Many producers would like to enroll in various USDA programs

such as CRP to reach environmental goals. However, to enroll in

these programs requires a producer to stop productive economic activity on the land in rule. We believe that economic activity and

conservation go hand in hand. As such, we support the addition of

provisions that would allow more working lands programs.

USDA’s conservation programs are great assets to cattle producers. We want to see them continued and refined to make them

more producer friendly and more effective in protecting the environment in a sensible way. Thank you for the opportunity to express our views here today.

[The prepared statement of Mr. O’Keeffe appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you.

Commissioner, whenever you are ready.

STATEMENT OF JUDITH L. SCHWANK, COUNTY

COMMISSIONER, COUNTY OF BERKS, READING, PA

Ms. SCHWANK. Thank you and good afternoon, Mr. Chairman,

and members of the committee. I am honored to have the opportunity to speak to be here today, and if you will pardon the pun,

to speak on conservation ideas from the grassroots level.

As mentioned, I am a county commissioner in Berks County,

Pennsylvania, and currently, I serve as chair of the Energy, Environment and Land Use Committee For the County Commissioners

Association of Pennsylvania. I have been a proud member of our

Berks County Conservation District for 6 years serving as commissioner/director, and prior to my role as commissioner, I was a county agricultural extension educator. And I also lived on a dairy farm

for 7 years, so agriculture is my thing.

And it is a big business in Pennsylvania and in particular in my county. Our cash receipts for the State total over $4 billion from

production agriculture, and the entire food and fiber system, which

includes food processing, marketing, transport, farm equipment,

contributes almost $45 billion to Pennsylvania’s economy. Our

farms are small by midwestern and western standards, but our

production rivals any other major agricultural State. We have permanently protected over 300,000 acres of land and preserve almost

3,000 farms in Pennsylvania. And I am proud to say, in our county,

we are first in the State protecting over 45,000 acres of land just

as of today. And we have borrowed $36 million so we can protect

more land. Our agriculture is diverse. While dairy predominates,

we are leading mushroom growers as well as poultry and egg producers. From small organic vegetable production to a growing

equine industry, there are many agricultural opportunities in our

State, and I want you to know that past Federal programs have

worked, and the benefits can be seen in a resurging rural economy

as well as better environmental impacts for our farmers.

Just yesterday at our conservation district meeting, a watershed

specialist was telling us about improvements at a water plant in

Philadelphia as a result of techniques that had been used in Berks

County. Those are incredible impacts to us.

Our farmers can be productive, and they can make a living. However, we can do that without degrading our natural resources, and
68

that is why these programs are so important to us. Travelling to

today’s hearing, I crossed the Susquehanna River Basin, which I

am sure you know is part of the Chesapeake Bay Watershed. I

passed through wonderful farm fields with 13-foot high corn, lots

of creeks and rivers complemented by acres of forests. Conservation

efforts to protect our soil and waterways are visible even to people

who do not know much about farming. However, we know that

those practices are not once and done events. And they are costly.

We have to continue to encourage farmers and provide them with

the resources so they can do those things.

Agriculture in the eastern United States and particularly in my

State is facing intense scrutiny from the public regarding farming

practices. The connection between farm practices and the decline of

water and air quality is very visible and noticeable to the nonfarm

rural and urban population. If I get back tonight early enough, I

will be attending a township meeting where the township has been

sued by the attorney general because their zoning ordinances are

more stringent than the ones that the State has for farm buildings.

These are very critical issues in our county.

Consumers are very aware that their tax dollars are being used

to support agriculture, and they are demanding a role in determining how those dollars will be spent, and they do have a right to ask

those questions. Past efforts to support conservation measures have

worked very well to varying degrees, as you have heard, but I must

say, for far too many years, our national agricultural policy has neglected the unique needs of the farmers in the eastern half of the

Nation. Farm operators, as I told you before, in Pennsylvania are

highly productive on limited acreage located in the middle of concentrated population areas. Their primary need is not so much for

commodity payments but for funding on conservation practices that

will enable them to be competitive yet at the same time protect our

natural resources.

Here are some of our most urgent needs of consideration in the

2007 farm bill: First, expand conservation technical assistance efforts to farms of all sizes and types. I heard someone mention forest land, and I want to underscore the importance of that as well.

Each farming enterprise has unique impacts on the environment

that can be mitigated by best management practices, but we have

got to have the funding to implement them. Increased funding for

technical assistance. I can tell you that our Farm Service Agency,

Natural Resources Conservation District, and Conservation District

staff are working as hard as they can, but in many cases, they are

very understaffed, so we rely quite a bit on outside contractors.

And what we need to do is communicate better with those outside

contractors, so we are all working together cooperatively, much better than we are. Give us a little bit more flexibility on the spending

so that we can tailor programs to precisely what we need in different regions of the country.

Integrate the conservation programs and provide better training

for our staff. I saw this as an extension agent. In many cases, different agencies do not talk to each other. You need to help enforce

that. Monitor the implementation of conservation practices and

document the results. Emphasize their impact on all residents, not

just the rural population. Encourage small- as well as large-scale
69

practices that can make a long-term difference in resource conservation. And might I add, open those conversations with local

government officials such as myself as well. We have a role to play

in this.

If something works, build on it. Expand the conservation security

program to include more critical watersheds. If better funded, this

program has the opportunity to dramatically improve farm sustainability and natural resources helping farmers but also helping our

general public as well. The implementation of conservation efforts

on a watershed basis makes possible the connection of farm practices to municipal efforts to mitigate storm water run off for one

example.

Enhance the technical assistance through the use of biomass for

fuel and energy generation from animal waste. There is opportunity for farms of all sizes throughout the country in energy generation, and we should be encouraging those practices but at the

same time being careful of environmental issues.

And I could not end without saying that the Chesapeake Bay

program is taking a long time, but we are seeing the impacts, and

I would suggest that that be funded as a part of the farm bill rather than a special project so that continues to be an important environmental effort.

Farm policy that successfully integrates modern production practices without degrading our water, soil and air is imperative, and

it is possible if we have a firm commitment by Congress to fully

fund conservation efforts.

The future of our agricultural economy and the well being of our

natural environment are at stake. Again, thank you all for allowing

me this opportunity.

[The prepared statement of Ms. Schwank appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Commissioner.

To that end, let’s talk about the environment and energy. As, obviously, the panel realizes from listening to the committee’s discussion with the previous panel, that is a topic that has come up rather frequently in our meetings across the country and stirred the

imagination and enthusiasm of the committee.

Let me—again, with you, Dave, talking about CRP and the potential for switch grass and biomass and all these things, one of the

big issues of concern in the last farm bill and the farm bill before

that in regards to CRP was the nature of mono culture grass, I believe was the phrase, and the potential impact on wildlife. If we

were to go down the course of creating or attempting to help encourage a substantial creation of switch grass acreage across the

country, how would your groups react to that? What is the impression that they would have on the effect on wildlife and just your

observations?

Mr. NOMSEN. Thank you, Mr. Chairman.

Please let me do kind of a two-part answer on this. First, I would

like to refer to a June 14 letter that many of our groups have provided to the committee and to leadership where we talk about and

support the use of biofuels in diminishing this Nation’s dependency

on fossil fuels. Specific to CRP, our groups talk about how altering

the existing CRP priorities on millions of acres could dramatically
70

reverse many of the gains that we have realized to date, particularly with relation to wildlife. We also believe that biofuels production will provide a viable alternative income source and additional

revenue stream for American agriculture. I would like to provide

this letter as part of the record please.

Mr. LUCAS. So ordered.

Mr. NOMSEN. Let me speak specifically as Dave Nomsen from

Pheasants Forever. I see some intriguing opportunities here with

the future of biofuels in this country. I am particularly interested

in the use of perennial crops here adding perennial crops like

switch grass or like alfalfa, especially into traditional role crop environments, we may have the opportunity to address some very serious water quality issues and concerns that continue, and from

most habitats, we can benefit a wide array of wildlife.

Specific to your thoughts about monocultures versus mixed grass

stands, it is very true that monocultures are not as diverse for

wildlife as mixed grass stands. And the vast majority of our current CRP acres are not in monocultures. At Pheasants Forever, we

did support sign ups a number of years ago through CRP that provided for a portion of the contracts to be in the monocultures of

switch grass and Indian grass. We did that because our members,

just like Mr. Peterson, we know the value of those grasses to Ring

Neck Pheasants. And those covers in the appropriate areas and

amounts can provide an important winter cover habitat for pheasants and a wide array of species.

Generally, I think the mixed grass stands as enzyme cocktails

become available to harvest a mixed grass for mix; I think we will

have opportunities to discuss things that are much more beneficial

to wildlife and conservation.

Mr. LUCAS. So the bottom line is, our friends in wildlife preservation most assuredly sound like they are willing to support an effort

to contribute to the Nation’s energy supply as long as there is not

a dramatic impact on our wildlife base.

Mr. NOMSEN. No question, Mr. Chairman, we would like to be

part of the discussion, yes.

Mr. LUCAS. Let me turn to your neighbors there, Dale and John.

I know there is some concern out across the countryside from the

perspective of swine and beef eaters, even some of the poultry people, that if the ethanol continues to take off with the expansion of

plants, and it is not just corn ethanol but barley and a variety of

other things as well as the cellulose, that demand for grain will

bring up grain prices. I guess my question to you two gentleman,

from your perspective, do you believe that CRP in the fashion it is

now, voluntary enrollment and reenrollment, do you think there

will be enough acres of perhaps more highly productive land that

would come out if grain prices rise sufficiently high that would

come back into the production to offset that loss in material from

the feeder area?

Mr. SCHULER. Well, certainly, we think high grain prices are a

good thing for our producers.

Mr. LUCAS. As a fellow wheat farmer, I agree with you, yes.

Mr. SCHULER. And certainly, if grain prices were to rise to a

higher level and be sustained at those levels, it would certainly

draw some land out of CRP and probably back into grain produc-
71

tion. Although we are certainly also interested in the development

of these dedicated energy crops and those being produced on CRP

acres, and we also have been in discussions with the Pheasants

Forever and Ducks Unlimited as well as a company that is developing switch grass for dedicated ethanol production to make sure that

these contracts would be sensitive to wildlife concerns and habitat

so that they would be harvested only if a producer had a conservation plan in place and also the harvest of those crops would be done

at a time where it was not detrimental to wildlife. But certainly,

taking land out of production does have the potential of raising

prices, and it probably would draw some of that land out and back

into grain production.

Mr. LUCAS. From your perspective, John, can we have the kind

of environmental situation we need and generate the kind of energy we need and also still meet our traditional needs of food and

fiber for livestock and consumers?

Mr. O’KEEFFE. I think we can, Mr. Chairman, we are very concerned about grain prices. They can extremely affect the bottom

line of our industry. But at the same time, this is a huge program,

and it involves lots of things, and I would hope that at the end of

the day, we would have a new balance where we have energy production, grain for livestock and conservation as well. I think it can

be done. It will require some attention, but we will definitely support the research and effort it takes to do that.

Mr. LUCAS. My time has expired. Hopefully we will have a second round.

Mr. Holden.

Mr. HOLDEN. Thank you, Mr. Chairman.

I have a few questions for Commissioner Schwank.

I know that the chairman and members of this subcommittee

and the members of the full committee are tired of hearing me talk

about farm land preservation, but, Commissioner, we are getting

ready to write a new farm bill, and now is the time to sound a broken record or maybe after this morning I should say beat a dead

horse. So we need to talk a little bit about the importance of farm

land preservation because, quite honestly, Commissioner, I have

talked about it around the country, and in areas out west and Colorado and Texas and the part of Minnesota that we were in, there

really isn’t much interest in it. And I remember the hearing that

the chairman had in Harrisburg; I asked a dairy farmer from Dauphin County what his biggest challenge was, and he said houses.

And I know it is the same thing in Berks County. I wonder if you

would take a moment on how real the developmental pressure is

and what you have been able to do with your colleagues in Berks

County for a great farm and preservation program?

Ms. SCHWANK. Thank you, Congressman Holden.

Yes, it is very much a problem for us, and it always amazes me

when I travel as well and understand that those types of pressures

are not the same in other areas of the country.

At each of our conservation district meetings, we outline the

number of acres of farm land that have been lost in our county on

a monthly basis, and we know that we have lost over 100,000 acres

of farmland within the past 12 years, which is a significant amount

of land. Our goal is to preserve 200,000. As I mentioned in my tes-
72

timony, we are in the middle of a major population center. In fact,

in our county, we like to say we are on the urban-rural interface

where of the suburbs from Washington, DC, as well as Philadelphia and New York City are closing in on us and as folks from

urban areas find that land values and the price, the cost of living

in our area is so much less, commuting does not seem like such a

bad idea even with the high gas prices that we find. We are one

of the few counties in Pennsylvania that experienced population

growth, as a matter of fact, in the past few years, even since the

2000 census. So very much, we are facing that pressure and at the

same time trying to maintain agriculture as our No. 1 industry in

our county.

What we have done and what has really been helpful from the

Federal Government has been that we have been able to apply for

funding for farmland preservation to supplement what the county

is contributing as well as what the State has contributed. And I believe last year it was almost $800,000 that we received from the

Federal Government for our farmland preservation efforts which

were very much appreciated.

Mr. HOLDEN. Thank you.

You mentioned the diversity of agriculture in Pennsylvania and

the Northeast. In Berks County, you can find anything from livestock to fruit and vegetables to our local market for Christmas

trees.

Ms. SCHWANK. That is correct, and even mushrooms.

Mr. HOLDEN. Does that diversity as far as conservation programs, does that make it harder for our farmers to participate in

traditional conservation programs? Do you want to elaborate on

that?

Ms. SCHWANK. I think what it does, it makes us on the agency

side, speaking as a conservation district, we need to be that much

more proactive, to reach out to farmers. Many of those small-scale

producers, they have no association with commodity programs, and

actually, we have a large old order Mennonite population what

would not participate in those types of programs. Yet if we can

offer them assistance on manure management—for instance, issues

of run off, even on mushroom compost where they store the compost, there are great issues with run off and possible degradation

of streams and actually reservoirs because of the lichen that comes

out of that material. We have been very proactive in trying to

reach out to those different producers and different commodities so

that they understand how we can help them. I would only ask that

we continue to enhance those efforts.

Mr. HOLDEN. Thank you, Mr. Chairman.

I would yield back for now.

Mr. LUCAS. The Chair now turns to the gentleman from Kansas.

Mr. MORAN. Mr. Chairman, thank you.

I think we have a vote momentarily so I will try to be very brief.

Mr. Schuler, you in particular mentioned the necessity of modifications in the CSP program. Would you like to elaborate upon

your thoughts?

Mr. SCHULER. Well, as it was expressed earlier here, there are

some concerns about the implementation of program. We are very

happy to see that we have a program that targets working lands
73

rather than a program that takes land out of production and retires that land. The problem is at this point that this program does

not reach all of our producers, and even in some of those dedicated

watersheds there seem to be some concerns within those watersheds about which producers qualify and which do not mainly because how NRCS is implementing those or determining how they

are qualified. But the biggest concern is that this program reaches

such a limited amount of our producers, and even now there is concern whether it ever will because of funding. We support this program and hope that it gets proper funding to reach all of our producers.

Mr. MORAN. So your issues are level of funding, and my impression is the kind of bureaucratic issues that are associated with that

program?

Mr. SCHULER. Exactly, yes.

Mr. MORAN. You are representing your members of Kansas very

well. I would say the same thing.

Thank you, Mr. Chairman. I yield back the balance of my time.

Mr. LUCAS. The Chair turns to the gentlewoman from South Dakota.

Ms. HERSETH. I would yield to the ranking member if he has

questions that he would like to pursue.

Mr. PETERSON. I thank the gentlewoman.

Mr. O’Keeffe, in your testimony, it looks like your organization

has moved a little bit on some of these issues of CRP haying and

grazing and so forth, but I am still curious, if we are going to manage this stuff and make it worthwhile, you cannot just let it sit

there. You have got to hay it every couple, 3 years, or it is not

worth anything to anybody. We keep hearing that the cattlemen

are worried about this because we are going to create additional

cattle and one thing or another because we are being subsidized,

but I do not know if you have any Federal land that you are grazing on or not where you are, but there is all kind of cattlemen out

there that have got grazing rights on Federal land that I think you

can argue is just as subsidized as CRP is.

Now, how does that get squared within your organization? I get

feedback from my cattlemen that they do not like this pushback

that they get from the western cattlemen. Is that a tension issue

within your organization, or am I way off base here?

Mr. O’KEEFFE. Well, actually, it continuously amazes me how

supportive our organization is of the western ranchers. I think one

of the reasons for that is because while the actual grazing fee on

the western Federal lands is fairly low, the noncash costs associated with running livestock on the Federal lands really bring the

cost back into balance. So, there is, your cash outlay for your feed

might be lower, but your other production costs are higher, so there

is really no big production advantage to running on the Federal

land. I do run on Federal land, and I leave AUMs on the table

every year. I leave the BLM, come in by private pasture because

the quality of the range and other issues that are involved with the

actual realities of being out on the Federal lands.

Mr. PETERSON. Well, I have supported whenever there have been

attacks or they have tried to raise your grazing costs and so forth,

I have been on your side to keep them down. And I just hope that
74

people would recognize that I do not think we are at a lot of cattle

because we are haying and grazing CRP in certain other areas because you have got to pay for it.

Mr. O’KEEFFE. We appreciate your support extremely as far as

the support on the attacks to our grazing fee, and we do recognize

that these places need management, and we are just concerned

that the program could evolve into something that would create a

large number of herds.

Mr. PETERSON. I do not think any of us want that. We just want

something that will make sense. We do not want to disturb the

wildlife. We do not want to do it early in the season. It just seems

to me that there is a way to make this work for everybody.

Mr. O’KEEFFE. I think there is. We do recognize that we need

management. We support management, and our written comments

reflect that.

Mr. PETERSON. The other thing I think that was in your testimony, you were talking about the big tract CRP is hurting counties

and economics and so forth. I have seen studies where, the study

that I saw says that that is not true. And I just would point out

that if you didn’t have big tracts of CRP, to some extent, you would

not have the wildlife that you have today. But the one thing it does

is it spreads the predators out. It would be like the WRP lands and

so forth where when you have got the government coming in and

buying a little piece of property, and it has some wetlands and so

forth, you normally do not see any wildlife on it because the predators zero in there and wipe them all out. The one thing CRP has

done for wildlife is spread that out. I do not think we can go to just

buffer strips and so forth. Those are good, but the reason we have

so many pheasants and ducks and deer and other wildlife that

have developed in my opinion because of CRP is because we have

had enough of this big tract CRP to spread out the pressure and

to give these species an opportunity to make it. So I think that was

in your testimony.

Mr. O’KEEFFE. We did call for reevaluation and perhaps savings,

but we would recognize that there is probably a need for big tracts

as well as buffer strips, and hopefully, when this is all settled, and

there is a new farm bill, that will allow for those needs to be met.

Mr. PETERSON. Thank you.

Mr. LUCAS. The Chair turns to the gentleman from Nebraska.

Mr. OSBORNE. Mr. Chairman, as a courtesy, do you have anything to ask?

The CHAIRMAN. I thank the chairman, but I do not have any

questions of this panel.

Mr. OSBORNE. I am not sure I have got a real good question, but

I do have something I would like to ask you.

I know there is about 39.2 million acres of CRP that is currently

established or authorized, but we never hit it. We always get

around 35, 36 million acres actually being utilized. And I have

often thought that maybe we would have greater utilization if the

rules for CRP were more liberalized. It seems like it is all or nothing. We have a drought, and all of the sudden, we let it be hayed

or grazed or whatever. But I am wondering if we did not do something to allow limited grazing, limited haying, eventually obviously,

the switch grass issue is going to be big and cellulosic ethanol, and
75

allow some of that to be, maybe not all of it certainly, but some of

it planted into switch grass and then harvested in ways that it

would still be good habitat. So I wondered if you had a thought of

how we could more efficiently use the CRP and any thoughts that

you would have as to how maybe CRP should be modified in terms

of how it is utilized. This is a general question if anybody wants

to answer it.

Mr. NOMSEN. Mr. Chairman, Congressman Osborne, let me take

a crack at that one from Pheasants Forever’s perspective. We

talked earlier today about the managed haying and grazing provisions that are within the current CRP program. It is it is our view

that it is one of the tools that we have to make CRP a workingman’s program for farmers and ranchers. We have struggled,

frankly, nationwide to get that done, and I would look forward to

more ideas about how to do that.

Congressman Peterson was correct that idle stands of grass over

time are just not productive for wildlife and we do need to manage

those acres. We are just saying, let’s manage them with wildlife

provisions as the objective, but that does include grazing; that does

include haying, controlled burns and a number of other options.

And we would look forward to more discussion about how to do

that on a larger scale.

Mr. LUCAS. The Chair now turns to the gentlewoman from South

Dakota.

Ms. HERSETH. Thank you, Mr. Chairman.

Mr. Nomsen, thank you for addressing some of the previous

questions of the subcommittee members today. I want to follow up

with you a little bit, but I thank all of the witnesses for their testimony today. It has been very insightful and helpful as we do prepare for another subcommittee field hearing out in South Dakota

in just a few days to explore some of these issues further with our

livestock producers and some of our grain producers who have participated in the various conservation programs.

But let me direct two quick questions to Mr. Nomsen, and I appreciate your point about the need for additional funding in the

Grassland Reserves Program. I could not agree more. We have far

more applications in South Dakota to enroll acres in South Dakota

in GRP than there is funding. I think that if we did fully fund that

program, it would help address some of the other issues that have

cropped up in certain parts of north and central South Dakota here

recently.

But does your organization, the coalition of organizations that

you are testifying on behalf of today, support an increase in CRP

acreage in the next farm bill.

Mr. NOMSEN. Congresswoman Herseth, we have stood by the 45

million acre figure for a number of years in the last several farm

bills. The number is the original authorization, when the program

was first initiated in 1985.

Ms. HERSETH. And then to follow up on some of the questions

that were posed, beginning with the chairman here on the energy

crops, and I know you initially mentioned the letter that you are

submitting for the record as it relates to the concern that a switch

there could reverse some of the gains that we have experienced for

wildlife, the current utilization of CRP program, but can you tell
76

me, speaking for Pheasants Forever or even the coalition if you

would like, would you be supportive of a review and possible modification of points in the EBI for biomass production as Ms. Lasseter

and a member of her staff discussed in the first panel?

Mr. NOMSEN. Congresswoman Herseth, let me answer on behalf

of Pheasants Forever, and yes, I would be interested in participating in that discussion.

In your State in South Dakota, prior to the conservation reserve

program, the pheasant population in 1986 was around 2 million

birds. Today, this fall, it is probably going to be 12 million birds.

And the South Dakota pheasant harvest, just in South Dakota, is

worth about $155 million annually, as you well know. I try to help

and participate in that aspect, as many of our members do, but

again, we just want to work with you to make sure that we protect

the objective of the program. I do see a future for a biofuels program for South Dakota and other areas, yes.

Ms. HERSETH. I appreciate your response. And back in 1980 and

1981 and in 1982, I agree with you that CRP and other conservation programs that have now been with us since the mid 1980’s

have certainly helped improve the pheasant population. Before we

had that trend moving in a better direction, it was incumbent upon

me and some of my friends when we were 10, 11, 12, to raise

pheasants and let those out in the refuge and on our private property to improve conditions for our hunters that enjoy coming to

South Dakota for that reason, so I appreciate the additional comments about how important these conservation programs and CRP

in particular have been to restoring to more average and better levels of pheasant population that has contributed significantly to the

State’s overall economic health. So thank you very much.

I thank you, all of the panel, and yield back.

Mr. LUCAS. Thank you.

Since we have just a bit more time before the next, well the beginning of the vote, Mr. Wilson, let’s touch for a moment once

again on the technical assistance cost from the perspective of your

group. You work with conservation, and your group does at every

State in every level in every way. Just touch on a moment on the

technical assistance issues, and have we made success; are we

doing better in making sure the resources are available to implement these programs?

Mr. WILSON. Well, I think the short answer is, yes, but I guess

a longer answer is not as much as we would hope, if that makes

any sense. I think there is still a lot of room for improvement. It

has been mentioned I think by Under Secretary Rey that we would

have to change the cap on CSP for instance, if we expanded the

funding and all the programs. Although they support their own

technical assistance—thanks to your leadership, we got that done—

there still seems to be a backlog in technical assistance and the

more pressing issue in our mind and our Members tell us is the

nonfarm bill technical assistance which is not a part of the farm

bill, but there are a lot of people being turned down. We can give

examples of individuals that have been refused service from their

field office because of NRCS and district staff simply did not have

the time to do that and deliver the requirements that they have to

deliver within the mandatory programs.
77

So there is certainly still a very severe need for technical assistance across the country. We see CSP driving that agenda to some

extent, farmers and ranchers are anticipating that they may at

some point be in a watershed, and they are actually installing best

management practices, conservation practices on their own farms

and ranches at their own expense, that they need to do that with

good technical assistance, good scientific knowledge, and it is unfortunate that some of those folks are being turned away because they

cannot get that assistance.

Mr. LUCAS. I think at that point I would like to offer an observation. I know I seem very focused on the cost of CSP, but I have always been very committed that whatever we offer, whatever we

provide should be available to everyone across the country who is

eligible. And I look at that number, $9 billion, $10 billion a year

more, $45, $50 billion over the life of a farm bill, and I think about

how far that would go towards funding a cellulose reserve program

or how far that would go towards doing so many of these other

things or dam rehab or EQIP or just a variety of things, how far

it would go. So I am not philosophically totally opposed to CSP. I

just see the good things that are not quite completely being done

and think, if we had the resources to make the commitments, that

$9 million would do so much. But that is my personal observation.

Any additional questions from members of the subcommittee?

Mr. WILSON. Mr. Chairman, could I remind the committee that

I think Mr. Rey said that was an estimate. They don’t know exactly

what the cost would be. So I don’t think it is quite that high personally, and I hope it isn’t. I agree with you, we would like to see

it be available to all producers.

Mr. LUCAS. And, sadly, I know by historic record, most agencies

of the Federal Government tend to guess a little bit low, but that

might be a little bit high; we will give them a benefit of the doubt.

Mr. PETERSON. Mr. Chairman, I think we have a minute.

Mr. LUCAS. Yes, Mr. Peterson.

Mr. PETERSON. I agree with you. We have the WRP program is

probably producing the best wetlands that we have got in this

country better than what we are getting from what the government

buys with their Duck stamp money and so forth because people are

managing it, and we are not doing anything close to what the backlog is. We have got successful programs that I think we need to

fund first because they work.

Now the CSP I think has potential, but the problem I have with

it is I think it is too—we are kind of paying people for what they

are already doing. I don’t think we can afford that. I think we have

got to if we are going to ramp up this program, people are going

to have to make significant environmental benefits before they get

payments. and I think if that was the way it was structured more

than an open-ended deal where everybody got money just because

they got something here, it wouldn’t cost near that much money

and I think we would get a lot more benefit out of it. And I think

one of the things that I really agree with the way they have done

this is to focus by watershed because a lot of these problems are

in the watershed, and it is different from one to another. So there

are some real good aspects of it. But I think it is a little bit too

open ended, and that is why you have got these kind of estimates.
78

And I am not sure how much we are getting back for some of that,

for whatever it is worth.

Mr. LUCAS. And if we are spending $1.8 billion a year on CRP,

that makes me think that we do need to rather aggressively look

at your concepts on switch grass for a few dollars to a major potential return. With that, seeing no other comments, without objection,

the record of today’s hearing will remain open for 10 days to receive additional material and supplemental written responses from

witnesses to any question posed by a member of the panel. This

hearing on the Subcommittee on Conservation, Credit Rural Development and Research is adjourned. Thank you.

[Whereupon, at 3:05 p.m., the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF BILL WILSON

Good Morning, I am Bill Wilson, president of the National Association of Conservation Districts and a rancher from Kinta, Oklahoma. I have served as a district

official form the Haskell County Conservation District since 1980 and have been

working with the national association since 1994. I am also a founder and past

president of the National Watershed Coalition.

