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HEARING TO REVIEW PROPOSALS TO AMEND 

THE PROGRAM CROP PROVISIONS OF THE 

FARM SECURITY AND RURAL INVESTMENT 

ACT OF 2002

HEARING

BEFORE THE

SUBCOMMITTEE ON 

GENERAL FARM COMMODITIES 

AND RISK MANAGEMENT

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

APRIL 26, 2007

Serial No. 110–14

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

COLLIN C. PETERSON, Minnesota, Chairman 

TIM HOLDEN, Pennsylvania, 

Vice Chairman 

MIKE MCINTYRE, North Carolina 

BOB ETHERIDGE, North Carolina 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

JIM MARSHALL, Georgia 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HENRY CUELLAR, Texas 

JIM COSTA, California 

JOHN T. SALAZAR, Colorado 

BRAD ELLSWORTH, Indiana 

NANCY E. BOYDA, Kansas 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

KIRSTEN E. GILLIBRAND, New York 

STEVE KAGEN, Wisconsin 

EARL POMEROY, North Dakota 

LINCOLN DAVIS, Tennessee 

JOHN BARROW, Georgia 

NICK LAMPSON, Texas 

JOE DONNELLY, Indiana 

TIM MAHONEY, Florida 

BOB GOODLATTE, Virginia, 

Ranking Minority Member 

TERRY EVERETT, Alabama 

FRANK D. LUCAS, Oklahoma 

JERRY MORAN, Kansas 

ROBIN HAYES, North Carolina 

TIMOTHY V. JOHNSON, Illinois 

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 R. ‘‘RANDY’’ KUHL, JR., New York 

VIRGINIA FOXX, North Carolina 

K. MICHAEL CONAWAY, Texas 

JEFF FORTENBERRY, Nebraska 

JEAN SCHMIDT, Ohio 

ADRIAN SMITH, Nebraska 

KEVIN MCCARTHY, California 

TIM WALBERG, Michigan 

PROFESSIONAL STAFF

ROBERT L. LAREW, Chief of Staff 

ANDREW W. BAKER, Chief Counsel 

APRIL SLAYTON, Communications Director 

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

SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT

BOB ETHERIDGE, North Carolina, Chairman 

DAVID SCOTT, Georgia 

JIM MARSHALL, Georgia 

JOHN T. SALAZAR, Colorado 

NANCY E. BOYDA, Kansas 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

BRAD ELLSWORTH, Indiana 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

EARL POMEROY, North Dakota 

JERRY MORAN, Kansas, 

Ranking Minority Member 

TIMOTHY V. JOHNSON, Illinois 

SAM GRAVES, Missouri 

CHARLES W. BOUSTANY, JR., Louisiana 

K. MICHAEL CONAWAY, Texas 

FRANK D. LUCAS, Oklahoma 

RANDY NEUGEBAUER, Texas 

KEVIN MCCARTHY, California 

CLARK OGILVIE, Subcommittee Staff Director 

(II) 

(III)

C O N T E N T S 

Page 

Etheridge, Hon. Bob, a Representative in Congress from North Carolina, 

prepared statement .............................................................................................. 29

Goodlatte, Hon. Bob, a Representative in Congress from Virginia, prepared 

statement .............................................................................................................. 36

Moran, Hon. Jerry, a Representative in Congress from Kansas, opening statement ...................................................................................................................... 2

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

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, prepared statement ................................................................................................... 34

Salazar, Hon. John T., a Representative in Congress from Colorado, prepared 

statement .............................................................................................................. 33

Scott, Hon. David, a Representative in Congress from Georgia, opening statement ...................................................................................................................... 1

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

WITNESSES

Buis, Tom, President, National Farmers Union ................................................... 25

Prepared statement .......................................................................................... 146

Erickson, Audrae, President, Corn Refiners Association ..................................... 8

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

Kapraun, Joseph, Financial Planning/Marketing Manager, Grain Division, 

GROWMARK, Inc.; on behalf of National Grain and Feed Association .......... 5

Prepared statement .......................................................................................... 67

Nicosia, Joseph T., Second Vice President, American Cotton Shippers Association (ACSA); CEO, Allenberg Cotton Co. ........................................................... 3

Prepared statement .......................................................................................... 38

Schwein, Rick L., Senior Vice President, Grain Millers, Inc.; on behalf of 

North American Millers’ Association .................................................................. 6

Prepared statement .......................................................................................... 76

Stallman, Bob, President, American Farm Bureau Federation ........................... 23

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

SUPPLEMENTAL MATERIAL FOR THE HEARING RECORD

National Family Farm Coalition, prepared statement ......................................... 158

Ryberg, Paul, President, International Sugar Trade Coalition, Inc., submitted 

letter ...................................................................................................................... 170

Wise, Timothy A. and Elanor Starmer, Global Development and Environment 

Institute at Tuft’s University, submitted paper ................................................ 167

SUPPLEMENTAL QUESTIONS FOR THE HEARING RECORD

Etheridge, Hon. Bob, a Representative in Congress from North Carolina ......... 172

Goodlatte, Hon. Bob, a Representative in Congress from Virginia ..................... 174

Graves, Hon. Sam, a Representative in Congress from Missouri ........................ 176

(1)

HEARING TO REVIEW PROPOSALS TO AMEND 

THE PROGRAM CROP PROVISIONS OF THE 

FARM SECURITY AND RURAL INVESTMENT 

ACT OF 2002

THURSDAY, APRIL 26, 2007

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND

RISK MANAGEMENT, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10 a.m., in Room 

1300 of the Longworth House Office Building, Hon. David Scott 

presiding. 

Members present: Representatives Scott, Marshall, Salazar, 

Boyda, Herseth Sandlin, Ellsworth, Space, Pomeroy, Moran, 

Boustany, Conaway, Neugebauer, McCarthy, and Goodlatte [ex officio]. 

OPENING STATEMENT OF HON. DAVID SCOTT, A 

REPRESENTATIVE IN CONGRESS FROM GEORGIA 

Mr. SCOTT. Good morning. This hearing of the Subcommittee on 

General Farm Commodities and Risk Management, to review proposals to amend the program crop provisions of the Farm Security 

and Rural Investment Act of 2002, will now come to order. 

We will proceed first with opening statements and I would like 

to just welcome everyone this morning to the hearing of our Subcommittee on General Farm Commodities and Risk Management. 

Our effort this morning is to review proposals to amend the program crop provisions of the Farm Security and Rural Investment 

Act of 2002. Unfortunately, our distinguished Chairman, Mr. 

Etheridge of North Carolina, is not able to be with us this morning, 

so I am pinch hitting for him. However, he does extend his regards 

to our distinguished panelists. We are glad to have you and we 

thank all of the Subcommittee Members for attending this very, 

very important hearing. In the interest of time, I will keep my 

opening statement very brief, so that we may have plenty of time 

to address questions toward both of our panels this morning. 

One issue that is of paramount importance to my constituents, 

and is therefore important to me, is the issue of payment limits 

and payment concentration. For example, in 2005, about 55,000 

farms, with sales over $500,000, received $5.7 billion, which is 60.2 

percent of the payment farms received, 36 percent of the payments. 

You all have no doubt, seen the series of articles in The WashVerDate 0ct 09 2002 09:08 Mar 09, 2009 Jkt 041481 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\DOCS\110-14\41560.TXT SOLEM PsN: REBEKA
2

ington Post and my hometown newspaper, the Atlanta JournalConstitution, decried wheat, which is perceived as a few large 

farms receiving the bulk of support payments. It certainly may be 

argued that limits on farm size or amount of payments received are 

unnecessary, because these payments are intended to buoy the entire sector, not individual households. It may also be said that 

these articles and the public perception are simply incorrect, and 

that they point out what are a few anomalies in an otherwise increasingly healthy system. Unfortunately, however, we, as Members of this Committee, work in a business where perception is reality and we must answer the questions of our constituents on this 

issue. 

It is my hope that our panelists today will touch on this subject 

and provide me with information that I can take back to my constituents to help improve the perception of farm sector support programs. Specifically, I am interested in hearing what you all have 

to say about the USDA’s proposal for means testing or efforts to 

reduce the limits on payments and how that would play in each of 

our respective commodity groups. 

With this being said, I turn to the distinguished Ranking Member of the Subcommittee, Mr. Moran of Kansas, for his opening remarks. 

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

of the hearing:] 

OPENING STATEMENT OF HON. JERRY MORAN, A 

REPRESENTATIVE IN CONGRESS FROM KANSAS 

Mr. MORAN. Mr. Scott, welcome to the Chairman’s chair. I, like 

you, continue to be a Chairman in waiting, but in the absence of 

Mr. Etheridge, I appreciate your leadership. 

Mr. SCOTT. Thank you. 

Mr. MORAN. I am delighted to be here and welcome our panelists 

this morning. I am very much appreciative of the fact that we have 

heard from many farmers, many commodity groups and farm organizations over a long period of time in anticipation of the 2002 

Farm Bill, and I think it is important that we not lose sight of the 

fact that the processing industry has a significant interest in the 

outcome of the farm bill debate. I hope they will remind us of the 

importance of developing farm policy that is market-oriented, that 

helps them establish markets for what we produce in the United 

States, but what they process as well. And I am also pleased—I 

don’t want to short-sight the fact that we have the President of 

American Farm Bureau and the President of National Farmers 

Union with us. Although they are not rarities within the Committee, I am interested in hearing what they have to say today, 

particularly in the light of the reality that we apparently are reasonably close to having some budget numbers that, in my estimation, actually determine much more about the farm bill than 

many other things that we continue to discuss. So I look forward 

to the testimony of both of those witnesses and I, again, appreciate 

the time that all of you are taking to try to help us determine what 

we should do in the best interest of the agricultural economy of the 

United States. Mr. Chairman, thank you very much. 

