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HEARING TO REVIEW THE 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

MARCH 28, 2007

Serial No. 110–9

(

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, 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, 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, 

opening statement ................................................................................................ 1

Prepared statement .......................................................................................... 2

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

statement .............................................................................................................. 5

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

statement .............................................................................................................. 6

Moran, Hon. Jerry, a Representative in Congress from Kansas, opening statement ...................................................................................................................... 3

Prepared statement .......................................................................................... 4

Neugebauer, Hon. Randy, a Representative in Congress from Texas, prepared 

statement .............................................................................................................. 6

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, prepared statement ................................................................................................... 4

WITNESSES

Pucheu, Jr., John E., Chairman, National Cotton Council of America; Partner, 

Pucheu Brothers Ranch, Tranquility, CA .......................................................... 7

Prepared statement .......................................................................................... 9

McCauley, Ken, President, National Corn Growers Association; Corn and 

Soybean Farmer, White Cloud, KS ..................................................................... 15

Prepared statement .......................................................................................... 17

Gertson, Jr., Peter D. ‘‘Dan’’, Chairman, U.S. Rice Producers Association; 

Rice Farmer, Lissie, TX; on Behalf of USA Rice Federation ............................ 19

Prepared statement .......................................................................................... 21

Ostlie, Richard, President, American Soybean Association, Northwood, ND ..... 25

Prepared statement .......................................................................................... 26 

Russell, Lance, President, Kansas Sunflower Commission; Member, Board 

of Directors, National Sunflower Association; Sunflower Farmer, Hays, KS . 29

Prepared statement .......................................................................................... 31

Thaemert, John C., President, National Association of Wheat Growers; 

Owner/Operator, JT Farms, Inc., Sylvan Grove, KS ......................................... 34

Prepared statement .......................................................................................... 36

Mitchell, Larry, CEO, American Corn Growers Association ................................ 57

Prepared statement .......................................................................................... 59

Hayes, Evan, President, National Barley Growers Association; Commissioner, 

Idaho Barley Commission; Barley and Wheat Farmer, American Falls, ID ... 132

Prepared statement .......................................................................................... 133

Evans, James, Chairman, USA Dry Pea and Lentil Council; Wheat, Barley, 

Dry Peas, Lentils, and Chickpea Farmer, Genesee, ID .................................... 134

Prepared statement .......................................................................................... 136

Shelor, Gregory, President, Kansas Grain Sorghum Producers Association; 

Past President, National Sorghum Producers; Farmer, Minneola, KS ........... 140

Prepared statement .......................................................................................... 141 

SUBMITTED STATEMENTS

Submitted questions ................................................................................................ 155 

(1)

HEARING TO REVIEW THE PROPOSALS TO 

AMEND THE PROGRAM CROP PROVISIONS 

OF THE FARM SECURITY AND RURAL 

INVESTMENT ACT OF 2002

WEDNESDAY, MARCH 28, 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 

1302 of the Longworth House Office Building, Hon. Bob Etheridge 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Etheridge, Salazar, Marshall, 

Boyda, Herseth, Ellsworth, Costa, Walz, Pomeroy, Peterson (ex officio), Moran, Johnson, Graves, Boustany, Conaway, and McCarthy. 

Staff present: Craig Jagger, Scott Kuschmider, Clark Ogilvie, 

John Riley, Sharon Rusnak, Anne Simmons, Debbie Smith, Bryan 

Dierlam, and Jamie Weyer. 

OPENING STATEMENT OF HON. BOB ETHERIDGE, A 

REPRESENTATIVE IN CONGRESS FROM NORTH CAROLINA 

The CHAIRMAN. This hearing of the Subcommittee on General 

Farm Commodities and Risk Management to review proposals to 

amend the program crops of the Farm Security and Rural Investment Act of 2002 will come to order. Let me welcome all of the 

Members and the witnesses and other guests to the Subcommittee’s 

first hearing of the 110th Congress. I apologize to all of you for the 

cramped conditions we find ourselves in today, and that so many 

people were unable to get into the hearing room. The main hearing 

room is not quite ready for prime time. It should be very shortly, 

so we are just going to have to make do today as we get started. 

Almost 6 months from today, most of the provisions of the Farm 

Security and Rural Investment Act of 2002 will expire. Full Committee Chairman Peterson has made it our goal to complete work 

on the next farm bill before that point arrives and occurs. This 

Subcommittee is tasked with the responsibility of crafting those 

provisions of the next farm bill that impact what is commonly 

called program crops, and as most of you know, it includes things 

like cotton, corn, wheat, rice, soybeans, minor oilseeds, barley, sorghum, dry peas and lentils. The farm bill programs for these commodities comprise the primary safety net for those who grow these 

crops for American consumers. As such, the 2002 Farm Bill is not 

2

as perfect or as comprehensive a safety net as I would like to see 

or many others would. However, I believe that these farm programs, by and large, endorse strong support in farm county. At 

least that is the message that I took away from the series of excellent field hearings held in the last Congress by both the full Committee, under the Chairmanship of Bob Goodlatte, my good friend 

and colleague, then-Subcommittee Chairman, Jerry Moran, as we 

held several hearings across the country. 

Since these hearings, the Administration has put forth a number 

of, well, let me call them interesting ideas for the next farm bill. 

Additionally, a number of farm organizations have, since that time, 

held their annual meetings; and as a result have approved specific 

proposals and suggestions for the next farm bill, which we will 

start dealing with. And finally, we received the January and now 

the March estimates from the Congressional Budget Office of what 

our baseline in the next farm bill is going to be. These estimates 

point to the same inescapable conclusion: we don’t have a lot of 

extra money for the next farm bill. So the purpose of today’s hearing is to take testimony from farm groups and to hear in detail 

what specific ideas their members would like to see in the next 

farm bill. 

I also expect that, in that process, we will also hear what each 

of you think about each other’s specific proposals as well as the Administration’s proposal. And as you give your testimony, I do hope 

that you will keep in mind this Committee’s tight fiscal constraints 

that are being imposed on it by the full Committee as we write the 

next farm bill, and that, of course, is being imposed by the current 

financial conditions we have placed all across various government 

programs under our budget. 

[The prepared statement of Mr. Etheridge follows:]

PREPARED STATEMENT OF HON. BOB ETHERIDGE, A REPRESENTATIVE IN CONGRESS

FROM NORTH CAROLINA

I want to welcome all the Members, witnesses, and other guests to the Subcommittee’s first hearing in the 110th Congress. 

I apologize that we are going to be a little cramped here today and that so many 

people are not able to get into the hearing room, but the main hearing room in 1300 

is almost, but not quite ready for prime time yet. So we have to make do. 

Almost 6 months from today, most of the provisions of the Farm Security and 

Rural Investment Act of 2002 will expire. Full Committee Chairman Peterson has 

made it our goal to complete work on the next farm bill before that occurs. 

This Subcommittee is tasked with the responsibility of crafting those provisions 

of the next farm bill that impact what are commonly called program crops: among 

them are cotton, corn, wheat, rice, soybeans, minor oilseeds, barley, sorghum, dry 

peas, and lentils. 

The farm bill programs for these commodities comprise the primary safety net for 

those who grow these crops. As such, the 2002 Farm Bill is not as perfect or as comprehensive a safety net as I would like to see. However, I believe these farm programs—by and large—enjoy strong support in farm country. 

At least, that is the message I took away from the series of excellent field hearings held last Congress by both then-Full Committee Chairman Bob Goodlatte and 

my good friend and colleague, then-Subcommittee Chairman Jerry Moran. 

Since those hearings, a few things have happened. 

The Administration, to its credit, has put forth a number of; well, let’s call them 

interesting ideas for the next farm bill. Additionally, a number of farm organizations 

have since held their annual meetings and, as a result, approved specific proposals 

and suggestions for the next farm bill. 

3

Finally, we have received the January and then March estimates from the Congressional Budget Office of what our budget baseline for the next farm bill is. These 

estimates point to the same inescapable conclusion. 

We don’t have a lot of extra dollars for the next farm bill. 

The purpose of today’s hearing is to take testimony from farm groups and hear 

in detail what specific ideas their members want to see in the next farm bill. I also 

expect in that process that we will also hear what they think of each other’s specific 

proposals as well as the Administration’s proposal. 

As you give your testimony, I hope you will keep in mind the tight fiscal restraints that are imposed on this Subcommittee and the Full Committee in writing 

the next farm bill. 

Because we have quite a few witnesses, I will end my comments here and recognize the Ranking Member of the Subcommittee, Congressman Jerry Moran, for any 

opening statement he would like to make.

The CHAIRMAN. Because we have quite a few witnesses, I will 

end my comments here and recognize my good friend and Ranking 

Member of the Subcommittee, Congressman Jerry Moran, for whatever opening statements he might have. Jerry. 

OPENING STATEMENT OF HON. JERRY MORAN, A 

REPRESENTATIVE IN CONGRESS FROM KANSAS 

Mr. MORAN. Mr. Chairman, thank you very much. With your consent, I will submit my opening statement for the record and just 

make a few comments. 

First of all, I would like to congratulate you on succeeding as the 

Chairman of this Subcommittee and I pledge my efforts to work 

with you to see that we develop good farm policy in this country 

on behalf of all of agriculture, whether they happen to grow crops 

in North Carolina or Kansas. I did take some discomfort at your 

statement about the then-Chairman of this Subcommittee. It 

seemed like you overemphasized the word then, but I am certain 

that we can work out our differences today, and in the future, and 

again pursue policies that matter to American agriculture for the 

benefits of farmers and ranchers, but really for the benefit of the 

U.S. economy and feeding and clothing a world that needs our 

products. 

I would also like to welcome to our Subcommittee my colleague 

from Kansas, Mrs. Nancy Boyda, who joins this Subcommittee. I 

welcome her to Congress, but especially I am pleased to have a 

Kansan join me in the efforts as we develop this farm policy, and 

I look forward to working with her. This is a hearing that is an 

important one. This really does set the stage for us to pursue. As 

we conclude our budget debates and determine what the baseline 

is, it is now really time to get down to work. And this Subcommittee and the full Agriculture Committee has had a long series of hearings here in Washington, D.C. and across the country 

as we try to figure out what the right questions are. 

And I think it is fortunate that most of us recognize the experts 

are the people in this room, as well as those they represent back 

home that run the combines and plow the fields and earn a living 

every day on the farm. I am especially delighted today to have four 

Kansans, who are farmers and who earn their living on the land, 

who join us, three on this panel and one later. Greg Shelor, the 

Past President of the National Sorghum Producers will testify on 

the second panel. But with us today is Mr. Ken McCauley, who is 

the President of the National Corn Growers Association; Mr. John 

4

Thaemert, who is the President of the National Association of 

Wheat Growers; and from my hometown, Mr. Lance Russell, who 

is the President of the Kansas Sunflower Commission. So as we get 

perspective today, we will have a particular Kansas flavor and I 

am grateful for that, but I know this Committee will do its work 

on behalf of all farmers across the country. Again, I thank you for 

the hospitality and kindness you have extended to me and look forward to working with you. 

[The prepared statement of Mr. Moran follows:]

PREPARED STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN CONGRESS

FROM KANSAS

Thank you, Mr. Chairman. It is a pleasure for me to be here with you and the 

rest of the Subcommittee today as we hear proposals from the industry on how to 

amend the commodity title of the 2002 Farm Bill. I would like to thank all the representatives from the commodity groups who are testifying before us today. We have 

ten witnesses representing ten different crops. It is good to see such a diverse representation of American agriculture in one place. I am especially pleased to see so 

many Kansans testifying today. 

Last year this Subcommittee, as well as the full Committee, began gathering producer input at field hearings across the nation. Our intent is to use that information 

in writing the 2007 Farm Bill. Soon we will have a budget resolution and the Committee will set to work drafting the next farm bill. Therefore, it is appropriate that 

our series of fact finding hearings culminate with this broad panel of agricultural 

producers. 

While I am sure that each organization may have a different perspective on how 

to improve the commodity title, we can all agree that maintaining a strong and vibrant agriculture industry in the United States is essential to our nation’s wellbeing. Agriculture across this nation is diverse. A wheat producer in Kansas may 

not have the same concerns as a cotton producer in Texas. It is this Subcommittee’s 

duty to listen to the problems faced by all producers and try to develop policy that 

will ensure the United States continues to have a safe and abundant supply of food, 

fiber and, as of recently, energy. 

It is also important that we write a farm bill that allows producers to remain 

profitable. During our field hearings last year, many producers informed this Subcommittee that the 2002 Farm Bill had relatively good success in providing a safety 

net for producers. However, I am sure many of today’s witnesses will tell us there 

may be some ways we can improve our current programs. I welcome all the witnesses’ perspectives as we move forward with the 2007 Farm Bill. 

Again, thank you, Mr. Chairman, for holding this hearing and I look forward to 

the testimony of today’s witnesses.

The CHAIRMAN. Jerry, I would say that the leadership from Kansas is still present. I looked down the list earlier and I said, ‘‘Good 

gracious, Kansas is still running the show.’’ Thank you and I look 

forward to working with you. And let me ask the other Members, 

if they would, for any opening statements they might have for the 

record, so that the witnesses may begin their testimony and so that 

we make sure there is ample time for questions, because there is 

going to be a full Committee today. 

[The prepared statements of Messrs. Peterson, Goodlatte, 

Graves, and Neugebauer follow:]

PREPARED STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE IN

CONGRESS FROM MINNESOTA

Mr. Chairman, thank you for calling this hearing today. 

As everyone in this room knows, the baseline funding to support the agricultural 

safety net has fallen substantially—roughly $60 billion over the next 10 years—due 

to higher than average commodity prices. This Committee made a strong bipartisan 

pitch before the Budget Committee last month to support additional resources for 

agriculture programs so that these high prices would not affect the forward-looking 

5

policies needed to facilitate a strong farm sector as well as helping our nation move 

toward energy independence. It looks as if this Committee will not have any wiggle 

room in terms of additional funding, and if that is the case, we will write the farm 

bill accordingly. 

Last year, during out field hearings, farmers and ranchers told us that the 2002 

Farm Bill is working well for the most part and that its basic structure should be 

maintained. 

That support for the commodity title contrasted sharply with the reaction we got 

from the 1996 Farm Bill. That bill was written during a time of high commodity 

prices, much like the environment we are in today. However, prices didn’t stay high, 

and Congress had to intervene, spending more than $23 billion in additional ‘‘low 

price’’ payments to farmers over its life. It ended up being a disaster for producers 

and taxpayers alike. 

In contrast, the 2002 Farm Bill has cost less than was projected, and that is because it is working well—making payments only when commodity prices are low 

and saving taxpayers billions of dollars. 

In one way, we have become victims of our own success. The last time a farm bill 

was written, the baseline for the safety net programs was $140 billion over 10 years. 

The most recent baseline has shrunk to about $80 billion. 

As we close in on a budget resolution and move into consideration of the farm 

bill in this and the other Subcommittees, I hope to build upon the strong fundamental structure that is already in place. The commodity title will not be decreased 

because prices are high, it will not be raided to pay for other programs, nor will 

it be dismantled to meet trade obligations that do not yet exist. We have made these 

kinds of assumptions once before with catastrophic results, and taxpayers have paid 

the price. 

I thank today’s witnesses for appearing, and I yield back my time. 

PREPARED STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS

FROM VIRGINIA

Since the Agriculture Committee began its review of the 2002 Farm Bill a little 

more than a year ago, we’ve received a wide assortment of input and policy recommendations from a variety of producers and producer groups. Today, we are here 

to review some of those recommendations for the commodity title of the farm bill. 

As we proceed with writing the farm bill this year, it is important to consider 

some of the factors that will shape the environment in which it will be written. One 

of the most influential factors is the budget. Today, our budget flexibility is quite 

limited, a significant difference from the budget situation we found ourselves in 

when writing the last farm bill in 2002. In FY 2006, outlays for commodity programs were $18.221 billion. The most recent CBO projections estimate spending for 

the same programs over the next 10 years to be between $7.7 billion and $9.9 billion 

a year. Essentially, we are going into the reauthorization of the 2002 Farm Bill with 

a commodity budget almost 43 percent smaller than what we had in 2002. This 

means we will have to be particularly creative in our approach to this farm bill to 

ensure that our producers can continue to produce the safest, most affordable food 

and fiber supply in the world. 

Throughout our farm bill field hearing series last year, the feedback we heard 

about the current commodity programs was generally positive and many asked that 

we just extend the current title. However, requests for an extension were also accompanied with requests for ‘‘tweaks’’ in the current language. Additionally, some 

groups, such as the corn producers in my home State of Virginia, assert that the 

current program doesn’t adequately cover production in areas of higher risk and are 

seeking changes that would work better for them. While a complete consensus 

would have certainly made our job a lot easier, we had no illusions that it would 

be that simple. 

Today, I hope to learn a little more detail about our witnesses’ recommendations 

for the upcoming farm bill, keeping in mind the serious budget challenges we face. 

Is a simple extension, meaning no changes, of the current commodity title truly in 

the best interest of producers? Does the current policy meet the needs of all commodity producers? If not, what aspects do you recommend we modify to make the 

programs more effective for more producers? 

I look forward to the testimony of our witnesses and would like to thank them 

for the thought and effort that went into their proposals and the testimony they prepared for us today. 

6

PREPARED STATEMENT OF HON. SAM GRAVES, A REPRESENTATIVE IN CONGRESS FROM

MISSOURI

Thank you Chairman Etheridge and Ranking Member Moran for convening this 

hearing today. As a farmer myself, I know that few titles in the farm bill can have 

as much impact on agriculture as the commodity title. 

While many farmers would like to see the different program rates adjusted in one 

minor way or another, the overwhelming number of farmers in my district believe 

the current structure of commodity programs that we approved in 2002—notwithstanding the rates which we will hear more about today—has the ability and potential to provide the all important safety net for agriculture that this Committee 

strives to provide. 

I am concerned that major changes to the structure of commodity programs, will 

cause confusion and complication for producers who already must expend a great 

deal of time and effort to participate in USDA programs. 

I am also concerned with many of the proposals for the commodity title advocated 

by USDA in the Administration’s farm bill draft. While the program rates cited in 

that document may provide an adequate safety net during years when prices are 

good, I have serious concerns about what would happen to many farmers across our 

nation in times of lower prices. Without an adequate safety net during tough years, 

we cannot count on the safe, affordable, abundant food supply that our farmers provide for us three times a day. 

Finally, Mr. Chairman, I’d like to also express my support for programs—through 

the commodity title and elsewhere—to help young and beginning farmers make agriculture a viable career option. Farmers are an aging population, and we will be 

in serious trouble down the road if more young people aren’t able to get into farming. 

Thank you again Chairman Etheridge and Ranking Member Moran. I look forward to the testimony of our witnesses. 

PREPARED STATEMENT OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN

CONGRESS FROM TEXAS

I appreciate Chairman Etheridge and Ranking Member Moran calling today’s 

hearing and thank the witnesses representing their fellow producers for their testimony. 

This Subcommittee has the responsibility for crafting the title of the farm bill that 

farmers in our districts are likely paying the most attention to. It has a direct impact on them, and they are looking to us to get this right. Producer organizations 

have clearly put a lot of work into their proposals, and input from producers is most 

important to me in this farm bill process. 

Based on what I’m hearing from farmers in my district, the 2002 Farm Bill has 

been successful. The current farm bill provides us with a great starting point; we 

don’t have to start from scratch. At the same time, as we will hear today, a few 

tweaks and adjustments may help make the 2002 Farm Bill work even better. 

In addition to working well for producers, the 2002 Farm Bill has also saved taxpayer dollars. According to the Congressional Budget Office, the total costs for the 

commodity programs over the life of the bill are expected to come in $25 billion less 

than originally projected. For several commodities, demand is strong, and prices are 

good. For others, prices are not so high, and the farm bill safety net has kicked in. 

While a higher baseline may have made it easier to add new things to the farm 

bill or adjust programs, the baseline reflects that the 2002 Farm Bill has worked 

as it was intended to. We could have a much more difficult debate if we had to explain to Members not on the Agriculture Committee why commodity programs cost 

more than projected. 

One option I think the Subcommittee should consider is improving coverage within crop insurance to help farmers better protect against disasters. I have legislation 

that allows producers to stack some of a supplemental group policy on top of their 

individual yield or revenue policy. USDA proposed supplemental insurance that 

would cover some or all of the farmer’s deductible if the county yield is lower than 

average. Farmers need a better option than uncertain and costly disaster assistance 

to help manage risks. 

While there will be differences among commodity groups as to how best write this 

farm bill, I encourage you, to the greatest extent possible, to work toward common 

ground. When agriculture can speak with a unified voice, all producers benefit in 

the long run. 

7

I look forward to working with my colleagues on this Subcommittee on crafting 

a commodity title for the 2007 Farm Bill that continues to be a success for the farmers we represent.

The CHAIRMAN. And with that, I would like to welcome our first 

panel to the table. Our first panelist is Mr. John Pucheu, Chairman of the National Cotton Council, from California; second, Mr. 

Ken McCauley, President of the National Corn Growers Association, as has been indicated, from Kansas; Mr. Dan Gertson, Chairman of the U.S. Rice Producers Association, from Texas; Mr. Richard Ostlie, American Soybean Association, from North Dakota; Mr. 

Lance Russell, President of the Kansas Sunflower Commission, 

from Kansas; and Mr. John Thaemert, President of the National 

Association of Wheat Growers, from Kansas. I don’t know why in 

the world we couldn’t have gotten a couple more from Kansas, then 

we would have a full table. But gentlemen, welcome. 

Mr. MORAN. Mr. Chairman, if you would allow me to intrude? We 

grow every crop that is represented at this panel today and I could 

never say that about rice, but we or the State of Kansas has accepted a genetically modified rice, so every crop that is represented 

today is now grown in the 1st Congressional District in the State 

of Kansas. We are a diverse state. 

The CHAIRMAN. It is quite obvious we have changed Chairmen, 

but nothing has changed. 

Mr. BOUSTANY. Mr. Chairman, does mean that we can send all 

our genetically modified rice to Kansas? 

The CHAIRMAN. I believe we better get on with the business at 

hand. Mr. Pucheu, you may begin. And please let me ask you, if 

you would, we have a light and we ask that you summarize your 

statement and it will be entered into the record, and keep it to 5 

minutes if you possibly can. Thank you. 

STATEMENT OF JOHN E. PUCHEU, JR., CHAIRMAN, NATIONAL 

COTTON COUNCIL OF AMERICA; PARTNER, PUCHEU

BROTHERS RANCH, TRANQUILITY, CA 

Mr. PUCHEU. Mr. Chairman, thank you for holding this hearing 

and allowing me to present the views of the National Cotton Council. My name is John Pucheu and I serve as Chairman of the National Cotton Council. My brother and I own and operate a diversified farming operation in Tranquility, California. 

The Council’s leaders have reaffirmed our recommendation that 

new farm legislation be pattered after the basic provisions of the 

2002 Farm Bill. A marketing loan available on all production is the 

foundation of a sound farm policy. The combination of direct and 

counter-cyclical payments provides effect income support, especially 

in periods of low prices. We support planning flexibility so producers can respond to market signals. We oppose further reductions in limitations on benefits or more restrictive eligibility requirements, and we urge continuation of the extra long stable cotton program. 

We recognize that cotton markets are changing. Adjustments in 

the administration of the cotton marketing loan are needed to 

maintain competitiveness. Recently, to prepare for the farm bill, we 

asked USDA to assist in a thorough review of all aspects of the cotton marketing loan. We also recommended changes to provide more 

8

flexibility in the way loans are redeemed so U.S. cotton can be marketed even more efficiently. 

U.S. mill consumption will be less than 50 percent of the levels 

just 7 years ago. U.S. mills are competing with heavily subsidized 

imports without a safety net. In recent months, it has been emphasized that the United States needs a robust and viable renewable 

fuels production base, protected by high tariffs and a significant 

tax credit. Downstream users of cotton products also need assistance. We recommend a modest, low-cost program for U.S. textile 

mills which would be offset by savings in other provisions of the 

cotton program. 

Mr. Chairman, I would like to make a few comments about the 

Administration’s farm bill proposal. We are pleased that it recognizes the importance of maintaining the structure of current law 

and that the marketing loan continues to operate without unworkable limits. We are concerned by the proposal to implement a formula that would result in a sudden precipitous drop in the cotton 

loan rate, even though it is supposed to be offset by a significant 

increase in the direct payment. Unfortunately, replacing the marketing loan, which is available on actual production with a decoupled payment based on ancient history, doesn’t offer adequate compensation. 

We are also concerned by the proposal to terminate the three-entity rule, which was viewed as a significant reform in 1989. If termination of the three-entity rule could be paired with a sustainable 

increase in limits, it could simplify compliance. You and your colleagues should also carefully consider how husband and wife eligibility is to be determined, and if the landowner exemption will continue to apply, and what regulatory changes USDA would make to 

the definition of ‘‘actively engaged in farming.’’

We are especially concerned about the proposal to modify the ex- isting adjusted gross income test by dropping the level to $200,000 

for commodity programs, while apparently leaving the existing 

$21⁄2 million AGI test in place for conservation programs. The current test allows continued eligibility as long as the individual earns 

75 percent or more of their income from farming, ranching or forestry. But this key proposal or provision is not in the Administration’s proposal. The Administration cites statistics that only a 

small percentage of the recipients of a farm program payment have 

an AGI above the new limit. We think the important question is, 

is what percent of U.S. commodity production will be affected? For 

cotton, we believe it will be significant and we believe the new test 

will result in growers being eligible 1 year and out the next, making it very difficult to secure financing or make long-term plans. 

Mr. Chairman, cotton farmers continue to be deeply concerned 

about the efforts in the WTO Doha negotiation to isolate cotton and 

to squeeze even more concessions from the United States. The 

United States should not make additional concessions on domestic 

support until our market access objectives are met and exceeded. 

I will conclude with brief comments about our concerns with the 

sluggish U.S. cotton sales and the high levels of cotton underneath 

the loan. Why are U.S. exports lagging? First, the termination of 

Step two has hurt U.S. competitiveness; second, subsidies and 

trade restrictions by other countries are having significant impacts 

9

on world cotton trade; and third, total export commitments to 

China are 78 percent below last year. The result is more cotton in 

the loan because of the lack of demand in some of our key export 

markets. We are concerned by the recent action of the Department 

to impose additional financial penalties on farmers who forfeit their 

cotton if the demand doesn’t rebound. It is imperative to find ways 

to ensure that U.S. cotton is competitive. Thank you for the opportunity to testify today and I will be pleased to respond to your 

questions. Thank you. 

[The prepared statement of Mr. Pucheu follows:]

PREPARED STATEMENT OF JOHN E. PUCHEU, JR., CHAIRMAN, NATIONAL COTTON

COUNCIL OF AMERICA; PARTNER, PUCHEU BROTHERS RANCH, TRANQUILITY, CA 

The National Cotton Council is the central organization of the United States cotton industry. Its members include producers, ginners, cottonseed handlers, merchants, cooperatives, warehousemen and textile manufacturers. While a majority of 

the industry is concentrated in 17 cotton producing states, stretching from the Carolinas to California, the downstream manufacturers of cotton apparel and home furnishings are located in Virtually every state. 

The industry and its suppliers, together with the cotton product manufacturers, 

account for more than 440,000 jobs in the U.S. [U.S. Census of Agriculture]. Annual 

cotton production is valued at more than $5 billion at the farm gate, the point at 

which the producer sells [Economic Services, NCC]. In addition to the cotton fiber, 

cottonseed products are used for livestock feed, and cottonseed oil is used for food 

products ranging from margarine to salad dressing. While cotton’s farm-gate value 

is significant, a more meaningful measure of cotton’s value to the U.S. economy is 

its retail value. Taken collectively, the annual business revenue generated by cotton 

and its products in the U.S. economy is estimated to be in excess of $120 billion 

[Retail Values of U.S. Agricultural Commodities, NCC]. 

Mr. Chairman, thank you for holding this hearing and for allowing me to present 

the views and concerns of the members of the National Cotton Council. My name 

is John Pucheu. I serve as Chairman of the National Cotton Council. My brother 

and I own and operate a diversified farming operation in Tranquillity, California—

a part of the highly productive San Joaquin Valley. 

Mr. Chairman, the Council’s recent annual meeting was highly productive. In 

spite of numerous challenges, I am pleased that our leaders once again achieved 

consensus and reaffirmed our priorities for sound farm policy. Stated simply, we 

haven’t changed our opinion that new farm legislation should be patterned after the 

basic provisions of the 2002 Farm Bill. A marketing assistance loan that is available 

on all production is the foundation of sound farm policy. The combination of direct 

and counter-cyclical payments provides effective income support when needed 

most—in times of low prices. We also support maintenance of adequate planting 

flexibility to allow producers to respond to market signals. And while we are opposed to payment limitations of any kind, we certainly oppose any change that reduces existing limits or further restricts eligibility. 

While we believe the basic structure of our farm program provides an effective 

safety net, we also recognize that our markets are changing. There need to be adjustments to the administration of the cotton marketing assistance loan to maintain 

competitiveness. Last August, we worked with USDA as they developed an extensive regulation that allows relocation of bales under loan to better position them to 

move to market. The regulations also capped the monthly storage charges paid by 

CCC and require warehouses to report performance on a weekly basis. Recently, we 

asked USDA to assist in a thorough review of the methodology used to establish 

loan premiums and discounts; whether location differentials make sense in a market 

that is approximately 75% exports; and whether the discovery of an accurate world 

price should use Far East rather than Northern Europe price quotations. We also 

recommend that the statute and the regulations be changed to provide more flexibility in the way loans are redeemed. We believe these changes can adequately protect CCC’s collateral while allowing producers, cooperatives, and merchants to market U.S. cotton more effectively. 

Mr. Chairman, we also want to work with you and your colleagues to develop provisions which will assist our struggling domestic textile industry. According to 

USDA, domestic mill consumption of cotton is forecast at 5.0 million bales for 2006–

2007 (Figure 1). This is 900,000 bales or 15% below levels of a year earlier. The 

10

current projection means consumption will be less than 50% of levels just 7 years 

ago. It will be the lowest U.S. mill consumption since 1931–1932. Quoting from a 

USDA analyst’s report to the recent USDA Outlook Conference ‘‘. . . this dramatic 

decline in U.S. mill use has resulted from increased competition of imported textile 

and apparel products . . . China is now the leading supplier of cotton textile and 

apparel products to the U.S.—accounting for nearly 20% in 2005 and growing rapidly.’’ While imports rise and domestic mill consumption declines, cotton use at retail actually increased to 23.6 million bale equivalents in 2006 and will continue to 

increase in 2007 and the foreseeable future. U.S. consumers continue to drive global 

demand for cotton—thanks in part to the U.S. producer and importer-funded promotion program operated by Cotton Incorporated. U.S. per capita consumption of 

cotton rose to 37.9 lbs in 2006. To place that in perspective, PCI Fibres places annual per capita cotton consumption in the developed economies of Western Europe 

and Japan at just over 16 lbs, and USDA is currently estimating that China’s consumers purchase only 5.5 lbs of cotton textile products annually.

U.S. mills are competing with heavily subsidized imports without a safety net. In 

recent months, it has been stated and re-stated that the U.S. needs a robust and 

viable renewable fuels production base protected by a high tariff and significant tax 

credit. Mr. Chairman, we support that policy because it clearly benefits farmers and 

is in the interest of U.S. security. But downstream users of cotton products are not 

afforded the same high level of protection. That protection was, in fact, traded away 

during the Uruguay Round of trade negotiations. As a result, we need to provide 

compensation to our domestic customers—this country’s textile production base. We 

recommend competitiveness assistance to U.S. mills for every pound of cotton they 

consume. This modest program would have very low costs and could be offset by 

minor modifications to other aspects of the cotton program. 

Mr. Chairman, I want to also make a few comments about the Administration’s 

farm bill proposal. We are pleased that it recognizes the importance of maintaining 

the structure of current law. We also appreciate the recommendation that the marketing assistance loan continue to operate without onerous, unworkable limits. But 

it won’t surprise you to hear that we are deeply concerned by the proposal to implement a loan rate formula that would result in a sudden, precipitous drop in the cotton loan rate. 

We understand that the proposal to significantly increase the direct payment is 

designed to compensate cotton producers for the lower loan—but it doesn’t do an 

adequate job. Replacing an important component of our policy that is available on 

actual production with a decoupled payment based on ancient history doesn’t offer 

adequate compensation—especially to growers in the Southeast and to new growers 

in places like Kansas and northern Texas. Cutting the loan rate and raising the direct payment may be considered good policy in Geneva, but in my opinion, it certainly doesn’t meet the Secretary’s objective of equitable farm policy. 

We were also intrigued and disappointed by the proposal to terminate the threeentity rule, which has been in place since 1989 when it was viewed as a significant 

compromise. The intriguing part is the simultaneous increase of the limits on direct 


11009001
11

payments, counter-cyclical payments and marketing loan gains. If we could be assured that the termination of the three-entity rule would be paired with the new 

limits—though they still disproportionately impact cotton, rice and peanuts—it 

might be worth considering as a means to simplify farmer’s compliance. However, 

the clear danger is that some will support the termination of the three-entity rule 

and insist that limits remain at current levels. You and your colleagues should also 

carefully consider how husband and wife eligibility is to be determined, if the landowner exemption will continue to apply, and what regulatory changes USDA would 

make to the definition of actively engaged in farming. 