I own and operate a 650-acre cow/calf, horse and mule ranch in East Central

Oklahoma and am a registered land surveyor in Oklahoma and Arkansas. I work

to restore Dust Bowl era farm fields into productive pasture land and on my operation; my conservation practices include grazing and nutrient management, tree

planting, erosion control drainage structures, cross fencing, and sediment collection

structures to improve water quality.

Across the United States, for over 60 years, nearly 3000 conservation districts are

helping local people to conserve land, water, forests, wildlife and related natural resources. We share a single mission: to coordinate assistance from all available

sources—public and private, local, state and Federal—in an effort to develop locally

driven solutions to natural resource concerns. More than 17,000 volunteers serve in

elected or appointed positions on conservation districts’ governing boards. Working

directly with more than 2.3 million cooperating land managers nationwide, their efforts touch more than 778 million acres of private land. NACD believes that every

acre counts in the adoption of a conservation practice. We work with landowners

across the country, urban, rural, row crop farmers, ranchers, forest landowners and

specialty crop producers in the plains and on the coast, so we know that no one program, practice, or policy will work for everyone. We support voluntary, incentive

based programs that provide a range of options, providing both financial and technical assistance to guide landowners in the adoption of conservation practices, improving soil, air and water quality providing habitat and enhanced land management.

Among other things, conservation districts help:

• implement farm conservation practices to keep soil in the fields and out of waterways;

• conserve and restore wetlands, which purify water and provide habitat for

birds, fish and numerous other animals.

• protect groundwater resources;

• plant trees and other land cover to hold soil in place, clean the air, provide

cover for wildlife and beautify neighborhoods;

• help developers and homeowners manage the land in an environmentally sensitive manner; and

• reach out to communities and schools to teach the value of natural resources

and encourage conservation efforts.

The conservation title has grown over the last decade to now represent significant

funding and meaningful technical assistance to farmers and ranchers across the

country. This commitment allows farmers to not only protect their soil and water

but also to be a better neighbor and citizen. Districts believe that every acre of conservation counts, including row crop, range, forest or livestock operations, and the

growing rural/urban interface. To meet the needs of all areas of agriculture, the

committee should consider the impacts of the current regulations that restrict participation in conservation programs. The 2002 farm bill has also resulted in new
79

participants coming to the conservation ‘‘table’’ and has created new partnerships,

both at the local and national level.

Another result of the 2002 farm bill can be seen in technical assistance (TA) funding for Oklahoma. TA rose from a little over $24 million in 2001 to a high of almost

$34.5 million in 2004. Through July 13 of this year, Oklahoma has been allocated

almost $31 million dollars for technical assistance. TA related to farm bill programs

must be earned each year, based on the specific program demands in each state.

I believe an additional $2.1 million remains in the account to be earned this fiscal

year. All of the remaining funds are connected to farm bill programs. Oklahoma has

established a good ‘‘track record’’ for getting conservation work done. I am hopeful

the remaining work can be completed in time to earn those funds.

Mr. Chairman we would like to thank you for your national leadership on conservation, both in writing the current farm bill and your continued oversight of implementation of the bill. As you well know, two of the programs you championed

are of particular interest of us in Oklahoma, the Watershed Program and the Grasslands Reserve Program. We look forward to working with you on refining conservation programs in the next farm bill, increasing participation in programs, access to

technical assistance and ensure that Federal dollars are spent wisely to provide the

greatest conservation benefits.

The 2002 farm bill authorized increases in conservation funding that by 2007 will

be double those of the last decade. About two-thirds of the new funds authorized

in 2002 target programs emphasizing conservation on working lands that are still

used for crop production and grazing, as opposed to conservation spending prior to

2002, in which the bulk of conservation spending was directed toward land retirement programs. According to USDA’s Economic Research Service (ERS), conservation programs for working lands will rise from less than 15 percent of Federal expenditures on agricultural conservation over the past 15 years to about half of the

total conservation spending by 2007. The use of the term ‘‘working lands’’ is defined

differently by groups, so to clarify; NACD defines working lands as those lands in

economic production of food, feed or fiber. We believe that a producer must have an

economically viable farming operation to be able to make an investment in conservation practices on their operation. Conservation districts support the increased emphasis on conservation spending for private working lands and hope these trends

continue. While NACD supports maintaining land retirement programs such as the

CRP and WRP, keeping our remaining cropland in production while funding conservation practices on that land may be a more cost-effective and environmentally

viable option for existing working lands.

A recent ERS report assessing the 2002 Census data reports that of the 2.3 billion

acres in the U.S., agriculture land comprises 52 percent and grassland, pasture &

range comprise two thirds of those agricultural lands. Urban and rural residential

acreage in the U.S. is increasing with rural residential increasing 29 percent from

1997 to 2002. Over the same period, cropland decreased by 3 percent and grassland

increased one percent. These numbers demonstrate the continued changing landscape that Conservation Districts are serving. We see greater pressure on the rural/

urban interface as cities and suburbs continue to grow, creating new and different

resource problems and new landowners/mangers. As residents move out of the city

to that rural residential area, they may not have an understanding of which conservation practices or habitat is appropriate for their land—or even that their management style is causing an environmental problem. The rural/urban interface, forestry, public lands and grassland management are all areas that have not fully benefited from the 2002 farm bill conservation programs.

Recent press reports have highlighted this change. A report focusing on Maryland

and Virginia stated:

Hobby farms—also called ‘‘farmlets,’’ ‘‘farmets’’ or ‘‘lifestyle farms’’—appear to be

popping up locally more often. In 2002, according to the most recent figures from

the U.S. Department of Agriculture, Maryland had 3,633 farms with sales of $0-

$1,000, a 54 percent jump from 1997. In Virginia, they were up 31 percent to

11,418. (Washington Post, 7/16/06, C01)

As these statistics demonstrate, the customers that conservation districts, NRCS

and FSA service are changing. Working with these new landowners and manager

takes more time than those that have grown up farming the same land that has

been in their family for generations. NACD is committed to conservation on all acres

and we are ready to work with all landowners, but we need the tools and resources

to do so in this changing landscape.

The comments we are providing to you today are based on our work at the local

level as part of the USDA program delivery system. We are talking with the landowners and those using the program, providing education, outreach and working to

focus programs on the local resource needs, whether it is water quality, soil erosion,
80

endangered species habitat management or other local priorities. Our goal is to provide you with the ‘‘real world’’ perspective of how the programs are working across

the country.

As with any program, the implementation of each of the 2002 conservation programs varies from state to state. Not all programs impact each region of the country

in the same way—some are just not options for producers in a specific state, so we

must continue to focus on a menu of options for conservation assistance. Local priorities should be integrated into conservation programs. No conservation program can

be successfully implemented from a national level and participation in work groups

at the local level best direct program implementation to the greatest resource need

in the community.

The continuation of the locally-led process is critical to identifying natural resource concerns, setting priorities, and meeting the resource needs of the county or

watershed. Conservation Districts are instrumental in the locally-led process, utilizing natural resource planning, working with landowners, Federal, state, and local

governments to priorities conservation efforts in the area to address the natural resource concerns. A local natural resource concern can be driven by regulatory demands such as Total Maximum Daily Loads (TMDLs) or Concentrated Animal Feeding Operations (CAFOs), or can be another county, state or watershed priority identified through local input. This prioritization based on local input allows for increased conservation benefits and more efficient utilization of financial and technical

assistance.

USDA conservation program implementation utilizes Local Work Groups to assist

in targeting funds and programs to address local resource needs and priorities.

Local Work Groups, convened by Conservation Districts and comprised of Federal,

state, county, tribal and local government representatives coordinate local program

delivery. Participants could include FSA county committee member, cooperative extension agents and state/local/tribal officials. The work groups establishes program

delivery priorities and can recommend eligible conservation practices, and recommend cost share levels and payment rates. The local work group is utilized to

aid in the implementation of several conservation programs. As with most of our

comments here today, utilization of this method of local input for implementation

of the programs as required by the farm bill varies from state to state.

NACD was pleased with the overall funding commitment provided and conservation program options in the 2002 farm bill, but is concerned with alterations to the

funding of the programs since the passage of the 2002 bill. Program authorization

levels have been repeatedly reduced through the appropriations process, administrative program limitations, and budget reconciliation. We agree that during times of

increasing budget deficits, all programs are subject to reductions, but we must also

stress those alterations of the programs from their original design in the 2002 farm

bill impacts the intended results of conservation programs. I would also like to mention the devastating disasters that impacted much of the southern United States

from Florida to Texas last year through repeated hurricanes, as well as other parts

of the country that suffered from natural disasters. Although we may not personally

feel the impact that agricultural producers felt in those areas, we know that Federal

assistance is critical to their recovery. Frequently, Federal assistance comes from redirecting existing program funding and staff and several states have felt the shift

of conservation resources. These funding and personnel shifts made at the national

level further complicate program delivery. NACD would hope that a better system

could be developed to provide emergency aid and disaster assistance without redirection of these resources.

I am the third generation of my family to farm the land my wife and I now operate. My family was farming here in the ‘30’s. The last two summers we have recorded less rainfall than in the in those years, yet we have not experienced another

‘‘Dust Bowl’’. We are not seeing neighbors leaving the land and moving as they did

then. The profitability of our farm is still suffering but erosion is not nearly as bad

as back then. Our farming practices have changed over those years partly because

of technical and some financial assistance from conservation programs. We believe

that the American taxpayer has received ‘‘‘good value’’ for their money spent on our

farm.

Conservation programs provide benefits to the landowners and the general public

through increased soil quality, air and water quality and improved habitat. Increased adoption of conservation practices though the 2002 farm bill Conservation

programs resulted in improved nutrient management with decreased nutrient and

sediment runoff, increased pesticide management, and increased wildlife habitat

benefiting both duck and wild turkey populations. Notable results from the adoption

of conservation practices include a reduction in soil erosion and increasing wetland

acres. In May, USDA released soil erosion numbers highlighting a 43 percent de-
81

crease in soil erosion on cultivated and non-cultivated cropland between 1982 and

2003. farm bill conservation programs have also increased the restoration of wetlands across the country and we are now marking net gains in agricultural wetland

acres. Programs have protected farmland from development and protected wetland

areas through easement programs.

Conservation financial assistance provided through the farm bill programs is an

important component in achieving agricultural sustainability both economically and

environmentally. But Mr. Chairman, let me assure you that every time you hear

NACD members talk about the farm bill we will talk about conservation technical

assistance. Technical assistance allows NRCS offices at the local level to work with

Districts, landowners, and state and local agencies to address local resource concerns. Technical assistance is utilized to work with landowners on conservation

plans from design, layout and implementation, helping landowners understand

highly erodible land and necessary compliance for participation in farm bill commodity programs. Technical assistance is also used for evaluation and maintenance of

conservation practices. Once a conservation practice is installed, it must be maintained to ensure we continue to see the benefits of the practice. Funding for technical assistance allows NRCS and district employees to meet face to face with landowners, visit their operation and help them design strategies to the resources needs

of their individual agricultural operation. Through these discussions, a comprehensive conservation plan can be developed and then financial assistance programs

such as EQIP, CRP or any other program in the conservation ‘‘tool box’’ can be utilized to help meet the goals of the conservation plans.

Technical assistance has been a key component in working with livestock producers to understand the EPA AFO/CAFO regulations. District staff and NRCS personnel helped to conduct workshops and demonstration projects so producers could see

first hand the changes that needed to be made to avoid enforcement actions under

the Clean Water Act. Some producers went on to seek EQIP assistance to make

these changes, some producers just needed to know what was required and made

the improvements on their own.

Conservation technical assistance is also used to assists local watershed planning

groups to address impaired water bodies—working to provide these groups with the

technical information they need to determine locally how best to address water quality issues. Technical assistance is necessary to help producers to install and maintain complex conservation practices on the landscape. The technical assistance from

NRCS field staff, along with the resources conservation districts and state conservation agencies provides is critical to the success of conservation in the United States.

The bottom line is that producers need quality technical assistance to maximize the

effectiveness of the financial assistance they receive. Even without financial help,

many producers still rely on technical help to ensure that they are putting quality

practices on the land. But it’s the combination of the two that makes America’s conservation delivery system efficient and effective.

A concern from many local conservation districts is focusing conservation technical assistance only for specific farm bill programs therefore not providing general

technical assistance. NACD understands the need to fully implement each of the

farm bill conservation programs, which we support, but feel that conservation technical assistance at the local level should not strictly be tied to a farm bill program.

Districts across the country engage landowners that may not seek Federal costshare programs or financial assistance, but would like technical assistance. Whether

they are limited by acreage, size of operation, or have sufficient funds to make capital conservation investments without Federal cost-share or program dollars, local

offices must be able to serve all landowners. We acknowledge that there is a backlog

of contract implementation through Federal farm bill conservation programs where

contracts are approved but need technical assistance for complete implementation.

This backlog should be addressed, but not at the loss of providing more general

technical assistance. We cannot loose the ability to provide this critical technical assistance to meet the needs of local landowners.

NACD worked to provide recommendations on the Technical Service Provider initiative and strongly believes that the use of third party public and private sector

technical assistance to help implement conservation programs should be seen as a

complement and supplement to, not a replacement of, the existing delivery system.

Districts believe that private sector participation in the TSP initiative has been

hampered by issues of liability, reimbursement rates, and local expertise. The liability surrounding a private entity vs. the Federal Government providing assistance

has resulted in high liability insurance costs. The reimbursement rates provided by

NRCS are calculated as the costs for the Federal Government to complete the work

and are not sufficient in all areas to cover the additional costs to the private sector.

When this initiative began three years ago, there was not a private sector capacity
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that understood NRCS’ conservation planning requirements and the field office technical guide, but NRCS is beginning to require more certification in this area and

offers web-based training for these registration requirements.

Conservation Districts participate in the TSP initiative through contribution

agreements and a 50/50 Federal & non Federal match. Contribution agreements can

be with individual Districts, state associations or state agencies and specify the

work to be carried out by the District in delivering technical assistance. Not all districts have the non-Federal match, but NACD is working to help all districts identify non-Federal funding sources to participate these agreements. USDA is continually working to meet some of the challenges in implementing the TSP initiative

and we support continued flexibility that allows state conservationists to meet the

need of their state, working through private entities and agreements with Conservation Districts

Mr. Chairman in our state NRCS has worked very closely with the Oklahoma

Conservation Commission to provided some funding, through a cooperative agreement, to enlist local district employee’s assistance in carrying out its responsibility

of delivering conservation programs. That arrangement is state wide and has

worked very well both for NRCS and conservation districts. Without that agreement

Oklahoma would be facing an even larger back-log of work remaining. Another

agreement was with the Oklahoma Department of Wildlife Conservation. It provided technicians to assist landowner with education and implementation of wildlife

and wetlands programs.

In 2004, thanks to your efforts Mr. Chairman, Congress passed legislation to ensure that each conservation program provides technical assistance for implementation of the specific program. This legislation specifically corrected the technical assistance funding problems associated with CRP and WRP and was very important

to fully implementing these programs. Availability of technical assistance is a limiting factor in program delivery and without adequate funding, knowledgeable staff

and committed local partners, the full benefits of conservation programs and practice adoption cannot be realized.

The EQIP program has been widely successful across the country. Even with the

substantial increase in funding provided in the 2002 farm bill, the demand exceeds

the available dollars. The input from the local level is instrumental in making this

program successful. Local work groups are utilized in setting priorities and allowing

for targeting the program to local conservation needs. We hear that in many states

there is a backlog of EQIP projects that have been approved but not yet implemented and feel it is crucial to have the personnel on the ground to administer

these programs.

The Grasslands Reserve Program has been very successful; however it has been limited by funding. The funding available from the 2002 farm bill ($254 million) has

been fully utilized prior to reaching the acreage cap of 2 million acres, making the

program unavailable for 2006 and 2007. The GRP program is just another excellent

program that helps maintain open spaces around growing communities and helps

keep our working lands from being developed at a higher rate. Keeping working

lands in production, whether it’s in crop production, grazing or timber is important

to our local communities and economies.

NRCS works with local watershed sponsors on watershed projects as authorized

under P.L. 83–566 and P.L. 78–534. In the 2002 farm bill, mandatory funding was

provided and appropriation authorized to carryout small watershed rehabilitation

projects. The issue of the current condition of the dams constructed over the last

fifty years under the watershed program is a matter of great concern. Many of the

11,000 plus dams that NRCS assisted in building throughout the United States, no

longer meet current dam safety standards. This situation exists largely as a result

of development and land use changes both up and downstream. Structures originally built to protect farm land now receive increasing run off from upstream while

protecting homes and lives rather than simply cropland downstream. There is a serious need to upgrade these dams to current standards immediately. Critical funding for rehabilitation efforts that was secured in the farm bill has not been provided.

These dams across the country are in need of repair and rehabilitation to ensure

flood control protection. Watershed projects nationwide not only provide flood control protection, but have resulted in over 9 million acres of wildlife habitat, over

200,000 acres of wetlands (created or enhanced), over 25,000 miles of enhanced

stream corridors and reduced sedimentation nearly 50 million tons per year.

The Conservation Reserve Program was long thought of as the main conservation

program of the farm bill. In 2002 the conservation program options expanded, but

CRP remained a focal point of the conservation portion of the farm bill. As this committee knows, many of those long term contacts under CRP are expiring over the

next few years. Between 2007 and 2010, the contracts on 28.5 million acres will ex-
83

pire. USDA has started the re-enrollment process with higher offers for the most

environmentally sensitive lands, a process that NACD supports. However, NACD

members across the country are not uniform in their views on CRP. In the South,

our members believe there should not be a general re-signup for CRP. With significant resources dedicated to the CRP program and land retirement, NACD believes

overall conservation funding should be balanced between working lands and land retirement programs.

The CRP program and its components—the Conservation Reserve Enhancement

Program (CREP), the Farmable Wetlands Program and the continuous sign-up have

been popular across the country. NACD believes that targeting CRP to the most environmentally sensitive lands should be the focus of the program. The CREP program has been tremendously successful in partnering Federal and state funding in

a targeted area for greater conservation benefits. Twenty eight states have entered

into at least one, if not several CREP agreements with the Farm Service Agency.

The most recent CREP agreement was in Colorado where USDA signed two CREP

agreements earlier this year. The Republican River CREP focuses on conserving irrigation water use in the basin on 30,000 acres. The CREP is expected to restore riparian habitat and wetlands, reduce soil erosion and reduce the application of agricultural chemicals. The High Plains CREP focuses on increasing populations of

pheasants and ground-nesting birds on 30,000 acres. Federal assistance is $72.7

million and state assistance is $18.9 million over a 15 year period.

Nine years ago, the first CREP agreement was signed in Maryland to protect the

Chesapeake Bay from nutrient loading and enrolled 72,000 acres. Maryland updated

that agreement last year for an additional 100,000 acres. The next agreement was

signed in 1998 in Minnesota addressing water quality and wildlife on the Minnesota

River. Minnesota signed its second CREP agreement in 2005. The CREP program

continues to be successful from its beginning in 1997 to the present day and our

local districts look forward to working with new CREP projects in the future.

NACD was a strong advocate for an incentive based conservation program and

supported the Conservation Security Program in the 2002 farm bill. In the development of the program, creation of regulations, and actual implementation, the program changed significantly from our original concept. We hoped for a program that

was easy for producers across the country to understand, resulting in graduated

support for increasing adoption of conservation practices. Unfortunately, the result

was an extremely targeted program with complex implementation. The reaction to

the CSP program across the country is mixed. Some states have been very successful in implementation. Local districts related that those who can access and participate in the program, like the program, but those who do not have access feel at a

disadvantage. We also hear that the program is too complicated—both with general

understanding of program design and application complexity by the producer, coupled with limited watershed-based availability and lack of additional assistance on

the ground needed to implement the program.

NACD is aware of a number of successful efforts by NRCS that have made CSP

work. This spring, the Poteau River Watershed, in Oklahoma, was selected for CSP.

NRCS was able to put a very successful team on the ground that resulted in 434

contracts with land owners. This example, and there are others, can be used by

NRCS as models for implementation of the program. There needs to be a greater

effort at education of producers and others about the program. The continued funding changes and the availability of the program have complicated the implementation and underscore a need for further education. We believe that when land owners

understand the program, they like it and want to participate.

In Iowa, NRCS, with the assistance of conservation districts, conducted state wide

producer pre-signup meetings once the CSP program was finalized. They followed

up with additional meetings in key watersheds where the program was likely to be

offered. These early education efforts introduced producers to the program, explained the operation and resulted in the success of the program today.

The Wetlands Reserve Program (WRP) has contributed to re-establishing or maintaining wetlands in traditional agricultural areas, resulting in no net loss of agricultural wetlands. This trend reverses years of wetlands loss due to agriculture production and puts us on the path to net gains in wetlands across the country. Wetlands

are important for wildlife habitat and WRP is supported by farmers and wildlife organizations across the country. The program is oversubscribed with high demand in

the South, Midwest and California.

The Farmland and Ranchland Protection Program has been very successful in

maintaining farmland production in the areas of the rural/urban interface currently

threatened by development. This program is broadly supported and has protected

over 400,000 acres of farmland (approved and pending easements). The program

builds on many state operated programs, and the work of local and non-govern-
84

mental organizations that purchase easements to maintain farmland in agricultural

production. FRPP leverages Federal dollars by partnering Federal funding with existing funds at the state and local level. It is another critical program that helps

to keep our farms and ranches intact across America. One of the most successful

state programs is in Pennsylvania where the state purchases easements to protect

farmland from development through the Purchase of Agriculture Conservation Easement (PACE) program. The PACE program has preserved 300,000 acres of farmland.

The Wildlife Habitat Incentives Program, working with landowners through costshare, increases wildlife habitat with priorities on threatened and endangered species habitat. We have heard support for this program from areas that can be considered ‘‘non traditional’’ agriculture, including municipalities and areas in the urban/

rural interface. This program provides a unique focus habitat restoration, and

broadens the scope of farm bill conservation programs to address increasing pressures on farmers and ranchers from the Endangered Species Act.

There are a few areas that NACD believes are not being fully addressed by the

conservation programs of the 2002 farm bill. Conservation districts not only work

on that 52 percent of land in the US that is in agriculture production, but most all

land in the US falls within a conservation district, and we must focus our resources

on all of these lands. In the West we hear from our members about more integration

of conservation programs on Federal lands. While this may pose jurisdictional

issues, we believe there could be additional conservation gains on this land through

coordinated efforts with Federal land management agencies. Forestry issues have

also not fully been addressed through conservation programs, with limited funding

for the Forestry Land Enhancement Program. More and more districts are concerned with the lack of conservation assistance for private forested lands and see

opportunities for conservation benefits. The 2007 farm bill should place additional

emphasis on conservation of forested lands to encourage greater participation of forest landowners. Public benefits provided by forests include clean water, clean air,

wildlife habitat, recreation opportunities, as well as a renewable source of wood

products. NACD encourages a Federal commitment to private forestry though increased technical and financial assistance to provide for continued public benefits

of ecosystem services on a forest landscape level.

The private forest issues are event in Virginia, where 15.8 million acres or 62 percent of the state is forested. Of those 15.8 million acres, 62 percent is owned by private landowners. Conservation and proper natural resource management on private

forest land is as important as conservation practices installed traditional crop land.

Conservation Districts in Virginia and across the country are actively working with

forest landowners, and look toward the next farm bill to further address the conservation needs of this sector of agriculture.

Across the country, the landscape is changing as urban areas spread further into

what have traditionally been rural or agricultural lands. The increase of the

‘‘farmet’’ or small farming operation on the outskirts of town, as well as increased

land development creates demands on the rural/urban interface applicability of farm

bill conservation programs and general technical assistance. These areas are frequently more demanding in terms of working with a landowner that is not knowledgeable about conservation practices and appropriate utilization of their land. Coordination with other Federal agencies for conservation on Federal lands, forestry

and the rural/urban interface are areas that have not fully benefited from the 2002

bill.

As the Subcommittee works on drafting the 2007 bill NACD encourages you to

look into increasing access to EQIP and other programs, to evaluate whether consolidation of the numerous conservation programs makes sense, or if streamlining

the application processes provides for smoother, more efficient program participation

on the ground. Districts do, however, hope that any streamlining does not result in

taking funding away from conservation programs.

As programs are reviewed we hope that the wide variety of benefits can be taken

into to account—programs don’t just improve water quality or soil quality, but also

improve air quality and provide better habitat, and all of these benefits should be

considered. NACD fully supports any effort to make the programs more user friendly, easier for producers to understand and more efficient, but they must continue

to focus on our conservation gains—cleaner air, water, improved soil quality and

wildlife habitat.

Also Mr. Chairman, we hear a lot of talk that the next farm bill will include a

strong renewable energy title. We too recognize the needs and benefits of energy

production in the US and on our lands, and support renewable fuel development

and production for on and off-farm energy. However, we just caution the subcommit-
85

tee not to minimize the conservation gains in all programs we have achieved over

the last 20–25 years.

NACD hopes the subcommittee will work with sound science and proven technologies for the best use of natural resources. We believe it can be done and is already being done with the production of corn for ethanol and oilseeds for biodiesel;

however, we do want to move carefully in the use of CRP lands and others agriculture lands for additional production. There is also potential through forestry resources that could be a valuable resource for cellulosic energy production with available biomass. We support continued research and development on the viability of

these renewable resources. NACD is not calling for the prohibition of more energy

production; we just want to interject a voice of reason to make sure we do not improve one set of factors while hurting another.

Conservation Districts work to identify local resource concerns, help prioritize

funding and the focus of projects to have the greatest conservation and environmental benefit in the local community, benefits that are provided both to the landowner and the public. Everyone benefits from cleaner water, air and improved wildlife habitat and water management. We seek to coordinate the efforts of local, state

and Federal Government programs and educate landowners and the public about

the opportunities and benefits of farm bill Conservation programs. But more can always be done. Conservation Districts across the country have a strong conservation

ethic and are committed to making these programs successful on our farms, in our

community and for our environment.

The 2002 farm bill was a hallmark for conservation in this country-it offers a

sound mix of programs and resources to build upon for the future. While it heralded

a tremendous leap forward, there are still many who remain untouched by its potential. Conservation districts believe that every acre counts from a conservation perspective and that the farm bill needs to bring its conservation benefits to all producers and all agricultural lands. It doesn’t matter whether it’s EQIP or CSP, WRP or

CRP, on-the ground results are what counts and making sure we have the vehicles

to get those results in 2007 will be the principal measure of our success.

STATEMENT OF JOHN O’KEEFFE

Mr. Chairman, members of the committee, my name is John O’Keeffe, and I am

a rancher from Adel, Oregon. Some of the cattle industry’s biggest challenges and

threats come from the loss of natural resources. Our industry is threatened every

day by urban encroachment, natural disasters, and misinterpretation and

misapplication of environmental laws. The conservation of our natural resources is

incredibly important, and ranchers are a partner in conservation. Our livelihood is

made on the land, so being good stewards of the land not only makes good environmental sense, it is fundamental for our industry to remain strong. We strive to operate as environmentally friendly as possible, and it is in conservation programs

where we can see a partnership with the government.

The goal of conservation and environmental programs is to achieve the greatest

environmental benefit with the limited resources available. USDA has numerous

programs that are currently utilized by cattlemen, and we know that these programs will be a highlight of the 2007 farm bill. I appreciate the opportunity to talk

about the cattlemen’s position on these programs.

A popular program among cattlemen is the Environmental Quality Incentive Program or EQIP. This cost-share program rewards and provides incentives to cattle

producers for their environmental stewardship. The NRCS assists the producer in

the development of a long range conservation plan then offers incentives through

cost sharing for the landowner to incorporate best management practices to accomplish the objectives of the plan. Although popular, EQIP has a few problems. One

small problem which you might address is to direct USDA to grant more flexibility

to NRCS to adjust cost share requirements because sometimes portions of these conservation plans may have significant benefits for wildlife species but contribute little

to the economic viability of the ranching operation, making it difficult for the landowner to justify the expense. In addition, many ranchers have complained that the

intense administrative paperwork and time allotment for receiving funds makes

EQIP an unattractive and burdensome program. Realizing that funding is limited,

one method to realize more dollars to the end users of conservation programs would

be to make the program more user-friendly and less burdensome. We understand

the that verification of records in order to ensure that appropriate qualifications are

met is very important, but achieving a more efficient application method and accountability system would result in more dollars that can be spent on actual con-
86

servation. A streamlined and efficient program is key to making the most of the taxpayer’s dollar.