3

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

of the hearing:] 

Mr. SCOTT. Thank you very much, Mr. Moran. The chair would 

request that other Members submit their opening statements for 

the record so that our witnesses can begin their testimony and to 

be sure that there will be ample time for your comments and 

thoughts as we get to the question and answer period. 

First, we would like to welcome our first panelists to the table. 

First, we have Mr. Joseph Nicosia—I hope I am pronouncing that 

correctly. I do not intend to butcher any names—who is the Second 

Vice President of the American Cotton Shippers Association of Cordova, Tennessee. Welcome to the panel. Next, we have Mr. Joseph 

Kapraun, Financial Planning/Marketing Manager of GROWMARK, 

Inc., on behalf of National Grain and Feed Association of Bloomington, Illinois. Welcome. Mr. Rick L. Schwein, on behalf of the 

North American Millers’ Association of Eden Prairie, Minnesota. 

Welcome. And Ms. Audrae Erickson, President of the Corn Refiners 

Association of Washington, D.C. Welcome to all of you. We are delighted to have you. Thank you for being with us. We look forward 

to all of your testimony. Mr. Nicosia, please begin whenever you 

are ready. 

STATEMENT OF JOSEPH T. NICOSIA, SECOND VICE PRESIDENT, AMERICAN COTTON SHIPPERS ASSOCIATION (ACSA); 

CEO, ALLENBERG COTTON CO. 

Mr. NICOSIA. Chairman Scott and Ranking Member Moran and 

Members of the Subcommittee, I thank you for this opportunity to 

be here this morning. I am Joe Nicosia, CEO of Allenberg Cotton 

Company of Memphis, Tennessee. Allenberg is a division of Louis 

Dreyfus Commodities. I appear here today in my capacity as Second Vice President of the American Cotton Shippers Association. I 

am also a Member of ACSA’s Executive Committee, its Foreign Policy Development and National Affairs Committee, and Chairman of 

the Committee on Futures Contracts. I am accompanied today by 

Neal Gillen, ACSA’s Executive Vice President and General Counsel. 

I have been involved in the merchandising and futures trading 

of cotton for some 25 years and I am fully familiar with and have 

traded all of the U.S. and foreign growths of cotton. In my appearance today, I will review why U.S. cotton is no longer competitive 

in the world market and what Congress can and should do to enable the U.S. to regain its competitive advantage and the market 

share that it has lost this past year since the repeal of the Step 

2 Program. 

The Step 2 Program masked the basic problems inherent in the 

cotton program. Since its repeal in August of 2006, U.S. cotton is 

no longer competitive in the world market, which accounts for 75 

percent of the U.S. cotton demand. Based on current sales and 

shipments, we can expect last year’s export level of 18 million bales 

to decrease to approximately 13 million bales. Since the CCC loan 

has become the market of first and not last resort, given the excessive premiums inherent in the price support loan structure, we expect loan forfeitures to continue. 

4

We are in agreement with the industry to maintain the marketing loan and use of certificates to facilitate the movement of cotton from the loan. This mechanism is critical to the well-being of 

our industry. We are also united in the opposition to means testing. 

Given the rapid decline in U.S. mill consumption from 11.4 million bales in 1997 to an estimated 5 million bales in 2007, we have 

become dependent on exports. The U.S. no longer has any choice 

but to be globally competitive. To do so requires a number of 

changes and reforms in the cotton program. 

If I could refer you to the PowerPoint, ‘‘The Current U.S. Cotton 

Situation Pending New Legislation.’’ The loss of the Step 2 Program directly diminished the competitiveness of U.S. cotton. Export 

demand for U.S. cotton has fallen sharply. The U.S. projected 

carry-out is the highest since the 1985 Act began. The loan is the 

best market for bales and major forfeitures are expected. This 

graph shows, not only the loss of demand, but also the loss of competitiveness of U.S. cotton in the world market after the loss of 

Step 2, which took place at the end of July 2006. You can see here 

that our exports have fallen off by a factor of 3 since that time. 

China is the world’s largest importer and it is the United States’ 

largest customer for cotton. Note how the U.S. percentage share of 

Chinese imports has dropped, again, reflecting a loss of competitiveness. So not only are exports and export demand down, but so 

is our market share. As our exports have faltered, our projected 

carry-out has risen from less than 5 million bales projected in August to more than 9 million bales today. Here we take a look at 

our carry-out in a historical perspective. The carry-out is the largest since the marketing loan began back in 1985. In some cases, 

it is estimated to reach 10 million bales this year. 

So the 4 key objectives for cotton legislation are: (1) we propose 

basing the loan rate on market prices. Currently, our loan level is 

too high relative to the world market price; (2) lower loan premiums. Premiums paid for higher-grade cottons are substantially 

larger than what exists in the world market, therefore this cotton 

gets trapped in the loan and cannot be redeemed, leading to loss 

of exports and forfeitures; (3) we propose allowing loan cotton to be 

shipped prior to redemption. Currently, cotton must remain in the 

loan, incurring storage and interest charges while waiting for a 

profitable opportunity to be redeemed. We propose allowing the cotton to be shipped prior to redemption, thereby saving storage 

charges and capturing export opportunities that would have been 

lost; and (4) maintain current payment limitations, which includes 

our opposition to means testing. 

Again, thank you for the opportunity to present these views. I 

will be happy to respond to any questions that you might have. 

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

of the hearing:] 

Mr. SCOTT. All right, thank you very much. Next, we will have 

Mr. Joseph Kapraun, Financial Planning and Marketing Manager, 

GROWMARK. You may begin. 

5

STATEMENT OF JOSEPH KAPRAUN, FINANCIAL PLANNING/

MARKETING MANAGER, GROWMARK, INC.; ON BEHALF OF 

NATIONAL GRAIN AND FEED ASSOCIATION 

Mr. KAPRAUN. Mr. Chairman, Ranking Member and Members of 

the Subcommittee, good morning and thank you for the opportunity 

to appear before you today. My name is Joe Kapraun. I am the Financial Planning Manager of the Grain Division at GROWMARK, 

based in Bloomington, Illinois. 

GROWMARK is regional agricultural supply and grain marketing network of cooperatives owned by nearly 250,000 farmers in 

the Midwest United States and Ontario, Canada. I am testifying 

today on behalf of the National Grain and Feed Association, on 

whose Board I serve. The NGFA’s market philosophy is derived 

from its mission statement, which commits our organization to foster an efficient free market environment that achieves an abundant, safe and high-quality food supply for domestic and world consumers. Further, our statement of purpose notes that Association 

activities are focused on growth and economic performance of U.S. 

agriculture. 

To this end, the NGFA has identified 4 major priority areas for 

the next farm bill: farm programs that provide opportunity to take 

advantage of market potential while minimizing potential trade 

disruption; to craft policies that foster production to meet the demand without sacrificing other markets, including livestock and 

poultry feed and grain export markets; adjusting the Conservation 

Reserve Program to provide opportunities for U.S. agricultural 

growth while continuing the protection of environmentally sensitive 

lands and minimizing government involvement in grain stocksholding, except for humanitarian purposes. 

The NGFA has a longstanding position that Congress and farm 

organizations are in the best position to recommend the appropriate level of Federal funding to allocate the farm program payments. The NGFA has 3 specific concerns relative to the farm program payments. First, such payments should minimize market distorting signals that allow the competitive marketplace to drive efficient production decision making by farmers. Second, we believe 

that Congress should avoid major and abrupt shifts in funding levels and program implementation that can create near-term disruptions. And third, we believe the U.S. farm program payments 

should be structured and implemented in a way that minimize exposure to World Trade Organization challenges. 

With respect to USDA’s Farm Bill proposal, we commend them 

for issuing a thoughtful and comprehensive set of proposals. However, among the most serious concerns we have is a proposal to 

change the way posted county prices are calculated and utilized to 

determining marketing loan gains and loan deficiency payments 

under the Marketing Assistance Loan Program. While we appreciate the Administration’s efforts to explore creative alternatives 

for addressing this issue, we believe that the proposal would be 

highly disruptive to the efficient operation of the cash grain marketplace, and the proposal would greatly disrupt cash grain movement and hedging efficiencies, particularly in inverse markets or 

during periods of significant flat price changes by encouraging producers to delay marketing decisions until they are able to deterVerDate 0ct 09 2002 09:08 Mar 09, 2009 Jkt 041481 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 I:\DOCS\110-14\41560.TXT SOLEM PsN: REBEKA
6

mine the applicable monthly PCP average at the start of each succeeding month. 

To comment on a few other related issues, by far the single most 

important development that will affect supply and demand balance 

sheets, commodity prices and the pattern of growth for various U.S. 

Ag sectors in the next 5 years will be the developmental rate of the 

biofuels industry. U.S. resource capacity will be challenged to provide grain supplies for both ethanol as well as traditional grain 

customers. We need both yield growth as well as expanded land 

committed to corn production. 

The NGFA supports the development of public policy which facilitates opportunities for growth in grain and oilseed production to 

supply traditional and new market demand. Adjusting the CRP is 

one potential tool to meet a portion of the anticipated land capacity 

constraints. The NGFA supports conservation programs that foster 

sound farmland conservation and environmental stewardship practices, while minimizing the idling of productive land resources, 

thereby strengthening the economies of rural communities while 

achieving environmental and other policy goals. 

The 2002 Farm Bill contained unprecedented authorizations for 

conservation spending, particularly for the working lands programs, which is EQIP and CSP. The NGFA strongly supports directing the scarce Conservation Resources Programs like these that 

enhance conservation of working farmlands, coupled with the shift 

away from land-idling schemes. 

Finally, I would like to comment on other tools producers utilize 

for managing risk. Given the competitive and transparent nature 

of the grain markets, the NGFA supports giving producers the opportunity to engage in a wide array of risk management techniques 

to supplement the income and price support received through government programs. The NGFA appreciates this opportunity to provide its views on the commodity title of the next farm bill, as well 

as some general recommendations. 

Thank you and I look forward to answering any of the questions 

you may have. 