The Administration’s proposal to modify the existing adjusted gross income (AGI) 

test by dropping the level to $200,000 is a bad idea. It is bad policy and bad operationally. Congress added a $2.5 million AGI test to the last farm bill in response 

to media criticism that high-income individuals—namely Scotty Pippin and Ted 

Turner—were receiving farm program payments. To ensure high-income individuals 

were denied benefits while not penalizing individuals who depend on farming, 

ranching or forestry for their livelihood, a 3 year AGI test was added to the 2002 

farm law. An important provision provides an exemption from the means test as 

long as the individual or entity earns 75% or more income from farming, ranching 

or forestry. The Administration apparently selected $200,000 as a new ceiling so 

they can say that less than 2% of Americans who file tax returns have an AGI at 

that level. The Administration also contends that 4.2% of recipients of farm program 

payments who filed a Schedule F in 2004 have an AGI above $200,000 and that only 

4.7% of all payments received by farm proprietors went to those with an AGI over 

$200,000. That is catchy spin, but dangerously misleading. The real question is 

what percent of U.S. commodity production will be affected. For cotton, we believe 

it will be very significant. 

This new AGI ceiling was not chosen with any regard to financial reality on commercial farms. Let’s be clear that a farmer’s AGI is not profit. There are still a number of expenses that must be covered. In addition to personal expenses, farmers 

must service debt that, given the costs of today’s machinery and land, can easily 

reach into the millions. Furthermore, the proposal inexplicably eliminates the 75% 

exclusion for people who farm and ranch—indicating that the purpose behind the 

means test has changed from one targeted to exclude millionaires who happen to 

own a farm to one that specifically targets active farmers and ranchers. Oddly, the 

Administration left the $2.5 million AGI test in place to determine eligibility for 

conservation programs—which are the payments the aforementioned Mr. Pippin actually received. The Administration’s proposal condemns growers and their lenders 

to the ping-pong effect of ‘‘in 1 year and out the next’’ which is directly at odds with 

the Secretary’s ‘‘equitable and predictable’’ criteria for the new farm law. Finally, 

in another interesting twist, the U.S. will receive no credit in the WTO for this type 

of a means test. 

We were also deeply disappointed by the Administration’s proposal to eliminate 

storage credits when prices are low. The practice of paying storage was put in place 

to ensure cotton was available at competitive prices, yet the Administration proposes eliminating the credits effective October 1, 2007, just as 2006 crop loans are 

maturing. This would result in significant market disruption and income losses to 

farmers by changing the existing rule during this marketing year. Inexplicably, the 

Administration proposed eliminating the credits in their FY08 budget proposal, but 

not in their farm bill proposal. 

Access to an affordable crop insurance program is an important tool for most 

farmers. However, given the continued inequities of coverage and service in different 

regions and for different crops, it is time for a thorough evaluation of the cost and 

benefits associated with the multi-peril crop insurance program. Also, the cotton industry would be interested in exploring enhancements to crop insurance products 

that would offer protection on an individual’s deductible. The Administration included the concept of supplemental insurance coverage in their farm bill proposal, 

and many growers are interested in further analysis to identify an effective program 

that would help mitigate production risk. 

The National Cotton Council believes conservation programs will continue to be 

an important component of effective farm policy. The Conservation Reserve Program, Conservation Security Program and Environmental Quality Incentive Program are proven, valuable ways to promote sound, sustainable practices through 

voluntary, cost-share, incentive-based programs. However, they are not an effective 

substitute for the safety net provided by commodity programs. We must maintain 

an equitable balance in conservation and commodity spending for the development 

of new farm policy. Furthermore, we support eligibility provisions for conservation 

programs that are as consistent as possible with commodity eligibility provisions. 

12

Continuation of an adequately funded export promotion program, including the 

Market Access Program (MAP) and Foreign Market Development (FMD) Program, 

are important in an export-dependant agricultural economy. It also is valuable to 

maintain a WTO-compliant export credit guarantee program. Individual farmers 

and exporters do not have the necessary resources to operate effective promotion 

programs which maintain and expand markets—but the public-private partnerships 

facilitated by the MAP and FMD programs, using a cost-share approach, have proven highly effective and have the added advantage of being WTO-compliant. 

Mr. Chairman, cotton farmers continue to be disappointed by the very overt effort 

in the WTO Doha negotiations to isolate cotton to squeeze even more concessions 

from the U.S. The U.S. proposal on agriculture was ambitious and has not received 

an adequate response from the EU, the G20, or most significantly, China. The elimination of the Step two program and the significant modification of the export credit 

guarantee program have also failed to elicit positive responses—despite the negative 

impact on U.S. cotton exports caused by these two changes. 

It sometimes seems that the WTO process is convincing other countries they can 

now dictate U.S. farm policy. Stunningly, an Argentine Government official recently 

derided the Secretary’s farm bill proposal, saying the Secretary’s proposal was moving in the wrong direction and would not make them happy with respect to cotton. 

He obviously read the USDA press release accompanying their farm bill proposal 

that said direct payments for cotton would be increased by 65% and did not note 

the precipitous decline in the cotton loan rate. While the NCC does not like all aspects of the Administration’s proposal, I, for one, do not want Congress writing U.S. 

farm policy to make Argentine ministers happy. And I trust that is not the goal of 

our trade negotiators. Our purpose should be to develop policy that is beneficial to 

U.S. farmers and ranchers while tailoring that policy to minimize trade-distorting 

elements. 

Further, despite the changes made in the U.S. cotton program and despite the 

very significant offer on domestic support tabled by the Administration, the WTO 

held another special session on cotton at the request of West African countries just 

weeks after the Doha round was restarted. While many of the presentations at that 

meeting were directed to developmental discussions, it is our understanding that developing countries that produce cotton again ignored the efforts being made by the 

United States, both in trade policy and on the developmental front, and used the 

WTO session as a platform to attack the U.S. cotton program. These countries want 

elimination of the U.S. cotton program, and they want the WTO to pay them $400 

million in compensation. 

Mr. Chairman, I must stress again that the U.S. has responded over and over to 

requests for reform and to requests for assistance. The Step two program was terminated at the end of the 2005 marketing year, and the negative impacts are being 

felt by producers of the 2006 crop. Furthermore, the export credit guarantee program has undergone significant revision, and I have already mentioned the significant agricultural offer tabled by the United States. I have not, however, mentioned 

that the U.S. committed to end all export subsidies for cotton by the end of 2006 

and has complied with that promise even though we did not have to. 

The U.S. has also responded to the very real needs of African countries. Two of 

the four African countries that initially targeted U.S. cotton have submitted qualified proposals and received significant promises of assistance under the Administration’s Millennium Challenge. According to the WTO’s table of assistance, Benin and 

Mali have received commitments from the U.S. totaling over $750,000,000. This 

level of assistance amounts to almost 20¢ per pound on all cotton produced in these 

two countries, annually, over the next 6 years. This level of directed support actually dwarfs the compensation being sought through the WTO. Sadly, however, U.S. 

officials have stated that these governments are devoting very little of these funds 

directly to the cotton sector. 

The U.S. is providing the means to assist cotton farmers in Benin and Mali, but 

their own governments are not taking full advantage of our generosity. Instead, they 

demand high-level cotton sessions in Geneva and continue to brow-beat the WTO 

looking for more and more inequitable concessions on cotton. 

Mr. Chairman, U.S. negotiators must send a clear signal that enough is enough. 

The U.S. should not continue to provide more concessions (often unilateral) while 

receiving virtually no positive indications from our trading partners that they will 

also move down the trade liberalization road. The strong stand by the U.S. in Geneva last July was fully appropriate. Unfortunately, the U.S. seems to have been 

apologizing ever since. The U.S. must not make additional concessions on domestic 

support until our market access objectives are met and exceeded. The U.S. should 

not agree to a Doha result that effectively exempts China—the fastest growing econVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
13

omy in the world—from concessions. The U.S. should not make further inequitable 

concessions on cotton beyond those made in Hong Kong. 

The Secretary frequently cites the Brazil cotton case as evidence that the U.S. 

farm law must be changed in order to be unchallengeable. The truth is that U.S. 

farm law can always be challenged under current WTO rules and there are no concrete signs that a new farm bill or a new Doha Agreement will change this. 

Mr. Chairman, I would like to make some brief comments about our concerns with 

sluggish U.S. cotton sales, high levels of cotton under loan and persistently low 

prices. Total export commitments to China for the 2006–2007 marketing year stand 

at only 1.5 million bales, down 5.2 million bales from last year’s number of 6.7 million bales. U.S. exports to other buyers in Asia are also off from last year’s pace, 

but to a lesser extent. At this point last year, other key Asian countries had purchased 2.1 million bales of U.S. cotton. In the current marketing year, they’ve committed to 1.8 million bales, a drop of about 10%. 

It is the case that cotton still under loan is above the levels observed at this same 

time in past marketing years. As of mid-March, there were 11.3 million bales of the 

2006 crop of upland cotton still under loan. In recent years, cotton under loan in 

March averaged about 4.0 million bales. However, it is very important to note that 

6.5 million bales of the 2006 crop have already been redeemed from the marketing 

loan. This suggests that the loan is not the market of last resort and that cotton 

is not locked in the loan. Simply put, there is more cotton in the loan because of 

the lack of demand from key export markets. When demand improves, cotton will 

move out of the loan to satisfy that demand. 

Instead of assigning undue blame for the current market situation to the marketing loan, it is better to focus on the number of reasons why U.S. export sales 

have been lagging. First, as I previously mentioned, the loss of the Step two program has hurt the competitiveness of U.S. cotton. The U.S. has a smaller presence 

in the world market as a result of the loss of Step two. Second, subsidies, trade restrictions, and other actions are having significant impacts on world cotton trade 

and prices—and frankly, are having a much greater impact than the remaining provisions of the U.S. cotton program. This second point is well supported by several 

statements made by USDA analysts in their report prepared for the recent USDA 

Outlook Conference.

‘‘A combination of moderately higher world production and sharply highly world 

consumption is reducing world stocks for the 2006–2007 season. Significant increases in production for China, India, Brazil and Turkey will more than offset 

reduced production in the United States, Australia, Greece and Syria.’’

‘‘For India, both area and yields rose in 2006–2007 from the year before, as the 

ongoing adoption of genetically engineered Bt cotton continued transforming cotton authorization across the country. Since much of the Bt cotton planted in 

India is illegal, estimates of the extent of Bt adoption vary widely.’’

‘‘Higher production is also expected in Pakistan in 2007–2008 as more normal 

weather and the spread of Bt cotton boosts yields. Commercial cultivation of Bt 

cotton is not legal in Pakistan, but has reportedly spread to several 100,000 hectares.’’

‘‘Production in West Africa’s Franc Zone in 2007–2008 is likely to be about unchanged compared with the year before cotton prices were higher in U.S. dollar 

terms during the first half of marketing year 2006–2007, but for the Franc Zone, 

this was offset by the strength of the Euro versus the U.S. dollar. A rebounding 

EU economy drove the Euro eight percent higher with respect to the dollar, and 

the CFA Franc is linked to the Euro.’’

‘‘China imported a record 19.3 million bales in 2005–2006; however, imports for 

the first half of the current season have fallen well short of the year ago level. 

The primary factor slowing the pace of imports appears to be government-imposed import quotas, which have been more restrictive thus far this season than 

last. In January 2007, the WTO TRQ of 894,000 tons (4.1 million bales) was released; however, because a portion of the quota is reserved for state enterprises, 

it has not all been allocated to mills.’’

‘‘China has used a sliding scale import duty on non-WTO TRQ imports that attempts to assure a minimum import price to help support the domestic price for 

cotton.’’

‘‘The apparent goal of the more restrictive import policies is to use domestic cotton first before allowing significant imports. The government imposed constraints on imports have made it difficult to ascertain the underlying demand 

from the world’s largest cotton consumer, and importer; thus in turn, has resulted in unusual uncertainty for the world cotton market.’’

14

‘‘The [U.S.] cotton product trade deficit in 2006 expanded to a record 18.1 million bale equivalents, more than double the trade deficit of just 8 years ago. During 2006, U.S. cotton textile and apparel imports reached the equivalent of 22.8 

million bales of raw cotton, four percent above 2005. In contrast, cotton product 

exports decreased slightly to 4.7 million bale equivalents in 2006, and now account for 86 percent of U.S. cotton mill use compared with 55 percent in 2002.’’

‘‘China’s extensive and complex system of import quotas and government cotton 

reserves has limited the correlation between price movements in China and the 

rest of the world in 2006–2007.’’

‘‘Subsidies to cotton producers are also being put in place in China, and the Government has frequently intervened in local markets, buying cotton for the government’s reserves.’’

COTTON OUTLOOK, Vol. 85 No. 10 March 9, 2007 pg. 7

‘‘. . . Beijing has announced a subsidy for the purchase of good quality planting 

seed . . . this is part of an overall package for agriculture valued at 8.87 billion 

Yuan . . . a massive increase of 48.6 percent over last year . . . for cotton, farmers in eight regions will benefit . . . the funds earmarked will be sufficient to 

pay the subsidy on 40 percent of prospective plantings.’’

Mr. Chairman, as previously noted, export markets account for approximately 

75% of total disappearance of U.S. cotton. Exports, and subsequently total use, can 

be highly variable, particularly within the marketing year (Figure 2). The industry 

recognizes the pressures that a highly-variable demand situation can place on the 

storage and distribution system. Through cooperation with USDA, the cotton industry is working to improve the flow and efficiency of the system to ensure that we 

remain the supplier of choice to the world cotton market. In a market environment 

with a high level of variability and uncertainty, I will reiterate the importance of 

the safety net provided by an effective farm program. The farm program provides 

the necessary stability to make the long-term investments that will keep the industry competitive and productive.

I will conclude my testimony by apprising the Committee of the Council’s assessment of U.S. cotton acreage. In recent years, cotton acreage in the U.S. has fluctuated between 13.5 and 15.5 million acres as farmers have adjusted acreage based 

on agronomic practices and relative returns between cotton and competing crops. 

For this year, we fully expect that the surge in corn and soybean prices will cause 

producers to adjust their crop mix, and cotton acres will decline. The Council’s acreage survey, conducted in late December and early January, reported cotton acreage 

intentions at 13.2 million acres—a 14% decline from last year’s level (Figure 3). Of 

course, since the time of the survey, corn and soybean prices have increased further, 

and the actual cotton acreage decline will likely be even greater. This year’s acreage 

adjustments are a clear indication that planting flexibility works and farmers are 

responding to market signals.


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15

Mr. Chairman, thank you for the opportunity to testify today. I will be pleased 

to respond to your questions.

The CHAIRMAN. Thank you. And Mr. McCauley, before you start, 

let me just acknowledge that the Chairman of the Committee has 

arrived. Mr. Peterson, thank you. Any comments you want to have 

before we——

Mr. PETERSON. No. Carry on. 

The CHAIRMAN. Okay. Mr. McCauley. 

STATEMENT OF KEN MCCAULEY, PRESIDENT, NATIONAL 

CORN GROWERS ASSOCIATION; CORN AND SOYBEAN

FARMER, WHITE CLOUD, KS 

Mr. MCCAULEY. Thank you, Mr. Chairman, Ranking Member 

Moran, and Members of this Subcommittee. On behalf of the National Corn Growers Association, I appreciate this opportunity to 

present our members’ recommendations for the 2007 Farm Bill 

commodity title. My name is Ken McCauley, President of the National Corn Growers Association. I farm in White Cloud, Kansas 

with my wife and son, producing corn and soybeans. The National 

Corn Growers Association represents more than 32,000 corn farmers from 48 states. NCGA also represents more than 300,000 farmers who contribute to the corn check off programs, and 26 affiliated 

state corn organizations across this Nation. 

First, it is important to note that NCGA has supported the 2002 

Farm Bill for the improvements it made to our nation’s agricultural 

policy. In short, the 2002 Farm Bill implemented the right policy 

for that time. Looking forward, though, today’s farm safety net is 

simply not designed to meet our producers’ long-term risk management needs, given the dynamic changes underway in U.S. agriculture. NCGA has developed a proposal to reform our commodity 

program supports, change that would help ensure better protection 

against volatile commodity prices, significant crop losses, and 

would provide a permanent disaster assistance. 

Earlier this month, our delegates voted in strong support of 

‘‘county-based revenue counter-cyclical program integrated with 


11009003
16

Federal crop insurance for corn and potentially other commodities.’’ 

Extending the current farm bill would do nothing to address the 

flaws that NCGA has noted since the summer of 2002. Too many 

farmers have learned the hard way that today’s farm supports may 

be effective when market prices are low, but when yields are low, 

the income protection has been less than adequate. 

Changes in the corn industry have created many new opportunities for producers. Projected prices for corn and other major commodities indicate that current Marketing Loan Assistance Program 

and Counter-Cyclical Program will provide, at best, minimal support over the next 5 years. NCGA’s proposal reflects the views that 

the time has arrived to adopt fundamental changes in our programs. The Congress has a unique opportunity to consider major 

reforms at a time when prices are strong for most crops and exports are expected to reach a record $77 billion in 2007. And 

thanks to continued support from the Congress, renewable energy 

from homegrown crops can now play a much larger role in enhancing the country’s energy security. 

NCGA proposes replacing the existing Marketing Loan Program 

and nonrecourse Marketing Loan Program with programs that 

would provide more cost-effective risk management tools. Rather 

than low target prices, the new Marketing Loan Program, or 

RCCP, would make payments when a county’s actual crop revenue 

is less than the expected revenue. In most years, RCCP payments 

would be triggered by the same thing, crop losses that lead to the 

great majority of crop insurance indemnity payments. The RCCP 

would be integrated with Federal crop insurance to minimize overlapping coverage and to ensure a more effective, cost-efficient farm 

safety net. With insurance companies only paying for losses not 

covered by the RCCP, the indemnities paid to farmers would be reduced, enabling them to provide individual revenue insurance at 

higher coverage levels. Our analysis indicates that the voluntary 

paid premiums of buy-up revenue insurance policies should drop 

significantly. Another advantage to this approach is that it would 

provide a standing disaster program by automatically providing 

payments to all farmers in counties that suffer low crop revenue, 

thus saving almost $1.8 billion annually on ad hoc disaster aid. 

The final component of NCGA’s proposal is to change the nonrecourse loan to a recourse loan program, a reform that would significantly increase the market orientation of U.S. farm policy. A recourse loan would continue to give producers harvest time liquidity, 

which increases their ability to market their crop at a more profitable time. NCGA believes that the time is right for introducing 

these reforms and urges Congress to provide the necessary resources to take advantage of this opportunity. Integration of the 

RCCP with Federal crop insurance creates efficiencies in delivering 

individual revenue protection policies. At a 95 percent expected 

county revenue trigger and a 2 year transition period, this new 

safety net is projected to add no more than $500 million to the 

CBO’s March baseline. NCGA recommends a cap on prices used to 

determine county trigger revenues and proposes to set projected 

crop prices using a straight 3 year average of the revenue insurance prices. At these levels of protection, we are confident of our 

17

proposal’s potential for long-term savings and promise as a superior farm safety net. 

Mr. Chairman, NCGA stands ready to work with you as you 

begin crafting a new farm bill. Our growers appreciate the difficult 

task before you and your continued support of our industry. I 

thank you again for this opportunity to discuss our goals and priorities and look forward to any questions you might have. Thank you. 

[The prepared statement of Mr. McCauley follows:]

PREPARED STATEMENT OF KEN MCCAULEY, PRESIDENT, NATIONAL CORN GROWERS

ASSOCIATION; CORN AND SOYBEAN FARMER, WHITE CLOUD, KS 

Mr. Chairman, Ranking Member Moran and Members of the Subcommittee, on 

behalf of the National Corn Growers Association (NCGA), I appreciate this opportunity to present for your consideration our members’ views and recommendations 

for the 2007 Farm Bill commodity title. 

My name is Ken McCauley, President of NCGA. I am from White Cloud, Kansas 

and farm with my wife and son producing corn and soybeans. 

The National Corn Growers Association represents more than 32,000 corn farmers 

from 48 states. NCGA also represents more than 300,000 farmers who contribute 

to corn check off programs and 26 affiliated state corn organizations across the nation for the purpose of creating new opportunities and markets for corn growers. As 

we celebrate our 50th anniversary, our members are mindful of their predecessors’ 

forward looking planning, their accomplishments and the value they placed on 

NCGA being a grassroots organization. That heritage as a grassroots organization 

remains very much alive and is reflected in the farm bill proposal that we bring 

forward today. 

First, it is important to note that NCGA has recognized and supported the 2002 

Farm Bill for the improvements it made to our nation’s agricultural policy, particularly the strengthening of the farm safety net. The introduction of a new countercyclical payment program with an option for producers to update their base yields 

marked a positive step toward delivering more targeted and timely assistance to 

producers during periods of low prices. Combined with the marketing assistance 

loan program, most producers have been in a much better position for long term 

planning, including investments in ethanol production and producer owned value 

added business opportunities. In short, the 2002 Farm Bill implemented the right 

policy for that time. 

Looking forward, though, today’s farm safety net is simply not designed to meet 

our producers’ long term risk management needs given the dynamic changes underway in U.S. agriculture, and particularly in the corn industry. Following 2 years of 

study, cost analysis and considerable input from our state associations, NCGA’s 

Public Policy Action Team developed a proposal to reform our commodity support 

programs; changes that would help ensure better protection against volatile commodity prices, significant crop losses, and would provide permanent disaster assistance. Earlier this month, our delegates voted in strong support of a ‘‘county based 

revenue counter-cyclical program integrated with Federal crop insurance for corn, 

and potentially other commodities.’’ NCGA’s proposal is designed to increase the 

market orientation of the commodity title, enhance the targeting of farm support so 

that payments arrive when farmers most need assistance and increase the efficiency 

with which taxpayer dollars are spent supporting agriculture. 

Although projections of higher commodity prices, alone, present a strong case for 

a revenue based farm program, it is producers’ experience with drought and other 

adverse weather conditions in isolated areas that have drawn our attention to what 

some economists have referred to as a hole in the current safety net. Under these 

circumstances, growers have been unable to fully benefit from higher market prices 

and cannot depend on counter-cyclical payments at a fixed target price to reduce 

the adverse impact of lost income. For those farmers who have experienced large 

crop losses or repetitive years of less severe or shallow losses during the recent 

years of record harvests and low prices, the combined support of marketing loan deficiency payments and counter-cyclical payments have provided insufficient income 

protection which has led to the need for recurring disaster assistance. Revenue protection from Federal crop insurance protection can certainly soften the financial 

blow, but the premiums for these policies rise significantly at the higher levels of 

coverage. 

Most producers would agree that the commodity support programs in the 2002 

Farm Bill have served them well. Extending these programs, though, would do nothVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
18

ing to address the flaws NCGA has noted since the summer of 2002 or the potential 

solutions we have recommended. Again, too many farmers have learned the hard 

way that today’s farm supports may be effective when the market price is low, but 

the income protection available when yields are low has proven to be less than adequate. A well designed revenue based program can deliver protection against low 

prices or low yields. 

As you well know, the changes in the corn industry, driven largely by a growing 

ethanol industry have created many new opportunities for producers, our rural communities and the many businesses that are critical to our success. Projected market 

prices for corn and other major commodities from both the Congressional Budget Office (CBO) and the Food and Agricultural Policy Research Institute forecast that the 

current marketing loan assistance program and counter-cyclical program will provide minimal, if any, meaningful support over the next 5 years. The CBO, in fact, 

has scored the level of spending for loan deficiency payments ranging from $7 million in 2008 to just $30 million in 2012. A very similar level of outlays is forecast 

for counter-cyclical payments. These projections, along with the expansion of planted 

acres for corn, have reinforced the need for NCGA and affiliated state associations 

to investigate an alternative safety net that enables producers to better manage 

their risks. 

NCGA’s commodity title proposal reflects the view that the time has arrived to 

adopt fundamental changes in our programs that would strengthen our competitiveness and enhance the long term viability of U.S. farmers. The United States Congress has a unique opportunity to consider major reforms at a time when prices are 

strong for most crops and exports are expected to reach a record $77 billion in 2007. 

Equally impressive is that U.S. agriculture can celebrate the lowest debt-to-asset 

ratio in recorded history, approximately 11 percent for 2006. And thanks to continued support from the Congress, renewable energy from home grown crops are now 

playing a much larger role in enhancing the country’s energy security. 

To provide a better safety net for producers, NCGA proposes replacing the existing counter-cyclical program, loan deficiency payments and the nonrecourse marketing loan program with programs that would provide more comprehensive and 

cost effective risk management tools. Direct payments would continue to provide a 

foundation of support. Rather than target low prices, the new Revenue Counter-Cyclical Program would make payments when a county’s realized crop revenue is less 

than a crop’s trigger revenue. When the actual per-acre revenue falls below the peracre trigger revenue, producers would be compensated for the difference. I need to 

emphasize that a farm’s total payment would equal the per-acre payment multiplied 

by planted acres rather than base acres as is the case with today’s price triggered 

program. This county based program is very similar to Group Risk Income Protection (GRIP), a product currently offered through the Federal crop insurance program. Similar to GRIP, the proposed RCCP trigger revenue for a county would 

equal the product of RCCP coverage level, the expected county yield and the projected price level. The harvest price and a crop’s actual county yield reported by 

NASS (National Agricultural Statistic Service) would determine the actual county 

revenue. However, RCCP would not include a Harvest Revenue Option which can 

increase payments if the harvest price is greater than the projected price. 

In most years, RCCP payments would be triggered by the same events that lead 

to the great majority of crop insurance indemnity payments: droughts, excessive or 

inadequate heat, excessive rain, or widespread disease related losses. Hail, wind 

damage or local flooding may also cause losses at the farm level, but not enough 

toward county losses to trigger RCCP payments. NCGA recognizes the potential for 

overlapping coverage with RCCP and crop insurance. Consequently, NCGA proposes 

to integrate RCCP payments with the Federal crop insurance program to create a 

more effective and cost efficient farm safety net. 

The integration of these core programs would provide a first line of revenue protection, reducing price risk and widespread production risk now borne by private insurance companies. By making sure the companies only pay for losses not covered 

by the RCCP, the indemnities that insurance providers pay farmers would be significantly reduced enabling them to provide individual revenue insurance at higher 

coverage levels. Analysis provided to NCGA indicates that the farmer paid premiums of buy-up revenue insurance policies would drop significantly through the rerating of insurance products by the Risk Management Agency. 

Integration of RCCP and crop insurance would establish a floor under farm revenue. In some years, though, farmers could receive RCCP payments when farm level 

crop losses are not severe enough to trigger insurance payments. In this situation, 

farm revenue would remain above the floor level. There could also be years farmers 

sustain farm level losses, yet would not receive any RCCP payments. Individual insurance would cover their losses and farm revenue would be brought up to the floor 

19

level. Participation in the crop insurance program would remain voluntary leaving 

the choice to producers to supplement the RCCP with insurance for farm level losses 

or accept the risk that the county level losses would not cover individual crop losses. 

The NCGA proposal through RCCP adopts an alternative approach that offers the 

advantage of providing savings for farmers wanting to purchase crop insurance 

while reducing the financial risks of the private insurance industry. We believe this 

change offers the potential of further strengthening the private-public partnership 

by making sure that most private insurance companies survive even through the 

heavy loss years. Another advantage to this direct approach is that it would provide 

a standing disaster program for farmers who grow program crops. Unlike the uncertainty and protracted delays that are now the norm for agriculture disaster assistance, RCCP would automatically provide payments to all farmers in counties that 

suffer low revenue. This change, alone, would help to ensure a more equitable and 

sensible delivery of aid than the antiquated crop disaster assistance formula which 

does little to fill the gaps in today’s farm safety net. 

The final component of NCGA’s proposal is to change the nonrecourse loan program to a recourse loan program, a reform that would significantly increase the 

market orientation of U.S. farm policy. A recourse loan would continue to give producers harvest time liquidity which increases their ability to market their crop at 

a more profitable time. Although the farmer’s last resort option to sell a crop to 

USDA would no longer be available, a recourse loan program would create incentives for producers to actively market their crop into the private sector. 

Recognizing the challenges before this Committee to write a commodity title 

under the current fiscal constraints, I now want to turn to the subject of funding. 

As I stated earlier, NCGA believes the time is right for introducing these proposed 

reforms and we urge the Congress to provide the necessary resources to take advantage of this opportunity. Specific to the projected outlays, this integration of a county revenue counter-cyclical program (RCCP) with Federal crop insurance extracts 

cost efficiencies from lowering the costs of delivering individual revenue protection 

policies and as well as spending offsets from replacing the current nonrecourse marketing loan program and the price triggered counter-cyclical program. In addition, 

a county based RCCP modeled after the Group Risk Income Protection insurance 

policy, provides producers permanent disaster assistance less costly than the ad hoc 

crop disaster aid programs that have averaged near $1.8 billion on an annual basis. 

Assuming a level of 75 percent buy up individual revenue insurance, a county revenue guarantee at a coverage level of 95 percent of projected price and a 2 year implementation delay of a 5 year farm bill, the annual cost of the NFSA is projected 

at approximately $500 million above baseline. To be prudent in the use of public 

funds, NCGA recommends implementation of a cap on projected prices used to determine trigger revenues. One option would be to base the cap on a multiplier of 

loan rates adjusted for basis and historical season average prices. To reduce the effects of market volatility on the program and to provide greater predictability to producers, NCGA proposes to establish projected crop prices as the average of the current year’s revenue insurance price and the previous 2 year’s prices. Given the improvements in the farm safety net that I have outlined and our confidence in the 

potential for long term savings, NCGA believes its proposal offers a viable policy alternative for your consideration. 

Mr. Chairman, NCGA stands ready to work with you and your colleagues in the 

weeks and months ahead as you begin crafting a new farm bill. Our growers appreciate the difficult task before you and your continued support of our industry. I 

thank you again for this opportunity to appear before this Subcommittee and discuss our goals and priorities.

The CHAIRMAN. Thank you, Mr. McCauley. Mr. Gertson. 

STATEMENT OF PETER D. ‘‘DAN’’ GERTSON, JR., CHAIRMAN, 

U.S. RICE PRODUCERS ASSOCIATION; RICE FARMER, LISSIE, 

TX; ON BEHALF OF USA RICE FEDERATION 

Mr. GERTSON. Thank you. Good morning, Chairman Etheridge, 

Ranking Member Moran, Mr. Peterson and Members of the Subcommittee. I am Dan Gertson, a rice farmer from Lissie, Texas. I 

am the Chairman of the U.S. Rice Producers Association. I have 

been farming rice for 50 years and I am blessed to have four sons, 

two son-in-laws and one grandson, who I have helped begin farming as well. I am pleased to appear today on behalf of both the USA 

20

Rice Federation and the U.S. Rice Producers Association. Our grain 

represents the grain that feeds half the world. It sustains life in 

half the population of the world. 

The rice industry strongly supports the continuation of the current farm program, with a three-prong safety net of a nonrecourse 

Marketing Loan Program, Direct Payment Program and CounterCyclical Program. These programs have worked as designed, to ensure a safety net for producers. When prices increase, program expenditures decline because less support is needed. 

Rice program support levels: U.S. farm policy will have saved about $25 billion since passage of the 2002 Farm Bill. As a result, 

the commodity program budget baseline, according to the Congressional Budget Office, has gone down by about 43 percent since 

2002. At the same time, input and production costs for rice producers have gone up by more than 42 percent. Under current law, 

the loan rate for rice is set at a national average rate of $6.50 per 

hundredweight of rice. The loan rate for rice has remained unchanged since 1989. Since the enactment of the 2002 Farm Bill, the 

support provided by the rice loan compared to the variable cost of 

rice production has gone down by a whopping 33 percent. This represents a greater and effective reduction in the support level for 

rice than for any other program cost since 2002 and is now lower 

than for any other program crop. The falling value of program support in the face of rising production costs is why we are seeking 

a very modest increase in our rice loan rate from the current level 

of $6.50 per hundredweight to $7.50 per hundredweight. We are 

also seeking a 50¢ increase in the target price to $11 per hundredweight. 

Loan rates by class: There are currently three distinct loan rates 

for rice by class that are set by USDA for each crop year. There 

is long grain, medium grain and short grain rice. The average of 

these three loan rates must equal the $6.50 per hundredweight national average. There has been a differential between the loan 

rates for several classes of rice, even though the loan rate has been 

set at one single level for all rice in the farm bill. We believe that 

the rice loan rate should be set at the same level for all classes of 

rice, long, medium and short grain. We urge this Committee, as 

you draft the farm bill, to include language directing USDA to set 

the national loan rate for each class of rice at the same level as 

established by the farm bill, with the only adjustment continuing 

to be reflective of milling yields. There should be no further loan 

rate differentials by class or location. 

Adjusted world price calculation for rice: Many in the industry 

are also concerned with the current black box methodology and formula used by USDA in calculating the adjusted world price for 

rice. The adjusted world price largely determines the level of loan 

program benefits, if any, provided to the producers, based on the 

world price for rice. We believe by putting in place a transparent 

and verifiable formula and method for calculating the average 

world price for rice, producers and others in the industry will have 

a greater confidence in the process. We look forward to working 

with the Committee to include legislative language in the farm bill, 

and the industry consensus, to bring much needed transparency to 

this process. 

21

U.S. Department of Agriculture proposal: It is unfortunate that 

many of the changes to the farm bill proposal developed by USDA, 

particularly in the commodity title, would weaken the safety net 

the farm bill is intended to provide. The proposal to set loan rates 

based on previous 5 year Olympic average prices and to include a 

loan rate cap, but not a floor, would be especially damaging. The 

proposed adjusted gross income rule would make U.S. farm policy 

unpredictable, inequitable, and punitive for American farm and 

ranch families, especially tenant and beginning farmers and ranchers. We urge you to oppose these provisions of the USDA farm bill 

proposal. 

The rice industry supports the continuation of the basic commodity programs structure, with a modest improvements outlined 

above. I would be pleased to respond to any questions. 

[The prepared statement of Mr. Gertson follows:]

PREPARED STATEMENT OF PETER D. ‘‘DAN’’ GERTSON, JR., CHAIRMAN, U.S. RICE

PRODUCERS ASSOCIATION; RICE FARMER, LISSIE, TX; ON BEHALF OF USA RICE

FEDERATION

Introduction 

Good morning, Chairman Etheridge, Ranking Member Moran, and Members of 

the Subcommittee. 