Cattle producers across the country participate in this program, but arbitrarily

setting numerical caps that render some producers eligible and others ineligible limits the success of the program. Addressing environmental solutions is not a large

versus small operation issue. All producers have the responsibility to take care of

the environment and their land, and should have the ability to participate in programs to assist them establish and reach achievable environmental goals. Accordingly, all producers should be afforded equal access to cost share dollars under programs such as EQIP.

Another category of livestock producers excluded by USDA from EQIP are custom

feeders. USDA has decided these producers do not share the risk of the ultimate

sale price of the animals they feed. This exclusion is difficult to understand. These

producers feed livestock on behalf of others and are obvious agriculture operations.

Their environmental profile is identical to every other feeding operation. They certainly share the risk of financial success of their operations, even if not for the ultimate price of the individual animals they sell.

Custom feeding is a response by the market to most efficiently organize production, whether the feeding is the main source of income for a producer or a supplement. It is strange that USDA would try to shape market forces through a bureaucratic rule, rather than trying to promulgate rules that support the market and protect the public’s interest in sound agriculture programs. We urge the Committee to

enact a law to eliminate USDA’s exclusion of custom feeders from EQIP.

We also feel that changes in EQIP contracts should also be implemented to make

this program more attractive to ranchers. Currently, ranchers are assessed unreasonable penalties associated with the cancellation of an EQIP contract that can be

up to 20 percent of the total financial and technical assistance obligated to the participant, even if little work has been performed by NRCS. NRCS should not require

an applicant to sign a contract until the final cost of the contract is known to, and

approved by, the producer. Producers should also be allowed to periodically review

and revise the terms of multiple year contracts to adjust for rising costs over time.

Finally, NRCS should provide the least-cost alternative to applicants when engineering for the government’s share.

One of the reasons EQIP is so popular among ranchers is the fact that it is a

working-lands program. We believe that conservation programs that keep land in

production and do not limit its use is best for the ranchers and the actual goal of

conserving our resources. Other working-lands programs that we support include

the Wildlife Habitat Incentive Program and the Grassland Reserve Program.

WHIP’s cost-sharing and technical assistance provisions provide assistance to conservation-minded landowners who are unable to meet the specific eligibility requirements of other USDA conservation programs. A healthy wildlife population is a sign

of a healthy ecosystem, which is conducive to a healthy cattle operation.

Likewise, the GRP has been very successful in helping landowners restore and

protect grassland while maintaining the acres for grazing and haying. This is in

huge contrast to programs such as the Conservation Reserve Program or CRP. Considering the fact that 28 million CRP contracts will expire over the next five years,

and considering the fact that the 2007 farm bill will be dealing with less funding

than in 2002, we believe that the CRP is one of the programs that should be considered for reevaluation and savings.

The CRP is a program designed for the purposes of reducing soil erosion, protecting water quality, enhancing habitat for wildlife, and decreasing overuse of lands

not suited to farming. These are worthy goals, but we believe the USDA should consider targeting the program to acres that would produce the most significant environmental benefits. Emphasis should be placed on enrolling buffers, grass waterways, and only the most environmentally sensitive portions of farms so that program dollars provide the most benefit to the public. We would discourage the enrollment of entire fields or farms, a practice that we believe adversely affects local

economies and may not provide significant environmental benefits that we believe

should be the focus of the program.

With the current program, NCBA is opposed to haying and grazing on lands enrolled in the CRP program except under a few limited conditions. These conditions

include:

(1) In case of drought or other emergency situation declared by the Secretary of

Agriculture, including emergencies caused by fires on private or public rangelands;

(2) In the case of incidental grazing in conjunction with grazing contiguous crop

residue or stubble on lands enrolled in continuous sign-up CRP or CREP, or
87

(3) In the case of a USDA determination that maintenance or management is required on land enrolled in CRP to maintain plant health and proper resource management.

We believe that in all instances of haying or grazing on lands enrolled in the CRP,

continuous sign-up CRP, or CREP, the payment should be reduced by the value of

the forage harvested or grazed. NCBA also believes that managed grazing on CRP

lands should be permitted during the primary nesting season where State Technical

Advisory Committees recommend it under an approved plan.

There has been discussion within the agricultural industry of allowing a portion

of producers’ enrolled acreage to be grazed annually. If the program were to evolve

in this direction, a number of issues must be addressed because the program was

not designed to be a subsidized grazing program.

One of the issues is: How would the program be managed? Would grazing be limited to a percent of the total enrolled acres per year or a percent of the total forage

production of the enrolled acres per year?

In the first instance, a person could rotationally graze a percent of his/her enrolled acres per year, thus supporting a livestock herd that might not have existed

previous to enrollment in the program. This would have a negative impact on beef

markets. Our markets, like any other industry markets, are fragile. Introducing a

potentially large number of animals into production with lower production costs

would be problematic. How would this program be managed considering these factors and the overriding goals of the program?

While NCBA does not support grazing of CRP lands as part of a continuous grazing program, we do support haying and grazing to maintain plant health and proper

resource management when determined by the NRCS or FSA.

CRP lands must be properly maintained at a higher level into the future. Problems exist due to noxious weed invasion, as well as proper growth control of desired

species. This required management is often very costly and in many instances could

be accomplished through very prescriptive haying and grazing. These two practices

have proven very effective and efficient on private and Federal lands.

Emergency use of CRP lands during a disaster declaration due to drought or fire

on private or public rangelands is of critical importance to ranchers. By allowing

emergency use of these lands, many livestock producers who otherwise may have

been forced out of business as a result of a disaster are able to stay in business.

We support the continued allowance of CRP lands for this reason at the designation

of the Secretary of Agriculture through state advisement. We also support payment

reductions when CRP lands are used in cases of disaster.

Another concern we have with certain USDA conservation programs, including

the GRP and FRPP, is the utilization of conservation easements. Many ranchers are

skeptical of participating in these programs because they simply don’t trust the government. To solve this problem, the 2007 farm bill should give USDA more flexibility to allow private land trusts to not only hold these easements, but also negotiate

the terms with state NRCS offices. A major benefit of this approach is that private

land trusts can manage easements at no ongoing cost to the public. The interest in

conservation from the ranching community is tremendous—we just need more flexibility in current programs to make them workable.

I would be remiss if I did not mention the Conservation Security Program. CSP

rewards those of us that have been conservationists and have spent time and money

in the past improving our land, water, and wildlife habitats. CSP also provides an

incentive to those who have not participated in conservation programs to become involved and improve their operations which in turn will benefit the environment.

When it comes to the implementation of USDA’s conservation programs, it is imperative that we ensure adequate support and technical assistance to make these

programs successful. Resources must be allocated to maintain adequate NRCS personnel at the local level to provide the technical assistance necessary to implement

successful rangeland conservation programs. Ranchers need a dependable and recognized source of technical assistance in order to meet rangeland conservation needs.

Paramount to any discussion regarding conservation programs is the need to protect individual private property rights. Federal conservation policy should reflect

both the U.S. and state constitution and enhance the individual right of free choice

of land, water, soil and energy use, development, and conservation. The rights of

private landowners must be protected. Any loss of private lands or water rights including waters arising or claimed on public lands without specific procedures of due

process of law and just compensation must be opposed. Agreements involving individual private land and water rights shall be solely a decision of individual private

property owners. The laws and policy of state and local governments and private

rights should be paramount in governing the use and ownership of water and natural resources.
88

The goal of conservation programs should be to maintain a balance between keeping good, well-suited working lands in production, and providing for conservation of

species and natural resources. Many producers would like to enroll in various USDA

conservation programs such as CSP and CRP to reach environmental goals. However, to enroll in these programs requires the producer to stop productive economic

activity on the land enrolled. We believe economic activity and conservation can go

hand in hand. As such, we support the addition of provisions in the next farm bill

that will allow more working-lands programs that will have tangible benefits on environmental quality, and help to improve our ranching lands.

USDA’s conservation programs are a great asset to cattle producers. We want to

see them continued and refined to make them more producer friendly and more effective in protecting the environment in a sensible way. Thank you for the opportunity to express our views to you here today.

STATEMENT OF DAVID E. NOMSEN

Mr. Chairman, Members of the Committee, my name is Dave Nomsen. I am the

Vice-president of Governmental Affairs for St. Paul, MN based Pheasants Forever

and I reside in Garfield, MN. I am a professional wildlife biologist with expertise

in wildlife and wetland management. I have worked for Pheasants Forever since

1987 and my primary duties involve supporting a strong framework of Federal policies and programs supporting natural resource conservation that complement our

habitat-focused mission at Pheasants Forever.

Pheasants Forever’s 650 chapters nationwide complete on average more than

20,000 individual projects annually with conservation minded farmers and ranchers

on 300,000 acres. The vast majorities of these projects are completed on private

lands and involve grassland establishment and management. Projects are focused

on the establishment of nesting, brood rearing, and winter cover for pheasants,

quail, and a wide array of wildlife.

Mr. Chairman, I appreciate the opportunity to be here today and I am pleased

to offer the shared views of many of our nations’ leading wildlife conservation and

sporting organizations. The groups that I represent today include the Archery Trade

Association, Association of Fish and Wildlife Agencies, Bowhunting Preservation Alliance, Congressional Sportsmen’s Foundation, Ducks Unlimited, Izaak Walton

League of America, Pheasants Forever, Quail Forever, Quality Deer Management

Association, Theodore Roosevelt Conservation Partnership, and Whitetails Unlimited.

Collectively, our members and supporters represent a sizable cross-section of our

nations’ citizenry, and we appreciate the increased role and importance of conservation in agriculture and its role in private land stewardship that has led to consensus

and partnerships among government and private interests, including farm and commodity groups, individual farmers and ranchers, and hunters and anglers.

It is our view that the conservation title of the 2002 farm bill represents the most

comprehensive array of conservation programs ever enacted in conjunctions with

Federal farm legislation and we recognize and appreciate the strong support from

you Mr. Chairman and your subcommittee in providing this authorization. I’d like

to offer a few thoughts about some of the individual program success stories that

we have benefited from.

CONSERVATION RESERVE PROGRAM

The Conservation Reserve Program (CRP) is currently celebrating 20 years as

USDA’s and our Nation’s most successful conservation program. CRP has been a

documented success for wildlife and the program is responsible for in excess of 15

million pheasants and 2.2 million waterfowl produced annually. In Iowa, CRP is estimated to produce up to 3.8 million pheasants per year. In South Dakota and Minnesota, CRP has contributed to increased pheasant harvests not experienced in over

40 years. In Montana, harvest of pheasants, gray partridge and sharp-tailed grouse

has increased 55 percent in 1987–2002 when compared to pre-CRP levels in the period 1971–1986. Lesser prairie chickens in Kansas have a greatly expanded range

since CRP and 215 leks (breeding grounds) have been found in 10 counties north

of the Arkansas River where the species was once virtually absent. A similar success story can be found in Idaho where harvest data indicates sharp-tailed grouse

numbers have increased from 285 harvested in 1984 to a high of 6,200 in 1992,

since enrollment of over 400,000 acres of CRP.

CRP continues to be popular with America’s farmers and ranchers with strong demand during signup periods. Just last month the Farm Service Agency announced
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that contracts covering 13 million of the 15.5 million acres of CRP set to expire this

coming September, 2007 will be extended or under new contracts. Additionally,

more than 1 million acres have been accepted for enrollment in a general CRP

signup conducted the spring of 2006, bringing total current enrollment to more than

36 million acres.

Because of the incredible contributions it has made to habitats for waterfowl, upland game birds, deer and wild turkeys, CRP has become a favorite of many in the

sportsmen’s’ and sportswomen’s community. CRP’s benefits don’t stop with wildlife.

CRP has reduced annual cropland loss by about 450 million tons. Additionally, according to USDA, CRP provides the following benefits: • Soil productivity benefits: $162 million • Hunting migratory waterfowl: $122 million • Reducing runoff from fields: $392 million • Viewing wildlife: $929 million

CRP is credited for protecting 170,000 miles of streams and restoring 2 million

acres of wetlands and adjacent buffers. All of the above benefits are realized at a

modest average rental rate of $49.00 per acre. We support continuing the vast documented benefits of CRP and urge reauthorization at 45 million acres, as was the

original program authorization.

WETLANDS RESERVE PROGRAM

The Wetland Reserve Program (WRP) was established by Congress in the 1990

farm bill and reauthorized in 1996 and 2002. In the 2002 bill, the national aggregate cap for WRP was set at 2,275,000 acres nationwide, a significant increase over

the previously authorized maximum of 1,075,000. We applaud Congress, and this

Subcommittee in particular, for their leadership in responding to landowner and

producer interest in this ever-popular provision of the farm bill. As of January 2006,

1,752,045 acres had been enrolled in WRP in all 50 states and Puerto Rico. Nationwide, demand for the program continues to exceed the annual acreage authorization

(250,000 acres) by a factor of 3:1.

WRP lands provide for voluntary, incentive-based conservation of wetland habitats and provide societal benefits such as improved water quality, increased flood

storage capacity and enhanced wildlife habitat, in addition to recreational opportunity.

The Lower Mississippi Alluvial Valley portions of Arkansas, Tennessee, Louisiana,

and Mississippi comprise one of the most important waterfowl wintering areas in

North America wintering at least 5 million ducks and geese annually. WRP has restored winter flooding on at least 45,000 acres. In Arkansas, Louisiana and Mississippi, WRP has reforested more than 400,000 acres of marginal farmland, providing habitat for a variety of wildlife. White-tailed deer populations are high on WRP

lands within days of planting, and as the forest matures Eastern Wild Turkeys return to the land, providing outstanding hunting opportunities.

Partnerships between state and Federal agencies, wildlife conservation groups

and landowners have proven to be the key to success of WRP throughout this country.

WRP restores and protects wetland habitats and provides significant wildlife habitat. WRP has seen strong demand by landowners and we support enrollment of

250,000 acres per year.

WILDLIFE HABITAT INCENTIVES PROGRAM

WHIP was authorized in the 1996 farm bill and was funded in 1998. Administered by the Natural Resources Conservation Service, WHIP helps landowners promote healthy wildlife populations by developing upland, wetland, riparian, and

aquatic habitats on private lands. WHIP is particularly valuable in states such as

the Northeast where land values and the acreages in working lands render other

conservation programs less applicable. Numerous WHIP projects are successful partnerships between Federal and state agencies, non-governmental organizations, and

farmers and landowners. WHIP projects have been completed on 2.8 million acres

under 18,000 different contracts. We supported WHIP at $100 million per year during negotiations over the 2002 farm bill.

GRASSLAND RESERVE PROGRAM

GRP helps farmers protect and restore grasslands while maintaining the areas as

grazing lands. The program has a goal of helping conserve, restore, and protect up

to 2 million acres and received strong demand from ranchers and landowners. GRP

provides an incentive to maintain and enhance the contributions of working grass-
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lands and supports the conservation of those prairie wildlife species that depend on

these habitats. In 2004, over 9,000 applications for 6.2 million acres were unfunded.

The program is strongly supported by our organizations. Due to the overwhelming

demand for GRP and the public benefits related to the protection of native grasslands, the program should be continued and increased funding should be considered.

Other Issues

Mr. Chairman, I’d like to raise several other issues that our groups hope to address during deliberations over the 2007 farm bill. The first is that of land conversion, where we are concerned about the continuing conversion of native prairies and

noncropland to the production of subsidized commodity crops. We hope to work with

the Committee to address this issue. We are supportive of both the swampbuster

and sodbuster provisions of the current farm bill and support both programs’ continuation.

We are also concerned about diminishing access to privately-owned lands for our

nation’s hunters. We hope to work with you to address this area of growing concern

for current and future generations of sportsmen and sportswomen. We support provisions similar to the ‘‘Open Fields’’ legislation that would provide financial assistance to states to develop or augment voluntary programs encouraging wildlife management, habitat development, and access for hunting and fishing on privately

owned land. We will be providing you and your staff with more detailed information

on each of these areas of concern in the near future.

I would also like to express our desire to address program administration. We like

to talk about how program authorizations are only the starting point for conservation and that we are not successful until programs are ‘‘in-the-ground’’ with conservation-minded farmers and ranchers. We believe that both non-governmental organizations with expertise such as many of our organizations and personnel from

state fish and wildlife agencies are part of the solution to more efficient and effective program implementation. We look forward to additional discussion with you

and your staff about how we can work in closer partnership with Federal agencies

and others to effectively deliver strong conservation programs.

In the next few months many of our organizations will be adopting detailed blueprints for the conservation title of the next farm bill. We hope to build upon the

proven success of programs like CRP, WRP, WHIP, and GRP. We look forward to

providing the Committee with additional information on each of these programs and

others as we work together toward a strong conservation title as an integral component of the next farm bill. Thank-you for the opportunity to testify here today.

STATEMENT OF JUDITH L. SCHWANK

Mr. Chairman, members of the committee, I want to thank you for the opportunity to appear before you today to discuss how conservation programs initiated

in prior farm bills have worked in Pennsylvania. I am also pleased to discuss my

ideas on the future direction of national policy on conservation practices.

I am a County Commissioner in Berks County, Pennsylvania. Currently, I serve

as Chair of the Energy, Environment and Land Use Committee of the County Commissioners Association of Pennsylvania (CCAP) and have been the Commissioner

Director of the Berks County Conservation District for six years. Prior to my role

as County Commissioner I served as an Agricultural Extension Educator for Penn

State Cooperative Extension for almost 20 years. In addition, I spent 7 years on a

dairy farm. I am a strong advocate for the agricultural economy in my county as

well as the state of Pennsylvania. Agriculture is big business in Pennsylvania. Our cash receipts total over $4 billion

from production agriculture. The entire food and fiber system, which includes food

processing, marketing, transport and farm equipment, etc., agriculture contributes

almost $45 billion to Pennsylvania’s economy. We have over 59,000 farm families

who are the stewards of over 7.7 million acres of farmland. As you can tell from

the statistics, our farms are small by mid-west standards but our production rivals

any other major agriculture state. We have implemented a successful Agricultural

Conservation Easement Program. State government in tandem with county and

some Federal funding have helped to permanently protect over 300, 000 acres of

land and preserved 2,750 farms.

Our agriculture is diverse; while dairy predominates we are leading mushroom

growers as well as poultry and egg producers. From small organic vegetable farmers

to the equine industry, there are many agricultural opportunities in our state. A

strong agricultural economy has helped to create a healthier rural economy. This

is in no small measure a tribute to the success of past farm bill conservation efforts

such as the Conservation Reserve Enhancement Program (CREP), which has pro-
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vided a welcome boost to wildlife habitat improvement. This in turn has enhanced

tourism efforts in Pennsylvania for hunting and fishing. EQIP has provided welcome

assistance to farmers who wish to implement conservation efforts on actively productive land. The Conservation Security Program has also been a success in Pennsylvania.

There is much more to be done to help our farmers not only be productive but

to attain a sustainable farm income without degrading the natural resources that

rural as well as urban citizens depend on. farm bill policies and programs instituted

in 2007 could make the difference for the future of agriculture in Pennsylvania.

Driving to today’s hearing, I traversed the Susquehanna River Basin. I passed

through verdant farmland with plenty of creeks and rivers and woodlands. Conservation efforts to protect our soil and waterways were visible even to the untrained eye. We know however, that these practices are not once and done events.

Conservation of our natural resources must become a way of life for our farmers.

They will need adequate resources to attain the goals they and we have set for

them.

Agriculture is facing intense scrutiny from the public regarding farming practices.

The connection between farm practices and the decline of water and air quality are

very visible and noticeable to the non-farm rural and urban population. I have had

citizens request that the county not preserve land where biosolids are applied. They

associate the land application of bio-solids with air and water pollution as well as

soil contamination. They are very aware that their tax dollars are being used to support agriculture and they are demanding a role in determining how those dollars

will be spent.

Past efforts to support conservation efforts have worked well to varying degrees.

Now more than ever it is imperative that investments in conservation practices

must be increased for the sustainability of agriculture in Pennsylvania.

Here are some of the most urgent needs for consideration in the 2007 farm bill:

1. Expand conservation technical assistance efforts to farms of all sizes and types.

Each type of farming enterprise has unique impacts on the environment that can

be mitigated by appropriate best management practices.

2. Increase funding for technical assistance. Farm Service Agency, Natural Resource Conservation Service and Conservation District offices are woefully understaffed and cannot implement some of the most critical conservation programs in

a timely manner.

3. Integrate conservation programs and provide better training coordination

among Federal, state, and local agencies as well as the land-grant universities. Enhance outreach to technical service providers and independent contractors who serve

farmers. This will ensure better practices and compliance.

4. Monitor the implementation of conservation practices and document results.

Emphasize their impact on all residents not just the rural population. Encourage

small as well as large-scale practices that can make a long-term difference in resource conservation.

5. Expand the Conservation Security Program to include more critical watersheds.

If fully funded, this program has the opportunity to dramatically improve farm sustainability and natural resources in a more visible manner to the general public.

6. Enhance technical assistance for the use of biomass for fuel and energy generation from animal waste. There is opportunity for farms of all sizes throughout the

country in energy generation and we should be encouraging practices that do not

degrade the environment.

7. Fund conservation efforts for the Chesapeake Bay Watershed through the farm

bill to ensure that this critical watershed area that serves millions of people becomes a permanent effort.

Farm policy that successfully integrates modern production practices without degrading water, soil and air is imperative and possible with a firm commitment by

Congress to fully funding conservation efforts. I urge to enhance funding for conservation in the 2007 farm bill. The future of our agricultural economy and the well

being of our natural environment is dependent on us.
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REVIEW OF FEDERAL FARM POLICY

MONDAY, SEPTEMBER 18, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONSERVATION, CREDIT, RURAL DEVELOPMENT, AND RESEARCH, COMMITTEE ON AGRICULTURE, El Reno, OK.

The subcommittee met, pursuant to call, at 10:00 a.m., at the

Redlands Community College Convention Center, El Reno, OK,

Hon. Frank D. Lucas (chairman of the subcommittee) presiding.

Present: Representatives Holden and Goodlatte [ex-officio].

Staff present: Josh Maxwell, subcommittee staff director; and

Christie Birdsong.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA

Mr. LUCAS. The Subcommittee on Conservation, Credit, Rural

Development, and Research and the Federal Farm Program will

come to order.

I’d like to welcome everyone to today’s subcommittee hearing for

review of Federal farm programs. It’s a pleasure to be here in El

Reno this morning. I’d like to thank the full committee chairman,

Mr. Goodlatte, for participating in today’s hearing. In preparation

for the next farm bill, Mr. Goodlatte has led the committee in hearings all across the country. I appreciate his being here today.

I would also like to recognize the ranking member of the subcommittee, Mr. Holden, from Pennsylvania, who has sat beside me

and listened to hours of testimony and questions as the committee

works to determine the shape of the next farm bill. The Agriculture

Committee and its subcommittees are committed to reaching out to

all regions of the Nation to hear the comments and take the testimony of producers that are affected by farm policy in order to make

a record of suggested priorities and improvements for the 2007

farm bill.

Today, we’ll hear from two panels of Oklahoma producers. The

first panel will comment on all aspects of the farm bill. I look forward to hearing the producers’ thoughts on the commodity title,

and I imagine we’ll hear from several producers who might just

want to extend the current farm bill in light of the stalled WTO

negotiations.

I imagine we’ll also hear from those who would like to make

changes. That’s why hearings like this one today are so important.
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The testimony and the input that we gather will be used by the

committee to draft legislation for the next farm bill.

Our second panel will focus on conservation, a subject near and

dear to all Oklahomans. The environmental gains from conservation are very evident in this region. Farmers and ranchers, through

the assistance and incentives of these programs, have voluntarily

worked to reduce soil erosion, increase wetlands, improve water

quality, and preserve farmland and wildlife habitat. Environmental

gains that have resulted are both proof and a testament that producers themselves are truly the most dedicated conservationists.

Many of you may ask what the next farm bill will look like.

Frankly, its final shape will remain unclear until the committee

has assigned a budget next spring. While some of my colleagues

may disagree, I feel very optimistic that the funding will remain

similar to what we have had in the previous bill. The requirements

that I have laid out for today’s testimony are simple. I have asked

our witnesses to tell us what in the 2002 farm bill has worked,

what has not worked, and what their priorities are for the next

farm bill.

Before I begin, I would like to express my thanks and appreciation to Redlands Community College for use of this room and the

wonderful facilities today, and those who’ve helped to set up and

make this hearing possible, and I’d like to thank our witnesses for

having taken the time away from their farming operations to appear today before this subcommittee. I look forward to your remarks. Once again, I thank you all for being here today. With that,

I will turn to our ranking member, Mr. Holden, for any opening

statement he might offer.

OPENING STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. HOLDEN. Well, thank you, Mr. Chairman, and thank you for

inviting me to your district. It’s my first trip to Oklahoma. Mr.

Chairman, when you came to Pennsylvania, I far exceeded the 5-

minute limit on my opening statement, so I promise you, I will not

do that today. I just wanted to thank you and the chairman of the

full committee, Mr. Goodlatte, for all of the work that you’ve done

in a very, very bipartisan manner as we’ve gone around the country and held hearings and tried to, as you just mentioned, Mr.

Chairman, tried to decide what we did right, and maybe some

things we need to improve on as we write the next farm bill.

Now, when you came to Pennsylvania, you heard about the interest in the mid-Atlantic and the northeastern part of the country

where dairy is so important, and we’re concerned about the dairy

safety net. And conservation programs of the last farm bill had the

largest investment in the history of conservation, and part of that

was almost a billion dollars of farmland preservation. It’s very important in that neck of the woods, and maybe not so important in

other areas, so Mr. Chairman, I’m looking forward to hearing from

your witnesses so I can understand what’s important in the minds

of people involved in agriculture in Oklahoma and again, thank you

very much for your hospitality.
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Mr. LUCAS. Thank you, Tim. You are a classic example of why

the House Agriculture Committee is such a bipartisan group. We

may struggle with regional issues, we may struggle with budget

issues, but we do work as a team, and with that, I would like to

turn to the leader of the team, so to speak, the chairman of the full

committee, from Virginia, who has spent an incredible amount of

time on the road this year, Chairman Goodlatte.

OPENING STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF VIRGINIA

The CHAIRMAN. Thank you, Chairman Lucas. It’s a real pleasure

to be back in Oklahoma. I hate to tell you how long it’s been since

the last time I was here. I was 14 years old, so it’s been 39 years,

and it’s long overdue. I enjoyed my stay in Oklahoma City last

night, hope to get a look around a little bit later on today, and I’m

especially glad to be here with all of you.

Agriculture, as Congressman Holden indicates, is something that

requires a lot of bipartisan cooperation to write good policy, and it

is very, very important that we get this next farm bill right. The

current one is working very well for a lot of farmers, not for everybody, but for a lot, and it will be certainly something that we are

very, very mindful of as we move forward next year to write a new

farm bill.

This current farm bill expires next September 30. Some have

suggested that we continue this farm bill. There are a lot of issues

with that. One is the budget, which we’re going to have to make

sure that we have sufficient funds next year. When we wrote the

current farm bill, we were coming off one of the first budget surpluses in decades in Congress, and so tight money is certainly a

consideration.

Another is what’s going on with the international trade. We

know that some of our commodity programs, the cotton program in

particular, are now under assault. We hear that the same thing

may be true in the not-too-distant future with some of our other

major commodity programs. We have to take that into account as

well as we write a new farm bill.