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

Mr. SCOTT. Thank you very much. Our next panelist is Mr. Rick 

L. Schwein, on behalf of North American Millers’ Association of 

Eden Prairie, Minnesota. You may begin. 

STATEMENT OF RICK L. SCHWEIN, SENIOR VICE PRESIDENT, 

GRAIN MILLERS, INC.; ON BEHALF OF NORTH AMERICAN 

MILLERS’ ASSOCIATION 

Mr. SCHWEIN. Mr. Chairman and Members of the Committee, 

thank you very much for the change to be here this morning. My 

name is Rick Schwein. I am the Senior Vice President with Grain 

Millers, Incorporated. We are a privately-owned oat processor 

headquartered in Minnesota. We own and operate 2 oat mills in 

the U.S., one in St. Ansgar, Iowa, near Austin, Minnesota, and the 

other in Eugene, Oregon, as well as having a mill up in Canada. 

We are one of the world’s largest suppliers of milled oat products 

to the food industry and our products are used all around the 

world. I am here today representing the North American Millers’ 

7

Association. NAMA is comprised of 48 wheat, oat and corn milling 

companies operating 170 mills in 38 states. Together, we produce 

more than 160 million pounds of product every day, which is more 

than 95 percent of the total industry capacity. 

Let me, before I get to my thoughts on suggested changes, set 

the stage a little bit. U.S. wheat plantings the last 3 years have 

been the lowest we have seen since 1972. The U.S. last year harvested fewer acres of wheat than we did way back in 1898 when 

we were still using horses for the harvest. Kansas, the Wheat 

State, now grows more corn than wheat. And the situation in oats 

is even worse. Oat production last year was at the lowest level 

since the USDA began keeping those records back 1866, shortly 

after the Civil War when President Lincoln created that Department. 

What has been the impact of this precipitous decline in production? Not many years ago, the thought that the U.S. would import 

cereal grains was unthinkable. Now, however, in most years, U.S. 

production of hard red spring wheat for bread and durum wheat 

for pasta is insufficient to meet total demand. Millers have no 

choice but to rely on imports to augment the short wheat crop. 

While, for the oat mills, the industry already imports almost 100 

percent of the oats we mill for food products every year. This dramatic production loss has also led directly to major relocation in 

the last 15 years of much of the value-added milling capacity to 

Canada, taking hundreds of industry jobs with it. 

Ironically, while this exodus in production capacity has occurred, 

the demand here in the U.S. for oat and other whole-grain products 

has been rising. These imports have caused regrettable friction between millers and growers. As millers, our first choice is to buy 

American grain whenever possible, but I can tell you today, for 

sure, imports of these grains into the U.S. will continue and absent 

action by Congress, will likely increase. Our country is working 

diligently to reduce its dependence on foreign oil. I ask, is it in our 

strategic interest to be dependent on foreign sources for basic nutritious commodities like wheat and oats? 

Now, how did this happen? First, beginning in 1986, the creation 

of the CRP program took 36 million acres out of production, much 

of which today could be farmed in environmentally sustainable 

ways. Much of the CRP land is concentrated in traditional wheat 

and oat-growing territory. Second, some of the inequities in the 

farm program have caused Uncle Sam to say loudly to the growers, 

‘‘don’t plant wheat or oats.’’ At the same time, the government is 

encouraging them to grow other crops like corn and beans, which 

really don’t need much encouragement today, given the President’s 

biofuels mandate. 

An example of inappropriate encouragement in the farm program 

is what we think are artificially high loan rates that have distorted 

producer planting decisions, leading to a 950,000 acre increase in 

peas and lentils in just the past 5 years, crops for which there really isn’t even much of a domestic market to speak of. We find it very 

frustrating that program payments have provided huge incentives 

for growers to produce crops for which there is little domestic demand, while discouraging them from growing crops the U.S. consumes, like wheat and oats. 

8

Third, total investments in wheat and oat research significantly 

lags behind investments in corn and beans, limiting producer alternatives. And next, the ethanol push has already dramatically altered farmers’ production decisions, but we think we are only seeing the tip of the iceberg. Other problems, we think, are looming 

on the horizon. We have all known for decades that growing corn 

after corn after corn is not desirable, either for environmental or 

disease issues or for insect management reasons, but this is what 

we are encouraging today. We believe that is the height of irony 

that the U.S. Government in the 2005 dietary guidelines and the 

food guide pyramid, encourages consumers to eat more grains, but 

at the same time is very directly discouraging growers from producing those very same grains. 

In conclusion, NAMA believes Congress has a significant opportunity here to improve conditions for the wheat and oat milling industry, from grower through miller and consumer. That can be 

achieved through reforming the CRP to responsibly allow sustainable acres back into production, re-balancing the farm program to 

reduce government-caused inequities distorting production decisions and investing in research to give growers better crop options. 

Thank you for the opportunity to speak this morning and I will 

look forward to your questions. 

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

Mr. SCOTT. Thank you, Mr. Schwein. Now we will hear from Ms. 

Audrae Erickson, President of the Corn Refiners Association. You 

may begin, Ms. Erickson. 

STATEMENT OF AUDRAE ERICKSON, PRESIDENT, CORN 

REFINERS ASSOCIATION 

Ms. ERICKSON. Mr. Chairman and Members of the Committee, 

thank you for the opportunity to present the views of the Corn Refiners Association on the next farm bill. The Corn Refiners Association represents the corn wet milling industry. Our Members 

produce highly specialized starch products for both food and industrial use, corn sweeteners, corn oil and other food ingredients, animal feed products like corn gluten feed and corn gluten meal, ethanol and bio-plastics. We support a strong farm economy and applaud the efforts of the National Corn Growers Association in proposing a revenue assurance program. We hope this Committee will 

actively review that proposal with a view to supporting its important concepts. 

One of our top priorities for the next farm bill is to ensure sufficient acreage planted to corn, given the growing demand for this 

versatile starch source. We support efforts in the next farm bill 

that will bring additional acres into the production of corn, including adjusting the CRP. It is also important to ensure that the efforts of this Committee to provide a safety net for producers are not 

inadvertently undermined by another title in the farm bill. 

Despite the best intentions of Congress to assist growers, there 

is one program that has resulted in unintended consequences for 

the corn industry and that is the sugar program. The sugar program is designed to support the price of sugar in part by limiting 

imports into the United States and allocating how much sugar is 

9

supplied to the domestic market through marketing allotments. As 

you know, we will no longer be able to limit imports of sugar from 

Mexico effective January 1, 2008, when we go to free trade with 

Mexico. If imports of Mexican sugar are restricted in any way, exports of corn sweeteners will be held hostage, and the next commodities in the firing line will be Mexico’s import-sensitive commodities, which happen to be our export engines, beef, pork, poultry, corn, soybean meal, dairy, rice, dry edible beans, and apples. 

All of these commodities consider Mexico to be their top or second 

most important export destination. 

One of the leading uses for corn is the production of corn sweeteners. The manufacture of high fructose corn syrup, or HFCS, has 

accounted for approximately 5 percent of U.S. corn production in 

recent years. Historically, our top export market has been Mexico. 

Regrettably, we have been embroiled in a 10 year dispute with 

Mexico, in large part because the United States limited Mexico’s 

sugar access during this period. In short, corn sweeteners became 

the victim in a tit-for-tat trade challenge. The corn industry has already experienced 10 years of either restricted exports or complete 

closure of our top export market, Mexico, at a cost of more than $4 

billion in lost sweetener sales and more than 800 million bushels 

of corn. As a result the CRA has no higher priority than the longterm, permanent resolution of the decade-long HFCS dispute with 

Mexico. 

The next farm bill is crucial for our industry. If Mexico stops imports of our high-quality sweeteners, because we are limiting their 

sugar imports through the farm bill, it will come at significant cost 

and loss of jobs to our industry. Given the importance of this issue, 

the CRA would like to have a seat at the table when decisions are 

being rendered about the structure of the sugar program in the 

next farm bill. 

We understand that some stakeholders may be considering a 

market balancing mechanism to ensure that the supply and demand for sugar in the United States is not out of equilibrium. One 

such mechanism may divert all excess supply of sugar, principally 

imported sugar, into ethanol. This approach is inconsistent with 

NAFTA and it is economically impractical, because Mexico’s sugar 

is priced higher than our own. No provision in the farm bill should 

stand in the way of or limit full implementation of 2-way trade in 

sweeteners with Mexico. If it does, the CRA will not be in a position to support it. 

We thank you for the opportunity to testify before this Committee and urge that the next farm bill brings additional acreage 

into the production of corn and ensures free trade in sugar with 

Mexico. Thank you. 

[The prepared statement of Ms. Erickson appears at the conclusion of the hearing:] 

Mr. SCOTT. Thank you. Thank you very much. We have been 

joined by our Ranking Member, Mr. Goodlatte. Mr. Goodlatte, 

would you like to have an opening statement? 

Mr. GOODLATTE. Well, thank you, Mr. Chairman. I will just submit my opening statement for the record and thank all of these witnesses for their testimony today. There is absolutely no doubt that 

processors and handlers play an absolutely critical role in the funcVerDate 0ct 09 2002 09:08 Mar 09, 2009 Jkt 041481 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 I:\DOCS\110-14\41560.TXT SOLEM PsN: REBEKA
10

tioning of our agricultural economy and they should have a significant input, and we should listen carefully to what they say is needed, to keep what is a great system for bringing America’s farmers, 

and ranchers, products to market and how we could help them accomplish that in the farm bill. So thank you very much for recognizing me. I will just put my statement in the record. 

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

Mr. SCOTT. Okay, very fine. Thank you very much. I thank the 

panelists for each of your presentations. They were very, very 

thoughtful and well presented. Thank you. The chair would like to 

remind Members that they will be recognized for questioning in 

order of seniority for Members who were here at the start of the 

hearing. After that, Members will be recognized in order of arrival 

and I would certainly appreciate each of the Members understanding that and we will have ample time for that. 