I am Dan Gertson, a rice farmer from Lissie, Texas and the Chairman of the U.S. 

Rice Producers Association. I have been farming rice for 50 years, and I am blessed 

to have four sons and two sons-in-law who I have helped begin farming as well. 

I am pleased to appear today on behalf of both the USA Rice Federation and the 

U.S. Rice Producers Association. 

Mr. Chairman, we thank you for holding this hearing and for the opportunity to 

express our views on the farm bill. 

The U.S. rice industry supports maintaining an effective farm safety net that includes the marketing assistance loan program, counter-cyclical and direct payments, 

and planting flexibility. 

Farm Bill Budget 

We would like to thank Chairman Peterson, Ranking Member Goodlatte and 

Members of the Agriculture Committee for the bipartisan effort they have made to 

obtain additional budget resources to help in developing the best farm policy possible. We are well aware of the difficult budget situation we are facing, but also fully 

agree with the position taken by the Committee in its budget views and estimates 

letter sent to the House Budget Committee. 

The fact is that U.S. farm policy will have saved about $25 billion since passage 

of the 2002 Farm Bill. As a result, the commodity program budget baseline according to the Congressional Budget Office has fallen by about 43 percent since 2002. 

At the same time, input and production costs for rice producers has risen by more 

than 42 percent since 2002. As such, the Agriculture Committees should be given 

some credit for this savings and provided an additional budget allocation for maintaining a farm program safety net in the farm bill. 

We recognize the many competing interests that must be considered when assembling a farm bill. New needs have been identified since passage of the 2002 Farm 

Bill. However, the safety net we have today is still vitally important to farmers and 

rural America—as important as when the 2002 Farm Bill was written. 

Commodity Programs 

Overall, the rice industry strongly supports the continuation of the current farm 

programs within the commodity title of the farm bill. We believe the structure of 

the three-prong safety net of a nonrecourse marketing loan program, direct payment 

program and counter-cyclical program are working as designed to ensure a safety 

net for producers. When prices increase, program expenditures decline because less 

support is needed. This has resulted in the approximately $25 billion in actual and 

projected savings from the commodity programs over the course of the 2002 Farm 

Bill. 

22

Payment Limitation Policies 

The U.S. rice industry opposes any further reduction in the payment limit levels 

provided under the current farm bill. We also oppose any government policies that 

attempt to ‘‘target’’ payments or apply a means test for agricultural production payments. Payment limits have the negative effect of penalizing viable family farms the 

most when crop prices are the lowest and support is the most critical. To be a viable 

family farm, we must use economies of scale to justify the large capital investment 

costs associated with farming today. It is essential that rice producers maintain eligibility for all production to the nonrecourse loan program. Arbitrarily limiting payments results in farm sizes too small to be economically viable, particularly for rice, 

cotton, and peanut farms across the Sunbelt. When the issue of payment limits is 

brought up, oftentimes opponents of production agriculture attempt to use misleading statistics taken out of context for the purpose of making their argument. 

Here are some key points that I know we are all probably aware of, but it’s important to be reminded of so that we see the real picture of production agriculture. 

Statistics skewed by ‘‘Rural Residence Farms’’: ‘‘Rural residence farms’’ as 

defined by USDA represent about 2⁄3 of the 2.1 million ‘‘farms’’ in this country. Excluding these farms where farming is not the primary occupation of the family results in a very different picture about the percentage of ‘‘farms’’ receiving farm program payments. The universe of farms actually producing this nation’s food and 

fiber is much smaller than 2.1 million. In fact, 38% of farms produce 92% of our 

food and fiber and receive 87% of farm program payments. 

While we support the overall structure of the current commodity programs, there 

are some rice specific legislative adjustments within the structure of the programs 

that are needed to address some issues that have arisen relative to rice. 

Rice Program Support Levels 

Within the current marketing loan program, the statutory loan rate for rice is set 

at a national average rate of $6.50 per hundredweight of rice (about 2.22 bushels). 

The loan rate for rice has remained unchanged since 1989. However, over that time 

period production costs and operating expenses have increased exponentially and 

continue to escalate. As a result, since the enactment of the 2002 Farm Bill the support provided by the rice loan compared to the variable cost of rice production has 

fallen by a whopping 33 percent! In 2002 the rice loan rate represented about 150 

percent of the variable cost of producing rice. Today that same loan rate represents 

only about 100 percent of the variable cost of producing rice. This represents a 

greater effective reduction in the support level for rice than for any other program 

crop since 2002, and is now lower than for any other program crop. As such, we are 

seeking a very modest increase in our rice loan rate from the current level of $6.50/

cwt to $7.00/cwt. 

In the 2002 Farm Bill, when the target price and counter-cyclical payment system 

was established, the target price for rice was set at $10.50/cwt and remains at that 

level today. Again, due to the continued increase in production costs, we are seeking 

a $.50/cwt increase in the target price to $11.00/cwt. 

Loan Rates by Class 

The current statutory loan rate for rice is set at $6.50/cwt, but there are currently 

three distinct loan rates for rice by class that are set by USDA for each crop year: 

long grain, medium grain, and short grain. The average of these three loan rates 

must equal the $6.50/cwt national average set by current statute in the farm bill 

for rice. Over the course of the marketing loan program operation, there has been 

a differential between the loan rates for the several classes of rice, while the statutory loan rate has been set at one level for all rice. USDA has recently undertaken 

efforts to ‘‘rebalance’’ these loan rates by class. We have concerns with the approach 

being used by USDA in this process. After studying and analyzing the issue we believe that the most appropriate course is to set the loan rate at the same level for 

all classes of rice—long, medium, and short grain. 

Analysis of the impact of the changes proposed by USDA suggests that the modifications would have a significant impact on the rice industry. At first glance, 

changes in class loan rates would appear to cancel each other out, assuming that 

the method to report adjusted world prices remains unchanged. If so, the result 

would basically be a transfer of loan support from long grain rice producers to producers of medium and short grain. 

However, these changes in payments could be large enough to generate a round 

of false market adjustments as producers shift acreage in response to the change 

in the program and markets react to the resulting larger medium and short grain 

supplies and smaller long grain supplies. In other words, this new ‘‘equilibrium’’ enVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
23

visioned by USDA will not have been achieved without causing significant economic 

pain. 

Arriving at a new ‘‘equilibrium’’ between long and medium/short grain loan rates 

will likely entail significant adjustments along regional lines. Within the long grain 

sector, the higher cost producers that are already operating at low rates of return 

would suffer the greatest burden. Losses in revenues would be concentrated in the 

areas where producers have the lowest ability to take advantage of changes in loan 

rates by shifting between varieties, such as Missouri, Mississippi, and Texas. Any 

gains in revenue would be concentrated in California where producers would receive 

a higher return on their existing production, and the potential to expand more profitable operations. 

The current method of setting loan rates by class has allowed for the orderly production and marketing of rice that has provided ample supplies to the market without generating excessive stocks in either the public or private sectors. Although domestic prices for medium grain varieties have over time appreciated at a rate much 

faster than long grain varieties, much of this increase reflects market forces unique 

to particular markets and even to particular medium grain varieties. 

Therefore, we urge this Committee as you draft the farm bill to include statutory 

language directing USDA to set the national loan rate for each class of rice at the 

same level as established by the farm bill, with the only adjustment continuing to 

be reflective of milling yields. There should be no further loan rate differentials by 

class or location. 

Making such a change to an ‘‘all rice’’ loan rate would, based on the current rice loan rate of $6.50/cwt, result in a slight reduction in the long grain loan rate of 

$0.09/cwt compared to the 2007 crop loan rate and an increase in the medium grain 

loan rate of $0.30/cwt and an increase of $0.22/cwt for short grain. Of note, long 

grain rice accounts for approximately 80% of total rice production, and medium and 

short grain rice accounts for approximately 20% of total production on average. 

Adjusted World Price Calculation for Rice 

Many in the industry are also concerned with the current methodology and formula used by USDA in calculating the ‘‘adjusted world price’’ (AWP) for rice. The 

AWP is set and announced each week by USDA as part of the marketing loan program. The AWP largely determines the level of loan program benefits (if any) provided to producers, based on the world prices for rice adjusted back to U.S. location 

and quality. 

The current process employed by USDA is essentially a ‘‘black box’’ approach that 

provides little, if any, transparency in the process. This method worked well overall 

for a number of years after the marketing loan program was first established. However, over the course of the last few years, the AWP as announced by USDA has 

varied significantly at times from what was believed to be the true price relationships in the world market place. This has reduced U.S. competitiveness in the world 

market and diminished the producer safety net. 

To help address this issue, the industry is working to develop a more transparent 

formula that would be representative of the prices in the major world rice markets. 

Such an approach would work in principle similar to the method used for calculating the AWP for cotton, which utilizes a rather specific formula calculation for 

certain markets. 

We believe by putting in place a transparent, verifiable formula and method for 

calculating the AWP for rice, producers and others in the industry will have greater 

confidence in the process. It should also help USDA to better calculate the AWP on 

a weekly basis. 

As the several industry producer, processor, and other organizations further define and reach consensus on a proposal for a transparent method of calculating an 

AWP for rice, we look forward to working with the Committee to include legislative 

language in the farm bill to bring this much needed transparency to the process. 

USDA Proposal 

We have reviewed the farm bill Proposal developed by USDA and released in January. While it is clear a great deal of effort went into developing the proposal, it 

is unfortunate that many of the proposed changes, particularly in the commodity 

title, would have the damaging effect of weakening and in some cases practically 

eliminating the safety net the farm bill is intended to provide. However, the USDA 

proposal does call for an additional $5.0 billion in funding for the farm bill over the 

next 10 years, which is a positive and necessary part of the farm bill development. 

Commodity Title 

It is important to note overall that USDA’s commodity program proposal recommends maintaining the key components of the safety net—nonrecourse marVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
24

keting loan program, direct payment program, and counter-cyclical program—although some of the changes within the programs are problematic, as described 

below. 

The proposal to set loan rates based on previous 5 year Olympic average prices 

and to include a loan rate cap but not a floor would be especially damaging. This 

would essentially remove any real safety net that the marketing loan program is 

intended to provide. If market prices for a certain commodity begin to decline and 

continue that downward trend for several years, the result could be a loan rate significantly below the current loan rate levels. Loan rates should be set in statute at 

the appropriate level to provide a basic safety net level and not be altered during 

the life of a farm bill. This level of certainty and predictability is necessary for producers to obtain production financing and make long-term planning decisions. 

Also, the proposal by USDA to modify the counter-cyclical program from a pricebased trigger to a revenue-based trigger at the national level is also problematic for 

rice producers and the rice industry. Given the unique nature of rice production, we 

experience very little variation in yield or production, but can experience significant 

changes in market prices. Therefore, using market prices as the basis for countercyclical payments is important for our industry and something we continue to support. We would note that the justification for this change—helping producers when 

they have production losses—is not even accomplished by the proposal because producers in an entire region could lose their crop and so long as other producers made 

their crop and prices were strong, no payment would be made. 

The current law adjusted gross income (AGI) provision prohibits commodity program payments from being made to individuals with greater than a $2.5 million 

AGI, excluding those individuals who earn at least 75% of their income from farming, ranching, or forestry. A major concern with the USDA proposal involves the reduction of the AGI test to only $200,000, and the repeal of the farmer safe harbor 

for those whose income principally comes from farming, ranching, or forestry. 

We believe the idea of means testing for commodity programs in general is bad 

policy. A farm safety net—no matter how good it may be—is not worth anything 

to thousands of farm and ranch families if they cannot access it. The AGI proposal 

unfairly penalizes full time farmers who have diversified and expanded for purposes 

of achieving economies of scale in order to compete with foreign competitors that 

enjoy huge subsidies, tariffs, and questionable non-tariff barriers. This rule would 

injure U.S. farmers and ranchers as they fight to compete on a very lopsided global 

playing field. 

The proposed AGI rule would make U.S. farm policy unpredictable, inequitable, 

and punitive for American farm and ranch families, especially tenant and beginning 

farmers and ranchers, as well as lenders, landowners, Main Street businesses, and 

rural communities. 

This provision would also have serious consequences as it relates to rental agreements between landowners and producers. It would force landowners to cash rent 

their land rather than share production risks with their producer tenants. This will 

only hurt the ‘‘real producers’’ farming or ranching on the land. Large or wealthy 

landowners who are the apparent targets of this proposal will not suffer, but will 

simply cash rent their land to other producers who are likely eligible for program 

benefits. 

The proposed AGI rule also makes it difficult or impossible for lenders to measure 

with any certainty the future cash flow of farm and ranch families in order to make 

both short and long term lending decisions. Uncertain whether the producer will be 

eligible for farm policy benefits, lenders—whether banks, farm credit system institutions, equipment dealers, or others offering business credit—will be unable to estimate producer cash flows with any level of certainty. 

It is understandable why this type of rule has not been proposed for conservation 

programs under the farm bill. Or under the JOBS Bill that helps U.S. manufacturers compete globally. Or for doctors under Medicare. They didn’t include this kind 

of a rule because it would have hurt the cause, not helped it. Similarly, farm and 

ranch families should not be means-tested out of farm policy based on their AGI because this, too, would undermine a fundamental purpose of farm policy: the provision of the safest, most abundant, most affordable food and fiber supply in the world 

to the American consumer. 

We urge you to oppose the above provisions of the USDA farm bill proposal due 

to the severe consequences that would result from any one or combination of them. 

America’s farm and ranch families are already facing enough uncertainty and difficulty without unnecessarily weakening the safety net as proposed by USDA. 

25

Conclusion 

Overall, the rice industry supports a continuation of the basic commodity programs structure, with the changes referenced above as it relates to rice: (1) Modestly increase the program support levels for rice to a loan rate of $7.00/cwt and 

a target price of $11.00/cwt.; (2) Set loan rates for all classes of rice at the same 

level, with no differential by class or location; and (3) Develop and implement a 

more transparent formula for the calculation of the AWP for rice. 

We continue to believe that our current farm programs are a fiscally responsible 

approach to farm policy and provide a safety net when needed. They have resulted 

in $25 billion in savings from the estimated costs of the farm commodity programs 

of the 2002 Farm Bill. 

Furthermore, any unilateral reduction of the current programs and funding levels 

of the farm bill will result in the effective ‘‘unilateral disarmament’’ by the U.S. 

when it comes to World Trade Organization (WTO) negotiations that the Administration is continuing to pursue. Such action would effectively weaken our negotiating position with other countries. We certainly do not agree that the pending WTO 

negotiations should dictate or steer our domestic farm policy. Farm policy should be 

directed by what’s best for America’s farm and ranch families. 

Thank you again for the opportunity to testify and share our views with you as 

it relates to the commodity provisions of the farm bill and the Administration’s farm 

bill proposal. We look forward to working with this Subcommittee and the full Committee in crafting the strongest farm policy possible to continue to provide an effective safety net for American agriculture. 

I would be pleased to respond to any questions at the appropriate time.

The CHAIRMAN. Thank you, sir. Mr. Ostlie, I understand that you 

and Mr. Russell will share your 5 minutes. Okay, you are recognized. Thank you, sir. 

STATEMENT OF RICHARD OSTLIE, PRESIDENT, AMERICAN 

SOYBEAN ASSOCIATION, NORTHWOOD, ND 

Mr. OSTLIE. Good morning, Mr. Chairman, Mr. Peterson, and 

Members of the Subcommittee. I am Rick Ostlie, a soybean farmer 

from Northwood, North Dakota and President of the American Soybean Association. The ASA appreciates the opportunity to present 

our views on the commodity title of the 2007 Farm Bill. 

Mr. Chairman, ASA previously testified on the 2007 Farm Bill 

before the full Committee in September of 2006. Our statement at 

that time was presented on behalf of the National Sunflower Association and the U.S. Canola Association as well as ASA. I am 

pleased that Mr. Russell from NSA is able to join me here in restating our position today. 

Oilseed producer organizations support the basic structure of the 

2002 Farm Bill, with some minor adjustments. We believe the 

three-legged stool that includes a marketing loan, the Marketing 

Loan Program, direct payments, combined with crop insurance and 

disaster assistance, can provide an adequate safety net for farmers 

in years of low prices and reduced production. 

I say can because the 2002 Farm Bill establishes target price and 

marketing loan rates for oilseeds at levels that do not provide an 

adequate safety net for producers of these crops. They are out of 

balance with the supports provided to other program commodities. 

The soybean target price of $5.80 per bushel triggers counter-cyclical payments only when seasonal average prices fall below $5.36. 

The difference reflects the soybean direct payment of 44¢. We believe that $5.36 per bushel is inadequate in protecting soybean producer income. Prices never fell below the $5.36 level during the 

past 4 years under the current farm bill. Even if they had, countercyclical payments are made on only a fraction of actual production. 

26

They are based on 85 percent of a formula that in many cases uses 

outdated yields from the early 1980s. This safety net is too low to 

be meaningful to oilseed producers. 

Our proposal is to adjust target prices for all program crops to 

a minimum of 130 percent of the Olympic average of season average prices in 2000 to 2004. This period was selected because it includes years of both lower prices and higher prices for most commodities. The 130 percent level was selected because it would increase income support for all crops except cotton and rice. Since 

target prices for these crops under the 2002 Farm Bill are already 

higher than 130 percent, they would not be affected under our proposal. 

At 130 percent, the soybean target price would increase from 

$5.80 to $6.85 per bushel. Subtracting the 44¢ direct payment, the 

average effective target price would be $6.41. The target price for 

canola, sunflower and other so-called minor oilseeds would increase 

from $10.71 to $14.61 per hundredweight. Considering the target 

prices for other program crops, we consider these to be adequate 

and reasonable levels of income support for oilseed producers. 

Our proposal would also adjust marketing loan rates to a minimum of 95 percent of the 5 year Olympic average. These adjustments would only marginally affect soybeans. The increase would 

be only 1¢, from $5 to $5.01 per bushel. However, as Mr. Russell 

will make clear, marketing loan rates must reflect the market 

value of commodities. If they are out of sync with each other, planting decisions can be distorted in years when prices at harvest are 

expected to be near or below loan levels. Some current loan rates 

do not reflect recent market price relationships between crops, and 

they must be adjusted. 

Mr. Chairman, attached to my written statement is a table showing current and proposed marketing loan rates and target prices 

for all program crops. Also attached are tables showing the cost of 

these adjustments for individual commodities, and a table showing 

the overall cost for all target price and loan rate adjustments of 

about $900 million per year. 

We understand the Subcommittee has limited resources to accommodate this and any changes in the commodity title in the 

2002 Farm Bill. However, we strongly believe our proposal is the 

best way to correct major deficiencies in the Act. We also strongly 

support making additional resources available from outside the 

commodity title to make these changes. However, if they are not 

made available, we encourage you to consider ways to make these 

adjustments using resources within the commodity title. Thank you 

very much. 

[The prepared statement of Mr. Ostlie follows:]

PREPARED STATEMENT OF RICHARD OSTLIE, PRESIDENT, AMERICAN SOYBEAN

ASSOCIATION, NORTHWOOD, ND 

Good morning, Mr. Chairman and Members of the Subcommittee. I am Rick 

Ostlie, a soybean farmer from Northwood, North Dakota, and President of the 

American Soybean Association. ASA appreciates the opportunity to present our 

views on the commodity title of the 2007 Farm Bill. 

Mr. Chairman, ASA previously testified on the 2007 Farm Bill before the full 

Committee in September 2006. Our statement at that time was presented on behalf 

of the National Sunflower Association and the U.S. Canola Association as well as 

27

ASA. I am pleased that Mr. Russell from the NSA is able to join me in restating 

our position today. 

Oilseed producer organizations support the basic structure of the 2002 Farm Bill, 

with some minor adjustments. We believe the ‘‘three-legged stool’’ that includes the 

marketing loan, the counter-cyclical program, and direct payments, combined with 

crop insurance and disaster assistance, can provide an adequate safety net for farmers in years of low prices and reduced production. 

I say ‘‘can’’ because the 2002 Farm Bill established target prices and marketing 

loan rates for oilseeds at levels that do not provide an adequate safety net for producers of these crops and are out of balance with the support provided to other program commodities. The soybean target price of $5.80 per bushel triggers countercyclical payments only when season average soybean prices fall below $5.36. The 

difference reflects the soybean direct payment of $0.44. We believe that $5.36 per 

bushel is inadequate in protecting soybean producer income. Prices never fell below 

$5.36 during the past 4 years under the current farm bill. Even if they had, countercyclical payments are made on only a fraction of actual production—they are based 

on 85% of a formula that in many cases uses antiquated payment yields from the 

early 1980’s. This safety net is too low to be meaningful to oilseed producers. 

Our proposal is to adjust target prices for all program crops to a minimum of 

130% of the Olympic average of season average prices in 2000–2004. This period 

was selected because it includes years of both lower prices and higher prices for 

most commodities. The 130% level was selected because it would increase income 

support for all crops except cotton and rice. Since target prices for these crops under 

the 2002 Farm Bill are higher than 130%, they would not be affected under our proposal. 

At 130%, the soybean target price would be increased from $5.80 to $6.85 per 

bushel. Subtracting the $0.44 direct payment, the effective target price would be 

$6.41. The target price for canola, sunflower and other so-called minor oilseeds 

would increase from $10.71 to $14.61 per hundredweight. Considering the target 

prices for other program crops, we consider these to be adequate and reasonable levels of income support for oilseed producers. 

Our proposal would also adjust marketing loan rates to a minimum of 95% of the 

same 5 year Olympic price average. These adjustments would only marginally affect 

soybeans—the increase would only be 1¢, from $5.00 to $5.01 per bushel. However, 

as Mr. Russell will make clear, marketing loan rates must reflect the market value 

of commodities. If they are out of sync with each other, planting decisions can be 

distorted in years when prices at harvest are expected to be near or below loan levels. Some current loan rates do not reflect recent market price relationships between 

crops, and they must be adjusted. 

Mr. Chairman, attached to my written statement is a table showing current and 

proposed marketing loan rates and target prices for all program crops. Also attached 

are tables showing the cost of these adjustments for individual commodities, and a 

table showing the overall cost for all target price and loan rate adjustments of about 

$900 million per year. 

We understand the Subcommittee has limited resources to accommodate this or 

any other change to the commodity title in the 2002 Farm Bill. However, we strongly believe our proposal is the best way to correct major deficiencies in that Act. We 

also strongly support making additional resources available from outside the commodity title to make these changes. However, if they are not made available, we 

encourage you to consider ways to make these adjustments using resources within 

the commodity title. 

Thank you very much.

RICHARD OSTLIE,

President, American Soybean Association.

28

Attachment 

Adjusting Loan Rates to 95% & Target Prices to 130% of 2000–2004 Olympic Average of Prices 

Commodity 

2000–04

Olympic

Average

Price 

Direct

Payment

Rate 

04–07

Loan

Rate 

Proposed

2008

Loan

Rate 

% of

Olympic

Average

Price 

04–07

Target

Rate 

Proposed

2008

Target

Price 

% of

Olympic

Average 

Price 

Wheat (bu.) $3.19 $0.52 $2.75 $3.03 95% $3.92 $4.15 130%Corn (bu.) $2.12 $0.28 $1.95 $2.01 95% $2.63 $2.75 130%Soybeans (bu.) $5.27 $0.44 $5.00 $5.01 95% $5.80 $6.85 130%Cotton (lb.) $0.4680 $0.0667 $0.5200 $0.5200 111% $0.7240 $0.7240 155%Rice (cwt.) $5.81 $2.35 $6.50 $6.50 112% $10.50 $10.50 181%Barley (bu.) $2.47 $0.24 $1.85 $2.35 95% $2.24 $3.21 130%Grain Sorghum (bu.) $2.05 $0.35 $1.95 $1.95 95% $2.57 $2.66 130%Oats (bu.) $1.52 $0.024 $1.33 $1.44 95% $1.44 $1.97 130%Minor Oilseeds (cwt.) $11.27 $0.80 $9.30 $10.71 95% $10.10 $14.66 130%Peanuts (lb.) $0.205 $0.0180 $0.18 $0.195 95% $0.2475 $0.267 130%

29

Overall Annual Average Change in Farm 

Program Costs: 

Baseline 

Marketing Loan Program: 

$ Million 160

Percent 11%

Countercyclical Program: 

$ Million 741

Percent 51%

Total: 

$ Million 901

Percent 32%

Change in Cost to Adjust Marketing Loans to 95% of 2000–2004 Olympic Ave. of Prices 

2008 2009 2010 2011 2012 2013

($ million)

All Crops 176 158 158 156 157 156

Soybean 5 55666

Corn 34 29 29 28 31 32

Wheat 66 55 50 44 40 37

Cotton 0 0 0000

Rice 0 0 0000

Barley 36 35 36 36 37 36

Oats 221111

Peanuts 24 23 26 28 27 27

Sorghum 0 0 0 0 0 0

Minor Oilseeds 10 10 11 13 14 15

Change in Cost of Counter-Cyclical Program to Adjust Target Prices to 130% of 2000–2004 

Olympic Average of Prices 

2008 2009 2010 2011 2012 2013

($ million)

All Crops 717 689 707 749 774 809

Soybean 395 400 421 468 486 520

Corn 108 92 90 88 93 95

Wheat 82 71 66 60 56 53

Cotton 0 0 0000

Rice 0 0 0000

Barley 45 44 46 47 50 50

Oats 20 18 17 17 17 17

Peanuts 40 40 40 41 41 41

Sorghum 6 5 5 5 5 4

Minor Oilseeds 21 20 21 24 26 29

Mr. OSTLIE. Mr. Russell? 

STATEMENT OF LANCE RUSSELL, PRESIDENT, KANSAS

SUNFLOWER COMMISSION; MEMBER, BOARD OF

DIRECTORS, NATIONAL SUNFLOWER ASSOCIATION;

SUNFLOWER FARMER, HAYS, KS 

Mr. RUSSELL. Good morning, Mr. Chairman, Mr. Peterson, and 

Mr. Moran. My name is Lance Russell. I am a sunflower farmer 

from Hays, Kansas and I run a diversified farm, growing most of 

these crops. I am currently the President of the Kansas Sunflower 

Commission and therefore on the Board of Directors of the National Sunflower Association, and I want to thank you for the opportunity to speak, even though I am in the red button right now. 

30

Anyway, Mr. Chairman, the U.S. sunflower industry has gone 

through a difficult transition dating back to the late 1970s. At that 

time, we were seen as a Cinderella crop, with boundless potential 

for production and demand. In the 1980s, oilseed crops discovered 

how farm programs can impact production decisions. We lost acres 

to program crops and became dependent on export subsidies, and 

later on access to the farm program payments to survive. In the 

1990s, our industry took a bold move and decided to take control 

of our future by building superior oil characteristics into the entire 

sunflower crop. This was a challenging and costly effort involving 

producers, feed companies and processors, but we emerged with 

NuSun sunflowers. NuSun varieties have low linolenic oil profile, 

making them ideal for use in food products and food service applications that require a healthier oil with higher stability and longer 

shelf life. 

They also require partial hydrogenation in these applications. 

What that means is they contain no transfats and we know that 

‘‘transfats’’ is the big buzz word right now. And following FDA’s decision to require transfats to be labeled on food products in 2006 

and actions or proposals to eliminate transfats in the food product 

and manufacturing industry, demand for NuSun sunflowers has exploded. A number of major U.S. and Canadian food companies have 

switched their formulae to include NuSun in order to avoid 

transfats. Now, there is more demand for low saturated and stable 

oils coming from other users. This is an enormous opportunity for 

our industry, after 25 years of work, to find our place in the oils 

market and we don’t want to lose it. Moreover, if we are to meet 

the consumers’ demands for healthier oils, we must assure an adequate and stable supply of sunflower seed oil. 

Mr. Chairman, sunflower support levels under the current farm 

program present one of the biggest obstacles in our ability to respond to market demand. Our marketing loan rate of $9.30 per 

hundredweight is only 82 percent of the Olympic average of season 

average prices between 2000 and 2004. The loan rates for commodities that compete with sunflower are much higher. Soybean is 95 

percent; corn, 92; wheat, 86; and dry peas at 120 percent. As a result, sunflower has lost 47 percent of our acreage since 1998 and 

1999, dropping from 31⁄2 million to 1.9 million acres, even as market demand has called for a major increase in sunflower production. 

Sunflower and other minor oilseeds were also discriminated 

against when target prices were established in the 2002 Farm Bill. 

The minor oilseed target price of $10.10 per hundredweight is 80¢ 

higher than our $9.30 loan rate. But since our direct payment is 

also 80¢, the effective target price is still the same, at $9.30, identical to the loan rate. There is no way counter-cyclical payments 

can be triggered for minor oilseed producers. 

Together with the other oilseed organizations, we strongly support adjusting marketing loan rates to a minimum of 95 percent of 

the Olympic average of prices in 2000 to 2004, and target prices 

to a minimum of 130 percent of the same price average. It is absolutely critical that these adjustments be made in the 2007 Farm 

Bill if our industry is going to survive and be able to take advanVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00034 Fmt 6633 Sfmt 6601 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
31

tage of the opportunities that we have helped to create and which 

we have before us today. Thank you for your consideration. 

[The prepared statement of Mr. Russell follows:]

PREPARED STATEMENT OF LANCE RUSSELL, PRESIDENT, KANSAS SUNFLOWER

COMMISSION; MEMBER, BOARD OF DIRECTORS, NATIONAL SUNFLOWER ASSOCIATION; 

SUNFLOWER FARMER, HAYS, KS 

Good morning, Mr. Chairman and Members of the Subcommittee. I am Lance 

Russell, a sunflower farmer from Hayes, Kansas. I currently serve as President of 

the Kansas Sunflower Commission, and on the Board of Directors of the National 

Sunflower Association. Thank you for the opportunity to appear before you today. 

Mr. Chairman, the U.S. sunflower industry has gone through a difficult transition 

dating back to the late 1970’s. At that time, we were seen as a Cinderella crop, with 

boundless potential for production and demand. In the 1980’s, oilseed crops discovered how farm programs can impact production decisions. We lost acres to program 

crops, and became dependent on export subsidies and, on later access to farm program payments, to survive. 

In the 1990’s, our industry decided to take control of our future by building superior oil characteristics into the entire sunflower crop. This was a challenging and 

costly effort involving producers, seed companies and processors, but we emerged 

with NuSun sunflower. NuSun varieties have a low linolenic oil profile, making 

them ideal for use in food products and food service applications that require a 

healthier oil with higher stability and longer shelf life. 

They also require no partial hydrogenation in these applications, meaning they 

contain no transfats. Following FDA’s decision to require transfats to be labeled on 

food products in 2006 and actions or proposals to eliminate transfats in the food 

product and manufacturing industry, demand for NuSun sunflower has exploded. A 

number of major U.S. and Canadian food companies have switched their formulas 

to include NuSun in order to avoid transfats. There is more demand for low saturated and stable oils coming from other users. This is an enormous opportunity for 

our industry, after 25 years of work, to find our place in the oils market—and we 

don’t want to loose it. Moreover, if we are to meet the consumers’ demands for 

healthy oils we must assure an adequate and stable supply of sunflower seed oil. 

Mr. Chairman, sunflower support levels under the current farm program represent one of the biggest obstacles to our ability to respond to market demand. Our 

marketing loan rate of $9.30 per hundredweight is only 82 percent of the Olympic 

average of season average prices in 2000–2004. The loan rates for commodities that 

compete with sunflower are much higher: Soybeans is 95 percent; corn is 92 percent, 

wheat is 86 percent, and dry peas is 120 percent. As a result, sunflower has lost 

47 percent of our acreage since 1998–1999, dropping from 3.5 million to 1.9 million 

acres, even as market demand has called for a major increase in sunflower production.


11009004
32

Sunflower and other minor oilseeds were also discriminated against when target 

prices were established in the 2002 Farm Bill. The minor oilseed target price of 

$10.10 per hundredweight is $0.80 higher than our $9.30 loan rate. But since our 

direct payment is also $0.80, the effective target price is $9.30—identical to the loan 

rate. There is no way counter-cyclical payments can be triggered for minor oilseed 

producers. 

Together with the other oilseed organizations, we strongly support the adjusting 

marketing loan rates to a minimum of 95 percent of the Olympic average of prices 

in 2000–2004, and target prices to a minimum of 130 percent of the same price average. It is absolutely critical that these adjustments be made in the 2007 Farm Bill 

if our industry is going to survive and be able to take advantage of the opportunities 

we have helped to create, and which we have before us today. 

Thank you for your consideration of our views.

LANCE RUSSELL, 

President, Kansas Sunflower Commission; 

Board Member, National Sunflower Association.