But most importantly, we need to make sure that we write this

farm bill in the United States Congress with the representatives of

you, the people of America, and not in Geneva over trade negotiations. That is an absolutely critical thing. Trade talks have pretty

well collapsed right now. They could come back, and if we saw an

agreement imminent, we would certainly want to see what the

form of that agreement was, and whether or not it could pass the

Congress before we wrote the farm bill, but I don’t see that happening right now. So we’re staying on track. We’ve held probably

over 20 full committee and subcommittee field hearings across

America to listen to farmers and ranchers, and I am very pleased

that we now have the opportunity to do that right here in Oklahoma.

Congressman Lucas is a very, very valued senior member of the

committee, and I am delighted to be listening to his constituents,

because I know that we have a lot of interests in common and we

will find common ground as we write this farm bill. So I thank you
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all for your participation today. This is a great turnout and we look

forward to hearing from all the witnesses.

Mr. LUCAS. Thank you, Mr. Chairman, and with that, let’s turn

to our first panel at the table. We have Mr. Steve Kouplen, cowcalf producer from Beggs, Oklahoma; we have Scott Blubaugh, producer, from Tonkawa; Mr. Jeff Krehbeil, wheat producer, I believe,

from Hydro, as my notes read here; Mr. Danny Robbins, a cotton

producer from Altus; Les Crall, a peanut producer from Weatherford; Kenneth Rose, a sorghum producer from Keyes, Oklahoma.

And with that, Mr. Kouplen, begin whenever you’re ready.

STATEMENT OF STEVE KOUPLEN, COW-CALF PRODUCER,

BEGGS, OK

Mr. KOUPLEN. Thank you, Mr. Chairman, and good morning,

gentlemen. Welcome to the great State of Oklahoma.

My name is Steve Kouplen. I’m a cow-calf producer from Beggs,

Oklahoma, which is just south of Tulsa. I am currently serving as

president of the Oklahoma Farm Bureau, and also serve on the

board of directors of the American Farm Bureau Federation.

Mr. Chairman and members of the committee, thank you for taking the time to hold this meeting. Our Nation’s farmers and ranchers have a lot at stake in the farm bill debate, and we appreciate

your willingness to listen to our ideas and concerns.

The face of production agriculture has changed considerably

since the enactment of the 2002 farm bill. Unpredictable weather

conditions and markets, uncertainties in international trade and

input costs have formed turbulent times for farmers and ranchers.

Oklahoma producers in particular have experienced hardship this

year due to widespread drought, including severe losses in crop,

hay, and livestock production. In addition to the drought, skyrocketing fuel, fertilizer, and other energy-related inputs have

raised our production costs.

The majority of those involved in production agriculture throughout this country will tell you that their ultimate policy vision would

be a level playing field, or a chance to compete in open markets.

Farm Bureau shares this vision.

Farmers and ranchers should live in a world where they are allowed to compete in open markets without tariff barriers, without

export subsidies, without currency manipulations, and yes, without

production-distorting domestic subsidies. Most, if not all, of Oklahoma’s producers will tell you that they would prefer to get their income from the marketplace, rather than from Government payments. This ideal could become a reality if all trade barriers are

removed, and the playing field is leveled for U.S. agricultural producers.

However, we know the reality of today’s world. In order to bridge

the gap between where we are now and where we want to be in

the future will require time and transitional policies. The shortterm reality is that we will continue to need a safety net in years

that revenues decline in response to low yields and/or low prices,

combined with higher costs of doing business, which is currently

the case for many agricultural producers today.

As the focus moves to the 2007 farm bill, it is vital that Congress

and the USDA build upon the success of the current farm bill, and
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implement policies that help make the United States a place where

producers have the ability to remain in production agriculture and

expand their operations if so desired. As the average age of producers continues to rise, we need to identify ways to assist beginning

farmers and ranchers who are interested in production agriculture.

Since the World Trade Organization talks were indefinitely suspended in July, it is uncertain when the talks will resume. Farm

Bureau supports extending the current farm bill for at least 1 year,

after making minor adjustments to comply with recent WTO rulings. An extension will provide our farmers and ranchers with the

consistent support they need, given the current inequities of the

global marketplace.

The U.S. should not unilaterally disarm our farm programs or

give up negotiating opportunities when our trade partners remain

unwilling to take the same steps. We should continue to work towards an agreement in the WTO, as well as bilateral and regional

trade agreements that accomplish our objectives to free up trade.

When this is accomplished, we can modify our domestic programs

accordingly, and to the extent necessary, based on the final outcome of those WTO negotiations.

We are committed to the potential of multilateral, regional, and

bilateral trade negotiations, and strongly support the renewal of

Trade Promotion Authority when it expires in 2007. Extending

TPA will allow the executive branch to continue negotiating regional and bilateral trade agreements that benefit American agriculture until a comprehensive WTO agreement is struck that allows multilateral agreements to proceed.

Many producers are facing severe financial risk because of a significant hole that has developed in the safety net. The problem lies

in the fact that while crop insurance is a useful tool to deal with

production risks, coverage levels continue to decline in times of

multiyear drought. Since the amount of coverage depends on the

average yields of previous years, every consecutive year of drought

drives down the amount of insurance farmers can buy for their

crops.

To address the issue of supporting revenue rather than prices,

maybe consideration should be given to combining the farm program with the crop insurance program that pays producers based

on revenue shortfalls. At a minimum, crop insurance subsidy levels

need to be high enough to allow producers to purchase a higher

level of coverage.

Mr. Chairman and members of the committee, there is one more

issue other than the farm bill that I would like to mention today,

and that is the recent demotion and subsequent early retirement

of our State conservationist, Darrel Dominick. Darrel’s forced retirement was unwarranted. Darrel’s character and commitment to

working with partners in conservation was beyond reproach. Oklahoma producers and the conservation community deserve some accountability from the USDA on this issue.

Thank you again for the opportunity to share our thoughts with

you. I’ll be happy to answer any questions you may have.

[The prepared statement of Mr. Kouplen appears at the conclusion of the hearing.]
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Mr. LUCAS. Thank you, Mr. Kouplen. Mr. Blubaugh, whenever

you are ready.

STATEMENT OF SCOTT BLUBAUGH, FARMER-RANCHER,

PONCA CITY, OK

Mr. BLUBAUGH. Thank you Chairman Lucas, Chairman Goodlatte, and the committee for coming to Oklahoma to hear us today.

I am Scott Blubaugh, a fifth generation farmer from the

Tonkawa-Ponca City area where I live on a family farm that my

great grandfather homesteaded in the opening of the Cherokee

Strip. My operation consists of 1,500 acres where I grow wheat,

soybeans, corn, alfalfa, and raise cattle. To support our operation,

making cash flow, I do some custom harvesting in the local area,

and I also own an Oklahoma Farmer’s Union Mutual Insurance

Agency in Tonkawa.

As a member of the Oklahoma Farmers Union, and part of the

American Farmers and Ranchers family of companies, my activities

have allowed me many opportunities. One of those is to serve on

the board of directors of the Oklahoma Sustainable Energy LLC,

for which our objective is to build the State’s first large-scale commercial ethanol facility that will produce 55 million gallons of ethanol per year, converting approximately 20 million bushels of grain

to 55 million gallons of fuel grade ethanol.

Agriculture and renewable energy is the key to diversifying our

energy markets, creating new economic opportunities for rural

America. Congress should continue to expand and accelerate renewable energy opportunities through tax credits, research, established standards, biofuel storage and reserves. We support the continuation of title 9 farm bill provisions of renewable energy.

Thank you, Congressman Lucas, for securing the Value Added

grants for which the ethanol project and the State’s oil seek project

would not have happened and would not have gone forward without. We believe that renewed authorization of this grand program

should be included in the new farm bill. Projects resulting from

these grants create jobs and add additional dollars into our rural

communities.

We also believe extending the current farm bill; that the Farm

Securities Investment Act in 2002 will ensure the continuation

without reductions of our economic safety net and other vital programs. We will continue to oppose any further reductions in the

farm bill programs. Higher than normal grain prices during this

farm bill have showed a savings of over $15 billion because of the

reduced countercyclical payments.

However, we are now faced with cutting the advanced 2007 and

the payments to 22 percent could not have come at a worse time

for our State’s producers, who are already burdened with wildfire

and drought. This action is creating anxiety within the banking

community. One of the State’s top agriculture attorneys reports

record numbers of producers seeking financial restructuring options.

We’re also faced with extraordinary rising cost of production in

the fuel petroleum products, such as fertilizer and diesel, yet adding another burden to rural America. Oklahoma farmers and

ranchers have experienced overwhelming losses from weather-re-
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lated disasters in 2005 and 2006. Producers have little to no wheat

pasture for their stock or cattle. Cattle herds have been either reduced in the State or totally sold off because of the lack of water,

grass, and hay. The State’s wheat crop yielded 45 percent of its

normal level this year.

Producers must have protection from natural disasters. The next

farm bill should include a permanent disaster program which does

not rely upon ad hoc assistance based on the political climate and

would provide immediate assistance in times of drought. Such authority has existed before, utilizing the Commodity Credit Corporation and budgeted finance. Congress would then retrospectively

fund the CCC annually, based upon its disaster expenses incurred

during that year.

It is important to note that under the current farm bill, the countercyclical payments have basically been a nonoccurrence in Oklahoma for wheat producers, so the recent acceleration of countercyclical payments did not assist wheat producers since there was

not a payment made.

Thank you again for coming to Oklahoma, and I hope you will

carry the message back that we like the current farm bill, just with

some changes. Thank you.

[The prepared statement of Mr. Blubaugh appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Scott. Mr. Krehbeil.

STATEMENT OF JEFF KREHBEIL, WHEAT PRODUCER, HYDRO,

OK

Mr. KREHBEIL. Mr. Chairman, members of the committee, my

name is Jeff Krehbeil. I am a wheat producer from Hydro, Oklahoma, currently president of the Oklahoma Wheat Growers Association and serve on the Domestic Policy Committee for NAWG.

Thank you for the opportunity to share the thoughts of the growers

I represent on farm policy.

Effective farm legislation is essential, not only for wheat growers,

but also rural economies and American consumers. Farm programs

were designed to ensure a consistently safe, affordable, and abundant food supply for the American people. The 2002 farm bill has

strong points, and we believe the next farm bill should build on

these strengths. However, while wheat growers generally support

current policy, much of the safety net provided by the 2002 bill has

not been effective for wheat farmers.

Since 2002, two key components of the current bill, the countercyclical program and the loan deficiency payment program, have

provided little or no benefit to wheat producers for two main reasons. First, severe weather conditions for several consecutive years

has led to significantly lower yields or total failure. The loan program and the LDP are useless when you have no crop.

Second, the target price on the countercyclical program for wheat

was set considerably lower than market conditions indicated, and

severe weather conditions in some areas have created a short crop

which has led to a higher price in other areas. As a result, there’s

been very little support in the form of a countercyclical payment.

As you can see by the chart in my testimony, the support level

for wheat compared to other commodities for the 2002 through
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2005 crop years, even as a percentage of production cost, is relatively low. Government payments cover about 10 percent of production costs for a wheat producer, while some commodities have

over 50 percent of their production costs covered by Government

payments.

We are not, in any way, suggesting that the other crops receive

too much support—far from it. They have the same problems our

growers face, and rely heavily on the safety net. We are simply

stating that wheat producers need a viable safety net, also. There

is no doubt the American farmers would rather depend on the markets than the Government for their livelihood, but the current

economy, the current economic and trade environments, do not

offer a level playing field in the global marketplace. Many of our

trading partners support their farmers at a much higher rate than

in the United States.

At the same time, we face continually increasing production and

transportation costs. Fuel and fertilizer prices are up an estimated

24 to 27 percent just over last year. In 2002, when the current

farm bill went into effect, I spent just over $49,000 for fuel and fertilizer on my operation. In 2006, for the same number of tillable

acres, my fuel and fertilizer costs will exceed $109,000. This 222

percent increase in the two major inputs for wheat production during the life of the current farm bill has left many of producers I

represent struggling to survive.

While we understand that there are likely to be economic impacts from any change in the current program, we believe that

wheat growers need an adequate safety net. We are currently examining the impacts, both to the farmers and to the Federal budget, if the safety net for wheat was more in line with the safety net

for other commodities.

One option we are currently considering is a proposal to increase

the direct payment and increase the target price to more accurately

reflect market conditions. We believe these two programs are the

least trade-distorting, and therefore offer the best opportunities to

provide support for our members. I expect NAWG’s full board will

finalize a 2007 farm bill proposal soon, and we’ll share that with

you when it is complete.

Wheat growers would like to see conservation programs continue

as presently authorized, but with full funding. We would also like

to explore opportunities to streamline program sign-up to be less

time consuming and more producer-friendly. Another area of interest to our members is the pursuit of renewable energy from agriculture sources, and support for additional incentives for future research and development of renewable energy initiatives, especially

cellulose ethanol.

In closing, I must state that we are firmly committed to developing an effective 2007 farm bill, and welcome the opportunity to

work with you to do so.

Thank you for this opportunity. I am ready to answer questions

that you may have.

[The prepared statement of Mr. Krehbeil appears at the conclusion of the hearing.]

Mr. LUCAS. Let’s turn to Mr. Robbins now.
141

STATEMENT OF DANNY ROBBINS, COTTON PRODUCER, ALTUS,

OK

Mr. ROBBINS. Mr. Chairman, thank you for holding this hearing

and for providing me the opportunity to present testimony on current and future farm policy.

My name is Danny Robbins. I am a fourth generation cotton, cattle, and wheat farmer in southwest Oklahoma. I am active in a

number of national and local farm and commodity organizations.

Before I comment on future farm policy, I want to quickly mention current conditions in our area. As you know, severe drought

conditions have and will cause significant financial losses. Over 71

percent of the cotton acreage in Oklahoma has been classified as

abandoned, or in poor to very poor conditions. Those who will be

fortunate enough to harvest a crop will incur inordinately high energy and input costs. I respectfully urge you to continue to work

with your colleagues to improve much needed disaster legislation.

Mr. Chairman, we believe that the current farm law has and continues to provide a stable and effective national farm policy for our

country. The combination of direct and countercyclical payments

will provide an effective means of income support, especially when

prices are low, without distorting planting decisions. The direct

payment provides financial stability required by our lenders and

suppliers. I believe it’s important to maintain such a balance.

The cotton industry strongly supports the continuation of marketing loan, which responds to low prices. It does not cause low

prices. It ensures that the U.S. cotton farmers are not the residual

suppliers in the world markets because they are unable to compete

with the treasuries of foreign governments.

It is also critical that all production remain eligible for the marketing loan. Arbitrary limits signal our competitors that we are

going to be competitive on only a portion of our production, and

this is an invitation for others to increase their production. Sound

farm policy is of little value to the cotton industry if arbitrary unworkable payment limits are placed on benefits. We believe limitations on benefits should be eliminated. At the very least, limitations in future laws should not be more restrictive or disruptive

than they currently are.

There are many misconceptions about what defines a farm. USDA’s definition includes anyone grossing over $1,000 per year in

agricultural receipts as a farm. Mr. Chairman, you, and anyone

else who really understands production agriculture, knows this

does not describe a commercially-sized viable operation. The facts

are that 21 percent of farms in the U.S. gross over $50,000 a year

in net farm sales, and this accounts for 94 percent of all agricultural sales. The other 6 percent of agriculture sales come from the

remaining 79 percent of farms that have sales close to $50,000.

Commercial agriculture has had to expand just like any other

business to remain viable. Consequently, limitations on benefits established based on invalid assumptions will severely penalize those

who produce the majority of our food and our fiber. Conservation

programs are an important component of an effective farm policy,

but they are not a substitute for the safety net provided by commodity programs. Conservation programs should be operated on a

voluntary, cost-share basis.
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The U.S. cotton industry understands the value of benefits of effective domestic and international promotion programs. In addition

to being original and continuous participants in the USDA’s foreign

market development and market access programs, growers finance

a very successful promotion program through a self-assessment,

check-off program.

Mr. Chairman, we are deeply concerned that the Doha negotiations are turning against U.S. agriculture in general, and against

U.S. cotton in particular. Our partners demand more U.S. concessions while refusing to provide adequate market access. Worse,

China, the largest cotton market in the world, wants to be exempt

from any further market access commitments by declaring herself

as a developing country.

I also want to emphasize an agreement that singles out U.S. cotton for inequitable treatment will not be accepted by U.S. cotton

producers. We applaud our negotiator’s decision to walk away from

a bad deal last July. We commend you and your colleagues for providing the support necessary to allow them to reject an inequitable

agreement. The cotton industry is prepared to work with all interests to develop and support continuation of a balanced and effective

policy for all of U.S. agriculture.

The 2007 farm bill will be a challenge. Farm organizations, commodity and livestock groups, specialty crops, and conservation

groups must work together to maintain effective farm policy. Production agriculture is critical to our economy and our Nation.

Thank you for the opportunity to testify today, and I will pleased

to respond to any questions. Thank you.

[The prepared statement of Mr. Robbins appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Danny. Mr. Crall.

STATEMENT OF LES CRALL, PEANUT PRODUCER,

WEATHERFORD, OK

Mr. CRALL. Congressman Lucas, always good to see you. Congressman Goodlatte, welcome back to Oklahoma. Congressman

Holden, welcome to Oklahoma.

I’m Les Crall. I’m a peanut producer from Weatherford, Oklahoma, about an hour west of here, recently appointed by our Governor, Brad Henry, to my second term on the Peanut Commission.

During my first term, I served as the commission’s vice chair. I am

joined here today by my fellow commissioners and staff, as well as

a number of peanut producers from across the State. We appreciate

your time and thank you for conducting this hearing in our State.

I’m proud to be an owner-operator of a fourth generation farming

operation in Custer County with my dad and brother. We farm

wheat, grain sorghum, hay, cattle, and of course, peanuts. I like to

say I work for peanuts. As with all Oklahoma farmers, Federal

farm legislation in its proper implementation and management is

critical to our livelihood. I’m here today specifically to speak to the

2002 farm legislation and its effect on the Oklahoma peanut producers.

As you know, the peanut provision of the 2002 farm bill was a

drastic departure from the supply management programs authorized by Congress and administered by the USDA during the pre-
143

vious four decades of farm legislation. Replacement policy ushered

in a marketing loan system for peanuts. The question is, is the

marketing loan working after 5 years? Well, large Government loan

forfeitures and huge price-depressing stocks should answer that

question.

In response, faced with no market and questionable opportunities

for little product, producers across the country this year have reduced plantings by 30 percent. In Oklahoma, we have the smallest

planted acreage since 1927.

Our neighbor, Texas, which is the Nation’s second-largest producer, cut back their acreage by 42 percent. In some industries, you

would say we are a shell of what you once were. In our industry,

we are a peanut hull of what we once were.

The program is not working. Without corrections, the U.S. peanut industry is headed for a train wreck. Price discovery is a problem. Congress needs to fix it. Unlike wheat and feed grains, peanuts do not have adequate price discovery system. There are no

peanut futures markets, no daily market reports, no accurate or

transparent method of price discovery. In fact, since the bill came

along, every segment of the industry has been critical of USDA’s

rule in establishing the national posted price and resulting loan repayment rate.

Accurate crop tracking is absent. Congress should reinstate what

we call the Smart-Card. USDA scrapped the use of Smart-Card

technology to track certified planted and harvested acres, actual

production records by farm reflecting the peanut type, grade, and

value, and the disposal of the crop. Without it, no accurate records

are available and important statistics are subject to industry survey.

Peanut handling and storage provisions for handlers expired in

August of 2007. Congress should extend the payment for the 2007

crop and the duration of the next farm bill. This provision was designed to protect the producer from these related costs. Should the

producer be forced to bear that burden, the net result would be a

$300 per-ton peanut and the end of peanut production in Oklahoma.

Peanut limitations should not be changed. The less understood

and often debated the fact is, USDA payments are based upon an

equitable risk per unit, no matter the size of the operation. Everyone receives the same payment per acre or unit. The fact that a

family farm is incorporated for tax management or other reasons

should not be a basis for a penalty.

Congress should consider an annual target price cost of production adjustment. Previous peanut provisions provided for an up and

down adjustment, based upon the annual review of the cost of fuel,

fertilizer, pest control, and other inputs. I’d like to refer you to my

written testimony for some more specific information and details

concerning recommendations for the current and future farm legislation.

I also want to thank the subcommittee on behalf of the Oklahoma Peanut Commission and the State’s peanut producers for

your time in the development of an improved Peanut Program.

Thank you.
144

[The prepared statement of Mr. Crall appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you, Les. Mr. Rose.

STATEMENT OF KENNETH ROSE, SORGHUM PRODUCER,

KEYES, OK

Mr. ROSE. I want to thank you, Chairman Lucas, and Chairman

Goodlatte for coming to Oklahoma, and the members of subcommittee, for your presence here, and for the opportunity to present my

priorities for the next farm bill.

My name is Kenneth Rose and I farm near Keyes, Oklahoma, in

the Oklahoma panhandle, and I am president of the Oklahoma Sorghum Producers and past president of the National Sorghum Producers. I raise dry-land sorghum and wheat and on my farm, and

have cow-calf operation on our grassland, and am the fourth generation to farm our land.

Next year, our farm will be a centennial farm just as Oklahoma

will celebrate its centennial.

This year has been a very trying year in my part of the country.

Up until the middle of August, we had 61⁄2inches of rain in the last

13 months, which is drier than any year during the Dust Bowl

1930’s or the 1950’s. Rain since then came too late to have not been

much benefit to drought-stunted sorghum crop, although our grassland has recovered nicely. Normally, I can count on sorghum for a

crop in the dry years, but this year has certainly been extreme.

I’d like to discuss the title 1 commodity program. Our sorghum

producers have been strong supporters of the 2002 farm bill, due

to the equitable treatment given sorghum producers relative to

other feed grains. We favor extension of the current bill. If a WTO

agreement requires a change to our farm programs, or a new farm

bill replacing our current farm legislation, maintaining equitable

direct payments and loan rates are high priorities.

Most of the sorghum grown in the region is in the High Plains

area. Due to the extreme weather conditions that our farms are

vulnerable to, on my own farm, I would like to see more emphasis

placed on well-funded and policed disaster provisions that would

supplement the limited safety net that crop insurance provides.

During WTO discussions, there was a lot of talk about what a

green box farm proposal would look like and how it would operate.

This task has been more difficult than we anticipated, since the

program cannot be based on price or production. Because of that

fact, we ask that any new programs that may be developed or discussed to replace the current commodity title be thoroughly reviewed with the agriculture industry, and that we fully understand

the implications of any potential WTO agreement.

On the title 2 conservation issues, because of WTO issues, more

emphasis may be placed on conservation funding in farm policy discussions. However, Oklahoma sorghum producers would be very

anxious about switching from our current commodity-based farm

programs and farm policy to a completely green policy, if that new

program were to be administered similar to the current Conservation Security Program. Our Oklahoma membership is frustrated

with the operation of that program in the State. Only a few Oklahoma farmers have even been allowed to apply for the conservation
145

programs under CSP because of limited geographical areas that are

approved, and only a few applicants have been accepted. Our members feel strongly that serious problems exist with this program.

Their first concern is that the agency started funding the top tier

of the programs and focused the programs on what looked like an

all-or-nothing concept. Either farmers qualified for all tiers, or he

was not in the program at all. The CSP tiers need to be designed

to meet the dynamic management needs of individual farms, and

maintain a degree of flexibility to meet the needs of those farms.

A CSP-type program can be an important part of farm policy; however, the rules of the current program and the implementation are

causing a significant amount of frustration among our membership.

Conservation programs must be flexible enough to meet the diverse

needs of different cropping systems and climatic conditions.

We all know that water use is definitely increasing and the national sorghum producers applaud this committee and the last farm

bill for giving serious consideration to the future of water supplies

in our semi-arid regions that are highly dependent upon grain sorghum by creating the Ground and Surface Water Conservation Program as a part of EQIP.

Sorghum is known as a water-sipping crop. According to research

conducted at USDA, the ARS Research Facility in Bushland, Texas,

sorghum uses approximately one-third less water than either corn

or soybeans, and 15 percent less water than wheat. It is a crop that

is well adapted to our semi-arid regions. Because of its excellent

drought tolerance and varied uses, sorghum is a viable option for

our producers in the Plains States. We support conservation programs that encourage the planting of low water-use crops based on

decisions that are environmentally sustainable and market-driven.

Overall, we believe that Congress and USDA need to emphasize

water quantity as part of water management in both current and

future conservation programs.

Last, but perhaps most important of all, ethanol production is

the fastest growing value-added market for the sorghum industry.

Producers are working to attract ethanol plants to our areas because it increases the local price. Sorghum is a good fit for ethanol

production because one bushel of sorghum produces the same

amount of ethanol as one bushel of corn.

In conclusion, you certainly have a challenge rewriting our Nation’s farm laws. The sorghum industry will work with you, Congressman Lucas, as you develop new farm programs. Thank you for

your time, and I’m happy to answer questions.

[The prepared statement of Mr. Rose appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you, Kenneth. Now, it turns to the part of the

process to discuss some questions.

Mr. Blubaugh, the Agriculture Committee went to Minnesota a

few weeks ago, and one of the fascinating things that I took away

from that was a producer who said that he now based his decision

in Minnesota on whether to raise soybeans and corn on which market was best for biodiesel or ethanol. He owns shares in both an

ethanol and a biodiesel plant, and he planted his crop based on

which facility had the best return as a participant, as well as producer selling.
146

Can you give us some insights into what you are going through

in the process of creating this ethanol opportunity in Oklahoma,

and do you see something like that maybe in Oklahoma eventually.

Mr. BLUBAUGH. Well, the Oklahoma Sustainable Energy LLC

has been offering stock for sale the last 45 days or so for the ethanol plant, and I believe we’re going to start breaking ground October 1 in Enid, building that facility. So it has been a very long

process. It’s taken a lot of time, and without the USDA Value

Added grant, we would not be able to have gotten to this point because it takes so much money up front just to do the research, and

the feasibility study, and the business plan, and the attorneys, and

all that goes into creating this, but I feel like we will have some

of the acres converted into bioproduction in the area because you

will have an added market because of this ethanol plant.

The milo is well-fitted for our area, like Mr. Rose spoke about,

that requires less water, and we believe much of our acreage will

be converted into milo because of the higher prices the ethanol

plant will pay for the grain.

Plus, we are going to create new jobs in the community, and also,

the farmers get the benefit from the thing on the other end, as actually being an owner, a stock owner, in the thing. So they get a

higher price of the grain, plus we believe the plant will be significantly profitable in order to return money to the farmers in the

form of their equity.

Mr. LUCAS. Along that line, Kenneth, I think we’d all like to hope

that the weather pattern between October of last fall and August

1 of this year is an anomaly, not another 1950’s or 1930’s. Only

time will tell. Do you think, from the perspective of sorghum producers, can we sustain the volume of grain necessary to run that,

what, two plants in Oklahoma on the way, maybe more? Can we

generate enough grain to maintain those kind of facilities, thinking

about sorghum as one of those prime fuel crops.

Mr. ROSE. In our panhandle area for sure the—our area’s deficit

in the feed grains already—there can certainly be a lot of acres

that will, as he said, switch to sorghum or possibly corn. But as

a national organization, what we have seen in other areas, other

plants, is the need to have good rail facilities to bring in feed

grains, starch sources, when there’s not enough grown locally and

that really puts the emphasis on our need for transportation facilities in the United States. Our rail system is overloaded as it is, and

some ethanol facilities that were proposed had problems getting

rail to agree to even ship the ethanol out once the product is made.

Mr. LUCAS. Speaking of that, let’s talk for a moment about flexibility and let’s talk about CSP. One of the issues that’s come up

time and time again in our hearings across the country is that if

the renewable energy takes off with the potential that it has, biodiesel ethanol, will there be enough grain to meet our livestock

feeding obligations, feed our customers around the world, and yet

to produce enough energy.

My response has typically been, we have 36 million acres of CRP,

not all of that land perhaps should have been in there in the first

place, or should 20 years still be there. We many need to maintain

flexibility in enabling acres to come out of that.
147

Let me put that question to the panel as a whole. One, and from

your producer perspective and the experiences of the folks you

work with in the agricultural industry, has the flexibility been generally a good thing in the last two farm bills? If so, do you agree

that flexibility is important in programs like CRP so that we can

meet our obligations for both renewable energy and feed the world?