I would like to start off, if I may, with 2 thoughts. As I mentioned in my opening statement, there has been great concern, certainly in my area in Georgia, concerning the exports of cotton and 

as well as the payment limits and the payment concentrations. As 

I mentioned, for example, in 2005, about 55,000 farmers’ with farm 

sales over $500,000 received $5.7 billion, which is 6.2 percent of the 

payment farms receiving 36 percent of the payments. In other 

words, there is a perception that just a few very large farms are 

receiving the bulk of the support payments. 

And Mr. Nicosia, I hope that I pronounced that right. I apologize 

if I am butchering your name, but accept those apologies, please. 

Would you comment on that? And I guess the fundamental question is, is that a perception? What is the understanding for that? 

Would you like to shed some light on that to give a better understanding of that? And the other part is that the depressing or dropping so much by export into some of these foreign markets where 

we depress the price and are driving some of those farmers, particularly in North Africa, and I am sure you may have read the articles in both The Washington Post and the Atlanta Journal-Constitution that referred to those 2 major problems. Would you take 

a moment and expand on that? 

Mr. NICOSIA. Sure. Let me handle the one about exports first. 

Obviously, the world has changed a little bit with the conversion 

of agricultural products into energy, as we have seen with the 

prices of grains, and that has an impact around the world on acreage distribution, nowhere more so than the United States, which 

is going to lose roughly 3 million acres to corn, beans and wheat. 

However, in reaction to what you read in The Washington Post

about what you referred to as us dumping or selling cotton at lower 

prices and hurting growers around the world, what I would like to 

show you is that, in response to higher grain prices, the world is 

going to grow slightly less than 3 million acres of cotton around the 

world. All of that and more than that is only in the United States. 

The 4 largest producers in the world, Pakistan, India, China, West 

Africa, are actually increasing cotton acres, even though prices are 

low and grain prices are high there; totally non-responsive to the 

market. So the United States is the only area that is actually responding to market forces; and yet they say we are the ones that 

11

have distorted the price level. Nothing could be further from the 

truth. 

In regards to the payment limitations, our organization is very 

much against them and the means testing. It makes little sense to 

us to see why someone in a 2,000 acre farm should not get benefits 

while someone in a 800 acre farm should, especially in cotton, in 

a situation where the cost of production is substantially higher, 2 

to 3 times that of grain. To penalize an individual because of their 

own success in growing their business; where 5 years ago maybe 

they qualified, today they don’t; again, it seems to make no sense 

to me. And to deny someone benefits upon their own personal situation or whether they have personal finances, investments or other 

earned wages, again, it doesn’t seem to make much sense, in relation to their farming operations. And to the U.S., why should that 

matter? Because the benefits of all the producers in the United 

States go to many of the people and the consumers that live here. 

They enjoy the benefits of large-scale farming operations, the promotion of lower prices, of reliable supply and the security that is 

provided to this country, and yet to deny the benefits to those people is to promote inefficiencies. So, to turn around and say the 

country is better off by having a higher cost of producing these 

goods and having lower quantities, I think, is probably not the goal 

that we are after. So we say, to all segments of our industry support eliminating means testing and continuing with the current 

payment limitations. 

Mr. SCOTT. Thank you. Thank you very much. My final question 

was probably directed to Mr. Kapraun or Ms. Erickson. It is on the 

ethanol issue, especially on the downward pressure that apparently 

our policy seems to be heading with the overemphasis, I think, on 

corn. Could you share with us what you feel, from the corn perspective, what the limits are? How much can we bear? In your estimation, what percentage of our thrust to make ethanol should we 

rely on corn, and especially as it relates to the higher prices that 

would occur for the feed stock element of that, and poultry and beef 

and those products? And the other thing is that we recently came 

back from a trip to Brazil and to South America and I was very 

fascinated with your comments, Ms. Erickson, on the sugar, and 

now 84 percent of their automobiles are manufactured with what 

is called flex fuel and the usage of ethanol made from sugar. What 

has been the impact in Brazil? Have they had an equal problem 

with the downward pressure on sugar, which I didn’t pick up at 

that time. Could you both just comment on where we are in terms 

of our movement into ethanol and the impact that that would have 

on our grain? 

Mr. KAPRAUN. I would just talk briefly on your ethanol question 

and corn. I think, as long as we let the farmers have a choice of 

what they raise, the market should dictate through price what they 

produce and I think they have answered that in the March report 

on planting intentions. We saw a huge shift of acres into corn and 

I think a lot of that is driven by price and some of that might be 

driven by the growth we see in ethanol. 

Mr. SCOTT. Ms. Erickson? 

Ms. ERICKSON. Mr. Chairman, with respect to ethanol, we agree 

with the statement that market forces ought to drive the decisions 

12

and we understand clearly that today it is corn and sometime down 

the road, as research and development allows, there will be other 

opportunities for feed stocks, including cellulosic. With respect to 

sugar, Brazil has a different pricing structure, clearly, for sugar 

than the United States does. Brazil’s price of sugar is much, much 

lower and cost production is much, much lower, so they haven’t had 

the impact on their feed stock sugar that we have had on corn in 

terms of price. And there is a lot at stake in the international market today in sugar growing around the world and how much is 

being put on the international market, so much so that when we 

encountered the hurricanes last year, at the same time, the price 

of sugar was rising dramatically in the United States. It was also 

coming up on the international market because the European 

Union was getting out of the export business of sugar because 

Brazil was diverting more of its sugar production into ethanol. And 

what that did and what will happen over time, of course, is the 

price is slowly going up, when it has been very, very low internationally before for sugar. And that could have tremendous implications for our industry, which we believe should not be shielded 

from the international marketplace, that there are opportunities 

for efficient sugar growers in the United States, many of whom are 

looking at the Mexican market to start exporting, which we think 

is a good development. Market forces ought to be the dictating factor, whether it is for ethanol, whether it is for corn, whether it is 

for sugar and other commodities as well. 

Mr. SCOTT. Thank you very much. I will recognize the gentleman 

from Kansas, Mr. Moran. 

Mr. MORAN. Mr. Chairman, thank you. Let me just ask a general 

question and I apologize for stepping out and not hearing your testimony, although I have read, in parts last evening, much of what 

you had to say this morning. Could you highlight for me any specifics that you have as far as concerns with the current farm bill, 

the 2002 farm bill that we are operating under, in ways in which 

the markets are distorted that disadvantage your businesses, your 

processing industry or American agriculture? Are there specific 

things that we ought to be looking for as we try to improve upon 

the 2002 Farm Bill? Mr. Schwein? 

Mr. SCHWEIN. Mr. Moran, yes, I will share with you the perspective from the oat milling industry. North Dakota and northern 

North Dakota have historically been major, major oat producing regions. There are climatic conditions that make oats a superior crop 

in that territory. During the 2002 Farm Bill, there was a significant loan rate established for dry peas and lentils through that territory and the same producers that could grow oats or barley or 

spring wheat have jumped all over growing dry peas through that 

territory. The loan rates and the historic yields in a particular 

county, a county called Burke County, North Dakota, just north of 

Minot. The producer can look at his average yields and what he is 

guaranteed through the loan program and receive nearly 10 times 

higher net return per acre than he can when he looks at the loan 

rate for oats. We have seen significant rises in oat prices. Production in Canada, where their producer decisions are unfettered by 

a farm program, we are seeing 36 percent increase this year in oat 

13

production in Manitoba and Saskatchewan, the biggest provinces, 

in responding to those higher prices. 

But the influence of a producer’s banker, his partner in his business in this area in North Dakota, while the producer may want 

to grow oats because the current price looks attractive, there is always concern that those prices won’t hold and so the banker discourages him from growing oats even if he chooses to. So we think 

there are inequities that result in swaying producer planting decisions as opposed to planting for the market. We are delighted to 

compete with the ethanol industry or corn or beans, with other 

processors. Let the market set the rates. But we can’t compete with 

government distortions of those decisions. 

Mr. MORAN. Thank you. Anyone else? 

Mr. NICOSIA. In response to your question about the 2002 Farm 

Bill, without a doubt, we need to make some changes in that for 

cotton. The main thing is we have to address the loan rates. Both 

the overall loan rate and the loan premiums have to be addressed 

to lower it down towards market values, towards world values, otherwise cotton is going to stay trapped in the loan and forfeited. We 

will be uncompetitive, so we do need to address that. 

Ms. ERICKSON. I have one comment and that has to do with a 

program that, although it is not the jurisdiction of this Subcommittee, it is clearly a program that you will get to vote on and 

it has a tremendous impact on the corn industry and that is the 

sugar program. As you know, it is not at all subjected to market 

forces through limiting of imports, which has had an impact on 

production agriculture and processing agribusiness, as we try to 

open new trade agreements and export to other countries around 

the world. And it has also had an impact on our inability to solve 

this long-standing sweetener dispute with Mexico, because we are 

limiting sugar imports and Mexico is limiting corn sweetener exports to its market. And nothing is going to be more of a perfect 

storm than when we go to free trade with Mexico under the 

NAFTA in 3 months after the farm bill is written, when we may 

be putting in place the same program on sugar, which stands in 

direct opposition to international forces. 

Mr. KAPRAUN. Just a couple comments. We believe that the U.S. 

farm program payments should be structured in a way and implemented in way that would minimize any exposure to WTO. At the 

same time, the NGFA also supports limiting any dramatic swings 

in farm program funding levels and delivery that would create 

short-term disruptions. 

Mr. MORAN. I am surprised, sir, that you don’t mention CRP. I 

will have to tell Mr. Tunnel that I have never had a conversation 

with anybody from the feed and grain industry in which CRP is not 

the topic of conversation. Thank you, Mr. Chairman. 

Mr. SCOTT. Thank you. 

Mr. MORAN. I yield back the balance of my 5 seconds of my time. 