33

Attachment 

Adjusting Loan Rates to 95% & Target Prices to 130% of 2000–2004 Olympic Average of Prices 

Commodity 

2000–04

Olympic

Average

Price 

Direct

Payment

Rate 

04–07

Loan

Rate 

Proposed

2008

Loan

Rate 

% of

Olympic

Average

Price 

04–07

Target

Rate 

Proposed

2008

Target

Price 

% of

Olympic

Average 

Price 

Wheat (bu.) $3.19 $0.52 $2.75 $3.03 95% $3.92 $4.15 130%Corn (bu.) $2.12 $0.28 $1.95 $2.01 95% $2.63 $2.75 130%Soybeans (bu.) $5.27 $0.44 $5.00 $5.01 95% $5.80 $6.85 130%Cotton (lb.) $0.4680 $0.0667 $0.5200 $0.5200 111% $0.7240 $0.7240 155%Rice (cwt.) $5.81 $2.35 $6.50 $6.50 112% $10.50 $10.50 181%Barley (bu.) $2.47 $0.24 $1.85 $2.35 95% $2.24 $3.21 130%Grain Sorghum (bu.) $2.05 $0.35 $1.95 $1.95 95% $2.57 $2.66 130%Oats (bu.) $1.52 $0.024 $1.33 $1.44 95% $1.44 $1.97 130%Minor Oilseeds (cwt.) $11.27 $0.80 $9.30 $10.71 95% $10.10 $14.66 130%Peanuts (lb.) $0.205 $0.0180 $0.18 $0.195 95% $0.2475 $0.267 130%

34

Overall Annual Average Change in Farm 

Program Costs: 

Baseline 

Marketing Loan Program: 

$ Million 160

Percent 11%

Countercyclical Program: 

$ Million 741

Percent 51%

Total: 

$ Million 901

Percent 32%

Change in Cost to Adjust Marketing Loans to 95% of 2000–2004 Olympic Ave. of Prices 

2008 2009 2010 2011 2012 2013

($ million)

All Crops 176 158 158 156 157 156

Soybean 5 55666

Corn 34 29 29 28 31 32

Wheat 66 55 50 44 40 37

Cotton 0 0 0000

Rice 0 0 0000

Barley 36 35 36 36 37 36

Oats 221111

Peanuts 24 23 26 28 27 27

Sorghum 0 0 0 0 0 0

Minor Oilseeds 10 10 11 13 14 15

Change in Cost of Counter-Cyclical Program to Adjust Target Prices to 130% of 2000–2004 

Olympic Average of Prices 

2008 2009 2010 2011 2012 2013

($ million)

All Crops 717 689 707 749 774 809

Soybean 395 400 421 468 486 520

Corn 108 92 90 88 93 95

Wheat 82 71 66 60 56 53

Cotton 0 0 0000

Rice 0 0 0000

Barley 45 44 46 47 50 50

Oats 20 18 17 17 17 17

Peanuts 40 40 40 41 41 41

Sorghum 6 5 5 5 5 4

Minor Oilseeds 21 20 21 24 26 29

The CHAIRMAN. Thank you, Mr. Russell. Now we will hear from 

Mr. Thaemert. Please, sir, 5 minutes. And remember, fellows, your 

full statement is in the record and you will summarize it within 

the 5 minutes. Thank you. 

STATEMENT OF JOHN C. THAEMERT, PRESIDENT, NATIONAL 

ASSOCIATION OF WHEAT GROWERS; OWNER/OPERATOR, JT 

FARMS, INC., SYLVAN GROVE, KS 

Mr. THAEMERT. Mr. Chairman and Members of the Subcommittee, my name is John Thaemert and I am a farmer from 

Sylvan Grove, Kansas, and I currently serve as President of the 

National Association of Wheat Growers. I would like to thank you 

for allowing me this opportunity to discuss how together we can 

35

best address the needs of our Nation’s wheat producers in the 2007 

Farm Bill. 

Effective farm legislation is essential, not only for wheat growers, 

but also for rural economies as well as consumers both here and 

abroad. Farm programs were designed to cushion boom and bust 

cycles that are inherent to farming, and also to ensure a safe, affordable and abundant supply of food and fiber for the American 

people. The economic safety net provided by multi-year farm legislation is largely responsible for the food security our country enjoys, which in turn provides a variety of societal and economic benefits. People all over the world also benefit from a healthy U.S. agriculture sector through trade, technology developed with American 

research, and our extensive network of food aid. 

U.S. farm policy is also essential to continue agriculture’s strong 

legacy of conservation and stewardship. This is something that the 

wheat growers feel very, very strongly about. Our farmers and 

ranchers care for the vast majority of America’s land. Responsible 

growers treat the land well because they know that it is their most 

precious resource. Our Nation’s farm policy has the responsibility 

to help these men and women maintain and improve the natural 

resources they have cared for over, oftentimes, many generations. 

Agriculture is increasingly providing Americans the opportunity 

to get their fuel from the Midwest rather than an unstable Middle 

East. The Federal Government can help make this goal a reality 

in a variety of ways. The emerging biofuels industry, especially cellulosic ethanol, which is of particular interest to the National Association of Wheat Growers, is an industry that could revolutionize 

and vitalize both our national and rural economies. These technologies will be commercialized much more quickly and efficiently 

if farmers can remain on their operations and profitably produce 

the necessary crops and feed stocks. 

As for title I, the commodity title, the Food Security and Rural 

Investment Act of 2002 has some strong points, and the membership of the National Association of Wheat Growers believes that 

the 2007 legislation should build on these strengths. While wheat 

growers generally support the structure of the current policy, much 

of the safety net provided by the 2002 Bill has not been effective 

for wheat farmers due to the fact that the support levels, namely, 

the target price, were set too low. The 2007 Farm Bill has an opportunity to correct these imbalances. 

The chart displayed in my written testimony clearly shows the 

inequities in the commodity safety net that wheat growers have 

dealt with over the term of the 2002 Bill. And I want to make this 

point quite clearly. Make no mistake about the fact that NAWG 

members understand the needs of producers of other crops and we 

certainly do not advocate a decrease in support for any crops. However, wheat producers need an equitable increase in support to 

maintain their operations. As a result of this inequity, our members and our Board of Directors gave firm direction to our domestic 

policy committee and to our officers to address this issue. After 

many months of discussion and extensive analysis of various options, including revenue-based programs, our Board adopted a proposal that increases the direct payment and target price to more 

accurately reflected increased cost of production. We therefore recVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
36

ommend to the Committee that the direct payment for wheat be increased to a $1.19 per bushel, along with a commensurate increase 

in the payment limit for fixed payments, and that the target price 

be increased to $5.29 per bushel, while maintaining the Market 

Loan Program as currently structured, a nonrecourse loan at $2.75 

per bushel. 

In addition to these changes in title I, NAWG opposes any type 

of means testing to establish eligibility for, or restrict participation 

in, Federal programs. NAWG supports the continuation of the 

three-entity provision of the 1996 FAIR Act, and separate identity 

rights for spouses actively engaged in farming. NAWG supports 

creating a separate market classification for hard white wheat. 

And the highlights of our position on titles II through X include 

extension of CRP for sensitive lands, utilizing certain CRP acreage 

for land eligible for CRP, or land eligible for CRP, for the purpose 

of planting and harvesting dedicated energy crops, including, but 

not limited to, switchgrass, and continued funding for research in 

mapping of the wheat genome, a complex project that offers huge 

potential. 

And at this point, I would like to refer to a magazine article that 

was in Farm Journal. I don’t know if you can see it there, but it 

says, ‘‘Farm Bill Disappoints Wheat.’’ This is what our members 

have been telling us for the last 4 or 5 years. But I want to quote 

a colleague of mine from Kansas and many of you may know him, 

Dr. Barry Flinchbaugh. In his plain spoken way he says, ‘‘Wheat 

has gotten the shaft in commodity programs.’’ I think it is important that we take this opportunity to right this inequity. 

In closing, I would also like to implore you about the need for 

disaster assistance for my members. This has been a struggle. We 

have been caught up in this for a number of months on this debate. 

We have gone through anywhere from 5 to 10 years of drought and 

that really hampers a person’s ability to pay loans. In closing, the 

members of the National Association of Wheat Growers are excited 

about this opportunity to make needed adjustments to the 2007 

Farm Bill and are ready to work with Congress and the Administration to produce legislation that will best serve all producers and 

consumers alike. And I thank you for this opportunity and I look 

forward to any questions you may have. 

[The prepared statement of Mr. Thaemert follows:]

PREPARED STATEMENT OF JOHN C. THAEMERT, PRESIDENT, NATIONAL ASSOCIATION

OF WHEAT GROWERS; OWNER/OPERATOR, JT FARMS, INC., SYLVAN GROVE, KS 

Mr. Chairman, Members of the Subcommittee, my name is John Thaemert. I am 

a farmer from Sylvan Grove, Kan., and am currently serving as President of the National Association of Wheat Growers. I would like to thank you for allowing me to 

be here today to discuss the needs of wheat growers in the 2007 Farm Bill. 

As you are aware, effective farm legislation is essential, not only for wheat growers, but also for rural economies and consumers all over the world. Farm programs 

were designed to cushion the boom and bust cycles that are inherent to agricultural 

production and to ensure a consistently safe, affordable and abundant supply of food 

and fiber for the American people. These programs provide stability to American agriculture, an industry that contributes to about 15 percent of our country’s gross domestic product. Because of these programs, American consumers also pay less for 

their food than citizens of any other developed country. 

The safety net provided by multi-year farm legislation is largely responsible for 

the food security our country enjoys, which has a variety of societal and economic 

benefits. Americans know that their food supply is the safest and most reliable in 

37

the world, a knowledge that fulfills a basic human need and allows citizens to be 

productive. People all over the world also benefit from a healthy American agricultural sector through trade, technology developed with American research and our 

extensive network of food aid. 

Federal farm policy is also essential to continue agriculture’s legacy of land conservation and stewardship. American farmers and ranchers care for the vast majority of America’s land, which they know intimately. Responsible growers treat the 

land well because they know it is their most precious resource. Federal farm legislation has a responsibility to help these men and women maintain and improve the 

areas they and their ancestors have cared for over generations. 

Agriculture is also increasingly providing Americans the opportunity to get their 

fuel from the Midwest rather than the Middle East. The Federal Government can 

help make this goal a reality in a variety of ways, but, for the infant biofuels market 

to grow to maturity, it is essential for growers to stay on the land. Cellulosic ethanol 

and other renewable fuels that could revolutionize our energy economy cannot be 

commercialized if farmers are not on the ground to produce the necessary crops. 

As farm legislation, the Food Security and Rural Investment Act of 2002 has 

strong points, and the membership of the National Association of Wheat Growers 

believes that the next farm bill should build on these strengths. But, while wheat 

growers generally support current policy, much of the ‘‘safety net’’ provided by the 

2002 Bill has not been effective for wheat farmers. The 2007 Farm Bill needs to correct these imbalances. 

The 2007 Farm Bill is also a chance to ensure conservation programs are appropriately funded, to create incentive programs and provisions for the development of 

a renewable fuel sector and to provide for a wide variety of other important measures to wheat growers. 

The members of National Association of Wheat Growers are excited about the opportunities inherent in the farm bill process and are ready to work with Congress 

and the Administration to produce legislation that will serve all producers and all 

Americans. 

Commodity Programs 

The members of the National Association of Wheat Growers realize that the U.S. 

wheat industry is suffering from both lower net returns and lower levels of support 

than other program crops, as well as a lack of access to advanced genetic technologies and stagnant demand. These challenges led to an industry-wide Wheat 

Summit in September 2006 that began with the goal of collaboration on issues ranging from domestic farm policy priorities and science and research to domestic utilization and exports. 

One of the most important elements of any plan to restore the wheat industry’s 

competitiveness is Federal farm policy that provides an equitable safety net for 

growers while allowing them to take production cues from the marketplace and 

while avoiding challenges based on our World Trade Organization obligations. Since 

2002, wheat growers have received little or no benefit from two key commodity components of the farm bill, the counter-cyclical program and loan deficiency payment 

program. Severe weather conditions for several consecutive years in many wheat 

states have led to significantly lower yields or total failure, and the loan program 

and the LDP are useless when you have no crop. The target price for the countercyclical program for wheat was also set considerably lower than market conditions 

indicated, which, combined with short crops due to disaster and, thus, higher prices, 

has led to very little support for wheat in the form of counter-cyclical payments. 

This safety net failure has hurt many wheat growers and has led to a continued 

decrease in wheat acres. 

The chart below clearly shows the inequities in the government-provided safety 

net to wheat growers over the term of the 2002 Farm Bill. While NAWG members 

understand the needs of producers of other crops and do not believe that their safety 

nets should be decreased, it is important for wheat growers to be in an equitable 

position relative to other program crops.

38

1 Cost-of-production forecasts for U.S. major field crops, 2005–2006f, Economic Research Service. 2 U.S. & All States Data—Wheat All, 1995–2006, USDA–NASS Quick Stats, National Agricultural Statistics Service, USDA. 3 U.S. & All States Data—Wheat All, 2002–2006, USDA–NASS Quick Stats, National Agricultural Statistics Service, USDA. 

Source for CCC outlays: http://www.ers.usda.gov/publications/agoutlook/

aotables/2006/03Mar/aotab35.xls.

Sources for production costs/acre: http://www.ers.usda.gov/Data/

CostsandReturns/testpick.htm.

We, therefore, recommend to the Committee that the direct payment for wheat 

be increased to $1.19 per bushel and that the target price be increased to $5.29 per 

bushel, while maintaining the marketing loan program as currently structured. 

While we are aware that other agriculture organizations have expressed concern 

about the effects that the direct payment may have on rental rates, we believe that 

the direct payment does not cause any greater increase in rental rates or land values than any other income. For instance, The Wall Street Journal reported on 

March 7 of this year that, ‘‘Farmland prices are soaring across the Midwest amid 

a surge in demand for corn driven by the ethanol boom.’’ We believe that higher 

crop prices and more demand for corn acres are the real causes of increases in land 

values and rental rates—not the direct payment. 

The decision of the NAWG Board of Directors to support the above proposal came 

about as a result of reviewing data on trends in the wheat industry including historical prices, historical cost of production and historical yields as determined by 

USDA’s National Agricultural Statistics Service and USDA’s Economic Research 

Service. NAWG’s Domestic Policy Committee also obtained data from the Food and 

Agricultural Policy Research Institute and the Agricultural and Food Policy Center 

that helped determine what it would take to keep wheat growers on the farm. 

(These reports are available through NAWG or on the NAWG Website, 

www.wheatworld.org.) 

According to USDA data, historical input costs for 2005 and 2006—the most representative of forecast production costs over the term of the next farm bill—averaged $215.79 per acre.1 The average yield, on the other hand, has stayed around 

38 to 42 bushels.2 Using these numbers, the average cost to produce a bushel of 

wheat is around $5.29 while the average market price over the term of the 2002 

Farm Bill has been approximately $3.40 (2003–2005).3

While most wheat growers purchase crop insurance and rely on it heavily, affordable coverage is typically limited to 65 to 70 percent of expected yield. Wheat growers expressed concern, therefore, about ensuring that a safety net exists for the 

other 30 to 35 percent of the crop. By providing a safety net to wheat growers of 


11009005
39

$1.19 per bushel in the form of a direct payment, Federal farm policy can assure 

growers, their families and their bankers that they have a predictable and dependable safety net. 

This proposal also took into consideration our current World Trade Organization 

obligations. This proposal is based on historical information and, in part, relies on 

a direct payment that is decoupled from current production. 

The benefits of this proposal echo Secretary of Agriculture Mike Johanns’ view of 

farm bill priorities, as stated publicly many times and specifically in an interview 

on Aug. 2, 2006: ‘‘. . . but it seems to me we should be talking about, how do we 

make our farm program predictable and beyond challenge and equitable for that 

matter?’’ 

NAWG members also support an increase in payment limits commensurate with 

the increase in the direct payment. While we understand this has been a very heated issue in the past, we believe that we cannot use any types of means testing in 

the farm bill, especially since payment limit proposals in the past have always targeted the direct payment more than the counter-cyclical or loan payments. This is 

unfair to wheat producers, who rely most on the direct payment. 

In addition to these changes in the farm bill’s title I:

• NAWG opposes any type of means testing to establish eligibility for or restrict 

participation in Federal farm programs.

• NAWG supports the continuation of the three-entity provisions of the 1996 

FAIR Act and separate identity rights for spouses actively engaged in farming.

• NAWG supports creating a separate market classification for Hard White 

Wheat. 

Conservation 

NAWG believes that all components of title II are important and that full and 

adequate funding for conservation programs should not come at the expense of full 

and adequate funding for commodity programs; the conservation title should not replace the commodity title. NAWG further believes that participation in a conservation program does not create a new right of public use and fully protects all otherwise applicable private property rights. 

NAWG makes the following recommendations for title II: 

Conservation Reserve Program (CRP) 

• CRP should be continued and renewed.

• CRP should be limited to the most highly erodible soils.

• CRP payments should reflect local rental rates.

• Any wheat base acreage enrolled in CRP should be restored, but not updated, 

upon the expiration of the contract.

• CRP acreage should be capped at 39.2 million acres. 

Conservation Security Program (CSP) 

• CSP should be fully funded and returned to its original purpose.

• If CSP is not fully funded, the ‘‘priority watershed’’ concept should be implemented.

• Choice of crop protection products should not qualify or disqualify producers 

from participating in CSP. 

Administration 

• NAWG does not support consolidating the conservation programs administered 

under the Department of Agriculture. However, NAWG believes that duplication and competing administrative functions should be removed to provide a 

streamlined sign-up process for these conservation programs. Additionally, 

NAWG believes Natural Resources Conservation Service programs, like the 

Conservation Security Program, should be administered by the Farm Service 

Agency. 

Other 

• NAWG also opposes the proposed sod saver provision from the Administration 

that would make grassland (rangeland and native grasslands, not previously in 

crop production) acres that are converted into crop production permanently ineligible for farm price, income support and other USDA program benefits. 

Trade and Food Aid 

NAWG supports fair and open trade of wheat throughout the world. Nearly half 

of U.S. wheat is exported and, since 95 percent of the world’s population lives outVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
40

side of the United States, wheat growers recognize that expanded markets will likely be overseas. In addition, wheat growers continue to support food aid programs. 

However, our requests for title III cannot come at the expense of the commodity or 

conservation titles. 

To facilitate trade, the wheat industry:

• supports funding of the Market Access Promotion (MAP) program at no less 

than $300 million annually.

• supports the use of funding allocated to the Export Enhancement Program 

(EEP) to enhance U.S. wheat exports and market development programs until 

all export subsidies have been eliminated.

• supports increased funding for CCC export credit programs.

• supports funding of the Foreign Market Development (FMD) program at no less 

than $55 million annually.

• supports continued legislative authorization of the cooperator program as a line 

item in the CCC budget.

• supports producer oversight of the allocation of cooperator program funds.

In the area of food aid, the wheat industry:

• opposes any attempt in the World Trade Organization (WTO), or in any other 

venues, to require that food aid be given as ‘‘cash only’’ instead of allowing 

donor nations to provide food directly as emergency and development assistance.

• supports funding food aid programs at levels no less than the amounts needed 

to provide food donation levels of at least six million metric tons annually, of 

which three million metric tons should be wheat.

• supports the original intent of the Bill Emerson Humanitarian Trust, that it 

provide direct food aid and should not be sold back into the U.S. domestic market. The wheat industry also supports the Emerson Trust being replenished in 

a timely manner.

• believes that current programs administered by the U.S. Department of Agriculture are effective and should remain under USDA management.

• believes that, except in times of emergency, U.S. food aid programs should be 

comprised of U.S.-produced food.

• opposes withholding of food aid for political purposes. 

Credit 

NAWG supports financing programs for beginning farmers. In addition, NAWG 

supports the continuation of and increased funding for the FSA guaranteed loan 

program. NAWG supports full funding for the FSA reduced interest loan program. 

Rural Development 

NAWG is supportive of rural development programs but strongly opposes the diversion of money from other areas of the farm bill for these efforts. 

Research 

NAWG supports funding for the mapping of the wheat genome and international 

triticae mapping initiatives. NAWG also supports funding for research into fusarium 

head blight and other wheat-related diseases and pests, as well as for other research 

initiatives that would benefit wheat growers. 

Energy 

NAWG supports utilizing Conservation Reserve Program (CRP) acreage, or land 

to be enrolled in CRP, for the purpose of planting and harvesting dedicated energy 

crops including, but not limited to, switchgrass. This should be carried out in a manner that maintains the environmental benefits that CRP is designed to achieve. 

NAWG also supports the Commodity Credit Corporation offsetting 40 percent of 

the cost of cellulosic feedstock for the first year of a cellulosic ethanol refinery’s life. 

A similar program intended for other types of biofuel, the CCC Bioenergy Program, 

expired in 2006, and should be reauthorized to support cellulosic ethanol feedstocks, 

including dedicated energy crops or agricultural/forestry residues. The program 

could be simplified to provide a per gallon payment rate, consider a payment limit 

per eligible entity and be terminated as cellulosic ethanol becomes commercially feasible. 

NAWG is highly supportive of programs to encourage the development of a viable 

renewable energy sector, but strongly opposes the diversion of money from other 

areas of the farm bill for these efforts. 

41

Other Priorities 

NAWG supports creating a Hard White Wheat development project that would 

focus on achieving critical mass. U.S. Wheat Associates’ HWW Committee will draft 

a plan that includes a research component and an infrastructure development component. A draft concept paper is available at http://www.wheatworld.org/pdf/

Draft%20HWWDP%20(2).doc and will be updated as necessary. 

NAWG believes that a nationally-uniform regulatory structure for biotechnology 

regulation is essential to successfully utilizing this technology. Accordingly, we propose amendments to the Grain Standards Act that would ensure a uniform, national 

regulatory structure. 

NAWG supports Federal pre-emption of state labeling requirements for biotech 

products to ensure that labeling is voluntary, consistent with U.S. law, consistent 

with international trade agreements, truthful and not misleading. 

Notes 

Both the NAWG Domestic Policy Committee and the NAWG Board of Directors 

began examining several farm bill proposals and options as early at April 2005 to 

ensure that the organization’s recommendations to Congress would provide the best 

possible safety net for wheat growers. 

Proposals that the NAWG Committee and Board examined included several revenue assurance-type programs, including options outlined by the American Soybean 

Association, the National Corn Growers Association, a NAWG Domestic Policy Committee proposal, and most recently, program recommendations from the U.S. Department of Agriculture. 

While these programs continue to sound good in theory, after much analysis, we 

have determined that these programs just won’t work for wheat growers. Most are 

based on a 70 percent cap, and/or either a 3 year average or 5 year Olympic average 

income that is used to determine a producer’s ‘‘target’’ revenue. 

Wheat is grown mostly in areas of variable production that have experienced recent years of drought and other natural disasters, which brings a producer’s potential target revenue much lower than it should be. That, combined with the possibility of only being able to cover 70 percent of revenue makes these programs a nowin situation for wheat growers. The recent proposal by the USDA uses the current 

(2002 Farm Bill) target price as the basis for figuring a target revenue. Wheat growers have continued to state that the current target price is far below what market 

conditions indicated was necessary for a reliable safety net, so a new target revenue 

based on the same number is completely inadequate. A quick analysis of the current 

year situation shows that once again, wheat growers would not receive any safety 

net from the Department’s proposal.

The CHAIRMAN. Thank you very much and I thank each of you 

for your testimony. The chair would like to remind Members that 

they will be recognized for questions in the order of seniority of the 

Members who were here at the start of the hearing. After that, 

Members will be recognized in the order that they arrived for the 

hearing. So I appreciate your understanding of that. We will adhere to that. Mr. Moran and I agreed, though, that if the Chairman 

and Ranking Member show up, that sort of will take precedence 

over the rest of us. So with that, I will recognize the Chairman of 

the Committee, Mr. Peterson, for the first questions. 

Mr. PETERSON. I thank the Chairman, and I want to thank him, 

the Ranking Member, and the other Members of the Committee for 

the outstanding job they are doing and the leadership in getting 

more information pulled together. I just got back from speaking at 

the National Cattlemen’s. I got delayed because the President was 

speaking and I got caught up in all of that commotion that goes 

on and couldn’t get out of there. But what I said to them I want 

to say to you, since you brought it up, Mr. Thaemert. 

Mr. THAEMERT. Yes, sir. 

Mr. PETERSON. Did I get that right? The disaster. We really 

didn’t want, or choose, to put this disaster in this Iraq supplemental, but we didn’t have any choice. This was supposed to have 

been done last year; we were promised in September; we were 

42

promised after the election. It didn’t happen. I don’t know how exactly we are going to work through this, but I just had a farmer 

Saturday in my district commit suicide over this. It is a serious situation and we need to address this and we need to figure out how 

to deal with this in the farm bill so we don’t have to go through 

this every 2 years in the future. But in my judgment, if we don’t 

figure out some way to work through this and get the President’s 

support in this bill, whatever it ends up being, we aren’t going to 

get this done and people need to understand that. I mean, this is 

the last train out of the station. If we don’t get this done now, it 

isn’t going to happen. So whatever influence any of you have, we 

have to figure out some way to get this done. 

So Mr. McCauley, I have a letter from my Minnesota corn growers and apparently they are still not totally on board with you, is 

that correct? 

Mr. MCCAULEY. That is correct. But I want to emphasize that. 

Mr. PETERSON. You are not making any progress with them at 

this point. 

Mr. MCCAULEY. No, there are three states that have different 

opinions and we have been notified of that, but we have had a 

large majority of our membership that is in favor of it, but Minnesota is not. 

Mr. PETERSON. And there are no more discussions, or are you 

still talking, or what? 

Mr. MCCAULEY. I think we will just leave it like that. 

Mr. PETERSON. All right. So Mr. Thaemert, the rebalancing idea 

that some of you guys have put out, that is not workable for you, 

I take it? 

Mr. THAEMERT. We are looking at cost production as opposed to 

market prices. The market hasn’t always guaranteed a return and 

we are not expecting to be guaranteed a return. The formula that 

you will see in our written testimony also does not guarantee a return, either. We put a margin in there. The issue that we have 

been looking at is the increased inputs and the cost of production 

relative to loan rate, target price and direct payments. And we 

struggled with a lot of different formulae. We looked at a lot of different delivery mechanisms; and what we could come up with as 

the best one for wheat was an increase in the direct payment and 

an increase in the target price. And I think it is very important to 

note that it is not a cookie-cutter application for every crop. The 

agronomics are different. 

Mr. PETERSON. Well, if you recall, I tried to improve the situation 

for wheat and barley in 2002. Unfortunately, at that time, I didn’t 

have enough clout. It is a little different this time, but we will see 

what we can do here. But I should know this, but have you gotten 

a score on what the changes, how much——

Mr. THAEMERT. We are working on——

Mr. PETERSON. We haven’t got a score——

Mr. THAEMERT. We have submitted an analysis of the target 

price and direct payment. The preliminary numbers that we hear 

are that the projections for the price increases are high enough 

that there won’t be much of a counter-cyclical as a result. The cost 

of the direct payment, we haven’t got a scoring on that yet, but we 

are waiting for that analysis. 

43

Mr. PETERSON. I assume, are all of you guys opposed to the 

President’s payment limit idea? Unanimous. And what do you 

think about this idea on the President’s or the Secretary’s farm bill, 

where they want to change the posted county price from a daily 

basis to monthly? Have you guys looked at that? What do you 

think about that change? 

Mr. MCCAULEY. Well, we talk about it every year at our policy 

session, and throughout the year as we have LDPs. Our proposal 

would change the way you look at posted county prices and we 

think that would answer that question. 

Mr. PETERSON. And it would still be daily, the way you are proposing it? 

Mr. MCCAULEY. Ours would be a yearly, established in the 

spring. 

Mr. PETERSON. Oh, yearly. Okay. 

Mr. MCCAULEY. That is one the benefits, also. 

Mr. PETERSON. The rest of you have any comment? 

Mr. OSTLIE. I guess I still think it is very important to keep them 

on a daily basis as we have done in the past. I think it is something that has worked and it should be left the way it is. 

Mr. THAEMERT. Well, speaking for wheat, we haven’t received 

any LDPs, so I can’t really talk about that. But for other crops, I 

would say that the marketing flexibility of the daily price system 

would be more desirable. 

Mr. PETERSON. If I could have one more? I keep getting complaints all the time about the way these prices are set—like if you 

had one county next to another and they have differences. People 

are hauling their grain two counties over because they can get a 

better deal, and all of that sort of stuff. Have you guys, in the work 

that you do, taken a look at that whole situation, in terms of how 

they establish those county prices? Did you come up with any ideas 

on how to get around some of these issues that keep coming up? 

Mr. MCCAULEY. We have looked at that quite a bit, Mr. Chairman, as in 2005, 2006, and 2007, and those continually continue 

to be a problem and it is always in one area. We felt like it is best 

to be addressed when you have that problem, because I think you 

are always going to have some kind of a problem as prices go from 

area to area and county to county. So we have addressed it as an 

implementation or administrative job. 

Mr. OSTLIE. Well, I guess I probably would agree with that. I 

think a lot of the problem is the way they do the formulae and a 

lot of the local problems of how they determine those prices on a 

county-by-county basis. I am not sure how we would change the 

law to actually address that at a national level. But it definitely 

is a problem, especially in our area, where we have these really 

large counties that are 30 by 40 miles wide. It really gets distorted 

from one end to the other. 

Mr. PETERSON. All right. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Thank you, Mr. Chairman. Mr. 

McCauley, you stated that your proposed revenue counter-cyclical 

proposal would reduce the indemnities paid out on risk management to where it would re-rate insurance products so producers 

could obtain higher coverage levels of individual revenue insurance 

at a lower premium. You also cited analysis provided to NCGA to 

44

this effect. My question is, who conducted the analysis and has 

anyone in the crop insurance industry, have they confirmed the 

conclusions? It would be interesting stuff. We would just like to 

know what. 

Mr. MCCAULEY. We had the study done by a CARD at Iowa 

State, Dr. Babcock. We had it reviewed by Dr. Barnaby. He commented on it. He didn’t totally review it, and another professor. We 

talked to the crop insurance industry, but really, these things have 

just come together pretty fast, so we anticipate doing that shortly. 

But one of the things that I really need to emphasize is that there 

is an overlap as you go through government payments at the FSA 

office and the crop insurance industry. We feel like we can do this 

without hurting the crop insurance industry’s profits. We could actually give them more access, to the farmers, the individual policies 

and as the buy-up. So we think, with a little bit of vision, the crop 

insurance industry can benefit also from this. 

The CHAIRMAN. It would probably be helpful to this Committee, 

though. We need some pretty hard data before we start doing——

Mr. MCCAULEY. I realize that. 

The CHAIRMAN. For the rest of you on the panel, let me ask this 

question. You suggested a number of changes and certainly that is 

what we like to see as it relates to loan rates, target prices, how 

loan repayment rates are calculated and how LDPs are collected, 

et cetera. As I listen to that, it seems to me that these suggested 

changes will end up costing some money. So my question is this: 

Money that we really don’t have unless we do some adjustments 

somewhere else. So let me ask the question this way. To achieve 

the changes you want, would each of you be willing to see a reduction in the direct payment, or would you rather keep the programs 

as they are, without changes? Because when you start doing it, we 

have a limited pot of money, as each of you know, this year. We 

don’t have the benefits we have had in the past. I would appreciate 

you helping this Committee with your comments on that. 

Mr. OSTLIE. I guess I would like to comment on that. I will comment first here. I mean, first of all, I would like to see, obviously, 

new money to fund our changes. But as I travel around the country, most farmers like the basic framework of the 2002 Farm Bill 

and that is what I have seen from most farmers. The problem is, 

the way it is set up right now, it simply causes farmers to make 

a planting decision based on a farm program. We think that those 

planting decisions have to be made on the market. So I guess when 

you talk about reducing the direct payments somewhat to pay for 

this; I guess I realize that that would affect all commodities, not 

just soybeans. You know, so I hate to—but I think that is something that we would be willing to look at. But I do understand it 

affects all commodities. 

The CHAIRMAN. Anyone else? 

Mr. THAEMERT. Yes, I would like to address that. You know, as 

I stated in my testimony, a cookie-cutter approach probably isn’t 

the best way to go. What works for corn and beans doesn’t work 

for wheat. What works for wheat doesn’t work for flowers and rice. 

And in the marginal production areas where wheat is normally 

grown, the direct payment is the only thing we have been able to 

depend on. We can go to our creditor and we can have a cash flow 

45

and know that we are going to get it. So wheat growers are strongly opposed to any reduction. As a matter of fact, we are pushing 

for an increase in the direct payment. As far as distorting planting, 

direct payment is based on historic. The loan rate would have more 

impact on planting than the direct payment would, and the direct 

payment is a known entity and we can budget for it and so can the 

government. 

The CHAIRMAN. We are going to run out of time. Anyone else 

want to comment, yes or no? 

Mr. MCCAULEY. We feel that the direct payments have been included in our proposal. It fits. We want to keep it, but you know, 

we have to realize that as we go through the process, that that 

might be some of the things we have to deal with. 

The CHAIRMAN. Okay, thank you. Let me ask each one of you and 

get it on the record. The Chairman thinks it is important. When 

the Secretary came, he talked about the AGI limits of $200,000. I 

happen to believe, in farming across this country, with the changes 

in cost and everything, that is going to be very difficult. I would 

like to know from each one of you very quickly, do you agree or disagree with that limit? 

Mr. PUCHEU. Absolutely disagree. 

Mr. MCCAULEY. I will have to say we think that it is a creative 

idea and it would be combined with a 3 year average or there is 

some ways that this could make some sense. 

Mr. GERTSON. I disagree. 

Mr. OSTLIE. And I would also strongly disagree. 

Mr. RUSSELL. I would echo most of this. I would disagree as well. 

Mr. THAEMERT. Strongly disagree. 

The CHAIRMAN. Thank you. Thank you, gentlemen, and I yield 

to Mr. Moran. 

Mr. MORAN. Mr. Chairman, thank you very much. Let me compliment Mr. Peterson’s efforts in regard to disaster assistance. 

There is no more greater need in ag country, and certainly from 

the ag country I come from, than disaster assistance. It has a higher priority at the moment than necessarily trying to figure out the 

details of the farm bill, and I will admit that we have failed in past 

Congresses led by the Republican Party. And I would also say that 

it is less than a perfect scenario to the new leadership. This is an 

issue, as Mr. Peterson indicates, that we have to figure out how to 

resolve and resolve quickly, and I look forward to working with him 

and others to see that that is accomplished. The farm bill and longterm policy is certainly important, but we will have a lot of farmers 

who aren’t in business to take advantage of this newly refined and 

improved version of the 2002 Farm Bill. 