Mr. BLUBAUGH. Yes.

Mr. LUCAS. It’s a real good time to say so.

Mr. BLUBAUGH. I live in Kay County, and our cropping has really

changed a lot with the new farm bill. Used to be, all we hear was

wheat. One the problems is our basis, and our payment anchors,

and everything are based on wheat, so it penalizes us somewhat

with these new crops, but we’ve been able to grow corn and soybeans and crops for the very first time in our county that haven’t

been done before, so the flexibility is very much so needed.

Mr. LUCAS. So you agree with some of what Jeff brought up

about the financial issues.

Mr. BLUBAUGH. Yes. Absolutely.

Mr. LUCAS. With that, I’d like to turn to my ranking member,

Mr. Holden, from Pennsylvania.

Mr. HOLDEN. Well, thank you, Mr. Chairman. Several members

of the panel talked about the disaster that Oklahomans are facing.

The chairman of the full committee, talking to reporters outside,

addressed that we’re going to try to take care of this. The entire

country is not facing disaster problems at this time, so we’re trying

to find a balance, hopefully before we leave for the recess before the

election, or the session afterwards. But saying that, somebody, I believe it was Mr. Blubaugh, mentioned the need for a permanent

disaster program in the next farm bill. I was just curious if the

other members of the panel agree with that.

Mr. ROSE. Yes, Mr. Holden, I certainly do. The sorghum producers do. One of the problems that we face as production falls because of natural disasters, prices go up, so we benefit not at all

from the countercyclical prices, and we feel like maybe some of the

money from the countercyclical program could be used to help fund

a disaster program. It’s when we have the real disasters that our

income falls short.

Mr. KOUPLEN. Yes, I’d like to say that disaster assistance is a

real issue to agriculture. When the hurricanes hit, I think that $4

billion was provided to those producers along the coast where they

were affected by the hurricanes. Those of us involved in the

drought, and up to 60 percent of the country has been involved in

this drought, and some of us even longer than we’ve experienced

here in Oklahoma, so there is definitely a need for drought assistance on an ad hoc basis.

Now, if you build that into the farm bill, it would be great, but

I think the realization should exist that Mother Nature is something that none of us can control and no matter how much flexibility we have, we have to deal with the conditions that we’re dealt,

and so in respect to a disaster and any disaster assistance that’s

forthcoming, I think the drought that has presented itself to us in

the past 18 months, and the rest of the country, is much deserving

of assistance of some nature.
148

Mr. KREHBEIL. I think the wheat producers would be in favor of

something like that, but what we would be very concerned about

is, if money would be made available for disaster assistance, we do

not want that money to come from our commodity title; it would

need to be new money. Just to rob from the commodity title to

make a disaster program would not be beneficial to producers and

that would be our biggest concern.

Mr. HOLDEN. Well, you just hit the nail on the head with the

money. We just had a very good conversation about energy and the

two chairmen here with me were up in Ranking Member Peterson’s

district in Minnesota, and we learned an awful lot about energy.

I hear about some exciting opportunities here in Oklahoma. In my

district of Pennsylvania, we have a proposed ethanol plant. We already have an agrodiesel plant in operation in my district with soybean as a feed stock.

So we have tremendous opportunities, but there is only going to

be so much money on the table, and I was just curious as to any

suggestions. There’s not going to be an endless amount of billions

of dollars of newfound money. Any suggestions where we can try

to have a more robust energy title, where we can find some extra

funds.

Mr. KREHBEIL. National Association of Wheat Growers is looking

into that and they have currently got some proposals to see where

that money may come from. My proposal is included raising target

prices and raising direct monies to producers.

To be able to say yes, we know where the money’s going to come

from, no, we don’t, but we are trying to find that money, and I’m

not sure—there is about one-half of 1 percent of the total budget

comes, total farm bill, comes out of the congressional budget. In

other words, one-half of 1 percent is all the farm bill takes of the

total budget.

That includes all of your WIC payments for your women, infants,

and children. It also includes the food stamp program. That’s a

small, very small, portion of the pie, and as a producer who has

seen input costs increase drastically, who has seen drought come

in, has seen wildfire, I’m concerned that we always have to look

within ourselves to find money to support agriculture.

Mr. KOUPLEN. One issue—they’re really not in the farm bill, but

as far as ethanol goes, I’m concerned that some of the tariffs on the

imported ethanol could be dropped because of price, and that is a

big concern of ethanol producers in this country.

I mean, price is a major driving factor in the production of ethanol, and I was in China a couple of years ago, and they’re a corn

country. They’re in the process of building two or three ethanol

plants, and we know that they’re probably going to be in the market of exporting that, so we certainly would like to protect our ethanol industry by making sure these tariffs are not removed to expedite lower costs in the short term, and allow the industry to continue to grow and mature.

Mr. HOLDEN. Thank you. Time has expired, Mr. Chairman.

Mr. LUCAS. The chair now turns to the chairman.

The CHAIRMAN. Thank you, Mr. Chairman. First, let me ask each

one of you as—go right down the line, start with you, Mr. Rose—

how would you rank the relative importance of direct payment, the
149

marketing loan, and the countercyclical payment, as components of

our commodity program? Which provides the greatest safety net for

producers?

Mr. ROSE. Thank you, Mr. Chairman. The direct payment is

probably the most valuable. It’s a payment we can depend on.

The CHAIRMAN. Mr. Crall.

Mr. CRALL. I would tend to agree. The direct payment, you’re

going to get that regardless, but it’s based upon historical production, and we were talking about the disaster safety net. That’s one

of the big problems with the current bill. If you don’t grow anything because you’ve had a crop failure, or you grow a very minimal crop, then your loan deficiency payments—you don’t have any

commodity to put into loan, and then if you have a great crop in

another region of the country, and your price is based upon supply

and demand, and there’s plenty of supply—the worst thing that can

happen to us in Oklahoma is we don’t have a crop and then another region of the country has a really good crop, because then the

market price as farmers is based upon supply and demand and has

no relationship to our cost.

We are cost takers. When we go into the local elevator to buy fertilizer or fuel, they tell us what our price is.

We can’t go into the elevator and say, OK, my cost of production for this is $400 a ton for peanuts. We take whatever the market

will give.

The CHAIRMAN. Let me go on to Mr. Robbins.

Mr. ROBBINS. Yes, sir, personally, how it affects me, the marketing loan would be No. 1 for me that I had to have. Second would

be the direct payments, and countercyclical would be third, for

some of the same reasons that the members have said here today.

The CHAIRMAN. Mr. Krehbeil.

Mr. KREHBEIL. First would be the direct payment, and then the

countercyclical, and then the penalty fee.

The CHAIRMAN. Mr. Blubaugh.

Mr. BLUBAUGH. I would agree with that. First and foremost, the

direct payment, then the countercyclical, and then the penalty fee.

Yes.

Mr. KOUPLEN. I’ll have to ditto with my fellow members.

The CHAIRMAN. So we have direct payment for all but one that

refers to the LDP payment. Outside of the current commodity programs, are there new ideas that you can share with us that we

should consider to provide a better safety net for producers? Start

with you, Mr. Kouplen.

Mr. KOUPLEN. Well, I think the whole ball game revolves around

risk management for producers. I think there’s some programs out

there dealing with some of these. I think probably we could give

some consideration to how they work. Whole farm revenue insurance programs may be something we need to look at.

I mentioned somewhat about crop insurance. I think crop insurance philosophically is a great idea; practically, it just hasn’t

worked real well. The term ‘‘insurance’’ is really a misnomer for

crop insurance, because the fact is without the Federal Government’s subsidization of up to 85 percent, it wouldn’t be viable at

all. You’ve got to keep producer’s part at a point where they can

afford to purchase it.
150

So, I mean, crop insurance needs to be evaluated and we either

need to do it right or not do it at all, in my opinion, and I think

we really had some areas dealing with crop insurance that needs

to be addressed and so hopefully that whole area would be studied

a little bit and maybe some changes made in that area.

The CHAIRMAN. Mr. Blubaugh.

Mr. BLUBAUGH. I also have some criticism of the crop insurance

program. It helps you if you have a total wipeout; in other words,

you harvest nothing. But if you have a half a crop or a quarter of

a crop, it helps you very little, because of the insurability of the

crop. And then if you harvest a little bit, why, what usually happens is the producer ends up getting credit for—his premium that

he owes the crop insurance company is taken off and the producer

gets little or no compensation at all, if you have a half a crop or

reduced crop. So I have a lot of problems with the crop insurance

program, as well.

Mr. KREHBEIL. There has been some proposals out there for target revenue system, and we growers have looked at those proposals

and have not really seen one that was viable for our industry, we

felt. However, we are open to suggestions about the target revenue

system. What we’ve seen so far is that it would cost more money

and probably not provide any more support than what we’re currently getting.

There’s also been some talk of a risk management account that

would be an account an individual producer could put in a local

bank and the Government would help match that money, and he

could use that money in case of a disaster to help cover expenses

and what have you. It’s in the process of being kicked around and

we don’t know where it’s going, but that’s two ideas that have come

up.

Mr. ROBBINS. I would have to reiterate what these other gentlemen have said, that the crop insurance system has some fatal

flaws, in my opinion. I insure my cotton crop and wheat crop for

65 percent of my average, whatever average is in Oklahoma, and

I can think of no other industry that’s in business that only insures

65 percent of their inventory or their proceeds. I would like to see

some type of system set up where you could get a revenue-type

product.

Right now, with the biotechnology, a majority of my costs are incurred the day I put the seed in the ground. When I came home

from college, I could buy a bag of cotton seed for $18 a bag. It costs

me $245 a bag, and I’m not that old, sir. I came home from college

in 1987. Thank you.

Mr. CRALL. I think a possible suggestion would be that the target

price should have some way to adjust it during the life of the farm

bill, and instead of being fixed in stone, I think any adjustments

should be related to our costs. I think with risk management, crop

insurance should not be based upon historical production, it ought

to be based upon what cost you have in that crop.

Take the example—you wouldn’t buy a brand new car and insure

it for what your old car was worth. Well, that’s what we’re doing

in crop insurance. We’re insuring it based upon what we grew last

time, so that’s two areas.
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The other is Smart-Cards for peanuts. I think we were the envy

of all the commodities. We would go in to the FSA office, we’d get

a credit card that had a computer chip in it, and we would take

that through the buying points, whenever we harvested peanuts.

And they already have the computers the software and everything

they need to make it work, and it’s an inexpensive, low-cost way

to track production.

Mr. ROSE. Mr. Chairman, would you drive your wife’s car on the

streets of Washington, DC with only two-thirds of insurance coverage and the bottom two-thirds only being covered.

The CHAIRMAN. I might if the Government were paying for part

of the cost of the insurance.

Mr. ROSE. Part of the problem is that in no case has the insurance coverage ever covered the cost of production.

The CHAIRMAN. I understand that, I’m not saying that we

shouldn’t make dramatic changes in crop insurance. I would like to

see it done. I would like to see it cover a lot more crops than it

covers today, and I’d like to see it cover a lot of stuff that it doesn’t

cover today, but you’ll also have to remember that the purpose of

the crop insurance is not to make you whole; the purpose is to

allow you to survive, and be able to continue to operate in the next

year, and hope that next year is going to be a much better year,

and you’re going to make back all that things you didn’t do in the

bad year.

Now, whether that policy works when you have several years in

a row of bad crops is, I think, a fundamental part of the problem.

But yes, we would like to improve the crop insurance program. If

we could make you more whole as a part of that, we certainly can

do it, but there have also been comments here, don’t take the

money to do that from the other programs. We’ve got a limited

amount of resources, and we are going to have to fight very hard

in a bipartisan fashion early next year to make sure that agriculture is treated fairly, and to get as much money as it possibly

can. Then we can make some of these decisions.

But if we are talking about a comparable amount of money that

we have this time, or even less, then those decisions are very

tough, and it will involve taking money from some other part of agriculture.

So in that regard, my last question, Mr. Chairman, if you will

forebear, since there are only three of us, maybe we can take a little extra time, I’d like to ask each of you: You’re aware of the demands from some other sectors of agriculture that do not participate in the major commodity programs today—and we’re talking

about fruits and vegetable folks, talking about livestock folks, we’re

talking about people who want to see more money spent on conservation, a whole host of other things—how do you respond to

those who say they think they should have a greater share of the

agricultural pie, relative to those who are able to participate in

these major commodity programs, knowing that to expand some of

those other programs, we’d have to reduce something? Mr. Rose,

start with you.

Mr. ROSE. Thank you, Mr. Chairman. There are certainly risks

in every part of agriculture, and I recognize the risk that some of

the other commodity groups face, and they, I’m sure, are going to
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be at the table. There needs to be some degree of recognition of

those needs.

The CHAIRMAN. Mr. Crall.

Mr. CRALL. I’d say Congressman, you’ve got your work cut out

for you. I’ve got a friend back here that teaches economics, and he

says we have unlimited wants, but limited demands, and I think

that there will have to be probably some compromises reached on

some of these agreements, and I fully believe you guys will do the

best that you can.

Mr. ROBBINS. I recognize that other people have something to

complain about possibly, but I think we should recognize two facts:

The direct payments are not the only means of support, in supporting agriculture here in the U.S., and direct payments to the producer of the commodity also has a trickle-down effect that offers

benefits to other segments of agriculture.

There are import barriers and tariffs that are enacted when

prices reach certain levels that protect some of the other people

that want to weigh in at the table, and I welcome them, as long

I have the opportunity to grow the crops that they’re growing,

which I’m restricted from at this point.

The CHAIRMAN. Well, that’s a good point, and also it should be

pointed out, and agriculture doesn’t do enough of this, but when we

have programs like our commodity programs that encourage the

production of an abundant supply of resources, which has a tendency to make the price more affordable for the consumer, who has

a close relationship with the taxpayer—they’re one in the same—

they benefit from that because they get an abundant and more affordable supply of food. Mr. Krehbeil.

Mr. KREHBEIL. Sounds like Mr. Robbins’ answer was pretty good.

I think I’ll just follow him.

The CHAIRMAN. Mr. Blubaugh.

Mr. BLUBAUGH. I think in Oklahoma, our share of the direct payments, I guess you would say, is very small compared to the Midwest Corn Belt where they’re able to get the LDP’s and they’re able

to get the countercyclical payments. Our part in Oklahoma is so

small, I don’t know that there’s anything left to cut here in our

State, because we have such few dollars actually going to our producers here, mainly because we’re using the old wheat basis for figuring that revenue.

The CHAIRMAN. Let me ask you a follow-up to that, because that

area of the country you just named to the north of here is producing more and more of those, particularly corn and soybeans, but

other commodities, sorghum and so on, can move in the direction

of producing energy.

Do you think that that significant shift and increase in demand

if it needed is sustained, will reduce the need for some of these

payments? I don’t mean eliminate the program, but that the payments will be, on a historic average, less because of that new

source of supply that should drive up the price.

Mr. BLUBAUGH. Well, I hope so, I hope so. I hope that the need

for the ethanol and the biofuels will drive up the prices where

maybe we don’t need the level of support. I hope that comes, but

we’re not there at this point.
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The CHAIRMAN. I guess here in Oklahoma, $65 a barrel oil isn’t

all that popular. Depends on who you are and where you live.

Mr. LUCAS. Exactly.

The CHAIRMAN. Mr. Kouplen.

Mr. KOUPLEN. Going back to the original question, the fruit and

vegetable people, in Farm Bureau, we’ve long had the issue of fruit

and vegetable people wanting to be a part of the program, but to

be honest with you, Congressman, I think at this time, the fruit

and vegetable growers are more concerned about labor and the

issue of immigration and how it will affect them than they are with

the commodity programs.

I think they’re real concerned about how this whole issue could

affect them, as far as getting the labor they need to grow, or gather, their crops.

I think they’re just like us. They have a multitude of problems,

and at this time, the commodity program probably is not the highest thing on their priority list.

The CHAIRMAN. Well, actually, we’ve been to California, we’ve

heard from witnesses in Michigan, and other places as well, who

are not asking to participate in a program similar to the commodity

programs that corn, and soybeans, and wheat, rice, peanuts, and

some others have, but they are interested in help with value added,

they are interested in help with research, they are interested in

help with marketing, and so, while those are not as substantial,

there’s definitely a major push going on with those groups to try

to be treated to a greater participation in the next farm bill.

Mr. KOUPLEN. I think they do have a greater opportunity to be

part of a collaboration on their crop, because there are fewer of

them, the growers in that area, than there are some of the commodity programs, so I think those areas—I can see their need for

assistance, then.

Mr. LUCAS. With that, the Chair would like to turn to Mr.

Holden for an additional question.

Mr. HOLDEN. Mr. Crall, just curious, I think you said there had

been a 30 percent reduction in planting. Are peanut farmers leaving farming, or are they going to some other sector?

Mr. CRALL. They’re growing other crops. They’re still farming, I

believe. The shift has been from traditional peanut-growing areas

to newer soils because of—with peanuts, we have issues with needing crop rotation. You can’t grow peanuts on the same land year

after year, or the disease will take you out. Soil-borne diseases—

sclerotina, web blotch, rhizoctonia, all kinds of wonderful things,

pod rot—OK, there’s a glorious disease for you. So we rotate it

around.

Under the old program, basically we were growing quota peanuts at $610 a ton. Additional peanuts were on a contract basis for export. The Peanut Program and, to a lot of the discussion, I think

the key is the global markets. We need to be competitive in the

international market move with peanuts.

Oklahoma, at one time, we grew over 100,000 acres of peanuts.

The 1996 farm bill, we grew around 80,000 acres of peanuts. This

year in Oklahoma, we’re down to the lowest level since 1927; we

only have 22,000 acres of peanuts. So, it’s a drastic shift in the peanut-producing areas. Southern Oklahoma, southeastern Oklahoma,
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they used to grow quite a few peanuts, but they’re not there anymore. They’ve quit growing peanuts. They’re doing other things.

So Freedom to Farm is wonderful—all the farmers try to grow

what they think they can make money on, if that’s a shift to sorghum because of water issues from corn, or because fertilizer is so

expensive. Of all the commodities represented here, we are the

most expensive to grow. You can easily get 400 to $500 an acre tied

up in a peanut crop, there are lots of inputs. In Oklahoma, we have

to irrigate. We’ll put 20, 25 acres of irrigation water a year to grow

a crop, so it’s very expensive to grow.

Mr. HOLDEN. Thank you.

Mr. LUCAS. Thank you, Mr. Holden. And a couple of observations

and a question to, not only our witnesses on the panel, but the audience here. I know a lot of times, it seems like we ask questions

from various perspectives and various points of view, but understand, the questions we ask you are the questions that we have to

answer on your behalf when we get into the trench of political warfare of actually crafting the farm bill, so it’s important to tell those

perspectives.

Now, from a personal point, a question that I’ve asked at virtually every hearing we’ve had, tell me guys, spread out across a

good slice of Oklahoma, land prices today versus 5 years ago, versus 10 years ago: Up, down, sideways.

Mr. ROSE. Mr. Chairman, I’ll respond to that. In our area, the

Panhandle, because of the dry conditions we have, we have not

seen a great deal of appreciation in land values.

Mr. LUCAS. And some of you are in areas where oil and gas is

a factor, and that changes the whole curve. I understand that completely.

Mr. CRALL. And wind towers, as well.

Mr. LUCAS. And wind towers.

Mr. CRALL. In Weatherford, we’re the windiest place in the State.

That’s why they sent me up here.

Mr. LUCAS. And I’ve resisted saying that.

Mr. CRALL. Yes, I appreciate that. Our land prices are considerably higher than what they were a few years back. But if you go

to an auction, it’s not farmers that are buying it, it’s investors coming out to buy. They’ve got money, the stock market hasn’t been

as good, CD’s aren’t as good, so they want to own land, so they are

investing in land. So our land prices are significantly appreciated

from what they were, but it’s not really farmers that are buying

it, it’s investors.

Mr. LUCAS. Which is one of Mr. Holden’s key issues in Pennsylvania that we’re working on, farmland protection.

Mr. ROBBINS. I would reiterate what he just got through saying.

It’s not the farmers that are driving—the land prices are up slightly where I live. Most of the land that’s increasing in value is river

bottom land, and grassland that has pheasants, quail, or bobtail

deer, and wild turkeys running on it. People are getting out of the

cities and coming out and buying up some of this farmland, and I

believe, and know for a fact, that’s what’s driving the land prices

in my part of the State. Thank you.

Mr. KREHBEIL. And as you alluded to, if it is a farmer buying

farmland, he’s buying it with money that was pumped out of the
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ground, or free flows out of the ground on one of his other farms

in the form of oil or gas.

Mr. BLUBAUGH. I have to agree with the other panelists. Land

prices are up in my area considerably from what they were, but

again, it’s not the farmers that are buying the land, and less animal production. It is these out-of— let’s say the city investors, that

are coming out, and the hunting is a big deal. People coming out,

they’ll buy a farm just to hunt on it and just to use it for recreation. That’s what’s driving the land prices up. It’s not for the production value of the farm.

Mr. KOUPLEN. I agree on part with the rest of the panel, but you

will find that the prices are up substantially more around the

urban areas. You will find those prices the farther away you get,

the urban pressure is less evident, but it’s the urban people and

the recreational users, those type individuals, that are the pushing

the price of land up, not the production agriculture aspect of it.

Mr. LUCAS. Thank you, and thank you, panel. You’ve been very

insightful. I would once again reiterate the goal of the committee

is to do what rural America, what production agriculture, wants to

do, and we work in a very diligent fashion to try to accomplish that

in the political environment we work in back in our Nation’s Capital.

Just think for a moment back to the 1996 farm bill, a year when

many people said we would not pass any farm bill, we passed a

farm bill—dramatic change to the policy flexibility, the concepts of

the annual payments, keeping the LDP payments. 2002 comes

along, and basically, you say to us, after 5 good years of weather

across the country as a whole, that’s great, but the production levels are such we’ve got to have an extra safety net, and we added

on the countercyclical payments.

Mother Nature’s not smiled on us quite so kindly, weather-wise,

since then, and it puts us in the challenge whether that extra layer

that you asked for, and we worked diligently to provide—the gentleman from Loke and the gentleman from Abilene last time, chairman and ranking member of the full House Agriculture Committee—now Mother Nature goes the other way. Just remember, when

you ask us to do something, we may actually do it for you, and be

prepared for the consequences. Thank you. With that, let’s dismiss

this panel and bring panel No. 2 to the table.

We would like to introduce Mr. Scotty Herriman, producer, South

Coffeyville; Mr. Trey Lam, producer from Pauls Valley; Mr. Joe

Popplewell, pork producer from Hennessey, I should know that; Mr.

Ladd Lafferty, producer from Watonga.

While the panel is coming up, I would be remiss if I didn’t note

that there are a number of members of the State legislature here

today, a number of our statewide office holders in positions of responsibility for the conservation of agriculture, too many for me to

name off, but I just want to note that the committee’s appreciative

of having the leadership from so many different perspectives of the

State of Oklahoma in attendance today to observe this process. And

with that, whenever you’re ready, Scotty, you may begin.
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OPENING STATEMENT OF SCOTTY HERRIMAN, PRODUCER,

SOUTH COFFEYVILLE, OK

Mr. HERRIMAN. Mr. Chairman, members of the subcommittee, I

am Scotty Herriman, a farmer from northeast Oklahoma. I do grow

the commodities that were at this table in the past session, with

the exception of peanuts and cotton. I am vice president of Oklahoma Association of Conservation District (OACD), and a member

of the Nowata County Conservation District Board.

On behalf of OACD, our local districts, our directors, employees,

associate members, and thousands of Oklahoma landowner cooperators, I want to take this opportunity to testify in support of

the conservation title of the 2002 farm bill, and to suggest for your

consideration ideas for the improvement and expansion of the current USDA conservation initiatives. My comments will be brief, but

I have submitted more detailed testimony in writing for your consideration.

First, let me say that OACD believes that the 2002 farm bill

marked a watershed for conservation. The expansion of the existing

program such as EQIP, CRP, combined with the creation of new

initiatives, such as the Grasslands Reserve Program and the Conservation Security Program, has set the tone for the delivery of assistance to producers, helping them to address environmental concerns through cooperative, voluntary, locally-led means instead of

through heavy-handed regulations.

Through these assets, we have addressed many natural resource

issues. However, we still have much to do. We must maintain this

level of conservation if we are going to help producers address natural resource challenges. We must maintain the commitment Congress made for conservation in the last farm bill, and build on its

success.

We also must remember that program funding is not all that is

needed. Technical assistance dollars must be made available, so

that these programs are delivered effectively, and that producers

have the assistance they need to address the natural resource

issues on their land. The current level of financial assistance, while

welcome, is straining the delivery system. Congress should ensure

that accurate funding is provided for human resources to deliver

the farm bill program, and that this delivery should be done

through the existing NCRS system, in cooperation with the local

conservation district, and the various State conservation agencies.

Congress should also reinvest in general technical assistance for

producers through the NRCS. We have lost some of our past focus

on non-farm bill program conservation while delivering these new

farm bill program dollars. It is this work that often shows landowners what issues they need to address, which then leads to the

utilization of farm bill programs. Landowners also often follow up

on the work they have done through a program like EQIP by asking the local NRCS staff what other improvements they could make

in their operation. This wouldn’t happen without non-farm bill

technical assistance through NARCS in cooperation with the local

conservation districts.

Many of the changes in technical assistance in the last farm bill

didn’t perform as anticipated. The push to move towards private

sector service providers is the best example here in Oklahoma. In
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Oklahoma, few private sector TSP’s are available for hire for the

landowner, and those that are there charge far above the percentage of program dollars that NRCS has traditionally utilized in the

farm bill. Private sector TSP’s in Oklahoma just hasn’t worked.

What has worked is the utilization of the partnership between

NRCS, the Oklahoma Conservation Commission, and the local conservation district in farm bill delivery. By training districts and the

State employees to help deliver farm bill programs and do conservation planning, we have been able to officially deliver the program dollars we have seen since 2002, while leading the Nation in

size for the new programs, such as TSP.

We believe NRCS should have greater flexibility to build on this

type of success. We also believe in the practice of utilizing local

conservation district boards as the entity that sets priorities for

local conservation, as done by NRCS in Oklahoma, should be the

model nationwide. In Oklahoma, our local landowners, through

their locally elected conservation district directors, help set the priorities for conservation work in their local area. After all, who

knows better the needs of the local people than the people who live

there.

We feel it’s time to write into the farm bill the role of the conservation districts as an entity to help set local conservation priorities. In the area of programs, the OACD feels that EQIP is working well. We would ask that the funding at the current levels be

continued or increased, and that Congress take into consideration

the technical assistance needs necessary to deliver this program.

WHIP, or W-H-I-P, however, is facing a backlog of applicants

who can’t take advantage of the program, due to inadequate funding. WHIP, if properly funded, could become the flagship program

for helping improve our wildlife habitats on working lands nationwide. It just needs more funding.

CRP is a popular program that we support that has done much

good in its retirement of some of the most marginal land. With that

said, OACD feels that more flexibility is needed in this program to

address sensitive lands. Too often, CRP has been treated as a program to reduce commodity production rather than a conservation

program.

There has been much interest in the Wetland Reserve Program

in Oklahoma. Unfortunately, recent changes in the land appraisal

process have reduced participation. Last year, 24 WRP projects

were planned in Oklahoma, but only eight were accepted by the

landowners after the appraisals were completed. We would ask

that the WRP be taken out from under the CRP cap for counties.

When considering the Grassland Reserve Program, Congress

needs to seriously review this program to ensure that it is meeting

the vision of Chairman Lucas. The rental rates that have been set

by FSA have limited the number of acres that can be enrolled. Additional funding is needed to increase participation. We support

this program, but we feel it needs review.

Finally, we feel that the Conservation Security Program is an exciting new program that has been implemented in a manner consistent with the vision laid out by Congress. It has not been implemented. This program should be nationwide in scope and be a continuing option for landowners.
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As with any new program, producers often learn from mistakes

in the original sign-up period, or they see ways in which they can

improve their operation for next year’s participation. This is not

possible in CSP as currently interpreted by the administration. We

support CSP, but we ask that Congress ensure that it be run in

the way it was intended in the last farm bill.