Oh, I am over 5 seconds. 

Mr. SCOTT. Thank you, Mr. Moran. I now recognize the gentlewoman from Kansas, Mrs. Boyda. 

Mrs. BOYDA. Thank you very much. I just had a question on 

when we are making our, and looking at, decisions on payments to 

farmers and we are currently talking about direct payments may 

14

be in more places than some of the counter-cyclical payments. How 

do you all feel about those kinds of payments, with regard to conservation and more direct payments as opposed to the countercyclicals? And I will open that up to anyone. 

Mr. NICOSIA. Well, I think the more direct payments are fine. It 

gives more assurances to what is happening out there in the community, to the grower to base his decisions on. Obviously, it lends 

itself to more free market decisions on the planning side. However, 

I don’t think it is the only answer, because it will still leave the 

producer with exposure to certain things that he cannot control, 

whether it be weather, whether it be import tariffs, or price 

changes that are there. So I think the movement that way, especially in response to how it is treated under WTO, it seems to be 

a more advantageous way to move benefits, but I don’t think we 

can use it in place of, whether it be counter-cyclical and/or revenue 

or price assurances as well. 

Mrs. BOYDA. Anyone have any additional thoughts on that? All 

right. I yield the balance of my time. Thank you. 

Mr. SCOTT. Thank you very much, Mrs. Boyda. I would now recognize the gentleman from Louisiana, Mr. Boustany. 

Mr. BOUSTANY. Thank you, Mr. Chairman. First of all, thank you 

all for your testimony. It was very informative and I certainly appreciate it. Ms. Erickson, if I could start with you. I come from a 

district in South Louisiana and obviously, we have a lot of sugar 

cane down there and I am certainly well aware of the market 

structure differences between corn and sugar. And maybe my question is either naı ̈ve or mischievous, but I am just curious as to 

whether or not there have been any discussions between the corn 

refiners and the sugar industry to come forward with perhaps a 

common proposal as we move toward the farm bill? 

Ms. ERICKSON. Thank you, Congressman. There were attempts 

by the Sweetener Users Association to bring everybody together. 

Unfortunately, there were reasons why the sugar industry wanted 

to restrict that discussion to sugar only. We did have a participant 

at that meeting and we very much support a dialogue between the 

users of sugar, all of the stakeholders in the sweetener industry, 

which would include the Corn Refiners Association and the sugar 

growers and processors. 

Mr. BOUSTANY. Okay. Well, certainly, if I could be of assistance 

as we go forward on that, I would be happy to try to play that role. 

Mr. Kapraun, in your testimony, you describe the disruption to 

marketing that would occur if the USDA transitioned to a monthly 

posted county price for the purposes of getting loan deficiency payments. Can you further explain the impact of the USDA’s proposal 

and what that impact would be on cost, transportation efficiencies, 

delivery time tables, and give me an indication of what the ripple 

effect might be if we went forward there? 

Mr. KAPRAUN. Absolutely. As we move to a monthly LDP rate, 

if the producers would watch the market during the month and try 

to predict what those LDPs are going to be before the end of the 

month, rather than seeing a marketing system where the producer 

could make that decision on a daily basis, we believe that if there 

are LDPs involved, you would probably see the need to not make 

those decisions until about once a month, either right towards the 

15

end of the month when the LDP rates were about to come out, or 

the beginning of the next month. What that would do, especially 

during the harvest season when we see a lot of LDPs, we would 

be having farmers hold on to their stocks. Elevators would not 

know if the grain is going to be sold or not. We would have trains 

that we didn’t know if we could fill or not, as those deliveries are 

short at that time of the year. And we feel like that would be the 

disruptive portion of it, having the farmers delay those decisions 

until those couple of days of the year that they can get the most 

benefit out of the LDP. 

Mr. BOUSTANY. Thank you. So what is your recommendation? 

What alternatives do you recommend? 

Mr. KAPRAUN. Even though I don’t know that we could say that 

the current system is perfect. I think given the choice of where we 

are at today and even the proposal of even a weekly or monthly, 

we prefer what you have currently got versus one of those other 2 

options. 

Mr. BOUSTANY. Thank you. Mr. Nicosia, you talked about the 

Step 2 Program and the impact; we are beyond that now. Can you 

talk a little bit more, elaborate a little more about the factors that 

are keeping U.S. cotton from being competitive now. You did mention, I think, what is going on with Pakistan, India and China not 

being subject to market forces and I would like you to elaborate a 

little more on that. 

Mr. NICOSIA. Well, I think the most glaring example of that is 

really what is taking place in their planning decisions. China is the 

largest producer, the largest consumer, the largest importer of cotton in the world. I don’t think any other commodity has this type 

of situation in any one country. And their market is protected. 

They control it by import quotas that are allocated. The ones that 

were negotiated under WTO are so small that they essentially 

mean nothing. So they can control their interior prices by how 

much quota they allow and when they allow it. So it may be that 

a farmer, for example, inside China is going to expand cotton acres 

when, as we know, cotton prices are extremely low and the rest of 

every other agricultural price is high, but the price of cotton in 

China is extremely high. 

Imports would probably be double what they are if they didn’t 

have those controls inside of China. From the U.S. standpoint, the 

problem that we have is that, again, the premiums that we have 

on high-grade cotton in the majority of cotton today, as technology 

is advanced, is much above the base quality grade that we have. 

Because of that, they receive a premium and when you receive a 

6¢ premium in the loan and the marketplace only pays you a 3¢ 

premium for those qualities that are grown from around the world, 

it is not going to come out of the loan because it just doesn’t work 

to profitably redeem those cottons and sell them. 

And so what happens? The other countries, whether it be the 

West Africans, Indians, Australians, Uzbekistans, all turn around 

and take our marketplace from us. It is not the U.S. cotton that 

is driving world prices down. The U.S. is the only one that is curtailing production. It is the continued over-production in Brazil, 

people who have gone ahead and moved forward with the complaint in the WTO, whose cotton production has expanded rapidly. 

16

It is the continued production and non-switching in West Africa, 

massive growth and production in China and India that has put 

the pressure on world prices. 

Mr. NICOSIA. Thank you very much. My time has expired. Thank 

you, Mr. Chairman. 

Mr. SCOTT. Thank you very much. I now recognize the gentleman 

from Ohio, Mr. Space, and I apologize for missing you the first goaround. 

Mr. SPACE. No problem. Thank you, Mr. Chairman. Ms. 

Erickson, I wanted to ask or enquire concerning acreage currently 

devoted for the production of corn. I understand that one of your 

top priorities is to ensure sufficient acreage, given the growing demand. My question is, in a general sense, how does this farm bill 

establish that and for a more specific sense, are you proposing either a release of current acreage devoted under the conservation 

programs or are you advocating for a reduction in the total acreage 

allotted under the current conservation programs? I would be interested in your thoughts on that. 

Ms. ERICKSON. Thank you, Congressman Space, and I will share 

my time a bit with NGFA, who also has views with respect to CRP, 

but we are generally supportive of bringing additional acreage out 

of CRP where it makes sense. I know there are a lot of factors that 

go into that decision making, but clearly, there is a lot of pressure 

right now on the corn industry and the corn complex broadly 

speaking. And with respect to policy levers, clearly Congress has to 

facilitate more corn coming into production, that would really be 

the one. It would be a close working relationship with the USDA 

and how acres come out, could those acres feasibly be put into corn 

production, and that is clearly the concern of many, including our 

industry. 

Mr. SPACE. And just for clarification, when you say acres coming 

out, are you talking about reducing the acreage level for CRP or 

are you talking about taking existing CRP acreage and bringing it 

back out of conservation into production? 

Ms. ERICKSON. Mostly taking existing acreage that which can 

come out, retire out of the program. 

Mr. SPACE. So in essence, a premature or early retirement. And 

have you or your organization given thought to how that can be equitably accomplished given the structure of the CRP program right 

now? 

Ms. ERICKSON. We don’t have specifics in that regard, but I 

would like to yield some time, if I could, to NGFA and their views 

on CRP. 

Mr. KAPRAUN. The time on the CRP, we realize that the land is 

environmentally sensitive, that the CRP is a good opportunity to 

protect that land. However, we also would like to see that those 

acres do not get increased where they currently are. We have the 

view that maybe we can see some shifting of acres or there may 

be some lands that are more environmentally sensitive than acres 

currently that are in the program, that those acres could be 

switched, get them out of the program. We also support the Working Lands Program. 

Mr. SPACE. And pardon me for dwelling on this subject, but I am 

curious as to whether you are suggesting a buy-in or a buy-out for 

17

a particular farmer who currently has his ground in a CRP program? Is there going to be a compensatory obligation in order to 

take land back out or is this something you envision as just being 

applied on a universal scale with due consideration of the land uses 

and values? 

Mr. KAPRAUN. I don’t know that I have personally given any 

thought to the compensation of getting those acres that are in CRP 

that are contracted out. We do appreciate the opportunity for a 

farmer to have the flexibility to take acres out if he feels like the 

market dictates that he raise crops on those acres rather than having them in the CRP. Also having the ability to maintain yield 

bases; updating those, as well. 

Mr. SPACE. Thank you. I yield back the balance of my time. 

Thank you, Mr. Chairman. 

Mr. SCOTT. Thank you. Mr. Neugebauer of Texas. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. Mr. Nicosia, you 

gave a chart that showed the exports for U.S. cotton and I think 

you showed a date there of the date that Step 2 was, the last day 

of that program, the remarkable drop in the amount of U.S. cotton 

being shipped. Has your industry given some thoughts, number 1, 

what was the Step 2 doing and what are some things that we can 

do to replace Step 2 that would maybe help additionally stimulate 

U.S. cotton exports? 