Let me ask a couple of questions. Our Chairman has given me 

strict instructions that I am to abide by the 5 minute light, and so 

I will. And it sounds like my colleagues are pleased by that suggestion as well. You talked about an unbalanced system in which 

there are a couple of components to how we determine what loan 

rates or target price ought to be. I assume one is what is we have 

talked about, this balance. I find it interesting and perhaps this is 

the way we would approach it too, is that we talk about how to 

raise crops’ target price. No one mentions that someone else’s target price might be too high now and that that is what you pay for, 

46

is by the adjustment of a give and take, which I assume has implications that make testifying before our Committee more difficult. 

But in addition to trying to figure out how you balance these payments that are based upon this desire that farmers make decisions 

based upon the markets and not based upon what the program 

says. 

The other part of this is the safety net and we have in all of this 

conversation seemed to concede that we are going to have less 

money to work with than we had in the 2002 Farm Bill. And in 

part, the Administration’s proposal is based upon a belief that 

prices will continue to be where they are today or higher during 

the life of the farm bill. It is troublesome to me that we spend a 

lot of time talking about prices, but very little understanding of 

what has happened in the cost of production. My understanding of 

the safety net, the purpose of the farm bill is to provide assistance 

to farmers in times in which the cost of production is not exceeded 

by the cost, or price, that they receive for the commodity they grow. 

So if we are trying to develop a safety net, what is your advice 

about target prices, as far as it relates to other commodities? And 

what would be your reminder to this Committee about the increasing input costs that have occurred since we adopted the 2002 Farm 

Bill? And in that regard, about target prices, can we treat commodities differently? Wheat is very interested in having a higher direct 

payment. Does that mean that every other commodity needs to be 

treated the same way? Or can we have a different program, a different target price, a different emphasis on a direct payment, based 

upon what commodity program we are dealing with? Mr. 

McCauley? 

Mr. MCCAULEY. Thank you, Congressman. I think the stability 

factor is really the important part when we start looking at the 

safety net as we go to these higher prices. In the corn market, 

today we are looking at $4 corn. I think a lot of our producers are 

recognizing the fact that there is actually more risk growing these 

higher priced crops than there is, say, $2 corn. So we, with this 

revenue approach, feel like we are addressing that. We put a cap 

on it so that we can be responsible looking at our taxpayers and 

say we don’t feel like we need a support over this figure. 

Mr. MORAN. Let me follow up on my final question, which was, 

can we treat corn differently than other commodities? So you found 

a program that you think will work better for corn. Does that mean 

we could do something different for wheat, or do you see this as 

needing to be uniformly applied to all commodities? 

Mr. MCCAULEY. We have done some rebalancing. We used the 

soybeans’ percentage rates to come up with this cap. I have to recognize that each commodity has their own issues. I totally agree 

with that. I think with some work we could probably make this go 

across, but it doesn’t address some of the other things that they 

have. As my limited experience in farm programs over the last 35 

years, everybody has their own issues and I hear from legislators 

that, to make it work right, they all have to be uniform. So I am 

hoping we can come together and make something uniform. 

Mr. RUSSELL. My biggest concern, Congressman, is when I go 

and do my spreadsheet, and go to my banker to get my loan for 

my operating mill for the year, he looks at what the minimum reVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00050 Fmt 6633 Sfmt 6601 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
47

turn is going to be a year. We don’t know what the prices are going 

to be, so we have to look at the loan prices, first of all. We know 

that is the minimum that we are going to get on our crop. And the 

inequities of the sunflowers, the banker looks at me kind of funny 

and says, ‘‘Are you sure you don’t want to grow another crop?’’ 

Even though the demand is there, we have to look at the bottom 

line, like you said, the increase in the input. The increase in my 

fertilizer, just this last month, went up 15 percent. We have to look 

at that safety net to where we are just asking if sunflowers were 

on a level playing field to where we can at least be in the game 

with the other program crops. We want a safety net to where we 

can go to our bankers and say, ‘‘Here is what we have and this is 

what we can do. Let us do what is best for the consumers, by producing this better oil.’’

Mr. THAEMERT. Congressman, I represent a crop that is grown 

in semi-arid areas. There are people that can only grow wheat or 

barley. If you happen to be down in some places with marginal 

rainfall, they can go grow very good wheat, but that is about all 

they can grow. They don’t have the options of these other crops, so 

they focus on what works for wheat and the direct payment has 

been something that, as Mr. Russell alluded to, you can go to your 

creditor and you know you are going to get that. And it is also a 

lot of trade distorting support. The loans run into some issues 

there and there are some issues as far as market or trade distorting that the loan rate has. 

Mr. OSTLIE. I guess most of us farm most of the other crops. At 

least in my area we grow other crops but rice, obviously, not in 

North Dakota. But you know, I have raised more wheat over the 

years going back than I have soybeans, actually, so I definitely understand the problems in the wheat market. But one of the disturbing things in my area, what I see as a direct payment, is that 

most of the people that own land or are renting land, they pencil 

that direct payment right into the price of their land right away. 

I feel that it really takes away a lot of the safety net that it was 

intended for, because that money gets put into that land price too 

quickly. I guess, going back to rebalancing, I have had the same 

situation happen, where you look at different crops and because of 

the farm program, your banker says, ‘‘This one you can guarantee 

yourself a better return,’’ even though in reality it is not and you 

have to argue with them and say, ‘‘Well, I guess I am the boss.’’ 

But it is unfortunate that the farm program sometimes does determine what you seed. I feel that our rebalancing of the target price 

and loan rates really addresses that. You should not be looking at 

having to have the farm program determine what you seed. Thank 

you. 

The CHAIRMAN. Thank you. Let me also welcome Mr. Costa to 

the Committee today. He is sitting in. We welcome you here today. 

Mr. COSTA. Thank you very much, Mr. Chairman. I heard all of 

the Kansas talk earlier and it is nice that you would allow a Californian to sit in here. We do appreciate it. 

The CHAIRMAN. It is good to have you. 

Mr. COSTA. I do have a witness here from my district. There really is a Tranquility, California, believe it or not and a wonderful 

48

place to live. But I do have a question I want to submit to him 

later on. 

The CHAIRMAN. Good to have you. When the time becomes appropriate. At this time, I would recognize the gentlelady from Kansas, 

Mrs. Boyda, for 5 minutes. 

Mrs. BOYDA. Thank you, Mr. Chairman. And yes, Mr. McCauley 

is from White Cloud. And I would like for the record, Mr. 

McCauley, is Kansas flat? 

Mr. MCCAULEY. Not everywhere. 

Mrs. BOYDA. Where Mr. McCauley lives is beautiful rolling 

plains, so I would like to get that myth out of the way. And I would 

also just like to say thank you for your proposal. I am a freshman 

and certainly learning how all of this is going to go and having my 

input, but quite honestly, I am very much in the learning stage 

today. So I appreciate the fact that you put together a proposal 

that said, ‘‘We want revenue but we realize that we are going to 

have to pay for it in some way,’’ and came up with a balanced approach, so thank you. And I will watch with interest as those discussions go on. 

It is interesting as we try to balance all of the payments, too. I 

would just like to put a few of my good Kansans on the spot, if I 

could, and just come back and listen to how you find a balance between these things. But the Sunflower Commission has basically 

said to the wheat growers, we are going to propose that you have 

a price support of $4—and 15¢—something along those lines. Do 

you think that $4.15 is really adequate for the wheat growers to 

go ahead and to be able to produce wheat? And by the way, Mr. 

Thaemert, I am going to come to you. But I would love to just hear 

how you found the way to balance this. 

Mr. RUSSELL. As a producer? 

Mrs. BOYDA. Yes. 

Mr. RUSSELL. As a producer, number one, I have a rotation on 

my farm and I do use wheat, sunflowers, grain sorghum and corn 

and soybeans. But on that point, any safety net, bottom line, that 

I can take to my banker and say in my rotation, that I can clear 

my cost, then he is willing to do that for me. Sunflowers has been 

the hard part of my rotation, to get that done, and as I sit here 

representing sunflowers, that is all we are asking for. And we are 

a minor oilseed, so the total dollars really don’t add up to much. 

Mrs. BOYDA. My question is really back to, is $4.15 going to be 

adequate for the wheat growers? You are in Hays, yes? 

Mr. RUSSELL. Yes. 

Mrs. BOYDA. So I don’t know if you go out to western Kansas, 

if that is a different scenario. But in your mind, $4.15 would be an 

adequate price there for wheat growers. Let me just turn to Mr. 

Thaemert for a minute——

Mr. THAEMERT. Yes. 

Mrs. BOYDA.—and come to you and say you are requesting $5.29, 

which is really up from less than $4. 

Mr. THAEMERT. Yes. 

Mrs. BOYDA. Is $5.29 the bottom line or is it something that, in 

fact, you are going to be able to work with and find a balance 

there? 

49

Mr. THAEMERT. That is a number that we got from USDA records 

and we divided that by the 10 year average yield. That was the 

cost of production, the average of 2005 and 2006, divided by the average production of the last 10 years and we came up with a national number. We are not just pulling that number out of the air 

as $5.29 per bushel. Congressman Moran alluded to cost of production. A lot of people have been looking at price. Price doesn’t guarantee you profitability. Again, we are not looking for a guarantee 

of profitability, but you might as well have a number that is based 

on cost of production, and that is what we did. So that is where 

that number is, we feel comfortable with that number, and that is 

why we chose that number. 

I would like to address one thing that was said earlier about direct payments being capitalized in the land values. Any income 

stream associated with the ownership of an asset gets capitalized 

into that asset, whether it is a loan price or whether it is a direct 

payment, regardless. And increased land values aren’t necessarily 

a bad thing for rural areas. When you look at how much tax base 

supports schools, hospitals and other county entities, this is just 

another way to help rural areas take advantage of some of the 

prosperity in the urban areas. So we are so adamant about an increased direct payment, that that is our focus and that is where 

you need to be. It is predictable. 

Mrs. BOYDA. Right. I yield back my time. Thank you. I appreciate just listening to how you balance it out. Thank you. 

The CHAIRMAN. I thank the gentlelady. The gentleman from 

Texas, Mr. Conaway, for 5 minutes. 

Mr. CONAWAY. Thank you, Mr. Chairman. Thank you, Mr. Chairman. Good to be here. Gentlemen, thank you for coming today. Mr. 

McCauley, you had mentioned that, when Mr. Peterson asked 

about Minnesota, Texas also has a letter out that says that they 

are not in accordance with what the National Corn Growers have 

done. You mentioned a strong majority or whatever. Can you give 

me the actual numbers of the split between those in favor of your 

position versus those who are not? 

Mr. MCCAULEY. Our delegates were over 70 percent in favor of 

our policy. 

Mr. CONAWAY. Okay. 

Mr. MCCAULEY. The revenue-based policy. 

Mr. CONAWAY. All right. Thanks. You also mentioned that we 

wield this up here like very poor referees. To try to referee between 

commodities is about the best we can do and we have commodities 

who come to us with a difference within the commodity itself. It 

really makes our job even tougher in terms of how we try to make 

all of that work. So I would encourage you to continue to work with 

the folks. I think there are four states now and there may be other 

states added on to that. You know, continue talking with each 

other and try to figure out a way to reconcile it within corn so we 

can limit the amount of refereeing that we have to do. 

Mr. MCCAULEY. I recognize that it is a state issue. We haven’t 

had anyone question our concept, most of these—marketing loans—

it is a regional issue, probably. But I wouldn’t want to speak for 

any of those states, because they have dissented and that is the 

way our policy reads. 

50

Mr. CONAWAY. All right. Thank you. Mr. Pucheu, I am pronouncing your name——

Mr. PUCHEU. Pucheu. 

Mr. CONAWAY. Pucheu. I am sorry. Excuse me. Can you talk to 

us a little bit about—we have a high inventory right now, a carryover inventory of cotton from this past crop. Can you talk about, 

are there things that we ought to be doing within the 5 year window of this farm bill that will help address that? We aren’t going 

to fix it today immediately, but is there something about the policy 

we have in place that could contribute to that or is it just——

Mr. PUCHEU. We are looking at ways to fine tune the marketing 

loan but basically, we had two things happen this last year. India 

had a bumper crop and China had a bumper crop and then the 

other long-term thing is the decline of our domestic textile industry, and we are adjusting to exporting a larger percentage of our 

crop. But with the shift, we are going to have a major shift in acreage this year, cotton acreage going down and shifting into soybeans, and especially corn, and this is going to help pull down our 

carryover and it should not be as big a problem as it has been the 

last year. 

Mr. CONAWAY. So the modest proposal that you are making for 

textile support is all you are going to change within the farm bill 

itself to address this? 

Mr. PUCHEU. Basically, that is the major change we are proposing. 

Mr. CONAWAY. Okay. Again, I appreciate you gentlemen coming 

this morning. What I have heard is that, except for the National 

Corn Growers Association, most of you support the position we 

have with minor changes within there. We will have a limited 

amount of money to go at it. I don’t expect any of you to trade 

against yourself this morning and tell us that you trade or whatever. We will be working with you and look forward to working 

with you during this process. Thank you for your testimony. With 

that, I yield back. 

The CHAIRMAN. I thank the gentleman. The gentleman from Indiana is now recognized for 5 minutes, Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Mr. Chairman. I don’t think it will 

take 5 minutes, but I appreciate it and I think I only have one 

question. It has been very informative for me, also, as a new Member. I just wanted to know, as I did my town halls over the last 

few weeks with farmers, a lot of the subject of Farm Flex came up, 

especially with some of the people who might like to grow tomatoes 

and get into that on base acres. They explained to me that they are 

getting ‘‘double-whammied’’ on base acres if they prefer to grow tomatoes. I was just curious if your organizations had taken a position on the Farm Flex issue and how you feel about that. So if you 

can just grab the line or if anybody wants to jump in. 

Mr. PUCHEU. The National Cotton Council has supported the existing policy. 

Mr. MCCAULEY. We are supporting the existing policy, but we do 

recognize the fact that the fruits and vegetables is an issue, not 

only with trade, but with the budget. So we think that we need 

more research on how it would affect corn and how it would affect 

the total budget of the farm bill, the commodity title. 

51

Mr. GERTSON. We support the present policy. I remind you that 

the WTO has a different view on this, and we will support whatever the Administration or whatever is composed. 

Mr. OSTLIE. We would support continuing the existing policy on 

vegetable crops. 

Mr. THAEMERT. We would be in favor of planting flexibility for 

vegetables. 

Mr. ELLSWORTH. Thank you. Let me go back to Mr. McCauley. 

You always get lead on this, so I will just run back to you. Can 

you just explain when the farmers came in and said, ‘‘They don’t 

want the base payment. They just want the option to be able to negotiate that.’’ Can you explain what the position—if they are saying, ‘‘We will forego the base payment, just give us the option and 

don’t bang us twice on this.’’

Mr. MCCAULEY. I think if you look at the fact that the money 

doesn’t affect the rest of the commodity title, it makes a huge difference. Depending on how much money you are actually talking 

about, it would make a lot of difference. That is what I said about 

the WTO implications. We do need to make a farm bill that is WTO 

compliant and that would make a big difference in that. 

Mr. ELLSWORTH. Thank you, sir. Thank you all. I would yield 

back, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. Now for 5 minutes to the 

gentleman from Louisiana, Mr. Boustany. 

Mr. BOUSTANY. Thank you, Mr. Chairman, and thank you all for 

your testimony. We certainly appreciate the work that you are all 

doing. I don’t want to leave rice out of this and I want to discuss 

a few issues here. First of all, the rice industry over the past 2 decades has had a very difficult time, with declining market access 

and of course, we have seen the recent disasters secondary to the 

hurricanes, which had a major impact. And you have made several 

specific proposals here. In your testimony, Mr. Gertson, you mentioned that loan rates for rice production have not changed in 18 

years; meaning that the loan rate compared to the variable cost 

has fallen by 33 percent, which is a pretty significant drop or differential. I want you to express, for the record, how this has impacted the rice industry. How your specific proposals which you 

mentioned, the modest increase in the program support levels for 

rice to a loan rate of $7 per hundredweight, a target price of $11 

per hundredweight, setting the loan rates for all classes of rice at 

the same level. I understand the current system, by separating 

them out, hurts long grain rice more proportionately. And then I 

have a specific question about the AWP. But for the record, give 

us an indication of how these measures will go toward stabilizing, 

long-term, the rice industry and how they will account for the increase in variable costs? 

Mr. GERTSON. First of all, the $6.50 loan rate increasing to a $7 

loan rate, this modest increase would help slightly on the 42 percent increase we have had in costs. Our fertilizer cost, a ton of urea 

in 2002 was $150. Today we are paying $425. We have taken—increases and fuels—just in the last 18 months, our cost per acre has 

gone up a hundred an acre and this increase in the loan is just to 

stabilize our economy a little better. Knowing that we are short of 

money in this country, we feel like this is a modest request, inVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00055 Fmt 6633 Sfmt 6601 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
52

creasing our target price to $11. At least we can take this to the 

banker and say, ‘‘Look, we have a target price of $11. Can you go 

along with us?’’ We have to got sell the banker in order to be able 

to farm. We cannot just go down and get a blank check to farm. 

We have to show some stability and this will help us to adjust this 

to the point that we feel like we can get financial backing. And do 

you want to go to the black box? 

Mr. BOUSTANY. Right. Yes, with regard to the average world 

price, you mentioned the need for transparency. Were there any 

specific recommendations that you have at this time? 

Mr. GERTSON. Well, the specific problem is there is only a couple 

people that know how this world price is arrived at. Cotton, for instance, it is transparent. You know how it is arrived at. But there 

is this black box that nobody understands how they come or arrive 

at a world market price. And so what we would like to see is a program kind of like cotton, where we know what is happening. We 

know where they get all of their figures to arrive at a world market 

price, because right now we don’t. We don’t know how they come 

up and I think it should be our right to know, in our own commodity, how they come up with these world market prices. 

Mr. BOUSTANY. Thank you. 

Mr. GERTSON. Okay, going back to the fixing the loan between 

the three grains——

Mr. BOUSTANY. Yes. Right. Yes, could you just——

Mr. GERTSON.—long, medium and short. We would like to fix it 

and the main reason we would like to fix it is because if we have 

a loan that fluctuates, again, we can’t go to the banker and say, 

‘‘We have an $11 loan rate.’’ If they are going to adjust it between 

the three, we can’t go to our banker and say, ‘‘It is going to be X 

number of dollars. It might be 50¢ lower or 50¢ higher.’’ If we feel 

like we are going to set a target price, we should have a fixed loan 

price to give to our banker. Our whole industry has agreed. All the 

different growers in the different states have agreed that we need 

a fixed loan price. 

Mr. BOUSTANY. Okay. I thank you. That is all I have. 

The CHAIRMAN. I thank the gentleman. Thank you. And I now 

yield 5 minutes to the gentleman from Georgia, Mr. Marshall. 

Mr. MARSHALL. Thank you, Mr. Chairman. Earlier, the Chairman, following up on what the Committee Chairman asked, had 

each of you give your position on AGI. Could you do the same thing 

real quickly for the three-entity rule? What is your view on the 

three-entity rule? I think I know cotton’s view. 

Mr. PUCHEU. Yes, cotton supports the three-entity rule. 

Mr. MCCAULEY. We support the three-entity rule. 

Mr. GERTSON. We support the three-entity rule. 

Mr. OSTLIE. Yes, we support the three-entity rule. 

Mr. RUSSELL. I think it is unanimous. You know, we support the 

three-entity rule, too. 

Mr. THAEMERT. Absolutely. 

Mr. MARSHALL. The question that I asked, you would expect the 

same answer from all of the different ag groups? Is there any ag 

group that you know of that is on the other side of that issue? 

Mr. OSTLIE. I don’t think there would be one that is in the commodity title, no. 

53

Mr. MARSHALL. Okay. Mr. McCauley, I would like to focus on 

your organization’s proposal for this counter-cyclical program. I am 

only now becoming familiar with it. It is the first I have seen it 

and I just read through your testimony, and I am sorry I wasn’t 

here when you gave your testimony earlier. No doubt you have had 

discussions with your comrades here, at least your staff has had 

discussions. Could you summarize the arguments that are made 

against your concept by others? Because I imagine you have been 

floating this around and a number of people have offered their comments. 

Mr. MCCAULEY. Well, it will be hard for me to talk about something that is against it. I usually try to look at the positive side. 

Mr. MARSHALL. Yes, and unfortunately, I am up here and I get 

to ask you questions and you pretty much have to answer. Well, 

you know that is going to shorten this considerably if you could 

identify, because you already know what they are, the primary arguments against what you are proposing and then address those 

arguments. Put them on the table so that we understand what people are saying is weak about your proposal. 

Mr. MCCAULEY. I think we have a different issue with wheat on 

the idea that the direct payment is a different climate and they 

had totally different issues on how their crop has increased in yield 

versus ours. So I have talked to these individuals quite a bit. John 

and I live in Kansas. Two hundred miles is a pretty close distance, 

so we live and we understand——

Mr. MARSHALL. That is because you all can see one another, because there are no hills in Kansas. 

Mr. MCCAULEY. If I can see over that hill right west of me, I can 

see quite a ways. But the direct payment issue is different in our 

philosophy versus wheat, because you have a regional difference on 

how they do business, plus, the wheat has the difference in their, 

which yields haven’t progressed. I contend that in the future, 

wheat, they will get to address the yield. Their yields will go up. 

We have tried to take the approach with both of these commodities, 

their only commodities, that we understand what they are talking 

about that we can fit into the program of each other’s commodity. 

Soybeans. Rick and I have talked and their issue is that their price 

could go lower than corn at this time. I think that is the reason 

they probably focused on the price aspect. I sure don’t want to 

speak for them, but our proposal——

Mr. MARSHALL. Could I interrupt? 

Mr. MCCAULEY. Sure. 

Mr. MARSHALL. Are you contemplating a commodity-by-commodity county price support, essentially? Or is it just one——

Mr. MCCAULEY. No. 

Mr. MARSHALL. Okay. 

Mr. MCCAULEY. Our hope is that we can get all the commodities 

together on this and you know, see where the issues really are. 

That is our hope. 

Mr. MARSHALL. Well, I guess maybe I don’t understand your proposal. Is your proposal that a target price be set in each different 

commodity? 

Mr. MCCAULEY. Yes. 

Mr. MARSHALL. Okay. 

54

Mr. MCCAULEY. As a revenue instead of just as a price, because 

we focused on the price. Price trigger is revenue trigger when you 

are at these levels, because you have more exposure to risk at this 

level and the price support today is at the lower level. 

Mr. MARSHALL. Have your economists done an analysis assuming 

that if this were adopted as the national farm program, an analysis 

of cost? 

Mr. MCCAULEY. Yes. 

Mr. MARSHALL. And how does it compare to——

Mr. MCCAULEY. We think where we are today, which is I think 

we are solid on where we are today at $500 million approximately 

over the baseline. 

Mr. MARSHALL. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. I thank the gentleman. Now the gentleman from 

California, Mr. McCarthy, for 5 minutes. 

Mr. MCCARTHY. Thank you, Mr. Chairman. I just have two follow-up questions for some others. If I could just follow up with Mr. 

Pucheu from the National Cotton Council. You commented and I 

have seen it in my district, declining cotton being grown. Is it 

mainly the market driving these decisions that are being made? 

Mr. PUCHEU. It is market driven and the economics of crops that 

have a better return. We are fortunate in California. We have a lot 

of different options as compared to a lot of areas of the country. 

Mr. MCCARTHY. And I have just one for everybody else. I want 

to follow up on what the Chairman asked about adjusted gross income. Overwhelmingly, the majority do not support the Administration position of $200,000, knowing now that it is $2.5 million 

and 75 percent of your income has to come. Would you recommend 

to keep it exactly like that or would you recommend any other 

change to it if you disagreed with going to the $200,000? 

Mr. PUCHEU. We are happy with the current policy. 

Mr. MCCARTHY. And is the current policy successful, do you 

think it corrected what we wanted it to? 

Mr. PUCHEU. I think so, in keeping people that have very high 

income from outside of agriculture away from the payments. 

Mr. MCCARTHY. Okay. 

Mr. MCCAULEY. If I could comment? Being the different one of 

the group, I think that an adjusted gross income, and I would disagree on the price, because I don’t think we know what the adjusted gross income should be today. But any time you get to work 

with a net income figure versus a hard cap of the dollar amount, 

as a farmer, you have to think that it might be a better way to look 

at it. That is where I was coming from with the possibilities, because right now, if you deal with a person that, say, it is a $2.5 

million hard cap, we could actually have a gross income of that 

much but not make any money. So that is where I was coming 

from. I think the concept itself has some merit if we figure out how 

it could work and the number. 

Mr. GERTSON. I do not think the $200,000 limit will work. I think 

$2.5 million was more in line with what we need to have, and also, 

we need to keep the 75 percent exemption, 75 percent of farm income. I think you should be exempt from either one of them. But 

the $200,000 is way too low. 

55

Mr. OSTLIE. I guess we would also agree that the $200,000 is too 

low and we would support staying with the same limits we have 

now. 

Mr. THAEMERT. Yes, the $200,000 is too low. You are going from $2.5 million to $200,000 and even if you talk about net income, if 

you are talking about a young producer that is buying land and is 

buying equipment, the principal payments, you cannot deduct the 

principal payments. You can deduct interest, you can deduct depreciation, you can do those things, but when you are making a principal payment, you are trying to grow your operation. Yes, you are 

going to run into the $200,000. You very easily could run into that 

$200,000 limit. One year you would be in it, the next year you 

would be out. How do you go to your creditor and say, ‘‘Well, this 

is what I have and this is my cash flow?’’ I can understand the 

public relations drive behind doing that, but that is too drastic a 

step, from $2.5 million to $200,000. Wheat Growers is fully behind 

the current legislation and thinks it is fair and effective. 

Mr. MCCARTHY. I appreciate it and yield back the balance of my 

time. 

The CHAIRMAN. I thank the gentleman. The gentleman from the 

Dakotas, Mr. Pomeroy——

Mr. POMEROY. Mr. Chairman, thank you very much and I enjoyed the—it is a very articulate——

The CHAIRMAN.—for 5 minutes. 

Mr. POMEROY. Yes, sir. Point noted. This is an articulate and interesting panel and I have enjoyed these responses. Mr. Thaemert, 

you can’t tell me you got a lot of wheat growers, especially beginning ones, that are cracking that $200,000 AGI. 

Mr. THAEMERT. No, what I am saying is that the drop from $21⁄2

million to $200 thousand is dramatic. 

Mr. POMEROY. That is a dramatic drop. 

Mr. THAEMERT. And there could be issues where——

Mr. POMEROY. You went on to tell us you have a lot of beginning farmers, that they are going to be stumbling around that $200,000 

AGI. Unless there is something tremendously different about 

wheat production in Kansas than North Dakota, I don’t get it. 

Mr. THAEMERT. Well, if Dale Schuler wanted to turn over his, 

well, he is in North Dakota. And let us just say that one of your 

constituents in North Dakota was trying to sell his farm to his children as a way to make his retirement, and having to make those 

payments of machinery and land, there could be an issue where 

you are trying to provide an income for your family, plus pay off 

those principal payments. You could very easily creep over that 

limit and the problem is 1 year you are in, 1 year you are out. 

Mr. POMEROY. That is right. 

Mr. THAEMERT. You could hopefully, hopefully have a decent year 

where you can get in that good lick to cover a lot of those expenses 

and expand. 

Mr. POMEROY. I am not for the Secretary’s proposal. I think that 

it is too low. But on the other hand, I couldn’t quite understand 

what you were saying there. I had to——

Mr. THAEMERT. I hope I explained it a little better. You know, 

why do we expect a retiring farmer to give his farm away? You 

know——

56

Mr. POMEROY. Now wait a minute. I have your answer. Let us 

just not overstate the point. We don’t have that many wheat farmers making more than $200,000 AGI. And maybe the other commodities have different things, but I know a little bit about wheat. 

That one isn’t going to cut us that bad. I am not sure it is good 

policy. But let us get to, and I want to talk to my constituent here, 

Mr. Ostlie. We are very proud of your leadership of the Soybean 

Council. 

Mr. OSTLIE. Thank you. 

Mr. POMEROY. And it is a very important year in this commodity, 

so for you to have the helm right now makes us all very proud indeed. 

Mr. OSTLIE. Thank you. 

Mr. POMEROY. Let us talk about the balance between loan rates, 

soybean to wheat. And the question I have to you is, under your 

proposal, it looks like the wheat target price would climb to $4.15. 

Wheat stated that is not high enough to keep the acreage in wheat, 

in light of the other things, the higher-value commodities that are 

available to grow right now. Do you have any response to that? 

Mr. OSTLIE. Yes. I said earlier, over the past 20 years, I have actually raised more acres of wheat than soybean. 

Mr. POMEROY. I have read that you have, yes. 

Mr. OSTLIE. Yes. And wheat has got a unique problem. I don’t 

really know what the answer is. I think the wheat problem goes 

way beyond the farm program. We have a lot of countries in the 

world that can grow wheat and grow it pretty efficiently. I just 

don’t know at what point and how we stop the wheat problem. 

But—commodity and soybeans, I don’t want farmers making decisions on what they plant based on the farm program, and I feel 

right now, the way the farm program is set up, the 2002 farm program, soybeans at $5.36 is the effect of the target price when you 

take off the direct payment. I would lose a lot of money at that, 

and the point of it is, is that we need to have it balanced or ‘‘adjusted,’’ is what I guess the word is that we have been using. With 

balancing, we are not looking to bring down other commodities, but 

an adjusted rate so that we are more at an equal level throughout 

the commodities. When I go to make my decisions on what I plant, 

and my neighbors, I don’t go to the bank and the banker will say, 

‘‘Well, I want you to plant more edible beans or corn or some other 

crop, because the farm program guarantees you a profit.’’

Mr. POMEROY. Thinking about the farm program essentially as 

insurance protection against price collapse, you would like a similar level of protection across the commodities? 

Mr. OSTLIE. Right. 

Mr. POMEROY. To me, it makes a lot of sense. 

Mr. OSTLIE. And you know, a lot of this is a conceived value and 

that is part of the problem. Right now, we may have soybeans that 

are not going to go below even at a $6.85 loan rate or whatever the 

target price may be. You know, nobody spent on counter-cyclicals. 

But when you go into the banker, they always look at the worse 

case scenario and suddenly you have to conceive in your mind that 

maybe next fall soybeans might drop and corn might drop. ‘‘Aha, 

I better raise corn because it has got a better support level, or some 

other crop.’’ And I think a lot of times it is a conceived value as 

57

much as it is actual market price. So we want to have a market 

price that has that guarantee there. 

Mr. POMEROY. Mr. Chairman, my time is up and I yield back. 

The CHAIRMAN. I thank the gentleman. Let me take this opportunity to thank each of our panelists for your thoughtful comments, 

for answering the questions. But before we dismiss you, I would 

yield to the gentleman from Kansas for his final comment. 

Mr. MORAN. Mr. Chairman, I finally found an advantage to you 

being the Chairman of this Subcommittee as compared to me, because Mr. Pomeroy never ended his comments under my regime. 

He would speak minutes beyond and then yield back the balance 

of his time. So you have greater authority over him than I ever 

had. I also want to point out that today we are eating North Carolina peanuts, which is also a change in this Committee, and I 

would indicate to Mr. Russell that last year, and maybe we can correct this, for the last 2 years we have been eating Kansas gold sunflower seeds. If we could get back to the days of sunflower seeds, 

we would all, well, I shouldn’t say that. We would appreciate the 

variety. 

The CHAIRMAN. The gentleman’s time has expired. No, thank 

you. And let me thank each of you, because you have been very 

helpful. As you understand, we will have a challenge, but working 

together we are going to make sure, as I have said to a number 

of folks, Jerry and I work very closely together. Having a farm policy is important to this country if we want a good food supply, a 

plentiful food supply, and by and large, a cheap food supply for the 

American consumers. Thank you for your part in that process. And 

you are excused and now we will ask the second panel to come and 

join us. 

Okay, if we can get everyone seated, we will be ready to proceed 

with our final panel. Let me thank each of you for being here and 

just remind each of you that your full statement will be submitted 

for the record and if you would summarize it within 5 minutes and 

we will move along. Our first panelist is Mr. Larry Mitchell, who 

is the Chief Executive Officer of the American Corn Growers Association; and our second witness will be Mr. Evan Hayes, President 

of the National Barley Growers Association; the third panelist is 

Mr. Jim Evans, Chairman of the USA Dry Pea and Lentil Council, 

from Iowa; and Mr. Greg Shelor, Past President of the National 

Sorghum Producers, from the great State of Kansas. Mr. Mitchell, 

you are recognized for 5 minutes. 

STATEMENT OF LARRY MITCHELL, CEO, AMERICAN CORN 

GROWERS ASSOCIATION 

Mr. MITCHELL. Thank you, Mr. Chairman, Congressman Moran, 

other Members of the Committee. I am here representing the 

American Corn Growers Association and I may give a slightly different version of what we think should be in the farm bill than 

some of the previous panel members. But we know that everyone 

in this room has pledged at one time or another that you are going 

to write this farm bill and it is not going to be written at the WTO, 

and we commend you for that commitment and we are here to help 

you make that commitment. 

58

You know, about 2 years ago, Secretary Johanns started off 

across the country asking seven important questions about the 

farm bill, and the American Corn Growers has been doing the same 

thing. In fact, I just got back Sunday night from a 3,800 mile, 

seven state, seven meeting tour in 9 days and we posed these same 

questions. Those questions are, are farm bills getting better? The 

sounding answer is no. Are farm bills getting more or less complicated? They are more complicated. Are we keeping people on the 

land? No. Are our rural communities improving? No. Are we exporting more? No. For those people that support the current farm 

bill, what do they find is the weakest link in that farm bill? And 

they will tell you that there is just not enough money in it. So the 

follow-up question has to be, are we going to have more or less 

money in the next farm bill? The answer that you have stated 

today, Mr. Chairman, is less. So given those questions and the resounding responses that we received over the past 4 or 5 months 

at the various meetings that we have held, we have to assume 

through deductive reason that it is time to rethink U.S. farm policy 

and change course to help, not only U.S. farmers, but farmers globally. 