Before closing, I should mention the importance of watershed rehabilitation programs in the State of Oklahoma.

I will yield my time to the next speaker that he will address

these watershed items.

Again, I want to thank you for the opportunity to testify before

the subcommittee. We appreciate all you do for rural America, and

we ask that you continue to support American agriculture and the

protection of our natural resources through voluntary, locally-led,

cooperative conservation. Thank you again for allowing OACD, and

myself, this opportunity.

[The prepared statement of Mr. Herriman appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Scotty. Mr. Lam, when you’re ready.

STATEMENT OF TREY LAM, PRODUCER, PAULS VALLEY, OK

Mr. LAM. Thank you. My name is Trey Lam. I live and work

along the Washita River in Garvin County, Oklahoma. I’m an agricultural producer, a Garvin Conservation District board member,

and representative of the National Watershed Coalition. On behalf

of the coalition, I appreciate the opportunity to provide testimony

at this hearing.

My home county has 13 USDA-assisted watershed projects that include 146 flood control dams. These dams provide over $10 million in annual benefits in flood damage reduction, soil erosion control, water supplies, recreation, and fish and wildlife habitat. The

dams benefit over 2,890 farms and ranches, protect 125 bridges

and hundreds of miles of roads, and provide protection to 135,000

acres of floodplain. Two of the lakes formed by Watershed Program

dams provide the sole source of water for more than 7,000 residents in Pauls Valley and Elmore City. These and thousands of

other projects across the Nation are important to the land and

water resources of this country.

Principal to our perspective on this program is the notion that

it is a federally-assisted partnership. State and local entities must

be full and equal partners in shaping the future, just as they were

when the legacy of this program was created. The Watershed Program works where other Federal water resource programs won’t.

This success may be credited to local watershed sponsors, who

make decisions as close to on-the-ground issues as possible.

While the watershed program has its own authorizing legislation,

the current farm bill has served as an important piece of legislation

to drive the rehabilitation of aging dams built under the Small Watershed Program. The National Watershed Coalition believes that

the current farm bill process presents a continuing important opportunity for Congress to extend public benefits derived from work

performed under the watershed program.

We ask that you authorize funding in the farm bill, and then join

us in working with appropriators to ensure authorized funding is
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fully appropriated. All across this Nation, local sponsors are working diligently to secure land rights and generate matching funds.

Based on the credibility and accountability of these local sponsors,

much has been achieved in anticipation of Federal watershed rehabilitation funds. A reliable and steady appropriation from Congress

is needed to assist sponsors in making efficient use of often limited

local resources.

Focusing farm bill land treatment programs on watershed boundaries designated by the USDA Watershed Program will not only

yield the desired on-farm benefits, but could also enhance and extend the public benefits derived from existing watershed projects.

Through this coordinated approach, conservation goals in both

program areas can be achieved. This coordinated approach may reduce the perception of land treatment program duplication, and

may make more funds available for unique watershed program specific areas, such as flood control and municipal and industrial

water supply. We ask that as you develop the conservation title of

the new farm bill, that you continue to consider the importance of

the USDA Watershed Program, as well.

In closing, I recognize this subcommittee does not have direct responsibilities in the area of appropriations. However, I would be remiss if I did not point out that the impact of the decline in funding

for the watershed program can certainly be seen around the Nation, as well as in Oklahoma. We believe that the administration’s

recent funding requests are not in touch with the reality of the documented demand for the program.

In Oklahoma, we have a significant number of well-planned

projects that are waiting on the necessary funding to be completed.

Fluctuations in the USDA Watershed Program budget make it difficult to maintain experienced watershed personnel and sufficient

technical assistance.

We appreciate the recent efforts of the committee to provide oversight for the watershed program. We support your efforts to educate the administration at all levels concerning the necessity to embrace and acknowledge the value and success of the watershed program, and the investment, benefits, and partnership it represents.

We believe that the watershed program is a model of effectiveness

and accountability. We pledge our continuing support for your actions on behalf of watershed sponsors across the country. Thank

you again for the opportunity to be here before you today.

[The prepared statement of Mr. Lam appears at the conclusion

of the hearing.]

Mr. LUCAS. Thank you.

OPENING STATEMENT OF JOE POPPLEWELL, PORK

PRODUCER, HENNESSEY, OK

Mr. POPPLEWELL. Good morning, Chairman Lucas, Chairman

Goodlatte, Ranking Member Holden.

I am Joe Popplewell, a pork producer from Hennessey, Oklahoma. I am currently serving my second term as president of the

Oklahoma Pork Council, and I’ve been a member of the Oklahoma

Pork Council board of directors for the past 6 years. I’m the operations manager for Seaboard Foods, where I have the responsibility
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for 26,000 sows and their corresponding nurseries and finishing

units.

Today, I am here to speak to you briefly about the leading role

pork producers have played in advancing environmental considerations within the agricultural community, to summarize some of

the challenges we continue to face, and outline a couple of solutions

that we believe Congress should consider as it crafts the 2007 farm

bill.

Over the last decade, America’s pork producers have actively

worked to address the environmental challenges before them in a

cooperative and productive fashion, while at the same time, improving the quality of our products to ensure that we are meeting

consumer demand. Pork producers have a well-deserved reputation

as proactive stewards of a natural environment, and we’re proud

of this.

Despite these efforts, we are disappointed in the inability of

EQIP to adequately assist pork producers in addressing environmental challenges. Additionally, many producers are fearful that

some current Federal land use policies will increase the cost of feed

grains to the point we may not be competitive in foreign markets.

While all this is explained in more detail in my written testimony,

I would like to point out a few items related to EQIP funding and

the cost of feed grains.

In 2002 farm bill, pork producers were one of the leading advocates for the development of the EQIP program. Despite this effort,

pork producers have not received a proportional share of those

same EQIP dollars. Looking back at the 2003 program year, using

NRCS data and our own estimates, pork producers nationwide received about 3 percent of the cost share assistance provided to all

livestock producers that year. That’s less than the share provided

to pork producers in the other category, a category that includes

goat, emu, ostrich, elk, and bison producers.

Despite our work, and that of NRCS headquarters to address

this issue, essentially the same result occurred in the 2004 and

2005. Here in Oklahoma, we produce 5 percent of the Nation’s pigs

in 2004. While EQIP funding for livestock in Oklahoma more than

doubled to 19.1 million in 2005, EQIP contracts for swine-related

operations here in Oklahoma during that time were $553,000, or

just three one-hundredths of a percent of total EQIP funding nationwide.

Furthermore, for defined swine operations, EQIP contributions

totaled only $1,083 over the same 3-year period. In my written testimony, I’ve identified a number of reasons for the funding shortfalls, as well as reasonable solutions. Due to time constraints, I will

share just a couple of these now.

EQIP cost shares assistance isn’t generally available for mobile

equipment. One of pork producers greatest needs is new, expanded,

and more precise manure utilization to aid efforts to apply the manure to more crop acres, and much of this equipment is mobile.

For example, in Oklahoma, most producers only need to remove

solids from their lagoons once every 10 to 12 years. And it doesn’t

make economic sense for a single producer to produce the agitator,

the pumping system, and equipment needed for land application for

a job that we do only once every 10 years. If it were possible for
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a group of producers in a geographic region to share a set of equipment to accomplish this goal, that would be a tremendous step.

NRCS’s commitment to helping the use of comprehensive nutrient management plans is not yet accurately reflected in the EQIP

program, and insufficient EQIP funds have been made available to

support farmers’ use of technical service providers, TSP’s, to acquire CNMP’s. The EPA has recently proposed, as part of a new

Federal cap over this, requiring NMP’s as a part of the MPDES

permit system. This will dramatically increase the need for TSP’s

to help develop the required plans.

Finally, a word about grant supplies. With the increasing national emphasis on ethanol production, pork producers are concerned about the increases in feed costs due to increased demand

for corn and milo. Here in Oklahoma, we’re a corn dusted State.

At least three new ethanol plants are planned for Oklahoma in the

near future, which will add to our deficit. The tremendous increase

in corn and milo demand for ethanol production has made it imperative that new sources of grain be identified.

One possible solution would be to allow the flexibility under the

CRP program to place land back into production. Without an increase in grain production, the resulting increases in feed costs will

result in pork producers being unable to compete in the international marketplace.

Mr. Chairman and members of this committee, on behalf of OPC,

and pork producers across the Nation, I’d like to thank you for

holding this hearing and allowing us to share our thoughts with

you. Pork producers are working hard to maintain, strengthen, and

defend our competitive advantage, both domestically and internationally. We look forward to working with you to fight for U.S.

agriculture.

[The prepared statement of Mr. Popplewell appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Joe.

STATEMENT OF LAD LAFFERTY, PRODUCER, WATONGA, OK

Mr. LAFFERTY. Chairman Goodlatte, Subcommittee Chairman

Lucas, and Ranking Member Mr. Holden, my name is Lad Lafferty.

I am currently a vice-president for Wheeler Brothers Grain Company in Watonga, Oklahoma. Wheeler Brothers is a family-owned

grain business that was founded in 1917, and I am a fourth generation family member employee of the company.

I am here today to present testimony on behalf of the Oklahoma

Grain and Feed Association, commonly known as OGFA. OGFA is

the voluntary trade organization of the State’s grain and feed industry. Our member’s customers are the grain producers of this

State, whose success determines the livelihood of our members.

OGFA appreciates the opportunity to present its views regarding

the writing of the 2007 farm bill.

The topics I am going to address today include commodity programs, land grant institution research, Conservation Reserve Program, otherwise known as CRP, Environmental Quality Incentives

Program or EQIP, and crop insurance program reform.

Commodity programs should not create artificial markets, which

in essence make planting one commodity more financially attrac-
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tive than another. Planting decisions should be based on prices derived from free market world supply and demand factors. The 1996

farm bill, dubbed ‘‘Freedom to Farm,’’ went a long way toward correcting these inconsistencies, and we hope future commodity programs continue along the same lines.

Additionally, commodity programs should be geared toward those

persons actually farming the ground. A July 2, 2006 Washington

Post article entitled ‘‘Farm Programs Pay $1.3 Billion to People

Who Don’t Farm’’ illustrates this point.

The article states that in the past 6 years, at least $1.3 billion

in subsidies were paid to individuals who didn’t farm at all, and

in many cases, a seed was not even planted. The article further

states that developers buy farmland and advertise that homeowners can collect farm subsidies on their new backyards.

OGFA recommends that countercyclical and loan deficiency payment programs be terminated in the wheat program and that current direct payments be increased. Not only will this get more

money into the hands of the producers, but it will be WTO-friendly,

as it is not considered a traditional price support program. Drought

and high fuel and fertilizer costs have put many southern plains

wheat farmers in financial trouble. To continue our national policy

of providing affordable, high quality food to the consumer, these

wheat farmers need assistance.

Land grant institution research. We believe land grant institutions should receive more funding for research in genetic crop improvement and in production system efficiencies. In particular,

wheat has very little private sector research investment and is

thus more reliant on public sector scientific initiatives for research.

This, in part, may be due to foreign consumers’ objections to genetically modified wheat. However, as the world consumer eventually

becomes more accepting of the idea of GMO wheat, the research of

such will be significantly behind other crops without more public

sector research investment.

Conservation Reserve Program. Highly productive land should

not be taken out of production through Government incentives.

Whole farm CRP acres are having a devastating effect on rural

western Oklahoma, due to the combination of acres being taken out

of production and payments often going to absentee landowners

who contribute little or nothing to local economies. This has had an

additional effect of establishing barriers to farmers, particularly

young farmers trying to become established. The Government

should not compete for the rental of productive land.

The 25 percent county acreage maximum rule also needs to be

re-examined. For example, in Ellis County, Oklahoma, the number

of CRP acres approaches 50 percent of the acres that were actually

cultivated in 1988. Acres that were included in the old Soil Bank

program in the 1950’s were erroneously included in the counting of

total acres of farm ground. This allowed the number of CRP acres

in many counties to be almost twice the amount that it should have

been.

Emphasis on conservation must be changed from a land and financial retirement program to one that emphasizes environmental

benefits. The focus should be on highly erodible, marginal, or envi-
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ronmentally sensitive lands. On productive land, the focus should

be on filter strips.

Current CRP rules on filter strips, however, do not allow the

wheat stocker/producer to use this program because of grazing restrictions.

It is not practical for the producer to fence off filter strips during

the stocker grazing season. The rule needs to be changed to allow

grazing of filter strips during the non-growing season. Such a

change in the rules would be good public policy in that research

has shown that filter strips improve run-off water quality by as

much as 30 percent regarding nutrients and silt.

The EQIP program needs to be modified to get funds into the

hands of the true producers for real conservation efforts. Landowner use of EQIP funds to simply improve the recreational use of

their land is not good use of conservation funds.

Crop insurance program reform. This past Oklahoma wheat harvest, some of our member’s customers experienced instances whereby a Federal crop insurance adjustor estimated a producer’s wheat

yield at X, and the producer decided to not take the insurance, but

instead harvest the wheat for seed. In the end, the field ended up

yielding anywhere from three to four times above the adjustor’s estimate.

We recommend either the yield estimate part of the program be

changed, or alternatively, allowing the producer to take the insurance payment, but allowing the option of harvesting the crop and

repaying the insurance amount.

Between a yield estimate made in late March and harvest time

in early June, a positive weather pattern can make a significant

positive impact on wheat yields.

This concludes my statement. Thank you.

[The prepared statement of Mr. Lafferty appears at the conclusion of the hearing.]

Mr. LUCAS. Thank you, Lad. Let’s visit for a moment about CSP,

GRP, and some of the other programs that were new in the 2002

farm bill. USDA is going through the process of opening CSP up

on a watershed by watershed basis, a very limited number of

places, a very limited number of producers.

We had a hearing with the director of FSA nationally, and the

Under Secretary for Natural Resources, USDA, once again a few

weeks ago, and I asked the question: If CSP was to be available

for all producers across the country—because I have this strange

concept that I’ve developed in my town meetings down through the

years, everybody needs to be a part of it if it’s going to happen—

the Secretary responded, and I believe, correct me, Mr. Chairman,

if my memory is a little soft, I think he said something to the effect

of $10 billion a year would be what the cost would be to run the

program nationwide and let everybody in.

I guess, Scotty, your observations under the scenario where it’s

going to be difficult to come up with $10 billion anytime soon, give

me your feel about CSP, and then we’ll touch on GRP for just a

moment.

Mr. HERRIMAN. CSP, of course, it’s limited to certain areas of this

country and watersheds, as I understand it.
164

Here in Oklahoma, we have an area east of the Poteau River

area, I believe, that has addressed this issues and many, many takers on that CSP monies.

There are others that, according to the farm bill, were aligning

their selves to get ready to participate in this, and now perhaps

there’s no money at all. It is a very important program, but again,

I can’t elaborate much more than that. I realize that dollars are

going to be short, but the program is going to work.

Mr. LUCAS. Ten billion dollars a year—if we redirect almost all

of the commodity title money, and then we just hit the threshold.

I have problems with programs where everybody can’t participate.

Let’s talk about GRP for a moment, and I’ll speak very carefully,

because my good friend here is extremely focused on farmland protection, and GRP has become, under the way leadership in USDA

in the Nation’s Capital have directed the rules, another kind of

Greenbelt protection program, but initially, it was envisioned that

when we put the bill together, the section of the bill in the subcommittee that I chaired in 2002, as a way for pasture people to

be able to have resources to participate in all the conservation programs.

From your perspective, is there anything wrong with directing

this back so that that GRP payment would enable people to do the

kind of purchase? Because traditionally, in pasture agriculture, it’s

not cost effective to do a lot of things that you need to do to be

truly environmentally sensitive, and a commitment for however

many years the GRP payment would have been matching dollars.

My short question is, how have you seen GRP implemented so far.

Mr. HERRIMAN. That’s a tough question for me to answer. It really is. I’m not up to speed enough to elaborate on it at this time.

We have people that are, but I am not.

Mr. LUCAS. OK. Trey, let’s talk about watersheds for a moment.

The rehab program, I would like to think—of course, being the author of the bill, I’d like to think it’s a great thing, hopefully some

of you agree with me—but that one of the successes of the program

has been that by making the rehab dollars available based on a formula, going out and gauging the problems of spring water control,

flood control projects across the country, and allocating those dollars based on where the greatest need is, the money, at least in the

hearings we’ve had, appears to go to the necessary resources.

I hope you would agree with that, although we do have a struggle in making sure all the farm bill dollars set aside really get

there in each appropriation sight, and we’ll touch on that in a few

moments, but one of the frustrations that I’ve had as a member is

the new construction money seems to all be earmarked primarily

from the other body of the United States Congress.

Would you agree that we need to come up with some way to target the money for a new watershed construction in a priority way,

the way we’ve done the rehab program.

Mr. LAM. I think that would be an excellent idea. With the rehab

program, we’d go out and put the high-hazard dams—we’d decide

where the greatest risk is with a dam failure breach or problem,

or which dam has the greatest problems. We try to go out and fix

those. We went and looked at watersheds on which had the greatest risk of flooding, the greatest risk to, in dollar figures or in other
165

infrastructure, or in water supplies, or water flow, those kinds of

things all figured into the formula, and then finally based on that,

rather than based on earmarked for certain areas. I think that

would be an excellent idea.

Mr. LUCAS. Lad, Joe, and I’ll turn to my colleagues here, the demand for grain for both livestock and energy production—we

touched on this with the earlier panel. Do you believe that there

are sufficient acres of high-quality CRP presently that if they were

allowed or flexibility was maintained that we’d come back into production and meet those needs.

Mr. POPPLEWELL. I’ll defer most of that question to Lad. He’s

more of an expert in that area than myself, but personally, where

I’ve grown up in Kay County, as well as the area I live in now, my

personal belief is yes, that there are some acres that would be profitable and would be able to be used for other things, other than

CRP.

Mr. LAFFERTY. Are you talking about in the Nation or——

Mr. LUCAS. In the Nation.

Mr. LAFFERTY. If you say 36 million acres, I mean, if you go

through the numbers, and see what’s it going to take to have a decent carry-out on corn, acre-wise, through the next 2 or 3 years, it

doesn’t take that many more acres. I mean, you’re going to have

to get the acres out, but not anywhere about 36 million, so I’d say

just simple math would say yes, there’s plenty of acres.

Mr. LUCAS. Would you be agreeable, Lad, one of the most popular parts of the farm bill among the general public is CRP, the effect on wildlife, water quality, all those things—would you be supportive of the concept of allowing more flexibility in those acres.

By that, I mean allowing some of the more productive land, perhaps which should probably not have been there in the 1980’s or

even in the 1990’s to come out, if that created a vacancy for perhaps more environmentally sensitive land in other places to come

in, maintaining the same X number of acres. If we allow more sensitive land in, more productive land to come out, increase our grain

stock, and perhaps enhance our environmental benefits, you

wouldn’t have any problem with that, would you.

Mr. LAFFERTY. No, I wouldn’t have a problem with that. That

would be a step in the right direction, for sure.

Mr. LUCAS. With that, I turn to the gentleman from Pennsylvania.

Mr. HOLDEN. Thank you, Mr. Chairman, and Mr. Lam, you mentioned a problem with the appropriators. The three of us are well

aware of that. As a matter of fact, you can go back to Kika de la

Garza and Jamie Whitten, and that’s an ongoing battle, and we’re

all in this together, trying to make sure our priorities are met. My

favorite subject—both chairmen are tired of hearing of—but we

talked last time about prices of land, and in the Northeast and

mid-Atlantic, we do have this tremendous developmental pressure

on farmers.

We had a similar hearing for this in Harrisburg, Pennsylvania,

and I asked a dairy farmer, what’s his biggest challenge in agriculture, and he said, houses. That’s how strong developmental

pressure is in our area, and that’s why farmland preservation is so

important and so successful in our region. I’m just curious, is it uti-
166

lized at all in Oklahoma? Does anyone take advantage of the Federal program to sell your easement out so you can’t develop it, or

is it not used at all in this region.

Mr. LAM. In our area, it hasn’t been used at all. I think probably

education on it is the most important thing because people don’t

understand the program. They think of private property rights, and

any time you talk about easements or land, you say, they probably

don’t understand the program. I think education would be something we could do in that area.

Mr. POPPLEWELL. And I would just add that, back to your question initially, or in the last panel, our land prices have doubled in

the area that I live in. Now, compared to Pennsylvania, or Iowa,

or areas where the acreage is going to be considerably higher, the

bottom line is, they’re still doubled, and I think that education, as

well, is the reason people don’t understand about some programs.

And I’d also like to add that the reasons that our land has doubled is exactly the reasons the gentlemen in the previous panel

talked about—people, either stockholders looking for a place to put

money, or I say stockholders, people in the stock market, looking

for places to put money, and as well, people coming and buying

those areas for hunting and fishing.

Mr. HERRIMAN. I would elaborate on one thing on the GRP again,

in connection with this. It’s my understanding, GRP was set aside

to reserve these lands over a number of years in time, but they had

to have boundaries close enough to cities and what have you——

Mr. LUCAS. Because of the way the rules were put together.

Mr. HERRIMAN. The way the rules were put together, and Congressman, I do need to back up and say I do know a little bit about

that. In our area in northeast Oklahoma, there are two boundaries

in our county, but this is going at least hold off some of this

ranchettes, if you will, homes and building out in the country, and

in that respect, the GRP is doing the job that needs to be done. We

just need more money to allow more acres to come into that. Yes,

in northeast Oklahoma, we’re 50 miles north of Tulsa. Obviously,

we’re getting the same that’s been spoken about—hunters, investors; certainly not farmers, by any slant.

Mr. HOLDEN. And one other area that has jurisdiction, that this

subcommittee has jurisdiction on, is credit. How are your credit

needs being met? Is it farm credit system, or commercial banks engaged, or I’m just curious.

Mr. HERRIMAN. I can start by addressing that because I am a

full-time farmer, and it’s not easy. I do have a good banker, but the

Federal assistance loans that go through the banks are being utilized.

The problem’s been mentioned earlier today, after this year, this

full year, of bad wheat, corn, soybeans, whatever, it is going to put

a strain on each of us as individuals to go look our bankers in the

eyes and come up with new ways to fund that farm next year.

Mr. HOLDEN. So you’re dealing with commercial bankers and

farm credit unions.

Mr. HERRIMAN. I am dealing with a commercial banker, and I do

have a shared loan with the DSP.

Mr. HOLDEN. Anyone else want to add anything?
167

Mr. LAM. I will tell you in our town, we have a strong local bank.

We also have a strong farm credit system, and they compete and

by competing it makes them more flexible with farmers, more willing to work with you if you have a bad year, because there is another option. The farm credit system allows you to go somewhere

else if you need to move away from the local bank. So they’re diligent in making sure that the loans that they make are all good,

but they are also very competitive.

Mr. HOLDEN. Thank you, Mr. Chairman.

Mr. LUCAS. Thank you. Mr. Chairman.

The CHAIRMAN. Thank you, Mr. Chairman. In looking at the witness list, I see Mr. Popplewell, you are a pork producer.

Mr. POPPLEWELL. Yes, sir.

The CHAIRMAN. Tell me what the rest of you produce.

Mr. HERRIMAN. Yes, I am from northeast Oklahoma. I grow corn,

soybeans, wheat, and milo, and cattle.

The CHAIRMAN. Mr. Lam.

Mr. LAM. We raise alfalfa, soybeans, corn, wheat, and we have

Angus cattle.

Mr. LAFFERTY. We’re a member of the Oklahoma Grain Feed Association, or country and terminal elevator business. We buy and

sort wheat for farmers.

The CHAIRMAN. OK. You have a controversial legal dispute going

on here in Oklahoma regarding the Circle of Provisions. Some of

you are familiar with that, but particularly—I don’t think we have

any poultry producers here—but tell me your perspective on that.

Have any of you signed a consent agreement with the EPA regarding your future practices in order to try to avoid getting entangled in that? They’re doing that not just here in Oklahoma, but all

over the country, and if you have—I take it the answer is no? All

right.

Well, tell me this. What confidence do you have that the Environmental Protection Agency, and other agencies like that, are going

to write regulation in the future that will make it difficult for you

to continue to engage in livestock agriculture, those of you that are

in this business, and what can we do in the next farm bill to help

you out.

Mr. POPPLEWELL. It is a very large concern of ours, the Circle is,

and if it is—in trying to deem the livestock manure as hazardous

waste.

The CHAIRMAN. A Superfund site.

Mr. POPPLEWELL. Yes, sir.

The CHAIRMAN. Well, we’re very sympathetic to your concerns,

but we’re also interested in knowing what we can do to help you,

and if you want to talk about the CSP program, I would be interested in hearing your thoughts on it, because that’s one of the purposes of that program. However, it’s been, though, somewhat limited, and might end up being; it’s kind of had a rocky start, but

it’s also quite popular with those who are able to participate in it.

Mr. POPPLEWELL. I’m not an expert enough to——

The CHAIRMAN. So you’ve not participated in that.

Mr. POPPLEWELL. No, sir. That’s correct.

The CHAIRMAN. And what about other things we might do for

you?
168

Mr. POPPLEWELL. Well, let me finish with the Circle, and I just

want to make sure that everybody in this room, as well as you gentlemen, know our position, and as you stated, we just want to make

sure that, first off, that there’s a lot of people, and there’s some

gentlemen in this room, that also do utilize animal manure as fertilizer, and with the additional costs of fuel prices, etc., energy resources, it’s a good alternative to——

The CHAIRMAN. Attractive to use it.

Mr. POPPLEWELL. Yes, sir. I think that’s just the main stance

that we would have, is just for everybody to keep that in mind, and

for everybody that is dealing with this, you gentlemen are obviously educated in this area, but to make sure that everybody understands that what Circle was initially developed for in the early

1980’s, as you said, for superfunding—I mean, superfunding issues,

as well as oil spills, and those types of things, so I guess that’s our

main stance on that. I don’t know if I’ve completely answered your

question.

The CHAIRMAN. Anybody else?

Mr. LAM. Well, I think with the continued support for the local

watershed program and the General Conservation Program, we can

function as coalition builders. I know the Oklahoma Association of

Conservation Districts is working with Municipal League, City of

Tulsa, Scenic River Authority, and the poultry producers on poultry

waste in eastern Oklahoma and water quality issues.

They’re trying to bring people together on these issues. But if we

don’t have the technical assistance of NRCS, and funding to go

ahead and implement programs, these groups, when they come together, want to do, then it’s pretty ineffective. We could bring people to the table that have completely opposite views, maybe, or

goals, but it’s difficult to have a project go forward if you don’t have

the funding on it.

The CHAIRMAN. Chairman Lucas, in his questioning, touched

upon the issue of greater flexibility in our programs to set aside

land, and the CRP program, by far, being the most significant of

those. I wonder if you might expand on that.

Some of those concerns we have, if we are going to increase our

production of energy domestically from renewable sources, we’re

going to have to make some tougher decisions about that. The goal

that we’ve set in the Congress—in fact, I think Congress will soon

pass legislation that I’ve introduced, if any of the members of the

committee are co-sponsors, to try to get 25 percent of our fuel needs

met from domestic renewable resources, and animal waste could be

one of those, and wood waste would be another, but obviously

grasslands and croplands are going to be of primary interest.

The President mentioned switchgrass in his State of the Union

address, and he did not do so just by picking something out of thin

air; it’s a native grassland, and it’s estimated that it could produce

three to four times as much ethanol per acre as corn produces, so—

that’s cellulosic ethanol—and the technology has been proven out,

but the commercial viability of it is just in the process now of being

established, so we’re a few years off from that. But starting with

this farm bill, we’re going to have to start taking into account that

need.
169

So what kind of increased flexibility do you think we should

write into this farm bill? Is it harmonious to meet the needs of the

horsemen that use some of your land, and certainly are very welcome in Oklahoma, to see that same land used for some type of

crop production purposes, and obviously, some crops are more sensitive to that than others, and some are more workable than others, and some types of wildlife are more workable with that. So

give me your thoughts on how much flexibility we can put into this

farm bill in terms of multiple uses of our lands. Mr. Herriman.