Mr. NICOSIA. Well, the most important thing that Step 2 did is 

it made us relatively competitive on every day. When you removed 

Step 2, the only way to become competitive was to become competitive in an absolute basis. So whether prices were 60¢, 70¢, 50¢, 

Step 2 allowed us to be competitive every day. Today, without the 

use of Step 2, which was an adjustment that was used, we can only 

be competitive on an absolute basis, so what that means is that the 

only way to do it is for U.S. prices to fall to a level below the rest 

of the world. 

When that happens, it triggers a whole spiral effect where then 

someone else cuts their price, you cut your price, they cut their 

price. At some point in time, prices go down and they do until what 

happens? Until the U.S. cotton gets caught in the loan. It gets 

caught, it gets trapped in the loan, the rest of the world can underprice us right underneath them, they grab the market share and 

we can’t spiral any lower than being trapped in the loan. We remove ourselves from the game and the foreign countries take all 

of the export market that is there. That is essentially what happened with the loss of Step 2. 

So how do we move forward, how do we address that? One way 

is we have to make sure that the cotton no longer gets trapped in 

the loan. That means we have to make the loan levels more competitive, both the absolute level and again, the premium levels, to 

bring them down so that they can compete in the world market 

again. We do have to make some tweaking to the adjusted world 

price formula. The industry is coming together, I believe, on that. 

You will see a pretty united front in 2007 to address that. There 

are different ideas on how to handle that for 2006. But for going 

forward for next year’s crop, I think the industry will come together on it. 

18

Mr. NEUGEBAUER. And when you talk to the producer groups 

about changing the loan rate, obviously many of those folks probably are pushing back some. What are the ways, if we did lower 

the loan rate, that we could still provide the safety net for those 

producers? 

Mr. NICOSIA. The Administration’s proposal that came out did 

have an increase in the direct payments that was there to help 

compensate. What they did miss, however, is that when we lower 

the loan rate and cotton being in the situation where prices are 

down towards the loan rate versus grain, we are increasing the 

counter-cyclical exposure for the cotton grower. I think he is willing 

to take that if it wasn’t for the risks of the payment limitations 

that they would have to impose. Cotton farms tend to be, from an 

efficiency standpoint, they are more expensive to grow and they 

tend to be larger scale, so the payment limitations affect them 

more directly. 

So if we could address the counter-cyclical payments, either 

through a direct relationship of lowering the loan to compensate or 

through direct payments, I think they would find very little 

pushback. We have found that producers understand it is broken. 

They realize, when they can’t sell their equities and cotton is 

caught in the loan, that something is wrong. So I think they are 

fairly open to ideas, but the payment limitations are a major problem in our industry. 

Mr. NEUGEBAUER. In my remaining time, to the rest of the panel, 

when we have farm policy and we sit down, writing the farm bill, 

what are some of the challenges you see as to making our farm bill 

more compliant with WTO provisions and how much of a factor 

should this group consider as we move forward in trying to make 

this farm bill as WTO compliant as we can? Mr. Kapraun. 

Mr. KAPRAUN. I don’t know that I have a list of the exact requirements right now for WTO, but I would be more than happy 

to get back to you and the Committee with some of our opinions. 

Mr. NEUGEBAUER. Okay. Mr. Schwein. 

Mr. SCHWEIN. I would say, with a great deal of comfort, that our 

group would definitely encourage compliance with WTO. I do not 

believe we have made any attempt internally to come up with a list 

of recommendations, but we will certainly undertake that effort 

and reply, as well. 

Mr. NEUGEBAUER. Ms. Erickson. 

Ms. ERICKSON. Mr. Congressman, thank you. We are concerned. 

As you know, Canada has begun the process of a challenge to the 

corn program, but there are elements of that potential challenge, 

should it go forward, that have broader implications beyond corn 

and really, it has to do with our overall domestic support spending. 

We would hope that the Committee would look seriously at ensuring that our trade obligations are met with respect to the WTO and 

the NAFTA, that we are not subject to challenge and that, in fact, 

we can take advantage of these trade agreements which have so 

benefited U.S. agriculture. 

Mr. NEUGEBAUER. Thank you. Thank you very much. 

Mr. SCOTT. The gentleman from California, Mr. McCarthy. 

Mr. MCCARTHY. Thank you, Mr. Chairman. I wanted to touch on 

Mr. Nicosia’s PowerPoint, if I could. First, if China is the largest 

19

purchaser, and I have seen, in California, less cotton being planted 

and grown, who are they buying their cotton from right now? 

Mr. NICOSIA. Well, the biggest change in the last 12 months has 

been India, by far. India has gone ahead and taken actually 30 percent of the market share this year alone, but they continue to buy 

from the United States, West Africa, Australia and then the CIS 

areas. 

Mr. MCCARTHY. If I could just touch on and have you elaborate 

a little more, you gave 4 key objectives for cotton legislation. We 

talked about the loan rate base. I was wondering if you would 

elaborate a little on the loan cotton to be shipped prior to redemption, the strategy there. 

Mr. NICOSIA. Sure. Currently, because of the way cotton is cycled 

through the loan and is redeemed, there is a tendency for cotton 

to remain in the loan for a longer period of time, looking for an opportunity for redemption. So that can happen anywhere within the 

9 months. When this time period goes through, if you have a small 

opportunity in the first month, you are going to tend not to grab 

it until such later period because you have 8 more months to wait 

for a better opportunity to come. So as this time passes and as this 

cotton remains off the market, you are missing export opportunities 

that other countries are taking from us. 

And since we cannot ship the cotton, we cannot make the sale 

because we can’t divorce redemption from shipment, we tend to 

lose all early export opportunities. So what our proposal is, is to 

allow us to redeem, not to redeem, but to actually make foreign 

sales, ship that cotton, put up collateral with CCC to protect their 

interest in the loan and yet allow us to still redeem it at another 

point in time. The benefits of that is one that is going to stop storage, which the government currently incurs; and it allows us to 

capture export markets and opportunities earlier in the year that 

we otherwise would miss. 

It will lower our carry-out, which will have a tendency to raise 

prices in the United States, which will lower, whether it be LDPs 

or counter-cyclical payments; and allow us to then go ahead and 

price that cotton or redeem it on paper at a later point in time. 

Now, people will argue and they will say whether that is cost effective or not because you will have the tendency to have larger payment schedules later in the year at advantageous prices. But the 

alternative is, it is happening, so all we are going to do is have 

those same opportunities to redeem them later, except the government is going to bear the cost of carrying that cotton until such 

time, therein losing the markets. 

Mr. MCCARTHY. So that would save the government from 

warehousing, the cost of warehousing? 

Mr. NICOSIA. Absolutely. 

Mr. MCCARTHY. Okay. I will yield back the balance of my time. 

Mr. SCOTT. Thank you very much. Again, I try and try again. I 

am sorry that I missed you on that one, Mr. Ellsworth, but I will 

make up for that by having 2 Democrats go this time. We will now 

have Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Mr. Chairman. Don’t give it a second thought. I learned as much from Mr. McCarthy’s excellent 

questions that I might from my own, so I only have 1 question. I 

20

think Mr. Kapraun, it is for you. Could you discuss your organization’s position, and the reasons why, if your organization thinks the 

fruit and vegetable planting prohibition on program base acres 

should be repealed? 

Mr. KAPRAUN. I don’t know that we have a strict position on 

that. Could you re-ask what provision it is, again? 

Mr. ELLSWORTH. On the fruit and vegetable planting prohibition 

on program base acres and whether that should be repealed. 

Mr. KAPRAUN. I don’t think that we have a specific position on 

fruit. 

Mr. ELLSWORTH. Anybody on the panel that has a position? Ms. 

Erickson. 

Ms. ERICKSON. Mr. Congressman, I will just note that although 

Brazil cannot challenge us on that particular measure today, under 

the cotton challenge, under the corn challenge that is being levied 

by Canada, should that proceed, that could have serious implications for our overall domestic support spending because those direct payments, of course, would no longer be green box and would 

have to be put in an amber box category and that would be the 

challenge, then, that would put at risk our overall domestic support 

spending, so it is a difficult situation. We don’t have a specific view, 

but we wanted to highlight the important implications of that decision. 

Mr. ELLSWORTH. Thank you. Mr. Chairman, I don’t have anything further. I yield back. 

Mr. SCOTT. All right. The gentleman from North Dakota, Mr. 

Pomeroy. 

Mr. POMEROY. Thank you, Mr. Chairman. I would just ask, 

maybe Ms. Erickson. What is the price of corn today? 

Ms. ERICKSON. It is very high, Mr. Congressman. It is a good situation, as you know, for the corn growers, but for our industry——

Mr. POMEROY. About $4 a bushel, right? 

Ms. ERICKSON. It is right about that. 

Mr. POMEROY. Now, it seems to me like your beef and Mr. 

Schwein’s beef, principally, are with the legitimate market dislocation issues of concern to your focused industries coming from high 

corn prices. Mr. Schwein, I find it rather implausible that you contend the government is somehow responsible for the decline in oat 

acreage when the fact of the matter is, is there are alternative applications for this cropland that previously was oat and wheat that 

are going to give the farmer a little better return. I also think that 

your statement failed to put in perspective where oats has been relative to a domestically produced product. 

It is my 15th year in Congress and oats has never, during the 

time I have been here, been a particularly important crop in North 

Dakota. It is, for example, looking at the acreage from the National 

Ag Statistic Service shows that in 2005 we had 490,000 acres. That 

sounds like a lot, but when you consider the fact that North Dakota 

has 26 million acres of cropland, 490,000 acres is a pretty small 

deal; 420,000, you know, 6 may be proving your point. You see a 

drop in acreage. But planting decisions, reported in the Ag Statistics Service for 2007, show 530,000 acres out of 26 million. 

Another thing that I think is, aside from the fact that people are 

going to be looking at corn and soybean because they can get better 

21

value. They can get more money into their farming operation from 

higher value crops, and you do note the agrimony advances that 

allow that opportunity in areas we didn’t have it before. There are 

other issues about other crops beyond the government programs. 

Yes, there is a loan program now supporting dry pea and lentil. 