Part of our work working towards this started nearly 6 years ago 

when a group of farmers got together and identified three things 

about farm policy that we needed to address. We did the analysis 

on that and we asked for a review of that analysis by the Agriculture Policy Analysis Center at the University of Tennessee. 

Those three things were: first, we knew that farmers farm. Farmers will farm every acre every year and they will produce every 

bushel and every pound, regardless of whether the price is high or 

low, or regardless of the subsidy. The second thing is that low 

prices does not reduce overproduction, and the third thing is that 

low prices have not expanded our exports. The fourth thing that we 

found out is just the simple elimination of U.S. farm subsidies does 

not help farmers in other countries. It only devastates our farmers, 

our rural communities, our rural banking system, and will have a 

downward turn on the U.S. economy. What we need to do is to replace those subsidies with a support system. 

Working with the National Family Farm Coalition and some 60 

other organizations from the farm, rural, environmental and the 

faith sectors, we have drafted the Food From Family Farm Act. 

The three key items for title I under that Act would be to return 

to the nonrecourse loan as opposed to the marketing loan, so that 

we can support the price as opposed pay out subsidies. This would 

relieve us of the burden of direct payments, counter-cyclical payments, marketing loan gains and loan deficiency payments. And for 

those of you that are conservative, and especially the blue dogs 

that have been working hard to figure out how to balance this 

budget and write a farm bill within the budget constraints, this 

may be your best option. The second thing that we need to work 

towards is reestablishing a grain reserve. Our country went to war 

4 years ago with a 30 day supply of petroleum in the Strategic Petroleum Reserve, and a 5 hour supply of corn in the Commodity 

Credit Corporation. We need to address that. The third thing, we 

need to find a way of curbing overproduction from those crops that 

are traditionally overproduced. That is why we support Chairman 

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Peterson’s plan for a cellulosic reserve to move crops that have traditionally been overproduced into new dedicated energy crops. 

One last point before we run out of time. We also support Congresswoman Herseth’s bill, H.R. 1649, that prohibits the closing of 

county Farm Service Agency offices until after this farm bill has 

been written, enacted and implemented. Until we get the computer 

system fixed at FSA and figure out what this farm bill is going to 

do, it is not the right time to be closing county offices. 

In conclusion, the Food From Family Farm Act provides a better 

safety net for farmers, it saves money and those savings can be 

used to fund the Conservation Security Program, and expanded energy title, and many other titles of the farm bill. Thank you, sir. 

[The prepared statement of Mr. Mitchell follows:]

PREPARED STATEMENT OF LARRY MITCHELL, CEO, AMERICAN CORN GROWERS

ASSOCIATION

Introduction 

Chairman Etheridge, Ranking Member Moran, and Members of the Subcommittee 

on General Farm Commodities and Risk Management, I am Larry Mitchell, Chief 

Executive Officer of the American Corn Growers Association (ACGA). 

We are pleased and honored to have been extended the invitation and opportunity 

to appear before this Committee today. It has been over 6 years since ACGA has 

been afforded this courtesy before any Committee associated with the U.S. House 

Committee on Agriculture. 

The ACGA has long recognized the daunting task Congress faces in writing our 

new farm bill, a task made particularly difficult because of the deepening economic 

depression endured by family agriculture and rural communities in the United 

States. A primary goal of our organization is to provide leadership on this new farm 

bill, through positive and specific suggestions for change. Therefore, on behalf of the 

14,000 members of the ACGA, I would like to present our views and suggestions 

on the crop provisions of the Farm Security and Reinvestment Act of 2002 to this 

Committee today. 

We wish it noted that our farm bill proposal for the crop title of the next farm 

bill is much more than a corn proposal. We have always attempted to represent the 

interests of not only corn farmers, but also all those in agriculture. We believe that 

all family farmers must work together to find a farm policy that restores prosperity 

to family farmers and ranchers of all types. 

We also understand that corn is the most widely grown crop in the U.S. and has 

by far the largest production volume of any commodity. It has the largest livestock 

feed usage, and the largest industrial usage. Therefore, we recognize that feed grain 

policy has a huge impact on all commodity prices, and also directly impacts the 

structure of the dairy and livestock industries. The commodity title also impacts our 

rural communities, our environment, our food system and our Federal budget more 

than any other sector of the overall farm bill. 

This is why we have been working with scores of other farm, rural, religious, 

international, environmental, and wildlife groups over the past year to advance the 

Food from Family Farm Act (FFFA) with the National Family Farm Coalition and 

some sixty other organizations. We will present the basic concepts of the FFFA 

today and ask for your consideration and support for the plan as you advance your 

endeavor in drafting this year’s farm bill. But first, we are obliged to request your 

consideration of a broader review of which direction we should choose in the next 

farm bill. 

In addition to our support for the FFFA, we take this opportunity to state that 

ACGA also supports the following farm bill provisions:

• Retention and expansion of the Conservation Reserve Program (CRP),

• Full funding and deployment of the Conservation Security Program (CSP),

• Expansion of the energy title of the farm bill,

• Establishment of a standing disaster program,

• Development of a Cellulosic Reserve Program,

• Extension of the Milk Income Loss Contract (MILC),

60

• Inclusion of a competition title similar to Senator Tom Harkin’s Agricultural 

Fair Practices Act,

• Implementation of the current Country of Origin Labeling (COOL) provision of 

the 2002 Farm Bill, and

• Improved delivery and full funding of programs targeted toward limited resource and socially disadvantaged farmers and ranchers. 

Ten Questions That Must Be Answered Before We Draft the 2007 Farm Bill 

Over the past year, we have been asking the questions listed below of farmers 

and others in rural America and the answers to these questions have been almost 

unanimous.

Question—Are farm bills getting better or worse? 

Answer—Worse!

Question—Are farm bills more or less complicated? 

Answer—Much more complicated!

Question—Are we keeping more or fewer families on the land? 

Answer—Fewer families are on the land!

Question—Are our rural communities improving? 

Answer—No!

Question—Are we exporting more? 

Answer—No!

Question—Are farm bills getting more or less expensive? 

Answer—More Expensive!

Question—For those that actually support the current farm bill, what do they 

identify as the biggest problem? 

Answer—It needs more funding!!

Question—Will we have more or less funding for the next farm bill? 

Answer—Less!

Question—If we don’t change course on U.S. farm policy, will the next farm bill 

be better or worse? 

Answer—Worse!

Question—Why don’t we take a serious look at changing course? 

Answer—We must change course to insure the livelihoods of all farmers in the 

U.S. and around the world. 

A New Course for U.S. Farm Policy—The Food From Family Farm Act 

(FFFA) 

We must change the course of U.S. farm policy. As a part of the Building Sustainable Futures for Farmers Globally campaign on the new farm bill, sixty organizations (see list in appendix) have endorsed the FFFA and many others are planning 

to join in the near future. 

The Building Sustainable Futures for Farmers Globally campaign calls for U.S. 

agricultural and trade policies that:

• Ensure food sovereignty,

• Curtail overproduction, raise low commodity prices and end dumping abroad,

• Advance sustainable bioenergy production,

• Promote healthier food through community-based food systems,

• Diminish inequalities both among and within countries and support small scale, 

family oriented agriculture,

• Transform U.S. food aid policies to promote more flexible and comprehensive 

aid to developing countries, and

• Respect the rights of immigrants and farmworkers.

FFFA is still a work in progress, but will encompass the following provisions for 

title I, the commodity title;

1. Reestablishment of the nonrecourse loan program to provide a floor price at 

the full cost of production for the major, strategic commodities and relieve the 

burden of tens of billions of dollars in subsidies from the shoulders of America’s 

taxpayers.

2. Reestablishment of a U.S. reserve of the basic storable commodities and a 

significant portion of that reserve should be a Farmer Owned Reserve (FOR) 

for:

61

• Domestic Food Security,

• Domestic Energy Security, and

• International Famine Relief.

3. Reauthorize the Secretary to manage over-production and price-depressing 

surpluses by providing incentives to plant dedicated energy crops on acres 

which are now, or may be, produced in surplus. 

Background on the Food from Family Farm Act 

The Agriculture Policy Analysis Center (APAC), at the University of Tennessee, 

Knoxville, a land-grant university, and ACGA released the groundbreaking research 

report Rethinking U.S. Agriculture Policy: Changing Course to Secure Farmer Livelihoods Worldwide in the fall of 2003 (a copy has been provided with this testimony). 

ACGA has worked closely with APAC on this analysis and will continue to advance its findings and seek solutions to the inadequacies in U.S. farm policy identified therein. We ask you to thoughtfully review this research, and to consult closely 

with its authors, Dr. Daryll Ray, Dr. Daniel De La Torre Ugarte and Dr. Kelly Tiller. 

The report concludes that even if the difficult task of negotiating the elimination 

of global farm subsidies is completed, family-based agriculture will continue to spiral downward as a result of continued low commodity prices. This report goes comprehensively to the heart of the ever more contentious trade issues of farm subsidies 

in developed countries, low world commodity prices, and global poverty. 

The Genesis of the APAC report came from a group of corn farmers at ACGA. For 

many years, we had been pondering how to quantify several key points that we, as 

farmers, have observed. 

First—Farmers farm. They farm every available acre and produce every pound, 

bushel or hundredweight possible. That’s what farmers do. They will produce as 

much as they can when prices are high to maximize profits. They will produce as 

much as they can when prices are low to service debt and survive. 

Second—While low prices in many sectors of the economy may drive producers out 

of business, reduce production and put it back in line with demand, we find that, 

although farmers are put off the land with low prices, the land stays in production. 

Third—Low prices have not expanded our exports and are detrimental to farmers, 

not only in the U.S., but also around the globe. 

Government has been involved in agriculture policy since the beginning of recorded history by expanding production, improving technology, managing stocks, establishing weights and measures, supporting prices, etcetera. There were those 7 fat 

years followed by 7 lean years. The Chinese started a grain reserve program in 54 

B.C., and operated it for 1,400 years. When government-backed military force removed the indigenous people from the land on our continent, government was again 

expanding agricultural production. The same can be said of the transcontinental 

railroad, where the government gave away miles of land on both sides of the tracks 

for settlement and, later, crop production. Then we had the homestead programs, 

USDA’s research and development, land-grant universities and even the Federal 

interstate highway system, which means that today 4,000 head dairies in New Mexico drive down the price of milk in Wisconsin. 

Let me repeat this point—government has been involved in agriculture since the 

beginning of recorded history—and will continue to do so. We must change course 

to make government involvement in agriculture work for all of us, not just the processors, vertical livestock producers and merchants. 

A good farm program includes not only a good commodity program, but also good 

programs for conservation, research, rural development, nutrition, credit, and 

etcetera. Having said that, let me point out the three components of a good commodity program as we envision it:

1. Price support, not subsidies,

2. Tools to manage stocks, and

3. Tools to manage over-production.

Price Support 

I know many of you may feel that the difference between price supports and price 

subsidies seem like a semantic splitting of hairs. But I can assure there is a great 

difference. The biggest difference is who pays. The user pays for the support and 

the government, i.e. taxpayers, pays for the subsidy. The best analogy I can give 

you to share with your urban friends is the difference between the minimum wage, 

a support program, and food stamps, a subsidy program. And you do not have to 

62

be an economist to realize that if we increase the support program, we can reduce 

or eliminate the subsidy program. 

One of the timeliest discoveries in Dr. Ray’s work, during these times when so 

many developing nations are demanding an end of U.S. farm subsidies as a way to 

improve the economic situation for their farmers, shows that the simple elimination 

of U.S. subsidies will not help. Such a policy change would devastate U.S. farmers 

and would even reduce the prices for some commodities worldwide. What would help 

is a policy to improve prices in the U.S., a world price setter for many commodities, 

and thereby help farmers worldwide. 

Managing Stocks 

Managing stocks is not a new government policy. From the Joseph Plan as Henry 

A. Wallace called the 7 fat years, 7 lean years program, to his Ever Normal 

Grainery, to the Chinese program I mentioned earlier up to the Farmer Owned Reserve (FOR) we lost in the 1996 Farm Bill, governments have previously provided 

the tools to manage stocks with positive results. 

One last note on government stocks from the ACGA farmer view of agriculture 

economics. Did you realize that when our nation went to war 4 years ago this 

month, we only had 5 hours worth of corn in the CCC reserve? We only had 8 hours 

worth of soybeans and 11 days worth of wheat. We had 30 days supply of petroleum 

in the Strategic Petroleum Reserve, but only 5 hours worth of corn. We support the 

President’s initiative announced during his 2007 state of the union address to expand the Strategic Petroleum reserve and we ask your support for a Strategic Grain 

Reserve. 

Managing Overproduction 

Tools to manage production are available and used by most every sector of the 

economy. The generals all use production management—General Dynamics, General 

Electric, General Foods, General Mills and General Motors. Even both the House 

and Senate Agriculture Committees believe in production management by government. During the last farm bill deliberation, they spent hours discussing the loan 

rate. Their concern was that the higher the loan rate, the more incentive producers 

have to produce more. An erroneous assumption as reported in the APAC study. But 

given the fact that they decided to keep the loan rate low in order to curb overproduction, it is clear that they support government tools to manage production. Recently the Bush Administration also recommended a similar proposal to manage 

production by lowering loan rates. It is evident that most everyone involved in the 

farm policy debate supports supply management, but lowering the loan rate is not 

the best solution to this issue. 

ACGA does not advance the notion that the Acreage Reduction Programs (ARP) 

of the past as the best way of managing overproduction. Nor do we advance the 

adoption of any production controls until a viable reserve is established as defined 

above. We do promote giving farmers tools to voluntarily manage ‘‘free stocks’’ as 

a primary way to improve farm price within a market-based system. 

We also see a need for a policy to advance the cultivation of more energy crops 

in order to provide alternatives to the over-planting of crops in surplus. Bio-energy 

crops should be a key in any future U.S. farm policy and additional user incentives 

should be considered for their advancement. This is why we are endorsing Chairman Peterson’s proposal for a Cellulosic Reserve Program to provide incentives for 

farmers to move crop acres which have traditionally been planted to crops in surplus into dedicated energy crops. To understand how this initiative would impact 

future production management, we suggest a review of the cultivation of soybeans 

over the past half century. Fifty years ago, few if any soybeans were planted in the 

U.S. In recent years, annual soybean plantings have exceeded 70 millions acres. We 

need to ask just how bad would corn, wheat and cotton prices have been in past 

years had we not planted over 70 million acres of soybeans. What we need in the 

future is a portfolio of dedicated energy crops to provide the same type of planting 

alternatives provided by soybeans over the past half century for the next half century. 

FFFA and the Federal Budget 

With the current improvements in commodity prices, almost any farm program 

will work within the budget constraints faced by this Committee. But we have no 

conclusive evidence as to whether the new farm gate prices are a bubble, a new plateau or even a new escarpment. Therefore, we must find a way to utilize our baseline smarter and raise the farm safety net above the pavement in the event current 

prices are a bubble. 

Because the FFFA’s reestablishment of the nonrecourse loan program provides a 

floor price at the full cost of production for the major, strategic commodities, we 

63

would relieve the burden of tens of billions of dollars in subsidies from the shoulders 

of America’s taxpayers. By setting a floor price on our commodities, we would alleviate the need for Loan Deficiency Payments (LDPs). Marketing Loan Gains (MLAs), 

Counter-Cyclical Payments and Fixed Payments. There would be some spending required to manage the strategic grain reserve and the cellulosic reserve program, but 

these expenditures would be very nominal when compared to the savings realized 

in other areas. Short of providing a full scoring of the initiative which is not available at this time, we suggest that based on previous expenditures, the FFFA could 

save $10 to $20 billion annually. Such Federal budget savings should be considered 

closely with any Member of Congress claiming to be a Budget hawk—be they conservative Republicans or Blue Dog Democrats. The savings realized by this change 

in course for farm programs would also provide the resources for fully funding the 

Conservation Security Program (CSP), expansion and full funding of the farm bill’s 

energy title, funding for the Chairman’s standing disaster program, livestock assistance programs and et cetera.

FFFA and the World Trade Organization 

Many in Congress, including several Members of this Committee, have said that 

the Congressional Agricultural Committees are going to write the 2007 Farm Bill, 

not the World Trade Organization. ACGA supports that position. We also suggest 

that the U.S. advance the FFFA to our negotiators currently engaged in the Doha 

Round of WTO negotiations, and suggest a review by the WTO of FFFA. We predict 

that if the U.S. were to advance a program of higher prices, supply management 

and production management, it would be embraced by the developing countries as 

well as the developed countries as a superior alternative. Let’s take a proposal to 

the table to raise world prices, eliminate subsidies and enhance the livelihoods of 

farmers globally and see how much interest it garners. 

While our farm and trade policy makers have decided time and time again that 

low prices are the most prescribed cure for our lagging competitiveness in global 

markets, farmers and livestock producers find that cure to be their biggest disease. 

To defeat the disease of low prices we need policies that improve prices in the U.S. 

and around the world, establish adequate food reserves and address production adjustments to enhance production of crops in short supply in favor of crops in surplus. There are efforts already underway to bring about such international cooperation on supply management, but those efforts have been limited to the academic and 

NGO sectors. We need our policy makers to engage in these discussions as well and 

we suggest that this Committee hold a separate hearing to review this critical issue. 

Program Delivery 

ACGA warns that until we know what programs will be contained in the new 

farm bill or how it will be administered, and until Farm Service Agency (FSA) computer problems have been mitigated, it is ill-advised to reduce the FSA farm program delivery platform. We urge Congress to postpone any county office closures or 

reductions in staff until after the farm bill has been passed, enacted and deployed 

and that a real solution to the antiquated computer system are likewise deployed. 

Conclusion—One Last Question That Must Be Answered Before We Draft 

the 2007 Farm Bill 

Given the new course we have just recommended for the 2007 Farm Bill, and the 

current farm bill, which one is better for:

• Farmers?

• Consumers?

• Taxpayers?

• The Environment?

• Rural Communities?

• Farmers in developing countries?

Or, which one is better for:

• The integrated livestock industry?

• The international grain traders?

• The food processors?

We are not asking ‘‘which of these farm bills will the Congress pass?’’ We are asking ‘‘which of these farm bills will be better and for whom?’’ Once we ascertain how 

Members of Congress feel about which farm bill is better for whom, we will then 

help answer the question ‘‘what will the Congress pass?’’ I am not asking for your 

64

answer today, but I am asking you to look closely at our proposal and formulate 

your answer prior to drafting our new farm bill. 

APPENDIX

Organizations endorsing the Food from Family Farm Act (FFFA) as part of the 

Building Sustainable Futures for Farmers Globally campaign’s farm bill initiative.

American Agriculture Movement, Inc. 

Action Aid USA, Washington, D.C. 

Federation of Southern Cooperatives/

Land Assistance Fund, Atlanta, Ga. 

Friends of the Earth U.S., Washington, 

D.C. 

Institute for Agriculture and Trade 

Policy, Minneapolis, Minn. 

National Family Farm Coalition, 

Washington, D.C. 

Rural Coalition/Coalicio ́n Rural, 

Washington, D.C. 

Farm & Food Policy Diversity Initiative, 

Washington, D.C. 

National Campaign for Sustainable 

Agriculture, Pine Bush, N.Y. 

American Corn Growers Association, 

Washington, D.C. 

Maryknoll Office of Global Concerns, 

Washington, D.C. 

Alliance for Responsible Trade, 

Washington, D.C. 

Church World Service, Elkhart, Ind. 

Heifer International, Little Rock, Ark. 

RAFI–USA, Pittsboro, N.C. 

NETWORK/A National Catholic Social 

Justice Lobby, Washington, D.C. 

Agricultural Missions, New York, N.Y. 

Grassroots International, Boston, Mass. 

Family Farm Defenders, Madison, Wisc. 

World Hunger Year, New York, N.Y. 

SHARE Foundation: Building a New El 

Salvador Today, Washington, D.C. 

Quixote Center/Quest for Peace, 

Hyattsville, Md. 

International Labor Rights Fund, 

Washington D.C. 

Food First/Institute for Food and 

Development Policy, Oakland, Calif. 

World Neighbors, Oklahoma City, Ola. 

Food & Water Watch, Washington, D.C. 

Ecumenical Program on Central America 

and the Caribbean (EPICA), 

Washington, D.C. 

Organization for Competitive Markets, 

Lincoln, Neb. 

Land Stewardship Project, White Bear 

Lake, Minn. 

Land Loss Prevention Project, Durham, 

N.C. 

Missouri Rural Crisis Center, Columbia, 

Mo. 

Campaign for Family Farms and the 

Environment, Iowa Citizens for 

Community Improvement, Des Moines, 

Iowa 

Oakland Institute, Oakland, Calif. 

The Second Chance Foundation, New 

York, N.Y. 

Sustainable Agriculture of Louisville, 

Louisville, Ky. 

Oklahoma Black Historical Research 

Project, Oklahoma City, Okla. 

Center of Concern, Washington, D.C. 

Sisters of the Holy Cross, Notre Dame, 

Ind. 

United Church of Christ, Justice and 

Witness Ministries, Cleveland, Ohio 

California Black Farmers and 

Agriculturalists, Sacramento, Calif. 

Cumberland Countians for Peace & 

Justice, Pleasant Hill, Tenn. 

Caney Fork Headwaters Association, 

Pleasant Hill, Tenn. 

Network for Environmental & Economic 

Responsibility, United Church of 

Christ, Pleasant Hill, Tenn. 

Corporate Agribusiness Research Project, 

Everett, Wash. 

Center for a Livable Future, Johns 

Hopkins Bloomberg School of Public 

Health, Baltimore, Md. 

Columban Justice, Peace, and Integrity 

of Creation Office, Washington, D.C. 

Ohio PIRG, Oberlin College Chapter, 

Oberlin, Ohio 

Ladies of Charity of Chemung County, 

Elmira, N.Y. 

Church Women United of New York 

State, N.Y. 

Catholic Daughters of the Americas, 

Corning/Elmira, N.Y. 

Missionary Oblates of Mary Immaculate 

Justice, Peace and Integrity of 

Creation Office, Washington, D.C. 

International Endorsements 

National Farmers Forum, New Delhi, 

India 

Mexican Action Network on Free Trade, 

Mexico City, Mexico 

Instituto Runa de Desarrollo y Estudios 

sobre Ge ́nero, Lima, Peru 

Small Farmers of Jalapa Coopereative, 

Jalapa, Nicaragua 

Lokoj Institute, Dhaka, Bangladesh 

Fiji AgTrade, Suva, Fiji 

Observatorio de la Deuda en la 

Globalizacio ́n, Catalun ̃ a, Spain 

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The CHAIRMAN. Thank you, Mr. Mitchell. Mr. Hayes. 

STATEMENT OF EVAN HAYES, PRESIDENT, NATIONAL BARLEY 

GROWERS ASSOCIATION; COMMISSIONER, IDAHO BARLEY 

COMMISSION; BARLEY AND WHEAT FARMER, AMERICAN 

FALLS, ID 

Mr. HAYES. Mr. Chairman, Mr. Moran, Members of the Committee, thank you for the opportunity to appear before you today. 

I am Evan Hayes, President of the National Barley Growers Association. I farm in eastern Idaho, a little higher than most of you 

are used to seeing farming. I farm above 6,000 feet. We still have 

plenty of snow, thank goodness. 

NBGA has serious concerns regarding the level of support barley 

receives relative to the other crops in the current farm program. 

We believe barley has lost significant competitiveness in its traditional growing region due in part to distortions in Federal farm 

program support levels, and the acreage trend certainly underscore 

our concerns. The NASS data 2006 Acreage Report showed barley 

seeded acreage at 3.5 million acres, a 10 percent decline from 2005 

and the lowest planted acreage since estimates began in 1926. Last 

year, the NBGA asked the Senate Agriculture Committee to have 

FAPRI look at the root cause of our barley acreage decline, specifically if the farm bill might be contributing to it. According to the 

findings, marketing loan benefits have clearly favored traditional 

row crops over cereal grains. In the Northern Plains, average marketing loan benefits for the last 5 years were $4 for wheat, $8 for 

barley, $12 for soybeans and $21 for corn. At the national level, the 

combination of marketing loan benefits and market returns can 

help explain the increase in national row crop acreage since the 

early 1900s and the decline in small grain production. 

Despite this disturbing trend, National Barley does support the 

structure of the current farm bill. However, we urge the Committee 

to adjust the support levels to make them more equitable among 

the program crops, using an objective method to determine the supports, mainly price history. Specifically, NBGA supports adjusting 

barley and other crop marketing loan levels upwards to 95 percent 

of a crop’s 2002 to 2004 Olympic average prices. Barley’s current 

marketing loan is at 75 percent of its recent history price is one 

of the lowest of any crops. If this change was adopted, barley’s loan 

rate would be set at $2.35 per bushel and farmers would be less 

likely to have their planting decisions influenced by loan rates during periods of low crop prices. 

NBGA supports adjusting barley and other crop target prices to 

130 percent of the crop’s 2000 to 2004 Olympic average prices. 

Once again, barley’s target price today is at 91 percent of its price 

history during those years. It is one of the lowest program crops. 

Barley’s target price would be set at $3.21 if these adjustments 

were made. NBGA is not advocating the crops with higher levels 

of support be decreased. NBGA supports adjusting barley’s direct 

payment to 42¢ per bushel or 17 percent of its 2000–2004 Olympic 

average price. Again, the current 24¢ per bushel direct payment 

that barley receives is among the lowest percentage, at 10 percent, 

when compared to the price history. 

133

NBGA supports the current level of payment limits and structure, including the continuation of the three-entity rule. NBGA 

supports the creation of a permanent disaster program, but does 

not support funding such a program from within the commodity 

title. NBGA understands the budgetary constraints facing the Committee as it begins to draft the 2007 Farm Bill, but urges the Committee to seriously consider these proposals designed to insert 

equality into program crop support levels. 

I again want to thank the Committee for this opportunity to testify about NBGA priorities for the 2007 Farm Bill, and I am certainly willing to stand for any questions that you would like to address to me. Thank you. 

[The prepared statement of Mr. Hayes follows:]

PREPARED STATEMENT OF EVAN HAYES, PRESIDENT, NATIONAL BARLEY GROWERS

ASSOCIATION; COMMISSIONER, IDAHO BARLEY COMMISSION; BARLEY AND WHEAT

FARMER, AMERICAN FALLS, ID 

Mr. Chairman and Members of Committee, thank you for this opportunity to testify before you today regarding policies we believe Congress should consider when 

writing the next farm bill. I am President of the National Barley Growers Association (NBGA). I raise barley and wheat at about 6,000 elevation near Soda Springs, 

Idaho. 

NBGA supports the structure of the current farm bill, but has serious concerns 

regarding the equity of program crop support levels, and in particular, the level of 

barley support relative to other program crops. NBGA believes that the U.S. barley 

industry has lost significant competitiveness in its traditional Northern Tier growing region due, in part, to distortions in Federal farm program supports. Acreage 

trends certainly underscore our concerns. The National Agricultural Statistics Service’s June 30, 2006 Acreage Report repeatedly used the terms ‘‘lowest level,’’ ‘‘new 

low,’’ and ‘‘record lows’’ when reporting barley seeded acreage last year:

‘‘Growers (barley) seeded 3.5 million acres for 2006, down 10 percent from the 

3.88 million acres seeded a year ago, and the lowest since barley planted acreage 

estimates began in 1926. Acres for harvest, at 2.99 million . . . the lowest since 

records began in 1926. North Dakota growers planted 1.05 million acres, a new 

low since records began in 1926 . . . In Montana, planted area is down 100,000 

acres from last year to the lowest level since 1953, while Idaho’s 560,000 planted 

acres is the lowest since 1967. California, Colorado, Minnesota, and South Dakota . . . set new record lows for planted acreage, with records going back to 

the 1920s.’’

The Senate Agriculture Committee sought on NBGA’s behalf a FAPRI analysis on 

the affect the U.S. farm bill is having on barley acres and to identify changes that 

could be made in future policy that would treat barley more equitable relative to 

other program crops. According to FAPRI’s findings, marketing loan benefits under 

the 2002 Farm Bill have clearly favored corn and soybeans over barley and wheat. 

In the Northern Plains, the average annual marketing loan benefit between 2000 

and 2005 was $4 per acre for wheat, $8 for barley, $12 for soybeans and $21 for 

corn. At the national level, the combination of marketing loan benefits and market 

returns can help explain the increase in national soybean and corn acreage since 

the early 1990s and the decline in small grain production. The report can be found 


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at http://www.fapri.missouri.edu/outreach/publications/2006/FAPRIlUMClRe

portl15l06.pdf.

To mitigate the inequities of the current farm bill, NBGA supports a 2007 Farm 

Bill proposal that would set barley and other crop loan rates and target prices at 

a percentage of a crop’s 2000–2004 Olympic average of prices. It is significant to 

note in the table below that barley’s loan level at 75 percent is the lowest of any 

crop; and its target price at 91 percent is also among the lowest. Likewise, barley’s 

current direct payment level at 10 percent is also in the lower range of all the program crops.

NBGA believes the following changes to current law would provide much greater 

equity between program crops in the 2007 Farm Bill. Specifically, the proposal we 

support would adjust all loan rates to 95 percent of each crop’s 2000–2004 Olympic 

average of prices, which would equal $2.35/bu for barley. Likewise, all target prices 

would be adjusted to130 percent of each crop’s 2000–2004 Olympic average of prices, 

which would equal $3.21/bu per bushel. However, crops currently at or above the 

95 and 130 percent support levels in this proposal would be left at current levels. NBGA also supports increasing the barley direct payment to no less than $.42; 

which would be equal to 17 percent of the 2000–2004 Olympic average of prices. 

NBGA also supports the current level of payment limits and structure, including 

the continuation of the three-entity rule. 

NBGA supports the creation of a permanent disaster program, but does not support funding such a program from within the commodity title. 

NBGA understands the budgetary constraints facing the Committee as it begins 

to draft the 2007 Farm Bill, but urges the Committee to seriously consider these 

proposals designed to insert equity into program crop support levels. I want to again 

thank the Committee for this opportunity to testify about NBGA priorities for the 

2007 Farm Bill. If you have any questions, I will be happy to address them.

EVAN HAYES,

President, National Barley Growers Association.

The CHAIRMAN. Thank you, sir. Mr. Evans. 

STATEMENT OF JAMES EVANS, CHAIRMAN, USA DRY PEA AND 

LENTIL COUNCIL; WHEAT, BARLEY, DRY PEAS, LENTILS, 

AND CHICKPEA FARMER, GENESEE, ID 

Mr. EVANS. Thank you, Mr. Chairman and Members of the Subcommittee. My name is Jim Evans. I am a farmer of dry peas, lentils, chickpeas, wheat and barley near Genesee, Idaho. Today, I am 

testifying on behalf of the USA Dry Pea and Lentil Council, a national organization representing producers, processors, exporters of 

dry peas, lentils and chickpeas across the northern tier of the 

United States. 

To begin with, we believe it is critical for the United States to 

provide a solid safety net to U.S. producers during periods of low 

prices and natural disaster. The 2007 commodity title should continue to encourage farmers to take advantage of market opportunities and reward them for being good environmental stewards. Right 

now commodity prices are up, and for the first time in years it apVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00138 Fmt 6633 Sfmt 6601 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA

11009074
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pears that U.S. farmers might do a little bit better than breaking 

even. Hallelujah. I hope it never ends. But some day it will and 

when it does, our farm policy must protect farmers from continued 

subsidized competition, high tariffs, phytosanitary trade barriers 

and exchange rate manipulation. 

As Congress writes a new farm bill, we ask that it include the 

following programs in the commodity title—pulse crops: dry peas, 

lentils and chickpeas, entered the farm program in 2002 with the 

introduction of the pulse marketing assistance loan program for 

dry peas and lentils and chickpeas. Our industry seeks to be included and be treated equally along with other program crops. 

The Marketing Loan/LDP Program provides the best safety net 

for U.S. pulse growers facing dips in market prices. The table 

below shows the pulse loan rate set by law in the 2002 farm program and our request is to continue this program at the same levels in the 2007 Farm Bill. The 2002 Farm Bill created the Marketing Loan Program for small chickpeas. Our organization supports the creation of a marketing assistance loan program for large 

chickpeas in the 2007 Farm Bill. We ask that the loan rate be set 

at $18 a hundredweight for large chickpeas. The loan rate should 

be based on number three grade chickpeas that stay above a 20⁄64

round sieve. 

To reduce our dependence on foreign oil, we support a strong energy component in the 2007 Farm Bill. The most effective way to 

reduce our dependence on foreign oil is to encourage U.S. farmers 

to implement a sound energy conversation strategy. To encourage 

energy conservation, we propose the creation of a pulse energy conservation incentive payment; PECIP we call it. Dry peas, lentils 

and chickpeas are legumes and they do not require the use of nitrogen fertilizer in the production cycle. In fact, university research 

showed that dry peas, lentils, and chickpeas provide a 40 pound 

per acre nitrogen credit for the next crop in the rotation. In addition to conserving energy, pulse crops also fix nitrogen in the soil, 

which provides a significant offset to greenhouse gas emissions. 

The program would be delivered as a direct payment to those producers who plant energy-conserving crops like dry peas, lentils, and 

chickpeas. The payment would be based on multiplying the nitrogen credit saved by planting a pulse crop, 40 pounds an acre, times 

the current cost of nitrogen fertilizer, 38¢ a pound. The payment 

would be roughly $15 per acre for pulse crops with nitrogen prices. 