Mr. HERRIMAN. I’m really going to have to be cautious with what

I say, obviously, but there are acres, as Mr. Lucas has mentioned,

that we probably could utilize for, if not farming, at least the production of these fuels. I would ask that they only be selected in the

technical people describing what these lands would be, not just

open the door for anyone that wants to cancel out their CRP contract with the farmers or whatever.

As far as the wildlife, I’m sure there’s some adaptability there

that can be give and take. So I would say the flexibility is there

for the right technical people to address.

Mr. LAM. I would agree with that. I think if you have a formula

for CRP land to come out, and with an effect on water quality, on

stream bank erosion, on soil erosion, on downstream public water,

you looked at all waterfall usage, and the future usage of that, and

before you retired, or brought it back out of retirement, you went

through that formula, and people that like the CRP program for

conservation reasons, if they saw it was having a minimal effect on

the environment, then they would be more willing to see it come

out.

The CHAIRMAN. Mr. Popplewell.

Mr. POPPLEWELL. Well, I’d like to state for all of the grain producers in here that my family homesteaded in the Hennessey area

in the late 1800’s, and most of my family members are grain producers, so I’m very conscious to the efforts that are going forward

there.

Having said that, the estimates that I’ve read through Feedstuffs

magazine, etc., said that we’re going to go from 2.1 million acres,

potentially, of corn to 10 for ethanol production, so it’s going to

have to come from somewhere, and so I would be—and I think that

some of the alternatives that have been listed, and I know out in

Guymon, Oklahoma, I know when you go up into the South Dakota

area, pheasant hunted a lot, and the strips as Mr. Herriman suggested, good viable options. So I think there’s a lot of opportunity

out there. We just need to flush them out.

The CHAIRMAN. Any opinion, Mr. Lafferty?

Mr. LAFFERTY. Well, I think that you definitely have to be flexible, there are subsidies involved in this ethanol production. There’s

a lot of research going into it, and we think, pretty much decided,

it’s going to continue to increase, and you’re going to have to have

the land available to produce the necessary feed stocks.

And then you also have the pork producer, the cattle producer,

so on and so forth, that needs to keep the cattle in the feed yard,

or what have you, and if you don’t have the necessary acreage,

then something has to give. And corn exports are less than 20 percent of our entire corn crop, so maybe that gives first, but that’s
170

not a big cushion, and if we don’t have the ability, I don’t know exactly what you mean by flexibility, but if that means flexibility to

bring the land out and have it produce, then yes, I agree with that.

Mr. LUCAS. If, Mr. Chairman, if bringing out less environmentally-sensitive land that would increase the productive capacity

of the country, also creates a window of opportunity for environmentally-sensitive property, perhaps that’s because of acre limits

as a whole, or particular regions couldn’t come in—I think that

gives us a very positive message to deliver to our environment

friends that we’re trying to be responsible stewards yet increase

our grain production in a positive way.

The CHAIRMAN. Well, I agree with that and that leads to my last

question, which is, 36 million acres—just right, too much, too little?

Mr. Lafferty.

Mr. LAFFERTY. It’s too much.

The CHAIRMAN. How much?

Mr. LAFFERTY. I can’t comment on that, because I don’t know

what energy values are going to do in the future. I don’t know if

in 3 years, we’re going to be back to $30 a barrel oil or $100, and

if we’re at $100, then it’s way too much, it we’re at $30, then it’s

not too bad.

The CHAIRMAN. Mr. Popplewell.

Mr. POPPLEWELL. I will defer. Well, I’m certainly not an expert,

but I think that as Congressman Lucas said, it’s which 36 million,

I think, is what’s important.

The CHAIRMAN. So you stay at 36 million, you feel like that’s the

trade outs of productive land for——

Mr. POPPLEWELL. I think it’s worked so far, but I don’t think

that’s the magic number at all. I think, you could have less and

still be just as environmentally sound, or you could have more. As

long as it’s the right acres, not the highly productive agriculture

acres, but the ones that——

The CHAIRMAN. And you have more money. Mr. Herriman.

Mr. HERRIMAN. I think you had the answer; if more farm ground

was taken out, the tradeoff would be there. As far as the total

acres, I have no idea. If it comes to a method that would use some

of that ground, then so be it.

The CHAIRMAN. OK. Very good. Thank you, Chairman.

Mr. LUCAS. Thank you. If my colleagues will indulge in one last

question to Scotty and Trey. It was locally-led conservation and

free to the upstream flood control dam system, locally-led conservation has driven so many farm bills down through the decades.

And my question then, to you gentlemen is, locally-led conservation: Still alive and healthy? Do we have more people willing to

participate? Do we have less? Give us the—include the answering

set period in this round—a report on the health and viability of locally-led conservation in Oklahoma.

Mr. HERRIMAN. The health is very good. Earlier, it was mentioned that Mr. Don, our State director, I will say that through

him, I have a new meaning of partnerships. I always knew that a

partner was a person that worked with you, et cetera. He has

taught me to reach out to get below, or beyond that box. So yes,

cooperative conservation is alive and well here in Oklahoma, because we have addressed BDQ people that 5, 10 years ago would
171

not have even associated with conservation, but now that we’re incorporating that. So our local conservation initiative is quite alive

and well here in Oklahoma.

We have a different audience out there that we are addressing

than we were 10 years ago. I’ve been a conservation district director for 29 years. I would say it used to be easy because all we addressed was the issues on conservation on the land. Now, we go

way beyond that. We’re talking about water, we’re talking about

pollution, not only the soil and water, but the environment totally

around it.

So yes, we are alive and well in Oklahoma, but we do need to

watch as the new audience referred, more ranchettes, more people

encroaching on those areas, that we never addressed before. But

we are addressing those here in Oklahoma right now.

Mr. LUCAS. Thank you.

Mr. LAM. I think that locally-led conservation is very much alive

in Oklahoma. I think that when you bring up an issue of, whether

it’s personnel, or whatever, that sparks people’s interest, they show

you just how much they care about conservation in Oklahoma. I

think that the formula of Federal funding, State funding, and local

funding has taught us how to be good partners, and how to work

with other people, and how to seek outside sources of funding, and

also outside people to help us with our projects.

And that has allowed us to reach out to groups like poultry producers, the nature conservation movement, hunting groups, municipal leagues, schools, towns—we can bring all those people together. I think they look, especially the conservation districts, as

to be in support of conservation, to not be on one side, extremely

environmental or extremely pro production agriculture. But we see

that both of those can come together, and that’s what we’re providing.

Mr. LUCAS. The committee wishes to thank the panel, and without objection, the record of today’s hearing will remain open for 30

days to receive additional material and supplemental written responses from witnesses to any question posed by a member of the

panel.

This hearing of the Subcommittee on Conservation, Credit, Rural

Development, and Research is adjourned.

[Whereupon, at 12:04 p.m. the subcommittee was adjourned.]

[Material submitted for inclusion in the record follows:]

STATEMENT OF SCOTT BLUBAUGH

Chairman Lucas, Chairman Goodlatte and members of the committee. Thank you

for coming to Oklahoma for state producers to have the opportunity to testify with

respect to policy considerations for the 2007 farm bill debate. We wish you could

have seen our state in a different light with our ponds full, plenty of forage, hay

in the barn, cattle in the pastures and grain bins to capacity. Unfortunately, the

drought which has plagued us for more than a year continues to be an issue for

state producers.

Good morning. I am Scott Blubaugh, a fifth generation farmer from the Tonkawa

area. Both sides of my family homesteaded in the territories as they were being

opened for settlement. I live on the farm that my family homesteaded during the

opening of the Cherokee Strip in the home built by my grandfather. My operation

consists of leased and owned land totaling 1,500 acres where I grow wheat, soybeans, grain sorghum (milo), corn and alfalfa and raise cattle. To underwrite our
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operation, I also do local custom harvesting and my wife and I own a local Oklahoma Farmers Union Mutual Insurance Agency.

As a member of the Oklahoma Farmers Union, a part of the American Farmers

and Ranchers family of companies, my activities have allowed me many opportunities. One of those opportunities is to serve on the board of directors of the Oklahoma

Sustainable Energy LLC where our objective is to construct the first commercial

ethanol plant in Enid, Oklahoma utilizing state grains—primarily grain sorghum to

enhance producers’ incomes and to help offset our dependence upon foreign oil.

EXTEND THE 2002 FARM BILL

First I will address the heart of the farm bill—underwriting the American food

supply system for not only the benefit of farmers and ranchers but for the consumer.

The latter perhaps benefits more than the producer from any bill that could be

crafted. Yet, so many times agriculture takes the brunt of criticism.

Rural America’s economy has deteriorated at a rapid pace as a result of skyrocketing energy expenses, low commodity prices, continued budget cuts and weather-related disasters. Cutting advance AMTA advance payments to 22 percent as part of

the congressional budget deal could not come at a worse time for state producers

already burdened as a result of wildfires and drought and little to no crop production. The word on this action with respect to these anticipated payments and which

usually comes in December or January is now reaching the desks of local bankers.

This is creating a great anxiety with the banking community. One of the busiest

state agricultural bankruptcy attorney reports record numbers of producers that are

lining up at his door to take steps to restructure in recent weeks.

World Trade Organization talks have stalled. A renewal of negotiations could use

agriculture as a bargaining chip in the overall negotiations and apply new limits

and disciplines for future domestic agricultural policies. We should not defer to

WTO in any way to write our domestic farm policy. It is Congress’ responsibility

to write a policy good for U.S. producers and to find a WTO legal way to get funding

to producers. Extending the current farm policy may provide U.S. negotiators with

incentive to bring back the very best deal possible for American agriculture.

Our trade deficit continues to worsen. Agriculture exports have always been the

bright spot to offset this number. This year we will likely import more agriculture

products than we export. The U.S. agriculture trade balance has shrunk from a surplus of $27 billion in 1996 to $3 billion today. Domestic cattle markets have done

well in recent years by borders being protected and beef being exported. However,

grain producers need the same opportunities. Our government is trading grain

farmers away.

We should negotiate at global trade sessions to maximize market access at the

minimum amount of cuts to our existing programs. Insist on guarantees, which substantially increase market admittance on any individual commodity in both developed and developing nations. We must make certain that all countries stop the manipulation of shifting various agricultural products and commodities to the ‘‘sensitive product’’ categories. ‘‘Sensitive products’’ are simply a protection method for

avoiding tariff reductions and subsidy cuts for some rather than all. Define the

terms of agreement and call for all members to adhere to the policy. As additional

trade leverage, strongly endorse and require at world summits, the absolute necessity for increased health standards for all agricultural products. U.S. offers far superior quality production at increased costs over the standards of other countries and

not given credit for our excellence at the trade table.

The administration and Congress continue to cut funding from farm bill programs

through the annual appropriations and budget reconciliation process while the farm

bill has shown savings of more than $15 billion in the first three years of enactment.

Oklahoma Farmers Union and producers just like me continue to oppose any dollar reduction of budgeted items in the 2007 farm bill over the previous bill. Our

basic and fundamental position has always been to support the stability and continuation of the family farm. Our major points are to resist any budget cuts and

give moderate consideration to minor lateral adjustments within the appropriations

of the agricultural funds.

Extending the Farm Security and Investment Act of 2002 will ensure continuation

of our economic safety net and other vital farm bill programs and allow time to improve on the current law and ideas being considered.

PERMANENT DISASTER AUTHORITY

The farmers and ranchers of Oklahoma as well as producers from across the country must have protection from natural catastrophes. The current global market is
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unforgiving when a natural occurrence causes the producer to loose the momentum

of supplying the demand. The contagious results of a drought disaster can impact

the producer far beyond the year of occurrence. The global market views the interruption of supply as a grower flaw and leaves little chance for the producer to reenter the competition. The economy of global market conditions must be stabilized

by protective programs and minimize the interruption by drought disasters.

The 2002 farm bill was not however designed to provide protection or mitigate

weather-related losses. Current risk management programs are also insufficient in

addressing production and quality losses.

Farmers and ranchers across the U.S. have experienced overwhelming losses from

weather-related disasters in 2005 and 2006. More than 50 percent of all U.S. counties have been declared primary or contiguous disaster areas by USDA in 2006. A

year ago, nearly 80 percent of all U.S. counties were declared weather-related disaster areas by either secretarial or presidential declarations.

Oklahoma has been impacted by both drought and wildfires. The statewide

drought started in the fall and winner of 2005. Because of the drought conditions,

producers have had little to no wheat pasture for stockers this past fall and winter.

Cowherds have been reduced or sold completely because of inadequate water, grass

and hay supplies. The state wheat crop yielded 45 percent of its normal level, the

lowest since the 1960’s. Wheat farmers typically harvest 70 percent of their land,

leaving the rest for cattle. This year they harvested 56 percent.

The cost of installing new wells, rural water connections and pumping or paying

monthly charges for water are all additional costs to producers. Without grass or

hay producers have purchased rations with high fiber content, at additional expense, to help their herds survive. To avoid the expense of sack feed and because

of volume feeding, producers are acquiring overhead bins and truck feeder delivery

systems to adequately feed their herds. Input providers are being impacted as producers are reluctant to apply fertilizer unsure they will have a crop established.

Grain elevators are losing revenue usually received from grain storage due to the

low-yielding crop.

Climatologists say it’s the worst drought in a half-century for the state. The

droughts of the 30’s and 50’s were similar in that they were a series of short, intermittent-term droughts, which together characterize a decade of limited rainfall.

Oklahoma set a record for the hottest first six months of a year from January

through June, making 2006 the warmest start to any year since records begin in

1895. These numbers do not include the triple-digit temperatures of July and August.

Solutions? The next farm bill authority should include a permanent disaster program to assist producers during times of natural disasters without relying upon

yearly ad hoc assistance or the political climate in Washington. Such authority existed in the 1980’s utilizing the Commodity Credit Corporation fund which Congress

retrospectively refunded annually based on the expenses incurred during the year.

Assistance to producers was immediate. In writing a new farm bill Congress must

return to standing authority that allows funding to be available immediately for

emergency assistance. Year around risk management protection programs for natural occurrences must be put into place in the new authorization. Minimum standards of rainfall could be established in states in order to have continuous implementation of expanding Conservation Reserve Program acres eligible for emergency

haying and grazing for livestock producers.

A short term solution to this issue is to pass immediate emergency disaster assistance that is available immediately. Since nothing else is on the table, we would encourage you to pass the Senate Appropriations Committee-approved FY2007 Agriculture appropriations bill, which includes $3.9 billion for emergency agricultural

disaster relief. Legislation has been introduced for a $3.3 billion package in the

House but nothing has been put into an appropriations measure to date. The need

is much greater than either of these amounts when both 2005 and 2006 losses are

considered. Funding must come quickly and not 1° years after the money is appropriated as was done in the last appropriations for crop and livestock farmers.

It is important to point out that under the current farm bill countercyclical payments have basically been a non-occurrence for wheat producers in Oklahoma. So,

the recently accelerated release of countercyclical payments did not assist wheat

producers since there was not a payment to be made.

The new bill should reform risk management tools in a manner that is structured

to respond to severe multi-year weather-related disasters. Provide coverage for forage and specialty crops; indemnify livestock losses; and cover quality and market

losses resulting from forced sales.
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FUELS FROM THE FARM

America’s addiction to foreign oil is threatening our national security. Foreign dependency will accelerate the emerging U.S. renewable energy sector and our goal

of developing while growing America’s energy independence. We should make use

of renewable fuels which will increase domestic demand for surplus farm commodities, lower Federal outlays of farm subsidies, improve the environment, and decrease American reliance on foreign oil. Agriculture and renewable energy is the key

to diversifying our energy markets and creating new economic opportunity for rural

America

Extraordinary rising costs of gasoline, diesel fuel, natural gas and petroleum-derived input products, such as fertilizer, chemicals and propane, are adding yet another economic burden to rural America. Farmers and ranchers are unable to pass

along these increased production costs as other businesses can, because producers

do not set the prices for their commodities.

Oklahoma Farmers Union is doing its’ part to assist with alternative fuels

through affiliated Oklahoma Sustainable Energy LLC (OSE). OSE, in a joint venture with Chaparral Energy, will construct a 55-million gallon per year ethanol

plant to be located in Enid. The plant will employ 30–35 employees and operate at

over 96 percent efficiency 350 days per year. The facility will convert grain sorghum

and corn into fuel-grade ethanol, distillers grain and carbon dioxide. The plant will

annually convert approximately 20 million bushels of grain into approximately 55

million gallons of fuel-grade ethanol, approximately 200,000 tons of distiller grains

and approximately 154,000 tons of raw carbon dioxide gas. To raise the necessary

equity capital for its’ portion of the plant, OSE is currently conducting an equity

drive offering up to $14,000,000 limited liability company units for up to 499 investors.

Short term, Congress should provide assistance to farmers and ranchers to mitigate the impact of higher energy prices and declining commodity prices.

Long term, Congress should expand and accelerate Renewable Fuels Standard

(RFS) for ethanol, establish RFS for biodiesel; extend and create renewable energy

production tax credits for community-based projects; create a farm-stored Strategic

Renewable Energy/Biofuels Reserve, dedicated to biofuels and energy feedstocks

storage and production; expand biofuels distribution system.

CONSERVATION

One of the early programs that came out of the Dust Bowl era, was the Upstream

Flood Control Program, PL–534 and PL–566. The structures these programs have

built, have provided flood control, erosion control, wildlife habitat, fishing, irrigation, water for cities, communities and rural water districts, along with many other

benefits. The PL–566 program needs reestablished and fully funded to continue this

much needed infrastructure. The original structures are at the end of their constructive life. Many of these structures have served their purpose, but continue providing

benefits. They need to be rehabilitated. Congressman Frank Lucas established the

Upstream Flood Control Rehabilitation Program several years ago. This program

has effectively rehabilitated some of these aging structures. However, much more

needs to be done. We cannot afford to let this important infrastructure fall into disrepair, like the levees in New Orleans. It will cost less to repair these sites than

to build new ones.

Cost share programs have been the base of the conservation effort in this state

and across the Nation. Programs such as the Great Plains Program, Agriculture

Conservation Program (ACP), Conservation Reserve Program (CRP), Environmental

Quality Incentive Program (EQIP), Wildlife Habitat Incentive Program (WHIP),

Conservation Reserve Enhancement Program (CREP) and Conservation Security

Program (CSP) are some of the numerous programs offering landowners a VOLUNTARY hand in managing their land. These programs MUST continue or be reestablished to assist in this conservation effort. Some talk about a regulatory approach

such as the past experience with wetlands; others talk about private industry paying for the programs, such as the current Oklahoma Attorney General’s lawsuit; but

programs that are voluntary in nature have established more wildlife habitat, erosion control, grassland plantings, and wetland protection than any regulatory or

lawsuit could ever do.

Farmers and Ranchers must have income from their land. Conservation practices

cost money to establish and maintain. Agriculture producers cannot sink dollars in

a practice that do not have a pay back over a few years. A combination of EQIP

and CSP has proved to be effective, yet not create an economic hardship to the agriculturist. CSP was designed to provide a level of income to producers following good

conservation on their land. CSP has not been fully funded; implementation has been
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spotty. The intent of Congress was to provide the needed assistance to producers

who want to continue proper care of soil and water. Oklahoma has the highest level

of CSP participation of any state because of the strong partnership over the last five

to six years. Funding EQIP and CSP must be a top priority in writing the next farm

bill.

Oklahoma’s cooperative conservation partners have worked together on the key

issues of water quality and quantity. Western Oklahoma has experienced numerous

years of drought cities have rationed water and producers using irrigation have

found more efficient methods of water application. Eastern Oklahoma has experienced drought and water quality problems for cities, rural residences and agriculture. The partners of local conservation districts, landowners, state and Federal

monies have shown a 39 percent improvement of water quality in watersheds that

best management practices have been used. EPA 319 funds have been used for implementation and monitoring watersheds that have plans approved. These partnerships have improved the environment and the economics of the area.

Oklahoma has the largest number of federally recognized Native American Tribes

in the Nation. The relations with the partners and tribes have improved greatly

over the last five years. They bring a wealth of caring for the land to the table. We

have discussed the issues of tribal water and air quality standards within the partnership. Our concern is to have consistency in standards, whether in a watershed

or an area of the state. The tribes have consistently worked with NRCS to establish

excellent conservation programs and recognized those producers that excel in caring

for our natural resources.

GENERAL TRADE RELATIONS

History has proven that free trade benefits have been largely over-estimated

based on the outcome of virtually every proposed trade agreement. The promise usually far exceeds the performance. Agreements should provide for fair and profitable

trade for the producer. Everyone seems to benefit except for guy on the land. Agreements must address all factors of trade including environmental standards equity,

health and labor standards equity and currency manipulation.

The trade balance of the United States has shrunk from a surplus of $27 billion

in 1996 to $3 billion today. Free trade agreements such as the Central American,

Australian and Oman agreements did not address persistent global overproduction

capacity, ensure net U.S. agricultural export expansion or increased market share

and did not seek coordination and enforcement of competition policies. Trade promotion authority forfeits Congress’ rights to amend U.S. trade legislation.

The relationship with Japan has been nothing less than on again off again. A recent and singular error by Atlantic Veal and Lamb reported ‘‘We sincerely regret

that we shipped product not approved for export to Japan,’’ said company’s president, Philip Peerless. The USDA Findings and Actions Report came to this conclusion, ‘‘The investigation revealed this incident was the result of a failure on the part

of the exporter and USDA personnel to know which products were eligible for shipment to Japan. By agreement with the Government of Japan, no vertebral column

was to be shipped. Vertebral column was shipped in one (1) box labeled Hotel Rack

and two (2) boxes labeled Trimmed Loin. While some evidence and history of error

has occurred, the incidence of 3 boxes is hardly a true representation of the overwhelming volume and quality of previous proven shipments. Based on reports of the

U.S. Cattle and Beef Industry prepared by Cattle-Fax in Oct of 2004, ‘‘U.S. cattle

producers were the second largest supplier of Japanese beef and beef variety meat

imports in 2002, supplying over half (51 percent) of the beef products imported by

Japan in 2003. Japan’s foot dragging attitude may be based on unfair trade tactics

due to Australia’s market surge during our absence. At best, the U.S. Meat Export

Federation concludes,’’ Australia has had three years to establish a now 80 percent

share of the Japanese beef import market. That country was the top exporter of beef

to Japan last year, exporting 440,304 metric tons, worth $2.1 billion (U.S.).’’ While

we hardly blame those countries who seek market opportunities, we question the

validity of those products being as good or equivalent to our worst market shipments.

All foreign buyers need specific rules of engagement of trade negotiations for beef.

We should make sure the parameters of sales is understood and once agreed upon

would include penalties for deviations or violations. Any country, including Japan’s

erratic behavior, sets uncomfortable precedents of acceptable behavior for economic

trade techniques for others such as China and Korea. The interruption of a U.S. billion dollar market export should not be established by three cases of beef products.

The economics of market trade cannot be the scapegoat of senseless world political

statements.
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We should stop the association of beef trade with any country with a history of

unchecked BSE. The U.S. relationship with Canada’s co-mingled beef creates suspicions and doubt of the overall quality of U.S. beef shipments with foreign consumers. We must be committed to the necessary inspection personnel and equipment for

compliance according to the trade agreements. It is a priority to create or seek out

an immediate replacement for the beef production volume, which is normally reserved for countries that exaggerate conditions and create gaps in flow of beef exports. The focus on the American beef industry should be evaluated on the basis

of a ‘‘technical violation and not a beef safety issue.’’

Congress should require the necessary enforcement for the 34 approved plants to

continue to ship quality BSE free products. Agree that all U.S. beef shipped for

Japan must come from cattle less than 20 months old with no brain or spinal material included. Make sure Japan embraces a gradual increase for the next two violation free years the change for the age increment to include animals of 24 months

and under in age. Necessitate a specific agreement for the insurance of sale and

shipment of American beef to Japan including provisions for the removal of diseased

beef without interrupting continuous shipments.

RURAL DEVELOPMENT/VALUE-ADDED GRANTS

We want to thank you Congressman Lucas for your assistance in the Value Added

Developments Grants through USDA Rural Development. Two of these grants will

result in an ethanol plant in Enid and an oilseed processing plant in western Oklahoma.

The new farm bill must include renewed authorization language and funding for

the Value Added Development Grants. These grants help lay the foundation for

small business development in rural Oklahoma and the Nation. Projects resulting

from these grants add value to raw agriculture commodities creating jobs and additional cash flow to rural citizens. These grants have given hope to agriculture producers who have weathered drought and tough economic times in the state. They

help foster new ideas and business development in parts of the state that need a

boost.

NEW OPPORTUNITIES

In this bill we must identify the unmet needs of agriculture. Recognize the requirements in conservation, environmental performance, research and discovery. Increase the production of bio-fuel commodities for their use in food, fuel, industrial

uses and exports. The use of bio-fuels production for ethanol produces a considerable

‘‘cake’’ by-product for animal feed groups. Increased production provides more

biofuels and animal food while decreases the practice of un-needed conservation programs. Recognize and project the highest global demand of agricultural products for

the next ten years and prepare the agricultural industry to supply the demand.

Every effort should be taken to ramp up agriculture science with monetary incentives to develop higher product yields with value. Initiate an aggressive use of the

advance technology of the United States agriculture products to provide a decisive

edge in the global market. Better utilize the dominant and superior telecommunication capabilities of the U.S. to enhance the demand from foreign markets. Aggressively develop a marketing program for American agricultural products matched to

targeted areas

Thank you for coming to Oklahoma and please carry our message back to your

colleagues in Washington as you craft the next farm bill which we hope would be

an extension of the basic commodity program and slightly adjusted in other areas.

STATEMENT OF SCOTTY HERRIMAN

I am Scotty Herriman, an agriculture producer from northeast Oklahoma, Vice

President of the Oklahoma Association of Conservation Districts (OACD) and a

member of the Nowata County Conservation District Board. On behalf of OACD, our

local Conservation Districts, our directors, employees, associate members and the

thousands of Oklahoma land-owner cooperators, I want to take this opportunity to

submit testimony in support of the Conservation Title of the 2002 farm bill and to

suggest for your consideration ideas for the improvement and expansion of current

USDA conservation initiatives.

First let me say that we at OACD believe that the 2002 farm bill marked a watershed for conservation in the United States. The level of interest in conservation and

the corresponding funding of voluntary, locally-led conservation initiatives nation-
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wide marked a new area in the partnership between the Federal and state governments, local conservation districts and individual landowner cooperators in the locally-led, voluntary protection of our soil, water, air and wildlife habitats. The expansion of existing programs such as the Environmental Quality Incentive Program

(EQIP), the Wildlife Habitat Incentive Program (WHIP), the Wetlands Reserve Program (WRP) and the Conservation Reserve Program (CRP) combined with the creation of new initiatives such as the Grasslands Reserve Program (GRP) and the

Conservation Security Program (CSP) has set the tone for the delivery of assistance

to producers, helping them address environmental concerns through cooperative approaches instead of heavy-handed regulations. With the help of the assets provide

in the last farm bill, we have made a significant impact on the landscape and have

addressed numerous natural resource issues. Truly the conservation title of the

farm bill has extended the opportunity for USDA financial and technical assistance

to every corner of the state and all segments of Oklahoma agriculture.

That said however, we have much more to do. We must maintain this level of

commitment to conservation as we move into the next farm bill if we are going to

help producers address the myriad natural resource challenges they face. An example of one such challenge is the spread of the eastern red cedar, a native plant that

has broken its historical bounds in our state due to changes in land use over the

last 100 years. This invasive species is currently infesting 700 acres of Oklahoma

every day. That’s 700 acres every day lost for grazing, 700 acres every day on which

wildlife habitat has been degraded or destroyed and 700 acres every day that presents a greater fire hazard due to the existence of this highly flammable tree. In

addition, the red cedar and the more aggressive salt cedar consume on average 100

gallons of water per tree per day. Clearly this presents a challenge for landowners

that must be addressed. Currently, we do not have the EQIP funds sufficient to address the challenges presented by invasive species such as the Red Cedar while at

the same time continuing the other work we do in conserving our soil, protecting

our water and improving wildlife habitats. We must maintain the commitment Congress made for conservation in the last farm bill and build on its success to address

these types of challenges.