But dry pea and lentil also have some particular characteristics 

that make it desirable to a farmer. They are nitrogen infusing 

crops at a time when inputs are just wildly expensive. 

Having a nitrogen infuser in your crop rotation has been found 

to be very valuable to a number of farmers when you talk about 

the soaring acreage of dry pea and lentil production in North Dakota, nearly 950,000 acres. Again, that is out of 26 million acres 

overall. You indicate why in the world don’t we put some support 

behind a product we don’t even eat. I hope we don’t eat it, we sell 

it. We just had the worst trade imbalance in the history of the 

country and some support for something we can actually export 

doesn’t strike me as the worst idea that we ever encountered. 

Ms. Erickson, I come back to your testimony. I am just kind of 

befuddled by it. You place all the blame on sugar for your inability 

to expand into the Mexican market, but the reality is, the Mexican 

market has, in some instances, demonstrated a preference for 

Mexican sugar as compared to U.S. corn as a sweetener product. 

In addition, production costs, market price for sugar in Mexico is 

more expensive than it is in the United States. So I think that 

there are some other market characteristics that play relative to 

what you are talking about and blaming the sugar policy, I think 

is, again, misplaced. 

I think the fundamental problem for each of you is that we have 

very high-priced corn because it is being used for ethanol. We have 

had, in the fairly near term, a transforming event in agriculture 

and it has caused market dislocation, market impact for related industries like the 2 of you represent. To me, that should have been 

placed on the table at the start of your testimony. I think that you 

have identified villains relative to your present challenges that are 

not the principal cause of your problems. 

Thank you, Mr. Chairman. They have 10 seconds to respond. I 

can just yield back and leave it for a statement, but if you would 

allow the time for them to respond——

Mr. SCOTT. Would you like to respond real briefly, in 2 seconds? 

We will give you a little bit of time. 

Ms. ERICKSON. Mr. Congressman, our challenges on corn sweetener has really been actions taken by the Mexican Government 

that limited our export opportunities. What we are hopeful in moving forward is that in the farm bill that our government doesn’t inadvertently take actions that limit the two-way trade in sweeteners 

between Mexico and the United States as the NAFTA allows. 

Mr. POMEROY. All right. Thank you. 

Mr. SCHWEIN. Just briefly, Congressman. Our concern is simply 

to provide the producer and his banker partner the opportunities 

to consider oats if the market prices are advantageous. We see 

strong market prices this year. Certainly, we need to compete with 

corn and beans and that is something we are well aware of and 

willing to undertake, but we would like to see the banker, that producer’s partner, also be able to look to oats as a reasonable option. 

22

Mr. SCOTT. All right. Thank you. And now I will recognize the 

gentleman from Texas, Mr. Conaway, and thank you for your patience in more ways than one. 

Mr. CONAWAY. Mr. Chairman, thank you. I always find it instructive to watch the techniques of my good colleague from North 

Dakota as to how he expands his 5 minutes by preaching right up 

to the last minute and then bullying the Chairman into—anyway, 

bullying. But thank you, Mr. Chairman. I appreciate that. Mr. 

Nicosia, you mentioned reducing loan rates. What should the loan 

rate be or how does that mechanism work? Give me a number that 

would work on a loan rate. 

Mr. NICOSIA. Well, today it is just set roughly at 52 cents. 

Mr. CONAWAY. Right. 

Mr. NICOSIA. What we would like to see is it be based more upon, 

the Administration proposal was for 85 percent of the 5 year Olympic average, which would relate it to market prices. If we did that, 

and we are in support of that concept, although we don’t believe 

it should all be at one time because that would be a massive drop 

and create such a large counter-cyclical exposure, it would be very 

difficult on the industry. But to base the base market rates on a 

5 year Olympic average is fine. We would probably propose to have 

some percentage limit on any one year change on it so as to not 

be market disruptive. 

Mr. CONAWAY. Okay, thank you. Mr. Schwein, you mentioned 

that your mills, after having trouble getting the raw materials to 

use, but you are now using imports, can you help me understand 

what the economic impact is on your business of using imported 

grains versus domestically grown grains? Or is there an impact? 

Mr. SCHWEIN. The economic impact is of a concern, but it is not 

the greatest concern and while we do bring in oats from across the 

Canadian prairies to the mill in Iowa, for example, and there is a 

transportation component there, market forces, if they were grown 

in Iowa, the market would probably be the same price based on our 

facility. A bigger concern is the strategic risk that all the mills are 

now taking by having most of North America’s oat production concentrated in a single growing region of the continent. 

There has historically been 5 large oat producing states in the 

U.S., but they covered a pretty broad geographic area. Today, as 

the oat production has shifted into Canada, most of the North 

America’s oat production is a 130 mile oval spread across Manitoba, Saskatchewan and into Alberta. So all of our oat demand for 

food products is filled from a narrow producing reason and the 

event of a crop growing problem in that region of the world, we will 

not be able to source sufficient supplies within North America. 

Mr. CONAWAY. Okay. Thank you, Mr. Chairman. I yield back. 

Mr. SCOTT. All right. Thank you, panelists. You have done a 

wonderful job. Thank you very much. Thank you, Mr. Nicosia, Mr. 

Kapraun, Mr. Schwein and Ms. Erickson, for your excellent, excellent presentations and we will allow you to leave and we would like 

to welcome our next panelists. 

All right. Thank you very much. We would like to welcome our 

second panel. First, we have Mr. Bob Stallman, President of the 

American Farm Bureau Federation, and Mr. Tom Buis, President 

of the National Farmers Union. You may begin, Mr. Stallman, but 

23

just before you begin, staff has just informed me that we will be 

having votes in about 15, 20 minutes, so if you could concise your 

remarks so that we can ask questions before we leave, we have a 

series of 3 votes; some may come back, some not. We can have it 

for the record, but you may proceed, Mr. Stallman. 

STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN 

FARM BUREAU FEDERATION 

Mr. STALLMAN. Chairman Scott and Members of the Committee, 

thank you for the opportunity to present our recommendations on 

the 2007 Farm Bill. The farm bill encompasses much more than 

just issues that affect farmers and ranchers. It covers issues in 

which all Americans have a stake; alleviating hunger and poor nutrition, securing our Nation’s energy future, conserving our natural 

resources, producing food, fuel and fiber and promoting rural development. 

Our Members have told us that the basic structure of the 2002 

Farm Bill should not be altered. The current farm bill is working 

and working well, overall, not only for farmers and ranchers, but 

also for the environment and consumers. The track record of success from the current farm program is very good. Agricultural exports continue to set new records, hitting $69 billion in 2006, accounting for 1⁄4 of farm cash receipts. Government outlays are considerably lower than what Congress said it was willing to provide 

as a farm safety net when the 2002 Farm Bill was signed. Farmers’ 

average debt to asset ratio is the lowest on record, about 11 percent 

in 2006, and farmers have access to a dependable safety net. 

The following is a summary of the 4 key principles underlying 

our proposal. First, the proposal is fiscally responsible. Even 

though the goals of the farm bill continue to grow, we have structured our proposal to stay within the March CBO baseline and do 

not assume any additional budget dollars from reserve funds. We 

accomplish this by proposing offsets for all funding increases within a title. 

Second, the basic structure of the 2002 Farm Bill should not be 

altered. Farm Bureau’s proposal for the 2007 Farm Bill maintains 

the baseline balance between programs. Our proposal does not shift 

funding from title to title. 

Third, the proposal benefits all of the sectors. Farm Bureau is a 

general farm organization with Members who produce all commodities. It is easy for any one group to ask Congress to allocate more 

funding for a program that benefits its interests without worrying 

about whether that will take funds away from others. Farm Bureau’s proposal seeks balance across the board. 

And fourth, world trade rulings are considered. The Farm Bureau proposal includes changes to comply with our existing agreement obligations and World Trade Organization litigation rulings, 

but it does not presuppose the outcome of the Doha Round of WTO 

negotiations, which are far from complete. 

We have nearly 60 recommendations and suggestions included in 

the report we have submitted for the record. I will highlight just 

a few of the major proposals. 

First, we support continuation of the 3-legged stool safety net 

structure of the commodity title, including the direct payment sysVerDate 0ct 09 2002 09:08 Mar 09, 2009 Jkt 041481 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 I:\DOCS\110-14\41560.TXT SOLEM PsN: REBEKA
24

tem and the loan support. But we recommend that the current 

counter-cyclical payment program should be modified to be a 

counter-cyclical revenue program using state crop revenue as the 

trigger, rather than the national average price. 

Second, given the determination of the ruling of the WTO Brazilian cotton case, we support eliminating the fruit and vegetable 

planting restriction on direct payments. We support continuing the 

restriction for the counter-cyclical payments. 

Third, we maintain our longstanding opposition to any further 

changes in the current farm bill payment limitations or means testing provisions. 

Fourth, we support establishing a county-based catastrophic assistance program focused on the systemic risk in counties with sufficient adverse weather to be declared disaster areas. In conjunction with this, we support elimination of the Catastrophic Crop Insurance Program and the Non-Insured Assistance Program. The 

crop insurance program would then need to be re-rated to reflect 

the risk absorbed by the catastrophic program. 

Fifth, we support changing the structure of the dairy price support program to support the price of butter, nonfat powder and 

cheese, instead of only the price of milk. We support this only if 

total Federal spending does not increase under this approach. 

Sixth, we support haying but not grazing on CRP acreage, with 

some reduction in the rental rate. Similarly, we support the use of 

selected CRP acres to harvest grasses raised for cellulosic feed 

stock, with a reduction in the rental rate. In both of these cases, 

production practices that minimize environmental and wildlife impacts would have to be utilized. We support an additional $250 million annual to expand the EQIP program and to allocate 17 percent 

of the mandatory EQIP funding for fruit and vegetable producers. 

And for the nutrition title, we support funding for additional purchases of fruit and vegetables. 