As Congress works on providing new incentives for the creation of 

biofuels, we ask that equal weight be given to providing incentives 

to produce pulse crops that conserve our energy resources. 

Pulse crops are grown in a rotation with wheat, barely and minor 

oilseeds across the northern tier of the United States. Each crop in 

the rotation has a direct payment except for pulses. We support the 

creation of a direct payment for dry peas, lentils, and chickpeas 

equal to the direct payment received for wheat. The current direct 

payment for wheat is 52¢ per bushel. The table below establishes 

a pulse direct payment based on the current wheat direct payment 

program. 

The counter-cyclical program provides an additional safety net to 

producers facing a downturn in the market. We support the creation of a pulse counter-cyclical program for dry peas, lentils and 

136

chickpeas equal to 130 percent of pulse loan rates established in 

the 2002 Farm Bill. The following table shows the pulse countercyclical price based on 130 percent of the pulse marketing assistance loan rates. 

Producers need planting flexibility to respond to market signals. 

Over 90 percent of chickpeas produced in the United States are 

gown in Washington, Idaho, Montana, North Dakota, and South 

Dakota. Currently chickpeas are classified as a vegetable crop and 

are not eligible to be planted on program crops. The growers producing chickpeas in the northern tier primarily produce program 

crops that are eligible to be planted on program acres. The Council 

supports the inclusion of chickpeas, large and small, as an eligible 

crop to be planted on farm program base acres in the 2007 Farm 

Bill. 

In summary, the Council believes the commodity title of the 2007 

Farm Bill should continue the current pulse marketing assistance 

loan program with the addition of large chickpeas. We believe the 

safety net for pulses should be expanded and include pulse direct 

payment and a counter-cyclical payment. We ask Congress to consider our pulse energy conservation incentive payment program to 

encourage producers to conserve energy. I thank you for your time 

and I will answer any questions you ask. 

[The prepared statement of Mr. Evans follows:]

PREPARED STATEMENT OF JAMES EVANS, CHAIRMAN, USA DRY PEA AND LENTIL

COUNCIL; WHEAT, BARLEY, DRY PEAS, LENTILS, AND CHICKPEA FARMER, GENESEE, 

ID 

Introduction 

Mr. Chairman and Members of the Subcommittee, my name is Jim Evans. I am 

a farmer of dry peas, lentils, chickpeas, wheat and barley near Genesee, Idaho. 

Today, I am testifying on behalf of the USA Dry Pea and Lentil Council, a national 

organization representing producers, processors and exporters of dry peas, lentils 

and chickpeas across the northern tier of the United States. Our membership includes farmers, processors and exporters in Washington, Idaho, Oregon, Montana, 

North and South Dakota, Minnesota, Nebraska, Wyoming, Colorado and Kansas. I 

am the current Chairman of the organization and in the audience today is the Vice 

Chairman of our Council, Greg Johnson. Greg owns and operates a large dry pea, 

lentil and chickpea processing facility in Minot, North Dakota. 

The USA Dry Pea & Lentil Council would like to thank you for holding this hearing and providing our organization with the opportunity to share our ideas on the 

2007 Farm Bill. To begin with, we believe it is critical for the United States to provide a solid safety net to our producers during periods of low prices or natural disaster. The 2007 Farm Bill should continue to encourage farmers to take advantage 

of market opportunities and reward them for being good environmental stewards. 

Right now commodity prices are up and for the first time in years it appears that 

U.S. agriculture might do a little better than breaking even. Hallelujah! I hope 

it never ends. But some day it will and when it does our farm policy must protect 

our producers from continued subsidized competition, high tariffs, phytosanitary 

barriers and exchange rate manipulation. As Congress writes a new farm bill we 

ask that it include the following programs in the commodity title: 

2002 Farm Bill—Pulse crops (dry peas, lentils and chickpeas) entered the farm 

program family in 2002 with the introduction of the pulse marketing assistance loan 

program for dry peas, lentils and small chickpeas. Our industry seeks to be included 

and treated equally with other farm program commodities.

137

Title I—Commodity Programs 

Marketing Loan Program/LDP—The nonrecourse marketing assistance loan 

and loan deficiency payment (LDP) program provides the best safety net for U.S. 

pulse farmers facing dips in market prices. The following table shows the pulse loan 

rates set by law in the 2002 farm program and our request to continue the program 

at the same levels in the 2007 Farm Bill:

Large Chickpeas—The USADPLC supports the creation of a marketing assistance loan program for large chickpeas. We ask that the loan rate be set at $18.00/

cwt. for large chickpeas. The loan rate should be based on a No. three grade 

large chickpea that stays above a 20⁄64 round hole sieve.

2. Pulse Energy Conservation Incentive Payment (PECIP)

To reduce our dependence on foreign oil, the USADPLC supports a strong energy 

component in the 2007 Farm Bill. The most effective way to reduce our dependence 

on foreign oil is to encourage U.S. farmers to implement a sound energy conservation strategy. The USADPLC supports the creation of a Pulse Energy Conservation 

Incentive Payment (PECIP). 


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Dry peas, lentils and chickpeas do not require the use of nitrogen fertilizer. In 

fact, university research has shown that the production of dry peas, lentils and 

chickpeas provides a 40 pound per acre nitrogen credit for the next crop in the rotation. The Pulse Energy Conservation Incentive Payment would multiply the nitrogen credit saved by planting a pulse crop (40 lbs/ac.) by the cost of nitrogen ($0.38/

lb.). The payment would be $15.00 per acre for pulse crops with current nitrogen 

fertilizer prices.

As Congress works on providing new incentives for the creation of biofuels, we ask 

that equal weight be given to providing incentives to produce pulse crops that conserve our nation’s energy resources.

3. Pulse Direct Payment Program

The production of pulse crops (dry peas, lentils and chickpeas) is grown in rotation with wheat, barley and minor oilseeds across the northern tier of the United 

States. Each crop in the rotation has a direct payment except for pulse crops. The 

USADPLC supports the creation of a direct payment for pulse crops (dry peas, lentils and chickpeas) equal to the direct payment received for wheat. The current direct payment for wheat is $0.52 cents per bushel. The table below establishes a 

pulse direct payment based on the current wheat direct payment program.

Pulse Base Acres—The USADPLC supports the creation of a USDA–FSA base 

for pulse crops (dry peas, lentils and chickpeas) in the 2007 Farm Bill in order to 

receive a direct payment. Producers should be allowed to sign up their vegetable 

base for the pulse direct payment program.

4. Pulse Counter-Cyclical Program

The counter-cyclical program provides an additional safety net to producers facing 

a downturn in the market. The USADPLC supports the creation of a pulse countercyclical program for dry peas, lentils and chickpeas equal to 130% of the pulse loan 

rates established in the 2002 Farm Bill. The following table shows the Pulse 

Counter-Cyclical Target Price based on 130% of the pulse marketing assistance loan 

rates.


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5. Remove Chickpeas from Fruit & Vegetable List

Producers need planting flexibility to respond to market signals. Over 90% of the 

chickpeas produced in the United States are grown in WA, ID, MT, ND, and SD. 

Currently chickpeas are classified as a vegetable crop and are not eligible to be 

planted on farm program base acres. The growers producing chickpeas in the northern tier primarily produce program crops that are eligible to be planted on farm program base acres. The USADPLC supports the inclusion of chickpeas (Small and 

Large) as an eligible crop to be planted on farm program base acres in the 2007 

Farm Bill. 

Title X—Crop Insurance 

Our organization supports establishing Federal Crop Insurance programs for all 

dry peas, lentils, and chickpeas that manage risk at an affordable price. We recommend the following issues be addressed to improve crop insurance for pulse producers: 

1. Pulse Long Term Revenue (LTR) Coverage—The 2002 Farm Bill required 

RMA to develop new ‘‘revenue’’ policies for non-program crops. Revenue coverage is 

not presently an option for producers of dry peas, lentils or chickpeas. Our organization has been working with RMA to create a ‘‘revenue’’ program for pulses since 

2001. Our commodity was chosen to participate in an RMA initiative to develop a 

new revenue based insurance program for pulses. Unfortunately, we still do not 

have a revenue insurance program for dry peas or lentils. The 2007 Farm Bill needs 

to put additional pressure on RMA to create new programs for minor crops with 

firm deadlines. 

2. APH Crop History—Pulse producers are required by RMA to have 4 years 

of production data to establish an Actual Production History (APH). Pulse crops are 

grown in a 3, 4 and sometimes 5 year crop rotation. It could take 12 to 20 years 

to establish an APH for a new grower. Last year RMA created a pilot program in 

North Dakota that would allow producers to generate an APH history in a shorter 

amount of time. Under the ‘‘Personal T Yield’’ pilot program a producer can generate production history each year for all units across his farm even if the unit did 

not produce pulses. This pilot program needs to be expanded to all growing regions 

raising pulses in the 2007 Farm Bill. 

3. Optional Unit Structure Written Agreements—Background—In 2005–

2006 the RMA rewrote the Optional Unit Structure Written Agreements to make 

them consistent throughout the country. There are many farms across the northern 

tier of the U.S., especially in the PNW, that do not fit the existing U.S. Rectangular 

Survey System that splits unit divisions based on sections or section equivalents. 

The rectangular survey system may work in flat regions of the country, but it fails 

miserably in the hills and valleys across the northern tier where producers farm 

outside section lines due to the varied topography. The RMA has decided to raise 

a ‘‘unit’’ under these agreements from 160 acres to 320 acres. The 320 acre unit 

sized is not fair to producers who face highly variable topography. Optional Unit 


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Structure Written Agreement size should be lowered from 320 acres to a 100 acre 

minimum for those areas of the country with varied topography. 

In summary, the USA Dry Pea and Lentil Council believe the commodity title 

in the 2007 Farm Bill should continue the pulse marketing assistance loan program. 

We believe the safety net for pulses should be expanded to include a pulse direct 

payment and counter-cyclical program. We ask Congress to consider our Pulse Energy Conservation Incentive Payment program to encourage producers to conserve 

energy. Viable Federal Crop Insurance programs are critical to pulse producers and 

a new revenue program for pulse crops is needed. 

I would like to thank the Committee for the opportunity to speak to you today, 

and I would be happy to answer any questions.

The CHAIRMAN. Thank you, sir. Mr. Shelor, for your final comments, please, sir. 

STATEMENT OF GREGORY SHELOR, PRESIDENT, KANSAS 

GRAIN SORGHUM PRODUCERS ASSOCIATION; PAST

PRESIDENT, NATIONAL SORGHUM PRODUCERS; FARMER, 

MINNEOLA, KS 

Mr. SHELOR. Thank you. On behalf of the National Sorghum Producers, I would like to thank this Subcommittee for the opportunity 

to discuss the farm bill and its impact to the sorghum industry and 

my farm. My name is Greg Shelor and I farm in southwest Kansas. 

I raise dryland sorghum and wheat in a sorghum-wheat-fallow rotation, and irrigate sorghum, corn and soybeans. My no-till production practices enhance water conservation and prevent wind and 

water erosion. More importantly, I have recently bought stock in an 

ethanol plant near Dodge City, which will produce 110 million gallons of ethanol per year. I expect that half the feed stock used will 

come from sorghum, since it is an economical and viable alternative starch and yields the same amount of ethanol per bushel as 

corn. The ethanol industry is rapidly changing how sorghum is 

priced by equalizing sorghum and corn prices at a local level. 

Sorghum producers are strong supporters of the 2002 Farm Bill 

because it significantly improved the equitable treatment given sorghum producers, related to other feed grains. Priorities for the 

2007 Farm Bill are to equalize the sorghum loan rate set at county 

level with other feed grains; maintain guaranteed direct payments, 

because they are important in the semi-arid sorghum belt; preserve 

a safety net of LDPs and counter-cyclical payments for commodities, as we all understand the cyclical nature of agriculture. 

While we are hoping the commodity prices don’t drop to loan rate 

levels again soon, the reality of farm economy is that prices will 

drop, related to the county loan rate issue in 2006. The largest sorghum-producing States of Kansas and Texas, which produce 75 

percent of the U.S. grain sorghum crop yield, only 33 of those 359 

counties had loan rates equal to or above corn. In those 33 counties, the average loan rate was 3¢ per bushel over corn. In the 

other 326 counties, the average loan rate was 15¢ per bushel under 

corn. In an average loan rate situation, this difference cost the producer $10 per acre based on a 70 bushel yield. This makes a difference in which crop a producer chooses to plant in a loan rate environment. Fortunately, I can sell sorghum today for double my 

county loan rate, but last year this was a significant factor in deciding which crop I grew, even though we were dry and my cash 

prices for feed grains was within a couple of cents of equal. 

141

As you write a new commodity title, maintaining the equitable 

direct payments, loan rates and counter-cyclical rates between all 

crops should be a high priority. The direct payment is very important to growers like me, as it is critical in the years we have a 

drought, which are not uncommon in the semi-arid sorghum belt. 

If sorghum had to rank payments today, direct payments would be 

the most important. 

Most of the sorghum-growing region is in a semi-arid Great 

Plains region. Due to the extreme weather conditions of our area, 

our farmers are vulnerable to significant yield variations. Sorghum 

farmers support a well-funded and policed disaster provision that 

would supplement the limited safety net that crop insurance provides. Our first funding priority would be the current safety net, 

but if money was found, we would support a permanent disaster 

program. 

If the Committee decides to address crop insurance, the price 

election mechanism for the sorghum industry is in desperate need 

of reform. The manner in which RMA sets price elections on sorghum is antiquated and is does not accurately reflect current market realities. USDA has an easier job of setting prices for commodities that have a futures market and more importantly, the future 

market is a forward-looking price mechanism. But for sorghum, 

and commodities like sorghum, they are not traded on the futures 

market, which USDA is forced to rely on past markets. 

Once again, I appreciate the Committee’s interest in sorghum 

and look forward to working with you and would be happy to answer any questions. 

[The prepared statement of Mr. Shelor follows:]

PREPARED STATEMENT OF GREGORY SHELOR, PRESIDENT, KANSAS GRAIN SORGHUM

PRODUCERS ASSOCIATION; PAST PRESIDENT, NATIONAL SORGHUM PRODUCERS; 

FARMER, MINNEOLA, KS 

Introduction 

On behalf of the National Sorghum Producers, I would like to thank the House 

Committee on Agriculture for the opportunity to discuss the farm bill and its impact 

on the sorghum industry and my farm. 

My name is Greg Shelor, and I farm near Minneola, Kansas. I raise dryland sorghum, wheat, and I have cow-calf pairs on our grassland. My 1,700 acre cropping 

system is a wheat-sorghum-fallow rotation, which includes 250 acres of irrigated 

corn. My no-tillage practices enhance water conservation and prevent wind and 

water erosion. In addition, I have recently bought stock in the Dodge City, Kansas 

ethanol plant that will produce 110 million gallons of ethanol per year. I expect that 

half of the feedstock used will be sorghum. 

My written testimony will follow the titles of the farm bill. While the commodity 

title remains the most significant title to most sorghum farmers and this Subcommittee, the energy title and energy legislation are drawing an increasing 

amount of attention. 

Ethanol production is the fastest growing value-added market for the sorghum industry. Producers are working to attract ethanol plants to their areas because it can 

increase the local cash price. Sorghum is a good fit for ethanol production because 

one bushel of sorghum produces the same amount of ethanol as one bushel of corn. 

NSP endorses the Renewable Fuels Association’s energy title recommendations. 

I have historically marketed all of my sorghum production to a local hog farm for 

use in their feed ration. This past fall, all my sorghum went to an industrial starch 

processor which converts my sorghum into starch that is used to make wallboard. 

NSP represents U.S. sorghum producers nationwide our major responsibilities are 

to increase the profitability of sorghum producers through market development, research, education, and legislative representation. 

142

NSP is committed to work with the Committee and its staff as it works to reauthorize our nation’s farm laws. The organization and industry are supportive of the 

current farm bill. However, we believe that Congress can clarify several program 

details so that USDA interpretation does not impact producers’ ability to use sorghum in a profitable cropping system. 

A Brief Description of Sorghum 

I would like to give you a brief history of sorghum and outline for you some of 

the unique opportunities that we have in sorghum. Sorghum originated in Africa 

and continues to be a staple in the diet of many Africans. Benjamin Franklin first 

introduced sorghum to the United States in 1725. In the 1850s, the U.S. Government began introducing various forage varieties from China and Africa. 

This versatile crop is used both in human food systems and, primarily in the 

United States, as an animal feed and energy crop. It is currently a non-GMO crop 

though NSP supports work on moving new technologies into the crop. Industrially, 

sorghum, like corn, is valued for its starch content. A prime example of this is the 

ethanol industry, which can use both corn and sorghum interchangeably in ethanol 

production. Its co-product, distiller’s grain, is a valuable and widely accepted feed 

for both cattle feeders and dairies. 

Industry Overview 

The Great Plains states produce the largest volume of grain sorghum, but the 

crop is grown from California to North Carolina. According to the National Agricultural Statistics Service, last year sorghum was produced in many of the states that 

you represent. This includes North Carolina, Kansas, Georgia, Illinois, Texas, Oklahoma, South Dakota, Colorado, Nebraska, Missouri, Louisiana, Arkansas, Mississippi, and California. Over the past ten years, grain sorghum acreage has ranged 

from a high of 13.1 million acres in 1996 to a low of 6.5 million acres planted in 

2006. Annual production from the last 10 years has ranged from 795 million bushels 

to 360 million bushels, with an approximate value of 1.2 billion dollars annually. 

The creation of the Conservation Reserve Program in the 1985 Farm Bill had a 

significant impact on the sorghum industry. Today’s sorghum acreage is 1⁄3 of what 

it was prior to the 1985 Farm Bill. It is a goal of the industry to increase producer’s 

profitability and to take acres back closer to the pre-1985 Farm Bill level. NSP expects that returning acreage to that level will help ensure the infrastructure to supply the needs of the ethanol industry, livestock industry and export markets. The 

sorghum industry has submitted to USDA a national check off which will allow producers the opportunity to direct research funds towards their priorities. And, it will 

ensure research and development funding to continue to improve our crop. In addition, forage sorghum utilized as silage, hay and direct grazing represents approximately five million acres of production in addition to grain sorghum production. The 

USDA reported that in 2005, 311,000 acres of sorghum were harvested for silage, 

producing approximately 3.5 million tons of silage. 

The U.S. is the world’s chief exporter of grain sorghum, and the crop ranks fifth 

in size as a U.S. crop behind corn, soybeans, wheat, and cotton. Historically, roughly 

45% of the crop is exported. This represents approximately 80% of world market 

share in sorghum exports. Of the 55% of the crop that is not exported, 27% goes 

into pork, poultry, and cattle feed; 24% goes into ethanol production; 3% goes into 

industrial use; and 1% goes into the food chain. In fact, sorghum’s newest market 

is the exponentially growing ethanol industry. We have seen a 57 percent increase 

in that market over the last 2 years and expect it to grow even faster over the next 

12 months as we have over one billion gallons of ethanol capacity coming on line 

in the sorghum growing areas in the next 12 months. 

The growth of the ethanol industry in the sorghum belt has been phenomenal. For 

example, marketers tell us in western Kansas that the new plants under construction in my low basis area of our state will push the use of sorghum for ethanol production in our area to 50% of our 2007 grain sorghum production. Worldwide, approximately half of total production of grain sorghum is consumed directly as 

human food. In addition, the U.S. dominates world sorghum seed production with 

a billion dollar seed industry focused on 200,000 acres primarily in the Texas Panhandle. 

Sorghum is a unique, drought tolerant crop that is a vital component in cropping 

rotations for many U.S. farmers. 

Title I—Commodity Programs 

Sorghum producers like me have been strong supporters of the 2002 Farm Bill 

because it significantly improves the equitable treatment given sorghum producers 

relative to other feed grains. However, many of the county loan rates of the organization’s board of directors are still below the loan rates of other feed grains. 

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For example, in the two largest sorghum-producing states of Kansas and Texas, 

which produced 75% of the U.S. grain sorghum crop, only 33 of the 359 counties 

had loan rates equal to or above corn. In those 33 counties, the average sorghum 

loan rate was 3¢ per bushel over corn. In the other 326 counties, the average sorghum loan rate was 15¢ per bushel under corn. In an average loan rate situation, 

this difference costs a producer $10/acre (.15¢ × 70 bushels) and makes a difference 

in which crop he may chose to plant. Fortunately, I can sell sorghum today for double my county loan rate, but only last year this was a significant factor in my decision on which crop I grew even though my cash price for feed grains was within 

a couple of cents of equal. 

When a new farm bill replaces our current farm legislation, maintaining equitable 

direct payments and loan rates between all crops are high priorities. The direct payment is very important to growers like me as it is critical in the years we have a 

drought, which are not uncommon in the semi-arid sorghum belt. 

We also understand the cyclical nature of the farm economy, and it is a matter 

of time until prices drop. Therefore, the sorghum industry is asking for a safety net 

that is on par with other crops as a counter-cyclical type program. Most of the sorghum growing region is in the Great Plains region. Due to the extreme weather conditions of the area, our farms are vulnerable to significant yield variability. Sorghum farmers support a well funded and policed disaster provision that would supplement the limited safety net that crop insurance provides if funding is available. 

Also, if another new policy option, revenue assurance, becomes part of serious policy debate, then it will be important for Members of the Agriculture Committee to 

understand that the devil is in the details of how the program functions. For example, drought can impact the baseline period for the semi-arid sorghum belt. Seventy 

percent of a zero yield is still zero revenue—no matter how high the price. This 

method of delivering farm benefits must be closely studied and well funded at a 

local level for our producers to support it. 

Risk Management 

If the Committee decides to address crop insurance, the price election mechanism 

for the sorghum industry is in desperate need of reform. The manner in which RMA 

sets price elections in sorghum is antiquated and it does not accurately reflect current market realities. Corn is used as a base comparison since both are feed grains, 

and in the CRC Commodity Exchange Endorsement, RMA uses a percentage of the 

corn price election to set the sorghum price election. For reference, the MPCI price 

election for corn in 2006 was 2.5% higher than sorghum. The CRC price election 

for corn was 11% higher than sorghum. In 2007, RMA set price elections for sorghum at 94.3% of corn for MPCI and 94.4% of corn for CRC policies. This was after 

repeated attempts by NSP to encourage RMA to set them equal or above corn. 

NASS’ Agricultural Prices monthly publication has shown sorghum equal or above 

corn since May 2006. NASS valued sorghum 16% higher than corn in January 2007. 

WASDE also reported a $.10/bu higher price range for sorghum over corn in their 

last report. A crop insurance guarantee is a vital part of most farmers’ cash flow 

plans and makes a difference in the crop that is planted on that farm. Sorghum producers deserve a level playing field to compete with other crops. 

Title II—Conservation Policy 

Sorghum producers would be extremely anxious about switching from our current 

commodity based farm programs and farm policy to a completely conservation-based 

payment policy if that new program would be operated similar to the current administration of the current programs. Our membership is frustrated with the operation 

of the Conservation Security Program in many states. Only a few farmers have even 

been allowed to apply for conservation programs under the CSP program because 

of the limited geographical areas approved, and only a few of the applicants have 

been accepted. Often, advice from local NRCS officials on one simple question has 

been the difference between a farmer receiving a significant contract or nothing at 

all. That uncertainty is causing a lot of angst toward the program. 

Our members feel strongly that serious problems exist with the program. First, 

sorghum farmers consider sorghum a conservation crop because it uses less water, 

fertilizer and chemicals and works very well on marginal lands around the country. 

We believe that a ‘‘water-sipping’’ crop like sorghum should be a natural fit for the 

program. 

Our producers would ask that the new Conservation Security Program operate in 

a manner that allows them more flexibility in the tiers of the program they can participate. 

Conservation programs must be flexible enough to meet the diverse needs of different cropping systems and climatic conditions. 

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Water Use Is Increasing 

NSP applauds the 2002 Committee for giving serious consideration to the future 

of water supplies in the semi-arid regions of the Plains, a region highly dependent 

upon sorghum, by creating the Ground and Surface Water Conservation Program 

as part of the Environmental Quality Incentive Programs (EQIP). However, more 

can and must be done to conserve water in the country’s semi-arid agricultural producing region. NSP leadership believes that water quantity issues will continue to 

grow in importance and urgency as non-agricultural uses compete with agricultural 

uses in the sorghum belt. 

Sorghum is known as a ‘‘water-sipping’’ crop. According to research conducted at 

the USDA Agricultural Research Service facility in Bushland, Texas, sorghum uses 

approximately 1⁄3 less water than either corn or soybeans, and 15% less water than 

wheat. It is a crop that is adapted to semi-arid agricultural regions; that is, regions 

that may receive less than 20 inches of rain a year or in higher rainfall areas that 

have soils with poor water holding capabilities. Corn and soybeans, on the other 

hand, are primarily grown in areas that receive 30–40 inches of rain a year. Because of its excellent drought tolerance and varied uses, sorghum is a viable option 

for producers in the Plains states. 

Demand for water is increasing in the semi-arid regions of the U.S., especially for 

non-agricultural uses. NSP is concerned that the demand for water for both agriculture and non-agriculture use could create a climate of tension that is not productive for either group. Since 1985, five million acres of high water-use crops have replaced sorghum acres in the Plains states. A prime example of this is western Kansas, which has had serious drought for the last 7 years. Yet, irrigated acres for high 

water-use crops continue to increase. As a result, since 1985, western Kansas has 

lost 600,000 planted acres of irrigated sorghum. Sorghum producers in Kansas and 

in other sorghum states believe that this trend needs to be reversed. The following 

chart shows the decrease in sorghum acres and the increase in higher water-use 

crops (USDA, NASS 2003 data).

Increasing water demand for agricultural and non-agricultural use is also a global 

concern. According to the National Water Research Institute (NWRI), 25 percent of 

the world’s population will be facing a severe water shortage by 2025. However, the 

NRWI says that 50 percent of the increase in demand for water by 2025 can be met 

by increasing the effectiveness of irrigation and by growing more water-use efficient 

crops like sorghum. This projection shows that appropriate crop selection and conservation efforts can save water. 

Policy Changes 

We have some particular concerns that we would like to share with the Subcommittee in our efforts to strengthen Federal Government support for sorghum. 

Unfortunately, concentrating solely on improving irrigation technologies and inVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00148 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA

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creasing efficiencies does not necessarily translate into less water usage. NSP supports conservation programs that encourage planting of appropriate crops based on 

decisions that are environmentally sustainable and market driven. Overall, NSP believes that Congress and USDA need to emphasize water quantity, as part of water 

management, in both current and future conservation programs. 

How Much Water Can Be Saved? 

A Regional Water Plan prepared for the Texas Panhandle Water Planning Group 

in Amarillo, Texas, has found that the water savings over 50 years for 524,243 acres 

spread over 21 counties in the Texas Panhandle would amount to 7,360,000 acrefeet of water if irrigated corn acreage were converted to irrigated sorghum. On average, that’s 147,200 acre-feet saved per year. An acre-foot of water equals 325,850 

gallons, roughly enough to supply two, four-person homes with water for a year. 

Theoretically, this 50 year water savings would amount to 147,200 acre-feet per 

year, enough to supply water to 294,400 four-person homes in a year. For reference, 

the city of Austin, Texas, has 276,842 housing units and a population of 642,994, 

according to the U.S. Census Bureau. 

On a broader geographic basis, the economic impact of converting higher water 

use acreage in the semi-arid regions to grain sorghum could be astounding. As you 

can see, encouraging the production of crops that are suited for a given area can 

save an enormous amount of water. 

Current Water Situation 

Currently, agriculture uses approximately 95% of the water drawn from the 

Ogallala Aquifer. Towns and cities within the region have aggressively educated 

citizens and in some cases implemented new laws that are forcing homeowners and 

businesses to conserve water. According to NRCS’s National Water Management 

Center (NWMC), water use for irrigation has increased by 125% over the past fifty 

years. NWMC also found that some aquifers have been permanently damaged because the full recharge of depleted aquifers storage may not be possible where compaction has occurred. The sorghum belt remains in a long-term drought, and the 

water table continues to drop as ground water supplies dwindle. NSP encourages 

NWMC to proactively consider long-range planning that focuses on ground water, 

because agricultural and non-agricultural users are critically dependent on water. 

Because of these concerns, NSP encourages the Subcommittee to promote conservation programs that save water. We have members that tell the organization 

that they find that they use more total water as they increase the efficiencies of 

their existing irrigation and add more new irrigation systems. NSP views this as 

contrary to the goals of a program like the Ground and Surface Water Conservation 

Program, and contrary to the best interests of producers. We believe that the best 

way to conserve water is to lower the amount of water used within an agricultural 

system, not to just improve irrigation delivery technologies. 

Improving Current Programs 

NSP believes that EQIP and other conservation programs should be playing an 

integral part of a system-wide approach that encourages and rewards lower water 

consumption. For example, the program could encourage producers to change from 

an irrigated high water use crop that on average uses 30 inches of irrigated water 

from a center-pivot watering 125 acres, to dryland sorghum. This would save 3,750 

acre-inches of water a growing season. An incentive equal to the difference between 

irrigated land rental rates and dryland rental rates could entice farmers to make 

the conversion and help save water. 

NSP members are concerned that concentrating solely on the use of efficient irrigation technologies may actually lead to an increase in overall water use. NSP leadership believes that the main priority of conservation programs should be to provide 

incentives to farmers to recharge ground water by lowering water use. With that 

in mind, another significant water saving conversion would be the production of less 

water intensive crops on irrigated land. Using our center-pivot irrigation example 

previously mentioned, switching from a high use water crop to a water sipping crop 

saves over 912 acre inches of water a growing season. NSP members believe that 

an incentive to compensate farmers for changing to a less water intensive crop 

would result in significant water conservation. NSP urges NRCS to work with the 

local offices and state committees to accurately determine the appropriate payment 

rate for different regions of the U.S. 

Title IX—Energy 

Sorghum can, and does, play an important role as a feedstock in the renewable 

fuels industry. The sorghum industry fully supports the President’s call to greatly 

increase biofuel production. The sorghum industry believes that the Federal GovernVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00149 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA
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ment should provide significant research resources to the development of cuttingedge methodology for producing renewable biofuels. These technologies must be both 

economically competitive and feasible in order to meet the stated goal of reducing 

our ‘‘addiction’’ to fossil fuel by 2025. 

We believe that the starched-based ethanol industry will play an important role 

in the renewable fuels industry, even after the cellulosic or biomass technology is 

perfected. 

Background on Sorghum in the Ethanol Industry 

Currently, 2% of the domestically consumed grain sorghum crop is used by the 

ethanol industry to make ethanol, and the number is growing each month. That production provides a source of ethanol outside of the traditional Corn Belt and sorely 

needed rural development in the sorghum belt. Ethanol processing plants routinely 

mix corn and sorghum together in the production of ethanol. Expanding ethanol production outside of the traditional Corn Belt is a priority for the sorghum industry 

and we are working to ensure that the ethanol industry uses a local grown feedstock. Sorghum producers are working to expand their role in the renewable fuels 

industry. 

Biofuels production in the United States has been fairly limited to the use of grain 

for production of ethanol. Research efforts within the United States have focused on 

improving efficiencies of the use of grains through optimization of enzyme technologies and feedstock improvements. The USDA and the DOE have been investigating the use of biomass for production of biofuels. That research should translate 

into any crop that produces high biomass yields. 

Sorghum has a unique role in bioenergy since it can and does fit into all three 

schemes for production of biofuels: grain, sugar-based, and biomass feed stocks. Hybrid grain sorghum is routinely used as a grain feedstock in the U.S., sweet sorghum is used widely as a sugar feedstock in India and China, and the potential to 

produce high tonnage biomass from forage sorghum is well documented by the universities in the U.S.

Starch to Ethanol Production 

In the U.S., almost all of the current ethanol production is based on starch conversion, using primarily corn and sorghum grain, to produce ethanol. To the ethanol 

production process, starch is starch; it does not matter if the starch comes from corn 

or sorghum. Both starch sources yield identical amounts of ethanol from a bushel, 

and the distiller’s grain has almost identical nutritional value when it is fed to livestock with the only differences being that sorghum has slightly more protein and 

corn has slightly more fat. 

Sweet Sorghum Conversion to Ethanol 

Most Americans know of sweet sorghum as the type that is used to make syrup 

or molasses. In addition, it is also used worldwide in the production of ethanol. 

India and China are producing ethanol from sweet sorghum. DOE is currently supporting a sweet sorghum pilot study in Florida to explore the potential of sweet sorghums as a feedstock for ethanol production. 

Under current systems, the sweet sorghum is harvested, and then the stems are 

crushed and juice extracted at a mill. Some harvesters, though not economically viable at this time, are being developed to extract the juice in one operation and leave 

the residue in the field to be gathered at a later time. Once the juice is extracted, 

it is fermented and ethanol is produced. This ethanol is then distilled and dehydrated using the same equipment that is being used in ethanol production from 

starch sources. NSP strongly supports research funding and loan guarantees to inVerDate 0ct 09 2002 13:26 Apr 27, 2009 Jkt 041481 PO 00000 Frm 00150 Fmt 6633 Sfmt 6621 I:\DOCS\110-09\36464.TXT SOLEM PsN: REBEKA

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sure that sweet sorghum to ethanol can become another component of the U.S. ethanol industry. 

Forage Sorghum’s Role in Biomass 

Forage sorghums can play a significant role in both cellulosic and lignocellulosic 

technologies that produce ethanol from biomass. Biomass production is based on utilizing the whole plant (or other organic waste) by breaking down most of the plant’s 

major biological components to produce ethanol. In most cases, tons per acre of convertible biomass would drive the feedstock equation in the conversion to ethanol. 