As we renew the Nation’s commitment to conservation however, we must remember that program funding alone is not all that is needed. Technical Assistance dollars must also be made available to ensure that these programs are delivered effectively and that producers have the assistance they need to properly address the natural resource issues they face on their land. The current level of financial assistance, while welcome, is straining the existing delivery system. Congress should ensure that adequate funding is provided to NRCS for the human resources to deliver

the various farm bill programs. This delivery should be done through the existing

NRCS system in cooperation with the local conservation districts and the various

state conservation agencies. Congress should also re-invest in general technical assistance for producers through the NRCS. With the increase in program dollars we

have seen since 2002, we have lost some of the past focus on conservation planning

and assistance to landowners with non-farm bill program conservation. It is this

conservation planning that often shows landowners what natural resource issues

they need to address on their land which then leads to their utilization of the farm

bill programs. In addition, landowners also often follow up on the conservation work

they have done through a program like EQIP by asking the local NRCS staff what

other improvements they could make to their operation. Without a solid level of

technical assistance support locally through NRCS in cooperation with the local conservation district, this help would not be available and this additional conservation

work would not take place, leading to greater challenges in the future and more

pressure on landowners.

Many of the changes in the area of technical assistance in the last farm bill, while

well meaning did not perform as anticipated. The primary example of this was the

push to move toward private sector technical service providers (TSP). While this

concept looked good on paper, in reality it has been a bust. In Oklahoma, few private sector TSPs are available for hire by landowners. In addition, those that are

in business charge a level far above the percentage of program dollars that NRCS

has traditionally utilized for farm bill delivery. These providers also are often hesitant to deal with producers with only a small number of acres in need of improvement. Private sector TSPs seem to prefer larger projects with a much larger pay

scale. While the push toward private sector TSPs has not been successful in our

state, one change to the delivery system that has worked is the utilization of the

partnership between the NRCS, the Oklahoma Conservation Commission and the

local conservation districts in farm bill delivery. By training local district employees

and Conservation Commission employees to help deliver farm bill programs and do

conservation planning, we have been able to effectively and efficiently deliver the
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increase level of program dollars we have seen since 2002 while leading the Nation

in sign-up of producers for new programs such as CSP. We believe NRCS should

have greater flexibility to work with local districts and state conservation agencies

to build on this type of success.

We also believe the practice of utilizing local conservation district boards as the

entity that sets priorities for local conservation as done by NRCS in Oklahoma

should be the model nation wide. In Oklahoma, our local landowners, through their

locally elected conservation district directors, help set the priorities for conservation

work in their local area, providing not only local input, but also local producer buyin. This is how conservation was originally supposed to work. Who knows better the

needs of the local area than the people who live there? NRCS should consult these

local boards to ensure that they have the input of local citizens, not just from a

statewide source such as the State Technical Committee, but from the landowners

within a more limited geographic region. By doing this, NRCS would avoid ‘‘cookiecutter’’ approaches that assume that one size will fit all. By moving more responsibility to the local level, NRCS would also enjoy the support and buy in of the local

producers who elected the board members and who know them as neighbors and

friends. It is much easier to have a local producer convince a landowner of the need

to address a natural resource issue than to have someone from Washington D.C. or

even Oklahoma City try and do it. We at OACD feel it is time to write into the

conservation title of the farm bill the role of Local Conservation Districts as the entity that helps set local conservation priorities. We also believe it is time to place

all USDA conservation programs including CRP and GRP under the conservation

district/NRCS umbrella.

In the area of farm bill Programs, OACD feels that many improvements can be

made to the existing alphabet soup of conservation initiatives. First, we feel that

the current rate of cost-share to producers needs to be reviewed. The current rates

of cost-share today are often times too low to allow farmers and ranchers who are

suffering economically to participate. This is especially evident in this record

drought year. Because of this, absentee landowners with non-farm income and those

many consider as ‘‘hobby farmers,’’ (people who live on acreages in the country but

work primarily in the city) are the ones who can most readily take advantage of

farm bill conservation programs. While we wish to serve these customers and are

appreciative of their participation in conservation programs, we believe some

thought should be given to ensuring that full time agriculture producers have the

ability to access programs, even during down turns in the agriculture economy. We

also believe it is important that the next farm bill continues to tie participation in

USDA programs to a conservation plan. These plans help producers identify needs

on their land and help set the stage for good stewardship work by the landowners.

We believe conservation plans are a critical element in the delivery of Federal conservation programs and should be a part of the next farm bill.

We feel EQIP is, for the most part, working well. We would ask that funding at

the current levels be continued (or increased) and that Congress take into consideration the technical assistance needs necessary to deliver this program. WHIP, however, currently is facing a backlog of applicants in Oklahoma who cannot take advantage of this program due to inadequate funding. If this program is continued,

it should be funded at a much higher level. We continue to see an increase in interest in wildlife habitat improvement and protection from our cooperators. WHIP, if

properly funded, could become the flagship program for helping improve our wildlife

habitats on working lands nation wide.

CRP is a popular program that has done much in its retirement of some of our

most marginal land in Western Oklahoma. During this record drought, one can

speculate that much of this land would again be subject to wind erosion on par with

that of the 1930’s if it was again in crop production. That said, OACD feels that

more flexibility is needed in this program to address sensitive lands. Too often CRP

has been treated as a program to reduce commodity production rather than as a

conservation program. That said we support CRP.

There has been much interest in the Wetlands Reserve Program (WRP) in Oklahoma. Unfortunately recent changes in the land appraisal process have reduced participation. Last year 24 WRP projects were planned in Oklahoma. Of these only 8

were accepted by landowners after the appraisals were done on the land in question.

We would also ask that WRP be taken out from under the CRP cap for counties.

We have land in Oklahoma, especially in the panhandle, that could be under the

WRP today except for the fact that the counties in which this land resides is currently at or over its CRP cap. This needs to change.

When considering the Grassland Reserve Program (GRP), Congress needs to seriously review this program to ensure that it is meeting the vision of Chairman

Lucas. The rental rates that have been set by the Farm Services Agency (FSA) have
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limited the number of acres that can be enrolled. Additional funding is needed to

increase participation. This program could play a major role in protecting ranchlands and preserving certain sensitive ecological habitats, but as it is currently

being implemented, few acres are being enrolled. We support this program, but we

feel it needs review.

Finally, we feel that the Conservation Security Program (CSP), like the Grassland

Reserve Program, is an exciting new program that has not been implemented in a

manner consistent with the vision laid out for it by Congress. The concept of rewarding landowners for practicing stewardship is one that we whole heartedly support. The possibilities of rewarding those good stewards of the land while providing

additional motivation for other landowners to follow the lead of their more conservation minded neighbors are incredible in their possible scope of reach. That said, the

way the program is currently being run falls short of this goal. The practice of only

signing up certain watersheds and then closing the program for that area does not

meet the vision that was laid out for this program in the 2002 farm bill. This program should be nationwide in scope and be a continuing option for landowners. As

with any new program, producers often learn from mistakes in the original signup period or they see ways in which they can improve their operation for next year’s

participation. This is not possible in the current framework of CSP as interpreted

by the administration. We believe the intention of this program was for it to be a

nationwide, multi-year program instead of the limited program currently being run.

We support CSP but would ask that Congress ensure that it be run as it was intended in the 2002 farm bill.

Before closing I also should mention the importance of the watershed rehabilitation program to the state of Oklahoma. Our state is home to the first flood control

dam built in the Nation, Cloud Creek Watershed Dam #1 near Cordell in Washita

County. Oklahoma is also proud to be the home of the first fully completed Watershed Project in the United States, the Sandstone Creek Watershed Project located

in the home county of Chairman Lucas, Roger Mills County. Today, Oklahoma has

more flood control structures than any other state in the Union. These ‘Silent Sentinels’ continue to stand guard in our countryside, protecting our citizens from the

devastation of life and property that results from flooding. Every year these structures provide an estimated $71 million dollar in flood prevention benefits to the

state. Clearly this infrastructure has been and continues to be a blessing for the citizens of Oklahoma.

Unfortunately, like any other piece of man-made infrastructure, these flood control dams must be maintained and in time rehabilitated. As you are well aware, the

vast majority of the flood control dams built in the 1940’s, 1950’s and 1960’s were

constructed with a life expectancy of 50 years. It takes very simple math to deduce

that the time has come for a major effort to be made in rehabilitating these structures. Currently, Oklahoma has 132 dams past their 50 year design life. Over the

course of the next 10 years, we will see 1,100 more structures reach this dangerous

road mark. Oklahoma has today rehabilitated over 28 structures, more than any

other state in the country, but clearly more must be done. We all witnessed what

happened in New Orleans when infrastructure dedicated to water impoundment

was allowed to fall into disrepair. Clearly we want to ensure that these ‘Silent Sentinels’ remain on watch and remain silent because we are all too well aware of the

noise they could make. We want to applaud Chairman Lucas and the other members of the Sub-Committee for their foresight in passing language in the year 2000

to provide matching funds from the Federal Government to help states begin the

process of rehabilitating these aging dams. We also want to convey our appreciation

for the continued funding of this program and for the increase this program received

for 2006. Clearly we have a long way to go on this issue. We at OACD want to again

voice our support for the Watershed Rehabilitation Program as well as the Flood

Prevention Operations Program (PL78–534) and the Small Watershed Program (PL

83–566). It is our understanding that the watershed rehabilitation program needs

to be re-authorized as part of the next farm bill and we would urge Congress to take

this action.

Again, I want to thank you for this opportunity to testify before the Sub-Committee. We appreciate all you do for rural America and we ask that you continue to

support American Agriculture and the protection of our natural resources through

voluntary, locally-led, cooperative conservation.

Thank you again for allowing myself and OACD this opportunity.

STATEMENT OF LES CRALL

Mr. Chairman and members of the subcommittee:
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I am Les Crall, a peanut producer from Weatherford, Oklahoma; here today on

behalf of the Oklahoma Peanut Commission..the state’s commodity board whose

mission is ‘‘to enhance the viability of all Oklahoma peanut producers’’. Thank you

for conducting this hearing and the invitation to comment on the affect of the 2002

farm bill on peanut producers and how the next farm bill might address the challenges facing our industry.

AN EXPERIMENT UNDER REVIEW

The Peanut provisions of the 2002 farm bill was a drastic departure from the

‘‘supply/management’’ programs authorized by Congress and administered by USDA

during the previous four decades of farm legislation. In preparation of drafting new

farm legislation it appears appropriate Congress evaluate the affects of the ‘‘peanut

marketing loan’’ program, now in its fifth year.

A CHANGING LANDSCAPE

The entire U.S. peanut industry was affected by the peanut provisions of the 2002

farm bill, arguably, some good and some bad.

Farmers quickly learned the opportunity for profit under a marketing loan program would demand sustained exceptional yields. The result of the Legislation has

been a dramatic shift in production areas in every peanut state. Thousands of ‘traditional’ producers nation wide have been squeezed out of business or have drastically

reduced acreage because the cost of producing exceptional yields exceeds any profit

potential.

On the other hand, producers with fresh ground (without the cost of controlling

disease, insect and weeds) have been able to produce yields high enough to offer

them a short-term profit. Over time, these new producers will face the ultimate

challenge..how to stay in business.

Results.The subcommittee should be aware Oklahoma is one of several States adversely affected by the 2002 bill. With limited fresh ground available, peanut acreage in the state has dropped from 80,000 in 2001 to less than 22,000 acres today,

the lowest since 1927. A farm producing less than 4,000 pounds per acre in Oklahoma is non-profitable under the 2002 legislation. In 2001 the state average yield

was 2,600#/A. Thus, hundreds of farms all across southern Oklahoma have abandoned peanut production as a livelihood, idling substantial investments of specialized equipment non-adaptive to other production systems.

Loss of acres has resulted in loss of infrastructure..50 percent of the state’s peanut buying points (marketing & storage facilities) and shelling plants have closed

since the implementation of the 2002 Bill. Transportation costs to remaining facilities, has become a major factor affecting planted acres.

Entire communities have suffered economic losses as the value of peanut production dropped from $55 million in 2001 to only $17 million in 2005, in spite of the

fact Oklahoma producers set ‘per acre’ record yields the past three years.

Without a supply management program, farmers in many states initially increased plantings, searching for a crop ‘that will work’; resulting in a record surplus.

The entire industry now faces a near disastrous situation..too many peanuts and no

market.

Has the Program Worked?

The corner stone of the 2002 peanut legislation was the establishment of a marketing loan program that had long benefited producers of other program crops. This

new concept for peanuts was designed to provide producers an essential level of cash

flow at harvest via a non-recourse $355/ton loan. Thus allowing the producer to orderly market his crop; which was pledged as collateral for the USDA loan. When

the producer found a favorable price in the market, the crop could be sold and the

USDA loan repaid.

The marketing loan program also allows the producer to fully repay the loan at

a reduced amount when the commodity price in the market is lower than the loan

rate established by Congress. If the repayment rate is greater than the prevailing

market price, the producer can exercise his option to forfeit his crop to USDA under

the non-recourse provision. Additionally, the farmer is given the option of foregoing

the loan and selling the crop into the commercial market and taking a loan deficiency payment (LDP), which reflects the difference between the loan rate and the

repayment rate.

How has the marketing loan worked after 5 years? Large government loan forfeitures and huge, price-depressing stocks should answer the question. USDA’s 2006

planted acres report reflects a unified rejection by producers via a 30 percent cutback in peanut plantings across the peanut belt. The Southwest is no exception,
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with Oklahoma cutting 30 percent and Texas, the Nation’s second largest producer,

off more than 42 percent from a year ago.

Farmers must have a market above the $355 loan. With escalating production

costs of fuel, transportation, irrigation and pest control farmers can not afford to

grow peanuts at loan price. Ironically, the 2002 program provides peanuts to buyers

at or below the loan price; resulting in only limited marketing options for producers

much above the loan. Thus, the marketing loan has become the market ceiling.

Time for a Fix

National Posted Price—Loan Repayment Rate: The reality is; peanuts are different than other commodities. Unlike wheat or feed grains, peanuts do not have

a market price mechanism to allow a marketing loan & repayment program to function honestly. There is no peanut futures market; no daily market reports; no accurate or transparent method of price discovery.

USDA/AMS announced on September 1, 2006, that due to consolidation in the

shelling industry and the increasing use of non-disclosure contracts, the agency can

no longer accurately reflect prices for shelled peanuts. Updating of the National

Posted Price report used for peanut loan repayment rates will now be attempted

from survey data published weekly by USDA/NASS. A problem lies with price discovery..Congress should fix!

Smart-Card Technology was scrapped in the 2002 Bill. Prior to the new Bill,

USDA used ‘state-of-the-art’ computer chip record keeping via the producer smart

card. FSA effectively managed the peanut program at the local level with the use

of the smart card to record certified planted & harvested acres, actual production

records by farm number reflecting the peanut type, grade & value; and disposal of

the crop. This record keeping device was the envy of other commodities. Without it,

farmers must rely on paper records for production history and other requests by

FSA. Without it, no one accurately knows how many Spanish, Runner, Virginia or

Valencia peanuts were grown in the U.S.; nor the crop value, quality or disposition.

Without it, important crop statistics are based upon industry surveys. The SmartCard has a proven record; Congress should reinstate!

Peanut Handling & Storage is an important provision of the current program necessary to allow orderly marketing of the crop. In contrast to other program commodities, peanuts are a semi-perishable crop requiring adequate storage to maintain

their viability as an edible commodity. The program provision was designed to protect the producer from costs related to storage and handling. Should in fact, the producer be required to bear that burden; the net result would be a $300-$310/ton peanut and the end of peanut production in Oklahoma! Government payment to handlers to cover these costs expire August 1, 2007...Congress should extend the payments for the 2007 crop and the duration of the next farm bill!

Payment Limitations is perhaps one of the most debated and most misunderstood

issues. USDA payments are based upon an equitable risk per unit. An acre is an

acre, no matter the size of the farm operation. For each unit of risk (large or small)

the producer is equal. The fact that a family farm has incorporated for tax, management or other reasons should not be a basis for penalty. Payment limitations..Congress should not change!

Cost of Production adjustments were historically a provision of previous peanut

legislation, not included in the 2002 bill. Without a mechanism to annually review

and adjust up or down program payments, producers become locked in a ‘fixed’ price

system for the life of the bill. USDA has the ability to survey production costs that

could be annually adjusted via changes up or down to the program target price. Escalating input costs such as fuel, fertilizer and pest control warrant a cost of production adjustment to maintain the viability of the producer. Congress should consider

an annual target price cost of production adjustment!

I want to thank the subcommittee on behalf of the Oklahoma Peanut Commission

and the state’s peanut producers for the opportunity to make suggestions for your

consideration in future farm legislation. We thank the Subcommittee for conducting

this hearing in Oklahoma, a proud state soon to celebrate our Centennial and our

agricultural heritage. We look forward to working with you in the development of

an improved peanut program that enhances the viability of our producers and carries out the intent of Congress.
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STATEMENT OF DANNY ROBBINS

Mr. Chairman and members of the subcommittee, thank you for holding this hearing and for providing me an opportunity to present testimony on current and future

farm policy.

My name is Danny Robbins. I have served in leadership roles with the National

Cotton Council, American Farm Bureau and Oklahoma Cotton Council. I am a 4th

generation cotton, cattle and wheat farmer in southwest Oklahoma.

Cotton acreage in Oklahoma has been relatively stable in recent years. The primary reasons are the success of the boll weevil eradication program, an effective,

stable farm program, and new cultural practices and technology—including biotechnology. I would also note that our operations require intensive management and

that we continue to invest heavily in technology to remain competitive.

This year drought conditions have caused Oklahoma farmers to abandon over

70,000 of the 300,000 planted acres. About 75 percent of all cotton in Oklahoma is

in counties with disaster declarations and over 71 percent of all acreage is either

abandoned or rated poor to very poor. Mr. Chairman, these crop losses impact growers, as well as gins and warehouses and rural businesses. I urge you to work with

your colleagues to pass legislation which will provide emergency disaster assistance.

The rapid decline in raw cotton consumption by domestic mills has created challenges for all cotton farmers who must identify new export markets to replace domestic consumption lost to imported products. The market has placed new and

added pressure on our infrastructure including surface transportation and port facilities. We are working with the industry and with USDA and Congress as appropriate to meet those challenges.

During my testimony, I will frequently refer to the success of our current farm

law. It is not insignificant that for the past 6 years no farm organization has called

for major modifications of current law nor has Congress approved major changes.

We believe the current farm law has and continues to provide a stable and effective national farm policy for our country. The combination of direct and counter-cyclical payments provide an effective means of income support, especially when prices

are low, without distorting planting decisions. The primary shortcoming of the 1996

law was the lack of a counter-cyclical payment that triggered when prices are low.

As a consequence, farmers were forced to request emergency assistance from Congress year after year. This has been alleviated by the counter-cyclical program provision in current law. The direct payment mechanism helps provide financial stability required by our leaders and suppliers without distorting production decisions.

It is important to maintain a balance between these two mechanisms. Higher direct payments can have unintended impacts. They can provide an incentive for landlords to take their lands out of producers’ hands. Higher direct payment can also

create unexpected problems with payment limits, which are currently established

separately for each program benefit.

It is important to consider that sudden, significant program changes can have different regional impacts due to historical differences in cropping patterns and yields.

We strongly support continuation of the marketing loan. In fact, it is clearly our

top priority under all circumstances. Cotton and rice were the guinea pigs for this

innovative policy in 1985 and it has served us well. The marketing loan responds

to low prices, it does not cause low prices. It is effective because it triggers—when

necessary—regardless of the cause of low prices and it ensures that U.S. cotton

farmers are not left as residual suppliers when they are unable to compete with the

treasuries of foreign governments.

It is also especially important that all production remain eligible for the marketing loan so farmers can make informed, orderly marketing decisions. And, it is important to continue to administer the marketing loan in a manner that minimizes

forfeitures and allows U.S. commodities to be competitive in domestic and international markets. For example, an ineffective price discovery mechanism or arbitrary limits on loan eligibility signal our competitors that the United States will be

competitive on a portion but not all of our production. This is an open invitation

for foreign competitors to increase production even in the absence of, or in spite of,

market prices signals—and would return U.S. farmers to being residual suppliers.

The cotton loan structure and world price calculation have served the industry

well. There have been minimal forfeitures and robust exports, but some modification

may be necessary to respond to the new emphasis on export markets and the termination of Step 2. Simplification of the loan rate schedule and modification of the calculation of a world price should be reviewed as part of any new farm law. We also

support elimination of the longstanding prohibition on USDA projecting cotton

prices for the purposes of administering the program.
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A sound farm policy is of little value to the cotton industry, including most producers in this area, as well as merchants, cooperatives and processors, if arbitrary,

unworkable limitations are placed on benefits. Current law requires USDA to determine if individuals meet certain eligibility requirements and there are stringent limitations on each category of benefits. Unfortunately, these limits have been dictated

by public perception, not the requirements of efficient, internationally competitive

family operations. Because there is continuous pressure on USDA to streamline and

downsize, it is reasonable to question the cost and efficiency of USDA administering

and farmers complying with complicated limitations provisions. Frankly, we believe

limitations should be eliminated but at the very least any limitations in future law

should not be more restrictive or disruptive than those in current law.

We believe conservation programs will continue to be an important component of

effective farm policy. These programs should be operated on a voluntary, cost-share

basis and are a valuable compliment to commodity programs. However, they are not

an effective substitute for the safety-net provided by commodity programs. The Conservation Reserve Program, Conservation Security Program and Environmental

Quality Incentive Programs are proven, valuable ways to promote sound, sustainable practices through voluntary, cost-share, incentive based programs.

Access to an affordable crop insurance program also is an important tool for most

farmers. However, given the continued inequities of coverage and service in different

regions and for different crops it is probably time for another thorough evaluation

of the cost and benefits associated with the multi-peril crop insurance program. This

is especially important as the concept of a whole-farm, revenue insurance program

is gaining attention as a way to devise a WTO-consistent farm program. While we

welcome the discussion, I cannot tell you that a majority of cotton farmers will embrace crop insurance as a major component of future farm policy without a great

deal more information. In fact, there are those who would support establishment of

a permanent disaster assistance program in lieu of funding crop insurance programs.

Continuation of an adequately funded export promotion program including the

Market Access Program (MAP) and Foreign Market Development (FMD) Program

are important in an export dependant agricultural economy. It is also valuable to

maintain a WTO-compliant export credit guarantee program. Individual farmers

and exporters do not have the necessary resources to operate effective promotion

programs which maintain and expand markets—but the public-private partnerships

facilitated by the MAP and FMD programs, using a cost-share approach, have proven highly effective and have the added advantage of being WTO compliant.

The U.S. cotton industry understands the value and benefits of effective promotion. In addition to being original and continuous participants in FMD and MAP,

growers finance a very successful promotion program through a self-assessment

(check-off) program. In large part, and as a result of effective promotion, the average

U.S. consumer purchases 35 pounds of cotton textile and apparel products each

year. In the rest of the world, consumption is less than six pounds per person per

year. Promotion works and it is important that the authority for farmers to operate

self-help, self-financed promotion programs be continued.

Mr. Chairman, we understand you and your colleagues will face significant challenges in designing and maintaining effective farm policy in the future. In addition

to the need to balance the diverse interests of different regions and commodities,

we know you have to compete for financial resources in times of a significant budget

deficit. We also realize you will have to consider compliance with international

agreements as you craft future farm policy.

Frankly, most cotton farmers and a majority of the industry would be satisfied

with an extension of current law. If the current trade negotiations are suspended

for a significant amount of time, we would strongly support an extension to current

law. This will ensure that when negotiations resume, the U.S. will be able to negotiate from a position of strength. We also know, however, that maintaining existing

policy will face hurdles, both domestically and internationally.

Internationally, we are concerned that the Doha Negotiations are isolating U.S.

agriculture and U.S. cotton in particular. Our trading partners have clearly ‘‘pocketed’’ the generous U.S. offer on reductions in domestic support and refused to make

an adequate response on market access. Our partners continue to demand even

more U.S. concessions on domestic support while working to undermine trade liberalization as the primary goal of this negotiating Round. And, while the U.S. cotton

industry was targeted for inequitable treatment in the Hong Kong ministerial declaration, China, the largest cotton market in the world, insists on being exempt

from market access commitments by claiming status both as a developing nation

and a newly acceded member of the WTO.
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A Doha agreement that cuts U.S. amber box supports by 60 percent targets U.S.

cotton for inequitable cuts, provides little or no real market access gains for agriculture in general, and exempts the biggest cotton user in the world from liberalizing its cotton quota system will not find a warm reception here.

These inequitable demands by our international partners will not work for U.S.

agriculture. If other countries cannot match the U.S. level of ambition for market

access, while continuing their calls for even deeper cuts in U.S. domestic supports,

we should either withdraw or reduce our offer on domestic support. We sincerely

appreciate Congress’ continued, clear commitment to an equitable agreement during

the period leading up to the most recent meetings in Geneva. U.S. negotiators correctly rejected calls for modifications in the already ambitious U.S. proposal and I

am certain your and your colleagues’ vocal support enabled our negotiators to be

more effective during the meetings.

We strongly disagree with Director General Lamy who seemed to say a few weeks

ago that any WTO agreement is better than no agreement. We appreciate you and

our negotiators for rejecting that approach.

We would be far better off constructing a new farm bill under current WTO rules

than we would accepting an agreement with rigid, inflexible, poorly defined limits

that contains no real gains in market access. Mr. Chairman, we would rather have

a $19.1 billion amber box ceiling and current rules, than a $7.6 billion ceiling and

worse rules.

We also appreciate Congress’ steadfast support for cotton throughout the WTO negotiations and recent statements urging U.S. negotiators of the opposition to an

early harvest for cotton. We remain concerned that this strong message has not

been fully appreciated. Cotton has already given more than any other commodity

in these negotiations. The Step 2 program has been eliminated, the subsidy component has been removed from the Export Credit program and in Hong Kong, and

least developed countries were assured of receiving duty free, quota free access to

the U.S. raw cotton market as soon as an agreement is reached. An agreement that

singles out U.S. cotton for even more inequitable treatment will not earn the support of U.S. cotton producers.

Finally, we are deeply disturbed by continual claims that 80 percent of all program benefits go to fewer than 20 percent of the producers and that only the socalled program crops receive direct benefits from farm law. These comments are

misleading and serve to divide rather than inspire cooperation. First, it’s important

to remember that program benefits do not just come as direct payments. Virtually

every commodity receives some type of support, whether through direct income payments, price support programs or barriers to import. For example, for some commodities, the U.S. imposes higher tariffs on imports during times when domestic

supplies are the most plentiful. In addition, some commodities receive support

through government purchases of the product or by mandating use of the product.

Favorable tax laws are also used to provide support for certain products but the

benefits are not directly attributed to individual farmers. If specialty crop producers

want to play a more significant role in developing future farm policy, we will welcome them as partners. But they will also need to be our partners in efforts to preserve and increase budget resources available to find future farm policy.

It is also misleading to contend that a majority of payments going to relatively

small number of farmers. With the natural consolidation of agriculture, it is inevitable that the majority of program benefits will go to the farmers who account for

the majority of production. However, it is also true that per-pound or per-bushel

support is consistent across producers regardless of size. And, payments to producers represent just a fraction of the costs and risks incurred to enable farmers to

produce. This is especially true in the current environment of increasing fuel and

energy costs. Today’s program benefits are an important safety net and not a windfall of profit.

I am pleased to assure you and your colleagues that the cotton industry is prepared to continue to work with all interests to develop and support continuation of

a balanced and effective policy for all of U.S. agriculture.

Thank you for the opportunity to testify today. I will be pleased to respond to your

questions at the appropriate time.

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