These are some of the major recommendations. I will be glad to 

answer any questions on the other recommendations I have not 

specifically referenced. For clarification, any element of the current 

farm bill not directly addressed in our submission, has our support 

to be continued. 

In closing, I want to emphasize that our recommendations are intended to more effectively use the limited dollars in the CBO baseline. There are still many unmet needs across all of the titles of the 

farm bill, and our testimony would look somewhat different if additional budget funds are allocated for the farm bill. Thank you and 

I will look forward to answering questions. 

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

Mr. SCOTT. Thank you very much. Now we will hear from Mr. 

Tom Buis, President of the National Farmers Union. 

Mr. BUIS. Thank you, Mr. Chairman. It is actually pronounced 

‘‘Bias.’’ It is a Hoosier pronunciation of a French name and I don’t 

know how they came up with it. 

Mr. SCOTT. Thank you. I appreciate that. As you have noticed 

from the first panel, I have struggled with my pronunciations of 

names. 

Mr. BUIS. That is okay. 

25

Mr. SCOTT. So thank you for correcting me. I appreciate it. 

Mr. BUIS. I can legitimately say I am born biased. 

Mr. SCOTT. Wonderful. Thank you, Mr. Buis. 

STATEMENT OF TOM BUIS, PRESIDENT, NATIONAL FARMERS 

UNION 

Mr. BUIS. Mr. Chairman and Members of the Subcommittee, I 

appreciate this opportunity to be here today. We have submitted a 

more complete, inclusive testimony in writing, which obviously we 

don’t have time to go over orally, but I would be glad to answer 

any questions regarding that. We too are a general farm organization and as you might imagine, there are a lot of issues out there 

considering the breadth and depth of the farm bill. 

The goal of this farm bill, however, should be profits from the 

marketplace. I have never met a farmer that didn’t prefer to get 

their income from the marketplace, and with the recent excitement 

and opportunity in renewable energy, both ethanol and biodiesel 

and wind energy and those opportunities down the road with cellulosic ethanol, farmers in those areas are very optimistic and very 

upbeat. And if we accomplish the goal of profits from the marketplace, many of the symptoms that we often debate, in this Committee and elsewhere, go away. However, while prices may be good 

in some sectors and overall, farmers are pretty satisfied with the 

2002 Farm Bill safety net structure, any farm program that works 

in high prices; any safety net would then work. But as history has 

taught us, good times do not last forever and we must plan for the 

worse. So we feel there should be a safety net that works when the 

rural economy is struggling and it has to be a key priority. 

We conducted numerous meetings around the country and by 

and large, people pointed out, over and over again, 2 glaring holes 

in the current safety net. One is the rising cost of production, primarily fueled by skyrocketing energy costs that farmers, as price 

takers, cannot pass on to others as most other businesses can and 

do. As President Kennedy once said, ‘‘farmers are the only ones 

who buy retail, sell wholesale and pay freight both ways.’’ I would 

add another sentence, that they also are the only ones that pay fuel 

charges both ways, and that has been difficult the last couple of 

years for them to grapple with. 

And since the Committee is faced with crafting a new farm bill 

with significantly diminished resources, we started looking, at 

Farmers Union, at options. One option that we had reviewed and 

analyzed, and we commissioned a study by Dr. Darryll Ray at the 

University of Tennessee, that looked at a purely counter-cyclical 

safety net based on cost of production. The concept is to take all 

of the current safety net, the 3 legs, the direct payments, marketing loans, target price, combine them into 1 counter-cyclical program based on cost of production. The preliminary results of the 

study show that we could provide the same level of safety net the 

farmers currently have, plus save $2 to $3 billion per year for other 

priorities. This level of support, 95 percent of the cost of production, would only provide Federal assistance if commodity prices are 

low and I think that is key, because one of the things that we get 

beat up with over and over again is how can you justify a payment 

26

to a farmer, like myself in Indiana, getting $4 for the corn, which 

is a profitable price, and also a payment from the government? 

The second glaring hole in the safety net is when producers have 

less than a normal crop because of weather-related disasters. Well, 

risk management programs are important. They do not protect 

enough of the risks farmers face. Emergency ad hoc assistance, as 

we all know, and you are going through it right now, is most difficult to enact. We are now going on the third year without an 

emergency disaster program. Permanent disaster assistance in the 

farm bill is a critical and inseparable part of an adequate safety 

net. Using part of the direct payments to pay for a permanent disaster program seems like a common-sense solution to a major challenge currently confronting our Nation’s farmers. 

In summary, Mr. Chairman, I would hope this Subcommittee 

would seriously consider taking a look at adopting a purely 

counter-cyclical safety net based on cost of production, because no 

one can project what prices are going to be down the road. Gross 

revenue, fixed payments, don’t get to the problem that they are 

currently facing; and also combine it with a permanent disaster 

program. Thank you, Mr. Chairman. I would be glad to take questions. 

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

of the hearing:] 

Mr. SCOTT. Thank you. Thank you, Mr. Buis. Here is our situation. We have got 12 minutes before votes and what I thought we 

could do is to get as many questions in as quickly as we can. And 

then, Members, we have a choice of either submitting our questions 

for the record or taking some—12 minutes left until the votes end. 

So I would suspect that we have got about 10 minutes before we 

have to rush over, with 2 minutes to get over that normally we can 

make it. So we have got 10 minutes here. We can take as much 

advantage of it and if we want to come back, the chair will certainly have us come back or we could submit questions for the 

record. With that, in an effort to speed things, I will recognize Mr. 

Moran for his questions. 

Mr. MORAN. Mr. Chairman, thank you very much. I will ask 

these questions and not expect a response today, but if Mr. 

Stallman or Mr. Buis, if you or your colleagues would visit with me 

about these topics in the future, that would be useful to me. I just 

wanted to raise the issue with Mr. Stallman, about rebalancing target prices and loan rates. That is not mentioned in your testimony. 

We heard from the panel previously, particularly from the millers, 

their concerns about oats and wheat, and I hear this issue from 

Kansas wheat farmers, about their importance. And I know how 

difficult it is if we don’t have more money. No one wants to give 

up anything in order to increase the other side. So Mr. Stallman, 

if you would visit with me sometime about American Farm Bureau’s thoughts in regard to rebalancing loan rates and target 

prices. 

Mr. Buis, your position on direct payments I am interested in 

pursuing. Direct payments at the moment in Kansas are the only 

thing that we are receiving as far as a safety net for farmers, and 

my guess is that the only way that I could reach a conclusion that 

direct payments are not a valuable part of this 3-legged stool is if 

27

we had a crop insurance or disaster program that was actually 

working. Despite our efforts, for as long as I have been in Congress 

and perhaps as long as you all have been working in agricultural 

policy, we are a long way from that being the case. So I would like 

to talk further about what I see developing here. It is kind of an 

anti-direct payment proposition and yet there are reasons in which 

direct payments are awfully important and so I would like to hear 

from you in the future about that, and I yield back the balance of 

my time. 

Mr. SCOTT. Thank you very much, Mr. Moran. The gentle lady 

from South Dakota, Ms. Stephanie Herseth Sandlin. 

Ms. HERSETH SANDLIN. Thank you, Mr. Chairman. I will defer to 

my colleagues who were here previously. I appreciate their testimony today, 2 organizations which you represent that have long 

provided good ideas to this Subcommittee and the full Committee; 

but I defer to my colleagues. Thank you. 

Mr. SCOTT. And thank you. The gentleman from Louisiana, Mr. 

Boustany. 

Mr. BOUSTANY. Thank you, Mr. Chairman. I also share Congressman Moran’s question with you and also, I would like you to compare and contrast your proposal on the counter-cyclical payments, 

your individual approaches to this, with that recommended by the 

corn growers. I would be interested in knowing some of the differences and how you have come about your change in position on 

this, to some degree, over the last several months. Thank you and 

I will yield back. 

Mr. SCOTT. All right, thank you. Now the gentleman from Indiana, Mr. Brad Ellsworth. 

Mr. ELLSWORTH. Thank you, Mr. Chairman. If you would ask me 

how to pronounce Mr. Buis, as a fellow Hoosier, I could help you 

there, but probably not. 

Mr. SCOTT. I needed help. I needed help this morning, my friend. 

I appreciate it. 

Mr. ELLSWORTH. I will submit my questions, but if you all could 

contact my office about the farm flex issue and your support and/

or feelings about that, and your organizations’, on farm flex. I think 

there are about 19 Members that are co-sponsoring legislation as 

a result of that and if you could have someone contact my office 

about that and your opinions. Thank you. 

Mr. SCOTT. Thank you. The gentleman from North Dakota, Mr. 

Pomeroy. 

Mr. POMEROY. Thank you, Mr. Chairman. It seems to me that 

the core of the farm bill, the heart of it, is making sure we have 

price protection for farmers when prices collapse. We have seen 

that if it doesn’t account for skyrocketing energy costs, that can be 

a very insufficient level of security. I am very intrigued by the 

Farmers Union proposal and the $3 billion it potentially frees up 

that we give through scoring. That could be used as a down payment on the permanent disaster component that many of us hope 

to put into this legislation. So I know each of these guys and think 

very highly of them and the organizations they represent. They 

have once again given us some weighty material to consider and 

I think it is going to be very helpful to us. Thank you. 

28

Mr. SCOTT. Thank you very much. And certainly, before we adjourn, let me, on behalf of the full Committee thank you for your 

understanding of our time crunch this morning. Your testimony 

was very, very informative and very beneficial to us. And thank 

you, Mr. Stallman, and thank you, Mr. Buis, for your testimony. 

Now, under the rules of the Committee, the record of today’s 

hearing will remain open for 10 days to receive additional material 

and the supplementary written responses from witnesses to any 

questions posed by a member of the panel. This hearing of the Subcommittee on General Farm Commodities and Risk Management is 

adjourned. 

[Whereupon, at 11:33 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:]

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