The Federal Government has been conducting research on the role of switchgrass 

in biomass production. Switchgrass and sorghum are both from the family Poaceae 

and probably diverged from each other sometime before the divergence between sorghum and corn. Switchgrass is a perennial plant that can spread by both seed and 

rhizomes. Though sorghum is thought to be primarily an annual plant, there are 

related species that are also rhizomatous and perennial. Both plants have open 

panicles and can be tall and very leafy. But just as importantly, forage sorghums 

have a significantly better water use efficiency. It is important not to limit biomass 

feedstocks to perennial plants. 

DOE has indicated the need and desire to include sorghum in its analysis of ethanol feedstocks. Basic compositional data analysis as well as research regarding cellulosic conversion of various feedstocks is needed. Limiting factors should be studied 

in regard to biomass-to-ethanol output. For example, Brown midrib (BMR) sorghums may increase ethanol output. We believe that utilizing sweet sorghums in 

the next logical step to moving ethanol efficiency forward. China and India have 

well-established technology and the U.S. should be able to ramp up production to 

make the U.S. more energy independent. Biomass-to-ethanol production would then 

be the next step. 

NSP supports the Renewable Fuels Association’s farm bill energy title recommendations. Theses include refocusing the CCC Bioenergy Program to incentivize 

cellulosic and biomass feedstocks for ethanol production and energy production of 

ethanol plants; developing pilot and demonstration programs to familiarize growers 

with new cellulosic crops, including harvesting, transportation and storage issues; 

studying the concept of a ‘‘transitional assistance’’ program to assist farmers in the 

adoption of cellulosic crops; establishing a loan guarantee program for cellulosic energy projects, particularly in rural areas; revising the BioPreferred Program to facilitate a timely implementation of this market development program, allow feedstocks (intermediaries) to be designated as biobased products, and implement the 

labeling program; developing a workforce education program for biofuels technology 

at land grant universities and biofuels research and testing centers; increasing research for better utilization of distillers grains for use by the livestock industry; and 

industry-focused cellulosic ethanol research and development on industry, and a 

commercialization-focused structure for funding. 

Conclusion 

The Committee has a big challenge on your hands rewriting our Nation’s farm 

laws and I expect that farm policy in the next 5 years will look significantly different than it does today because of efforts to cut the deficit while meeting needs 

for domestically-produced, renewable energy in the U.S. My industry looks forward 

to working with you during these efforts. Again, thank you for your interest in sorghum.

The CHAIRMAN. Thank you, sir. I yield myself 5 minutes. Mr. 

Shelor and Mr. Mitchell, for both of you, in reading your testimony, 

I don’t think either of you mentioned the Administration’s means 

test and proposal of the $200,000 adjusted gross income cap for 

farm programs, or other proposals that tend to lower payment limits for the three types of program payments. And my question to 

you is, what does your organization feel on both of these proposals 

in the context of both keeping farm payments exactly where they 

are—okay, as we do them now—or assuming that the Congress 

were to accept the recommendations that you have recommended 

and adopt that for the next farm bill? 

Mr. MITCHELL. Well, as far as the means testing, the level that 

is set sets us up for a very dangerous situation, in that we would 

exclude many of our largest producers. Those producers would no 

148

longer have a reason to be in conservation compliance, therefore it 

may be a negative environmental move on the part of the Administration with the farm bill. As far as the three-entity rule——

The CHAIRMAN. So you are for it or against it? 

Mr. MITCHELL. We would be against it——

The CHAIRMAN. Okay. 

Mr. MITCHELL.—going there because of the exclusion of some of 

the larger producers from the environmental protections that are 

afforded in the farm bill. We do think there should be some limits 

as far as the three-entity rule. Until we can get a better farm bill, 

something similar to what we have proposed where, quite frankly, 

if there aren’t payments, we don’t have to worry about payment 

limitations. We probably need to retain that three-entity rule. 

Mr. SHELOR. Our current policy now is to agree with what we 

have now and see no changes. 

The CHAIRMAN. All right. Thank you. Mr. Mitchell, if you want 

marketing loan program rates to be equal to the full cost of production, can you show us any ideas numerically what the loan rates 

would be for major commodities? By that I mean, does full cost 

mean variable cost or are you including fixed cost in that as well? 

We understand that you have a variable cost and then you have 

a fixed cost, and would these rates be exactly the same for everyone or would there be a variation for different parts of the country, 

because you can obviously expect different places in the country 

where you have irrigation, otherwise it would be different. 

Mr. MITCHELL. Well, what we are talking about is a nonrecourse 

loan as opposed to a marketing loan and we are talking about the 

full cost of production, which has actually been proposed as the target price by a couple of other organizations here today. In fact, 

finding that full cost of production can be a bit elusive, it depends 

on who you look at and I would recommend this Committee consider a hearing and bring in several of the land-grant universities 

to determine how they are calculating that full cost of production. 

You second question was? 

The CHAIRMAN. Were you recommending that it be the same for 

everyone or would it be regional? 

Mr. MITCHELL. Well, no. Of course, that would be that we would 

still need to go back to that adjustment so that the weighted average would come back to that national loan rate. 

The CHAIRMAN. Okay, thank you. Now for my final question. Mr. 

Hayes and Mr. Evans, let me ask the question a little differently 

for the farmers that you represent, as it relates to payment limits 

and others. Would that have an impact on the number of farmers 

that you think would be engaged in the conservation programs, 

taking advantage—under the proposed $200,000 limit? 

Mr. HAYES. You know, I don’t know how to respond to that as 

far as conservation is concerned. I can tell you that we are opposed 

to the——

The CHAIRMAN. Okay. Okay, that will do it. 

Mr. EVANS. I would say the same thing, that the Council is opposed to the payment limitation. 

The CHAIRMAN. Okay, thank you, sir. I now yield to the gentleman from Kansas, Mr. Moran. 

149

Mr. MORAN. Mr. Chairman, thank you very much. Mr. Mitchell, 

thank you for your opening comments about FSA office closures. 

We are undergoing the same thing that many other states are and 

I absolutely think that. In fact, earlier this week, I asked Mr. Peterson to have a hearing in the full Agriculture Committee on the 

issue of the failures, current failures, of our IT technical and computer systems and my guess is that the potential there for catastrophic problems for farmers across the country is just huge, as 

Mr. Etheridge says, but perhaps around the corner, and I find it 

interesting that we are disconcerting. I find it discouraging that we 

are focusing such a tremendous effort on trying to figure out how 

to eliminate offices across Kansas and across the country as compared to focusing on what I think is a much larger problem that 

USDA faces. And I visited with Ms. Herseth about her bill and we 

will take a look at that. But thank you for raising that topic and 

it is one that we really need to force USDA to address. 

Mr. Shelor, I asked the panel, the first panel, earlier about, can 

you segregate and segment the crop commodities and treat them 

differently as far as loan rates and LDP, counter-cyclical and direct 

payments? Each commodity has a slightly different version of what 

they are looking for in the next farm bill and I didn’t get an answer. I am going to follow up and ask them to answer my question 

in writing. But any reaction to that? Is this an opportunity for us 

to treat commodities differently or the way people farm? Would 

that be a mistake? 

Mr. SHELOR. Well, it probably could be a mistake, but you know, 

as long as they are equitable, so that a producer isn’t out there trying to make decisions on the farm bill, what is best for him, and 

it is market driven. You know, I think it would be best for producers. 

Mr. MORAN. In a state like ours, in which there is a lot of diversity and program crops, a farmer has a significant number of options, depending upon price, the farm bill and weather conditions, 

to make decisions about what crop to raise. What do you see going 

on today in regard to decisions being made based upon provisions 

of the farm bill, the commodity title? 

Mr. SHELOR. Well, it is still back there even though we have 

higher cash prices and we are looking forward; and hopefully we 

don’t utilize the loan rates and LDPs and stuff. But as we all know, 

the reality is that someday we will be using them again and like 

has been mentioned before, when you go to the banker, you have 

done a cash flow and stuff. You have to have that minimum price 

in there and it is really important to know that that safety net is 

there between different crops. 

Mr. MORAN. You and your farming operation, can you give me 

examples of where decisions are made based upon the farm bill as 

compared to what would make more sense from a marketing or 

weather point of view? 

Mr. SHELOR. Well, if you just look at the safety net, if you have 

a crop that has lower prices and you are not guaranteed as good 

a return, you are not going to be inclined to produce that crop. 

Mr. MORAN. Mr. Shelor, I want to give you the opportunity. I 

was trying to give you the opportunity to point out how, in sorghum, decisions are being made based upon that imbalance that 

150

you described, and I assume you could tell us that is going on in 

your farming operation or your neighbors or across the country, 

that people are not growing grain sorghum because of current provisions of the 2002 Farm Bill. Is that true? 

Mr. SHELOR. Well, that is correct, because of the lower loan rates 

and then even the price election on crop insurance has the same 

problem, too. So that affects——

Mr. MORAN. So in addition to the program payments, crop insurance discourages the growing of grain sorghum? 

Mr. SHELOR. Extremely, yes. 

Mr. MORAN. Because? 

Mr. SHELOR. Because it is a lower price election, because of the 

way they figure the price going over the past history and not looking forward to future prices. 

Mr. MORAN. And my assumption is that your bankers at least attempt to make many decisions for you and other farmers as to 

what crops are grown? 

Mr. SHELOR. Well, they don’t necessarily do that, but they do 

have a smile on their face if you can show them a return. 

Mr. MORAN. I can understand that. Mr. Evans, let me address 

you. These are crops I am less familiar with and I am interested 

in knowing what we did in the 2002 Farm Bill, which I thought 

and you indicate in your testimony that pulse crops entered the 

farm program family in 2002, but I was uncertain, in listening to 

your testimony, as to what is still missing in 2007. What did we 

fail to do that would be beneficial to your segment of agriculture? 

Mr. EVANS. Well, as I said in my testimony, we just want to be 

treated equally with all other commodity crops and wheat has a direct payment. It has a counter-cyclical payment. I realize that they 

didn’t get to use them and it works that way. But I mean, we just 

want to be like everybody else. 

Mr. MORAN. And again, give me the instances in which you are 

not like everybody else. You don’t have a direct payment? 

Mr. EVANS. Yes. 

Mr. MORAN. What else? 

Mr. EVANS. What is that? 

Mr. MORAN. What else? 

Mr. EVANS. Oh, and a counter-cyclical payment. I mean, I don’t 

know whether we get it. I mean, I hope the prices stay up and we 

don’t need it. 

Mr. MORAN. But you don’t have the opportunity for a countercyclical? 

Mr. EVANS. We don’t have the opportunity. 

Mr. MORAN. And so when you entered the farm family, I have 

to choose my words carefully, you are not a full-fledged member of 

the family? 

Mr. EVANS. No, we got to sit at the big table, but we haven’t got 

fed yet. 

Mr. MORAN. And then the restrictions. That is a good description. 

You are at the TV tray. The prohibition on program acres. 

Mr. EVANS. Yes? 

Mr. MORAN. You are prohibited from growing your crops on program acres? 

Mr. EVANS. Just chickpeas. 

151

Mr. MORAN. Just chickpeas. 

Mr. EVANS. In the 1996 Freedom to Farm Act, our organization 

put the wording into the bill to have an exclusion for peas and lentils. We weren’t able to get it at that time for chickpeas. 

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

The CHAIRMAN. Thank you. The gentleman from Georgia for 5 

minutes. 

Mr. MARSHALL. Thank you, Mr. Chairman and Mr. Moran. I will 

be pleased to let Mr. Pomeroy know that you are now occupying 

his role in the Committee and running over your 5 minute block 

of time. 

Mr. MORAN. In the old days, I had the ability to do that. 

Mr. MARSHALL. Chairman Peterson is very high on sweet sorghum as an energy source and thinks that, in fact, things are going 

to look up pretty quickly where sorghum is concerned. He even 

thinks we will be growing sorghum in Georgia. I am not really familiar enough with the science and the opportunity there, but you 

know, maybe you will be representing a lot more acreage here 

shortly. 

Mr. Mitchell, I principally have questions for you. It is the same 

question that I asked. I guess you corn guys are the troublemakers 

in the group here. I asked Mr. McCauley and you heard me ask 

the question. The question is, you have a proposal that is a little 

different than what is being advocated by most of the other commodities and this has been around now for a couple of years, 2 or 

3 years. It is based on the University of Tennessee work. And so 

there has been a debate and that debate probably in your mind has 

crystallized into a few very narrow points, major points, differences 

of opinion here, and could you quickly summarize that for me? 

What do others say is the real weakness in your proposal and what 

is your response to that? 

Mr. MITCHELL. Well, I will do my best. The three legs of what 

we are talking about is to go back to a support price as opposed 

to a subsidy, and I know a lot of times I have to explain this to 

urban audiences as well. Many times the analogy we use is the difference between a support and a subsidy is the difference between 

who pays the money; does the government pay the money or does 

the user pay the money? In this case, we are looking also at the 

difference between, say, minimum wage and food stamps. And you 

know, this has been debated recently by this body, about the minimum wage. You don’t have to be a rocket scientist to figure out 

that you can raise the minimum wage and help reduce the cost of 

food stamps. We are talking about raising the minimum wage for 

farmers to establish a floor price so that we don’t have to deal with 

the subsidies. 

Mr. MARSHALL. I understand that. Have you done an analysis 

and concluded that this is just politically not going to happen and 

so that is your position, but you are really not going to push it because you don’t think it will happen? 

Mr. MITCHELL. No, not at all. I think, given the budget constraints that you are going to have to deal with this year, this is 

probably your best option. 

Mr. MARSHALL. The other objections to your proposal? 

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Mr. MITCHELL. Well, I think some of the objections that have 

been proven false before is that we have priced ourselves out of the 

market by using such a program. Well, to be quite honest, we have 

dropped the price of most of our commodities fairly dramatically 

over the last 25 or 30 years. In fact, adjusted for inflation, corn 

prices, until this recent rebound, had been reduced by 80 percent 

over the last 25 years, the time period that we saw grocery prices 

increase by 300 percent, but our exports still remain static. In fact, 

they are worse than static. We continue to export just above or just 

below two billion bushels, but that used to be two billion bushels 

of a seven or eight billion bushel crop. Now it is two billion bushels 

of an 11 billion bushel crop. So as a percentage of our crop, we are 

exporting much less, even with these lower prices. So I think we 

have proven that the myth that the recourse loan prices us out of 

the marketplace has been disproven. 

Mr. MARSHALL. You would obtain these prices not by controlling 

supply, and you would obtain those prices by going ahead and saying this is what people are going to have to pay for the different 

commodities? 

Mr. MITCHELL. For the most part. I mean, this was the cornerstone of the farm programs that started in the 1930s, and without 

going through all of that history, but I will say that we do need 

to determine a way of managing overproduction. One of those ways 

we see, I don’t think we will ever go back to the ARPs of the past, 

the acreage reduction programs, but if we can give farmers incentives to plant dedicated energy crops in place of some of these crops 

we have been overproducing, I think it would work over the next 

50 years similar to what soybeans have done for us over the past 

50. 

Mr. MARSHALL. If I could interrupt. I am going to run out of time 

here. I have just an observation. I do think things look up in ag 

because of the fact that we are going to be using a lot of acreage 

for energy production, assuming we continue heading in the direction we are heading right now. One of the things that worries me, 

though, is if you poll this, public support for, at least in the Southeast, as far as I can determine, public support for ag, for farmers, 

for family farmers, just isn’t there and it would be very nice if 

there were some way we could come up with a farm program that 

increased public support. As it diminishes, it becomes politically 

more difficult to do some of the things that we need to do. I see 

my time has expired. 

The CHAIRMAN. I thank the gentleman. Let me thank each of you 

for your testimony and your for your time this morning. You have 

been very helpful and certainly will be helpful to us as we struggle 

through the challenge we face of getting a new farm bill to our 

farmers, that is really for America, because not only are we keeping people on the land, more importantly, we are feeding people in 

this country and a lot of folks around the world. With that, let me 

thank you and turn to the gentleman from Kansas for any closing 

comments he might have. 

Mr. MORAN. Mr. Chairman, thank you very much and I appreciate the fact that you have called these witnesses to give us the 

testimony that we have heard today. It is very useful and I appreciate their presence in Washington, D.C., to help us in this regard. 

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I especially appreciate Mr. Shelor, a constituent of mine, for making the trip from Kansas to Washington, D.C. I am grateful that 

we had such good testimony and appreciate the role that grain sorghum plays in our state. We are the number one grain sorghum 

producing state in the country and we often talk about corn as the 

ethanol provider, the input. Mr. Shelor raises a product that can 

be very helpful to our country in meeting its energy needs. Thank 

you, Mr. Chairman. 

The CHAIRMAN. Thank you. And I might say that a lot of sorghum we grow in a lot of places, we are going to use that as a feedstock for energy. So let me thank you. But before we adjourn, 

under the rules of the Committee, the record of today’s hearing will 

remain open for 10 days to receive additional material and supplementary written responses from witnesses to any question posed by 

a Member of the panel. This hearing of the Subcommittee on General Farm Commodities and Risk Management is adjourned. 

[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:]

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155

SUBMITTED QUESTIONS

Responses from John E. Pucheu, Jr., Chairman, National Cotton Council of 

America; Partner, Pucheu Brothers Ranch, Tranquility, CA 

Questions Submitted By Hon. Bob Etheridge, a Representative in Congress from 

North Carolina 

Question 1. You call for competitiveness assistance to be provided to U.S. mills 

for every pound of cotton they consume and believe such a program would have very 

low costs. Can such a program be created that is compliant with our WTO obligations, and exactly how low do you envision these costs being? 

Answer. The National Cotton Council and the National Council of Textile Organizations support inclusion of a provision in the new farm law that would provide a 

payment of 4¢/lb. on every pound of raw upland cotton fiber spun into yarn in U.S. 

based yarn manufacturing plants. By providing the benefit on all cotton consumed, 

the provision would not violate the national treatment provision of the WTO. The 

proposal is based on the average value of the payments made under the cotton competitiveness provision prior to its termination, effective August 1, 2006. The U.S. 

textile industry, which is a critically important market for U.S. farmers, continues 

to struggle for survival in the face of increasing imports, especially from China 

where mills receive significant subsidies in the form of no-cost loans, currency 

undervaluation, subsidized utility, land and shipping costs, export tax rebates and 

other direct and indirect subsidies. Unfortunately, the proposed fiber competitiveness program will not restore lost production capacity but mills will reinvest the 

benefits, preserving a market for U.S. cotton and U.S. jobs. Given the continued decline in cotton consumption by U.S. based mills, the provision can be expected to 

have relatively low cost over the life of a new farm bill and should be reviewed when 

the new law expires.

Question 2. I note you support continuation of the extra-long staple cotton program. Please explain the provisions of the program and why having a separate program for ELS in important to California and to the rest of the cotton producing 

states. Also, am I correct that the ELS program was not referenced in the case 

Brazil filed with the WTO? 

Answer. The extra-long staple cotton program has provided an effective, low-cost 

safety net for U.S. producers. The provisions of the ELS program, which include a 

nonrecourse loan and competitiveness provision, were not part of the WTO case. 

While ELS cotton can and has historically been produced in West Texas, New Mexico, Arizona and California, the production is currently concentrated in California’s 

San Joaquin Valley. ELS producers have successfully initiated a successful self-help 

promotion program and have established markets for their premium cotton, both domestically and internationally. The ELS program combined with cropping flexibility 

provisions allows producers to respond to market signals. In the absence of an effective ELS program and cropping flexibility provisions, farmers in the irrigated West 

would not have the option of planting ELS and would be forced to plant upland regardless of market signals.

Question 3. You have express concern about the limitations on program benefits, 

eligibility requirements and the Administration’s proposed modifications to the existing AGI test. How do these proposals impact California and other highly productive irrigated areas? 

Answer. Limitations on program benefits have a disproportionate impact on producers of high value crops and particularly producers in irrigated areas with high 

productivity per acre. Since current and proposed limitations are expressed in dollars, the limits cover significantly fewer acres for a highly productive irrigated operator than a dry land operation. For example, the $75,000 limitation on loan deficiency payments at today’s cotton price of 43¢/lb. would cover about 575 acres in 

California compared to 1,070 acres in Texas. The limits cover even more acreage in 

the Midwest causing the impacts to fall disproportionately on irrigated operators 

producing high value crops including cotton, rice and peanuts. Since the limitation 

is applied cumulatively for all crops, if the cotton producer also has rice or other 

program crops, the limit would restrict benefits to even fewer acres. The limits can 

impact financing and marketing decisions in a way that undermines the cropping 

flexibility provisions. For example, if limitations or eligibility were further restricted, producers would have to shift to specialty crops—many of which have very 

fragile markets which would be severely damaged by over-production. The Administration’s proposal to deny all benefits to individuals with adjusted gross incomes 

that exceed $200,000 would be particularly penal in the West where high value specialty crops can generate high income on relatively small production in years when 

favorable market conditions exist.

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Question 4. Can or should each commodity have its own program that is dissimilar in structure from the others or should we maintain a uniform structure for 

the safety net for all program crops. 

Answer. Since most operators can chose to produce various crops, it is important 

for the structure of farm programs to be uniform and for there to be a balance between programs so producers can respond to market signals rather than program 

benefits. However, because markets are different, it is necessary for programs to be 

tailored to individual crops. For example, the cotton marketing loan is based on an 

adjusted world price that is based on actual market price data available to USDA. 

The industry supports this method of calculating the weekly world price because reliable data are readily available. The marketing loan for grains and oilseeds is based 

on county posted prices, which are not relevant for cotton. 

Responses from Ken McCauley, President, National Corn Growers Association; Corn and Soybean Farmer, White Cloud, KS 

Questions Submitted By Hon. Bob Etheridge, a Representative in Congress from 

North Carolina 

Question 1. If the only way we could implement an RCCP would be for corn only, 

and all the other crops would have their programs remain the same, would that be 

acceptable or are there disadvantages to corn if you go it alone on this? 

Answer. NCGA’s analysis indicates our proposed revenue based counter-cyclical 

program, integrated with the Federal crop insurance program, will provide much 

greater income protection for corn, soybeans, wheat and sorghum compared to the 

current farm support programs. Although we believe U.S. agriculture would be 

much better served by a shift to a revenue based safety net, there is no reason why 

corn could not go it alone except for the fact that some budget offsets are lost from 

the other commodity support programs remaining the same. Moreover, we do not 

anticipate any problems with planting decisions based on the different structures 

between the existing price base programs and our proposed. Revenue-based safety 

net.

Question 2. Does the current marketing loan program have to become a recourse 

loan in order for the RCCP to work or can the RCCP work with the current program? 

Answer. NCGA believes the RCCP, particularly with a higher price floor than the 

current loan rate, eliminates the need for a nonrecourse loan. Should Congress decide to keep the nonrecourse loan program, then it would be very important for the 

harvest price that determines the RCCP Actual County Revenue to not fall below 

the loan rate. However, NCGA has yet to evaluate the projected costs of the National Farm Security Act proposal with a nonrecourse loan. 

Response from Peter D. ‘‘Dan’’ Gertson, Jr., Chairman, U.S. Rice Producers 

Association; Rice Farmer, Lissie, TX; on Behalf of USA Rice Federation 

Question Submitted By Hon. Bob Etheridge, a Representative in Congress from 

North Carolina 

Question. Can or should each commodity have its own program that is dissimilar 

in structure from the others or should we maintain a uniform structure for the safety net for all program crops? 

Answer. First, with regard to program crops below we are referring to those ‘‘covered commodities’’ under title I of the farm bill. We believe the overall general structure of the safety net should remain the same for each program crop, however it 

is important to note that currently there are distinct differences in the programs 

for some crops and in how the programs operate. For instance, the nonrecourse marketing loan program for rice and cotton uses a ‘‘world price’’ for determining the 

loan repayment rate or loan deficiency payment, while the marketing loan program 

for most other crops uses a domestic posted county price for this determination. 

While we believe it is important for the overall structure of the programs to be similar, it is also important that such key distinctions are recognized and continue to 

remain in place given the the different market dynamics for different crops. We are 

very concerned that, should programs differ too substantially from one crop to another, the differences could interfere with production decisions and effectively impede planting flexibility, especially if such changes work to the detriment of particular commodities or growing regions. A program for a particular crop should provide a meaningful safety net for all regions of the country and all producers who 

select to grow that crop. 

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Response from Richard Ostlie, President, American Soybean Association, 

Northwood, ND 

Question Submitted By Jerry Moran, a Representative in Congress from Kansas 

Question. Can or should each commodity have its own program that is dissimilar 

in structure from the others or should we maintain a uniform structure for the safety net for all program crops? 

Answer. ASA and other oilseed organizations strongly support maintaining a uniform structure for all program crops. We supported the decision to establish direct 

and counter-cyclical payment programs for oilseeds in the 2002 Farm Bill, although 

we objected at the time to the levels of oilseed supports relative to other crops. We 

continue to support maintaining the current structure, while adjusting support levels to eliminate planting distortions and to provide an adequate safety net to all producers for all crops. 

The marketing loan program can seriously distort planting decisions if prices for 

crops that compete for acres are expected to be near or below loan levels and the 

loan rates themselves do not reflect the relative market prices of their commodities. 

Inequitable target prices can also indirectly distort planting decisions. Inequitable 

target prices make it less likely for a low target price crop to be planted on a high 

target price crop’s base acres because the expected ‘‘market returns’’ of the low target price crop must be higher than both the ‘‘target price returns’’ and ‘‘market returns’’ of the high target price crop. And since farming is inherently risky, producers 

and lenders will seek to reduce risk wherever they can, even to the point of continuing to plant a crop with a higher effective target price on that crop’s base acres 

when a low target price crop’s market price sends signals to the contrary. Also, even 

though base acre updates are said to be unlikely in new farm legislation, producers 

will continue to take that possibility into account and factor in inequitable target 

prices when making planting decisions. 

Direct payments are income transfers, and have little impact on planting decisions. 

As indicated in my testimony, ASA is proposing to adjust target prices and marketing loan rates to ensure producers of all crops an adequate safety net against 

low prices, and to reduce the planting distortions caused by current inequitable loan 

levels and target prices. This proposal is intended to make the current structure of 

the 2002 Farm Bill work more successfully. Providing different programs for different commodities would make it more difficult to provide equitable support, and 

could have serious unintended consequences for production of the various program 

crops. 

Response from John C. Thaemert, President, National Association of Wheat 

Growers; Owner/Operator, JT Farms, Inc., Sylvan Grove, KS 

Questions Submitted By Hon. Bob Etheridge, a Representative in Congress from 

North Carolina 

Question 1. You mention in your testimony your organization’s support for creating a separate market classification for Hard White Wheat. Can you elaborate on 

that; what do you envision and why is it necessary? 

Answer. Hard White Wheat is a new wheat class needed in the U.S. export market basket to compete with U.S. competitors in world markets that are cutting into 

U.S. export market share. U.S. domestic industry also uses and needs Hard White 

Wheat to optimize consumer interest in healthy, 100% whole wheat products. Currently, under the marketing loan program Hard White Wheat does not have its own 

classification and instead continues to mimic Hard Red Winter. As market share begins to increase and the industry strives to achieve a critical mass, we believe it 

is necessary for Hard White Wheat to be able to stand on its own, which means 

treating it as a separate class, similar to Soft White Wheat, Hard Red Spring, Hard 

Red Winter etc.

Question 2. Is there a need to continue the White Wheat Incentive Program that 

was funded in the 2002 Farm Bill? 

Answer. We believe there is a need for creating a new Hard White Wheat Development program to incorporate all segments of the industry. Hard White Wheat has 

continued, since enactment of the 2002 Farm Bill, to gain some market share, and 

plantings in some areas have increased. However, lack of available infrastructure, 

lack of knowledge and lack of disease resistance have hurt the industry. While we 

believe there is a need for a Hard White Wheat Development program to help gain 

critical mass, we believe a new program should be developed to ensure that HW can 

be successfully marketing throughout the entire wheat supply chain; addressing the 

needs of researchers, seed producers, grain producers, and marketers. The U.S. 

Wheat Associates Hard White Wheat Committee has developed a draft concept 

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paper (attached) that explains the needs of the industry and their visions for a new 

incentive program in the next farm bill. 

Question Submitted By Jerry Moran, a Representative in Congress From Kansas 

Question. Can or should each commodity have its own program that is dissimilar 

in structure from the others or should we maintain a uniform structure for the safety net for all program crops. 

Answer. We believe that the agronomics of each commodity are different and that 

in many cases, different growers may have different needs in a safety net. Therefore 

there should not be a ‘‘one-size’’ fit all approach to farm policy. Wheat growers 

strongly believe in the current structure of the 2002 Farm Bill, but urge Congress 

to put a greater emphasis on the direct payment for wheat growers, and adjust target prices to reflect historic cost of production. We understand that other commodity 

growers have different needs and ideas about their safety net, and believe, when 

working within the structure of the 2002 bill, adjustments should be made to programs based on each commodities needs. 

ATTACHMENT

U.S. Wheat Associates Hard White Wheat Committee 

(Draft) Concept Paper

Hard White Wheat Development Program

January 21, 2007

THESE ARE THE GOALS OF THE CONCEPT

• Establish HW wheat as a viable U.S. market class.

• HW is widely used in U.S. domestic and export markets.

• 240 million bushels is a minimum amount that would create a sustainable, critical mass that would supply the market with a year round supply.

• Create this critical mass by the summer of 2011.

• Concept IV is a 4 year, $35 million program.

SEVEN COMPONENTS OF THE PROGRAM

1. National coordinated and regionally managed program.

2. Research—Assistance to wheat breeding programs for new white wheat variety development to ensure reaching critical mass.

3. Access U.S. Government human feeding programs and export food aid assistance.

4. Domestic and export market development.

5. Access appropriate rural economic development programs.

6. Support to producers to ramp up ‘‘critical mass’’ hard white wheat production.

7. Assistance to first purchasers in coordination with NGFA.

National coordinated and regionally managed program

• Program nationally managed with the cooperative efforts of NAWG, U.S. Wheat 

and National Grain and Feed Association.

• Regions would be defined as ‘‘Great Plains’’ (KS, CO, NE, OK, TX, WY); ‘‘Northern Plains and the PNW’’ (MT, ND, SD, ID, OR, WA); ‘‘California’’; and other.

• Coordinator for each defined region at a maximum cost of $125,000 per coordinator, per year. Coordinators are accountable to regional HWWDP committees 

composed of representatives from wheat commissions, first purchasers, seed 

dealers, wheat researchers, transporters and buyer-users and others as deemed 

appropriate with USDA oversight.

Research

• $1 million disbursed annually for wheat variety research and other research as 

determined by HWWDP Committee. Funds divided based on regional HW 

wheat production and as appropriated by HWWDP regional committees.

U.S. Government human aid programs

• Develop access to human food programs such as school nutrition programs, military procurement, correctional facilities and export food aid programs.

Domestic and Export Market development programs

• Commercial samples, sample testing and sampling transportation to potential 

domestic and foreign customers as determined by the HWWDP regional committees.

• Related promotions and promotional materials.

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• HW wheat trade development teams.

• Training and consultation programs to assist customers in optimizing the value 

of HW wheat.

• Estimated at $250,000 per year, divided based on regional HW wheat production and as appropriated by HWWDP regional committees.

USDA Rural economic development programs

• Access appropriate USDA rural economic development programs.

Support to producers

• To qualify for the following certified seed purchase rebates, a producer must 

buy certified seed of a state sanctioned approved variety rated superior or better 

on quality.

• A $5 per acre seed rebate to be paid to the producer for certified HW wheat 

seed purchases, capped as following:

• Great Plains region ( KS, CO, NE, OK, TX, WY)

» Fall of 07; 350,000 acres certified seed

» Fall of 08; 400,000 acres certified seed

» Fall of 09; 450,000 acres certified seed

» Fall of 10; 300,000 acres certified seed

• Northern Plains and The PNW (MT, ND, SD, ID, OR, WA)

» Fall of 07; 150,000 acres certified seed

» Fall of 08; 200,000 acres certified seed

» Fall of 09; 250,000 acres certified seed

» Fall of 10; 200,000 acres certified seed

• California

» Fall of 07; 100,000 acres certified seed

» Fall of 08; 150,000 acres certified seed

» Fall of 09; 200,000 acres certified seed

» Fall of 10; 150,000 acres certified seed

• Other—To be determined

• Estimated cost of seed rebate in first 4 years on 2.9 million aggregate acres = 

$14.5 million. This proposal does not include any rebate money for certified seed 

after 4 years.

• The goal of this is to make sure that HW wheat seed is available to the producer at a significant savings.

Assistance to first purchasers

• A rebate of 2.5¢ per bushel will be effective in bringing in the grain handler.

• For the first 3 years of the program, certain quality parameters should be met, 

including #2 or better grade, minimum 13.5 protein for a spring wheat variety, 

a minimum of 11.5 protein for a winter wheat variety, minimum 300 falling 

numbers. Quality based on settlement sheets. ‘‘Milling quality’’ is the goal.

• Handling Rebates are paid at $10,000 for every 500,000 bushels purchased, 

with an additional $5,000 bonus at each millionth bushel

• Handling rebates will be paid to the initial purchaser, based on settlement 

sheets.

• The handler will be responsible for selling the wheat.

» Summer of 08; 58 MILLION BU = $1.45 million rebate potential

» Summer of 09; 98 MILLION BU = $2.45 million rebate potential

» Summer of 10; 158 MILLION BU = $3.95 million rebate potential

» Summer of 11; 272 MILLION BU = $6.80 million rebate potential

• Total aggregate handling rebate potential is $14.65 million dollars.

TOTAL ESTIMATED COSTS FOR THE 4 YEARS ARE ABOUT $35 MILLION.

REMAINING FUNDS AT THE END OF THIS 4 YEAR PROGRAM WILL BE 

CARRIED INTO YEAR 5 AND USED ACCORDING TO THE EXISTING PROGRAM PROVISIONS.

ESTIMATED HW WHEAT PRODUCTION AT THE END OF 4 YEARS IS 272 

MILLION BUSHELS.

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